You are on page 1of 8

See page 7 for Analyst Certification and Important Disclosures

10 November 2003

BUY (1)
Mediaset (MS.MI) Medium Risk (M)
3Q03 Results On Tuesday
Rogan Angelini-Hurll +44-20-7986-3906 rogan.angelinihurll@citigroup.com
Patrick Wellington +44-20-7986-4263** patrick.wellington@citigroup.com
Edward Hill-Wood +44-20-7986-4051 edward.hillwood@citigroup.com
Roberto Odierna +39-02-864-84-714 roberto.odierna@citigroup.com
Neil Shelton (Specialist Sales) +44-20-7986-4201 neil.shelton@citigroup.com
Robert Garlick (Global Sales) +44-20-7986-3547 robert.j.garlick@citigroup.com

Year to Revenues PBT EPS EPS (Old) P/E P/E EV/ Operating EV/ Net
Dec (€m) (€m) (€) (€) Multiple Relative Revenue Margin (%) EBITDA Div (€)
2001A 2,351.1 581.0 0.35 0.35 25.2 1.75 4.6 25.0 16.0 0.2
2002A 2,316.1 562.5 0.36 0.36 24.3 1.50 4.6 24.1 16.4 0.2
2003E 2,974.0 732.0 0.35 0.33 25.3 1.88 3.6 25.6 12.0 0.2
2004E 3,093.0 805.0 0.38 0.37 23.1 2.02 3.5 26.6 11.1 0.2
2005E 3,255.0 890.0 0.42 0.41 21.0 2.07 3.3 27.5 10.2 0.3
52W Price Range: €8.84 to 6.14 Price Performance (%) Ytd -1m -3m -12m
Expected Share Price Return 13.4% Shares Outstanding 1,176.1m Absolute 25.00 8.20 13.70 28.70

Europe
Expected Dividend Yield 2.4% Market Capitalisation €10,373.2m Relative to Local 7.55 2.76 5.31 10.37
Expected Total Return 15.8% Relative to DJ STOXX 8.75 2.00 3.33 17.62
Sources: Company reports and Smith Barney estimates.

Price: EUR8.82 Target: EUR10.00 Rating: Unchanged EPS: Changed


Summary
➤ Mediaset is reporting nine-month results on Tuesday 11 November

➤ The company has recently issued on advertising trends into October, indicating a
strong third quarter and double-digit growth in October

➤ The focus is therefore likely to be primarily on the cost side — whether existing cost
control targets still apply and are achievable or whether some of the better than
expected revenues are to be reinvested

➤ Other perennial areas of interest include progress of the proposed media ownership
regulations (Gasparri law) and Albacom — we do not expect any change in view
➤ While our earnings forecasts were already towards the top-end of the range, the
company’s indications of full-year advertising progress are ahead of our expectations
and we raise our forecasts — at the earnings level by 5.6% in 2003 and 2.7% in 2004-05
➤ We continue to view Mediaset as one of our preferred free-TV plays, given its strong
operational performance and our view on its stronger long-term revenue growth
potential. Rated Buy/ Medium Risk (1M) with a €10 target price

Smith Barney is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could
affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
Opinion
Mediaset is reporting nine-month results on Tuesday 11 November after the market closes with a web conference call
at 6.30pm Central European Time. Reported revenue and operating profit growth will be skewed by the first-time full
consolidation of Telecinco. We look for the following:

➤ Revenues to have grown by 26.5% to €2,110m. There should be few surprises since the company has already
indicated the likely scale of advertising growth at both the Spanish and Italian channels. In the first nine months
the Italian channels have grown around 2% while Telecinco has seen double-digit growth. On this basis the
advertising trend has strengthened further in the third quarter relative to the second quarter.
Figure 1. Mediaset and Telecinco Advertising Growth Trends, 1Q02-3Q03E (Percentage)
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03E
Italian Channels (2.8%) (2.4%) +2.1% +6.0% 0.0% +1.4% +6.5%
Telecinco (21.4%) (0.5%) +1.1% +10.2% +28.2% (1.5%) +11.0%
Source: Company accounts and Smith Barney forecasts

➤ Operating profit to have grown by 27.9% to €527m. We expect flat margins at the Italian business and a
significant margin increase at Telecinco (mirroring the performance at the first half). Our forecasts in the first
nine-months put the company on track to at least meet its cost control targets for the year, namely between 1%-
2% growth in Italian TV costs and less than 1% growth in Telecinco costs. In the first nine months we expect
Italian cost inflation of 1.4% and flat costs at Telecinco.
➤ Reported PBT, after adjusting for the Telecinco minority of €54.7m, up some 20% against the similar period in
2002. This includes a forecast €3.9m of net financial charges, €23.3m of losses from Albacom and a Telecinco
goodwill amortisation charge of €32.4m.
Figure 2. Mediaset Nine-Month Performance, 2002-03E (Euro in Millions)
Nine-Mo 2002 Nine-Mo 2003E Change (%)
Italian business revenues 1,668.4 1,689.3 +1.3%
Telecinco revenues - 421.1
Total revenues 1,668.4 2,110.4 +26.5%
Italian business operating profit 412.2 414.8 +0.6%
Telecinco operating profit - 112.5
Total operating profit 412.2 527.3 +27.9%
Finance charges (23.1) (3.9)
Albacom (18.6) (23.3)
Other income/ (expenses) (36.2) (13.5)
Telecinco goodwill amortisation (15.0) (32.4)
PBT (reported) 331.8 454.2 +36.9%
Minority charge - (54.7)
Adjusted PBT (reported) 331.8 399.5 +20.4%
Adjusted PBT (pre goodwill amortisation and exceptionals) 383.0 445.4 +16.3%
Source: Company accounts and Smith Barney estimates.

Focus points
➤ Advertising outlook — Mediaset has already outlined its full year expectations in light of the first ten months
performance at the Italian channels. In a press release on 3 November, the company indicated that the Italian
channels had grown by 3.5% in the first ten months of the year and that, based on the indications of November, it
anticipated stronger growth than this for the full year. Two things were evident from this statement. First,
October was clearly a very strong month, growing by clear double digits. Second, the company is clearly ahead
of schedule relative to our 2% growth forecast in the full year. At Telecinco, the company hosted a meeting for
analysts in October, and on current progress the channel should see advertising growth at the 7%+ level for the
full year. Again this is ahead of our forecast of +6%. As we discuss below, ahead of 3Q03 results we are raising
our full-year forecasts to reflect increased advertising expectations at both the Italian and Spanish businesses.

Page - 2 -
➤ Cost controls — We expect the cost base in the first nine-months to be on track to meet the company’s full year
targets. Specifically the company plans to limit cost inflation in the Italian TV business to 1%-2% and at
Telecinco to below 1%. Within the Italian businesses, Mediaset anticipates personnel costs to rise by 3%, TV
amortisation to rise by 2%-2.5% (lower than previously expected due to the cheaper Champions’ League contract
in the second half) and other TV costs to decline by €10m. In the first half, Mediaset was ahead of schedule on
these targets and although the comparables are slightly more difficult in the second half, we anticipate the
company reiterating its targets. The key will be whether, with revenues growing ahead of original expectations,
the company plans to reinvest in 2004 and beyond.
➤ Potential regulatory changes — The market continues to monitor the situation with the proposed Gasparri
Media Bill, although there is little that the company can add to what is already known. The Bill has passed
through the Upper House and the Lower House, each time with amendments and is currently awaiting approval
again from the Upper House. Our view on the key proposal with regards to Mediaset is the extension of the
market place to a single integrated media market including all TV and radio advertising revenues, circulation
revenues and pay-TV subscriptions, Internet publishing, movie production and distribution, music records and
book production and distribution, a market size estimated by Mediaset at €25-27bn. Companies will be limited to
controlling 20% of this market. There are two benefits for Mediaset, in our opinion.
1 Once enacted the Bill should essentially remove the threat that Rete 4 will have to be removed from the
analogue terrestrial network (Mediaset’s ownership of three analogue terrestrial channels is in breach of
current limits). Progress on the alternative solution (namely establishing two DTT multiplexes covering
50% of the country) is progressing with one multiplex up and running (at a cost of €30m out of a budget of
€100m in 2003).
2 Mediaset should be able to expand its media activities within its domestic market. Although the draft Bill
prohibits TV companies from acquiring newspaper assets until the end of 2008, we see opportunities in the
(fragmented) radio market or, as Mediaset has indicated in the past, to act as a sales house for smaller
companies (in the same way that the Carlton sales house sells SMG’s TV airtime in the UK). This latter
opportunity would likely be high margin (since Mediaset has the infrastructure in place already to serve its
existing requirements) and, we believe, would prove attractive to those companies who may lack the critical
mass to justify their own sales house.

Changes to forecasts
In anticipation of its nine-month results, Mediaset has already indicated stronger than expected advertising growth at
both its Italian channels and Telecinco. While our forecasts had already been towards the top-end of the range, the
full-year progress suggested by Mediaset is ahead of our expectations. We are therefore raising our forecasts to
reflect 3.5% advertising growth at the Italian channels and 7.3% growth at Telecinco in 2003.

➤ Based on our nine-month forecasts, our new full year growth rates require fourth quarter growth of 7.6% at the
Italian channels (achievable given the strength already indicated in October) and just 1.9% growth at Telecinco
(against by far the most challenging comparable in 2002).
➤ We raise our total revenue forecasts by 1.2% in 2003E and by 0.6% in 2004E and 2005E. Implicitly this suggests
a slight reduction in our annual growth rates in 2004, which is explained by the tougher comparable that we now
forecast in 2003. In effect we are attributing some of the 2003 upgrade to a pull-though of revenues from 2004.
Nevertheless we still forecast 4% growth in revenues in 2004, accelerating to 5.2% in 2005.
➤ At this stage we have fed the revenue upgrade through to the profit level, although as we highlight above we will
closely monitor Mediaset’s reinvestment plans. This has the effect of raising our earnings forecasts in 2003E by
5.6% and by 2.7% in 2004-05E. We show a summary profit & loss and cash flow below.

Page - 3 -
Figure 3. Mediaset Profit & Loss Forecasts, 2001-05E (Euros in Millions)
2001A 2002A 2003E 2004E 2005E
Italian TV revenues 2,234.4 2,222.7 2,279.6 2,362.1 2,477.6
Italian Multimedia revenues 37.0 36.9 37.0 38.2 38.8
Other Italian revenues 50.3 56.5 42.4 43.6 45.0
Spanish revenues - - 615.0 649.1 693.6
Epsilon revenues 29.4 - - - -
Total revenues 2,351.1 2,316.1 2,974.0 3,093.0 3,255.0

Italian purchases, services and other 721.7 662.3 (642.2) (661.3) (690.1)
Italian personnel costs 284.5 300.2 (309.4) (320.7) (335.2)
Italian Amortisation & Depreciation 729.3 795.1 (822.5) (823.2) (840.3)
Telecinco cash costs - - (282.9) (297.1) (311.9)
Telecinco TV D&A - - (125.6) (135.0) (145.1)
Telecinco Other D&A - - (31.4) (33.8) (36.3)
Epsilon costs 28.4 - - - -
Total operating costs 1,763.9 1,757.6 (2,214.0) (2,271.0) (2,358.9)

Operating profit 587.2 558.5 760.0 822.0 896.0


Operating margin (%) 25.0% 24.1% 25.6% 26.6% 27.5%
Financing cost (14.8) (5.7) (3.9) (6.6) (3.0)
Goodwill amortisation (20.0) (20.0) (43.2) (43.2) (43.2)
Share of Albacom (34.1) (24.6) (24.1) (10.4) (3.0)
Other income/ (expenses) (145.0) (45.4) (13.5) - -
Share of Telecinco profits 44.8 34.3 - - -
PBT (reported) 418.1 497.1 675.3 761.8 846.8
PBT (pre goodwill and exceptionals) 581.0 562.5 732.0 805.0 890.0
Tax (169.6) (135.0) (263.4) (293.3) (326.0)
Minority Interests (0.1) (0.1) (59.4) (63.2) (69.5)
Net income (reported) 248.4 362.0 352.6 405.3 451.3
Net Income (pre goodwill and exceptionals) 411.3 427.4 409.3 448.5 494.5
Source: Company accounts and Smith Barney estimates

Figure 4. Mediaset Cash Flow Forecasts, 2001-05E (Euros in Millions)


2001A 2002A 2003E 2004E 2005E
Operating Profit 587.2 558.5 760.0 822.0 896.0
Amortisation & Depreciation 729.3 795.1 979.5 991.9 1,021.7
Minority Interests 184.5 56.2 (59.4) (63.2) (69.5)
Operating sources of cash 1,501.0 1,409.8 1,680.1 1,750.7 1,848.3
Disposal of assets 72.6 102.4 - - -
Gain/ (Loss) on FX (0.4) 6.9 6.6 2.0 -
Other income/ (expense) (154.3) (55.7) (80.8) (53.6) (46.2)
Non-operating sources of cash (82.1) 53.6 (74.2) (51.6) (46.2)
Interest received 26.3 15.9 9.9 8.7 10.2
Interest paid (40.7) (28.5) (20.5) (17.3) (13.2)
Net cash flow relating to servicing of debt (14.4) (12.5) (10.5) (8.6) (3.0)
Capital expenditure on television rights (776.0) (648.6) (876.0) (819.0) (860.0)
Other capital expenditure (110.5) (79.0) (102.7) (113.0) (124.3)
Tax paid (169.6) (135.0) (263.4) (293.3) (326.0)
Dividends (283.2) (247.8) (247.0) (247.0) (270.5)
Change in working capital (253.9) (141.7) (15.0) (105.0) (115.0)
Acquisitions/ investment in associates (392.6) (121.7) (306.0) - -
Other 207.7 - - - -
Uses of cash (1,778.1) (1,373.8) (1,810.1) (1,577.3) (1,695.8)
Net change in cash before financing (373.6) 77.0 (214.7) 113.2 103.2
Share issue 0.5 - - - -
Net cash (open) 125.5 (247.6) (170.6) (385.3) (272.1)
Change (373.1) 77.0 (214.7) 113.2 103.2
Net cash (close) (247.6) (170.6) (385.3) (272.1) (168.9)
Source: Company accounts and Smith Barney estimates

Page - 4 -
Investment Thesis
We rate Mediaset Buy/ Medium Risk (1M) with a target price of €10. Despite a decent run in the shares in recent
weeks, our forecast upgrade keeps multiples below the peer group average. On our new forecasts, Mediaset trades at
25.3x earnings (pre goodwill amortisation) in 2003E, dropping to 23.1x in 2004E. While admittedly high in the
context of the market and the overall sector, we see the capacity for some multiple expansion on numbers in which
we have increasing confidence.

➤ Historically Mediaset has commanded a premium valuation relative to the free-TV average and we believe that
this relationship can be returned to. The company is currently trading on a 4.5% discount to TF1, which
compares to the 15% average premium that Mediaset has enjoyed historically.
➤ In the short-term, Mediaset is outperforming its peer group, seemingly coming out of the advertising recession
faster and sooner than the peer group. This despite the fact that Mediaset has not seen a year on year decline in
advertising revenues at its Italian channels. In 3Q03, we look for 6.5% growth at the Italian channels and 11%
growth at Telecinco, which compares to 3.6% growth already reported at TF1 and 4.2% growth already reported
at M6 in 3Q03.
➤ We believe that Mediaset is one of the best positioned among the European broadcasters for longer-term revenue
growth. (1) Overall advertising spend as a percentage of GDP in Italy can grow as deregulation continues and the
number of international advertisers increases. (2) Prices at Mediaset’s channels remain low in the context of the
European market. (3) The company is making strong viewing share gains. (4) The threat of pay-TV is less
established than elsewhere in Europe notwithstanding the merger between Telepiu and Stream as Sky Italia. (5)
Mediaset continues to attract high levels of new clients. (6) Even prior to the Internet-fuelled advertising
‘bubble’, Mediaset was delivering consistent double-digit revenue growth.

Valuation
We use market-based multiples to value Mediaset, comparing the company with its European free television peer
group as well as with its historical trading multiples. In arriving at our valuation we also take account of Mediaset’s
19.5% stake in Albacom, which is currently loss-making. In our view Mediaset’s strong longer-term revenue growth
potential justifies a premium multiple relative to its peers. Our target price of €10 is based on Mediaset (adjusting for
Albacom losses) regaining its historical average 15% premium to TF1, which traded at 25-26x prospective earnings
coming out of the last recession.

On an EV/ EBITDA basis, Mediaset trades on 12.0x our new forecasts in 2003E, dropping to 11.1x in 2004E. Again
this represents a discount to TF1, of about 10%. At our target price of €10, the shares would trade at what we view as
a more appropriate premium of 10%.

Risks
We view Mediaset as Medium Risk. The risk rating on the stock is derived after consideration of a number of factors.
These factors include an assessment of industry-specific risks, financial risk and management risk. In addition, we
consider historical share price volatility, based upon the input of the Smith Barney quantitative research team, as a
possible indicator of future stock-specific risk. With regards to Mediaset, we particularly highlight its strong balance
sheet and cash generation, as well as its leading competitive position in an attractive market. At the same time, the
shares have proved volatile in the past.

The major areas of risk for Mediaset, which could impede the share price from achieving our target valuation, are: (1)
the outlook for advertising markets in both Italy and Spain. (2) Programme investment has been high in recent years,
reflecting both content inflation and the potential threat of new competition (La Sette). (3) The digital terrestrial
television (DTT) framework has yet to be established, leading to uncertainty over potential future costs and
competition. (4) The regulatory environment may change, with proposals made in the past to move one of Mediaset’s

Page - 5 -
three channels to cable and satellite and ongoing concerns over the potential conflict of interest with Mr Berlusconi
(Prime Minister and owner of Fininvest, which holds 48% of Mediaset). (5) It is unclear how Mediaset will unlock
any value from its stake in Albacom. (6) Pay-TV competition may become more robust now that the market has
consolidated under Sky Italia.

** Us investors please contact Rogan Angelini-Hurll (+44-20-7986-3906)

Page - 6 -
ANALYST CERTIFICATION Appendix A-1
We, Rogan Angelini-Hurll, Patrick Wellington, Edward Hill-Wood, Roberto Odierna, Neil Shelton (Specialist Sales) and Robert Garlick
(Global Sales), hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and
all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to
the specific recommendation(s) or view(s) in this report.

IMPORTANT DISCLOSURES

Mediaset (MS.MI)
Ratings and Target Price History Target Closing
Analyst: Rogan Angelini-Hurll EUR # Date Rating Price Price
1: 15 Nov 00 *3M *16.00 16.22

Chart current as of 27 September 2003


2: 24 Apr 01 3M *13.00 11.83
3: 11 Sep 01 3M *8.00 6.76
4: 17 Oct 01 *4M *6.00 7.09
15 5: 25 Mar 02 4M *8.50 9.79
1 6: 28 Mar 02 *3M *10.00 9.85
7: 13 Jun 02 *2M 10.00 8.30
6 8: 6 Sep 02 Stock rating system changed
2 9: 6 Sep 02 *1M 10.00 7.09
5 11 10 10: 12 Sep 03 Stock rating system changed
3 7 9 10 11: 12 Sep 03 1M 10.00 8.23
4 8 *Indicates change.

0
ON D J FMAM J J A SO N D J FMAM J J A SO ND J FMAM J J A S
2001 2002 2003
Covered See "Important Disclosures" at the end of this report for
Not covered a description of the firm’s current and former rating systems

Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global
Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm
profitability, which includes revenues from, among other business units, the Private Client Division, Institutional Equities, and Investment
Banking.
Smith Barney Equity Research Ratings Distribution
Data current as of 30 September 2003 Buy Hold Sell
Smith Barney Global Equity Research Coverage (2249) 31% 45% 24%
% of companies in each rating category that are investment banking clients 47% 42% 37%
Media--General -- Europe (29) 34% 55% 10%
% of companies in each rating category that are investment banking clients 40% 31% 67%
Guide To Investment Ratings:
Smith Barney's stock recommendations include a risk rating and an investment rating.
Risk ratings, which take into account both price volatility and fundamental criteria, are: Low [L], Medium [M], High [H], and Speculative
[S].
Investment ratings are a function of Smith Barney's expectation of total return (forecast price appreciation and dividend yield within the
next 12 months) and risk rating.
For securities in developed markets (US, UK, Europe, Japan, and Australia/New Zealand), investment ratings are: Buy [1] (expected total
return of 10% or more for Low-Risk stocks, 15% or more for Medium-Risk stocks, 20% or more for High-Risk stocks, and 35% or more for
Speculative stocks); Hold [2] (0%-10% for Low-Risk stocks, 0%-15% for Medium-Risk stocks, 0%-20% for High-Risk stocks, and 0%-35%
for Speculative stocks); and Sell [3] (negative total return).
Investment ratings are determined by the ranges described above at the time of initiation of coverage, a change in risk rating, or a
change in target price. At other times, the expected total returns may fall outside of these ranges because of price movement and/or
volatility. Such interim deviations from specified ranges will be permitted but will become subject to review by Research Management.
Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only after
evaluating the stock's expected performance and risk.
Between September 9, 2002, and September 12, 2003, Smith Barney's stock ratings were based upon expected performance over the
following 12 to 18 months relative to the analyst's industry coverage universe at such time. An Outperform (1) rating indicated that we
expected the stock to outperform the analyst's industry coverage universe over the coming 12-18 months. An In-line (2) rating indicated
that we expected the stock to perform approximately in line with the analyst's coverage universe. An Underperform (3) rating indicated
that we expected the stock to underperform the analyst's coverage universe. In emerging markets, the same ratings classifications were
used, but the stocks were rated based upon expected performance relative to the primary market index in the region or country. Our
complementary Risk rating system -- Low (L), Medium (M), High (H), and Speculative (S) -- took into account predictability of financial
results and stock price volatility. Risk ratings for Asia Pacific were determined by a quantitative screen which classified stocks into the
same four risk categories. In the major markets, our Industry rating system -- Overweight, Marketweight, and Underweight -- took into
account each analyst's evaluation of their industry coverage as compared to the primary market index in their region over the following 12
to 18 months.
Prior to September 9, 2002, the Firm's stock rating system was based upon the expected total return over the next 12 to 18 months. The
total return required for a given rating depended on the degree of risk in a stock (the higher the risk, the higher the required return). A Buy

Page - 7 -
(1) rating indicated an expected total return ranging from +15% or greater for a Low-Risk stock to +30% or greater for a Speculative
stock. An Outperform (2) rating indicated an expected total return ranging from +5% to +15% (Low-Risk) to +10% to +30% (Speculative).
A Neutral (3) rating indicated an expected total return ranging from -5% to +5% (Low-Risk) to -10% to +10% (Speculative). An
Underperform (4) rating indicated an expected total return ranging from -5% to -15% (Low-Risk) to -10% to -20% (Speculative). A Sell (5)
rating indicated an expected total return ranging from -15% or worse (Low-Risk) to -20% or worse (Speculative). The Risk ratings were
the same as in the current system.

OTHER DISCLOSURES
In addition to Investment Banking compensation that is disclosed in the Important Disclosures section of this research report, the Firm
and its affiliates, including Citigroup Inc., provide a vast array of non-investment-banking financial services, including among others
corporate banking, to a large number of corporations globally. The reader should assume that the Firm or its affiliates receive
compensation for those non-investment-banking services from such corporations.
For securities recommended in this report in which the Firm is not a market maker, the Firm usually provides bids and offers and may act
as principal in connection with such transactions. The Firm is a regular issuer of traded financial instruments linked to securities that may
have been recommended in this report. The Firm may, at any time, hold a trading position (long or short) in the shares of the subject
company(ies) discussed in this research.
Securities recommended, offered, or sold by the Firm: (i) are not insured by the Federal Deposit Insurance Corporation; (ii) are not
deposits or other obligations of any insured depository institution (including Citibank); and (iii) are subject to investment risks, including
the possible loss of the principal amount invested. Although information has been obtained from and is based upon sources Smith
Barney believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates
constitute the judgment of Smith Barney's Equity Research Department as of the date of the report and are subject to change without
notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security.
Any decision to purchase securities mentioned in this research must take into account existing public information on such security or any
registered prospectus.
Investing in non-U.S. securities, including ADRs, may entail certain risks. The securities of non-U.S. issuers may not be registered with,
nor be subject to the reporting requirements of the U.S. Securities and Exchange Commission. There may be limited information
available on foreign securities. Foreign companies are generally not subject to uniform audit and reporting standards, practices and
requirements comparable to those in the U.S. Securities of some foreign companies may be less liquid and their prices more volatile than
securities of comparable U.S. companies. In addition, exchange rate movements may have an adverse effect on the value of an
investment in a foreign stock and its corresponding dividend payment for U.S. investors. Net dividends to ADR investors are estimated,
using withholding tax rates conventions, deemed accurate, but investors are urged to consult their tax advisor for exact dividend
computations. Investors who have received this report from the Firm may be prohibited in certain states or other jurisdictions from
purchasing securities mentioned in this report from the Firm. Please ask your Financial Consultant for additional details.
This report may have been distributed simultaneously, in multiple formats, to the Firm's worldwide institutional and retail customers. If this
report is being made available via the Smith Barney Private Client Group in the United Kingdom and Amsterdam, please note that this
report is distributed in the UK by Citigroup Global Markets Ltd., a firm regulated by the Financial Services Authority (FSA) for the conduct
of Investment Business in the UK. This document is not to be construed as providing investment services in any jurisdiction where the
provision of such services would be illegal. Subject to the nature and contents of this document, the investments described herein are
subject to fluctuations in price and/or value and investors may get back less than originally invested. Certain high-volatility investments
can be subject to sudden and large falls in value that could equal or exceed the amount invested. Certain investments contained herein
may have tax implications for private customers in the UK whereby levels and basis of taxation may be subject to change. If in doubt,
investors should seek advice from a tax adviser. This material may relate to investments or services of a person outside of the UK or to
other matters which are not regulated by the Financial Services Authority and further details as to where this may be the case are
available upon request in respect of this material. This report may not be distributed to private clients in Germany. If this publication is
being made available in certain provinces of Canada by Citigroup Global Markets (Canada) Inc. ("CGM Canada"), CGM Canada has
approved this publication. If this report was prepared by Smith Barney and distributed in Japan by Nikko Citigroup Ltd., it is being so
distributed under license. This report is made available in Australia to non-retail clients through Citigroup Global Markets Australia Pty
Ltd. (ABN 64 003 114 832) and to retail clients through Smith Barney Citigroup Australia Pty Ltd. (ABN 19 009 145 555), Licensed
Securities Dealers. In New Zealand it is made available through Citigroup Global Markets New Zealand Ltd., a member firm of the New
Zealand Stock Exchange. This report does not take into account the investment objectives, financial situation or particular needs of any
particular person. Investors should obtain advice based on their own individual circumstances before making an investment decision.
Citigroup Global Markets (Pty) Ltd. is incorporated in the Republic of South Africa (company registration number 2000/025866/07) and its
registered office is at Citibank Plaza, 145 West Street (corner Maude Street), Sandown, Sandton, 2196, Republic of South Africa. The
investments and services contained herein are not available to private customers in South Africa. If this report is made available in Hong
Kong by, or on behalf of, Citigroup Global Markets Asia Ltd., it is attributable to Citigroup Global Markets Asia Ltd.; 20th Floor, Three
Exchange Square, Hong Kong. If this report is made available in Hong Kong by The Citigroup Private Bank to its clients, it is attributable
to Citibank N.A., 45th Floor, Citibank Tower, Citibank Plaza, 3 Garden Road, Hong Kong. This publication is made available in Singapore
through Citigroup Global Markets Singapore Pte. Ltd., a Capital Markets Services Licence.
© 2003 Citigroup Global Markets Inc. Member SIPC. Smith Barney is a division and service mark of Citigroup Global Markets Inc. and its
affiliates and is used and registered throughout the world. Citigroup and the Umbrella Device are trademarks and service marks of
Citicorp or its affiliates and are used and registered throughout the world. Nikko is a service mark of Nikko Cordial Corporation. All rights
reserved. Any unauthorized use, duplication, redistribution or disclosure is prohibited by law and will result in prosecution. The Firm
accepts no liability whatsoever for the actions of third parties. The Firm makes no representations or warranties whatsoever as to the
data and information provided in any third party referenced website and shall have no liability or responsibility arising out of, or in
connection with, any such referenced website.
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

Smith Barney European Equity Research, Citigroup Centre, Canada Square, Canary Wharf, London, E14 5LB, UK. Tel: (44-20) 7986-4000

Page - 8 -