United Group 9M 2016 HIGH YIELD BONDHOLDER REPORT

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United Group

9M 2016 HIGH YIELD BONDHOLDER REPORT

9M 2016 HIGH YIELD REPORT

CONTENTS Page

Summary ...... 3 Key Operating Measures ...... 6 Results of Operations ...... 8 Liquidity and Capital Resources ...... 14 Subsequent (Material Recent) Events ...... 18 Mergers & Acquisitions ...... 19 Group Background ...... 20 Appendices ...... 24

9M 2016 HIGH YIELD REPORT

Disclaimer

THIS REPORT (THIS “REPORT”) IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL SECURITIES. IT IS SOLELY FOR INFORMATION PURPOSES. BY READING THIS REPORT, ATTENDING A PRESENTATION OF THIS REPORT (THE “PRESENTATION”) AND/OR READING THE SLIDES USED FOR THE PRESENTATION (THE “PRESENTATION SLIDES”) YOU AGREE TO BE BOUND AS FOLLOWS:

This Report, the Presentation and/or the Presentation contains forward-looking statements, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or including the words “targets”, “believes”, “expects”, “aims”, “intends”, “may”, “anticipates”, “estimates”, “would”, “will”, “could”, “should” or similar expressions or the negative thereof. Such forward- looking statements involve known and unknown risks, uncertainties and other important factors beyond our control that could cause our actual performance or achievements to be materially different from future performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future strategies and the environment in which we will operate in the future. These forward-looking statements speak only as at the date of this Report, and/or the Presentation. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any of such statements are based.

This Report, and/or the Presentation contains summary unaudited condensed financial information for Adria Midco B.V. and its subsidiaries for the nine months ended September 30, 2016. The interim statement of financial position for Adria Midco B.V. and its subsidiaries as at 30 September 2016 and as at 30 September 2015, as well as the condensed consolidated interim statements of profit or loss and cash flows for Adria Midco B.V. and its subsidiaries for the nine months periods then ended have been reviewed by our independent auditors in accordance with the International Standard on Review Engagements 2410 and have been prepared in accordance with IFRS.

Certain financial measures and ratios related thereto in this Report, and/or the Presentation, including EBITDA, Adjusted EBITDA, Adjusted EBITDA minus capital expenditure, RGUs and ARPU (collectively, the ‘‘Non-IFRS Measures’’) are not specifically defined under IFRS or any other generally accepted accounting principles. These measures are presented here because we believe that they and similar measures are widely used in our industry as a means of evaluating a company’s operating performance and financing structure. Our management believes this information, along with comparable IFRS measures, is useful to investors because it provides a basis for measuring the operating performance in the periods presented. These measures are used in the internal management of our business, along with the most directly comparable IFRS financial measures, in evaluating the operating performance. These measures may not be comparable to other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles, and you should not consider such items as alternatives to net income (loss), operating income or any other performance measures derived in accordance with IFRS, and they may be different from similarly titled measures used by other companies.

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Summary

29 November 2016 – United Group, the leading cable and pay-TV operator in South Eastern Europe, today reports its financial results for the first nine months of 2016.

Operational Highlights

 Homes passed up by 4% to 1,553 thousand compared to 9M 2015, primarily as a result of network expansion and the acquisition of M-Kabl in Montenegro  Number of unique cable subscribers increased to 958 thousand  RGUs up by 10% year-on-year to 3,060 thousand, driven by organic growth and acquisitions  Blended Cable ARPU for 9M 2016 up by 5% year-on-year to €19.3 (9M 2015: €18.5), driven by migration from lower-priced to higher-priced service packages, growth in subscribers for the multi-play offering, and price increases in Serbia, Slovenia and Bosnia and Herzegovina

Financial Highlights

 Consolidated Group revenue for 9M 2016 up 23% year-on-year to €336.4 million (9M 2015: €273.4 million)  Consolidated Group adjusted EBITDA up by 21%1 in 9M 2016 to €140.9 million (9M 2015: €116.8 million)  Net cash inflow of €22.8 million against an inflow of €9.1 million in 9M 2015

 Net leverage (ratio of Group Net Debt to Annualised Last Two Quarters Adjusted Pro Forma EBITDA2) as at September 30, 2016 up to 4.15x (3.97x as at June 30, 2016)

1 Year-on-year comparison is affected by the positive effect of the Tušmobil acquisition, and Bosnia and Herzegovinian entities acquired during 2015, as well as M-Kabl acquisition in 2016 and changes in FX rates 2 Pro Forma Ajusted EBITDA is calculated as two times Q2 2016+Q3 2016 Adjusted EBITDA plus €425 thousand of expected synergies with Tušmobil and €210 thousand of expected synergies with Bosnian entities

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The following summary describes the operations in each of our current business segments:

 SBB Serbia includes the results of cable services in Serbia and DTH operations in Serbia, Croatia and Macedonia, including the results of EUnet (acquired in May 2015). Absolut Solutions and Totalna TV Croatia results are included in the SBB Serbia segment, however their results are not reflected in the statutory consolidated results of the SBB Serbia Group.  Telemach Slovenia includes the results of our cable and mobile services in Slovenia and DTH operations in Slovenia;  Telemach BH includes the results of our cable and DTH services in Bosnia and Herzegovina;  United Media Group (formerly Adria Media Group) includes the results of our media and content business including the results of N1 Info, Grand Production and Orlando Kids and Bambino; and  Other Businesses includes our other operating businesses, such as NetTV and Telemach Podgorica (renamed from Broadband Montenegro) including DTH services in Montenegro and acquired M-Kabl (as of August 1, 2016).

United Group generated consolidated revenues of €336.4 million during 9M 2016, up 23% year-on-year. Growth of our business operations resulted primarily from organic growth of our subscriber base, migration of subscribers to multi-play packages and the positive impact of companies acquired in 2015. Adjusted EBITDA generated during 9M 2016 increased by 21% year-on-year to €140.9 million.

Summary financials table in € m 9M 2015 9M 2016 Change

Revenue 273.4 336.4 23%

Adjusted EBITDA 116.8 140.9 21%

Result from operating activities 30.8 42.6 39%

Profit before tax (6.9) (6.7) (2%)

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Revenue % of total Adj. EBITDA % of total 9M 2016 in m

SBB Serbia Segment 136.2 40.5% 56.4 40.0% Telemach Slo Segment 139.3 41.4% 46.1 32.7% Telemach BH Segment 39.7 11.8% 13.9 9.9% United Media Segment 53.0 15.7% 17.8 12.7% Other Businesses 22.5 6.7% 6.9 4.9% Intra Company (54.2) (16.1%) (0.3) (0.2%) Total 336.4 100% 140.9 100%

As of September 30, 2016, United Group had 3.06 million RGUs, up by 10% compared to the same period last year (9M 2015: 2.78 million) and an increase of 109 thousand quarter-on-quarter (H1 2016: 2.95 million). This positive trend was driven by organic growth and acquisitions. Blended cable ARPU for the period was €19.3 compared to €18.3 for 9M 2015, with the 5% increase primarily driven by the migration of existing subscribers from lower-priced to higher-priced service packages, growth in subscribers for the multi-play offering, and price increases in Serbia, Slovenia, and Bosnia and Herzegovina. The year-on-year blended cable ARPU growth would have been higher without the acquisitions completed in Bosnia and Herzegovina, which had lower ARPU than Telemach BH. However, gradual improvement in ARPU levels at these companies has commenced in line with their increasing integration with Telemach BH. The trend of subscriber migration to multi-play packages is expected to continue with further development of the cable market. Capital expenditure (including capitalized inventory3) in 9M 2016 amounted to €96.7 million, compared to €92.8 million in 9M 2015. The majority of investments during the period were related to network upgrades, especially in mobile (not part of United Group in Q1 2015), investment in customer premise equipment and content.

United Group nine month financial statements have been prepared in accordance with IFRS.

3 Capitalized inventory was not included in 9M 2015 but is included in 9M 2016 due to a policy change to bring management accounts closer to IFRS standards

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Key Operating Measures

United Group uses several key operating measures, including homes passed, unique cable subscribers, RGUs and ARPU, to track the performance of the business. None of these terms are measures of financial performance under IFRS, nor have these measures been reviewed by an outside auditor, consultant or expert. These measures are derived from management information systems. As these terms are defined by our management, they may not be comparable to similar terms used by other companies. Please refer to Appendix 3 for definitions of our key operating measures.

Unique Cable Subscribers, RGUs and ARPU

The following table sets forth key operating measures for United Group as of and for the nine months ended September 30, 2016 and September 30, 2015.

Group in 000 9M 2015 9M 2016 Change % Change Key Operating Measures

Homes passed 1,487 1,553 4% 65 Unique cable subscribers 912 958 5% 47 RGUs 2,775 3,060 10% 284 Cable pay-TV 912 958 5% 47 DTH pay-TV 465 484 4% 19 OTT 100 112 12% 12 Broadband internet 541 603 12% 62 Fixed -line telephony 321 404 26% 83 Mobile services 324 380 17% 56 Other services 113 118 4% 5 Penetration Cable television 61.3% 61.7% 1% 0.00 Broadband internet 36.4% 38.9% 7% 0.02 Fixed-line telephony 21.6% 26.0% 21% 0.04 Blended Cable ARPU (in €) 18.3 19.3 5% 1.0

Homes passed increased by 65 thousand, or 4%, year-on-year, from 1,487 thousand as of September 30, 2015 to 1,553 thousand as of September 30, 2016, driven by network expansion and acquisition of M-Kabl in Montenegro.

As of September 30, 2016, we had 958 thousand cable pay-TV RGUs, which represents an increase of 47 thousand compared to 912 thousand as of September 30, 2015, resulting from organic growth and acquisitions (almost 23 thousand unique cable subs acquired in Montenegro).

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The total number of DTH pay-TV RGUs amounted to 484 thousand as of September 30, 2016, which represents an increase of 19 thousand, or 4%, compared to 465 thousand as of September 30, 2015.

As of September 30, 2016, we had 603 thousand broadband internet RGUs, representing an increase of 62 thousand, or 12%, compared to 541 thousand as of September 30, 2015 primarily attributable to an increase in multi-play subscriptions over this period, subscriber growth and 11 thousand RGUs acquired in Montenegro.

The total number of fixed telephony RGUs rose to 404 thousand as of September 30, 2016, an increase of 26% compared to 321 thousand as of September 30, 2015, primarily attributable to an increase in multi-play subscriptions over this period.

Our OTT RGUs grew by 12% to 112 thousand, compared to 100 thousand as of September 30, 2015. This figure includes 13 thousand OTT RGUs in Serbia and Slovenia.

Our mobile service RGUs increased by 17% year-on-year to 380 thousand as a result of organic growth following our acquisition of Tušmobil in April 2015 with 310 thousand RGUs.

Our total RGUs increased by 284 thousand, or 10%, from 2,775 thousand on September 30, 2015 to 3,060 thousand on September 30, 2016. RGUs added over this period were a result of the acquisition of M-Kabl, growth in the number of cable pay-TV, OTT, telephony and DTH subscribers, as well as the growing proportion of multi-play subscribers.

The following table provides a breakdown of our key operating measures for SBB Serbia, Telemach Slovenia and Telemach BH.

Telemach in 000 SBB Serbia Slovenia Telemach BH 9M 9M 9M 9M 9M 9M Footprint 2015 2016 YoY 2015 2016 YoY 2015 2016 YoY

Homes passed 839 892 6% 302 306 1% 301 309 3% Unique cable subscribers 516 539 4% 186 186 0% 209 210 0%

RGUs Cable pay-TV 516 539 4% 186 186 0% 209 210 0% DTH pay-TV 257 264 3% 31 30 (3)% 114 125 9% OTT 9 13 38% 0 0 13% Broadband internet 283 320 13% 136 138 2% 122 134 10% Telephony 117 182 55% 150 155 4% 53 64 26% Mobile services 324 380 17% Other services 66 81 23% 22 23 5% 3 3 (18)% Total RGUs 1,248 1,397 12% 850 914 8% 502 538 7%

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The following table sets forth the Blended cable ARPU for SBB Serbia, Telemach Slovenia and Telemach BH generated by the products and services we offer.

SBB Serbia Telemach Slo Telemach BH in € 9M 2015 9M 2016 9M 2015 9M 2016 9M 2015 9M 2016 ARPU

Cable pay-TV 8.1 8.9 16.8 17.2 7.4 7.8 Broadband internet 9.7 9.9 15.8 16.1 8.7 8.6 Telephony 5.3 5.0 3.8 3.8 10.6 9.7 Mobile services 13.1 13.6 Blended Cable ARPU 14.4 16.1 31.1 32.2 15.5 16.0

DTH pay-TV 8.5 8.6 15.2 15.8 7.0 7.4

ARPU from broadband internet includes value-added services such as online backup, internet security and anti-virus solutions. One unique cable subscriber can be a Revenue Generating Unit for cable pay-TV, fixed-line telephony, broadband internet or other services. DTH subscribers are DTH RGUs.

SBB Serbia. Blended cable ARPU for SBB Serbia in 9M 2016 was €16.1, an increase of €1.6, or 11%, year-on-year. This positive trend was primarily a result of a price increase implemented in January 2016 and the continued positive impact of subscribers upgrading to multi-play packages.

DTH ARPU at SBB Serbia remained unchanged at €8.6.

Telemach Slovenia. Blended cable ARPU for Telemach Slovenia in 9M 2016 increased by 3.7% or €1.1 year-on-year to €32.2, driven by the growth in the number of multi-play subscribers. The price increase, effective as of March 2016, has had a positive impact on cable service revenues. Following the acquisition of Tušmobil in April 2015, Telemach Slovenia is now the third largest mobile operator in Slovenia. The segment’s mobile ARPU for the nine months of 2016 amounted to €13.6.

DTH ARPU at Telemach Slovenia increased to €15.8 from €15.2 due to a price increase.

Telemach BH. Blended cable ARPU for Telemach BH in 9M 2016 was €16.0, an increase of €0.5, or 3% year-on-year. This growth would have been higher without the acquisitions completed in Bosnia and Herzegovina, which had lower ARPU than Telemach BH. ARPU levels at these companies have started to improve and this trend is expected to continue going forward.

DTH ARPU at Telemach BH increased to €7.4, from €7.0 in 9M 2015, due to a price increase.

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Results of Operations

In this report we present financial data for United Group for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. Please refer to Appendix 2 for the key factors affecting our business and results of operations. For a description of the key line items, please refer to Appendix 4.

Group in €000 9M 2015 9M 2016 Delta %

Revenue 273,388 336,402 23% Other income 2,555 2,185 (14%) Content cost (45,604) (46,899) 3% Satellite capacity cost (5,624) (5,542) (1%) Interconnection link cost (21,793) (29,552) 36% Materials cost (8,325) (27,455) 230% Staff costs (29,408) (37,201) 26% Other operating expenses (58,442) (59,615) 2% IFRS EBITDA 106,747 132,323 24%

Depreciation (46,543) (54,296) 17% Amortisation of intangible assets (29,433) (35,387) 20% Results from operating activities 30,771 42,640 39%

Finance income 2,182 1,093 (50%) Finance costs (39,812) (50,469) 27% Net finance costs (37,630) (49,376) 31%

Profit/(loss) before tax (6,859) (6,736) (2%)

Income tax (expenses)/benefit (308) (6,862) 2128% Profit/(Loss) for the period (7,167) (13,598) 90%

(Loss)/profit attributable to: Owners of the Company (8,595) (14,338) 67% Non-controlling interests 1,428 740 -48% (Loss)/profit for the period (7,167) (13,598) 90%

Revenue. The Group recorded strong revenue growth which increased by €63.0 million, or 23%, year-on-year to €336.4 million in 9M 2016, from €273.4 million in the same period of 2015. This was a result of higher organic and non-organic subscriber growth, growth in average revenue per subscriber, and the acquisitions of Tušmobil (April 2015), six cable entities in Bosnia and Herzegovina (July 2015) and M-Kabl Montenegro (August 2016). These positive trends offset the negative effect resulting from the devaluation of the Serbian dinar against the euro during the reporting period. Revenue figures for the business segments below include intra-company transactions which have not been eliminated.

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Revenue by Segment 4

in € m 9M 2015 9M 2016 Change

SBB Serbia 127,695 136,200 7% Telemach Slovenia 106,819 139,285 30% Telemach BH 29,527 39,694 34% United Media 33,318 52,953 59% Other 17,050 22,456 32% Total 273,388 336,402 23%

SBB Serbia. Revenue for our SBB Serbia Group segment increased by €8,505 thousand, or 7%, to €136,200 thousand in 9M 2016, from €127,695 thousand generated in the same period of 2015, mostly as a result of a price increase in January 2016 and continuous growth of the number of subscribers and RGUs / subscribers.

Telemach Slovenia. Revenue for Telemach Slovenia Group increased by €32,466 thousand, or 30%, to €139,285 thousand in 9M 2016, from €106,819 thousand in the same period of 2015. The key driver of this trend is the price increase of our cable services and acquisition of Tušmobil in April 2015 with continuous growth in the number of new subscribers.

Telemach BH. Revenue for our Telemach BH Group segment increased by €10,167 thousand, or 34%, to €39,694 thousand in 9M 2016, from €29,527 thousand generated in the same period of 2015, primarily due to the acquisition of six cable operators in July 2015 and a price increase in August 2016.

United Media Group. Revenue for our United Media Group segment increased by €19,635 thousand, or 59%, to €52,953 thousand in 9M 2016, from €33,318 thousand generated in the same period of 2015, primarily driven by increased sales of distribution rights to various channels and higher intercompany revenues within United Group.

Other Businesses. Revenue for our Other Businesses segment increased by €5,406 thousand, or 32%, to €22,456 thousand in 9M 2016, from €17,050 thousand generated in the same period of 2015. This increase was driven by the increase of our Net TV subscribers and the acquisition of M-Kabl in August 2016.

Intragroup eliminations increased by 32% in 9M 2016 compared to the same period of 2015.

4 Total 9M revenues include Intercompany revenues

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Other income. Other income in 9M 2016 was €2,185 thousand. This amount represents non-operating revenues.

Content cost. Content cost in 9M 2016 slightly increased to €46,899 thousand, 3% higher compared to 9M 2015, due to an increase in the number of subscribers and continuous improvements to our offering.

Satellite capacity cost. Satellite capacity cost in 9M 2016 remained unchanged at €5,542 thousand.

Interconnection cost. Total cost in 9M 2016 increased by €7,759 thousand to €29,552 thousand, from €21,793 thousand in the same period of 2015, mainly attributable to mobile interconnection costs resulting from the acquisition of Tušmobil.

Materials cost. Materials cost in 9M 2016 increased by 230% year-on-year to €27,455 thousand, from €8,325 thousand in 9M 2015, primarily as a result of recognition of cost of sold handsets and higher maintenance costs following the acquisition of Tušmobil.

Staff costs. Staff costs in 9M 2016 increased by €7,793 thousand, or 26%, to €37,201 thousand, from €29,408 thousand in 9M 2015. This increase was primarily attributable to an increase in headcount based on organic growth and our acquired businesses.

Depreciation. Depreciation in 9M 2016 increased by €7,753 thousand, or 17%, to €54,296 thousand, from €46,543 thousand for the same period of 2015. This increase was mainly due to higher fixed tangible assets, resulting from the acquisitions in 2015 and 2016 and expansion-related capex.

Amortization of intangible assets. Amortization of intangible assets in 9M 2016 increased by €5,954 thousand, or 20%, to €35,387 thousand, from €29,433 thousand in 9M 2015, primarily as a result of recognition of certain intangible assets during purchase price adjustments.

Other operating expenses. Other operating expenses in 9M 2016 increased by €1,173 thousand, or 2%, to €59,615 thousand, from €58,442 thousand in 9M 2015.

Net finance costs. Net finance costs in 9M 2016 increased by €11,746 thousand, or 31%, to €49,376 thousand, from €37,630 thousand in 9M 2015, primarily due to the higher level of bond interest and changes in foreign exchange rates in Serbia.

Loss before tax. Loss before tax in 9M 2016 was €6,736 thousand, compared to €6,859 thousand in the same period of 2015.

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EBITDA Reconciliation

EBITDA is a supplemental measure of financial performance that is not required by, or presented in accordance with IFRS. We define “EBITDA” as Profit/(Loss) for the period plus income tax (benefit)/expense, depreciation, amortisation of intangible assets and net finance costs.

EBITDA is not a measurement of performance or liquidity under IFRS and you should not consider EBITDA as alternatives to (a) net income as determined in accordance with IFRS as a measure of our operating performance, (b) cash flow for the period as a measure of our ability to meet our cash needs, or (c) any other measure of performance or liquidity under IFRS. We present EBITDA and the ratios derived therefrom, because we believe that they are measures commonly used by investors and they are measures that we use in managing our business. EBITDA, as presented in this report, however, may not be comparable to similarly titled measures reported by other companies due to differences in the way these measures are calculated.

The following table provides a reconciliation of Profit/(Loss) for the period to EBITDA. in €000 9M 2015 9M 2016 Change

Profit/(Loss) for the period (7,167) (13,598) 90% Income tax (benefit)/expense 308 6,862 2128% Depreciation 46,543 54,296 17% Amortisation of intangible assets 29,433 35,387 20% Net finance costs 37,630 49,376 31% EBITDA 106,747 132,323 24% Non-operating expenses 10,005 8,591 (14%) Adjusted EBITDA 116,752 140,914 21%

The following table provides a build-up of Annualized Last Two Quarters Adjusted Pro Forma EBITDA in €000 L2QA

Annualized L2Q Adjusted EBITDA 190,872 Adjustment for additional expected Tušmobil synergies 425 Adjustment for additional expected BH synergies 210 Annualized Last Two Quarters Adjusted Pro Forma EBITDA 191,507

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Gross Leverage and Net Leverage Ratio Our gross leverage ratio (i.e. ratio of Group Gross Debt to Annualized Last Two Quarter EBITDA) and net leverage ratio (i.e. ratio of Group Net Debt to Annualized Last Two Quarter EBITDA) as at September 30, 2016, increased to 4.34x and 4.15x, respectively, compared to 4.04x and 3.97x as at June 30, 2016.

in €000 9M 2016 a) Annualized Last Two Quarters EBITDA 191,507 b) Cash and cash equivalents 37,735 c) Finance lease 18,812 d) SSRCF 30,000 e) Senior Secured Notes due 2020 775,000 f) Other financial liabilities 7,726 g) As adjusted Group Gross debt (c+d+e+f) 831,538 h) As adjusted Group Net debt (g-b) 793,803

i) Gross leverage (g/a) 4.34x j) Net leverage (h/a) 4.15x

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Liquidity and Capital Resources

Our primary sources of liquidity and funds for capital expenditures, acquisitions and other investments have been operating cash flow, Bond borrowings, our Revolving Credit Facility, ancillary lending facilities and finance leases. Our ability to generate cash from our operations will depend on our future operating performance, which is in turn dependent, to some extent, on general economic, financial, competitive, market, regulatory and other factors, many of which are beyond our control.

We maintain cash and cash equivalents to fund the day-to-day requirements of our business. We hold cash in euro as well as Serbian dinar, Bosnia and Herzegovinian mark and U.S. dollar. Historically, we have relied primarily upon bank borrowings under senior secured credit facilities, other debt facilities and cash flow from operations to provide funds required for investments in capital expenditures and operations.

As at September 30, 2016, we had €37.7 million in cash and cash equivalents. In addition, a €775.0 million Bond, partially drawn Revolving Credit Facilities in the total available amount of €155.0 million, finance leasing in the amount of €18.8 million and other financial liabilities of €7.7 million were in place as at September 30, 2016. Cash Flow

The table below summarises the consolidated cash flow for the Group for the nine months ended September 30, 2016.

in €000 9M 2015 9M 2016 Change Operating net cash flow 72,928 74,578 1,650 Investing net cash flow (172,161) (146,480) 25,681 Financing net cash flow 108,381 94,661 (13,720) Net cash flow 9,148 22,759 13,611

Net cash from / (used in) operating activities. Net cash flows from operating activities increased by €1,650 thousand from a net cash inflow of €72,928 thousand in 9M 2015 to a net cash inflow of €74,578 thousand in 9M 2016, mainly due to better operating results. This increase was dampened by higher interest and tax payments (€1,853 thousand and €3,277 thousand, respectively) and initial net working capital investments due to the sale of mobile phones in 24 instalments.

Net cash from / (used in) investing activities. Net cash outflows used in investing activities decreased by €25,681 thousand, from a cash outflow of €172,161 thousand in 9M 2015 to a cash outflow of €146,480 thousand in 9M 2016, due to the acquisition of Tušmobil in April 2015.

Net cash from / (used in) financing activities. Net cash flows from financing activities decreased by €13,720 thousand, from a cash inflow of €108,381 thousand in 9M 2015 to a cash inflow of €94,661 thousand in 9M 2016.

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Capital Expenditure

Our capital expenditure relates primarily to the purchase of property and equipment, including expansion of our network in terms of capacity and new homes connected, purchase of modems and set-top boxes to be installed in customer premises, growth in RGUs and maintenance of our network and infrastructure, purchase of intangible assets such as content, software, investments in our core infrastructure and systems to facilitate the addition of new services and acquisitions. Therefore, capital expenditure is primarily driven by extending, upgrading and maintaining our network, the installation and in-home wiring for new subscribers and the cost of cable modems, including high-speed modems for our subscribers for our high-speed broadband internet. Our capital expenditure has historically also included certain investments of a non-recurring nature, as well as costs to integrate acquired businesses.

Capital expenditure also includes increases in intangible assets (except our customer list and brand names) and does not include financial assets. As part of our strategy to focus capital expenditures on improving returns, we have implemented measures to ensure a more efficient usage of capital investment. We intend to manage capital expenditures to maintain our well-invested asset base. The members of our board review all material capital expenditure programs.

Our capital expenditure for 9M 2016 amounted to €96.7 million5, compared to €92.8 million in 9M 2015.

Over the next several years, our capital expenditure will be largely success and capacity based. Success and capacity based capital expenditure includes capital expenditure related to the expansion of our network footprint to additional homes and existing subscribers, the replacement of set-top boxes, expanding network capacity and new product and service development and expenditure incurred in connecting business subscribers to our network. Success based capital expenditures do not include capital expenditure for maintenance, upgrade and replacement of our systems and infrastructure.

Management does not currently expect capital expenditure to exceed depreciation levels on a long term basis.

5 This figure includes €1.8 million of capitalized inventory following a policy change to bring management accounts closer to IFRS standards. Excluding this effect, capex growth would have been 3%.

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CAPEX by Segment in €000 9M 2015 9M 2016 Change

SBB Serbia 37,218 32,300 (13%) Telemach Slovenia 32,084 35,355 10% Telemach BiH 8,193 14,653 79% United Media 11,940 11,082 (7%) Other 3,407 3,341 (2%) Total 92,842 96,731 4%

SBB Serbia. Capital expenditures for SBB Serbia decreased by €4,918 thousand, or 13%, to €32,300 thousand in 9M 2016, from €37,218 thousand in 9M 2015.

Telemach Slovenia. Capital expenditures for Telemach Slovenia increased by €3,271 thousand, or 10%, to €35,355 thousand in 9M 2016, from €32,084 thousand in 9M 2015. In 2016, higher capital expenditures were driven by investment in the mobile network and higher subscriber acquisition cost.

Telemach BH. Capital expenditures at Telemach BH in 9M 2016 increased by €6,460 thousand, or 79%, compared to the same period last year. Higher capital expenditures were driven by network investment in acquired entities.

United Media. Capital expenditures for United Media decreased by €858 thousand to €11,082 thousand in 9M 2016, from €11,940 thousand in 9M 2015.

Other. Capital expenditures for this segment decreased by 2% to €3,341 thousand in 9M 2016, from €3,407 thousand in 9M 2015. The figure for 9M 2016 includes investments related to the fibre network expansion at Telemach Montenegro.

Please refer to Appendix 5 for certain quantitative and qualitative disclosures about market risk and Appendix 6 for our critical accounting policies.

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Adjusted EBITDA-CAPEX increased from €23,911 thousand in 9M 2015 to €44,183 thousand in 9M 2016.

Group in €000 9M 2015 9M 2016 Change

Adjusted EBITDA 116.8 140.9 21%

CAPEX 92.8 96.7 4%

Adjusted EBITDA - CAPEX 23.9 44.2 85%

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Subsequent (Material Recent) Events

As of 9 May 2016, SBB entered in a new, unsecured €20 million RCF facility, maturing in 2020.

As of 3 February 2016, Telemach d.o.o. merged into Telemach Mobil d.o.o., Slovenia. Subsequently, Telemach Mobil d.o.o. was renamed Telemach d.o.o.

In May 2016, SBB paid an additional earn out amount of €110 thousand to the former majority owner of EUnet. Additionally, SBB acquired the one remaining minority stake in EUnet for €12 thousand resulting in 100% ownership of the company.

Effective 31 December, 2015, Adria Topco B.V., the immediate parent company of Adria Midco B.V., made a receivables contribution in an aggregate amount of €26 million to Adria Midco B.V., which Adria Midco B.V. designated an “Excluded Contribution” under the indenture governing United Group B.V.’s 7.875% senior secured notes due 2020. On 30 March, 2016, Adria Midco B.V. made a cash distribution to Adria Topco B.V. in an aggregate amount of €20 million, reducing the amount of this “Excluded Contribution”.

On July 25 2016, United Group issued an additional €150 million of debt by tapping the high yield bond with the interest rate of 7.875%.

Effective July 26, 2016, the commitments under our Revolving Credit Facility were increased by €35 million to €135 million.

As is customary in private equity-backed investments, we have put in place a management incentive plan that was recently approved by the board of directors and is being implemented. The management incentive plan is intended to align the long term interests of our shareholders and our senior management team and is subject to customary vesting and leaver provisions and designed to reward our management team upon the successful exit of our current shareholders. In connection with the implementation of our management incentive plan, United Group B.V. made a loan in an aggregate principal amount of €30 million to Mr. Šolak, pursuant to a loan agreement dated September 15, 2016 based on arm’s length terms, to enable Mr. Šolak to acquire shares of equivalent value in our parent company, Adria Luxco S.à r.l. These shares in Adria Luxco S.à r.l. acquired by Mr. Šolak have been pledged in favor of United Group B.V. to secure the obligations of Mr. Šolak under the loan agreement.

As of October 13th2016, we have merged Total TV in Bosnia and Herzegovina into the Telemach BH cable operator.

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Mergers & Acquisitions

In July 2015, we completed the acquisition of a majority interest in BHB Cable TV d.o.o, a cable pay-TV operator in Bosnia and Herzegovina, and five relatively small cable TV operators in Bosnia and Herzegovina. The consideration for these acquisitions consists of an initial cash consideration of €20 million, and an additional €10 million which has been deposited in an escrow account. The current escrow account balance is €3.2 million; this will be paid out by the end of 2016 if certain conditions are met.

In July 2016, we closed the acquisition of M-Kabl, a cable operator in Montenegro with 23 thousand subscribers, for a total consideration of €12.7 million, of which €11.2 million has been paid. The remaining amount is a deferred consideration subject to certain conditions being met (of which €0.5 million has been paid in October 2016).

In Q1 2016, we signed an SPA for the acquisition of Maxtel, a Dark fibre B2B operator in Slovenia, for a total consideration of €4 million. This transaction was closed in November 2016.

On 29 August 2016, we signed an SPA for the acquisition of Ikom, a cable operator in Serbia with almost 100 thousand unique cable subscribers, for a total consideration of €45 million.

United Group continually monitors M&A opportunities and is currently in early stages of evaluating multiple potential opportunities. In line with its stated strategy, the Group is looking for acquisitions that are value accretive and offer substantial synergies with the Group’s existing operations.

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Group Background

We are the leading distributor of cable and satellite pay-TV in Slovenia, Serbia and Bosnia and Herzegovina where we also provide broadband internet and fixed-line telephony services via our cable infrastructure. Additionally, we offer mobile telephony services in Slovenia, and we also distribute satellite pay-TV across the six countries of former Yugoslavia, Slovenia, Serbia, Bosnia and Herzegovina, Croatia, Macedonia and Montenegro. We are the only pan-regional distribution platform in a region of approximately 20 million people. We are the leading multi-play provider in our primary markets, where we combine our services into packages, or bundles, which offer subscribers the convenience of being able to purchase television, broadband internet and telephony services from a single provider, and provide us with significant opportunities to cross-sell our products. We believe that we have been able to establish our business as one of the leading distribution platforms in our region due to our attractive content portfolio, which we have established through ownership of certain key pay-TV channels as well as long-term contracts with third parties, our well-invested network that provides, among other things, one of the highest internet download speeds in our markets, and our high-quality customer service, which has led to low churn rates that we believe evidence a satisfied customer base.

The following summary describes the operations in each of our reportable segments or subgroups:

 SBB Serbia. This segment includes the results of cable services in Serbia and DTH operations in Serbia, Croatia and Macedonia, including the results of KDS, JetTV, Beogrid and Absolut Solutions. KDS, JetTV and Beogrid were merged into SBB Serbia on January 5, 2015;

 Telemach Slovenia. This segment includes the results of our cable, DTH and mobile services in Slovenia;

 Telemach BH. This segment includes the results of our cable services and DTH operations in Bosnia and Herzegovina;

 United Media Group (formerly, Adria Media Group). This segment includes the results of our media and content business in the former Yugoslav region including the results of N1, Grand Production, Orlando Kids and Bambino; and

 Other Businesses. This segment includes our other operating businesses, such as NetTV, Telemach MNE and DTH operations in Montenegro.

Management team

Many of our key management members have been with our business since its inception, including our Executive Chairman and Founder, Dragan Šolak, our Group Vice President - Sales and Marketing, Victoriya Boklag and our Group Vice President - Operations, Violeta Vasilijević. Our senior management team has substantial experience in the telecommunications, media and technology industries, as well as in banking, private equity

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and corporate finance. Many members of our senior management team, including our founder, have each held different positions within our business and have shaped the direction of the development of our business and its organic growth within the region. Dragan Šolak - Founder and Executive Chairman of the Group. Mr. Šolak founded SBB in 2000 and has been a member of the management since the Group’s inception. In 2009, Mr. Šolak assumed the role of Group Executive Chairman. In his current role, he continues to be involved in all aspects of the business and is responsible for the overall strategic leadership of the Group.

Victoriya Boklag – Director - Group Vice President - Sales & Marketing and SBB CEO. Ms. Boklag has been with the management team since the Group’s inception in 2000, and prior to assuming her current role she held various functions including Director of Finance. Since June 2016, Ms. Boklag has also functioned as the CEO of SBB Serbia. Ms. Boklag holds a BA degree from the ICU Kiev.

Violeta Vasilijević - Group Vice President - Operations. Ms. Vasiljević has been with the management team since the Group’s inception in 2000. She is currently responsible for the technical and operating support for all of the Group’s administrative functions and products. Ms. Vasiljević holds a degree in Mechanical Engineering from the University of Kragujevac.

Vladislav Ratajac - Group Vice President - Corporate Development. Mr. Ratajac joined the management team in 2011. Mr. Ratajac held positions at Mid Europa Partners from 2008 to 2011 and Deutsche Bank before joining the Group. He holds a degree in Economics from Rutgers University in New Jersey, USA.

Janez Živko – Director - Group Vice President - Finance. Mr. Živko joined the management team in March 2015. Prior to joining us, Mr. Živko served as the CFO of the Petrol Group, one of the largest companies in Slovenia. He has also served in numerous roles at Gorenje Group over a period of seven years, including Director of Finance and Deputy CFO. Mr. Živko began his career in 1998 as a financial analyst and subsequently financial controller for European operations at ACT Teleconferencing in Denver, Colorado. He holds a Masters in Business Administration (in Finance) from the University of Denver, USA.

Dragica Pilipović Chaffey – Group Vice President – Corporate Affairs. Ms. Pilipović Chaffey joined the management team in 2009. Prior to her current role, Ms. Pilipović Chaffey held a number of senior posts within the European Bank for Reconstruction and Development (EBRD) from 2007 to 2009, and the IMF in Washington, D.C. Ms. Pilipović Chaffey holds an MBA from George Washington University, Washington, D.C. and a BA in Economics, from the University of Belgrade.

Marko Šter - Chief Executive Officer - Telemach Slovenia. Mr. Šter has been with the management team since Telemach Slovenia’s inception in 2005. Prior to his current role, he was the Group’s Chief Technology Officer, holding responsibility for the Group’s technical

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operations and IT. Mr. Šter has a mechanical engineering background and an MBA from IEDC Bled.

Željko Batistić - Chief Executive Officer - Telemach BH. Mr. Batistić first joined the management team in May 2012. Prior to joining, Mr. Batistić was an experienced CATV manager and served at a Croatian cable operator at B.net Croatia from 2007 to 2012. Mr. Batistić holds a Master’s degree in Electrical Engineering from the Faculty of Electrical Engineering and Computing, University of Zagreb and an Executive MBA from Cotrugli Business School, Zagreb.

Srđan Radić - Director of Satellite and OTT Platforms. Mr. Radić joined the Group in 2010. He is responsible for the Group’s direct to home (DTH) satellite offering under the Total TV brand. Before joining the Group, he was the Chief Commercial Officer of MTEL Montenegro (a leading mobile telephony operator), and was the head of corporate sales at Telekom Srbija before that. He holds an MA in Technical Sciences from the Faculty of Organizational Sciences, Belgrade University.

Tanja Milošević – CEO Telemach Montenegro. Before being appointed CEO of Telemach Montenegro in 2014, Mrs Milošević was responsible for operations in Broadband Montenegro for 5 years. Her previous experience is related to managing investments and business development projects in tourism, hospitality and marketing. She holds a BA degree in International Affairs and Business Administration from John Cabot University, Rome and an Executive MBA degree from ESCP Europe, Paris.

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Shareholder Structure

Investment funds advised by affiliates of KKR as well as certain co-investors (including the European Bank for Reconstruction and Development (the ‘‘EBRD’’)) indirectly hold approximately 70.3% of the United Group, while the remaining 26.2% is indirectly held by management and 3.5% is indirectly held by Middlesbor Associates Limited.

KKR was founded in 1976 and is currently led by Henry Kravis and George Roberts. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with investors through its client relationships and capital markets platforms. KKR has in- depth experience in telecommunications and media sector, through its current and former investments including TDC, Versatel, Nielsen, and ProSiebenSat 1.

The EBRD, owned by 65 countries across five continents and two intergovernmental institutions, supports the development of market economies and democracies in central Europe, central Asia and the southern and eastern Mediterranean. The Bank’s investments cover agribusiness, power and energy, industry, commerce, information and communication, as well as the financial and infrastructure sectors.

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Appendices

Appendix 1 - Financial statements

Income Statement (Adria Midco)

Group in €000 9M 2015 9M 2016

Revenue 273,388 336,402 Other income 2,555 2,185 Content cost (45,604) (46,899) Satellite capacity cost (5,624) (5,542) Interconnection link cost (21,793) (29,552) Materials cost (8,325) (27,455) Staff costs (29,408) (37,201) Other operating expenses (58,442) (59,615) IFRS EBITDA 106,747 132,323

Depreciation (46,543) (54,296) Amortisation of intangible assets (29,433) (35,387) Results from operating activities 30,771 42,640

Finance income 2,182 1,093 Finance costs (39,812) (50,469) Net finance costs (37,630) (49,376)

Profit/(loss) before tax (6,859) (6,736)

Income tax (expenses)/benefit (308) (6,862) Profit/(Loss) for the period (7,167) (13,598)

(Loss)/profit attributable to: Owners of the Company (8,595) (14,338) Non-controlling interests 1,428 740 (Loss)/profit for the period (7,167) (13,598)

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Statement of Financial Position

Group in €000 9M 2015 9M 2016 Assets Property, plant and equipment 307,267 342,185 Goodwill 649,094 660,994 Intangible assets 255,728 246,832 Investment property 497 447 Deferred costs 5,077 2,182 Other financial assets 2,049 32,002 Non current prepayments 5,987 14 Deferred tax assets 5,467 7,860 Non-current assets 1,231,166 1,292,516

Inventories 8,110 6,245 Trade and other receivables 77,326 91,744 Short term loan receivables 4,145 4,541 Prepayments 20,904 22,208 Income tax receivable 2,433 939 Cash and cash equivalents 25,370 37,735 Current assets 138,288 163,412 Total assets 1,369,454 1,455,928

Equity Issued and fully paid share capital 125 125 Share premium 564,592 570,592 Other capital reserves 26,000 Translation and other reserves (11,637) (16,757) Accumulated losses (86,036) (118,394) Equity attributable to owners of the Company 493,044 435,566 Non-controlling interests 13,841 12,515 Total equity 506,885 448,081

Liabilities Loans and borrowings 32,582 34,214 Bond loan 619,950 775,010 Long term liabilities 2,704 94 Long term provisions 3,868 7,225 Deferred revenue 7,234 6,222 Finance lease liabilities 16,264 7,576 Deferred tax liabilities 32,117 31,610 Employee benefits 1,175 502 Non-current liabilities 715,894 862,453

Trade and other payables 112,275 101,698 Interest payable 19,184 21,156 Current tax liabilities 275 2,471 Loans and borrowings 2,055 867

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Deferred revenue 8,670 7,966 Finance lease liabilities 4,216 11,236 Current liabilities 146,675 145,394 Total liabilities 862,569 1,007,847 Total equity and liabilities 1,369,454 1,455,928

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Statement of Cash Flows Group in €000 9M 2015 9M 2016 Cash flows from operating activities Profit/(Loss) for the year (7,167) (13,598) Adjustments for: Depreciation 46,543 54,296 Amortisation 29,433 35,387 Impairment of trade and other receivables 3,969 2,777 Impairment of PPE and Intangibles 2,472 954 Tax (income)/expense 99 6,872 Employee benefits (103) (32) Net finance cost 39,857 51,042 Operating cash flows before WC changes 115,103 137,698

Changes in working capital: (Increase)/Decrease in accounts receivables and prepayments (12,811) (16,638) Increase/(Decrease) in deferred income 2,228 (46) (Increase)/Decrease in deferred cost (5,077) (1,415) (Increase)/Decrease in inventories (3,302) (28) (Increase)/Decrease in prepayments 182 3,489 Increase/(Decrease) in trade and other payables 2,373 (17,584) Cash generated from operations 98,696 105,476

Interest paid (25,618) (27,471) Income tax paid (150) (3,427) Net cash from operating activities 72,928 74,578

Cash flows from investing activities Purchase of property, plant and equipment (82,933) (73,250) Purchase of intangible assets (21,012) (31,379) Acqusition of NCI (568) (280) Acquisition of subsidiaries, net of cash acquired (65,149) (12,238) Change in short term loan receivables (3,418) 667 (Increase)/decrease in non-current financial asset 919 (30,000) Net cash used in investing activities (172,161) (146,480)

Cash flows from financing activities Proceeds from bond issue 159,750 157,875 Proceeds from borrowings 130,513 107,825 Repayment of borrowings (175,566) (138,700) Transaction costs related to loans and borrowings (6,344) (4,359) Proceeds from finance lease 9,735 6,162 Repayment of finance lease (9,707) (14,142) Distribution of share premium (20,000) Net cash used in financing activities 108,381 94,661

Net increase in cash and cash equivalents 9,148 22,759 Cash and cash equivalents at 1 January 16,182 15,126 Effects of movements in exchange rates on cash held 40 (150) Cash and cash equivalents at end of period 25,370 37,735

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Appendix 2 - Key Factors Affecting Our Business and Results of Operations

The performance of our businesses, our results of operating and the key operating measures discussed below have been and will continue to be affected by a variety of factors. Certain of these factors are discussed below.

A) Products

Our results are impacted by our product mix as well as our ability to introduce new products and upgrades and successfully sell those products and upgrades to increase our RGUs and ARPUs. We continually evaluate the suite of products and services we provide to our subscribers in order to ensure that we are able to remain competitive with other providers in our markets and have an opportunity to increase our subscriber base and increase the number of products we sell to our subscribers. We accomplish this through product innovation, investments in technology and acquisitions of complementary businesses. For example, we have expanded our product offering by introducing fixed-line services to offer multi-play packages in Slovenia, Serbia and Bosnia and Herzegovina, including pay television, broadband internet access, fixed-line telephony and in Slovenia mobile telephony services. We believe that customers of media and communications services will increasingly choose bundled products because of the convenience and better value that result from obtaining TV, broadband internet and telephony services from a single provider for one price.

We also seek to be the leader in our markets in pay-television content and we have entered into long-term strategic partnerships with key international and regional content owners, and have acquired leading regional content owners in key television sub segments (sports, lifestyle, children and movies) such as providers of the Sport Klub family of channels (which includes Sport Klub, Golf Klub and our fishing and hunting channels), Cinemania and the Ultra family of pay-TV channels (Ultra and Mini Ultra). Our ability to maintain the strength of our content in the future will impact our ability to sell our pay television offerings as well as bundled packages.

Increasing demand for attractive content and higher broadband speeds allows us to increase the prices at which we provide these services while maintaining relatively low churn rates. We believe our low churn rates provide us with recurring cash flows and visibility with respect to future revenues. We believe that the primary drivers of our churn are existing customers moving outside of our current geographical area of service as well as termination of services contracts by us due to existing customers’ inability to pay, with only a limited amount of churn being driven by competition. We believe that launching telephony in our markets, further driving digitization, providing our subscribers with multi-play packages (including quad-play in Slovenia), expanding our cable footprint to broaden our geographic reach and benefiting from increasing disposable incomes in the region, which reduces the likelihood of customers’ bad debt, will help us to keep cable pay-TV churn rates low.

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Our product mix can also have an impact on our margins. For example, our mobile telephony business has lower margins compared to our cable-based business. Our success in growing our mobile business will therefore regularly affect our Adjusted EBITDA margins.

B) Pricing

We regularly review the prices of our products and services and in the past have adjusted our subscription fees as necessary in line with inflation, changes in foreign exchange rates or in response to market conditions and content costs. Changes in the pricing of our products and services will impact the revenues and margins that we generate from these products and services and will impact our ability to attract new customers. For example, our multi-play bundles offer subscribers more value in terms of channels, speeds functionality and add-on features. The pricing of all of our services, including our multi-play bundles, is dependent on market conditions and pricing by competitors with similar offerings and the perceived quality of our products to other products. In relation to our Basic TV package, we are also subject to price regulation in Serbia.

C) Cost

Our most significant costs include (i) carriage fees which we pay to international and regional broadcasters such as Fox, Discovery and Pink, in order to carry their programs on our distribution network, (ii) licensing fees payable to sports rights owners such as the English Premier League, National Basketball Association, the Spanish Premier League, ATP and Formula 1 in order to develop content for our own channels, (iii) satellite capacity costs, (iv) payroll costs, (v) internet and interconnection fees, (vi) costs of materials used to connect subscribers to our network and (vii) costs for marketing and sales. A majority of our costs, such as a portion of our network operations, customer care, billing and administration costs, are relatively fixed, while a portion of our marketing and customer services cost is variable. Our content acquisition costs are mostly fixed and a decreasing portion of these costs are subscriber-based. Where possible, we aim to negotiate fixed-rate content costs. This allows us to anticipate the input price of our content and price our products accordingly. The costs associated with the growth of our business, such as RGU acquisition costs, which are primarily comprised of campaign costs and sales costs for attracting new subscribers, are variable costs.

A large portion of our costs is content costs. While we own a portion of our content, we are dependent on broadcasters and other content owners for most of our programming. We pay license fees to several regional and international broadcasters in order to broadcast their programs. For on-demand content purchased by our subscribers, we generally pay a revenue share of the retail price, subject, for certain on-demand content, to fixed minimum guarantees. For packaged on-demand content (subscription video on demand) we pay on a per-subscriber basis, sometimes with minimum guarantees. We generally expect that our content costs (above the minimum amounts) will increase in line with increased revenues

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from digital pay-TV and on-demand content. In the past we have successfully been able to obtain rebates and discounts for our content, but these may not continue in the future.

We pay fees to satellite operators to uplink and transmit our content to our DTH subscribers, and we also use other network operators to have telephone calls of our customers connected to customers of their respective networks (interconnection). Generally the amount we pay in interconnection fees in any period will depend on the level of usage of our services.

Our staff costs are impacted by the number of personnel we employ, the experience levels at which such persons are employed and increases in salaries and bonuses due to performance factors. Labour costs of technicians spent on the construction and upgrade of our network and acquisition of subscribers are capitalized as tangible and intangible assets.

RGU acquisition costs include campaign costs and sales costs. We target to recover RGU acquisition costs over the duration of the service contract. Factors that contribute to successful recovery of RGU acquisition costs include our operational efficiency, the density of our subscriber base and the fact that we have direct relationships with our subscribers, which enables us to know our customers and not to rely on intermediaries to interact with our subscribers.

Network and Technological Advances

Our ability to provide new high definition and on-demand digital TV services, broadband internet access at higher speeds and telephony services to subscribers depends in large part on our ability to upgrade and maintain our network. We incur capital expenditures in periods in which these upgrades are made with the aim of recouping these investments through increased revenues and profitability. Our ability to compete effectively and maintain or increase our customer base depends on our ability to anticipate and react quickly to technological developments and evolving industry standards and develop successful new and enhanced products and services to adapt to the changing market. We need to make investments in new or enhanced technologies, products or services in periods in which industry standards change or to upgrade our technologies. Additionally, we incur capital expenditures relating to the replacement of existing equipment.

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External Factors

A) Foreign Currency Exchange Rates

We operate across the Balkan region generating revenues in many local currencies, which fluctuate from time to time in relation to the euro. Our revenues in Slovenia are generated in euro. SBB Serbia and Telemach BH record their financial results in their respective functional currencies (the Serbian dinar and the Bosnian and Herzegovinian mark, respectively), which are then translated into euros in preparing our consolidated financial statements. While the Bosnian and Herzegovinian mark is pegged against the euro at a fixed exchange rate of BAM 1.9558 per €1.00, the Serbian dinar freely fluctuates against the euro. However, due to the historic indexation of the Serbian dinar against the German mark, which was replaced by the euro in 2002, we believe the Serbian consumer price index closely tracks the depreciation of the Serbian dinar against the euro which has historically allowed us to “pass-through” a portion of the impact of the depreciation of the dinar to our customers. We believe that our pricing strategy reflects this “pass-through” principle.

We present our consolidated financial statements in euro. As a result, we must translate the assets, liabilities, revenue and expenses of all of our operations with a functional currency other than the euro into euro at then-applicable exchange rates. Consequently, increases or decreases in the value of these currencies against the euro may affect the value of our assets, liabilities, revenue and expenses with respect to our non-euro businesses in our consolidated financial statements, even if their value has not changed in their original currency. These translations could significantly affect the comparability of our results between financial periods and result in significant changes to the carrying value of our assets, liabilities and stockholders’ equity.

Additionally, certain of our expenses, primarily content and satellite costs, are in euro and U.S. dollar. Where we are unable to match sales received in foreign currencies with costs paid in the same currency, our results of operations are impacted by currency exchange rate fluctuations. A substantial portion of our indebtedness are denominated in euro. In March 2015, we entered into a EUR/USD currency hedge agreement, pursuant to which we hedge a part of our exposure to the U.S. dollar. We entered into an additional EUR/USD currency hedge agreement in May 2016 pursuant to which we hedged the remaining portion of our exposure to the U.S. dollar for the year 2016.

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B) Growth in our Markets

Two of our key markets, Serbia and Bosnia and Herzegovina, are generally characterized by lower pay television and internet broadband household penetration rates compared to elsewhere in Western Europe and the CEE. As a result, growth in our markets has been higher than in certain CEE and Western Europe jurisdictions. We believe this is primarily due to the increasing importance of high-quality broadband internet and an increasing convergence of our regions with the EU. Slovenia is a more mature market, with subscriber rates similar to the CEE, and as a result growth in that market will depend more on our ability to effectively compete with other market participants and to continue to offer high-quality customer propositions. A number of factors will impact the rate of growth of pay television, broadband internet and telephony industries in our markets, including economic conditions, political stability, increases in infrastructure and an increased distribution of wealth. These industries may not grow at the same rate as they have in the past.

C) Regulation

Our operations are subject to various regulations in Europe and in our regional markets. We are generally free from price regulation other than with respect to our Basic TV package in Serbia due to SBB Serbia’s significant market power (SMP) in the Serbian pay-TV market. As a result, the pricing of our Basic TV-package in Serbia, which we use as a platform to up- and cross-sell our products, is regulated and we are not permitted to increase the price for such packages without regulatory approval. For 2013 and 2014, we have been successful in applying for price increases. In 2015, our first application for increase in the price for this package was not accepted by the Serbian regulator; however, our second application, in November 2015, was accepted by the Serbian regulator, and we implemented price increases for our Basic TV package in Serbia on January 1, 2016. We will strive to get approval for future price increases; however, we cannot assure you that we will be successful. In addition we will be subject to various competition clearances as we continue to expand our business through bolt-on, value accretive acquisitions and we may be subject to market power analysis from the relevant regulators, which could force us to adjust our prices or sell various parts of our businesses.

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Appendix 3 - Definitions of Key Operating Measures Homes passed represents all homes connected to our network directly and through third party networks. We provide our services to subscribers directly over our network and over certain cable networks owned by third parties with whom we have entered into exclusive or non-exclusive agreements to provide our services over their networks.

Unique cable subscribers represent the number of individual end-users who have subscribed to one or more of our cable-based services. In all of our cable markets, cable pay-TV is the basic service that a cable unique subscriber is typically required to subscribe to in order to receive our other services such as broadband internet access and telephony. A unique cable subscriber may subscribe to several different services, thereby accounting for only one unique cable subscriber, but several RGUs.

Cable pay-TV RGUs includes the sum of our analogue and digital cable pay-TV RGUs in Slovenia and in Serbia and Bosnia and Herzegovina our total analogue cable pay-TV RGUs (without separately counting analogue cable RGUs that have purchased digital top ups).

OTT RGUs consists of our NetTV and D3i subscribers.

Broadband internet RGUs represents residential broadband internet provided via coaxial cable.

Fixed-line telephony RGUs represents residential fixed line telephony provided via coaxial cable.

Mobile RGUs represents mobile telephony services provided to customers in Slovenia, where we have operated as an MNO since our acquisition of Tušmobil in April 2015. Prior to April 2015, we provided mobile services to our customers as an MVNO. Other services includes multichannel multipoint distribution service based services, MVNO services in Slovenia in 2013, ADSL internet services and B2B. Penetration represents the number of RGUs at the end of the relevant period as a percentage of the number of homes passed by our network.

Blended cable ARPU is calculated by adding together, for each month in a given period, the total cable pay-TV, broadband internet and fixed-line telephony revenues (including fixed-line telephony usage revenues and excluding minor installation fees) for that particular month divided by the average number of cable pay-TV RGUs for that month and then dividing that sum by the total number of months in the period. Blended Cable ARPU does not include mobile ARPU. We calculate mobile ARPU by adding together, for each month in a given period, the total mobile telephony revenues (excluding revenues generated by customers of other networks roaming on our network and excluding wholesale revenues) for that particular month divided by the average number of mobile RGUs for that month and then dividing that sum by the total number of months in the period. DTH subscribers represent the number of individuals outside of our cable footprint across the six former Yugoslav markets (Slovenia, Serbia, Bosnia and Herzegovina, Croatia,

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Montenegro and Macedonia) who have subscribed to our DTH pay-TV services. We believe that most of these subscribers are outside of our cable footprint. Typically, DTH subscribers are only able to subscribe to DTH based pay-TV services and represent a single RGU. However we are re-selling ADSL services purchased from our competitors in the respective markets to DTH subscribers.

Average monthly revenue per user, or ARPU, is a measure we use to evaluate how effectively we are realising potential revenues from subscribers. ARPU is calculated by adding together, for each month in a given period, the total subscription-related revenues for that particular month divided by the average number of subscribers for that month and then dividing that sum by the total number of months in the period.

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Appendix 4 - Description of Key Line Items

Revenue. Revenues are generated from the following services: cable television, broadband internet, DTH-TV, value-added services (such as OTT), telephony subscriptions and telephony usage, content and other sources (primarily related to the sale of end-user equipment). Revenues generated from our bundle subscriptions are allocated to the individual products of standard cable, broadband internet and telephony subscriptions based on the individual product prices for each product as a percentage of the sum of the individual product prices. Revenue for these services is charged and recognised in the period in which these services are provided. We recognise revenues for connection fees upon delivery of installation and we defer and amortise connection fees over the average remaining useful life of the customer relationship. Other income. Other income arises mainly from the sale of programming rights, advertising and lease of cable network. Content cost. Content costs include author rights and royalties we pay to procure our content, and include fees paid to channel providers, primarily related to foreign television channels. Our content fees are predominantly determined on a flat monthly amount and to a lesser extent on a per-subscriber basis.

Satellite capacity cost. Satellite capacity costs relate to the lease of satellite capacity from third-party providers, which currently is EUTELSAT. These costs are impacted by the type and amount of commercial discounts obtained from satellite providers. Link and interconnection cost. These costs relate to fees payable in order to transfer data over third-party networks. Internet connection links are leased from various parties.

Materials cost. Materials cost include costs to procure set-top boxes, other products, such as telephones and routers, and materials used to connect subscribers to our network.

Staff costs. Staff costs include wages and salaries, social security costs, pension costs and other post-employment benefits and the cost of temporary and external personnel, adjusted for own work capitalized based on direct labour hours spent on projects which are capitalized.

Depreciation cost. Depreciation cost relates to the depreciation and impairment of our property, plant and equipment over their useful lives.

Amortisation of intangible assets. Amortisation of intangible assets relates to the amortisation and impairment of our intangible assets over their useful lives. Our intangible assets include our customer base and direct subscriber acquisition costs, which, for our cable and DTH customers, are capitalized and amortised over the estimated useful life of the customer relationship. For our mobile customers, subscriber acquisition costs are capitalized and amortised over a twenty-four month period (the estimated life of the post-paid

35 9M 2016 HIGH YIELD REPORT

customer contract), while our mobile customer base is capitalized and amortised over its estimated useful life. Intangible assets also include goodwill, computer software, licenses and content such as sport rights. Other operating expenses. Other operating expenses includes rent of premises, poles and ducts, marketing and promotion expenses, legal and administrative fees and maintenance costs. Finance income. Finance income includes interest income on funds invested (including short-term bank deposits) and foreign currency gains. Finance costs. Finance costs include interest expense on borrowings and foreign currency losses. Income tax (expense)/benefit. Income tax (expense)/benefit comprises current and deferred income tax and is recognized in our statement of comprehensive income, except to the extent that such expense or benefit relates to an item that is recognized as equity in our balance sheet or in our statement of other comprehensive income. Operating income. Operating income represents the amount of profit from business operations, and includes total revenues less total operating expenses (which contains cost of goods sold, personnel expenses, contracted work, materials and logistics, marketing and sales, office expenses, other operating expenses, amortisation, depreciation and impairments).

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Appendix 5 - Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Our income and cash flow from operations are affected by changes in market interest rates. Some items on our balance sheet, such as cash and bank balances, interest bearing investments and borrowings, are exposed to interest rate risk.

Borrowings under our Revolving Credit Facility bear interest at varying rates, and as a result we will have interest risk with respect to this debt. We currently do not expect to enter into any interest rate hedging arrangements with respect to the debt under our Revolving Credit Facility. For fixed rate debt, interest rate changes affect the fair market value of such debt, but do not impact earnings or cash flow.

Currency Risk

As a result of our operations in various countries, we generate a significant portion of our sales and incur a significant portion of our expenses in currencies other than the euro. Our primary exposure is to Serbian dinar. For the year ended December 31, 2014, approximately 42% of our revenue were denominated in Serbian dinars and 58% was denominated in euro or other currency. The Bosnia and Herzegovinian mark is pegged to the euro, while Croatian kuna and Macedonian dinar are relatively stable. In March 2015, we entered into a EUR/USD currency hedge agreement, pursuant to which we hedge our exposure to the U.S. dollar. We entered into an additional EUR/USD currency hedge agreement in May 2016 pursuant to which we hedged the remaining portion of our exposure to the U.S. dollar for the year 2016.

Translation Risk

Translation risk is the risk that the value in euro of the consolidated profit and loss statement and balance sheet will fluctuate due to changes in foreign exchange rates connected with the translation of our subsidiaries that do not have the euro as their functional currency. Since November 2013, almost all of our indebtedness has been denominated in euro.

Transaction Risk

Transaction risk is the risk of exchange losses made by us from purchases and sales in currencies other than the local currency of the subsidiaries concerned.

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Appendix 6 – Critical Accounting Policies

For a description of our critical accounting estimates and judgments, see note 5 of our audited consolidated financial statements as of and for the year ended December 31, 2015. Our significant accounting policies are described in note 3 of these financial statements.