##### Table of Contents



As filed with the Securities and
Exchange Commission on June 30, 2003

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 20-F




|                                                                        
|------------------------------------------------------------------------
|o       REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
|SECURITIES EXCHANGE ACT OF 1934                                         

OR

|                                                                                            
|--------------------------------------------------------------------------------------------
|x       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2002

OR

|                                                                           
|---------------------------------------------------------------------------
|o       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|EXCHANGE ACT OF 1934                                                       

Commission file number: 333-12334

SEAT Pagine Gialle S.p.A.


(Exact name of Registrant as specified in its charter)


Italy

(Jurisdiction of incorporation or
organization)Via Aurelio Saffi, 18, 10138 Torino, Italy
(Address of principal executive offices)Securities registered or to be registered pursuant to Section 12(b) of the Act:
None





Securities registered or to be registered pursuant to Section 12(g) of the Act:
None



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Ordinary Shares, nominal value 0.03 per share


The number of outstanding shares of each of the issuers classes of
capital or common stock as of the close of the period covered by the annual
report:

|                                               |  |  |                | 
|---------------------------------------------- |  |  | -------------- | 
|Ordinary Shares, nominal value 0.03 per share |  |  | 11,185,094,342 | 
|Savings Shares, nominal value 0.03 per share  |  |  | 187,689,368    | 

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

|    |  |   |    |  
|--- |  | - | -- | -
|Yes |  | x | No | o

Indicate by check mark which financial statement item the Registrant has elected to follow.

|        |  |   |         |  
|------- |  | - | ------- | -
|Item 17 |  | o | Item 18 | x



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TABLE OF CONTENTS



|                                                            |                                                                                       |  |  |  |  |  |  | 
|----------------------------------------------------------- | ------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PRESENTATION ON INFORMATION                                
|FORWARD-LOOKING STATEMENTS                                 
|PART I                                                     
|                                                            | ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        
|                                                            | ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                      
|                                                            | ITEM 3. KEY INFORMATION                                                              
|Selected Consolidated Financial Information                
|Exchange Rates                                             
|Risk Factors                                               
|Risks relating to the consequences of the proposed Spin-off
|                                                            | ITEM 4. INFORMATION ON THE COMPANY                                                   
|Introduction                                               
|History                                                    
|Recent Developments                                        
|Present Organizational Structure and Developments          
|Business Overview                                          
|Intellectual Property                                      
|Property                                                   
|Regulation                                                 
|                                                            | ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 
|                                                            | ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   
|Directors and Senior Management and Employees              
|Compensation                                               
|Board Practices                                            
|Employees                                                  
|Share Ownership                                            
|                                                            | ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            
|Major Shareholders                                         
|Related Party Transactions                                 
|                                                            | ITEM 8. FINANCIAL INFORMATION                                                        
|Consolidated Statements and Other Financial Information    
|                                                            | ITEM 9. SHARE PRICE INFORMATION                                                      
|                                                            | ITEM 10. ADDITIONAL INFORMATION                                                      
|Memorandum and Articles of Association                     
|Material Contracts                                         
|Exchange Controls                                          
|Taxation                                                   
|Documents on Display                                       
|                                                            | ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  
|                                                            | ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                      
|PART II                                                    
|                                                            | ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                             
|                                                            | ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|                                                            | ITEM 15. CONTROLS AND PROCEDURES                                                     
|                                                            | ITEM 16. AUDIT COMMITTEE FINANCIAL EXPERT                                            
|PART III                                                   
|                                                            | ITEM 17. FINANCIAL STATEMENTS                                                        
|                                                            | ITEM 18. FINANCIAL STATEMENTS                                                        
|                                                            | ITEM 19. EXHIBITS                                                                    
|Signatures                                                 
|Certifications                                             
|Exhibit 3.(II)                                             
|Exhibit 10                                                 
|Exhibit 12                                                 



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TABLE OF CONTENTS

|                                                              |                                                        |  |      |    | 
|------------------------------------------------------------- | ------------------------------------------------------ |  | ---- | -- | 
|                                                              |                                                        |  | Page
|                                                              |                                                        |  |     
|PRESENTATION ON INFORMATION                                   |                                                        |  | 1    |   
|FORWARD-LOOKING STATEMENTS                                    |                                                        |  | 1    |   
|PART I                                                        |                                                        |  | 2    |   
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |                                                        |  | 2    |   
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE               |                                                        |  | 2    |   
|ITEM 3. KEY INFORMATION                                       |                                                        |  | 2    |   
|Selected Consolidated Financial Information                   |                                                        |  | 2    |   
|Exchange Rates                                                |                                                        |  | 4    |   
|Risk Factors                                                  |                                                        |  | 4    |   
|Risks relating to the consequences of the proposed Spin-off   |                                                        |  | 4    |   
|                                                              | Risks relating to the business of Telecom Italia Media |  |      | 6  | 
|                                                              | Risks relating to the business of New SEAT             |  |      | 7  | 
|                                                              | Risks relating to SEATs shares:                       |  |      | 8  | 
|ITEM 4. INFORMATION ON THE COMPANY                            |                                                        |  | 10   |   
|Introduction                                                  |                                                        |  | 10   |   
|History                                                       |                                                        |  | 10   |   
|Recent Developments                                           |                                                        |  | 13   |   
|Present Organizational Structure and Developments             |                                                        |  | 19   |   
|Business Overview                                             |                                                        |  | 20   |   
|                                                              | Telecom Italia Media Business Segments               |  |      | 21 | 
|                                                              | Internet Services                                      |  |      | 21 | 
|                                                              | Other Businesses and Assets                            |  |      | 24 | 
|                                                              | Office Products and Services                           |  |      | 25 | 
|                                                              | Television                                             |  |      | 27 | 
|                                                              | Professional Publishing                                |  |      | 29 | 
|                                                              | New SEAT Business Segments                             |  |      | 31 | 
|                                                              | Directories                                            |  |      | 31 | 
|                                                              | Directories Assistance                                 |  |      | 37 | 
|                                                              | Business Information                                   |  |      | 38 | 
|Intellectual Property                                         |                                                        |  | 40   |   
|Property                                                      |                                                        |  | 40   |   
|Regulation                                                    |                                                        |  | 41   |   
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS          |                                                        |  | 44   |   
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES            |                                                        |  | 68   |   
|Directors and Senior Management and Employees                 |                                                        |  | 68   |   
|Compensation                                                  |                                                        |  | 74   |   
|Board Practices                                               |                                                        |  | 78   |   
|Employees                                                     |                                                        |  | 80   |   
|Share Ownership                                               |                                                        |  | 80   |   
|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS     |                                                        |  | 81   |   
|Major Shareholders                                            |                                                        |  | 81   |   
|                                                              | Ownership of SEAT Ordinary Shares                      |  |      | 81 | 
|Related Party Transactions                                    |                                                        |  | 83   |   
|ITEM 8. FINANCIAL INFORMATION                                 |                                                        |  | 84   |   
|Consolidated Statements and Other Financial Information       |                                                        |  | 84   |   
|                                                              | Financial Statements                                   |  |      | 84 | 
|                                                              | Legal Proceedings                                      |  |      | 84 | 
|                                                              | Dividends                                              |  |      | 85 | 
|ITEM 9. SHARE PRICE INFORMATION                               |                                                        |  | 86   |   

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|                                                                                      |  |  |      |  | 
|------------------------------------------------------------------------------------- |  |  | ---- |  | 
|                                                                                      |  |  | Page
|                                                                                      |  |  |     
|ITEM 10. ADDITIONAL INFORMATION                                                       |  |  | 88   | 
|Memorandum and Articles of Association                                                |  |  | 88   | 
|Material Contracts                                                                    |  |  | 94   | 
|Exchange Controls                                                                     |  |  | 95   | 
|Taxation                                                                              |  |  | 96   | 
|Documents on Display                                                                  |  |  | 100  | 
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  |  | 100  | 
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  |  | 104  | 
|PART II                                                                               |  |  | 104  | 
|ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  |  | 104  | 
|ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  |  | 104  | 
|ITEM 15. CONTROLS AND PROCEDURES                                                      |  |  | 104  | 
|ITEM 16. AUDIT COMMITTEE FINANCIAL EXPERT                                             |  |  | 104  | 
|PART III                                                                              |  |  | 104  | 
|ITEM 17. FINANCIAL STATEMENTS                                                         |  |  | 104  | 
|ITEM 18. FINANCIAL STATEMENTS                                                         |  |  | 104  | 
|ITEM 19. EXHIBITS                                                                     |  |  | 105  | 
|Signatures                                                                            |  |  | 106  | 
|Certifications                                                                        |  |  | 107  | 

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PRESENTATION ON INFORMATION

SEAT Pagine Gialle S.p.A. (SEAT or the Company) publishes consolidated
financial statements which are included elsewhere in this annual report (the
Consolidated Financial Statements) for the Company and its consolidated
subsidiaries (collectively, the SEAT Group or the Group) in euro, the
lawful currency of Italy and 11 other member states of the European Union
(EU).

In this annual report, references to U.S. dollars, dollars or $ are
to United States dollars; references to euro, euros, Euro or  are
to euro; and references to lire or Lit. are to Italian lire, the former
Italian non-decimal denomination of the euro. On January 1, 1999, the Italian
lira became a member currency of the euro at a fixed conversion rate of 1 =
Lit. 1,936.27. For purposes of this annual report, billion means a thousand
million.

This annual report contains translations of certain euro amounts into U.S.
dollars at specified rates. Unless otherwise specified, the translations of
euro into U.S. dollars have been made using the noon buying rate in the city of
New York for cable transfers in foreign currencies as announced by the Federal
Reserve Bank of New York for customs purposes (the Noon Buying Rate) for the
euro in effect on December 31, 2002, which was 1.0485 = $1.00. That rate
may differ from the actual rates during the year used in the preparation of
SEATs Consolidated Financial Statements, and dollar amounts in this annual
report may differ from the actual dollar amounts that were translated into euro
in the preparation of the Consolidated Financial Statements.

The Consolidated Financial Statements included in this annual report have
been prepared in accordance with generally accepted accounting principles in
the United States (U.S. GAAP).




FORWARD-LOOKING STATEMENTS

Cautionary Statement for Purposes of the Safe Harbor Provisions of the
United States Private Securities Litigation Reform Act of 1995. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. This annual report contains certain
forward-looking statements, including, but not limited to, the discussion of
the changing dynamics of the marketplace, including liberalization of the
telecommunications and Internet industry, the opening to competition of
directory services, the Companys outlook for growth in the Internet, directory
and directories assistance industries both within and outside of Italy,
including sources of increasing revenues to offset the impact of increasing
competition. Such statements include, but are not limited to, statements under
the following headings: (i) Item 3. Key InformationRisk Factors, (ii)
Item 4. Information on the CompanyBusiness OverviewRecent
Developments, (iii) Item 4. Information on the CompanyRegulation, (iv)
Item 5. Operating and Financial Review and Prospects, (v) Item 8.
Financial InformationLegal Proceedings and (vi) Item 11. Quantitative
and Qualitative Disclosures About Market Risk, including statements regarding
the likely effect of matters discussed therein. Actual results may differ
materially from those projected or implied in the forward-looking statements.
Such forward-looking information involves risks and uncertainties, which are
outside the Companys control, that could significantly affect expected results
and are based on certain key assumptions.

The following important factors could cause the Groups actual results to
differ materially from those projected or implied in any forward-looking
statements:



| |  |  | the impact of the proposed Spin-off of the Directories business and
almost all of the Directory Assistance and Business Information
segments into a separate company to be known as SEAT Pagine Gialle
S.p.A. (New SEAT) on the financial condition and prospects of New
SEAT and the separate company consisting of the remaining business
segments, to be known as Telecom Italia Media S.p.A. (Telecom Italia
Media);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the impact of any disposition by Telecom Italia S.p.A. (Telecom
Italia) of its majority stake in New SEAT on the financial condition
and prospects of New SEAT;                                                                                                                                                                                                                                                           





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| |  |  | the impact of political and economic developments in Italy and
other countries in which the Group operates;                         
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the impact of fluctuations in currency exchange and interest rates;                                                                 
|
| |  |  | New SEATs ability to implement successfully its business strategy;                                                                 
|
| |  |  | Telecom Italia Medias ability to generate sufficient cash flow and
otherwise obtain sufficient financing to support its activities;
|
| |  |  | Telecom Italia Medias ability to continue the process of
rationalizing its non-core assets and to dispose its non-core business;   
|
| |  |  | Telecom Italia Medias ability to benefit from an increased
collaboration of its Internet business with Telecom Italia;             
|
| |  |  | the continuing impact of increased competition, including the entry
of new competitors; and                                         
|
| |  |  | the impact of regulatory decisions and changes in the regulatory
environment in Italy and elsewhere in Europe.                      

The foregoing factors should not be construed as exhaustive. Due to such
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward-looking statements, which speak only as of the date hereof. SEAT
undertakes no obligation to release publicly the result of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof, including, without limitation, changes in
our business or acquisition strategy or planned capital expenditures, or to
reflect the occurrence of unanticipated events. See the related cautionary
statement under Item 5. Operating and Financial Review and Prospects.




PART I




ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.




ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.




ITEM 3. KEY INFORMATION




Selected Consolidated Financial Information

Effective October 1, 2000, SEAT acquired Tin.it S.p.A. (Tin.it), a
wholly owned subsidiary of Telecom Italia S.p.A. (Telecom Italia), in a
two-step transaction through the exchange of newly-issued SEAT ordinary shares
for 100% of the outstanding shares of Tin.it. Upon consummation of the
transaction, the company continued to operate under the name SEAT Pagine
Gialle S.p.A. After the acquisition, which is described in more detail below,
Telecom Italia owned a majority interest in SEAT. Accordingly, under U.S.
GAAP, the transaction has been accounted for as a reverse acquisition in which
SEAT is considered the acquiree, even though under Italian law it was the
acquiror. As a result, the selected financial data set forth below presents
historical financial data of Tin.it from January 1, 1998 to October 1, 2000,
the effective date of the acquisition, and the consolidated financial data of
SEAT and Tin.it since that date.

The selected financial data set forth in the table below should be read in
conjunction with SEATs audited consolidated financial statements as of
December 31, 2001 and 2002 and for the years ended December 31, 2000, 2001 and
2002 including the notes thereto included in this Annual Report and the
information included under the headings Item 5. Operating and Financial
Review and ProspectsBackgroundResults of Operations.

2



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The selected statement of operations data for 1998, 1999, 2000, 2001 and
2002, and the selected balance sheet data as of December 31, 2000, 2001 and
2002 set forth below, have been derived from the Companys audited consolidated
financial statements prepared under U.S. GAAP included in this Annual Report.
The historical balance sheet data set forth below as of December 31, 1998 and
1999 have been derived from SEATs unaudited financial statements and have been
prepared in a manner consistent with SEATs audited consolidated financial
statements as of, and for the year ended, December 31, 2000.

In this annual report, all of the amounts are expressed in thousands of
euro unless otherwise indicated.

|                                                 |  |                         |         |      |  |         |          |         |  |         |             |         |  |  |            |             |  |  |            |   |  |               |            |  
|------------------------------------------------ |  | ----------------------- | ------- | ---- |  | ------- | -------- | ------- |  | ------- | ----------- | ------- |  |  | ---------- | ----------- |  |  | ---------- | - |  | ------------- | ---------- | -
|                                                 |  | Year ended December 31,
|                                                 |  |                        
|                                                 |  | 1998(1)                 |         | 1999 |  | 2000(2) |          | 2001(3) |  | 2002(4) |             | 2002(4)
|                                                 |  |                         |         |      |  |         |          |         |  |         |             |        
|                                                 |  |                         |         |      |  |         |          |         |  |         |             |         |  |  |            |             |  |  |            |   |  | (thousands of
|                                                 |  | (euro)                  |         |      |  |         |          |         |  |         |             |         |  |  |            | dollars)(5)
|Statement of operations data:                    |  |                         |         |      |  |         |          |         |  |         |             |         |  |  |            |             |  |  |            |   |  |               |            |  
|Operating revenues:                              |  |                         | 177,633 |      |  |         | 211,317  |         |  |         | 607,306     |         |  |  | 1,897,483  |             |  |  | 1,981,081  |   |  |               | 2,077,258  |  
|                                                 |  |                         |         |      |  |         |          |         |  |         |             |         |  |  |            |             |  |  |            |   |  |               |            |  
|Operating income/(loss)                          |  |                         | (13,121 | )    |  |         | (89,905  | )       |  |         | (10,827,648 | )       |  |  | (4,669,353 | )           |  |  | (6,186,425 | ) |  |               | (6,486,762 | )
|                                                 |  |                         |         |      |  |         |          |         |  |         |             |         |  |  |            |             |  |  |            |   |  |               |            |  
|Net income/(loss)                                |  |                         | (19,385 | )    |  |         | (104,000 | )       |  |         | (10,886,364 | )       |  |  | (4,502,274 | )           |  |  | (5,958,629 | ) |  |               | (6,247,907 | )
|                                                 |  |                         |         |      |  |         |          |         |  |         |             |         |  |  |            |             |  |  |            |   |  |               |            |  
|Basic and diluted net
income/(loss) per share(6) |  |                         |         |      |  |         |          |         |  |         |             |         |  |  |            |             |  |  |            |   |  |               |            |  
|- ordinary                                       |  |                         |        |      |  |         | (0.02    | )       |  |         | (1.68       | )       |  |  | (0.40      | )           |  |  | (0,52      | ) |  |               | (0.55      | )
|- savings                                        |  |                         |        |      |  |         |         |         |  |         | (1.67       | )       |  |  | (0.40      | )           |  |  | (0,52      | ) |  |               | (0.55      | )
|Dividends per share                              |  |                         |         |      |  |         |          |         |  |         |             |         |  |  |            |             |  |  |            |   |  |               |            |  
|- ordinary                                       |  |                         |        |      |  |         |         |         |  |         |            |         |  |  |           |             |  |  |           |   |  |               |           |  
|- savings                                        |  |                         |        |      |  |         |         |         |  |         |            |         |  |  |           |             |  |  |           |   |  |               |           |  

|                                    |  |              |         |      |  |         |         |      |  |         |            |         |  |  |            |             |  |  |            |  |  |               |            | 
|----------------------------------- |  | ------------ | ------- | ---- |  | ------- | ------- | ---- |  | ------- | ---------- | ------- |  |  | ---------- | ----------- |  |  | ---------- |  |  | ------------- | ---------- | 
|                                    |  | December 31,
|                                    |  |             
|                                    |  | 1998         |         | 1999 |  | 2000(2) |         | 2001 |  | 2002(4) |            | 2002(4)
|                                    |  |              |         |      |  |         |         |      |  |         |            |        
|                                    |  |              |         |      |  |         |         |      |  |         |            |         |  |  |            |             |  |  |            |  |  | (thousands of
|                                    |  |              |         |      |  | (euro)  |         |      |  |         |            |         |  |  |            | dollars)(5)
|Balance sheet data:                 |  |              |         |      |  |         |         |      |  |         |            |         |  |  |            |             |  |  |            |  |  |               |            | 
|Total assets                        |  |              | 193,342 |      |  |         | 160,356 |      |  |         | 20,288,891 |         |  |  | 17,029,514 |             |  |  | 10,593,884 |  |  |               | 11,108,193 | 
|Total shareholders, equity          |  |              | 101,388 |      |  |         | 69,914  |      |  |         | 15,715,321 |         |  |  | 12,185,674 |             |  |  | 6,223,901  |  |  |               | 5,936,004  | 
|Shares outstanding (in millions)(6) |  |              |         |      |  |         |         |      |  |         |            |         |  |  |            |             |  |  |            |  |  |               |            | 
|- ordinary                          |  |              | 5,091   |      |  |         | 5,091   |      |  |         | 9,514      |         |  |  | 11,185     |             |  |  | 11,185     |  |  |               | 10,667     | 
|- savings                           |  |              |        |      |  |         |        |      |  |         | 1,449      |         |  |  | 188        |             |  |  | 188        |  |  |               | 179        | 



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|Notes:
|------
|      
|(1)   
|      
|(2)   
|      
|(3)   
|      
|(4)   
|      
|(5)   
|      
|(6)   

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Exchange Rates

Effective January 1, 1999, the following 11 EU member states adopted the
euro as a common currency: Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain. They also
established fixed conversion rates between their respective sovereign
currencies and the euro. On January 1, 2001, Greece (together, with the 11 EU
member states referred to in the previous sentence, the Member States) joined
the European Economic and Monetary Union. The exchange rate at which the lira
was irrevocably fixed against the euro is Lit.1,936.27 = 1.00. On January
1, 2002, the Member States began issuing new euro-denominated bills and coins
for use in cash transactions. As of March 1, 2002, the Member States withdrew
the bills and coins denominated in their respective currencies from
circulation, and they are no longer legal tender for any transactions.

The Federal Reserve Bank of New York no longer quotes a Noon Buying Rate
for the legacy currencies of any of the Member States.

At the extraordinary shareholders meeting held on December 11, 2001,
SEATs share capital was converted from lire into euros by rounding up the par
value of the ordinary and savings shares, from Lit. 50 to 0.03 using
approximately 48 million from available reserves.

The following table sets forth, for the year 1998, certain information
regarding the Noon Buying Rate for dollars expressed in lire per U.S.$1.

|                |  |      |       |     |  |            |       |               |  |  |       |  |  |  |       | 
|--------------- |  | ---- | ----- | --- |  | ---------- | ----- | ------------- |  |  | ----- |  |  |  | ----- | 
|Calendar Period |  | High |       | Low |  | Average(1) |       | At Period End
|                |  |      |       |     |  |            |       |              
|1998            |  |      | 1,828 |     |  |            | 1,592 |               |  |  | 1,737 |  |  |  | 1,654 | 

The following table sets forth, for the years 2000 to 2002 and for the
beginning of 2003 certain information regarding the Noon Buying Rate for
Dollars expressed in euros per U.S.$1.

|                                  |  |      |        |     |  |            |        |               |  |  |        |  |  |  |        | 
|--------------------------------- |  | ---- | ------ | --- |  | ---------- | ------ | ------------- |  |  | ------ |  |  |  | ------ | 
|Calendar Period                   |  | High |        | Low |  | Average(1) |        | At Period End
|                                  |  |      |        |     |  |            |        |              
|2000                              |  |      | 1.0335 |     |  |            | 0.8270 |               |  |  | 0.9207 |  |  |  | 0.9388 | 
|2001                              |  |      | 0.9535 |     |  |            | 0.8425 |               |  |  | 0.8909 |  |  |  | 0.8901 | 
|2002                              |  |      | 1.0485 |     |  |            | 0.8594 |               |  |  | 0.9495 |  |  |  | 1.0485 | 
|2003 (through June 13, 2003)      |  |      | 1.1870 |     |  |            | 1.0361 |               |  |  | 1.1199 |  |  |  | 1.183  | 
|Monthly Amounts                   |  |      |        |     |  |            |        |               |  |  |        |  |  |  |        | 
|January 2003                      |  |      | 1.0861 |     |  |            | 1.0361 |               |  |  | 1.0622 |  |  |  | 1.0739 | 
|February 2003                     |  |      | 1.0875 |     |  |            | 1.0708 |               |  |  | 1.0785 |  |  |  | 1.0779 | 
|March 2003                        |  |      | 1.1062 |     |  |            | 1.0545 |               |  |  | 1.0797 |  |  |  | 1.0900 | 
|April 2003                        |  |      | 1.0621 |     |  |            | 1.1180 |               |  |  | 1.0862 |  |  |  | 1.1180 | 
|May 2003                          |  |      | 1.1853 |     |  |            | 1.1200 |               |  |  | 1.556  |  |  |  | 1.766  | 
|June 2003 (through June 13, 2003) |  |      | 1.1870 |     |  |            | 1.686  |               |  |  | 1.1751 |  |  |  | 1.183  | 



---

|Notes:
|------
|      
|(1)   




Risk Factors




Risks relating to the consequences of the proposed Spin-off



| |  | Telecom Italia Media has incurred net losses to date and may not become
profitable for the next two years.
| |  | ----------------------------------------------------------------------------------------------------------

The business of Telecom Italia Media is the result of rapid growth through
acquisition in the years 2000 and 2001, followed by a year of contraction in
2002. The business has incurred losses for the last two years and has a
significant restructuring plan. (See Item 4.a Information on the CompanyRecent Developments). Although Telecom Italia Media is expecting a significant
improvement of its operating result as a consequence, among other

4



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##### Table of Contents



factors, of the planned greater degree of the collaboration of its
Internet business with the Internet and media segment of Telecom Italia, it is unlikely
that Telecom Italia Media will return to profitability in the near future and
this may have a material adverse effect on Telecom Italia Medias financial
conditions and prospects.



| |  | Telecom Italia Media to date
has been unable to generate sufficient cash flow from operations to
fund its activities. In 2003 Telecom Italia Media expects that its
cash flow from operations are only sufficient to funds its capital
expenditure and working capital requirements because it benefits from
the cash flow from operations of SEAT for the year 2003 until the
effectiveness of the Spin-off. In case of an extraordinary event
Telecom Italia Media will be dependent on Telecom Italias centralized
treasury function to fund its activities.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On
a stand alone basis, Telecom Italia Medias cash flow used in operations
for the year ended December 31, 2002 would have been
approximately a negative
31 million.
In 2002 funding needs of Telecom Italia Media were met by the
central treasury function of Telecom Italia and the cash flow
generated by New SEAT.
Telecom Italia Media is expecting to have, after the carve out of New Seat, enough cash on hand to fund its ordinary business operations and that it will not need
any additional funding prior to 2005. However the cash available would be insufficient in case of an extraordinary event such as a significant adverse ruling in the De Agostini litigation was to occur.
Please see Item 8. Financial
Information  Consolidated Statements and Other Financial
Information  Legal Proceedings. In any case Telecom Italia Media
expects that it will continue to be financially supported by Telecom
Italia through the centralized treasury function based on Telecom
Italias policy to support its group companies. However, if such
support were not provided, Telecom Italia Media would have
insufficient cash flow to fund its activities unless it could obtain financing from a third
party on acceptable terms.



| |  | Telecom Italia has signed a Share Purchase Agreement to sell the shares they
own in New SEAT, which will lead to a change in control of New SEAT once the
conditions in the Share Purchase Agreement are satisfied.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On June 10, 2003 Telecom Italia entered into a Share Purchase Agreement
with a consortium of investors formed by BC Partners, CVC Capital Partners,
Investitori Associati and Permira (the Investors) for the sale of
approximately 61.5% of the share capital of New SEAT (including shares
resulting from the exercise by Telecom Italia for a notional amount of
710,777,200 shares - corresponding to about 6.2% of the share - resulting from
put/call options with JP Morgan). The completion of the sale will be subject to
the Spin-off becoming effective, the admission to listing of New SEAT that is
expected to occur by the beginning of August 2003 and the approval of the
relevant anti-trust authorities. This will lead to a change of control. A
change of control as defined in the Italian Takeover Act would require the
Investors to make a compulsory offer to the remaining ordinary shareholders of
New SEAT at a price equal to the price agreed to the Investors for the purchase
of the ordinary shares the Investors acquired. In the event the stake acquired
by the Investors were to pass the threshold of 90% of the ordinary share
capital they would be required to make a public offer to buy all the shares
with voting rights at the price set by CONSOB unless within four months the
Investors restore a free float sufficient to ensure regular trading. Under
Italian law a majority shareholder who holds more than 98% may squeeze out the
remaining shareholders at a purchase price set by an expert appointed by the
president of the commercial court of having jurisdiction over the company which
in case of New SEAT will be Milan, taking into consideration the offer price
and the market price in the last six months. Any of the compulsory offers
could lead to reduced liquidity of SEATs shares in the public markets and
could eventually lead to their delisting from the automated screen-based
trading system (Mercato Telematico Azionario) of Borsa Italiana S.p.A.
(Telematico).



| |  | Subsequent to the proposed Spin-off, SEAT shares will be split into the shares
of two different companies neither of whose shares will have had a trading
history. There has been no prior market for New SEAT shares. Although the
Telecom Italia Media shares have been listed on the Telematico as SEAT shares,
after the Spin-off they will represent shares in a company considerably
smaller than SEAT. These facts may have a material adverse effect on the
liquidity and share price of each of the new companies compared to SEAT
shares.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Subsequent to the Spin-off, SEAT shares will be split into the shares of
two different companies. Prior to the Spin-off, there has been no market for
New SEAT shares on a stand alone basis. The absence of any such trading history
may have a material adverse effect on the share price and liquidity of New SEAT
shares compared to SEAT shares.

Although the Telecom Italia Media shares have been listed on the
Telematicoas SEAT shares, after the Spin-off they will represent shares in a
company considerably smaller than SEAT and its market capitalization is
consequently expected to decrease. Moreover, subsequent to the Spin-off Telecom
Italia Media will become a more

5



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specialized company with a significantly narrower business. Therefore
current SEAT investors may decide to sell the Shares after the Spin-off if they
consider Telecom Italia Media no longer appropriate for their investment
portfolios. All these facts may have a material adverse effect on the liquidity
and share price of Telecom Italia Media shares compared to compared to SEAT
shares.

Risks relating to the business of Telecom Italia Media



| |  | Telecom Italia Medias business will be adversely affected if it is unable to
successfully implement SEATs strategic plan. Factors beyond Telecom Italia
Medias control may prevent Telecom Italia Media from successfully
implementing its strategic plan.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On April 1, 2003 the Board of Directors of SEAT decided to Spin-off the
Directories business and almost all of Directory Assistance and Business
Information activities as a result of the reorganization of its business. SEAT
currently operates in two broad market sectors.

The first sector is that of targeted advertising and telephone services,
in which SEAT operates through its Directories, Directory Assistance and
Business Information segments, providing answers to queries via printed, online
and telephone products and services.

The second sector is that of traditional advertising and the Internet, in
which SEAT operates through its Internet, TV and other business segments,
primarily providing access and content services. Both sectors present
interesting development prospects (including broadband access and digital TV).

Following the Spin-off and the restructuring of Telecom Italia Media,
Telecom Italia Medias business plan envisages a greater degree
of collaboration
with the Media and Internet business segment of its parent company, Telecom
Italia.

Factors beyond Telecom Italia Medias control that could affect the
implementation and completion of the strategic plan include:



| |  |  | Telecom Italia Medias ability to generate sufficient cash flow or
otherwise obtain financing to support its business activities;                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Telecom Italia Medias ability to manage costs;                                                                                                                          
|
| |  |  | Telecom Italia Medias ability to attract and retain highly-skilled and qualified personnel;                                                                             
|
| |  |  | Telecom Italia Medias ability to divest non-core businesses and
the adequacy of the returns of such divestitures;                                                       
|
| |  |  | the need to establish and maintain strategic relationships;                                                                                                              
|
| |  |  | declining prices for some of Telecom Italia Medias services and
the risks from decreasing margins caused by the demand for higher value
products at the same prices; and
|
| |  |  | the effect of adverse economic trends on Telecom Italia Medias
principal markets.                                                                                       



| |  | Material litigation involving Telecom Italia Medias Internet Services
business could have a material adverse effect on Telecom Italia Medias
operating results and financial condition.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SEAT is currently involved in litigation relating to the sale of
Finanziaria WEB to SEAT by De Agostini. De Agostini claims enforcement of a
clause providing for the purchase by SEAT of the remaining 40% of Finanziaria
WEB for an originally agreed purchase price of 700 million, with payment
beginning June 30, 2003, plus unspecified damages. SEAT believes that it has a
meritorious defense to the De Agostinis claims. Nevertheless, it is very
difficult to predict the outcome of the arbitration proceeding. Should the
arbitration panel rule against SEAT on the merits, SEATs operating results and
financial condition could be adversely affected. Please see Item 8.
Financial Information  Consolidated Statements and Other Financial
Information  Legal Proceedings.

6



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##### Table of Contents





| |  | Litigation involving SEATs Television business could have a material adverse
effect on Telecom Italia Medias operating results and financial condition.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

SEAT is currently involved in litigation relating to the acquisition of
the TeleMonteCarlo television network. The seller of the network, Cecchi Gori
group, filed suits relating to certain corporate actions and commenced an
arbitration proceeding against SEAT claiming rescission, invalidity or
termination of the purchase and sale agreement of the TeleMonteCarlo television
network and also claiming damages. SEAT is defending the legitimacy of the
acquisition and believes the Cecchi Gori groups claims are meritless.
Nevertheless it is very difficult to predict the outcome of the proceedings.
Should the court or the arbitration panel rule against SEAT on the merits,
SEATs operating results and financial condition could be adversely affected.



| |  | Telecom Italia Medias strategy is dependent on the continued development of
the Internet market in Italy.
| |  | ----------------------------------------------------------------------------------------------------------

In 2002, the Internet businesses of SEAT incurred net losses. The
Internet market in Italy is still in an early stage of development and, if
Internet usage in Italy grows more slowly than anticipated, the Internet
businesses of SEAT may not achieve net profits. The following is a list of
factors that could inhibit Internet growth in Italy:



| |  |  | As in many European countries, the Internet is not yet a widely
accepted medium for advertising in Italy: in 2002 total online
advertising spending in Italy represented 1.5% of the total advertising
market, in line with the average European rate (1.5%), and the rates
in the UK (1.6%), France (1.6%) and Germany (1.3%) (source: Jupiter
2002).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the Internet is not generally used to make purchases in Italy
because of, among other things, the lack of on-line payment methods and
low levels of credit card use.                                                                                                                                                                                  

Should the Internet market in Italy continue to experience a slow growth
rate Telecom Italia Medias operating results and financial condition could be
adversely affected.



| |  | Write downs of Telecom Italia Medias investments could adversely affect
Telecom Italia Medias financial condition and results of operations.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------

Telecom Italia Medias constituent businesses grew in past years through
both internal expansion and acquisitions. Due to the negative economic
conditions in general and the slowdown of the Internet market in particular,
the demand for Internet services and web advertising has sharply declined. Due
to the changed economic conditions, Telecom Italia Medias financial condition
and results of operation could be adversely affected by the loss of value (and
the consequential write-down of goodwill or other assets) of its investments.

Risks relating to the business of New SEAT



| |  | New SEATs business will be adversely affected if New SEAT is unable to
successfully implement the business strategy. Factors beyond New SEATs
control may prevent New SEAT from successfully implementing its strategic
plan.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On April 1, 2003 the Board of Directors of SEAT decided to Spin-off the
Directories business and almost all of Directory Assistance and Business
Information activities as a result of the reorganization of its business. SEAT
currently operates in two broad market sectors.

The first sector is that of targeted advertising and telephone services,
in which SEAT operates through its Directories, Directory Assistance and
Business Information segments, providing answers to queries via printed, online
and telephone products and services.

The second sector is that of traditional advertising and the Internet, in
which SEAT operates through its Internet, TV and other business segments,
primarily providing access and content services. Both sectors present
interesting development prospects (including broadband access and digital TV).

Factors beyond New SEATs control that could affect the implementation and
completion of the strategic plan include:

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| |  |  | New SEATs ability to manage costs;                                                                                                                      
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | New SEATs ability to attract and retain highly-skilled and qualified personnel;                                                                         
|
| |  |  | difficulties in developing and introducing new directories products;                                                                                     
|
| |  |  | reduced interest of customers in advertising on paper directories;                                                                                       
|
| |  |  | declining prices for some of New SEATs services and the risks from
decreasing margins caused by the demand for higher value products at
the same prices;
|
| |  |  | the effect of adverse changes in the regulatory environment;                                                                                             
|
| |  |  | the effect of adverse economic trends on New SEATs principal markets; and                                                                               
|
| |  |  | the effect of foreign exchange fluctuations on New SEATs results of operations.                                                                         



| |  | The outcome of court claims arising from pricing and printing mistakes may
have a material adverse effect on New SEATs operating results and financial
condition.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

SEAT, like other companies involved in the telephone directories business,
is frequently named as a defendant in routine litigation relating to printing
and pricing mistakes occurring in SEATs publishing of client advertisements in
its directories (including on-line directories such as Pagine Gialle on-line)
and other products. SEAT believes, based on its historical experience, that it
will settle such claims for significantly less than the aggregate damages
claimed. However, no assurance can be given as to the outcome of these claims,
and the award of substantially all the amounts claimed by clients would have a
material adverse effect on New SEATs operating results and financial
condition.



| |  | New SEATs directories business is dependent on key partners and suppliers.
| |  | ---------------------------------------------------------------------------

SEAT continues to rely on one printer, Industria Libraria Tipografica
Editrice S.p.A. (ILTE), for nearly all of its printing, binding and print
publication services. This reliance could potentially expose New SEAT to extra
costs. SEAT entered into a nine-year arrangement with ILTE which expires in
2007 and contains price adjustment mechanisms in order to align ILTEs services
to market conditions. There are only a limited number of other printers that
would be able to provide SEAT with similar services. Thus, in the event that
ILTE fails to provide some or all of its services to SEAT, New SEAT is likely
to incur significant additional costs in procuring a replacement for ILTE. In
addition, New SEAT may not be able to obtain the services of such third party
at terms and conditions as favorable to New SEAT as those of the current
contracts with ILTE.

SEAT selects its paper suppliers through a competitive procedure based on
pricing and delivery. Although SEAT receives its supply of directory paper
from at least six paper suppliers, four of them account for a significant
portion of its total paper supply. In the event that one or more current
suppliers were to fail to provide some or all of the required paper to New SEAT
(including for changes affecting the paper-supply market), New SEAT may not be
able to locate readily a substitute supplier or provide an alternative supply
on equally favorable terms, which would have a material adverse effect on New
SEATs operating results and financial condition.

Risks relating to SEATs shares:



| |  | Telecom Italia has effective control over SEAT, which limits other
shareholders influence on voting matters.
| |  | -------------------------------------------------------------------------------------------------------------

The Telecom Italia Group currently controls a majority of the outstanding
ordinary shares of SEAT. Telecom Italia has the power to elect a majority of
the members of SEATs board of directors, who have substantial involvement in
the day-to-day activities of SEAT, and will have a significant influence on all
matters to be decided by a vote of shareholders, including resolutions relating
to:



| |  |  | corporate reorganizations including the sale of SEATs assets;
| | - |  | --------------------------------------------------------------
|
| |  |  | mergers;                                                      

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| |  |  | certain amendments to the Companys bylaws; and
| | - |  | -----------------------------------------------
|
| |  |  | the payment of dividends.                      

Telecom Italias interest in SEAT would also allow it to prevent the
acquisition of SEAT by any third party without Telecom Italias approval.



| |  | SEAT shares lack a trading market in the United States.
| |  | -------------------------------------------------------

The principal trading market for SEATs shares is the Telematico. SEATs
shares are not listed on a U.S. stock exchange and SEAT does not plan to
establish an American Depositary Receipt program for SEAT shares. As a result,
there may be little or no liquidity for SEAT shares in the United States.

9



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ITEM 4. INFORMATION ON THE COMPANY

SEAT is incorporated in Italy as a joint stock company under the name
SEAT Pagine Gialle S.p.A. and is registered under the Italian Civil Code with
the Milan Company Register under no. 12213600153. The address of its
registered office is: Via Grosio 10/8, 20151 Milan, Italy. The telephone
number of the Companys headquarters is 0039 02 334 431. The duration of the
Company extends until December 31, 2100.




Introduction

The SEAT Group is part of the Telecom Italia Group and operates in the
media sector through traditional printed products, the Internet, telephone and
television.

SEAT is the principal seller in Italy of advertising in the Yellow Pages
directory (Yellow Pages or Pagine Gialle) and in the White Pages directory
(White Pages or Elenchi Telefonici) and the principal publisher of the
Yellow Pages and White Pages directories in Italy and through its subsidiary
TDL Infomedia, of the Thomson Directory in the United Kingdom. In addition,
SEAT offers a variety of other directory products and services in Italy.

SEAT is also a leading Internet services provider in Italy (through
Tin.it) and operates one of Italys most frequently visited portals (Virgilio).
Through Gruppo Buffetti, SEAT is a leading distributor of office products and
business solutions in Italy.

Through HMC, its communications holding company, SEAT provides television
services in Italy with an all-news channel (La7) and an all-music channel (MTV
Italia).

On April 1, 2003 the Board of Directors of SEAT decided to Spin-off the
Directories business and almost all of Directory Assistance and Business
Information into a newly incorporated company which will assume the current
name of SEAT. On June 10, 2003 Telecom Italia, SEATs majority shareholder
entered into a Share Purchase Agreement with BC Partners, CVC Capital Partners,
Investitori Associati and Permira, which are referred to as the Investors for
the sale of approximately 61.5% of the share capital of New SEAT (including
shares resulting from the exercise by Telecom Italia of the put/call options
with J.P.Morgan for a notional amount of 710,777,200 shares, corresponding to
about 6.2% of the share capital of SEAT). Please see Recent
DevelopmentsSpin-off of the Directories, Directory Assistance and Business
Information Business Segments.




History

SEAT Pagine Gialle

SEAT was incorporated under the name Società Elenchi Ufficiali degli
Abbonati al Telefono S.p.A. in Turin, Italy in 1925 with the purpose of
publishing White Pages for northern Italys telephone service provider. SEAT
gradually increased the geographical coverage of the White Pages until 1953
when it completed its expansion and was publishing the White Pages throughout
Italy for most of the major telephone service providers. In 1966, SEAT
introduced Pagine Gialle, its Yellow Pages business directory product.

In 1987, SEAT was merged into STET, a company that the Italian Treasury
had indirectly controlled since 1933. Until 1997, STET also owned a
controlling interest in Telecom Italia, SEATs principal supplier of telephone
listing information and the main provider of fixed-line public
telecommunications services in Italy. On December 31, 1996, STET reorganized
SEAT as a separate corporate entity and spun-off SEATs shares to STETs
shareholders on a pro rata basis through a partial de-merger. As a result,
38.73% of the voting control of SEAT was held by the public and the remaining
61.27% by the Italian Treasury. On January 2, 1997, SEATs ordinary and
savings shares began trading on the Telematico. In November 1997, the Italian
Treasury sold its entire stake in SEAT, 61.27% of the ordinary shares and 0.93%
of the savings shares.

SEAT subsequently grew through various acquisitions and investments
completed prior to the merger between SEAT and Tin.it.

10



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Tin.it

Telecom Italia started its Internet operations in 1996 under the name TOL
(Telecom Online). In mid-1996, Telecom Italia acquired VOL (Video Online), a
company primarily engaged in Internet dial-up access. Telecom Italia then
merged VOL into TOL, which it reorganized as an internal division named Tin.it.
The Tin.it division initially focused on the development of its Internet
dial-up access, and subsequently began to supplement its Internet access
business with the introduction of general Internet portals.

Effective May 1, 2000, Telecom Italia contributed the following assets
into a joint stock company, which was renamed Tin.it S.p.A.:



| |  |  | the Tin.it division, including other Internet business-related assets;                                                          
| | - |  | --------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | ownership of the White Pages;                                                                                                   
|
| |  |  | Telecom Italias 49% interest in ESRI Italia, which distributes and
customizes environmental software applications in Italy; and
|
| |  |  | Telecom Italias 50% interest in the joint venture Excite Italia
B.V.                                                           

The SEATTin.it Combination

In March 2000, Telecom Italia and SEAT entered into a framework agreement
for the combination of SEAT and Tin.it, Telecom Italias Internet division, and
related transactions. For more information, see Item 7. Major Shareholders
and Related Party Transactions  Related Party Transactions  The Framework
Agreement Relating to the Combination of SEAT and Tin.it. The combination was
effected through the de-merger of Telecom Italia by way of transfer to SEAT of
approximately 8.1% of the share capital of Tin.it owned by Telecom Italia and
the subsequent merger of Tin.it with SEAT. In connection with the de-merger
and merger, SEAT ordinary shares were respectively issued to Telecom Italias
shareholders and to Telecom Italia. Currently, Telecom Italia owns, directly
and indirectly, approximately 56.147% of SEATs ordinary share capital. Under
U.S. GAAP, the de-merger and merger of SEAT and Tin.it have been accounted for
as a reverse acquisition, where SEAT is considered the acquiree for financial
statement purposes even though under Italian law it was the acquiror. You
should read Item 7. Major Shareholders and Related Party Transactions for a
discussion of the principal shareholders of SEAT.

The integration of SEAT and Tin.it was subject to approval by the Italian
Antitrust Authority. On July 27, 2000, the Italian Antitrust Authority issued
its authorization subject to compliance with certain conditions.

The de-merger deed was signed on November 8, 2000 and had legal effect as
of November 10, 2000. SEAT issued 415,864,739 new ordinary shares in the
de-merger to shareholders of Telecom Italia, based on the share exchange ratio
of 56 new SEAT shares for every 1,000 Telecom Italia shares held.

The merger deed was signed on November 10, 2000 with legal effect from
November 15, 2000. As a result, SEAT issued to Telecom Italia 4,675,461,657
new ordinary shares based on the share exchange ratio of 124.1787 ordinary SEAT
shares for each ordinary Tin.it share.

Under U.S. GAAP, the transaction was recorded as of October 1, 2000, the
date SEAT assumed effective control of the operations of Tin.it. As described
above, subsequent to the transaction, Telecom Italia owns a majority interest
in the combined company. U.S. GAAP required that SEAT be considered the
acquiree for financial statement purposes (a reverse acquisition) even though
under Italian law it was the acquiror. Therefore, the transaction has been
recorded as the acquisition of SEAT by Tin.it in the consolidated financial
statements prepared in accordance with U.S. GAAP presented under Item 18 of
this annual report. The financial statements, selected financial data and
other financial information included elsewhere in this annual report present
the historical operating results and financial position of Tin.it to October 1,
2000 and the consolidated operations and financial position of SEAT and Tin.it
since that date.

As a result of the merger and related transactions, Telecom Italia
currently owns, either directly and indirectly, 56.147% of SEATs ordinary
share capital. Telecom Italia, which was fully privatized in November 1997, is
the

11



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incumbent Italian telecommunications operator. The company is Italys
leading operator in both the wireline and wireless sectors. Telecom Italias
wireless operations are conducted through its majority-controlled subsidiary,
Telecom Italia Mobile S.p.A. (TIM). Both Telecom Italia and TIM are listed
on Telematico.

Expansion, Reorganization and Rationalization

In 2000, SEAT continued its expansion through various acquisitions in the
office products and business services, directory publication, directory
services, business information and television sectors.

In the course of 2001, Olimpia S.p.A. (a subsidiary of Pirelli S.p.A.)
(Olimpia), acquired a 28.736% stake in Olivetti S.p.A. (Olivetti) which
holds 54.96% of Telecom Italias ordinary share capital. Subsequent to the
completion of the acquisition, the majority of the members of Telecom Italias
Board of Directors resigned. In October 2001, the majority of the members of
SEATs Board of Directors resigned. In accordance with Article 15 of SEATs
bylaws, a new Board of Directors was elected on December 11, 2001. On December
19, 2002 Hopa S.p.A. and two of its affiliates accepted an offer by Olimpia to
retire its bonds in exchange for a 16% interest in Olimpia. Then, on February
21, 2003, Hopa entered into an agreement with the former shareholders of
Olimpia that gives Hopa the right to appoint one director. Please see Item 6.
Directors, Senior Management and Employees.

Until June 30, 2001, SEATs business activities were organized into six
main segments: Directories, Internet, Office Products and Services, Business
Information, Professional Publishing and Other Activities. In the second half
of 2001, in an effort to reduce costs and rationalize the allocation of SEATs
subsidiaries within the Groups structure, the SEAT Groups organizational
structure was reviewed and reorganized. The principal change made was the
creation of two new business segments, Directories Assistance and Television.



| |  | 2002-2005 Business Plan
| |  | -----------------------

On February 14, 2002, SEAT announced the guidelines of its strategic
business and financial plan. The strategic plan was introduced to rationalize
the Groups structure and portfolio through the divestment of non-strategic
assets in order to maximizing profitability.

Such disposals were aimed at focusing SEATs activities on its core
businesses, with the objective of further enhancing its market position, and to
develop synergies through a multiplatform approach among print, telephone and
online directories.

The Group sought to meet its goals mainly by:



| |  |  | capitalizing on its multiplatform media company leadership:                           
| | - |  | --------------------------------------------------------------------------------------
|
| |  |  | exploiting brand distinctiveness and strength;                                        
|
| |  |  | enhancing the connectivity business model;                                            
|
| |  |  | strengthening SEATs position in the United Kingdom directories market;               
|
| |  |  | tightening the cooperation among the Group business units;                            
|
| |  |  | developing synergies among the portal, television and directory business segments; and
|
| |  |  | maintaining operational efficiency through capital expenditure and cost control.      

On February 14, 2003, SEAT announced the achievements of its strategic
business and financial plan for the year 2002 and highlighted the strategy and
guidelines for the year 2003.

In terms of reorganization and rationalization of the Groups structure,
SEAT reduced the number of its affiliates from a total of 190 at the beginning
of 2002 to 100 companies at the end of 2002, as a result of the following
transactions: 46 affiliates were sold, 43 affiliates were put in liquidation 5
affiliates were merged with other affiliated companies. SEAT also acquired 4
new equity stakes: Intel.Audit Scarl (18.18% owned by SEAT), which is a
consortium owned by Olivetti S.p.A., Telecom Italia S.p.A. and TIM S.p.A. for
the centralization of
12Table of Contentsinternal auditing services for Telecom Italia Group companies; Tiglio I
S.r.l. (2.10% owned by SEAT), a real estate company established in the context
of the so-called Project Tiglio following the disposal of certain real estate
properties (for more information see Item 4  Business Overview  Project
Tiglio); GIS Italia S.r.l. (40% owned by Esri Italia S.pA. which is 49% owned
by SEAT), a software company; and QMT (70% owned by Consodata Espana), a newly
established Spanish company.The most significant disposals which occurred during the course of 2002
were:
    
    the sale in April 2002 of SEATs stake (46.4%) in Mondus Limited (a
company belonging to the Internet business segment) to Mondus Limited
for a sale price of 19.1 million;
    
    the sale in July 2002 of SEATs stake (25.0%) in Roncadin
Restaurants (a company belonging to the Internet business segment) to
Fin.Eco Investimenti SGR S.p.A. for a sale price of 2.1 million;
    
    the sale in July 2002 of SEATs stake (49.0%) in Wisequity S.p.A.
(a closed-end mutual investment fund) for a sale price of 11.0
million;
    
    the sale in August 2002 of SEATs stake (100.0%) in Datahouse (a
company belonging to the Business Information segment) to Dun &
Bradstreet S.p.A., the Italian subsidiary of the American parent, for a
sale price of 15.9 million;
    
    the sale in November 2002 of SEATs stake (50.0%) in VIASAT to EXE
Fin S.p.A. for a sale price of 2.5 million;In terms of cost reduction, the Groups headcount was reduced from 9,264
in 2001 to 7,715 in 2002 at December 31, 2001 and December 31, 2002,
respectively.
Recent DevelopmentsSpin-off of the Directories, Directory Assistance and Business Information
business segmentsThe information contained in the following paragraphs does not constitute
an offer of securities for sale in the United States or an offer to acquire
securities in the United States. The securities to be issued by New SEAT have
not been (and are not intended to be) registered under the United States
Securities Act of 1933 (the Securities Act), and may not be offered or sold,
directly or indirectly, in the United States except pursuant to an applicable
exemption from the requirements of the Securities Act. Ordinary and savings
shares issued by New SEAT Pagine Gialle as a result of the Spin-off are
intended to be made available in or into the United States pursuant to an
exemption from registration requirements by the Securities Act.On April 1, 2003, the Board of Directors of SEAT approved the proposed
proportional Spin-off of the Directories business and almost all of the
Directory Assistance and Business Information business segments into a newly
incorporated company which will assume the name of SEAT. Effective as of the
date of the Spin-off, the corporate name of SEAT shall become Telecom Italia
Media S.p.A. (Telecom Italia Media). On May 9, 2003, SEATs extraordinary
shareholders meeting approved the plan.The Spin-off plan contemplates the creation of two independent companies,
each focused on its core businesses. In managements view, SEAT operates in
two broad market sectors that have increasingly developed separate and distinct
characteristics in terms of strategy, operations and competitive landscape.
The first sector is that of targeted advertising and telephone services, in
which SEAT operates through its Directories, Directory Assistance and Business
Information segments, providing answers to queries via printed, online and
telephone products and services.The second sector is that of traditional advertising and the Internet, in
which SEAT operates through its Internet, TV and other business segments,
primarily providing access and content services. Both sectors present
interesting development prospects (including broadband access and digital TV).13Table of ContentsThe Spin-off plan provides for a Spin-off on a proportional basis. The
allocation of the shares of, respectively, New SEAT and Telecom Italia Media is
based on the net assets of each company as of December 31, 2002. Consequently,
for every 40 ordinary (or savings, as applicable) shares currently owned, the
present shareholders of SEAT will receive:
    
    11 new ordinary (or savings, as applicable) shares of Telecom
Italia Media, and
    
    29 new ordinary (or savings, as applicable) shares of New SEAT.The shares of both companies will be listed on the Telematico: the
effectiveness of the Spin-off is conditioned upon the shares of New SEAT being
accepted for listing. The shares of Telecom Italia Media are expected to
remain registered with the Securities and Exchange Commission under the
Securities Act of 1933 and therefore Telecom Italia Media will remain a
reporting issuer under the U.S. Securities Exchange Act of 1934, as amended
(the 1934 Act) and therefore will continue to file periodic reports under the
1934 Act. New SEAT has applied for an exemption from registration under the
1934 Act of its newly issued shares or savings shares with the Securities and
Exchange Commission pursuant to Rule 12g3-2(b) under the 1934 Act.The Spin-off plan provides for the transfer to New SEAT, of the following
companies within the Directories, Directory Assistance and Business Information
business segments:
    
    Directories.Directories Italia Seat Pagine Gialle S.p.A.
division, Annuari Italia S.p.A., Euredit S.A., TDL Group, Euro
directory S.A.;
    
    Directory Assistance.Directories Assistance Seat Pagine Gialle
division, Telegate Group, Telegate Holding GmbH, IMR S.r.l.;
    
    Business Information.Consodata S.A., Consodata Group Ltd
(including NetCreations Inc. and Pan Adress).SEATs other companies and business segments will remain in SEAT, which,
as noted above, will be known as Telecom Italia Media. The strategic objective
of the Spin-off plan is to allow SEATs businesses in each of the two sectors
to focus on their core business.The following organization charts illustrate how Telecom Italia Media and
New SEAT will be structured compared to SEATs structure as of December 31,
2002.14Table of ContentsThe chart below shows the organizational structure of the SEAT Group as of
December 31, 2002:(ORGANIZATIONAL STRUCTURE OF THE SEAT GROUP CHART)Notes:(1)
    
    Effective from June 2002, SEAT reduced its stake in Italbiz.com from
72.46% to 19.50%.(2)
    
    Of which 16.46% held directly and 61.98% indirectly through Telegate
Holding GmbH, in which SEAT holds a 100% stake.(3)
    
    Of which 99.996% held directly and 0.004% indirectly through Cal Ltd, in
which Consodata S.A. holds a 100% stake.(4)
    
    Of which 0.7% held directly and 66% indirectly through Finanziaria WEB
S.p.A. in which SEAT holds a 60% stake.15Table of ContentsThe following is a chart of the organizational structure of Telecom Italia
Media after the Spin-off:(ORGANIZATIONAL STRUCTURE OF TELECOM ITALIA MEDIA CHART)The company aims to strengthen its presence and visibility in such markets
in co-ordination with the strategy of the Telecom Italia Group. The business
units remaining with Telecom Italia Media to date showed a net loss
from operations and had negative
cash flow. Management believes that thanks to the
better use of resources, both in financial and management terms, Telecom Italia
Media will be able to complete the turnaround process recently started by SEAT
and achieve a net profit within the next two years.The restructuring of the Internet business of Telecom Italia Media focuses
largely on the development of multimedia production, content distribution
business, the portal business and internet access services. Simultaneously
Telecom Italia Media is working on ways to benefit from synergies between the
two TV networks (LA7 and MTV), the Virgilioweb portal and Tin.its Internet
access services.16Table of ContentsThe chart shows the organizational structure of New SEAT after the Spin-off:(ORGANIZATIONAL STRUCTURE OF NEW SEAT CHART)Notes:(1)
    
    Of which 16.45% held directly and 61.95% indirectly through Telegate
Holding GmbH, in which SEAT holds a 100% stake.(2)
    
    Of which 99.996% held directly and 0.004% indirectly through Cal Ltd, in
which Consodata S.A. holds a 100% stake.Effective as of the date of the Spin-off, the spun-off company will be
called SEAT Pagine Gialle S.p.A..New SEAT intends to become one of the main telephone directories
publishers in Europe, with a significant market share in Italy, the United
Kingdom and Germany. New SEAT will seek to benefit from an increased focus on
directories publication and further develop the key word search services
market, particularly in the online sector. In addition, almost all of the
Directory Assistance segment, providing telephone information and call center
services, and the Business Information segment (excluding the stake in Databank
S.p.A.) will be spun-off to New SEAT.The Spin-off plan was approved by the Board of Directors on April 1, 2003
and the Shareholders Meeting on May 9, 2003. With the Spin-off plan, the
Shareholders Meeting approved New SEATs articles of association, elected the
members of New SEATs Board of Directors and Board of Statutory Auditors,
appointed the independent auditors and the decision was taken to request the
admission of listing for the ordinary shares and savings shares on the
Telematico.Sale of Telecom Italias controlling stake in New SEATAs a consequence of Telecom Italias decision that New SEAT was no longer
strategic, Telecom Italia put in place an auction process to sell its majority
stake in New SEAT. On June 10, 2003 Telecom Italia entered into a Share
Purchase Agreement with a consortium of investors formed by BC Partners, CVC
Capital Partners, Investitori Associati and Permira for the sale of
approximately 61.5% of the share capital of New SEAT (including shares
resulting from the exercise by Telecom Italia of the put/call options with
J.P.Morgan for a notional amount of 710,777,200 shares, corresponding to about
6.2% of the share capital of SEAT). The agreed price for Telecom Italias
direct and indirect stake is 3.033 million. The completion of the sale will
be subject to the Spin-off17Table of Contentsbecoming effective, the admission to listing of New SEAT that is expected
to occur by the beginning of August 2003, and the approval of the relevant
anti-trust authorities.New SEAT is expected to maintain an ongoing business relationship with
Telecom Italia, in particular with respect to the following business:
    
    New SEAT will be allowed to continue to use Telecom Italias
database of telephone subscription customers free of charge.
    
    The contract with Telecom Italia regarding the publishing of
advertising and information contents of PAGINEBIANCHE will remain in
force. The agreement sets forth the times and conditions for the
delivery of copies of PAGINEBIANCHE directories to Telecom Italia
pursuant to its universal service obligation.
    
    The contract with Telecom Italia relating to advertising space on
the PAGINEBIANCHE and PAGINEGIALLE.
    
    The contract with a company of the Telecom Italia Group to
categorize business directories, which allows SEAT to assign to each
business customer, irrespective of its telephone service provider, a
specific sector for its listing in the PAGINEGIALLE directory and in
other products and services with directory content.18Table of Contents
Present Organizational Structure and DevelopmentsThe SEAT Group is part of the Internet and Media business area of the
Telecom Italia Group, as shown in the following chart of the Telecom Italia
Groups organizational structure:(ORGANIZATIONAL STRUCTURE OF TELECOM ITALIA GROUP)Notes:(1)
    
    Mobile South America.(2)
    
    Previously included in the International Operations Business Unit.The chart below shows how the organizational structure of the SEAT Group
was re-organized during the course of 2002. For organizational structure of
the SEAT Group after the Spin-off, (Please see Recent Developments).19Table of Contents(ORGANIZATIONAL STRUCTURE OF SEAT)Notes:(1)
    
    Effective from June 6, 2002, SEAT reduced its stake in Italbiz.com from
72.46% to 19.50%.(2)
    
    In August 2002, Kompass Italia transferred its operating activities and
personnel to SEAT. Kompass changed its name to Annuari Italiani S.p.A.
and is no longer operative.(3)
    
    Following a capital increase authorized by Telegate AGs shareholders
extraordinary meeting on November 18, 2002, SEATs direct and indirect
participation in Telegates share capital increased to 78.44%.(4)
    
    On December 28, 2002, the operations and personnel of NetCreations, Inc.;
Pan-Adress Direktmarketing Verwaltung GmbH and Pan-Adress Direktmarketing
GmbH were transferred to Consodata Group Ltd. (UK).(5)
    
    On August 13, 2002, SEAT sold its stake in Data House to Dun & Bradstreet
S.p.A, the Italian subsidiary of the American parent, for 15.9 million.(6)
    
    On August 2002, SEAT Capital Investments was put into liquidation(7)
    
    On November 22, 2002, SEAT sold its stake in VIASAT to ExeFin S.p.A for
2.5 million.
Business OverviewIn light of the proposed Spin-off discussed above, this section is divided
into two parts: the first part provides an overview of the business segments
that will remain with Telecom Italia Media; the second part provides an
overview of the business segments that will be spun-off into New
SEAT.20Table of ContentsTelecom Italia Media Business SegmentsInternet ServicesThrough the Internet services business segment, SEAT offers a full range
of Internet services, comprising Internet access services, portal services,
on-line advertising services; and web services. SEATs Internet services are
provided through Tin.it and Matrix. Please see Item 4. Information on the
Company  History  The SEAT  Tin.it Combination.(SEAT INTERNET SERVICES)In May 1999, SEAT acquired a 60% interest in a newly-formed joint venture,
Finanziaria WEB S.p.A., (WEB), with the remaining equity interest being held
by De Agostini Invest S.A. (De Agostini Invest) In September 1999, WEB
purchased a 66% interest in Matrix S.p.A. for a cash consideration of 8.5
million.The following is a brief overview of SEATs acquisition of Matrix: In
June 2000, SEAT acquired a 0.7% direct stake in Matrix for a cash consideration
of 16.9 million. On September 20, 2000, SEAT signed an agreement to increase
its investment in WEB to 100%, which would involve the acquisition of shares
from De Agostini Invest. Pursuant to the agreement, SEAT was to acquire the
remaining 40% of WEB from De Agostini Invest for a purchase price of 700
million on June 30, 2003. De Agostini Invest also had an option to subscribe
by April 15, 2003 for 166,666,667 newly-issued SEAT ordinary shares by paying
4.20 per share for a total of 700 million. This option was not exercised. On
September 20, 2000, SEAT also entered into an agreement with N.V. Vertico S.A.
(Vertico), a Belgian company at that time owned by Matrixs promoters, Paolo
Ainio and Carlo Gualandri and controlled by ISM, pursuant to which SEAT was to
acquire the remaining 33.3% of Matrix held by Vertico, concurrently issuing
approximately 191 million SEAT ordinary shares in exchange for this stake,
subject to an unavailability clause until December 31, 2003.On July 30, 2001, the Shareholders Meeting of SEAT adopted a resolution
to terminate the clause of the agreement which provided for the acquisition by
SEAT of the remaining 40% of WEB and to postpone from July 31, 2001 to December
31, 2003 the capital increase for the acquisition of the remaining 33.3% of
Matrix. See Item 8. Financial InformationConsolidated Statements and Other
Financial Information Legal Proceedings below for a description of the
related litigation.On August 3, 2001, Telecom Italia acquired through its subsidiary Huit II,
100% of ISM from its founders in exchange for 186,000,000 SEAT ordinary shares
of which 42,802,272 ordinary shares were originally locked up until December
31, 2003. On June 27, 2002 the number of locked-up shares decreased to
26,802,272 shares held by Paolo Ainio and Carlo Gualandri were removed.
Therefore these shares in SEAT are now freely tradeable. ISM currently holds,
through Vertico, a 33.3% stake in Matrix. As a result of this transaction, the
Telecom Italia Group now holds 100% of Matrix. On March 31, 2003 Vertico (now
a company of the Telecom Italia Group) waived its right to the capital increase
in exchange for the 33.3% stake in Matrix.On April 12, 2001, Matrix acquired 24.88% of FreeFinance S.p.A.
(FreeFinance), an on-line brokerage company, from its major shareholders for
1 million. On July 18, 2001, Matrix acquired an additional 64.5% of
FreeFinance for a consideration of 1.7 million. During the first half of
2001, Matrix acquired minority stakes in a variety of companies for a total
consideration of 5 million. As of June 20, 2002, Matrix had placed certain of
these companies into liquidation, and had already sold or was in the process of
negotiating a sale of its stake back to the companies other shareholders.
Matrix had sold Free Finance on February 20, 2003.21Table of ContentsInternet Access ServicesThrough Tin.it, SEAT provides Internet access services to predominantly
residential users and to a lesser extent to small office/home office category
of customers (SOHO) and SMEs Internet users. The SOHO market consists of
businesses that use telephone lines to connect to the Internet, as opposed to
dedicated lines, and is made up of small businesses, generally with one to two
employees, and businesses conducted out of the home. The SME market consists
of businesses having between three and 50 employees. While residential
customers have made up the majority of Tin.its revenues historically, the
SOHO/SME business is growing.Tin.its Internet access products generate revenue from the following
sources:
    
    Subscription Fees. All customers, other than subscribers to the
tin.it Freeproduct, pay subscription fees for basic Internet access.
Customers also pay additional fees for features that can be added to
their premium access service; and
    
    Revenue Sharing Fees. Since the last quarter of 1999, pursuant to
an agreement between the Association of Internet Service Providers and
Telecom Italia, Internet Service Providers, including Tin.it, have been
entitled to share in Telecom Italias revenues from the provision of
metered Internet access services. Accordingly, in 2002, Tin.it
received on average approximately 4.40 from Telecom Italia for each
thousand minutes that its subscribers spent on-line, in line with the
revenue stream in 2001.Tin.it offers three principal access subscription plans:
    
    free dial-up access (tin.it Free);
    
    premium dial-up access; and
    
    ADSL access.At December 31, 2002, Tin.its subscriber base amounted to approximately
6.6 million registered users and 2.2 million active users (defined as users who
connect to the Internet at least once every 45 days).

|                 |  |           |     | 
|---------------- |  | --------- | --- | 
|                 |  | 2002     
|                 |  |          
|                 |  | (millions
|                 |  | of users)
|Registered users |  |           | 6.6 | 
|Active users     |  |           | 2.2 | 

During 2002, SEAT re-launched the Tin.it brand and completely reviewed its
product range. The most important products are the following:

Free Dial-up Access  Virgilio ClubNet. Tin.it launched free access
services in September 1999 under the ClubNet brand. In the second half of
2000, the integration of Tin.its operations within those of the SEAT group
resulted in the launch of the renewed free access service, Virgilio ClubNet,
which was intended to maximize marketing synergies between Tin.its subscriber
base and the Virgilioportal operated by Matrix. This product does not require
the payment of a subscription fee but does require the payment of a local
telephone call for the duration of the connection.

At year-end 2002, Tin.itFree totaled approximately 1.45 million active
users with an average daily connection time of 19 seconds.

Premium Dial-up Access. Premium access is provided to both residential
and business users. These products require the payment of a subscription fee
and provide a wide range of value-added services, depending on the Premium plan
selected. Premium plans offer different combinations of on-line time and
value-added services, such as multiple e-mail addresses and 24-hour customer
support. In addition, a number of value-added services can be packaged with
Premium plans, including services allowing customers to listen to and send
e-mail messages by phone, receive faxes and voice messages by e-mail and to
subscribe to news services by e-mail. In particular, in the
22Table of Contents

second part of 2002 a new offer was launched for Premium Access customers
by providing them access to the premium content of the Virgilioportal
(Virgilio Piú).

At year-end 2002, SEAT had 300,000 active subscribers to Premium Dial-up
Access services.

ADSL Access. ADSL based on consumption (pay-as-you-go) was launched by
SEAT (ADSL Tin.it) and by Telecom Italia (Alice ADSL) with a positive effect on
the customer base for both. The revenues for Tin.it ADSL are the subscription
fees paid by its customers. Based on a commercial agreement, Telecom Italia
pays to SEAT a 20 activation fee and a 50 annual subscription fee for each
Alice user (Telecom Italia customers), because Seat is providing services such
as authentication, second level customer care for technical matters and
Virgilio Più services (e-mail, web space, video call, virus protection and
exclusive contents).

ADSL based on consumption consists of two alternative product packages:
ADSL Tempo and ADSL Giornaliero. The ADSL Tin.it customer pays a monthly
fee of 9,71 (Tempo) or 18,71 (Giornaliero) plus the Internet dial-up fee of
0,015 per minute (Tempo) or 0,05 per each day of connection (Giornaliero). At
the end of 2002 the users of ADSL Tin.it based on consumption are almost 27% of
the total ADSL Tin.it users.

At year-end 2002, SEAT had 53,000 active subscribers to the ADSL Access
services.

Portal Services

SEAT provides portal services through Matrix, which operates the Virgilio
portal.

Virgiliois a leading Italian portal, with approximately 5.3 billion web
page views in 2002, that caters to the Italian-speaking community on the
Internet. Management believes that Virgilio, which has been on-line since July
1996, is one of the most complete Italian portals. It contains a search engine
and a website index, and it centralizes services in various interest areas such
as stock quotes, weather forecasts, TV guides, games, chats, advertisements and
shopping. In order to simplify the use of information, Virgiliooffers
personalized, interactive services that correspond to the requirements of
individual customers. Virgilioderives its revenues principally from
advertising, which consists of both displaying advertising banners in its web
pages and directing Internet traffic to websites designed, maintained or
promoted on its network. In 2002, Virgilioreceived a yield per thousand pages
of 2.50 which represents the advertising revenue per thousand pages for the
year 2002.

Virgilioacts as a traffic and visibility aggregator for its advertisers,
clients and partners on the Internet where the portal is a real distribution
platform to be used to reach Italian consumers. Its objective is to maintain
its leading position through a publishing approach favoring an open platform
policy: users logging on to Virgiliohave access to selected content and
services while they have complete visibility and access to all the content
available on the Internet, including those outside the portal, thanks to a
comprehensive directory of sites available in Italy and to the navigation paths
prepared by Virgiliosstaff.

During the course of 2002, new features were added and a range of new
products was launched. A new format was provided to the home page, interaction
with content such as news and resources (such as journalists and artists) from
the Television business segment was implemented, news management services were
introduced for mobile users, and premium content sections (containing games,
news, music, cartoons, real time stock quotes) were developed in a new section
of the portal (VirgilioPiú) restricted to paying subscribers of the Internet
Access Services offers to increase customer loyalty.

Moreover, a new priority search engine (PG Net) was launched in June 2002.
For this service Matrix receives from SEAT a fee for each subscriber present
on the priority search engine.

On April 30, 2002, Virgilio.it began distributing an on-line version of
Corriere della Sera, a leading Italian newspaper.

23



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##### Table of Contents



On-line Advertising Services

Matrixs Active Advertising division is a leading on-line advertising
agency in Italy and, as of June 13, 2003 had arrangements with approximately
18 Italian websites to provide advertising services. In 2002, Active
Advertising sold approximately 162 million impressions (excluding Virgilios
impressions).

Web Services

SEAT provides web services through Tin.it and Matrixs Matrix
Communication division.

Tin.it provides different packages that enable SME and SOHO customers to
establish a presence on the Internet or provide e-commerce services. In
particular, Tin.its Easyand Villagepackages provide SME and SOHO customers
with the ability to buy web links, template websites (including design and
hosting), domain names, and to establish and manage e-commerce capabilities on
the Internet.

Matrix Communication provides a wide range of web services, including
communication consultancy, website construction and maintenance, and technical
assistance.

Pursuant to its strategic plan (which included a change in SEAT Groups
strategy for the business-to-business market) in the first half of 2002, SEAT
sold its 46.4% stake in Mondus, a business-to-business service provider which
operates a European marketplace on the Internet for SMEs to the founders for
19 million.

Other Businesses and Assets

In connection with the Spin-off of Tin.it and the SEAT/Tin.it merger,
Telecom Italia and its subsidiaries contributed the following businesses to
SEAT:



| |  |  | 49% Interest in ESRI Italia. The principal business of ESRI Italia
is the distribution and customization throughout Italy of territorial
and environmental software applications and information systems that
utilize Geographic Information System, or GSI technology.                                                          
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | VIASAT S.p.A. VIASAT S.p.A. was formed in 1998 as a 50%-50% joint
venture between Telespazio, at which point in time was Telecom Italias
wholly-owned satellite telecommunications subsidiary, and Magneti
Marelli S.p.A. VIASAT is a provider in Italy of satellite automotive
telecommunications services in Italy, including:



| |  |  | an anti-theft satellite system to track a missing vehicle and notify authorities of the theft;                 
| | - |  | ---------------------------------------------------------------------------------------------------------------
|
| |  |  | security and medical assistance in the event of an emergency; and                                              
|
| |  |  | infomobility services which allow users, through the GSM
network, to determine the route to their destinations.

On November 22, 2002 SEAT sold its 50% stake (33.54% directly owned and
16.46% owned through its subsidiary Finsatel) in VIASAT to ExeFin S.p.A for
2.5 million.

Project Tiglio

On May 24, 2002, the Telecom Italia Group and the Olivetti Group reached
an agreement with Pirelli & C. Real Estate S.p.A., Pirelli S.p.A., MSMC Italy
Holding B.V. and Popoy Holding B.V. with regard to the so called Project
Tiglio, aimed at integrating real estate assets and entities of the various
groups companies involved in real estate services and subsequently maximizing
their value.

According to the terms of the agreement, the Telecom Italia Group in
October 2002 transferred property and staff in charge of real estate asset
management activities to two newly founded companies. In particular, SEAT
Groups contribution through the disposal of real estate assets amounted to 53
million, offset by its purchase of 2% of Tiglio I s.r.l. for 10,613 and its
loan to Tiglio I s.r.l. of 2,663. Please see Note 11 to the Consolidated Financial
Statements included in this annual report for more information.

24



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##### Table of Contents



Competition

The Italian markets for Internet access, portal services and on-line
advertising are highly competitive. In addition, these markets are still in an
early stage of development and grows slower than anticipated although the
barriers to entry are relatively insubstantial. SEAT expects that intense
competition in these areas will increase as:



| |  |  | the number of strategic alliances among its competitors continues
to grow;                                                                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Internet use in Italy continues to grow slowly and the Internet is
generally not used to make purchases in Italy, although 31% of Italian
households have access to Internet;
|
| |  |  | technological developments introduce new platforms for Internet access; and                                                                                                  
|
| |  |  | an increased number of global and local companies enter these markets.                                                                                                       

With respect to SEATs Internet access services, Tin.its principal
competitors are Infostrada-Wind and Tiscali. Tin.its market share in the
dial-up and ADSL segment as of December 31, 2002 was 22% to the total market
share comprising both the business and consumer market of dial-up, ADSL and
fiber markets and 27% in the consumer segment.

In the market for portal services, based on the number of page views,
Virgiliosprincipal competitor is IOL-Libero, a subsidiary of Infostrada-Wind.
Other competitors include MSN, Supereva, Tiscali and Yahoo!.

SEAT and Active Advertising compete for Internet advertising with
advertising agencies representing competitive portals and vertical sites.

The principal competitors of Tin.it and Matrix Communication for web
services include Datanord, Inferentia and E-Tree-Etnoteam.

Human Resources

The number of employees in the Internet business segment decreased from
981 at December 31, 2001 to 569 at December 31, 2002.

Office Products and Services

Through Gruppo Buffetti and Cipi, SEAT distributes office products and
services in Italy and operates in the sector of promotional articles and gifts
for businesses.



| |                                    
| | -----------------------------------
| | (SEAT OFFICE PRODUCTS AND SERVICES)

Buffetti Group

Gruppo Buffetti is a distributor of office products and services in Italy.
The primary target groups are professionals, retailers, SOHO and SME. The
Buffetti brand name has been present in the Italian market for over 150 years
and enjoys of a 93% brand awareness. A large portion of the products and
services offered are designed and sold under Gruppo Buffettis own brands,
while their actual production is mostly outsourced to third parties. Products
are distributed mostly through Gruppo Buffettis nationwide franchise network
and its new direct-to-business agency network, independent retailers and
through the Internet.

At the beginning of 2002, Gruppo Buffetti underwent a significant internal
reorganization. The Group was restructured into three internal operating
divisions (Sales, Marketing and Consumer Products). During the course
of

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2002, Buffetti completed the reorganization of its corporate computer
system, restructured the entire system of the supply chain and further
developed the interface with the network of Buffetti franchise outlets.

In accordance with the 2002-2005 plan announced in February 2002, SEAT
enhanced Gruppo Buffettis strategic role as a key distribution platform for
products and services for both the SEAT Group and the Telecom Italia Group.
Pursuant to this strategy, Buffettis management made efforts to develop
Buffetti as a one-stop shop for its customers. This was made possible as
Buffetti focused on higher margin services, such as software, print-on-demand
services, promotional items and digital signature software packages. Buffetti
increased its interaction with other business segments of SEAT and Telecom
Italia and thus offers, communication and business solutions such as mobile
telephone connections, provided by and marketed under the brand name of Telecom
Italia Mobile and Internet services (through Tin.it), professional software,
Yellow Pages products and services, professional publishing and electronic
gadgets.

In 2002, Gruppo Buffetti opened in Italy two cash-and-carry stores one in
Rome and the other in Altopascio (Lucca) and in December its first megastore in
Padua. Gruppo Buffetti intends to open additional stores of this kind. These
stores have the advantage to offer customers (especially SOHO and SME) a whole
variety of business solutions together with a show room and the products of
Gruppo Buffettis most important suppliers. At the end of 2002, the number of
sale outlets of Gruppo Buffetti was 1,011 of which 324 operated under the name
of Buffetti Businessand 687 under Buffetti. Gruppo Buffettis main products
are:



| |  |  | Business Solutions. Gruppo Buffettis business solutions products
include printed business forms, professional publishing and
professional software. Gruppo Buffetti publishes a big variety of
books and magazines covering a wide range of business topics under the
Gruppo Buffetti Editore brand. In order to satisfy all business topics
and their needs these products are supported by databases on CD-ROM and
Internet pages. At the beginning of 2003 Gruppo Buffetti is setting up
a commercial partnership with a strategic publishing company. Gruppo
Buffettis specialized software products include professional packages
with features for tax planning, accounting, inventory, sales and
personnel management;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Traditional Office Products. Gruppo Buffetti offers traditional
office products such as filing and organizing products, presentation
materials, stationery, writing instruments, gifts and leather
accessories;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | Consumer IT Products. Gruppo Buffetti offers a wide range of
standard consumer and professional information technology products such
as software, personal computers, printers, fax machines and various
computer accessories; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | Telecommunications Products. Gruppo Buffetti distributes TIM
mobile telecommunications products, including handsets, accessories,
subscriptions and rechargeable SIM cards. Gruppo Buffetti also
distributes Telecom Italia fixed telecommunications products, such as
voice and data services, Internet connections and e-commerce solutions
for small businesses.                                                                                                                                                                                                                                                                                                                                                            

Gruppo Buffetti plans to keep approaching the market as a full service
provider for small- and medium-sized companies by offering a wider range of
products through its franchise shops. Gruppo Buffetti is also implementing its
plan to increase its sales on the Internet. Gruppo Buffetti is investing in
web technology to provide customers online custom catalogues and information
services through the three sales channels: the nationwide franchise network,
independent retailers and the internet.

Cipi S.p.A.

Cipi produces and distributes clothing, stationery, address books,
diaries, and bags for offices and professionals. Cipi also offers its products
through its website. Cipi represents approximately 9% of the total Office
Products and Services net revenue.

Competition

During 2002, the products and office services market was subject to strong
competition due to the growing presence of large national and multinational
operators (selling directly to the end-customers), a high level of
fragmentation of the points of sale (about 12,000 in the Italian domestic
market), an increase in sales through
26Table of Contentsspecialized channels and a weakening demand from retail customers. The
market did not have a uniform trend in its various product segments. As of
December 31, 2002, Gruppo Buffettis market share was approximately 19% on
printed forms, 18% on filing, 6% on commodities (such as stationery and paper)
and 4% on software related to SMEs and professional segments.Gruppo Buffettis main competitors are Corporate Express, Karnak,
Errebian, Data Ufficio and Office Depot. In particular, Office Depot operates
in the Italian market through the Viking Office products (direct marketing
catalogs). In addition Office Depot has contract business operations under its
own brand name (Office Depot) which targets medium to large-sized corporate
accounts through a specialized sales force.Additional competitors are SEATs suppliers such as 3M, and Bic with which
SEAT has no exclusive contract and specialized software companies such as Team
System, Zucchetti and Dialog.Human ResourcesThe number of employees in the Office Products and Services business
segment increased from 495 at December 31, 2001 to 503 at December 31, 2002.TelevisionThe Television business segment was formed in 2001 and consists of the La7
and MTV Italia television channels. SEATs management decided to form a
separate segment for television services in order to rationalize costs and
allow a better interaction with the other business segments for its news
oriented and all-music channels.(SEAT TELEVISION BUSINESS)Acquisition of Cecchi Gori CommunicationsPursuant to an agreement dated August 7, 2000, SEAT agreed to purchase TMC
(now HMC) the owner of the TeleMonteCarlo television network, from the Cecchi
Gori Group for an aggregate amount of 516 million. TMC is the third-largest
television network in Italy, broadcasting two television channels, TMC
(recently renamed La7) and TMC2 (recently renamed MTV Italia). The acquisition
of Cecchi Gori Communications added a new distribution platform for SEATs
services and allowed SEAT to explore potential synergies with its Internet
services. The Internet portal Virgiliobroadcasts via Internet La7 and some
contents produced by MTV can also be obtained on Virgilio Piú. It is also
possible to participate in an on-line discussion forum, regarding the various
topics analyzed and discussed in a talk-show called the otto e mezzoshow
broadcasted on La7.On April 27, 2001, the ordinary and extraordinary shareholders meeting of
Cecchi Gori Communications approved the companys annual report for the fiscal
year 2000 and resolved to reduce the share capital to zero and then to increase
it up to the original amount in order to cover its losses shown on the
financial statements for the fiscal year 2000. SEAT subscribed to the portion
of the capital increase necessary to maintain its 25% interest
by27Table of Contentspaying approximately 21,175 and also advanced approximately 64,506 for
Cecchi Gori Media Holdings 75% portion.As of June 4, 2001, the prescribed deadline for subscribing to the capital
increase, Cecchi Gori Media Holding Group had failed to make a payment with
respect to its share capital or provide notification of its intent to do so.
Accordingly, its shares in Cecchi Gori Communications were cancelled and SEAT
currently owns 100% of the share capital of Cecchi Gori Communications (now
renamed HMC).As described below under Item 8. Financial Information  Consolidated
Statements and Other Financial Information Legal Proceedings, the Cecchi Gori
Group and its controlling company have filed claims challenging the shareholder
resolutions approving the financial statements for the year 2000 and the
recapitalization and commenced an arbitration proceeding claiming rescission,
invalidity or termination of the purchase and sale agreement of Cecchi Gori
Communications and also claiming damages.In February 2001, Cecchi Gori Communications reached an agreement with
Viacom Networks Europe Inc. (the Viacom Group) providing for the acquisition
of MTVs Italian business by Beta Television (now MTV Italia) from the Viacom
Group for a consideration of approximately 6,000 and for the acquisition by
the Viacom group of 49% of Beta Televisions share capital through the
subscription to a capital increase.Pursuant to the 2002-2005 business plan, the reorganization of the
companies belonging to the Telecom business segment was completed at the end of
2002. The two subsidiaries H.M.C. Broadcasting S.r.l. and H.M.C. Produzioni
S.r.l. were merged with and into TV Internazionale S.p.A., the company
controlled by HMC, that holds the broadcasting license for La7, which now acts
as the holding company for MTV Italia S.r.l.. Moreover, the programming format
was completely reviewed and rationalization measures were taken to reduce
costs.More recently, in March 2003, TV Internazionale S.p.A. was awarded by the
ICA a license for the testing of the digital terrestrial television, or DTV.
DTV is a recently introduced means of transmitting pictures and sound which
comprise a television program, together with other services like text and
Internet interactivity. DTV offers many advantages over the analog
television transmission system. Because the information needed to construct a
television program is coded into a digital stream of ones and zeroes 
similar to the way a computer works - the technical quality can be improved and
made more consistent. The digital stream takes up much less capacity in the
airwaves, so that the space needed in the past for just one analogue channel
can now carry up to seven different programs. This allows for a larger
selection of programs for a digital television customer. DTV also allows for
access to a wider range of information: digital text is much clearer than the
old teletext system. Some digital services also provide access to Internet
pages through the television set.SEATs current plans are to test-preview service among a pool of selected
users. No decision has yet been made regarding the beginning of the roll-out.
DTV services are currently regulated at the European Union level. Please see
under RegulationTelevision.La7After its acquisition in 2000, the La7 television channel was providing
generic content in competition with the other national television networks
(mainly the state-owned RAI television channels and the channels of Mediaset
S.p.A., a company that is part of the Fininvest Group). Following a decline in
advertising revenues and after an evaluation by SEAT of the costs of competing
against other generic-content television channels, in September 2001 SEAT
decided to implement a different strategy for its television services by
changing the editorial content of La7.Pursuant to its strategic plan, La7 has become a focused television
channel, providing news-oriented programming with prime time entertainment
programming in the evenings targeting young professionals, and is currently
interacting with the Internet Services business segment in order to provide
on-line news information through the use of video-streaming technology. La7
started broadcasting under the new format on March 18, 2002.The change in format of La7 forced SEAT to rescind contracts and
agreements with employees and professionals hired under the pre-existing plan.
Please see Item 5. Operating and Financial Review and Prospects  Year Ended
December 31, 2001 Compared to Year Ended December 31, 2000  Operating Loss
for a discussion of the economical consequences of such rescissions.28Table of ContentsMTV ItaliaMTV is a television channel providing music programs and programming for
young people (11-35 years segment) on a 24-hour basis. The brand MTV is a well
known brand in the music industry and in the television network business. MTV
Italia started broadcasting its programs on Beta Television frequency on May 1,
2001. MTV Italias strategy is to increase brand awareness and customer
loyalty in the specific market segment in which it operates.MTV continues to have its own advertising agency acting through its
subsidiary MTV Pubblicità S.r.l.Outsourcing of Advertising ServicesOn November 9, 2002, SEAT reached an agreement for the outsourcing of its
advertising agency services to Cairo Communication S.p.A.. The agreement
provides for Cairo Communication to place La7 advertising space among potential
clients for the next three years. The outsourcing contract allowed for the
ending of the operations of the internal advertising agency, H.M.C. Pubblicità
S.r.l., which has been put into liquidation.MTV continues to have its own advertising agency acting through its
subsidiary MTV Pubblicità S.r.l.CompetitionThe total market share measured by audience in Italy in 2002 for La7 and
MTV Italia is approximately 3%. As per the year 2001, the reduction in
advertising spending in 2002 reflects the impact of the economic downturn on
investments and expectations by the companies and customers. According to
market research conducted by AC Nielsen, the television advertising market in
2002 generated a total of approximately 3.900 million in revenues compared to
3,392 million in 2001.In recent years, the use of satellite receivers and the presence in the
Italian market of pay-per-view program providers has increased. Consequently,
La7 faces competition from all-news channels broadcast by Italian competitors,
as well as foreign competitors, who have access to the Italian market. Such
channels include Italian channel RAI, RAINews (owned by state-owned Italian
television RAI), Mediaset and the U.S. networks CNN and Fox News.MTV Italia competes with established Italian and foreign music channels
broadcast on both digital satellite and analog terrestrial technology, such as
ReteA-All Music, MatchMusic, VIVA, and Magic TV.Human ResourcesThe number of employees in the Television business segment increased from
559 at December 31, 2001, to 591 at December 31, 2002.Professional Publishing(GIALLO PROFESSIONAL PUBLISHING S.p.A)29Table of ContentsThe Giallo Professional Publishing Group, which was established during the
course of 2000, has specific responsibility in this business area with
interests in companies publishing specialized information in the following
sectors:
    
    in the hotel, restaurant and entertainment industry (Ho.Re.Ca):-
    
    through Mark up, an Italian monthly publication providing
specialized information on the economics, strategies and policies of
goods and services; and-
    
    Fuoricasa, an Italian monthly publication providing
specialized information on entertainment.
    
    in electronics, information technology and audiovisual
communication through Gruppo Editoriale JCE S.p.A., the publisher of
magazines which specialize in telecommunications, electronics and
computers;
    
    in ceramics, architecture and urban design; through Gruppo Faenza
Editrice, the publisher of a magazine and books specializing in
architecture and house décor which has operations in Italy and Spain;
and
    
    in tourism with reference to in- and outgoing tourism activities,
where the offer of each country and regional area is matched with a
tour operators request through TTG Italia S.p.A., the publisher of
magazines specializing in business travel and tourism and in the
organization and promotion of events such as exhibitions and road
shows.Meanwhile the Giallo Professional Publishing Group also offers services
and expertise in the Stands & Exhibitions business.The Professional Publishing business segment has been among the worst-hit
segments of Telecom Italia Mobile. SEAT is evaluating the possibility of
disposing of its Professional Publishing-activities because of the severe
contraction of investments by advertisers during all of 2002.CompetitionThe total Italian business market amounts to 560 million.In 2002, the volume of the Italian publishing market remained unchanged
compared to 2001 with a total of 500 million in revenues. The market share of
the companies in the Professional Publishing group was approximately 7.5%,
followed by Agepe and Tecniche Nuove with 5.5% each, and Reed Elsevier with 5%.
The other competitors all have less than a 5% market share.Human ResourcesThe number of employees in the Professional Publishing business segment
decreased from 163, at December 31, 2001 to 155 at December 31, 2002.OthersGiallo VoiceSEAT provides call center services through four call-centers (IMR S.r.l.,
Teleprofessional S.r.l, OPS S.r.l and Call Center Services S.r.l.).
Teleprofessional S.r.l., OPS S.r.l. and Call Center Services S.r.l. will remain
with Telecom Italia Media after the Spin-off. Giallo Voice provides services
for the Directories business segment. Giallo Voice acquired a majority stake
in each of the four call-centers during the course of 2001 for a total
consideration of 12,700. Pursuant to contractual provisions of the purchase
agreements of the four call-centers in June and July 2002, Giallo Voice
increased its stake in IMR from 51% to 100%, in Call Center Services from 66%
to 100% and in OPS from 51% to 66%. Call Center Services S.r.l. was
subsequently merged with and into Giallo Voice in December 2002.Teleprofessional S.r.l. is based in Monza and, for the past 15 years, it
has offered mainly telemarketing services; OPS S.r.l. is based in Milan and
specializes in technological innovation for call center services; Call Center
Services30Table of ContentsS.r.l., now part of Giallo Voice, is located in Cernusco sul Naviglio,
Milan, and focuses on call center services for the businessto-business market.On January 20, 2003 Giallo Voice S.p.A. entered into a purchase agreement
to purchase the remaining 34% of the share capital of Teleprofessional S.r.l.
(for a purchase price of 1,450,000). On May 26, 2003 the merger agreement was
entered into and both companies merged.With these three companies, Giallo Voice can rely on approximately 450
call-center stations that already offer services aimed particularly toward
companies in information technology and in the telecommunications, manufacture,
publishing, non-profit and financial industry.Giallo Voice offers such telemarketing services to small-and medium-sized
enterprises (SME) and to large companies that outsource their customer
relations management services.DatabankSEAT provides business information services. After the spin-off the
services provided by Databank would remain with Telecom Italia Media. Databank
is an Italian company which specializes in customer asset improvement and
industry forecasts by providing information, surveys, research and analyses
related to 350 economic sectors, 1,500 markets and 10,000 companies and their
clients. It is also involved in competitive intelligence, analyzing and
evaluating the services on markets and distribution channels. Similarly to
Consodata for the French market, Databank provides intelligence and data in
relation to the Italian Internet market (especially Internet sites, rankings).New SEAT Business SegmentsDirectoriesThrough the companies of the Directories business segment SEAT publishes
printed dual on-line consumer classified directories in Italy and the United
Kingdom and provides other services such as special editions by topic and
operator-assisted or on-line research services.(SEAT DIRECTORS)The Yellow Pages  (Pagine Gialle)SEAT sells advertising with multicolor formatting in its three Yellow
Pages products principally to small and medium-sized businesses, operating on a
local or regional, rather than a national basis. In 2002, SEAT published 202
editions plus 5 Pagine Gialle Professionaleditions of its Yellow Pages for a
total of 296,000 paying advertisers. The three Yellow Pages products are as
follows:Business-to-Business Yellow Pages  (Pagine Gialle Lavoro). Pagine Gialle
Lavorois a Yellow Pages directory that lists the name, address and telephone
number of each business customer of Telecom Italia. The listings are organized
in approximately 2,200 headings. In 2002, SEAT published and distributed 87
annual editions31Table of Contentsof Pagine Gialle Lavorocovering various cities and provinces within
Italy. Each Italian business customer receives one copy of Pagine Gialle
Lavoroper telephone line at no cost.Business-to-Consumer Yellow Pages  (Pagine Gialle Casa). Pagine Gialle
Casais a Yellow Pages directory that lists the name, address and telephone
number of those Italian businesses that SEAT characterizes as businesses
providing goods and services to residential consumers. The listings are
organized into approximately 1,000 categories. In 2002, SEAT published and
distributed 202 editions of Pagine Gialle Casacovering various neighborhoods,
towns, cities and geographic regions.Business-to-Business Regional Yellow Pages  (Pagine Gialle Professional).
Pagine Gialle Professionalis a Yellow Pages directory that lists the name,
address and telephone and facsimile numbers of businesses selected by size and
type of company. In 2002, SEAT published and distributed 5 editions of Pagine
Gialle Professional, one for each of the following regions: Northwestern Italy
comprising Piemonte, Valle dAosta Lombardia Ligura, Northeastern Italy
comprising (Friuli, Trentino Alto Adige and Veneto), Emilia Romagna, Lazio and
Umbria. Pagine Gialle Professionalis provided in print and CD-ROM versions at
no cost to approximately 900,000 major Italian businesses.Starting with the 2002 edition for the listings in the city of Rome, SEAT
launched a new format and a new graphic design for the Yellow Pages. The
directories are printed in a new font (Nomina), which was first used for the
White Pagesin 2001. A new four-color process on white paper (White Spot
Light) permits better visibility of the advertisements. The Home and
Office volumes have been redesigned: new logo, new covers, new graphics and
the use of the White Spot Light technique. The printing is done on white paper
that is then colored yellow, ensuring greater visibility for advertisers. The
advertisements have a lighter print compared to the background of the page
which in connection with a recently created typeface makes research on this
database easier.Greater specialization and more detailed information were added by
introducing over 200 new categories that respond to the most recent market
requirements (for example, e-commerce, online banks, Internet cafes and
cyberpubs, health, etc.). In addition, to make it easier to locate nationally
known brands, the Trovamarche, or brand-finder index, has been overhauled and
optimized.Based on the high use and enjoyment levels of several sections found in
the old editions, new sections have been added, such as the Restaurant Guide,
with information on venues categorized by specialties and cuisine, and the
section on Bars & Nightspots, following the model of some of the most famous
and widely circulated national guides. The new format and the enhanced
features of all the editions of the Yellow Pages(amounting to 202 editions)
will be available by September 2003. A new advertising campaign was launched
in October 2002.Talking Yellow Pages  (Pronto Pagine Gialle). 89.24.24 Pronto Pagine
Gialle: your personal assistant with you 24 hours a day.89.24.24 is the
phone voice portal that operates 24 hours a day. Through 89.24.24 Pronto
Pagine Gialle, consumers can find information about economic subjects, flight
and train schedule, chemist shops, cinemas, weather, traffic, airlines,
airports, museums, theatre shows and live music concerts. All information is
retrieved and delivered by a member of the service staff who is able to better
understand consumer needs and looking for the most suitable match closes to the
caller, or other information, properly matching that need.The members of the service staff are professionally trained to respond to
callers needs. They interact with the consumer and take care of the search
and try to find the best solution working on a complete and updated data base.Advertisers describe their activity through keywords such as: product and
services, brands, time schedules, etc. Each keyword accomplishes two things:
On the one hand it can be used as input for the search engine to find the
information, on the other hand it is the most precise way to describe consumer
needs. Finally each advertiser has the choice of either being freely listed or
ask for a priority listing.89.24.24 Pronto Pagine Gialle gives callers a range of additional services
such as: maps via sms, call completion, information delivery via sms, e-mail
and fax.89.24.24 is reachable by every wire line and mobile carrier in Italy.
32Table of Contents89.24.24 Pronto Pagine Gialle business model is based on a double revenue
stream: on the one hand revenues from advertisers and on the other hand from
phone calls.SEAT also applies technology to the development of value-added services
for its existing telephone directory products. For example, SEAT uses a
digital map database to support delivery businesses in areas already covered by
an electronic map.On-Line Yellow Pages (Pagine Gialle.it). Pagine Gialle.itis an
Internet-based product through which users can search an on-line directory for
descriptions and information on approximately 150,000 advertisers and also
limited listing information for approximately 3 million Italian businesses.
Similar to Pagine Gialle, the database is accessible through subject areas
within categories such as restaurants or hotels. Pagine Gialle.itallows a
subscribing business advertiser to include information on its products and
services as well as links to its web page. Following the upgrade of Pagine
Gialle.itthrough the introduction of an enhanced search-engine and a link to
the search engine of the Virgilioportal (Virgilio.it), in October 2002 the
website underwent significant restyling with the introduction of a new format
and layout, enhanced search engine features and more areas divided by topic.Pursuing a closer integration with the internet platform, in June 2002
SEAT launched PG Net, a new product which offers to Pagine Gialle.itcustomers
the possibility to gain greater visibility with respect to other advertisers in
the Virgilio.it database.The White Pages  (PagineBianche)PagineBiancheis a directory containing the names, addresses and telephone
numbers of Telecom Italias and other main Italian telecommunications
operators business and residential customers. It is published with two-color
formatting available for advertisements. SEAT publishes a total of 103
editions of PagineBianchecovering each city, town and geographic region of
Italy. SEAT owns PagineBianche, sells advertising in PagineBianche, retains
100% of the advertising revenues, and bears all production costs. In
accordance with Italian law, Telecom Italia continues to distribute
PagineBiancheand pays for the distribution. As part of the conditions to the
SEAT-Tin.it combination, SEAT will have to put out for tender the sale of
advertising for PagineBianchetelephone directories beginning January 1, 2008.PagineBiancheis provided to Telecom Italias and other main Italian
telecommunications operators residential and business customers and contains
approximately 600,000 advertisers. The total circulation of PagineBianchein
2002 was approximately 27 million copies.In accordance with a European Union directive and the related Italian
decree, Italian telecom operators must provide access to their telephone
subscriber databases to independent telephone directory operators and Italian
telephone subscribers must be provided with at least one universal directory
containing the complete telephone listings of residential and mobile
subscribers within their local geographic area. SEAT launched its first
edition of the universal directory in October 2002 starting with the Rome
edition. In the Rome edition, the new directories include subscribers to the
services of Telecom Italia, as well as those working through Infostrada,
Albacom, Atlanet, Colt and Fastweb. In the 2003 editions the White Pages
contained the information of 16 different telecom operators. The directories
will be distributed by Telecom Italia with the usual procedures.The cover features brand new graphics, plus a new logo. One of the most
important innovations of the new printed directories is that, in addition to
the new graphic layout of the advertisements and a new font to make the
directories easier to read, there is also a section where the telephone
carriers can publish their subscription terms and a list of services. In the
middle of the volume, there are two new sections: PAGINEBIANCHEINFORMA,
listing emergency and public service numbers, and GESTORINFORMANO, with more
commercial information about the services and offers of the various carriers.Thanks to an innovative integrated multiplatform system, Pagine Bianche
will be available to everyone anywhere  on paper (with the new telephone
books), on the Web (at PagineBianche.it, also in the WAP and PDA versions), on
CD (in two versions, one for businesses and one for private customers) and
through the voice service at 89.24.24. The advantages of the system are
constantly updated information and easy use. As of June 13, 2003, SEAT
publishes 103 editions of the White Pages.33Table of ContentsOn-Line White Pages (Pagine Bianche.it). Pagine Bianche.it is an
Internet directory assistance service. It contains the complete and updated
telephone directory of all Italian subscribers, 19 million residential
customers and 4 million businesses, and performs rapid searches by name or by
telephone number at the national, provincial and local levels. The service is
free of charge and was launched in September 1999. SEAT offers advertising
space on PagineBianche.it. For a fee, the subscriber can add to the already
available information contained in the White Pages listing additional
information such as e-mail addresses, mobile phone numbers and other
information of the listed business or activity. Starting in June 2003,
PagineBianche.itis sold in bundling with the printed version of PagineBianche;
the same advertisement will appear on paper, on-line and on CD Rom.TDL InfomediaTDL Infomedia, through its subsidiary, Thomson Directories, is the second
largest directory publisher in the United Kingdom, with a market share of
approximately 14%. Thomson Directories distributes 173 editions of the Thomson
Local Directoryand one new WebFinder directory, which have a combined
circulation of over 22 million copies covering approximately 85% of the United
Kingdoms population. Thomson Directories, proprietary business database is
compiled by contacting the listed businesses in order to verify and modify, if
necessary, the data obtained from a variety of sources, including British
Telecom.In addition to printed directories, Thomson Directories also offers
on-line directory advertising through the Internet sites ThomsonLocal.com and
ThomWeb.co.uk and business information products. Thomson Directories Internet
sites offers comprehensive directory services and provides access to a database
of approximately 2 to 3 million businesses in the United Kingdom.Internet advertising packages sold on ThomWeb.co.uk and ThomsonLocal.com
comprise online business listing with a more prominent position and an
enhanced listing section and links to the advertisers website, an online
version of the customers printed advertisement and guaranteed placement in the
preferred listings section.Business Information products consist of the sale of information from
Thomson proprietary database relating to U.K. businesses to both wholesale and
retail customers. In the wholesale category, sales are relatively concentrated
to a small number of large companies which basically pay license fees to have
access to Thomson proprietary database. Products for retail customers consist
in tools such as Business Search Pro, which is a CD-ROM providing detailed
information on 2.1 million business listings in the U.K. and enabling customers
to download data on a pay-as-you-go basis and new connections.As of December 31, 2002, Thomson Directories had approximately 93,000
print directory customers, approximately 23,000 on-line directory customers
(fully overlapping the print directory customers) and approximately 5,500
business information products customers.TDL Infomedia continually seeks to introduce new products and features in
order to create incentives for customers to renew their prior years
advertising subscription and increase their expenditure on TDLs products.
Typically these product innovations are rolled out over a two to three year
period. In 2000 TDL launched color advertisements in the classified section of
39 directories. The roll-out of such color advertisements was extended to an
additional seven directories in 2002 and it is intended to be rolled out across
eleven more directories in 2003.In December 2002, TDL published a new directory of web addresses,
WebFinder, which was distributed throughout Central London. This product
supported the launch of the new WebFinder.com online search engine, which took
place in January 2003.Regarding the Internet strategy, in April 2002, TDL launched a new
proprietary Internet site, ThomsonLocal.Com, complementing the existing
Thomweb.co.uk. This local information portal features an enhanced business
finder, the WebFinder search engine and a search nearby facility, as well
as local area information.During 2002, TDL entered into separate paper and printing agreements with
3 paper suppliers based in Sweden and Finland and 2 printers based in Italy and
Sweden. Each agreement is due to expire in 2004 (except for the paper
agreement with one of the Swedish suppliers (Holmen A.B.), which is due to
expire in 2005) with fixed rates.34Table of ContentsThe U.K. classified directories market has been subject to review by the
U.K. Office of Fair Trading. Following the most recent review, on May 11, 2001
the Office of Fair Trading announced that the price cap limiting annual price
increases in advertising rates by Yell Group Limited, which is viewed as the
incumbent market leader, should be tightened from Retail Price Index minus 2%
to Retail Price Index minus 6% for directories published from January 2002.
Although TDL was not required to offer any similar undertaking, the cap imposed
on Yell Group Limited has the indirect effect of constraining TDLs ability to
increase advertising rates.In October 2002, SEAT increased its stake in TDL Infomedia from 99.6% to
99.73% following the acquisition of A Investment Shares from the Management
of TDL Infomedia in accordance with the Share Purchase Agreement entered into
among SEAT and Apax, 3i, Advent and participating management and employees.EureditEuredit publishes the Business-to-Business European Directory 
(Europages).SEAT is the exclusive Italian licensee for the sale of advertising in
Europages, a European business directory containing information on
approximately 120,000 exporters of goods and services for the printed version
and 500,000 suppliers for the on-line and CD-ROM versions. Businesses are
classified among more than 600 headings. Europagesis published in six
languages in either print version or on CD-ROM and distributed at no cost to
each listed company and selected exporters in 33 countries.Euredit offers advertising space on Europagesthrough both sales agents in
26 countries and a telephone marketing program from Euredit headquarters in
Paris, France. SEAT, earns commissions for the sale of advertising space in
Europages.Euredit also sells on-line advertising space in its proprietary site,
Europages.com, in which the Euredit database consisting of approximately
500,000 business addresses is available for consultation. The site, available
in 16 different languages, provides visitors with enhanced search tools as well
as with links to the corporate sites of the main European Yellow Pages
operators throughout Europe.Other Directories and Related Products and ServicesPagineBiancheCD Italia is the retail edition of PagineBianchein CD-ROM
format. This product is sold directly by the customer service branch of SEAT.Pagine Bianche Office. Pagine Bianche Officetogether with Pagine Gialle
Lavorois a database of about 4 million businesses in CD-ROM format distributed
free of charge. The available information includes fixed telephone line
numbers, fax numbers, e-mails, URL and companies telephone numbers. Pagine
Bianche Officehad 120,000 customers in 2002.Business-to-Business Industry Sector Listings  (Annuario SEAT Neoexpo).
Annuario SEAT is a multi-volume business-to-business directory. It contains
selected Italian businesses grouped by industry and services offered.City Maps  (TuttoCittà). TuttoCittàis available in all editions of
PagineGialle Lavoroand in 65 editions of PagineGialle Casa; there are 35
editions of TuttoCittàavailable in a separate volume. TuttoCittàprovides a
city map and information about local public services, including transportation,
leisure activities and local attractions. Starting from July 2002, TuttoCittà
made Italian city maps available on-line.Annuario Kompass(formerly known as Kompass Italia)  Information on over
60,000 Italian companies: names, activities, products and services,
decision-makers and their functions, key figures. It is part of a worldwide
network of 66 publishers of industry annuals and provides on-line, on-disc and
printed services relating to specialist economic information for the
business-to-business market. Until August 2002 this service was provided by
Kompass Italia which in August 2002 transferred its operating activities and
personnel to Annuari Italiani S.p.A. and therefore is no longer an operating
subsidiary.Business-to-Business directories: Guida agli acquisti per gli Enti
Pubblici, a sale guide for shopping in hotels and a comprehensive guide to
Italian hotels (both on paper and on line).35Table of ContentsThrough the brand-name Giallo Promo, SEAT also sells direct marketing
services and provides merchandising services.OperationsDistribution and Sales. In December 1998, SEAT began subcontracting the
distribution of all Pagine Gialleproducts in response to a ruling from the
Italian Antitrust Authority that the previous co-packaging and distribution
system with Telecom Italia restricted competition. SEAT uses two independent
distributors to deliver its Pagine Gialleproducts throughout Italy. Telecom
Italia distributes all White Pages directories published by SEAT.SEATs directories sales force is divided into three groups: territorial
sales, large customer and telephone sales, each of which covers a specific type
of customer. At the end of 2001, SEAT completed the reorganization of SEATs
sales channels and the commissions structure for SEATs sales agents; SEAT now
deals directly with its sales agents through an agency contract without the use
of sub-agents.Paper Supply Arrangements. The market for directory paper is controlled
by a limited number of specialized paper mills that are being further reduced,
as a result of ongoing consolidation in the paper sector. SEAT seeks to
diversify its use of paper suppliers in an effort to reduce printing paper
expenses and increase the stability and quality of its paper supply.Accordingly, SEAT reduced the quantity of paper purchased from the Italian
supplier Cartiere Burgo S.p.A. from 45% of its requirements in 2000, to 7% in
2002. As of June 13, 2003, SEATs purchases from Cartiere Burgo S.p.A. are
being maintained at the same percentage of paper supply requirements. Cartiere
Burgo S.p.A. is also backed up by further potential local suppliers. In 2002,
SEAT entered into a three-year supply contract with the Swedish paper supplier
Holmen Paper A.B., and into a two-year contract with the Finnish paper
suppliers UPM-Kymmene OY, Stora Enso Publication Papers OY Ltd. and Stromsdal
Corporation. These contracts obligate the supplier to sell, and SEAT to
purchase, a target amount of paper at a fixed price for their duration. SEAT
received approximately 93% of its printing paper from these suppliers in 2002,
and does not expect this to change. SEAT also maintains commercial relations
with certain paper suppliers in the United States and Canada, in order to
obtain access to the North American paper market and evaluate the prospects for
long-term supply agreements with those suppliers.Printing  Relationship with ILTE. Since SEATs sale in August 1998 of
ILTE, its former printing subsidiary, SEAT has continued to use ILTE as its
exclusive provider of printing, binding and cellophane wrapping services for
its directory-publishing activities. In 1998, SEAT entered into an exclusive
supply contract with ILTE, that expires on December 31, 2007. The prices were
renegotiated in 2002, based on benchmarking against major European directory
printers. A future price increase will be based upon a maximum of 50% of
Istat, the Italian cost of living index. The contract also stipulates timing
and qualitative performances criteria, with penalties if they are not met.
SEAT provides paper that meets quality specifications to ILTE which provides
the other principal raw material for printing, such as ink. Although SEAT is
required to use ILTE for its printing needs throughout the duration of the
agreement, SEAT has an option to terminate the entire agreement, or the
exclusivity requirement with respect to 30% of SEATs printing needs, in the
event that ILTE is unable to meet the performance criteria set out in the
agreement.Billing and Credit Management Systems. SEATs advertising customers are
invoiced for the cost of advertisements placed in its publications on an agreed
upon timetable when the order is placed. The canvassing for advertising
orders begins approximately 11 months prior to publication of the relevant
edition. Revenue from advertising sales is recognized upon publication of the
relevant directory. Prior to extending credit to a customer, the customer,
SEAT performs a credit check.CompetitionSEATs market share in Italy in the telephone directory segment is
approximately 90%. In 1997, the Italian publishing company Arnoldo Mondadori
Editore S.p.A. (Mondadori), and Pagine Italia S.p.A. (Pagine Italia), both
subsidiaries of Fininvest S.p.A., the parent company of the Fininvest S.p.A.
group of companies (Fininvest), launched Pagine Utili, an on-line and
paper-based Yellow Pages directory. Pagine Utilihas a 5% market share, SEAT
currently has no other significant national direct competitors for its printed
directory products.36Table of ContentsHuman ResourcesThe number of employees in the Directories business segment decreased from
2,281 at December 31, 2001, to 2,220 at December 31, 2002.Directories AssistanceThe Directories Assistance business segment includes:
    
    Telegate Group
    
    IMR S.r.l.; and
    
    Pronto Pagine Gialle 89.24.24 (a division of SEAT)SEATs strategy for Directories Assistance is focused on increasing Pronto
Pagine Gialles relatively small market share of the Italian telephone
directory assistance market and the expansion of Telegate in European countries
other than Germany, specifically the U.K. and Spain.(SEAT DIRECTORIES ASSISTANCE)TelegateSEAT currently holds a direct and indirect interest of 78.4% of Telegate
AG. This is a result of the capital increase approved by the shareholders
meeting of Telegate AG of November 18, 2002. The shareholders meeting
resolved to increase the share capital by 46,973,700.00 against the issuance
of 12,730,000 new shares at an issue price of 3.69 including a premium of
2,69. Of this amount, 6,360,740.83 was contributed by SEAT, 23,950,229.17
by Telegate Holding GmbH and 16,662,730.00 by the remaining shareholders.
Currently the subscribed share capital of Telegate AG amounts to 20,954,355.00Telegate had 2,383 employees at the end of 2002 (primarily call-center
operators) and its main operations are in Germany although it is also active in
Italy, Spain, the UK and the United States.In 2002, SEAT continued the implementation of its international strategy
for the Directories Assistance business segment:
    
    Telegates main service in Germany is the telephone number 11.88.0.
In 2002, it handled a total of approximately 93.6 million calls.
    
    In December 2002, Telegate began providing services through its
subsidiary 11.88.66 Ltd. in the UK through the telephone number
11.88.66.
    
    Through Telegate Italia S.r.l. (Telegate Italia), its Italian
subsidiary, Telegate also provides telephone services for 89.24.24
Pronto Pagine Gialle.37Table of ContentsBy dialing each call-center number, users can transfer calls, access
information relating to telephone numbers and access other information services
(weather updates, films at cinemas and other events) via a hotline for booking
and buying tickets. Telegate handled more than 119 million calls during 2002.Pronto Pagine GiallePronto Pagine Gialle is a relatively new business unit that was
transferred out of Directories Italia and into Directory Assistance in 2002.
Pronto Pagine Gialles activities relate exclusively to the provision of
telephone directory assistance services to the general public in Italy, via the
branded telephone number service 89.24.24. Pronto Pagine Gialle receives a
share of the call charges levied by the telephone network operators on the
users of its 89.24.24 services. In addition small and medium size business and
corporate clients wishing to receive priority listing on Pronto Pagine Gialle
89.24.24 service are also advertising customers for Pronto Pagine Gialle.
These advertising services are promoted by the SEAT sales force responsible for
the promotion of other paper and on-line directory products.IMR S.r.l.SEAT provides call-center services through Giallo Voice, consisting of
four call-centers (IMR S.r.l., Teleprofessional S.r.l., OPS S.r.l. and Call
Center Services S.r.l.). After the Spin-off, IMR S.r.l. will be part of New
SEAT. In June and July 2002, Giallo Voice increased its stake in IMR S.r.l.
from 51% to 100%.IMR S.r.l. is based in Turin, where its main activity is to assist Pronto
Pagine Giallein its directory assistance services.CompetitionIn Germany, Telegates main competitors are free Internet-based
search-engines. As of December 31, 2002, Telegates market share in Germany
was approximately 32%.Human ResourcesThe number of employees in the Directories Assistance business segment
decreased from 3,775 at December 31, 2001 to 2,712 at December 31, 2002.Business InformationSEAT provides direct marketing and database services through its
subsidiaries Consodata, NetCreations, PanAdress, Databank and Datahouse. These
companies operate in the business-to-business market, providing a wide range of
direct marketing services, including direct mail campaign management, preparing
demographically tailored mailing lists, data treatment and enhancement, and
marketing database management.(SEAT BUSINESS INFORMATION)Notes:38Table of Contents(1)
    
    After the spin-off Databank S.p.A. would be included in Telecom Italia
Media.(2)
    
    On August 13, 2002, SEAT sold its stake in Datahouse to Dun & Bradstreet
S.p.A., for 15.9 million.In compliance with the goals and strategy set forth in the 2002-2005
business plan, which provides for the divestiture of non-core assets, SEAT is
still evaluating the possibility of disposing of its Business Information
activities due to weakening demand of services in the business-to-business
market, and the decrease of investments in the direct marketing area which
persisted during the course of 2002.ConsodataConsodata, a French company, is a leading European company in the
development and management of information about consumer trends. The
acquisition was originally part of SEATs strategy to strengthen its position
in the consumer marketing intelligence services sector.Consodata is active in three business areas:
    
    Information gathering services, using traditional and on-line
questionnaires with different criteria to identify consumer profiles
(lifestyle);
    
    geomarketing, profiling and cartography (marketing intelligence);
and
    
    direct marketing, consumer information services, management and/or
enhancement of proprietary and third-party databases (one-to-one).SEAT currently holds 98.60% interest in Consodata. Pursuant to its
2002-2005 business plan, SEAT is currently evaluating the possibility of
disposing of its interests in Consodata. In accordance with the agreement
reached with Consodata minority shareholders, before any such sale, SEAT will
transfer its interests in Pan-Adress and NetCreations to Consodata. In an
agreement with the founders of Consodata dated August 2, 2002, SEAT amended
certain terms and conditions of previous agreements among the same parties
dated July 31, 2000, and February 11, 2002, respectively. The new agreement
provided for a put option in favor of the founders (which hold the minority
stake) on their stake in Consodata, exercisable only if SEAT disposes of its
controlling stake in Consodata;On February 12, 2003 pursuant to a put option exercised by the founders of
Consodata, SEAT acquired 1,108,695 ordinary shares of Consodata at
44 per
share (corresponding to an 8.17% interest) for a total consideration
of 48.8
million. Please see under Business OverviewBusiness
InformationConsodata.On April 15, 2002, Consodata S.p.A. (Consodatas subsidiary for Italian
operations) (Consodata) acquired an additional stake of 36% in Consodata
Marketing Intelligence S.r.l. for a total consideration of 3,780,000. On May
19, 2003 Consodata entered into an agreement to purchase the remaining 2.69% of
the share capital of Consodata Marketing Intelligence. Consodata now owns 100%
of Consodata Marketing Intelligence S.r.l.DatahouseDatahouse is an Italian company which specializes in real estate market
intelligence. Datahouse provides information on Italian real estate properties
through a database of more than 20 million documents, partly retrieved from
land registries, bankruptcy court procedures files and databases specialized in
security. Datahouse makes its content available on-line for a fee and targets
professionals in the legal and banking businesses, real estate agencies and
brokers. On its Internet site, Datahouse also offers additional services
including a search engine in cooperation with Altavista.it and other enhanced
research features relating to the real estate market.On August 13, 2002, SEAT sold its stake (100%) in Datahouse to Dun &
Bradstreet S.p.A., the Italian subsidiary of the U.S. parent, for a sale price
of 15.9 million (at the closing SEAT bought back its minority stake (48%) in
Datahouse for 11.0 million and was repaid by the purchaser of an intercompany
debt of 6.5 million.)39Table of ContentsPan-AdressPan-Adress is a wholly owned subsidiary of SEAT specializing in off-line
direct marketing. Pan-Adress was acquired in July 2001 by SEAT from the
Beisheim Holding Switzerland, a sister company to the Metro Group, one of the
leading German companies in the direct marketing sector. Pan-Adress was
founded in 1962, is currently based in Munich, and offers a broad range of
products and services as well as experience in mailing list management, based
on databases.NetCreationsNetCreations is a U.S.-based company which specializes in opt-in e-mail
data collection, database management and e-mail marketing services. At the end
of 2002, its database contained over 45 million e mail addresses of consumers
who have identified and confirmed areas of special interest to them.
NetCreations has partnerships with over 400 websites and provides direct e-mail
marketing services to over 2,000 clients. NetCreations is the U.S. leader in
Opt-In® e-mail marketing services. Through the Opt-In® service NetCreations
obtains authorization for the handling of personal data from the contacts in
its own database, and is thus capable of offering businesses precise targets of
possible customers to whom promotional messages can be addressed.CompetitionConsodatas main competitors are: Axciom, Wegener, Experian, InfoUSA,
Doubleclick, SE Equifax, D&B, Claritas, Nielsen, Caci. Databank competitions
consists primarily of Eurisko, Centrale bilanci, Cerved, Prometeia, D&B,
Gartner Gr., Ipsos Explorer, Nielsen, while Datahouse competes with SE Equifax,
Consit and Crif.Human ResourcesThe number of employees in the Business Information business segment
decreased from 912 at December 31, 2001 to 812 at December 31, 2002.
Intellectual PropertySEATs success and ability to compete in Italy depends to a significant
extent on the marketing effectiveness of the PAGINE GIALLE brand name and logo,
as well as the names and logos of SEATs other products and services. In order
to protect its proprietary rights, SEAT has received Italian and international
registration in respect of approximately 235 product names, including PAGINE
GIALLE, PAGINE GIALLE On-Line (its new name PAGINE GIALLE.it, TuttoCittà,
its former company name, SEAT S.p.A., its new name SEAT PAGINE GIALLE
S.p.A., Pronto PAGINE GIALLE 892424, PAGINE BIANCHE and PAGINE BIANCHE.it.
SEAT, as an Internet Service Provider, also holds a number of trademark
registrations in Italy and the European Union, including for Tin.it, ClubNet,
E-Vai, Premium and C6 (Here You Are) and about 190 domain names registration
including SEAT.it, PagineGialle.it, PagineBianche.it, PagineGialleon-line.it,
Tin.it, Clubnet.it, Atlantide.it and E-vai.it. Tin.it also licensed software
and other technology from various third parties.
PropertySEAT has offices throughout Italy, but its principal offices are located
in Turin, Italy. The following is a list of SEATs principal real property
holdings as of December 31, 2002 all of which are used as office space and
owned by SEAT without any major encumbrances.The following real estate was included as part of the Project Tiglio, as
described above, in October 2002 and is still rented by SEAT:

|        |  |                                        |  |               |       | 
|------- |  | -------------------------------------- |  | ------------- | ----- | 
|City    |  | Address                                |  | Square Meters
|        |  |                                        |  |              
|Bologna |  | Via Cairoli, 8F                        |  |               | 6,842 | 
|Genova  |  | Via dell Acciaio, 139 Badia S. Andrea |  |               | 3,042 | 
|Torino  |  | Via A. Saffi, 18                       |  |               | 7,587 | 

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|                                                                |  |                                     |  |               |        | 
|--------------------------------------------------------------- |  | ----------------------------------- |  | ------------- | ------ | 
|City                                                            |  | Address                             |  | Square Meters
|                                                                |  |                                     |  |              
|Torino                                                          |  | Via Mezzenile, 11                   |  |               | 6,482  | 
|Torino                                                          |  | Strada del Lionetto, 6              |  |               | 5,321  | 
|Torino                                                          |  | Via G. Re. 47/49/51                 |  |               | 11,103 | 
|Torino                                                          |  | Via Caprie, 18                      |  |               | 1,537  | 
|Torino                                                          |  | Via San Ambrogio, 19/21             |  |               | 6,740  | 
|Pomezia (Rome)                                                  |  | Via Carlo Poma, 11                  |  |               | 17,500 | 
|                                                               
|From October 2002 SEAT pays rental for the following buildings:
|                                                               
|Torino                                                          |  | Via Mezzenile, 11                   |  |               | 6,482  | 
|Torino                                                          |  | Strada del Lionetto, 6              |  |               | 5,321  | 
|Torino                                                          |  | Via G. Re. 47/49/51                 |  |               | 11,103 | 
|Torino                                                          |  | Via Caprie, 18                      |  |               | 1,537  | 
|Torino                                                          |  | Via San Ambrogio, 19/21             |  |               | 6,740  | 
|Bologna                                                         |  | Via Cairoli, 8F                     |  |               | 6,842  | 
|                                                               
|SEAT at December 31, 2002 owned the following real estate:     
|                                                               
|Torino                                                          |  | Via Mocchie, 8                      |  |               | 0,510  | 
|Farnborough, Hampshire UK                                       |  | Thomson House, 296 Farnborough Road |  |               | 6,637  | 
|N.A.                                                            |  | N.A.                                |  |               | N.A.   | 

SEAT is not aware of any environmental issues that may affect its use of
its assets and management believes SEAT is fully compliant with Law 626/94
which sets environmental standards for all companies operating in Italy.




Regulation

Directories

The directory market is fully liberalized. The provision of a local
telephone subscribers directory however, is also an important part of the
Universal Service Obligation. Currently in Italy, Telecom Italia is designated
to provide the service under the Universal Service Obligation, which requires
Telecom Italia to provide local telephone subscriber directory services in the
whole of Italy. Telecom Italia is using SEATs PAGINEBIANCHEdirectory to
fulfill its duty to provide the local telephone subscriber directory under the
Universal Service Obligation.

Any voice telephony operator is obliged to guarantee the availability of
subscriber data on a fair, transparent and non-discriminatory basis and to
provide directory and directory assistance services. Moreover, since the
SEAT-Tin.it merger in 2000, Telecom Italia is obliged to guarantee the
availability of subscriber data without charge.

From January 1, 1998 the potential designation of companies other than
Telecom Italia has been authorized in order to guarantee maximum efficiency
(art.3 dPR 318/97). The National Regulatory Authority for Communications
(Autorità per le Garanzie nelle Comunicazioni AGCom) by resolution 36/02/CONS
allows for a tender for various telecommunication services. This provision is
not applicable to the directory business since the market is already open to
competition and a tender would re-introduce exclusive rights, not allowed in
the European or Italian regulatory environments. The new EU regulatory
framework (EU Directive 2002/22/EC on universal service and users rights
relating to electronic communications networks and services) confirms this
interpretation: the EU directory market is fully liberalised and no barriers
for new market participants exist since subscriber data is available to third
parties.

This EU Directive however requires that at least one comprehensive
directory is made available to end users in a form approved by the relevant
authority, whether printed or electronic, or both, and is updated on a regular
basis, and at least one on an annual basis. The adoption under Italian law is
expected by the end of July 2003.

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AGCom called for consultation on the possible introduction of electronic
support (CD Rom) as part of the scope of universal services of telephone
directories. The initial data on CD Rom usage has highlighted that there is a
substantial lack of utility of the product as it cannot be used by all
customers and that therefore cannot be considered a universal service.

AGCom, by resolutions 36/02/CONS and 180/02/CONS in application of dPR
77/01, has fixed the criteria for the constitution of the comprehensive
customer database (Universal Database) for the general directory containing
the information of all subscribers (fixed and mobile) in order to guarantee
more readily the availability of subscribers data for directories and directory
assistance services. Licensed Operators with direct access to subscribers are
obliged to create and operate this Universal Database. The Universal Database
will be made available to all parties who provide a telephone directory service
or directory assistance service on a fair, transparent and non discriminatory
basis.

The fixed network operators have reached a partial agreement on the
technical specifications for the production of the Universal Database.

The mobile network operators have signed a similar agreement. Once the
fixed network operators agreement is finalized, the agreement between the
mobile network operators will need to be revised to ensure both agreements are
consistent. The Privacy Authority (Garante per la protezione dei data
personali) has provided guidelines regarding the acquisition of consent to
processing of customer data. Subscribers must be informed, free of charge,
about the purpose of a directory available to the public or obtainable through
directory inquiry services, in which their personal data can be included and of
any further usage possibilities based on search functions embedded in
electronic versions of the directory. Subscribers will be given the
opportunity not to be included in a public subscriber directory. Existing
fixed network subscribers will be treated with an opt-out approach, new
subscribers and mobile with an opt-in approach. Under the opt-out approach a
subscriber has the option to be deleted from the directory under the opt-in
approach the subscriber has the choice to be listed.

Starting with the Rome directories in October 2002, SEAT produced a
multi-brand product (PAGINEBIANCHE) which included subscribers of Telecom
Italia and competitors, that complied with the regulations prior to
implementation of the Universal Database.

SEATs management believes that these requirements do not impose any
limitations on SEATs competitiveness in the directories market.

Directory Assistance  89.24.24 service

AGCom is evaluating the appropriateness of introducing by mid-2003 a
number specifically assigned to directory assistance services (12XY) within the
National Numbering Plan. The existing National Numbering Plan assigns codes and
numbers for fixed telephony services, mobile, value added services, but does
not identify any specific code for directory enquiry services. The
introduction of a specific code for directory enquiry is consistent with
present or past initiatives in other European countries. This initiative would
provide equal opportunities for all the parties offering directory assistance
services, whether they be network operators, or service providers like SEAT
S.p.A.

Internet

Seat-Tin.it is present in the residential and SME (Small and Medium
Enterprises) retail market for both dial-up and ADSL Internet access.
Seat-Tin.it acquires from Telecom Italia all network services for the
realization of such offers: access (mainly, call origination for dial up calls,
ADSL wholesale access, IP transport, national and international bandwidth).

Retail market  dial-up

After the first quarter 2002, Seat-Tin.it activated new numbers for
dial-up calls: (i) 7020001033 for premium, and (ii) 7020001099 for free
dial-up calls. The old geographic numbers are still in operation. The financial
relationship with Telecom Italia was based on revenue sharing both for the old
(geographic) and new (70X) numbering.

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On October 7, 2002, the Ministry of Communications assigned to Seat-Tin.it
the right of use of 70X numbering. As a consequence, Seat-Tin.it negotiated
and signed with Telecom Italia a contract related to 70X dial-up calls which
provides: from January 1, 2003 (i) SEAT is entitled to all the revenues of 70X
calls and (ii) Seat-Tin.it pays the correspondent call origination and IP
transport to Telecom Italia. The publication of Law 59/02 and subsequent
implementation of the relevant resolution by AGCom (9/02/CIR) require Telecom
Italia to grant Internet Service Providers the same economical conditions for
network services that it does to other licensed telecommunication operators.

For the remaining SEAT Tin.it regular traffic, Seat Tin.it shares its
revenue with Telecom Italia only for geographic numbering.

ADSL/ATM Broadband

The applicable regulatory provisions (AGCom decision 407/99, 217/00/CONS,
15/00/CIR, 06/03/CIR) require Telecom Italia make a wholesale offer to access
broadband ADSL Internet services available to competing operators, before
providing services to its own customers. This wholesale offer forms the basis
upon which Seat Tin.it defines its offer conditions for broadband ADSL Internet
access for its customers.

As an ISP, SEAT prices its services to its customers based on the
wholesale offering. With the 06/03/CIR resolution, the AGCom has reviewed the
economic conditions of the wholesale offer by Telecom Italia in order to
guarantee suitable financial spaces for competition and required Telecom Italia
to decrease its prices. Like other operators, also SEAT has benefited from
this price reduction.

WIFI Services

SEAT has obtained the authorization for the experimentation of the public
Radio-LAN, access to public electronic communications networks, and services in
the 2.4 GHz band (WIFI service). The authorization does not allow any
commercial visibility. The regulations for the issue and the authorization for
offering of the commercial services in the 2.4 GHz and 5 GHz bands has been
published (Decree dated May 28, 2003). SEAT has opened its own experimental
WIFI access areas (currently, more than 50 locations). Currently, the access
is limited to no more than 3,000 selected customers. SEAT intends to open its
own WIFI access areas and to form agreements with other authorized parties to
grant access for its customers (Internet roaming).

E-Commerce

EU Directive 200/31/CE on Electronic Commerce has implemented in Italy by
Law No. 70/03 which establishes specific harmonized rules to ensure that
businesses and citizens can supply and receive e-commerce services throughout
the EU. These include:



| |  |  | Conclusion and validity of electronic contracts;                                                                                                                                                                                                                                                       
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Transparency requirements. It subjects commercial communications
over the Internet, such as advertising and direct marketing, to certain
transparency requirements to ensure consumer confidence and fair
dealing;                                                                                     
|
| |  |  | Liability of Internet intermediaries. It establishes an exemption
from liability for intermediaries, who play a passive role as a mere
conduit of information from third parties and limits service
providers liability for other intermediary activities, such as the
storage of information; and
|
| |  |  | On-line dispute settlement.                                                                                                                                                                                                                                                                            

Television

In February 2003, MTV Italia and TV Internazionale requested and obtained
from the Italian Ministry of Communications the authorization for the first
commercial tests of digital terrestrial television (DTV).

A new regulatory framework regulating broadcasting is expected to be
implemented by mid 2003. The provisional text confirms the switch-off of the
analog broadcasting network and the full roll-out of DTV broadcasting by 2006.

43



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##### Table of Contents



Competition Law

SEAT is subject to Law No. 287 of October 10, 1990, the Italian
competition law of general application, and to the competition rules of the EU
(the Law No. 287). Law No. 287 prohibits:



| |  |  | agreements, including resolutions and concerted practices, aimed at
fixing prices, limiting production or access to markets and
technological developments, sharing of markets, applying different
conditions for the same services to the detriment of competitors, and
subjecting contracts to the acceptance of conditions that, according to
their nature and common practice, are not linked to the object of the
contract;                                                                                                                                                                                                                                                                                                                                                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | abuses of dominant position, including practices aimed at fixing
prices, limiting production or access to markets and technological
developments, applying different contractual conditions for the same
services to the detriment of competitors, as well as subjecting
contracts to the acceptance of conditions that, according to their
nature and common practice, are not linked to the object of the
contract; and                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | concentrations of enterprises, such as mergers, acquisitions of
controlling interests and concentrative joint ventures, which would
result in the creation or strengthening of a dominant position. All
concentrations in relation to which the combined overall turnover, in
Italy, of the companies involved is higher than 377,013 or the
turnover of the company being acquired is, in Italy, higher than
39,000, must receive a prior authorization from the Antitrust
Authority. These thresholds are adjusted every year to take account of
inflation. Failure to file prior notification of a concentration to
the Italian Antitrust Authority will result in a fine of up to 1% of
the turnover of the parties involved in the concentration, or higher in
the case of fines for violation of a prohibition of a concentration.

The Italian Antitrust Authority administers Law No. 287, either on its own
initiative or following a complaint submitted by any interested party, and has
the power to investigate and ascertain compliance with Law No. 287. When the
Italian Antitrust Authority finds evidence that Law No. 287 has been violated,
the parties involved, including the interested party, are notified of the
opening of a formal investigation. The party under investigation and the
interested parties have the right to be heard and to file written arguments
with the Italian Antitrust Authority. Pending the investigation, the Italian
Antitrust Authority may also require the parties involved and third parties to
disclose information or to submit documents that it considers useful for the
investigation. In addition, the Italian Antitrust Authority may appoint
experts and carry out direct inspections at the investigated partys premises
in order to examine and seize relevant documents.

If at the conclusion of the investigation the Italian Antitrust Authority
determines that Law No. 287 has been violated, it may order the investigated
party to cure the relevant violation and, in the case of serious violations,
impose fines ranging from 1% to 10% of the turnover relating to the relevant
activities. Any failure to comply is sanctioned with an additional fine of up
to 10% of the turnover of the investigated party.

The competition rules of the EU also apply directly in Italy. The main
principles of EU competition law are contained in Articles 85 and 86 of the
Treaty of Rome. Article 85 prohibits collusion between competitors that may
affect trade between Member States and has the object or effect of restricting
competition within the EU. Article 86 prohibits any abuse of a dominant
position within a substantial part of the EU that may affect trade between
Member States. These rules are primarily enforced by the European Commission,
which cooperates with the national competition authorities, and through the
national courts. The Italian Antitrust Authority has the power to apply
Article 85(1) and Article 86, following its own procedures and imposing, if
necessary, the fines provided for under Law No. 287. In September 1991,
general guidelines were published by the European Commission on the application
of EU competition law in the telecommunications sector. These guidelines
outline the EUs approach to common competition issues. On November 5, 1998,
following the EUs guidelines, the Italian Antitrust Authority amended the form
required for filing notices of concentration.




ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with the
consolidated financial statements included elsewhere in this annual report.
Such financial statements have been prepared in connection with U.S. GAAP.

44



---



##### Table of Contents



Background

As previously described, effective October 1, 2000, SEAT acquired Tin.it
in a two-step transaction through the exchange of newly-issued ordinary shares
for 100% of the outstanding shares of Tin.it. After the acquisition, Telecom
Italia owned a majority interest in the combined company. Accordingly, under
U.S. GAAP, the transaction was accounted for as a reverse acquisition, whereby
SEAT was considered the acquiree even though legally it was the acquiror. As a
result, the results of operations data included in the table below presents the
historical operations of Tin.it to October 1, 2000 and the consolidated results
of operations of SEAT and Tin.it since that date. Please see Note 4 to the
Consolidated Financial Statements included in this annual report.

Results of Operations

The following table sets forth SEATs statement of operations for the
years ended December 31, 2000, 2001 and 2002. These amounts have been derived
from, and should be read in conjunction with, SEATs audited consolidated
financial statements as of December 31, 2001 and 2002 and for the years ended
December 31, 2000, 2001 and 2002 included in this annual report.

|                                                                                        |  |         |             |      |  |                  |            |   |  |  |            |  
|--------------------------------------------------------------------------------------- |  | ------- | ----------- | ---- |  | ---------------- | ---------- | - |  |  | ---------- | -
|                                                                                        |  | 2000(1) |             | 2001 |  | 2002            
|                                                                                        |  |         |             |      |  |                 
|                                                                                        |  |         |             |      |  | (euro thousands) |            |   |  | 
|Operating revenues                                                                      |  |         | 607,306     |      |  |                  | 1,897,483  |   |  |  | 1,981,081  |  
|Cost of materials                                                                       |  |         | (86,236     | )    |  |                  | (300,895   | ) |  |  | (283,867   | )
|Cost of external services                                                               |  |         | (374,383    | )    |  |                  | (744,099   | ) |  |  | (747,881   | )
|Salaries, wages and employee benefits                                                   |  |         | (50,405     | )    |  |                  | (445,308   | ) |  |  | (398,247   | )
|Depreciation and amortization                                                           |  |         | (612,007    | )    |  |                  | (1,794,869 | ) |  |  | (607,362   | )
|Writedown of impaired assets                                                            |  |         | (10,271,669 | )    |  |                  | (3,165,405 | ) |  |  | (5,969,126 | )
|Other operating expenses                                                                |  |         | (40,254     | )    |  |                  | (116,260   | ) |  |  | (161,023   | )
|                                                                                        |  |         |             |      |  |                  |            |   |  |  |            |  
|Total operating expenses                                                                |  |         | (11,434,954 | )    |  |                  | (6,566,836 | ) |  |  | (8,167,506 | )
|                                                                                        |  |         |             |      |  |                  |            |   |  |  |            |  
|Operating loss                                                                          |  |         | (10,827,648 | )    |  |                  | (4,669,353 | ) |  |  | (6,186,425 | )
|Interest expense, net                                                                   |  |         | (198,132    | )    |  |                  | (97,159    | ) |  |  | (121,236   | )
|Equity in losses of affiliated companies                                                |  |         | (26,123     | )    |  |                  | (81,747    | ) |  |  | (26,168    | )
|Other income, net                                                                       |  |         | 2,265       |      |  |                  | (7,921     | ) |  |  | (12,657    | )
|                                                                                        |  |         |             |      |  |                  |            |   |  |  |            |  
|Loss before income taxes, minority interests and
cumulative effect of accounting change |  |         | (11,049,638 | )    |  |                  | (4,816,171 | ) |  |  | (6,282,684 | )
|Income tax benefit                                                                      |  |         | 158,335     |      |  |                  | 245,306    |   |  |  | 268,992    |  
|                                                                                        |  |         |             |      |  |                  |            |   |  |  |            |  
|Loss before minority interests and cumulative effect
of an accounting change            |  |         | (10,891,303 | )    |  |                  | (4,570,865 | ) |  |  | (6,013,692 | )
|Minority interests                                                                      |  |         | (4,939      | )    |  |                  | (66,295    | ) |  |  | (55,063    | )
|                                                                                        |  |         |             |      |  |                  |            |   |  |  |            |  
|Net loss before cumulative effect of accounting change                                  |  |         | (10,886,364 | )    |  |                  | (4,504,570 | ) |  |  | (5,958,629 | )
|                                                                                        |  |         |             |      |  |                  |            |   |  |  |            |  
|Cumulative effect of accounting change                                                  |  |         |            |      |  |                  | 2,296      |   |  |  |           |  
|                                                                                        |  |         |             |      |  |                  |            |   |  |  |            |  
|Net loss                                                                                |  |         | (10,886,364 | )    |  |                  | (4,502,274 | ) |  |  | (5,958,629 | )
|                                                                                        |  |         |             |      |  |                  |            |   |  |  |            |  



---

|Notes: |  |                                                                                                                                                                                                                                                                             
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | The 2000 statement of operations data include the effects of the reverse
acquisition of SEAT effective October 1, 2000 and certain other
acquisitions during the fourth quarter of 2000. See Note 4 to the
consolidated financial statements included in this annual report.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Presentation of Results

The following discussion is based on and should be read in conjunction
with the Consolidated Financial Statements, which have been prepared in
accordance with U.S. GAAP.

The scope of the consolidation includes the Italian and foreign companies
that are majority owned by directly or indirectly controlled by SEAT Pagine
Gialle S.p.A. or its subsidiaries. As discussed in more detail in Note 4 of
the

45



---



##### Table of Contents



Consolidated Financial Statements for the fiscal year ended December 31, 2002,
footnotes to the Selected Financial Data presented in Item 3 of this annual
report and discussed in detail in the annual report on Form 20-F for the fiscal
year ended December 31, 2001, for the year ended December 31, 2002 compared to
the year ended December 31, 2001, the scope of consolidation
changed in 2001 materially compared to 2000. In 2002 the scope of
consolidation changed primarily
due to the sale of Datahouse, which was part of the Business Information
segment, and of several companies of the Internet Services segment with
impacts, particularly in terms of operating income, that are not significant.
Thus the changes to the scope of consolidation do not affect the comparison of
the results of the year ended December 31, 2002 with the results of the year
ended December 31, 2001. For more information on the disposal of subsidiaries
see Item 4  Present Organizational Structure and Developments.

In the following presentation we have grouped the segments together in
accordance with whether they will become part of Telecom Italia Media or part
of New SEAT after the Spin-off, as described above. This grouping is not a
perfectly faithful reflection of the way in which such segments will be divided
between the two companies pursuant to the Spin-off plan, in that the Giallo
Voice Group excluding IMR S.r.l. which is included in the Directories
Assistance business segment as part of the analysis below, will remain with
Telecom Italia Media. Similarly the Databank Group is included in the Business
Information segment in the analysis below but will remain with Telecom Italia
Media. The purpose of this presentation is to facilitate a discussion of the
results of SEAT in a way that represents approximately the results of the two
companies into which SEAT will be demerged.

In this annual report, all of the amounts are expressed in thousands of
euro unless otherwise indicated.

Operating Revenues

|                          |                      |  |                  |  |      |  |           |  | 
|------------------------- | -------------------- |  | ---------------- |  | ---- |  | --------- |  | 
|                          |                      |  | 2001             |  | 2002
|                          |                      |  |                  |  |     
|                          |                      |  | (euro thousands)
|Total                     |                      |  | 1,897,483        |  |      |  | 1,981,081 | 
|                          | Telecom Italia Media |  |                  |  |      |  |           |  | 
|Internet Services         |                      |  | 151,089          |  |      |  | 140,419   | 
|Office Products           |                      |  | 262,863          |  |      |  | 283,845   | 
|Professional Publishing   |                      |  | 33,768           |  |      |  | 33,548    | 
|Television                |                      |  | 64,757           |  |      |  | 94,135    | 
|                          | New SEAT             |  |                  |  |      |  |           |  | 
|Directories               |                      |  | 1,105,882        |  |      |  | 1,121,270 | 
|Directories Assistance(1) |                      |  | 155,255          |  |      |  | 157,192   | 
|Business Information(2)   |                      |  | 123,869          |  |      |  | 150,672   | 



---

|Notes: |  |                                                                                                                                                               
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | 17,107 for 2001 and 14,924 for 2002 are related to Giallo Voice Group
excluding IMR S.r.l. and would be included in Telecom Italia Media after
the Spin-off.
|      
|(2)    |  | 13,930 for 2001 and 12,944 for 2002 are related to Databank Group and
would be included in Telecom Italia Media after the Spin-off.                         

Revenues for 2002 were 1,981,081 compared to 1,897,483 in 2001, an
increase of approximately 4.4%. In 2002 operating revenues were comprised of
revenues of the various SEAT business segments, as discussed below:

Telecom Italia Media:



| |  |  | 140,419 from the Internet Services segment, consisting of revenues
from Internet access subscription fees, revenue sharing fees paid by
Telecom Italia based on telephone traffic generated by Internet usage
through Tin.it, portal services, on-line advertising and web services,
compared to 151,089 in 2001, a decrease of 7.1%. The decrease in net
revenues was primarily due to the sale of several subsidiaries, which
were no longer deemed part of the core business. As a result of the sale
the subsidiaries were eliminated from the
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

46



---



##### Table of Contents





| |   |  | scope of consolidation. SEAT decided to focus its Internet business on
internet access services and portals. This decrease was partially offset
by an increased use of the new ADSL services, while revenues for return
commissions from Telecom Italia (52,248, a 10.3% decline compared to
2001) reflect the drop in dial-up telephone traffic due to migration of
previous dial-up use toward ADSL services. Revenues for online
advertising, web services and other Internet businesses (21,284)
decreased 43.3 % compared to 2001 due to the winding up or transfer of
several companies and their elimination from the scope of consolidation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 283,845 from the Office Products and Services segment, consisting of
revenues from sales of office products of the Gruppo Buffetti and Cipi
business gifts products, compared to 262,863 in 2001, an increase of
8.0% primarily due to the increased revenues from sales of Buffettis
office automation products, management software and promotional items,
partially offset by a decrease in sales of Buffettis other office
products.                                                                                                                                                                                                          
|
| |  |  | 33,548 from the Professional Publishing segment, consisting of
revenues from its Giallo Professional Publishing which operates in the
field of technical and specialized publications, compared to 33,768 in
2001, a decrease of 0.7% primarily due to the decreases in advertising
revenues, as well as the decline in the tourist industry, the principal
market for one of the segments publishing houses.                                                                                                                                                                                                                                      
|
| |  |  | 94,135 from the Television segment, consisting of revenues from its
La7 and MTV Italia television channels, compared to 64,757 in 2001, an
increase of 45.4% primarily due to an increase in net revenues of the
MTV Italia channel, despite a slight decline in the advertising market
which remains a very competitive market.                                                                                                                                                                                                                                                                                                                    

New SEAT:



| |  |  | 1,121,270 from the Directories segment, consisting of revenues from
the sale of advertising in its Yellow Pages, White Pages and other
directories, and the distribution of printed and online products and the
distribution of other communication products for SMEs compared to
1,105,882 in 2001, an increase of 1.4%. In the Directories segment the
overall decline in advertising revenues was offset by the introduction
of new products, an increase of 7,000 customers to a total of 743,000
customers as of December 31, 2002, an increase of 10,000 advertisers to
a total of 680,000 advertising clients as of December 31, 2002 and an
increase of 3,000 units of printed directories as well as increased
on-line activities and the development of promotional items. Revenues
from TDL Infomedia remained stable despite the unfavorable sterling-euro
exchange rate.                              
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 157,192 from the Directories Assistance segment, consisting of
revenues from its Telegate voice portal and Giallo Voice call-center
services, compared to 155,255 in 2001, an increase of 1.2%. In the
Directories Assistance segment net revenues increased primarily due to
the revenues generated by 89.24.24 Pronto Pagine Gialle due to the
increase in revenues from telephone traffic and the substantial increase
in advertising revenues in 89.24.24 Pronto Pagine Gialle, which were
partially offset by an approximate combined 15% decline in revenues from
the Italian and foreign call-center operations. The decline in the
Italian call-center business was caused by increased competition in the
out-bound market and the decline in foreign call-center operations was
caused by the poor performance of the German market.                                                                      
|
| |  |  | 150,672 from the Business Information segment, consisting of
revenues from the direct marketing and database services provided by
Consodata, NetCreations, Pan Adress and Databank, compared to 123,869
in 2001, an increase of 21.6%. The increase from revenues was
primarily attributable due to a full year of consolidation in 2002
for Consodata and NetCreations compared to only a partial year in
2001, the year of their acquisition by Seat. The primary operating
factors that affected the Business Information segment was the
continued reduction of investments in direct marketing services by
large companies that are the main purchasers of these services, to
the trend towards higher value products at the same prices compared
to 2001 due to increased financial constraints of the customers of the
Business Information segment, and the deconsolidation of Datahouse
after July 1, 2002.

47



---



##### Table of Contents



Cost of Materials

|                          |                      |  |                  |  |      |  |         |  | 
|------------------------- | -------------------- |  | ---------------- |  | ---- |  | ------- |  | 
|                          |                      |  | 2001             |  | 2002
|                          |                      |  |                  |  |     
|                          |                      |  | (euro thousands)
|Total                     |                      |  | 300,895          |  |      |  | 283,867 | 
|                          | Telecom Italia Media |  |                  |  |      |  |         |  | 
|Internet Services         |                      |  | 13,881           |  |      |  | 626     | 
|Professional Publishing   |                      |  | 3,674            |  |      |  | 2,559   | 
|Office Products           |                      |  | 178,587          |  |      |  | 197,402 | 
|Television                |                      |  | 10,759           |  |      |  | 3,580   | 
|                          | New SEAT             |  |                  |  |      |  |         |  | 
|Directories               |                      |  | 60,230           |  |      |  | 62,758  | 
|Directories Assistance(1) |                      |  | 597              |  |      |  | 61      | 
|Business Information(2)   |                      |  | 33,167           |  |      |  | 16,881  | 



---

|Notes: |  |                                                                                                                                                           
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | 80 for 2001 and 84 for 2002 are related to the Giallo Voice Group
excluding IMR S.r.l. and would be included in Telecom Italia Media after
the Spin-off.
|      
|(2)    |  | 201 for 2001 and 643 for 2002 are related to the Databank Group and
would be included in Telecom Italia Media Group after the Spin-off.                 

Cost of materials decreased by 5.7% from 300,895 in 2001 to 283,867 in
2002.

On a segment level the results were as follows:

Telecom Italia Media:



| |  |  | 626 for the Internet Services segment, compared to 13,881 in 2001,
a decrease of 95.5%, primarily due to the one-time large purchase in
2001 of computer hardware used for the solicitation of new customers in
the high margin business.                                                                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 2,559 for the Professional Publishing segment, compared to 3,674 in
2001, a decrease of 30.3%, primarily due to reduced editing and printing
costs.                                                                                                                                                                                             
|
| |  |  | 197,402 for the Office Products segment, compared to 178,587 in
2001, an increase of 10.5%, primarily due to an 8% increase in sales,
increased communication costs attributable to increasing presence of the
Buffetti trademark in the marketplace and increased costs for office
automation products compared to traditional office products.
|
| |  |  | 3,580 for the Television segment, compared to 10,759 in 2001, a
decrease of 66.7% primarily due to lower technical broadcasting costs.                                                                                                                                                                                                          

New SEAT:



| |  |  | 62,758 for the Directories segment, compared to 60,230 in 2001, an
increase of 4.2%, primarily due to the increase in the sales volumes
which were partially offset by reduced operating costs, including a
decrease in paper consumption and advertising costs.                                      
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 61 for the Directories Assistance segment, compared to 597 in 2001,
a decrease of 89.8%, primarily due to the further development of
proprietary databases.                                                                                                                                           
|
| |  |  | 16,881 for the Business Information segment, compared to 33,167 in
2001, a decrease of 49.1%, primarily due to a reduction in the use of
paper and other operating costs which was partially offset by the
purchase of mailing lists for use in the direct marketing of business
information products.

48



---



##### Table of Contents



Cost of External Services

|                          |                      |  |                  |  |      |  |         |  | 
|------------------------- | -------------------- |  | ---------------- |  | ---- |  | ------- |  | 
|                          |                      |  | 2001             |  | 2002
|                          |                      |  |                  |  |     
|                          |                      |  | (euro thousands)
|Total                     |                      |  | 744,099          |  |      |  | 747,881 | 
|                          | Telecom Italia Media |  |                  |  |      |  |         |  | 
|Internet Services         |                      |  | 143,867          |  |      |  | 93,504  | 
|Professional Publishing   |                      |  | 19,288           |  |      |  | 19,234  | 
|Office Products           |                      |  | 45,942           |  |      |  | 46,807  | 
|Television                |                      |  | 60,872           |  |      |  | 94,441  | 
|                          | New SEAT             |  |                  |  |      |  |         |  | 
|Directories               |                      |  | 366,755          |  |      |  | 347,820 | 
|Directories Assistance(1) |                      |  | 86,629           |  |      |  | 74,228  | 
|Business Information(2)   |                      |  | 20,746           |  |      |  | 71,847  | 



---

|Notes: |  |                                                                                                                                                                     
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | 7,303 for 2001 and 7,465 for 2002 are related to the Giallo Voice Group
excluding IMR S.r.l. and would be included in the Telecom Italia Media
after the Spin-off.
|      
|(2)    |  | 8,113 for 2001 and 6,232 for 2002 are related to the Databank Group and
would be included in the Telecom Italia Media after the Spin-off.                         

The cost of external services was 747,881 in 2002, compared to 744,099
in 2001, an increase of approximately 0.5%.

On a segment level the results were as follows:

Telecom Italia Media:



| |  |  | 93,504 for the Internet Services segment, compared to 143,867 in
2001, a decrease of 35.0%, primarily due to the reorganization, closure
and disposals of businesses previously operating in the Internet
Services segment.                                                                                                    
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 19,234 for the Professional Publishing segment, compared to 19,288
in 2001, a decrease of 0.3%, primarily due to lower paper and printing
costs.                                                                                                                                                                               
|
| |  |  | 46,807 for the Office Products segment, compared to 45,942 in 2001,
an increase of 1.9%, primarily due to the first time consolidation of
Cipi in 2002 compared to the partial consolidation of Cipi in 2001.                                                                                                                  
|
| |  |  | 94,441 for the Television business segment, compared to 60,872 in
2001, an increase of 55.1%, primarily due to the acquisition of more
one-year television contracts (which have a higher per-show cost) and
less multi-year television contracts (which have lower costs per show)
and also due to increased production costs.

New SEAT:



| |  |  | 347,820 for the Directories segment, compared to 366,755 in 2001, a
decrease of 5.2%, primarily due to the marketing of new products that
required more resources in the launch phase.                                                                                                               
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 74,228 for the Directories Assistance segment, compared to 86,629
in 2001, a decrease of 14.3%, primarily due to a reorganization process
aimed at rebalancing the cost structure which has led to a strong
reduction in advertising costs and in a shift to a lower cost
telecommunication provider.

49



---



##### Table of Contents





| |  |  | 71,847 for the Business Information segment, compared to 20,746 in
2001, an increase of 246.3%, primarily due to the inclusion of a full
year of costs in 2002 related to the acquisition of Pan-Adress,
Consodata and NetCreations compared with the only partially inclusion of
these costs in 2001 because the acquisitions occurred during the year.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Salaries, Wages and Employee Benefits

|                          |                      |  |                  |  |      |  |         |  | 
|------------------------- | -------------------- |  | ---------------- |  | ---- |  | ------- |  | 
|                          |                      |  | 2001             |  | 2002
|                          |                      |  |                  |  |     
|                          |                      |  | (euro thousands)
|Total                     |                      |  | 445,308          |  |      |  | 398,247 | 
|                          | Telecom Italia Media |  |                  |  |      |  |         |  | 
|Internet Services         |                      |  | 53,502           |  |      |  | 36,176  | 
|Professional Publishing   |                      |  | 6,760            |  |      |  | 7,141   | 
|Office Products           |                      |  | 17,550           |  |      |  | 21,495  | 
|Television                |                      |  | 35,471           |  |      |  | 34,279  | 
|                          | New SEAT             |  |                  |  |      |  |         |  | 
|Directories               |                      |  | 209,476          |  |      |  | 181,188 | 
|Directories Assistance(1) |                      |  | 76,581           |  |      |  | 64,493  | 
|Business Information(2)   |                      |  | 45,968           |  |      |  | 53,475  | 



---

|Notes: |  |                                                                                                                                                                     
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | 7,073 for 2001 and 6,836 for 2002 are related to the Giallo Voice Group
excluding IMR S.r.l. and would be included in the Telecom Italia Media
after the Spin-off.
|      
|(2)    |  | 4,349 of 2001 and 4,398 of 2002 are related to the Databank Group and
would be included in the Telecom Italia Media Group after the Spin-off.                     

Salaries, wages and employee benefit costs were 398,247 in 2002 compared
to 445,308 in 2001, a decrease of approximately 10.6%.

On a segment level the results were as follows:

Telecom Italia Media:



| |  |  | 36,176 for the Internet Services segment, compared to 53,502 in
2001, a decrease of 32.4%, due to the reduction in headcount to 569 at
December 31, 2002 from 981 at December 31, 2001, primarily due to the
disposition of non-core businesses and the rationalization measures
taken in 2002.                                                                                                                                                                                                                                                                                                        
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 7,141 for the Professional Publishing segment, compared to 6,760 in
2001, an increase of 5.6%, primarily due to bonuses and other one-time
incentive payments to employees.                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | 21,495 for the Office Products segment compared to 17,550 in 2001,
an increase of 22.5%, primarily due to the fact that Cipi was fully
consolidated for six months in 2001 compared to the entire year in 2002.                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | 34,279 for the Television segment compared to 35,471 in 2001, a
decrease of 3.4%, primarily due to the fact that in 2001 the
restructuring of the programming led to the incurrence of significant
one-time salary-related programming costs due to the cancellation of
several long-term agreements, which was offset by an increase in costs
for salaries, wages and employee benefits caused by the increase in the
headcount from 559 employees in 2001 to 591 employees in 2002 following
the decision by MTV to internalize activities such as signal
broadcasting and MTV Italia TV productions.

50



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New SEAT:



| |  |  | 181,188 for the Directories segment, compared to 209,476 in 2001, a
decrease of 13.5%, primarily due to the reduction in headcount to 2,220
at December 31, 2002 compared to 2,281 at December 31, 2001, which was
partially offset by the introduction of the new cash bonus system in
favor of the SEAT group executives and middle management and the
recruitment of several executives from the Matrix subsidiaries.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 64,493 for the Directories Assistance segment, compared to 76,581
in 2001, a decrease of 15.8%, primarily due to the reduction in
headcount to 2,712 at December 31, 2002 from 3,775 at December 31, 2001.
The reduction in the headcount was mainly in the German call-center
unit.                                                                                                                                    
|
| |  |  | 53,475 for the Business Information segment, compared to 45,968 in
2001, primarily due to a full year of consolidation in 2002 for
Consodata and NetCreations compared to only a partial year in 2001,
the year of their acquisition by Seat. This increase was offset by
the reduction in headcount to 812 at December 31, 2002 compared
to 912 at December 31, 2001.                                                  

Depreciation and Amortization

|                          |                      |  |                  |  |      |  |         |  | 
|------------------------- | -------------------- |  | ---------------- |  | ---- |  | ------- |  | 
|                          |                      |  | 2001             |  | 2002
|                          |                      |  |                  |  |     
|                          |                      |  | (euro thousands)
|Total                     |                      |  | 1,794,869        |  |      |  | 607,362 | 
|                          | Telecom Italia Media |  |                  |  |      |  |         |  | 
|Internet Services         |                      |  | 58,598           |  |      |  | 43,389  | 
|Professional Publishing   |                      |  | 2,933            |  |      |  | 595     | 
|Office Products           |                      |  | 93,791           |  |      |  | 45,093  | 
|Television                |                      |  | 50,468           |  |      |  | 25,991  | 
|                          | New SEAT             |  |                  |  |      |  |         |  | 
|Directories               |                      |  | 1,353,147        |  |      |  | 476,782 | 
|Directories Assistance(1) |                      |  | 166,551          |  |      |  | 4,747   | 
|Business Information(2)   |                      |  | 69,381           |  |      |  | 10,669  | 



---

|Notes: |  |                                                                                                                                                               
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | 2,299 for 2001 and 580 for 2002 are related to the Giallo Voice Group
excluding IMR S.r.l. and would be included in Telecom Italia Media after
the Spin-off.
|      
|(2)    |  | 5,617 for 2001 and 2,606 for 2002 are related to the Databank Group and
would be included in Telecom Italia Media after the Spin-off.                       

Depreciation and amortization was 607,362 in 2002 compared to 1,794,869
in 2001, a decrease of 66.2%, and consisted primarily in the amortization of
intangible assets.

On a segment level the results were as follows:

Telecom Italia Media:



| |  |  | 43,389 for the Internet Services segment, compared to 58,598 in
2001, a decrease of 26.0%, primarily due to the fact that goodwill was
not amortized in 2002 but was amortized in 2001 and, to a lesser degree,
to changes in the estimated useful life of certain depreciable assets.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 595 for the Professional Publishing segment, compared to 2,933 in
2001, a decrease of 79.7%, primarily due to the reduced investments in
additional office equipment made in 2002 and due to the fact that
goodwill was not amortized in 2002 but was amortized in 2001.              

51



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##### Table of Contents





| |  |  | 45,093 for the Office Products segment, compared to 93,791 in 2001,
a decrease of 51.9%, primarily due to the fact that goodwill was not
amortized in 2002 but was amortized in 2001.    
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 25,991 for the Television business segment, compared to 50,468 in
2001, a decrease of 48.5%, primarily due to the fact that goodwill was
not amortized in 2002 but was amortized in 2001.

New SEAT:



| |  |  | 476,782 for the Directories segment, compared to 1,353,147 in 2001,
a decrease of 64.8%, primarily due to the fact that goodwill was not
amortized in 2002 but was amortized in 2001.       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 4,747 for the Directories Assistance segment, compared to 166,551
in 2001, a decrease of 97.1%, primarily due to the fact that goodwill
was not amortized in 2002 but was amortized in 2001.
|
| |  |  | 10,669 for the Business Information segment, compared to 69,381 in
2001, a decrease of 84.6%, primarily due to the fact that goodwill was
not amortized in 2002 but was amortized in 2001.  

Writedowns of Impaired Assets in 2002

In accordance with the requirements of SFAS 142, the annual impairment
test of goodwill was conducted as of December 31, 2002. As part of that
assessment, it was determined that certain reporting units contained goodwill
that was potentially impaired. The 2002 review incorporated into the analysis
all of the known facts and management strategies at the time, including the
possibility that the assessment that the ownership levels of certain businesses
may change in the future. In particular, Telecom Italia, SEATs majority
owner, had been assessing the structure and benefits of having the Internet and
Directories businesses constituted as a single business. Although Telecom
Italia management had not committed to a plan regarding the sale of certain
reporting units of SEAT until after December 31, 2002, the probablility that a
realignment of the business would take place, including the possible disposal
valuations of those businesses, were considered. The 2001 valuation approach
was based on a discounted cash flow model, using the best estimates of
management at that time, including the intention to keep SEAT together as an
integrated asset for the foreseeable future. In 2002 the fair value of the
affected reporting units, in particular those to be included in New SEAT, were
derived based on an assessment of recent trading multiples for other similar
assets. This approach was used as, given the increasing likelihood that
Telecom Italia would sell these assets, the use of multiples for recent
transactions for similar assets was considered more indicative of fair value
than a discounted cash flow analysis. Those to be included in Telecom Italia
Media were valued based on a combination of both multiples and the discounted
cash flow method. Using the comparables approach to the valuation, SEAT
identified that the fair value of the reporting units implied goodwill, after
performing a hypothetical purchase price allocation, including intangibles, was
5,969,126 less than the carrying value of these assets. The most significant
writedowns were in the Directories business segment Internet  Portals
reporting unit of the Internet Services segment and Office Products segment in
the amount of
(5,330,936),
(479,623) and (138,511), respectively.

Other Operating Expenses

|                          |                      |  |                  |  |      |  |         |  | 
|------------------------- | -------------------- |  | ---------------- |  | ---- |  | ------- |  | 
|                          |                      |  | 2001             |  | 2002
|                          |                      |  |                  |  |     
|                          |                      |  | (euro thousands)
|Total                     |                      |  | 116,261          |  |      |  | 161,023 | 
|                          | Telecom Italia Media |  |                  |  |      |  |         |  | 
|Internet Services         |                      |  | 11,438           |  |      |  | 16,808  | 
|Professional Publishing   |                      |  | 1,127            |  |      |  | 916     | 
|Office Products           |                      |  | 6,070            |  |      |  | 3,022   | 
|Television                |                      |  | 10,844           |  |      |  | 8,731   | 
|                          | New SEAT             |  |                  |  |      |  |         |  | 
|Directories               |                      |  | 80,759           |  |      |  | 66,896  | 
|Directories Assistance(1) |                      |  | 4,340            |  |      |  | 26,268  | 
|Business Information(2)   |                      |  | 1,683            |  |      |  | 38,382  | 

52



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---

|Notes: |  |                                                                                                                                                       
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | 1,146 for 2001 and 130 for 2002 are related to Giallo Voice Group
excluding IMR S.r.l. and would be included in Telecom Italia Media after
Spin-off.
|      
|(2)    |  | 163 for 2001 and 229 for 2002 are related to the Databank Group and
would be included in Telecom Italia Media after the Spin-off.                   

Other operating expenses increased by 44,762 to 161,023 in 2002,
compared to 116,260 in 2001, an increase of approximately 38.5%.

On a segment level the changes were as follows:

Telecom Italia Media:



| |  |  | 16,808 in the Internet Services segment, compared to 11,438 in
2001, an increase of 46.9% primarily due to the cost related to
disposition of non-core businesses.                         
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 916 in the Professional Publishing segment, compared to 1,127 in
2001, a decrease of 18.7% primarily due to a reduction in overhead such
as travel expenses and other non-operating costs. 
|
| |  |  | 3,022 in the Office Products segment, compared to 6,070 in 2001, a
decrease of 50.2%, primarily due to lower provisions for contractual
risks and to lower writedowns of trade receivables.
|
| |  |  | 8,731 in the Television business segment, compared to 10,844 in
2001, a decrease of 19.5%, primarily due to lower provisions made for
contractual risks incurred in 2002.                  

New SEAT:



| |  |  | 66,896 in the Directories segment, compared to 80,759 in 2001, a
decrease of 17.2%, primarily due to less write-offs of trade receivables
due to better collection and to lower provisions made for contract risks
and other charges, as there were no particular risks at the end of the
year that would have required a level of provisions similar to that in
2001.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 26,268 in the Directories Assistance segment, compared to 4,340 in
2001, an increase of 505.3%, primarily due to increased provisions
recorded for the Telegate Group.                                                                                                                                                                                                
|
| |  |  | 38,382 in the Business Information segment, compared to 1,683 in
2001, an increase of 2,180.6%, primarily due to increased provisions for
NetCreations and an increase of the of Consodata Group excise tax.                                                                                                                                                          

Operating Loss

Operating loss, was (6,186,425) in 2002 compared to (4,669,353) in 2001,
an increase of 32.5%, primarily due to the increase in the writedown of
impaired assets in the Directories segment in 2002 compared to 2001.

Interest Expense

|                          |                      |  |                  |  |      |  |         |  | 
|------------------------- | -------------------- |  | ---------------- |  | ---- |  | ------- |  | 
|                          |                      |  | 2001             |  | 2002
|                          |                      |  |                  |  |     
|                          |                      |  | (euro thousands)
|Total                     |                      |  | 97,159           |  |      |  | 121,236 | 
|                          | Telecom Italia Media |  |                  |  |      |  |         |  | 
|Internet Services         |                      |  | 3,734            |  |      |  | 2,296   | 
|Professional Publishing   |                      |  | 1,024            |  |      |  | 1,200   | 
|Office Products           |                      |  | 4,240            |  |      |  | 3,555   | 
|Television                |                      |  | 5,288            |  |      |  | 5,361   | 
|                          | New SEAT             |  |                  |  |      |  |         |  | 
|Directories               |                      |  | 75,196           |  |      |  | 90,160  | 
|Directories Assistance(1) |                      |  | 4,472            |  |      |  | 14,962  | 
|Business Information(2)   |                      |  | 3,205            |  |      |  | 3,702   | 

53



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| |  |  |  |  |  |  |  |  | 
| |  |  |  |  |  |  |  |  | 



---

|Notes: |  |                                                                                                                                                             
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | 446 for 2001 and 709 for 2002 are related to the Giallo Voice Group
excluding IMR S.r.l. and would be included in Telecom Italia Media after
the Spin-off.
|      
|(2)    |  | 17 for 2001 and 9 for 2002 are related to the Databank Group and would
be included in Telecom Italia Media after the Spin-off.                            

Interest expense was 121,236 in 2002, compared to 97,159 in 2001, an
increase of approximately 24.8%.

On a segment level the results were as follows:

Telecom Italia Media:



| |  |  | 2,296 in the Internet Service segment compared to 3,734 in 2001, a
decrease of 38.5%, primarily due to the entry of Matrix into the group
treasury of Telecom Italia which allowed it to receive funding from
banks at a lower interest rate.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 1,200 in the Professional Publishing segment compared to 1,024 in
2001, an increase of 17.2%, primarily due to the slower repayment of
outstanding debt due to the lower cash flow caused by decreased
advertising revenues.                 
|
| |  |  | 3,555 in the Office Products segment compared to 4,240 in 2001, a
decrease of 16.2%, primarily due to participation of the Group companies
of the Office Products segment in the group treasury of Telecom Italia.                           
|
| |  |  | 5,361 in the Television segment compared to 5,288 in 2001, a
increase of 1.4%, primarily due to a higher net average financial
indebtedness in 2002 compared to 2001.                                                                        

New SEAT:



| |  |  | 90,160 in the Directories segment compared to 75,196 in 2001, an
increase of 19.9%, primarily due to the higher expense for the
medium/long-term debt of Seat Pagine Gialle S.p.A. due to an interest
rate collar contract entered into counter the effects in the change of
the Euribor for a 700 million credit facility. SEAT has an interest
rate swap with a notional amount of 700 million and a maturity of July
1, 2003, under which SEAT receives 3-month Euribor plus 0.70% and pays
3-month Euribor plus 0.017%. Additionally, SEAT has an interest rate
collar with a notional amount of 700 million and a maturity of July 1,
2003 under which SEAT pays the difference between 5.8% and EURIBOR if
the EURIBOR is below 3.99%. SEAT receives the difference between EURIBOR
and 5.8% if EURIBOR exceeds 5.8%.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 14,962 in the Directory Assistance segment compared to 4,472 in
2001, an increase of 234.6%, primarily due to the exchange rate charges
recorded by Telegate Group in 2002 for a total amount of (10,452
thousand) related to the loans granted to the Telegate Inc. subsidiary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

54



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##### Table of Contents





| |  |  | 3,702 in the Business Information segment compared to 3,205 in 2001,
an increase of 15.5.%, primarily due to the exchange rate charges
recorded by NetCreations (145) and Consodata Group Ltd. (301).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Equity in Losses of Affiliated Companies

|                        |  |                  |         |      |  |  |         |  
|----------------------- |  | ---------------- | ------- | ---- |  |  | ------- | -
|                        |  | 2001             |         | 2002
|                        |  |                  |         |     
|                        |  | (euro thousands)
|Total(1)                |  |                  | (81,747 | )    |  |  | (26,168 | )
|Directories             |  |                  | (54,902 | )    |  |  | (29,673 | )
|Internet Services       |  |                  | (12,709 | )    |  |  | (1,759  | )
|Business Information(2) |  |                  | (1,707  | )    |  |  | (7,296  | )
|Office Products         |  |                  | (361    | )    |  |  | (279    | )
|Television business     |  |                  | (6,135  | )    |  |  |        |  
|Others                  |  |                  | (5,933  | )    |  |  | 12,839  |  



---

|Notes: |  |                                                                                                                                        
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | No equity in losses of affiliated companies have been recorded for the
Directories Assistance and the Professional Publishing segments.
|      
|(2)    |  | (20) for 2001 and (1) for 2002 are related to the Databank Group and would be included in Telecom Italia Media after the Spin-off.   

Equity in losses of affiliated companies was (26,168) in 2002, compared
to (81,747) in 2001, a decrease of approximately 68.0%.

On a segment level the results were as follows:

(29,673) in the Directories segment, compared to (54,902) in 2001, a
decrease of 46.0%, primarily due to the sale of TDL Belgium in the first
quarter of 2002.

(1,759) in the Internet Services segment, compared to (12,709) in 2001,
a decrease of 86.2%, primarily due to the sale of subsidiaries in the Internet
Service segment that are no longer considered strategic.

(7,296) in the Business Information segment, compared to (1,707) in
2001, an increase of 327.4%, primarily due to the loss recorded in connection
with the sale of Datahouse during 2002.

(279) in the Office Products segment, compared to (361) in 2001, a
decrease of 22.7%.

Income Taxes

The tax benefit was 268,992 and 245,306 thousand for the years ended
December 31, 2002 and 2001, respectively. For the years ended December 31,
2002 and 2001, the tax benefits for the respective years differ from applying
the Italian statutory tax rate of 40.25% to pretax losses primarily due to the
non-deductibility of goodwill amortization and write-down, the
non-deductibility of other expenses and the increase in valuation reserves
which will drop to 38.25% for 2003 due to the reduction of the Italian
corporate income tax rate from 36% to 34% effective from January 1, 2003.

Net Loss

55



---



##### Table of Contents



Net loss was
5,958,629 in 2002
compared to 4,502,274
in 2001, an increase of approximately 32%. The increased net loss was
due to the individual factors described above.

Net Debt

Net debt decreased from 922,004 at December 31, 2002 to 679,618 at
December 31, 2003 due to the overall reduction in operating costs, the sale of
subsidiaries in the Internet Service segment and increased operating revenues.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Presentation of Results

The following discussion is based on and should be read in conjunction
with the Consolidated Financial Statements, which have been prepared in
accordance with U.S. GAAP.

As discussed in more detail in Note 4 to the Consolidated Financial
Statements, SEAT made a number of acquisitions in 2001, and as a result the
scope of consolidation expanded significantly compared to 2000. The most
important acquisitions were:

56



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##### Table of Contents





| |  |  | in the Television segment, the acquisition of the remaining 75%
interest in Cecchi Gori Communication Media Holdings S.p.A. (since
renamed Holding Media & Communicazione HMC S.p.A., or HMC) on June 4,
2001;                                                                                                                                    
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | in the Business Information segment, the acquisition of (i) a
controlling interest in Consodata on February 9, 2001; (ii) 100% of
Pan-Adress on May 29, 2001; (iii) 100% of NetCreations on June 15, 2001;
and (iv) 52% of Data House between March 29, 2001 and June 18, 2001,
with a controlling interest being acquired on the latter date; and
|
| |  |  | in the Office Products and Services segment, a controlling interest
in Cipi on July 3, 2001.                                                                                                                                                                                                                                                      

The companies acquired were fully consolidated in the financial statements
as of the dates on which a majority interest was acquired.

As discussed in more detail in Note 4 to the financial statements, SEAT
made a number of acquisitions at the end of 2000, and as a result the scope of
consolidation expanded significantly compared to 2000. The most important
acquisitions were:



| |  |  | in the Directories segment, the acquisition of a 99.6% interest in
TDL Infomedia in December 2000;
| | - |  | --------------------------------------------------------------------------------------------------
|

| |  |  | in the Directories Assistance segment, the acquisition of a
controlling interest in Telegate AG (Telegate) in November 2000;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | in the Business Information segment, the acquisition of a
93.465% interest in Databank S.p.A. in December 2000; and           
|
| |  |  | in the Internet Services segment, the acquisition of a 46.43%
interest in Mondus. In December 2000.                           

The companies acquired were fully consolidated in the financial statements
as of the dates on which a majority interest was acquired.

Finally, as discussed in more detail in Note 4 to the financial
statements, the 2000 statement of operations data include the effects of the
reverse acquisition of SEAT effective as of October 1, 2000. As a consequence,
all the previously existing SEAT businesses were included in the results of
operations only effective as of October 1, 2000. The most important businesses
already existing in the SEAT Group were:



| |  |  | in the Directories segment, all of the directory publication
activities directly managed by SEAT Pagine Gialle S.p.A. and other minor
subsidiaries,  
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | in the Office Products and Services segment, all of the Office
Products and Services businesses managed through the Gruppo Buffetti
subsidiaries; and
|
| |  |  | in the Internet Services segment, the Internet businesses managed
through the Matrix Group.                                                          

All of the amounts in the following discussion are expressed in thousands
of Euro unless otherwise indicated.

Operating Revenues

Revenues for 2001 were 1,897,483 compared to 607,306 in 2000, an
increase of approximately 212%. In 2001 operating revenues were comprised of:



| |  |  | 1,105,882 from the Directories segment, consisting of revenues from
the sale of advertising in its Yellow Pages, White Pages and other
directories, compared to 402,629 in 2000;                                                                                                                               
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 155,255 from the Directories Assistance segment, consisting of
revenues from its Telegate voice portal and Giallo Voice call-center
services. As noted in Item 4Information on the CompanyOrganizational
Structure and Developments of the annual report on Form 20-F for the
fiscal year ended December 31,

57



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##### Table of Contents





| |   |  | 2001, this segment was first created in 2001. The operating revenues of
the companies that currently make up this segment were 0 in 2000;                                                                                                                                                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 151,089 from the Internet Services segment, consisting of revenues
from Internet access subscription fees, revenue sharing fees paid by
Telecom Italia based on telephone traffic generated by Internet usage
through Tin.it, portal services, on-line advertising and web services,
compared to 122,835 in 2000;          
|
| |  |  | 262,863 from the Office Products and Services segment, consisting of
revenues from sales of its Gruppo Buffetti and Cipi products, compared
to 66,462 in 2000;                                                                                                                                                             
|
| |  |  | 123,869 from the Business Information segment, consisting of
revenues from the direct marketing and database services provided by
Consodata, NetCreations, Pan Adress, Databank and Datahouse, compared to
12,575 in 2000;                                                                                                 
|
| |  |  | 33,768 from the Professional Publishing segment, consisting of
revenues from its Giallo Professional Publishing publications, compared
to 2,805 in 2000; and                                                                                                                                                               
|
| |  |  | 64,757 from the Television segment, consisting of revenues from its
La7 and MTV Italia television channels. As noted in Item 4Information
on the CompanyOrganizational Structure and Developments of the annual
report on Form 20-F for the fiscal year ended December 31, 2001, this
segment was first created in 2001.

The increase in operating revenues in 2001 compared to 2000 was primarily
attributable to the following factors:



| |  |  | changes in the scope of consolidation from 2000 to 2001, specifically
(i) the acquisition and consolidation during 2001 of the respective
operating revenues of Cipi (19,883) in the Office Products and Services
segment; Consodata (75,675), Pan Adress (10,512), NetCreations
(14,953) and Datahouse (7,608) in the Business Information segment;
and HMC (63,962) in the Television segment (these companies contributed
a total of 252,340 to operating revenues for 2001); and (ii) the fact
that operating revenues for 2000 did not include those of Gruppo
Buffetti, SEAT (as added to those of Tin.it), Telegate and TDL Infomedia
until, respectively, October 2000, October 2000, November 2000 and
December 2000;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a 703,253 (175%) increase in the Directories segment, primarily due
to a full years consolidation of SEAT and TDL Infomedia. Excluding
those factors, the increase in operating revenues was due to price
increases, increased advertising sales and new products in Italy, as
well as an increase in the number of customers in Italy from 647,000 at
year-end 2000 to 670,000 at year-end 2001;                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | a 155,255 increase in the Directories Assistance segment, primarily
due to a full years consolidation of Telegate in 2001, as well as
several acquisitions by Giallo Voice;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | in the Internet Services segment, the 28,254 (23%) increase in
revenues was primarily attributable to the acquisitions made in 2001 by
Matrix, such as Xoom.it and FreeFinance and the full years
consolidation of subsidiaries purchased in 2000, such as Matrix.
However, the trend in revenues in the Internet Services declined during
2001 primarily due to (i) a decline in advertising revenues, and (ii) a
shift in the mix of users from subscription access to free access, which
resulted in access revenues remaining flat despite an increase in users
from 1.66 million to 1.8 million;                                                                                                                              
|
| |  |  | a 196,401 (296%) increase in the Office Products and Services
segment, primarily due to the full years consolidation of Buffetti and
the acquisition of Cipi. The trend in Buffetti revenues increased in
2001 due mainly to increases in revenues from sales of Buffettis office
automation products, partially offset by a decrease in sales of
Buffettis other office products;                                                                                                                                                                                                                                                                                                                                               
|
| |  |  | in the Business Information segment, the 111,294 (885%) increase in
revenues was primarily attributable to the acquisition of Consodata,
NetCreations, PanAdress and Datahouse in 2001, which accounted for
108,748 of the increase. The remaining increase was due to the full
years consolidation of Databank in 2001, compared to one month in 2000.
The trend in revenues of this segment declined in 2001 primarily                                                                                                                                                                                                                                                                                                          

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| |   |  | due to a decline in revenues from direct marketing and information
marketing services. These decreases were due to various factors,
including declining prices and strong competition;                                                                                                                                                                                                                                                                                                                                                           
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | in the Professional Publishing segment, the 30,963 (1,104%) increase
in revenues was primarily attributable to the acquisitions made by
Giallo Professional Publishing, such as Gruppo Editrice JCE and TTG
Italia, during 2001 and a full years consolidation of Giallo
Professional Publishing in 2001. The trend in the revenues of the
segment have been declining primarily due to decreases in advertising
revenues, as well as the decline in the tourist industry, the principal
market for one of the segments publishing houses; and
|
| |  |  | the 64,757 increase in the Television segment was primarily due to
SEAT consolidating HMC for 7 months in 2001 while accounting for it as
an equity method investment in 2000. Therefore, HMC had no effect on
SEATs 2000 revenues. The trend in revenues in Television increased in
2001 primarily due to the acquisition of MTV Italia in 2001, partially
offset by decreases in advertising revenues from La7 resulting primarily
from the change in programming content during the course of 2001.                                         

Cost of Materials

Cost of materials was 300,895 in 2001, compared to 86,236 in 2000, an
increase of approximately 249%.

This line item consisted primarily of materials purchased by the Office
Products and Services (178,587 thousand), Directories (60,230) and Business
Information (33,167) segments in connection with the sale of office products,
the cost of paper for the various directories published, and the purchase of
mailing lists for use in the direct marketing activities, respectively. The
increase in 2001 compared to 2000 was primarily attributable to changes in the
scope of consolidation.

Cost of External Services

Cost of external services was 744,099 in 2001, compared to 374,383 in
2000, an increase of approximately 99%. The cost of external services was
primarily for services provided to the Directories (366,755), Internet
Services (143,867), Directories Assistance (86,629), Television (60,782) and
Office Products and Services (45,942) segments. It consisted primarily of:



| |  |  | commissions paid to agents of SEAT, which were 146,745 in 2001 compared to 42,104 in 2000;                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | professional and consulting fees, which were 101,394 in 2001 compared to 30,520 in 2000;                                                            
|
| |  |  | advertising costs, which were 82,462 in 2001 compared to 68,412 in 2000;                                                                            
|
| |  |  | production costs, primarily related to the production of the various
directories published which were 81,405 in 2001 compared to 15,301 in
2000;    
|
| |  |  | royalties and television rights paid to third parties, which were
30,290 in 2001 compared to 250 in 2000;                                           
|
| |  |  | network usage fees, primarily related to the use of Telecom Italias
telephone and ADSL lines, which were 58,274 in 2001 compared to 80,560
in 2000;
|
| |  |  | television production costs, which were 16,036 in 2001 compared to 0 in 2000; and                                                                   
|
| |  |  | distribution costs, which were 25,410 in 2001 compared to 4,158 in 2000.                                                                            

The increase in 2001 compared to 2000 was primarily attributable to
changes in the scope of consolidation.

Salaries, Wages and Employee Benefits

Salaries, wages and employee benefit costs were 445,308 in 2001, compared
to 50,405 in 2000, an increase of approximately 783%. The cost of salaries,
wages and employee benefits was primarily attributable to the

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Directories (209,476), Directories Assistance (76,581), Internet Services
(53,502), Business Information (45,968) and Television (35,471) segments.

The increase was primarily due to changes in the scope of consolidation
from 2000 to 2001, and the accompanying increase in the number of SEATs
employees from 2,654 at December 31, 2000 to 9,264 at December 31, 2001

The largest contributors to SEATs increased personnel costs in 2001 were
SEAT (95,452), Telegate (68,966), TDL Infomedia (53,772), HMC (35,471), and
Consodata (27,625), in that they were either fully consolidated for the first
time in 2001 or else were fully consolidated for only a part of 2000.

Depreciation and Amortization

Depreciation and amortization was 1,794,869 in 2001, compared to 612,006
in 2000, an increase of approximately 193%, and consisted primarily of the
amortization of goodwill and intangible assets in the Directories (1,353,147),
Directories Assistance (166,551), Office Products and Services (93,791),
Business Information (69,381), Internet Services (58,598) and Television
(50,468) segments.

The increase in depreciation and amortization in 2001 compared to 2000 was
primarily due to the acquisitions made by SEAT in the course of 2001 and the
additional amortization and depreciation resulting from the recognition of fair
values of assets acquired in its acquisitions  in particular HMC (50,468) and
Consodata (28,972)  as well as the full years depreciation of SEAT, Telegate
and TDL Infomedia compared to only a partial year of amortization in 2000.

Writedowns of Impaired Assets in 2001

SEAT conducts an annual review for indicators of impairment of long-lived
assets and, based on its review of the businesses and related cash flows, the
Company determined that a potential impairment existed regarding the goodwill
arising from many of its acquisitions. SEAT performed an impairment review in
accordance with its policy and, as a result, recorded a non-cash impairment
charge of 3,165,405 in 2001. The most significant write-downs were for SEAT
(1,506,014), Telegate (907,385), and Consodata (457,437).

In 2000, SEAT recorded a non-cash impairment charge of 10,721,669, all of
which was attributable to a write-down of goodwill arising from the acquisition
of SEAT by Tin.it.

Other Operating Expenses

Other operating expenses were 116,260 in 2001, compared to 40,254 in
2000, an increase of approximately 189%.

Other operating expenses were primarily for services provided to the
Directories (80,759) business segment. The increase in other operating
expenses was primarily due to the increase in bad debt expense of 70,710 in
2001 compared to 26,340 in 2000, related to the changes in the scope of
consolidation.

Operating Loss

Operating loss, which is equal to operating revenues less total operating
expenses, was 4,669,353 in 2001, compared to 10,827,648 in 2000, a decrease
of approximately 57%.

The lower operating loss for 2001 was attributable to the increase in
operating revenues from 607,306 in 2000 to 1,897,483 in 2001 and the
reduction in operating expenses from 11,434,954 in 2000 to 6,566,836 in
2001.

The largest contributor to the decrease in operating losses for 2001 and
2000 was the decrease in the write-down of impaired assets from 10,271,669 in
2000 to 3,165,405 in 2001. Excluding the write-down of impaired assets, the
operating loss in 2001 by segment was as follows:



| |  |  | 964,484 for the Directories segment, compared to 418,087 in 2000;
| | - |  | -------------------------------------------------------------------

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| |  |  | 179,443 for the Directories Assistance segment. As noted above,
this segment was first created in 2001. The operating loss of the
companies that currently make up this segment was 9,170 in 2000;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 130,197 for the Internet Services segment, compared to 108,638 in 2000;                                                                                                                           
|
| |  |  | 79,077 for the Office Products and Services segment, compared to 20,992 in 2000;                                                                                                                  
|
| |  |  | 47,076 for the Business Information segment, compared to an operating profit of 163 in 2000;                                                                                                      
|
| |  |  | 14 for the Professional Publishing segment, compared to an operating profit of 753 in 2000; and                                                                                                   
|
| |  |  | 103,657 for the Television segment. As noted above, this segment was first created in 2001.                                                                                                        

The reduction in operating loss in 2001 compared to 2000 was primarily
attributable to the significantly lower write-down of impaired assets in 2001
compared to 2000, partially offset by increases in all other categories of
operating expenses attributable to the following factors:



| |  |  | in the Directories segment, primarily attributable to the full years
consolidation of SEAT and TDL, partially offset by SEATs implementation
of a cost-cutting plan in Italy that reduced certain distribution costs,
marketing costs and advertising expenses during 2001;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | in the Directories Assistance segment, primarily due to a full years
consolidation of Telegate in 2001, as well as several acquisitions by
Giallo Voice;                                                                                                                    
|
| |  |  | in the Internet Services segment, primarily attributable to the
change in the scope consolidation from 2000 to 2001 and as a result of
Matrixs expanded operations.                                                                                                         
|
| |  |  | in the Office Products and Services segment, primarily due to the
full years consolidation of Buffetti and the acquisition of Cipi. In
addition, Buffettis operating expenses increased due to higher sales of
lower margin products compared to 2000;                     
|
| |  |  | in the Professional Publishing segment, primarily attributable to the
change in consolidation and the costs of launching a new publication,
Fuoricasa magazine; and                                                                                                          
|
| |  |  | in the Television segment, primarily due to SEAT consolidating HMC
for 7 months in 2001 while accounting for it as an equity method
investment in 2000. Therefore, HMC had no effect on SEATs 2000
operating expenses.                                                      

Interest Expense

Interest expense was 57,150 in 2001, compared to 198,132 in 2000, a
decrease of approximately 71%.

The decrease was primarily attributable to an increase in interest income
from short-term deposits at Telecom Italias centralized treasury, mainly from
the cash received by SEAT via the conversion of SEAT savings shares to ordinary
shares at the end of 2000, compensated by the interest expense resulting from
the changes in the scope of consolidation (mostly related to SEAT and TDL) and
from the fact that SEAT had imputed interest expense of 172,895 in 2000
related to the reverse acquisition of SEAT by Tin.it.

Equity in Losses of Affiliated Companies

Equity in losses of affiliated companies was 81,747 in 2001, compared to
26,123 in 2000, an increase of approximately 213%.

The increase was primarily attributable to the full years consolidation
of the equity losses in affiliated companies. The primary contributors of the
equity losses were Mondus (16,473) TDL Belgium (15,685) and VIASAT (9,156).

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Income Taxes

The tax benefit was 245,306 and 158,335 for the years ended December 31,
2001 and 2000, respectively. For the year ended December 31, 2001 and 2000,
the tax benefits of the respective years differ from applying the Italian
statutory tax rate of 40.25% and 41.25% to pretax losses primarily due to the
non-deductibility of goodwill amortization and write-down, the
non-deductibility of other expenses and the increase in valuation reserves.

Net Loss

Net loss was 4,502,274 in 2001, compared to 10,886,364 in 2000, a
decrease of approximately 59%.

The lower net loss was due to the individual factors described above.

Liquidity and Capital Resources

Liquidity

The table below summarizes, for 2000, 2001 and 2002 SEATs statement of
cash flows. Historically, Tin.it did not have its own bank account and
therefore all cash receipts and payments until its legal formation on May 1,
2000 were handled by its parent company on its behalf. This cash flow
statement has been presented as if such receipts and payments during these
periods had been received or made by Tin.it.

|                                                    |  |                  |          |      |  |      |          |   |  |  |          |  
|--------------------------------------------------- |  | ---------------- | -------- | ---- |  | ---- | -------- | - |  |  | -------- | -
|                                                    |  | 2000             |          | 2001 |  | 2002
|                                                    |  |                  |          |      |  |     
|                                                    |  | (euro thousands)
|Net cash provided by (used in) operating activities |  |                  | 5,042    |      |  |      | 66,474   |   |  |  | 302,352  |  
|Net cash used in investing activities               |  |                  | (111,690 | )    |  |      | (389,302 | ) |  |  | (120,418 | )
|Net cash provided by financing activities           |  |                  | 149,353  |      |  |      | 328,858  |   |  |  | (131,135 | )
|                                                    |  |                  |          |      |  |      |          |   |  |  |          |  
|Increase (decrease) in cash and cash equivalents    |  |                  | 42,705   |      |  |      | 6,030    |   |  |  | 50,800   |  
|                                                    |  |                  |          |      |  |      |          |   |  |  |          |  
|Cash and cash equivalents:                          |  |                  |          |      |  |      |          |   |  |  |          |  
|Beginning of year                                   |  |                  |         |      |  |      | 42,705   |   |  |  | 48,735   |  
|                                                    |  |                  |          |      |  |      |          |   |  |  |          |  
|End of year                                         |  |                  | 42,705   |      |  |      | 48,735   |   |  |  | 99,535   |  
|                                                    |  |                  |          |      |  |      |          |   |  |  |          |  

Net cash provided by (used in) operating activities

Net
cash provided by operating activities in 2002 was
302,352 compared to
66,474 in 2001 and net cash used in operating activities of 5,042 in 2000.
In 2000, the effect of the continued growth of the Internet activities was
mitigated by the operating cash flows related to the addition of SEATs
business in the last three months of 2000. In 2001, the increased cash flow
was related to the acquisitions in 2001 along with a full years consolidation
of business purchased in 2000. In 2002, the strong increase in cash flow was
partially related to the more successful collection of and a resulting decrease
in accounts receivable, increased sales at a lower cost caused by a reduction
in the cost of salaries, wages and employee benefits, and the disposal of
loss-making assets.

The net cash flow from operating activities for New SEAT would have been
336,343 in 2002.

The net cash flow from operating activities for Telecom Italia Media was
(30,849) in 2002. The cash flow from the Internet-Access unit of the Internet
Services segment are expected to continue to improve during 2003 with the goal
of providing cash flows from operations for the year as a result of Telecom
Italia Medias reorganization and focus on the Internet ISP business. The
Television segment and Internet-Matrix unit of the Internet Service segment are
expected to continue to use cash flows form operations during 2003 though at a
slower rate than in 2002 due to the positive effects of the Companys
restructuring plans. Telecom Italia Media is expecting to have, after the carve out of New Seat, enough cash on hand to fund its ordinary business operations and that it will not need
any additional funding prior to 2005. However the cash available would be insufficient in case of an extraordinary event such as a significant adverse ruling in the De Agostini litigation was to occur.
Please see Item 8. Financial
Information  Consolidated Statements and Other Financial
Information  Legal Proceedings. In any case Telecom Italia Media
expects that it will continue to be financially supported by Telecom
Italia through the centralized treasury function based on Telecom
Italias policy to support its group companies.

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Net cash used in investing activities

Net cash used in investing activities was 120,418 in 2002 compared to
cash provided by investing activities in the amount of 389,002 in 2001 and
111,690 in 2000. The main item in 2002 consisted of proceeds from
disposals in the amount of 43,322 compared to 32,479 in 2001 and
9,201 in 2000. The capital expenditure was reduced to 27,799 compared
to 81,958 in 2001 and 63,112 in 2001 and additions to intangible assets
decreased to 56,772 compared to 90,000 in 2001, 22,791 in 2000. The
disposal of operating assets and the reduction in the acquisition of new
operating assets are a result of managements decision to focus on SEAT core
business and to reduce capital expenditures.

Net cash used in investing activities for New SEAT would have been
approximately 56,797 in 2002.

Net cash used in investing activities for Telecom Italia Media would have
been approximately 14,343 in 2002. During 2003, Telecom Italia Media does
not expect to invest significant capital in investing activities.

The difference between the net cash used in investing activites for New
SEAT and Telecom Italia Media on a stand alone basis and the amount for SEAT on
a consolidated basis is primarily related to the accounting treatment of the
Tiglio real estate transaction described in Note 11 of the Financial Statements
for the year ended December 31, 2002. On a consolidated basis, the cash
received was considered as proceeds from long-term debt based upon the
structure of the transaction. However, had the spin-off occurred prior to year
end, it is expected that New SEAT would have met the criteria for
sale-leaseback accounting and, therefore, the cash received would have been
considered as proceeds from disposals of plant, property and equipment.

Net cash used in financing activities

Net cash used in investing activities was 131,135 in 2002 compared to
a net cash provided by financing activities of 328,858 in 2001 and
149,353 in 2000. In addition to the investment by the parent company, 2000
cash flows from financing activities also included 1,120 million cash
received from the conversion of savings shares to ordinary shares, offset by
(785,014) advanced to the parent company and 218,789 short-term
borrowings. In addition to the investment by parent company, 2001 cash flows
from financing activities also included proceeds from long-term debt of
194,862, offset by repayments of long-term debt of 176,023 and
short-term borrowings of 116,229. The main change in the net cash provided
by financing activities is the net change in short-term advances to parent
company from (148,649) in 2002 compared to 404,415 in 2001 which was
primarily due to the need by SEAT for funding by the parent company for its
acquisitions in 2001.

Net cash used in financing activities for New SEAT would have been
295,429 in 2002.

Net cash provided by financing activities for Telecom Italia Media would
have been 111,875 in 2002. In 2002, Telecom Italia Media obtained
financing internally from the central treasury function of Telecom Italia or
the cash produced by the business segments that will become a part of New SEAT

as a result of the Spin-off. Telecom Italia Media will continue to be included
in the Telecom Italia centralized treasury function and, therefore, expects to
have continued access to this type of funding. This will allow it to have no
significant external debt and to obtain financing from its parent company until
such time as the entity can provide enough positive cash flow from operations.

The reason for the difference in the net cash used in financing activities
between Telecom Italia Media and New SEAT on a stand alone basis compared to
SEAT on a consolidated basis is the same than for net cash used in investing
activities as discussed above.

Investments

The table below sets forth, for the years indicated, SEATs investments in
long-lived assets.

|                              |  |                  |        |      |  |      |        |  |  |  |        | 
|----------------------------- |  | ---------------- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                              |  | 2000             |        | 2001 |  | 2002
|                              |  |                  |        |      |  |     
|                              |  | (euro thousands)
|Capital expenditures          |  |                  | 63,112 |      |  |      | 81,958 |  |  |  | 27,799 | 
|Addition to intangible assets |  |                  | 22,791 |      |  |      | 90,000 |  |  |  | 56,772 | 
|                              |  |                  |        |      |  |      |        |  |  |  |        | 

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|                      |  |                  |         |      |  |      |         |  |  |  |         | 
|--------------------- |  | ---------------- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                      |  | 2000             |         | 2001 |  | 2002
|                      |  |                  |         |      |  |     
|                      |  | (euro thousands)
|Total                 |  |                  | 85,903  |      |  |      | 171,958 |  |  |  | 84,571  | 
|Financial investments |  |                  | 34,988  |      |  |      | 259,158 |  |  |  | 109,682 | 
|                      |  |                  |         |      |  |      |         |  |  |  |         | 
|Total investments     |  |                  | 120,891 |      |  |      | 431,116 |  |  |  | 194,253 | 
|                      |  |                  |         |      |  |      |         |  |  |  |         | 

Capital expenditures primarily related to hardware and operating software
in 2002, 2001 and 2000.

Additions to intangible assets mainly relate to application software for
Internet activities and database. The 109,682 thousand and 259,158
thousand of financial investments in 2002 and 2001, respectively, reflects the
cash portion of business acquisitions, various minority interest investments
and investments in investments funds.

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Capital Resources

At December 31, 2002, SEAT had unsecured short-term lines of credit with
banks, including bank overdraft facilities, providing borrowings up to
approximately 85,070 of which 48,923 was advanced at December 31,2002.
The lines of credit bear various interest rates including both fixed and
variable interest rates. At December 31, 2002, the weighted-average interest
rate was approximately 3.8% per annum. Amounts outstanding under these lines
of credit are payable upon demand.

SEAT funds its operations principally from cash generated by operating
activities and available credit facilities. As described above, in 2002,
SEATs cash position increased due to cash from operations, investments by the
parent company, proceeds from long-term debt and proceeds from disposals,
offset by acquisitions of businesses, capital expenditures, investments in
intangible assets and financial investments, repayment of long-term debt and
short term borrowings.

SEATs long-term debt as of December 31, 2002, including amounts due
within one year, amounted to 1,192,188.

The tables below show SEATs contractual obligations and commercial
commitments as of December 31, 2002.

|                         |                           |                   |  |           |           |        |  |           |         |           |  |                 |         |  |  |        |        |  |  |         |         | 
|------------------------ | ------------------------- | ----------------- |  | --------- | --------- | ------ |  | --------- | ------- | --------- |  | --------------- | ------- |  |  | ------ | ------ |  |  | ------- | ------- | 
|                         |                           |                   |  |           |           |        |  | Less than |         |           |  |                 |         |  |  |        |        |  |  |        
|                         |                           |                   |  | Total     |           | 1 year |  | 1-3 years |         | 4-5 years |  | After 5 years  
|                         |                           |                   |  |           |           |        |  |           |         |           |  |                
|                         |                           |                   |  |           |           |        |  |           |         |           |  | (euro millions) |         |  |  |       
|Contractual Obligations: |                           |                   |  |           |           |        |  |           |         |           |  |                 |         |  |  |        |        |  |  |        
|                         | Long-term debt            |                   |  | 1,192,188 |           |        |  | 709,386   |         |           |  | 315,624         |         |  |  | 7,703  |        |  |  | 159,475 |        
|                         | Capital lease obligations |                   |  | 0         |           |        |  | 0         |         |           |  | 0               |         |  |  | 0      |        |  |  | 0       |        
|                         | Operating lease           |                   |  | 98,350    |           |        |  | 25,577    |         |           |  | 43,828          |         |  |  | 25,104 |        |  |  | 3,841   |        
|                         | Cross border lease        |                   |  | 0         |           |        |  | 0         |         |           |  | 0               |         |  |  | 0      |        |  |  | 0       |        
|                         |                           |                   |  |           |           |        |  |           |         |           |  |                 |         |  |  |        |        |  |  |         |        
|                         |                           | Total obligations |  |           | 1,294,882 |        |  |           | 734,963 |           |  |                 | 359,452 |  |  |        | 32,807 |  |  |         | 167,656 | 
|                         |                           |                   |  |           |           |        |  |           |         |           |  |                 |         |  |  |        |        |  |  |        

A significant portion of the debt is represented by SEATs 700 million
floating rate notes due July 1, 2003, which bear interest at the variable rate
of 3 months Euribor plus 0.70% and its 303,040 fixed rate notes due July 1,
2005 bearing interest at a rate of 6.5%. These notes represent unsecured
obligations of SEAT and are listed on the Luxembourg Stock Exchange. Interest
payments on the variable rate notes are due quarterly each January 1, April 1,
July 1 and October 1. Interest payments on the fixed rate notes are due
annually each July 1. Other components of SEATs long-term debt include
119,995 senior subordinated notes due October 2009 bearing interest at
12.125% and 9,889 notes which bear interest at 15.5% through maturity in
October 2010, both representing obligations of TDL Infomedia.

SEAT has a number of interest rate swap and collar agreements, which
partially modify the interest rate characteristics of SEATs fixed and floating
rate notes described above and partially limit SEATs exposure to variable
interest rate risks by providing an interest rate cap and floor. With respect
to the 700 million floating rate notes, SEAT has an interest rate swap with
a notional amount of 700 million and a maturity of July 1, 2003, under
which SEAT receives 3-month Euribor plus 0.70% and pays 3-month Euribor plus
0.017%. Additionally, SEAT has an interest rate collar with a notional amount
of 700 million and a maturity of July 1, 2003 under which SEAT pays the
difference between 5.8% and EURIBOR if the EURIBOR is below 3.99%. It receives
the difference between EURIBOR and 5.8% if EURIBOR exceeds 5.8%.

With respect to the fixed rate notes, SEAT has two interest rate swaps
with a combined notional amount of 200 million and a maturity of July 1,
2005 under which SEAT receives 6.5% and pays 3 month Euribor plus 1.07%. SEAT
has an additional interest rate swap with a notional amount of 100 million
and a maturity of July 1, 2005 under which SEAT receives 6.5% and pays 3 month
Euribor plus 1.11%. Additionally, SEAT has an interest rate collar with a
notional amount of 300 million and a maturity of July 1, 2005 under which
SEAT receives EURIBOR flat and pays fixed rates of 5.255% and 5.1575%
respectively.

SEAT also enters into foreign currency forward exchange contracts to
mitigate a portion of the risk related to fixed sales commitments denominated
in foreign currencies. The purpose of SEATs foreign currency risk

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management activities is to protect SEAT from the risk that future cash flows resulting
from transactions denominated in foreign currencies will be adversely affected
by changes in exchange rates.

As of December 31, 2002 SEAT had the following forward exchange contracts:



| |  |  | two forward exchange contracts US dollars with a notional amount of
16.5 million to protect it from exchange rate risks related to a
credit facility agreement with Telegate AG denominated in U.S. dollars.                  
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | three forward exchange contracts to sell US dollars with a net
notional amount of 35.5 million to protect it from exchange risks
related to a credit facility agreement with Telegate Inc. denominated
in US dollars.         
|
| |  |  | one forward exchange contract to sell pound sterling with a net
notional amount of 3.3 million to protect it from exchange rate risks
related to a credit facility agreement with Telegate LTD. denominated
in pound sterling.
|
| |  |  | one forward exchange contract to buy US dollars with a net notional
amount of 9.2 million to protect it from exchange rate risks related
to bonds denominated in US dollars.                                                  

SEAT does not currently have substantial capital expenditure plans as of
December 31, 2002. Please refer to note 19 of the consolidated financial
statements included in this annual report for a description of SEATs capital
expenditure commitments as of December 31, 2002. SEATs principal capital
expenditure plan currently is comprised of a plan to add additional software
and hardware. SEAT believes that cash flow from operations and available
credit facilities will be sufficient to meet its anticipated capital
expenditure and long-term debt requirements.

In terms of research and development, SEAT pursues the development of new
products and services through intense research activities undertaken as an
integral part of its production. It also focuses on the technical-specialist
training of its personnel. All research and development costs are expensed as
incurred.

Off-balance sheet transactions

As of June 13, 2003, neither SEAT nor any company within the SEAT Group is
a party of an off-balance sheet transaction.

Critical Accounting Policies

SEATs discussion and analysis of its financial condition and results of
operations are based upon SEATs consolidated financial statements, which have
been prepared in accordance with generally accepted accounting principles in
the United States (US GAAP). Reported financial condition and results of
operations of SEAT are sensitive to accounting methods, assumptions and
estimates that underlie the preparation of financial statements generally.
SEAT bases its estimates on historical experience and on various other
assumptions, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

The selection of critical accounting policies, the judgments and other
uncertainties affecting application of those policies and the sensitivity of
reported results to changes in conditions and assumptions are factors to be
considered when reviewing SEATs financial statements. SEAT believes the
following critical accounting policies involve the most significant judgments
and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

SEATs primary revenue streams consist publication of its directories
(both print and on-line), internet access and related services, directory and
operator assistance, sales of office products and services, publishing, direct
marketing and television.

Revenues related to publication of its directories are the fee that SEAT
collects from customers to be listed in the directory. These revenues are
recognized at the date of publication, which corresponds to the time at which
the

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related publications are printed and delivered. For revenue related to
publication in the on-line directories, revenue is recognized over the length
of the contract for which the customer is included on the website, generally
one year.

Revenues from Internet access and related services primarily represent
subscription services, which are recognized over the subscription period on a
straight-line basis.

Revenues from directory and operator assistance are recognized when the
services have been provided, which is based upon the number and duration of
calls received from end customers at the date of service.

Revenues from the sale of office products are recognized when title
transfers to the customer, which is either at the date the products are shipped
or when the products are delivered and accepted by the customer.

Revenues from the sale of publishing are recognized at the date of
publication, which corresponds to the time at which the related publications
are printed and delivered.

Advertising revenue from television is recorded on the date at which the
advertisement is shown. Payments received for advertising services to be
rendered in future periods are deferred and recognized at the time the
advertising is provided.

Provisions for returns and other adjustments related to sales are provided
in the same period the related sales are recorded.

Valuation of Goodwill

The determination of goodwill is dependent on the allocation of the
purchase price to the tangible and intangible assets acquired and liabilities
assumed. Such allocation is often based on judgmental factors and estimates of
fair values for assets that may not have a readily determinable market value.

Goodwill represents the excess of the purchase price paid for business
acquisitions over the fair value of the identifiable tangible and intangible
assets and liabilities acquired. As of January 1, 2002, upon the adoption of
SFAS 142 Goodwill and Other Intangible Assets, goodwill is no longer amortized.
Prior to adoption of SFAS 142, amortization was provided on a straight-line
basis over 5 to 15 1/2 years, the estimated period to be benefited.

The company annually reviews the carrying value of goodwill to determine
if impairment may exist and also on an interim basis if certain events occur.
The requirements of SFAS 142 include that goodwill be assessed for impairment
using fair value measurement techniques, and, specifically, a two-step process
must be utilized. The first step is used to identify potential impairment by
comparing the fair value of a reporting unit with its carrying amount,
inlcuding goodwill. If the fair value of a reporting unit exceeds its carrying
amount, goodwill of the reporting unit is not considered impaired and the
second part of the test is not considered necessary. If the carrying amount of
a reporting unit exceeds its fair value, the second step of the goodwill
impairment test is performed to measure the amount of the loss, if any. The
second part of the goodwill impairment test compares the implied value of the
operating units goodwill with the carrying amount of that goodwill. The
excess of the carrying value over the implied value is then written-off in the
period. Implied value of goodwill is determined in the same manner as the
amount of goodwill recognized in a business combination. That is, the fair
value of the reporting unit is allocated to all of the asset and liabilities of
that unit (including any unrecognized intangible assets) as if the reporting
unit had been acquired in a business combination and the fair value of the
reporting unit was the purchase price paid to acquire the reporting unit. The
determination of impairment of goodwill requires significant judgement and
estimates. If actual results differ from these estimates, or if the Group
adjusts these estimates in future periods, operating results could be
significantly affected.

Other Intangible Assets

Other intangibles assets are recorded at their fair value at the date of
purchase when acquired in a purchase business combination. Other intangible
assets are stated at the cost to acquire, such as a license or patent, or the
cost to produce, such as software. These assets are amortized over the
estimated useful life of the asset. As described
above, SEAT will implement SFAS 142 in 2002 which suspend the amortization
of infinite lived intangible assets.

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Finite lived intangible assets, of which
most of SEATs intangible assets are, will continue to be amortized over the
estimated useful life of the asset.

In 2002, SEAT adopted SFAS 144 Accounting for the Impairment of
Long-Lived Assets which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets, including intangible assets other
than goodwill. Under both SFAS 144 and SFAS 142, the Group assesses potential
impairments whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable or if the price of the asset
has had considerable market depreciation. The recoverability of an assets
carrying value is initially determined by comparing the undiscounted cash flows
of the asset to its carrying value. If, after the initial assessment,
impairment is deemed to exist, then the Group estimates the fair value of the
asset based on discounted cash flows, independent appraisals or quoted marked
prices, if available. Any excess of carrying value over estimated fair value
is written off and recorded as an expense in current period earnings.

Deferred Taxes

SEAT is required to estimate its income taxes in each of the jurisdictions
in which it operates. This process involves the jurisdiction-by-jurisdiction
estimation of actual current tax exposure and the assessment of the temporary
differences resulting from differing treatment of items, such as accruals and
amortization, among others, for tax and financial reporting purposes. These
differences result in deferred tax assets and liabilities, which are included
within SEATs consolidated balance sheet. SEAT must assess in the course of its
tax planning procedures the ability of the Company and its subsidiaries to
obtain the benefit of deferred tax assets based on expected future taxable
income and available tax planning strategies. If in managements judgment, the
deferred tax assets recorded will not be recovered; an impairment is recorded
to reduce the deferred tax asset to its estimated recoverable value.

Significant management judgment is required in determining SEATs
provision for income taxes, deferred tax assets, deferred tax liabilities and
impairments to reflect the potential inability to fully recover deferred tax
assets. If actual results differ from these estimates, or SEAT adjusts these
estimates in future periods, SEAT may need to establish an additional valuation
allowance, which could adversely effect SEATs financial position and results
of operations.

Accrued Liabilities

Considerable judgment is exercised by SEAT in recording the Companys
accrued liabilities and its exposure to contingent liabilities related to
pending litigation or other outstanding claims subject to negotiated
settlement, mediation, arbitration or government regulation as well as other
contingent liabilities.

Judgment is necessary in assessing the likelihood that a pending claim
will succeed or a liability will arise and to quantify the possible range of
the final settlement. In case the occurrence of a contingency or potential
liability is more likely than not, SEAT accrues an amount for contingent
liabilities that represents managements estimate at that date. Because of the
inherent uncertainties in the foregoing evaluation process, actual losses may
be different from the original estimated amount accrued.

For purposes of US GAAP, the Group applies the guidance outlined in SFAS
5, Accounting for Contingencies. Under SFAS 5 a loss contingency is considered
to exist when a future use of assets to settle a liability or claim is
considered probable and can be reasonably estimated. The necessary estimates
used by management rely on the analysis of internal specialists, attorneys,
actuaries or other external specialist as considered necessary. A revision of
the original estimates may significantly affect future operating results.




ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES




Directors and Senior Management and Employees

The management of SEAT is entrusted to a Board of Directors, which is
vested with all the powers for the ordinary and extraordinary management of
SEAT, with the sole exception of those which Italian law mandatorily reserves
to the shareholders. The day-to-day management of SEAT is entrusted to the
Deputy Chairman, the Managing Director and certain other key officers.

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Under SEATs bylaws, the Board of Directors is made up of 7 to 21 members,
as from time to time established by a shareholders resolution appointing the
Board of Directors. The Board of Directors remains in office for the terms
established by the shareholders resolution appointing it; no term, however,
can be longer than three years. The directors may be re-elected.

Subsequent to the Olimpia acquisition of a 28.736% stake in Olivetti
described above in Item 4. Information on the Company  History 
Expansion, Reorganization and Rationalization, the majority of the members of
SEATs Board of Directors resigned in October, 2001. On December 11, 2001, the
ordinary meeting of SEATs shareholders elected a new Board of Directors,
consisting of Paolo Ainio, Enrico Bondi, Pierpaolo Contone, Paolo Dal Pino,
Gianfranco Negri-Clementi, Giuseppe Parrello, Guido Roberto Vitale and Mario
Zanone Poma, all of whom were confirmed. In addition, five new directors were
appointed: Gilberto Benetton, Gianni Mion, Giulia Ligresti, Candido Fois and
Alessandro Ovi.

As noted in Item 4  The SEAT-Tin.it Combination Telecom Italia is SEATs
controlling shareholder. Telecom Italia is controlled by Olivetti with which
it is merging pursuant to the resolutions adopted by the extraordinary
shareholders meetings of Telecom Italia on May 24, 2003 and Olivetti on May
26, 2003, respectively. Olivettis major shareholder is Olimpia. (For more
information on Olimpia, please see Item 4  History  Expansion, Reorganization
and Rationalization) Olimpias shareholders are Pirelli S.p.A. (Pirelli),
Edizione Holding S.p.A. (Edizione Holding), Unicredito Italiano S.p.A.
(UniCredito), IntesaBCI S.p.A. (IntesaBci) and Hopa S.p.A. (Hopa). As a
result of these various shareholders agreements among the Former Olimpia
Shareholders, the following arrangements apply to SEAT.

Pursuant to a shareholders agreement between Pirelli and Edizione Holding
S.p.A. dated August 7, 2001 (as amended on September 14, 2001 and on February
13, 2002), and to an agreement among Pirelli, IntesaBci and UniCredito Italiano
dated October 24, 2001 (collectively, the Shareholders Agreements) Edizione
Finance International S.A. (Edizione Finance), a company 100% owned by
Edizione Holding, which was subrogated to Edizione Holdings rights and
obligations, may designate one-fifth of the members of the Board of Directors
available for nomination (not including the members of the Board appointed by
minority shareholders and government agencies) and the Deputy Chairman, who
will be the legal representative of the Company. One member of the Board is
appointed at the request and designation of IntesaBci and one member of the
Board is appointed at the request and designation of Unicredito. The same
designation rights apply in case SEAT establishes an Executive Committee.

Moreover, pursuant to the Shareholders Agreements, Pirelli pledged, to
the extent allowed by law, that no decision will be made by the Board of
Directors without the favorable vote of at least one of the Board members
appointed by Edizione Finance (if present) on the following points of business:



| |  |  | individual investments greater than 250 million;                                                                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | purchases, sales and deeds of disposition for any reason of
controlling and connecting shareholdings with an individual value of
more than 250 million;
|
| |  |  | deeds of disposition for any reason of businesses or assets with an
individual value of more than 250 million;                                         
|
| |  |  | proposals to call a shareholders extraordinary meeting;                                                                                                
|
| |  |  | transactions between the Olivetti group and the Pirelli group for
amounts individually greater than 50 million; and                                    
|
| |  |  | transactions with related parties.                                                                                                                      

Hopa is a former bondholder of Olimpia. On December 19, 2002 Hopa and two
of its affiliates accepted an offer by Olimpia to retire its bonds in exchange
for a 16% interest in Olimpia. As a result the share capital in Olimpia is
currently held by Pirelli, Edizione Holding, Unicredito, IntesaBci and Hopa in
the following proportion: 50.4%, 16.8%, 8.4% and 16%. In connection with the
acceptance of the retirement of the bonds by Hopa, Hopa entered into an
agreement with the other Olimpia shareholders on February 21, 2003 which sets
forth certain rights

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and obligations of the shareholders of Olimpia that effect among other
interests the governance of their interest in SEAT (the Hopa Agreement).

Under the Hopa Agreement, Hopa has the right to appoint one Olimpia
director and the other Olimpia shareholders will seek to elect one director of
SEAT nominated by Hopa (with a corresponding reduction in the number of Pirelli
nominees).

On February 21, and March 6, March 14, 2002, respectively, Mr. Paolo
Ainio, Mr. Pierpaolo Cotone and Mr. Gilberto Benetton, respectively, resigned
from the Board. The three departing directors were replaced by Mr. Aldo
Cappuccio, Mr. Enrico Parazzini and Mr. Carlo Bertazzo, who were elected on May
2, 2002 by the Ordinary Meeting of SEATs shareholders.

On September 4, 2002, Mr. Enrico Bondi resigned from the position of
Executive Chairman. Mr. Bondi was replaced by Mr. Riccardo Perissich.

The current Board of Directors consists of 13 members. The term of the
current Board of Directors expires at the meeting of shareholders which will
approve the financial statements of SEAT for the financial year ending December
31, 2003.

The members of the Board of Directors of SEAT are currently as follows:

|                          |  |                       |  |             |      | 
|------------------------- |  | --------------------- |  | ----------- | ---- | 
|Name                      |  | Position              |  | Joined SEAT
|                          |  |                       |  |            
|Riccardo Perissich        |  | Executive Chairman(1) |  |             | 2002 | 
|Giuseppe Parrello         |  | Vice Chairman(2)      |  |             | 2001 | 
|Paolo dal Pino            |  | Managing Director(3)  |  |             | 2001 | 
|Candido Fois              |  | Director              |  |             | 2001 | 
|Giulia Ligresti           |  | Director              |  |             | 2001 | 
|Gianni Mion               |  | Director              |  |             | 2001 | 
|Gianfranco Negri Clementi |  | Director              |  |             | 2001 | 
|Alessandro Ovi            |  | Director              |  |             | 2001 | 
|Aldo Cappuccio            |  | Director              |  |             | 2002 | 
|Enrico Parazzini          |  | Director              |  |             | 2002 | 
|Carlo Bertazzo            |  | Director              |  |             | 2002 | 
|Guido Roberto Vitale      |  | Director              |  |             | 2001 | 
|Mario Zanone Poma         |  | Director              |  |             | 2001 | 



---

Notes:




|(1) |  | Appointed by the Board of Directors in September, 2002.
|--- |  | -------------------------------------------------------
|   
|(2) |  | Appointed by the Board of Directors in September, 2001.
|   
|(3) |  | Appointed by the Board of Directors in July, 2001.     

The management of SEAT is currently as follows:

|                  |  |                                                     |  |             |      | 
|----------------- |  | --------------------------------------------------- |  | ----------- | ---- | 
|Name              |  | Position                                            |  | Joined SEAT
|                  |  |                                                     |  |            
|Paolo Dal Pino    |  | Managing Director                                   |  |             | 2001 | 
|Fabrizio Grassi   |  | Chief Operating Officer                             |  |             | 2001 | 
|Angelo Novati     |  | Chief Financial Officer                             |  |             | 1999 | 
|Harald Rosch      |  | Senior Vice President, Internet                     |  |             | 2002 | 
|Pierre LeManh     |  | Senior Vice President, Business Information         |  |             | 2002 | 
|Giuseppe Parrello |  | Senior Vice President, Television                   |  |             | 2001 | 
|Ernesto Mauri     |  | Senior Vice President, Directories                  |  |             | 2000 | 
|Paolo Gonano      |  | Senior Vice President, Directories Assistance       |  |             | 1998 | 
|Paolo Cellini     |  | Senior Vice President, Office Products and Services |  |             | 2002 | 
|Carlo Basile      |  | Senior Vice President, Sales Division               |  |             | 1985 | 

Director and Company Management Biographies

Riccardo Perissich, born in Milan in 1942, was appointed Chairman of SEAT
Pagine Gialle in September 2002. He is also Vice President of Assolombarda,
Unione Industriali di Roma, Assonime, member of the Board of the European
Institute of Oncology, the Board and the Executive Committee of ISPI, the
International Institute for

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Strategic Studies (London), the Istituto Affari Internazionali (Rome) and
of the Aspen Institute Italia (Rome). Mr. Perissich began his career at
Italconsult S.p.A. in 1962. In 1966 he became responsible for studies on the
European Communities by the Istituto Affari Internazionali in Rome and he was
later appointed as the Deputy Director of the Istituto. From 1970 to 1988 he
worked as Chef de Cabinet for four members of the Commission of the European
Communities. He was Director General of the DG for Industry until 1994 having
served as Deputy Director General of the DG for Internal Market and Industrial
Affairs from 1988 to 1990. From 1994 to 2001 he was Director of Public and
Economic Affairs and a Member of the Board of Directors of Pirelli S.p.A., also
in 2001 he coordinated the institutional affairs at the Pirelli Group. From
2001 to 2002 he was Director of the Central Function Public and Economic
Affairs of Telecom Italia Group and a member of the Board of Directors of
Telecom Italia Mobile S.p.A.

Giuseppe Parrello, born in Milan in 1946, was appointed as director in
September 2001 and has been Vice Chairman of the Board since December 11, 2001.
He is also Vice Chairman and Managing Director of HMC, the group that manages
the La 7 and MTV television stations. He was head of the Organization and
Personnel Department of the Montedison Group until 1994 and Member of the
Boards of Directors (vested with operating powers) of several Group companies
(Telemontecarlo, Messaggero, Trenno, Montecaini, Farmitalia Carlo Erba,
Buffetti, Nikols and others). Some of these companies are listed. From 1994
to 2000 he was Managing Director of Calcestruzzi S.p.A. (now Calcemento) and
from 1998 he was Managing Director of Heracles Halkis S.A. and Chairman of
Concretum S.A. From August 2000 to September 2001 he was Chairman and CEO of
Edison Hellas S.A. From September 1, 2001 he is an executive officer of
Telecom Italia S.p.A.

Paolo Dal Pino, was born in Milan in 1962, and was appointed Managing
Director of SEAT Pagine Gialle in July 2001. From March 1995 to July 2001 he
was General Manager of Gruppo Editoriale LEspresso  Republica Division  and
a member of the Board of Directors of Gruppo Editoriale LEspresso SpA;
Managing Director and founding member of Kataweb SpA, the Group holding company
for the Internet business area; Member of the Board of Directors of several
subsidiaries (Manzoni, Finegil and others); Member of the Board of Directors
and of the Executive Committee of ANSA. From 1991 to March 1995 he was Chief
Administrative, Financial and Audit Officer of Editoriale la Republica. From
1990 to 1991 he was Controller of Editoriale la Republica. From 1988 to 1990
he was Chief Administrative, Financial and Audit Officer of the Verkerke Group,
headquartered in Holland and, from 1987 to 1988, Assistant to the Head of
Planning and Control of Mondadori S.p.A. From 1986 to 1987 he was Assistant to
the Head of Planning and Control of Fininvest S.p.A.

Aldo Cappuccio, was born in Trieste, Italy in 1949. He has been Head of
Telecom Italia Group Corporate and Legal Affairs since March 12, 2002, he was
appointed as SEAT Director on May 2, 2002. Mr. Cappuccio began his career in
1976 as a freelance civil lawyer. In 1986, he joined Assicurazioni Generali,
where he worked until 2001 in positions of increasing responsibility, rising
from Deputy Director in Charge of Legal Consulting to Central Director of Group
Legal Affairs, with supervision over the Privacy Service.

Enrico Parazzini, was born in Milan, Italy, in 1944 and was appointed as
Director in May 2002. He is also Head of Telecom Italia Group Finance,
Administration and Control. Mr. Parazzini began his career in 1968 as a Junior
Auditor at Arthur Andersen. In 1969, he was hired by the Finance Department at
General Electric. In 1970, he joined Honeywell Information Systems Italia.
Over the next 20 years he was promoted through the company, holding the
positions of Financial Planning Manager from 1975 to 1980, Administration and
Control Manager from 1981 to 1986, and Administrative Coordinator from 1987 to
1990. In 1991, after Honeywell sold its business to the Bull Group, Mr.
Parazzini was appointed General Manager of Administration, Control, IT Systems
and Logistics. He joined Pirelli as Group Controller in May 1992. He took an
active part in the process of Group restructuring, with special reference to
reform of the planning and control system. Between 1996 and 1999, he was Head
of Administration, Group Acquisitions and Risk Management. He was appointed
Chief Financial Officer of the Cables and Systems division in 2000. Mr.
Parazzini is currently a Board member of I.T. Telecom, SEAT PG and Tim. Since
1994 he has worked as a visiting lecturer on the Multinational Group Planning
and Control Course at the Luigi Bocconi University of Milan.

Carlo Bertazzo, was born in Monselice (Padova) on September 24, 1965 and
was appointed as Director in 2002. From 1995 to date he has also been CFO of
Edizione Holding S.p.A. From 1991 to 1994 he worked for IFI  Istituto
Finanziario Industriale S.p.A. and in 1990 for Banca Commerciale Italiana
S.p.A.

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Gianfranco Negri Clementi, born in 1931, was appointed as Director in May
2001. He is admitted to the Italian Bar and is admitted to plead before the
Italian Supreme Court. During that period he establishes his law firm (now
named Negri Clementi, Toffoletto, Montironi & Soci) which specializes in
commercial law, corporate law (including M&A) , banking law, insurance law and
law of financial markets and has four offices (Milan, Rome, Verona and
Vicenza). He is frequently appointed as common representative of bondholders
or savings shareholders, arbitrator, and legal advisor. Mr. Gianfranco
Negri-Clementi, also sits on several of the board of directors of leading
companies and takes part to many activities carried out by non-profit
associations and foundations with cultural aims.

Candido Fois, born in 1941, was appointed as director in May 2001. Mr.
Fois is professor of Commercial law at the University of Padua. He is also a
director of Unicredito S.p.A., Alleanza S.p.A. and Aprilia S.p.A. Mr. Fois is
a lawyer admitted to the Italian Bar. His academic background include the
appointment as professor of commercial law at the University of Venice, and
Innsbruck. He is author of several publications of insurance corporate and
banking law and is an editor of the Giurisprudenza Commercialelaw review. His
most important appointments in the past include: director and deputy chairman
of Banca Cattolica del Veneto and of Mediocredito delle Tre Venezie; director
of Banco Ambrosiano Veneto and director and member of the Executive Committee
of Mediocredito Lombardo S.p.A.

Mario Zanone Poma, born in 1939, was appointed as Director in May 2001.
He currently holds executive and non executive posts in a variety of businesses
in Italy. His most important appointments include: chairman of Intesa
Mediocredito, member of the governing body of Fondazione Cariplo, chairman of
the Italo-Chinese Chamber of Commerce, chairman of the Advisory Board of Cap
Gemini Ernst & Young and chairman of Governance Consulting. He held the office
of chief executive and deputy chairman of Telepiu (the first Italian pay-TV)
until 1997, before which he worked for corporations such as Hoechst, Fininvest
and Rank Xerox. Since the early 80s he has given seminars and lectures in
Italy and abroad on topics such as information technology and television.
Mario Zanone Pomas academic background lies in the discipline of economics,
with a degree in business economics followed by a second degree in industrial
administration.

Giulia Ligresti, born in 1968, was appointed as Director on December 11,
2001. Ms. Ligresti is a Member of the Board of Directors of SAI Assicurazioni
S.p.A., Vice Chairman of the Sailux S.A., Vice Chairman of Nuova MAA
Assicurazioni S.p.A., Managing Director of SAI Holding Italia S.p.A., Managing
Director of SAIFIN S.p.A.

Alessandro Ovi, born in 1944, was appointed as Director on December 11,
2001. He is a member of the Board of Directors of the Euro Pacific Fund and
the New World Fund, and a member of the Board of Advisors of New Perspective
Fund. He is also Special Advisor in industrial matters to the President of the
EU Board of Directors and Audit Committee of STMicroelectronics to the Board of
Advisors of Korn-Ferry, Director of Technology Review Italy (the MIT Journal of
Innovation). Member of the Board of Telecom Italia; Alitalia; Finmeccanica. He
is President of the Italian Fulbright Association and a member of the
Commission for Italy and U.S. Cultural Relations, IAI (International Affairs
Institute), the Aspen Institute, the United States  Italy Council, and the
Italy-Japan Business Group.] Previous appointments include: CEO of Tecnitel
(Telecom Italia Group, Manufacturing activities) from May 1994 to September
2000, when the activities managed by the company have been dismissed by Telecom
Italia. He has been Senior Vice President  International and Institutional
Affairs from 1993 to 1994, and Senior Vice President  International Affairs
from 1989-1992, and Assistant to the President from 1985 to 1989 of IRI S.p.A.
He has been Deputy Director and Secretary of the Board from 1982 to 1984,
Assistant to CEO and head of Development Planning, Licensing and R&D from 1976
to 1982, Head of Development Planning at CDI (Milan) from 1973  75 for Hoffman
la Roche Italy. He was as a Fulbright Fellow, a Research Assistant at MIT, and
Research Assistant at Politecnico of Milano and CISE from 1970 to 1971.

Guido Roberto Vitale, born in 1937, was appointed as Director in May 2001.
Mr. Vitale has been the founder of Euromobiliare in the 70s and of Vitale
Borghesi (Lazard Italy since 1998) in the early 90s, of which he was Chairman
until May 2001. He is currently Chairman of Vitale & Associati Spa, and
Director of AON Nichols Italy and FAI and member of the Council for the United
States and Italy. He is very experienced in complex financial transactions.

Gianni Mion, born in 1943, was appointed as Director on December 11 2001.
He is Managing Director of Edizione Holding SpA (the holding company of the
Benetton familys businesses) since 1986. He currently is a

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member of the Board of Directors of several Edizione Holding subsidiaries
including Benetton Group, Autogrill, Edizione Property, 21 Investimenti,
Autostrade, Sagat Olimpia, Telecom Italia, TIM, Olivetti, Interbanca,
Bancantonveneta. Precedent positions include CFO Marzotto SpA (1985  86), CEO
of Fintermica SpA (1983  85), Deputy General Manager Gepi SpA (1974  1985),
controller at McQuay Europe SpA auditor with KPMG (formerly Peat Marwick,
Mitchell) (1966   1973).

Fabrizio Grassi, born in 1959, has been Chief Operating Officer of SEAT
since 2001. His most important appointments in the past include: Deputy General
Manager of La Repubblica, Head of the Organization and Personnel Department of
Gruppo Editoriale LEspresso, several appointments, such as Head of
Institutional Relations for Central and Southern Italy, Employees Organization
General Manager Assistant to the Head of Industrial Relations, for the
automotive and industrial Fiat Group. He is Member of the Supervisory Board of
Telegate A.G., Chairman of Databank S.p.A. and Consodata S.p.A., Managing
Director of TV Internazionale S.p.A. and Director of Gruppo Buffetti S.p.A.,
Cipi S.p.A., Holding Media e Comunicazione HMC S.p.A., Consodata S.A., Matrix
S.p.A., TDL Infomedia Ltd, Editoriale Quasar S.r.l., Quasar e Associati S.r.l.,
Giallo Professional Publishing S.p.A., Gruppo Editoriale Faenza Editrice
S.p.A., Gruppo Editoriale JCE S.p.A. and Promo Advertising S.r.l.

Angelo Novati, born in 1954, has been Chief Financial Officer of SEAT
since 1999. From 1995 to 1999, Mr. Novati served as Financial Director in FIAT
AUTO S.p.A. He is Member of the Supervisory Board of Telegate A.G. and Director
of Consodata S.A., TDL Infomedia Ltd, Matrix S.p.A., Holding Media e
Comunicazione HMC S.p.A. and Gruppo Buffetti S.p.A.

Ernesto Mauri, born in 1946, has been Senior Vice President, Directories,
of SEAT since 2003 and, Office Products and Services, since 2002. Before
jointing SEAT, Mr. Mauri served as Vice President  Periodicals of Arnoldo
Mondadori Editore S.p.A. Mr. Mauri has been Managing Director of Cecchi Gori
Advertising S.r.l., Cecchi Gori News and Sport S.r.l., Cecchi Gori Broadcasting
S.r.l., and a Director of Cecchi Gori Communications S.p.A. He is Chairman of
TDL Infomedia Ltd and Director of TDL Infomedia Group PLC, TDL Group Ltd, TDL
Infomedia Finance Ltd, TDL Infomedia Holdings PLC, Thomson Directories Ltd and
Euredit S.A.

Harald Rosch, born in 1968, has been Senior Vice President, Internet, of
SEAT since 2002. From 1999 until 2001, Mr. Rosch served as Marketing Director
of Italia Online and Internet Services. From 1993 until 1998 he served as
Engagement Manager for McKinsey Co. in Milan. He is Managing Director of Matrix
S.p.A. and Director of Miaeconomia S.r.l.

Paolo Gonano, born in 1960, has been Senior Vice President, Directories
Assistance, of SEAT since 2001. Since April 1994 to January 1999, Mr. Gonano
served as Marketing Manager of PIAGGIO V.C. S.p.A. He is Chairman of Giallo
Voice S.p.A. and Telegate Italia S.r.l., Member of the Executive Board of
Telegate A.G. and Director of NetCreations Inc.

Pierre Le Mahn, born in 1966, has been Senior Vice President, Business
Information (Consodata Group), of SEAT since 2003. He previously served as
General Manager of Consodata Group French activities. He also had previous
experiences in restructuring and implementation of financial controlling
systems as a Consultant at Andersen Consulting. He is Chairman of Netcreations,
Inc., Consodata Espana S.A., BCA Finances S.A. and Consodata Solutions S.A.,
Managing Director of Consodata S.A. and Director of Consodata S.p.A., Cal Ltd,
Consodata UK Ltd, Consobelgium S.A. and BCA S.A.

Paolo Cellini, born in 1958, has been Senior Vice President, Office
Products and Services, of SEAT since 2003. He has also served as General
Manager of Italian Consodata Group subsidiary since 2002. He previously has
been Vice President of Disney Internet Group International. He is Chairman of
SK Direct S.r.l., Office Automation Products S.p.A., Orma Informatica S.r.l.,
PBS Professional Business Software S.p.A. and Cipi Sp.A. and Director of Gruppo
Buffetti S.p.A.

Carlo Basile, born in 1947, has been Senior Vice President of the Sales
Division since 2003. Since joining SEAT in 1985, Mr. Basile was promoted to
head of sales in March of 1998 assuming the responsibility for the entire sales
network after assuming various other leading positions in the sales area.
Between 1975 and 1985 Mr. Basile worked in various capacities with the Banca
Commerciale Italiana. He is Director of Consodata S.p.A. and Euredit S.A.

73



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Board of Statutory Auditors

Under Italian law, in addition to electing the board of directors, SEATs
shareholders elect a Board of Statutory Auditors (Collegio Sindacale) at an
ordinary shareholders meeting. The statutory auditors are elected for a term
of three years, may be re-elected for successive terms and may be removed only
for cause and with the approval of a competent court. Each member of the Board
of Statutory Auditors must provide certain evidence that he is in good standing
and meets certain professional standards.

The Board of Statutory Auditors is currently comprised of three statutory
members (sindaci effettivi) and two alternates (sindaci supplenti) as follows:

|                  |  |          
|----------------- |  | ---------
|Name              |  | Position 
|                  |  |          
|Enrico Cervellera |  | Chairman 
|Franco Caramanti  |  | Auditor  
|Giovanni Fiori    |  | Auditor  
|Piero Gennari     |  | Alternate
|Roberto Timo      |  | Alternate

The term of the current Board of Statutory Auditors will expire at the
annual general meeting held to approve the financial statements of SEAT for the
financial year ending December 31, 2003.

Under Italian law, the Board of Statutory Auditors is required to verify
that SEAT: (i) complies with applicable law and its bylaws; (ii) respects the
principles of correct administration; (iii) maintains adequate organizational
structure, internal controls and administrative and accounting systems; and
(iv) adequately instructs its subsidiaries to transmit to SEAT information
relevant to the disclosure obligations of SEAT.

SEATs Board of Statutory Auditors is required to meet at least once each
quarter. In addition, the statutory auditors of SEAT must be present at
meetings of SEATs Board of Directors and shareholders meetings and at
meetings of SEATs senior management. On May 9, 2003 the extraordinary meeting
of SEATs shareholder the by-laws were revised to allow to hold meetings of the
Statutory Auditors via video-conference or audio-conference.

The statutory auditors may decide to call a meeting of the shareholders,
the Board of Directors or the senior management, ask information on the
management of SEAT from the directors, carry out inspections and verifications
at SEAT and exchange information with SEATs external auditors. The Board of
Directors must report to the statutory auditors at least quarterly on its
activities and on the main transactions carried out by SEAT.

Any shareholder may submit a complaint to the Board of Statutory Auditors
regarding facts that the shareholder believes should be subject to scrutiny by
the Board of Statutory Auditors, which must take any such complaint into
account in its annual report to the shareholders meeting. If shareholders
collectively representing 2% of SEATs share capital submit such a complaint,
the Board of Statutory Auditors must promptly undertake an investigation and
present its findings and any recommendations to a shareholders meeting (which
must be convened immediately if the complaint appears to have a reasonable
basis and there is an urgent need to take action).

The Board of Statutory Auditors may report to the competent court serious
breaches of the duties of the directors. SEATs Board of Statutory Auditors is
also required to notify the Italian Securities and Exchange Commission
(CONSOB) without delay of any irregularities found during its review
activities. CONSOB itself may report to the competent court serious breaches
of the duties of the statutory auditors of a listed company.




Compensation

The following table shows the compensation, benefits and fees paid by SEAT
to members of the Board of Directors and members of the Board of Statutory
Auditors of SEAT in 2002.

74



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|                          |  |                                                           |  |                   |  |      |            |                 |  |                  |   |                 |  |             |            |       |  |  |              | 
|------------------------- |  | --------------------------------------------------------- |  | ----------------- |  | ---- | ---------- | --------------- |  | ---------------- | - | --------------- |  | ----------- | ---------- | ----- |  |  | ------------ | 
|Person                    |  | Description of office                                     |  | Emoluments       
|                          |  |                                                           |  |                  
|                          |  |                                                           |  | Duration of       |  |      |            |                 |  |                  |   |                 |  | Bonuses and |            | Other
|Name                      |  | Office held                                               |  | office            |  | Fees |            | Fringe benefits |  | other incentives |   | remuneration(1)
|                          |  |                                                           |  |                   |  |      |            |                 |  |                  |   |                
|                          |  |                                                           |  |                   |  |      |            |                 |  | (in euros)       |   |                 |  |            
|DAL PINO Paolo (5)        |  | Managing Director                                         |  | 12/03/01-12/31/02 |  |      | 77,468.53  |                 |  |                  | = |                 |  |             | 619,748.28 | (6)   |  |  | 1,002,302.00 | 
|PERISSICH Riccardo        |  | Chairman                                                  |  | 9/4/02-12/31/02   |  |      | 25,822.84  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|BONDI Enrico(2)           |  | Chairman                                                  |  | 12/31/01-8/30/02  |  |      | 51,645.69  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|PARRELLO Giuseppe(5)      |  | Deputy Chairman                                           |  | 12/31/01-12/31/02 |  |      | 77,468.53  |                 |  |                  | = |                 |  |             | =          |       |  |  | 701,095.00   | 
|PARAZZINI Enrico(1)       |  | Director                                                  |  | 3/25/02-3/31/02   |  |      | 58,101.40  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|BERTAZZO Carlo(2)         |  | Director                                                  |  |                   |  |      | 58,101.40  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|CAPPUCCIO Aldo(1)         |  | Director and Member
of Remuneration
Committee             |  |                   |  |      | 77,468.53  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|AINIO Paolo(3)            |  | Director                                                  |  | 1/1/02-2/21/02    |  |      | 12,911.42  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|BENETTON Gilberto         |  | Director                                                  |  | 1/1/02-2/21/02    |  |      | 12,911.42  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|COTONE Pierpaolo(1)       |  | Director                                                  |  | 1/1/02-3/6/02     |  |      | 17,215.23  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|FOIS Candido              |  | Director and Member
of the Remuneration
Committee         |  | 12/31/01-12/31/02 |  |      | 103,291.38 |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|LIGRESTI Giulia           |  | Director                                                  |  | 12/31/01-12/31/02 |  |      | 77,468.53  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|MION Gianni(2)            |  | Director                                                  |  | 12/31/01-12/31/02 |  |      | 103,291.38 |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|NEGRI CLEMENTI
Gianfranco |  | Director and Member
of the Committee
for Internal Audit   |  | 12/31/01-12/31/02 |  |      | 103,291.38 |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|OVI Alessandro            |  | Director                                                  |  | 12/31/02-12/31/02 |  |      | 77,468.53  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|VITALE Guido Roberto      |  | Director and Member
of the Remuneration
Committee         |  | 12/31/01-12/31/02 |  |      | 103,291.38 |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|ZANONE POMA Mario         |  | Director and
Chairman of the
Committee for
Internal Audit |  | 12/31/01-12/31/02 |  |      | 103,291.38 |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|CERVELLERA Enrico         |  | Chairman of the
Board of Statutory
Auditors               |  | 12/31/01-12/31/02 |  |      | 61,974.83  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|CARAMANTI Franco          |  | Acting Auditor                                            |  | 12/31/01-12/31/02 |  |      | 41,316.55  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 
|FIORI Giovanni            |  | Acting Auditor                                            |  | 12/31/01-12/31/02 |  |      | 41,316.55  |                 |  |                  | = |                 |  |             | =          |       |  |  | =            | 



---

|Notes:
|------
|      
|(1)   
|      
|(2)   
|      
|(3)   
|      
|(4)   
|      
|(5)   
|      
|(6)   

For the year ended December 31, 2002, the aggregate compensation paid to
SEATs senior management was approximately 4,758,034.40.

Stock Option Plan 1999-2003

On December 13, 1999, SEATs Board of Directors approved the terms of a
stock option plan providing for the grant of stock options to SEATs sales
managers and certain senior employees (the Stock Option Plan 1999-2003). The
Stock Option Plan 1999-2003 was adopted pursuant to a resolution adopted by the
extraordinary shareholders meeting of SEAT on September 24, 1999, which
granted the Board of Directors the power to increase

75





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SEATs share capital by up to 1,363,446.21 through the issuance of up to
38,332,800 ordinary shares and up to 14,467,200 convertible savings shares to
be offered for subscription to SEATs employees. The Stock Option Plan
1999-2003 is intended to strengthen loyalty to the Company and provide
incentives to employees who hold strategic positions or are considered to be
important to the success of the Company. Directors of SEAT and of SEATs
subsidiary companies are not beneficiaries of the Stock Option Plan 1999-2003.

The duration of the plan is five years and it comprises several tranches
of share capital increases, generally annual, tied to the achievement of the
objectives in each reference year according to the methods defined in the plan.

As of December 31, 2002, there were 325,004 outstanding SEAT options
entitling holders to 10,725,132 SEAT ordinary shares, under the Stock Option
Plan 1999-2003. Each option entitles the holders to subscribe to 33 SEAT
ordinary shares. All outstanding options may be exercisable, depending on the
achievement of defined objectives during 2003. The exercise price will be
fixed at a rate between the nominal and market value of each newly issued SEAT
share pursuant to the plan rules for the Stock Option Plan 1999-2003.

In March 2001, Mr. Pellicioli, the then Managing Director and director,
was granted, as an employee of SEAT, a total of 72,382 options (Tranche II),
carrying the right to subscribe to a total of 2,388,606 SEAT ordinary shares,
50% were, at the time they were assigned, granted non-transferable until the
approval of the financial statements for the year ended December 31, 2002.

Also, in March 2001, Mr. Ainio, the then Managing Director of Matrix and a
senior manager of SEAT, was granted, as an employee of Matrix, a total of
10,000 options, carrying the right to subscribe to 330,000 SEAT ordinary
shares. On February 21, 2002 Mr. Ainio resigned from Managing Director of
Matrix and senior manager of SEAT. Mr. Ainio waived its rights under the stock
option plan.

On April 12, 2001, SEAT issued 5,246,835 new SEAT ordinary shares, under
the Stock Option Plan 1999-2003, with a share issue price of Lit. 50
(approximately 0.025, then rounded up to 0.03). On April 12, 2001, senior
managers of SEAT (excluding Mr. Pellicioli) subscribed to a total of 1,386,264
SEAT ordinary shares at the exercise price of Lit. 50 (approximately 0.025).

As of December 31, 2001, Mr. Pellicioli owned options for a total of
2,561,637 SEAT ordinary shares, 100% of which were, at the time they were
granted, non-transferable until the approval of the financial statements for
the year ended December 31, 2002. On May 5, 2003, the Board of Directors of
SEAT resolved to increase SEATs share capital by up to 249,198.84 through the
issuance of up to 8,306,628 ordinary shares of which 2,595,054 to be used in
case Mr. Pellicioli exercises its right to subscribe to the SEAT ordinary
shares he is entitled to and 5,711,574 for certain beneficiaries. The exercise
price is fixed at a rate amounting to the former nominal value expresses in
lire (Lit. 50, approximately 0.025). On May 12, 2003 5,711,574 ordinary
shares were issued and subscribed for 0.03 each for an amount of 171,347. On
June 13, 2003 2,595,054 ordinary shares were issued and subscribed for 0.03
each for an amount of 77,851.62.

Following the redenomination of the share capital of SEAT in euro, which
was implemented through an increase of the par value of each share to 0.03
using available reserves, on December 11, 2001, SEATs extraordinary
shareholders meeting approved a resolution to constitute a special reserve of
170,097.98 for the increase of the share capital due to the Stock Option Plan
1999-2003. The special reserve will be used by the Company to pay the
difference between the issue price (0.03) and the exercise price (originally
set at Lit. 50, which corresponds to 0.025).

Stock Option Plans 2000-2002 and 2001-2002

On November 20, 2000, SEATs extraordinary shareholders meeting approved
a share capital increase, excluding option rights, for a maximum nominal amount
of 3,279,501.30 through the issue, in more than one installment, of a maximum
of 127,000,000 ordinary shares of a nominal value of 0.03 each, reserved to
the employees of the Company and its directly or indirectly-controlled
subsidiaries, including:



| |  |  | a plan for certain employees (managers, junior managers and certain
senior staff) to be identified within the Company and subsidiaries who
hold positions vital for the achievement of Company objectives (the
Stock Option Plan 2000-2002); and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | a plan for all the employees of the Company and its subsidiaries
(the Stock Option Plan 2001-2002) which, as of June 13, 2003 had not
yet been implemented.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

On May 10, 2001, SEATs extraordinary shareholders meeting resolved to
extend the Stock Option Plan 2000-2002 to the directors of subsidiary companies
and to detail certain aspects concerning the determination of the issue price
of the shares.

On July 30, 2001 a resolution was passed for a further extension of the
plan to the directors of SEAT, establishing that 20% of the total shares to be
issued would be earmarked for the Stock Option Plans for the directors of SEAT.

As of December 31, 2002, there were 44,669,976 outstanding SEAT options
entitling holders to 44,669,976 SEAT ordinary shares, under the Stock Option
Plan 2000-2002. Each option entitles the holders to subscribe to one SEAT
ordinary share. All the outstanding options (44,669,976) were granted in 2002
on the basis of certain objectives already reached and may be exercisable as
follows:



| |  |  | 32,456,451 from May 2002 to May 2005;
| | - |  | -------------------------------------
|
| |  |  | 7,408,117 from May 2003 to May 2006; 
|
| |  |  | 4,805,408 from May 2004 to May 2007; 

The exercise price for all the outstanding options is fixed at 1.22 per
share.

As of June 13, 2003, no shares under the Stock Option Plan 2000-2002 had
been issued.

Stock Option Plan TOP

Pursuant to the power to increase the share capital conferred by SEATs
extraordinary shareholders meeting of September 24, 1999, on May 17, 2002
SEATs Board of Directors approved:



| |  |  | the terms of a new stock option plan (the Stock Option Plan TOP);                                                                                                                                                                                                                                                                                                                                                                   
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the regulation of the Stock Option Plan TOP concerning one category
of beneficiaries (beneficiaries A);                                                                                                                                                                                                                                                                                                                             
|
| |  |  | the granting of options under the Stock Option Plan TOP to the
beneficiaries in three lots: (i) 30% of the total amount of the options
granted with a five-year exercise period starting from May 2003, (ii)
30% of the total amount of the options granted with a four-year
exercise period starting from May 2004 and (iii) 40% of the total
amount of the options granted with a three-year exercise period
starting from May 2005;
|
| |  |  | the determination of the exercise price at a rate equal to the
average share price in the 30 days preceding the exercise (0.8532);
and                                                                                                                                                                                                                                                                                               
|
| |  |  | the granting of 1,500,000 options, carrying the right to subscribe
for an equal number of SEAT ordinary shares at the exercise price of
0.8532, to SEATs Managing Director, Mr. Paolo Dal Pino, as the sole
A Beneficiary.                                                                                                                                                                                                        

On the same date, SEATs Board of Directors approved the above-mentioned
share capital increase, for a maximum nominal amount of 45,000.00 through the
issue of up to 1,500,000 SEAT ordinary shares with a par value of 0.03, to be
subscribed for within May 31, 2008. The stock option plan TOP was neither
updated nor amended as of June 13, 2003.

Stock Option Plan Key People

Pursuant to the share capital increase approved by SEATs extraordinary
shareholders meeting of November 20, 2000, on May 17, 2002, SEATs Board of
Directors also approved:



| |  |  | the terms of a new stock option plan (the Stock Option Plan Key
People);
| | - |  | --------------------------------------------------------------------------

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| |  |  | the regulation of the Stock Option Plan Key People concerning the
beneficiaries which are divided into two main categories (beneficiaries
B and C);                                                                                                                                                                                                                                                                                      
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the granting of options under the Stock Option Plan Key People to
the beneficiaries in three lots: (i) 30% of the total amount of the
options granted with a five-year exercise period starting from May
2003, (ii) 30% of the total amount of the options granted with a
four-year exercise period starting from May 2004 and (iii) 40% of the
total amount of the options granted with a three-year exercise period
starting from May 2005;
|
| |  |  | the determination of the exercise price at a rate in the 30 days
preceding the exercise (0.8532);                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | the nominal list of the B beneficiaries, with the detail of the
options granted to each of them, for a total amount of 2,500,000
options at the exercise price of 0.8532;                                                                                                                                                                                                                                                                 
|
| |  |  | the conferral to the Managing Director of the power to define the
nominal list of the C beneficiaries, including the number of options
granted to each one of them, for a total amount of 45,000,000 options
at the exercise price of 0.8532.                                                                                                                                                                                             

As of December 31, 2002, there were 46,400,000 outstanding SEAT options
entitling holders to 46,400,000 SEAT ordinary shares, under the Stock Option
Plan Key People. Each option entitles the holders to subscribe to one SEAT
ordinary share. All the outstanding options (46,400,000) were granted in 2002
and may be exercisable as follows:



| |  |  | 13,920,000 from May 2003 to May 2008;
| | - |  | -------------------------------------
|
| |  |  | 13,920,000 from May 2004 to May 2008;
|
| |  |  | 18,560,000 from May 2005 to May 2008;

Impact of the Spin-off on Stock-option Plans

As of the effective date of the Spin-off, the stock options that were
granted to but not yet exercised by the employees of either Telecom Italia
Media, New SEAT or controlled companies, will be transferred at the same
conditions to either Telecom Italia Media and New SEAT which will take over all
obligations of SEAT relating to such plans.




Board Practices

Severance Provisions

Pursuant to his employment contract, Mr. Mauri will serve as senior vice
president until December 31, 2004 and is entitled to a severance payment in the
case of termination without just cause.

Remuneration Committee

SEATs Remuneration Committee is composed of non-executive directors and
is currently represented by Guido Roberto Vitale (Chairman), Candido Fois and
Aldo Cappuccio.

The Committee shall submit proposals to the Board of Directors on:



| | (i)  |  | remuneration of the Managing Directors and all those directors who
are appointed to particular positions, including those positions that
make the determination of stock option plans; and
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) |  | determining the criteria for total remuneration to the top
management of the Company, on recommendation of the Managing Director.                                                         

78



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The Committee was established during the Board of Directors meeting held
on July 3, 2001. Since the term of office of the then-Board expired, the
Committee was reappointed on December 11, 2001 and therefore reintegrated on
March 25, 2002 (appointment of Mr. Cappuccio as a replacement for Mr. Cotone,
who resigned in the interim).

Internal Audit Committee

On July 3, 2001, the Board established an Internal Audit Committee, whose
task consists of making recommendations and proposals and is currently composed
of non-executive directors represented by Mario Zanone Poma (Chairman),
Alessandro Ovi (Gianni Mion resigned on February 10, 2003) and Gianfranco Negri
Clementi. The Chairman of the Board of Statutory Auditors and, for
particularly important discussions, the entire Board of Auditors, may attend
the Committee meetings.

The Internal Control Committee must, according to the recommendations of
the Preda Code:



| | (i)   |  | assess the adequacy of the internal control system;                                                                                                                                                                                     
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii)  |  | assess the operating plan prepared by the persons responsible for
internal control and receive their periodic reports;                                                                                                                  
|
| | (iii) |  | assess the proposals put forward by the Independent Auditors to
obtain the audit assignment, the operating plan for carrying out the
audit and the results thereof as laid down in the Auditors Report and
their letter of suggestions;
|
| | (iv)  |  | report periodically to the Board of Directors on its activity and
the adequacy of the internal control system; and                                                                                                                      
|
| | (v)   |  | perform the other duties entrusted to it by the Board of Directors,
particularly as regards relations with the Independent Auditors.                                                                                                    

The so-called Preda Code is a voluntary corporate governance code drawn up
by the Italian Committee for the Corporate Governance Committee of Listed
Companies.

Code of Ethics and Code of Behavior on Insider Dealing

On December 11, 2002, the Board of Directors of SEAT approved the Code of
Ethics and the Code of Behavior on Insider Dealing. The decision is in line
with the strategy of the Telecom Italia Group to reinforce its rules of
corporate governance, making them even more effective and in line with
international best practices and the new rules required by the CONSOB.

The Code of Ethics is the underlying concept for the entire system of
Corporate Governance, and as such it plays a vital role in terms of planning,
as it represents the body of principles for the ethically oriented conduct of
business. The document in which the Code of Ethics is embedded sets out the
objectives and information values of business practices, with reference to the
main shareholders with which the SEAT Group of companies interact on a daily
basis: shareholders, the financial market, customers, the community and
personnel.

The Code of Behavior on Insider Dealing has been drawn up in fulfillment
of the regulations recently introduced by Borsa Italiana. Starting January 1,
2003, these regulations require listed companies to make periodic disclosures
concerning any transactions involving the listed securities of the issuer and
its subsidiaries that have been made by parties with access to price-sensitive
information.

With respect to the reference regulations drawn up by Borsa Italiana, the
document is qualified by the following aspects:



| |  |  | flexibility in identifying the list of people subject to the
disclosure obligation, so that contingent situations involving access
to confidential information can be taken into consideration;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | extension of the notification obligation to cover transactions
involving listed financial instruments issued by parent companies (as
well as subsidiaries);                                    

79



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| |  |  | significant reduction in the thresholds that are relevant for the
purposes of transactions to be reported to the market on a quarterly
basis (35,000 instead of 50,000) or immediately upon completion of
the transaction (80,000 instead of 250,000);                                                                                                                                    
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | extension of the obligation for transparency to include the
exercise of stock options or option rights, as well as to all
transactions involving financial instruments issued by companies in the
Olivetti-Telecom Italia Group, also when conducted as part of
management relations on individual basis of investment portfolios in
which the customer waives the right to give instructions;
|
| |  |  | inclusion of blackout periods, i.e. established time frames in
which the persons subject to the provisions of the Code of Behaviour on
Insider Dealing cannot perform transactions.                                                                                                                                                                                                           

The Code of Behavior on Insider Dealing also envisages a particularly
strict set of penalties that includes the possible proposal to the
Shareholders Meeting to revoke the appointment of Directors and Statutory
Auditors.

In accordance with the mandatory term set by the Italian stock exchange
regulations, the Code went into effect on January 1, 2003.




Employees

As of December 31, 2002, SEAT had 7,715 employees, broken down into the
following categories:

|                    |  |          |       |         |  |          |         |         |  |  |       |  |  |  |         | 
|------------------- |  | -------- | ----- | ------- |  | -------- | ------- | ------- |  |  | ----- |  |  |  | ------- | 
|                    |  | 2002     |       | 2001   
|                    |  |          |       |        
|No. of employees    |  | Year End |       | Average |  | Year End |         | Average
|                    |  |          |       |         |  |          |         |        
|Executives          |  |          | 292   |         |  |          | 297.5   |         |  |  | 327   |  |  |  | 324.0   | 
|Middle managers     |  |          | 710   |         |  |          | 590.2   |         |  |  | 690   |  |  |  | 723.0   | 
|Clerical Staff      |  |          | 4,046 |         |  |          | 3,938.0 |         |  |  | 4,753 |  |  |  | 5,019.0 | 
|Technicians         |  |          | 246   |         |  |          | 282.9   |         |  |  | 238   |  |  |  | 235.4   | 
|Telephone operators |  |          | 2,315 |         |  |          | 1,626.3 |         |  |  | 3,154 |  |  |  | 2,263.0 | 
|Journalists         |  |          | 106   |         |  |          | 100.0   |         |  |  | 102   |  |  |  | 99.2    | 
|Total               |  |          | 7,715 |         |  |          | 6,934.9 |         |  |  | 9,264 |  |  |  | 8,663.6 | 

All of SEATs employees are covered by national collective bargaining
agreements and company specific collective bargaining agreements. Until 1998,
managers, directors and middle management benefited from a cash bonus scheme.
In September 1999, SEAT resolved to replace this cash bonus scheme for certain
senior employees with the Stock Option Plan 1999-2003. See - Compensation -
Stock Option Plan 1999-2003 above. SEAT believes that its relationship with
its employees is good.

SEATs future success will depend, in part, on its ability to continue to
attract, retain, manage and motivate highly qualified employees, particularly
in management and Internet development services.




Share Ownership

The following table shows the number of SEAT ordinary shares owned by
directors and members of the Board of Statutory Auditors of SEAT as of June 13,
2003.

|                   |  |         |   |             |  |               |   |               |  |               |   |             |  |          |   |               |  |            |   |  |  |               |   | 
|------------------ |  | ------- | - | ----------- |  | ------------- | - | ------------- |  | ------------- | - | ----------- |  | -------- | - | ------------- |  | ---------- | - |  |  | ------------- | - | 
|                   |  |         |   |             |  |               |   |               |  |               |   |             |  |          |   |               |  |            |   |  |  | No. of shares
|                   |  |         |   |             |  | No. of Shares |   |               |  |               |   |             |  |          |   | No. of shares |  | held as of
|                   |  |         |   |             |  | held at the   |   | No. of Shares |  | No. of shares |   | held at the |  | June 13,
|Name               |  | Company |   | end of 2001 |  | purchased     |   | sold          |  | end of 2002   |   | 2003       
|                   |  |         |   |             |  |               |   |               |  |               |   |            
|Board of Directors |  |         |   |             |  |               |   |               |  |               |   |             |  |          |   |               |  |            |   |  |  |               |   | 
|DAL PINO Paolo     |  |         | = |             |  |               | = |               |  |               | = |             |  |          | = |               |  |            | = |  |  |               | = | 
|BONDI Enrico (1)   |  |         | = |             |  |               | = |               |  |               | = |             |  |          | = |               |  |            | = |  |  |               | = | 
|PARRELLO Giuseppe  |  |         | = |             |  |               | = |               |  |               | = |             |  |          | = |               |  |            | = |  |  |               | = | 
|PERISSICH Riccardo |  |         | = |             |  |               | = |               |  |               | = |             |  |          | = |               |  |            | = |  |  |               | = | 

80



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|                          |  |         |   |             |            |               |   |               |     |               |   |             |           |          |   |               |            |            |   |  |     |               |       | 
|------------------------- |  | ------- | - | ----------- | ---------- | ------------- | - | ------------- | --- | ------------- | - | ----------- | --------- | -------- | - | ------------- | ---------- | ---------- | - |  | --- | ------------- | ----- | 
|                          |  |         |   |             |            |               |   |               |     |               |   |             |           |          |   |               |            |            |   |  |     | No. of shares
|                          |  |         |   |             |            | No. of Shares |   |               |     |               |   |             |           |          |   | No. of shares |            | held as of
|                          |  |         |   |             |            | held at the   |   | No. of Shares |     | No. of shares |   | held at the |           | June 13,
|Name                      |  | Company |   | end of 2001 |            | purchased     |   | sold          |     | end of 2002   |   | 2003       
|                          |  |         |   |             |            |               |   |               |     |               |   |            
|AINIO Paolo (1)           |  | SEAT    |   |             | 23,541,250 |               |   |               | =   |               |   |             | 8,800,000 |          |   |               | 14,741,250 |            |   |  |     |              
|BENETTON Gilberto (1)     |  |         | = |             |            |               | = |               |     |               | = |             |           |          | = |               |            |            | = |  |     |               |       | 
|COTONE Pierpaolo (1)      |  |         | = |             |            |               | = |               |     |               | = |             |           |          | = |               |            |            | = |  |     |               | 7,263 | 
|FOIS Candido              |  | SEAT    |   |             | 7,263      |               |   |               | =   |               |   |             | =         |          |   |               | 7,263      |            |   |  | =   |              
|LIGRESTI Giulia           |  |         | = |             |            |               | = |               |     |               | = |             |           |          | = |               |            |            | = |  |     |               | =     | 
|MION Gianni               |  |         | = |             |            |               | = |               |     |               | = |             |           |          | = |               |            |            | = |  |     |               | =     | 
|NEGRI CLEMENTI Gianfranco |  | SEAT    |   |             | 61         |               |   |               | =   |               |   |             | 61        |          |   |               | =          |            |   |  | =   |              
|OVI Alessandro            |  | SEAT    |   |             | =          |               |   |               | 186 |               |   |             | =         |          |   |               | 186        |            |   |  | 186 |              
|BERTAZZO Carlo            |  |         | = |             |            |               | = |               |     |               | = |             |           |          | = |               |            |            | = |  |     |               | =     | 
|CAPPUCCIO Aldo            |  |         | = |             |            |               | = |               |     |               | = |             |           |          | = |               |            |            | = |  |     |               | =     | 
|PARAZZINI Enrico          |  |         | = |             |            |               | = |               |     |               | = |             |           |          | = |               |            |            | = |  |     |               | =     | 
|ZANONE POMA Mario         |  |         | = |             |            |               | = |               |     |               | = |             |           |          | = |               |            |            | = |  |     |               | =     | 
|VITALE Guido Roberto      |  | SEAT    |   |             | 10,000     |               |   |               | =   |               |   |             | 10,000    |          |   |               | =          |            |   |  | =   |              



---

|Notes:
|------
|      
|(1)   

|                            |  |         |   |             |  |               |   |               |  |               |   |             |  |          |   |               |  |            |   |  |  |               |   | 
|--------------------------- |  | ------- | - | ----------- |  | ------------- | - | ------------- |  | ------------- | - | ----------- |  | -------- | - | ------------- |  | ---------- | - |  |  | ------------- | - | 
|                            |  |         |   |             |  |               |   |               |  |               |   |             |  |          |   |               |  |            |   |  |  | No. of shares
|                            |  |         |   |             |  | No. of Shares |   |               |  |               |   |             |  |          |   | No. of shares |  | held as of
|                            |  |         |   |             |  | held at the   |   | No. of Shares |  | No. of shares |   | held at the |  | June 13,
|Name                        |  | Company |   | end of 2001 |  | purchased     |   | sold          |  | end of 2002   |   | 2003       
|                            |  |         |   |             |  |               |   |               |  |               |   |            
|Board of Statutory Auditors |  |         |   |             |  |               |   |               |  |               |   |             |  |          |   |               |  |            |   |  |  |               |   | 
|CERVELLERA Enrico           |  |         | = |             |  |               | = |               |  |               | = |             |  |          | = |               |  |            | = |  |  |               | = | 
|CARAMANTI Franco            |  |         | = |             |  |               | = |               |  |               | = |             |  |          | = |               |  |            | = |  |  |               | = | 
|FIORI Giovanni              |  |         | = |             |  |               | = |               |  |               | = |             |  |          | = |               |  |            | = |  |  |               | = | 

As of June 13, 2003, the total ownership of SEAT shares by senior managers
of SEAT was 1,453,360 ordinary shares, representing less than 0.02% of SEATs
ordinary share capital. As of June 13, 2003, SEATs directors and senior
managers did not own any Savings Shares. As of the same date, the members of
SEATs Board of Statutory Auditors did not own any SEAT Shares.




ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS




Major Shareholders

Ownership of SEAT Ordinary Shares

Telecom Italia, SEATs parent company, owns directly and indirectly
56.147% of SEATs ordinary shares. The Shares held directly amount to 54.063%.
Through Telecom Italia Finance S.A. and TI.IT-Telecom Italia Information
Technology S.p.A. Telecom Italia owns indirectly 2.084%. Telecom Italia is the
largest fixed-line telecommunications operator in Italy. It has interests in
fixed-line and mobile telecommunications operations in a number of European and
Latin American markets, including Spain, Austria, Serbia, Argentina, Bolivia,
Brazil and Chile as well as other international investments. Olivetti S.p.A.
owned approximately 54.96% of Telecom Italia ordinary shares as of June 13,
2003.

The following table sets forth SEAT shareholders who own more than 2% of
SEAT ordinary shares as of June 13, 2003.

|                |  |                              |  |        |               |                  |  |  |        |   |  | 
|--------------- |  | ---------------------------- |  | ------ | ------------- | ---------------- |  |  | ------ | - |  | 
|Title of Class  |  | Identify of Person of Group  |  | Amount |               | Percent of Class
|                |  |                              |  |        |               |                 
|Ordinary Shares |  | Telecom Italia S.p.A         |  |        | 6,051,510,901 |                  |  |  | 54.063 | %
|Ordinary Shares |  | J.P. Morgan
Whitefriars Inc. |  |        | 759,649,185   |                  |  |  | 6.787  | %
|Ordinary Shares |  | Telecom Italia
Finance S.A.  |  |        | 231,355,270   |                  |  |  | 2.067  | %

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There is no person known to SEAT who owns more than 2% of SEATs ordinary
shares other than as set forth above. SEATs major shareholders do not have
different voting rights.

Telecom Italia became SEATs controlling shareholder as a result of
several transactions completed in 2000, including the merger of Tin.it and SEAT
and the agreement to acquire SEAT shares from Huit II. Prior to these
transactions, Telecom Italias interest in SEAT consisted of its interest in
Huit II, whose shareholding in SEAT is described below. After a series of
intercompany mergers, Huit II interest in SEAT is now held by Telecom Italia
Finance.

Telecom Italia Finance S.A. is in turn owned by Telecom Italia (99.9%) and
Mr. Adriano Trapletti (0.01%).

In 1999, Huit owned approximately 50% of SEATs ordinary shares. In early
2000, Huit was contemplating a reduction in its participation in SEAT through a
secondary offering of SEAT shares. On March 15, 2000, the same date as the
framework agreement described below, Telecom Italia entered into an agreement
with Huit, Huit II, the other Huit shareholders and Lorenzo Pellicioli, then
the Managing Director of SEAT, pursuant to which Telecom Italia agreed to
acquire from Huit II approximately 812,535,304 ordinary shares of SEAT at 4.5
per SEAT ordinary share, corresponding to approximately 19.93% of SEATs
ordinary share capital. The acquisition of SEAT shares through this agreement
and the merger of Tin.it into SEAT allowed Telecom Italia to become the
controlling shareholder of SEAT. As of the date of Telecom Italias agreement
with Huit II for the acquisition of SEAT shares described below, the other
shareholders of Huit were Banca Commerciale Italiana, De Agostini and four
other financial investors, and Huit II owned 47% of SEATs ordinary shares.
Telecom Italia owned 21.07% of Huit II.

As part of this agreement, Telecom Italia granted to Huit II a put option
for approximately 710 million SEAT shares. On December 5, 2000, Telecom Italia
announced that it had reached an agreement with the Chase Manhattan Group and
Huit II, pursuant to which Chase Equities Ltd., a company of the Chase
Manhattan Group, acquired approximately 710 million SEAT ordinary shares from
Huit II along with Huit IIs put option to sell such shares to Telecom Italia
at the price of  4.20 per share. Chase Manhattan and Telecom Italia also
agreed to extend the put option until December 2005, except that Chase
Manhattan had the right to exercise it sooner, in April and May of 2003, 2004
or 2005. The Telecom Italia group also purchased a call option on over 660
million SEAT ordinary shares under the same terms and conditions as the put
option with a premium payment of approximately 747 million. The terms of the
put and call options have since been renegotiated between Telecom Italia and
J.P. Morgan Chase Bank; the price has been reduced to 3.40 per share, and the
put option cannot be exercised until December 2005.

On May 12, 2003, an agreement was reached between Telecom Italia Finance
S.A. and Mr. Paolo Ainio and Carlo Gualandri to remove the share transfer
restriction on the 26.802.272 shares. Therefore these SEAT shares are now
freely tradeable.

In March 2000, Telecom Italia entered into a framework agreement with SEAT
contemplating the combination of Tin.it and SEAT. Telecom Italia received
4,675,461,657 new SEAT ordinary shares in the merger of SEAT and Tin.it, which
was completed in November 2000. Telecom Italia had also acquired 339,291,608
SEAT ordinary shares, representing 8.32% of SEATs ordinary share capital, in a
tender offer for all of SEAT ordinary shares, except those which Telecom Italia
already indirectly owned or had a right to acquire under the agreement
described above, and all outstanding savings shares of SEAT, at 4.20 for each
SEAT ordinary share and 2.94 for each SEAT savings share.

Ownership of Ordinary Shares

As of June 13, 2003, there were 11,193,400,970 outstanding SEAT ordinary
shares, of which 10,145,541,115 were registered in the SEAT shareholders
register in the name of approximately 784.214 holders. As of the same date, a
total of 907.573.038 SEAT ordinary shares were registered in SEAT shareholders
register in the name of 618 holders resident in the United States. These
shares represented 8.11% of the total outstanding SEAT ordinary shares, of
which 6.787% owned by J.P. Morgan Whitefriars Inc. Not all shareholders may be
reflected on SEATs

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shareholder register at any given time. The actual numbers of holders of
SEAT ordinary shares, therefore, may be less or more than these numbers
indicate.

Ownership of Savings Shares

Because most SEAT savings shares are in bearer form, SEAT has not
determined the number of holders of savings shares, including holders resident
in the United States.

As of June 13, 2003, there were 187,689,368 outstanding SEAT savings
shares. As of the same date a total of 117,601 SEAT savings shares were
registered in SEAT shareholders register in the name of 2 holders resident in
the United States. Not all shareholders may be reflected on SEATs shareholder
register at any given time. The actual numbers of holders of SEAT savings
shares, therefore, may be more or less than these numbers indicate.




Related Party Transactions

Contracts with Telecom Italia

Internet

SEAT acquires from Telecom Italia the following network services:



| |  |  | Call origination and IP transport and bandwidth for dial up
Internet access. Internet access call origination through the
nationwide 702 access code also comprises billing to end customers,
which are part of Telecom Italia Reference Interconnection Offer. IP
transport and bandwidth is a commercial service named E@sy.IP.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | ADSL wholesale and IP transport and bandwidth for ADSL Internet
access. ADSL wholesale service is a regulated offer based on retail
less price. IP transport and bandwidth is a commercial service named
E@sy.IP ADSL.                                                                                                           

All of these contracts have standard terms approved by the AGCom and apply
on equal terms to all OLO/ISPs.

SEAT sells to Telecom Italia:



| |  |  | Internet Service Provider (ISP) services, customer service and
other related services for Telecom Italias ADSL retail services and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Proxy radio services for Virtual Internet Service Providers on the
Telecom Italia network.                                         

Directory

SEAT provides Telecom Italia PAGINEBIANCHE copies. With this contract
Telecom Italia fulfils its Universal Service Obligation.

Please see Note 18 to the consolidated financial statements included in
this annual report for additional information.

All the transactions entered into with related parties, including
intragroup transactions, are part of ordinary operations and were entered into
at market conditions or based on specific regulatory provisions. In addition,
there are no atypical and/or unusual transactions or transactions that may
represent a conflict of interest.

|                                                                          |  |                      |     |                      |  |                       |        | 
|------------------------------------------------------------------------- |  | -------------------- | --- | -------------------- |  | --------------------- | ------ | 
|                                                                          |  |                      |     |                      |  | From parent companies
|                                                                          |  | From unconsolidated  |     | and subsidiaries and
|                                                                          |  | subsidiaries and     |     | affiliates of parent
|Main economic, equity and financial items of the SEAT Pagine Gialle group |  | affiliated companies |     | companies           
|                                                                          |  |                      |     |                     
|                                                                          |  | (thousands of euros)
|Sales and service revenues                                                |  |                      | 676 |                      |  |                       | 93,205 | 
|Raw materials and outside services                                        |  |                      | 571 |                      |  |                       | 83,917 | 

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|                                                                          |  |                      |        |                      |  |                       |         | 
|------------------------------------------------------------------------- |  | -------------------- | ------ | -------------------- |  | --------------------- | ------- | 
|                                                                          |  |                      |        |                      |  | From parent companies
|                                                                          |  | From unconsolidated  |        | and subsidiaries and
|                                                                          |  | subsidiaries and     |        | affiliates of parent
|Main economic, equity and financial items of the SEAT Pagine Gialle group |  | affiliated companies |        | companies           
|                                                                          |  |                      |        |                     
|                                                                          |  | (thousands of euros)
|Positive (negative) net other income (expense)                            |  |                      | 237    |                      |  |                       | 2,436   | 
|Positive (negative) net financial income (expense)                        |  |                      | 632    |                      |  |                       | 11,167  | 
|Financial receivables                                                     |  |                      | 12,143 |                      |  |                       | 548,983 | 
|Borrowings                                                                |  |                      | 3,128  |                      |  |                       | 165,316 | 
|Trade and other accounts receivable                                       |  |                      | 4,635  |                      |  |                       | 46,440  | 
|Trade and other accounts payable                                          |  |                      | 5,183  |                      |  |                       | 70,043  | 
|Intangibles, fixed assets and long-term investments                       |  |                      | 815    |                      |  |                       | 12,882  | 




ITEM 8. FINANCIAL INFORMATION




Consolidated Statements and Other Financial Information

Financial Statements

See Item 18. Financial Statements.

Legal Proceedings

General

SEAT, like other companies involved in the telephone directories business,
is frequently named as a defendant in routine litigation relating to printing
and pricing mistakes occurring in SEATs publishing of client advertisements in
its directories and other products. SEAT was the defendant in 157 new court
proceedings in 2002 in which clients sought compensation for printing mistakes
made by SEAT. The number of these claims is very small relative to the total
number of SEATs advertising clients, which in 2002 exceeded 670,000. In the
event of a printing mistake, SEAT generally offers a client some form of
compensation, such as a price reduction or a free connection. In 2002, the
average size of a claim paid by SEAT was 2,614.02. SEAT paid 125 claims in
2002 resulting from litigation for a total of 287,541.61. SEAT currently has
a total of approximately 339 pending claims with an aggregate of approximately
18,252,947.71 in claimed damages. SEAT believes, based on its historical
experience, that it will settle such claims for significantly less than the
aggregate damages claimed. However, no assurance can be given as to the
outcome of these claims, and the award of substantially all the amounts claimed
by clients would have a material adverse effect on SEATs operating results and
financial condition.

WEB

In relation to litigation following the sale of WEBFIN to SEAT by De
Agostini, in December 2001, De Agostini commenced an arbitration proceeding
against SEAT before the National and International Arbitration Chamber of Milan
in Italy, claiming enforcement of the clause providing for the purchase by SEAT
of the remaining 40% of WEBFIN. De Agostini is seeking specific performance of
the clause (for an originally agreed purchase price of 700 million with
payment beginning June 30, 2003) plus damages of approximately 33,000,000 to
cover losses incurred by the plaintiff. SEAT argues in response that the
purchase clause was terminated. SEAT bases its termination on a material
adverse change clause of the contract and, particularly as it was the case with
all internet companies with regard to the loss of value of the company.
Management expects a verdict by November 2003.

Sign

SEAT and Telecom Italia are defendants before the civil court of Venice in
a lawsuit by Sign S.r.l., an Italian software company (Sign), alleging
damages due to SEATs refusal to license the telephone-subscriber listings file
to Sign. In connection with this lawsuit, SEAT and Telecom Italia were charged
by the Antitrust Authority for abuse of a dominant position. Subsequently, on
April 19, 1994, Sign filed a civil lawsuit before the court of Venice alleging
damages due to a breach of contractual and pre-contractual responsibilities.
On the same date, Sign also

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filed another lawsuit with the court of appeals of
Venice sitting as a court of first instance for damages allegedly
suffered because of the antitrust violation. A decision on the merits was
issued in May 2003. Judgment was rendered against SEAT requiring payment to
the plaintiff in the amount of 146,867 in damages and a fine of 750,000 for
violation of antitrust law. Telecom Italia and SEAT have filed an appeal with
the Supreme Court against the judgment of Court of Appeals sitting as a court
of first instance.

Acquisition of Cecchi Gori Communications

In relation to litigation following the sale of TeleMonteCarlo television
network, or La7 and MTV, through a sale and purchase agreement among SEAT,
Cecchi Gori Group Media Holding S.r.l. and Cecchi Gori Group FIN.MA.VI. S.p.A.
(Cecchi Gori Group) on August 6, 2001, the Cecchi Gori Group filed a
proceeding with the civil court of Milan asking for the rescission of the
pledge agreement by which Cecchi Gori Group granted a security interest in
Cecchi Gori Communications S.p.A.s (now named HMC S.p.a.) ordinary shares to
SEAT. After the preliminary hearing, the next hearing will be held on
September 18, 2003.

On July 31, 2001, the Cecchi Gori Group, enforcing an arbitration clause,
commenced an arbitration proceeding against SEAT claiming rescission,
invalidity or termination of the purchase and sale agreement of Cecchi Gori
Communications S.p.A. and claiming damages. A judgment is expected by July 25,
2003.

The Cecchi Gori Group parties have also challenged, in the civil court of
Rome, the validity of a resolution of the ordinary and extraordinary
shareholders meeting of Cecchi Gori Communications S.p.A. (on April 27, 2001),
which approved the companys annual report, resolved to cover the losses for
the year 2000 and increased its share capital. On December 11, 2001, the
hearing on the merits was concluded. On June 13, 2002, the court dismissed the
complaint filed by the Cecchi Gori Group. The complaint was based on the (i)
invalidity of the shareholders resolution of April 27, 2001 and (ii) lack of
authorization on behalf of the shareholder SEAT to cast the vote of MEDIA
Holding. The decision was later appealed by the Cecchi Gori Group and a first
court hearing was scheduled for April 30, 2003.

In April 2001, the Cecchi Gori Group has also challenged before another
judge of the civil court of Rome, the validity of a resolution of the
extraordinary shareholders meeting of Cecchi Gori Communications S.p.A. (on
August 11, 2000), which approved an amendment to the companys by-laws to
modify the meeting and voting quorums of the ordinary shareholders meeting.
On May 14, 2003, the civil Court of Rome rejected the plaintiffs requests and
sentenced the Cecchi Gori Group to pay the trial expenses incurred by SEAT and
by Cecchi Gori Communications.

Dividends

SEAT does not have a policy of declaring a regular dividend. Rather, SEAT
declares a dividend from time to time in light of prevailing circumstances and
its future capital requirements. Any determination to pay dividends in the
future will be at the discretion of SEAT, subject to limitations imposed by
Italian law.

Consistent with Italian law, the payment of annual dividends by SEAT is
made out of the distributable profits and reserves of SEAT on an unconsolidated
basis for each relevant year and upon the recommendation of the Board of
Directors. Any recommendation is subject to approval by the ordinary
shareholders of SEAT at the annual shareholders meeting, which must be
convened for the approval of the annual financial statements of SEAT within
four months after the end of the financial year to which the financial
statements relate.

The payment and amounts of future dividends, if any, will depend upon the following factors:



| |  |  | the amount of distributable profits and reserves on an unconsolidated basis;
| | - |  | ----------------------------------------------------------------------------
|
| |  |  | SEATs capital expenditure and investment plans;                            
|
| |  |  | earnings and level of profitability;                                        
|
| |  |  | the ratio of debt to equity;                                                

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| |  |  | applicable restrictions on the payment of dividends under Italian law;                      
| | - |  | --------------------------------------------------------------------------------------------
|
| |  |  | the level of dividends paid by other comparable listed companies in Italy and elsewhere; and
|
| |  |  | other factors as the Board of Directors may deem relevant.                                  

Before SEAT may pay dividends with respect to any financial year, SEAT
must allocate to its legal reserve (Riserva Legale) an amount equal to 5% of
its net profit on an unconsolidated basis for that year, until the reserve,
including amounts set aside during prior years, is equal to at least 20% of the
aggregate nominal value of SEATs share capital.

In addition to paying dividends from unconsolidated distributable profits,
SEAT may also distribute dividends by charging reserves, some of which may only
be charged for such distributions, provided that, prior to the distribution,
the legal reserve is at or above the legally required 20% minimum referred to
above.

In addition to annual dividends, SEATs bylaws give the Board of Directors
the power to approve the distribution of interim dividends. Pursuant to
Italian law, after the approval of the preceding financial years financial
statements and provided that the financial statements do not reflect current
and/or accumulated losses, interim dividends may be distributed provided that
they do not exceed the lower of:



| |  |  | the profit of the current financial year, net of the amount to be attributed to legal and other reserves; and
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | distributable reserves.                                                                                      

On May 9, 2003, the extraordinary meeting of SEATs shareholders approved
an amendment of the Article 6 of SEATs bylaws concerning the procedures to pay
the preferred dividend of the savings shares; in particular, the new clause
enables the shareholders meeting which approves the financial statements in
case that the net profit shown in the financial statement is non-existing or
insufficient, to use the available reserves to meet the financial rights of
those holding savings shares.

Once dividends have been paid in compliance with applicable laws,
shareholders cannot be required to repay interim dividends, or annual dividends
paid on the basis of duly approved financial statements, to SEAT if the
shareholders collected such dividends in good faith.




ITEM 9. SHARE PRICE INFORMATION

In December 2000, SEAT completed a conversion offer of SEAT savings shares
into SEAT ordinary shares, which allowed holders of savings shares to exchange
one savings share plus 0.89 for each ordinary share. On completion of the
conversion, SEAT received acceptances for approximately 87% of all outstanding
savings shares and savings shares now represent only 1.7% of SEATs share
capital. As a result of the conversion, SEAT issued 1,261,108,452 new ordinary
shares and received cash proceeds of 1.122 billion in January 2001.

SEATs ordinary and savings shares are traded in euro on the Italian stock
exchanges Mercato Telematico. SEATs shares commenced trading on the
Telematicoon January 2, 1997. The shares are traded on the Telematicoin
minimum lots of 500 shares. Smaller lots of shares are traded on the
Telematicoin the opening tender.

SEATs shares are not listed on any U.S. stock exchange.

Following the acquisition of Consodata and as agreed with the French
financial authority (Conseil des Marchés Fiduciaries), SEATs ordinary shares
have been trading on the Premier Marchéof Euronext in Paris since August 7,
2001.

The following tables show the high and low official price, which
represents the weighted average of the trading prices for all trades effected
on a trading day, for SEATs ordinary shares and savings shares as reported
through Telematico. All prices are expressed in euro.

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|                               |  |                    |      |                    |  |      |      |     |  |  |      |  |  |  |      | 
|------------------------------ |  | ------------------ | ---- | ------------------ |  | ---- | ---- | --- |  |  | ---- |  |  |  | ---- | 
|                               |  | Official Price per |      | Official Price per
|                               |  | Ordinary Share (1) |      | Savings Share (1) 
|                               |  |                    |      |                   
|Fiscal year ended December 31, |  | High               |      | Low                |  | High |      | Low
|                               |  |                    |      |                    |  |      |      |    
|1998                           |  |                    | 0.80 |                    |  |      | 0.35 |     |  |  | 0.63 |  |  |  | 0.23 | 
|1999                           |  |                    | 3.40 |                    |  |      | 0.81 |     |  |  | 2.21 |  |  |  | 0.66 | 
|2000                           |  |                    | 6.63 |                    |  |      | 2.26 |     |  |  | 4.51 |  |  |  | 1.33 | 
|2001                           |  |                    | 2.30 |                    |  |      | 0.62 |     |  |  | 1.47 |  |  |  | 0.39 | 
|2002                           |  |                    | 0.94 |                    |  |      | 0.55 |     |  |  | 0.68 |  |  |  | 0.36 | 
|2003 (through May 10, 2003)    |  |                    | 0.69 |                    |  |      | 0.56 |     |  |  | 0.54 |  |  |  | 0.46 | 
|January                        |  |                    | 0.69 |                    |  |      | 0.61 |     |  |  | 0.53 |  |  |  | 0.46 | 
|February                       |  |                    | 0.65 |                    |  |      | 0.58 |     |  |  | 0.50 |  |  |  | 0.46 | 
|March                          |  |                    | 0.62 |                    |  |      | 0.56 |     |  |  | 0.50 |  |  |  | 0.47 | 
|April                          |  |                    | 0.60 |                    |  |      | 0.56 |     |  |  | 0.49 |  |  |  | 0.46 | 
|May                            |  |                    | 0.62 |                    |  |      | 0.59 |     |  |  | 0.54 |  |  |  | 0.51 | 
|June (through June 13, 2003)   |  |                    | 0.63 |                    |  |      | 0.58 |     |  |  | 0.53 |  |  |  | 0.51 | 



---

|Notes: |  |                                                                                                                                                                                                                                                                                                                                                        
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|(1)    |  | Beginning January 4, 1999, SEATs ordinary and savings shares began
trading on Telematicoin Euro. The prices for 1998 have been restated,
based on the fixed Euro/Lira exchange rate of Lit. 1936.27 = 1.00
established on December 31, 1998, as if the SEATs ordinary and savings
shares had been trading in Euro since the beginning of the period.

|               |  |                    |      |                    |  |      |      |     |  |  |      |  |  |  |      | 
|-------------- |  | ------------------ | ---- | ------------------ |  | ---- | ---- | --- |  |  | ---- |  |  |  | ---- | 
|               |  | Official Price per |      | Official Price per
|               |  | Ordinary Share (1) |      | Savings Share (1) 
|               |  |                    |      |                   
|               |  | High               |      | Low                |  | High |      | Low
|               |  |                    |      |                    |  |      |      |    
|2001           |  |                    |      |                    |  |      |      |     |  |  |      |  |  |  |      | 
|First quarter  |  |                    | 2.33 |                    |  |      | 1.22 |     |  |  | 1.47 |  |  |  | 0.89 | 
|Second quarter |  |                    | 1.48 |                    |  |      | 1.12 |     |  |  | 0.99 |  |  |  | 0.79 | 
|Third quarter  |  |                    | 1.25 |                    |  |      | 0.61 |     |  |  | 0.81 |  |  |  | 0.39 | 
|Fourth quarter |  |                    | 1.03 |                    |  |      | 0.73 |     |  |  | 0.72 |  |  |  | 0.67 | 
|2002           |  |                    |      |                    |  |      |      |     |  |  |      |  |  |  |      | 
|First quarter  |  |                    | 0.94 |                    |  |      | 0.75 |     |  |  | 0.68 |  |  |  | 0.57 | 
|Second quarter |  |                    | 0.89 |                    |  |      | 0.71 |     |  |  | 0.65 |  |  |  | 0.51 | 
|Third quarter  |  |                    | 0.74 |                    |  |      | 0.58 |     |  |  | 0.52 |  |  |  | 0.39 | 
|Fourth quarter |  |                    | 0.83 |                    |  |      | 0.55 |     |  |  | 0.65 |  |  |  | 0.36 | 
|2003           |  |                    |      |                    |  |      |      |     |  |  |      |  |  |  |      | 
|First quarter  |  |                    | 0.69 |                    |  |      | 0.56 |     |  |  | 0.53 |  |  |  | 0.46 | 

|                             |  |                    |      |                    |  |      |      |     |  |  |      |  |  |  |      | 
|---------------------------- |  | ------------------ | ---- | ------------------ |  | ---- | ---- | --- |  |  | ---- |  |  |  | ---- | 
|                             |  | Official Price per |      | Official Price per
|                             |  | Ordinary Share     |      | Savings Share     
|                             |  |                    |      |                   
|                             |  | High               |      | Low                |  | High |      | Low
|                             |  |                    |      |                    |  |      |      |    
|December 2002                |  |                    | 0.83 |                    |  |      | 0.64 |     |  |  | 0.65 |  |  |  | 0.52 | 
|January 2003                 |  |                    | 0.69 |                    |  |      | 0.61 |     |  |  | 0.53 |  |  |  | 0.46 | 
|February 2003                |  |                    | 0.65 |                    |  |      | 0.58 |     |  |  | 0.50 |  |  |  | 0.46 | 
|March 2003                   |  |                    | 0.62 |                    |  |      | 0.56 |     |  |  | 0.50 |  |  |  | 0.47 | 
|April 2003                   |  |                    | 0.60 |                    |  |      | 0.56 |     |  |  | 0.49 |  |  |  | 0.46 | 
|May                          |  |                    | 0.62 |                    |  |      | 0.59 |     |  |  | 0.54 |  |  |  | 0.51 | 
|June (through June 13, 2003) |  |                    | 0.63 |                    |  |      | 0.58 |     |  |  | 0.53 |  |  |  | 0.51 | 

The following table shows the high and low official price, which
represents the weighted average of the trading prices for all trades effected
on a trading day, for SEATs ordinary shares as reported through Premier
Marché. All prices are expressed in euro.

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|                 |  |                             |      |     |  |  |      | 
|---------------- |  | --------------------------- | ---- | --- |  |  | ---- | 
|                 |  | Official Price Per Ordinary
|                 |  | Share                      
|                 |  |                            
|                 |  | High                        |      | Low
|                 |  |                             |      |    
|2002             |  |                             |      |     |  |  |      | 
|Third quarter(1) |  |                             | 0.78 |     |  |  | 0.55 | 
|Fourth quarter   |  |                             | 0.97 |     |  |  | 0.54 | 
|2003             |  |                             |      |     |  |  |      | 
|First quarter    |  |                             | 0.70 |     |  |  | 0.51 | 



---

|Notes: |  |                  
|------ |  | -----------------
|      
|(1)    |  | From August 2002.

|                            |  |                             |      |  |  |  |  |     |  |  |      | 
|--------------------------- |  | --------------------------- | ---- |  |  |  |  | --- |  |  | ---- | 
|                            |  | Official Price per Ordinary
|                            |  | Share                      
|                            |  |                            
|                            |  | High                        |      |  |  |  |  | Low
|                            |  |                             |      |  |  |  |  |    
|December 2002               |  |                             | 0.80 |  |  |  |  |     |  |  | 0.57 | 
|January 2003                |  |                             | 0.70 |  |  |  |  |     |  |  | 0.59 | 
|February 2003               |  |                             | 0.65 |  |  |  |  |     |  |  | 0.55 | 
|March 2003                  |  |                             | 0.58 |  |  |  |  |     |  |  | 0.51 | 
|April 2003                  |  |                             | 0.60 |  |  |  |  |     |  |  | 0.53 | 
|May 2003                    |  |                             | 0.60 |  |  |  |  |     |  |  | 0.58 | 
|June 2003 (through June 13) |  |                             | 0.62 |  |  |  |  |     |  |  | 0.59 | 

Clearance and Settlement of SEAT Shares

Legislative Decree No. 213 of June 24, 1998 (Dematerialization Decree)
provided for the dematerialization of financial instruments publicly traded on
regulated markets including treasury bonds. From July 9, 1998, all companies
that issue financial instruments that are publicly traded on regulated markets
must inform Monte Titoli S.p.A., a centralized securities clearing system owned
by certain of the major Italian banks and financial institutions (Monte
Titoli), which will open an account in the name of each company in its
register.

Beneficial owners of Shares and Savings Shares must hold their interests
through specific deposit accounts with any participant having an account with
Monte Titoli. The beneficial owners of Shares and Savings Shares held with
Monte Titoli may transfer their shares, collect dividends, create liens and
exercise other rights with respect to those Shares and Savings Shares through
such accounts and may no longer obtain physical delivery of share certificates
in respect of their Shares and Savings Shares. All new issues of Shares and
Savings Shares and all other transactions involving Shares and Savings Shares
must settle electronically in book-entry form.

Shares and Savings Shares are accepted for clearance through Euroclear and
Clearstream. Holders of shares may elect to hold such Shares and Savings
Shares through Euroclear or Clearstream (outside the United States).




ITEM 10. ADDITIONAL INFORMATION




Memorandum and Articles of Association

General

SEAT Pagine Gialle S.p.A. is a public company (societá per azioni)
incorporated and regulated under the Italian Civil Code.

On May 9, 2003, the extraordinary meeting of SEATs shareholders approved
the amendment of the following articles of SEATs Bylaws: Article 6 (Shares),
concerning the procedures to pay the preferred dividend of the savings shares;
Article 12 (Ordinary and Extraordinary General Meeting), concerning the
reference to the relevant legal provisions establishing quorum requirements for
holding the meetings and approving resolutions; Article 15 (Composition of the
Board of Directors) concerning a technical specification; Article 17 (Meetings of

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the Board of Directors)
concerning providing information (pursuant to Art. 150 of Legislative Decree
58/98) to the Board of Statutory Auditors; Article 23 (Board of Statutory
Auditors) concerning the possibility to hold meetings of the Statutory
Auditors via video-conference or audio-conference.

The objects and purpose of SEAT are set out in Article 4 of the Bylaws,
which are attached as Annex B to the Articles of Association.

SEATs objectives include:



| |  |  | to operate in the industry and trade of publishing, printing and
graphics in general, in any form and by any means, including on-line;                                                                                                                                                                        
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | to gather and engage in advertising in any form and for any means
of communication, even in exchange for goods or services or on the
account of third parties;                                                                                                                                                
|
| |  |  | to manage activities, including promotional activities, in the
field of advertising communications and public relations initiatives;                                                                                                                                                                          
|
| |  |  | to engage, to prepare and to sell, with all technological means and
any other transmission support, including on-line and via the Internet,
all types of documentation services, including but not limited to
databases and support services for trading goods or services;                                   
|
| |  |  | to manage all activities related to information processing and use
of any type and of any manner, including the use and sale of
communications services of any type, by any instruments and means and
to manage all related, complementary or instrumental production and
sales activities in the these areas;
|
| |  |  | to engage in all commercial, industrial and financial operations
and transactions involving real or personal property that are
considered appropriate for the carrying out of SEATs objectives; and                                                                                                          
|
| |  |  | to acquire, directly or indirectly, interests and holdings in other
corporations or companies as long as it is not SEATs primary activity
and so long as no activities inherent to bringing in public funds or
not permitted by law are carried out.                                                         

Directors

SEATs Board of Directors consists of not fewer than seven and not more
than 21 directors. Directors and deputy directors are elected annually at the
annual general meeting for a term expiring at the end of the next annual
general shareholders meeting. Under the voting list system contained in SEATs
bylaws, SEATs directors are to be elected on the basis of candidate lists
presented by one or more shareholders representing at least 3% of the share
capital of SEAT having the right to vote at the annual general meeting of
shareholders. The candidate lists must be deposited at the head office of SEAT
at least ten days before the date of the first call of the general meeting of
shareholders. Each shareholder may present or participate in the presentation
of, and may vote for, only one candidate list.

A director of SEAT may not vote in respect of any proposal in which such
director, or any person connected with the director, has any material interest
other than by virtue of his interests in securities of, or otherwise in or
through, SEAT.

The compensation of SEATs directors is resolved by the meeting of SEATs
shareholders. The directors may authorize the issuance of bonds or other
indebtedness only if empowered by a shareholders resolution.

There is no mandatory retirement age for directors of SEAT, and directors
may be reelected to successive boards. Directors are not required to hold any
shares of SEAT to be qualified for membership on the board.

Rights and Restrictions Attaching to SEAT Shares

As of June 13, 2003, the issued and outstanding share capital of SEAT
amounted to 341,432,710.14 divided into 11,193,400,970 ordinary shares and
187,689,368 savings shares with a nominal value of 0.03 each. All of the

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ordinary shares and savings shares are validly issued and fully paid. The
ordinary shares are in registered form, while the savings shares may be either
in registered or bearer form.

Dividend Rights

The payment by SEAT of any annual dividend is proposed by the Board of
Directors and is subject to the approval of the shareholders at the annual
shareholders meeting, which must be convened within four months or, under
special circumstances, six months after the end of each financial year. Before
dividends may be paid out of SEATs unconsolidated net income in any year, an
amount equal to 5% of net income must be allocated to SEATs legal reserve
until the reserve is at least equal to 20% of the par value of SEATs issued
share capital. The Board of Directors may authorize the distribution of
interim dividends, subject to certain statutory and legal limitations. Holders
of savings shares have preferential rights on the distribution of dividends.

Dividends are payable to those persons who hold the shares through an
intermediary on the dividend payment date declared by the shareholders
meeting. Payments in respect of dividends are distributed through Monte Titoli
on behalf of each shareholder by the intermediary with which the shareholder
has deposited its shares. See Item 8. Financial Information  Financial
Statements  Dividends.

Meetings of Shareholders and Voting Rights

Holders of ordinary shares are entitled to attend and vote at ordinary and
extraordinary shareholders meetings. Votes may be cast personally or by
proxy. Shareholders meetings may be called by SEATs Board of Directors (or
the Board of Statutory Auditors or at least two statutory auditors) and must be
called if requested by holders of at least 20% of the issued and outstanding
ordinary shares. Shareholders meetings may also be called if requested by
holders of at least 10% of the issued and outstanding ordinary shares. In this
latter case, however, the Board of Directors may refuse to call the meeting if
calling it conflicts with SEATs interest; any dispute arising from a refusal
to call a meeting must be resolved by the competent court. Shareholders are
informed of all shareholders meetings to be held by publication of a notice in
the Italian Official Gazette (Gazzetta Ufficiale) at least 30 days before the
date fixed for the meeting. The period is reduced to, respectively, 20 days
with respect to meetings convened at the request of minority shareholders and
meetings convened to resolve upon SEATs dissolution, and 15 days for meetings
convened pending a public tender offer launched on SEATs shares. The notice
is also published in at least one national daily newspaper, as recommended by
CONSOB.

Shareholders meetings must be convened at least once a year. The annual
unconsolidated financial statements of SEAT are submitted for approval to the
ordinary shareholders meeting which must be convened within four months or, in
the event of exceptional circumstances, within six months after the end of the
financial year to which the financial statements relate. At ordinary
shareholders meetings, shareholders also approve the distribution of
dividends, appoint the Board of Directors and statutory auditors, determine
their remuneration and vote on any business matter submitted by the directors.
Extraordinary shareholders meetings may be called to pass upon proposed
amendments to the bylaws, capital increases, mergers, de-mergers, dissolutions,
issuance of debentures, appointment of receivers and similar extraordinary
actions. The notice of a shareholders meeting may specify up to two or three
meeting dates, respectively, for an ordinary or extraordinary shareholders
meeting; these meeting dates are generally referred to as calls.

The quorum required for shareholder action at an ordinary shareholders
meeting on first call is at least 50% of the total number of issued and
outstanding ordinary shares, while on second call there is no quorum
requirement. In either case, resolutions may be approved by holders of the
majority of the ordinary shares present or represented at the meeting. The
quorum required at an extraordinary shareholders meeting on first, second and
third call is determined by statutory law. Resolutions of any extraordinary
shareholders meeting require the approval of a majority set forth by statutory
law. In addition, a meeting will be deemed duly convened if shareholders
representing 100% of SEATs share capital, together with all members of the
Board of Directors and the Board of Statutory Auditors, are present at the
meeting.

To attend any shareholders meeting, shareholders must be in possession of
an appropriate certificate. This certificate may be obtained by owners of
ordinary shares through the intermediary associated with Monte Titoli, the
company authorized by CONSOB to operate a centralized clearing system, or the
centralized security custody and

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administration system with which their
accounts are held. Shareholders must deposit their shares with the authorized
intermediary for the certificate to be issued.

Shareholders may attend the shareholders meeting by proxy. A proxy may
be given only for a single shareholders meeting (including, however, the
first, second and third calls of such meetings) and may be exercised only by
the person expressly named in the applicable form. The person exercising the
proxy cannot be a subsidiary of SEAT, a director, statutory auditor, or
employee of SEAT or of any of its subsidiaries.

Proxies may be solicited by an intermediary (banks or investment
companies, asset management companies and companies having proxy solicitation
as their sole purpose) on behalf of a qualified soliciting shareholder or group
of shareholders (who individually or as a group own and have owned at least
0.5% of SEATs voting capital for at least six months and who have been
registered with SEAT as holder or holders of the shares for the same period of
time). Proxies may also be collected by a shareholders association from among
its members provided that the association has been formed by notarized private
agreement, does not carry out business activities other than those relevant to
the purpose of the association and is made up of at least 50 individuals each
of whom owns not more than 0.1% of SEATs voting capital. Members of the
shareholders association may, but are not obliged to, grant proxies to the
legal representative of the association and proxies may also be granted in
respect of only some of the matters to be discussed at the relevant
shareholders meeting. The association votes in different manners in
compliance with the instructions given by each member who has guaranteed a
proxy to the association. CONSOB has established provisions which govern the
transparency and proper performance of the solicitation and collection of
proxies.

Savings Shares

Italian companies which have their shares listed on the Telematicocan
issue savings shares (azioni di risparmio) which carry preferential rights in
the payment of dividends and no voting rights. SEAT, in accordance with
Italian law and its bylaws, has issued savings shares which have the following
characteristics:



| |  |  | they have a right to the distribution of net income of up to 5% of
their nominal value;                                                                                                                            
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | thereafter they must be allocated dividends in an amount at least
2% higher than the par value in comparison to dividends allocated to
ordinary shares;                                                            
|
| |  |  | if dividends cannot be distributed as above in any financial year,
the unpaid amount accrues to the following two financial years;                                                                                 
|
| |  |  | they have the same rights as other shares in the distribution of
reserves;                                                                                                                                         
|
| |  |  | should a capital reduction become necessary due to losses, the
nominal value of the savings shares is reduced by an amount equal to
the amount of the loss exceeding the nominal value of all the other
shares; and
|
| |  |  | in the liquidation of assets they rank prior to other categories of
shares for the full nominal value.                                                                                                             

On May 9, 2003, the extraordinary meeting of SEATs shareholders approved
an amendment of the article 6 of SEATs Bylaws concerning the procedures to pay
the preferred dividend of the savings shares; in particular, the new clause
enables the shareholders meeting which approves the financial statements in
the case that the net profit shown in the financial statement is non-existing
or insufficient, to use the available reserves to meet the financial rights of
those holding savings shares.

In accordance with SEATs bylaws, in the case of delisting of the ordinary
shares or savings shares, the savings shares will keep their rights and
characteristics unless the holders of savings shares wish to exercise the right
to convert their shares into:



| |  |  | listed preferential shares, which would have the same features as
savings shares, in accordance with the Italian law in force at the time
of conversion, and would be entitled to vote at the extraordinary
general meeting; or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | ordinary shares.
| | - |  | ----------------

The right to convert would be exercised by the holders of savings shares
in accordance with the terms and conditions set out in the resolution of the
extraordinary meetings and where necessary with the approval of the holders of
savings shares.

Italian Legislative Decree No. 58 of 1988, dated February 24, 1998
(Decree No. 58) provides for a special meeting of holders of savings shares
for the approval of resolutions regarding the following matters:



| |  |  | appointment and removal of the savings shareholders common
representative and the commencement of legal action for liability
against such person;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | approval of any resolution taken by the ordinary or extraordinary
meetings of the company that may prejudice rights of savings
shareholders;      
|
| |  |  | creation of a fund for the expenses necessary to protect common
interests and the approval of the related statement of account;                   
|
| |  |  | settlement of disputes with the company; and                                                                                                      
|
| |  |  | any other matter of common interest.                                                                                                              

In December 2000, SEAT completed a conversion offer of SEAT savings shares
into SEAT ordinary shares, which allowed holders of savings shares to exchange
one savings share plus 0.89 for each ordinary share. Following completion of
the conversion, savings shares now represent only 1.7% of SEATs share capital.
As a result of the conversion, SEAT issued 1,261,108,452 new ordinary shares
and received cash proceeds of 1.122 billion in January 2001.

Liquidation Rights

Pursuant to Italian law and subject to the satisfaction of the claims of
all other creditors, shareholders are entitled to a distribution of all the
remaining liquidated assets of SEAT proportional to the nominal value of their
shares. Holders of savings and preferred shares are entitled to a priority
right to any distribution of liquidated assets up to their par value.
Thereafter, all shareholders would rank equally in their claims to the
distribution of surplus assets, if any. Ordinary shares rank equally among
themselves in liquidation.

Notification of the Acquisition of Shares and Voting Rights

Pursuant to Italian securities laws, any acquisition of any interest in
excess of 2% of the voting shares of a listed company, as well as the
acquisition by a listed company of an interest exceeding 10% of the voting
shares of an unlisted company, must be notified to CONSOB and the company whose
shares are acquired. In the case of an acquisition of shares of a listed
company, the purchaser must notify CONSOB and the company within five business
days following the acquisition. In the case of an acquisition of shares of an
unlisted company, the purchaser must notify the company within seven days and
must notify CONSOB biannually and at the end of each fiscal year. The voting
rights attributable to the shares in respect of which the notification has not
been made may not be exercised. Any resolution taken in violation of this
restriction may be annulled if the resolution would not have been adopted in
the absence of those votes.

In addition, any person whose aggregate interest in the voting shares of a
listed company exceeds or falls below 2%, 5%, 7.5%, 10% and successive
percentages being multiples of five, respectively, of the listed companys
voting share capital, is obliged to notify CONSOB and the issuer. For the
purpose of calculating these ownership thresholds, shares owned by any person,
irrespective of whether the voting rights are exercisable by that person or by
a third party, are taken into consideration and, except in limited
circumstances, account should also be taken of
shares held through, or shares the voting rights of which are exercisable
by, subsidiaries, fiduciaries or intermediaries. For the purpose of
calculating the ownership thresholds of 5%, 10%, 25%, 50% and 75%, shares
should also be taken into account which:

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| |  |  | a person has an option to, directly or indirectly, purchase or
sell; and                                           
| | - |  | -------------------------------------------------------------------------------------------------------------------
|
| |  |  | a person may acquire pursuant to the exercise of a warrant or
conversion right which is exercisable within 60 days.

The notification must be repeated when the person, upon the exercise of
either of these rights, acquires shares which causes the persons aggregate
ownership in the listed company to exceed the relevant thresholds.
Notification should be made (except in limited circumstances) within five
business days of the event which gives rise to the notification obligation.

Cross-ownership of listed companies may not exceed 2% of their respective
voting shares and cross ownership between a listed company and an unlisted
company may not exceed 2% of the voting shares of the listed company and 10% of
the voting shares of the unlisted company. If the relative threshold is
exceeded, the company which is the later to exceed the threshold may not
exercise the voting rights attributable to the shares in excess of the
threshold and must sell the excess shares within a period of 12 months. If the
company does not sell the excess shares, it may not exercise the voting rights
in respect of its entire shareholding. If it is not possible to ascertain
which is the later company to exceed the threshold, subject to a different
agreement between the two companies, the limitation on voting rights and the
obligation to sell the excess shares will apply to both of the companies
concerned. The 2% limit for cross ownership is increased to 5% on the
condition that the limit is only exceeded by the two companies concerned
following an agreement authorized in advance by an ordinary shareholders
meeting of each of the two companies. Furthermore, if a party holds an
interest in excess of 2% of a listed companys share capital, the listed
company or the party which controls the listed company may not purchase an
interest above 2% in a listed company controlled by the first party. In case
of non compliance, voting rights attributable to the shares held in excess may
not be exercised. If it is not possible to ascertain which is the later party
to exceed the limit, the limitation on voting rights will, subject to any
different agreement between the two parties, apply to both. Any shareholders
resolution taken in violation of the limitation on voting rights may be
annulled if the resolution would not have been adopted in the absence of those
votes. The foregoing provisions in relation to cross-ownership do not apply
when the thresholds are exceeded following a public tender offer aimed at
acquiring at least 60% of a companys ordinary shares or when a controlled
company purchases shares of a controlling company within the limits mandated by
Italian law; however, certain restrictions on the manner of purchase will
apply.

Pursuant to Decree No. 58, agreements among shareholders of a listed
company or of its parent company must be notified to CONSOB within five days,
published in summary form in the press within ten days and filed with the
Chamber of Commerce within 15 days. Failure to comply with these rules will
render the agreements null and void and the shares cannot be voted. These
rules apply to shareholders agreements which:



| |  |  | regulate the exercise of, or require prior consultation for the
exercise of voting rights in a listed company or its controlling
companies;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | contain limitations on the transfer of shares or securities which
grant the right to purchase or subscribe shares;                         
|
| |  |  | provide for the purchase of those shares or securities; or                                                                                 
|
| |  |  | have as their objective or effect the exercise, including joint
exercise, of a dominant influence over the company.                        

Any shareholders agreement of the nature described above may have a
maximum term of three years or, if executed for an unlimited term, can be
terminated by a party upon six months prior notice. In case of a public
tender offer, shareholders who intend to participate in the tender offer may
withdraw from the agreement without notice. This withdrawal is effective only
in the event that the relevant shares are actually sold.

Regulation 11971, as amended, contains provisions which govern the method
and content of the notification and publication of the agreements as well as of
subsequent amendments thereto. The regulation also provides that any party to
an agreement described above concerning more than 5% of the listed companys
share capital is obliged to notify CONSOB and the listed company in question of
its overall shareholding in the listed company, unless the information has
already been notified in compliance with other provisions of Decree No. 58.

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In accordance with Italian antitrust laws, the Italian Antitrust Authority
is required to prohibit the acquisition of control in a company which would
thereby create or strengthen a dominant position in the domestic market or a
significant part thereof and which would result in the elimination or
substantial reduction, on a lasting basis, of competition, provided that
specified turnover thresholds are exceeded. However, if the turnover of the
acquiring party and the company to be acquired exceed certain other monetary
thresholds, the antitrust review of the acquisition falls within the exclusive
jurisdiction of the European Commission.

There are no provisions in SEATs bylaws that would either prevent or
delay a change of control or discriminate against large shareholders of SEAT.

Limitations on Voting and Shareholding

There are no limitations imposed by Italian law or SEATs memorandum or
articles of association on the right of non-residents or foreign persons to
hold or vote SEATs ordinary shares or savings shares, other than the
limitations that would generally apply to all of SEATs shareholders.




Material Contracts

Contracts with Telecom Italia

Certain contracts with Telecom Italia to which SEAT is, or has been since
January 1, 2002, a party, are described above under Item 7. Major Shareholders
and Related Party Transactions  Related Party Transactions.

Agreements with ILTE

As of the date of this annual report, ILTE has contracts with SEAT to
print the following products: PAGINEBIANCHE(the subscribers alphabetic
telephone directory), the Pagine Gialle(home and office editions), TuttoCittà
(the SEAT city guides), AnnuarioSEAT NeoExpo (the SEAT yearbook), Pagine
Gialle Professional, Annuario Kompass (classified business to business
yearbook) and Guida degli Alberghi dItalia (on hotel guide).

A contract to print PAGINEBIANCHE will terminate on December 31, 2007.
SEAT may terminate the contract earlier if the publication of PAGINEBIANCHE
ends for any reason.

A contract to print the Pagine Giallewill terminate on December 31, 2007.
SEAT may terminate the contract if the publication of the Pagine Gialleends
for any reason.

A contract to print TuttoCittàand AnnuarioSEAT NeoExpo will terminate on
December 31, 2007 but SEAT may terminate the contract if the publication of
TuttoCittàand/or Annuario SEAT NeoExpoends for any reason (if publication of
just one of these products ends, SEATs right to terminate shall be only
partial). Under a December 1999 agreement (which is renewed annually), ILTE
printed SEATs Pagine Gialle Professional(only six editions for the regions of
Lombardia, Triveneto, Piemonte, Valle dAosta, Emilia-Romagna, Lazio and
Umbria).

A contract to print Annuario Kompass, Guida degli Alberghi dItaliaand
two other minor business to business directories will terminate on December 31,
2004.

All the above contracts contain detailed technical and quality
specifications and contain penalties ranging from progressive fines (in the
event of failure to meet deadlines and quality criteria) to loss by ILTE of its
sole printer position (allowing SEAT to award part or all of one or more of the
above contracts to other firms, up to a maximum of 30% of ILTEs total sales to
SEAT) in the event of a serious default or poor service.

The above contracts list unit charges per process. Starting from year
2003, the charges are updated each year, except the contract to print Annuario
Kompass, Guida degli Alberghi dItalia and two others minor business to
business directories on the basis of a different percentage of the variation
dellindice dei prezzi al consumo over the previous year published by Istat
(the Italian Statistics Institute).

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Under a contract signed on July 14, 1998 and ending on December 31, 2007,
ILTE will also produce cellophane-wrapped sets for SEAT, i.e., it will assemble
the main product plus all its accessory publications and printed material
intended for the telephone subscriber in a single, thermoplastic-sealed pack.

Other Contracts

Pursuant to an agreement dated November 30, 2001 SEAT outsourced to
Accenture S.p.A. the management and assistance services of the Sales Force
Automation system (including the Click and Commission system realized by
Amdocs and licensed to SEAT) until December 31, 2004. After this date, it can
be renewed for terms of one year each unless terminated by SEAT with a 6-month
notice by Accenture with a 9-month notice. Pursuant to the agreement, SEAT
keeps the right to terminate the contract starting from July 1, 2002 with a
6-month notice.

Under an outsourcing contract signed on December 31, 2001, Saritel (now
known as TI. IT-TELECOM ITALIA INFORMATION TECHNOLOGY) will furnish to SEAT
certain services for facility management, housing of hardware and software,
system and objective management of hardware and software systems. SEAT has
entered into paper supply contracts with Swedish and Finish companies for the
Directory business. For more information see Item 4  New SEAT Business
Segments  Directories Operations. Under a software licensing agreement signed
on January 1, 2000, VOLT DELTA EUROPE Ltd. granted SEAT the use of the
necessary software for the operation of the 89.24.24 Pronto Pagine Gialle call
center service.




Exchange Controls

Foreign Investment and Exchange Control Regulations in Italy

There are no exchange controls in Italy. Residents of Italy may hold
foreign currency and foreign securities of any kind, within and outside Italy.
Non-residents may invest in Italian securities without restriction and may
export cash, instruments of credit and securities, in both foreign currency and
euro, representing interest, dividends, other asset distributions and the
proceeds of dispositions. There are no limitations on the right of
non-resident or foreign beneficial owners to vote their Shares except as
provided for all SEATs shareholders by law. See Memorandum and Articles of
Association  Limitations on Voting and Shareholding.

Updated reporting and record-keeping requirements are contained in recent
Italian legislation which implements an EU Directive regarding the free
movement of capital. Such legislation requires that transfers into or out of
Italy of cash or securities in bearer form in excess of 10,329.14 be reported
in writing to the Ufficio Italiano Cambi (the Italian Exchange Office) by
residents or non-residents that effect such transfers, or by credit
institutions or other intermediaries that effect such transactions on their
behalf. In addition, credit institutions and other intermediaries effecting
such transactions on behalf of residents or non-residents of Italy are required
to maintain records of such transactions for five years, which may be inspected
at any time by Italian tax and judicial authorities. Non-compliance with these
reporting and record-keeping requirements may result in administrative fines
or, in the case of false reporting and in certain cases of incomplete
reporting, criminal penalties. The Ufficio Italiano Cambiwill maintain
reports for a period of ten years and may use them, directly or through other
government offices, to police money laundering, tax evasion and any other crime
or violation.

Certain additional procedural requirements are imposed for tax reasons.
Non-corporate residents of Italy effecting transfers to and from Italy in
excess of 10,329.14 in one year must disclose them in their annual tax
declarations. Non-corporate residents must also give details in their tax
declarations of financial assets held outside Italy at the end of the fiscal
year and of transfers in excess of 10,329.14 to, from, within and between
foreign countries in connection with such assets during the fiscal year. No
declaration is required in respect of foreign investments and foreign
income-earning assets that are exempt from income tax or subject to withholding
tax in Italy. Such disclosure requirements do not apply (i) if the total value
of the investments and assets at the end of the taxable period or the total
amount of the transfers effected during the year is not greater than 10,329.14
or (ii) in
respect of foreign investments, foreign assets or transfers within the EU
(except for transfer from or to Italy). For corporate residents there is no
requirement for such a declaration because their financial statements (on the
basis of which their tax returns are prepared) already contain the information.

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There can be no assurance that the present regulatory environment in or
outside Italy will endure or that particular policies presently in effect will
be maintained, although Italy is required to maintain certain regulations and
policies by virtue of its membership in the EU and other international
organizations and its adherence to various bilateral and multilateral
international agreements.




Taxation

Unless otherwise indicated, for purposes of the following discussion
regarding taxation the Shares and the Savings Shares are collectively referred
to as the SEAT Shares.

Italian Taxation

The following is a summary of certain Italian tax consequences of the
purchase, ownership and disposition of Shares or Savings Shares as at the date
hereof. It does not purport to be a complete analysis of all potential tax
matters relevant to a decision to hold Shares or Savings Shares.

Income Tax

Savings Shares and Shares. Under Italian law dividends paid to holders of
Savings Shares who are not Italian residents and do not have a permanent
establishment in Italy to which dividends are connected are subject to a 12.5%
withholding tax.

With respect to dividends paid to beneficial holders of Shares who are not
Italian residents and do not have a permanent establishment in Italy to which
dividends are connected, Italian law provides for a 27% withholding tax on
dividends paid.

Under Italian law, all shares of Italian listed companies have to be
registered in a centralized deposit system. With respect to dividends paid in
connection with shares held in the centralized deposit system managed by Monte
Titoli, such as SEAT Shares, instead of the 27% or 12.5% withholding taxes
mentioned above, a substitute tax will apply at the same tax rates as the
above-mentioned withholding taxes. This substitute tax is levied by the
Italian authorized intermediaries participating in the Monte Titoli system and
with whom the securities are deposited and also by non-Italian authorized
intermediaries participating, directly or through a non-Italian centralized
deposit system, in the Monte Titoli system.

Non-resident holders of Shares have the right to recover up to four-ninths
of the 27% substitute tax on their dividend income by establishing to the
Italian tax authorities that the dividend income was subject to income tax in
another jurisdiction in an amount at least equal to the total refunds claimed.
U.S. holders should consult their own tax advisers concerning the possible
availability of these additional refunds, which traditionally have only been
payable after extensive delays.

These refunds are normally subject to extensive delays. In addition,
these refunds are an alternative to seeking any relief from double taxation
under the Italian-U.S. income tax convention (the Treaty).

U.S. resident owners of Shares may be entitled to reduced rates of tax on
their dividends under the Treaty. Under circumstances where a U.S. resident
owner is the actual beneficiary of the dividends and the dividends paid are not
connected with a permanent establishment in Italy through which the U.S.
resident owner carries on a business or with a fixed base in Italy through
which the U.S. resident owner performs independent personal services, the
Treaty provides that Italian taxes cannot exceed 15% of gross dividends.

To qualify for the reduced tax rate afforded by the Treaty, a beneficial
owner of Shares must provide the intermediary with which the shares are
deposited and which participates in the Monte Titoli system with the following:



| | (i) |  | a declaration by the beneficial owner containing all the data
identifying this person as the beneficial owner and establishing the
existence of all the conditions necessary for the application of the
Treaty; and
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (ii) |  | a certification (Form 6166) issued by the U.S. Internal Revenue
Service that states that the beneficial owner is a U.S. resident for
tax purposes. The certification is valid until March 31 of the year
following the submission.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

IRS Form 6166 may be obtained by filing a request with the Internal
Revenue Service Center in Philadelphia, Pennsylvania, Foreign Certification
Request, P.O. Box 16347, Philadelphia, PA 19114-0447. Requests for
certification must include the holders name, mailing address, social security
number or employer identification number, tax return form number, and tax
period for which the certification is requested. In addition, each
certification request for Italy must include a statement declaring, under
penalties of perjury, the following:



| |  |  | that the holder is a U.S. resident;                              
| | - |  | -----------------------------------------------------------------
|
| |  |  | that the holder does not have a permanent establishment in Italy;
|
| |  |  | the holders permanent street address; and                       
|
| |  |  | if a corporation, the holders state of incorporation.           

If the holder of Shares fails to obtain the reduced rate provided by the
Treaty, a refund equal to the difference between the Treaty rate and the
Italian 27% tax must be claimed directly from the Italian tax authorities.
Extensive delays have been encountered by U.S. residents seeking payments
directly from the Italian authorities pursuant to the Treaty.

In the case of dividends derived by a U.S. partnership, the reduction of
the tax rate under the Treaty is only available to the extent such dividends
are subject to U.S. tax in the hands of the partners.

Transfer Tax

No transfer tax is payable upon the transfer of SEAT Shares through
Telematico. Other types of transfers of shares listed on Telematicoare also
exempted from the payment of transfer tax provided that the parties entering
into the agreement pursuant to which the transfer takes place are (i) banks,
Italian securities dealing firms (SIMs) exchange agents or (ii) banks, SIMs
or exchange agents on the one hand, and non-residents on the other hand or
(iii) banks, SIMs or resident or non-resident exchange agents, on the one hand,
and investment funds on the other hand. In any other case, transfer tax is
currently payable at the following rates:



| |  |  | 0.072 per 51.65 (or any fraction) of the price at which the
shares are transferred when the transfer is made between private
individuals directly or through an intermediary that is not a bank, SIM
or exchange agent;                                             
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 0.0258 per 51.65 (or any fraction) of the price at which the
shares are transferred when the transfer is made either (i) between
bank, SIM or exchange agent and a private individual or (ii) between
private individuals through a bank, SIM or exchange agent; and
|
| |  |  | 0.0062 per 51.65 (or any fraction) of the price at which the
shares are transferred when the transfer is made between banks, SIMs or
exchange agents.                                                                                                               

The mere change of the depositary (e.g., Euroclear, Clearstream, Monte
Titoli, DTC or the Depositary) not involving a transfer of the ownership of the
transferred shares will not trigger the Italian transfer tax.

Capital Gains Tax

Under Italian law, capital gains tax (CGT) is levied on capital gains
realized by non-residents from the disposition of shares in companies resident
in Italy for tax purposes even if those shares are held outside of Italy.
Capital gains realized by non-resident holders on the sale of
non-qualified shareholdings in companies listed on a stock exchange and
resident in Italy for tax purposes are not subject to CGT.

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In order for a non-resident holders to benefit from the exemption from
non-qualified shareholdings, SEAT may require the shareholder to provide a
declaration in which they have to declare that they are U.S. residents for tax
purposes.

A qualified shareholding consists of securities that (i) entitle the
holder to exercise more than 2% of the voting rights of a company with shares
listed on a stock exchange (as is SEATs case) or 20% of the voting rights of
other companies, in each case in the ordinary meeting of the shareholders or
(ii) represent more than 5% of the share capital of a company with shares
listed on a stock exchange (as is SEATs case) or 25% of the share capital of
other companies.

The relevant percentage is calculated taking into account the holdings
sold during a 12-month period. Where losses exceed gains, they can be carried
forward for up to the fourth taxable period.

Pursuant to the Treaty, a U.S. resident will not be subject to CGT unless
the SEAT Shares form part of the business property of a permanent establishment
of the holder in Italy or pertain to a fixed base available to a holder in
Italy for the purpose of performing independent personal services. U.S.
residents who sell SEAT Shares may be required to produce appropriate
documentation establishing that the above mentioned conditions of
non-taxability pursuant to the Treaty have been satisfied if CGT would
otherwise be applicable.

Gift Tax

Gift tax is payable on transfers of shares of Italian companies by reason
of donation, regardless of the residence of the donor and even if the shares
are held outside Italy, the application of Italian gift tax depends upon the
value of the gift and the relationship between the donee and donor.

There is currently no gift tax convention between Italy and the United
States.

United States Federal Income Taxation

The following summary describes material U.S. federal income tax
consequences of the acquisition, ownership and sale of SEAT Shares that are
generally applicable to U.S. holders who own SEAT Shares as capital assets for
U.S. federal income tax purposes. For these purposes, you are a U.S. holder if
you are for U.S. federal income tax purposes:



| |  |  | a citizen or resident of the United States;                                                                                                                    
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a corporation, or other entity taxable as a corporation, organized
under the laws of the United States or of any political subdivision of
the United States; or
|
| |  |  | an estate or trust the income of which is includible in gross
income regardless of its source.                                                                 

This discussion is based on the tax laws of the United States currently in
effect, including the Internal Revenue Code of 1986, as amended, Treasury
Regulations, administrative announcements, and judicial decisions, as well as
the Italian-U.S. income tax convention (the Treaty). These laws may change,
possibly with retroactive effect. This discussion does not address U.S. state,
local or non-U.S. tax consequences.

Please note that this discussion does not address all of the tax
consequences that may be relevant in light of your particular circumstances.
In particular, it does not address purchasers subject to special rules,
including:



| |  |  | partnerships;                                           
| | - |  | --------------------------------------------------------
|
| |  |  | persons subject to the alternative minimum tax;         
|
| |  |  | tax-exempt entities;                                    
|
| |  |  | dealers and traders in securities or foreign currencies;
|
| |  |  | insurance companies;                                    

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| |  |  | financial institutions;                                                                                                                                                                                     
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | persons who own the SEAT Shares as part of an integrated
investment, including a straddle, hedging or conversion transaction,
comprised of the SEAT Shares and one or more other positions for tax
purposes;
|
| |  |  | persons whose functional currency is not the U.S. dollar for U.S. federal income tax purposes; or                                                                                                           
|
| |  |  | persons who actually or constructively own 10% or more of the Companys voting stock.                                                                                                                       

Please consult your tax advisors with regard to the application of U.S.
federal income tax laws to the SEAT Shares, and any tax consequences arising
under the laws of any state, local or non-U.S. taxing jurisdictions.

Taxation of dividends

Distributions made with respect to the SEAT Shares (other than certain pro
rata distributions of SEAT Shares), before reduction for any Italian tax
withheld, will generally constitute foreign source dividend income for U.S.
federal income tax purposes to the extent such distributions are made from the
Companys current or accumulated earnings and profits, as determined in
accordance with U.S. federal income tax principles. Under recently enacted
legislation, dividends received by noncorporate U.S. holders of SEAT Shares may
be subject to U.S. federal income tax at lower rates than other types of
ordinary income if certain conditions are met. You should consult your own tax
advisor regarding the application of this new legislation to your particular
circumstances.

You will not be entitled to claim a dividends-received deduction for
dividends paid on the SEAT Shares. The amount of any distribution paid in
euros will be equal to the U.S. dollar value of such euros on the date of
receipt by the U.S. holder, regardless of whether the payment is in fact
converted into U.S. dollars. Gain or loss, if any, recognized on the sale or
other disposition of such euros will be U.S. source ordinary income or loss.
The amount of any distribution of property other than cash will be the fair
market value of such property on the date of distribution.

Subject to certain limitations and restrictions, Italian taxes withheld
from distributions up to an amount not exceeding the rate provided in the
Treaty will be eligible for credit against a U.S. holders U.S. federal income
tax liability. Italian taxes withheld in excess of the rate provided in the
Treaty will generally not be eligible for credit against a U.S. holders
federal income tax liability.

The limitation on foreign taxes eligible for credit is calculated
separately with respect to specific classes of income. For this purpose,
dividends the Company distributes with respect to the SEAT Shares will
generally constitute passive income or, in the case of certain U.S. holders,
financial services income. You should consult your tax advisor concerning
the foreign tax credit implications of the payment of these withholding taxes.

Taxation of capital gains

You will recognize capital gain or loss for U.S. federal income tax
purposes on the sale or exchange of SEAT Shares in the same manner as you would
on the sale or exchange of any other shares of stock held as capital assets.
As a result, you will generally recognize capital gain or loss for U.S. federal
income tax purposes equal to the difference between the amount realized and
your adjusted basis in the SEAT Shares. The gain or loss will generally be
U.S. source income or loss. You should consult your own tax advisor about the
treatment of capital gains, which may be taxed at lower rates than ordinary
income for non-corporate taxpayers, and capital losses, the deductibility of
which may be limited.

Passive Foreign Investment Company Rules

The Company believes that it will not be considered a passive foreign
investment company (PFIC) for United States federal income tax purposes for
2002. However, since PFIC status depends on the composition of the Companys
income and assets and the market value of the Companys assets (including,
among others, less than 25 percent owned equity investments) from time to time,
there can be no assurance that the Company will not be
considered a PFIC for any taxable year. If the Company were treated as a
PFIC for any taxable year during which a U.S. holder held SEAT Shares, certain
adverse consequences could apply to the U.S. holder.

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Information Reporting and Backup Withholding

You may, under certain circumstances, be subject to information reporting
and backup withholding with respect to dividends or the proceeds of any sale,
exchange or redemption of SEAT Shares unless you:



| |  |  | are a corporation or come within certain other exempt categories,
and, when required, demonstrate this fact, or                                                                            
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | provide a correct taxpayer identification number, certify that you
are not subject to backup withholding and otherwise comply with
applicable requirements of the backup withholding rules.

Any amount withheld under these rules will be creditable against your U.S.
federal income tax liability if you provide the required information to the
U.S. Internal Revenue Service. If you are required to and do not provide a
correct taxpayer identification number, you may be subject to penalties imposed
by the U.S. Internal Revenue Service.




Documents on Display

It is possible to read and copy documents referred to in this annual
report on Form 20-F that have been filed with the SEC at the SECs public
reference room located at 450 Fifth Street, NW, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms and their copy charges. As of November 2002 we file our
reports electronically. The SEC maintains an Internet site (http:
//www.sec.gov) that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC.




ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion should be read in conjunction with the Summary
of Accounting Policies in the notes to the consolidated financial statements
and in conjunction with Note 20 to the consolidated financial statements, which
provides a summarized comparison of the nominal amounts, carrying values and
market values of derivative and non-derivative financial instruments and other
information relating to those instruments. In the normal course of business,
the financial position of the SEAT Group is routinely subjected to interest
rate and foreign exchange rate risks. These market risks principally relate to
the SEAT Groups outstanding debt and non-Euro denominated assets and
liabilities. The SEAT Group does not enter into derivative transactions for
trading or speculative purposes. The following discussion is based on the
amounts of indebtedness as derived from our Italian GAAP financial statements.
See footnote 20 for a further discussion of items which, for purposes of U.S.
GAAP, are considered to be debt.

Debt Policy

SEAT Groups debt used to support the financing of its domestic business
and international expansion (and the expanding geographic breadth of its
business) contains an element of market risk from changes in interest and
currency rates. With respect to interest rates applicable to medium and
long-term debt, SEAT Groups policy is to utilize both floating rate and fixed
rate with different ranges of maturity. SEAT Groups policy is intended to
optimize the cost of funding/risk exposure mix, utilizing as providers funds of
Telecom Italia as centralized Treasury. The centralized treasury also gives
support in negotiating credit lines and financial operations in general.

The table below sets forth, for the periods indicated, the aggregate
principal amount of long-term debt (including current portion) payable in each
year through 2007 and thereafter.

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|                   |  |                    |     |      |  |      |   |      |  |      |     |            |  |       |   |             |  |  |   |  |  |  |     |  |  |              |       |              |  |  |       | 
|------------------ |  | ------------------ | --- | ---- |  | ---- | - | ---- |  | ---- | --- | ---------- |  | ----- | - | ----------- |  |  | - |  |  |  | --- |  |  | ------------ | ----- | ------------ |  |  | ----- | 
|                   |  |                    |     |      |  |      |   |      |  |      |     |            |  |       |   |             |  |  |   |  |  |  |     |  |  | As of        |       | As of       
|                   |  |                    |     |      |  |      |   |      |  |      |     |            |  |       |   |             |  |  |   |  |  |  |     |  |  | December 31, |       | December 31,
|                   |  |                    |     |      |  |      |   |      |  |      |     |            |  |       |   |             |  |  |   |  |  |  |     |  |  | 2002         |       | 2001        
|                   |  | 2003               |     | 2004 |  | 2005 |   | 2006 |  | 2007 |     | Thereafter |  | Total |   | (pro forma)
|                   |  |                    |     |      |  |      |   |      |  |      |     |            |  |       |   |            
|                   |  | (millions of Euro)
|Fixed Rate
Debt(1) |  |                    | 9   |      |  |      | 0 |      |  |      | 1   |            |  |       | 4 |             |  |  | 4 |  |  |  | 160 |  |  |              | 178   |              |  |  | 210   | 
|Floating Rate
Debt |  |                    | 700 |      |  |      | 6 |      |  |      | 308 |            |  |       | 0 |             |  |  | 0 |  |  |  | 0   |  |  |              | 1,014 |              |  |  | 1,010 | 
|                   |  |                    |     |      |  |      |   |      |  |      |     |            |  |       |   |             |  |  |   |  |  |  |     |  |  |              |       |              |  |  |       | 
|Total              |  |                    | 709 |      |  |      | 6 |      |  |      | 309 |            |  |       | 4 |             |  |  | 4 |  |  |  | 160 |  |  |              | 1,192 |              |  |  | 1,220 | 
|                   |  |                    |     |      |  |      |   |      |  |      |     |            |  |       |   |             |  |  |   |  |  |  |     |  |  |              |       |              |  |  |       | 

(1)  Bonds are callable at October 15, 2004 at a price respectively of 106.0625%
for the GBP Bond and 107.75% for the USD Bond. The originals on October 15,
2004 maturity dates are 2009 and 2010.

The table below sets forth, for the periods indicated, the aggregate principal
amount of long-term debt outstanding at year-end (excluding current portion of
long-term debt) and the average interest rate, broken down by type of loan. As
of December 31, 2002 the fair value of such outstanding debt amounted to about
1,182 million. The financial debts market value is estimated on the basis of
the present value of the future cash flows.

|                              |  |                                            |       |      |  |      |       |      |  |      |       |      |  |            |     |  |  |  |     |  |  |  |     |  |  |  |   | 
|----------------------------- |  | ------------------------------------------ | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---------- | --- |  |  |  | --- |  |  |  | --- |  |  |  | - | 
|                              |  | Year ended December 31                    
|                              |  | 2002                                       |       | 2003 |  | 2004 |       | 2005 |  | 2006 |       | 2007 |  | Thereafter
|                              |  |                                            |       |      |  |      |       |      |  |      |       |      |  |           
|                              |  | (millions of Euro, except for percentages)
|Long-Term Fixed
Rate Debt (1) |  |                                            | 178   |      |  |      | 169   |      |  |      | 169   |      |  |            | 168 |  |  |  | 164 |  |  |  | 160 |  |  |  | 0 | 
|Average Fixed
Rate            |  |                                            | 13.55 | %    |  |      | 13.56 | %    |  |      | 13.56 | %    |  |            | 0   |  |  |  | 0   |  |  |  | 0   |  |  |  | 0 | 
|Average Total
Fixed Rate      |  |                                            | 13.55 | %    |  |      | 13.56 | %    |  |      | 13.56 | %    |  |            | 0   |  |  |  | 0   |  |  |  | 0   |  |  |  | 0 | 
|Floating Rate Debt            |  |                                            | 1014  |      |  |      | 314   |      |  |      | 308   |      |  |            | 0   |  |  |  | 0   |  |  |  | 0   |  |  |  | 0 | 
|                              |  |                                            |       |      |  |      |       |      |  |      |       |      |  |            |     |  |  |  |     |  |  |  |     |  |  |  |   | 
|Total Long-Term Debt          |  |                                            | 1,192 |      |  |      | 483   |      |  |      | 477   |      |  |            | 168 |  |  |  | 164 |  |  |  | 160 |  |  |  | 0 | 
|                              |  |                                            |       |      |  |      |       |      |  |      |       |      |  |            |     |  |  |  |     |  |  |  |     |  |  |  |   | 

(1) Bonds are callable at 15/10/04 at a price respectively of 106.0625%
for the GBP Bond and 107.75% for the USD Bond. The originals on October 15,
2004 maturity dates are 2009 and 2010.

As of December 31, 2002, approximately 90% of SEAT Groups long term debt
was denominated in Euro, while the remainder, approximately 116 million, was
denominated in foreign currencies primarily US dollars and Pound Sterling.
After taking into account the SEAT Groups derivative financial instruments,
the SEAT Groups long-term debt is not materially exposed to fluctuations in
foreign exchange rates. At December 31, 2002, approximately 90% of the
long-term debt carried a floating rate.

Market Risk Policy

The SEAT Groups policy regarding market risk that consists of the
following:



| |  |  | The Centralized Treasury at Telecom Italia determines the maximum
level of interest rate and foreign exchange rate risk to which Telecom
Italia and its affiliated companies benefitting from Telecom Italias
Centralized Treasury should be exposed. A Supervisory Committee meets
on a regular basis to monitor the activities and the level and value of
the current market risk exposures. The Centralized Treasury, operating
as a service center, supplies financial services and actively supports
to Telecom Italias subsidiaries according to their requirements and
local circumstances.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The SEAT Group uses derivative financial instruments to manage
these risks as discussed below and does not, in the ordinary course,
enter into such instruments on a speculative basis. It is SEATs
policy to retain any such instruments until maturity.                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | The SEAT Group continually evaluates the credit quality of
counterparties to minimize the risk of non-performance. Any such
derivative financial instruments are entered into with major banks or
financial institutions.                                                                                                                                                                                                                                                                                                                                                                           

Financial Instruments

101



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Interest Rate and Foreign Exchange Risk Management

The SEAT Group seeks to minimize market risk of its operating and
financing activities and according to the evaluation of its exposures,
selectively enters into derivatives instruments with the support of the Telecom
Italia Centralized Treasury. The SEAT Group defines the optimal mixture of
fixed and floating-rate debt in each currency, and enters into financial
derivatives to adjust their risk profile to the defined target mixture.
Interest rate swaps (IRS) are therefore used to reduce the interest rate
exposure on fixed-rate and floating-rate bank loans and bonds. As a result of
these hedge activities, the SEAT Group as of December 31, 2002 was not subject

to any material foreign exchange risk in its financial indebtedness nor in its
commercial operations.

To determine the market value of the financial derivatives, the SEAT Group
uses Telecom Italia Treasury Department pricing models. The market value of
interest rate swaps reflects the present value difference between the fixed
rate to be paid/received and the interest rate assessed on the basis of the
market trend having the same expiry date as the swap. With regard to IRSs,
they involve or can involve the exchange of flows of interest calculated on the
applicable notional principal amount at the agreed fixed or variable rates at
the specified maturity date with the counterparties. This amount does not
represent the amount exchanged between the parties and therefore does not
constitute a measure of exposure to credit risk, which is instead limited to
the amount of interest or interest differentials to be received at the interest
date.

102



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The counterparties to derivative contracts are generally highly rated
banks and financial institutions and such counterparties are continually
monitored in order to minimize the risk of non-performance.

The following tables give a description of the SEAT Groups financial
derivative contracts outstanding as of December 31, 2002 to hedge the debt
positions.

|                                              |  |                 |       |                 |  |                 |     |                     |  |                 |     |                 |  |  |      |  |  |  |     |  
|--------------------------------------------- |  | --------------- | ----- | --------------- |  | --------------- | --- | ------------------- |  | --------------- | --- | --------------- |  |  | ---- |  |  |  | --- | -
|                                              |  |                 |       |                 |  |                 |     |                     |  | Market value of |     | Market value of |  |  |      | 
|                                              |  | Notional        |       | Market value of |  | underlying debt |     | debt including      |  |                 |     |                
|                                              |  | amount/ Capital |       | derivatives at  |  | positions at    |     | related derivatives |  | Market value of
|                                              |  | exchanged at    |       | 12/31/2002      |  | 12/31/2001      |     | at 12/31/2002       |  | derivatives at 
|(millions of Euro)                            |  | 12/31/2002      |       | (a)             |  | (b)             |     | (c)=(b-a)           |  | 12/31/2001     
|                                              |  |                 |       |                 |  |                 |     |                     |  |                
|Interest rate swaps
and interest rate
options |  |                 | 3,000 |                 |  |                 | (31 | )                   |  |                 | 998 |                 |  |  | 1031 |  |  |  | (37 | )
|Cross-currency and
interest rate swaps        |  |                 | 0     |                 |  |                 | 0   |                     |  |                 | 0   |                 |  |  | 0    |  |  |  | 0   |  

|                                    |  |                                      |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 
|----------------------------------- |  | ------------------------------------ | ---- | ---- |  | ---- | - | ---- |  | ---------------- | ---- | ---------- |  | ----- | - | ----- | - |  | - |  | - |  | - |  |  |  | ---- |  |  | ---- | --- | 
|                                    |  | Interest Rate Derivative Instruments
|                                    |  | (millions of Euro)                  
|                                    |  | Maturities                          
|                                    |  |                                      |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  | Fair
|IRS                                 |  | 2003                                 |      | 2004 |  | 2005 |   | 2006 |  | 2007             |      | Thereafter |  | Total |   | Value
|                                    |  |                                      |      |      |  |      |   |      |  |                  |      |            |  |       |   |      
|EURO interest rate Swaps            |  |                                      |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 
|Receive variable, pay fixed         |  |                                      |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 
|Amount                              |  |                                      |      |      |  |      |   |      |  |                  | 600  |            |  |       |   |       |   |  |  |  |   |  |  |  |  |  | 600  |  |  |      | -48 | 
|Average pay rate                    |  |                                      |      |      |  |      |   |      |  |                  | 5,85 | %          |  |       |   |       |   |  |  |  |   |  |  |  |  |  |      |  |  |      |     | 
|Average receive rate                |  |                                      |      |      |  |      |   |      |  | Euribor 3m+30bp  |      |            |  |       |   |       |  |  |   |  |  |  |   |  |  |  |      |  |  |     
|EURO Interest rate Swaps            |  |                                      |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 
|Receive variable, pay variable      |  |                                      |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 
|Amount                              |  |                                      | 1400 |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  | 1400 |  |  |      | 2   | 
|Average pay rate                    |  | Euribor 3m+35,8bp                    |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |     
|Average receive rate                |  | Euribor 3m+66,5 bp                   |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |     
|EURO interest rate Swaps            |  |                                      |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 
|Receive fixed, pay variable         |  |                                      |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 
|Amount                              |  |                                      |      |      |  |      |   |      |  |                  | 300  |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  | 300  |  |  |      | 26  | 
|Average pay rate                    |  |                                      |      |      |  |      |   |      |  | Euribor 3m+108bp |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |     
|Average receive rate                |  |                                      |      |      |  |      |   |      |  |                  | 6,50 | %          |  |       |  |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 
|Options/Collars                     |  |                                      |      |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 
|EURO interest rate collar           |  |                                      | 700  |      |  |      |   |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  | 700  |  |  |      | -11 | 
|Average cap strike rate (purchased) |  |                                      | 5,80 | %    |  |      |  |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 
|Average floor strike rate (sold)    |  |                                      | 3,99 | %    |  |      |  |      |  |                  |      |            |  |       |   |       |   |  |   |  |   |  |   |  |  |  |      |  |  |      |     | 

|                                  |  |                                         |          |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|--------------------------------- |  | --------------------------------------- | -------- | ---- |  | ---- |  | ---- |  | ---- |  | ---------- |  | ----- |  | ----- |  |  |  |  |  |  |  |  |  |  |  |  |  | ---- |  | 
|                                  |  | Foreign Exchange Derivative Instruments
|                                  |  | (millions of Euro)                     
|                                  |  | Maturities                             
|                                  |  |                                         |          |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  | Fair
|Cross Currency Interest Rate Swap |  | 2003                                    |          | 2004 |  | 2005 |  | 2006 |  | 2007 |  | Thereafter |  | Total |  | Value
|                                  |  |                                         |          |      |  |      |  |      |  |      |  |            |  |       |  |      
|Currency forward                  |  |                                         |          |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Buy U.S.$/Sell EURO               |  |                                         |          |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Amount                            |  |                                         | 3,89     |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Forward rate                      |  |                                         | 1,00087  |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Sell U.S.$/Buy Euro               |  |                                         |          |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Amount                            |  |                                         | 56,39    |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Forward rate                      |  |                                         | 0,93600  |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Sell GBP/Buy Euro                 |  |                                         |          |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Amount                            |  |                                         | 3,3      |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Forward rate                      |  |                                         | 0,65115  |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Buy USD/Sell GBP                  |  |                                         |          |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Amount                            |  |                                         | 9,23     |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 
|Forward rate                      |  |                                         | 1,582885 |      |  |      |  |      |  |      |  |            |  |       |  |       |  |  |  |  |  |  |  |  |  |  |  |  |  |      |  | 

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.




PART II




ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.




ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS

None.




ITEM 15. CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, SEAT Pagine Gialle
S.p.A., under the supervision and with the participation of our management,
including the Managing Director and the Chief Financial Officer, performed an
evaluation of the effectiveness of our disclosure controls and procedures.
Based on this evaluation, our Chairman of the Managing Board and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective for gathering, analyzing and disclosing the information we are
required to disclose in the reports we file under the Securities Exchange Act
of 1934, within the time periods specified in the SECs rules and forms. Our
management necessarily applied its judgment in assessing the costs and benefits
of such controls and procedures, which by their nature can provide only
reasonable assurance regarding managements control objectives. There have
been no significant changes in our internal controls or other factors that
could significantly negatively affect internal controls subsequent to the date
of their evaluation.




ITEM 16. AUDIT COMMITTEE FINANCIAL EXPERT




PART III




ITEM 17. FINANCIAL STATEMENTS

Not applicable.




ITEM 18. FINANCIAL STATEMENTS

The following consolidated financial statements and related schedule,
together with the report thereon of Ernst & Young and Arthur Andersen, are
filed as part of this annual report:

|   |  |                                                   |  |     
|-- |  | ------------------------------------------------- |  | ----
|   |  |                                                   |  | Page
|1. |  | Independent Auditors Report                       |  | F-1 
|2. |  | Financial Statements                              |  |     
|   |  | - Consolidated Balance Sheets                     |  | F-3 
|   |  | - Consolidated Statements of Operations           |  | F-4 
|   |  | - Consolidated Statements of Cash Flows           |  | F-5 
|   |  | - Consolidated Statements of Shareholders Equity |  | F-6 
|   |  | - Notes to the Consolidated Financial Statements  |  | F-8 

104



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ITEM 19. EXHIBITS

The following exhibits are filed as part of this annual report:

|           |  |                                                                                                                                                        
|---------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 1  |  | English translation of the Articles of Association and Bylaws of SEAT Pagine Gialle S.p.A., as
amended.                                                
|           |  |                                                                                                                                                        
|Exhibit 4  |  | English language summary of employment agreement of Mr Paolo Dal Pino, Chief Executive Officer.                                                        
|           |  |                                                                                                                                                        
|Exhibit 8  |  | Please refer to page 15 of the annual report for a chart showing SEATs significant subsidiaries.                                                      
|           |  |                                                                                                                                                        
|Exhibit 12 |  | Certification of Mr. Paolo Dal Pino, Chief Executive Officer and Mr. Angelo Novati, Chief
Financial Officer pursuant to Section 906 Sarbanes Oxley Act.

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Signatures

Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all requirements for filing on
Form 20-F and has duly caused this annual report to be signed on its behalf by
the undersigned, thereunto duly authorized.

| |  |                           |  |                   
| |  | ------------------------- |  | ------------------
| |  | SEAT Pagine Gialle S.p.A.
| |  |                           |  |                   
| |  | By:                       |  | /s/ Paolo Dal Pino
| |  |                           |  |                   
| |  | Name:                     |  | Paolo Dal Pino    
| |  | Title:                    |  | Managing Director 

Date: June 30, 2003





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##### Table of Contents






Certifications

Certification by the Managing Director of SEAT Pagine Gialle S.p.A.

I, Paolo dal Pino, certify that:

1. I have reviewed this annual report on Form 20-F of SEAT Pagine Gialle
S.p.A.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrants as of, and for, the periods presented in this annual report;

4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrants and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

(b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6. The registrants other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

| |     |  |                          
| | --- |  | -------------------------
| | By: |  | /s/ Paolo Dal Pino       
| |     |  |                          
| |     |  | Name:  Paolo Dal Pino    
| |     |  | Title:  Managing Director

June 30, 2003





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Certification by the Chief Financial Officer of SEAT Pagine Gialle S.p.A.

I, Angelo Novati, certify that:

1. I have reviewed this annual report on Form 20-F of SEAT Pagine Gialle
S.p.A.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrants as of, and for, the periods presented in this annual report;

4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrants and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrants, including their consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

(b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6. The registrants other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

| |     |  |                                
| | --- |  | -------------------------------
| | By: |  | /s/ Angelo Novati              
| |     |  |                                
| |     |  | Name:  Angelo Novati           
| |     |  | Title:  Chief Financial Officer

June 30, 2003





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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.

CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2002 AND 2001
AND FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2002

WITH REPORT OF INDEPENDENT AUDITORS





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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|   |  |                                                    |  |     
|-- |  | -------------------------------------------------- |  | ----
|   |  |                                                    |  | Page
|   |  |                                                    |  |     
|1. |  | Report of Independent Auditors                     |  | F-1 
|2. |  | Consolidated Financial Statements                  |  |     
|   |  |   Consolidated Balance Sheets                     |  | F-2 
|   |  |   Consolidated Statements of Operations           |  | F-3 
|   |  |   Consolidated Statements of Cash Flows           |  | F-4 
|   |  |   Consolidated Statements of Shareholders Equity |  | F-5 
|   |  |   Notes to the Consolidated Financial Statements  |  | F-7 





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##### Table of Contents



Report of Independent Auditors

To the Shareholders
SEAT PAGINE GIALLE S.p.A.

We have audited the accompanying consolidated balance sheets of SEAT PAGINE
GIALLE S.p.A. (the Company) as of December 31, 2002 and 2001, and the related
consolidated statements of operations, shareholders equity, and cash flows for
each of the three years in the period ended December 31, 2002. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SEAT PAGINE
GIALLE S.p.A. at December 31, 2002 and 2001, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States.

As discussed in Note 3and Note 8to the consolidated financial statements, in
2002 the Company changed its method of accounting for goodwill and other
intangible assets.

Reconta Ernst & Young S.p.A.

Turin, Italy
June 6, 2003





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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2002 and 2001

|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |            |         |            |  | 
|-------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | --------------------------------------------------------------------------------------------------- | ---------- | ------- | ------------ | ----------- | ---------- | ------- | ---------- |  | 
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         | 2002         |             | 2001      
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |           
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         | (in
 000s)
|ASSETS                                                                                             |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |           
|Current assets:                                                                                    |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |           
|                                                                                                   | Cash and cash equivalents                                                                                                                                            |                        |                                                                                                     | 99,535     |         |              |             | 48,735     |        
|                                                                                                   | Receivables:                                                                                                                                                         |                        |                                                                                                     |            |         |              |             |            |        
|                                                                                                   |                                                                                                                                                                      |                        | Trade, net of allowance for doubtful accounts of 135,413 and
144,279 in 2002 and 2001, respectively |            |         | 894,825      |             |            |         | 877,028    | 
|                                                                                                   |                                                                                                                                                                      |                        | Due from related parties                                                                            |            |         | 582,776      |             |            |         | 491,639    | 
|                                                                                                   | Inventories                                                                                                                                                          |                        |                                                                                                     | 49,993     |         |              |             | 36,642     |        
|                                                                                                   | Deferred income taxes                                                                                                                                                |                        |                                                                                                     | 126,526    |         |              |             | 127,305    |        
|                                                                                                   | Prepaid expenses and other current assets                                                                                                                            |                        |                                                                                                     | 246,491    |         |              |             | 241,787    |        
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |            |        
|                                                                                                   |                                                                                                                                                                      |                        | Total current assets                                                                                |            |         | 2,000,146    |             |            |         | 1,823,136  | 
|Property, plant and equipment, at cost                                                             |                                                                                                                                                                      |                        | 344,428                                                                                             |            |         |              | 370,214     |           
|Less: Accumulated depreciation                                                                     |                                                                                                                                                                      |                        | (183,765                                                                                            | )          |         |              | (163,288    | )         
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |            |        
|                                                                                                   |                                                                                                                                                                      |                        | Property, plant and equipment, net                                                                  |            |         | 160,663      |             |            |         | 206,926    | 
|Goodwill,
net of amortization of 1,185,406 and 1,196,551 in 2002 and 2001,
respectively            |                                                                                                                                                                      |                        | 3,197,305                                                                                           |            |         |              | 9,176,513   |           
|Customer lists, net of amortization of 720,688 and 399,310 in 2002 and
2001, respectively          |                                                                                                                                                                      |                        | 3,145,207                                                                                           |            |         |              | 3,466,585   |           
|Brand name, net of amortization of 240,643 and 126,876 in 2002 and 2001,
respectively              |                                                                                                                                                                      |                        | 1,296,643                                                                                           |            |         |              | 1,410,317   |           
|Other intangible assets, net of amortization of 387,694 and 307,663 in
2002 and 2001, respectively |                                                                                                                                                                      |                        | 715,035                                                                                             |            |         |              | 801,993     |           
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |           
|                                                                                                   |                                                                                                                                                                      |                        | Total intangible assets                                                                             |            |         | 5,156,885    |             |            |         | 5,678,895  | 
|Investments in affiliated companies                                                                |                                                                                                                                                                      |                        | 23,193                                                                                              |            |         |              | 49,487      |           
|Other non current assets                                                                           |                                                                                                                                                                      |                        | 55,692                                                                                              |            |         |              | 94,557      |           
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |            |        
|                                                                                                   |                                                                                                                                                                      |                        | TOTAL ASSETS                                                                                        |            |         | 10,593,884   |             |            |         | 17,029,514 | 
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |            |        
|LIABILITIES AND SHAREHOLDERS EQUITY                                                               |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |           
|Current liabilities                                                                                |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |           
|                                                                                                   | Short-term bank borrowings                                                                                                                                           |                        |                                                                                                     | 48,923     |         |              |             | 68,497     |        
|                                                                                                   | Current portion of long-term debt                                                                                                                                    |                        |                                                                                                     | 709,386    |         |              |             | 18,519     |        
|                                                                                                   | Payables:                                                                                                                                                            |                        |                                                                                                     |            |         |              |             |            |        
|                                                                                                   |                                                                                                                                                                      | Trade                  |                                                                                                     |            | 405,802 |              |             |            | 431,471 |           
|                                                                                                   |                                                                                                                                                                      | Due to related parties |                                                                                                     |            | 219,847 |              |             |            | 186,028 |           
|                                                                                                   | Deferred income                                                                                                                                                      |                        |                                                                                                     | 164,386    |         |              |             | 175,391    |        
|                                                                                                   | Accrued expenses and other current liabilities                                                                                                                       |                        |                                                                                                     | 202,273    |         |              |             | 309,677    |        
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |            |        
|                                                                                                   |                                                                                                                                                                      |                        | Total current liabilities                                                                           |            |         | 1,750,617    |             |            |         | 1,189,583  | 
|Termination indemnities                                                                            |                                                                                                                                                                      |                        | 55,114                                                                                              |            |         |              | 52,053      |           
|Long-term debt, less current portion                                                               |                                                                                                                                                                      |                        | 482,802                                                                                             |            |         |              | 1,240,464   |           
|Deferred income taxes                                                                              |                                                                                                                                                                      |                        | 1,884,842                                                                                           |            |         |              | 2,196,926   |           
|Other non-current liabilities                                                                      |                                                                                                                                                                      |                        | 186,626                                                                                             |            |         |              | 145,441     |           
|Minority interests                                                                                 |                                                                                                                                                                      |                        | 9,982                                                                                               |            |         |              | 19,373      |           
|Commitment
and contingencies                                                                      
|Shareholders equity:                                                                             
|                                                                                                   | Share capital: ordinary shares-0,03 par value for 2002 and 2001,
authorized 11,185,094,342 in 2002 and 2001; issued and outstanding
11,185,094,342 in 2002 and 2001 |                        |                                                                                                     | 335,552    |         |              |             | 335,552    |        
|                                                                                                   | Share capital: savings shares -0,03 par value for 2002 and
2001, authorized 187,689,368 in 2002 and 2001; issued and
outstanding 187,689,368 in 2002 and 2001       |                        |                                                                                                     | 5,631      |         |              |             | 5,631      |        
|Unearned stock compensation                                                                        |                                                                                                                                                                      |                        |                                                                                                    |            |         |              | (19,257     | )         
|Accumulated other comprehensive loss                                                               |                                                                                                                                                                      |                        | (21,891                                                                                             | )          |         |              | (13,224     | )         
|Additional paid in capital                                                                         |                                                                                                                                                                      |                        | 27,204,333                                                                                          |            |         |              | 27,218,067  |           
|Accumulated deficit                                                                                |                                                                                                                                                                      |                        | (21,299,724                                                                                         | )          |         |              | (15,341,095 | )         
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |            |        
|                                                                                                   | Total shareholders equity                                                                                                                                           |                        |                                                                                                     | 6,223,901  |         |              |             | 12,185,674 |        
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |            |        
|                                                                                                   | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                           |                        |                                                                                                     | 10,593,884 |         |              |             | 17,029,514 |        
|                                                                                                   |                                                                                                                                                                      |                        |                                                                                                     |            |         |              |             |            |        

See accompanying notes

F-2



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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2002, 2001 and 2000

|                                                                                        |          |         |            |        |       |              |            |        |       |   |             |       |       |  
|--------------------------------------------------------------------------------------- | -------- | ------- | ---------- | ------ | ----- | ------------ | ---------- | ------ | ----- | - | ----------- | ----- | ----- | -
|                                                                                        |          |         |            | 2002   |       | 2001         |            | 2000  
|                                                                                        |          |         |            |        |       |              |            |       
|                                                                                        |          |         |            |        |       | (in  000s) |            |       
|Revenues:                                                                               |          |         |            |        |       |              |            |        |       |   |             |      
|Product sales                                                                           |          |         | 310,417    |        |       |              | 271,265    |        |       |   | 65,664      |      
|Service revenues                                                                        |          |         | 1,647,719  |        |       |              | 1,592,308  |        |       |   | 430,728     |      
|Advertising royalties                                                                   |          |         | 647        |        |       |              | 6,062      |        |       |   | 106,744     |      
|Other revenues                                                                          |          |         | 22,298     |        |       |              | 27,848     |        |       |   | 4,170       |      
|                                                                                        |          |         |            |        |       |              |            |        |       |   |             |      
|                                                                                        |          |         | 1,981,081  |        |       |              | 1,897,483  |        |       |   | 607,306     |      
|Operating expenses:                                                                     |          |         |            |        |       |              |            |        |       |   |             |      
|Costs of materials                                                                      |          |         | 283,867    |        |       |              | 300,895    |        |       |   | 86,236      |      
|Costs of external services                                                              |          |         | 747,881    |        |       |              | 744,099    |        |       |   | 374,383     |      
|Salaries, wages and employee benefits                                                   |          |         | 398,247    |        |       |              | 445,308    |        |       |   | 50,405      |      
|Depreciation and amortization                                                           |          |         | 607,362    |        |       |              | 1,794,869  |        |       |   | 612,007     |      
|Write-down of impaired assets                                                           |          |         | 5,969,126  |        |       |              | 3,165,405  |        |       |   | 10,271,669  |      
|Other operating expenses                                                                |          |         | 161,023    |        |       |              | 116,260    |        |       |   | 40,254      |      
|                                                                                        |          |         |            |        |       |              |            |        |       |   |             |      
|                                                                                        |          |         | 8,167,506  |        |       |              | 6,566,836  |        |       |   | 11,434,954  |      
|                                                                                        |          |         |            |        |       |              |            |        |       |   |             |      
|Operating loss                                                                          |          |         | (6,186,425 | )      |       |              | (4,669,353 | )      |       |   | (10,827,648 | )    
|Interest and other income (expense):                                                    |          |         |            |        |       |              |            |        |       |   |             |      
|Interest expense                                                                        |          |         | (121,236   | )      |       |              | (97,159    | )      |       |   | (199,665    | )    
|Interest income                                                                         |          |         | 41,946     |        |       |              | 40,009     |        |       |   | 1,533       |      
|Gain on extinguishment of debt                                                          |          |         | 21,856     |        |       |              |           |        |       |   |            |      
|Equity in net loss of affiliated companies                                              |          |         | (26,168    | )      |       |              | (81,747    | )      |       |   | (26,123     | )    
|Other income (expense), net                                                             |          |         | (12,657    | )      |       |              | (7,921     | )      |       |   | 2,265       |      
|                                                                                        |          |         |            |        |       |              |            |        |       |   |             |      
|Loss before income taxes, minority interests and
cumulative effect of accounting change |          |         | (6,282,684 | )      |       |              | (4,816,171 | )      |       |   | (11,049,638 | )    
|Income tax benefit                                                                      |          |         | 268,992    |        |       |              | 245,306    |        |       |   | 158,335     |      
|                                                                                        |          |         |            |        |       |              |            |        |       |   |             |      
|Loss before minority interests and cumulative effect
of accounting change               |          |         | (6,013,692 | )      |       |              | (4,570,865 | )      |       |   | (10,891,303 | )    
|Minority interests                                                                      |          |         | 55,063     |        |       |              | 66,295     |        |       |   | 4,939       |      
|                                                                                        |          |         |            |        |       |              |            |        |       |   |             |      
|Net loss before cumulative effect of accounting change                                  |          |         | (5,958,629 | )      |       |              | (4,504,570 | )      |       |   | (10,886,364 | )    
|                                                                                        |          |         |            |        |       |              |            |        |       |   |             |      
|Cumulative effect of an accounting change                                               |          |         |           |        |       |              | 2,296      |        |       |   |            |      
|                                                                                        |          |         |            |        |       |              |            |        |       |   |             |      
|Net loss                                                                                |          |         | (5,958,629 | )      |       |              | (4,502,274 | )      |       |   | (10,886,364 | )    
|                                                                                        |          |         |            |        |       |              |            |        |       |   |             |      
|Basic and diluted net loss per share:                                                   |          |         |            |        |       |              |            |        |       |   |             |      
|                                                                                        | Ordinary |         |            | (0.52  | )     |              |            | (0.40  | )     |   |             | (1,68 | )    
|                                                                                        |          | Savings |            |        | (0.52 | )            |            |        | (0.40 | ) |             |       | (1,67 | )
|Weighted average shares (in millions):                                                  |          |         |            |        |       |              |            |        |       |   |             |      
|                                                                                        | Ordinary |         |            | 11,185 |       |              |            | 11,001 |       |   |             | 6,135 |      
|                                                                                        |          | Savings |            |        | 188   |              |            |        | 194   |   |             |       | 361   |  

See accompanying notes

F-3



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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2002, 2001 and 2000

|                                                                                          |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |            |         |          |  
|----------------------------------------------------------------------------------------- | ---------------------------------------------- | -------------------------------------- | --------------------------------------------------- | --------- | ------------ | -------- | ---------- | --------- | -------- | -------- | ----------- | ---------- | ------- | -------- | -
|                                                                                          |                                                |                                        |                                                     |           | 2002         |          | 2001       |           | 2000    
|                                                                                          |                                                |                                        |                                                     |           |              |          |            |           |         
|                                                                                          |                                                |                                        |                                                     |           | (in
 000s)
|Cash Flows from Operating Activities:                                                     |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|Net loss                                                                                  |                                                |                                        | (5,958,629                                          | )         |              |          | (4,502,274 | )         |          |          | (10,886,364 | )         
|Adjustments to reconcile net loss to net cash provided
by (used in) operating activities: |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|                                                                                          | Minority interests                             |                                        |                                                     | (55,063   | )            |          |            | (66,295   | )        |          |             | (4,939     | )      
|                                                                                          | Equity in net loss of affiliated companies     |                                        |                                                     | 26,168    |              |          |            | 81,747    |          |          |             | 26,123     |        
|                                                                                          | (Gain) loss on disposal of assets              |                                        |                                                     | 11,580    |              |          |            | (28,777   | )        |          |             | (5,488     | )      
|                                                                                          | Depreciation                                   |                                        |                                                     | 54,840    |              |          |            | 67,653    |          |          |             | 22,729     |        
|                                                                                          | Amortization                                   |                                        |                                                     | 552,522   |              |          |            | 1,727,216 |          |          |             | 589,277    |        
|                                                                                          | Deferred income taxes                          |                                        |                                                     | (309,250  | )            |          |            | (292,817  | )        |          |             | (175,306   | )      
|                                                                                          | Provision for doubtful accounts                |                                        |                                                     | 54,555    |              |          |            | 70,710    |          |          |             | 26,340     |        
|                                                                                          | Write-down of impaired assets                  |                                        |                                                     | 5,969,126 |              |          |            | 3,165,405 |          |          |             | 10,271,669 |        
|                                                                                          | Stock option and deferred compensation expense |                                        |                                                     | 23,777    |              |          |            | 23,952    |          |          |             | 166        |        
|                                                                                          | Unrealized (gain) loss on derivatives          |                                        |                                                     | (11,079   | )            |          |            | 17,369    |          |          |             |           |        
|                                                                                          | Gain on extinguishment of debt                 |                                        |                                                     | (21,856   | )            |          |            |          |          |          |             |           |        
|                                                                                          | Imputed interest on SEAT acquisition           |                                        |                                                     |          |              |          |            |          |          |          |             | 173,798    |        
|                                                                                          | Changes in operating assets and liabilities:   |                                        |                                                     |           |              |          |            |           |          |          |             |            |        
|                                                                                          |                                                | Accounts receivable                    |                                                     |           | (14,701      | )        |            |           | (95,098  | )        |             |            | 5,269   |         
|                                                                                          |                                                | Inventories                            |                                                     |           | (1,418       | )        |            |           | 4,033    |          |             |            | (745    | )       
|                                                                                          |                                                | Prepaid expenses and other assets      |                                                     |           | 34,766       |          |            |           | (17,455  | )        |             |            | (43,790 | )       
|                                                                                          |                                                | Accounts payable                       |                                                     |           | (44,115      | )        |            |           | (165,233 | )        |             |            | 87,982  |         
|                                                                                          |                                                | Income taxes payable                   |                                                     |           |             |          |            |           | (4,879   | )        |             |            | (46,012 | )       
|                                                                                          |                                                | Deferred income                        |                                                     |           | (9,510       | )        |            |           | 23,782   |          |             |            | (61,055 | )       
|                                                                                          |                                                | Accrued expenses and other liabilities |                                                     |           | (3,154       | )        |            |           | 54,377   |          |             |            | 23,399  |         
|                                                                                          |                                                | Termination indemnities                |                                                     |           | 3,793        |          |            |           | 3,058    |          |             |            | 1,989   |         
|                                                                                          |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|                                                                                          |                                                |                                        | Net cash provided by operating activities           |           |              | 302,352  |            |           |          | 66,474   |             |            |         | 5,042    |  
|Cash Flows from Investing Activities:                                                     |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|Proceeds from disposals of property, plant and equipment                                  |                                                |                                        | 43,322                                              |           |              |          | 32,479     |           |          |          | 9,201       |           
|Proceeds from disposals of businesses                                                     |                                                |                                        | 30,513                                              |           |              |          | 9,335      |           |          |          |            |           
|Acquisition of businesses and other equity investments, net
of cash acquired              |                                                |                                        | (94,570                                             | )         |              |          | (196,146   | )         |          |          | (34,988     | )         
|Additions to property, plant and equipment                                                |                                                |                                        | (27,799                                             | )         |              |          | (81,958    | )         |          |          | (63,112     | )         
|Additions to intangible assets                                                            |                                                |                                        | (56,772                                             | )         |              |          | (90,000    | )         |          |          | (22,791     | )         
|Additions to other non current assets                                                     |                                                |                                        | (15,112                                             | )         |              |          | (63,012    | )         |          |          |            |           
|                                                                                          |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|                                                                                          |                                                |                                        | Net cash (used in) investing activities             |           |              | (120,418 | )          |           |          | (389,302 | )           |            |         | (111,690 | )
|Cash Flows from Financing Activities:                                                     |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|Proceeds from long-term debt                                                              |                                                |                                        | 47,591                                              |           |              |          | 194,862    |           |          |          |            |           
|Repayments of long-term debt                                                              |                                                |                                        | (94,504                                             | )         |              |          | (176,023   | )         |          |          | (16,520     | )         
|Cash received in advance for conversion of savings shares                                 |                                                |                                        |                                                    |           |              |          |           |           |          |          | 1,119,976   |           
|Net change in short-term advances to parent company                                       |                                                |                                        | (148,649                                            | )         |              |          | 404,415    |           |          |          | (785,014    | )         
|Net change in short-term advances to affiliated companies                                 |                                                |                                        |                                                    |           |              |          |           |           |          |          | (44,128     | )         
|Net
change in short-term borrowings from affiliated companies                             |                                                |                                        | 54,961                                              |           |              |          |           |           |          |          |            |           
|Repayments of capital lease obligations                                                   |                                                |                                        |                                                    |           |              |          |           |           |          |          | (950        | )         
|Net change in short-term borrowings                                                       |                                                |                                        | (34,861                                             | )         |              |          | (116,299   | )         |          |          | (218,789    | )         
|Proceeds from issuance of share capital                                                   |                                                |                                        |                                                    |           |              |          | 135        |           |          |          | 41          |           
|Dividends                                                                                 |                                                |                                        | (1,905                                              | )         |              |          | (242       | )         |          |          |            |           
|Minority interests                                                                        |                                                |                                        | 46,233                                              |           |              |          | 22,010     |           |          |          | 7,627       |           
|Changes in cumulative investment by parent company                                        |                                                |                                        |                                                    |           |              |          |           |           |          |          | 87,110      |           
|                                                                                          |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|                                                                                          |                                                |                                        | Net cash provided by (used in) financing activities |           |              | (131,135 | )          |           |          | 328,858  |             |            |         | 149,353  |  
|                                                                                          |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|Net increase in cash and cash equivalents                                                 |                                                |                                        | 50,800                                              |           |              |          | 6,030      |           |          |          | 42,705      |           
|Cash and cash equivalents at beginning of year                                            |                                                |                                        | 48,735                                              |           |              |          | 42,705     |           |          |          |            |           
|                                                                                          |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|Cash and cash equivalents at end of year                                                  |                                                |                                        | 99,535                                              |           |              |          | 48,735     |           |          |          | 42,705      |           
|                                                                                          |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|Supplemental disclosures of cash flow information:                                        |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|Cash paid during the year for:                                                            |                                                |                                        |                                                     |           |              |          |            |           |          |          |             |           
|                                                                                          | Interest                                       |                                        |                                                     | 116,160   |              |          |            | 61,104    |          |          |             | 15,540     |        
|                                                                                          | Income taxes                                   |                                        |                                                     | 77,315    |              |          |            | 101,785   |          |          |             | 48,653     |        

See accompanying notes

F-4



---



##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the years ended December 31, 2002, 2001 and 2000
(Amounts in thousands of Euros, except for number of shares, which are in thousands of shares)



|                                                                                            |  |                 |           |                |  |        |         |        |  |         |           |  |  |  |        |  |  |               |         |  
|------------------------------------------------------------------------------------------- |  | --------------- | --------- | -------------- |  | ------ | ------- | ------ |  | ------- | --------- |  |  |  | ------ |  |  | ------------- | ------- | -
|                                                                                            |  |                 |           |                |  |        |         |        |  |         |           |  |  |  |        |  |  | Cumulative   
|                                                                                            |  |                 |           |                |  |        |         |        |  |         |           |  |  |  |        |  |  | Investment by
|                                                                                            |  | Ordinary shares |           | Savings Shares |  | Parent
|                                                                                            |  | Number          |           | Amount         |  | Number |         | Amount |  | Company
|                                                                                            |  |                 |           |                |  |        |         |        |  |        
|Balance as of January 1, 2000                                                               |  |                 | 5,091,326 |                |  |        | 131,472 |        |  |         |          |  |  |  |       |  |  |               | (61,558 | )
|Net loss through legal formation                                                            |  |                 |          |                |  |        |        |        |  |         |          |  |  |  |       |  |  |               | (47,785 | )
|Change in cumulative investment by parent through legal
formation                           |  |                 |          |                |  |        |        |        |  |         |          |  |  |  |       |  |  |               | 87,109  |  
|Legal formation                                                                             |  |                 |          |                |  |        |        |        |  |         |          |  |  |  |       |  |  |               | 22,234  |  
|Acquisition of SEAT New                                                                     |  |                 | 4,077,474 |                |  |        | 105,292 |        |  |         | 1,448,360 |  |  |  | 37,401 |  |  |               |        |  
|Unearned stock compensation at acquisition of SEAT New                                      |  |                 |          |                |  |        |        |        |  |         |          |  |  |  |       |  |  |               |        |  
|Issuance of 1,139,424 ordinary shares and 438,240 savings
shares under stock option program |  |                 | 1,139     |                |  |        | 30      |        |  |         | 438       |  |  |  | 11     |  |  |               |        |  
|Issuance of 147,446,627 ordinary shares for Telegate
acquisition                            |  |                 | 147,447   |                |  |        | 3,807   |        |  |         |          |  |  |  |       |  |  |               |        |  
|Issuance of 140,672,537 ordinary shares for TDL acquisition                                 |  |                 | 140,673   |                |  |        | 3,633   |        |  |         |          |  |  |  |       |  |  |               |        |  
|Issuance of 44,344,611 ordinary shares for Mondus acquisition                               |  |                 | 44,345    |                |  |        | 1,145   |        |  |         |          |  |  |  |       |  |  |               |        |  
|Issuance of 11,402,738 ordinary shares for Databank
acquisition                             |  |                 | 11,403    |                |  |        | 294     |        |  |         |          |  |  |  |       |  |  |               |        |  
|Compensation for the year under stock option plan                                           |  |                 |          |                |  |        |        |        |  |         |          |  |  |  |       |  |  |               |        |  
|Cash received in advance for conversion of savings shares,
net of 4,691 of issuance costs   |  |                 |          |                |  |        |        |        |  |         |          |  |  |  |       |  |  |               |        |  
|Net loss subsequent to legal formation                                                      |  |                 |          |                |  |        |        |        |  |         |          |  |  |  |       |  |  |               |        |  
|                                                                                            |  |                 |           |                |  |        |         |        |  |         |           |  |  |  |        |  |  |               |         |  
|Balance as of December 31, 2000                                                             |  |                 | 9,513,807 |                |  |        | 245,673 |        |  |         | 1,448,798 |  |  |  | 37,412 |  |  |               |        |  
|                                                                                            |  |                 |           |                |  |        |         |        |  |         |           |  |  |  |        |  |  |               |         |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                            |  |               |   |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |             |  
|------------------------------------------------------------------------------------------- |  | ------------- | - | ------------ |  | ---------- | ------- | ----------- |  | ------------- | ---------- | ----- |  |  | ----------- | - |  |  | ----------- | -
|                                                                                            |  | Accumulated   |   |              |  |            |         |             |  |               |            |       |  |  |             |   |  | 
|                                                                                            |  | Other         |   | Unearned     |  | Additional |         |             |  |               |            | Total
|                                                                                            |  | Comprehensive |   | stock        |  | paid in    |         | Accumulated |  | shareholders'
|                                                                                            |  | Income (Loss) |   | compensation |  | capital    |         | deficit     |  | equity       
|                                                                                            |  |               |   |              |  |            |         |             |  |              
|Balance as of January 1, 2000                                                               |  |               |  |              |  |            |        |             |  |               |           |       |  |  |            |   |  |  | 69,914      |  
|Net loss through legal formation                                                            |  |               |  |              |  |            |        |             |  |               |            |       |  |  |            |   |  |  | (47,785     | )
|Change in cumulative investment by parent through legal
formation                           |  |               |  |              |  |            |        |             |  |               |           |       |  |  |            |   |  |  | 87,109      |  
|Legal formation                                                                             |  |               |  |              |  |            |        |             |  |               | (22,234    | )     |  |  |            |   |  |  |            |  
|Acquisition of SEAT New                                                                     |  |               |  |              |  |            |        |             |  |               | 23,790,553 |       |  |  |            |   |  |  | 23,933,246  |  
|Unearned stock compensation at acquisition of SEAT New                                      |  |               |  |              |  |            | (56,123 | )           |  |               |           |       |  |  |            |   |  |  | (56,123     | )
|Issuance of 1,139,424 ordinary shares and 438,240 savings
shares under stock option program |  |               |  |              |  |            |        |             |  |               |           |       |  |  |            |   |  |  | 41          |  
|Issuance of 147,446,627 ordinary shares for Telegate
acquisition                            |  |               |  |              |  |            |        |             |  |               | 712,931    |       |  |  |            |   |  |  | 716,738     |  
|Issuance of 140,672,537 ordinary shares for TDL acquisition                                 |  |               |  |              |  |            |        |             |  |               | 517,981    |       |  |  |            |   |  |  | 521,614     |  
|Issuance of 44,344,611 ordinary shares for Mondus acquisition                               |  |               |  |              |  |            |        |             |  |               | 162,087    |       |  |  |            |   |  |  | 163,232     |  
|Issuance of 11,402,738 ordinary shares for Databank
acquisition                             |  |               |  |              |  |            |        |             |  |               | 45,477     |       |  |  |            |   |  |  | 45,771      |  
|Compensation for the year under stock option plan                                           |  |               |  |              |  |            | 5,136   |             |  |               | (4,970     | )     |  |  |            |   |  |  | 166         |  
|Cash received in advance for conversion of savings shares,
net of 4,691 of issuance costs   |  |               |  |              |  |            |        |             |  |               | 1,119,977  |       |  |  |            |   |  |  | 1,119,977   |  
|Net loss subsequent to legal formation                                                      |  |               |  |              |  |            |        |             |  |               |           |       |  |  | (10,838,579 | ) |  |  | (10,838,579 | )
|                                                                                            |  |               |   |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |             |  
|Balance as of December 31, 2000                                                             |  |               |  |              |  |            | (50,987 | )           |  |               | 26,321,802 |       |  |  | (10,838,579 | ) |  |  | 15,715,321  |  
|                                                                                            |  |               |   |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |             |  

F-5



---



##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the years ended December 31, 2002, 2001 and 2000
(Amounts in thousands of Euros, except for number of shares, which are in thousands of shares)



|                                                                                                                                                  |  |                 |            |                |  |        |         |        |  |         |            |   |  |  |         |   |  |               |   | 
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ---------- | -------------- |  | ------ | ------- | ------ |  | ------- | ---------- | - |  |  | ------- | - |  | ------------- | - | 
|                                                                                                                                                  |  |                 |            |                |  |        |         |        |  |         |            |   |  |  |         |   |  | Cumulative   
|                                                                                                                                                  |  |                 |            |                |  |        |         |        |  |         |            |   |  |  |         |   |  | Investment by
|                                                                                                                                                  |  | Ordinary shares |            | Savings Shares |  | Parent
|                                                                                                                                                  |  | Number          |            | Amount         |  | Number |         | Amount |  | Company
|                                                                                                                                                  |  |                 |            |                |  |        |         |        |  |        
|Balance as of December 31, 2000                                                                                                                   |  |                 | 9,513,807  |                |  |        | 245,673 |        |  |         | 1,448,798  |   |  |  | 37,412  |   |  |               |  | 
|Conversion of savings shares to ordinary shares                                                                                                   |  |                 | 1,261,108  |                |  |        | 32,565  |        |  |         | (1,261,108 | ) |  |  | (32,565 | ) |  |               |  | 
|Issuance of 5,246,835 ordinary shares under stock option program                                                                                  |  |                 | 5,247      |                |  |        | 136     |        |  |         |           |   |  |  |        |   |  |               |  | 
|Issuance of 159,495,104 ordinary shares for Consodata
acquisition (of which, 17,358,592 were indirectly issued for the
acquisition of Pan-Adress) |  |                 | 159,495    |                |  |        | 4,118   |        |  |         |           |   |  |  |        |   |  |               |  | 
|Issuance of 150,579,625 ordinary shares for Telegate acquisition                                                                                  |  |                 | 150,580    |                |  |        | 3,888   |        |  |         |           |   |  |  |        |   |  |               |  | 
|Issuance of 76,310,000 ordinary shares for NetCreations
acquisition                                                                               |  |                 | 76,310     |                |  |        | 1,971   |        |  |         |           |   |  |  |        |   |  |               |  | 
|Issuance of 2,849,417 ordinary shares for Data House acquisition                                                                                  |  |                 | 2,849      |                |  |        | 74      |        |  |         |           |   |  |  |        |   |  |               |  | 
|Issuance of 15,698,286 ordinary shares for Cipi acquisition                                                                                       |  |                 | 15,698     |                |  |        | 405     |        |  |         |           |   |  |  |        |   |  |               |  | 
|Compensation for the year under stock option plan                                                                                                 |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Conversion of par value of shares from Lit 50 to 0.03 Euro                                                                                        |  |                 |           |                |  |        | 46,722  |        |  |         |            |   |  |  | 784     |   |  |               |  | 
|Dividends                                                                                                                                         |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Net loss                                                                                                                                          |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Cumulative translation adjustment                                                                                                                 |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Minimum pension liability                                                                                                                         |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Cumulative effect of an accounting change (net of 3,873 tax)                                                                                     |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Amortization of fair value of cash flow hedge, net of 1,079
tax                                                                                  |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Total comprehensive loss                                                                                                                          |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|                                                                                                                                                  |  |                 |            |                |  |        |         |        |  |         |            |   |  |  |         |   |  |               |   | 
|Balance as of December 31, 2001                                                                                                                   |  |                 | 11,185,094 |                |  |        | 335,552 |        |  |         | 187,690    |   |  |  | 5,631   |   |  |               |  | 
|                                                                                                                                                  |  |                 |            |                |  |        |         |        |  |         |            |   |  |  |         |   |  |               |   | 
|Compensation for the year under stock option plan                                                                                                 |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Other movements                                                                                                                                   |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Net loss                                                                                                                                          |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Minimum pension liability                                                                                                                         |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Amortization of fair value of cash flow hedge, net of 1,109
tax                                                                                  |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Cumulative translation adjustments                                                                                                                |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|Total comprehensive loss                                                                                                                          |  |                 |           |                |  |        |        |        |  |         |           |   |  |  |        |   |  |               |  | 
|                                                                                                                                                  |  |                 |            |                |  |        |         |        |  |         |            |   |  |  |         |   |  |               |   | 
|Balance as of December 31, 2002                                                                                                                   |  |                 | 11,185,094 |                |  |        | 335,552 |        |  |         | 187,690    |   |  |  | 5,631   |   |  |               |  | 
|                                                                                                                                                  |  |                 |            |                |  |        |         |        |  |         |            |   |  |  |         |   |  |               |   | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                                                                                  |  |               |         |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | ------------ |  | ---------- | ------- | ----------- |  | ------------- | ---------- | ----- |  |  | ----------- | - |  |  | ---------- | -
|                                                                                                                                                  |  | Accumulated   |         |              |  |            |         |             |  |               |            |       |  |  |             |   |  | 
|                                                                                                                                                  |  | Other         |         | Unearned     |  | Additional |         |             |  |               |            | Total
|                                                                                                                                                  |  | Comprehensive |         | stock        |  | paid in    |         | Accumulated |  | shareholders'
|                                                                                                                                                  |  | Income (Loss) |         | compensation |  | capital    |         | deficit     |  | equity       
|                                                                                                                                                  |  |               |         |              |  |            |         |             |  |              
|Balance as of December 31, 2000                                                                                                                   |  |               |        |              |  |            | (50,987 | )           |  |               | 26,321,802 |       |  |  | (10,838,579 | ) |  |  | 15,715,321 |  
|Conversion of savings shares to ordinary shares                                                                                                   |  |               |        |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |           |  
|Issuance of 5,246,835 ordinary shares under stock option program                                                                                  |  |               |        |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  | 136        |  
|Issuance of 159,495,104 ordinary shares for Consodata
acquisition (of which, 17,358,592 were indirectly issued for the
acquisition of Pan-Adress) |  |               |        |              |  |            |         |             |  |               | 527,956    |       |  |  |             |   |  |  | 532,074    |  
|Issuance of 150,579,625 ordinary shares for Telegate acquisition                                                                                  |  |               |        |              |  |            |         |             |  |               | 295,314    |       |  |  |             |   |  |  | 299,202    |  
|Issuance of 76,310,000 ordinary shares for NetCreations
acquisition                                                                               |  |               |        |              |  |            |         |             |  |               | 115,079    |       |  |  |             |   |  |  | 117,050    |  
|Issuance of 2,849,417 ordinary shares for Data House acquisition                                                                                  |  |               |        |              |  |            |         |             |  |               | 7,984      |       |  |  |             |   |  |  | 8,058      |  
|Issuance of 15,698,286 ordinary shares for Cipi acquisition                                                                                       |  |               |        |              |  |            |         |             |  |               | 21,861     |       |  |  |             |   |  |  | 22,266     |  
|Compensation for the year under stock option plan                                                                                                 |  |               |        |              |  |            | 31,730  |             |  |               | (24,423    | )     |  |  |             |   |  |  | 7,307      |  
|Conversion of par value of shares from Lit 50 to 0.03 Euro                                                                                        |  |               |        |              |  |            |         |             |  |               | (47,506    | )     |  |  |             |   |  |  |           |  
|Dividends                                                                                                                                         |  |               |        |              |  |            |         |             |  |               |            |       |  |  | (242        | ) |  |  | (242       | )
|Net loss                                                                                                                                          |  |               |        |              |  |            |         |             |  |               |            |       |  |  | (4,502,274  | ) |  |  | (4,502,274 | )
|Cumulative translation adjustment                                                                                                                 |  |               | (2,991  | )            |  |            |         |             |  |               |            |       |  |  |             |   |  |  | (2,991     | )
|Minimum pension liability                                                                                                                         |  |               | (5,267  | )            |  |            |         |             |  |               |            |       |  |  |             |   |  |  | (5,267     | )
|Cumulative effect of an accounting change (net of 3,873 tax)                                                                                     |  |               | (6,885  | )            |  |            |         |             |  |               |            |       |  |  |             |   |  |  | (6,885     | )
|Amortization of fair value of cash flow hedge, net of 1,079
tax                                                                                  |  |               | 1,919   |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  | 1,919      |  
|                                                                                                                                                  |  |               |         |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |            |  
|Total comprehensive loss                                                                                                                          |  |               |        |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  | (4,515,498 | )
|                                                                                                                                                  |  |               |         |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |            |  
|Balance as of December 31, 2001                                                                                                                   |  |               | (13,224 | )            |  |            | (19,257 | )           |  |               | 27,218,067 |       |  |  | (15,341,095 | ) |  |  | 12,185,674 |  
|                                                                                                                                                  |  |               |         |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |            |  
|Compensation for the year under stock option plan                                                                                                 |  |               |        |              |  |            | 19,257  |             |  |               | (16,653    | )     |  |  |            |   |  |  | 2,604      |  
|Other movements                                                                                                                                   |  |               |        |              |  |            |        |             |  |               | 2,919      |       |  |  |            |   |  |  | 2,919      |  
|Net loss                                                                                                                                          |  |               |        |              |  |            |        |             |  |               |           |       |  |  | (5,958,629  | ) |  |  | (5,958,629 | )
|Minimum pension liability                                                                                                                         |  |               | (12,527 | )            |  |            |        |             |  |               |           |       |  |  |            |   |  |  | (12,527    | )
|Amortization of fair value of cash flow hedge, net of 1,109
tax                                                                                  |  |               | 1,979   |              |  |            |        |             |  |               |           |       |  |  |            |   |  |  | 1,979      |  
|Cumulative translation adjustments                                                                                                                |  |               | 1,881   |              |  |            |        |             |  |               |           |       |  |  |            |   |  |  | 1,881      |  
|                                                                                                                                                  |  |               |         |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |            |  
|Total comprehensive loss                                                                                                                          |  |               |        |              |  |            |        |             |  |               |           |       |  |  |            |   |  |  | (5,967,296 | )
|                                                                                                                                                  |  |               |         |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |            |  
|Balance as of December 31, 2002                                                                                                                   |  |               | (21,891 | )            |  |            |        |             |  |               | 27,204,333 |       |  |  | (21,299,724 | ) |  |  | 6,223,901  |  
|                                                                                                                                                  |  |               |         |              |  |            |         |             |  |               |            |       |  |  |             |   |  |  |            |  

See accompanying notes

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

1. Basis of Presentation

SEAT PAGINE GIALLE S.p.A. (SEAT Old), was incorporated in July 1997, and
in November 1997, through a wholly owned subsidiary, acquired a majority
interest in SEAT S.p.A., a company quoted on the Italian Stock Exchange.
Through a series of transactions during 1998 and 1999, SEAT Old acquired the
remaining ownership of SEAT S.p.A. primarily through the exchange of shares.
Upon completion of SEAT Olds acquisition of the remaining ownership of SEAT
S.p.A. in December 1999, SEAT S.p.A. was merged into SEAT Old, and SEAT Old
changed its name to SEAT PAGINE GIALLE S.p.A., (SEAT New) which continues to
be a publicly traded company in Italy.

SEAT News principal revenue generating activity is advertising in the
Italian and European markets. The Company also operates in the business
solutions and office products markets in the Italian market as a result of its
majority ownership of Gruppo Buffetti. SEAT New is involved in the selling, in
Italy, of advertising in telephone directory products that it publishes in the
Italian Yellow Pages (Pagine Gialle) and in the Italian White Pages (Elenco
Alfabetico). SEAT New also derives revenue from the sale of its published
products, participates in the European telephone directory advertising market,
and is involved in a variety of other advertising and marketing services,
including an Internet based Yellow Pages service (Pagine Gialle On-Line), an
operator assisted talking Yellow Pages directory service (Pronto Pagine Gialle)
and direct mail advertising campaigns. SEAT New also owns, through a joint
venture, a controlling interest in Matrix S.p.A., a company that operates the
Italian Internet portal Virgilio, an Italian on-line advertising network and
a division developing Internet projects.

Effective October 1, 2000, SEAT New acquired Tin.it S.p.A. (Tin.it), a
wholly owned subsidiary of Telecom Italia S.p.A. through the exchange of newly
issued ordinary shares for 100% of the outstanding shares of Tin.it (the
Transaction). Tin.it is an Italian stock company, which provides internet
access, internet portal services, internet content management services, web
hosting, and e-commerce solutions. After the Transaction, Telecom Italia owns
a majority interest in the combined company. Accordingly, the Transaction has
been accounted for as a reverse acquisition whereby SEAT New is considered to
be the acquiree even though legally it is the acquiror. As a result, the
accompanying financial statements present the historical financial statements
of Tin.it until October 1, 2000, the effective date of the acquisition, and the
consolidated financial statements of SEAT New and Tin.it since that date.

Upon consummation of the Transaction, the combined company continued to
operate under the name SEAT PAGINE GIALLE S.p.A. Hereinafter, the terms the
Company and SEAT refer to the operations of Tin.it prior to the Transaction,
and the consolidated Tin.it/SEAT New entity subsequent to the transaction.

In 2001, the Company completed its purchase of Cecchi Gori Communications
S.p.A. and now owns two over-the-air television stations in Italy. SEAT
obtains revenue via the sale of advertising space on these two national
television channels. SEAT also has expanded into the field of business
information services with its purchase of Consodata S.p.A., NetCreations Inc,
and PanAdress DirecMarketing GmbH. With these businesses, SEAT provides
information marketing, data collection, surveys of domestic consumption
patterns, e-mail marketing, competition studies and research and property
information for the national and international market.

As of December 31, 2002 the Company was a majority-owned subsidiary
(61.50% of ordinary shares) of Telecom Italia S.p.A. (Telecom Italia), a
publicly traded company in Italy that has related party transactions with the
Company.

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

2. Background and Organization

On May 1, 2000, Telecom Italia S.p.A. and two of its subsidiaries
(Telespazio S.p.A. (Telespazio) and Saritel S.p.A.(Saritel)) spun-off the
following activities into the Company:



| |  |  | Telecom Italias internet division known as Tin.it, which
provides internet access and interactive content and services to
residential and small business customers throughout Italy, including
Small Office/Home Office, or SOHO, customers and Small- and
Medium-sized Enterprises, or SMEs;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Netway ISDN, a dial up access to the internet for basic
internet applications; Village Commerce, a package for e-commerce
based on the Transact platform and Village Windows, a package for web
hosting solution;                                                                             
|
| |  |  | Telecom Italias 49% interest in ESRI Italia S.p.A., which
distributes and customizes environmental software applications in
Italy;                                                                                                                                                           
|
| |  |  | Telecom Italias 50% interest in Excite Italia B.V., its joint
venture with Excite Inc.;                                                                                                                                                                                                      
|
| |  |  | Ownership of Telecom Italias White Pages, including the
assignment of its contracts with SEAT New relating to the production
of and advertising for the White Pages in Italy;                                                                                                                
|
| |  |  | A 50% interest in VIASAT S.p.A.(Viasat), a joint venture held
directly and indirectly by Telespazio, a wholly-owned subsidiary of
Telecom Italia. Viasat provides security and communications services
for automobiles based on satellite (GPS) and mobile phone (GSM)
platforms; and       
|
| |  |  | The content management division of Saritel, a wholly-owned
subsidiary of Telecom Italia, which provides customers with Internet
access to banking data and credit information services.                                                                                                       

The amounts presented in the accompanying financial statements prior to
May 1, 2000, represent the assets, liabilities, revenues and expenses
attributable to the Companys business. These amounts differ from the actual
assets and liabilities, which Telecom Italia transferred to the Company
pursuant to the agreement with SEAT New. Any additional assets or liabilities
transferred to the Company from Telecom Italia, which were not reflected in the
historical carve out financial statements, have been reflected in Change in
cumulative investment by parent through legal formation in the accompanying
2000 statement of shareholders equity. Subsequent to May 1, 2000, and through
December 31, 2002, the accompanying financial statements represent the assets,
liabilities, revenues and expenses of the Company as a separate legal entity.

The Companys financial statements for the four month period ending April
30, 2000, included in the 2000 consolidated financial statements, have been
prepared on the basis set out below.

a)
Structure of the financial statements -The spun-off activities of the
Company referred to above were carried out on an integrated basis as part of
Telecom Italia group and, as such, the operations comprising the spun-off
activities have been carved out from the financial statements of Telecom Italia
and its subsidiaries. Consequently, certain revenues, expenses, assets and
liabilities have been allocated to reflect the revenues, expenses, assets and
liabilities attributable to the spun-off activities.

Indirectly attributable expenses and revenues have been allocated using
bases which management believes provide an appropriate mechanism to present the
Companys financial results for the four months ended April 30, 2000 (included
in the 2000 statement of operations).

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

As a result of the carve out, the statement of shareholders equity at
January 1, 2000 presents the item cumulative investment by parent company,
consistent with the fact that the spun-off activities did not operate as a
stand-alone company. This item, combined with the Companys ordinary share
capital reflected under reverse acquisition accounting (see Note 4), represents
the net investment in the spun-off activities held by Telecom Italia,
Telespazio and Saritel and the accumulated net losses incurred by the
activities.

b)
Revenues -All of the spun-off activities revenues are specifically
identifiable from the total revenues of Telecom Italia and its subsidiaries.

For the year ended December 31, 2000, such revenue includes approximately
58 million, based upon an agreement that the Association of Internet Service
Providers, including the Company, entered into with Telecom Italia. This
agreement specifies that the network revenues earned by Telecom Italia for
Internet usage are shared with the relevant internet service provider. The
agreement expired in August 2000, at which point the parties renegotiated the
terms and entered into a new agreement.

c)
Costs -Approximately 75% of costs for the four-month period ended
April 30, 2000 were directly attributable to the Companys businesses. These
include staff costs related to employees wholly engaged in the business,
advertising costs, amortization of intangible assets, depreciation attributable
to fixed assets used in the business and bad debt expense attributable to
receivables arising from the Companys activities. Directly attributable costs
also include network operations costs charged based upon a network service
agreement that regulates the relative usage of Telecom Italias network by
those products and services provided by the Company. The rates charged to the
Company for use of the network have been regulated by the Italian
Telecommunications Authority since January 1, 1998 and the agreements
regulating such charges are renegotiated annually. Under Italian law the rates
charged by Telecom Italia to the Company are the same as those charged to third
party internet service providers and are based on volume of traffic. Amounts
owed by the Company to Telecom Italia are paid on a monthly basis.

Certain other costs have been allocated as follows:



| |  |  | Indirect staff and related costs have been allocated primarily
based upon managements estimate of the relative proportion of an
individuals time spent providing services to the Companys
activities.                             
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Facilities, information technology and other related costs have
been allocated primarily based on administrative services agreements,
which reflect the relative usage by the Company. These agreements are
also negotiated annually.

The Company believes that the allocation of such costs have been
calculated on reasonable bases and that the total amount of costs recognized in
the statement of operations approximates what its actual costs would have been
as a stand-alone entity.

d)
Losses and accumulated deficit -The losses for the four month period
ended April 30, 2000 have been classified as part of the cumulative investment
by parent company in excess of (less than) cumulative losses.

e)
Cash flow statement -Prior to May 1, 2000, the Company did not
maintain its own bank account, and, therefore, all cash receipts and payments
have been handled by Telecom Italia group companies on its behalf. The cash
flow statement has been presented as if such receipts and payments had been
received/made by the Company.

f)
Allocation of indirectly attributable assets and liabilities -Assets
obtained or liabilities incurred for the benefit of the Companys activities,
which were not specifically attributable to Company activities, for instance
trade payables for goods and services provided to both the Company and other
Telecom Italia group companies, have not been specifically allocated to the
Company. Instead such amounts have been added to or deducted from the
cumulative investment by parent company in excess of (less than) cumulative
losses, since they represent funding provided to the Company.

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

g)
Borrowings and interest -There were no borrowings specifically
attributable to the Companys businesses. Accordingly, no borrowings or
interest expense is reflected in the financial statements for the four month
period ended April 30, 2000.

h)
Income taxes -The Company utilizes the liability method of accounting
for income taxes in accordance with Statement of Financial Accounting Standards
(SFAS) 109, Accounting for Income Taxes. Under the liability method, deferred
taxes are determined based on the differences between the carrying value and
tax bases of assets and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse. Valuation allowances
are recorded to reduce deferred tax assets when it is more likely than not that
a tax benefit will not be realized.

For the four months ended April 30, 2000 Tin.it was not a separate legal
entity. The results of the business were included in the tax returns of other
legal entities within the Telecom Italia group. Accordingly, for these periods
the tax calculations and disclosures only reflect the legal entities within the
group. The difference between the carrying value and tax bases of the assets
and liabilities of the unincorporated business was recognized when the business
was incorporated to Tin.it. No tax losses generated by the unincorporated
business were contributed to Tin.it.

The Company has generated substantial tax losses since inception. Under
generally accepted accounting principles, deferred tax assets are recognized
when it is more likely than not that a tax benefit will be realized. In view of
the historic losses incurred by the Company, no deferred tax assets have been
recognized prior to the acquisition of SEAT New.

i) Limitations on use of financial statements-Because of the allocations
referred to above and the changes in the Companys structure going forward, the
carve out financial statements should not be relied upon as being
representative of the future financial position or performance of the Company.
In particular, the operating costs attributed to the activities for the four
month period ended April 30, 2000 included in the 2000 financial statements are
not necessarily representative of the costs incurred after the spin-off
transaction as they represent the carve out of costs incurred by Telecom Italia
group companies in managing integrated businesses.

3. Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the accompanying financial statements.
These policies are in conformity with accounting principles generally accepted
in the United States.

Principles
of consolidation -The consolidated financial statements
include the accounts of the Company and its majority owned subsidiaries. All
significant intercompany transactions and balances are eliminated in
consolidation.

Use
of estimates -The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could
differ from those estimates.

Foreign
currency translation -The functional currency of the Companys
foreign subsidiaries is the subsidiaries local currency. The financial
statements of the subsidiaries are translated to Euro using year-end rates of
exchange for assets and liabilities, and average rates of exchange for the year
for revenues, costs, and expenses. Translation gains (losses) are deferred and
reflected as a component of accumulated other comprehensive income within
stockholders equity. Net realized and unrealized gains and losses resulting
from foreign currency transactions are included in the consolidated statements
of operations.

Cash
and cash equivalents -The Company considers all highly liquid
instruments with maturities of three months or less when acquired to be cash
equivalents. The carrying value of all cash equivalents approximates fair
value.

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

Sale of trade accounts receivable- During 2002, the Company entered into
a factoring arrangement with a third party financial institution in order to
sell approximately  29,905 of trade accounts receivable: 90% of these accounts
receivable was sold without recourse, while 10% (or  2,990) was transferred
with recourse.

The Company collected approximately  26,800 on the sale without recourse,
recognizing a loss of  115 in the 2002 statement of operations. With regards
to the sale with recourse, no amounts have been received and these receivables
have not been deconsolidated from the balance sheet at December 31, 2002.

Inventories
-Inventories are carried at the lower of cost, determined
using the weighted average method, or market.

Property,
plant and equipment -Property, plant and equipment are recorded
at historical cost. Repairs and maintenance are expensed in the period
incurred. Plant and equipment leased under capital lease arrangements are
capitalized and depreciated. Depreciation of these assets is at rates equal to
the term of the lease or the useful life used for similar owned assets and is
included in depreciation expense.

Depreciation is computed on the historical cost of the assets using
principally the straight-line method over the estimated useful lives of the
related assets, as follows:

|                                |  |               |  | 
|------------------------------- |  | ------------- |  | 
|Buildings                       |  | 33 years     
|Machinery and equipment         |  | 3 to 10 years
|Office furniture and equipment  |  | 5 to 10 years
|Automobiles and others          |  | 4 to 5 years 
|Hardware and operating software |  | 3 years      

In August 2001, the FASB issued SFAS 144 Accounting for the Impairment of
Long-Lived Assets which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. The Statement applies to certain
long-lived assets, including those reported as discontinued operations, and
develops one accounting model for long-lived assets to be disposed of by sale.
SFAS 144 supersedes SFAS 121 Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, and APB 30, Reporting the
Results of Operations  Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment. The Group adopted the provisions
of SFAS 144 effective January 1, 2002. Prior to 2002, the Group applied SFAS
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of,to all long-lived assets, including goodwill.

Under both SFAS 121 and 144, the Group assesses potential impairments
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable or if the price of the asset has had
considerable market depreciation. The recoverability of an assets carrying
value is initially determined by comparing the undiscounted cash flows of the
asset to its carrying value. If, after the initial assessment, impairment is
deemed to exist, then the Group estimates the fair value of the asset based on
discounted cash flows, independent appraisals or quoted market prices, if
available. Any excess of carrying value over estimated fair value is written
off and recorded as an expense in current period earnings. No impairment
charges were taken under SFAS 144 in 2002. During 2001 and 2000, under SFAS
121, the Company recorded a pretax impairment charge of 3,165,405 and
10,271,669, respectively to adjust the carrying values of certain of its
long-lived assets to fair value.

Goodwill
-Goodwill represents the excess of the purchase price paid for
business acquisitions over the fair value of the identifiable tangible and
intangible assets and liabilities acquired. As of January 1, 2002, upon the
adoption of SFAS 142 Goodwill and Other Intangible Assets, goodwill is no
longer amortized. Prior to
adoption of SFAS 142, amortization was provided on a straight-line basis
over 5 to 15 1/2 years, the estimated period to be benefited.

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

The Company annually reviews the carrying value of goodwill to determine
if impairment may exist and also on an interim basis if certain events occur.
The requirements of SFAS 142 include that goodwill be assessed for impairment
using fair value measurement techniques, and, specifically, a two-step process
must be utilized. The first step is used to identify potential impairment by
comparing the fair value of a reporting unit with its carrying amount,
including goodwill. If the fair value of a reporting unit exceeds its carrying
amount, goodwill of the reporting unit is not considered impaired and the
second part of the test is not considered necessary. If the carrying amount of
a reporting unit exceeds its fair value, the second step of the goodwill
impairment test is performed to measure the amount of the loss, if any. The
second part of the goodwill impairment test compares the implied value of the
reporting units goodwill with the carrying amount of that goodwill. The
excess of the carrying value over the implied value is then written-off in the
period. Implied value of goodwill is determined in the same manner as the
amount of goodwill recognized in a business combination. That is, the fair
value of the reporting unit is allocated to all of the asset and liabilities of
that unit (including any unrecognized intangible assets) as if the reporting
unit had been acquired in a business combination and the fair value of the
reporting unit was the purchase price paid to acquire the reporting unit. The
determination of impairment of goodwill requires significant judgment and
estimates. Based upon the tests required above, an impairment of goodwill was
recorded in 2002 for 5,969,126.

Other
intangible assets -Other intangible assets represent primarily the
fair value of customer lists, brand name, trademarks and other intangible
assets purchased in business acquisitions, costs incurred for software, and
costs incurred to obtain patents and licenses. Such costs are amortized over
the estimated useful lives of the related assets as follows:

|                               |  |                        |  | 
|------------------------------ |  | ---------------------- |  | 
|Customer lists                 |  | 12 to 15 years        
|Brand name                     |  | 7 to 15 years         
|Trademarks                     |  | 10 to 15 years        
|Franchisee and agents network |  | 10 years              
|Software costs                 |  | 3 years               
|Database                       |  | 10 years              
|Patents and licenses           |  | Legal/contractual term

Software costs capitalized represent only those costs associated with the
development of new software or the enhancement of software when additional
functionality is provided. The Company applies the same policy in accounting
for web site development costs as for costs of computer software developed or
obtained for internal use. All costs of maintaining existing software, costs
for the enhancement of software that does not provide for additional
functionality, and costs pertaining to the preliminary stage of software
development are expensed as incurred. The Company reviews these items for
impairment in accordance with SFAS 144, as described above.

Investments- Investments in which the Company has significant influence,
which generally represents common stock ownership of at least 20% and not more
than 50%, are accounted for under the equity method. Other investments, which
represent less than 20% ownership of non-marketable securities, are carried at
cost, adjusted when necessary to reflect an other than temporary decline in
value of the investment.

Derivative financial instruments

Accounting Standard

Effective January 1, 2001, the Company adopted the provisions of SFAS 133,
Accounting for Derivative Instruments and Hedging
Activities. SFAS 133
requires the Company to recognize all of its derivative instruments as either
assets or liabilities in the balance sheet at fair value. The accounting for
changes in the fair value of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and further, on
the type of hedging relationship. For those derivative instruments that are
designated and qualify as hedging instruments, the Company must designate the
hedging instrument, based upon the exposure being hedged, as a fair value
hedge, cash flow hedge or a hedge of a net investment in a foreign operation.

For derivative instruments that are designated and qualify as a fair value
hedge, the gain or loss on the derivative instrument as well as the offsetting
loss or gain on the hedged item attributable to the hedged risk are recognized
in current earnings during the period of the change in fair values. For
derivative instruments that are

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

designated and qualify as a cash flow hedge,
the effective portion of the gain or loss on the derivative instrument is
reported as a component of other comprehensive income and reclassified into
earnings in the same period or periods during which the hedged transaction
affects earnings. The ineffective portion of the gain or loss on the derivative
instrument, if any, is recognized in current earnings during the period of
change. For derivative instruments that are designated and qualify as a hedge of
a net investment in a foreign
operation, the gain or loss is reported in other comprehensive income as part
of the cumulative translation adjustment to the extent it is effective. Any
ineffective portions of net investment hedges are recognized in current
earnings during the period of change. For derivative instruments not designated
or qualifying as hedging instruments, the gain or loss is recognized in current
earnings during the period of change.

The adoption of SFAS 133 on January 1, 2001 resulted in the cumulative
effect of an accounting change of 2,296, net of tax of 1,292, being
recognized as income in the statement of operations and a charge of  6,885 net
of tax of  3,873 in other comprehensive income. The charge to other
comprehensive income will be amortized on a straight line basis over the
remaining useful lives of the related derivative instruments. The cumulative
effect income of 2,296 had no effect on earnings per share on both the
ordinary and savings shares. A charge of 1,979 net of tax of 1,019 and
1,919 net of tax of  1,079 has been included in the statement of operations
representing the amortization for 2002 and 2001, respectively. Of the remaining
 4,756 charge in accumulated other comprehensive income,  1,979 net of tax of
 1,019 will be amortized in 2003.

Interest rate swap and collar agreements

The Company enters into interest rate swap and collar agreements as part
of the management of its interest rate exposures. These interest rate swaps
and collar agreements are not accounted for as hedges and, as such, the gain or
loss based upon the change in fair value is recorded in the statement of
operations. The total amount recognized during the year ended December 31,
2002 and December 31, 2001 was income of 10,967 and expense of 17,756
respectively, and is included in other expenses in the statement of operations.

Foreign currency options and forward contracts

The Company enters into foreign currency forward exchange contracts as part of
the management of its foreign currency exchange rate exposures related to
financing through April 2003. These foreign currency forward exchange
contracts are not accounted for as hedges and, as such, the gain or loss based
upon the change in fair value is recorded in the income statement. The total
expense recognized during the year ended December 31, 2002 and December 31,
2001 was  1,903 and  214, respectively, and is included in other expenses in
the statement of operations.

Income
taxes -The Company accounts for income taxes under the asset and
liability method and accordingly deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and net operating loss carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Valuation allowances are provided against
deferred tax assets when it is more likely than not that a tax benefit will not
be realized. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the period the tax rate change was enacted.

Revenue
recognition -The Companys revenues are primarily derived from
advertising and publishing, sale of office and related products, and internet
access and related services. Revenues from the sale of advertising and
publishing are recognized in the statement of operations according to the date
of publication, which corresponds to the time at which the directories are
printed and delivered. Advertising revenue from on-line and telephone services
is recorded over the period the advertising service is delivered. Advertising
revenue from television is recorded on the date at which the advertisement is
shown.

Revenues from the sale of office and related products are recognized when
title transfers, which generally corresponds to the date when products are
shipped. Provisions for returns and other adjustments related to sales are
provided in the same period the related sales are recorded.

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

Revenues from internet access and related services primarily include
subscription services and telephone traffic fees. Revenues from subscription
services are recognized over the subscription period on a straight line basis.
The Company also receives a portion of the revenues earned by Telecom Italia
for telephone traffic fees from the Companys internet subscribers. Such
revenues are recognized when the communication services are provided based on
the number of minutes of traffic utilized.

Deferred income is primarily related to payments received for advertising
services to be rendered in future periods and prepaid internet subscription
services and are reported on the balance sheet as deferred income.

Shipping
and handling costs -Shipping and handling costs on product sales
are classified as Costs of External Services and were not significant during
the years ended December 31, 2002, 2001, and 2000.

Research
and development costs  -Research and development costs are
charged to expense as incurred.

Advertising costs- Advertising costs are expensed when the advertisement
is run. Advertising expense was  54,434,  82,462 and  68,412 for the years
ended December 31, 2002, 2001 and 2000, respectively.

Accounting
for stock-based compensation -The Company accounts for
stock-based employee compensation arrangements in accordance with the
provisions of Accounting Principles Board Opinion (APB) No. 25, Accounting
for Stock Issued to Employees, and complies with the disclosure provisions of
SFAS 123, Accounting for Stock-Based Compensationand SFAS 148, Accounting
for Stock Based Compensation  Transition and Disclosure.Under APB 25,
compensation cost is recognized over the service period, which generally
represents the vesting period, based on the difference, if any, between the
fair value of the Companys stock at the related measurement date and the
amount an employee must pay to acquire the stock.

For the year ended December 31, 2002, total compensation expense recorded
in the Companys consolidated financial statements amounted to  2,236. The
Companys net loss and loss per share would have been increased to the pro
forma amounts for the years ended December 31, 2002, 2001 and 2000 indicated
below.

|                                                                                                                                            |             |  |                   |            |                   |  |                   |            |   |  |       |             |  
|------------------------------------------------------------------------------------------------------------------------------------------- | ----------- |  | ----------------- | ---------- | ----------------- |  | ----------------- | ---------- | - |  | ----- | ----------- | -
|                                                                                                                                            |             |  | Year ended        |            | Year ended        |  | Year ended       
|                                                                                                                                            |             |  | December 31, 2002 |            | December 31, 2001 |  | December 31, 2000
|                                                                                                                                            |             |  |                   |            |                   |  |                  
|Net loss applicable to shareholders:                                                                                                        |             |  |                   |            |                   |  |                   |            |   |  |       |            
|                                                                                                                                            | As reported |  |                   | (5,958,629 | )                 |  |                   | (4,502,274 | ) |  |       | (10,886,364 | )
|Add: Stock-based compensation
expense recognized under intrinsic
value method                                                               |             |  | 2,236             |            |                   |  | 7,307             |            |   |  | 5,719 |            
|                                                                                                                                            |             |  |                   |            |                   |  |                   |            |   |  |       |             |  
|Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects |             |  | (42,562           | )          |                   |  | (65,442           | )          |   |  | (166  | )          
|                                                                                                                                            |             |  |                   |            |                   |  |                   |            |   |  |       |             |  
|                                                                                                                                            | Pro forma   |  |                   | (5,998,955 | )                 |  |                   | (4,560,409 | ) |  |       | (10,891,917 | )
|Basic and diluted loss per share:                                                                                                           |             |  |                   |            |                   |  |                   |            |   |  |       |            
|Ordinary:                                                                                                                                   |             |  |                   |            |                   |  |                   |            |   |  |       |            
|                                                                                                                                            | As reported |  |                   | (0.52      | )                 |  |                   | (0.40      | ) |  |       | (1.68       | )
|                                                                                                                                            | Pro forma   |  |                   | (0.53      | )                 |  |                   | (0.41      | ) |  |       | (1.68       | )
|Savings:                                                                                                                                    |             |  |                   |            |                   |  |                   |            |   |  |       |            
|                                                                                                                                            | As reported |  |                   | (0.52      | )                 |  |                   | (0.40      | ) |  |       | (1.68       | )
|                                                                                                                                            | Pro forma   |  |                   | (0.53      | )                 |  |                   | (0.41      | ) |  |       | (1.68       | )

Net
loss per share -Basic loss per share is computed by dividing net loss
allocated to ordinary and savings shares by the weighted average number of
ordinary and savings shares outstanding for the period. Diluted loss per share
reflects the potential dilution that could occur if securities or other
contracts to issue

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

ordinary shares were exercised or converted into ordinary shares or
resulted in the issuance of ordinary shares that then shared in the loss of the
entity. Diluted loss per share are the same as the basic loss per share for the
years ended December 31, 2002, 2001 and 2000, as the computation of diluted
loss per share did not assume the effect of shares contingently issuable upon
the exercise of stock options because their inclusion would have been
antidilutive.

Credit
risk -Financial instruments which potentially subject the Company
to concentrations of credit risk, consist primarily of cash and cash
equivalents, trade receivables and derivative financial instruments. The
Company places its funds into high credit quality financial institutions and,
at times, may be in excess of insured limits. Credit risk on trade receivables
is minimized as a result of the large and diversified nature of the Companys
customer base. With respect to its derivative contracts, the Company is also
subject to credit risk of non-performance by counter-parties and its maximum
potential loss may exceed the amount recognized in the financial statements.
The Company controls its exposure to credit risk through credit approvals,
credit limits and monitoring procedures. Collateral is generally not required
for the Companys financial instruments.

New
accounting standards -In November 2002, the FASB issued FIN 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others (FIN 45). The Interpretation
requires expanded disclosure to be made in the guarantors financial statements
in regards to the guarantees and obligations under certain agreements. It also
requires that a guarantor recognize, as of the inception of the guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of FIN 45 are effective for financial
statement periods ending after December 15, 2002 and have therefore been
applied in the accompanying financial statements. The recognition requirements
of FIN 45 are applicable for guarantees issued or modified after December 31,
2002. The Company does not believe that the adoption of FIN 45 will have a
material impact on the financial position, results of operations or cash flows
of the Company.

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, Consolidation of Variable Interest Entities, an
interpretation of Accounting Research Bulletin No. 51(FIN 46). The
Interpretation requires the consolidation of entities in which an enterprise
absorbs a majority of the entitys expected losses, receives a majority of the
entitys expected residual returns, or both, as a result of ownership,
contractual or other financial interests in the entity. Currently, entities
are generally consolidated by an enterprise when it has a controlling financial
interest through ownership of a majority voting interest in the entity. The
Company does not believe that the adoption of FIN 46 will have a material
impact on the financial position, results of operations or cash flows of the
Company.

In November 2002, the Emerging Issues Task Force (EITF) of the FASB
reached a consensus on EITF 00-21, Accounting for Revenue Arrangements with
Multiple Element Deliverables.The EITF addresses how to account for
arrangements that may involve the delivery or performance of multiple products,
services or rights to use assets. Revenue arrangements with multiple
deliverables should be divided into separate units of accounting if the
deliverables in the arrangement meet certain criteria. Arrangement
consideration should be divided into separate units of accounting based on
their relative fair values. The Issue also supersedes certain guidance set
forth in SEC Staff Accounting Bulletin (SAB) 101. The final consensus is
applicable to agreements entered into in fiscals periods beginning after June
15, 2003, with early adoption permitted. Additionally, companies are permitted
to apply the consensus guidance to all existing arrangements as a cumulative
effect of a change in accounting principle. The Company will adopt this new
pronouncement as of January 1, 2004. The Company is currently evaluating the
impact of the Issue on results of operations, financial position and cash
flows.

In June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations,which addresses the financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. This standard applies to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development or normal use of the asset.
SFAS 143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred. The fair value
of the liability is added to the carrying amount of the associated long-lived
asset and is depreciated over the assets useful life. The liability is
accreted to its present value each period

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

through charges to operating expense. If the obligation is settled for
other than the carrying amount of the liability, a gain or loss on settlement
is recognized. The Company is required to adopt the provisions of SFAS 143,
effective January 1, 2003. To accomplish this, the Company must identify all
legal obligations for asset retirement obligations, if any, and determine the
fair value of these obligations on the date of adoption. The determination of
fair value is complex and will require gathering market information and the
development of cash flow models. Additionally, the Company will be required to
develop processes to track and monitor these obligations. The Company does not
believe that the adoption of SFAS 143 will have a material impact on the
financial position, results of operations or cash flows of the Company.

In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses financial accounting and
reporting for costs associated with exit or disposal activities, which
effectively nullifies EITF 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit Activity( Including Certain Costs
Incurred in a Restructuring).The principal differences between SFAS 146 and
EITF 94-3 relates to SFAS 146s requirements for recognition of a liability for
a cost associated with an exit or disposal activity. SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. Under EITF 94-3, a liability for an exit cost
was recognized at the date of an entitys commitment to an exit plan. A
fundamental conclusion reached by the FASB in this new Statement is that an
entitys commitment to a plan, in and of itself, does not create an obligation
that meets the definition of a liability. Therefore, this Statement eliminates
the definition and requirements for recognition of exit costs in EITF 94-3.
This Statement establishes that fair value is the objective for initial
measurement of the liability. SFAS 146 also changes the accounting recognition
of one-time termination benefits, requiring that those costs be recognized over
the period of the employees service if that service is beyond a minimum
retention period. Under EITF 94-3, these costs were accrued upfront when all
the criteria of EITF 94-3 were met. The effective date for the new Statement
is January 1, 2003, with earlier adoption allowed. The Company will apply the
provisions of the Statement as of January 1, 2003.

In December 2002, the FASB issued SFAS 148 Accounting for Stock-Based
Compensation  Transition and Disclosure an Amendment of SFAS 123.,The new
Statement is applicable to those entities that decide to adopt the fair value
stock based compensation as their primary accounting policy, as opposed to APB
25. The Company has adopted the additional disclosure requirements of SFAS
148.

In May
2003 the FASB issued SFAS 150 Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity, the new
accounting standard for certain types of freestanding financial instruments and
disclosure regarding possible alternatives to settling financial instruments.
The Group has started to evaluate what impact, if any, adoption of the
Statement will have on the Groups consolidated financial condition and results
of operation. The Statement is effective for all financial instruments entered
into or modified after May 31, 2003 and is otherwise effective at the beginning
of the first interim period after June 15, 2003.

Fair value of financial instruments
-The following methods and assumptions
were used by the Company in estimating its fair value disclosures for financial
instruments:

|                                                                                                                                                                                                                                      
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cash and cash equivalents:The carrying amount of cash and cash
equivalents is assumed to approximate fair value as cash
equivalents include all highly liquid, short-term investments
with original maturities of three months or less
|                                                                                                                                                                                                                                      
|Accounts receivable: The carrying amount of accounts receivable
is assumed to approximate fair value as a valuation allowance is
recorded to adjust the nominal value of accounts receivable to
the expected recoverable value        
|                                                                                                                                                                                                                                      
|Trade payables: The carrying amount of trade accounts payable
is assumed to approximate fair value as trade accounts payable
includes short-term payables, which will be due within three
months or less                              
|                                                                                                                                                                                                                                      
|Short and long term debt:The carrying amount of the Companys
variable rate debt is assumed to approximate fair value based
upon periodic adjustments of the interest rate to                                                         

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

|                                                                                                                                                                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|the current market rate in accordance with the terms of the debt
agreements. The fair value of the Companys fixed rate debt is
estimated using discounted cash flow analysis based on the
Companys estimated current borrowing rate for similar types of
borrowing arrangements
|                                                                                                                                                                                                                                                                                 
|Foreign currency forward contracts:The fair values of the
Companys foreign currency contracts were estimated based on
differences between the exchange rate inherent in the contracts
and the related exchange rate at the end of the period                                    
|                                                                                                                                                                                                                                                                                 
|Interest rate swap and collar agreements:The fair values of
interest rate swap and collar agreements is based upon quotes
received from the related counter-parties and represents the
cash requirement if the existing agreements had been terminated
at the end of the year    
|                                                                                                                                                                                                                                                                                 
|The carrying amounts and fair values of the Companys financial
instruments are as follows:                                                                                                                                                                                      

|                                         |  |                   |            |                   |  |          |            |       |  |  |            |   |  |  |            |  
|---------------------------------------- |  | ----------------- | ---------- | ----------------- |  | -------- | ---------- | ----- |  |  | ---------- | - |  |  | ---------- | -
|                                         |  | December 31, 2002 |            | December 31, 2001
|                                         |  |                   |            |                  
|                                         |  | Carrying          |            | Fair              |  | Carrying |            | Fair 
|                                         |  | Amount            |            | Value             |  | Amount   |            | Value
|                                         |  |                   |            |                   |  |          |            |      
|Cash and cash equivalents                |  |                   | 99,535     |                   |  |          | 99,535     |       |  |  | 48,735     |   |  |  | 48,735     |  
|Accounts receivable                      |  |                   | 894,825    |                   |  |          | 894,825    |       |  |  | 877,028    |   |  |  | 877,028    |  
|Accounts payable                         |  |                   | (405,802   | )                 |  |          | (405,802   | )     |  |  | (431,471   | ) |  |  | (431,471   | )
|Short term debt                          |  |                   | (48,923    | )                 |  |          | (48,923    | )     |  |  | (68,497    | ) |  |  | (68,497    | )
|Foreign currency forward contract        |  |                   | (1,903     | )                 |  |          | (1,903     | )     |  |  | (214       | ) |  |  | (214       | )
|Long term debt                           |  |                   | (1,192,188 | )                 |  |          | (1,181,784 | )     |  |  | (1,258,983 | ) |  |  | (1,202,000 | )
|Interest rate swap and collar agreements |  |                   | (671       | )                 |  |          | (671       | )     |  |  | (11,637    | ) |  |  | (11,637    | )

4. Business Combinations and Acquisitions

In June 2001, the Financial Accounting Standards Board (FASB) issued
SFAS 141, Business Combinations. The Statement requires the use of the
purchase method of accounting for all business combinations initiated after
June 30, 2001, thereby eliminating the use of the pooling of interest method of
accounting for business combinations. In addition, SFAS 141 requires that
intangible assets be recorded apart from goodwill if they meet certain
criteria. This new standard did not have an impact on the Seats results of
operations, financial position or cash flows upon adoption. In addition, on
January 1, 2002, the Company ceased amortizing goodwill for all business
combinations initiated before June 30, 2001.

Telecom Italia Minority Interests Acquisition

In July, 1997, due to the merger of the former Telecom Italia S.p.A. (Old
Telecom Italia) with and into its parent company, Stet, which changed its name
to Telecom Italia after the merger, Stet increased its ownership of Old Telecom
Italia to 100% by acquiring the then outstanding minority shareholdings. The
acquisition of the minority interest of Old Telecom Italia has been accounted
for under the purchase method of accounting. As a result, Stet recorded
approximately  3,100,000 of goodwill. Of this total, management has estimated
that  108,300 related to certain activities comprising Tin.it. Management has
estimated goodwill attributable to White Pages of  106,400 based on the
present value of estimated future cash flows of that business. White Pages
goodwill is being amortized over its estimated useful life of 15 1/2 years.
Management has estimated the goodwill attributable to its investment in VIASAT
of  1,900 based on the fair value of VIASAT by reference to other 1997
transactions involving acquisitions of interests in that company. VIASAT
goodwill was being amortized over its estimated useful life of five years.

Reverse Acquisition

Effective October 1, 2000, SEAT New acquired all of the outstanding shares
of Tin.it S.p.A. (Tin.it) through the exchange of newly issued shares for 100%
of the outstanding shares of Tin.it (the Transaction). 4,675,461,457
ordinary shares were issued to Telecom Italia and 415,864,739 ordinary shares
were issued

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

directly to the shareholders of Telecom Italia. Subsequent to the
Transaction, Telecom Italia and its shareholders owned approximately 65.7% of
the Company. Generally accepted accounting principles in the United States
require that SEAT New be considered the acquiree for financial statement
purposes (a reverse acquisition) even though legally it is the acquiror.
Therefore, the acquisition has been recorded as the acquisition of SEAT New by
Tin.it in the accompanying financial statements. The accompanying financial
statements present the historical financial statements of Tin.it from January
1, 2000 to October 1, 2000, the effective date of the acquisition, and the
consolidated financial statements of SEAT New and Tin.it since that date.
Historical stockholders equity has been restated to reflect the shares issued
in the Transaction as outstanding for all periods prior to the effective date
of the Transaction.

The purchase price was determined by applying the average quoted market
price of shares of SEAT New two days before and after the date of announcement
of the Transaction to the number of shares outstanding of SEAT New on the
effective date of the Transaction. In addition, the purchase price includes
the fair value of stock options of SEAT New outstanding at the effective date
of the Transaction, approximating 76,791 and acquisition costs approximating 
65,074.

The total purchase price of  23,933,247 was allocated to the fair value
of the net assets of SEAT New, as the accounting acquiree, at the date of the
Transaction under the purchase method of accounting. The excess of the
purchase price over the fair value of the identifiable net assets has been
recorded as goodwill. The amortization of intangible assets and goodwill is
computed using the straight line method over the expected period to be
benefited, which is 12 years for customer lists and goodwill, 15 years for
brand name, and the remaining contractual life of interest rate swap and collar
agreements.

A summary of the purchase price allocation is as follows:

|                                                          |  |  |            |  
|--------------------------------------------------------- |  |  | ---------- | -
|Fair value of recorded net liabilities at October 1, 2000 |  |  | (120       | )
|Customer lists                                            |  |  | 3,770,135  |  
|Brand name                                                |  |  | 1,291,142  |  
|Interest rate swaps and collars                           |  |  | 7,592      |  
|Unearned compensation from unvested options               |  |  | 56,123     |  
|Deferred taxes                                            |  |  | (2,120,975 | )
|Goodwill                                                  |  |  | 20,929,350 |  
|                                                          |  |  |            |  
|Total purchase price                                      |  |  | 23,933,247 |  
|                                                          |  |  |            |  

As a result of the Transaction, the Company was required to dispose of
SEAT News equity investment in MC Link S.p.A. (MC Link) to comply with anti
trust requirements in Italy. The sale was completed on September 27, 2001 for
516. The carrying value of McLink was 13,022. The difference between the
sale price and the carrying value increased the goodwill that was recorded in
purchase accounting.

As described above, the value assigned to the purchase price of SEAT was
primarily based on the quoted market price of SEAT shares two days before and
after the announcement of the transaction. From the date of announcement to the
effective date of the transaction, and subsequent to the effective date of the
transaction, the quoted market price of SEAT and of the newly combined entity,
respectively, decreased considerably. Although a relatively minor portion of
SEATs historical operations consisted of internet and internet related
activities, its quoted market price increased significantly during the latter
part of 1999 and early 2000 consistent with other companies in the technology
sector. Also consistent with many other companies in the technology sector,
its market value decreased significantly during the second half of 2000
attributable to, among other factors, decreases in multiples of expected future
revenue and decreases in expected profitability and cash flows of the sector as
a whole. The declining trend in SEATs quoted market price continued through
2002. During the Companys annual review for indicators of impairment of
long-lived assets in 2001 and 2000, based on the significant decrease in market
capitalization, the Company determined a potential impairment existed regarding
goodwill arising from its acquisition of SEAT New. At January 1, 2002, the
Company performed the transition testing required under FAS 142. This included
identifying the reporting units at the date of transition and assigning
goodwill to these reporting units. Also at the date of transition an
impairment test of the new reporting
units was performed under the FAS 142 guidance and no impairment charge
was recorded at that date. In accordance with the requirements of SFAS 142,
the annual impairment test of goodwill was conducted as of December 31, 2002.
As part of that assessment, it was determined that certain reporting units
contained

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

goodwill that was potentially impaired. The 2002 review incorporated into
the analysis all of the known facts and management strategies at the time,
including the possibility that the assessment that the ownership levels of
certain businesses may change in the future. In particular, Telecom Italia,
Seats majority owner, had been assessing the structure and benefits of having
the Internet and Directories businesses constituted as a single business.
Although Telecom Italia management had not committed to a plan regarding the
sale of certain reporting units of SEAT until after December 31, 2002, the
probability that a realignment of the business would take place, including the
possible disposal valuations of those businesses, were considered. The 2001
valuation approach was based on a discounted cash flow model, using the best
estimates of management at that time, including the intention to keep SEAT
together as an integrated asset for the foreseeable future. In 2002 the fair
value of the affected reporting units, in particular those to be included in
New SEAT, were derived based on an assessment of recent trading multiples for
other similar assets. This approach was used as, given the increasing
likelihood that Telecom Italia would sell these assets, the use of multiples
for recent transactions for similar assets was considered more indicative of
fair value than a discounted cash flow analysis. Those to be included in
Telecom Italia Media were valued based on a combination of both multiples and
the discounted cash flow method. Using the comparables approach to the
valuation, SEAT identified that the fair value of the reporting units implied
goodwill, after performing a hypothetical purchase price allocation, including
intangibles, was 6,035,790 less than these assets carrying value. The Company
performed an impairment review in accordance with its applicable policy
described in Note 3for 2002, 2001 and 2000, and as a result, recorded a
non-cash impairment charge of 5,656,538 in 2002,  1,506,014 in 2001 and 
10,271,669 in 2000.

Other Acquisitions

On August 8, 2000, SEAT new purchased 25% of Cecchi Gori Communications
S.p.A. (CGC ) for a total of 129,114 in cash from Cecchi Gori Communication
Media Holdings (CGCMH). It also signed an agreement to purchase the
remaining 75% of CGC for a fixed price of approximately  387,342, to be paid
in SEAT shares. During the period after the agreement was signed, the value of
SEAT stock significantly decreased. Since the value of the stock decreased and
the number of shares were fixed, the seller requested to renegotiate the sale
agreement. On April 27, 2001, the Extraordinary Shareholders Meeting of CGC
approved the financial statements at December 31, 2000 and moved to cover the
loss shown therein by a capital increase to be subscribed by the owners. On
that day, SEAT covered its 25% of the losses with a payment of 21,175. The
deadline for exercising the right to subscribe to the capital increase
described above was June 4, 2001, and CGCMH, the owners of the other 75% of CGC,
failed to cover their percentage of the previous years losses. As such, SEAT
contributed the remaining 75% of the losses for  64,506, and took ownership
of those shares. As a result, the shares owned by CGCMH were cancelled and new
shares were issued in SEATs name, which thus holds 100% of the share capital
of CGC. The Companys cumulative purchase price of its investment in CGC
totaled 216,857, including 2,062 of transaction costs. The operations of CGC
have been included in the consolidated financial statements from the date of
majority acquisition. The transaction was accounted for as a purchase, using
step-acquisition accounting, and the excess cost over the fair value of the
identifiable tangible and intangible net assets acquired of 71,720 was
recorded as goodwill, which is being amortized over 10 years computed on the
straight line method. In December 2001 CGC changed its name to Holding Media e
Comunicazione HMC S.p.A. (HMC).

On February 9, 2001, SEAT gained a controlling stake (54.5%) of Consodata
SA (Consodata), a company listed on the Paris Nouveau Marché in the business
of information marketing. The acquisition occurred in the following manner: (i)
SEAT issued 63,789,104 ordinary shares to the Consoldata shareholders for
3,986,819 Consodata shares, corresponding to 39.27% of the French companys
share capital; (ii) SEAT contributed their entire stake (100%) in Giallo Dat@
to Consodata in return for 3,383,520 new ordinary shares (25% of the new
post-increase capital of Consodata). On May 30, 2001, SEAT announced a public
tender offer in which sixteen new ordinary SEAT shares were offered for each
Consodata share. The holders of 5,981,625 Consodata shares, equivalent to
approximately 44.19% of the share capital, participated in the offer in which
95,706,000 new ordinary SEAT PG shares were issued on August 8, 2001. SEAT,
therefore, gained a total interest of 90.735% in the new combined entity
Consodata-Giallo Dat@. The contribution of Giallo Dat@ was
recorded at historical cost for the portion retained and at fair value for
the portion attributed to the remaining minority shareholders of Consodata,
resulting in a gain of  14,924. The Companys cumulative purchase price of its
investment in Consodata totaled 553,526, including 5,362 of transaction
costs. The operations of

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

Consodata have been included in the consolidated financial statements from
the date of majority acquisition. The transaction was accounted for as a
purchase, using step-acquisition accounting, and the excess cost over the fair
value of the identifiable tangible and intangible net assets acquired of
513,514 was recorded as goodwill, which is being amortized over 10 years
computed on the straight line method. During 2002, the Company recorded an
additional purchase of 8.19% of the company for 48,783 in cash. This purchase
completed SEATs obligations under previously signed put and call options. The
entire 48,783 was recorded as goodwill. The Company performed an impairment
review in accordance with its policy described in Note 3, and as a result,
recorded a non-cash impairment charge to the goodwill related to Consodata of 
457,437 in 2001 while there was no impairment charge recorded in 2002.

On May 29, 2001, SEAT purchased 100% of Pan-Adress Direktmarketing GmbH
and of General Partner GmbH (collectively Pan-Adress), companies incorporated
under German law in the business of direct marketing. Under the terms of the
agreement SEAT initially exchanged 1,084,912 of Consodata shares which it held
for 100% of the share capital of Pan-Adress. These Consodata shares were then
contributed back to SEAT in exchange for 17,358,952 SEAT shares via the public
tender offer for Consodata described above. The Companys purchase price of
its investment in Pan-Adress totaled 20,578, including 622 of transaction
costs. The operations of Pan-Adress have been included in the consolidated
financial statements from the date of majority acquisition. The transaction
was accounted for as a purchase and the excess cost over the fair value of the
identifiable tangible and intangible net assets acquired of 18,922 was
recorded as goodwill, which is being amortized over 7 years computed on the
straight line method.

On June 15, 2001 SEAT acquired 100% of the share capital of NetCreations
Inc (NetCreations) via Sogerim , a 100% owned subsidiary of Telecom Italia.
Telecom Italia loaned 76,310,000 of its SEAT shares to its subsidiary Sogerim.
Sogerim then sold the SEAT shares in the open market for U.S.$109,000 cash,
which it then used to purchase NetCreations. On June 15, 2001, SEAT issued a
total of 76,310,000 new ordinary SEAT shares to Sogerim in exchange for 100%
of NetCreations. The shares issued to Sogerim were ultimately returned to
Telecom Italia to repay the loaned shares. The Companys purchase price of its
investment in NetCreations totaled 124,946, including 7,896 of transaction
costs. The operations of NetCreations have been included in the consolidated
financial statements from the date of acquisition. The transaction was
accounted for as a purchase and the excess cost over the fair value of the
identifiable tangible and intangible net assets acquired of 14,059 was
recorded as goodwill, which is being amortized over 10 years computed on the
straight line method. The Company performed an impairment review in accordance
with its policy described in Note 3, and as a result, recorded a non-cash
impairment charge to the goodwill of related to NetCreations of  13,055 in
2001.

On March 29, 2001 SEAT purchased 3% of Data House S.p.A. (Data House), a
company in the business of collection, electronic handling and marketing of
realty information. SEAT purchased additional ownership interest on May 29,
2001 of 17% and on June 18, 2001 of 32% for a total interest of approximately
52%. The 32% stake was purchase via the issuance of 2,849,417 new ordinary
SEAT shares while the other 20% was purchased with cash. The Companys
purchase price of its investment in Data House totaled 14,425, including 284
of transaction costs. The operations of Data House have been included in the
consolidated financial statements from the date of majority acquisition. The
transaction was accounted for as a purchase using step acquisition accounting
and the excess cost over the fair value of the identifiable tangible and
intangible net assets acquired of 8,811 was recorded as goodwill, which is
being amortized over 7 years computed on the straight line method. On August
9, 2002, Seat sold its interest in Data House for proceeds of 15,939 and
recording a loss of  6,667.

On July 3, 2001 SEAT purchased 60% of CIPI S.p.A. (CIPI), a company
operating in the B2B internet sector, handling promotional items and corporate
gifts. SEAT issued 15,698,286 new ordinary shares for its 60% ownership
interest. The Companys purchase price of its investment in CIPI totaled
22,643, including 377 of transaction costs. The purchase price was
determined based on the average market price of SEATs stock over the period
including two days before and two days after the terms of the acquisition were
agreed to and announced, which was April 15, 2001. The operations of CIPI have
been included in the consolidated
financial statements from the date of majority acquisition. The
transaction was accounted for as a purchase and the excess cost over the fair
value of the identifiable tangible and intangible net assets acquired of 
16,813 was recorded as goodwill, which is being amortized over 5 years computed
on the straight line method and is not

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

deductible for tax purposes. Intangible assets with finite lives had a
fair value of  7,800 at the time of acquisition. The following table
summarizes the estimated fair values of the assets acquired and liabilities
assumed at the date of acquisition.

|                                           |                                                     |  |         |       | 
|------------------------------------------ | --------------------------------------------------- |  | ------- | ----- | 
|Current assets                             |                                                     |  | 12,698  |      
|Property, plant, and equipment             |                                                     |  | 3,683   |      
|Intangible assets subject to amortization: |                                                     |  |         |      
|                                           | Brand Name (5 year weighted-average useful life)    |  |         | 1,680 | 
|                                           | Customer List (5 year weighted-average useful life) |  |         | 6,120 | 
|Goodwill                                   |                                                     |  | 16,813  |      
|                                           |                                                     |  |         |      
|Total assets acquired                      |                                                     |  | 40,994  |      
|Current liabilities                        |                                                     |  | (10,754 | )    
|Long-term liabilities                      |                                                     |  | (6,817  | )    
|                                           |                                                     |  |         |      
|Total liabilities assumed                  |                                                     |  | (17,571 | )    
|Minority Interest                          |                                                     |  | (780    | )    
|                                           |                                                     |  |         |      
|Net assets acquired                        |                                                     |  | 22,643  |      
|                                           |                                                     |  |         |      

The  16,813 of goodwill has been assigned to the Office Products segment
in which CIPI operates.

As of October 1, 2000, SEAT owned 2.2% of Telegate AG, a publicly traded
company in Germany, with a fair value of  36,834. During November 2000, the
Company acquired an additional 11.34% of Telegate AG and 51.37% of Telegate
GmbH, a German holding company. Telegate GmbH directly owns 50.99% of Telegate
AG. The acquisition was accomplished through the issuance of 147,446,627
ordinary shares for a total purchase price of  758,269, including  41,531 of
acquisition costs. On April 5, 2001, the Company purchased the remaining
48.63% of Telegate GmbH through the issuance of 150,579,625 new ordinary shares
for a purchase price of 308,869 including 9,667 of acquisition costs.
Including the fair value of the 2.2% of Telegate AG previously owned by SEAT,
the Companys cumulative purchase price of its investment in Telegate GmbH and
Telegate AG totaled 1,103,972. The operations of Telegate GmbH and Telegate
AG have been included in the consolidated financial statements from the date of
majority acquisition. The transaction was accounted for as a purchase, using
step-acquisition accounting, and the excess cost over the fair value of the
identifiable tangible and intangible net assets acquired of 1,047,516 was
recorded as goodwill, which is being amortized over 7 years computed on the
straight line method. During 2002, the Company purchased an additional 13.9%
of Telegate AG for 30,311 via a capital increase. The capital increase was
only subscribed by Seat and Telegate GmbH and, as such, the Company now owns
78.44% of Telegate AG. An additional 9,005 of goodwill was recorded as part
of this purchase. The Company performed an impairment review in accordance
with its policy described in Note 3, and as a result, recorded a non-cash
impairment charge to goodwill related to Telegate of  907,385 in 2001.

During December 2000, the Company acquired 99.6% of TDL Infomedia Ltd.
(TDL) through the issuance of 140,672,537 ordinary shares for a total purchase
price of  526,798, including  5,185 of acquisition costs. The operations of
TDL Infomedia Ltd. are included in the consolidated financial statements from
the date of acquisition. The transaction was accounted for as a purchase and
the excess cost over the fair value of the identifiable tangible and intangible
net assets acquired of 446,782 was recorded as goodwill, which is being
amortized over 15 years computed using the straight line method. The Company
has an option to acquire the remaining 0.4% of TDL from certain executive
shareholders beginning in 2002 at a price to be determined based on a multiple
of the operating results of TDL during 2001 through 2003, up to a maximum
purchase price of 120,172. In connection with the acquisition of TDL, the
Company entered into share lock-up agreements with certain executive
shareholders of TDL. Under the terms of these agreements, the executives are
restricted through 2004 from selling the 13,684,099 aggregate shares of the
Company received. As consideration, the Company has guaranteed the executives
a value of  3.53 per share, as long as the executive remains employed by TDL
at the end of the lock-up period. If at the conclusion of the lock-up period
the quoted market price of the Companys shares fall below the guaranteed
value, the Company will be required to issue additional shares to
the executives such that the total market value of all shares received
equals the value of the original number of shares received at the guaranteed
value. The purchase option and share lock-up agreements result in potential
additional compensation to the executives. As a result, during the term of the
option and lock up periods,

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

compensation expense will be recorded to reflect the fair value of any
additional shares, if any, to be issued at the end of each reporting period and
the excess of the option price over the estimated fair value of additional
shares to be acquired. The amount of compensation expense related to these
agreements in 2002 and 2001 was approximately 21,000 and 32,000,
respectively, while in 2000 it was not material. The Company performed an
impairment review in accordance with its policy described in Note 3, and as a
result, recorded a non-cash impairment charge to goodwill related to TDL of 
154,021 in 2002.

As of October 1, 2000, SEAT New owned 4.31% of Mondus Ltd. (Mondus), with
a fair value of 11,076. During December 2000, the Company acquired an
additional 42.13% of Mondus through the issuance of 44,344,611 ordinary shares
for a total purchase price of  164,425, including 1,192 of acquisition costs.
Including the fair value of the 4.31% of Mondus previously owned by SEAT New,
the Companys cumulative purchase price of its investment totaled  175,501.
This investment is being accounted for under the equity method, with the amount
of the purchase price in excess of the value of the Companys ownership in the
underlying net assets of Mondus of  138,328,amortized over 7 years. The
Company performed an impairment review in accordance with its policy described
in Note 3, and as a result, recorded a non-cash impairment charge to its equity
carrying value related to Mondus of  128,418 in 2001. Mondus was subsequently
sold in 2002 for
19,100. See Note 9for additional information on the sale.

During December 2000, the Company acquired 93.465% of Databank S.p.A.
through the issuance of 11,402,738 ordinary shares for a total purchase price
of  46,980,including 563 of acquisition costs. The operations of Databank
have been included in the consolidated financial statements from the date of
acquisition. The transaction was accounted for as a purchase and the excess
cost over the fair value of the identifiable tangible and intangible net assets
acquired of  29,887 was recorded as goodwill, which is being amortized over 10
years computed on the straight line method. The Company also provided the
shareholders of the remaining 6.535% of Databank an option to put their shares
to the Company from May 2001 through May 2004, at a price based on Databanks
future operating results.

In addition, the Company acquired various percentages of other businesses
through the payment of cash, each of which have been consolidated or included
in the consolidated financial statements under the equity method from the date
of acquisition. The acquisitions were accounted for under the purchase method
of accounting with the aggregate purchase price of approximately  121,173 in
2001 and 26,300 in 2000, allocated to the fair value of identifiable tangible
and intangible net assets acquired. Goodwill, representing the excess of the
purchase price over the fair value of net assets acquired, aggregating
approximately  80,450 in 2001 and 19,100 in 2000, has been recorded and is
being amortized over 5 to 10 years computed using the straight line method.

The pro forma unaudited results of operations for the years ended December
31, 2001 and 2000, assumes the purchases of SEAT New, Telegate, TDL, Consodata
and HMC had been consummated as of January 1, 2000.

|                                                      |          |  |             |       |      |  |             |       |  
|----------------------------------------------------- | -------- |  | ----------- | ----- | ---- |  | ----------- | ----- | -
|                                                      |          |  | (unaudited)
|                                                      |          |  | 2001        |       | 2000
|                                                      |          |  |             |       |     
|Revenues                                              |          |  | 1,968,421   |       |      |  | 1,763,475   |      
|Loss before cumulative effect of an accounting change |          |  | (4,627,963  | )     |      |  | (12,633,550 | )    
|Net loss                                              |          |  | (4,625,667  | )     |      |  | (12,633,550 | )    
|Net loss per share :                                  |          |  |             |       |      |  |             |      
|                                                      | Ordinary |  |             | (0.41 | )    |  |             | (1.94 | )
|                                                      | Savings  |  |             | (0.41 | )    |  |             | (1.94 | )

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

5. Inventories

Inventories consisted of the following at December 31:

|                            |  |      |        |      |  |  |        | 
|--------------------------- |  | ---- | ------ | ---- |  |  | ------ | 
|                            |  | 2002 |        | 2001
|                            |  |      |        |     
|Raw materials               |  |      | 8,875  |      |  |  | 10,225 | 
|WIP and semi-finished goods |  |      | 12,221 |      |  |  | 310    | 
|Finished goods              |  |      | 28,897 |      |  |  | 26,107 | 
|                            |  |      |        |      |  |  |        | 
|                            |  |      | 49,993 |      |  |  | 36,642 | 
|                            |  |      |        |      |  |  |        | 

6. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following at
December 31:

|                                             |  |      |         |      |  |  |         | 
|-------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                                             |  | 2002 |         | 2001
|                                             |  |      |         |     
|Advance payments to agents                   |  |      | 65,231  |      |  |  | 52,018  | 
|Receivables from tax authorities             |  |      | 121,725 |      |  |  | 98,544  | 
|Prepaid expenses and costs                   |  |      | 12,136  |      |  |  | 40,984  | 
|Advance payments to suppliers and publishers |  |      | 11,748  |      |  |  | 17,259  | 
|Other current assets                         |  |      | 35,651  |      |  |  | 32,982  | 
|                                             |  |      |         |      |  |  |         | 
|                                             |  |      | 246,491 |      |  |  | 241,787 | 
|                                             |  |      |         |      |  |  |         | 

7. Property, Plant and Equipment

Property, plant and equipment consisted of the following at December 31:

|                                |  |      |          |      |  |  |          |  
|------------------------------- |  | ---- | -------- | ---- |  |  | -------- | -
|                                |  | 2002 |          | 2001
|                                |  |      |          |     
|Land and buildings              |  |      | 70,585   |      |  |  | 73,490   |  
|Machinery and equipment         |  |      | 109,718  |      |  |  | 119,714  |  
|Office furniture and equipment  |  |      | 9,959    |      |  |  | 16,880   |  
|Vehicles                        |  |      | 1,151    |      |  |  | 1,555    |  
|Hardware and operating software |  |      | 143,978  |      |  |  | 139,948  |  
|Other                           |  |      | 7,205    |      |  |  | 4,475    |  
|Construction in progress        |  |      | 1,831    |      |  |  | 14,152   |  
|                                |  |      |          |      |  |  |          |  
|                                |  |      | 344,428  |      |  |  | 370,214  |  
|Less accumulated depreciation   |  |      | (183,765 | )    |  |  | (163,288 | )
|                                |  |      |          |      |  |  |          |  
|                                |  |      | 160,663  |      |  |  | 206,926  |  
|                                |  |      |          |      |  |  |          |  

8. Goodwill and Other Intangible Assets

Goodwill and other intangible assets consisted of the following at
December 31:

|                                                    |  |      |           |      |  |  |           |  
|--------------------------------------------------- |  | ---- | --------- | ---- |  |  | --------- | -
|                                                    |  | 2002 |           | 2001
|                                                    |  |      |           |     
|Goodwill, net                                       |  |      | 3,197,305 |      |  |  | 9,176,513 |  
|Customer lists, net                                 |  |      | 3,145,207 |      |  |  | 3,466,585 |  
|Brand name, net                                     |  |      | 1,296,643 |      |  |  | 1,410,317 |  
|Other intangible assets                             |  |      |           |      |  |  |           |  
|Agents network                                      |  |      | 5,682     |      |  |  | 5,682     |  
|Franchisee network                                  |  |      | 161,024   |      |  |  | 161,024   |  
|Trademarks                                          |  |      | 265,585   |      |  |  | 271,418   |  
|Software costs                                      |  |      | 87,132    |      |  |  | 78,214    |  
|Database                                            |  |      | 18,729    |      |  |  | 18,729    |  
|Patents and licenses                                |  |      | 483,324   |      |  |  | 489,297   |  
|Software costs for projects in process and advances |  |      | 19,310    |      |  |  | 9,710     |  
|Other intangible assets                             |  |      | 61,943    |      |  |  | 75,582    |  
|                                                    |  |      |           |      |  |  |           |  
|                                                    |  |      | 1,102,729 |      |  |  | 1,109,656 |  
|Less accumulated amortization                       |  |      | (387,694  | )    |  |  | (307,663  | )
|                                                    |  |      |           |      |  |  |           |  
|Total other intangible assets, net                  |  |      | 715,035   |      |  |  | 801,993   |  
|                                                    |  |      |           |      |  |  |           |  
|Total intangible assets, net                        |  |      | 5,156,885 |      |  |  | 5,678,895 |  
|                                                    |  |      |           |      |  |  |           |  

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

Over the next five successive years the amortization of intangibles by asset
class is expected to be the following:

|     |  |               |         |            |  |                   |         |  |  |  |         | 
|---- |  | ------------- | ------- | ---------- |  | ----------------- | ------- |  |  |  | ------- | 
|     |  | Customer List |         | Brand Name |  | Other Intangibles
|     |  |               |         |            |  |                  
|2003 |  |               | 320,766 |            |  |                   | 105,977 |  |  |  | 131,452 | 
|2004 |  |               | 320,766 |            |  |                   | 105,977 |  |  |  | 123,883 | 
|2005 |  |               | 320,766 |            |  |                   | 105,977 |  |  |  | 102,391 | 
|2006 |  |               | 320,766 |            |  |                   | 105,977 |  |  |  | 75,741  | 
|2007 |  |               | 320,766 |            |  |                   | 105,977 |  |  |  | 75,741  | 

In June 2001, the FASB issued SFAS 142 effective for fiscal years
beginning after December 15, 2001. SFAS 142 changed the accounting for
goodwill from an amortization method to an impairment-only approach based on
the supposition that goodwill is not a wasting asset that requires periodic
cost allocation. Thus, amortization of goodwill, including goodwill recorded
in past business combinations and amortization of intangibles with an
indefinite life, ceased upon adoption of SFAS 142.

SFAS 142 was adopted by the Company as of January 1, 2002 (except for
acquisitions made subsequent to June 20, 2002), and required that goodwill no
longer be amortized. As a result, a significant portion of the Companys total
intangibles, essentially related to goodwill, ceased allocating costs to the
statement of operations on a periodic basis. Total amortization expense was 
552,522,  1,727,216 and 589,277 in 2002, 2001 and 2000, respectively.
Accumulated amortization of goodwill and intangible assets was  2,534,431 and
 2,030,400 at December 31, 2002 and 2001, respectively.

The Companys 2001 and 2000 results of operations do not reflect the
provisions of SFAS 142. Had the Group adopted SFAS 142 as of January 1, 2000,
the net loss and basic and diluted net loss per ordinary share and savings
share would have been the adjusted pro forma amounts indicated below:

|                                                  |  |      |            |      |  |  |             |  
|------------------------------------------------- |  | ---- | ---------- | ---- |  |  | ----------- | -
|                                                  |  | 2001 |            | 2000
|                                                  |  |      |            |     
|Net loss for the year                             |  |      | (4,502,274 | )    |  |  | (10,886,364 | )
|Net loss adjustment for amortization of goodwill  |  |      | 1,301,415  |      |  |  | 519,226     |  
|Adjusted net loss                                 |  |      | (3,200,859 | )    |  |  | (10,367,139 | )
|Reported Basic and Diluted EPS per Ordinary Share |  |      | (0.40      | )    |  |  | (1.68       | )
|Reported Basic and Diluted EPS per Saving Share   |  |      | (0.40      | )    |  |  | (1.67       | )
|Adjusted Basic and Diluted EPS per Ordinary Share |  |      | (0.29      | )    |  |  | (1.60       | )
|Adjusted Basic and Diluted EPS per Saving Share   |  |      | (0.29      | )    |  |  | (1.59       | )

The Company completed the SFAS 142 transitional impairment test before
June 30, 2002 and concluded that there was no impairment of goodwill at that
time, as the fair value of its reporting unit exceeded their carrying amounts
as of January 1, 2002. Therefore, the second step of the transitional
impairment test required under SFAS 142 was not necessary.

As required under SFAS 142, the Company performed its annual impairment
test of goodwill at the end of 2002 at the reporting unit level. At December
31, 2002, the fair value of the reporting units within the Directories,
Directory Assistance and Business Information segments were derived based on an
assessment of recent trading multiples for other similar assets. This approach
was used as, given the intent of Seats parent company, Telecom Italia, to sell
their interest in these assets, the use of multiples for recent transactions
for

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

similar assets was considered more indicative of fair value than a
discounted cash flow analysis. The remaining businesses were valued based on a
combination of both multiples and the discounted cash flow method, with
impairments identified at the reporting unit level. The Company identified that
the fair value of the reporting units implied goodwill, after performing a
hypothetical purchase price allocation, including intangibles, was 5,969,126
less than the carrying value, of which 638,190 related to businesses that are
not expected to be spun-off as described in Note 22.

A summary of the changes in the Companys goodwill during the year ended
December 31, 2002, by business segment is as follows:

|                             |  |             |            |            |  |             |        |          |  |            |          |                   |  |              |          |          |  |  |        |  |  |  |         |   |  |  |        |  |  |  |            |  
|---------------------------- |  | ----------- | ---------- | ---------- |  | ----------- | ------ | -------- |  | ---------- | -------- | ----------------- |  | ------------ | -------- | -------- |  |  | ------ |  |  |  | ------- | - |  |  | ------ |  |  |  | ---------- | -
|                             |  |             |            |            |  | Directories |        |          |  |            |          | Office Products & |  | Professional |          | Business |  |  |        |  |  |  |         |  
|                             |  | Directories |            | Assistance |  | Internet    |        | Services |  | Publishing |          | Information       |  | Television   |          | Total   
|                             |  |             |            |            |  |             |        |          |  |            |          |                   |  |              |          |         
|Balance at December
31, 2001 |  |             | 7,872,350  |            |  |             | 28,872 |          |  |            | 593,227  |                   |  |              | 416,428  |          |  |  | 28,378 |  |  |  | 167,605 |   |  |  | 69,653 |  |  |  | 9,176,513  |  
|Impairment charges           |  |             | (5,330,936 | )          |  |             |       |          |  |            | (479,623 | )                 |  |              | (138,511 | )        |  |  |        |  |  |  | (20,056 | ) |  |  |        |  |  |  | (5,969,126 | )
|Other                        |  |             | (10,522    | )          |  |             | (3,840 | )        |  |            | (6,830   | )                 |  |              |          |          |  |  | 53     |  |  |  | 11,057  |   |  |  |        |  |  |  | (10,082    | )
|                             |  |             |            |            |  |             |        |          |  |            |          |                   |  |              |          |          |  |  |        |  |  |  |         |   |  |  |        |  |  |  |            |  
|Balance at December
31, 2002 |  |             | 2,530,892  |            |  |             | 25,032 |          |  |            | 106,774  |                   |  |              | 277,917  |          |  |  | 28,431 |  |  |  | 158,606 |   |  |  | 69,653 |  |  |  | 3,197,305  |  
|                             |  |             |            |            |  |             |        |          |  |            |          |                   |  |              |          |          |  |  |        |  |  |  |         |   |  |  |        |  |  |  |            |  

9. Investments in Affiliated Companies

The Company has numerous investments in unconsolidated affiliates as follows as
of December 31:

|                                |  |        |  |           |         |                |  |  |        |  |        | 
|------------------------------- |  | ------ |  | --------- | ------- | -------------- |  |  | ------ |  | ------ | 
|2002                            |  | Method |  | Ownership |         | Carrying Value
|                                |  |        |  |           |         |               
|ICOM Inc.                       |  | Equity |  |           | 40.00   | %              |  |  | 6,951  | 
|TIGLIO I S.r.l                  |  | Cost   |  |           | 2.10    | %              |  |  | 10,613 | 
|TWICE SIM S.p.A                 |  | Cost   |  |           | 18.64   | %              |  |  | 1,694  | 
|Listing Service
Solutions, Inc. |  | Cost   |  |           | 2.00    | %              |  |  | 1,672  | 
|Other                           |  | Equity |  |           | Various |                |  |  | 1,478  | 
|Other                           |  | Cost   |  |           | Various |                |  |  | 785    | 
|                                |  |        |  |           |         |                |  |  |        |  |        | 
|                                |  |        |  |           |         |                |  |  |        |  | 23,193 | 
|                                |  |        |  |           |         |                |  |  |        |  |        | 

|                           |  |        |  |           |       |                |       |  |        |  |        | 
|-------------------------- |  | ------ |  | --------- | ----- | -------------- | ----- |  | ------ |  | ------ | 
|2001                       |  | Method |  | Ownership |       | Carrying Value
|                           |  |        |  |           |       |               
|Mondus Limited             |  | Equity |  |           | 46.44 | %              |       |  | 18,000 | 
|Icom inc                   |  | Equity |  |           | 40.00 | %              |       |  | 15,073 | 
|Roncadin Restaurants S.p.a |  | Equity |  |           | 25.00 | %              |       |  | 2,100  | 
|Twice Sim S.p.a            |  | Cost   |  |           | 18.64 | %              |       |  | 2,427  | 
|Other                      |  | Equity |  | Various   |       |                | 4,734 | 
|Other                      |  | Cost   |  | Various   |       |                | 7,153 | 
|                           |  |        |  |           |       |                |       |  |        |  |        | 
|                           |  |        |  |           |       |                |       |  |        |  | 49,487 | 
|                           |  |        |  |           |       |                |       |  |        |  |        | 

A buyback agreement was entered on March 15, 2002, whereby Mondus Ltd.
acquired SEATs equity investment, equivalent to 46.4%, in Mondus Ltd. The
agreement also provides for the transfer to SEAT of the 10% stake in the share
capital that Mondus Ltd. holds in the company Giallo Market S.r.l. The carry
value of the investment as of December 31, 2001 has been written down to 
18,000 reflecting the estimated fair value of consideration to be received
under the agreement of
 19,100 less  1,000 of related transaction costs

The Companys equity in net losses of its equity affiliates was  26,168,
 81,747 and  26,123 in 2002, 2001 and 2000, respectively. At December 31,
2002 2001 and 2000, the amount of consolidated

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

accumulated deficit representing net losses of equity affiliates
approximated  (107,915),  (107,870) and  (20,266).

The Company has certain equity investments for which its recorded share of
losses exceed its equity in the underlying net assets, and for which the
Company has committed to contribute such excess to the related affiliate. The
net accrual representing such excess losses is included in accrued expenses and
other current liabilities (see Note 13). The above disclosures include the
results of all equity affiliates of the Company. For investments recorded at
cost, a fair value cannot be estimated at December 31, 2002 as none of these
investments are publicly traded securities.

10. Short-term Bank Borrowings

At December 31, 2002 and 2001, respectively, the Company had unsecured
short-term lines of credit with banks, including bank overdraft facilities,
providing borrowings up to approximately  85,070 and  73,381 of which 
48,923 and  68,497 was advanced. The lines of credit bear various rates of
interest, including both fixed and variable interest rates. At December 31,
2002 and 2001, the weighted-average interest rate was approximately 3.80% and
5.15% per annum, respectively. Amounts outstanding under these lines of credit
are payable upon demand.

11. Long-term Debt

Long-term debt consisted of the following at December 31:

|                                                                                                                                                                      |  |      |           |      |  |  |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  |  | --------- | -
|                                                                                                                                                                      |  | 2002 |           | 2001
|                                                                                                                                                                      |  |      |           |     
|Floating rate notes due July 1, 2003, bearing interest at
variable rate of 3 month Euribor plus 0.70% (4.133% and
5.070% at December 31, 2002 and 2001, respectively) |  |      | 700,000   |      |  |  | 700,000   |  
|Fixed rate notes due July 1, 2005, bearing interest at 6.5%                                                                                                           |  |      | 303,040   |      |  |  | 303,734   |  
|Senior subordinated notes due October 15, 2009, bearing
interest at 12.125%                                                                                           |  |      | 119,995   |      |  |  | 125,906   |  
|Zero coupon notes through October 15, 2004, bearing
interest at 15.50% thereafter through maturity of October
15, 2010                                                |  |      | 9,889     |      |  |  | 101,498   |  
|Floating rate notes due September 30, 2008, bearing
interest at 3 month Libor plus 0.60% (7.71% at December
31, 2001)                                                 |  |      |          |      |  |  | 14,370    |  
|Floating rate long term loan due October 16, 2005, bearing
interest at 3 month Euribor plus 0.50% (3.933% and 4.206%
at December 31, 2002 and 2001, respectively)     |  |      | 3,099     |      |  |  | 5,371     |  
|Secured borrowing in relation to Tiglio real estate project                                                                                                           |  |      | 47,591    |      |  |  |          |  
|Others                                                                                                                                                                |  |      | 8,574     |      |  |  | 8,104     |  
|                                                                                                                                                                      |  |      |           |      |  |  |           |  
|                                                                                                                                                                      |  |      | 1,192,188 |      |  |  | 1,258,983 |  
|Less current portion                                                                                                                                                  |  |      | (709,386  | )    |  |  | (18,519   | )
|                                                                                                                                                                      |  |      |           |      |  |  |           |  
|                                                                                                                                                                      |  |      | 482,802   |      |  |  | 1,240,464 |  
|                                                                                                                                                                      |  |      |           |      |  |  |           |  

The maturities of long-term debt over the next five years as of December
31, 2002 are as follows:

|                  |  |  |           | 
|----------------- |  |  | --------- | 
|Year ended:       |  |  |           | 
|December 31, 2003 |  |  | 709,386   | 
|December 31, 2004 |  |  | 6,408     | 
|December 31, 2005 |  |  | 309,216   | 
|December 31, 2006 |  |  | 3,905     | 
|December 31, 2007 |  |  | 3,798     | 
|Thereafter        |  |  | 159,475   | 
|                  |  |  |           | 
|                  |  |  | 1,192,188 | 
|                  |  |  |           | 

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

The floating and fixed rate notes (collectively, the Notes) were
originally issued by SEAT New and were outstanding at the date of acquisition
by the Company. The carrying amount of the fixed rate notes was adjusted to
fair value at acquisition and the related discount of  1,650 from the
principal balance of  300,000 is being amortized over the remaining term of
the Notes. As of December 31, 2000 the unamortized balance of the discount was
 1,477. Remaining unamortized debt issuance costs at the date of acquisition
were fully written off as part of the purchase price allocation. The Notes
represent unsecured obligations of the Company and are listed on the Luxembourg
Stock Exchange. Interest payments on the variable rate notes are due quarterly
each January 1, April 1, July 1 and October 1. Interest payments on the fixed
rate notes are due annually each July 1. Upon adoption of SFAS 133 on January
1, 2001, the debt was marked to fair market value. The difference between book
value and fair value of  6,514 was recorded as a liability and is being
amortized over the life of the debt. The balance of the fair value adjustment
at December 31, 2002 and 2001 was  3,908 and  5,211, respectively.

The senior subordinated notes represent obligations of TDL which was
acquired by the Company in December 2000. The notes have a nominal value of £
70,000, which is equivalent to  107,609 at December 31, 2002. These notes were
adjusted to fair value as part of the Companys purchase price allocation
during 2000. The resulting premium of  16,435 is being amortized over the
life of the notes of which  1,869 and  1,869 was amortized during 2002 and
2001. The senior subordinated notes require semi-annual interest payments each
April 15 and October 15. £ 69,250 ( 106,457 at December 31, 2002) of the
senior subordinated notes are registered in the United States under the US
Securities Act of 1933, as amended. The notes may be repaid in advance
beginning in 2004 at a price equal to 106.0625% of their nominal value.

The zero coupon notes represent obligations of TDL, which was acquired by
the Company in December 2000. The notes have a nominal value of $ 13,150, which
is equivalent to  13,785 at December 31, 2002 and were originally issued at
47.366% of their nominal value. These notes were adjusted to fair value as part
of the Companys purchase price allocation during 2000. The resulting discount
of  7,292 is being amortized over the remaining life of the notes, of which 
964 was amortized during 2002. The notes are zero coupon notes through October
15, 2004, at which time they convert to interest bearing at an annual rate of
15.50%. Subsequent to October 15, 2004, the notes require semi-annual interest
payments each April 15 and October 15.

The floating rate notes due through September 30, 2008 require principal
and interest payments each March 31, June 30, September 30, December 31, with
the interest rate adjusted quarterly.

The Company has a number of interest rate swap and collar agreements,
which partially modify the interest rate characteristics of the Notes and
partially limit the Companys exposure to variable interest rate risks by
providing an interest rate cap and floor. With respect to the  700,000
variable rate notes, the Company has an interest rate swap with a notional
amount of  700,000 and a maturity of July 1, 2003 under which the Company
receives 3 month Euribor plus 0.70% and pays 3 month Euribor plus 0.017%.
Additionally, the Company has an interest rate collar with a notional amount of
 700,000 and a maturity of July 1, 2003 under which the Companys pays the
difference between 5.8% and EURIBOR if the EURIBOR is below 3.99%. It receives
the difference between EURIBOR and 5.8% if EURIBOR exceeds 5.8%.

The Company has entered into a transaction under which it has sold

approximately 48,553 of real estate assets to a special purpose entity called
Tiglio and then leased the assets back under a 6 year by
6 year lease. A portion of this
transaction did not qualify for sale leaseback accounting under SFAS 98,
Accounting for Sale-Leaseback Transactions; therefore, the real estate assets
have not been deconsolidated and the future lease payments are considered debt.
The Company received approximately 53,064 in cash from Tiglio offset by its
purchase of 2% of Tiglio for 10,613 and its loan to Tiglio of 2,663. The
debt will be paid back over the life of the lease term.

With respect to the fixed rate notes, the Company has two interest rate
swaps with a combined notional amount of  200,000 and a maturity of July 1,
2005 under which the Company receives 6.5% and pays 3 month Euribor plus 1.07%.
The Company has an
additional interest rate swap with a notional amount of  100,000 and a
maturity of July 1, 2005 under which the Company receives 6.5% and pays 3 month
Euribor plus 1.11%.

F -27



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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

Additionally, the Company has two
interest rate swap with a combined notional amount of  300,000 and a maturity
of July 1, 2005, under which the Company receives Euribor flat and pays fixed
rates of 5.255% and 5.1575% respectively.

The fair value of the interest rate swap and collar agreements at the date
of the Companys acquisition in 2000 of SEAT New of  7,592 has been recorded
as other non-current assets and is being amortized over the contractual terms
of each such agreement through December 31, 2000. Total amortization of  816
was recorded as additional interest expense during 2000. As of January 1,
2001, the Company adopted SFAS 133, as described in the companys accounting
policies related to derivative financial information. The difference between
the carrying value and the fair value of the interest rates swaps and collars
at the date of adoption was recorded as a charge to other comprehensive income
of  6,885, net of  3,873 tax and is being amortized over the life of the
related derivative instrument. The gross fair value of these swaps and collars
at December 31, 2002 and 2001 is recorded in either other non-current assets or
other non-current liabilities, with the change in fair value of
 10,967 and
17,756 for the year ended December 31, 2002 and 2001, respectively, recorded
in other income.

12. Income Taxes

For the four months ended April 30, 2000 the Company was not a separate
legal entity. The results of the business were included in the tax returns of
other legal entities within the Telecom Italia group. The Company generated
substantial tax losses from inception through May 1, 2000, and accordingly, the
resulting
net deferred tax asset was fully reserved, and no tax benefit was
recognized in the accompanying financial statements. The tax effect and related
disclosures of separate legal entities within the Company during these periods
was not material, and therefore the disclosures below only reflect those
related to the period from May 1, 2000. The net deferred tax asset derived from
the difference between the carrying value and tax bases of the assets and
liabilities of the unincorporated business as of May 1, 2000 was fully reserved
at the date of legal formation of the Company. No tax losses generated by the
unincorporated business through the date of legal formation were contributed to
Tin.it.

The Companys income tax benefit consisted of the following for the year
ended December 31:

|                            |                  |  |         |         |      |  |         |         |   |  |         |         |  
|--------------------------- | ---------------- |  | ------- | ------- | ---- |  | ------- | ------- | - |  | ------- | ------- | -
|                            |                  |  | 2002    |         | 2001 |  | 2000   
|                            |                  |  |         |         |      |  |        
|Provision for income taxes: |                  |  |         |         |      |  |         |         |   |  |         |        
|                            | Current expense  |  |         | (40,258 | )    |  |         | (47,511 | ) |  |         | (16,971 | )
|                            | Deferred benefit |  |         | 309,250 |      |  |         | 292,817 |   |  |         | 175,306 |  
|                            |                  |  |         |         |      |  |         |         |   |  |         |        
|Total income tax benefit    |                  |  | 268,992 |         |      |  | 245,306 |         |   |  | 158,335 |        
|                            |                  |  |         |         |      |  |         |         |   |  |         |        

The reconciliation between the Italian statutory tax rate and the
effective consolidated tax rate for the year ended December 31 is as follows:

|                                                                     |                                                       |  |            |         |      |  |            |         |   |  |            |         |  
|-------------------------------------------------------------------- | ----------------------------------------------------- |  | ---------- | ------- | ---- |  | ---------- | ------- | - |  | ---------- | ------- | -
|                                                                     |                                                       |  | 2002       |         | 2001 |  | 2000      
|                                                                     |                                                       |  |            |         |      |  |           
|Tax benefit at the Italian statutory rate of 40,25% in 2002 and 2001 |                                                       |  | 2,532,831  |         |      |  | 1,938,509  |         |   |  | 4,557,975  |        
|Effects of different tax rates:                                      |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                                     | Tax benefit of reduced tax rate on disposal of assets |  |            |        |      |  |            |        |   |  |            | 1,112   |  
|                                                                     | Tax rate impact of dual income tax provision          |  |            |        |      |  |            | (1,076  | ) |  |            | (1,681  | )
|Increase in valuation allowance                                      |                                                       |  | (77,295    | )       |      |  | (174,490   | )       |   |  | (9,872     | )      
|Goodwill amortization and write-down                                 |                                                       |  | (2,278,943 | )       |      |  | (1,453,581 | )       |   |  | (4,425,023 | )      
|Non-taxable stock compensation benefit                               |                                                       |  | 13,678     |         |      |  | 3,131      |         |   |  | 2,050      |        
|Effects of different tax rates for foreign subsidiaries              |                                                       |  | (4,622     | )       |      |  | (5,816     | )       |   |  |           |        
|Other Non-deductible expenses:                                       |                                                       |  |            |         |      |  |            |         |   |  |            |        
|                                                                     | For IRPEG                                             |  |            | (95     | )    |  |            | (18,011 | ) |  |            | (6,087  | )
|                                                                     | For IRAP (primarily payroll and interest expense)     |  |            | (30,826 | )    |  |            | (51,020 | ) |  |            | (13,758 | )
|Change in tax rate                                                   |                                                       |  | 114,264    |         |      |  |           |         |   |  | 53,619     |        
|Other                                                                |                                                       |  |           |         |      |  | 7,660      |         |   |  |           |        
|                                                                     |                                                       |  |            |         |      |  |            |         |   |  |            |        
|Income tax benefit                                                   |                                                       |  | 268,992    |         |      |  | 245,306    |         |   |  | 158,335    |        
|                                                                     |                                                       |  |            |         |      |  |            |         |   |  |            |        
|Effective tax rate                                                   |                                                       |  | 4.27       | %       |      |  | 5.09       | %       |   |  | 1.43       | %      

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SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

The Italian statutory tax rate for 2002 and 2001 was 40.25% consisting of
a 36% national corporate income tax rate (IRPEG) and a 4.25% Regional Tax on
Productive Activities (IRAP). A new tax law was enacted in December 2002
that will have the effect of reducing the IRPEG tax rate from 36% to 34% from
January 1, 2003.

Principal items comprising the deferred income tax assets (liabilities) as
of December 31 were as follows:

|                                |                                         |  |            |            |      |  |            |            |  
|------------------------------- | --------------------------------------- |  | ---------- | ---------- | ---- |  | ---------- | ---------- | -
|                                |                                         |  | 2002       |            | 2001
|                                |                                         |  |            |            |     
|Deferred tax assets:            |                                         |  |            |            |      |  |            |           
|                                | Allowance for doubtful accounts         |  |            | 37,164     |      |  |            | 39,299     |  
|                                | Accrual for contractual and other risks |  |            | 10,954     |      |  |            | 8,298      |  
|                                | Accrual for commercial risks            |  |            | 5,444      |      |  |            | 7,630      |  
|                                | Provision for losses of subsidiaries    |  |            | 60,686     |      |  |            | 67,150     |  
|                                | Net operating loss carryforwards        |  |            | 304,176    |      |  |            | 191,895    |  
|                                | Financial instruments                   |  |            | 3,233      |      |  |            | 31,797     |  
|                                | Other                                   |  |            | 21,666     |      |  |            | 25,801     |  
|                                |                                         |  |            |            |      |  |            |           
|Total gross deferred tax assets |                                         |  | 443,323    |            |      |  | 371,870    |           
|Valuation allowance             |                                         |  | (277,061   | )          |      |  | (192,747   | )         
|                                |                                         |  |            |            |      |  |            |           
|                                |                                         |  | 166,262    |            |      |  | 179,123    |           
|Deferred tax liabilities:       |                                         |  |            |            |      |  |            |           
|                                | Gain on disposal of assets              |  |            |           |      |  |            | (5,373     | )
|                                | Intangible assets                       |  |            | (1,929,304 | )    |  |            | (2,228,008 | )
|                                | Property plant and equipment            |  |            | (3,024     | )    |  |            | (319       | )
|                                | Unearned stock option compensation      |  |            |           |      |  |            | (7,751     | )
|                                | Other                                   |  |            | 7,750      |      |  |            | (7,293     | )
|                                |                                         |  |            |            |      |  |            |           
|                                |                                         |  | (1,924,578 | )          |      |  | (2,248,744 | )         
|                                |                                         |  |            |            |      |  |            |           
|Net deferred tax liability      |                                         |  | (1,758,316 | )          |      |  | (2,069,621 | )         
|                                |                                         |  |            |            |      |  |            |           
|Deferred income tax assets      |                                         |  | 126,526    |            |      |  | 127,305    |           
|Deferred income tax liabilities |                                         |  | (1,884,842 | )          |      |  | (2,196,926 | )         
|                                |                                         |  |            |            |      |  |            |            |  
|Net deferred tax liability      |                                         |  | (1,758,316 | )          |      |  | (2,069,621 | )         
|                                |                                         |  |            |            |      |  |            |           

The valuation allowance at December 31, 2002 and 2001, relates to net
operating loss carryforwards of approximately  917,870 and  518,215,
respectively, and other temporary differences related to the operations of
subsidiaries acquired during 2002 and 2001, the recovery of which is not
considered more likely than not. The valuation allowance of 277,061 was
provided against net operating loss carry forwards pertaining to Italian and
foreign subsidiaries. The net operating loss carry forwards relating to
Italian subsidiaries of approximately  721,520 of which approximately  34,152
expires in 2003,  42,110 in 2004,  46,056 in 2005,  166,428 in 2006, 
345,813 in 2007 and  86,961 with an unlimited expiration. In addition, the
operating loss net carry forwards pertaining to foreign subsidiaries
aggregating approximately  93,365.

In addition to the NOLs that have been provided for described above, at
December 31, 2002, the Company has net operating loss carry forwards in Italy
aggregating approximately  102,985 of which approximately  1,524 expires in
2004,  1,771 in 2005,  1,512 in 2006,  74,288 in 2007 and  23,890 with an
unlimited expiration. No valuation allowance has been provided for in regards
to these NOLs as the Company considers them more likely than not to be
recoverable.

13. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following
at December 31:

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

|                                                                                            |  |      |         |      |  |  |         | 
|------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                                                                                            |  | 2002 |         | 2001
|                                                                                            |  |      |         |     
|Accrual for commercial risks for publication errors                                         |  |      | 15,925  |      |  |  | 19,023  | 
|Accrual for losses in equity investments in excess of equity in
net assets of such entities |  |      | 7,556   |      |  |  | 23,461  | 
|Withholdings and accruals for social security contributions                                 |  |      | 16,206  |      |  |  | 15,812  | 
|Accrued payroll                                                                             |  |      | 49,594  |      |  |  | 41,671  | 
|Withheld payroll taxes and other taxes payable                                              |  |      | 28,425  |      |  |  | 45,805  | 
|Subscribed share capital not paid                                                           |  |      |        |      |  |  | 41,990  | 
|Purchase liabilities under put and call options and deferred
compensation                   |  |      | 35,549  |      |  |  | 38,028  | 
|Advances from customers                                                                     |  |      | 21,592  |      |  |  | 21,867  | 
|Accrual for interest expense                                                                |  |      | 18,964  |      |  |  | 13,787  | 
|Other accrued expenses and current liabilities                                              |  |      | 8,462   |      |  |  | 48,233  | 
|                                                                                            |  |      |         |      |  |  |         | 
|                                                                                            |  |      | 202,273 |      |  |  | 309,677 | 
|                                                                                            |  |      |         |      |  |  |         | 

The accrual for losses in equity investments in excess of equity in net
assets of such entities is comprised of the following as of December 31, (see
Note 9):

|           |  |           |        |                |        |   |        |  
|---------- |  | --------- | ------ | -------------- | ------ | - | ------ | -
|2002       |  | Ownership |        | Carrying Value
|           |  |           |        |               
|SCS        |  |           | 100.00 | %              |        |   | (1,291 | )
|Emax Trade |  |           | 100.00 | %              |        |   | (2,396 | )
|Others     |  | Various   |        |                | (3,869 | )
|           |  |           |        |                |        |   |        |  
|           |  |           |        |                |        |   | (7,556 | )
|           |  |           |        |                |        |   |        |  

|            |  |           |       |                |         |   |         |  
|----------- |  | --------- | ----- | -------------- | ------- | - | ------- | -
|2001        |  | Ownership |       | Carrying Value
|            |  |           |       |               
|Viasat      |  |           | 50.00 | %              |         |   | (5,865  | )
|TDL Belgium |  |           | 49.60 | %              |         |   | (5,114  | )
|Others      |  | Various   |       |                | (12,482 | )
|            |  |           |       |                |         |   |         |  
|            |  |           |       |                |         |   | (23,461 | )
|            |  |           |       |                |         |   |         |  

14. Employee Benefit Plans

Termination Indemnities

The liability for termination indemnities relates to the employees of the
Companys Italian operations. In accordance with Italian severance pay
statutes, an employee benefit is accrued for service to date and is payable
immediately upon separation. The termination indemnity liability is calculated
in accordance with local civil and labor laws based on each employees length
of service, employment category and remuneration. The termination liability is
adjusted annually by a cost-of-living index provided by the Italian Government.
There is no vesting period or funding requirement associated with the
liability. The liability recorded in the balance sheet is the amount that the
employee would be entitled to, immediately upon separation. The related charge
to earnings was  11,156,  10,901 and  2,775 for the years ended December 31,
2002, 2001 and 2000, respectively.

Pension Plan

As described in Note 4, during December 2000, the Company acquired 99.6%
of TDL. A wholly owned subsidiary of TDL sponsors a contributory defined
benefit pension plan covering substantially all employees of the related
subsidiary. Benefits under the plan are based on participants years of
service and level of compensation.

As of December 31, 2002 and 2001, the funded status and amounts recognized
in the consolidated balance sheet for the plan were as follows:

|                             |  |                   |         |                   |  |  |         |  
|---------------------------- |  | ----------------- | ------- | ----------------- |  |  | ------- | -
|                             |  | December 31, 2002 |         | December 31, 2001
|                             |  |                   |         |                  
|Projected benefit obligation |  |                   | (57,324 | )                 |  |  | (53,918 | )
|Fair value of plan assets    |  |                   | 34,271  |                   |  |  | 44,311  |  
|                             |  |                   |         |                   |  |  |         |  
|Pension (liability) asset    |  |                   | (23,053 | )                 |  |  | (9,607  | )
|                             |  |                   |         |                   |  |  |         |  

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

The changes in the projected benefit obligation for the year ended
December 31, 2002 and 2001 were as follows:

|                                          |  |                   |        |                   |  |  |        |  
|----------------------------------------- |  | ----------------- | ------ | ----------------- |  |  | ------ | -
|                                          |  | December 31, 2002 |        | December 31, 2001
|                                          |  |                   |        |                  
|Benefit obligation at beginning of period |  |                   | 53,919 |                   |  |  | 47,453 |  
|Service cost                              |  |                   | 3,480  |                   |  |  | 3,556  |  
|Interest cost                             |  |                   | 2,925  |                   |  |  | 2,800  |  
|Contributions by plan participants        |  |                   | 1,341  |                   |  |  | 1,298  |  
|Foreign currency exchange rate changes    |  |                   | (3,481 | )                 |  |  | 1,216  |  
|Actuarial gain                            |  |                   | 447    |                   |  |  | (942   | )
|Benefits paid                             |  |                   | (1,307 | )                 |  |  | (1,463 | )
|                                          |  |                   |        |                   |  |  |        |  
|Benefit obligation at end of period       |  |                   | 57,324 |                   |  |  | 53,918 |  
|                                          |  |                   |        |                   |  |  |        |  

The changes in the fair value of the plan assets for the year ended
December 31, 2002 and 2001 were as follows:

|                                                 |  |                   |        |                   |  |  |        |  
|------------------------------------------------ |  | ----------------- | ------ | ----------------- |  |  | ------ | -
|                                                 |  | December 31, 2002 |        | December 31, 2001
|                                                 |  |                   |        |                  
|Fair value of plan assets at beginning of period |  |                   | 44,310 |                   |  |  | 48,793 |  
|Actual return on plan assets                     |  |                   | (8,656 | )                 |  |  | (5,569 | )
|Contributions by plan participants               |  |                   | 2,785  |                   |  |  | 1,298  |  
|Foreign currency exchange rate changes           |  |                   | (2,861 | )                 |  |  | 1,252  |  
|Benefits paid                                    |  |                   | (1,307 | )                 |  |  | (1,463 | )
|                                                 |  |                   |        |                   |  |  |        |  
|Fair value of plan assets at end of period       |  |                   | 34,271 |                   |  |  | 44,311 |  
|                                                 |  |                   |        |                   |  |  |        |  

The funded status of the plan for the year ended December 31, 2002 and
2001 is as follows:

|                                                            |  |                   |         |                   |  |  |        |  
|----------------------------------------------------------- |  | ----------------- | ------- | ----------------- |  |  | ------ | -
|                                                            |  | December 31, 2002 |         | December 31, 2001
|                                                            |  |                   |         |                  
|Funded status                                               |  |                   | (23,053 | )                 |  |  | (9,607 | )
|Unrecognized actuarial loss                                 |  |                   | 22,366  |                   |  |  | 11,236 |  
|                                                            |  |                   |         |                   |  |  |        |  
|Pension balance                                             |  |                   | (687    | )                 |  |  | 1,629  |  
|Provision for shortfall against accrued benefit obligations |  |                   | (17,454 | )                 |  |  | (5,267 | )
|                                                            |  |                   |         |                   |  |  |        |  
|Net pension liability at end of period                      |  |                   | (18,141 | )                 |  |  | (3,638 | )
|                                                            |  |                   |         |                   |  |  |        |  

The net periodic cost for the year ended December 31, 2002 and 2001 is as
follows:

|                               |  |                   |        |                   |  |  |        |  
|------------------------------ |  | ----------------- | ------ | ----------------- |  |  | ------ | -
|                               |  | December 31, 2002 |        | December 31, 2001
|                               |  |                   |        |                  
|Service cost                   |  |                   | 3,480  |                   |  |  | 3,556  |  
|Interest cost                  |  |                   | 2,925  |                   |  |  | 2,800  |  
|Expected return on plan assets |  |                   | (3,142 | )                 |  |  | (3,754 | )
|Net amortization               |  |                   | 390    |                   |  |  | 2,602  |  
|                               |  |                   |        |                   |  |  |        |  
|Net periodic cost              |  |                   | 3,653  |                   |  |  | 2,602  |  
|                               |  |                   |        |                   |  |  |        |  

F-31



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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

The net pension liability is included in other non-current liability in
the accompanying consolidated balance sheet at December 31, 2002 and 2001.
Assumptions used to determine pension obligation for the defined benefit plan
were:

|                         |  |                   |     |                   |  |  |     |  
|------------------------ |  | ----------------- | --- | ----------------- |  |  | --- | -
|                         |  | December 31, 2002 |     | December 31, 2001
|                         |  |                   |     |                  
|Discount rate            |  |                   | 5.6 | %                 |  |  | 5.8 | %
|Rate of return on assets |  |                   | 7.6 | %                 |  |  | 7.6 | %
|Salary growth            |  |                   | 3.8 | %                 |  |  | 4.5 | %

15. Other Non-Current Liabilities

Other non-current liabilities consisted of the following at December 31:

|                                             |  |      |         |      |  |  |         | 
|-------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                                             |  | 2002 |         | 2001
|                                             |  |      |         |     
|Accrual for contractual and other risks      |  |      | 113,327 |      |  |  | 57,553  | 
|Termination indemnities for sale agents      |  |      | 17,526  |      |  |  | 15,898  | 
|Substitute tax on gain on disposal of assets |  |      | 4,490   |      |  |  | 11,974  | 
|Derivatives liability                        |  |      | 29,056  |      |  |  | 38,295  | 
|Other                                        |  |      | 22,227  |      |  |  | 21,721  | 
|                                             |  |      |         |      |  |  |         | 
|                                             |  |      | 186,626 |      |  |  | 145,441 | 
|                                             |  |      |         |      |  |  |         | 

16. Shareholders Equity

Reverse
Acquisition: -As described in Notes 1and 4, the acquisition of
Tin.it by SEAT in 2000 has been accounted for as a reverse acquisition of SEAT
by Tin.it. In accordance with reverse acquisition accounting, the
5,091,326,196 ordinary shares of SEAT issued in the reverse acquisition have
been treated as if they were outstanding for all periods presented.

Ordinary Shares: -The share capital of the Company is stated at 0.03 per
share and as of December 31, 2002 and 2001 was fully paid in. During 2001, the
Company converted the par value of its ordinary shares from Lit. 50 per share
to 0.03 per share during Italys conversion to the Euro. This conversion had
no effect on total equity. The shareholders of the ordinary shares have voting
rights.

Savings
Shares: -The share capital of such shares was stated at 0.03 per
share and as of December 31, 2002 and 2001 was fully paid in. During 2001, the
Company converted the par value of its ordinary shares from Lit. 50 per share
to 0.03 per share during Italys conversion to the Euro. The shareholders of
the savings shares do not have voting rights. In accordance with Italian law
and the Companys by-laws such shares have the following characteristics: (i)
they are preferred in the distribution of dividends up to 5 percent of the
nominal value of all shares issued; (ii) thereafter they must be allocated
dividends of an amount being at least two percent higher than the par value in
comparison to dividends allocated to ordinary shares; (iii) if dividends cannot
be distributed as described in (i) and (ii) in any fiscal year, the unpaid
amount accrues to the following two fiscal years; (iv) they have the same
rights as other shares in the distribution of reserves; (v) should a capital
reduction become necessary due to losses, the nominal value of the savings
shares is reduced by an amount equal to the amount of the loss exceeding the
nominal value of all the other shares; and (vi) in the liquidation of assets
they rank prior to other categories of shares for the full nominal value.

During December 2000, the Company initiated a public offer in Italy for
the conversion of its savings shares into ordinary shares. The public offer
was initiated on December 6, 2000 and ended December 21, 2000. Holders of
savings shares were required to pay 1,723.3 lire ( 0.89) per share and were
allowed to convert savings shares to ordinary shares on a one-for-one basis.
At December 31, 2000, the Company had received proceeds of  1,119,977, net of
2,423 issuance costs, which have been classified as additional paid in capital
in shareholders equity. On January 2, 2001 the Company issued 1,261,108,452
ordinary shares and an equal number of savings shares were cancelled. As of
December 31, 2002, the company had a total of 187,689,368 of savings shares
outstanding.

F-32



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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

Italian law requires that 5% of a companys net income be retained as a
legal reserve, until such reserve equals 20% of share capital. Included in
retained earnings are legal reserves of 30,059 and 30,059 at December 31,
2002 and 2001, respectively, pertaining to the groups Italian companies. This
reserve is not available for distribution.

Stock options

1999 Stock Option Plan

The Company grants stock options to employees under a Stock Option Plan
and accounts for these stock option grants in accordance with APB Opinion No.
25, Accounting for Stock Issued to Employees. Accordingly, the Company, (i)
recognizes compensation expense over the period the employee performs the
service measured by the difference between the fair value of the shares on the
measurement date and the stock option exercise price and (ii) records the sum
of the compensation accrued in addition to the cash paid by the employees as
consideration for the stock issued in connection with the exercise of the stock
option.

Prior to the Transaction (as defined in Note 1), no stock options were
granted by the Company; however, SEAT New had previously granted stock options
to employees, a portion of which were unexercised at the date of the
Transaction. Even though SEAT New is considered the acquiree for accounting
purposes, as it was the legal acquiror, the outstanding options existing at the
date of the Transaction continue to be outstanding subsequent to the
Transaction. As discussed in Note 4, the fair value of outstanding options
issued by SEAT New prior to the Transaction have been included in the
determination of its purchase price. For unvested options outstanding at the
effective date of the Transaction, the excess of the quoted market price of the
underlying shares over the option price at the date of acquisition of 56,123
has been recorded as unearned compensation and is being amortized to
compensation expense over the remaining service period.

The following table summarizes the 1999 Plan stock option activity:

|                                                 |  |              |            |                |  |                  |             |  |  |          |      | 
|------------------------------------------------ |  | ------------ | ---------- | -------------- |  | ---------------- | ----------- |  |  | -------- | ---- | 
|                                                 |  |              |            |                |  |                  |             |  |  | Weighted
|                                                 |  | Shares under |            | Exercise Price |  | Average Exercise
|                                                 |  | options      |            | Range          |  | Price           
|                                                 |  |              |            |                |  |                 
|Options outstanding upon acquisition of SEAT New |  |              | 28,114,596 |                |  |                  | 0.03  3.53 |  |  |          | 0.19 | 
|Granted                                          |  |              |           |                |  |                  |            |  |  |          |     | 
|Exercised                                        |  |              | (1,577,664 | )              |  |                  | 0.03        |  |  |          | 0.03 | 
|Forfeited                                        |  |              |           |                |  |                  |            |  |  |          |     | 
|Conversion of savings to ordinary shares         |  |              | (2,211,411 | )              |  |                  | 0.03  3.53 |  |  |          | 0.17 | 
|                                                 |  |              |            |                |  |                  |             |  |  |          |      | 
|Balance at December 31, 2000                     |  |              | 24,325,521 |                |  |                  | 0.26  3.53 |  |  |          | 0.20 | 
|Granted                                          |  |              |           |                |  |                  |            |  |  |          |     | 
|Exercised                                        |  |              | (5,246,835 | )              |  |                  | 0.03        |  |  |          | 0.03 | 
|Forfeited                                        |  |              | (2,386,032 | )              |  |                  | 0.03  3.53 |  |  |          | 1.87 | 
|                                                 |  |              |            |                |  |                  |             |  |  |          |      | 
|Balance at December 31, 2001                     |  |              | 16,692,654 |                |  |                  | 0.03        |  |  |          | 0.03 | 
|Granted                                          |  |              |           |                |  |                  |            |  |  |          |     | 
|Exercised                                        |  |              |           |                |  |                  |            |  |  |          |     | 
|Forfeited                                        |  |              | (5,967,522 | )              |  |                  | 0.03        |  |  |          | 0.03 | 
|                                                 |  |              |            |                |  |                  |             |  |  |          |      | 
|Balance at December 31, 2002                     |  |              | 10,725,132 |                |  |                  | 0.03        |  |  |          | 0.03 | 
|                                                 |  |              |            |                |  |                  |             |  |  |          |      | 

Under the terms of the Companys incentive stock option plan, certain key
employees identified by the Board of Directors and executive management are
eligible to participate in the plan. Options granted under the plan have an
exercise price determined by the Board of Directors and executive management in
accordance with the plan. The duration of the plan is five years. Options
granted under the plan vest only upon the achievement of certain financial
objectives as established by the Board of Directors and executive management,
and the date for final subscription and payment is established at the
discretion of the Board of Directors. As the vesting of the options is
dependent on the achievement of defined financial objectives, the plan is
considered to be variable. Accordingly, changes in the quoted market price of
the underlying stock from the grant date to the date at which the final number
of shares to be granted is determined is recorded as an adjustment to
compensation expense over the related service period.

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

The net effect of the amortization of unearned compensation recorded at
the date of acquisition of SEAT New and changes in the quoted market price from
the acquisition date, resulted in the recognition  2,236,  7,307 and  166 of
compensation expense in the Companys statement of operations for the year
ended December 31, 2002, 2001 and 2000 respectively.

The Company initially granted employees the option to subscribe to 26
ordinary shares and 10 savings shares per option. In conjunction with the
Companys conversion of savings into ordinary shares, the Company resolved to
convert options for savings shares into ordinary shares at a ratio of 7
ordinary shares for each 10 savings shares.

As of December 31, 2002, no granted options were vested and exercisable.
Options for 29,995,881 ordinary shares were available for future grant under
the plan at December 31, 2002.

|                                 |  |                     |            |                  |  |                  |  |             |      |                  |  |  |   |  |  |  |   |  |  | 
|-------------------------------- |  | ------------------- | ---------- | ---------------- |  | ---------------- |  | ----------- | ---- | ---------------- |  |  | - |  |  |  | - |  |  | 
|Shares under Options Outstanding |  | Options Exercisable
|                                 |  |                    
|                                 |  |                     |            |                  |  | Weighted-Average |  |             |      |                  |  |  |   |  |  |  |   | 
|Exercise                         |  | Number              |            | Remaining        |  | Weighted-Average |  | Number      |      | Weighted-Average
|Price                            |  | Outstanding         |            | Contractual Life |  | Exercise Price   |  | Exercisable |      | Exercise Price  
|                                 |  |                     |            |                  |  |                  |  |             |      |                 
|0.03                             |  |                     | 10,725,132 |                  |  | 0.3 years        |  |             | 0.03 |                  |  |  |  |  |  |  |  | 

SFAS 123, Accounting for Stock-Based Compensationrequires that when APB
Opinion 25 is applied in computing compensation cost of stock based
compensation that pro forma information as to net income and earnings per share
be presented as if the Company had accounted for its employee stock based
compensation in accordance with SFAS 123.

The fair value of each stock option granted was estimated on the date of
acquisition of SEAT New using the Black Scholes option pricing model with the
following weighted average assumptions:

|                         |  |      |       |  
|------------------------ |  | ---- | ----- | -
|Employee stock options   |  | 2000
|                         |  |     
|Expected life of options |  | 1.66 | years
|Risk free interest rate  |  |      | 5.14  | %
|Volatility               |  |      | .88   |  
|Dividend yield           |  |      | 0.02  | %

The weighted average estimated fair value of options outstanding at date
of acquisition of SEAT New amounted to  2.73.

2001 Stock Option Plan

In January 2001, the Company approved the 2001 Stock Option Plan (2001
Plan) authorizing the issuance of stock options up to 127,000,000 ordinary
shares to certain employees of the Company. The 2001 Plan provides for the
allocation of options in three annual installments following attainment of
Company and personal objectives according to the guidelines as defined in the
2001 Plan. The exercise price of stock options granted under the 2001 Plan
will approximate the fair market value on the grant date. The 2001 Plan
expires on December 31, 2008.

The following table summarizes stock option activity:

|                             |  |              |             |                |  |                  |      |  |  |          |      | 
|---------------------------- |  | ------------ | ----------- | -------------- |  | ---------------- | ---- |  |  | -------- | ---- | 
|                             |  |              |             |                |  |                  |      |  |  | Weighted
|                             |  | Shares under |             | Exercise Price |  | Average Exercise
|                             |  | Options      |             | Range          |  | Price           
|                             |  |              |             |                |  |                 
|Balance at December 31, 2000 |  |              |            |                |  |                  |     |  |  |          |     | 
|                             |  |              |             |                |  |                  |      |  |  |          |      | 
|Granted                      |  |              | 97,056,926  |                |  |                  | 1.22 |  |  |          | 1.22 | 
|Exercised                    |  |              |            |                |  |                  |     |  |  |          |     | 
|Forfeited                    |  |              | (32,052,927 | )              |  |                  | 1.22 |  |  |          | 1.22 | 
|                             |  |              |             |                |  |                  |      |  |  |          |      | 

F-34



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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro,
unless otherwise indicated)

|                             |  |              |             |                |  |                  |      |  |  |          |      | 
|---------------------------- |  | ------------ | ----------- | -------------- |  | ---------------- | ---- |  |  | -------- | ---- | 
|                             |  |              |             |                |  |                  |      |  |  | Weighted
|                             |  | Shares under |             | Exercise Price |  | Average Exercise
|                             |  | Options      |             | Range          |  | Price           
|                             |  |              |             |                |  |                 
|Balance at December 31, 2001 |  |              | 65,003,999  |                |  |                  | 1.22 |  |  |          | 1.22 | 
|                             |  |              |             |                |  |                  |      |  |  |          |      | 
|Granted                      |  |              |            |                |  |                  |      |  |  |          |      | 
|Exercised                    |  |              |            |                |  |                  |      |  |  |          |      | 
|Forfeited                    |  |              | (20,334,023 | )              |  |                  | 1.22 |  |  |          | 1.22 | 
|                             |  |              |             |                |  |                  |      |  |  |          |      | 
|Balance at December 31, 2002 |  |              | 44,669,976  |                |  |                  | 1.22 |  |  |          | 1.22 | 
|                             |  |              |             |                |  |                  |      |  |  |          |      | 

No compensation expense was recognized during 2002 or 2001 for options
granted related to the 2001 Plan as the Companys stock price was below the
exercise price at December 31, 2001.

As of December 31, 2002, options granted which were vested and exercisable
were 32,456,451 ordinary shares. Options for 82,330,034 ordinary shares were
available for future grant under the plan at December 31, 2002. The
weighted-average remaining contractual life was 3.8 years at December 31, 2002.

The fair value of each stock option granted was estimated on the grant
date using the Black Scholes option pricing model with the following weighted
average assumptions:

|                         |  |         |      |  
|------------------------ |  | ------- | ---- | -
|Employee stock options   |  | 2001   
|                         |  |        
|Expected life of options |  | 2 years
|Risk free interest rate  |  |         | 4.60 | %
|Volatility               |  |         | .84  |  
|Dividend yield           |  |         | 0.00 | %

The weighted average estimated fair value of options granted during 2001
amounted to  0.55.

Top Plan and Key People Stock Option Plans

The Board of Directors on May 17, 2002 approved the implementation of two
new stock option plans, offered to directors and employees who hold key
positions in the group due to their particular responsibility and/or skills.

The Top Plan and the Key People Plan provide for the allocation of options
in three annual installments. The exercise price of stock options granted
under the new Plans will approximate the fair market value on the grant date.
Both plans expire on May 31, 2008.

All the options of the aforementioned new stock option plans are
exercisable at a price of Euro 0.8532 (equal to the market value of the share
at the date of May 17, 2002).

The Top Plan resulted in the allocation of 1,500,000 options, reserved for
the Managing Director of the Company, of which on May 17, 2002 the Board of
Directors resolved to increase the share capital by payment at a maximum par
value of Euro 45,000.00, by the issue of maximum 1,500,000 ordinary shares with
a par value of Euro 0.03 each, cum coupon.

The following table summarizes stock option activity:

|                             |  |              |           |                |  |                  |      |  |  |          |      | 
|---------------------------- |  | ------------ | --------- | -------------- |  | ---------------- | ---- |  |  | -------- | ---- | 
|                             |  |              |           |                |  |                  |      |  |  | Weighted
|                             |  | Shares under |           | Exercise Price |  | Average Exercise
|                             |  | options      |           | Range          |  | Price           
|                             |  |              |           |                |  |                 
|Balance at December 31, 2001 |  |              |          |                |  |                  |     |  |  |          |     | 
|Granted                      |  |              | 1,500,000 |                |  |                  | 0.85 |  |  |          | 0.85 | 
|Exercised                    |  |              |          |                |  |                  |     |  |  |          |     | 
|Forfeited                    |  |              |          |                |  |                  |     |  |  |          |     | 
|                             |  |              |           |                |  |                  |      |  |  |          |      | 
|Balance at December 31, 2002 |  |              | 1,500,000 |                |  |                  | 0.85 |  |  |          | 0.85 | 
|                             |  |              |           |                |  |                  |      |  |  |          |      | 

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

No compensation expense was recognized during 2002 for options granted
related to the Top Plan as the Companys stock price was below the exercise
price at December 31, 2002.

The Key People Plan on the other hand led to the allocation of 46,400,000
options, of which 2,500,000 reserved for B Beneficiaries and 43,900,000
reserved for C Beneficiaries.

The following table summarizes stock option activity:

|                             |  |              |            |                |  |                  |      |  |  |          |      | 
|---------------------------- |  | ------------ | ---------- | -------------- |  | ---------------- | ---- |  |  | -------- | ---- | 
|                             |  |              |            |                |  |                  |      |  |  | Weighted
|                             |  | Shares under |            | Exercise Price |  | Average Exercise
|                             |  | options      |            | Range          |  | Price           
|                             |  |              |            |                |  |                 
|Balance
at December 31, 2001 |  |              |            |                |  |                  |      |  |  |          |      | 
|Granted                      |  |              | 46,400,000 |                |  |                  | 0.85 |  |  |          | 0.85 | 
|Exercised                    |  |              |           |                |  |                  |     |  |  |          |     | 
|Forfeited                    |  |              |           |                |  |                  |     |  |  |          |     | 
|                             |  |              |            |                |  |                  |      |  |  |          |      | 
|Balance at December 31, 2002 |  |              | 46,400,000 |                |  |                  | 0.85 |  |  |          | 0.85 | 
|                             |  |              |            |                |  |                  |      |  |  |          |      | 

No compensation expense was recognized during 2002 for options granted
related to the Key People Plan as the Companys stock price was below the
exercise price at December 31, 2002.

The fair value of each stock option granted under the two new plans was
estimated on the grant date using the Cox-Ross-Rubenstein option pricing model
with the following weighted average assumptions:

|                         |  |      |      |      
|------------------------ |  | ---- | ---- | -----
|Employee stock options   |  | 2002
|                         |  |     
|Expected life of options |  |      | 2.96 | years
|Risk free interest rate  |  |      | 4.74 | %    
|Volatility               |  |      | .51  |      
|Dividend yield           |  |      | 0.00 | %    

The weighted average estimated fair value of options granted during 2002
amounted to  0.46.

Prior to 2002, the Group had used the Black-Scholes option pricing model
to estimate the fair value of stock options granted to employees. Starting in
2002, the Group revisited the use of the Black-Scholes option-pricing model and
concluded that certain other option-pricing models, in particular binomial
models, were better adapted to capturing the complexity of the fair value of
these options. Therefore, effective January 1, 2002, the Group adopted the
Cox-Ross-Rubenstein (CRR) binomial model for estimating the fair value of
employee stock options. The CRR model uses a binomial tree to assess the
probabilities that the price of the underlying stock might follow over the life
of the option.

In contrast to the Black-Scholes model, the CRR model takes into account
possible future stock prices at specified times between the grant date and the
option maturity. An additional strength of the CRR model is that it is
specifically designed to value options that can be exercised at any time (so
called American options), as opposed to those that can only be exercised at
the end of their maturity (so called European options). The CRR model also
has the flexibility to incorporate assumptions related to the payment level of
future dividends. The CRR model was designed for these types of options,
therefore it provides more useful fair value information.

The Black Scholes option valuation model, which was by Seat used prior to
2002, was developed for use in estimating the fair value of traded options,
which have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because of the Companys
employee stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in managements opinion the existing
models do not necessarily provide a reliable single measure of the fair value
of the employee stock options. For purposes of pro forma disclosures, the
estimated fair value of the options is amortized over the service period, which
approximates the vesting period.

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

Telegate Stock Option Plan

As described in Note 4, during November 2000, the Company acquired 51.37%
of Telegate GmbH and the remaining 48.63% in April 2001. Telegate AG, a
majority owned subsidiary of Telegate GmbH had, at the date of each
acquisition, 200,000 shares of its common stock reserved under its 1999 stock
option plan. Under the terms of the plan, options are awarded to selected
executives and other key employees at exercise prices not less than the fair
market value of the common stock at the date of grant. The stock options vest
over a two year period, contingent upon increases in the quoted share price of
Telegate AG compared to various industry indices. As the vesting of the
options is dependent on the achievement of defined objectives, the plan is
considered to be variable. Accordingly, changes in the quoted market
price of the underlying stock from the acquisition date to the date at which
the final number of shares to be granted is recorded as an adjustment to
compensation expense over the related service period.

The following table summarizes stock option activity:

|                                 |  |               |         |                  |  |  |       | 
|-------------------------------- |  | ------------- | ------- | ---------------- |  |  | ----- | 
|                                 |  | Shares        |         | Weighted Average
|                                 |  | under options |         | Exercise Price  
|                                 |  |               |         |                 
|Outstanding at December 31, 2000 |  |               | 26,875  |                  |  |  | 55.36 | 
|Granted                          |  |               | 9,640   |                  |  |  | 69.33 | 
|Exercised                        |  |               |        |                  |  |  |      | 
|Forfeited                        |  |               | (1,690  | )                |  |  | 92.03 | 
|                                 |  |               |         |                  |  |  |       | 
|Outstanding at December 31, 2001 |  |               | 34,825  |                  |  |  | 57.45 | 
|                                 |  |               |         |                  |  |  |       | 
|Granted                          |  |               | 36,110  |                  |  |  | 2.62  | 
|Exercised                        |  |               | (18,055 | )                |  |  | 56.29 | 
|Forfeited                        |  |               | (13,045 | )                |  |  | 59.38 | 
|                                 |  |               |         |                  |  |  |       | 
|Outstanding at December 31, 2002 |  |               | 39,835  |                  |  |  | 5.89  | 
|                                 |  |               |         |                  |  |  |       | 

At December 31, 2001, there are no stock options exercisable. The
following table summarizes the related stock options outstanding at December
31, 2002.

|                    |  |                     |        |                  |  |                  |  |             |        |                  |  |  |   |  |  |  |   |  |  | 
|------------------- |  | ------------------- | ------ | ---------------- |  | ---------------- |  | ----------- | ------ | ---------------- |  |  | - |  |  |  | - |  |  | 
|Options Outstanding |  | Options Exercisable
|                    |  |                    
|                    |  |                     |        |                  |  | Weighted-Average |  |             |        |                  |  |  |   |  |  |  |   | 
|Exercise            |  | Number              |        | Remaining        |  | Weighted-Average |  | Number      |        | Weighted-Average
|Price               |  | Outstanding         |        | Contractual Life |  | Exercise Price   |  | Exercisable |        | Exercise Price  
|                    |  |                     |        |                  |  |                  |  |             |        |                 
|27.00               |  |                     | 2,990  |                  |  | 0.3 years        |  |             | 27.00  |                  |  |  |  |  |  |  |  | 
|114.22              |  |                     | 185    |                  |  | 1.4 years        |  |             | 114.22 |                  |  |  |  |  |  |  |  | 
|69.33               |  |                     | 550    |                  |  | 2.2 years        |  |             | 69.33  |                  |  |  |  |  |  |  |  | 
|2.62                |  |                     | 36,110 |                  |  | 3.6 years        |  |             | 2.62   |                  |  |  |  |  |  |  |  | 

The fair value of each stock option were estimated on the grant dates
using the Black Scholes option pricing model with the following weighted
average assumptions:

|                         |  |      |       |       |  |  |      |      
|------------------------ |  | ---- | ----- | ----- |  |  | ---- | -----
|Employee stock options   |  | 2002 |       | 2001 
|                         |  |      |       |      
|Expected life of options |  |      | 2.25  | years |  |  | 2.25 | years
|Risk free interest rate  |  |      | 4.5   | %     |  |  | 4.5  | %    
|Volatility               |  |      | 123.4 | %     |  |  | 95.5 | %    
|Dividend yield           |  |      |      |       |  |  |     |      

The weighted average estimated fair value of options granted during the
years ended December 31, 2002 and 2001 were 1.51 and 19.62, respectively

17. Net loss per share

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

The following table sets forth the computation of basic and diluted loss
per share:

|                   |                                                                                       |                                    |       |          |            |         |       |          |         |         |       |          |            |         |       |     |         |   |       |       |             |   |       |     |          |  
|------------------ | ------------------------------------------------------------------------------------- | ---------------------------------- | ----- | -------- | ---------- | ------- | ----- | -------- | ------- | ------- | ----- | -------- | ---------- | ------- | ----- | --- | ------- | - | ----- | ----- | ----------- | - | ----- | --- | -------- | -
|                   |                                                                                       |                                    |       | 2002     |            | 2001    |       | 2000    
|                   |                                                                                       |                                    |       |          |            |         |       |         
|                   |                                                                                       |                                    |       | Ordinary |            | Savings |       | Ordinary |         | Savings |       | Ordinary |            | Savings
|                   |                                                                                       |                                    |       |          |            |         |       |          |         |         |       |          |            |        
|Numerator:         |                                                                                       |                                    |       |          |            |         |       |          |         |         |       |          |            |         |       |     |         |   |       |       |             |   |       |    
|                   |                                                                                       | Numerator for
basic
loss per
share |       |          | (5,860,530 | )       |       |          | (98,099 | )       |       |          | (4,424,464 | )       |       |     | (77,810 | ) |       |       | (10,281,878 | ) |       |     | (604,486 | )
|Denominator:       |                                                                                       |                                    |       |          |            |         |       |          |         |         |       |          |            |         |       |     |         |   |       |       |             |   |       |    
|                   | Denominator for
basic and diluted
loss per share 
weighted average
shares (millions) |                                    |       | 11,185   |            |         |       | 188      |         |         |       | 11,001   |            |         |       | 194 |         |   |       | 6,135 |             |   |       | 361 |         
|Net loss per share |                                                                                       |                                    | (0.52 | )        |            |         | (0.52 | )        |         |         | (0.40 | )        |            |         | (0.40 | )   |         |   | (1.68 | )     |             |   | (1.67 | )  

In computing diluted loss per share, 103,295,108, 81,696,653 and
24,325,521 ordinary share equivalents for performance stock options were
excluded for the year ended December 31, 2002, 2001 and 2000, respectively,
from the diluted loss per share computation because their effect would have
been anti-dilutive.

18. Related parties transactions

Transactions with related companies are as follows:

|                            |  |      |        |      |  |      |        |  |  |  |         | 
|--------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------- | 
|                            |  | 2002 |        | 2001 |  | 2000
|                            |  |      |        |      |  |     
|Revenues:                   |  |      |        |      |  |      |        |  |  |  |         | 
|Sales and services revenues |  |      | 93,881 |      |  |      | 80,395 |  |  |  | 165,042 | 
|Interest income             |  |      | 11,799 |      |  |      | 27,280 |  |  |  | 1,047   | 
|Costs and expenses:         |  |      |        |      |  |      |        |  |  |  |         | 
|Costs of external services  |  |      | 84,488 |      |  |      | 95,286 |  |  |  | 191,152 | 
|Other operating expenses    |  |      | 5,982  |      |  |      | 173    |  |  |  | 841     | 

|                                            |  |              |         |              |  |  |         | 
|------------------------------------------- |  | ------------ | ------- | ------------ |  |  | ------- | 
|                                            |  | December 31, |         | December 31,
|                                            |  | 2002         |         | 2001        
|                                            |  |              |         |             
|Assets:                                     |  |              |         |              |  |  |         | 
|Accounts receivable: parent company         |  |              | 571,321 |              |  |  | 471,307 | 
|Accounts receivable: affiliated companies   |  |              | 11,455  |              |  |  | 20,332  | 
|                                            |  |              |         |              |  |  |         | 
|Total Assets                                |  |              | 582,776 |              |  |  | 491,639 | 
|                                            |  |              |         |              |  |  |         | 
|Liabilities:                                |  |              |         |              |  |  |         | 
|Accounts payable: parent company            |  |              | 50,517  |              |  |  | 60,169  | 
|Accounts payable: affiliated companies      |  |              | 8,312   |              |  |  | 19,802  | 
|Short-term borrowings: affiliated companies |  |              | 161,018 |              |  |  | 106,057 | 
|                                            |  |              |         |              |  |  |         | 
|Total liabilities                           |  |              | 219,847 |              |  |  | 186,028 | 
|                                            |  |              |         |              |  |  |         | 

During 2002 and 2001, the Company recorded revenue from parent company of
 52,248 and  58,274, respectively, for telephone traffic,  20,889 and 
18,410, respectively, for revenues generated by internet use;  2,195 and 
2,009 for advertising on yellow pages in 2002 and 2001, respectively;  9,369
for advertising on Pronto Pagine Gialle in 2002. In connection with the
legal formation of the Company, Telecom Italia contributed its ownership of the
Italian White Pages to the Company, including the assignment of its contracts
with SEAT New relating to the production of and advertising in the White Pages
in Italy. Under the terms of the contracts, prior to the acquisition of SEAT
New, the Company paid SEAT for the production and printing of the White Pages
and received advertisement royalties from SEAT New. Subsequent to the
acquisition of SEAT New, these revenues and expenses and have been eliminated
in consolidation. Prior to the acquisition of SEAT New in 2000, the Company
recorded advertising royalties from SEAT New of 106,743 and production and
printing expenses to SEAT New of  66,590.

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

Costs due to the use of Telecom Italias interbusiness network for
connection to the Internet in 2002, 2001 and 2000 were  45,943,  40,888, 
80,560, respectively. Costs related to other services provided by Telecom
Italia were  17,085 and  16,357 during 2002 and 2001, respectively: they
include costs for employees ( 4,369 in 2002), telephone subscriptions (
6,137) and rental costs ( 1,978). Costs related to other services provided
by other subsidiaries of parent company and other related parties were  21,460
and  37,994 in 2002 and 2001 respectively: they include  6,025 for services
rendered by TIM (Telecom Italia
Mobile S.p.A.),  5,591 for internet subscriptions made by Saritel, and 
2,422 for products sold by Olivetti Lexikon.

At December 31, 2002 and 2001, accounts receivable from parent company
include  529,249 and 380,600, respectively, of short-term advances to Telecom
Italia S.p.A., with due dates between seven days and six months, bearing
interest at variable rates. Furthermore the Company has trade receivables from
Telecom Italia for  42,072 and  52,699, of which  23,071 and  34,981
related to internet telephone traffic fees for 2002 and 2001 respectively.

Accounts receivable from affiliated companies at December 31, 2001
consisted primarily of short-term advances of  5,623 to Viasat S.p.A. and 
6,596 to Softe, while at December 31, 2002, they are reduced to zero because
Viasat S.p.A. has been sold.

Accounts payable to parent company at December 31, 2002 are related to
services provided by Telecom Italia to the Company for  46,219. At December
31, 2001, accounts payable to parent company are primarily related to services
provided by Telecom Italia to the Company for  59,186.

Accounts payable to affiliated companies at December 31, 2001 are
primarily related to various services provided by Saritel to Tin.it for  7,705
and by Netikos S.p.A. to Seat for  4,207, while at December 31, 2002 they are
primarily related to various services provided by Tinweb S.p.A. for 4,628 and
by Giallo Market for 3,096.

Short-term borrowing from affiliated companies at December 31, 2002
consists of credits from Telecom Italia Finance S.A. to TDL and Consodata for 
161,018. Short-term borrowing from affiliated companies at December 31, 2001
consists of a revolving credit facility from Sogerim, a wholly owned subsidiary
of Telecom Italia, to TDL for  80,108 and to Consodata of  25,949.

19. Commitments and contingencies

Leases

The Company leases buildings, automobiles, and other minor fixed assets
including office equipment under various operating lease agreements.
Commitments for minimum rentals under noncancellable operating leases for the
next five years and thereafter are as follows:

|                             |  |  |        | 
|---------------------------- |  |  | ------ | 
|2003                         |  |  | 25,577 | 
|2004                         |  |  | 23,343 | 
|2005                         |  |  | 20,485 | 
|2006                         |  |  | 17,935 | 
|2007                         |  |  | 7,169  | 
|Thereafter                   |  |  | 3,841  | 
|                             |  |  |        | 
|Total minimum lease payments |  |  | 98,350 | 
|                             |  |  |        | 

Rent expense for operating leases for the year ended December 31, 2002, 2001
and 2000 amounted to approximately 45,113, 45,664 and 4,580, respectively.

Commitments

As of December 31, 2002 and 2001 the Company has purchase commitments for
paper and distribution of directories through 2003, of approximately  118,150
and  113,453, respectively, of which approximately 

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##### Table of Contents



SEAT PAGINE GIALLE S.p.A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

63,781 and  40,399 is
expected to be expended in 2003 and 2004, respectively. Additionally, the
Company has an agreement with ILTE, under which ILTE provides printing services
to the Company for inflation indexed prices through 2003 of approximately 
104,900 of which  52,600 and  53,300 are expected to be expended in 2003 and
2004, respectively. The price terms under the printing services agreements
will be renegotiated from 2003 to 2007.

The Company also has commitments outstanding for capital expenditures
under purchase orders and contracts amounting to 8,904 at December 31, 2002,
of which 4,471 and 4,250, are expected to be expended in 2003 and 2004,
respectively.

The Company has entered into contracts for marketing and EDP services with
total future minimum payments under non-cancelable contracts with initial terms
of one year of more totaling 5,951 at December 31, 2002. Approximately 5,672
and 1,086 of the future minimum payments are due in 2003 and 2004,
respectively, with the remaining commitment due thereafter.

As of December 31, 2002, the Company has given guarantees on behalf of
affiliated companies and other third parties for their borrowings and other
obligations, of 
37,558.

During 2001, Giallo Professional Publishing (GPP), a 100% owned
subsidiary of the Company, purchased 65% of Gruppo Editoriale JCE S.p.A.
(JCE) and has entered into an agreement to acquire the remaining 35% of JCE.
The Company and JCE have corresponding put and call options based upon a
multiple of the average financial results of JCE, as defined, for the years
ended December 31, 2001, 2002 and 2003. The options are exercisable during
September 2003 and must be exercised 90 days after the approval of the JCE 2003
financial results.

During 2001, GPP also purchased 60% of Gruppo Editoriale Faenze Editrice
S.p.A. (GEFE) and has entered into an agreement to acquire the remaining 40%
of GEFE. The Company and GEFE have corresponding put and call options based
upon a multiple of the average financial results of GEFE, as defined, for the
years ended December 31, 2001, 2002 and 2003. The options are exercisable
during September 2003 and must be exercised 90 days after the approval of the
2003 GEFE financial results.

During December 2000, the Company acquired 99.6% of TDL Infomedia Ltd.
(TDL) and has an option to acquire the remaining 0.4% of TDL beginning in
2002 at a price to be determined based on a multiple of the operating results
of TDL during 2001 through 2003, up to a maximum purchase price of 120,172.
During 2002, the Company purchased 0.1% of TDL for a total of 7,417 as called
for in the aforementioned agreements and has one-third of the original 0.4%
still to purchase.

During December 2000, the Company acquired 93.465% of Databank S.p.A. The
Company provided the shareholders of the remaining 6.535% of Databank an option
to put their shares to the Company from May 2001 through May 2004, at a price
based on Databanks future operating results. The company has a corresponding
call option during this same period.

The Company entered into numerous other call options and/or put options
with companies of which it does not own 100%. These agreements may either
allow SEAT to purchase additional shares or require SEAT to purchase additional
shares based upon a pre-determined formula. The exercise of these agreements
may be dependent upon events that are outside of the control of the Company and
the seller. Some of these agreements include pre-determined floor and/or
ceilings for the price that SEAT would pay. The final price for these
additional shares, if the options are exercised, cannot be determined as of
December 31, 2002, though none of the individual agreements are considered
likely to be material to the Company.

Contingent liabilities

The Company is involved in various claims and legal actions arising in the
ordinary course of business. The Company provides for costs related to
contingencies when a loss is probable and the amount is reasonably
determinable. It is the opinion of the Companys management that the ultimate
resolution of these matters will not have a material effect on the Companys
financial position or results of operations.

F-40



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##### Table of Contents



SEAT PAGINE GIALLE S.p.A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro, unless otherwise indicated)

The Company owns 60% of Webfin S.p.A. (Webfin), which owns 66% of Matrix
S.p.A (Matrix). The Company also directly owns 0.7% of Matrix. In September
2000, the Company entered into an agreement to acquire the remaining 40% of
Webfin for  700,000 cash or shares to be paid in June 2003. Additionally, in
September 2000, the Company entered into an agreement to acquire the remaining
33.93% of Matrix through for 190,985,294 shares to be issued in June 2003. The
Company passed a resolution during 2001 not to
proceed with this acquisition, due to the excessive burden that has arisen
from the framework agreement dated September 20, 2000 with the De Agostini
Group concerning this acquisition, following the unexpected loss of value that
occurred among internet business companies. De Agostini has initiated
arbitration proceedings against SEAT, for the alleged non-fulfillment of the
framework agreement with regard to this obligation. The De Agostini Group is
asking for the specific execution of the framework agreement and therefore that
its Webfin shares should be transferred to SEAT for the amount originally
agreed of 700 million, with payment beginning in June 30, 2003, as well as the
payment of unspecified damages. Although during the period the two parties
have filed with the Board of Arbitrators several briefs, including technical
experts reports, and the preliminary hearing for the attempt to conciliation in
April 2003 has failed, the arbitration procedure is still currently in the
preliminary phase and an outcome of the case cannot be reasonable determined.
In the event of a completely negative outcome, SEAT would be required to
fulfill the obligations set forth in the contract of September 20, 2000 and
thus the acquisition of the equity investment would take place at a value
substantially higher than the current fair value.

During 2000 and 2001, SEAT has purchased 100% of Cecchi Gori
Communications S.p.A. (CGC). See discussion in Note 4Business Combinations
and Acquisitions for more information related to this acquisition. In relation
to this purchase, the former shareholders have initiated litigation against the
Company. The objective of their litigation is: to invalidate the resolution
passed in August 2000 by the Extraordinary Shareholders Meeting of CGC
amending the company bylaws; to invalidate the financial statements of CGC at
December 31, 2000 and the ensuing resolution to recapitalize CGC, pursuant to
which SEAT came to hold a 100% stake of CGC; and to invalidate or rescind a
contract by which, in August 2000, Cecchi Gori Media Holding S.r.l. pledged CGC
shares to SEAT as security. Also, on August 2, 2001, the former owners of CGC
filed for arbitration, citing the arbitration clause in the contract dated
August 7, 2000. Through this last procedure, the former owners requested
invalidation and/or rescission of the acquisition contract dated August 7, 2000
and requested an order that SEAT reimburse 75% of the share capital of CGC or a
substantial sum as compensation for damages to the former owners. SEAT, based
on the preliminary sentences of various judiciary authorities that expressed
their favorable opinion concerning the Companys premise, considers that the
risk stemming from the dispute is remote.

20. Derivative financial instruments

SEAT is exposed to foreign currency risks, interest rate risks and equity
price risks arising from fluctuations in exchange rates, interest rates and
quoted share prices. The Companys risk policy generally only takes into
account matters affecting the Companys cash flow and foreign exchange risks.
Therefore, fair value risks arising from changes in fluctuations in quoted
share prices of investments are normally not hedged. SEAT does not enter into
derivative financial instruments for trading purposes or other speculative
purposes.

The Company enters into foreign currency forward exchange contracts to
mitigate a portion of the risk related to fixed sales commitments denominated
in foreign currencies. The purpose of the Companys foreign currency risk
management activities is to protect the Company from the risk that future cash
flows resulting from transactions denominated in foreign currencies will be
adversely affected by changes in exchange rates.

As of December 31, 2002, the Company had two forward exchange contracts to
sell US dollars with a net notional amount of $ 16.5 million to protect it from
exchange rate risks related to a credit facility agreement with Telegate AG
denominated in US dollars.

As of December 31, 2002, the Company had three forward exchange contracts
to sell US dollars with a net notional amount of $ 35.5 million to protect it
from exchange rate risks related to a credit facility agreement with Telegate
Inc. denominated in US dollars.
F-41Table of ContentsSEAT PAGINE GIALLE S.p.A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001(All amounts in thousands of Euro, unless otherwise indicated)As of December 31, 2002, the Company had one forward exchange contract to
sell GB pounds with a net notional amount of $ 3.3 million to protect it from
exchange rate risks related to a credit facility agreement with Telegate Ltd.
denominated in Great British pounds.As of December 31, 2002, the Company had one forward exchange contract to
buy US dollars with a net notional amount of $ 9.2 million to protect it from
exchange rate risks related to bonds denominated in US dollars.The Company enters into interest rate swap and collar agreements as part
of the management of its interest rate exposures. Under these agreements the
Company agrees to exchange, at specified intervals, the difference between
specified interest amounts calculated on an agreed notional principal amount. A
description of the Companys interest rate swap and collar agreements as of
December 31, 2002 and 2001 is included in Note 11.The Companys accounting policies related to derivative financial
statements, the fair values of its derivatives as of December 31, 2002 and 2001
and the impact of adopting SFAS 133 are disclosed in Note 3.21. Segment informationPrior to May 1, 2000, the Company was part of Telecom Italia and was
primarily in the business of providing internet access services, internet
portal services, internet content management services, web hosting, and
e-commerce solutions in the internet market. The Company also owned the rights
to the Italian White Pages, Telecom Italias primary telephone directory.Subsequent to the acquisition of SEAT New in 2000, the Company operates
primarily in seven segments, each of which are strategic businesses that are
managed separately because each business develops, produces, and sells distinct
products and services. The segments and a description of their businesses are
as follows.Telephone Directories:-Telephone Directory publishing and advertising
represents the Companys principal revenue generating segment. The Companys
most significant products within this segment include nationally distributed
Italian Yellow Pages and White Pages directories. Additionally the Company
publishes certain Yellow Pages directories with regional coverage, national
subscriber-only directories, various industry specific directories, and
operates an operator-assisted talking Yellow Pages directory service. The
Company also holds the Italian license for a European business directory,
publishes city maps to be inserted into certain editions of the Yellow Pages,
publishes a directory of facsimile numbers in Italy, and offers certain of its
directories in electronic formats, such as CD-ROM. This segment also includes
the operations of the Companys on-line telephone directories including its
online Yellow Pages service and online White Pages service.The Company also participates in the European telephone directory
advertising and services market through shareholdings in a) TDL Infomedia,
which is the second largest directories publisher in the United Kingdom, b)
EUREDIT S.A., which publishes and distributes Europages, and c) Euro
Directory S.A., which publishes Yellow and White Pages telephone directories in
Luxembourg.Directories Assistance:- The Directories Assistance group is composed of
two main components, Telegate and Giallo Voice. Telegate and its subsidiaries
are the second largest operator of directory assistance services in Germany.
Giallo Voice and its subsidiaries operate in the directory assistance services
in Italy. They both provide operator and directory assistance services for
private and corporate customers of various telephone companies.Internet:- The Companys internet segment consists of a broad range of
Internet services including Internet access services, Internet portal services,
on-line advertising services, web-hosting, Internet content management services
and e-commerce consulting and solutions.Office Products and Services:- The Company operates in this segment
primarily through its ownership in the Buffetti group. Buffetti and its
subsidiaries distribute office products and related services throughout Italy,
through a nationwide franchised network of approximately 1,200 Bufetti and
Maggioli retail stores. The Company also sells office products and services
directly through its direct-to-business agency network,F-42Table of ContentsSEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001(All amounts in thousands of
Euro, unless otherwise indicated)independent retailers and through the
Internet. A significant portion of the products and services included in this
segment are produced by others on behalf of the Company, however, are designed
and sold under Buffettis own brand names.Professional Publishing:- The operations of this segment consist
primarily of publishing of and advertising in various specialty magazines
focused on business and economics and entertainment and leisure, among other
areas.Business Information Services:- This segment represents direct marketing
and database services consisting primarily of direct mail campaign management,
demographically tailored mailing lists, data management and enhancement, and
marketing database management.Television:-This segments represents the two over-the-air television
stations in Italy that the Company owns.Management utilizes more than one measurement and multiple views of data
to measure segment performance and to allocate resources to segments. However,
the dominant measurements are consistent with the Companys consolidated
financial statements and, accordingly, are reported on the same basis herein.
Management evaluates the performance of its segments and allocates resources to
them primarily based on actual and expected operating profitability.
Intersegment sales are generally accounted for at amounts comparable to sales
to unaffiliated customers, and are eliminated in consolidation. The accounting
policies of the segments are substantially the same as those described in the
summary of significant accounting policies, as discussed in Note 3.Certain items are maintained at the Companys corporate headquarters and
are not allocated to the segments. They primarily include the net cost of the
Companys interest expense, impairment of assets and non-operating items.
Management views interest income and expense as corporate financing costs and
not as a business segment cost. In addition, management applies one effective
tax rate such that income taxes are not reported or viewed internally on a
segment basis.

|                                          |  |             |           |            |  |          |         |          |  |            |         |              |  |            |         |       |  |       |        |   |  |  |         |   |  |  |         |   |  |  |        |   |  |  |            |  
|----------------------------------------- |  | ----------- | --------- | ---------- |  | -------- | ------- | -------- |  | ---------- | ------- | ------------ |  | ---------- | ------- | ----- |  | ----- | ------ | - |  |  | ------- | - |  |  | ------- | - |  |  | ------ | - |  |  | ---------- | -
|                                          |  |             |           |            |  |          |         |          |  |            |         |              |  | Office     |         |       |  |       |        |   |  |  |         |   |  |  |         |   |  |  |        |   |  | 
|                                          |  | Telephone   |           | Directory  |  |          |         |          |  | Products & |         | Professional |  | Business   |         |       |  |       |        |   |  |  |         |   |  | 
|                                          |  | Directories |           | Assistance |  | Internet |         | Services |  | Publishing |         | Information  |  | Television |         | Other |  | Total
|                                          |  |             |           |            |  |          |         |          |  |            |         |              |  |            |         |       |  |      
|2002                                      |  |             |           |            |  |          |         |          |  |            |         |              |  |            |         |       |  |       |        |   |  |  |         |   |  |  |         |   |  |  |        |   |  |  |            |  
|Revenues with third
parties               |  |             | 1,121,270 |            |  |          | 157,192 |          |  |            | 140,419 |              |  |            | 283,845 |       |  |       | 33,548 |   |  |  | 150,672 |   |  |  | 94,135  |   |  |  |       |   |  |  | 1,981,081  |  
|Intersegment revenues                     |  |             | 3,768     |            |  |          | 2,526   |          |  |            | 10,341  |              |  |            | 19,079  |       |  |       | 130    |   |  |  | 9,944   |   |  |  | 324     |   |  |  |       |   |  |  | 46,112     |  
|Profit (Loss) from
operations             |  |             | (14,174   | )          |  |          | (12,605 | )        |  |            | (50,084 | )            |  |            | (29,974 | )     |  |       | 3,103  |   |  |  | (40,582 | ) |  |  | (72,887 | ) |  |  | (96    | ) |  |  | (217,299   | )
|Equity in net income
(loss) of affiliates |  |             | (29,672   | )          |  |          |        |          |  |            | (1,759  | )            |  |            | (279    | )     |  |       |       |   |  |  | (7,296  | ) |  |  |        |   |  |  | 12,838 |   |  |  | (26,168    | )
|Depreciation and
amortization             |  |             | (476,782  | )          |  |          | (4,747  | )        |  |            | (43,389 | )            |  |            | (45,093 | )     |  |       | (595   | ) |  |  | (10,669 | ) |  |  | (25,991 | ) |  |  | (96    | ) |  |  | (607,362   | )
|Assets                                    |  |             | 8,706,584 |            |  |          | 80,705  |          |  |            | 238,786 |              |  |            | 763,026 |       |  |       | 47,488 |   |  |  | 237,069 |   |  |  | 474,727 |   |  |  | 45,500 |   |  |  | 10,593,884 |  
|Investments in
affiliated
companies, net  |  |             | 1,307     |            |  |          | 1,672   |          |  |            | (3,414  | )            |  |            | (700    | )     |  |       |       |   |  |  | 6,934   |   |  |  | 16      |   |  |  | 9,822  |   |  |  | 15,637     |  
|Capital expenditures                      |  |             | 27,753    |            |  |          | 4,432   |          |  |            | 18,502  |              |  |            | 6,021   |       |  |       | 252    |   |  |  | 9,224   |   |  |  | 18,387  |   |  |  |       |   |  |  | 84,571     |  

|                            |  |             |           |            |  |          |          |          |  |            |          |              |  |            |         |       |  |       |        |   |  |  |         |   |  |  |          |   |  |  |   |  |  |  |            |  
|--------------------------- |  | ----------- | --------- | ---------- |  | -------- | -------- | -------- |  | ---------- | -------- | ------------ |  | ---------- | ------- | ----- |  | ----- | ------ | - |  |  | ------- | - |  |  | -------- | - |  |  | - |  |  |  | ---------- | -
|                            |  |             |           |            |  |          |          |          |  |            |          |              |  | Office     |         |       |  |       |        |   |  |  |         |   |  |  |          |   |  |  |   |  |  | 
|                            |  | Telephone   |           | Directory  |  |          |          |          |  | Products & |          | Professional |  | Business   |         |       |  |       |        |   |  |  |         |   |  | 
|                            |  | Directories |           | Assistance |  | Internet |          | Services |  | Publishing |          | Information  |  | Television |         | Other |  | Total
|                            |  |             |           |            |  |          |          |          |  |            |          |              |  |            |         |       |  |      
|2001                        |  |             |           |            |  |          |          |          |  |            |          |              |  |            |         |       |  |       |        |   |  |  |         |   |  |  |          |   |  |  |   |  |  |  |            |  
|Revenues with third
parties |  |             | 1,088,204 |            |  |          | 172,933  |          |  |            | 151,089  |              |  |            | 262,863 |       |  |       | 33,768 |   |  |  | 123,869 |   |  |  | 64,757   |   |  |  |  |  |  |  | 1,897,483  |  
|Intersegment revenues       |  |             | 9,213     |            |  |          | 6,267    |          |  |            | 7,043    |              |  |            | 12,310  |       |  |       | 234    |   |  |  | 7,209   |   |  |  | 1,062    |   |  |  |  |  |  |  | 43,338     |  
|Loss from operations        |  |             | (963,982  | )          |  |          | (179,945 | )        |  |            | (130,197 | )            |  |            | (79,077 | )     |  |       | (14    | ) |  |  | (47,076 | ) |  |  | (103,657 | ) |  |  |  |  |  |  | (1,503,948 | )

F-43



---



##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of
Euro, unless otherwise indicated)

|                                          |  |             |            |            |  |          |          |          |  |            |         |              |  |            |         |       |  |       |        |   |  |  |         |   |  |  |         |   |  |  |        |   |  |  |            |  
|----------------------------------------- |  | ----------- | ---------- | ---------- |  | -------- | -------- | -------- |  | ---------- | ------- | ------------ |  | ---------- | ------- | ----- |  | ----- | ------ | - |  |  | ------- | - |  |  | ------- | - |  |  | ------ | - |  |  | ---------- | -
|                                          |  |             |            |            |  |          |          |          |  |            |         |              |  | Office     |         |       |  |       |        |   |  |  |         |   |  |  |         |   |  |  |        |   |  | 
|                                          |  | Telephone   |            | Directory  |  |          |          |          |  | Products & |         | Professional |  | Business   |         |       |  |       |        |   |  |  |         |   |  | 
|                                          |  | Directories |            | Assistance |  | Internet |          | Services |  | Publishing |         | Information  |  | Television |         | Other |  | Total
|                                          |  |             |            |            |  |          |          |          |  |            |         |              |  |            |         |       |  |      
|Equity in net income
(loss) of affiliates |  |             | (54,902    | )          |  |          |         |          |  |            | (12,709 | )            |  |            | (361    | )     |  |       |       |   |  |  | (1,707  | ) |  |  | (6,135  | ) |  |  | (5,933 | ) |  |  | (81,747    | )
|Depreciation and
amortization             |  |             | (1,353,147 | )          |  |          | (166,551 | )        |  |            | (58,598 | )            |  |            | (93,791 | )     |  |       | (2,933 | ) |  |  | (69,381 | ) |  |  | (50,468 | ) |  |  |       |   |  |  | (1,794,869 | )
|Assets                                    |  |             | 14,674,182 |            |  |          | 146,226  |          |  |            | 382,185 |              |  |            | 966,989 |       |  |       | 49,572 |   |  |  | 309,968 |   |  |  | 500,392 |   |  |  |       |   |  |  | 17,029,514 |  
|Investments in
affiliated
companies, net  |  |             | 23,511     |            |  |          | 1,982    |          |  |            | (9,101  | )            |  |            | 16      |       |  |       |       |   |  |  | 15,467  |   |  |  | 16      |   |  |  | (5,865 | ) |  |  | 26,026     |  
|Capital expenditures                      |  |             | 44,998     |            |  |          | 17,476   |          |  |            | 54,247  |              |  |            | 390     |       |  |       | 5,884  |   |  |  | 7,919   |   |  |  | 41,044  |   |  |  |       |   |  |  | 171,958    |  

|                                          |  |             |            |             |  |          |         |          |  |            |          |              |  |          |         |       |  |  |        |   |  |  |         |   |  |  |         |   |  |  |            |  
|----------------------------------------- |  | ----------- | ---------- | ----------- |  | -------- | ------- | -------- |  | ---------- | -------- | ------------ |  | -------- | ------- | ----- |  |  | ------ | - |  |  | ------- | - |  |  | ------- | - |  |  | ---------- | -
|                                          |  |             |            |             |  |          |         |          |  |            |          |              |  | Office   |         |       |  |  |        |   |  |  |         |   |  |  |         |   |  | 
|                                          |  | Telephone   |            | Directories |  |          |         |          |  | Products & |          | Professional |  | Business |         |       |  |  |        |   |  | 
|                                          |  | Directories |            | Assistance  |  | Internet |         | Services |  | Publishing |          | Information  |  | Other    |         | Total
|                                          |  |             |            |             |  |          |         |          |  |            |          |              |  |          |         |      
|2000                                      |  |             |            |             |  |          |         |          |  |            |          |              |  |          |         |       |  |  |        |   |  |  |         |   |  |  |         |   |  |  |            |  
|Revenues with third parties               |  |             | 402,629    |             |  |          |        |          |  |            | 122,835  |              |  |          | 66,462  |       |  |  | 2,805  |   |  |  | 12,575  |   |  |  |        |   |  |  | 607,306    |  
|Intersegment revenues                     |  |             | 4,230      |             |  |          |        |          |  |            | 3,848    |              |  |          |        |       |  |  | 80     |   |  |  | 1,878   |   |  |  |        |   |  |  | 10,036     |  
|Profit (Loss) from operations             |  |             | (418,087   | )           |  |          | (9,170  | )        |  |            | (108,638 | )            |  |          | (20,992 | )     |  |  | 753    |   |  |  | 162     |   |  |  | (7      | ) |  |  | (555,979   | )
|Equity in net income (loss) of affiliates |  |             |           |             |  |          |        |          |  |            | (17,571  | )            |  |          |        |       |  |  | (8,552 | ) |  |  |        |   |  |  |        |   |  |  | (26,123    | )
|Depreciation and amortization             |  |             | (552,354   | )           |  |          | (9,170  | )        |  |            | (26,200  | )            |  |          | (23,075 | )     |  |  | (236   | ) |  |  | (972    | ) |  |  |        |   |  |  | (612,007   | )
|Assets                                    |  |             | 18,069,079 |             |  |          | 812,776 |          |  |            | 307,101  |              |  |          | 986,273 |       |  |  | 12,398 |   |  |  | 101,164 |   |  |  | 100     |   |  |  | 20,288,891 |  
|Investments in affiliated companies, net  |  |             | (7,193     | )           |  |          |        |          |  |            | 173,618  |              |  |          |        |       |  |  |       |   |  |  |        |   |  |  | 140,803 |   |  |  | 307,228    |  
|Capital expenditures                      |  |             | 3,031      |             |  |          |        |          |  |            | 58,070   |              |  |          | 1,919   |       |  |  | 8      |   |  |  | 84      |   |  |  |        |   |  |  | 63,112     |  



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | A reconciliation of segment operating income to consolidated pretax income
is as follows:

|                                                                                                    |  |                   |            |                   |  |              |            |   |  |            |             |  
|--------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ----------------- |  | ------------ | ---------- | - |  | ---------- | ----------- | -
|                                                                                                    |  |                   |            |                   |  |              |            |   |  | Year ended
|                                                                                                    |  | Year ended        |            | Year ended        |  | December 31,
|                                                                                                    |  | December 31, 2002 |            | December 31, 2001 |  | 2000        
|                                                                                                    |  |                   |            |                   |  |             
|Pretax income                                                                                       |  |                   |            |                   |  |              |            |   |  |            |             |  
|Total operating loss from segments                                                                  |  |                   | (217,299   | )                 |  |              | (1,503,948 | ) |  |            | (555,979    | )
|Write down of impaired assets                                                                       |  |                   | (5,969,126 | )                 |  |              | (3,165,405 | ) |  |            | (10,271,669 | )
|Interest expense, net                                                                               |  |                   | (79,290    | )                 |  |              | (57,150    | ) |  |            | (198,132    | )
|Equity in net loss of affiliates                                                                    |  |                   | (26,168    | )                 |  |              | (81,747    | ) |  |            | (26,123     | )
|Other income, net                                                                                   |  |                   | 9,199      |                   |  |              | (7,921     | ) |  |            | 2,265       |  
|                                                                                                    |  |                   |            |                   |  |              |            |   |  |            |             |  
|Consolidated loss before income
taxes, minority interest and
cumulative effect of accounting
change |  |                   | (6,282,684 | )                 |  |              | (4,816,171 | ) |  |            | (11,049,638 | )
|                                                                                                    |  |                   |            |                   |  |              |            |   |  |            |             |  



| |                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | For 2000, no geographic information for revenues from external customers
is disclosed as substantially all of the Companys operating activities are
concentrated in Italy. For 2002 and 2001, revenue by geographic region is as
follows:

|                         |  |                   |           |                   |  |  |           | 
|------------------------ |  | ----------------- | --------- | ----------------- |  |  | --------- | 
|Revenue                  |  | December 31, 2002 |           | December 31, 2001
|                         |  |                   |           |                  
|                         |  |                   |           |                   |  |  |           | 
|Italy                    |  |                   | 1,574,955 |                   |  |  | 1,493,948 | 
|Other European countries |  |                   | 383,835   |                   |  |  | 387,733   | 
|Other countries          |  |                   | 22,291    |                   |  |  | 15,802    | 
|                         |  |                   |           |                   |  |  |           | 
|                         |  |                   | 1,981,081 |                   |  |  | 1,897,483 | 
|                         |  |                   |           |                   |  |  |           | 

F-44



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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of
Euro, unless otherwise indicated)

Geographic information for long-lived assets based on physical location is
as follows:

|                         |  |              |         |              |  |              |         |  |  |  |         | 
|------------------------ |  | ------------ | ------- | ------------ |  | ------------ | ------- |  |  |  | ------- | 
|                         |  | December 31, |         | December 31, |  | December 31,
|Long lived assets        |  | 2002         |         | 2001         |  | 2000        
|                         |  |              |         |              |  |             
|Italy                    |  |              | 117,551 |              |  |              | 142,752 |  |  |  | 134,809 | 
|Other European countries |  |              | 42,432  |              |  |              | 61,856  |  |  |  | 42,021  | 
|Other countries          |  |              | 675     |              |  |              | 2,318   |  |  |  |        | 
|                         |  |              |         |              |  |              |         |  |  |  |         | 
|                         |  |              | 160,663 |              |  |              | 206,926 |  |  |  | 176,830 | 
|                         |  |              |         |              |  |              |         |  |  |  |         | 

22. Subsequent events

A.

On February 12, 2003 Seat acquired 1,108,695 ordinary shares in the French
subsidiary Consodata S.A., listed on the Paris Nouveau Marché stock exchange,
after the founding shareholders exercised their option to sell, which was
extended to them under an agreement made in the original acquisition by the
preceding Seat Pagine Gialle management on July 31, 2000. This transaction,
undertaken at an agreed consideration of Euro 44 per share, for a total of
approximately 48,782, has enabled Seat to acquire a further 8.17% of the
company share capital and voting rights, thereby raising its stake in Consodata
S.A. to 98.60%.

On May 9, 2003, the Extraordinary Shareholders meeting of the Company
entered into a plan to divest its Directories, Directories Assistance and
Business Information segments from it other segments. The divested
subsidiaries are to be listed on the Italian stock exchange and renamed Seat
(New Seat). The non-divested segments, Internet, Television, Office Products
and Services and Professional Publishing will be renamed as Telecom Italia
Media.

B. (Unaudited)

On June 11, 2003 Telecom Italia and a consortium of investors formed by BC
Partners, CVC Capital Partner, Investitori Associati and Permira entered into a
sale and purchase agreement for the sale of approximately 61.5% of the share
capital of New SEAT held by Telecom Italia, the new company to be composed of
the aforementioned units. The parties agreed on a sale price of  0.598 per New
SEAT ordinary share, for a total consideration of 3,032,923,166. The buyers
will also accept the estimated Euro 708 million of debt at the closing. The
completion of the sale will be subject to the spin-off becoming effective, the
admission to listing of New SEAT that is expected to occur by the beginning of
August and the approval of the relevant Italian Antitrust Authority.

23. Valuation and Qualifying Accounts

The following table summarizes the changes in accounts receivable and
inventory allowances for each of the years ended December 31, 2002, 2001 and
2000:

|                              |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |      |   |  |         |         | 
|----------------------------- | ------------------------------------ | ------ | ------------ | -------- | ---------- | --------- | ---------- | ------------ | -------- | ------ | ------- | ------- | - |  | ---------- | ---- | - |  | ------- | ------- | 
|                              |                                      |        | Balance at   |          | Charged to |           |            |              |          |        |         |         |   |  | Balance at
|                              |                                      |        | beginning of |          | costs and  |           | Write-offs |              | Business |        | end of 
|Description                   |                                      | period |              | expenses |            | and other |            | Acquisitions |          | period
|                              |                                      |        |              |          |            |           |            |              |          |       
|Year ended December 31, 2002  |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |      |   |  |         |        
|Deducted from asset accounts: |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |      |   |  |         |        
|                              | Allowance for doubtful accounts      |        |              | 144,279  |            |           |            | 54,555       |          |        |         | (62,505 | ) |  |            | (916 | ) |  |         | 135,413 | 
|                              | Allowance for inventory
obsolescence |        |              | 3,622    |            |           |            | 1,236        |          |        |         | (463    | ) |  |            |     |   |  |         | 4,395   | 
|                              |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |      |   |  |         |        
|Total                         |                                      |        | 147,901      |          |            |           | 55,791     |              |          |        | (62,968 | )       |   |  | (916       | )    |   |  | 139,808 |        
|                              |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |      |   |  |         |        
|Year ended December 31, 2001  |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |      |   |  |         |        
|Deducted from asset accounts: |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |      |   |  |         |        

F-45



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##### Table of Contents



SEAT PAGINE GIALLE S.p.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2002 and 2001

(All amounts in thousands of Euro,unless otherwise indicated)

|                              |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |        |  |  |         |         | 
|----------------------------- | ------------------------------------ | ------ | ------------ | -------- | ---------- | --------- | ---------- | ------------ | -------- | ------ | ------- | ------- | - |  | ---------- | ------ |  |  | ------- | ------- | 
|                              |                                      |        | Balance at   |          | Charged to |           |            |              |          |        |         |         |   |  | Balance at
|                              |                                      |        | beginning of |          | costs and  |           | Write-offs |              | Business |        | end of 
|Description                   |                                      | period |              | expenses |            | and other |            | Acquisitions |          | period
|                              |                                      |        |              |          |            |           |            |              |          |       
|                              | Allowance for doubtful accounts      |        |              | 91,254   |            |           |            | 70,710       |          |        |         | (35,270 | ) |  |            | 17,585 |  |  |         | 144,279 | 
|                              | Allowance for inventory
obsolescence |        |              | 2,906    |            |           |            | 671          |          |        |         |        |   |  |            | 45     |  |  |         | 3,622   | 
|                              |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |        |  |  |         |        
|Total                         |                                      |        | 94,160       |          |            |           | 71,381     |              |          |        | (35,270 | )       |   |  | 17,630     |        |  |  | 147,901 |        
|                              |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |        |  |  |         |        
|Year ended December 31, 2000  |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |        |  |  |         |        
|Deducted from asset accounts: |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |        |  |  |         |        
|                              | Allowance for doubtful accounts      |        |              | 3,247    |            |           |            | 26,340       |          |        |         | (11,126 | ) |  |            | 72,793 |  |  |         | 91,254  | 
|                              | Allowance for inventory
obsolescence |        |              |         |            |           |            | 1,447        |          |        |         |        |   |  |            | 1,459  |  |  |         | 2,906   | 
|                              |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |        |  |  |         |        
|Total                         |                                      |        | 3,247        |          |            |           | 27,787     |              |          |        | (11,126 | )       |   |  | 74,252     |        |  |  | 94,160  |        
|                              |                                      |        |              |          |            |           |            |              |          |        |         |         |   |  |            |        |  |  |         |        

F-46