Annual Report 2010

Consolidated financial statements of freenet AG

freenet AG · Hollerstraße 126 · 24782 Büdelsdorf Key ﬁ gures

Overview Group

Result in € million 2010 2009 Q4/2010 Q3/2010 Q4/2009 adjusted¹ adjusted¹ adjusted¹

Third-party revenue 3,339.5 3,601.8 857.7 843.4 931.4 Gross proﬁ t 720.3 762.6 187.8 174.7 205.8 EBITDA 334.9 327.0 88.0 86.2 100.9 Recurring EBITDA 366.5 392.9 96.0 96.2 121.2 EBIT 145.5 124.6 40.7 40.1 48.7 EBT 102.6 36.7 30.9 31.1 28.1 Group result from continued operations 118.8 17.7 43.2 29.7 12.5 Group result from discontinued operations –6.3 238.8 –3.7 –1.1 232.0 Group result 112.5 256.5 39.5 28.6 244.5 Earnings per share (€) 0.88 2.00 0.31 0.22 1.91

Balance sheet 2010 2009 Q4/2010 Q3/2010 Q4/2009

Balance sheet total in € million 2,542.4 3,033.5 2,542.4 2,455.8 3,033.5 Shareholders’ equity in € million 1,134.5 1,047.8 1,134.5 1,095.1 1,047.8 Equity ratio in % 44.6 34.5 44.6 44.6 34.5

Finances and investments in € million 2010 2009 Q4/2010 Q3/2010 Q4/2009 adjusted¹ adjusted¹ adjusted¹

Free cash ﬂ ow², ³ 211.7 232.4 63.3 55.9 23.8 Depreciation and amortisation 189.4 202.4 47.3 46.1 52.3 Investments³ 26.6 69.9 8.0 5.9 18.4 Net cash³ –623.1 –789.8 –623.1 –677.8 –789.8

Share 2010 2009 Q4/2010 Q3/2010 Q4/2009

Closing price XETRA (€) 7.90 9.39 7.90 8.63 9.39 Number of ordinary shares (in thousand) 128,061 128,061 128,061 128,061 128,061 Market capitalisation (in €’000s) 1,011,682 1,202,493 1,011,682 1,105,039 1,202,493

Employees 2010 2009 Q4/2010 Q3/2010 Q4/2009

Employess at the end of period 3,972 4,394 3,972 4,049 4,394

1 The comparison fi gures have been adjusted retrospectively due to IFRS 5 (presentation of Next ID as a discontinued operation). 2 Free cash fl ow is defi ned as cash fl ow from operating activities, minus investments in property, plant and equipment and intangible assets, plus proceeds from the disposal of property, plant and equipment and intangible assets. 3 This information relates to the overall Group (including discontinued operations). Overview Mobile Communications segment

Customer development in million 2010 2009 Q4/2010 Q3/2010 Q4/2009

Mobile Communications customers 15.65 17.58 15.65 15.84 17.58 Thereof contract customers (excluding no-frills customers) 6.11 6.98 6.11 6.37 6.98 Thereof prepaid customers 7.58 9.15 7.58 7.56 9.15 Thereof no-frills customers¹ 1.97 1.45 1.97 1.91 1.45 Gross new customers 4.25 4.28 1.34 1.00 1.27 Net change –1.93 –1.54 –0.19 –0.69 –0.04

Result in € million 2010 2009 Q4/2010 Q3/2010 Q4/2009

Revenue 3,265.6 3,508.8 839.8 827.2 907.2 Gross proﬁ t 674.4 708.2 176.6 164.5 191.6 EBITDA 328.7 322.6 86.1 87.0 97.9 Non recurring items –26.7 –55.1 –5.2 –8.7 –15.1 Recurring EBITDA 355.3 377.7 91.3 95.8 113.0 EBIT 151.0 136.4 42.0 43.8 50.2 Non recurring items –26.7 –55.1 –5.2 –8.7 –15.1 Recurring EBIT 177.6 191.5 47.2 52.5 65.3

Monthly average revenue per user (ARPU) in € 2010 2009 Q4/2010 Q3/2010 Q4/2009

Contract customer (excluding no-frills) 24.0 24.2 24.3 24.5 24.1 Prepaid customer 3.2 3.0 3.3 3.4 3.1 No-frills-customer¹ 4.9 5.4 4.6 5.5 5.3

1 Starting in Q1/2010 including no-frills-prepaid. List of contents

To our shareholders ...... 2

Letter to shareholders ...... 5 Supervisory Board report ...... 9 The freenet share ...... 15 Corporate Governance report ...... 20

Group management report ...... 28

Business and macroeconomic conditions ...... 31 Assets, ﬁ nancial position and results ...... 36 Sustainability report ...... 43 Signiﬁ cant events after the reporting date ...... 45 Risk report ...... 46 Information required under takeover law according to section 315 (4) HGB . . . . 53 Compensation report of the Executive Board and the Supervisory Board ...... 55 Opportunities and forecast ...... 60

Consolidated ﬁ nancial statements ...... 64

Overview ...... 67 Consolidated income statement and consolidated statement of comprehensive income for the period from January 1 to December 31, 2010 . . . . 68 Consolidated balance sheet as of December 31, 2010...... 70 Schedule of changes in equity for the period from January 1 to December 31, 2010 ...... 72 Consolidated statement of cash fl ows from January 1 to December 31, 2010 ...... 73 Consolidated statement of movements in non-current assets as of December 31, 2010 ...... 74 Consolidated statement of movements in non-current assets as of December 31, 2009 (adjusted) ...... 76 Notes to the consolidated fi nancial statements of freenet AG for the fi nancial year 2010 ...... 78 Auditor’s Report ...... 153 Responsibility statement ...... 154

Further information ...... 156

Glossary ...... 159 Financial calendar ...... 163 Imprint, contact, publications ...... 164 1

Annual Report 2010

Consolidated financial statements of freenet AG To our shareholders

So much to communicate mobilcom-debitel’s contract customers spent over 11,000 years on the phone in 2010! In addition, our customers sent over 500 million characters in SMS messages—contain- ing words of love, appointments, confi rmations and wishes. The Product Management department supports our customers’ ever increasing need to communicate with a number of innovative, low-cost tariff s and hardware off ers. Kerstin Niemann, Product Manager Consumer Tariff s:

“My motto is: a smile adds beauty to any conversation! Our new smartphones with FaceTime video telephony make it possible. My colleagues and I combine the latest smartphone technology with the right tariff s and aff ordable options to make sure our off ers are always up-to-date.” To our shareholders An unsere Aktionäre: Brief an die Aktionäre 5

Letter to shareholders

From left to right: Stephan Esch, Chief Technical Offi cer (CTO); Christoph Vilanek, Chief Executive Offi cer (CEO); Joachim Preisig, Chief Financial Offi cer (CFO)

Following the debitel acquisition, freenet AG completed a strategic realignment in 2009 and subsequently positioned itself among its competitors as the biggest network- independent telecommunications provider in the German market. Today’s freenet Group off ers its customers a comprehensive portfolio of services and products, primarily in the fi eld of mobile voice and data services. Among the targets we had set for 2010 were: ■ To continually improve internal processes and services with a view to “operational excellence”, and related to this ■ To secure long-term profi tability and strong cash fl ow for freenet AG.

As a result, we now look back on a positive fi nancial year 2010. For instance we achieved a recurring Group EBITDA—adjusted for one-off items—of 366.5 million euros and free cash fl ow came to 211.7 million euros. The road to achieving this was marked by many small and large successes in the consistent implementation of our goals and by the hard work of all our employees and managers. All of them deserve our thanks for their tireless eff orts, including those who left during the course of 2010. Our thanks also go to all our loyal customers and shareholders. As in the previous year, we systematically focused on valuable contract relationships in new customer acquisition and existing customer management. As expected, this has reduced the customer base to currently 15.65 million. We also expanded our range of products and tariff s, especially in mobile internet as well as in the traditional mobile communications, to allow us to participate in the sustained positive trends in the fi elds

Annual Report 2010 6 An unsere Aktionäre: Brief an die Aktionäre

of data and smartphones. As a result, data revenue share in postpaid mobile communications increased during the year, to 11.4 percent at the end of December 2010. Monthly average revenue per contract customer (ARPU) stabilised at 24 euros across the full year. The introduction of the Apple iPhone 3G and 3GS, and later of the Apple iPhone 4, was an important milestone. From the fi rst half of the year freenet AG was the distribu- tor of these phones alongside Deutsche Telekom, off ering them in its own shops, in all Media-Markt and Saturn branches and at select retailers. Since the fourth quarter, freenet AG has also marketed the Apple iPhone in cooperation with the network operators Vodafone and O₂. Overall, the smartphone share rose to 70 percent in 2010, and we have gained over half a million mobile internet customers. In the second half of 2010 freenet AG established an innovative tariff concept with its new “free” tariff . It takes advantage of freenet AG’s special positioning as a network- independent service provider, thereby giving customers maximum independence in their decision-making. Using a modular principle, customers can compile a customised mobile communications tariff according to their individual needs, choosing between D-network, O₂ and E-Plus each month. This tariff campaign was accompanied by a complex brand-building and -selling campaign which included about 4,800 TV commercials and advertisements in German media as well as a high-attention PR tour of German cities with a large Statue of Liberty. Independence in consultation and choice of tariff is a key component of our brand core, and is excellently represented by “Liberty”. In the discount sector, freenet AG regularly occupies top positions in the respective categories of infrequent, normal and frequent callers. Over the course of 2010, this competitive positioning was reinforced through new off ers related to mobile voice and data services. As a result, we signifi cantly increased our customer base in this segment by more than half a million. This package of new initiatives and products puts us well on our way to creating the basis for sustained and stable results for freenet AG. In the past fi nancial year we generated revenue of 3.34 billion euros, compared with 3.60 billion euros in 2009. The Group result from continued operations increased from 17.7 million euros in 2009 to a total of 118.8 million euros—the Group result including discontinued operations amounted to 112.5 million euros. The Group’s net debt was further reduced by 166.7 million euros year-on-year, to 623.1 million euros. As a result, we—the Executive Board and Supervisory Board—will propose to the upcoming Annual General Meeting the payment of a dividend in the amount of 80 cents per share. This represents a payout ratio of 48 percent of free cash fl ow.

Annual Report 2010 An unsere Aktionäre: Brief an die Aktionäre 7

All these positive developments and successes have encouraged us in our strategic realignment and the related measures we systematically implemented in the past few months and quarters. At the same time they provide the direction and key objectives for the current fi nancial year: ■ By expanding our range of products and tariff s related to mobile voice and data services, we want to seize opportunities with the aim of further stabilising ARPU, especially in the contract customer segment. ■ The fi nal integration steps are now planned for our very complex IT migration project – one of the most elaborate in the German private sector with about 600 experts working intensively on it—which will unify the two remaining IT landscapes into a single system. ■ In the next few months we will extend our Retail+ programme, which has enabled us to achieve double-digit performance improvements in our shops, to our partners in independent specialist retail.

In view of these measures and the stabilising of our customer quality, we expect a positive overall development for the company in the months and quarters ahead. Accord- ingly, we expect recurring Group EBITDA of 325 million euros and free cash fl ow of over 200 million euros for the fi nancial year 2011. This takes into account a continued qualitative adjustment of the postpaid customer base by less than 500,000, and a positive development of the no-frills customer base. For 2012, from today’s perspective we are expecting a recurring Group EBITDA of over 300 million euros and a sustainably strong free cash fl ow of over 200 million euros. To allow our shareholders to participate appropriately in the positive development of freenet AG, the adopted fi nancial policy stipulates that between 40 and 60 percent of future free cash fl ow will be distributed as dividends. For the fi nancial year 2011, we aim to propose to the Supervisory Board a dividend payment in the amount of 80 cents per share. In order to meet these objectives and secure the long-term success of your company and ours, we—management and employees of freenet AG—will systematically continue our committed work during the current fi nancial year.

Christoph Vilanek Joachim Preisig Stephan Esch

Annual Report 2010 8 An unsere Aktionäre: Brief an die Aktionäre

Annual Report 2010 Chairman of the Supervisory Board Chairman of theSupervisory Kraemer,Thorsten responsibilities Board. within theExecutive communicationsthe mobile business IT and examination optionsfortheGrou ofstrategic consultations withthe The meetings. Board in Supervisory thevarious upon decided issues and Many substantive werediscussed ofassociation. thearticles itby lawand upon incumbent functions advisory and visory In thefi with the Executive Board Supervision and advice in an ongoing dialogue 2010. Board In thefollowing, theSupervisory report Board Supervisory attended fewer than half of the meetings. Each of the committees met in full in 2010. in full met in ofthecommittees 2010. Each fewerthanhalfofthe meetings. attended in met full. Board theSupervisory meetings At theother atanother fi meeting. wereabsent members two and meetings, two from absent was onlyonemember review: during percent theyear under than94 more conference decisions calls took additionally procedure. by and written forcomplaint. gave nocause Executive Board and was kept informed of current issues events. ofcurrent kept and was and informed Board Executive future withthe alignment and strategic in meetings prospects thecompany’s discussed Furthermore, latest business developments. ofthe meetings offormal outside informed members Board also kept theSupervisory Board Executive notice. The were convened atshort meetings consideration, required wherenecess resolutions formal passed Board theSupervisory deliberation, reviewand after and reports Board’s on theExecutive onthe based Board full by theSupervisory ofmaterial signifi businessAll transactions in close newbusinesspossible segments, co onthemobile toregard thefocus with alignment, continued strategic thecompany’s Board theExecutive Furthermore, on these reviewed and targeted, and planned thedeviations ofthe Board the Executive in with detail discussed Board Inparticular, theSupervisory meetings. committee and plenary Board atSupervisory questions proactively, answered and and onrequest both Board, to theSupervisory documents and reports provided Board theExecutive this end, situation in current writing. To and and verbally both development strategic planning, corporate business onthecompany’s development, comprehensivelylarly and reported of decisions onthemanagement fundamental in all Board involved ofthecompany. theSupervisory management Board Executive The of regarding themanagement The Supervisory Board regularly advised th regularlyadvised Board Supervisory The Attendance at the Supervisory Board meetings was again very high and averaged high averaged and again was very meetings Board attheSupervisory Attendance In thefi The proper,The eff nancial year 2010 too, the Supervisory Board diligently performed thesuper- diligently Board performed theSupervisory too, nancial year 2010 nancial year 2010, the Supervisory Board held four actual meetings and four four and meetings actual heldfour Board theSupervisory nancial year 2010, ective and effi and ective the company and constantly monitored and supervised its its supervised and monitored constantly the company and cient running of the company by the Executive Board cient running ofthecompany Board by theExecutive mmunications businessmmunications theidentifi and reports on its activities during thefi activities onits reports consultation with the Supervisory Board. Board. consultation withtheSupervisory business development from what has been business fromwhathasbeen development cance tocance in thecompany werediscussed Executive Board’s reports. Based likewise Based reports. Board’s Executive the Chairman of the Supervisory Board Board theChairman oftheSupervisory Executive Board focused especially onthe especially focused Board Executive Accordingly, no Supervisory Board member member Board Accordingly, noSupervisory system landscapes, and thedistribution of and landscapes, system the basis of the documentation provided. provided. thebasis ofthedocumentation p, thecontinuation oftheintegration of To shareholders: our the company at an early stage and regu- and thecompany atanearlystage ary. Where current business transactions business current transactions Where ary. e Executive Board in its decision-making in its Board e Executive Supervisory Board report Board Supervisory Annual Report 2010 cation of nancial nancial year ve ve 9

To our shareholders To our shareholders Annual Report 2010 10 To shareholders: our Supervisory Board report Board Supervisory further development of the compensation syst ofthecompensation development further for energy marketing atthis Mo for energy meeting. plans its presented also Board Executive The in communications market. themobile ments Board options for operational improvements improvements optionsforoperational Board pliance with the German Corporate Governance Code. Code. Governance Corporate pliance withtheGerman areso passed and ID GmbH ofNext the sale meetings. actual in participation forphone and heldasconference calls, meetings committee and Board for Supervisory will fees waive attendance Board theSupervisory From of2010, thethirdBoard. quarter ofavoluntary theintroduction was meeting wa withMr. Krieger mination agreement Axel responsibilities accordingly.located within Board theExecutive to theter- this, Further Mr. Preisig Joachim asChief Financial Offi about possible alternatives to the current loan-based fi alternatives possible to loan-based thecurrent about topic thediscussion was Another Board. in withtheExecutive detail discussed was 2011 results from the external au fromtheexternal results theSupervisor ownexamination, onits Based General Meeting. to theAnnual proposed to resolutions be Board theSupervisory and 2010 Meeting eral withtheassistance ofexternal discussed, 2014. 31, to December extended was Board Executive ofMr. ofthe theappointment landline asamember Stephan Inaddition, business. Esch services network narrowband for outsourcing 2010. 12, onApril members ofresponsibilitiesbution Board oftheExecutive thereby formally adopted. consolidated fi by theannualand approving mittee together with theexternal au re The 2009. 31, asofDecember statements take adequately into thatwould account Board long-termExecutive incentives. forthe system discussing ofacompensation meetings thedevelopment several spent In matters. Board withExecutive dealt also ofintegration ontheprogress reported and compliancetion and withloanterms fromfi business thecurrent fi and discussed and regularlypresented meetings The Supervisory Board meetings Two plenary meetings were held after the end ofthefi theend were heldafter Two meetings plenary discussed Board theSupervisory 22, 2010, In aconference call onDecember session appointed Board theSupervisory In aconference 27, call onAugust session 2010, to discuss withtheExecutive 2010 ofJuly5, themeeting used Board Supervisory The In thefollowing onDecember meeting to develop- withmedium-term deal used was 2010 20, ofSeptember meeting The In a session held as a conference call on May 17, 2010, Supervisory Board members members Board Supervisory In asession heldasaconference call onMay 17, 2010, amodel discussed Board theSupervisory 2010 In aconference 19, call onApril modifi Board theSupervisory by circulationIn aresolution procedure, consolidated fi withtheannualand dealt 2010 15, onMarch meeting The ditors and followed thereco followed and ditors ditors fromtheauditingditors fi cer with eff reover, the Supervisory Board discussed the discussed Board reover, theSupervisory legal advisers, the agenda for the Annual Gen- fortheAnnual theagenda advisers, legal particular, the Supervisory Board members members Board particular, theSupervisory nancing agreements with the lending banks, withthelending banks, nancing agreements 6, 2010, theplanning forthefi 2010, 6, sults of the annual audit were discussed oftheannualauditwerediscussed sults of the IT system landscapes. The meetings meetings The landscapes. of theITsystem lution with regard to the statement ofcom- tolution withregard thestatement self-restraint agreement by the Supervisory self-restraint by theSupervisory agreement and theexpansion ofthebusinessand model. s decided on. Another major subject ofthis majorsubject Another on. s decided and the associated restructuring ofthe restructuring theassociated and y Board raised no objections to theaudit noobjections raised y Board em for the Executive Board atthis meeting. Board em fortheExecutive nancial statements, which were nancial statements, ect from October 1, 2010 and real- and 1, 2010 fromOctober ect nancing. rm rm PricewaterhouseCoopers. mmendation oftheauditcom- mmendation nancial nancial year. nancial nancial year ed thedistri-ed nancial situa- nancial this report. “Audit consolidated fi oftheannualand fi solidated substance. oftheinvestigation as theresults sees Board Supervisory The investigation involving checks. anindependent spot out toKPMG carry Offi allegations theChief against Executive content of committee meetings. committee of content onthe meeting plenary Board to theSupervisory reports ofthecommittee chairperson chairs all oftheco Board the Supervisory Chairman of The individual cases. to in thecommittees delegated some also was ity th To thatlegislation theextent permits, Board. by theSupervisory passed to resolutions be and session in plenary addressed be fi and committee of oneexecutive Schneider. business current developments. supervised and monitored also committee The sions. ses- oftheplenary in thepreparation reviewing optionsand strategic Board Executive wereheldin 2010. meetings Atotal committee executive time. offour taken in good areso nodelay and bear can that thematter provided ofprocedure, rules in accordance Board’s Board withtheExecutive Executive is formeasures required whereapproval Board in place resolutions pass oftheSupervisory can executive committee The Board. visory onkey oftheSuper- advises executive committee resolutions issuesThe prepares and Executive committee to effi In order deal Work of the Supervisory Board committees Supervisory Board. Supervisory subject Board, oftheExecutive ing members in place resolutions oftheSuperv passes regularreview. committee The its and system thecompensation Board, of theExecutive concerning thecompensation Board to forresolution theSupervisory proposals submits theSuperv prepares committee personnel The Personnel committee The meeting of March 24, 2011 focused on the examination of the annual and con- ontheexamination oftheannualand focused 2011 24, ofMarch meeting The 27, the 2011 ofJanuary At themeeting Members: Thorsten Kraemer (Chair), Maarten Henderson, Franziska Matthias Oelte, (Chair), Henderson, Kraemer Maarten Thorsten Members: to advice the provided and Topics werethesupport atthemeetings discussed nancial statements as of December 31, 2010. Details are set out in the section in out thesection areset Details 2010. 31, asofDecember nancial statements ciently with its duties, theSupe duties, ciently withits ve committees. These committees prepare topics to topics prepare committees These ve committees. nancial statements forthefi nancial statements e Supervisory Board’s decision-making author- Board’s e Supervisory isory Board about personnel matters regard- matters personnel about Board isory mmittees, except the audit committee. The The except theauditcommittee. mmittees, cer. Ithadcommissioned theauditing fi Supervisory Board dealt withanonymous dealt Board Supervisory lution of the Supervisory Board cannot be cannot be Board lution oftheSupervisory proof thattheanonymous accusations proof lack to the mandatory responsibilitiesto of the the mandatory To shareholders: our isory Board’s personnel resolutions. It resolutions. personnel Board’s isory and transactions to be carried out by the out carried to be transactions and rvisory Board hasestablished atotal Board rvisory Supervisory Board report Board Supervisory nancial year 2010” of nancial year 2010” Annual Report 2010 rm 11

To our shareholders To our shareholders Annual Report 2010 12 To shareholders: our Supervisory Board report Board Supervisory conference call. Anderleit. convened during thefi not Itwas 1MitbestG. clause (3) 31 in section ofachieving described thetask the purpose with MitbestG (3) is committee 27 in mediation established accordanceThe withsection committee Mediation with theauditor (in particular ofprofi fortheappropriation aswell astheproposal statements, concerning consolidated fi theannualand Board oftheSupervisory resolutions the prepares and compliance internal and auditfunction system, risk management monitoring theeff oftheaccounting process, is auditcommittee withques concerned The Audit committee Joachim Halefeld. members. Board Executive with optionsforreforming thelong-term co extensively dealt also committee The contracts. service Board regulations in Executive Krieger, Axel thediscus member tive Board with the audit 2010, requesting with theaudit2010, Vodel. commissioning and theaudit. independence, to theauditors conduct Corporate oftheGerman 7.2.1 to section fi thehalf-year and report reports the quarterly accounting Other issues withtheauditors. regularlyreoccurring discussed members committee The internaland auditfunction. internal and control system ofcompliance, system risk status management company’s consolidated fi the annualand of theapproval session to theplenary recommended committee The business. DSL issues thedeco others herewereamong PricewaterhouseCoopers as auditors. withtheparticipatio items werediscussed any services). and additional offees theagreement points, nancial statements forthefi nancial statements Besides thereorganisation oftheExecutiv Besides one and meetings heldatotal committee actual ofthree thepersonnel In 2010, Members: Thorsten Kraemer (Chair), Kraemer Franziska Dr. Thorsten Bahlmann, Claudia Arnold Oelte, Members: Members: Thorsten Kraemer (Chair), Kraemer Prof. Thorsten Claudia Dr. Anderleit, Thoma, Helmut Members: Members: Maarten Henderson (Chair), Henderson Dr. Schneider, Matthias Steff Christof Maarten Aha, Members: superv and monitored closely committee The ateachofwhich individual agenda wereheld, A total ofsix meetings actual nancial year 2010. rst half-year of 2010. The committee also dealt intensively dealt also committee The half-yearrst of2010. nancial statements. The committee also inspected the inspected also committee The nancial statements. the audit assignment, thedete theauditassignment, the statement of independence by the auditors pursuant by pursuant theauditors ofindependence thestatement nsolidation of the STRATO Group and the and Group nsolidation oftheSTRATO Governance Code, monitoring theauditors’ Code, Governance n of representatives fromtheauditing fi n ofrepresentatives topics discussed at the meetings included included atthemeetings discussed topics sion of ontheharmonisation centred also mponents in the compensation system for system in thecompensation mponents tions of accounting, in particular the tions ofaccounting, in particular ectiveness oftheinternal control system, ectiveness as well asthereviewofconsolidated e Board following the departure ofExecu- following thedeparture e Board ised the annual audit for 2009. Major Major theannualauditfor2009. ised rmination of auditing focal rmination ofauditing focal t and the agreements theagreements t and nancial rm en the auditors’ reports. the auditors’ oftheauditcoDetails information. further orprovide questions any to answer supplementary Board visory Schneider. cooperation. theresultingnetwork-based voice and network internet to and AG, QSC access services ofthefi with thetransfer dealt also committee The technical details. their and risks fi theSupervis and theauditcommittee of both in thediscussion consolidated fi oftheannualand part took auditors The 2011. 24, onMarch Board in oftheSupervisory and themeeting 2011 4, March and 2011 11, within onFebruary werediscussed theauditcommittee They unqualifi also consolidatedof these fi in ontheIFRS based HGB 315a with section fi consolidated anunqualifi issued auditors The 2010. on July6, Meeting General by in theAnnual accordance passed Board with theresolution visory co auditwas The amMain. Frankfurt chaft, fi auditing AG thefreenet and (HGB) Commercial Code Board by theExecutive prepared 2010 ber 31, annualfi The for the fi Audit of the annual and consolidated fi in times 2010. three met signifi thatareofparticular IT integration projects IT/networks monitoring and The ofsupervising withthetask is committee charged IT/Networks committee convened during thefi not Itwas Meeting. to General theAnnual forrecommendation Board the Supervisory to candidates forupcoming suitable elections nominations proposes committee The Nominations committee ndings of the audit and made themselves themselves made ndings oftheaudit and Members: Thorsten Kraemer (Chair), Kraemer Achim Thorsten Weiss, Franziska Matthias Members: Oelte, The reports on these matters were sent on time to all Supervisory Board members. members. Board ontime to weresent all Supervisory matters onthese reports The werethemonitoring Issues discussed and (Chair), Kraemer Dr. Thorsten Achim Bahlmann, Weiss. Arnold Members: rm PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesells- Aktiengesellschaft rm PricewaterhouseCoopers nancial year 2010 nancial statements forthefi nancial statements ed. nancial statements as of December 31, 2010 were prepared in accordance wereprepared 2010 31, asofDecember nancial statements nancial year 2010. nancial statements and of the Group management report was was report management oftheGroup and nancial statements mpany’s early risk-detection system were also included in included werealso earlyrisk-detection system mpany’s nancial year from January 1, 2010 to Decem- 2010 1, nancial year fromJanuary mmissioned by theChairman oftheSuper- available Super- to and theauditcommittee ternational accounting standards. The audit The ternational accounting standards. management report were audited by wereaudited the report management in accordance oftheGerman withtherules To shareholders: our ory Board. They reported onthematerial reported They Board. ory ed auditor’s report. The freenet AG freenet The report. auditor’s ed supervising of the IT migration projects, oftheIT migration projects, supervising nancial statements in the meetings in themeetings nancial statements cance for the Group. The committee committee The fortheGroup. cance nancial statements Supervisory Board report Board Supervisory Annual Report 2010 xed- 13

To our shareholders To our shareholders Annual Report 2010 14 To shareholders: our Supervisory Board report Board Supervisory supports the Executive Board’s proposal proposal Board’s theExecutive supports Following th itwiththeauditors. discussed ofprofi fortheappropriation theproposal examined Board theSupervisory 2011, ofprofi fortheappropriation proposal Board’s Executive ofFebrua oftheauditcommittee mendation fi consolidated fi and th oftheauditcommittee, recommendation of withtheresults agreed and no objections ofprofi fortheappropriation proposal Board’s Executive the and report themanagement statements, Chairman Kraemer Thorsten Board Supervisory The 2011 24, March Büdelsdorf, in adiffi hardwork mitment and all empl and Board oftheExecutive members ofthecompany and support his constructive 31, 2010. asofDecember Board theExecutive left Krieger Axel Executive Board in thefi to changesweremade thecomposition of No Board Supervisory Changes to the Supervisory Board and the Executive Board nancial statements arethusformally adopted. nancial statements Furthermore, the Supervisory Board has passed—in accordance withtherecom- has passed—in Board theSupervisory Furthermore, theconcluding result After The Supervisory Board would also like to express its thanks and appreciation to appreciation the and like also would thanks its to Board express Supervisory The like would Board to thank Supervisory The nancial year 2010. nancial statements at the meeting on March 24, 2011. The annual The 2011. 24, onMarch atthemeeting nancial statements cult environment. s of its audit oftheannu s ofits for the appropriation ofcumulative profi for theappropriation is, the Supervisory Board agreed with and withand agreed Board theSupervisory is, e Supervisory Board approved theannual approved Board e Supervisory ry 16, 2011—a resolution concerning resolution the 2011—a 16, ry the auditors’ audit. In audit. the auditors’ Group management report, aswell asthe report, management Group oyees of the Group for their personal com- fortheiroyees oftheGroup personal for his many fortheGroup. ofwork years the Supervisory Board or its committees committees orits Board theSupervisory Mr. Krieger for his good cooperation, for Mr. cooperation, forhis Krieger good al and theconsolidated fi al and t. In its meeting on March 24, 24, onMarch meeting Inits t. raised Board theSupervisory t, accordance withthe t and nancial t. 100 120 130 110 freenet AG is listed, rose by 4.1 percent during percent theyear.freenet AG by is 4.1 rose listed, in which TecDAX, The in 2010. percent of34.9 achievingstill, anannualperformance again mark forthefi 7,000-point by rose DAX from theongoing The upswing. thatprofi which those wereamong ofindustrial stocks, high proportion highly was markets variable. strong its domestic economy was, share economy was, domestic its strong aff was onhowmuchacountry Depending earnings. many time companiesthe same wereableto fi crisis debt eurozoneThe ofseveral countr International fi 2009) 30, closing price onDecember =XETRA 100 (indexed; Performance of the freenet share over the past twelve months share freenet The 2010. fl eurosonMa annual lowof7.25 reaching its theprice fell, Inthefollowing weeks, 2010. 11, eurosonMarch to rose 11.07 and February slight in thefi declines After thefi shareprice started freenet’s shares freenet 80 90 60 70 nancial markets in 2010. However, dueto economic anoverall recovery, robust nancial in at 2010. markets uctuated between 7.35 euros and 9.11 euros, closing at 7.90 euros on December 30, 30, closing eurosonDecember at7.90 euros, 7.35 9.11 eurosand between uctuated In an international comparison, German indices benefi In aninternational German comparison, a.1 e.1 ac 0Arl1 a 0Jn 0Jl 0Ag 0Sp.1 c.1 o.1 Dec.10 Nov. 10 10 Oct. 10 Sept. Aug. 10 July10 June10 May 10 April10 March 10 Feb. 10 Jan. 10 TecDAX freenet AG nancial markets rst weeks oftheyear, weeks rst frommid- theshareprice recovered rst time since 2008. The MDAX developed better better developed MDAX The time sincerst 2008. nancial year 2010 at 9.39 euros on January 4, 2010. 2010. 4, eurosonJanuary at9.39 nancial year 2010 price development in theinternationalprice development fi ies dominated the mood oftheinternational ies dominated themood y 25, 2010. Thereafter, the freenet shareprice Thereafter, thefreenet 2010. y 25, post surprisingly revenues positive and post 16.1 percent during percent hit theyear and the 16.1 ected by theeurocrisis how ected and To shareholders: our ted in particular fromtheir inted particular The freenet share freenet The ted the most ted the most Annual Report 2010 nancial 15

To our shareholders To our shareholders Annual Report 2010 16 To shareholders: our The freenet share freenet The 580.7 thousand sharesin 2009. thousand 580.7 daily fi during volume trading thepast oftheyear,course to 147.5 compared million year. sharesin theprevious average The shareholder structure as of December 31, 2010 is asfollows: 2010 31, asofDecember structure shareholder date. atthereporting voting nolongerapplicable was rights (falling This notifi thethreshold). below also notifi both mermuth United AG Internet Mr. and Dom- Ralph GmbH. Holding viawhich MSP wereowned ofthevoting percent rights a total of12.14 in November, Also Drillisch percent. thatitheld AG announced to 4.84 amounted time AG’s freenet struct shareholder WpHG, ing rights (exceedinging rights In thethreshold). Mana thatJanusCapital stating announcement cent ofthevoting (exceeding rights theth thatitheld3.01 per- announced Classic Aktiengesellschaft Fund Management May 2010, us thattheyhadreduce 2010: sharerepresents Each shares. tered regis- into is eurosand divided 128,061,016 AG’sfreenet totals sharecapital 128,061,016 Shareholder structure through United Internet AG. United Internet through AG offreenet ofthesharecapital percent owns4.98 indirectly Mr. Ralph Dommermuth GmbH. Holding via MSP indirectly and directly of the voting rights, 12.14 percent that its voting AG in freenet hadfall rights that its of private and institutional abroad. and investors and of private in Germany percent. with3.01 Aktiengesellschaft Classic and Fund percent Management 3.09 According to thenotifi In all, 203.3 million freenet shares were traded via the XETRA system over system the via million theXETRA sharesweretraded freenet 203.3 In all, The largest shareholder in freenet AG in shareholder freenet is largest The aresultofthenotifi As In January 2010, Cyrte Investments and Telco and Cyrte Investments (Netherlands) B. Holding 2010, In January V. notifi Other major shareholders in freenet AG in freenet majorshareholders Other GmbH. is Investment percent heldby DWS A shareof4.84 The free fl free The oat thus amounts to 71.94 percent, and is distributed among a broad base is abroadbase and distributedamong percent, to 71.94 oat thusamounts d their share of voting rights in the company to 0.00 percent. In percent. d their shareofvoting in thecompany rights to 0.00 ed us that they held a share of 4.98 percent ofthevoting percent rights usthattheyheldashareof4.98 ed cations of voting rights received pursuant to section 21 to section pursuant ofvoting received cations rights cations of voting rights received in the year under review, in ofvotingcations received theyear under the rights 1.00 euroofthesharecapital. 1.00 nancial year was 794.1 thousand shares, versus versus shares, thousand nancial year 794.1 was cation was required because the attribution of theattribution because required was cation November,notifi GmbH Investment DWS ure changed asfollows duringure changed thefi reshold). In October 2010, we received an wereceived 2010, InOctober reshold). en below the5-percent th en below (falling below the threshold), 3.90 percent of percent (falling 3.90 thethreshold), below Drillisch which holdsatotal AG, of are Janus Capital Management LLC Management with are JanusCapital gement LLC held 3.09 percent ofthevot- percent LLCgement held3.09 reshold, and atthat and reshold, nancial nancial year ed us ed –0.05 euro for the past fi euroforthepast –0.05 theundiluted/dilute and in 2009) (0.14 euro eurosin 2009. to 2.00 compared euro at0.88 reviewstood Undiluted/diluted in theyear under share(EPS) per earnings Earnings per share MSP Holding GmbH Holding MSP United Internet AG/ Internet United iue annsprsaei .82.00 128,061 2.00 1.86 128,061 0.88 0.14 128,061 1.86 0.88 0.14 128,061 –0.05 0.93 (diluted) inthousand outstanding ofshares average Weighted –0.05 (undiluted) inthousand outstanding ofshares average Weighted 0.93 in€(diluted) operations discontinued sharefrom per Earnings in€(undiluted) operations discontinued sharefrom per Earnings in€(diluted) operations continued sharefrom per Earnings in€(undiluted) operations continued sharefrom per Earnings in€ share per earnings Diluted in€ share per earnings Undiluted The basis isThe forcalculating EPS theweighted average ofsharesoutstanding. euro at0.93 stood Undiluted/diluted in 2010 fromcontinued operations EPS Dommermuth Dommermuth Drillisch AG, Drillisch Mr. Ralph Mr. Ralph Free fl Free 12.14 % 12.14 71.94 % 71.94 4.98 % oat nancial year (1.86 euroin 2009). nancial year (1.86 d EPS from discontinued operations was was fromdiscontinuedd EPS operations To shareholders: our Source: freenet AG, December 31, 2010 December AG, freenet Source: 002009 2010 The freenet share freenet The Annual Report 2010 3.01 % 3.01 Aktiengesellschaft Management Fund Classic % 3.09 Management LLC Capital Janus % 4.84 GmbH Investment DWS adjusted 17

To our shareholders To our shareholders Annual Report 2010 18 To shareholders: our The freenet share freenet The and strategic growth opportunities. growth strategic and million 50 ofaround eurosis adequate. and appropriate reserve that aliquidity fl thecompany temporary against which protect reserves prerequisite fl foroperational necessary Another ■ ■ ■ 1 Free cash fl cash Free 1 in thefi payments Following realignment thestrategic ofth payoutTarget and ratio structure capital strategy Financial share. per cents of80 in payment theamount adividend Board fl cash offree percent 48 of apayout ratio This represents earnings. sharefromretained per cents of80 amount forthefi ofadividend thepayment Meeting General Annual onJuly7, paid out was 2010. forthefi dividend AG thefreenet Annual 2010, July6, On Dividend which withthefollowing parameters: wemeasure three theintere company thusrepresents and goal hastheprimary This strategy strategy. and intangible assets. intangible and equipment and plant ofproperty, disposal the from proceeds plus assets, intangible and equipment and

Furthermore we must protect the company’s ability to thecompany’s invest protect in thecore wemust business Furthermore long-term. to percent ratio over 50 equity to its increase strives i. company ratio, The equity The to total equity assets. ofshareholders’ theratio e. of5.0. afactor fall below company intends The business. covered to fromtheoperative be can notthe debt from interest payments Itallowsincome. thecompany to ensurethatthenecessary interest cover,The i. netinterest and EBITDA recurring therelationshipe. between to weareaimingregard 2.5. of1.5 corridor foratarget factor, debt i. The Inthis to ofeconomic theratio EBITDA. netdebt recurring e. For thefi to the to have propose decided Board theSupervisory and Board Executive The For freenet AG, the capital structure is an important pillar ofthefi is animportant structure thecapital AG, For freenet ofthefi cornerstones The ow isdefi ow nancial year 2011, the Executive Board aims to propose to the Supervisory aims to to theSupervisory Board propose theExecutive nancial year 2011, nancial year 2009 in the amount of 20 cents per share. The dividend dividend The share. per cents of20 in theamount nancial year 2009 nancial year under review, and in early 2011 announced afi review, announced nancial in year under early 2011 and ned as cash fl ascash ned ow¹. nancial strategy areasfollows: nancial strategy ow from operating activities, minus investments in property, plant plant inproperty, minusinvestments activities, operating from ow General Meeting approved thepayment ofa approved Meeting General sts of shareholders and lenders alike. lenders and ofshareholders sts e company, dividend AG resumed freenet ofcontinually enhancing ofthe thevalue exibility is to ensure adequate liquidity is liquidity exibility to ensure adequate uctuations. The company feels The uctuations. nancial year 2010 in the nancial year 2010 nancial strategy, nancial http://www.freenet-group.de/investor-relations AG equinet Bank AG, Bank Seydler Brothers Close shareis information available onthefreenet Further at: Continuous trading sponsor: Designated Trading type: model FNTGn.DE code: Reuters instrument FNTN Symbol: parameters trading XETRA Frankfurt standard: market/Prime Regulated HDAX, euros CDAX, Index, Market Midcap TecDAX, 128,061,016.00 value par Registered shareswithout 128,061,016 Stock exchanges: ofshares: Quantity capital: Share Index: market Regulated Class: Information onthesecurity standard Prime segment: Market AG freenet NA standard: Transparency share No-par-value Sector: WKN: A0Z2ZZ ISIN: DE000A0Z2ZZ5 Type ofshare: Name: Master data DAXsector Information on the freenet share Telecommunication, 1 Free cash fl cash Free 1 ratios will AGratios ensurethatfreenet achieves all objectives. oftheabove distributed asdividends. fl offuture cash percent free stipulates that40—60 in early2011 tive Board by theExecu- adopted policy dividend The return. annualcash by way ofanattractive fi nancial liquidity, allows shareholders our and intangible assets. intangible and equipment and plant ofproperty, disposal the from proceeds plus assets, intangible and equipment and We have defi also Adherence to the target corridors which toAdherence wehave corridors thetarget defi ow isdefi ow ned as cash fl ascash ned ned a dividend policy that, withou that, policy adividend ned Hannover,Düsseldorf, München Over-the-counter Stuttgart, Hamburg, Berlin, market: Technology Share All Share, Prime All Communication Wireless DAXsubsector ow from operating activities, minus investments in property, plant plant inproperty, minusinvestments activities, operating from ow to participate into thesuccess participate ofthecompany To shareholders: our t prejudice to value creation and t prejudice to creationand value ned for our relevant fi relevant forour ned The freenet share freenet The Annual Report 2010 ow¹ will be ow¹ nancial 19

To our shareholders To our shareholders Annual Report 2010 20 To shareholders: our Corporate Governance report 4. A member of the Supervisory Board has Board oftheSupervisory Amember 4. hasnot established noworforthefuture Board defi Supervisory The 3. In members. Board Supervisory and agelimit No Board is forExecutive laid down 2. to regard With members. Board insurance forits company D&O hastaken out The 1. below. except wherethereis in adecl cases Code, ve 2010 oftheMay26, the recommendations intends and to also comply in future 2010) with onMay 26, amended 2009/as on June18, contained in version thecurrent oftheGerm with theexception ofthedeviations listed 2010: in December Board Supervisory and website, Board issued by was theExecutive ofcomplianwhich like statements therecent committed to objectives. these are Group offreenet employees all and executives and Board Supervisory and Board value-driven and responsible Code Governance Corporate tives oftheGerman governance corporate responsible and of good to arecommitted theprinciples bodies supervisory and management AG its and freenet report Governance Corporate cant competitor of the company. (section 5.4.2, clause 4ofthe Code)“ clause competitor ofthecompany.cant 5.4.2, (section oftheCode) (3) and 5.4.1 (2) individually composition in eachspecifi its about ing proposals inappropriate wishes and to make members decisions concern- Board Supervisory vis-à-vis suchrestrictions other crit deems offema degree or“appropriate “diversity” in composition ofspecifi consideration for its Code) cl simply 5.1.2, dueto (section their age. ascandidates considered not should be experience personal great professional and opinion thatwell-qualifi itmakes nosense Board’s the Supervisory of the Code) (3) 3.8 this inappropriate. (section seems are thesame, Given thattheir duties members. Board ontheSupervisory impact have avarying excess therefore An would vary. members Board oftheSupervisory circumstances have uniformly onaccount set to ofthe be Moreover, anexcess would members. Board bly is forall agiven Supervisory duty as thereis novisible benefi ofanexcess is anagreement not intended, Board, oftheSupervisory the members AG has, freenet 2009, ofcompliance in statement December issuing last its “Since AktG, ofcompliance following 161 printed statement inThe accordance withsection management and control ofthecompany. and management Executive The t to the company associated with this. Acting responsi- t to Acting thecompany withthis. associated below, complied with the recommendations withtherecommendations below, complied aration to the contrary fromthecompany to thecontrary aration ause 6 and section 5.4.1, clause 2ofthe clause 5.4.1, section 6and ause an Corporate Governance Code (as Code Governance issued an Corporate ce available is onthecompany permanently taken on advisory functions forasignifi functions taken onadvisory rsion of the German Corporate Governance Governance Corporate oftheGerman rsion le representation“. The Supervisory Board Board le representation“. Supervisory The and identify themselves withtheobjec- themselves identify and eria for proposals about the election of theelection about eria forproposals equality principle, although the personal thepersonal although principle, equality c themes described in the Code as in theCode described c themes as well as the principles of transparent, oftransparent, as well astheprinciples c situation. (section c situation. (section ed people with people ed nite targets - tion provided no further details in regarding no.4. thedeviation stated nofurther tion provided the above mentioned deviations areeach mentioned the above tive Board in three meetings and discussed po discussed and meetings in three tive Board thisfortheExecu- examined to system approach thecompensation Board Supervisory constitute long-term incentives asoriginally thefi During intended. to long-termorder issued set The incentives. will basis have in years ofseveral components anassessment variable compensation atasustainabl aimed shall be members Board tochanges orextensions existing contract (VorstAG) came into came force,(VorstAG) whenever newco ontheAppropriateness of theAct After ofcompensation principles Basic Executive compensation Board report Compensation present system and the newly added statutory requirements. statutory thenewlyadded and system present to take into account theexisting both econom in order areextended, aresigned orifexisting contracts whenever newcontracts Board of is foraredesign striving Board visory theSuper- compensation, the ongoing comprehensive Board reviewoftheExecutive prac ifthepast thecase havewould been in thefi Board to fortheExecutive lowervariable compensation in out forsuchanevent th the rules set wi forannualvariable compensation agreed were agreements target discontinued noseparate was and practice theprevious 2010 primarilyaimed atthesustainable developmen the long-term theref and business objectives into refl force usuallycame was and ofthecompen ontheAppropriateness Act to theEBITDA ofasinglecomponents fi acquisition performanc customer quantitative which refl and practical and which arenon-confl system compensation future Board Executive Due to obligations legal Due ofconfi clause 3.10 In accordance withsection ect both the earnings indicators and the qualitative and thequalitative and and indicators theearnings both ect ected in agreements—confl annualtarget ected dentiality, the Supervisory Board member in ques- member Board dentiality, theSupervisory nancial year—which was practiced untilnancial the year—which practiced was e Executive Board employment contracts led led contracts employment Board e Executive the compensation system for the Executive fortheExecutive system thecompensation the compensation for the Executive Board Board fortheExecutive the compensation tice had been retained. Upon completion of retained. Upon tice hadbeen found in the remarks onthedeviations. in theremarks found To shareholders: our s, the compensation structure for Executive forExecutive structure thecompensation s, sation for the Executive Board (VorstAG) (VorstAG) Board fortheExecutive sation 2 of the Code, the explanatory remarks on remarks theexplanatory 2 oftheCode, th Executive Board members. As a result, aresult, As members. Board th Executive ore with a compensation system approach approach system ore withacompensation ntracts are signed, oriftherearesignifi aresigned, ntracts stock appreciation rights indeed nolonger indeed appreciation rights stock e development of the business. Therefore, Therefore, ofthebusiness. e development e. The linking The e. ofvariable compensation ssibilities forincentiv ic points ofcriticism to withregard ic points the t of the business. For these reasons, in reasons, Forthese t ofthebusiness. Corporate Governance report nancial year 2010 than than year2010 nancial icting with objectives withobjectives icting nancial year, the e components forthe e components Annual Report 2010 icts icts with cant 21

To our shareholders To our shareholders Annual Report 2010 22 rcBre³25126 409 1,192 1,082 680 62 1,153 29 212 1,101 137 400 142 1,110 267 367 216 211 331 233 620 424 1,043 299 230 53 205 400 503 400 327 –663 422 –362 –205 410 28 Spoerr⁴ Eckhard 575 Berger³ Eric 365 Axel Krieger 425 Esch Stephan Preisig Joachim 615 Christoph Vilanek² Axel Krieger Stephan Esch Preisig Joachim Christoph Vilanek (€’000s) fi the for Compensation (€’000s) fi the for Compensation To shareholders: our nancial year 2009 year nancial 2010 year nancial Corporate Governance report 4 Fixed compensation and other variable compensation until the termination of the employment agree- employment ofthe termination untilthe compensation variable other and 4 compensation Fixed agree- employment ofthe termination untilthe compensation variable other and compensation Fixed 3 from i. AG, period the for offreenet e. Board Executive tothe appointed being after Compensation 2 fi 2inthe IFRS with inaccordance measured compensation and compensation non-cash Incl. 1 fi 2inthe IFRS with inaccordance measured compensation and compensation non-cash Incl. 1 former members of the Executive Board in 2010. Board oftheExecutive members former ofpost-emp euros arising fromrestriction for Mr. eurosforMr. thousand Preisig, 595 thousand 1,015 resultin 2010: compensation of the following amounts rights, appreciation ofstock component compensation cash in theprov to thereduction ofnegativethe form fi ofthecompany. Board oftheExecutive to themembers In thefi asfollows: down appreciation programme for the full year2009. full the for programme appreciation stock the from compensation variable 2009; 23, 1toJanuary January from i. ment, period the for e. year2009. full the for programme appreciation stock the from compensation variable 2009; 30, 1toSeptember January from i. ment, period the for e. 2009. 31, toDecember May 1 compensation compensation In addition to the amounts set out in the above table, payments of 200 thousand thousand of200 payments in out table, theabove set toIn addition theamounts shownin was appreciation programme fromthestock variable compensation The ofthecompany is broken Board oftheExecutive ofmembers compensation The nancial year 2010, no new stock appreciation rights or stock options wereissued orstock rights appreciation nonewstock nancial year 2010, ,8 1221392,107 1,329 –1,202 1,980 ,2 ,9 ,0 5,617 1,107 2,590 1,920 Fixed Fixed gures in 2010 forMr. Preisig,gures in Mr.this 2010 Mr. and is due Esch Krieger; from stock appreciation rights¹ appreciation stock from rights¹ appreciation stock from ision for stock appreciation rights. Disregarding thenon- ision appreciation rights. forstock Variable compensation compensation Variable compensation Variable loyment competition clauses were made to weremade clauses loyment competition Esch and 874 eurosforMr. and thousand Esch Krieger. eurosforMr. euros 825 thousand Vilanek, Other variable variable Other variable Other compensation compensation compensation compensation nancial nancial year. nancial year. Total Total Board. wereissued warranties other or guarantees commitments. as aresultofthepension Board euros) 820 thousand areshownin personnel euros). thousand 1,827 year: (previous 2010 31, eurosasofDecember thousand totalled 2,096 Board oftheExecutive members Mr. and forMr. asformer Berger euros). Spoerr thousand DBOs The 244 year: (previous forMr. euros theDBO Preisig thousand to amounted 347 2010, 31, ofDecember As AG to overfreenet took Mr. commitment granted thepension Preisig by AG. debitel 2008, euros). ofSeptember 1, thousand As 1,128 year: euros forMr. (previous Krieger year eurosforMr. (previous Esch 518 thousand eurosforMr. thousand Vi 265 as follows: theDefi 2010, 31, ofDecember As May 1, 2009. to Mr. Vilanek onthe occasion Offi ofhis asChief Executive appointment Mr. Krieger. Inthefi in thefi rights appreciation stock options and euros). oftheExecut Mr. Berger members asformer and forMr. Spoerr 2010 31, totalling euroswereshownasofDecember thousand 148 euros). thousand Provisions rights appreciation forstock 719 year: Mr. Krieger (previous thou 392 year: euros forMr. (previous Esch eurosforMr. Preisig181 thousand (previous eurosforMr. thousand Vila 452 follows: (fai in 2009 when theyweregranted issued to Mr. rights appreciation Vilanek eurosto Mr. thestock to plus in claims, order cover Berger contractual of 508 thousand to amounted 4,04 HGB section 314 (1) no. 6a in accordance Board with oftheExecutive formembers thecompensation 2009, clauses) tocompetition 3,509 amounted asaresultofpost-employment Board oftheExecutive members to former payments (1) (cash-eff 314 HGB accordance no.6a withsection No loans were extended to any of the members of the Executive Board, and no and Board, oftheExecutive to any ofthemembers loanswereextended No year: euros(previous thousand of373 expenses time service past and Current to Mr. granted was and commitment pension Esch anindirect 2004, In November year, in theprevious As nocash-eff wereas theprovisions rights appreciation forstock 2010, 31, ofDecember As in in 2010 Board oftheExecutive paid to themembers compensation Overall, nancial year 2009, an indirect pension commitment was granted granted was commitment pension anindirect nancial year 2009, r value in 2). accordancer value withIFRS ective compensation was paid from stock fromstock paid was compensation ective nek (previous year: 424 thousand euros), thousand 424 year: nek (previous lanek (previous year: 115 thousand euros), thousand 115 year: lanek (previous thousand euros. In the previous year Intheprevious euros. thousand with their total value of 509 thousand euros with their total of509 thousand value To shareholders: our sand euros) and 56 thousand eurosfor euros) thousand sand 56 and for any of the members of the Executive oftheExecutive forany of the members year: 386 thousand euros), 30 thousand euros), thousand thousand 30 386 year: ive Board (previous year: 1,921 thousand thousand 1,921 year: (previous ive Board nancial year 2010. 4 thousand euros, including the payments including thepayments euros, 4 thousand expenses for the members of the Executive oftheExecutive forthemembers expenses ned Benefi : 386 thousand euros) and 1,416 thousand thousand euros) thousand 1,416 and : 386 ective compensation incl. the incl. compensation ective t Obligations (DBOs) were (DBOs) t Obligations Corporate Governance report cer as of Annual Report 2010 23

To our shareholders To our shareholders Annual Report 2010 24 To shareholders: our Corporate Governance report ■ ■ ■ ■ Berger: Eric and Krieger Eckhard Spoerr, Axel members Board Executive as well astheformer Stephan Esch member Board event fortheExecutive oftermination ofemployment contract. ending ofhis service of offi to claim forloss right compensation exists (prematurely) No ending. the employment astheold werethesame contracts including thenumb the level ofcompensation, which theexception continued With legally to of werereplaced by valid, newones. be to into thecompany came whenthemerger eff were transferred in eff contracts Service Premature termination of employment contract tofreenet AG areentitled thebenefi pens anindirect granted were each AG freenet.de oftheformer Board oftheExecutive all members 2004, In November Pensions ceasing employed to ExecutiveBoard be of the provisions event forthe ofamember Compensation

ce if a member of the Executive Board Board oftheExecutive ce ifamember pension). to amaximum ofone-third AG, offi freenet.de predecessor legal ofthecompany orits Board ontheExecutive year commenced of fi percent toshall amounting 2.5 receive apension Board oftheExecutive members birthday,From theaforementioned their 60th ofa months twelve either case, within, in ornotice is to is ended end served contract theservice mutual agreement cent whereby achievement oftargets) fortheremaining ofthecontract period ontheassumptionof100 per- (based bonuses and right to ofsalary The payment 12-month restriction does not apply. does restriction 12-month su Where later ofthe term. thanby theend not but ofemployment, from theend months oftwelve within aperiod conditions, to theother contractual subject remainciation exercised, in rights be force can and orinvalidity, in earnings capacity appre- all orin stock theeventreduction ofdeath, ordueto acomplete cause forany other good terminating contract his service later Inthe oftheterm. thanby theend not but ifthe other exercise within months, conditionsing aremet twelve period remain exercised ofthevest- regardless rights inappreciation be force can and isremain terminated in Ifemployment place. dueto all achangeofcontrol, stock will achieved, being objectives therespective and vestingof therelevant period Stock which exercisable have appreciation rights already dueto become theexpiry they reachtheageof27, to amaximum training, terminatingdren until ofschooling orvocational theend atthe when latest orlife co forthespouse annuity Survivor In particular, the company’s service contracts provide thefollowing provide benefi contracts In particular, service thecompany’s of Board oftheExecutive themembers terminationUpon ofemployment, ect with mobilcom AG and freenet.de AG before the merger themerger AG before withmobilcom AG freenet.de and ect ion commitment by freenet.de AG. ion commitment by freenet.de ones, including thetermsones, ofbenefi ts described under item 35 ofthenotes. item 35 under described ts change ofcontrol ofthecompany. total amount of the guaranteed pension. oftheguaranteed total amount is responsible himself forthe(premature) event of a member of the Executive Board Board oftheExecutive event ofamember mpanion, and orphan’s pension for any pension chil- orphan’s and mpanion, er of stock appreciation rights, thenew appreciation rights, er ofstock ch termination is due to good cause, the ch termination cause, is dueto good nal annualfi nal annualfi xed salary (guaranteed (guaranteed salary xed ect. The old contracts, oldcontracts, The ect. xed salary foreach salary xed ts in theevent of ts ts in the ts compensation amounts, stock appreciation ri appreciation stock amounts, compensation ■ There are no service contracts withany subsidiaries AG. offreenet contracts arenoservice There ■ ■ ■ 2009: Offi For theChief Executive ■ ■ 2008: 1, September Joachi Board oftheExecutive For themember

when theyreachtheageof27, to amaxi children training, terminating until of schooling orvocational theend atthelatest orlife forthespouse annuity Survivor of fi From birthday, Mr. his percent shall to amounting 60th Vilanek receive apension 2.5 not apply. does restriction the12-month cause, nation is dueto good suchtermi- not but Where later oftheterm. thanby theend ofemployment, the end from months oftwelve within aperiod conditions, to theother contractual subject remain exercised, in rights be appreciation force can all and stock the event ofdeath, orinvalidity, in earnings capacity ordueto acomplete cause orin reduction good in Intheevent place. ofMr. forany Preisig other terminating contract his service will achieved, being remain objectives therespective and vestingthe relevant period Stock which of exercisable have appreciation rights dueto already become theexpiry isorphan’s pension paid. themonthly times to amounting payment 24 lump-sum aone-time At this point, will to pension. orphan’s orphans receive entitled cease themonthly to be age of18, Mr. Preisig to oreligible entitled was forat that ofthepension percent may combined orphan’spensions 90 notand exceed Preisig. forJoachim pension onthebasis Widow’s rights oftheguaranteed custody orphan and forthespouse annuity Survivor ofservice. length actual hence thereis a scalin requirements, legal conditions prerequisite which is arise, according to calculated non-forfeiture to early, Mr. Preisig af shall receive apension, pension). monthly Ifheleaves euros(guaranteed sion of9,333.00 in theamount Mr. Preisig Joachim onreaching retirement the ageof60, shallUpon receive apen- Please also referto also Please in item thenotes 35 not apply. does restriction suchterminat Where oftheterm. by theend not later but than ofemployment, fromtheend months oftwelve within aperiod conditions, to theother contractual subject remain exercised, in be force can and orinvalidity, ings capacity rights appreciation all orin stock theevent ofdeath, cause for any other good contract service terminating Board hisremain oftheExecutive in Intheevent place. ofamember will achieved, being objectives therespective and vestingof therelevant period Stock which exercisable have appreciation rights already dueto become theexpiry pension). ofthecompany,Board to ofone-third amaximum offi nal annualfi xed salary for each contractual year commenced on the Executive ontheExecutive year commenced foreachcontractual salary xed cer Christoph Vilanek, the following rules apply from May 1, thefollowingcer fromMay 1, Christoph apply rules Vilanek, To shareholders: our companion, and orphan’s pension forany pension orphan’s and companion, for further information, in particular about about in particular information, for further mum total amount of the target pension. mum total ofthetarget amount ghts held, share ownership other details. and held, ghts m Preisig, from thefollowing apply rules g of the guaranteed pension based onthe based pension g oftheguaranteed or due to a complete reduction inor duetoearn- acomplete reduction the time of his death. On reaching On thetime ofhis the death. ter reaching the age of 60 and once the and ter reaching theageof60 ’s forbinding pension individual child ion is due to good cause, the 12-month the12-month cause, ion is dueto good nal annualfi Corporate Governance report xed salary (target salary xed Annual Report 2010 25

To our shareholders To our shareholders Annual Report 2010 26 To shareholders: our Corporate Governance report the vice chairperson one and a half times this ahalftimes oneand amount. the vice chairperson this receives double amount, Board oftheSupervisory chairperson The compensation. isthe compensation limited to which is thatamount payable in ofbasic theform is distributed to theshareh shareofthecompany which europer in excess in dividends of0.10 each 0.01 euro eurosfor of 500 in theamount compensation year, variable performance-based with eff meetings in actual participation aswell heldasconference asforphone calls, meetings committee and Board forSupervisory fees attendance waived Board the Supervisory agreement, self-restraint ofavoluntary part As this amount. double receives chairperson eurosforeach of1,000 fee an attendance in addition MitbestG—receive (3) 27 in accordance formed committee withsection Boar to aSupervisory whobelong members Board he/she Supervisory meeting Board attends. foreach Supervisory 1,000 euros thistimes amount. this receives double Board the Supervisory each full fi receive fi members Board Supervisory The ■ ■ ■ consists of three components: ofthree consists and ofassociation, by thearticles is governed compensation Board Supervisory The ofcompensation principles Basic compensation Board Supervisory position after the decimal point. thedecimal after position subtotals fi presenting and note Please diff thatrounding tables. a resultofexercising their offi euros. thousand thus968.0 was activities forthefi resolution ontheprofi depends paid out be will compensation indeed based this performance- Whether asanexpense. recognised also euroswas 405.0 thousand of compensation Performance-based euros. thousand of158.0 fees attendance ofthecompany fi received Board

For their activity during thefi For their activity ofeachfi theend after receive, also members Board Supervisory The of fee receives anattendance in addition member Board Supervisory Every Performance-linked compensation fees Attendance Basic compensation Individualised fi Individualised as incurred forexpenses arereimbursed members Board Supervisory Furthermore, ect from the third quarter of2010. fromthethird quarter ect nancial year of membership on the Supervisory Board. The chairperson of chairperson The Board. ontheSupervisory nancial year ofmembership nancial year 2010. The total compensation paid for Supervisory Board Board forSupervisory paid total compensation The nancial year 2010. gures for the last two fi two gures forthelast nal totals, because thefi because nal totals, olders for the previous fi fortheprevious olders ce aswell asforturnover taxes. xed compensation of 405.0 thousand euros and eurosand thousand of405.0 xed compensation nancial year 2010, the members of the Supervisory oftheSupervisory themembers nancial year 2010, erences may result from the format used for mayerences used resultfromtheformat xed basic compensation of 30,000 eurosfor of30,000 xed basic compensation meeting of the committee. The committee committee The ofthecommittee. meeting nancial areshownin years the following amount, the vice chairperson one and ahalf oneand thevice chairperson amount, d committee—with theexception ofthe d committee—with gures have been rounded to one rounded gures have been nancial year. of extent The t appropriation nancial 3 Employee representatives in accordance with section 7 (1) clause 1 no. 1 MitbestG of May 4, 1976. 4, ofMay 1MitbestG 7(1) 1no. clause section with inaccordance representatives Employee 3 7, untilJuly 2009. Board Supervisory ofthe Chairman 2 7, July 2009. since Board Supervisory ofthe Chairman 1 1976. 4, ofMay 1MitbestG 7(1) 1no. clause section with inaccordance representatives Employee 1 ihr o 562. . 38.2 19.2 26.2 2.6 30.2 2.6 2.6 20.0 2.6 1.0 8.0 15.6 12.0 15.6 15.6 15.6 Richard Roy P.Lars Reichelt Priester Prof. Dr. Hans-Joachim Leuering Dr. Dieter Former members ci es 46502422.0 60.0 95.2 2.4 46.0 31.0 60.0 21.0 60.0 23.0 68.5 5.0 7.6 5.0 5.0 84.0 2.4 5.0 2.4 5.0 2.4 7.5 25.0 42.0 14.6 7.4 11.0 69.0 14.0 25.0 4.0 25.0 6.0 16.0 30.0 45.6 78.0 72.0 32.0 30.0 14.6 30.0 30.0 66.0 81.0 71.0 14.6 30.0 14.6 65.0 72.0 45.0 71.0 30.0 30.0 44.5 102.0 9.0 30.0 150.0 30.0 Achim Weiss 30.0 Steff 30.0 Thoma² Prof. Dr. Helmut 30.0 30.0 Schneider³ Matthias 45.0 Klempau³ Hans-Jürgen 18.0 12.0 Maarten Henderson 30.0 6.0 60.0 Halefeld³ Joachim 21.0 11.0 Bahlmann Dr. Arnold 5.0 Anderleit³ Claudia 12.0 11.0 Aha Dr. Christof 12.0 Franziska Oelte³ 30.0 30.0 Kraemer¹ Thorsten 30.0 30.0 Active members 30.0 30.0 (€’000s) 30.0 30.0 fi the for Compensation 30.0 45.0 60.0 Weiss Achim Steff Prof. Thoma Dr. Helmut Schneider¹ Matthias Hans-Jürgen Klempau¹ Henderson Maarten Halefeld¹ Joachim Bahlmann Arnold Dr. Anderleit¹ Claudia Aha Dr. Christof Franziska Oelte¹ Kraemer Thorsten Active members (€’000s) fi the for Compensation e oe³3. 405049.0 5.0 14.0 30.0 71.0 30.0 11.0 en Vodel³ 30.0 en Vodel¹ nancial year 2009 year nancial 2010 year nancial compensation compensation 0. 6. 76733.3 67.6 260.0 405.8 4. 1. 73619.7 57.3 219.0 343.5 0. 5. 0. 968.0 405.0 158.0 405.0 Basic Basic 234. 03113.6 10.3 41.0 62.3 tednefe Performance-based fees Attendance Performance-based fees Attendance To shareholders: our compensation compensation Corporate Governance report Annual Report 2010 Total Total 27

To our shareholders Group management report

Incoming, outgoing, going strong.

Our logistics department ensures on-time delivery of goods from the world of mobile communications to our customers and trade partners. Apart from unfailing high quality standards, this also involves eﬃ ciency, ﬂ exibility, speed and reliability. In 2010, mobilcom-debitel’s two logistics sites in Büdelsdorf and Oberkrämer handled a total of 145,000 incoming and 1,120,000 outgoing consignments, working with 6,400 m² of storage space and 4,300 pallet spaces. Andreas Müller, Supply Chain Management team leader:

“My colleagues and I have everything under control: incoming goods, outgoing goods, returns and stored goods. We pick, pack, unpack... and don’t ‘pack it in’ until we’re sure that the goods will arrive at their destination on time. That’s the way I like it. And our suppliers and our customers like that. Obviously.“ Group management report

Important note:

This Group management report (management report) should be read in context with the audited consolidated fi nancial statements and notes. This report includes statements looking into the future, i. e. statements that are based not on historic facts but on current plans, assumptions and estimates. Forward- looking statements are valid only at the time that they are made. freenet AG accepts no obligation to modify these in the event that new information comes to light. State- ments about the future are by their nature subject to risks and uncertainty. We therefore explicitly point out that a range of factors may infl uence actual results to such eff ect that they then diff er appreciably from those forecast. Some of these factors are described in the “Risk report” section and in other parts of this report. marketing agency freeXmedia. off business is rounded Portal Group’s freenet internetmobile The aswell. B2C business in Germany. households withprivate in marketing Germany. is essentially focus Its onthe communicationsmobile products makes network-independ thelargest theGroup This well astheonline direct-to-customer sales. and GmbH—as Deutschland Saturn incl superstores—which retail and electronics in thefi services thecompany also off rates, and no-frills services and prepaid postpaid, ownnetwork-independent to Inaddition its customers. end its themto markets and operators fromthenetwork communicationsmobile services thebasis business:form oftheoperative companies signed mentioned withtheabove contracts operator Germany. network The T-Mobile, O₂ and Vodafone, in E-Plus operators network forthemobile tions services communica- mobile ownaccount, forits and ownname its under markets, ownbut its primarily in thefi products, products areavailable via thehotline theinternet, oratretail. products oneoftheleading communications mobile Group discountersfreenet in Germany. The in Germany. products communications formobile distribution platform network-independent toproximity thebiggest thanks agreat customer and services, and communications mobile products forselected port network-in include ofthebrand strengths The market. telecommunications in provider network-independent theGerman gest asthebig- thecompany itself positions brand, main „mobilcom-debitel“ its Under brands Product off in Group Germany. The telecommunications is network-independent provider Group thebiggest freenet The Business operations conditions Business andmacroeconomic The company also operates an online portal and is and increasingly off anonline company portal operates also The channels sales arethenearly primary The sells additional communications mobile devices and Group thefreenet In addition, of provider, infrastructure hasnonetwork service Group amobile thefreenet As Its no-frills brands „klarmobil“, „freenetMobile“ and „callmobile“ and also make the „freenetMobile“ no-frills „klarmobil“, Its brands eld of mobile data communications. data eld ofmobile ers its customers a comprehensive portfolio of services and and ofservices acomprehensive portfolio customers its ers eld of mobile voice and data services. voice services. eld ofmobile data and Group management report: Under these contracts, thecompany buys contracts, these Under dependent, demand-oriented customer sup- customer demand-oriented dependent, udes a distribution agreement withMedia- adistribution agreement udes 600 branded shops, a large presence in alargepresence shops, branded 600 ers the network operators’ rates. rates. operators’ thenetwork ers ent sales and distribution platform for distribution platform and ent sales Business and macroeconomic conditions macroeconomic and Business ering content for Annual Report 2010 by theonline 31

Group management report Group management report Annual Report 2010 32 freeXmedia GmbH freenet.de GmbH Group management report: (100 %) (100 %) GmbH &Co. KG callmobile callmobile (100 %) mobilcom-debitel AG fi nanzierungsGmbH mobilcom-debitel debitel Konzern- GmbH (100 %) (100 %) Business and macroeconomic conditions macroeconomic and Business (100 %) mobilcom-debitel Shop GmbH (100 %) Major companies in the Group: companies inthe Major to refl companies, GmbH. now mobilcom-debitel is mobilcom while Communicationstechnik GmbH theformer AG, as mobilcom-debitel to business AG debitel achieve were renamed nowdoes withthebranding. consistency to weresold mr. &Co.KG. bundled, GmbH netgroup in which this was segment IDtechnologies GmbH, Next and IDGmbH Next business. During thefi Group structure mobilcom-debitel Logistik GmbH is now also listed in the overview of major Group is Logistik ofmajorGroup nowalso listedmobilcom-debitel GmbH in theoverview main companieWithin thetwo theGroup, Logistik GmbH(100 %) mobilcom-debitel nancial year under review, the Group disposed of its value-added services services value-added ofits review,nancial disposed year under theGroup freenet AG freenet ect its importance in theGroup. importance its ect munikations GmbH freenet Datenkom- (100 %) KielNET Gesellschaft für Kommunikation Cityline GmbH mbH (50 %) (100 %) freenet 01 Telefon- 0 1019 dienste GmbH (100 %) s in the Mobile Communications segment segment Communications s in theMobile klarmobil GmbH (100 %) Fundorado GmbH (50 %) communications market numbers. is nearing also in saturation terms ofparticipant by Telekom out incards sector, theprepaid carried in particular. Apparently, themobile VATM.mates Consult and by Dialog to SIM acleanupof inactive This not is least, due, percent. VATM.Consult and Drillisch and 1.4 percent O₂ hasamarket share of12.1 according percent in third E-Plus to and eachwithamarket place, Dialog shareof13.3 freenet and percent by Vodafone followed closely with29.8 percent, enue shareof30.1 in percent 2010. to 55.8 in 2009 51.5 percent theshareofdata ofsmartphones, bution by theincreasing distri- Supported year-on-year percent. points to 28.5 1.5 percentage continued to in 2010. decline year-on-year,0.8 percent transmission data mobile asretail telephony in prices and both However, volumes. overall communications revenues mobile onlyincreased of data forcalls (+ phones ofmobile use an increased higher annualrevenues for the fi intense remains competition themobile high, year. asso theindustry Consultand Dialog tancy According toto fi fewvolatile developments. to thetelecommunications market exposed In contrast was worldmarkets in Germany Telecommunications market in Germany. demand increasing thekey domestic included larly to reasons Asia, particu- exports, frombooming boost astrong Besides percent. by 3.6 rose tic product Offi Statistical InGermany, according Federal years. to theGerman two theworldeconomy largelyrecovere During 2010 Overall market Market development 2010 long-term by competitiveness developing and/or evolving innovative off its AG freenet secures to requirements. newmarket customer and portfolio services and one’s ownproduct to adjust ofmarket and keep trends abreast tor make itnecessary department. Development and Research traditional not maintain thecompany in does So vider thetelecommunications aseparate market. pro- asaservice AG freenet operates services, voice onmobile data and focus its With Development The total number of active SIM cards stagnated at 108.3 million according to at108.3 esti- stagnated cards SIM ofactive total number The Telekom witharev- themarket in remained communications leader mobile in 2010 by non-voice communications rose revenues shareofmobile inThe Germany fi While revenue fromtraditional At the same time, rapid technological progress and strong competition in competition this strong and sec- progress technological rapid time, At thesame Group management report: rst time since 2005. This growth was mainly was driven by This growth since time rst 2005. xed-line telephony continued to asthe decline revenues in non-voice revenues grewfrom ciation VATM, again last revenue declined gures published consul- by themanagement 3.2%) over atripling year and theprevious 3.2%) communications market recorded slightly marketcommunications recorded d fromthesevere crisis oftheprevious Business and macroeconomic conditions macroeconomic and Business ce gross domes- ers. Annual Report 2010 33

Group management report Group management report Annual Report 2010 34 Group management report: Business and macroeconomic conditions macroeconomic and Business entertainment and multitasking fl multitasking and entertainment Nokia’s new and Ericsson adding devices fromHTC Sony and shops—for example in its in out shops. to try by made BlackBerry phones will enablethecompanycooperation to off bo supply created demand customer enormous withthecarriers iPhonein cooperation also marketed theApple Vodafone The O₂. and quarter, freenet AG has Since thefourth retailers. select and branches Saturn and Markt Telekom, Deutsche alongside tor phones off ofthese milestone. From thefi animportant was a customised mobile communications mobile a customised tariff compile can customers eachmonth, O₂ E-Plus and D-network, between them to choose in their thatallows decision-making. principle Using independence maximum amodular positioningspecial provider, asanetwork-independent thereby gives and customers past fi contributed to AG freenet gaining halfamillion internet newmobile in the customers also devices to thelatest range include ofits expansion The rates. introducing attractive accessedactually onagiven day. calendar fi The man mobile networks. Starter” “Internet withdiff national calls, fl withthenew added was aswell have to contract. sign smartphone a24-month amodern whowant Those voice fl various data optionsinclude and tional bookable terminated aminimum not Addi- include be withinrate can does chargeand amonth. innovative tariff innovative retention. and satisfaction customer strengthen fi over thepast business within model its voice services formobile data and services and theinternet. communications and theconvergence advanced ofmobile further progressive networks expansion ofdata thegrowing and availability withthe content ofmobile in surfsticks) conjunction and in themobile netbooks internet sector. technologies devices (smartphones, and New year thetelecommunications market last dominated by was developments in 2009, As Products nancial year and tuned them to new customer requirements, in order to in order sustainably nancial tuned year themto and requirements, newcustomer at rate and a choice of three options for calls to all German mobile networks and and optionsforcalls networks achoice mobile at rate and to ofthree all German freenet AG also expanded the quality and quantity of other high-end smartphones smartphones ofother high-end quantity and thequality AG expanded also freenet The AG withBlackBerry. freenet signed astrategic partnership 2010 In November oftheApple introduction The However, AG freenet not to onlycatered toward internet thetrend mobile by usage fi AGfreenet its introduced calling foreasy internet mobile and browsing product portfolio attractive Another In oftariff range its Against this expanded backdrop, AG freenet further nancial nancial year. Mobile Communications Mobile concept withthenew in July—as a pre-installed option for all voice rates, and all Ger- four and optionforall voice rates, apre-installed in July—as erent low-cost per-minuteerent low-cost minimum prices and charges. e@sy tariff xed dailyxed internet ifthemobile price is is usage onlycharged rst daily fl rst , in the second half of 2010 freenet AG freenet established an halfof2010 , in thesecond agship, the Nokia N8. N8. agship, the Nokia iPhone s launched in early April. They provide aninternet provide They in earlyApril. launched “free” tariff rst half of the year freenet AG halfoftheyear thedistribu- freenet was rst at rate for mobile surfi at rate formobile er its customers more high-quality smart- high-quality more customers er its 3G and 3GS, and later of the Apple iPhone 4, iPhone4, later and oftheApple 3GS, and 3G according to their individual needs. The base base according The to their individual needs. ttlenecks during the year under review. during theyear under ttlenecks

. It takes advantage of freenet AG’s offreenet . Ittakes advantage ering at its own shops, in all Media- ownshops, ering atits at rates and an SMS package. package. anSMS and at rates ng with the launch of ng withthelaunch s, products place in the Stiftung Warentest ranking of September 2010 right after its launch. its right after place 2010 in Warentest theStiftung ranking ofSeptember the onall networks, month minutes every 10 free terms ofatariff Vodafone, theattractive including freenet including services and unlimited newsupdates have also free, They access to freenet.de periods. minimum subscription chargesorcontract fees, networks—without to all German minute per forauniform 8cents texts send call and can Customers content services. and itoff brands, Group “freenet.de” and the“klarmobil” between onacollaboration to Based comers internet. themobile services. this market competitive positioning voice newmobile reinforced data was through and regular oftheoccasional, segments respective is available. network wherevercard anappropriate cellular orWLAN SIM internet communications-enabled mobile access withadata provides to high-speed Finally, with &Co.KG agreement callmobile GmbH hadsigned acooperation after For instance, inFor instance, Junethe In the Box”, which In November, AG freenet themobilcom also introduced debitel “Surf discount (no-frills)discount sector Mail mobile e-mail use. e-mail mobile Group management report: “freenetMobile” ers low-price calls and free access to freenet.de’s mobile mobile access low-price calls free ers and to freenet.de’s , freenet AG, freenet regularlyoccu featuring a 9 cents per minute including featuring per rate, a9cents product brand was launched fornew- launched was brand product and frequent users. In the course of 2010, of2010, Inthecourse users. frequent and “callmobile” Business and macroeconomic conditions macroeconomic and Business brand soared to fi soared brand pied top in positions pied the Annual Report 2010 rst 35

Group management report Group management report Annual Report 2010 36 Group management report: Assets, fi Assets, nancial position and results and position nancial on thecore business voice ofmobile services. data and the beginning ofthefi a high to possible itwas level, reduce netfi million which slightly was at of 211.7 stabilised year lowerthanin euros, but theprevious fl Group”. cash to offree thegeneration Due business” the“STRATO and of the“DSL higher contribution to resu theGroup year lowerthaninresult was theprevious grossprofi revenue and in Group thedecline despite continued operations, in key fi earnings In thefi Summary statement on the business performance in 2010 year.for theprevious fi comparative adjusted comparison is to retrospectively made thecorresponding 5. IFRS under asadiscontinued operation statement income to withregard year made therepresenta was “STRATO Group”. signifi Profi ofnegligibleincome importance. and expenses aswell assubsequent adjustments price purchase ings fromsubsequent toearnings theconsolidated fi business these their in deconsolidation 2009, of (consolidated months), part for12 formed business” (consolidated Group” thatthe“DSL for11months)operations “STRATO and year,ures fortheprevious noted be itmust comparing theconsolidatedWhen fi Preliminary remarks on the comparability with the previous year fi Assets, AG’s validate once more freenet consistent results continuationThese in focusing Where a comparison to the previous year is provided in the following statements, acomparison in to year is thefollowing theprevious Where provided statements, fi ofthecomparative adjustment lowretrospective A very cantly infl nancial year 2010 the freenet Group was able to report ayear-on-year increase ableto was report Group thefreenet nancial year 2010 uenced by profi gures such as Group EBITDA, EBIT and EBT as well as Group resultfrom EBT aswell and asGroup EBIT EBITDA, gures suchasGroup nancial position andresults nancial position nancial year 2010) to 623.1 million euros by December 31, 2010. 2010. 31, million to eurosby December 623.1 nancial year 2010) nancial statements in 2010 but onlycontributed earn- but in 2010 nancial statements ts from the sale of the business units “DSL business” and ofthebusiness fromthesale “DSL units ts nancial statements from 2010 with the adjusted fi withtheadjusted from2010 nancial statements ts from discontinued operations in 2009 were in 2009 fromdiscontinued operations ts lt in 2009. This dueto was theprofi lt in 2009. because discontinued operations made a made discontinued operations because nancial debt from 789.8 million euros(as of nancial from789.8 debt with regard towith regard theresu the discontinued operations in 2009. After After in 2009. thediscontinued operations tion of the “Next ID” business ID” unit in the tion ofthe“Next units no longer contributed operational nolongercontributed operational units gures for the previous gures fortheprevious lt from discontinued t from the sale t fromthesale t. The Group Group The t. gures ow g- 4.9 euros in 2010, which was below the previous year’s level of 5.4 euros. euros. level of5.4 year’s theprevious which below was eurosin 2010, 4.9 was theARPU Intheno-frills segment, eurosin 2009. upfrom3.0 euros, 3.2 was ment in seg- theprepaid ARPU and eurosin 2009, onlyslightly down from24.2 euros, 24.0 was segment customers in thecontract ARPU In2010, fewyears. in thelast experienced thathasbeen completely itto in haltthedecline ARPU almost enabled above, described million1.97 no-frills customers. (excluding customers 6.11 million contract no-frills), 7.58 million and customers prepaid This includes from17.58 million million of2010 by of2009. theend attheend to 15.65 fl duemainly and ondata to thefocus expanded further in was base thediscount segment this although hadnoeff in losses customer 2010, considerable again caused operators, by cards thenetwork SIM ofinactive deactivation technical churn so-called in 2009, the case way. also was systematic and in adeliberate As base customer its company hasreduced thatthe This means acquisition newcustomer management. existing customer its and AG is freenet increasing focusing pressure, continues competition under in come prices to Germany. and intensify As operators comm mobile ownaccount, forits and name own its under AG freenet markets, core business services, voiceIn its ofmobile data and Customer andARPU development Group: forthe indicators key performance highlights afewimportant following overview The Key items in the consolidated fi or 3,265.6 million euros, to the segment revenues (2009: 3,508.8 million euros). The 3,508.8 revenues (2009: to thesegment euros, or 3,265.6 million percent, than97 contributed more year.ous segment Communications Mobile The revenue Group Revenue andresults atrate products. Overall, the total number of mobile communications customers fell communications ofmobile customers thetotal number Overall, atrate products. B 0,4 67365,907 –144,023 20,914 7,918 36,733 256,490 124,587 112,467 102,640 327,025 Change –262,282 145,501 101,041 334,943 –245,064 3,601,786 2009 238,769 17,721 3,339,504 2010 –6,295 118,762 Group result Group result from discontinued operations operations continued from result Group EBT EBIT EBITDA Gross profi Revenue In €’000s In 2010, the company’s focus on valuable postpaid contract relationships, as relationships, contract postpaid onvaluable focus thecompany’s In 2010, t70357264–42,329 762,634 720,305 t fell to 3,339.5 million euros from 3,601.8 million eurosin theprevi- million eurosfrom3,601.8 fell to 3,339.5 Group management report: nancial statements on valuable postpaid contract customers in customers contract postpaid on valuable in theprepaid duemainly business, to the unications services for the four network network forthefour services unications ect onprofi ect Assets, fi Assets, ts. In contrast, the customer thecustomer Incontrast, ts. nancial position and results and position nancial Annual Report 2010 37

Group management report Group management report Annual Report 2010 38 Group management report: Assets, fi Assets, nancial position and results and position nancial profi re aresultofthereduced As percent). 21.2 operations. remaining revenue is by generated Other to theone-off This improvement is mainly million due in 2010. incurred euroswas income of16.1 tax million euroswererecorded, of19.0 year, in theprevious Whereas expenses tax 2009. fl cash fromtheoperational repayments and 2010, onJuly31, rate swaps est at Group” business” “STRATO and of the“DSL annualaverage netfi reduced to compared decrease The Group. the debitel income relates primarilyest to fi of87.9 millioninterest expenses eurosin million to euroscompared net of42.9 improved withnetinterest considerably expenses off euros werewritten million off euroswerewritten 121.6 price allocation the occasion ofthepurchase on in in theconsolidated which 2008 balance wereincluded sheet ships trademarks, and year, relation- mainly suchascustomer arose fromintangible costs assets depreciation year dueprimarily was toprevious thereduce million eurosin theprev to 202.4 compared ofintegrating theentire ITsystem project millionone-off these euros). 65.9 In2010, year: ous one-off byrestructuring-related burdened million was EBITDA year. eurosin eurosfrom327.0 theprevious 334.9 million In2010, amortisation and depreciation tax, million year to of247.8 lion (expenses theprevious euros). euroscompared mil- animprovement which represented of0.4 million eurosin 2010, of247.4 expenses 2009. million eurosin 2010 reducing themby 4.0 hadtheeff expenses in personnel included appreciation rights stock The business. of continued effi during thefi by 422 ofemployees in thenumber ex in personnel reduction The cent in 2009. to 5.5 per- compared percent improved to 4.5 in ratio 2010 expenses that thepersonnel million million eurostoyear, This 149.3 means euros. million by from199.7 50.3 euros, represented an increase of 65.9 million euros or 179.6 percent. percent. million eurosor179.6 of65.9 anincrease represented to Compared tions wereregistered in 2010. t fell to 720.3 million euros in 2010, from 762.6 million eurosin 2009. from762.6 milliont fell to 720.3 eurosin 2010, Group personnel expenses were reduced signifi werereduced expenses personnel Group The As a result, aresult, As income interest Net write-downs impairment and Depreciation dueto eff above Largely thesumofthese balance of The The gross profi gross result from taxes onincome fromtaxes result eff ciency improvements and restructuring measures in the operational in measures theoperational restructuring and improvements ciency pre-tax Group earnings Group pre-tax ect of deferred taxes relating to taxes th ofdeferred ect t margin other operating expenses and other operating income operating other and expenses operating other in the previous year. in theprevious , as a balance of interest income and interest expenses, , asabalance interest ofinterest and expenses, income increased by 0.4 percentage points to 21.6 percent (2009: (2009: percent to 21.6 points percentage by 0.4 increased nancial debt as a result of redemptions following thesale asaresult ofredemptions nancial debt nancial liabilities to banks as part ofthe acquisitionnancial liabilities of aspart to banks with regard to these assets in 2010, 124.9 million 124.9 in 2010, to withregard assets these (EBITDA) improved by 35.1 million to euroscompared improved by 35.1 of 102.6 million eurosfromcontinued opera- of102.6 items amounting to 31.6 million euros(previ- items to amounting 31.6 the previous year. As in 2009, thenetinter- year.the previous in 2009, As the Portal, Narrowband and B2B Services B2BServices and Narrowband the Portal, venue compared to the previous year, tovenue theprevious compared gross landscape following acquisition. thedebitel landscape and increasing them by 2.9 million increasingand themby 2.9 eurosin the previous year (36.7 million euros), this year (36.7 the previous penses was due primarily to the reduction dueprimarily was to thereduction penses ious year.ious fromthe slight The reduction connected to thedebitel acquisition: connected while from continued operations increased to increased fromcontinued operations ects, the Group result before interest, interest, resultbefore theGroup ects, the previous year duemainly was theprevious to the d level of investments. As in the previous in theprevious As d level ofinvestments. the end of 2009, the expiry oftheinter- theexpiry of2009, theend nancial year 2010, mainly asaresult nancial year 2010, amounted to 189.4 million euros to 189.4 amounted items weremainly linked to the e previous year: due to of thesale year: e previous cantly compared to the previous to theprevious compared cantly ow. resulted in resulted ect ect of year. 256.5 million after toamounted 112.5 euros, “STRATO Group”. the profi so that theprofi di forthethree realised was ing activities profi a posted thediscontinued operations in 2009, Whereas adjustments. price purchase ofalowamount expenses and income sequent onlysub- generated in 2010, and, in 2009 sold business hadalready been units Group” business” “STRATO and “DSL The business unit. ID” fromthe“Next largelyresulted and ous year (December 31, 2009: 3,033.5 million euros). This signifi 3,033.5 2009: 31, yearous (December million weretherefore491.1 and eurosor16.2 theGroup’s 2010, 31, ofDecember As highlights afewkey following fi overview balanceThe sheet andfi Assets year. from 17.7 million million eurosin 2010 eurosin eurosto theprevious 118.8 101.0 million 25 to amounting millionwards around in 2009. made euroswas losscarryfor- fromtax assets tax ofdeferred write-down multi-annual aone-time plan, omission thecorresponding and offuture Group” earnings in theGroup’s the “STRATO aac he oa 3,033.5 1,075.3 1,958.2 total sheet Balance 31. 12. 2009 assets Current Non-current assets 2,542.4 694.0 inm€ Assets 1,848.4 total sheet Balance 31. 12. 2010 assets Current Non-current assets inm€ Assets t of 238.8 million euros. It must be noted that a loss of 1.1 million noted thatalossof1.1 million be eurosfromoperat- Itmust euros. t of238.8 The The The t of 239.9 million eurosfromthesale t of239.9 Group result Group result from discontinued operations resultGroup from continued operations nancial position t described from discontinued operations is fully by explained almost fromdiscontinued operations t described posted in 2010 from continued and discontinued operations discontinued fromcontinued and operations in 2010 posted Group management report: total assets scontinued business operations combined, combined, scontinued business operations million euros were recorded for the previous million fortheprevious euroswererecorded percent lower than at the end oftheprevi- lowerthanattheend percent of the business units “DSL business” and of thebusiness “DSL units together with results from subsequent fromsubsequent together withresults urn iblte 1,985.8 1,047.8 current liabilities and Non-current equity Shareholders’ 2,542.4 1,407.9 inm€ liabilities and Shareholders’ equity 1,134.5 total sheet Balance liabilities current and Non-current equity Shareholders’ inm€ liabilities and Shareholders’ equity aac he oa 3,033.5 total sheet Balance amounted to 2,542.4 million euros to 2,542.4 amounted after tax therefore increased by thereforeincreased tax after was –6.3 million euros in 2010 million eurosin 2010 –6.3 was Assets, fi Assets, gures fortheGroup: nancial position and results and position nancial cant reduction in total reduction cant Annual Report 2010 31. 12. 2009 12. 31. 31. 12. 2010 12. 31. 39

Group management report Group management report Annual Report 2010 40 Group management report: Assets, fi Assets, nancial position and results and position nancial euros (2009: 789.8 million euros) during 2010. 789.8 euros (2009: emphasised. especially be should million ofborrowings, redemption eurosfromthecash ofwhich 454.0 euros, million by million 470.1 in borrowings eurosto thereduction 800.0 2010, December 31, million eurosasof to percent 1,407.9 by 29.1 2009) lion euros (as 31, ofDecember from 34.5 percent at the end of the previous year. oftheprevious attheend percent from 34.5 million euros). (–25.6 2010 onJuly6, Meeting General Annual atthecompany’s approved profi euros).1,047.8 million by This 86.7 increase 2009: 31, million euros(December 1,134.5 was equity shareholders’ 2010, ber 31, ual balance sheet items ofthecontinueual balance sheet fi millionof 12.3 euroswere listed in thebalanc to percent 407.5 million euros. million eurosor16.4 by receivable 79.8 accounts in to revenu thedevelopment Corresponding Group”. business” the“STRATO and ofthe“DSL received fromthesale from payments million euros). At ofthe theclose 306.0 (by million euros), duemainly to 1,075.3 2009: price allocation the occasion ofthepurchase relationsh oncustomer mainly to write-downs liabilities and included arealso of assets diff liabilities ontemporary tax deferred thenetted in this areincluded Furthermore, item. 2009, 31, to December slightly which compared increased losscarryforwards, ontax assets tax the deferred million noted million that from27.1 be Itshould euros, million euros. 52.7 eurosto 79.8 by assets tax is in opposite theincrease development deferred An low newinvestments. with equipment and plant onexistingeuros is property, dueprimarily to write-downs million euros. 14.0 was value), licences, and mainly relating to software (additionsbalance to ofother netadditions intangible atnetbook lessdisposals assets in price allocation occasion ofthepurchase onthe thatwereincluded relationships trademarks suchascustomer and gible assets million onintan- euroswererelatedto million write-downs ofwhich 121.6 euros, 170.4 in thefi ofintangible assets impairment write-downs tion and in non-curr reduction The goodwill. and assets million euros) year, asin theprevious and, mainly intangible comprised 1,958.2 2009: 31, Group”, onintangible aswell assets. asto thewrite-downs “STRATO following thesale repayments of unscheduled to is thereduct primarily attributable assets ed as held-for-sale”—those assets of the Next ID Group werestill asheld-for-sale”—those IDGroup ed listed in oftheNext theindivid- assets t for 2010 (112.5 million (112.5 which was payment, euros) dividend t for2010 year’s fromlast and Current assets Current As a result, the group thegroup aresult, As Regarding Regarding percent to 44.6 points percentage by 10.1 increased ratio theequity aresult, As On theliabilities inOn anincrease therewas side, attributed assets 2010, 31, ofDecember As million eurosto 37.7 million by 14.4 equipment and plant in property, reduction The Non-current assets non-current and current liabilities current and non-current declined by 35.5 percent to 694.0 million euros (December 31, 31, million euros(December to percent 694.0 by 35.5 declined decreased by 5.6 percent to 1,848.4 million euros (December million euros(December to percent 1,848.4 by 5.6 decreased erences between tax balance sheet values and book values values book and values balance sheet tax between erences net debt was reduced by 166.7 million million eurosto 623.1 by 166.7 reduced was d operations in the previous year. in theprevious d operations in this item, which witnessed a reduction due in this areduction which item, witnessed the reduction in cash and cash equivalents equivalents cash in and cash the reduction million net fromGroup eurosmainly results connection withthedebitel acquisition. The connection previous year, 362.8 million eurosresulted year,previous 362.8 ion in cash and cash equivalents asaresult equivalents cash ion in and cash e sheet item “assets of disposal group classi- group ofdisposal item “assets e sheet in connection withthedebitel acquisition. in connection e, there was a reduction in current trade in trade current areduction therewas e, of the business units “DSL business” and ofthebusiness “DSL units ips and trademarks that were included on thatwereincluded trademarks ips and ent assets is mainlyent assets dueto thedeprecia- to the discontinued operation “Next ID” to “Next ID” thediscontinued operation , which fell in total from1,985.8 mil- shareholders’ equity shareholders’ nancial to year amounting : onDecem- 1 Free cash fl cash Free 1 2010. 2010. rebates in bylion income tax reduced euros) onincome, payments resulted fromtax Furthermore, netcash outfl hardware communications to mobile respect tion oftheacquired also fl but debitel Group, operator, in provisions thereduction forre to network amobile aswell aswithrespect fromdistribution rights distribution partners theplan Communications, Mobile in liabilitieto thereduction million million euros). by 22.3 working capital by 82.7 increase eurosis The duemainly by in inthe increase networking capital 2010 infl subsidiaries activi investment areshownunder ofsubsid fromthesale forproceeds adjusted fi million The euros. fell including by 11.0 Group discontinued operations million Compared lion euros. eurosto 236.3 Compared to the previous year, to theprevious Compared ing remarks on cash fl oncash ing remarks of to anumber attributable was This reduction million year. to million theprevious 667.6 euroscompared euros), by 122.0 down 2009: 31, (December 2010 31, million eurosasofDecember in totalcharges amounted to 545.6 contingent resulting losses from thewind million year, Intheprevious euroswerelisted in this 16.5 for position 2010. 31, December asliabilities classifi group ofdisposal reported euros have been The following overview highlights afewkey following cashfl overview The Cashfl hnei ahadcs qiaet 311314–652.5 351.4 –301.1 fl cash Free equivalents cash and incash Change and intangible assets. intangible and equipment and plant ofproperty, disposal the from proceeds plus assets, intangible and equipment and Cash fl Cash fl Cash fl Cash fl ow from operating activities compared to year primarily was compared dueto theprevious activities ow fromoperating The trade accounts payable, other provisions payables payable, accounts and trade forother liabilitiesThe and The liabilities toThe thedisconti attributable ow o rmivsigatvte . 0. –307.4 –59.3 307.8 295.5 0.4 236.3 fi from ow activities investing from ow activities operating from ow o ttmn nm 0020 Change 2009 2010 ow statement in m€ ow isdefi ow o¹217224–20.7 232.4 211.7 ow¹ nnigatvte 578–5. –285.8 –252.0 –537.8 nancing activities ned as cash fl ascash ned ow from operating activities. activities. ow fromoperating ow of more than 10.4 million euros (previous year: 20.8 mil- million year: euros(previous than10.4 ow ofmore s fortheremaining declining other than business operations ow from operating activities, minus investments in property, plant plant inproperty, minusinvestments activities, operating from ow Group management report: cashfl ned reduction in liabilities and accruals with respect to in liabilities accruals reduction withrespect and ned ow from operating activities operating ow from ing business”. upoftheremaining “DSL structuring measures related to related measures theintegra- structuring to year, theprevious EBITDA for thewhole uctuations ofliabilitiesuctuations accruals with and manufacturers on the balance sheet date. onthebalance sheet manufacturers iaries (incoming of fromthesale payments 82.7 million euros (2009: increase in increase net million 82.7 euros(2009: nued operation “Next ID” of 10.3 million of10.3 ID” “Next operation nued ties). In addition, the reduction in cash ties). thereduction Inaddition, factors thatwewill referto in follow-factors our ow fi Assets, fi Assets, gures fortheGroup: nancial position and results and position nancial ed asheld-for-saleed on declined by 59.3 mil- declined gure was Annual Report 2010 41

Group management report Group management report Annual Report 2010 42 Group management report: Assets, fi Assets, nancial position and results and position nancial compared to 2009. compared Free fl cash intangible and assets. equipment and plant ofproperty, fromthedisposal proceeds plus intangible and assets, equipment and plant in property, minus investments ties, additional transparency. Free fl cash transparency. additional arose within ofbusiness. arose scope thenormal mill (2.0 assets ofnon-current from thesale incoming attributable Other payments segment. yearin fordistribution righ theprevious undertaken dueprimarily million was year, to This development payments euros. to 26.6 million to theprevious euroscompared fell by equipment 43.4 and plant as forproperty, fi pu business The unit. ID” ofthe“Next sale an Group” ofthe“STRATO forthesale ment million price pay- purchase euroswereasubsequent while 0.6 GmbH, Breitband freenet million fromsubsequent eurosresulted 16.4 million ofwhich ofsubsidiaries fromthesale euros, to amounted 19.1 proceeds In 2010, asaresult ofth euros thatwerededucted amounting to million of47.5 410.3 eurosin equivalents total cash and lesscash million prices purchase Group”. frompreliminary This sumis upofpayments made “STRATO from million eurosin 2009 of362.8 proceeds year, to theprevious euros compared to 0. eff Divide ininterest themiddle of2010. swaps loweraverage netfi comparatively millionacquisition. euroslowerth This 38.1 was primarily fortheloan of 58.1 million euros, Group”. top ofthis On therewerealso interest business” “STRATO payments and “DSL million largelyasa euros, of242.0 payment payment bank loansconsisted ofascheduled withthedebitel ac taken in out connection million euroswerere acquisition 308.7 and million145.3 lo onthevendor made euroswas resultofthecompany comp sales as adirect theywerereduce million eurosin 2009, 155.8 by werereduced borrowings million Whereas euros. million eurosto –537.8 from –252.0 pared to 4,394 at the end ofthefi atthe end to 4,394 pared com- of 2010, by theend at3,972 stood Group in thefreenet ofemployees number The Employees nal. The cash outfl cash The nal. ect of reducing cash fl ofreducing cash ect The company now reports company nowreports The Cashfl In thefi ow fromfi ow amounted to 211.7 million euros in 2010, a decline of 20.7 million of20.7 adecline euros million to 211.7 ow amounted eurosin 2010, nancial year 2010, nancial year 2010, ow for the renewal and expansion ofintangible expansion and ow fortherenewal fi nancing nancing activities ow fromfi cashfl free cash fl cash free nancial year 2009. nancial debt of the Group and also the expiry ofthe also theexpiry and nancial oftheGroup debt nancing activities in 2010. in 2010. nancing activities ow is defi ow from investing activities investing ow from declined by 285.8 million eurosyear-on-year by 285.8 declined ts, and declining investments in the “Other” in declining the“Other” and investments ts, e deconsolidation of these sold companies. companies. sold ofthese e deconsolidation ow s taken ontheoccasion out ofthedebitel 4 million This primarily was dueto euros. deemed on the two long-term onthetwo bankloans deemed rchase prices for thes quisition. The repayments onthelong-term repayments quisition. The nd payments of 25.6 million euroshadthe of25.6 payments nd ion euros) million interest and (4.3 euros), purchase price payments for the sale of forthesale price payments purchase result of the sale ofthebusiness result ofthesale units leted at the end of 2009. A redemption of Aredemption of2009. leted attheend d 2.0 million fromthe euroswerereceived d 2.0 ned as cash fl ascash ned the sale of the “DSL business” the and ofthe“DSL thesale d by a further 454.0 million eurosin 2010 454.0 d by afurther as a key performance indicator to create asakey performance of 66.7 million euros and an unscheduled million anunscheduled eurosand of 66.7 an taken on theoccasion out ofthedebitel an in the previous yearan in asaresultofthe theprevious to investment activities in 2010, largely in 2010, to activities investment ow from operating activi- ow fromoperating e 3 sales aretherefore e 3sales fell by 307.4 million fell by 307.4 xed assets aswell assets xed employees to help shape these developments withtheir owninitiatives. developments to these employees help shape encourage scheme suggestion anemployee innovation and management competitions, time idea At thesame developments. majoroperational about informed employees itkeeps intranet, aGroup-wide in Using particular channels, various employees. with its promotion of women arecodifi promotion ofwomen while men taking and into women account their diff between facilitate ahealthy work-life The balance. forexceptional performance. ofbonuses payment off environmental protection. and engagement social inmeasures theareasofpersonnel, ■ Social engagement fl include ment forprofessional rewards commit- forkey Inaddition, players. programmes development and coaching to individual needs, optionstailored personal of training, technical and policy. is why ofall fr employees. This performance competentSuccessful business is competition thededicated, not without possible Employees the society, theenvironment. and thespirit ofcomprehe also—in but holders, acompany, share- and As AG customers hasaresponsibility freenet not onlytowards its report Sustainability Büdelsdorf region.Büdelsdorf Children’s Schweitzer Village in initiatives Thuringia playground and in the an Albert withsix-fi some foundations/associations, sports and youth data. privacy ofcustomer protection in and thestrict communities, and forchats monitoring blacklists and ofconducts, codes aswell asin features, paid relationships is in and about suchthings evident asadvisories To asawhole. responsibility to society its AG’sfreenet is not engagement social limited thecompany embraces employees; to its

ers (such as special employee rates and an employee car ownership (such car scheme) anemployee ers rates and the employee and asspecial Beyond this, freenet AG attaches great importance to cultivating a direct dialogue dialogue to cultivating adirect greatimportance AG attaches freenet this, Beyond to an SOS Children’sto anSOS Village in Haiti. eurosofklarmo 10,000 running since 2006 (Save Donate) and Spenden” campaign thathasbeen und ofthe“Sparen part As freenet AGfreenet off In the area of human resources developmen In theareaofhumanresources thefi In this context, A few examples from the Group’s many from theGroup’s other include: initiativesA fewexamples in 2010 adozen children’s, about formany thecompany years has supported Furthermore, at hierarchies with great decision-making freedom, extra benefi extra at hierarchies withgreatdecision-making freedom, ers its employees fl employees its ers nancial year 2010 once again saw a variety of activities and and ofactivities once again avariety saw nancial year 2010 ed in themissioned statement. exible parental leave and working hours to leave working hours parental exible and deliberate consideration of equal treatment treatment ofequal consideration deliberate begin with, this relates with, to obviously begin customer nsive stakeholder value—to its employees, employees, its nsive value—to stakeholder Group management report: eenet AG eenet hasaresponsible humanresources bil customers’ donations were presented werepresented donations bil customers’ t, this acomprehensive includes t, range gure amounts, aswell gure amounts, erent needs, and the special thespecial and erent needs, Sustainability report Sustainability Annual Report 2010 ts ts and 43

Group management report Group management report Annual Report 2010 44 Group management report: Sustainability report Sustainability phones. environment by off related material fortheshopsby email. th conferencing. time, At thesame video business pollutive possible, travel is Wherever by replaced conference calls and reports. printed copies not ofquarterly produce company does also The consumption. paper reduce their and to waste arerequired separate all employees Forexample, measures. reusable europallets in particular. europallets reusable largepape reusable uses theGroup possible, thatis provider to committed also business asustainable philosophy.service Wherever ■ ■ years in one of seven German aff inyears oneofseven German offi the “Volt+Wald” eachyear over customer aperiod per initiative onetree plants supply oftheelectricity part online As cialist via distribution channels. its and retailers electric ecologically produced sells low-cost, Flensburg”, mobilcom-debitel withthepublic utility “Stadtwerke Incooperation project. technology. environmentally friendly most thelatest, favours and cars, guidelines in choosing its AG emission freenet considers also consumption, and CO₂ categories and selection diff between in choose can which employees model ofstaff management friendly electricity. converte computer and energy-saving systems a responsible handling ofthe Nonetheless, thanproducing companies. ments provider, aservice AG freenet isAs lessaff Environmental protection

freenet AG also gives its customers opportunities to actively help protect the help protect to actively opportunities AG customers freenet also gives its eff environmental protection Group’s The hospices. with sites, nearthecompany’s ties located eurosweregiven to eight children’s chari- 40,000 Another telethon. during theZDF forChildren) charity (AHeart fürKinder” Herz eurosto the“Ein 100,000 donated mobilcom-debitel premium to customers, its Instead aChristmas ofsending gift fi eachreceived Erfurt and Kaiserslautern Düsseldorf, ties nearStuttgart, children’s local chari- locations, atvarious ofChristmasFrom auctions theproceeds In a company with currently over 4,000 employees theeffi employees In acompany over withcurrently 4,000 In July 2010, the Group also launched launched also theGroup In July2010, ahighly Group, effi AG’s isfreenet theGLS comprehensive partner logistics AG sw freenet in years recent For example, donations. ering online invoices, a repair service and buyback for used mobile mobile forused ering buyback online and invoices, arepair service vehicles must be a priority. freenet AG apriority. freenet off vehicles be must resources used in theGroup. used resources orestation regions—monitored by TÜV Nord. regions—monitored by TÜV orestation e company now also sends information and information and e company sends now also ected by environmental protection require- by environmental protection ected the “Volt+Wald” energy sustainable green ity across Germany in its own shops, atspe- ownshops, in its acrossGermany ity rboard containers for in-house storage and and containersstorage forin-house rboard orts are rounded off arerounded orts d the local electricity supply to “green” supply electricity d thelocal a focus onchildren’s afocus centres cancer and itched its data centre in Düsseldorf to centre in data Düsseldorf its itched the Group practices, wherever possible, wherever possible, practices, theGroup erent models. In addition to model to Inaddition model erent models. cient, cient, environmentally by numerous smaller by numerous ers a full-service afull-service ers ve-fi cient gure ve ve Board the payment of a dividend in the amount of 80 cents per share. per cents of80 in theamount ofadividend thepayment Board fl cash offree percent 48 of apayout ratio This represents earnings. sharefromretained per cents of80 amount forthefi ofadividend thepayment Meeting General Annual fl offuture cash free 40—60 percent to continue agreed their collaboration. GmbH Deutschland percent. to percent 2.97 their AG shareofvoting in freenet from5.06 rights in Germany, areduction announced Frankfurt, GmbH, Investment DWS 2011, In January Signifi 1 Free cash fl cash Free 1 and intangible assets. intangible and equipment and plant ofproperty, disposal the from proceeds plus assets, intangible and equipment and For thefi to the to have propose decided Board theSupervisory and Board Executive The afi hasadopted Board Executive The AG theMedia-Saturn- mobilcom-debitel and Group’s freenet 2011, inAlso January cant events after the reporting date reporting the after events cant ow isdefi ow nancial year 2011, the Executive Board aims to propose to the Supervisory aims to to theSupervisory Board propose theExecutive nancial year 2011, ned as cash fl ascash ned ow¹. Group management report: ow from operating activities, minus investments in property, plant plant inproperty, minusinvestments activities, operating from ow ow¹ will be distributed will asdividends. be ow¹ nancial policy which determines that nancial policy Signifi cant events after the reporting date reporting the after events cant nancial year 2010 in the nancial year 2010 Annual Report 2010 45

Group management report Group management report Annual Report 2010 46 Group management report: Risk report the probability oftheirthe probability occurr hasdefi Board forarisk system. management requirements statutory within which complies monitoring system theGroup, management withalltion, and damage to company, our customers. and employees aretaken measures that appropriate to withtheidentifi deal to communication timely ofrisks there The way logical to theright decision-makercommunicated in asystematic, in thecompany. earlyonby and executives eachofour aredetected futurecompany’s development is to to meant ensurethatrisks the risk system management The AG. offreenet ity evolved and adjusted. As part part As adjusted. evolved and ing notifi timely divisions co in arealso corporate constant jour-fi atthese future discussed arealso measures “jourfi de operational is about keptBoard informed fi to the to both monitor manageand thatextends system ongoing business operations assessment. forreviewand Board toted theExecutive specifi which describe risk reports, thesubsidiaries. These and ments therisk summarising, atregular intervals, build their to risk systematically is awareness. used ties ofrisk within Em management theGroup. responsibili- and thedistribution oftasks documented and ing risk withthese categories, aff could signifi perspective, fromthecurrent seen orareasofriskvidual risks that, all identifi of therisks Of Major risks An eff management Risk Risk report fi nancial thenon-fi and nancial year 2010, the auditor also reviewed freenet AG’s freenet theauditor reviewed also risk system. management nancial year 2010, ect freenet AG’s assets, fi AG’s freenet assets, ect In addition, in a manual that is continually amended and improved, the Executive theExecutive improved, in and amanualthatis continuallyIn addition, amended To upaneff hasset AG Board thefreenet Executive this end, The Group’s risk management methods and systems are continually reviewed, arecontinually systems reviewed, and methods risk management Group’s The upacomprehensive reporting hasset monthly themanagement this, Beyond is in chargeof organisation in Group’s our structure adepartment time, At thesame ective risk management system is vita system risk management ective xe” meetings, which are held for all relevant operations. Recent developments and and developments Recent which areheldforall operations. relevant xe” meetings, ned themajorriskned categories forthe cation of risks to ofrisks theappropriate decisioncation maker atall times. nancial performance indicators in the Group. The Executive Executive The in indicators theGroup. nancial performance ed for the freenet Group, we elaborate below on those indi- onthose below weelaborate Group, forthefreenet ed nancial position and results. and nancial position ence, and theimplications shou and ence, of theauditannualfi reports from the parent company’s depart- company’s fromtheparent reports mmunication with the Executive Board, ensur- Board, withtheExecutive mmunication sponsible executive is to executive sponsible designed ensure l forsafeguarding thelong-term continu- velopments in manneratregular atimely velopments ployees arefamiliarployees withthis it manualand xe meetings. The heads of the various headsofthevarious The xe meetings. Group along with a strategy fordeal- alongwithastrategy Group nancial statements forthe nancial statements ed risks, thereby averting thereby averting risks, ed ld theyoccur, aresubmit- ective early risk detec- early ective c identifi ed risks, cantly it more diffi it more loss ofmarket to onmargins shareand pressure in and/or any given make operation can high willingness thecustomers’ and to switch. arise fromthis risks petitive sector. Accordingly, earnings. revenuesterms and ofboth signifi themost in Group for thefreenet sector important communications isMobile themost by far Market andcompetition risks means that consumers may be contacted by phone for advertising purposes only after onlyafter purposes for advertising by phone contacted may thatconsumers be means ofmarketing forms fromspecial wentintoimprove eff protection consumer to translate opportunities. of sales considerable ofpoints thehigh and number operators, network and purchasing frommanufacturers clearpreference fornewdevices, customers’ willdevices likely also resultin marketing The ahigher commitment and risk. capital op ofnetwork Areduction devices. cation onthecompany earnings prospects. negative impact tained off don’t operators if thenetwork not AG manageto If freenet generate does appropriate reachor mobile voice services. internet ofmobile to off opportunities growth duetoconsiderably rise in of thestrong use market. in to in this order participate growth brands, “callmobile” and business indoes “freenetMobile” withthe “klarmobil”, this segment is by exacerbated thesteadily AG growing discount freenet itself services cation market. leadto model. provider and pressure aweakening oftheservice This could competitive reduce operators. will consolidation network mobile among be margins. levels in negatively themarket onfreenet’s could also impact inwill customer themark revenue reduce per This leadto can channels customers. alossofsales and viders. ableto off arein part operators network mobile Moreover, ofthemarket. out dueto providers their business service structure, mobile areincreasinglytors moving over to market opera- network mobile fromthis, their calling Apart structure plans. operators network fi assets, onthecompany’s impact thisnot oronlyatinappropriate atthis, succeed adequately cost, will have anegative readiness tominimise wi switch customers’ its fi assets, onthecompany’s tive impact this continue Should ready to trend switch. oreven growstronger, this will have anega- acquisition,on newcustomer while revenue continues arevery to customers fall and The telecommunications markets continue to be fraught withintensive continue fraught telecommunications markets to be competition The On August 4, 2009, the law to counteract unauthorised telemarketing unauthorised to thelawto and counteract 2009, 4, August On thebusiness onexpanding communi- withmobile attendant areprice risks There increased communications mobile revenue from“non-voice services” Since 2008, margins B2Cmarket onprices and communi- pressure for mobile inThe theGerman pr competitive aresultofthepersistent As ofthe‘termination reduction A further onhowthe business provider Margins arelargelydependent in service themobile cult to gain Strong market co share. er attractive purchasing models, this have can asus- purchasing models, er attractive nancial position and results. and nancial position nancial position and results. freenet AG to freenet strives results. nancial and position erator subsidieserator communication formobile ing their products themselves and to and themselves forcing ing their products data services. freenet AG to freenet plans the use services. data charges’ by the Federal Network Agency Agency Network by theFederal charges’ combined when witheconomies ofscale et. The resulting overall reduction in price resulting overall reduction The et. set price-related declines in revenue declines from price-related set th customer retention measures. If it does Ifitdoes retentionth customer measures. This can lead to shortfalls in to revenue, This leadto can shortfalls er better rates than mobile service pro- service rates thanmobile er better mpetition also leadsto ever-highermpetition costs essure it cannot be ruled out thatthere out ruled essure itcannot be Group management report: cant market and com- marketcant and Annual Report 2010 Risk report ect. ect. This 47

Group management report Group management report Annual Report 2010 48 Group management report: Risk report with parallel interests (harmful acquisition (harmful interests with parallel come to be directly or indirectly heldby a orindirectly directly tocome be section 19 (2) (old 19 UmwStG version).section (old sentence 2UmwStG version), with (3), 12 in conjunction ifapplicable section and GewStG, (9) tion 8 (4) (old 10a KStG version), withsection in conjunction ifapplicable porate form, capital infl capital form, porate involving changesofcor- other transactions contributions, through inapplicable partially by thefi assessed far also so and Group, freenet losscarr tax trade and that thecorporation totally out itcannot be ruled Therefore status. legal ofcorporate any restructuring audits. tax to external subject theyusually arenot because in particular thatmaytaxes audited, not have even been of is fortypes true same The audit. during their tax ofany fact underlying assessments if thefi orchangesto losscarryforwards, payments changes will arrears thatresultin occur tax fi thathave not yet been periods For assessment Tax risks arenot risks fully these within thecompany’sthis control. connection, in ofthird parties AG the services asfreenet uses far As resources. upconsiderable tying over, forintegration result plans thecomplex also resultin and fi lead to thelossofcustomers orfailures can faults by system caused problems or service outages Network projects. oftheITmigrat background contin its and successful business operations for is centres billing ofmajorimportance including and data thecompany’s systems, Maintaining availability effi and theoperational infrastructure Technical having athigher implemented existing to terms. ornewpartnerships be promotional forpurely purposes. customers tono longerpossible these phone ably, Itis since didnot asmany explicitly give existing customers then their agreement. consider- ofexisting thissition, customers themanagement newregulationwill impact acqui- fromnewcustomer Apart for promotional purposes. their information used being have to to Consumers agree explicitly as“OPT-IN”). (known agreement prior explicit a right forthefi withthefi agreements its resultin th circumstances certain could under If within fi The risk of divergent interpretations and valuations applies in particular also to also in particular applies risk valuations ofdivergent and interpretations The Should the macroeconomic conditions unde themacroeconomic Should atother could also leadto grossactivations partners channels lossofsales and The scal authorities come to authoritiescome diff scal ve years 25 percent or more ofthesharesorvoting in ormore thecompany 25ve years percent rights nancing banks to declare the loans due and payable. payable. theloansdueand tonancing declare banks ows and changesinows and the composit nancing banks. Under certain circumstances this circumstances could leadto certain Under nancing banks. ions aheadin theyear 2011 erent interpretations of single shareholder or by several shareholders single orby shareholders several shareholder of shares), negative thecompany’s income yforwards declared by thecompanies in the declared yforwards uity. This the against is true especially ing fromcombining are units thecompany’s e Group nolongerbeing abletoe Group deliver on ciency of the technical infrastructure, ofthetechnical infrastructure, ciency scal authorities, could become wholly or could become authorities, scal nancial forthecompany. losses More- nally audited, itis that alwaysnally possible audited, rgo a negative development again, this again, rgo anegative development , which are enormously complex complex , which areenormously ion of shareholders as per sec- asper ion ofshareholders tax regulationsorto diff tax erent ability to continue doing business could even AG’s and result in freenet insolvency. have This negatively right aff would ofcancellation. aspecial banks fi assets, AG’s suchasadeteriorating economy—have onfreenet anegative impact factors, other things. amongst to thelenders mortgaged sharesin loancontract, to thesyndicated Further, claims to relating ability asinsurance forcreditors’ paycompany’s adividend. servicing, debt after nications operations fl obligation ofthecash to percent upto use 50 The loancontract. thesyndicated under debt to pay the down assets ofcertain fromthesale theproceeds use to proportionally obligates also freenet AG loancontract syndicated The shareproperty. especially assets, whenraising to loansfrom restrictions subject AG freenet is other things, Among in viewofcontinuing loancontract. thesyndicated covenants), and (undertakings to AG which restrictions freenet agreed contractual ous restrictions. within stringent loancontract thesyndicated loansbeyond toallowed raise third-party lo revolving line thesyndicated credit under down AG draw freenet can conditions, certain covenants of the syndicated loan ofthesyndicated covenants million arevolving The line includes also credit of150 in euros. theamount contract loan syndicated The 2010). millionof approximately euros(as 31, 653 ofDecember liabilities Group’s onthedebitel under ments withthedebitel acquisition, fr connection In stem fromvariable-interest liabilities loans. borrowings The shownunder to banks risks Financial interests. withparallel ortothe buyer ofbuyers agroup unitedto in asingle be ifthey shareholder areconsidered Shares GewStG. (9) 10a withsection in conjunction ifapplicable KStG, or acquisitionthe harmful in lost part could be by thetime of ordeducted not settled losscarryforwards) tax (corporation trade and The above-described legal consequences apply accordingly. apply consequences legal above-described The shar orseveral gle shareholder ofthesharesorvoting arefi ormore if 25 percent rights risk exists ofthesharescould be ormore 25 percent purcha oradditional as theresultofasale Against level. atshareholder transactions and by thetime oftheharmful carryforwards) loss negative tax income (corporation trade and ordeducted tion ofany not settled The above mentioned restrictions can—on their withother ownorin interaction can—on restrictions mentioned above The AG’s freenet fromthis, fi Apart The company hasnoinfl The nancial position and results. Intheeven results. nancial and position uence on the occurrence of this risk, as the (partial) elimina- uence ofthis ontheoccurrence asthe(partial) risk, eholders with parallel interests through other measures. other measures. through interests withparallel eholders contract restrict the company’s fi thecompany’s restrict contract nancial and operating leeway is leeway limitednancial operating and by numer- to service the loan, which could impact the which could theloan, impact to service se of shares by the company’s shareholders, ofsharesby shareholders, thecompany’s se the major companies of the freenet Group are Group the majorcompanies ofthefreenet eenet AG has guaranteed to continue AG pay- hasguaranteed eenet united under asingleunited shareholder. under same The acquisition are brought about by measures acquisition by measures about arebrought are transferred to abuyer, to close are transferred to persons an contract. Moreover, thecompany is only an contract. syndicated loan contract also includes an includes also loancontract syndicated a syndicated loan contract in the amount in theamount loancontract a syndicated this that out backdrop, ruled itcannot be as a whole, in accordance with section 8c 8c in accordance asawhole, withsection ow available commu- fromthemobile loans of up to half of the amount of its ofits loans ofupto halfoftheamount third parties, granting collateral, orselling granting third parties, t of a change of control, the consortium theconsortium t ofachangecontrol, Group management report: rst united under asin- under united rst ect the company’s thecompany’s ect nancial leeway. Under Annual Report 2010 Risk report 49

Group management report Group management report Annual Report 2010 50 Group management report: Risk report measures of the freenet Group’s fi Group’s ofthefreenet measures offi elaboration and in report. this shownseparately management torequired Group be classifi be orexchange rate changescan currency fi assets, onthecompany’s impact allowances these turn Should not out to suffi losses. be in forexpected Allowances weremade orincome. thebalance sheet loss ofcurrency non- The shownonthebalance sheet. assets resultin can majorwrite-downs. impairment testing periods in subsequent is arisk There that relationships trademarks. suchascustomer and intangibleand assets of the 800 million eurosin fi of the800 witheff in May 2010 the risk ofinterest rate changesby using an will riserise accordingly. over interest time, expense thecompany However haslimited fi where variable-interest fi agreement is being challenged by isa challenged being agreement ofthis settlement validity withFrance Télécomment The companies. associated and agree- mobilcom companies group into entered ofother former number asettlement thattheexchan proceedings legal these in decrees AG into Ifthecourt mobilcom whatis AG. AG freenet.de nowfreenet and oftheshare UmwG 15 according to section ofmobilcom AG free shareholders and Former Legal risks tribution in kind of mobilcom AG, the company’s legal predecessor, in November 2000 tribution in predecessor, thecompany’s legal kind ofmobilcom 2000 AG, in November ofany counterclaims amounts thecompany and maythe grounds make. will and contest the sumof7.1 oftheagreement, billion aspart which itwaived euros, anticipated thatFrance be itshould Télécomlegally upheld, will claim from thecompany However, by it. Télécom bound not feel does determined and was audited and confi and audited was and determined carefully was astheexchange ratio adjustments, priate nocash thattherewill and be even iftheywerenot theplaintiff among will have adjustment cash paid to to all The be aff in cash. settled be nance-related risks as of August 1, 2010. 2010. 1, asofAugust risks nance-related Please also refer to item 34 oftheNote referto also itemPlease 34 In theopinion ofthecompany, other fi other and receivable accounts withtrade in exist connection ofnon-payment Risks The freenet Group consolidated balance Group freenet The The interest rate swaps used in the past expired on July 31, 2010, leading to newloan 2010, onJuly31, expired in thepast interest used rateThe swaps ofinterest by means rate swaps, hedged interest werepartly rate risks In thepast, In November 2002, mobilcom AG, being the company’s legal predecessor, thecompany’s being legal mobilcom a AG, and 2002, In November Some individual shareholders areofthevi individual shareholders Some thatFrance hasnoindication valid and to be company theagreement considers The It is, however,It is, appro- was assumptionthattheshareexchange ratio thecompany’s nancial risks, and in particular the principles, goals and implemented implemented goals and theprinciples, in particular and nancial risks, ect from July 31, 2010. The interest rate The covers million cap 750 euros 2010. fromJuly31, ect nancial liabilities to fi areconverted nancial debt reported at December 31, 2010. 31, atDecember reported nancial debt nancial risk management. nancial position and results. results. and nancial position number ofindividual shareholders. number rmed by the court-appointed merger auditors. by thecourt-appointed auditors. merger rmed ge ratio was inappropriate, the diff was ge ratio s in the compensation claim. s in thecompensation If the short term interest ratesIf theshort (=EURIBOR) nancial risks such as those relatingnancial suchas those to risks foreign exchange ratio applied in the merger of in themerger applied exchange ratio interest which rate cap thecompany bought s which categorization contains adetailed payment risk consists of any unexpected riskpayment ofany consists unexpected were the view of these shareholders to be to be shareholders were theviewofthese sheet showsmajora sheet net.de AG have applied for a court review AG foracourt have applied net.de ew that the capital increase through con- through increase ew thatthecapital ed asimmaterialed arethereforenot and cient, thiscient, have would anegative xed-interest liabilities. xed-interest mounts of goodwill ofgoodwill mounts ected ected shareholders, erence will system. ex forfurther oftherisk report section monitoring and acrosstheGr ment ofrisks also but risk management, only theoperating results. aggregated controls onmanualprocess the other hand to viaautomated fi error ITcontrol processes in charge. employees internal derive guidelines train the and followed, to be other standards and requirements in particular. departments Treasury HumanResources and responsibility for the Group’s internalresponsibility fortheGroup’s cont particular. accounting complian proper and and economical eff tosion). secure thatareapplied measures and all Itcomprises theprocesses ofCOSO (Committee Organizations oftheTreadwayframework ofSponsoring Commis- internal Group’s freenet control system The Defi (section and (5) section 289 315(2) no. 5HGB) system in relation to the Group accounting process Key features of the internal control and risk management reviewproceedings. ontheshareevaluation will have also noimpact in avalid manner. company thereforelikewise The performed thatthiskind was assumes France Télécom have would hadnovoting rights. claims France against Télécom running to into thatthesharesissued billions further and thecompan thatontheonehand consequence fl was consolidation system at the top Group level. When preparing theconsolidated balance When level. atthetopconsolidation Group system fr Excel. in which MS are managed packages, company fi fi consolidated the Inpreparing CSS. and accounting using by SAP are essentially local systems recorded Accounting forthecompany fi processes Structure accounting oftheGroup process nition oftheinternal andelements control system in thefreenet Group As part of the internal control system, the risk management system includes not includes oftheinternal therisk system management control system, part As internal Group’s inKey thefreenet on monitoring elements arebased system to also withregard theprocess analyse newlegal permanently departments These To manage the control process, the Executive Board of freenet AG has entrusted AG offreenet hasentrusted To Board theExecutive managethecontrol process, contribution in through increase thatthecapital It is understanding thecompany’s awed and/orawed not withthe was ofany thatthecontribution value, in kind rendered nancial statements with further inform withfurther nancial statements nancial statements of freenet AG, the subsidiaries enrich their respective thesubsidiaries AG, enrichtheir respective offreenet nancial statements planatory remarks ontherisk management remarks planatory nancial statements of freenet AG’s offreenet subsidiariesnancial statements les and probations on probations les and rol system torol system theCont oup. Please refer to the “Risk management” management” referto Please the“Risk oup. follows theinternationally recognized eenet AG uses SAP’s “EC-CS” module as its asits module “EC-CS” AG SAP’s eenet uses the systematic early detection, manage- earlydetection, thesystematic check theplausibility check oftheautomatically y would still be entitled to compensation to compensation entitled stilly would be ce with the pertinent legal provisions legal ince withthepertinent ation to create standardized reporting reporting ation to create standardized Group management report: the one hand, and on and theonehand, rolling, Accounting, Accounting, rolling, Annual Report 2010 Risk report ective, 51

Group management report Group management report Annual Report 2010 52 Group management report: Risk report liabilities in theconsolidated fi and disclosure ofassets and measurement anaccurate and recognition, stocktaking tory oftheunderlying checks random and results ofall interim relevant by manualplausibility checks controlsmated aresupplemented auto- These depreciation. accruals and invoicing to adjustments, value ofcustomers ranging frominvoicing-relevant ofall data, crosschecking via relevant and the data raw at internal areaimed Group’s control system provisionswith thelegal and arefully ensure thatbusiness transactions reliable accounting and Group internal proper atsecuring control aimed The measures andreliableproper accounting Group Key regulation andcontrol activities to ensure MS Excel. in each packages reporting the standardised individual notes are taken The from subgroups. forvarious summarised been previously thathad data manually by entering sometimes reported and “FI” module via theSAP the subsidiaries is entered into theconsolid by reported thedata consolidations income etc., and aswell asexpense debt capital, theconsolidated fl cash theconsolidated statement, income sheet, process. the fi fi thereview oftheincluded and reviewactivities. monitoring withprocess-independent Board. themonitoring AG’s offreenet under oftheauditcommittee Supervisory in particular auditoffreene reviewsby theGroup pendent to AG thefreenet consolidated fi aswell asthetransition from the system, consolidation EC-CS theSAP and SAP-FI between theinterface tor regularlyinspects consolid EC-CS authorisations oftheSAP nal process-independent monitoring accounting to withregard measure theGroup nal process-independent In addition, there are extraordinary cont thereareextraordinary In addition, re AG’sfreenet auditing department Group In particular, the Group auditor’s reviewoftheconsolidated fi auditor’s In particular, theGroup arealso involved Group’s in auditorthefreenet other reviewbodies and Group The the Articles of Association. ofAssociation. the Articles nancial statements. nancial statement forms fromthesubsidiaries forms nancial statement represent nancial statements. ation system. The freenet AG audi- freenet Group The ation system. subsidiaries’ standardised reporting packages packages reporting subsidiaries’ standardised recorded in mannerin atimely accordance recorded ating system in various ways—automatically inating various system case; thenotes case; arethenconsolidated in detailed data. This ensures proper inven- This ensuresproper data. detailed an extensive automation anextensive oftheformation rol elements including theprocess-inde- rol elements t AG on behalf of the Supervisory Board, Board, oftheSupervisory t AG onbehalf gularly reviews the accuracy and access and gularly reviewstheaccuracy The regular elements in the regularelements The nancial statements ow statement, the ow statement, Employees cannot claim cannot Employees any special Type event participation inthe ofemployees’ ofcontrol ofvoting rights withspecial arenosharesvested There ofcontrol orpowers rights withspecial vested Shares GmbH. Holding via MSP indirectly and Drillisch ofthevoting ofthecompany, percent AG rights holdsatotal of12.14 directly voting ofthe rights percent exceeding 10 Shareholdings shares. of onvoting orthetransfer is rights ofany not aware restrictions Board Executive The voting and restrictions transfer Share Annual General Meeting. individual registered intodivided 128,061,016 is eurosand to 128,061,016 AG (capital amounts offreenet sharecapital stock) The ofsharecapital Composition 315 (4)HGB section to according undertakeover law required Information using equity derivatives (put orcall optionsoracombination ofthetwo). (put using derivatives equity or a public to invitation by issuing rights theshareholders, to submit tenders, delivery off ofapublic purchase by means exchange, take thestock place through Executiv subsidiaries. The orits the Group subsidiaries onaccount exercised orits may orby by third of theGroup be ity parties shareca ofthecurrent percent shares upto 10 to back buy Board theExecutive authorised 2010, ofJuly6, Meeting General Annual The shares to back buy Executive Board ofthe Authorisation 2009”). capital (“approved and/or cash against contributions in kind 2011, July6, onorbefore shares, or bearer euros by issuing ofnew registered amount thesame by uptocapital 20,000,000 oftheSuperv withtheapproval authorised, oftheArti 4(7) In accordance withsection to issueshares ExecutiveBoard ofthe Authorisation AG. freenet se and AktG 179 133, aresections Association clause The ofAssociation. of theArticles withsection 5 (1) in conjunction MitbestG 31 section and AktG 85 84, to sections subject AG is offreenet Board oftheExecutive dismissal and ofmembers appointment The ofAssociation to Articles the amendments Board, Executive ofthe ofmembers dismissal and Appointment Group management report: Information required under takeover law according to section 315 (4)HGB 315 tosection according law takeover under required Information rights iftheyareshareholders. rights rights which confer powers ofcontrol. which conferrights powers s governing amendments to the Articles of to theArticles s governing amendments e Board chooses whether the buyback shall whetherthebuyback chooses e Board cles of Association, the Executive Board is Board theExecutive cles ofAssociation, isory Board, to increase the Group’s share to theGroup’s increase Board, isory shares. Each share confers onevote shareconfers Each atthe shares. ction 16 in the Articles of Association of ofAssociation in theArticles 16 ction pital on or before July 5, 2015. This author- 2015. July 5, onorbefore pital er, of by means Annual Report 2010 53

Group management report Group management report Annual Report 2010 54 Group management report: Information required under takeover law according to section 315 (4)HGB 315 tosection according law takeover under required Information less ofthevesting period. In theevent stock ofachangecontrol, company ofthe agreement Indemnity by Group. thefreenet to granted their benefi companies which hadbeen to therisk thattheconsor exposed be would fi Ifnosubsequent AG. forfreenet unfavourable onterms thatare obtained onlybe orcan obtained cannot be loancontract syndicated fi therisk AG thatsubsequent freenet bears loancontract, cated In Meeting. General attheAnnual majority jointly, acting parties obtain orseveral a ifoneparty, to submit atakeover bidexists, control atthecompany. Suchachangeofco call theloan. has noinfl AG freenet cases, Insome loan. ofthesyndicated thetransfer freenet AG onupon took arise in theevent ofviolationscertain Aright to conditions. call theloanmay orin certain full under in part called may be liabilitiesThe taken to onby thefree banks Change ofcontrol This is true in particular fortheright toThis is in particular true uence on the conditions under which the consortium banks obtain aright to banks which theconsortium uence ontheconditions under contractual restrictions and obligations and that restrictions contractual appreciation rights may be exercised may regard- be rights appreciation net Group under the syndicated loan contract loancontract thesyndicated under net Group the event ofthecancellation ofthesyndi- ntrol already exists, provided theobligation provided ntrol already exists, call theloanin theevent ofachange tium banks liquidate in themajor tium banks thepledge nancing can be obtained, freenet AG freenet obtained, nancing be can t aswell asother collateral furnished nancing the to settle 3 Fixed compensation and other variable compensation until the termination of the employment agree- employment ofthe termination untilthe compensation variable 3 other and compensation Fixed agree- employment ofthe termination untilthe 2 compensation variable other and compensation Fixed 1, May i. AG, period the for of freenet e. Board Executive tothe appointed being after 1 Compensation appreciation rights: thenon-cash-eff thereforewithout and i. (1) 314 accordance HGB, no.6a withsection onlythecash-eff e. ken asfollows;thefollowing down table asanincentive. along-term and to element component serve a performance-based afi components: is ofthree and comprised mance-driven committee. personnel Board’s visory Bo is by theSupervisory set Board Executive Board’ In accordance withtheSupervisory principlesBasic ofcompensation Executive Board compensation Board Supervisory and the Board Executive the of report Compensation ment, i. e. for the period January 1, 2009, to January 23, 2009 23, toJanuary 2009, 1, January i. ment, period the for e. 2009 30, toSeptember 2009, 1, January i. ment, period the for e. 2009 31, toDecember 2009, chr per 32 82 267 715 464 822 29 62 677 212 137 400 53 205 267 503 874 327 595 422 825 410 299 1,015 230 400 Spoerr³ Eckhard Berger² Eric 400 575 Axel Krieger 365 Esch Stephan 425 Preisig Joachim Christoph Vilanek¹ 615 compensation 2009 (€’000s) Board Executive Axel Krieger Esch Stephan Preisig Joachim Christoph Vilanek compensation 2010 (€’000s) Board Executive Group management report: The compensation of members of the Executive Board ofthecompany is bro- Board oftheExecutive ofmembers compensation The ofthecompany is perfor- Board oftheExecutive ofmembers compensation The Compensation report of the Executive Board and the Supervisory Board Supervisory the and Board Executive the of report Compensation compensation compensation ective compensationective from stock components shows the Executive Board compensation in compensation Board shows theExecutive s procedural rules, compensation forthe compensation rules, s procedural ard at the proposal of freenet AG offreenet Super-ard attheproposal ,8 ,2 3,309 1,329 1,980 ,2 ,0 3,027 1,107 1,920 Fixed Fixed xed compensation component, component, compensation xed Other variable variable Other variable Other compensation compensation ective ective compensation Annual Report 2010 compensation compensation Total Total Total 55

Group management report Group management report Annual Report 2010 56 Group management report: Compensation report of the Executive Board and the Supervisory Board Supervisory the and Board Executive the of report Compensation issued to the members oftheEx issued to themembers euros). thousand 1,921 year: (previous Board oftheExecutive members as former Mr. and forMr. Berger Spoerr 2010, 31, euroswereshownasofDecember 148 thousand euros). thousand totalling Provisions rights appreciation forstock 719 year: (previous euros) thousand 392 year: Mr. Esch (previous eurosforMr. 38 sand year: Preisig (previous euros), thousand 181 thou- 424 eurosforMr. year: thousand (previous 452 Vilanek lows: (fair in 2). accordance value withIFRS in 2009 granted issued torights Mr. withtheir Vilanek total eurosto appreciation Mr.sand thestock plus to in claims, order cover Berger contractual euro thousand to amounted 4,044 HGB no. 6a (1) 314 in accordance Board withsection oftheExecutive formembers compensation thousa clauses) tocompetition 3,509 amounted asaresultofpost-employment Board oftheExecutive members to former payments (1) (cash-eff 314 HGB accordance no.6a withsection in 2010. Board oftheExecutive members arising ofpost-employment fromrestriction euros thousand of200 payments in out table, theabove set toIn addition theamounts Board. wereissued warranties other or guarantees commitments. as aresultofthepension Board euros) 820 thousand areshownin personnel euros). thousand 1,827 year: (previous 2010 31, eurosasofDecember thousand totalled 2,096 Board Executive ofthe Mr. members and forMr. asformer euros). Berger thousand Spoerr DBOs The 244 year: forMr. euros(previous theDBO Preisig thousand to 347 amounted 2010, 31, ber to Mr. over commitment granted took ofDecem- thepension Preisig As by AG. debitel AG freenet 2008, 1, euros). ofSeptember thousand As 1,128 year: Mr. Krieger (previous thou 386 year: euros forMr. (previous Esch eurosforMr. thousand (previou Vilanek 265 theDefi 2010, 31, ofDecember As 2009. Mr. ontheoccasion Vilanek Offi ofhis asChief Executive appointment Mr. Krieger. Inthefi in thefi rights appreciation stock options and As in the previous year, in theprevious As nocash-eff In thefi theprovisions wereasfol- rights appreciation forstock 2010, 31, ofDecember As in in 2010 Board oftheExecutive paid to themembers compensation Overall, No loans were extended to any of the members of the Executive Board, and no and Board, oftheExecutive to any ofthemembers loanswereextended No year: euros(previous thousand of373 expenses time service past and Current to Mr. granted was and commitment pension Esch anindirect 2004, In November nancial year 2010, no new stock appreciation rights or stock optionswere orstock rights appreciation nonewstock nancial year 2010, nancial year 2009, an indirect pension commitment was granted to granted was commitment pension anindirect nancial year 2009, ecutive Board ofthecompany. Board ecutive ective compensation was paid from stock fromstock paid was compensation ective ned Benefi sand euros) and 1,416 thousand eurosfor thousand euros)sand 1,416 and value of 509 thousand thousand of509 value for any of the members of the Executive oftheExecutive forany of the members 6 thousand euros), euros for 6 thousand thousand 30 s year: 115 thousand euros), 518 thousand euros), thousand thousand 115 s year: 518 competition clauses were made to former to weremade former clauses competition nancial year 2010. and 56 thousand eurosforMr. thousand Krieger 56 and expenses for the members of the Executive oftheExecutive forthemembers expenses s, including the payments of 508 thou- of508 including thepayments s, nd euros. In the previous year 2009, the year 2009, In theprevious euros. nd t Obligations (DBOs) were as follows: (DBOs) wereasfollows: t Obligations ective compensation incl. the incl. compensation ective euros whentheywere cer as of May 1, cer 1, asofMay ■ ■ ■ ■ pens anindirect granted were each AG freenet.de oftheformer Board oftheExecutive all members 2004, In November Pensions of theExecutive ceasing Board employed to be Compensation provisions for theevent ofamember Berger: Eric and Krieger Eckhard Spoerr, Axel members Board Executive as well astheformer Stephan Esch member Board event fortheExecutive oftermination ofemployment contract. ending ofhis service of offi to claim forloss right compensation exists (prematurely) No ending. the employment astheold werethesame contracts including thenumb the level ofcompensation, which theexception continued With legally to of werereplaced by valid, newones. be to into thecompany came whenthemerger eff were transferred in eff contracts Service Premature termination ofemployment contract tofreenet AG areentitled thebenefi

Group management report: ce if a member of the Executive Board Board oftheExecutive ce ifamember freenet.de AG, to amaximum ofone-third AG, offi freenet.de predecessor legal ofthecompany orits Board ontheExecutive year commenced of fi percent toshall amounting 2.5 receive apension Board oftheExecutive members birthday,From theaforementioned their 60th ofa months twelve in either case, within, ornotice is to is ended end served contract theservice mutual agreement cent whereby achievement oftargets) fortheremaining ofthecontract period ontheassumptionof100 per- (based bonuses and right to ofsalary The payment conditions, within a period of twelve months from the end of employment, but not but ofemployment, from theend months oftwelve within aperiod conditions, to theother contractual subject remainciation exercised, in rights be force can and orinvalidity, in earnings capacity appre- all orin stock theeventreduction ofdeath, ordueto acomplete cause forany other good terminating contract his service later Inthe ofthe term. thanby theend not but ifthe other exercise within months, conditionsing aremet twelve period remain exercised ofthevest- regardless rights inappreciation be force can and isremain terminated in Ifemployment place. dueto all achangeofcontrol, stock will achieved, being objectives therespective and vestingof therelevant period Stock which exercisable have appreciation rights already dueto become theexpiry pension. whentheyreachtheageof27,est to a children training, terminating until of schooling orvocational theend atthelat- orlife forthespouse annuity Survivor In particular, the company’s service contracts provide thefollowing provide benefi contracts In particular, service thecompany’s of Board oftheExecutive themembers terminationUpon ofemployment, pension). ect with mobilcom AG and freenet.de AG before the merger themerger AG before withmobilcom AG freenet.de and ect Compensation report of the Executive Board and the Supervisory Board Supervisory the and Board Executive the of report Compensation ion commitment by freenet.de AG. ion commitment by freenet.de ones, including thetermsones, ofbenefi ts described under item 35 ofthenotes. item 35 under described ts change ofcontrol ofthecompany. companion, and orphan’s pension forany pension orphan’s and companion, maximum total amount of the guaranteed oftheguaranteed totalmaximum amount is responsible himself forthe(premature) event of a member of the Executive Board Board oftheExecutive event ofamember er of stock appreciation rights, thenew appreciation rights, er ofstock nal annualfi nal annualfi xed salary (guaranteed (guaranteed salary xed ect. The old contracts, oldcontracts, The ect. xed salary foreach salary xed ts in theevent of ts Annual Report 2010 ts in the ts 57

Group management report Group management report Annual Report 2010 58 Group management report: Compensation report of the Executive Board and the Supervisory Board Supervisory the and Board Executive the of report Compensation 2009: Oﬃ For theChief Executive 2008: 1, September Joachi Board oftheExecutive For themember ■ ■ ■ ■ ■ ■

of fi From birthday, Mr. his percent shall to amounting 60th Vilanek receive apension 2.5 apply. suchtermination ca Where is dueto good not but later oftheterm. thanby theend ofemployment, fromtheend months oftwelve within aperiod conditions, to theother contractual subject exercised, be remain in rights ity, appreciation force can all orin and stock theevent ofdeath, orinvalid- in orduetoearnings capacity acomplete cause reduction other good remain in Intheevent place. ofMr. forany Preisig terminating contract his service will achieved, being objectives therespective and vestingof therelevant period Stock which exercisable have appreciation rights already dueto become theexpiry isorphan’s pension paid. themonthly times to amounting payment 24 lump-sum aone-time At this point, will to pension. orphan’s orphans receive entitled cease themonthly to be age of18, Mr. Preisig to oreligible entitled was forat that ofthepension percent may combined orphan’spensions 90 notand exceed Preisig. forJoachim pension onthebasis Widow’s rights oftheguaranteed custody orphan and forthespouse annuity Survivor ofservice. length actual hence thereis ascalin requirements, legal conditions prerequisite which is arise, according to calculated non-forfeiture to early, Mr. Preisig af shall receive apension, euros(g of9,333.00 in theamount pension Mr. Preisig Joachim onreaching retirement the ageof60, shallUpon receive a not apply. does restriction 12-month su Where later oftheterm. thanby theend restriction does not apply. does restriction suchterminat Where oftheterm. by theend not later but than ofemployment, fromtheend months oftwelve within aperiod conditions, to theother contractual subject remain exercised, in be force can and orinvalidity, ings capacity rights appreciation all orin stock theevent ofdeath, cause forany other good contract service terminating Board hisremain oftheExecutive in Intheevent place. ofamember will achieved, being objectives therespective and vestingof therelevant period Stock which exercisable have appreciation rights already dueto become theexpiry when theyreachtheageof27, to amaxi children training, terminating until of schooling orvocational theend atthelatest orlife forthespouse annuity Survivor pension). ofthecompany,Board to ofone-third amaximum offi nal annualfi xed salary for each contractual year commenced on the Executive ontheExecutive year commenced foreachcontractual salary xed cer Christoph Vilanek, the following rules apply from May 1, thefollowingcer fromMay 1, Christoph apply rules Vilanek, companion, and orphan’s pension forany pension orphan’s and companion, mum total amount of the target pension. mum total ofthetarget amount m Preisig, from thefollowing apply rules use, the 12-month restriction does not does restriction the12-month use, g of the guaranteed pension based onthe based pension g oftheguaranteed or due to a complete reduction inor dueto earn- acomplete reduction the time of his death. On reaching On thetime ofhis the death. ter reaching the age of 60 and once the and ter reaching theageof60 uaranteed monthly pension). monthly Ifheleavesuaranteed ch termination is due to good cause, the ch termination cause, is dueto good ’s forbinding pension individual child ion is due to good cause, the 12-month the12-month cause, ion is dueto good nal annualfi xed salary (target salary xed one and a half times this ahalftimes one and amount. thevice this chairperson receives double amount, Board oftheSupervisory chairperson tion is limited to which is thatamount The payable in ofbasic theform compensation. a resultofexercising their offi thousand euros. thus 968.0 fi ontheprofi depends paid out be willsation indeed compen- this performance-based Whether asanexpense. recognised also euros was of405.0 thousand compensation Performance-based euros. thousand of158.0 ance fees ofthecompany fi received Board uted to theshareholde shareofthecompany which europer is distrib- in excess in dividends of0.10 0.01 euro eurosforeach of500 in theamount compensation year, variable performance-based eff with meetings in actual participation ings aswell heldasconference asforphone calls, meet- committee and Board forSupervisory fees attendance waived Board Supervisory the self-restraint agreement, ofavoluntary part As this receives double amount. person eurosforeachmeet of1,000 fee attendance in an addition MitbestG—receive (3) 27 in accordance formed committee with section Boar to aSupervisory whobelong members Board he/she Supervisory meeting Board attends. foreach Supervisory 1,000 euros thistimes amount. this receives double Board the Supervisory each full fi receive fi members Board Supervisory The details. appreciation stock amounts, compensation ■ ■ ■ components: ofthree consists and ofassociation, by thearticles is governed compensation Board Supervisory The principlesBasic ofcompensation compensation Board Supervisory withany subsidiaries AG. offreenet contracts arenoservice There nancial year 2010. The total compensation total compensation The nancial year 2010.

ect from the third quarter of2010. fromthethird quarter ect Group management report: For their activity during thefi For their activity Furthermore, Supervisory Board members are reimbursed for expenses incurred as incurred forexpenses arereimbursed members Board Supervisory Furthermore, ofeachfi theend after receive, also members Board Supervisory The Every Supervisory Board member receives in addition an attendance fee of fee receives anattendance in addition member Board Supervisory Every Performance-linked compensation fees Attendance Basic compensation Please also referto also Please in item thenotes 35 nancial year of membership on the Supervisory Board. The chairperson of chairperson The Board. ontheSupervisory nancial year ofmembership rs for the previous fi fortheprevious rs Compensation report of the Executive Board and the Supervisory Board Supervisory the and Board Executive the of report Compensation ce aswell asforturnover taxes. xed compensation of 405.0 thousand euros and attend- eurosand thousand of405.0 compensation xed nancial year 2010, the members of the Supervisory oftheSupervisory themembers nancial year 2010, xed basic compensation of 30,000 eurosfor of30,000 xed basic compensation nancial year. ofthecompensa- extent The rights held, shareownership other and held, rights amount, the vice chairperson one and ahalf oneand thevice chairperson amount, d committee—with theexception ofthe d committee—with paid for Supervisory Board activities was was activities Board paid forSupervisory for further information, in particular about about in particular information, for further ing of the committee. The committee chair- committee The ing ofthecommittee. t appropriation resolution forthe resolution t appropriation nancial Annual Report 2010 59

Group management report Group management report Annual Report 2010 60 Group management report: Opportunities and forecast and Opportunities ■ ■ ■ ■ ■ ■ prices by as much as three percent. byprices asmuch asthree in adecline the but tions revenue for2011, aslight in communica- mobile increase expect VATMThe Consultexperts Dialog and Telecommunications market consumption. onprivate could have impact apositive which areexpected, households ofprivate income in disposable increases further and positive eﬀ Hence for2011. by percent 2.3 product domestic gove theGerman annualeconomic report In its Macroeconomic development Forecast opportunities: and priorities following operational enhance thelong-termwill competit further 2011/2 Fortheperiod integration programme. thecompany largelyimpl this connection, started which hadbeen services voice data and In theﬁ Opportunities andforecast Opportunities

customer segment long-term. segment customer withtheaim of stabilising trend, in thecontract in ARPU thegrowth participation thus and apps ofattractive development further and in thepremium segment, of qualitative expansion and A quantitative to market distribution thecompany’s power newproducts; Exploiting structures; cost reduce to further improvements quality and Continuous process specialist retailers; to independent ownshopsin 2010 inimplemented its (Retail+) successfully productivity and quality to themeasures increase Extending forgrowth; seize opportunities to in order communications, mobile oftraditional in also internet thesegments but thecompany’s tariff Expanding savings; cost and synergies withtheaim additional ofexploiting system, into remaining asingle thetwo Final integration ITlandscapes steps to unify nancial year 2010, freenet AG systematically continued its focus on mobile onmobile focus continued AG its systematically freenet nancial year 2010, and product off product and emented a comprehensive restructuring and and acomprehensiveemented restructuring already communications retail lowmobile iveness ofthecompany. the include They 012, additional measures are planned that areplanned measures additional 012, rnment predicts an increase in realgross anincrease predicts rnment the range of smartphones, especially especially ofsmartphones, therange as a result of the debitel acquisition.as aresultofthedebitel In ers, especially in especially thefi ers, ects on the labour market onthelabour ects eld of mobile eld ofmobile Board the payment of a dividend in the amount of 80 cents per share. per cents of80 in theamount ofadividend thepayment Board fl cash offree percent 48 of apayout ratio This represents earnings. sharefromretained per cents of80 amount forthefi ofadividend thepayment Meeting General Annual fl offuture cash percent free that 40—60 euros. 200 million fl million cash free strong asustainably eurosand ofoverEBITDA 300 fl cash a free ayear-on-year in revenue decline in 2011. thecompany expects tions in 2010, year.on thelevel oftheprevious data tariff by marketing and by improving base in ofthecustomer ARPU decline ated thequality towill made base. achieve ofstabilisation ofthecustomer be ahigh degree positive development inpositive development theno-frills Forthefi base. customer a and thousands, by lessthan500 base customer ofthepostpaid qualitative adjustment takes planning into for2011 The account base. ofthecustomer acontinued reduction will continue contract onvaluable to focus overall forthecompany. future development apositive foresees AG Board thefreenet Executive of2011, in thecourse tion activities expects the following developments for 2011 and 2012: and for2011 thefollowing developments expects theVATM government, tions oftheGerman onthemarket expecta- Based declining numbers. user cases in and some rates growth in businesses Group’s fi freenet operate The freenet Group 1 Free cash fl cash Free 1 and intangible assets. intangible and equipment and plant ofproperty, disposal the from proceeds plus assets, intangible and equipment and For thefi to the to have propose decided Board theSupervisory and Board Executive The afi hasadopted Board theExecutive Furthermore, Group anadjusted thecompany is expecting perspective fromtoday’s For 2012, million is Group aiming of325 freenet EBITDA eurosand Group The foranadjusted Communica- ofthedeclining in asaconsequence base Mobile customer Notably market-wide company aims associ- The and to decline price counter theexpected In its new customer acquisition and existing customer management, thecompany acquisition newcustomer management, existingIn its customer and With thestabilization qu With ofthecustomer s. Forthefi s. ow isdefi ow ow¹ of over 200 million ofover eurosforthefi 200 ow¹ nancial year 2011, the Executive Board aims to propose to the Supervisory aims to to theSupervisory Board propose theExecutive nancial year 2011, ned as cash fl ascash ned nancial year 2011, the company expects a stabilisation of the ARPU astabilisation oftheARPU thecompany expects nancial year 2011, ow. ow from operating activities, minus investments in property, plant plant inproperty, minusinvestments activities, operating from ow Group management report: ow¹ will be distributed will asdividends. be ow¹ relationships. In the past this to thepast hasled a relationships. In ercely competitive markets, with varying withvarying ercely markets, competitive and Dialog Consultthecompany currently Dialog and ality and after the completion ofintegra- thecompletion after and ality nancial year 2011. nancial policy which determines nancial policy nancial year 2010 in the nancial year 2010 Opportunities and forecast and Opportunities nancial year 2012, eff nancial year 2012, ow¹ ofover ow¹ Annual Report 2010 orts orts 61

Group management report Group management report Annual Report 2010 62 Group management report: Opportunities and forecast and Opportunities hitp iae JahmPesg Stephan Esch Preisig Joachim Christoph Vilanek Board Executive The 2011 6, March Büdelsdorf, continue into tapping tosystematically pursue potential newareasofgrowth. ﬂ cash strong long-termgoals ofthis enhance proﬁ its and business areto secure approach primary The company willThe continue services. voice onmobile data to and focus development statement ontheprospective oftheGroup Summary ow, and to continue paying down its debt. In addition thecompany Inaddition willow, to and continue debt. paying its down tability tability and Annual Report 2010 63

Group management report Consolidated ﬁ nancial statements

Data is our daily bread.

Unseen by the customer, the IT department ensures the smooth functioning of technological processes in the background. To make these processes even more eﬃ cient, the freenet Group IT team is hard at work on a complex project on an unprecedented scale: unifying our two remaining IT landscapes into a single system. An elaborate project involving the migration of 20 terabytes of data material, which is unparalleled in Europe. Heike Peters, Administrator Oﬃ ce IT:

“There’s so much to do. In addition to the tasks of the everyday routine, my colleagues and I are working full steam on unifying all systems and data. This allows us to successfully merge mobilcom, debitel and Talkline also on an IT level.“ Consolidated fi nancial statements rmJnay1t eebr3,21 7 . 2010 31, 1to December from January for thefi 76 toNotes theconsolidated fi (adjusted) . 2009 31, as ofDecember assets in non-current ofmovements statement Consolidated . 2010 31, as ofDecember assets in non-current ofmovements statement Consolidated fl ofcash statement Consolidated 70 ofchangesin equity Schedule . 68 2010 31, asofDecember Consolidated balance sheet 2010 31, 1to. December fromJanuary comprehensive income fortheperiod of consolidated statement and statement income Consolidated Overview Responsibility statement Responsibility statement . . . Report Auditor’s nnilya 00...... 78 nancial year 2010 . . nancial statements of freenet AG offreenet nancial statements for the period for theperiod ows from aur oDcme 1 00 73 . 2010. 31, 1to December January Consolidated fi nancial statements: Annual Report 2010 Overview 153 . 154 . . 74 . 67 2

Consolidated financial statements Consolidated financial statements Annual Report 2010 68 egtdaeaeo hrsottnigi huad(iue)1801128,061 128,061 128,061 1.86 128,061 0.14 1.86 0.14 –0.05 0.93 –0.05 0.93 13.2 13.2 13.1 13.1 (diluted) inthousand outstanding ofshares average Weighted (undiluted) inthousand outstanding ofshares average Weighted in€ (diluted) operations discontinued sharefrom per Earnings in€ (undiluted) operations discontinued sharefrom per Earnings in€ (diluted) operations continued sharefrom per Earnings in € (undiluted) operations continued sharefrom per Earnings in€ (diluted) share per Earnings ru eutatiual osaeodr ffentA 1,3 256,485 112,433 in€ (undiluted) share per Earnings interest tominority attributable result Group AG offreenet toshareholders attributable result Group resullt Group Group result from discontinued operations operations continued from result Group Taxes income on neetpybeadsmlrepne 1–104–103,042 15,188 –61,024 18,163 11 10 –202,438 –189,442 8 income on taxes before Result similarexpenses and payable Interest similarincome and receivable Interest ofassociates ofresults Share result Operating expenses operating Other write-downs impairment and Depreciation expenses Personnel ofmaterials Cost capitalised work own Other income operating Other Revenue In €’000s Consolidated fi nancial statements: Consolidated income statement and consolidated statement of comprehensive income income comprehensive of statement consolidated and statement income Consolidated for the period from January 1 to December 31, 2010 31, 1toDecember January from period the for period from January 1 to December31,2010 1to January from period the incomefor comprehensive of statement Consolidated income statement and consolidated oe1. 1. 2010 Note 13.2 13.1 21,2 –19,012 16,122 12 71311,685 1,331 17 24 3304–364,277 –199,653 –333,064 –2,839,152 –149,312 116,444 9 –2,619,199 3,601,786 7 85,692 6 3,339,504 5 4 —31. 12. 2010 12. —31. 1,6 256,490 112,467 0,4 36,733 102,640 4,7 122,902 144,170 1,6 17,721 118,762 625238,769 –6,295 ,9 10,192 9,991 .82.00 2.00 0.88 0.88 45 34 —31. 12. 2009 2009 —31. 12. 1. 1. 2009 adjusted osldtdcmrhnieicm trbtbet ioiyitrs 45 34 256,493 112,448 interest tominority attributable income comprehensive Consolidated AG offreenet toshareholders attributable income comprehensive Consolidated Consolidated comprehensive income inequity directly recognised invalue Change inequity directly recognised Taxes income on fi ofheld-for-sale value infair Change Group result In €’000s Consolidated fi nnilisrmns2 12 22 nancial instruments nancial statements: Consolidated income statement and consolidated statement of comprehensive income income comprehensive of statement consolidated and statement income Consolidated for the period from January 1 to December 31, 2010 31, 1toDecember January from period the for —31. 12. 2010 12. —31. 1. 1. 2010 1,8 256,498 112,482 1,6 256,490 112,467 58 15 7–4 –7 Annual Report 2010 —31. 12. 2009 12. —31. 1. 1. 2009 69

Consolidated financial statements Consolidated financial statements Annual Report 2010 70 te eevbe n te ses2 45045,689 44,500 21 17,817 11,006 52,103 21 37,678 15 14, classifi group ofdisposal Assets equivalents cash and Cash assets other and receivables Other receivable accounts Trade assets tax income Current Inventories Current assets assets other and receivables Other receivable accounts Trade assets tax income Deferred investments Other inassociates Investments equipment and plant Property, Goodwill Intangible assets Non-current assets Assets in €’000s Consolidated fi nancial statements: e shl-o-ae2 2230 12,283 24 ed as held-for-sale Consolidated balance sheet as of December 31, 2010 31, December of as sheet balance Consolidated as of December31,2010 as of sheet balance Consolidated 4 5115941,116,505 735,082 1,115,924 578,722 14, 15 14, 15 Note 31. 12. 2010 31. 12. 2009 12. 31. 2010 12. 31. Note 82282,190 2,258 18 21434480,291 174,334 22 97,2 27,090 79,828 19 334610,005 3,486 23 05,9 52,057 51,897 20 73433,645 3,403 17 14759487,296 407,539 21 3,755 19,530 21 ,4,4 1,958,187 1,848,349 ,4,8 3,033,525 2,542,388 9,3 1,075,338 694,039 rvsosfrohrlaiiisadcags3 69932,469 26,929 31 12,792 19,211 31 141 0 classifi group ofdisposal Liabilities charges and liabilities other for Provisions 1,047,618 Borrowings liabilities tax income Current 1,134,464 Other payables payable Trade accounts 31. 12. 2009 liabilities Current 31. 12. 2010 Note charges and liabilities other for Provisions Pension provisions Borrowings Other payables payable Trade accounts liabilities Non-current interest tominority attributable reserves and Capital AG freenet of toshareholders attributable reserves and Capital earnings Retained reserve Revaluation Capital reserves capital Share Shareholders’ equity in€’000s liabilities and equity Shareholders’ e shl-o-ae2 03316,536 10,333 24 held-for-sale as ed Consolidated fi nancial statements: Consolidated balance sheet as of December 31, 2010 31, December of as sheet balance Consolidated 511801128,061 128,061 25.1 02,3 24,194 24,638 30 25 92545551,874 215,435 29 718,207 584,583 29 82,3 7,337 27,339 28 71202177,927 390,289 132,082 355,191 27 3 27 54,138 11,796 387 27 27 ,3,6 1,047,759 1,134,464 ,4,8 3,033,525 2,542,388 4,1 809,334 640,615 6,0 1,176,432 767,309 6,1 181,980 268,811 3,3 737,536 737,536 641 56 Annual Report 2010 71

Consolidated financial statements Consolidated financial statements Annual Report 2010 72 opeesv noe001 1,3 1,4 4112,482 1,134,464 34 0 112,448 1,134,464 112,433 268,811 1,047,759 256,498 15 141 56 5 1,047,759 141 1,047,618 0 737,536 791,261 256,493 181,980 1,047,618 128,061 136 256,485 41 0 181,980 31. of As 12. 2010 8 791,125 41 737,536 income comprehensive Consolidated –74,505 sale 128,061 0 to due Deconsolidation 737,536 33 D 128,061 As of 1. 1. 2010 i 0 737,536 31. of As 12. 2009 v 128,061 income comprehensive iConsolidated As of 1. 1. 2009 d e of n d p a subsidiaries y m e 2 n 5 t000– , 6 0 2– 2 5 , 6 0 20–2 5 , 6 00000–175–175 0 2 n€00 Share In €’000s Consolidated fi nancial statements: capital Schedule of changes in equity for the period from January 1 to December 31, 2010 31, 1toDecember January from period the for inequity changes of Schedule from January 1 to December31,2010 1to January from Schedule of changes in equity changesinequity of Schedule reserves Capital Revaluation Revaluation reserves Retaines Retaines earnings reserves attri attri reserves - of freenet AG freenet of shareholders Capital and and Capital butable to for the period period the for attributable attributable Capital and and Capital to minority to minority reserves reserves interest holders’ Share - equity netet npoet,patadeupetaditnil ses–651–69,920 6,734 –26,561 2,044 fl cash Free assets intangible and equipment and plant ofproperty, disposal the from Proceeds assets intangible and equipment and plant inproperty, Investments Cashfl at31. 12. equivalents cash and Cash at1. 1. equivalents cash and Cash Cash-eff paid taxes Income non-paymentOther components fi or to investing attributed not capital¹ working innet Increase ahrpyet fbnsadbroig 9–5,4 –155,813 –454,047 362,793 29 19,062 24 –69,920 –239,920 6,734 –26,561 –4,251 2,044 24 Cashfl Interest paid borrowings and ofbonds repayments Cash payment Dividend Cashfl received Interest associates from ofcapital Return ofsubsidiaries sale the from Proceeds assets intangible and equipment and plant ofproperty, disposal the from Proceeds assets intangible and equipment and plant inproperty, Investments 352,528 Cashfl 139,058 offi disposals on Loss ofsubsidiaries sale the from Proceeds ofassociates ofresults Share offi items on impairment and Depreciation Adjustments (EBIT) taxes and interest before operations discontinued and continued from Result In €’000s ow from operating activities ow from fi from ow activities investing ow from activities operating ow from etv hnei ahadcs qiaet 3111351,368 –301,121 equivalents cash and incash change ective ow (FCF) nancing activities nancing nancing activities xed xed assets Consolidated fi xdast ,2 9,2 224,872 191,624 24 8, assets xed 1 Net working capital isdefi capital working Net 1 from Consolidated statement of cash fl amounts such items are also included in “Decrease/increase in net working capital” capital” working innet in“Decrease/increase included arealso items such amounts respective their With origin. nature and totheir due capital working ofnet positions contain can group classifi group charge and liabilities other for Provisions provisions, Pension payables, Other payable, Trade accounts Inventories, assets, other and receivables Other nancial statements: January 1 to December31,2010 1to January ed as held-for-sale” as well as “Liabilities of disposal group classifi group ofdisposal as“Liabilities aswell asheld-for-sale” ed ned as the sum of the following positions: Trade accounts receivable, receivable, Trade accounts positions: following sumofthe asthe ned Consolidated statement of cash fl cash of statement Consolidated s. Moreover positions such as “Assets of disposal ofdisposal as“Assets such positions Moreover s. 20, 21, 30, 30, 20, 21, 1 31–268–22,294 –82,658 33.1 31, ows from January 1 to December 31, 2010 31, 1toDecember January from ows 2 9–040–20,797 –10,400 19 12, oe1. 1. 2010 Note 33.2 33.3 33.1 71531,502 1,573 17 –1,685 –1,331 17 —31. 12. 2010 12. —31. ows 5776–252,010 –537,766 3,5 295,543 236,252 3,1 –19,950 331,418 1,3 232,357 211,735 3,5 295,543 236,252 5,1 –96,197 –58,117 2,0 0 –25,602 027331,418 30,297 ed as held-for-sale” asheld-for-sale” ed ,5 2,816 4,259 ,7 6,726 4,275 9 307,835 393 4 23 –49 Annual Report 2010 —31. 12. 2009 12. —31. 1. 1. 2009 73

Consolidated financial statements Consolidated financial statements Annual Report 2010 74 In €’000s odil1165500181,116,377 111,969 218 14,979 29,830 128 61,207 488,898 0 75 2 –4,799 174 0 223,126 3,704 0 –126 65 45,732 0 20,821 0 2,596 217 5,274 65 177,910 –4,037 0 1,116,505 23,605 4,068 129 5,365 14,914 489,072 10,175 242,619 construction under assets and account on Payments Other offi 36,763 machinery and Technical equipment networks and Switches buildings and land on facilities Land, equipment and plant Property, Goodwill Customer relationships Trademarks licences and Software Internally-generated software Intangible assets 335,035000335,035 Consolidated fi eeupet10498081102,1 109,128 20,619 1,190 8,078 120,479 ce equipment nancial statements: Consolidated statement of movements in non-current assets as of December 31, 2010 31, December of as assets innon-current movements of statement Consolidated in non-current assets as of December31,2010 asof assets in non-current Consolidated statement of movements ,1,9 5503 6372,209,168 26,397 31 15,540 2,219,994 ,5,3 651018302,475,292 108,300 0 26,561 2,557,031 .1 00AdtosTasesDsoas31. 12. 2010 Disposals Transfers Additions 1. 1. 2010 3,3 101–18,0 266,124 81,903 –31 11,021 337,037 Cost of purchase or production or purchase of Cost .1 00AdtosImpairment Additions 1. 1. 2010 6,0 6,4 ,9 62,4 1,2 ,9,4 1,851,587 1,694,646 514,522 25,749 26 2,998 168,840 368,407 8,3 91066–67,4 2,4 76852,103 37,678 228,446 76,248 –26 636 19,150 284,934 5,4 8,9¹364 0,9 4,6 ,3,2 1,903,690 1,732,324 742,968 101,997 0 3,634¹ 187,990¹ 653,341 6,9 2282552 06417453,3 79,329 35,631 187,495 20,644 26 2,545 42,278 163,290 7,3 1,8 522112677317,541 206,797 282,101 15 0 0 110,585 171,531 7,8 1 2 4796,0 1,1 5 926 750 111,219 61,204 –4,799 120 118 176,984 2984810001,4 1,8 322,037 317,186 17,849 0 0 0 4,851 12,998 0581,2 ,9 6641,0 16,175 19,108 26,624 5,090 0 0 11,126 20,588 938189263777 5154654,207 4,655 25,175 75 3,727 226 1,899 19,398 2711,6 9 ,4 4998,8 34137,728 23,441 85,687 14,969 1,046 290 16,569 82,751 ,0 6 ,6 ,1 9,113 8,614 6,365 0 0 0 564 5,801 000218129000000 5 5 ,1,2 1,116,505 1,115,924 453 0 0 453 0 0 Depreciation and impairment write-downs Net book amounts book Net write-downs impairment and Depreciation Consolidated fi write-downs nancial statements: 1 The additions to depreciation in the amount of 187,990 thousand euros and the the and euros of187,990 thousand amount inthe todepreciation additions The 1 nagbeast 189,442 2,182 Group result from discontinued operations assets intangible and equipment and plant property, on write-downs impairment and Depreciation asfollows: statement income the in areincluded euros thousand of3,634 amount inthe write-downs impairment Transfers Disposals 31. 12. 2010 31. 12. 2010 1. 1. 2010 1. 1. 2010 12. 31. 2010 12. 31. Disposals Transfers Consolidated statement of movements in non-current assets as of December 31, 2010 31, December of as assets innon-current movements of statement Consolidated Annual Report 2010 191,624 75

Consolidated financial statements Consolidated financial statements Annual Report 2010 76 osrcin157035–,8 129 5 –1,788 177,910 10,395 325 23,605 61 0 1,390 574 2,882 1,597 0 3,286 –31,516 187,670 50,343 construction under assets and account on Payments Other offi machinery and Technical equipment networks and Switches Land, equipment and plant Property, facilities on land and buildings 14,9300502114,914 odil11012–,1 0001,116,505 335,035 0 489,072 0 0 0 36,763 0 242,619 60 0 4,366 9 100 –3,717 1,580 506 203 –17,704 1,120,162 39,855 –36,304 9,989 352,639 –25,616 524,870 –175 231,166 26,755 Goodwill Customer relationships Trademarks licences and Software Internally-generated software Intangible assets In €’000s Consolidated fi eeupet1341–9081,2 2981,4 120,479 16,146 –2,938 15,220 –19,098 143,441 ce equipment nancial statements: Consolidated statement of movements in non-current assets as of December 31, 2009 (adjusted) 2009 31, December of as assets innon-current movements of statement Consolidated current assets as of December 31, 2009 (adjusted) December31,2009 asof assets current innon- movements of statement Consolidated ,5,7 14106,2 2322,557,031 32,332 0 69,920 –134,130 2,653,573 ,5,9 8,1 0501734352,219,994 4,375 1,783 50,510 –83,516 2,255,592 .1 09Changein 1. 1. 2009 9,8 5,1 940–,8 797337,037 27,957 –1,783 19,410 –50,614 397,981 consolidation included in included companies companies Cost of purchase or production or purchase of Cost diin rnfr ipsl 31. 12. 2009 Disposals Transfers Additions .1 09Changein 1. 1. 2009 0,4 5,9 0,2¹1,4¹02,8 5,4 ,0,9 2,146,925 1,903,690 653,341 22,782 0 19,845¹ 205,027¹ –55,397 506,648 0,0 3,0 00179102,9 8,3 21397,575 52,103 284,934 20,799 0 7,941 30,091 –32,705 300,406 0,4 2,9 7,3 19401933847181572,049,350 1,851,587 368,407 1,983 0 11,904 174,936 –22,692 206,242 1,1 1,2 869943219313207,2 111,554 79,329 163,290 1,983 2 9,433 48,649 –12,423 119,612 7,1 ,7 ,9 03516949610,659 926 176,984 10,395 0 6,193 4,175 0 177,011 441–98746314001291,9 ,0 15,902 4,207 19,398 1,259 0 1,480 4,623 –19,887 34,441 154–1654241002,8 61515,221 16,175 20,588 0 0 2,471 6,594 –11 11,534 376–2882,2 6 ,3 2713,2 59,735 37,728 82,751 9,133 0 268 20,728 –12,818 83,706 998–02811830– 7,3 1,4 454,952 317,541 171,531 0 –2 0 111,873 –10,258 69,918 ,4 6 25819139,682 9,113 5,801 12 0 0 565 0 5,248 5,17807,82000012,998 322,037347,461 000 1,116,5051,120,1620000000 0000000 consolidation included in included companies companies Consolidated fi Depreciation and impairment write-downs Net book amounts book Net write-downs impairment and Depreciation diin Impairment Additions nancial statements: write-downs 1 The additions to depreciation in the amount of 205,027 thousand euros and the the and euros thousand of205,027 amount inthe todepreciation additions The 1 n nagbeast 202,438 22,434 Group result from discontinued operations assets intangible and equipment and plant property, on write-downs impairment and Depreciation asfollows: statement income the in areincluded euros thousand of19,845 amount inthe write-downs impairment Consolidated statement of movements in non-current assets as of December 31, 2009 (adjusted) 2009 31, December of as assets innon-current movements of statement Consolidated Transfers Disposals 31. 12. 2009 31. 12. 2009 1. 1. 2009 1. 1. 2009 12. 31. 2009 12. 31. Disposals Transfers 2 1,597 129 Annual Report 2010 224,872 77

Consolidated financial statements Consolidated financial statements Annual Report 2010 78 Consolidated fi 1. General General 1. information nancial statements: Notes to the consolidated fi consolidated tothe Notes mobile communications/mobilemobile internet. focussing on in Germany telecommunication services provides Germany. Group The company (also to in referred thefollowing as AGfreenet (also to referred in thefollow accounting and standards activity Business 1.1 fi the AGfor freenet of fi consolidated the to Notes functional currency. Unless otherwise specifi currency. Unlessotherwise functional taken into consideration. have been additionally HGB 315a incommercial accordance lawapplicable withsection in Union theEuropean as asapplied (IFRIC), the interpretations oftheInternational Fi oftheInternatioaccordance withtheIFRS fi in relationto prepared have allThey been idated fi annualfi The their fair value. fi thatsome to therestriction cost convention—subject ormillion (€’000s) euros. nancial statements. The consolidated fi The The consolidated fi The The consolidated fi The nancial statements are subject to uniform accounting and valuation principles. to accounting uniform principles. valuation and aresubject nancial statements nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial statements forthefi nancial statements nancial statements have been prepared in euros, the Company‘s theCompany‘s in euros, prepared have been nancial statements nancial statements have been prepared applying thehistorical applying prepared have been nancial statements nancial statements of the companies included in theconsol- ofthecompanies included nancial statements nancial year2010 ing as “the Company”), the Group‘s parent parent theGroup‘s Company”), ing as“the nancial Reporting Interpretations Committee Committee Interpretations nancial Reporting the balance sheet date thebalance oftheconsolidated sheet nal Accounting Standards Board (IASB) and and (IASB) nal Accounting Board Standards of December 31, 2010. The regulationsof The 2010. 31, ofDecember ed, all fi ed, “freenet”), is registered in Büdelsdorf, is registered in Büdelsdorf, “freenet”), nancial statements nancial statements nancial yearnancial 2010 nancial year 2010 were prepared in wereprepared nancial year 2010 gures are stated in thousand euros in thousand gures arestated nancial assets are stated with arestated nancial assets FS1Rsrcuigo h tnad1 .21 6 1 09None 26. 11. 2009 None 1. 1. 2010 2009— Project Improvements Annual 1. 12. 2009 None None Share-based 11: IFRIC 2and toIFRS Changes Diverse 1. 11. 2009 Standard ofthe Restructuring 27. 11. 2009 None 26. 3. 2009 2 IFRS and Recognition Instruments: Financial 1 IFRS 1. 11. 2009 27. 7. 2009 3. 30. 2009 Customers from Transfer ofAssets toOwners Assets ofNon-cash Distributions 39 IAS 18 1. IFRIC 1. Mandatory 2010 inaForeign Investment ofaNet Hedges 17 IFRIC Estate ofReal Construction the for Agreements Agreements Concession Service 16 IFRIC 15 IFRIC 12 IFRIC 2008) (revised 3 IFRS 2008) (revised 27 IAS Standard/Interpretation Improvements toImprovements the IFRS natureand the on Depending aGroup within Settlement Cash with Transactions Payment 12. 6. 2009 Relationships) ofHedge Part as Underlyings (Admissible Measurement 1. 7. 2009 Operation Combinations Business IFRS under Statements Financial Separate and Consolidated Consolidated fi nancial statements: and the related impact ontheGroup: therelated impact and 2010, 1, since adoption January ofearlyvoluntary thesubject orwhich have been 2010, tions (IFRIC), which arethesubjec tions (IFRIC), The followingThe showsthenewormodifi table Notes to the consolidated fi consolidated tothe Notes .1 002.3 00None earlier) (some 24. 3. 2010 1. 1. 2010 None 1. 1. 2010 None 9. 16. 2009 09 20 6. 7.1. 2009 5. and nature the on Depending 09 20 7. 1. 2009 6. 12. 7.1. 2009 application t of mandatory adoption witheff adoption t ofmandatory nancial statements of freenet AG for the fi the AGfor freenet of statements nancial 24. 3. 2010 No material impact material No 3. 2010 24. EU Commission Adoption by ed standards (IAS/IFRS) orinterpreta- (IAS/IFRS) standards ed extent of future transactions offuture extent extent of future transactions offuture extent Impact ect from January 1, 1, fromJanuary ect nancial yearnancial 2010 Annual Report 2010 79

Consolidated financial statements Consolidated financial statements Annual Report 2010 80 IFRS 9 Financial Instruments—Classifi Financial Taxes— Deferred 12: toIAS Change 9 IFRS Infl High Severe 1: toIFRS Change 12 IAS by reviewed Stillbeing 7: Instruments— Financial toIFRS Change 1 IFRS Equity with Liabilities 20. Financial Extinguishing 7. 2010 7 IFRS asPart Payments Advance 14: toIFRIC Change 19 IFRIC 1. 1. 2011 2010— Project Improvements Annual 14 IFRIC Mandatory Classifi 32: toIAS Change Diverse from Exemption Limited 1: toIFRS Change 32 IAS Disclosures Party Related 1 IFRS 24 IAS Standard/Interpretation Consolidated fi Valuation Realisation Assets of Underlying First-Time Adopters for Data ofFixed Remedying 2010) (October DIsclosures Instruments Requirements Funding of Minimum toImprovements the IFRS First-Time Adopters 7for IFRS with inAccordance Disclosures Comparative Rights nancial statements: Notes to the consolidated fi consolidated tothe Notes cation of Subscription ofSubscription cation freenet Direkt GmbH, mobilcom-debitel GmbH, MobilCom Multimedia GmbH, GmbH, Multimedia MobilCom GmbH, mobilcom-debitel GmbH, Direkt freenet GmbH, newdirections GmbH, 01083.com tellfon GmbH, GmbH, 01050.com Gm Cityline freenet GmbH, freeXmedia in voting percent rights. 50 and 20 of between nifi to joint which management. is subject aneconomic activity out in item 36. HGB 315a fi solidated Foracompletecompany list AG’s in in ofall question. freenet companies included con- business policies in benefi suchaway parent thattheGroup fi in to aposition thecompany‘s determine orindirectly Company is directly consolidated fi The Consolidated 1.2 companies ontheGroup: their impact probable in adoption thefi ofmandatory which arenot thesubject (IFRIC) followingThe showsthenewormodifi table cant infl cation cation and 01019 Telefondienste GmbH, 01024 Telefondienste GmbH, freenet.de GmbH, GmbH, Telefondienste freenet.de GmbH, Telefondienste 01024 GmbH, 01019 Associated companies aredefi Associated carry partners ormore which two under A joint agreement venture is acontractual ation ation and nancial statements, please consult our disclosures in accordance with section consult disclosures our in accordance please withsection nancial statements, uence but whichuence but arenot normally controlled by involving theGroup; ashare nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial statements include all companies with respect to which the all companies include withrespect nancial statements 1. 1. 2013 Pending Still being reviewed by reviewed Still being by reviewed Still being Pending None Pending by reviewed Still being 1. 1. 2013 Pending by reviewed being Still 1. 1. 2012 Pending None 1. 7. 2011 7. 24. 2010 1. 7. 2011 20.7. 2010 None 7.1. 2010 2011 1. 1. None 2009 12. 24. standard the on Depending 1. 7. 2010 2010 2. 1. 1. 7. 2010 application ned as companies over which the Group exerts asig- ascompanies overned exerts which theGroup bH, freenet Datenkommunikations GmbH, Datenkommunikations freenet GmbH, bH, Pending Still being reviewed by reviewed Still being Pending EU Commission Adoption by ed standards (IAS/IFRS) orinterpretations (IAS/IFRS) standards ed nancial yearnancial 2010 ts from the activities ofthe fromtheactivities ts management management Impact management management management management nancial year 2010 and and nancial year 2010 nancial and valuation methods valuation 2. Accounting Accounting 2. and Consolidated fi nancial statements: of acquisition asrevenue. is immediately recognised Any excess inties. theshareoffair net oftheacquiredfair value identifi company’s in theinitial whichas determined valuation, exte ofthe irrespective value, 3.37 criteria therecognition meeting ofIFRS dire thecosts acquisition and purposes theliabilitie purchased, oftheassets values onthebalance sheet. separately companies aredisclosed forthefi Companies areincluded Consolidation 1.3 principles 2010. fortheannualfi HGB (3) 264 meOme GmbH will of take advantage GmbH meOme aswell as GmbH, MIDRAY fürIT&PR, Stanniol GmbH Logistik DEG GmbH, GmbH, debitel Konzernfi AG, mobilcom-debitel determined and ifitis and determined thatafuture probable economic benefi completely rendered have been the services Revenue is after recognised period. forashort mainly Group services provides The Revenue 2.1 fi Comparable “2.20 under described consistently withtheprevio applied compared fi consolidated following accounting me The valuation and forassociates. applicable liabilities and receivables elimination areeliminated. The ofintercompany profi of associates is separately. not disclosed to which capital is thefreenet attributable of by theproportion orreduced increased according whereby th to method, theequity statement. income and sheet in thecorres aresummarised expenditure and Group’s The consolidation method. proportional eff pany. Services rendered but not but yet invoiced in separately theconsolidated rendered pany. areaccrued Services ect fromthedate onwhich theCompany as ect Joint ventures are included in ventures theconsolidatedJoint fi areincluded of asthatportion is recognised Goodwill oftheacquiredAll identifi company’s historical ofcompany cost The acquisitions is by the sumofthefair determined to consolidation. thecapital applied was method purchase The Internal profi Internal in in theconsolidated associates aredisclosed fi Investments Notes to the consolidated fi consolidated tothe Notes nancial statements. The accounting and valuation methods have been have been accounting methods valuation The and nancial statements. ts and losses, revenue, costs and income aswell income asintercompany and costs revenue, losses, and ts nancial statements for the period ending December 31, 31, ending December fortheperiod nancial statements nt ofany interests. minority rst time in time theconsolidated fi rst nancial statements of freenet AG for the fi the AGfor freenet of statements nancial gures and changes in theaccountinggures and policies”. theexemption regulationsspecifi nanzierungs GmbH, mobilcom-debitel Shop Shop mobilcom-debitel nanzierungs GmbH, ctly attributable to theacquisition. attributable ctly able assets, liabilities contingent and liabilitiesable assets, the changesin thejoint venture’s equity Group. Goodwill arising fromtheacquisition Goodwill Group. value oftheacquiredvalue company over thecosts thods were applied whenpreparing the wereapplied thods able assets, liabilities contingent and liabili-able assets, s acquired, any equity instruments issued for issued instruments anys acquired, equity e recognised values oftheholdings are values e recognised is in excess of the purchaser’s shareofthe is in excess ofthepurchaser’s will be disclosed separately attheir separately fair will disclosed be if the amount of revenue can be reliably be ofrevenue can if theamount ponding items ontheconsolidatedponding balance the asset value at the time ofacquisition, atthetime value the asset us year, withtheexce sumes control. Minority interests in interests the Minority control. sumes shares of the assets, liabilities, revenue shares oftheassets, nancial statements using the nancial statements t will fl nancial statements with nancial statements nancial statements ow to theCom- ption ofthechanges nancial yearnancial 2010 ed in section in section ed Annual Report 2010 ts is also ts 81

Consolidated financial statements Consolidated financial statements Annual Report 2010 82 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes mobile communications services off communications services mobile remaining to business areattributable clients. sales business activities. ofnormal within theframework services and ofproducts will forthesale received be Revenue ofthecons comprises thefair value fi as well as data transmission)as well asdata comprise mont comm Mobile accessories. devicesmobile and revenue is accordingly. accrued commission wereperformed, in which theservices theperiod beyond claims extend subsidies is linked to thenewcustomers, advertis forsome subsidies arealso provided user. ortheaverage revenue per cost advertising quarter Inaddition, per new customers defi contractually on provider. access atanetwork commission withnetwork is The provided claims arebased Commission asanewcustomer sions. is assoon revenue recognised fornewcustomers fornewuser particularly nications networks restriction”). “cash in future provided to (so-called be onservices the revenue which is not dependent which havein relationto alread theelements fair values. on thebasis oftheproportionate entire multiple-component business is broken price forthe The etseq. in accordance withIAS 8.10 guideline EITF 00-21 US-GAAP the applies Group The contracts. withmultiple-component for revenue generated “relative-fair-value is The used method” 18.13. in IAS asdetailed contracts component customer. to access provision arerealised to atwhich is atthepoint network fees the provided to aredelivered thecustomer the products when arerecognised accessoriesRevenues devices ofmobile and fromthesale products is provided. during which asrevenue theservice oversion arerecognised fees theperiod roam and well asconnection recognised asexpense. recognised ifaqualifi arecapitalised costs Borrowing Borrowing 2.2 costs account not constitute do ofthecustomer revenue in accordance withIAS 18. ofthird partie account onbehalf also and nancial statements. Revenue is ne disclosed nancial statements. Revenues in the Mobile Communications Communications Revenues in theMobile notes onrevenue: Supplementary aregenerate oftheGroup ofthesales Most With regard to added-value services, a services, to regard With added-value receives Group commissionThe commu- ofthe mobile revenue fromtheoperators aremultiple- segment Communications in theMobile contracts user end Certain nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ned qualitative and quantitative features, such as the number of suchasthenumber features, quantitative qualitative and ned ing charges. The voice communication and data transmis- voice data communication and The ing charges. ered, ered, one-off ed asset exists. Other borrowing costs are costs borrowing Other exists. asset ed s. Amounts which theCo Amounts s. these are recognised in the revenue. Where in Where arerecognised therevenue. these mounts are received for the Company’s own fortheCompany’s arereceived mounts or thedistributor. Revenue attributable hly charges, chargesfo hly charges, s who are signed up and for contract exten- forcontract s whoaresigned upand ideration which has been received orwhich received which hasbeen ideration ing campaigns and, if the granting ofthe ifthegranting ing and, campaigns y been supplied is limited supplied of toy been theextent The extent of the revenue to be recognised recognised oftherevenue to be extent The t of value added tax and cash discounts. discounts. cash and tax added t ofvalue down over the various valuation entities over valuation down thevarious unications revenues (voice revenues unications communication segment are generated by the range of by therange aregenerated segment provision chargesaswell of asthesale d with a large number of end users; the users; ofend d withalargenumber nancial yearnancial 2010 mpany chargesforthe r special features as r special Consolidated fi nancial statements: nor could any time limit be set on its useful life. useful nor could any limit onits time set be nosteady lossofvalu because chosen has been indefi An year orifthereareany ofanimpairment. indications once every ful economic life to which instead animpairment is and test is not depreciated, subject assets”. fornon-monetary test aswell “Impairment asitem 15 goodwill” and ment specifi to derive abenefi which areexpected generating units ofcash orgroups generating units to cash those impairments. cumulative less year, once isevery forimpairment atleast tested is and shownatoriginalGoodwill cost Intangible 2.3 assets sheet date and adjusted whereapplicable. date adjusted and sheet grounds ofimmateriality.grounds of theresidual attheend values depreciation, refl of assets straight-line forthedepreciation livessystematic useful assumed The depreciation. less atthecostofacquisition is equipment valued and plant orproduction Property, equipment and plant Property, 2.4 agreement. oftheunderlying duration 2010. over down aresidual us arewritten statements mainstraight-line relations shownin customer The theconsolidated fi method. to life useful fi ofthree of theirthe duration prospective to straight-line aresubjected costs over depreciation development software Capitalised until inised thepoint time whentheir tech in creating incurred fees and on services forthesoftware costs thepersonnel include overall economic benefi expected uct‘s defi clearly theyrelate to provided a theheading “internally software” under generated assets in theyear theyareincurr asexpenses nised to ten forlicences. years economic life, in over theirmethod expected months. 60 and 36 between was names brand 31 date thebalance December sheet basis. On economic life useful onastraight-line over aredepreciated costand theircal expected attheir histori- arecarried names have adeterminate brand economic life. useful These On the other hand, the other brand names names theother brand theother hand, On is withanindefi anasset amount withamajorresidual carrying brand One Itis allocated to is generating units. allocated cash thegoodwill For this purpose, The residual book values and useful econ useful and values residual book The A distribution right is depreciated using thestraight-line over theexpected method using months the to 66 of42 over relations aredepreciated aperiod Customer areusually recog- programs in developing ormaintaining incurred Costs software using aredepreciated and thestraight-line areshown atcost Licences software and c breakdown, please refer to item 14 “Intangible assets, property, plant and equip- and plant property, referto assets, item please 14“Intangible c breakdown, ned software product which can be used by theCompany, used which be can theprod- and product software ned ect the assets’ expected useful lives useful within theCompany. Incalculating expected theassets’ ect Notes to the consolidated fi consolidated tothe Notes t from the merger which to regard gavet fromthemerger With the rise to thegoodwill. nancial statements of freenet AG for the fi the AGfor freenet of statements nancial t is greater than the costs incurred These costs costs These incurred t is greater thanthecosts the asset. Development costs arenot capital- costs Development the asset. nical and economic feasibility can be proven. proven. economicnical feasibility and be can ed. Such costs are recognised asintangible arerecognised Suchcosts ed. development team as well as expenditure team aswell asexpenditure development general three years for software and three three and forsoftware years three general omic ateachbalance lives are reviewed the assets’ useful lives are disregarded on lives useful are disregarded theassets’ , 2010, theremaining life useful ofthese , 2010, eful life of 24 months as of December 31, 31, asofDecember months eful life of24 e is discernible with respect to this asset, to thise is discernible asset, withrespect with a major residual carrying amount amount with amajorresidual carrying ve years. nancial yearnancial 2010 nite life useful Annual Report 2010 nancial nite nite use- 83

Consolidated financial statements Consolidated financial statements Annual Report 2010 84 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes line method overline of thelease. theduration method by thelessor)made asacost arerecognised (net lease taking account withanoperating ofincentive after payments in connection made Payments aretransferred. property withtheownershipassociated oftheleased orfi leases equipment. telecommunications not and to but (purchase), IThardware equipment and plant and specifi assets, Fornon-current chased. orpur- leased areto basis by be case onacase whetherassets decides Group The Leases where theGroup is thelessee 2.6.1 2.6 Leases inpossible this respect. for goodwill and assets withanindefi assets and for goodwill ten upto afi (impairment). once ayear tested in accordance be must with withindefi assets and Goodwill impaired. might oftheasset be value in to thevalue use. and sell less costs amount. The recoverable amount is defi amount recoverable The amount. therecoverable exceeds value arealways impaired ifthebook assets Non-monetary assets ofnon-monetary Impairment 2.5 following lives: useful leases. leases. wereclassifi nocontracts 2010, 31, oftheclosing date As December ment. in state- theincome directly interest is content recognised oftheleasing instalments by content therepayment oftheleasing inst Accordingly,lives. theliability arising from isGroup thebenefi Teupet3 to10years 3to10years 2to7years to33 25 years Useful life 3to6years years 3 to19 improvements Leasehold hardware and equipment Telecommunications equipment IT vehicles Motor machinery and Technical equipment Buildings Asset In the case offi In thecase into enters which areclassifiLeases theGroup asthelessee If the reason foran impairmentIf thereason is nolonger indicate thatthe iftriggering events out carried hasto impairment test be An Systematic depreciation of property, plant and equipment is generally based onthe is equipment generally based and plant Systematic ofproperty, depreciation nance leases, depending onwhetherall thesignifi depending nance leases, gure not exceeding the amortised cost of purchase. This is costofpurchase. not applicable gure not exceeding theamortised nancial statements of freenet AG for the fi the AGfor freenet of statements nancial cial owner are capitalised and depreciated over their expected useful useful over depreciated cial their and ownerarecapitalised expected nance leases, IAS 17 specifi 17 IAS nance leases, nite useful economic life, because no write-ups are nowrite-ups nite economic life, useful because c rules apply to motor apply c rules vehicles (operating leases) ned asthehigherned ofth the lease is the lease shownasaliability reduced and in the income statement using in statement theincome thestraight- alments which have already been made. The The which made. have alreadyalments been es that the leased assets ofwhich the assets es thattheleased the provisions of IAS 36 for loss of value forlossofvalue 36 theprovisions ofIAS applicable, the value thevalue applicable, nancial yearnancial 2010 cant risks and opportunities opportunities and risks cant e fair value of the asset oftheasset e fair value ed as either operating aseitheroperating ed nite lives useful of the asset isof theasset writ- ed asfi ed nance Consolidated fi nancial statements: This category comprises fi This category measuredFinancial atfair assets value through profi 2.8.2 recognition. determines theclassifi Management acquired. classifi The from the very beginning, and fi and beginning, from thevery included in this category. this in included or ifthefi ifitis in acquired principle with category profi through value ment, fi ment, a fi A fi Defi 2.8.1 Financial 2.8 instruments referto item please 1.3. method, the equity method valuation accounting and associates theGroup’s in forthevarious and accordance prepared with IFRS statement via in fi anindividual associates continue recognised to investments Equity be inassociates Investments 2.7 is classifi Group in which the therearenocontracts 2010, 31, oftheclosing date As December periods. asfi arerecognised interest components The component. aredemption which and is recognizedcomponent, in statement, theincome aresplit which into arereceived aninterest instalments Lease is concluded. the contract is receivable shownin ofth The theamount customer, showsarece theGroup ■ ■ ■ ■ When benefi Leases where theGroup is thelessor 2.6.2 Loans and receivables are non-derivative fi arenon-derivative receivables Loans and Loans andreceivables 2.8.3 other assets. rent other and receivables date consistthe balance sheet fi ofderivative money, commodities or services directly to any adebtor without intention directly the oftrading money, orservices commodities provides arise ifthe Group They which arenot market. listedpayments onanactive

nancial liability or equity instrument of another entity. For the purpose ofmeasure- ofanother entity.nancial instrument liability Forthepurpose orequity nancial instrument is any contract thatgives rise to is afi nancial any instrument contract Available-for-sale fi Available-for-sale Held-to-maturity fi receivables, and Loans profi through value atfair measured Financial assets The fi The nancial assets arenormally broken intonancial down assets thefollowing categories: nition andclassifi nancial asset is designated accordingly by management. Derivatives are also arealso Derivatives is accordinglynancial designated asset by management. nancial assets measured at fair value through profi through value atfair measured nancial assets cation depends on the individual purpose forwhich thefi ontheindividual purpose depends cation cial ownership of an asset is transferred to the contractual partner or partner to thecontractual cial is ownership ofanasset transferred Notes to the consolidated fi consolidated tothe Notes ed asthelessor.ed t or loss” right from the start. Afi rightt orloss” fromthestart. nancial assets, nancial assets. nancial assets which areclassifi nancial assets cation nancial assets which areclassifi nancial assets s. With regard to regard ofconsolidation theprinciples With usings. ivable due from the lessee in accordance duefromthelessee ivable withIAS 17. nancial statements of freenet AG for the fi the AGfor freenet of statements nancial the intention in sold ofbeing thenearfuture nancial assets withfi nancial assets e net investment value atthetime atwhiche netinvestment value nancial over spread income therelevant nancial assets which are shown under cur- which areshownunder nancial assets cation ofthefi cation nancial is asset assigned to this t orloss t or loss, t orloss, ed asheld-for-tradinged right nancial asset of one entity and and ofoneentity nancial asset t orlosswhich existed on nancial assets upon initial upon nancial assets ed as “measured at fair atfair as“measured ed xed ordeterminable nancial assets were assets nancial nancial yearnancial 2010 Annual Report 2010 nancial 85

Consolidated financial statements Consolidated financial statements Annual Report 2010 86 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes expensed in statement. theincome expensed areinitiallyor loss” shownwiththeir fair shown withtheir fair valu profi through atfair value which arenot designated as“measured day enters into onwhich theGroup Financial anobligation assets to orsell theasset. buy offi sales and Regular purchases Measurement of fi 2.8.6 other assets. date areshowninsheet theother fi of fi profi Any value. atfair measured sale fi date. intend thebalance sheet to after themwithin sell months 12 areclassifi They categories shown. Held-to-maturity fi Held-to-maturity 2.8.4 fi claim exists. which but forwhich have billed but acontractual provided which not have yet been been services also include They aswell asin other assets. receivable, and other receivables receiv Loansand rent assets. thebalance sh after months due12 only fall curren under areincluded They receivables. of future fl cash quotes institutionsresponding ofcredit wh atthe interest aremeasured and caps swaps arethusimmediatelyChanges in re value fair arenot caps shown as“hed and interest swaps not maintain does also aneff and maintain complete documentation hedging ofrising therisks interest rates forfi fi arederivative caps and swaps Interest statement. be classifi fi Available-for-sale Available-for-sale2.8.5 fi held-to-maturity. is ableto holduntil fi fi and minable payments shown correspondingly as current assets—hav ascurrent shown correspondingly whichof those fall duewithin months 12 nancial assets measured at fair value through profi through value atfair measured nancial assets Financial assets measured at fair value through profi through value atfair measured Financial assets profi through value atfair which as“measured aredesignated Financial assets Shares in affi At present, the Group does not classify any fi not classify does theGroup At present, nancial assets. The available-for-sale The nancial assets. fi ed under this category orwhich classifi have this not been under category ed ows by way ofinternal mark-to-market models. liated companies and investments are considered to be available-for- to areconsidered be liated investments companies and nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial assets are non-derivative fi arenon-derivative nancial assets nancial assets are non-derivative fi arenon-derivative nancial assets nal maturity. fi Held-to-maturity nancial nancial instruments nancial assets nancial assets xed termsxed in intends relationto management and which Group e plus transaction costs. transaction e plus ables areshownin thebalanc nancial assets are shown as of the trade date, i. date, i. areshownasofthetrade nancial assets the e. t orlossresulting from ed under non-current assets if management does not does ifmanagement assets non-current under ed nancial assets aswell and astheother receivables nancial assets value; corresponding transaction costs are costs transaction corresponding value; after the balance sheet date which are and thebalance sheet after ich determine themarket price onthebasis nancial assets which onthebalance existed nancial assets eet date. Such assets areshownasnon-cur- date. Suchassets eet t assets, withtheexception which ofthose t assets, nancial liabilities. Because freenet does not does freenet nancial liabilities. Because market This price. is fromthecor- derived cognised in the income statement. Interest Interest cognised in statement. theincome e to be shown under non-current assets. non-current shownunder e to be ge accounting” in accordance with IAS 39. 39. inge accounting” accordance with IAS nancial instruments as nancial instruments nancial yearnancial 2010 nancial instruments and are used for areused and nancial instruments nancial assets—with theexception nancial assets—with nancial assets withfi nancial assets nancial assets which eitherhavenancial to assets t orlossis taken to the income the subsequent measurement measurement the subsequent t or loss are subsequently t orlossaresubsequently e sheet under trade accounts accounts trade under e sheet ed under any oftheother under ed t or loss” areinitiallyt orloss” ectiveness test, the test, ectiveness xed ordeter- t Consolidated fi nancial statements: at the point atwhichat thepoint clai thelegal for-sale have asother shownin income to theincome statement be instruments equity shownasother income inbe theincome stat arising income fromfi Dividend reserve. revaluation profi unrealised whereby value, impaired oramortised. arederecognised, investments held-to-maturity Profi costs. transaction amortised. or impaired are shownin theresultfor the eff the eff withborrowing. associated costs lessthetransaction received initially theyareshow When recognised, ties. Liabilities comprise thefi Liabilities 2.8.8 fi liquid highly other current and deposits demand consist ofcash, equivalents cash and Cash Cash andcash equivalents 2.8.7 are recognised. these Ifthereareany oflowerfair indications values, atpresent. sold to be assets these moreover, not exist; marketare not does listed thereis anactive nointention and for it is not fortheir possible fair because cost, interest method. interest method. in accordance arerecognised amount therepayment withtheeff torical and cost when theliabilities oramortised. arederecognised Accordingly, fi derivative than 12 months from the balance sheet date. fromthebalance sheet months than 12 oftheliability to in apoint noearlier time settlement rightunconditional to postpone liabilities areclassifi In the case of equity instruments which areclassifi instruments ofequity In thecase ofanimpairment ofafi indications objective is date, acheck pe balance sheet every On Impairment of fi 2.8.9 minimum payments. lease After initial available-for-saleAfter recognition, fi initial held-to-maturity After recognition, receiv initial loansand recognition, After In the following period, thefi In thefollowing period, Shares in affi Current liabilitiesCurrent are shownin th Any diff cost. liabilities areshownatamortised Non-current Financial liabilities arising fromfi Derivative fi ective interest method less impair less method interest ective ective interest method. Profi interest method. ective nancial assets with an original term of max. three months. months. three withanoriginal term ofmax. nancial assets Notes to the consolidated fi consolidated tothe Notes liated companies, investments and securities however areshownat securities and investments liated companies, nancial instruments are measured onthebasis aremeasured offuture fl cash nancial instruments ed as current liabilities provided that the Group does not have liabilities ascurrent does ed the that theGroup provided nancial assets ts and losses are recognised in arerecognised losses and ts nancial instruments can also be shownasfi be also can nancial instruments nancial payable aswell accounts asother liabilities, liabili- trade the period if the loans and iftheloansand the period ts or losses are recognised directly in the equity, under directly arerecognised orlosses ts nancial liabilities are shown at amortised cost using cost nancial liabilities areshownatamortised m of the Group forpayment arises. m oftheGroup ts and losses are recognised in the income statement in statement theincome arerecognised losses and ts nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nance leases areshownat nance leases e amount due for repayment orfulfi dueforrepayment e amount ments for reductions in value. Profi in value. forreductions ments rformed to determine whetherthereareany rformed value to be reliably determined. The shares The reliably to value determined. be nancial asset or a group offi oragroup nancial asset ement. Dividends attributable to available- attributable Dividends ement. n with the fair value of the consideration oftheconsideration n withthefair value ables are shown at amortised cost using cost ables areshownatamortised investments are shown at fair value plus plus areshownatfair value investments nancial assets areshownwiththeir fair nancial assets ed asavailable-for-saleed fi nancial assets in this category hasto in thisnancial category assets receivables are derecognised, arederecognised, receivables the resultforth the present value ofthe value thepresent erences between his- between erences nancial liabilities. nancial yearnancial 2010 e period ifthe e period nancial assets. nancial assets. lment. Loan lment. Annual Report 2010 nancial ts and losses losses and ts ows. ows. ective 87

Consolidated financial statements Consolidated financial statements Annual Report 2010 88 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes climate which are associated with defaults ofreceivables. climate withdefaults which areassociated ofaloanaswellaverage duration aseviden ofpa in anincrease thefrequency the past, infl withpayment experience theGroup’s might of receivables be of aportfolio ofanimpairment indications Objective basis. forimpairment onaportfolio are tested onanindividual basis determined forwhich noimpairment hasbeen assets receivable, of theexistence ofanimpairment. anindication to areconsidered be orlate ofinterest principal, payment and default e.g. will have to another restructuring gothrough fi The Group derecognises afi derecognises Group The Derecognition of fi 2.8.10 receivable. accounts oftrade impairments under in statement theincome payment infl Subsequent itis irrecoverable, hasbecome receivable areno thatthedueamounts indications are available, method other valuation Ifnomarket prices ofanimpairment. indication is anobjective tochase considered be ofthefair decline permanent quently reversed. theyarenot subse- in statement, theincome recognised have been instruments equity of impairments Once shownin statement. theincome and fromequity derecognised lessany recogn value impairment losses asthediff loss—measured Ifthereisare impaired. suchanindication instruments thattheequity is anindication to considered be instruments equity these in decline orpermanent aconsiderable assets, attributable to afi attributable using theexchange rate applicable purposes fortranslation is used date method modifi The into aretranslated euros. currency in thereporting accounts fi The transactions Foreigncurrency 2.10 moving average. onthebasis aremeasured of the ofproduction costs and ofpurchase Costs to sell. costs sheet date. The netrealisable is value date. defi The sheet Inventories areshownatthelowerofcost Inventories 2.9 to athird withownership oftheassets party. opportunities all and therisks culties of a debtor, an increased probability that the borrower will become bankrupt or bankrupt culties ofadebtor, will become thattheborrower probability anincreased The book value of the receivable is ofthereceivable value reduce book The categories offi ofsome In thecase An impairment of trade accounts receivable is recognised if there are objective is receivable ifthereareobjective accounts recognised impairment oftrade An oflistedIn thecase equities which asavailable arecategorised amajoror forsale, nancial statements of foreign Group companies their offoreign not which prepare Group do nancial statements nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial asset expires or if it transfers thefi nancial expires orifittransfers asset nancial assets ows in relation to previously derecognised amounts areshown amounts ows in derecognised relationto previously erence between the cost of purchase and the current fair thecurrent and ofpurchase thecost erence between nancial asset only if the contractual right to fl cash nancial onlyifthecontractual asset value of the securities to a level below their to costofpur- alevel below ofthesecurities value on the date of the transaction. on thedate ofthetransaction. s are used, e. e. s areused, method. theDCF g. nancial assets, for instance trade accounts accounts trade forinstance nancial assets, ised inised relationto fi therelevant t fully recoverable. Considerable fi t fully Considerable recoverable. ned as the estimated recoverable proceeds less astheestimated recoverablened proceeds derecognised from the impairment account. fromtheimpairment account. derecognised for available-for-sale thecumulative assets, and thenet realisableand yment defaults within the portfolio over the within theportfolio defaults yment t changes in the national or local economict changesin thenationalorlocal . Receivables and liabilities and . Receivables aretranslated process, as well as any breach of contract, aswell asany breachofcontract, process, d by using Ifa account. animpairment the fair value to a level below the costs of the fairto thecosts value alevel below nancial yearnancial 2010 nancial asset and essentially and nancial asset value onthebalance- value ed ed reference nancial asset—is nancial dif- ows ows in Consolidated fi nancial statements: on the balance sheet date; like italso includes on thebalance sheet takes accountThis method not onlyofthepe method. unit credit using theprojected expert actuarial year by anindependent every the income statement. The present value ofthedefi value present The the income statement. cost not shownin service shownin aswell assubsequent theincome statement not been by cumulative profi actuarial adjusted assets of theplan ofthedefi value sent addition toaddition provisions is shownin fi vested. become rights usingshown in theincome statement thestra is cost service thepast Inthis case, vested). until becomes entitlement (period period group. chargeina minor relati ofanasset probability basis ofthis Aprovision ofobligations Group is determined. is also shown ifthereis only obligations. the discounting ofnon-current best-possible estimate oftheobligation on oftheobligationestimate can of theextent oftheobligationtlement will leadto anoutfl likely whereitis more thannot thatset- events, which ariseamount asaresultofpast Provisions orconstr forlegal arerecognised 2.13 Other provisions in theyear instatement which theyareincurred. ontheemploy in depend plan thepension ofthebenefi years remaining service overised theexpected profi These period. reporting oftheprevious attheend assets plan assets oftheplan deduction obligation (before thehigher exceeds oftenstatement pe if thebalance ofthecumulative profi actuarial expe to past arial assumptionsattributable 19. in accordance recognised Pension withIAS and provisions aremeasured Pension 2.12 provisions areshow interests minority aswell earnings as retained reserves, revaluation reserves, capital shares, Ordinary 2.11 Shareholders’ equity date areshowninsheet statement. theincome Profi ts and losses arising losses and fromchangesints Contributions to defi personnel cost is shownunder service The If a number of identical obligations exists, obligations exists, ofidentical If anumber unlessthechanges is cost immediately taken to statement, theincome service Past Actuarial profi provision pension The shownin thebalance aretr balances statement oftheincome The Notes to the consolidated fi consolidated tothe Notes ts and losses which are based on adjustments and changesto and actu- onadjustments which arebased losses and ts ned benefi ned-contribution benefi n as shareholders’ equity. n asshareholders’ t obligation onthebalance-sh nancial result. nancial statements of freenet AG for the fi the AGfor freenet of statements nancial rcent of the present value ofthedefi rcent value ofthepresent exchange which rates by occur thebalance ee remainingee withtheCompany foradefi rience are shown in the income statement rience areshownin theincome statement the balance-sheet date, taking into accountthe balance-sheet uctive obligations of uncertain timing obligations or ofuncertain uctive be made. The provisions using The a arevalued made. be ow of Group resources and whereareliable and resources ow ofGroup nsions acquired known and interests vested ts and losses not losses shownin and theincome ts ly future increases in pensions and salaries. salaries. and ly future in pensions increases on to in individual obligations this included ight-line until the over theperiod method ) orten ofthe ofthefair value percent the probability of an asset charge on the ofanasset the probability expenses, and the interest portion of the theinterest and portion expenses, anslated into anslated eurosusing average rates. sheet issheet equivalent to theactuarial pre- t plans are recognised in theincome arerecognised t plans ned benefi ts and losses which losses have and far so ts ciary. eet date lessthefaireet value t obligation is calculated is calculated t obligation ts or losses arereal- orlosses ts nancial yearnancial 2010 Annual Report 2010 ned benefi ned t 89

Consolidated financial statements Consolidated financial statements Annual Report 2010 90 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes for all temporary diff for all temporary lossca fortax arerecognised taxes Deferred onincome taxes current and Deferred 2.15 ontheincome statement. withnoimpact equity in shareholders‘ reference date, allocation for thecorresponding Following settlement. in ofacash theform ofthesubstitution righttage which ithad day. balance sheet every ofoptionswhichmate areexpe ofthenumber culated onthebasis ofth ofthefair value is cal- vested, until atwhich thepoint theoptionsbecome over recognised theperiod be which hasto entire expense, The as anexpense. ofoptionsisfor thegranting recognised in by return theemployees provided ofthework fair value The instruments. by equity mobilcom AG former upastock-based which hadset plan isThe compensation funded Stock options of theformer mobilcom AG 2.14.2 programmes”. participation to “Employee item explanations our 26 thestrike price and price lesstaxe stock evant toin equivalent return thediff amount ofacash forpayment which will appreciation rights stock probably issued by freene appreciation rights stock The Stock appreciation of rights freenet AG 2.14.1 indetailed thefollowing: ofth accounting methods valuation The and off Group The programmes participation Employee 2.14 fi tenant by means arerecognised or thediscount rate, ofanexisting provision,the value likely; this provision is atthepoin created created to cover ofobligations value forwhich anoutfl thepresent obligations to remove tenant fi to employees. payments aswell asseverance agreements rental ■ ■ settled. liability tax is is asset realised orthedeferred tax whenthedeferred to apply expected enac substantively orhavethat apply been (and rates laws) atthetax tax aremeasured taxes liabilities. and Deferred of assets

As part of the process ofexercising oftheprocess mobilcom AG theformer part advan- took options, As Stock mobilcom AG optionsfortheformer AG offreenet Stock rights appreciation oftenant fi costs thepurchase According 16, to IAS paym provisions comprise Restructuring ttings (upper limit: recoverable amount; lowerlimit: (upper zero).ttings limit: recoverable amount; ers the following employee participation programmes: programmes: thefollowing participation ers employee nancial statements of freenet AG for the fi the AGfor freenet of statements nancial erences between the tax balance sh the tax between erences ttings. In accordance with IAS 37, Inaccordance aprovision withIAS isttings. therefore in other wordschangesin thefulfi e options which have been granted. The esti- The granted. e optionswhich have been t atwhich theobligations Changesin arise. been granted. The stock options are redeemed options areredeemed stock The granted. been ted on the balance sheet date thatare and on thebalanceted sheet revaluation using the parameters applicable applicable usingrevaluation theparameters e individual share option programmes are e individual shareoptionprogrammes rry-forwards and using the liability method, using and theliability method, rry-forwards become vested. These rights areexercised rights These vested. become ents forthepremature termination of ents t AG are measured at the fair value ofthe atthefair value t AG aremeasured s and charges. For details, please referto please Fordetails, charges. s and of an adjustment to the book value ofthe value to thebook of anadjustment cted to become exercisable to is on become reviewed cted s arepaid into theprovision via an entry nancial yearnancial 2010 ttings include costs expected for expected costs include ttings eet values and the book values values thebook and values eet erence between therel- erence between ow of resources isow ofresources lment amount and/ Consolidated fi nancial statements: relation to these transactions diff relation to transactions these Iftheeventual in due. taxation will onincome taxes become additional to whatextent, provisions ontheba foranticipated audits tax of determines theextent Group The ofbusiness. during course thenormal tive taxation become payable. withwhich theprobability fi assess to estimates onthebasis oftheGroup, aremade experience ofpast products various operations”. “Discontinued item 24 for determining theresultfromdisconti ofreceivable onthestatus and structure aswell asontheage mainly experience werebased onpast assessments These assets. for establishing adjustme valuation suitable companies. theGroup representing lawyers arecrea passive disputes legal in particular We 1.122: thefollowing provide to details pursuant IAS Exercise of management discretion 2.17 immediately. recognised itwill be eitherindepreciated wholeorin part, into comes entitlement being, when thegrant Ifatthetime down. arewritten over which thesubsidised assets ance withtheperiod is re and deferrals, liabilities, accruals and this itemity. is 20, Inaccordance withIAS withsuffi estimated be can thereof theamount and claim exists sponding in ofgovernme receivable theform Accounts grants forgovernment deferrals Accruals and 2.16 future. ontheclosingtions which areapplicable date profi thatitis to likely onlycapitalised are also theextent utilised thattheywill by future be by future profi used will be assets thatitis to likely tax are onlyrecognised theextent thatthedeferred diff relation to allowable temporary liabilities tax exist. thatdeferred the extent is defi is in which thetaxation onincome in taxes theperiod deferred and onthecurrent impact ts. There are transactions in relationto which itis not to possible aretransactions determine thedefi There to regard theaccrual ofpurchased With onthebasis made hadtoEstimates of be of ofthevalue evaluation An Provisions onestimates. for ofprovisions calculation and depends statement The regula- tax is in accordance calculated withtheGerman expense tax current The diff in relationto allowable temporary assets tax Deferred nitively nitively determined. Notes to the consolidated fi consolidated tothe Notes ts. Deferred tax assets in relation to any tax losses carried forward forward in carried relationto losses any tax assets tax Deferred ts. ers fromtheoriginallyers fi assumed the receivables as well as other assets was carried out out carried was aswellthe receivables asother assets nal commissions (which cancelled) nolongerbe can erences exceeds thiserences exceeds fi nancial statements of freenet AG for the fi the AGfor freenet of statements nancial s in the dunning and collection process. s in thedunning collection and cognised in the income statement incognised accord- in statement theincome shown as accruals and deferrals in the other shownasaccruals deferrals and ted onthebasis ofthe oftheassessment nued operation “Next ID”—please referto ID”—please “Next operation nued nts for trade accounts receivable and other and receivable accounts fortrade nts If the amount of the deferred tax assets in assets tax ofthedeferred If theamount services from sales commissions fromsales services forthe nt grants are capitalised provided a corre- provided arecapitalised nt grants or which will be applicable in orwhich will thenear applicable be individual assessments of management ofmanagement assessments individual sis ofestimates asto whether, ifso and the assets in question have already been have in question already been the assets gure, the deferred tax assets assets tax thedeferred gure, erences are recognised to arerecognised erences gure, thisgure, will have an nancial yearnancial 2010 cient reliabil- Annual Report 2010 ni- 91

Consolidated financial statements Consolidated financial statements Annual Report 2010 92 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes programme, and it was also necessary to make estimates ofthe regarding theamount necessary also itwas and programme, the will after receive payments severance to make who ofemployees estimates regarding thenumber necessary itwas payments, benefi ofthefuture de theassessment in pensions, sions similar and This involves obligations. ofadiscount therecognition thetrend rate, forward-looking assumptions have been made made assumptionshave been forward-looking programmes”. tion participa- referto “Employee item please 26 2010, 31, according 2asofDecember to IFRS rights appreciation stock determining optionsand stock the provisions for outstanding offuture to withregard inmade theextent losses this fi for contingent forreducing thelandli losses sibility subletin areasbeing future. ofthese offi shopsand of rented income were to increase or decrease by 10 percent in the respective planning period. in therespective percent by 10 wereto ordecrease income increase by appr ordecrease increase would assets tax thatthedeferred hasestablished liabilities”. assets tax forthedeferred test Asensitivity tax deferred and assets tax “Deferred referto item 19 please recognised, have been assets carried ofthelosses also theextent and ward for- carried onlosses taxes deferred ofthecapitalised to regard With theextent market. aswell as developments macro-economic to withregard forinstance assumptions, planning which recognises forward-looking to allocated thisto theassets CGU. points); percentage this by 0.5 reduced wo be million euros(iftheWACC points) of607 orincrease percentage by 0.5 increased wereto to decrease would sell lesscosts fair value the in theplanning period, by 10 percent orincreased reduced wereto be (EBIT) taxes and if theWACC percentage by wereto 0.5 decline million euros 230 by approx. increase would and points percentage by 0.5 were increased to de sell would lesscosts that thefair value CGU Communications” to hasestablished allocated the“Mobile fortheassets test ment assets”. A for impairment ofnon-monetary 293.3 year: million previous 293.3 euros, 2010: withanindefi intangible assets million euros) of aswell 1,116.5 asimpairments million year: previous euros; 1,115.9 2010: 31, asofDecember value (book relating impairments to potentialthe tests goodwill 1.125: to IAS tions pursuant inherent in theconsolidated fi signifi to regard With themost margins assumptionsand oferror looking Forward 2.18 With regard to the measurement ofrestru to regard themeasurement With how to provisions regard pension With similar describes and item 30 obligations, to estima regard the assumptionsand With With regard to regard thecreationofprovisWith oncorporate arebased forward relating to carried losses assets tax deferred The assu to regard With theforward-looking ciary as well as an assessment of an expected return assets. ontheplan ofanexpected aswell asanassessment ciary nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ce buildings, assumptions have been made in relation to made thepos- assumptionshavece been buildings, nancial statements, wehereby make thefollowing observa- nancial statements, cant forward-looking assumptions and margins assumptionsand oferror forward-looking cant nite useful economic life (book value as of December 31, 31, asofDecember value nite economic life useful (book balance sheet date from the restructuring datebalance fromtherestructuring sheet the development ofthetelecommunications the development by 512 millionby 512 euros(iftheWACC wereto be sensitivity assessment regarding theimpair- assessment sensitivity ne/internet network, an assumption has been anassumptionhasbeen ne/internet network, cline by approx. 195 million eurosiftheWACC 195 cline by approx. velopment of the pensionable income ofthe ofthepensionable velopment With regard to regard thevalu With mptions made within the framework of withinmptions made theframework ion for contingent losses for any vacancy ion forcontingent forany losses vacancy uld not resultin any impairment withregard ox. 13.7 million euros if the corporation tax million tax eurosifthecorporation 13.7 ox. million euros), referto “Test item please 15 forward in relation to which no deferred tax tax in relationto which nodeferred forward points and that, if earnings before interest before ifearnings that, and points cturing provisionscturing forpaying severance for the valuation ofth for thevaluation tes made in the binomial model used for tes in used made thebinomial model nancial yearnancial 2010 eld. ation oftheprovision e provisions forpen- 3. Segmental Segmental 3. reporting Consolidated fi nancial statements: following operating segments in 2010: segments following operating in the operated Group The regions. ongeographical based organisation management and exclusively almost in business Germany, exercises operations its the Group thereis no off services and theindividual products ferences between fl change in refer accounting –please policies as “discontinued operations” and therecove and as “discontinued operations” classifi hadnot been ofassets orgroup iftheassets out carried which have would been areshownatthelowerof ofassets the group whenthecr operations” as “Continued for-sale long-term assets, depreciation of the corresponding assets is nolongercalculated. for-sale assets ofthecorresponding depreciation long-term assets, ofreclassifi At thepoint use. further realised by way thanby ofasale way be of likely can value generally more thattheir book held-for-sale, valu areshownatthelowerorbook available-for-sale and Discontinued which operations areclassifi long-term assets, Discontinued operations and available-for-sale 2.19 long-term assets refertoPlease item programmes. restructuring withprevious onthebasis gained were made ofexperience estimates severance payment which These will payable foreachemployee. be probably ing to the allocation of resources to this segment and the measurement of its profi ofits themeasurement ing to and ofresources to this theallocation segment by of themainreviewed decision-making body have distinguished to segm be fromgroup segments onthebasis operating and ofinternal management, 8, In accordance withIFRS please refer to item 24 “Discontinued operations”. “Discontinued referto itemplease 24 asdiscontinu in statement the income adjusted from the disposal of the segments “DSL Business” and “STRATO Group”. “STRATO Business” and “DSL ofthesegments from thedisposal mainly was infl year in 2009 generated theprevious operations tinued profi The ofnegligible income and importance. expenses well assubsequent fi dated inst in 2010; activities ofoperating the results in werenolongerincluded segments these in theyweredeconsolidated 2009, Because (consolidated Group” months) for12 discontinued to operations. wereconsidered be Busi “DSL result ofdiscontinued operations, year fi previous the adjusted theconsolidated fi acomparison is between When made 2.20 Comparable fi ofcontinued operations. aspart ment to ofthegrou therevaluation adjustments The ow statement”. The Executive Board organises and manage and organises Board Executive The The available-for-saleThe ortheavaila assets The change in the structure oftheconsolidated fl cash changein thestructure The The previous year fi previous The nancial statements with results fromsu withresults nancial statements Notes to the consolidated fi consolidated tothe Notes gures and changes in the accounting inthe policies changes and gures 31 “Other provisions”. gures for the segment “Next ID” have been retrospectively retrospectively have been ID” “Next gures forthesegment gures, it is necessary to bear in mind that, with regard to withregard the in to mind that, bear itis necessary gures, nancial statements of freenet AG for the fi the AGfor freenet of statements nancial cation to the discontinued operations and available- and tocation thediscontinued operations iteria of IFRS 5 arenolongersatisfi iteria ofIFRS 5 ents whose operating operating whose ents to item 33 “Notes to theconsolidated cash to “Notes item 33 ness” (consolidatedness” for11months), “STRATO rable amount at the time ofreclassifi atthetime amount rable ble-for-sale group of assets arereclassifi ble-for-sale ofassets group book value less depreciation or revaluations revaluations or depreciation less value book ead, they were only included in theconsoli- theywereonlyincluded ead, p of assets areshownin state- theincome p ofassets bsequent purchase price adjustments as adjustments price purchase bsequent the Company to withregard decisions related operations in accordance with IFRS 5; in 5; accordance withIFRS operations ed s theCompany onthe basis ofthedif- e and fair value less costs to ifitis sell lesscosts fair value e and nancial statements 2010 and and 2010 nancial statements ered by the Company. Because by theCompany.ered Because ow statement constitutes a ow statement results areregularly results nancial yearnancial 2010 uenced byuenced theprofi ed. The assets or assets The ed. Annual Report 2010 t from discon- cation. ed as tability. ed ed 93 t

Consolidated financial statements Consolidated financial statements Annual Report 2010 94 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes entire Group grossprofi entire Group profi ofmaterials cost thegross also forrevenues, and onlypossible it was In2009, ments. by theindividual allocating consol “Other” to clearlyallocated income to the be economic Inthe fi and relevance. ofcommercial negotiation. are thesubject prices which onthebasis arecharged oftransaction services These segments. operating longer listed as segments in abbreviated consolidated these fi longer listed assegments the quantitative thresh quantitative the nolongerattain “Narrrowband” and “B2B” “Portal”, well segments astheother previous as Following anextensivereview, segments ofnegligible these activities importance. nowonlycomprise residual aswell as“Hosting” “Broadband” segments the former “Other”. and Communications” “Mobile segments ofthetwo itonlyconsists instead, ofsixlonger consists segments; withthefi Starting Other: ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Mobile Communications: Mobile

t to be clearly allocated using clearlyallocated thedimensiot to be Income and expenses are allocated to the segments on the basis of selected criteria onthebasis ofselected to areallocated thesegments expenses and Income to other services orprovided provide eachalso segments individual operating The Following year in thesales of theprevious “Hosting” assegment presentation solutions, software ofassociated provision implementation domains, ofwebspace, top-level suchasregistration of ofhosting services, Range Up to including and 2009: voice ofbroadband range servic facilities, access and internet ofbroadband connections Range Up to including and 2009: services ofsales Rendering “Narrowband” segment asseparate presentation to including and 2009, up services, data and (call-by-call, preselection) voice ofnarrowband Range services “B2B” segment asseparate presentation including 2009, upto forbusiness and customers; services ofvalue-added range ness customers; forbusi- other services and services EDP ofcommunication solutions, Development “Portal” segment asseparate presentation 2009, onwebsites)ing upto including banners and users; forend aswell aspay services themarketing and tially ofadvertis- of online comprise therange shopping services suchasE-commerce/-advertising (these services essen- services ofportal Rendering services ofsales Rendering communications data formobile services communications aswell devices ofmobile asadditional Sale oftariff as a range tariff and services ownindependent oftheCompany’s arange operators, network withthese concluded agreement operator thebasisOn ofthenetwork T-Mobile, O₂ and Vodafone, in E-Plus Germany operators (voice communication services) forthemobile data communication and services provider—marketing ofmobile communications service asamobile Activities nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial year 2010, segment reporting of the freenet AG no ofthefreenet Group reporting segment nancial year 2010, s of the network operators s ofthenetwork old of IFRS 8.13 forreportable 8.13 old ofIFRS t has been completely allocated to segments. to completely allocated segments. t hasbeen nancial year 2010, it was possible for all expenses and and forall expenses possible itwas nancial year 2010, two segments “Mobile Communications” and and Communications” “Mobile segments two idated group companies group idated to oneoftheseg- es, presentation as segment “Broadband” assegment presentation es, the “STRATO Group” and “DSL Business”, “DSL and Group” the“STRATO ns of the cost centre;ns ofthecost this that the means nancial yearnancial 2010 segments, and arethereforeno and segments, nancial statements. s aswell netet ncniudoeain 18143326,164 4,343 21,821 operations incontinued Investments interest tominority attributable result Group AG offreenet toshareholders attributable result Group Group result Group result from discontinued operations operations continued from result Group Taxes income on emn BT1097–1990643145,501 6,443 334,943 1,331 0 4,261 0 9,991 –149,312 –189,442 0 0 –333,064 –11,929 8,374 2,182 0 85,692 9,840 150,987 0 0 2,031 –2,771 0 6,024 0 1,331 –4,162 328,651 0 –2,619,199 –34,525 –13,960 –37,703 0 726 3,906 0 3,339,504 13,302 –123,161 –177,664 –2,619,199 0 –311,225 –15,088 3,339,504 8,572 9,265 3,906 79,323 –15,088 fi Group 8,572 –10,434 –10,434 0 0 –40,491 EBIT Segment 99,391 write-downs impairment and Depreciation –6,041 –2,591,186 6,481 3,265,635 –2,531 EBITDA Segment –34,450 92,910 ofassociates ofresults Share 3,953 expenses operating Other –2,588,655 expenses Personnel 3,261,682 capitalised work own Other income operating Other profi gross Segment total ofmaterials, Cost materials of cost Intersegment parties third materials, of Cost total Revenue, revenue Intersegment revenue Third-party €’000s Segmentreport1. 1. 2010—31. 12. 2010 nancial nancial result t64495,0 182–112720,305 –11,182 –1,862 58,900 674,449 t Consolidated fi nancial statements: corresponding expenses and income do not income diff do and expenses corresponding spective adjustment, please refer to item 24 „Discontinued operations“. „Discontinued referto item 24 please adjustment, spective fi consolidated are accordingly withth nolongeridentical fi year comparison previous The onindividual customers. ismainly not customers dependent onprivate shown in theconsolidated balance sheet For purposes of segment reporting, thefi reporting, ofsegment For purposes The mass business which is carried out by the freenet Group and which focuses which and focuses massbusiness Group by out thefreenet The which is carried Notes to the consolidated fi consolidated tothe Notes nancial statements 2009. With regard With 2009. nancial statements Communi- gures of segment reporting have been retrospectively adjusted, and and adjusted, retrospectively have been reporting gures ofsegment cations Mobile nancial statements of freenet AG for the fi the AGfor freenet of statements nancial te Elimination of Other and the consolidated income statement. theconsolidated income and e segment report 2009 aspublished in the 2009 report e segment gures and measurem gures and intersegment intersegment er fromthefi revenue and and revenue to forthis thebackground retro- costs gures and measurements measurements gures and regarding regarding ents shownforthe ents Eff IFRS 5 ects ects nancial yearnancial 2010 Annual Report 2010 112,467 –42,861 112,433 118,762 –6,295 16,122 Total 34 95

Consolidated financial statements Consolidated financial statements Annual Report 2010 96 €’000s Segmentreport1. 1. 2009—31. 12. 2009 oto aeil,ttl–,0,9 1526–18,007 –3,690 –14,317 40,451 –165,216 –7,803 interest tominority attributable result Group AG offreenet toshareholders attributable result Group –157,413 –2,800,598 232,274 Group result Group result from discontinued operations –2,143 operations continued from result Group Taxes income on –2,798,455 fi Group 3,499,740 fi before result Group ofassociates ofresults Share expenses operating Other write-downs impairment and Depreciation expenses Personnel capitalised work own Other income operating Other profi gross Segment total ofmaterials, Cost materials of cost Intersegment parties third materials, of Cost total Revenue, revenue Intersegment revenue Third-party Consolidated fi nancial nancial result nancial statements: t78206,5 25,287 67,058 708,230 t nancial result and taxes on income on taxes and result nancial Notes to the consolidated fi consolidated tothe Notes Communications segment and 14.4 million euros are attributable to the Fixed Network segment. Network Fixed tothe areattributable euros million 14.4 and segment Communications Mobile tothe areattributable euros million 49.2 participations), equity and ofsubsidiaries acquisition the fi the Of segment. Network Fixed tothe areattributable euros –438 thousand and segment Portal tothe areattributable euros thousand 4,862 segment, Communications Mobile the fi the Of activities). Holding and Narrowband of B2B, (consisting segment Network Fixed tothe areattributable euros thousand –16,099 and segment Portal tothe areattributable euros thousand 4,253 segment, Communications Mobile tothe are attributable fi the Of gure of 63.6 million euros shown for investments in continued operations (excl. the payments for for payments the (excl. operations incontinued investments for shown euros million of63.6 gure to areattributable euros thousand 322,601 EBITDA, for shown euros thousand of327,025 gure euros thousand 136,433 operations, incontinued EBIT for shown euros thousand of124,587 gure nancial statements of freenet AG for the fi the AGfor freenet of statements nancial Communications ,0,2 3,7 43,294 232,274 3,508,828 Mobile ,8 2,843 0 9,088 nancial yearnancial 2010 rabn Portal Broadband Hosting B2B Narrowband Elimination of of Elimination Narrowband B2B Hosting 1,7 5,0 1,9 1,0 –2,839,152 211,607 0 –14,391 –50,507 –15,676 1,7 5,8 1,9 6292167–2,839,152 211,607 16,219 –14,392 –52,387 –16,378 4721,7 776–4 1793762,634 –157,903 –242 27,756 17,676 74,772 8646,8 2090–6,1 3,601,786 –369,510 0 42,069 68,088 88,674 1107,6 218–641–6,1 3,601,786 –369,510 –16,461 42,148 70,063 91,150 ,7 ,7 9–64100 0 –16,461 79 1,975 2,476 72–,8 11,1 0 0 16,219 –1 –1,880 –702 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes revenue and costs and revenue intersegment intersegment nancial statements of freenet AG for the fi the AGfor freenet of statements nancial Eff IFRS 5(adjusted) IFRS ects ects regarding nancial yearnancial 2010 Annual Report 2010 (adjusted) –364,277 –202,438 –199,653 124,587 256,490 116,444 256,485 238,769 –87,854 –19,012 10,192 17,721 1,685 Total 5 97

Consolidated financial statements Consolidated financial statements Annual Report 2010 98 Consolidated fi 7. Personnel expenses Personnel 7. 6. Cost ofmaterials Cost 6. 5. Other Other 5. operating nancial statements: 4. Revenue income Notes to the consolidated fi consolidated tothe Notes out under item 3 “Segment reporting”. item 3“Segment under out million euros) is set 3,602 million year: euros(previous A breakdown ofrevenue of3,340 Personnel expenses arebroken asfollows: down expenses Personnel tions commissions premiums and partners. forsales business. fromprepaid also bundles principally and telephones ofmobile comprise value the cost goods ofpurchased Costs ofmaterialsCost is broken asfollows: down operations. ofbranch reorganisation ofthe result ofprovisions liabilities.sal accrued and rental of company fortheuse cars, employees fromcharging income to subsidies, fees cost advertising debits, for reversing direct mainly income other from dunning operating comprisesincome charges The chargesand accessories. munications devices and euros) 320 million year: 416 million relatesand to com- ofmobile euros(previous thesale million euros) 586 year: relates forpremiums to commissions,euros (previous and fees million million 2,593 euros) 501 year: relateslion fees, to euros(previous and rentals ’0s21 2009 30,160 169,493 24,563 2010 124,749 2009 contributions Social salaries and Wages 2010 513,638 2,325,514 €’000s 2,074,753 544,446 services ofpurchased Costs goods ofpurchased Costs €’000s Of external revenue in generated theMo external Of The costs of purchased services mainly communica- chargesformobile comprised services ofpurchased costs The year,In theprevious this item incl also nancial statements of freenet AG for the fi the AGfor freenet of statements nancial uded income ofshopsasa fromthesale uded bile Communications segment, 2,345 mil- bile segment, Communications income aswell asincome fromtherever- nancial yearnancial 2010 ,1,9 2,839,152 2,619,199 4,1 199,653 149,312 adjusted adjusted 8. Depreciation Depreciation 8. and impairments Consolidated fi nancial statements: social insurance contribution as costs ofdefi insurance contributionsocial ascosts similarand obligations”. benefi programme”. incentive “Employee 26 and to items referto 2.14 comments our please programme, a ofthestock toregard anexplanation With expenses). eurosin personnel thousand of2,940 increase year: 2(previous IFRS eurosin accordance thousand with declining by 4,011 expenses inresulted personnel oftheCompany has programme appreciation stock The persons). 4,394 year: (previous debitel acquisition. ofthefi At theend asaresult also and Group” the “STRATO Business” withthecall centre in and which Kiel of thesales year place took of“DSL last mainly asaresult persons, to 4,111 year, withtheprevious compared from6,020 namely percent by 31.7 onaverage hasdeclined in employed theGroup ofpersons number The ment costs for self-created software. forself-created software. costs ment develop- and software utilisation aswell and asself-developed rights torelated software integr to thegroup-wide attributable mostly year. placetook last Business” which that the limitedwhich means is of“DSL use ofthesale aconsequence pr hadbeen This in software the value use. to in make in future, which onlylimited is to equivalent areduction ofthis use software ofaright to asoftware use write-down ment of assessment theresultant and insolvency fully impaired proces dueto therestructuring ofthedistribution right value hasbeen The program. well astheright to asoftware use mainly onintangible relate to assets adistribution right as impairment write-downs The impairments: and thedepreciation out following sets table The euros). thousand 14,803 year adjusted: ’0s21 2009 2010 171,324 4,165 26,726 223 168,325 18,938 2,044 135 equipment and plant property, on write-downs Impairment equipment and plant property, on Depreciation assets intangible on write-downs Impairment Depreciation on intangible assets €’000s Personnel expenses include afi include expenses Personnel Personnel expenses also comprise an expense of 473 thousand eurosfordefi thousand of473 comprise also anexpense expenses Personnel The impairment write-downs on intangible assets shown in the previous year shownin were theprevious onintangible assets impairment write-downs The t plans (previous year: 920 thousand euros), see also item 30 “Pension provisions “Pension euros), item thousand also 30 see 920 year: (previous t plans Notes to the consolidated fi consolidated tothe Notes nancial statements of freenet AG for the fi the AGfor freenet of statements nancial gure of 11,771 thousand euros as the employer’s eurosastheemployer’s thousand gure of11,771 nancial year, the Group employed 3,972 persons persons nancial year, 3,972 employed theGroup ppreciation programme and the stock option thestock and programme ppreciation of the restructuring process following process the of therestructuring imarily used in the former “DSL Business”,imarily “DSL in theformer used the value in (zero).the value use impair- partial The ned contribution benefi ation process within the debitel Group, and within and ation process Group, thedebitel program was attributable to theintention attributable was program s at a distribution partner threatened by threatened s atadistribution partner 8,4 202,438 189,442 t plans (previous (previous t plans nancial yearnancial 2010 Annual Report 2010 adjusted ned 99

Consolidated financial statements Consolidated financial statements Annual Report 2010 100 Consolidated fi 10. Other interest and and interest Other 10. 9. Other Other 9. operating nancial statements: similar expenses similar 11. Interest Interest 11. and similar income similar expenses Notes to the consolidated fi consolidated tothe Notes Interest and similar expenses arebroken similar asfollows: and Interest down expenses interest similar and Other ofthefollowing consists income items: expenses. other operating under translation currency leasing and contracts. forrental in statement theincome recognised euros).62 thousand euros) a thousand other assets and 31,410 fi this euros) Of thousand wereincurred. 31,472 year: euros(previous thousand 46,178 costs. consultancy thede and ofimpairments costs costs, postage mainly administration comprise costs, marketing expenses costs, operating Other gure, trade accounts receivable accounted accounted receivable accounts trade gure, ’0s21 2009 1,398 2010 1,446 1,502 726 93,354 6,811 1,100 50,419 5,378 8,111 601 300 2009 fi on Interest 3,412 fi ofderivative valuation ofthe Expense 2010 991 obligations pension on Interest payments tax supplementary on Interest toliabilities inrelation interest ofcumulative Expense similarcosts and tobanks payable Interest €’000s refund oftax Interest assets from interest Compound fi ofderivative valuation Market similarincome and collection debt banks, from receivable Interest €’000s A fi euros) were 74,004 thousand year: euros(previous of51,929 thousand Payments In thefi gure of 0 thousand euros (previous year: year: euros(previous gure of0thousand nancial year, costs of impairments and the default of receivables totalling ofreceivables nancial thedefault year, and ofimpairments costs nnelae 33 0 nance leases nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nnilisrmns1,6 8,109 13,460 nancial instruments nnilisrmns260 266 nancial instruments ccounted for 0 thousand euros (previous year: year: euros(previous ccounted for0thousand for 46,178 thousand euros (previous year: year: euros(previous thousand for 46,178 fault of receivables as well as legal and aswell and ofreceivables aslegal fault 18 thousand euros) thousand 18 is shownforforeign nancial yearnancial 2010 81315,188 18,163 104103,042 61,024 adjusted 2 Taxes onincome 12. Consolidated fi nancial statements: 2 2 fi the Of assets and liabilities”. and assets tax “Deferred referto item please 19 taxes, details concerning deferred For further fi the 1 Of taxes. aswell onincome asdeferred taxes This item outstanding and paid comprises attributable to tax income for the discontinued operations. discontinued the for income totax attributable is euros thousand 10,723 and operations, continued the for expense toatax isattributable euros sand utable to tax costs for the discontinued operations. discontinued the for costs totax utable isattrib- euros thousand 85 and operations, continued the for income totax isattributable euros sand ˚0s21 2009 2010 –8,289² –2,113 16,037¹ –1,060 –18,866 1,066 14,563 expense) tax year: (previous income tax Actual –6,924 changes rate totax attributable expense tax Deferred diff totemporary due income tax Deferred assets tax ofdeferred write-down) year: (previous write-up tothe due expense) tax year: (previous income tax Deferred years previous for income) tax year: (previous Tax expense fi the for expense tax Current €˚000s gure of 8,289 thousand euros shown for the actual tax expense for the year 2009, 19,012 thou- 19,012 year2009, the for expense tax actual the for shown euros thousand of8,289 gure gure of 16,037 thousand euros shown for the actual tax income for the year 2010, 16,122 thou- year2010, the for income tax actual the for shown euros thousand of16,037 gure Notes to the consolidated fi consolidated tothe Notes nnilya 2,4 –20,561 –25,143 nancial year nancial statements of freenet AG for the fi the AGfor freenet of statements nancial eecs3,0 32,185 34,601 erences nancial yearnancial 2010 Annual Report 2010 101

Consolidated financial statements Consolidated financial statements Annual Report 2010 102 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes 2 Of the fi the Of 2 1 Of the fi the Of 1 average rate of 29.4 percent (previous year: 30.2 percent). year: (previous average rate of29.4 percent in thefi taxes deferred The used. were also 411.46 percent) year: (previous rate of387.59 percent assessment tax an average trade in surchargeof5.5 percent Asolidarity income. in thefi used was year: 15 percent) (previous rate of15 percent tax acorporation companies, For theGroup shown in thefollowing reconciliation. million of8.3 euros) expense is million year: tax euros(previous of16.0 income tax actual million euros). diff The 80.0 year: euros (previous onincome taxes result before income to the discontinued operations. discontinued tothe income aretax income tax euros thousand 10,723 and operations tocontinued inrelation expense aretax euros discontinued operations. for expense aretax euros thousand 85 and operations tocontinued inrelation income aretax euros te noeadepne 5 19,311 9,541 1,066 957 50,627 –8,289² –6,924 2009 16,037¹ –79,963 264,779 2010 –28,350 96,430 Eff expense) tax year: (previous income tax Actual expenses and income Other years previous from Tax expense Eff eff Tax forward carried tolosses inrelation assets tax deferred non-recognised and assets tax deferred for allowance inthe Change percent) 30.2 year: (previous of29.4 percent rate atax applying expense tax Expected income on taxes before operations discontinued and continued of Results €’000s etv a aei ecn 1.33.13 –16.63 –2,113 –1,060 inpercent rate tax ective rate intax tochanges due ects Applying the average tax rate ofthecons theaverage tax Applying eto o-loal xessadtxfe noe7743,869 787 income tax-free and expenses ofnon-allowable ect gure of 8,289 thousand euros shown as actual tax expense for the year 2009, 19,012 thousand thousand 19,012 year2009, the for expense tax asactual shown euros thousand of8,289 gure gure of 16,037 thousand euros shown as actual tax income for the year 2010, 16,122 thousand thousand 16,122 year2010, the for income tax asactual shown euros thousand of16,037 gure nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial year 2010 for calculating the current and deferred taxes on taxes deferred forcalculating and thecurrent nancial year 2010 would result in anticipated tax expenses of 28.4 million of28.4 resultin expenses anticipated would tax nancial year 2010 were calculated withan werecalculated nancial year 2010 olidated companies to theconsolidated relation to the corporation tax aswell as tax relationto thecorporation erence between this the and amount erence between nancial yearnancial 2010 13. Earnings per share per Earnings 13. Consolidated fi nancial statements: a result of the possible utila resultofthepossible cial as year. increased sharemight be per earnings thatundiluted Infuture, itis possible diluting shares. by ofsh theweighted averageholders number by d sharearecalculated per earnings Diluted share per earnings Diluted 13.2 at the subscription price and theordinaat thesubscription price and to sharesattributable the potential ordinary by theweighted average number shareholders Undiluted earnings per share are calculated by sharearecalculated per earnings Undiluted share per earnings Undiluted 13.1 hro rmcniudoeain n€09 0.14 1.86 2.00 128,061,016 0 128,061,016 0.93 –0.05 0.88 0 128,061,016 128,061,016 Thereof from discontinued operations in € in€ operations continued from Thereof 256,485 in€(diluted) share per Earnings of diluting shares number potential plus outstanding ofshares average Weighted 112,433 ofdiluting shares Potential number outstanding ofshares average Weighted AG in€’000s offreenet toshareholders attributable result Group 0.14 1.86 2.00 0.93 –0.05 0.88 128,061,016 128,061,016 256,485 Thereof from discontinued operations in € in€ operations continued from Thereof 112,433 in€ (undiluted) share per Earnings outstanding ofshares average Weighted AGin€’000s freenet of toshareholders attributable result Group The number ofpotentially diluting number sharesis asthediff The calculated Notes to the consolidated fi consolidated tothe Notes isation ofcontingent capital. isation nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ry shares issuable at fair value. sharesissuable atfair value. ry employee stock option programmes valued valued optionprogrammes stock employee ividing theresultattr ares in circulation increased by potentiallyares in circulation increased ofsharesin circulation during thefi dividing theresult attributable to the attributable ibutable toibutable theshare- 002009 2010 002009 2010 erence between nancial yearnancial 2010 Annual Report 2010 adjusted adjusted nan- 103

Consolidated financial statements Consolidated financial statements Annual Report 2010 104 Consolidated fi 15. Impairment test for test Impairment 15. 14. Intangible 14. assets, non-monetary assets non-monetary nancial statements: property, plantproperty, and equipment equipment and and goodwill and Notes to the consolidated fi consolidated tothe Notes Of thefi Of following: opment expenses. euros). 99.2 million 31, 2009: (December 31, 2010 eurosareshownasofDecember of55.1 million intangible assets further custom and rights toIn addition thebrand undefi CGU. Communications” inbined the“Mobile Business” arecom- Operator frills” Network aswell Mobile as“Original “No “Prepaid”, euros). “Postpaid”, business models The 293,204 thousand year: right (previous brand gible withanindefi asset euros); anintan- 1,111,830 thousand year: (previous Communications” “Mobile (“CGU”) testing: impairment asset In accordance 36 withtheprovisions ofIAS operations”. “Discontinued to item 24 attributed eurosrelates tosand thegoodwill ofthefi relations asattheend inof thedebitel Group thefi price to thepurchase relations attributable assets. ofnon-current schedule areshownin the intangible and assets equipment and plant in property, Movements analogy method was used fordetermining used was the method analogy te ,9 4,675 4,094 2009 12. 31. 2010 12. 31. 1,111,830 1,111,830 321,809 314,031 316,968 2009 12. 31. Other 206,632 Mobile Communications 2010 12. 31. €’000s Customer relations Brand rights €’000s The goodwill recognised in relation to cash generating units is in relationto broken recognised generating units in cash the down goodwill The onlyaff was income statement The Because it is possible for cash fl itis forcash possible Because to generating unit allocated thecash euroswas of1,111,830 thousand Goodwill customer and rights brand ofthese values thebook out following sets The table customer and relate rights to ofintangible values brand assets main book The ned useful life, the capital value oriented value life, thecapital useful ned gure of 581 thousand eurosshownfor thousand gure of581 nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nite useful life of 293,204 thousand euros was allocated to allocated a euroswas nite life useful of293,204 thousand nancial year 2008. nancial year 2008. nancial nancial year: ows to be allocated to the brand right to withan allocated ows to thebrand be ected to devel- alimited and by research extent ected er relations from the debitel acquisition,er relationsfromthedebitel , wehereby thefollowing provide details on allocation ontheoccasionallocation oftheacquisition to the “Next ID” segment. Please refer also refer also Please segment. ID” to the“Next the reduction under under the reduction fair value less costs to sell. The licence to The sell. less costs fair value method in ofthelicence the form method price nancial yearnancial 2010 ,1,2 1,116,505 1,115,924 2,0 635,840 523,600 “Other”, 453 thou- 453 “Other”, Consolidated fi nancial statements: tinued operations – please referto –please operations tinued euros) thousand in re wererecognised 4,388 with anindefi aswell astheintangible assets goodwill CGU in thatnoimpairment established recognised hasto relationto be theallocated 0.5 percent). year: assumptions(previous asaresultofgrowth assumed has been adiscount of0.5 percent 2015), (starting the capitalisation phase rate in thesubsequent to regard With 7.4 percent). year: (previous of determining is thefair value 6.6 percent onthebasis Communications” the CGU “Mobile acquisitioncustomer slightly and higher cust as aresultoftheacquisition prog orloyalty commissions dealer and thehardware forprocuring paid to toby partners sales costs be loyalty.contribution customer to and by This earnings newcustomers made is opposed ofacquiring costs retaining The and dominate customers the operators. network mobile forpurchased by thecosts areopposed These fl ings profi gross in relationto themain future expectations yield. in theperpetual extrapolated was planning phase detailed The forcalculating thefair value. used was by management which approved was and 2014 CGU. Communications” upto including Planning and which“Mobile covers theperiod Communications”. right withanindefi forthebrand recognised to foranimpairment be noneed was There 0.5 percent). year: assumptions (previous asaresultofgrowth assumed hasbeen adiscount of0.5 percent 2015), (starting phase to regard thecapitalisation With rate in thesubsequent 7.4 percent). year: (previous forcalculating thefair used tax (WACC) after capitalisation rate below. The in thetext described Communications” the CGU “Mobile revenue forthis right is brand-relevant brand taken planned fromtheplanning for The specifi given being withdueconsideration to its cent, is 1.5 per-rate right for this onthebasis calculated transactions brand ofcomparable In thefi Communications” in relationto out the“Mobile carried 2010 impairment test The in relationto derived thespecifi tax capitalisation rate after The and experience fromprevious assumptionsderived Planning ondetailed is based to sell hasbeen lesscosts fair value The ows, the contribution to results made thecontribution made toows, results t of the “Mobile Communications” CGU can be broken CGU into Communications” earn- be down can two t ofthe“Mobile nancial year 2010, impairments of 2,179 thousand euros (previous year: year: euros(previous of2,179 thousand impairments nancial year 2010, Notes to the consolidated fi consolidated tothe Notes nancial statements of freenet AG for the fi the AGfor freenet of statements nancial item 8 “Depreciation and impairments”. and item 8 “Depreciation event and value drivers. In principle, the Inprinciple, drivers. value event and rammes. freenet is assuming freenet slightly reduced rammes. nite life to useful allocated theCGU “Mobile by new customers and customer retention. retention. customer and by newcustomers used as the recoverable amount ofthe astherecoverable amount used lation to non-monetary assets forthecon- assets lation to non-monetary omer retention costs in retention theplanningomer costs period. value is 6.6 percent asoftheclosing date isvalue 6.6 percent services, particularly with regard to withregard the particularly services, of market data and used in the course in thecourse used and of market data c strength as a premium brand. asapremium brand. c strength nite life. useful c risk structure of c risk structure nancial yearnancial 2010 Annual Report 2010 105

Consolidated financial statements Consolidated financial statements Annual Report 2010 106 Consolidated fi nancial statements: 16. Joint Joint 16. ventures Notes to the consolidated fi consolidated tothe Notes the fee-based internet portal of FunDorado. NetCon in turn owns a 100 percent stake percent in turn NetCon ownsa100 ofFunDorado. internet portal the fee-based content Companyas NetCon). produces which The in is primarily designed used to be s. Media NetCon r. in Republic (referred Hlucin, theCzech o. based to in thefollowing (previous year: 38). (previous Inthefi 2010. holding withtheGroup’s in this inexisted 31, connection joint venture asofDecember year, in theprevious thecase was As noco orin thefi 2009 liabilities, an income following assets, The orin thefi 2010 ber 31, internet portal. afee-based operates percent). FunDorado year: 50.0 fi (FunDorado), which Hamburg, established was in the including GmbH, FunDorado consolidated fi The nancial year 2001 and in which the freenet Group holds a 50.0 percent stake (previous (previous stake percent holdsa50.0 in Group and which thefreenet nancial year 2001 xess7623,801 4,302 52 969 7,602 8,604 763 1,120 104 1,938 3,445 2,240 1,526 3,996 Group tothe Attributable GmbH FunDorado Expenses Income 38 961 6,890 7,991 Non-current liabilities Current liabilities 913 1,089 Non-current assets Current assets 76 1,922 €’000s 2,179 1,826 Group tothe Attributable GmbH FunDorado Expenses Income liabilities Non-current liabilities Current Non-current assets Current assets €’000s Eff areshownasofDecem- expenditure liabilities, and income following assets, The ective October 13, 2006, FunDorado GmbH acquired stake in percent a50 GmbH FunDorado 2006, 13, October ective nancial year 2010, FunDorado GmbH employed an average of 38 persons persons anaverage of38 employed GmbH FunDorado nancial year 2010, nancial year 2009 forFunDorado: nancial year 2009 nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial statements show an investment in three joint in showaninvestment ventures, three nancial statements nancial year 2010: d expenditure are shown as of December 31, 31, areshownasofDecember d expenditure ntingent liabilities obligations orcapital nancial yearnancial 2010 ,9 999 1,998 ,4 1,021 2,042 ,0 2,002 4,005 ,6 1,883 3,766 Consolidated fi nancial statements: ments in connection with the Group interest withthe Group in joint these in ventures. connection ments year: 71). (previous 75 persons In thefi respectively: forthefi and 2009 31, asofDecember liabilities, expenses and income subsidiary Including thebalances ofits forthefi expenses and 2010, 31, liabilitiesand asofDecember the date ofinitial consolidation. fi asjoint ventures consolidated in the included areboth aswell assiXXup NetCon siXXup). Pulheim (referred to in thefollowing GmbH, as newMedia company sales siXXup in its nancial statements. For the sake of simplicity, November 1, 2006 has been chosen as chosen hasbeen Forthesake ofsimplicity, 2006 1, nancial statements. November xess108262 282 0 20 1,048 1,126 65 46 0 81 261 182 411 413 Group tothe Attributable Expenses s. Media r. NetCon o. Income 0 33 1,642 liabilities Non-current 1,652 liabilities Current 67 82 Non-current assets assets Current 0 131 €’000s 266 327 Group tothe Attributable Expenses s. Media r. NetCon o. Income liabilities Non-current Current liabilities Non-current assets assets Current €’000s As of December 31, 2010, therewereno contingent obligations commit- orcapital 2010, 31, ofDecember As subsidiary Including thebalances ofits nancial year 2010, NetCon, including it NetCon, nancial year 2010, Notes to the consolidated fi consolidated tothe Notes nancial year 2010: nancial statements of freenet AG for the fi the AGfor freenet of statements nancial siXXup, NetCon shows the following assets, showsthefollowing NetCon assets, siXXup, the following assets, liabilities, and income the following assets, siXXup, NetCon shows the following assets showsthefollowing NetCon assets siXXup, s subsidiary, anaverage of employed 4 111 443 9 148 594 3 33 131 120 81 nancial yearnancial 2010 nancial year 2009 nancial year 2009 Annual Report 2010 107

Consolidated financial statements Consolidated financial statements Annual Report 2010 108 Consolidated fi assets and liabilities and assets nancial statements: 19. Deferred Deferred 19. tax 17. Investments 17. Investments in associates investments 18. Other Other 18. Notes to the consolidated fi consolidated tothe Notes euros) asrentcollateral forsh which serve long-term fi euros(pre thousand of500 ofpurchase cost atcost. weremeasured investments These euros. thousand 398 euros aswell in astheinvestment Pocketfi with Hamburg GmbH, ininvestment Libri.de other fi The participation. in theequity reduction received euroswas thousand of1,573 payment panies accounted in forusing method theequity year: euros(previous thousand ings of1,331 withearn- in conjunction 2009, 31, withDecember compared method using theequity (previous year: 30.2 percent). 30.2 year: (previous liabilities using werecalculated theliability diff temporary After havedisposals taken place. date asofth also and of thebalance sheet euros). thousand 9,835 year: euros), theliabilities and to an amounted 17,074 thousand year: euros(previous thousand 16,962 topany anaggregate amounted ofthis com- theassets 2010 31, euros). ofDecember thousand As 3,370 year: (previous euros thousand euros) thousand aswell of2,662 asnetincome 20,392 year: (previous in region. theKiel within thelicense area telecommunication services supplies KielNET Kiel. werke AG, Kiel company. vote thedeciding Ifvoting is is ofresolutions tied, heldby in Stadt- thecase in stake percent this ownsa50 Group The (referred to in thefollowing as“KielNET”). fürKommunikation, Kiel year,in Gesellschaft theprevious GmbH this to related KielNET year euros(previous thousand 3,403 was 2010 ofcompanies accounted value forus book The eerdtxlaiiis00 27,090 0 2009 12. 31. 79,828 2010 12. 31. liabilities tax Deferred assets tax Deferred €’000s No impairments had been recognised in relationto recognised the other fi hadbeen impairments No other fi The The following amounts areshownin following amounts The in eurosdecline thebo thousand 242 The In thefi nancial investments shownasoftheba nancial investments xed-income bonds of 1,054 thousand euros (previous year: 987 thousand thousand 987 year: euros (previous thousand of1,054 xed-income bonds nancial year 2010, KielNET generated revenue of 19,083 thousand euros thousand revenue of19,083 generated KielNET nancial year 2010, nancial instruments mainly comprise a silent partnership, measured at mainly measured comprise asilentnancial instruments partnership, nancial statements of freenet AG for the fi the AGfor freenet of statements nancial erences were taken into consideration, deferred tax assets and and assets tax weretakenerences into deferred consideration, theconsolidated balance sheet: aggregate 10,208 thousand euros (previous euros(previous thousand 10,208 aggregate lm Media Entertainment GmbH, Frechen, of GmbH, Entertainment lm Media e previous balance sheet date. Moreover, balance sheet e previous no ops and which are measured at fair value. atfair value. which aremeasured ops and method with a total tax rate of 29.4 percent percent rate withatotalof29.4 tax method 1,685 thousand euros) thousand by generated thecom- 1,685 vious year: 500 thousand euros) thousand aswell as 500 year: vious an unchanged book value of 304 thousand thousand of304 value book an unchanged ok value ofthecompok value ing the equity method as of December 31, 31, asofDecember method ing theequity : 3,645 thousand euros); thousand thecase aswas : 3,645 from KielNET; this asa treated hasto be 2010, is due to the fact that a dividend thatadividend is dueto thefact 2010, nancial yearnancial 2010 lance sheet datelance mainly sheet comprise the 98827,090 79,828 nancial assets as assets nancial anies accounted for et4300–,6 –2,136 9,529 –2,569 –460 –24 2,764 0 223,696 –469 –160,790 121 0 1,111 8,679 0 41,295 0 –7 0 1,383 0 0 433 0 0 0 6,765 –220 0 9 –138 0 215,237 –202,085 –272 OthersDebt accruals and liabilities Other Provisions Loss carry-forwards assets Financial Intangible assets equipment and plant Property, 7,141001,7618,902 €’000s in2010 liabilities and assets tax indeferred Changes Consolidated fi nancial statements: income attributable to discontinued continued and operations. attributable income on taxes to thesumof thedeferred income correspond and expenses income tax The asfollows: statement income dated euros) areshownin theconsoli- (52,965 thousand income and expenses tax income The areshownin thefollowing tables: 2009 losscarry-forwards. tax million year previous euros; long-termand (44.9 27.1year: million euros) is classifi million previous euros; (78.9 which arerecognised assets tax overhang ofdeferred The ru eutfo icniudoeain 0 Group result from discontinued operations Taxes income on €’000s Changes in the deferred tax as tax Changes in thedeferred .1 00Change 1. 1. 2010 700–2 75,6 79,828 52,965 –7 –220 27,090 Notes to the consolidated fi consolidated tothe Notes consolidated consolidated in group of of ingroup companies ed as short-term (34.9 million 27.1 euros; million asshort-termed euros) (34.9 sets and liabilities and forthefi sets nancial statements of freenet AG for the fi the AGfor freenet of statements nancial directly in directly Shown equity : 0) asaresultoftheanticipated of use taxes on income on taxes expenses from Income and and Income nancial year 2010 and and nancial year 2010 nancial yearnancial 2010 Annual Report 2010 31. 12. 2010 12. 31. 52,965 52,965 2010 109

Consolidated financial statements Consolidated financial statements Annual Report 2010 110 €’000s in2009 liabilities and assets tax indeferred Changes et–4 8 433 7,141 980 6,765 –11,559 –138 9 0 0 –8,072 215,237 –202,085 794 –18,866 0 –2,498 –272 0 49,585 –9 –4 0 0 842 0 –30 –547 18,709 0 0 0 1,053 14,867 0 –928 1,454 234,103 –4 –251,670 –1,110 Others Debt accruals and liabilities Other Provisions Loss carry-forwards Financial assets Intangible assets equipment and plant Property, Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes clause 2 EStG. clause 2 interest carry- date, therearenoundisclosed year reporting asoftheprevious thecase was As tax). 1.7 billion eurostrade and tion tax (2.3 billion (1.7 billion euros) tax 2.3 billion trade euros) and year: euroscorpora- (previous in theconsolidated fi recognised have been assets tax forwhich nodeferred euros). losscarry-forwards Further 109,930 thousand year: euros(previous accounted for107,877 thousand tax to trade which areattributable euros), losscarry-forwards and 105,307 thousand year: euros(previous 115,819 thousand euros). this corpor item, Of 215,237 thousand year: (previous forward in eurosexisted relationto carried losses of 223,696 thousand assets tax deferred 2010, 31, ofDecember date. As asofthebalance sheet applicable on arebased results expected The realised. be thatitis thatthis to probable to will considered asset theextent asset be indeed fi consolidated the Accordingly, the sumoftheforecast tion exceed any without restric- forward carried which be can losscarry-forwards existing tax The ofdefe netdevelopment summarised The fi nancial year 2009: so 1 2 98827,090 11,206 –4 79,828 14,878 52,965 2009 27,090 –7 2010 1,010 –220 31. of As 12. Tax income inequity directly Shown companies ofconsolidated ingroup Change As of 1. 1. €’000s The deferred tax assets and deferred tax tax deferred and assets tax deferred The .1 09Change 1. 1. 2009 488100– 12627,090 11,206 –4 1,010 14,878 nancial statements of freenet AG for the fi the AGfor freenet of statements nancial consolidated consolidated in group of of ingroup companies nancial statements only recognise a deferred tax tax adeferred onlyrecognise nancial statements cumulative resultofthefollowing fi rred taxes is taxes showninrred thefollowing: nancial statements relate to corporation tax tax relate to corporation nancial statements directly in directly the Company’s forecast the Company’s ation tax loss carry-forwards account for losscarry-forwards ation tax forwards in accordance with section 4h(1) in accordance withsection forwards liabilities asfollows in the developed Shown equity nancial yearnancial 2010 taxes on income on taxes expenses from Income and and Income for pre-tax result forpre-tax nancial nancial years. 31. 12. 2009 12. 31. 21. Receivables Receivables 21. and 20. Inventories 20. other assets assets other Consolidated fi nancial statements: ers, dealers and sales partners. partners. sales and dealers ers, theyareduefrombusiness to extent and custom- alesser mainly customers, fromend signifithe most euros). thousand Group, Inthefreenet 520,943 year: (previous 2010 31, of December eurosas thousand to amounted 442,170 recognised, which hadbeen less impairments fi and sales equipment to fees, bles attributable comprise mainly and receiva- Trade parties, areduefromexternal receivable accounts This item is broken asfollows: down in relationto ofinventories. year-endrecognised stocks euros) thousand hasbeen 3,679 year: euros(previous thousand impairment of4,837 An Inventories arebroken asfollows: down ate future. to this fi in created relation have taxes been deferred million No 12.3 euros. purposes) ofapprox. fortax ofinvestments amounts is higher carrying IFRS thanthecorresponding under term of 30 days. term of30 invoices theinvoiceimmediately The after to submitted is DTAG raised. have apayment Telekom ofDeutsche AG (DTAG) services thecollection vices, areutilised. invoices some areissued segment, the Other te ses3,4 45,700 17,806 35,744 19,762 2009 12. 31. 491,051 2010 12. 31. 427,069 1,117 488 5,708 15,304 8,821 Advance payments 8,377 2009 12. 31. assets Other receivable accounts Trade 2010 12. 31. 29,928 €’000s 34,211 Other vouchers and Bundles cards SIM Mobile telephones/accessories €’000s Invoices in the Mobile Communications se Communications Invoices in Mobile the fi theother non-derivative and receivable accounts totalThe oftrade diff outside-basis therearetemporary 2010, 31, ofDecember As Where invoices are issued to end customers by the Group itself, they are mostly due invoices theyaremostly Where itself, by theGroup areissued to customers end gure because it is not expected thatthediff itis not expected gure because Notes to the consolidated fi consolidated tothe Notes cant item in this category are trade accounts receivable. These aredue These receivable. accounts item aretrade cant in this category nancial statements of freenet AG for the fi the AGfor freenet of statements nancial by the Group itself; for narrowband ser- fornarrowband itself; by theGroup xed network and internet and services. xed network gment are issued by the Group itself. In itself. by areissued theGroup gment erences willerences in theimmedi- reverse 8,7 554,557 482,575 18752,057 51,897 erences (neterences capital nancial yearnancial 2010 nancial assets, nancial assets, Annual Report 2010 111

Consolidated financial statements Consolidated financial statements Annual Report 2010 112 rd consrcial 9,5 2,1 5622005,994 2,070 134 15,632 327,917 46 491,051 6,958 337,608 non-derivativeOther fi Trade receivable accounts 427,069 non-derivativeOther fi receivable accounts Trade ’0sCarrying €’000s €’000s Consolidated fi nancial statements: nnilast 9822,3 2 563 127 147 0 0 27,934 29,892 0 nancial 14,893 assets 15,101 nancial assets Notes to the consolidated fi consolidated tothe Notes which werenot overdue, norenegotiations were neither impaired noroverdue. euros) are 355,851 thousand 31, 2009: euros(December of352,501 thousand cial assets accounts receivable and non-derivative fi non-derivative and receivable accounts withownership rece associated ofthese euros). opportunities and majorrisks All of506 thousand income year: euros (previous receivable. accounts trade oftheabove-mentioned value the past. whohave in customers areduefromvarious not receivables defaulted impaired. These euros) areoverdue arenot but 24,386 thousand 2009: 31, euros(December sand As of December 31, 2010, trade accounts receivable and other non-derivative fi other non-derivative and receivable accounts trade 2010, 31, ofDecember As year,Last which receivable werenot accounts impaired oftrade and in thecase Trade fi other non-derivative and receivable accounts The following informationThe relates to theag review,In theyear ofreceivab under sales to not it. have provided which does any have Group securities been The risk asofthebala default maximum The 31. 12. 2009 12. 31. 31. 12. 2010 12. 31. Carrying 4,7 5,0 ,5 6281 46 6,958 352,501 442,170 2,4 5,5 5622176,557 2,197 15,632 355,851 520,943 amount amount nancial statements of freenet AG for the fi the AGfor freenet of statements nancial neither impaired neither impaired On closing date date closing On On closing date date closing On nor overdue nor nor overdue nor Thereof: Thereof: ivables were transferred to thebuyer. weretransferred ivables nancial assets. Fewer than than Fewer Fewer than than Fewer nce sheet date corresponds to the book to datence thebook sheet corresponds 90 days 90 days Thereof: On closing date not impaired not date closing On Thereof: Thereof: On closing date not impaired not date closing On Thereof: les resulted in expenses of 64 thousand of64 thousand inles resulted expenses e structure of this category of trade oftrade ofthis category e structure heldin relationto existing receivables. nancial yearnancial 2010 Between 91 and 91and Between Between 91 and 91and Between and overdue by overdue and and overdue by overdue and nancial assets of7,285 thou- nancial assets 180 days 180 days More than More than 180 days 180 days nan- 22. Cash and cash cash and Cash 22. equivalents Consolidated fi nancial statements: with anoriginal months: term ofupto three liquidated atany which be aswell time fi can ascurrent market paper money current and cheques in 7, cash hand, ance consisting withIAS atbanks, ofcash in accord- following equivalents is cash The and areconciliation withcash ofliquid assets arebroken asfollows: down equivalents cash and Cash parties”. related euros) to thousand rela areattributable 4,606 thefi Of fi aswell receivable accounts asnon-derivative oftrade the category information out co following sets The table €’000s 31. 12. 2010 31. 12. 2009 12. 31. 0 2010 12. 31. 480,291 2,588 174,334 6 2009 12. 31. 2010 12. 31. 480,285 fi ofcurrent as part Liabilities 0 operations ofdiscontinued Liquid assets operations ofcontinued Liquid assets 174,334 €’000s –2,827 paper) market (money Securities atbanks cash and inhand Cash 126,280 €‘000s 125,397 129,018 126,280 fi inthe toimpairments additions Net 2009 asof31 created December Impairments (at ofdeconsolidation) time todeconsolidation due released Impairments 2008 asof31 created December Impairments €’000s fi inthe toimpairments allocations Net 2010 asof31 December created Impairments 2009 asof31 created December Impairments €’000s gure stated for receivables and other as and forreceivables gure stated Notes to the consolidated fi consolidated tothe Notes nneshdln u obns–4,2 –148,873 –146,625 tobanks due scheduling nance nnilya 093,710 2009 year nancial nnilya 002,738 2010 year nancial nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ncerning for in themovement impairments ted parties, see item 35 “Transactions with “Transactions item 35 see parties, ted sets, 40 thousand euros (previous year: year: euros(previous 40thousand sets, 7,3 480,291 174,334 027331,418 30,297 nancial assets: nancial liabilities nancial yearnancial 2010 Annual Report 2010 113

Consolidated financial statements Consolidated financial statements Annual Report 2010 114 Consolidated fi 23. Current tax assets tax Current 23. nancial statements: 24. Discontinued Discontinued 24. operations Notes to the consolidated fi consolidated tothe Notes “STRATO Group” asdiscontinued operations. Group” “STRATO aswe ID” “Next showsthesegment for 2010 Accordingly, deconsolidation. after theconsolidatedwhich statement income occurred income and expenses to aminor extent, and, adjustments, price purchase subsequent relating to in 2010, still results generated segments two These during 2009. were sold 2009) 31, (deconsolidated asofDecember Group” aswell as“STRATO 2009) 30, ber Business” (deconsolidated asofNovem- “DSL thesegments 2009, 31, ending December been retrospectively adjusted. year comparison fi previous operations”. The tinued forthefi income ofthesegment and theexpenses and 2010 31, liabilities and asofDecember ofthis assets segment The 2010. 5in consolidated these fi IFRS 2010. 31, fully consolidated in asofDecember theconsolidated balance sheet companies arethus still These atthattime. deconsolidated werealso which weresold to thecompanies theacquirer; consequently transferred was which weresold operations infreenet thefi segment. Ne The forbusiness customers. services value Group“. ID orthe“Next segment (referredgies ID“ GmbH to in thefollowing jointly asthe“Next IDtechnolo- aswell asNext regarding ofall thesale GmbH sharesin Next-ID agreement mr.net &Co.KG and Group GmbH thefreenet group signed an 2010, 23, December On years. balances fromprevious ting credit mainly comprise rece assets tax current The As detailed in theconsolidated fi detailed As is shownas discon segment ID” “Next The control At over thattime, the 2011. 1, completed onJanuary was transaction The million this forthesale; fi agreed euroswas price of2.0 A cash mainly IDGroup ofproviding consists ofadded business arange The oftheNext nancial year 2010. nancial year 2010. nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial statements for the period ending December 31, 31, ending December fortheperiod nancial statements nancial year 2010 have been reclassifi have been nancial year 2010 nancial statements of freenet AG for the period AG offreenet fortheperiod nancial statements ivables attributable to corporation tax net- tax to corporation attributable ivables ll as the segments “DSL Business” and Business” and “DSL ll asthesegments xt ID Group is attributed to the “Other” is to IDGroup attributed the“Other” xt tinued operations in accordance with operations tinued nancial yearnancial 2010 gures of the income statement have statement gures oftheincome gure was received by received gure was ed as “discon- ’0s21 2009 (adjusted) 2010 1 2,588 9,689 €’000s 5 31. 12. 2010 equivalents cash and Cash payments advance and assets other Receivables, Inventories Current assets payments advance and assets other Receivables, Non-current assets €’000s Assets Taxes on income 0 0 0 0 0 14,163 0 14,163 14,163 0 238,769 –166 –1,169 272 14,163 0 263,016 0 80 –23,078 –3,440 –6,295 –166 –15,457 0 –6,711 0 –85 163 0 0 –70 –2,240 29 0 –1,200 0 –110,354 0 0 –46,466 486 –215,370 239,920 –8,671 233 9,371 –6,710 –40,692 0 –85 0 –6,977 0 –24,567 –15,457 0 –13,214 –20,297 3,544 –77,116 –1,455 –1,367 233 –727 0 –161,464 –19,459 222,972 –13,025 0 –4,042 2,359 –5,610 –1,455 0 –8,373 16,948 0 –727 –9,005 –4,555 0 operations 3,468 –5,411 4,398 Result 0 from discontinued 0 0 0 0 operations 0 1,557 0 ofdiscontinued 373,273 disposal the 0 15,224 profi Taxes the on –4,020 52,647 1,368 Taxes income on 513 232,213 12,841 –2,962 similarexpenses and Interest –115 88,413 45 similarincome and Interest 0 2,383 expenses operating Other 4,513 write-downs Impairment 144 Depreciation expenses Personnel materials of Cost discontinued operations Profi income operating Other Revenue t from the disposal of disposal the t from t from Consolidated fi business nancial statements: DSL follows: forthediscontinu results The 2010: 31, as ofDecember The balance sheet items ofthediscontinued balance sheet The TAONx DTtlDSL Total Next ID STRATO Notes to the consolidated fi consolidated tothe Notes 12,278 5 te rvsos24 10,309 2010 12. 31. Other provisions deferrals and liabilities other payable, Trade accounts liabilities Current €’000s Liabilities ed operations in 2010 and 2009 arebroken as down 2009 and in 2010 operations ed nancial statements of freenet AG for the fi the AGfor freenet of statements nancial business operations “Next ID” wereasfollows ID” “Next operations TAONx DTotal Next ID STRATO nancial yearnancial 2010 Annual Report 2010 10,333 115

Consolidated financial statements Consolidated financial statements Annual Report 2010 116 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes of thefi cash outfl euros ofthefi discontinued operations). lion eurosis ofashort-term nature. Please ofthis fi 2010; 31, December mi is of12.4 and shownin anamount tions, reclassifi the provision forcontingent hasbeen above losses is suchasale and also nolongerlikelysold, to Accordingly, term. take place in theshort far, have assets”. So ofcertain not withthesale been assets these ties in connection 2010: 30, (June 2009 31, asofDecember sheet millionprovision eurosto cover of16.5 cont a equipment, and plant property, and relatedto intangible these assets services pending Inrelationto 2010. upto including and June30, subsequently and 2009 December 31, wereclassifi in 2009 GmbH Care Customer as well asfreenet GmbH Breitband offreenet ofthesale which aspart and werenotDSL Business sold euros ofthefi the discontinued operations “STRAT million euros) accounted and infl for acash of 0.4 ties attributable to “DSL Business” were small. Business” weresmall. to “DSL ties attributable fi and activities outfl cash year: ous to the euros areattributable euros). fl shown forcash milliongain fromthis of4.5 generated euroswas in sale thefi disposal asubsequent adjustments, price aresultofpurchase As pany to party. a related involved ofa fully thesale consolidated com- group AG Internet ment) in to 2009 1&1 Group. to th date, attributable as ofthereporting forrecognising realised which howevereuros forcosts hasnot been loss, aprobable thousand atotal include of2,503 expenses” operating aswell as“Other “Impairments” ken into down fi two thenet withinternal relations, connection continue to Accordingly, in run thelongterm. will oftheservices thatsome completed and hasbeen thesale terminated after soon be will cases in IDsegment certain theNext and Group thefreenet relations between specifi IDGroup of theNext forthesale agreement The previous year comparison period, the cash outfl thecash year comparison period, previous The cash-fl The discontinued operations “Next ID” accounted foranoutfl ID” “Next discontinued operations The to which areattributable equipment and plant property, and Intangible assets to regard theresultfo With No cash fl cash No fl cash thereported Of Business” (as seg- GmbH ofthe“DSL Breitband acomponent offreenet sale The gure shown for cash fl gure shownforcash ow of 2.4 million euros); theyaccountedow of2.4 for anoutfl gure shown for cash fl gure shownforcash gure shown for cash fl gure shownforcash ows were reported for the “STRATO Group” segment in 2010. In 2009, In2009, in 2010. segment Group” forthe“STRATO ows werereported nancing activities for “DSL Business” in thefi for“DSL nancing activities ow statement showsthefi ow statement ow fromfi nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ows of 10.4 million euros). fl werenocash There ows of10.4 million gures, namely before and after expenses have been consolidated. have been expenses after and before namely gures, nancing activities (previous year: cash infl cash year: (previous nancing activities ow from operating activities, cash outfl cash activities, ow fromoperating gure, 10.2 million eurosis ofalong-term nature 2.2 mil- and 10.2 gure, discontinued operations “DSL Business” in 2010 (previ- Business” in 2010 “DSL discontinued operations ow from investing activities (previous year: cash outfl cash year: (previous ow frominvesting activities r the period 2010 of the Next ID Group, thepositions IDGroup, oftheNext 2010 r theperiod ow from operating activities in 2010 (previous year: year: (previous in 2010 activities ow fromoperating ow from operating activities, and also accounted also and for activities, ow fromoperating O Group” accounted infl foracash O Group” gures for the overall Group (continuedgures fortheoverall Group and e imminent deconsolidation of the Next ID e imminent oftheNext deconsolidation refer also to item 31 “Other provisions”. to referalso “Other item 31 income of the Next ID segment has been bro- hasbeen IDsegment income oftheNext llion euros under the “Other provisions” asof llion the“Other eurosunder ingent losses had been shownin thebalance ingent hadbeen losses with regard to the expenses and income in income and to withregard theexpenses 12.8 million euros) theitem “Liabili-12.8 under ows frominvesting fi and ow of 0.2 million eurosin thefi ow of0.2 nancial yearnancial 2010 es thattheinternal business ed under continued opera- under ed nancial year 2010. Inthe nancial year 2010. ed asheld-for-saleed asof nancial year 2010. ow of 0.4 million euros ow of0.4 ow of 3.0 million ow of3.0 ows of 3.6 million ows of3.6 million ows frominvesting ow of 0.1 millionow of0.1 ow of 36.9 million ow of36.9 nancing activi- gure ow 25. Shareholders’ Shareholders’ 25. equity Consolidated fi nancial statements: rights to holders of stock options of the former mobilcom AG. Inaccordance mobilcom AG. optionsoftheformer with of stock torights holders UmwG), theCompany is obliged equivalent to grant (Umwandlungsgesetz; tion Act capital 2007). contingent incr oftheCompany was capital In accordance ofthe An with theresolution Contingent 25.3 capital Board. oftheSupervisory approval in subscription rights excluding shareholders’ is to authorised also take Board adecision to withregard Executive The 2009). capital sharesin returnregistered forca orbearer eurosby way ofissuing value newno-par occasions by atotal ofupto 20,000,000 onseveral ononeoccasion or in amounts several 2011 by July6, sharecapital Company’s withtheapproval is authorised, tive Board 4(7) Inaccordance withsection 2009. ber 9, which in entered was thecommercial euros, register onSeptem- of20,000,000 capital oftheCompany authorised adopted Meeting General theAnnual July7,On 2009, Authorised 25.2 capital Gazette. Federal in theElectronic 2010 Meeting in items 7 8ontheagenda theinvitation General and theAnnual under to attend 2010 derivati may equity use additionally Board 2015. This until authorisation is July5, applicable permissi authorisation is forevery exercised, or–ifthisadopted is existing amount atthetime atwhich lower–thesharecapital this existing atwhich atthetime capital the oftheshare to sharesequivalent atotal ofuptoto 10 percent acquire treasury use and wi 2010, onJuly6, Meeting General Annual rights. with equal is entire sharecapital euro.The of1.00 value registered no-par-v of128,061,016 consists sharecapital The euros. ofthecompany sharecapital is issued 128,061 thousand The Share 25.1 capital fl to theconsolidated referto ID”, cash item “Notes please 33 “Next ofthesegment sale price payment aswell asthepurchase Group” oftheyear of fromthesales the course ties; cash fl cash ties; cash outfl ow statement”. As a result of the merger in accordance aresultofthemerger As complete wordingThe authorisat ofthese to In addition theauthorisation pursuant by authorised the was Board theExecutive (1) no.8AktG, toPursuant section 71 With regard to regard With theeff ows of 5.9 million eurosofthefi ows of5.9 ows fromfi Notes to the consolidated fi consolidated tothe Notes nancing activities were small. weresmall. nancing activities ects of the subsequent purchase price payment received in received price payment purchase ofthesubsequent ects nancial statements of freenet AG for the fi the AGfor freenet of statements nancial the segments “DSL Business” and the “STRATO the“STRATO Business” and “DSL the segments resolution regarding thisresolution authorisation is gure shown for cash fl gure shownforcash ves in order to acquire treasury shares. toves in order acquire treasury sh and/or contributions (authorised non-cash alue shareseachwith of the Supervisory Board, to the increase Board, of theSupervisory th the approval of the Supervisory Board, Board, oftheSupervisory th theapproval nual General Meeting of July 20, 2007, the 2007, ofJuly20, Meeting nual General eased by up to 318,447 euros(contingent by upto 318,447 eased with section 23 of the German Reorganisa- 23oftheGerman with section fully paid up. All shares have been issued issued fully shareshave paid up.All been ble purpose subject to the legal regulations. to regulations. thelegal subject ble purpose of the articles of incorporation, theExecu- ofincorporation, of thearticles legally permitted cases and subject to the subject and cases legally permitted to section 71 (1) no. 8 AktG, the Executive theExecutive (1)to no.8AktG, section 71 received in the course oftheyear inreceived fromthe thecourse ion resolutions was published was ion resolutions on21May ow frominvesting activi- a theoretical nominal a theoretical nancial yearnancial 2010 Annual Report 2010 117

Consolidated financial statements Consolidated financial statements Annual Report 2010 118 Consolidated fi nancial statements: 26. Employee 26. participation participation programmes Notes to the consolidated fi consolidated tothe Notes Executive Board of freenet AG (programme 3). Inthefi 3). AG (programme offreenet Board Executive to Mr. weregranted rights Preisig Joachim ontheoccasion to ofhis the appointment appreciation stock 400,000 2008, 30, asofSeptember 2008; 1, executives asofApril wereissued to senior rights appreciation stock 720,000 2, Inprogramme programmes: Inthefi Board. oftheExecutive including members to executives, senior steigerungsrechte—SARs) (Aktienwert- rights appreciation stock by issuing atotal of5,145,000 atpresent programme appreciation stock AG aso-called freenet introduced of2006, In thecourse offreenet AG rights Stock appreciation 26.1 ■ ■ off Group The thecontingent out increase. capital details forcarrying further the fi fromthebeginning entitlement of adividend newshareswill The carry settlement. not acash provide oriftheCompany does forsettlement sharesarenot used treasury or to withaconversion which holders their obligation conversion meet obligation if and to to out which theextent conversionis carried areutilised onlyto oroptionrights be ofin ofthearticles (9) in out section 4 set establish aconversion obligation in relationto shares. these or optionright v in relationto theno-par which aconversion provide A)and letter item agenda 10 under of 7 July 2009 Meeting issued onthebasis oftheau ofconversion which toregistered are granted theholders sharesto oroptionbonds be ofthecontingent value is increase to capital enableno-par purpose The 2009”). capital shareaccounting value for individual no-par witheach registered value shares, newno-par by way ofissuing upto 15,000,000 forthesharecapital out carried euroswas ofupto increase 15,000,000 gent capital far, ofthecontingent out issued 2007. capital noshareshave been profi in participate to in ownsharesorpay cash fulfi order any ofits grant only forsharesoftheCompany and subscribe ofthe to thattheholders out ried theextent ofincorporation. (8) ofthearticles section 4 contin optionsareexercised, stock mentioned in accordanceers withtheregulationsset thesharesofmo forconverting agreement forsharesoftheCompany in rights forsharesin mobilcom subscription rights AG theformer converting into subscription this achieved by was theCompany 2005, ofJuly8, agreement 4ofthemerger section

nancial year in which they are issued. The Executive Board is to authorised fi Board Executive nancial year The in which theyareissued. Stock mobilcom AG optionsoftheformer AG offreenet Stock rights appreciation The issue forthenewregistered amount The no acontin- ofJuly 7, Meeting According 2009, General to oftheAnnual aresolution in to to aposition In order be issue new ers the following employee participation programmes: thefollowing participation ers employee nancial year 2008, stock appreciation rights were issued in two additional additional in were issued two rights appreciation stock nancial year 2008, nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ts fromthebeginning ofthefi ts thorisation oftheCompany ad accordance with the ratio of 1:1 defi accordance of1:1 withtheratio alue registered sharesoftheCompany orwhich corporation. The contingent capital increase contingent increase capital The corporation. out inout theoptionconditions iftheabove- bilcom AG into sharesoftheCompany. 1.00 euro of the share capital (“contingent euroofthesharecapital 1.00 shares oftheCompany to theoptionhold- The contingent capital increase is onlycar- increase contingent capital The option rights actually exercise actually option rights their right to to the extent that the Company does not thattheCompany to does theextent gent capital 318,447 euros was created in created euroswas 318,447 gent capital nancial year in which they are issued. So nancial year So in which theyareissued. -par-value ontherules sharesis based nancial yearnancial 2010 l the option rights. The newshares The l theoptionrights. nancial year 2009, 400,000 SARs 400,000 SARs nancial year 2009, opted by the Annual General opted by General theAnnual ned in ned themerger x the Consolidated fi nancial statements: longer applicable; however,longer applicable; theprofi Company after the end of the corresponding sh ofthecorresponding theend Company after ofthefi theend amMain after Frankfurt exchange days trading stock exchange which in onthestock 31 commences the period is in eachinstance defi exercise period The 4) respectively. (programme 2015 1, May 3)and (programme 2014 1, 2), September (programme 2014 1), 1, April gramme 4). 3and 2, 5(programmes forthetranche price in relationto increase percent thestrike 1) 50 and 5(programme strike fortranche price 4) in upto 3and relationto increase a25 the percent 2, (programmes tranche per points by fi incremented to fi two ofthetranches appreciation rights Forthestock program. oftherelevant exercisable ending withtheexpiry and become rights appreciation stock st ononeoccasion inat least theperiod fi by atleast thestrike exceed price sharesmust pany’s attained. have been targets providing thatcertain 2010, 29, year, withApril starting ofeach 29, 3),oronApril (programme 2009 31, withAugust ofeachyear starting 31, forthefi 2009 1, withApril each year starting forthefi 7, withNovember 2006 year starting to appreciation rights whichstock abenefi isemployee still by theCompany, employed forthetotal sharehol methods deducted areeach shareholders the following table. in out areset thestrike and individual caps price foreachprogramme The programmes. exercising, to upon in acap Company which theindividual applicable however is subject tion right to equivalent thediff theyspecif instead, forshares; subscribe Board. toof his theExecutive appointment ontheoccasion 4) wereissued to Mr.(programme Christoph asofMay 1, 2009 Vilanek The term of all stock appreciation rights is due to end on February 2, 2012 (pro- 2012 2, is dueto term rights appreciation onFebruary ofall end stock The If achangeofcontrol takes place atthe For eachfi other benefi and to theshareholders payments ofdividend value The not any provide do authorisation to appreciation right programmes stock The ve percent (programme 1) or by at least ten percent (programs 2, 3 and 4) 3and 2, 1) (programs ten percent orby atleast (programme ve percent Notes to the consolidated fi consolidated tothe Notes rst tranche of a program, the relevant ofaprogram, tranche rst ve percentage points per tranche (programme 1) orby ten percentage (programme tranche per points ve percentage erence between astrike theshareprice ofthe price and erence between der return approach. Subject to thecondition thatthe Subject returnder approach. fromthestrike price in accordance withrecognised nancial statements of freenet AG for the fi the AGfor freenet of statements nancial t targets areretained. t targets arting immediately before the corresponding thecorresponding immediately before arting rst ordinary Annual General Meeting ofthe Meeting General Annual ordinary rst y a cash payment for each stock apprecia- foreachstock payment y acash ciary is entitled ends on 7 November ofeach on7November ends is entitled ciary (under thetotal return shareholder approach) Company, areno shut-out theabove periods the shut-out period for 20 percent ofthe percent for20 the shut-out period rst tranche (programme 2) and on August 2) onAugust and (programme tranche rst rst tranche (programme 1), of on1April (programme tranche rst ut-out period until oftheterm. ut-out theend period target is target thattheprice oftheCom- ve, the percentage is thepercentage ve, nancial yearnancial 2010 ts forthe ts Annual Report 2010 ned ned as 119

Consolidated financial statements Consolidated financial statements Annual Report 2010 120 rnh 12 68 14 .9 048,0 80,000 80,000 80,000 0 80,000 0 80,000 0 0 0 0 0 0 0 0 0 0 0 80,000 0 80,000 0 80,000 1. 9. 2014 28,817 80,000 1. 9. 2014 21.46 28,817 80,000 1. 9. 2014 21.46 28,817 11,683 16.89 1. 9. 2014 21.46 28,817 15.76 11,683 1. 9. 2014 21.46 11.26 28,817 0 11,683 14.64 21.46 11.26 0 11,683 13.51 11.26 0 11,683 12.39 Tranche5 0 11.26 0 Tranche4 0 11.26 0 Tranche3 0 Tranche 40,500 2 0 Tranche 40,500 1 0 40,500 1. 4. 2014 40,500 709,708 1. 4. 2014 21.00 40,500 709,708 1. 4. 2014 21.00 9,000 16.70 37,292 709,708 1. 4. 2014 21.00 15.58 37,292 709,708 1. 4. 2014 21.00 11.13 14.47 0 0 37,292 21.00 11.13 13.36 0 37,292 11.13 12.24 Tranche 0 5 11.13 0 Tranche 0 4 0 11.13 0 Tranche3 0 Tranche2 747,000 0 Tranche1 0 747,000 747,000 2. 2. 2012 747,000 27.00 2. 2. 2012 9,000 27.00 2. 2. 2012 13.70 27.00 2. 2. 2012 13.15 27.00 2. 2. 2012 10.96 12.60 27.00 10.96 12.06 10.96 11.51 Tranche5 10.96 Tranche4 10.96 Tranche3 Tranche2 Tranche1 gramme 3 gramme pro- rights appreciation Stock 2 gramme pro- rights appreciation Stock 1 gramme pro- rights appreciation Stock Consolidated fi Strike Strike Strike nancial statements: price price price € € € Target Target Target price price price € € € Notes to the consolidated fi consolidated tothe Notes Cap Cap Cap following table: following € € € Details of stock appreciation rights which have so far been issued are set out in out the issued areset which have been rights appreciation far ofstock so Details auiyBalance Maturity Balance Maturity Balance Maturity nancial statements of freenet AG for the fi the AGfor freenet of statements nancial 31. 12. 2009 12. 31. 2009 12. 31. 2009 12. 31. ,9,0 4,6 ,4,3 288 2,847,832 149,168 0 0 2,997,000 0,0 0,0 181 400,000 0 0 0 400,000 0,0 845140563 144,085 58,415 0 0 202,500 SARs SARs SARs sudExer- Issued Exer- Issued Exer- Issued cised cised cised nancial yearnancial 2010 Disposals Balance Balance Disposals Balance Disposals Balance Disposals 31. 12. 2010 12. 31. 2010 12. 31. 2010 12. 31. SARs SARs SARs 31. 12. 2009 12. 31. 2009 12. 31. 2009 12. 31. Provisions Provisions Provisions Provisions €’000s €’000s €’000s rnh .01.01.01 .21 00000050,000 50,000 0 100,000 100,000 0 100,000 0 0 0 0 0 0 0 0 0 0 0 50,000 0 50,000 0 1. 5. 2015 100,000 100,000 1. 5. 18.00 2015 100,000 1. 5. 18.00 2015 11.70 1. 5. 2015 18.00 10.92 1. 5. 18.00 2015 7.80 10.14 18.00 7.80 9.36 7.80 8.58 Tranche5 7.80 Tranche4 7.80 Tranche3 Tranche2 Tranche1 gramme 4 gramme pro- rights appreciation Stock Strike price € Consolidated fi Target price € nancial statements: Cap programs have also been taken into have consideration. been also programs suchastherelative succes parameters Further ence date halfoftheremaining plus term af astheremain determined ciation was rights the oftheindividual programmes, tranches Foreachofthemeasured 1.56 percent. and 0.90 between 4was rate forprogramme est therisk-free and inter- 1.41 percent, and 0.81 between 3was interest rate forprogramme therisk-free 1.11 percent, and 0.76 risk-free between 2was interest rate forprogramme ofprogramme for theindividual tranches of De date. As asofthebalance sheet Bonds Federal ofGerman curve interest onthebasis rate determined was oftheyieldstructure ing maturities aswell volatili astheimplied Company be taking account value ofamean oftheshareprice ofthe using determined was anestimate ofthefuture performance defi volatility was expected The astheshareprice. used been theshareprice ofthe asfollows: set been 4. eurosforprogramme 2.09 and euros 1.58 between 3and eurosforprogramme 1.03 euroand 0.49 between 2, gramme euroforpro- 0.85 euroand 0.45 between 1, euroforprogramme 0.18 and 0.08 euro 4). (tranche 1fromprogramme 2010 31, able asofDecember areexercis- SARs Intotal, 100,000 euros long-term) SARs. is shownfortheoutstanding euros(of th thousand whichsion 688 of984 provi- asundry 2010, 31, ofDecember As exercised. being asaresultofsuchrights made were payments nocash wereexercised and noSARs in 2010, weregranted SARs further due exclusively to thereductio of4, in hasresulted areduction programme this In2010, (binomialin model). accordance 2using withIFRS anoptionprice model determined obligation was arisingThe programme appreciation rights fromthestock € The valuation parameters of the option price model for all four programs have forall programs four model oftheoptionprice parameters valuation The right appreciation arebetween oftheoptionprices foreachstock ranges The auiyBalance Maturity Notes to the consolidated fi consolidated tothe Notes 31. 12. 2009 12. 31. 0,0 0,0 452 400,000 0 0 0 400,000 SARs n of the provision compared with December 31, 2009. No No 2009. 31, n oftheprovision withDecember compared sudExer- Issued nancial statements of freenet AG for the fi the AGfor freenet of statements nancial 1 was between 0.46 and 0.54 percent; the 0.54 percent; and 0.46 between 1 was company on the closing date (7.90 euros)company ontheclosing date has (7.90 ty of the shares of freenet AG. The risk-free The AG. ofthesharesfreenet ty ter the end of the waiting time is attained. ter ofthewaiting theend is time attained. cised expected remaining appre- term ofthestock expected ing refer- waiting asofthe valuation time 011 thousand euros in personnel expenses, expenses, eurosin personnel thousand 011 ousand euros short-term and 296 thousand thousand eurosshort-termousand 296 and tween thehistorical volatility ofmatch- tween cember 31, 2010, therisk-free interest 2010, rate 31, cember s targets of the individual tranches ofthe oftheindividual tranches s targets Disposals Balance Balance Disposals ned as 32.0 percent—it as32.0 ned 31. 12. 2010 12. 31. nancial yearnancial 2010 SARs Annual Report 2010 31. 12. 2009 12. 31. Provisions Provisions €’000s 121

Consolidated financial statements Consolidated financial statements Annual Report 2010 122 rnh 041.92.13.31 3421,8 ,4 51,288 5,240 0 16,884 73,412 31.03.11 20.51 17.09 Tranche 2004 price Strike options Stock Consolidated fi nancial statements: € Target price Target Notes to the consolidated fi consolidated tothe Notes cise price of 20.51 euros, thereference date euros, cise price of20.51 on is valuation based The decision tree. using abinomial price aremodelled ofastock developments possible models, In these maturity. upon defi options forwhich thecontractually ofthe exercise theend period. nated before termi- company ataGroup hadbeen contract employment issued whose to employees euros. ten theexercise days trading last date theexercise before and price of20.51 closing pr theaverage XETRA ference between been satisfi Group. date areoptions balance sheet exercised asofthe shareoptionswhich hadnot been year: 73,412) (previous 51,288 The table: following in concerning out Details the areset far cised. issued theoptionswhich so have been is years defi ofthree period further a shut-out ofthecorresponding period, theexpiry After which theoptionswereissued. at thetime after years theremaining exercised four and onlybe optionscan years, three exercised forthefi be 25 percent can afurther shut-out period; the exercised after be can granted which have oftheoptionrights been up to 50 percent in th increase ofa20 percent relative target success atwhichthe point Assuming theyareissued (shut-out ina meeting period). into AG. sharesoffreenet 1:1 in of themobilcom aratio shareswereconverted because 23UmwG, ance withsection identical AG freenet grants AG, freenet.de and which signed was by theCompany aswell asmobilcom AG 2005, ofJuly8, agreement affi companies ofmobilcom employees AG thefollowing and ofthesubsidiaries selected and bodies theexecutive mobilcom Board, optionsto AG stock former theExecutive granted The mobilcom AG Stock former optionsofthe 26.2 € The stock options of the 2004 tranche are tranche optionsofthe2004 stock The thefi In addition, were year: 4,541) previous options; (5,240 asdisposals optionsrecognised The diff The theexercise conditions hadnot year because optionswereexercised last stock No after years oftwo theexpiry exercised before to be optionsarenot permitted The auiyBalance Maturity ed. erence to be granted for each option of tranche 2004 is defi 2004 for eachoptionoftranche granted erence to be liated with mobilcom AG. In accordance with section 4(1)liated Inaccordance withmobilcom AG. withsection ofthemerger nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial year saw the expiry of 16,884 (previous year: 31,952) stock stock year: 31,952) (previous of16,884 nancial theexpiry year saw 1. 1. 2010 options 3421,8 ,4 51,288 5,240 0 16,884 73,412 stock which arelinked to relationship theemployee’s within the ned as the period in which the rights can be exer- in be can which therights astheperiod ned Expired Exercised Disposals Balance Balance Disposals Exercised Expired ned exercise period expired or which expired orwhich expired expired exercisened period the following assumptions: With theexer-the following assumptions: With of freenet shares on the Frankfurt stock stock shares ontheFrankfurt offreenet e share price compared withthestrike price, compared e shareprice ice ofthesharesCompany onthe valued by means of a binomial model. ofabinomial by means model. valued rights to ofoptionsinrights all accord- holders nancial yearnancial 2010 rst time after a period of aperiod after time rst ned asthedif-ned 31. 12. 2010 12. 31. options stock 7 Trade payable, accounts 27. other liabilitiesother accruals and Consolidated fi nancial statements: payable and other non-derivative fi otherpayable and non-derivative v mately to book equivalent therecognised remaining long-term other liabilities of609 t liabilities ofthese value totalled 12,545 tho market The percent. euroswithadiscount rate of7.80 thousand of11,574 an amount of more thanfi of more euros) have year: 0 thousand amaturity euros(previous Liabilities of33 thousand years. fi oneyear euros) and have between amaturity year: 54,141 thousand euros (previous euros) Liabilities of12,150 thousand is 12 months. duewithin thenext 568,216 thousand parties”. plea euros) to parties; related is attributable recognised in the income statement, as described under item 2.16. item 2.16. under asdescribed in statement, theincome recognised euros) reversal from of theproportionate th In thefi follows: payable aswell accounts asother liabilities trade The accruals and arebroken as down 2010. 31, eurosasofDecember 0.00 to almost optionamounted optionprice foreachstock The which applied. was model the valuation classifi optionshadto thestock be ing date, because asofthepreviouis report- also thecase aswas mobilcom AG, oftheformer programme taken werealso into consideration. programme parameters Further term options. ofthe stock remaining astheexpected date used was until theexpiry period relevant The program. this in resulted arisk-free forthe 2010, 0.6 percent interest rate ofapprox. 31, December ofGe curve the basis oftheyield structure optionson also forthenon-vested optionsand forthevested separately determined risk-fre ofmatchingvolatility The maturities. including exchange, historical stock oftheFrankfurt trading AGof freenet in XETRA cent—it oftheshareprice using estimated was anestimate ofthefuture performance at 32.0 per- set volatility was euros). expected The (7.90 used was exchange (XETRA) te iblte n cras4,3 130,174 2009 12. 31. 390,292 101,891 2010 12. 31. 42,932 355,578 100,946 accruals and liabilities Other received payments Advance payable accounts Trade €’000s The maturities liabilities ofthose The which ar arediscounted to 2011 31, liabilitiesOther December which aredueto after expire Of thefi Of Of thefi Of No further provisions were created as of December 31, 2010 for the stock option forthestock 2010 31, provisions werecreated asofDecember further No nancial year 2010, afi nancial year 2010, gure shownforliabilities, 487, gure shownforliabilities, 4 thous Notes to the consolidated fi consolidated tothe Notes ve years. gure of 0 thousand euros (previous year: 701 thousand year: 701 thousand euros(previous gure of0 thousand nancial liabilities are as follows: 383,680 thousand nancial liabilities 383,680 thousand areasfollows: nancial statements of freenet AG for the fi the AGfor freenet of statements nancial usand euros as of December 31, 2010. Forthe 2010. 31, eurosasofDecember usand rman Bunds as of the closing date. As of as of theclosing Bunds date.rman As 273 thousand euros (previous year: year: euros(previous 273 thousand alue asaresultofthediscounting process. e accruals for public sector subsidies was e accruals forpublic sector se refer to item 35 “Transactions with related withrelated referto “Transactions se item 35 e interest rate ofmatching maturities was housand euros, themarket is value approxi- euros, housand and euros (previous year: 47 thousand year: 47 thousand euros(previous and e shownin thecategories Trade accounts such astherelative ofthe success targets ed as worthless in accordance with asworthless ed 9,5 622,357 499,456 nancial yearnancial 2010 Annual Report 2010 ve ve 123

Consolidated financial statements Consolidated financial statements Annual Report 2010 124 Consolidated fi 28. Current Current 28. income nancial statements: tax liabilities tax 29. Debt 29. Notes to the consolidated fi consolidated tothe Notes as of December 31, 2010 (previous year: 789.8 million euros). 789.8 year: (previous 2010 31, as ofDecember of netborrowings discontinued operations, item million 35. see euros, accounted for145.6 thefi Of borrowings. million of2. other borrowings euros and 13.5 million liabilities to fi euros, derivative attributable 145.6 million euros) 146.6 acquisition year: (previous million fi eurosatthebanks as well asarevolving of146.6 facility million euros) 243.9 million year: previous euros; (68.8 above bankloansmentioned two million euro 551.9 year: (previous 2010 ber 31, asofDecem- million eurosreported short-term The of215.4 borrowings July2014. 31 bank loanstaken onto fi million euros) are 718.2 year: (previous 2010 31, million eurosshownin asofDecember theGroup long-term of584.6 The borrowings asfollows: is structured Debt fi forprevious payments tax trade and tax corporation additional liabilities tax income Current mainly comprise expected theclosing date. after years euros) thanfi is duemore 14,046 thousand year: euros(previous 33 thousand and fi euros) oneyear and is duebetween 40,092 thousand year: euros (previous euros) is duewithin oneyear, 12,150 thousand 454,537 thousand year: euros (previous iblte u obns2545406,251 215,435 145,623 718,207 2009 12. 31. 0 2010 12. 31. 584,583 loans) (vendor toshareholders due Liabilities tobanks due Liabilities Current tobanks due Liabilities Non-current €’000s Netted with the liquid assets and includin and withtheliquid assets Netted nancial statements of freenet AG for the fi the AGfor freenet of statements nancial gure shown for borrowings as of December 31, 2009, related parties parties related 2009, 31, asofDecember gure shownforborrowings nance the debitel acquisition in 2008, and aredueto until and run nance acquisition thedebitel in 2008, nancial nancial years. 623.1 million euroswereshownin 623.1 theGroup 3 million short-term euroswereshownunder attributable to the long-term portion of two oftwo to thelong-termattributable portion s) comprise ofthe theshort-term portion g the liquid assets attributable to the attributable g theliquid assets . In the previous year,. Intheprevious loanof avendor nancial yearnancial 2010 nancial instruments (swaps)nancial instruments of nancing thedebitel 8,8 718,207 584,583 1,3 551,874 215,435 ve years, ve ve 30. Pension 30. provisions and similarand obligations Consolidated fi nancial statements: non-funded obligations: obligations thatthese will fulfi be It is expected follows: service attheCompany. service by arealways determined commitments pension benefi pension The dependants. ofbenefi thepayment and or65 reaching upon theageof60 pension benefi pension The ments. commit- pension direct and ofindirect obligations areaconsequence pension The so 1 2 18930,157 –862 4,308 31,829 1,398 –1,180 1,095 636 545 432 1,502 23,241 2009 254 0 460 30,157 2010 31. of As 12. Payments made Actuarial losses –1,389 contribution Employees’ 24,194 expense Interest 2009 12. 31. cost service Current –2,294 24,638 Past service costs 2010 12. 31. 3,700 26,457 As of 1. 1. 27,187 4,642 €’000s sheet inbalance shown Provision (profi losses Actuarial assets ofplan Fair value obligations ofunfunded value Present obligations offunded value Present €’000s The following table sets out thedevelopmen out followingThe sets table The amount oftheprovision amount The in theconsol Notes to the consolidated fi consolidated tothe Notes t)–,9 –4,574 –4,897 ts) t provided in each case is in ofalifetime thepayment eachcase retirement t provided ts are partly fi arepartly ts nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nanced by a reinsured benevolent fund. All All fund. by areinsured benevolent nanced idated balance sheet is calculated as is calculated balance sheet idated lled inlled thelongterm. the amount of salary and the time of thetime and ofsalary theamount t in the present value of the funded and and ofthefunded value t in thepresent ts to surviving to surviving ts nancial yearnancial 2010 Annual Report 2010 125

Consolidated financial statements Consolidated financial statements Annual Report 2010 126 ’0s21 0920 072006 –699 4 832 –22 2007 –829 78 1,453 4 2008 803 –255 –1,122 82 1,550 2009 22,119 –97 –5 –1,389 1,830 2010 28,768 21,411 –2,294 –214 –79 29,535 3,700 26,457 230 9 27,187 4,642 plan ofthe assets ofthe adjustments Experience-based plan ofthe liabilities ofthe adjustments Experience-based plan the loss) of income/(net Net assets ofplan Fair value obligations ofunfunded value Present obligations offunded value Present €’000s Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes sand euros. of out eurosaswell aspayments 515 thousand theactuarial profi and assets plan euros), thousand as arecalculated and of 158 expenses euros(2009: thousand to amount 300 assets income fromtheplan actual The in thedevelopment out fair value: sets table following The shares. euros); and units fund theyareinvested in equity 1,389 thousand 2009: 31, euros(December thousand of2,294 withafair value up forthis purpose set fund by the benevolent concluded consist ofareinsurance policy assets plan The reporting period and the previous reporting periods: shownforthedefi have following been amounts The so 1 2 ,9 1,389 2,294 1,122 2009 425 56 1,389 2010 605 70 31. of As 12. Employers’ contribution to plan assets Diff assets plan from income Expected As of 1. 1. €’000s eec ewe xetdadata noefo lnast 3 –214 230 assets plan from income actual and expected between erence For thefi nancial year 2011, freenet is expecting payments into the plan assets of into assets payments theplan is expecting freenet nancial year 2011, nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ts orlosses. ts the sum of the expected income fromthe thesumofexpected the plan assets for pensions of 597 thou- of 597 forpensions assets theplan nancial yearnancial 2010 ned-benefi t plans for the current forthecurrent t plans Consolidated fi nancial statements: ric basis. to achieve reconciliation withalongerterm ofobligations. thefi Inaddition, subordinate bonds. securities date also and the balance sheet The fi The index. onthebasis determined ofthe iBoxx hasbeen percent discount rateThe of5.0 main assumptionsareasfollows: actuarial The as recognised in theamounts Movements uuepninicess202.0 5.1 2.0 5.0 5.0 0.0 2.5 2009 12. 31. 2010 12. 31. 5.0 0.0 24,194 2.5 24,638 –1,287 1,095 22,068 2009 –1,785 254 24,194 increases Future pension 2010 freenet) (programme increases Future salary debitel) (programme increases Future salary assets plan from income Expected Discount rate percent In 2,318 0 1,398 1,975 2009 31. of As 12. –56 920 contribution 976Employees’ 1,502 2010 83 made 1,398 Payments statement income consolidated inthe –70 recognised Total cost 473 460 As of 1. 1,502 1. €’000s similarexpenses and ininterest recognised Thereof expenses inpersonnel recognised Thereof defi of Total cost assets plan from income Expected (realised) losses Actuarial expense Interest cost service past and Current €’000s The RT 2005G mortality tables of Dr. Klaus Heubeck have been used asthebiomet- used have been ofDr. tables Heubeck Klaus mortality 2005G RT The The following in items statement: theconsolidated income The arerecognised gure has been adjusted by securities by securities adjusted gure has been Notes to the consolidated fi consolidated tothe Notes ned benefi tpas1952,318 1,975 t plans nancial statements of freenet AG for the fi the AGfor freenet of statements nancial gure has been extrapolated by swap rates in order in rates order by swap extrapolated gure has been put on watch for downgrade at Moody’s and and atMoody’s onwatchput fordowngrade provisions areshownin thefollowing: which had already been downgraded asof downgraded which hadalready been nancial yearnancial 2010 Annual Report 2010 127

Consolidated financial statements Consolidated financial statements Annual Report 2010 128 ’0s1 .21 Con- 2010 1. 1. €’000s etutrn 6421,6 ,5 ,6 1,883 2,944 12,242 0 0 –24 1,568 0 26,539 9,019 0 12,843 94 0 2,416 4,057 750 1,462 376 12,060 491 682 335 16,432 4,198 4,282 Other 3,958 StorageWarranty/guarantee 14,507 0596and 0 options stock Outstanding 0 0 Restructuring condition to original assets torestore Obligation risks Litigation 0596 losses Contingent stock costs appreciation 540065000475 547070000477 rights 4,99504,011000984 Consolidated fi 31. Other provisions Other 31. nancial statements: Notes to the consolidated fi consolidated tothe Notes 5211,7 ,2 ,5 3591,1 46,140 12,819 13,599 1,556 9,820 17,275 45,261 ness”, this fi forthis created issue;euros hadbeen becaus thousand aprovision of16,536 2009, 31, euros). ofDecember thousand As (10,256 2017 euros) to thousand in to 2012 and theyears take (2,176 place in 2011 is expected of assets oftheGrou with thelandline activities for2011. expected outfl turing The ofthe Group. thelandline activities withrestruc- ofintegrating in also process connection and theacquired Group debitel withthe in provisions connection costs restructuring essentially compriseThe personnel ofprovisions: abreakdown out ofthedevelopment sets following overview The plan. assets oftheplan averagepated performance historical oftheunderlying consideration prices assets is expected in 2011. is expected assets purposes in this respect. And fi And in this respect. purposes forunwinding used hasbeen percent euros)—a rate of4.50 thousand (5,688 to 2017 outfl offi shopsand ofrented costs for vacancy ofprovisions. Provisionsin theschedule fo thefi operations”); tinued thousand of12,843 withavalue 1 July2010 This provision assets”. reclassifi was ofcertain disposal tions fordismantling tenant fi of 4,101 thousand euros for losses expected fromnegative-margin tariff expected eurosforlosses of 4,101 thousand ow of assets is expected in 2011 (4,318 thousand euros) thousand 2012 aswell in theperiod (4,318 in 2011 is expected ow ofassets The provisions for contingent losses partly relate to pending services in connection in connection relate provisions services toThe pending forcontingent partly losses onthebasis determined ofa hasbeen anticipated assets incomeThe fromtheplan The fi The gure stated fortheprovisiongure stated fordi sumption gure has been shown under theitem shownunder gure hasbeen nancial statements of freenet AG for the fi the AGfor freenet of statements nancial eeslCom- Reversal gure has been shownin “Reclassifi thecolumn entitled gure hasbeen ttings and various technical and administration locations administration technical and various locations and ttings nally, theprovisions forcontingent afi include losses pounding p (12,432 thousand euros), thousand whereby theoutfl p (12,432 ce buildings (10,006 thousand euros); thousand the ce buildings (10,006 r contingent losses have also been created created r contingent have losses been also euros (please also refer to item 24 “Discon- referto also item 24 euros (please smantling obligations relates to obliga- e the activities are attributed to “DSL Busi- areattributed e theactivities until the end of the term of the pension until oftheterm ofthepension theend of the plan assets aswell astheantici- assets oftheplan “Liabilities in connection withthe “Liabilities in connection nancial yearnancial 2010 loainReclassifi Allocation ow of assets for these provisions forthese isow ofassets ed as continuing operations asof ascontinuing operations ed cation s; theoutfl s; - 31. 12. 2010 12. 31. cation” ow of ow gure obligations, contingencies, 32. Other Other 32. fi securities forloans securities Consolidated fi nancial nancial statements: of these extension optionsarein fr extension allof these cases ofleas themajority options forextending leasin shopsaswell ashardware and buildings leasing and obligations fromrental agre The in thefollowing commitments other amounts: obligations order and and aswell asmaintenance, support leasing and fromleases agreements terminated) At ofthefi theend programmes”. participation “Employee item 26 under aredocumented rights appreciation stock and a risk fortheposition. negotiating and that thelegal is position no during thefi tions will settled be expect issues law. Group ofcompetition The aswell as customers and provisions partners relatedto litigation trade withformer ofthese Most disputes withthird companiesgroup aswell asother parties. outstanding 4.25 percent. provisions discounted The have witharate of again been to 2018. euros in 2012 theyears outfl the agreements, tenancy oftheunderlying expiry theexpected After of theGroup. u ihnoeya 35438,143 2009 12. 31. 33,534 2010 12. 31. fi than greater term Due fi yearand one between Due year one within Due obligations leasing and Rent €’000s eadn nagbeast 5585 21 5 20,245 16,504 180 20,624 15,066 services and expenses inventories, Regarding equipment and plant property, Regarding assets intangible Regarding orders from obligation Acceptance fi than greater term Due fi yearand one between Due year one within Due obligations other and support Maintenance, ow of funds is expected to be 449 thousand euros in 2011 and 2,495 thousand thousand 2,495 and eurosin 2011 thousand 449 to be isow offunds expected Further details concerning options Further stock thecreationofprovisions foroutstanding against actions ofvarious costs provisionThe forlitigation relates to theexpected Notes to the consolidated fi consolidated tothe Notes nancial year, obligations lease (which thereareoperating cannot be v er 38722,044 13,837 ve years v er 0 0 ve years v er 27674,793 72,726 ve years v er ,5 21 1,455 ve years nancial year 2011. More information is not More given hereso nancial year 2011. nancial statements of freenet AG for the fi the AGfor freenet of statements nancial es and leasing agreements. The conditions conditions The leasinges and agreements. t announced ahead of time, thereby creating aheadoftime, t announced eely negotiable toeely oridentical thecurrent ements relate mainly to ofoffi ements therental s that the majority ofthedisputed ques- s thatthemajority g. As of the balance sheet date, there were ofthebalance sheet As g. 2,9 134,980 120,097 5,2 172,356 157,427 08920,851 20,809 65116,525 16,521 nancial yearnancial 2010 Annual Report 2010 ce 129

Consolidated financial statements Consolidated financial statements Annual Report 2010 130 Consolidated fi nancial statements: consolidated cash cash consolidated 33. Notes to Notes the 33. fl ow statement Notes to the consolidated fi consolidated tothe Notes and fi and million euros). (2.6 operations asdiscontinued IDGroup oftheNext equivalents cash and cash include also equivalents cial liabilities, eachwithanoriginal maturi liquidated fi atany current which be and can short-term time market papers money operations”. “Discontinued in out item areset 24 operations (continued and discontinued operations). Se In theconsolidated fl cash date. of thebalance sheet euros) thousand as 10,545 year: euros(previous thousand to 15,452 amounted and rents ascollateral. pledged been have aswell ofintangible asasmall percentage assets other assets other receivables, receivable, accounts thetrade atbanks, ofcash this that most means 2010, 31, December ascollateralintangible to thelender assets (withother theexception assets ofreceivable existing in ofliquid theform from banks companies have mainly These assigned ment. to withregard this loanagreemen borrowers ofthedebitel acquisition. freene framework ous yearous is to mainly anincrease attributable million million by 59.3 euros. euros to 236.3 declined theinfl withthecomparison period, Compared 33.1 Cash fl fl the cash This item fi includes also accessories. and phones mobile e.g. forresale, purchased aswell asproducts projects euros) withongoing in mainly connection relate to services 20,245 thousand year: vious offi production euros) 606 thousand year: euros(previous sand euros). this thousand fi Of 20,851 year: euros(previous thousand 20,809 engineering infrastructure. aswell building asthenetwork services databases, relate mainly toother agreemen agreements and obligations arising The frommaintenance, support conditions oftheagreements. the reduction in theinfl the reduction infl by therevenues adjusted in operations, tinued million discon- incl. eurosfor theoverall Group by 11.0 declined (EBITDA) amortisation ows from the sale ofsubsidiariesows fromthesale areshow The cash fl cash The and cheques in cash hand, consist atbanks, ofcash equivalents cash and Cash for guarantees and liability ofcomfort obligations asaresultofletters Other exist as wereprovided oftheGroup assets Major Compared with the previous year, withtheprevious Compared earnings acceptance ofthefi attheend The obligations fromorders nancing activities. The indirect calculat indirect The nancing activities. ow fromongoing business activities. ow from ongoing business activities ow fromongoingbusiness ows arebroken asongoing down busi xed assets. Further purchase obligations of 20,624 thousand euros(pre- obligations of20,624 thousand purchase Further xed assets. nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ow of cash from operating act fromoperating ow ofcash nancial obligations arising centre fromdata services. ow statement, thefi ow statement, assets, major parts of their receivables and oftheir and receivables majorparts assets, ty of less than three months. Cash and cash cash and Cash months. oflessthanthree ty s. With regard to asof regard With thebalance sheet s. t AG companies aswell are asmajorGroup parate details relating details parate to discontinued ion method has been used for presenting forpresenting used hasbeen ion method ts forthemaintenance and ts ofIThardware t, or act as guarantors fortheloanagree- asguarantors oract t, of 82.7 million of82.7 eurosin networking capital their relevant accounts receivable due their receivable accounts relevant n under investing n under activities). Inaddition, s due from end users)s duefromend aswell ascertain gures are reported for the overall Group fortheoverall Group gures arereported ow of cash from operating activities activities fromoperating ow ofcash cluded from the sale ofsubsidiaries fromthesale cluded (the is attributable to the procurement and and to theprocurement is attributable before interest, taxes, depreciation and and depreciation taxes, interest, before collateral for the debt raised withincollateral raised the forthedebt nancial yearnancial 2010 ness activities, investing activities investing activities activities, ness ivities compared withtheprevi- ivities compared nancial year amounted to nancial year amounted gure, gure, 185 thou- nan- Consolidated fi nancial statements: the sales of the segments “DSL Business” and “STRATO Group”. “STRATO Business” and “DSL ofthesegments the sales euros were scheduled and 242.0 million euros 242.0 and euros werescheduled the debitel acquisition. therepayments Of long-t to thetwo lion attributable euros was able to ontheoccasi loanraised the vendor this fi Of of2009. attheend concluded of thesales consequence asadirect in in repaid 2010 euroswas relationto borrowings 454.0 million euros. eurosto –537.8 million eurosfrom–252.0 million by 285.8 million declined activities 33.3 Cash fl expectations. forecast fi segment. “Other” outfl duemainly to hasbeen million This development year,previous euros. to namely 26.6 million withthe euroscompared by 43.4 have equipment declined and plant property, segment. Communications in theMobile manufacturers tuations in liabilities dueto turing withtheintegration of in connection 82.7 million eurosis to mainly attributable of increase million The eurosin networking capital). of22.3 increase (2009: in 2010 Compared with the comparable peri withthecomparable Compared arethusfi sales three prices forthese purchase The segment. million price paymen eurosforpurchase as 2.0 price payments purchase euros forsubsequent for thesale price payments quent purchase mainlysubsidiaries comprise shownfor2010 (47.5 sold have been million euros). infl The well asanoutfl ofinfl consists This fi Group. Business theSTRATO lion ofDSL and by eurosgenerated thedisposal million year, euros. withtheprevious pared to 0.4 namely infl thecash In 2010, Cash 33.2 fl refunds. bylion tax reduced euros) payments, dueto tax operator communicationfor amobile network also and rights fromdistribution tion ofliabilities accruals partners fordistribution and withtheexception of operations “Other” xed assets (2.0 million euros) (2.0 million interest and (4.3 xed assets euros) in line have with been ows in the previous yearows in fordistribution theprevious Whereas borrowings of 155.8 million euros were reduced in 2009, atotal of million in 2009, euroswerereduced of155.8 borrowings Whereas inflFurther outfl cash The therewerealso netoutfl In 2010, This development inThis fl cash development ow fromfi ow from investing activities investing ow from Notes to the consolidated fi consolidated tothe Notes ows fromprovisional prices (a purchase total million of410.3 euros) as ow of liquid assets duetoow ofliquid thede assets ows attributable to investing activities in 2010, mainly of fromthesale to investing inows attributable 2010, activities ows for the renewal and extension of extension and ows fortherenewal ow from investing activities declined by 307.4 million euroscom- by 307.4 declined ow frominvesting activities nancing nancing activities reference date factors and accruals with regard to hardware accruals to withregard and hardware reference date factors ow is to mainly infl attributable nancial statements of freenet AG for the fi the AGfor freenet of statements nancial od of the previous year, oftheprevious od fl cash ows of 10.4 million euros (previous year: 20.8 mil- 20.8 million year: euros(previous ows of10.4 Mobile Communications, the scheduled reduc- thescheduled Communications, Mobile ows of 19.1 million eurosdueto of thesale ows of19.1 the reduction ofliabil the reduction of the long-term bank loans, 66.7 million of thelong-term 66.7 bankloans, of freenet Breitband GmbH, 0.6 million 0.6 GmbH, Breitband offreenet theacquired aswell asfl debitel Group on of the debitel acquisition,on ofthedebitel 308.7 mil- and erm bank loans existing in connection with bankloansexisting inerm connection 16.4 million to subse- eurosattributable 16.4 rights as well as lower investments in the aswell aslowerinvestments rights , the reduction in pr , thereduction ts received for the sale of the “Next ID” ID” ofthe“Next received forthesale ts were unscheduled, main for the sale of the STRATO Group aswell Group oftheSTRATO for thesale consolidation companies ofthese which gure, 145.3 million 145.3 attribut-gure, euroswas intangible assets and also for also and intangible assets nal. ows in 2009 of362.8 mil- ows in 2009 ities ofthedeclining ow fromfi ovisions forrestruc- nancial yearnancial 2010 ly as a result of ly asaresult Annual Report 2010 nancing uc- gure 131

Consolidated financial statements Consolidated financial statements Annual Report 2010 132 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes been changes in the sequence in changesin which thesequence item been have also There equipment. and plant property, and ofintangiblefrom disposals assets theinfl plus intangible and assets, equipment and plant in property, investments purposes; this ispurposes; defi fl cash gible “Free assets”. The “Outfl new position as well“Outfl “Outfl thepositions ing activities, to investingnet workingifnot capital attributable orfi fi in liabilities aswell asother liabilities not“Decrease/increase classifi which arenot classifi other assets and receivables inventories, in “Decrease/increase provisions”, in “Decrease/increase tions theposi- activities, operating under Inaddition, well asinterest similar and expenses. nolongerhave ad to activities be operating discontinued taxes operations before onin (EBIT) interest” and taxes before operations the consolidated fl cash to withregard considered have been also year. ofinvestors analysts withtheprevious and compared suggestions statement The in thefollowing inof thechangesdescribed ofthefi withaclearerpicture cial statements Company is oftheopinionThe thatitwill fl consolidated ofthe cash structure inthe Changes 33.4 fl cash of reducing offr meeting attheannualgeneral adopted in mid-2010. swap ofth loweraverageparatively netborrowings million withtheprevio euroscompared 38.1 ontheoccasion ofthedebitel acquisitraised nancing activities” have now been combined to form a position “Decrease/increase in “Decrease/increase to combined aposition form have nowbeen nancing activities” There have also been interest payments of interest payments have been also There The statement now commences with the “Result of continued and discontinued ofcontinued and withthe“Result nowcommences statement The In thefi nancial year 2010, the dividend payment of 25.6 million euroswhich was of25.6 payment thedividend nancial year 2010, ows for investments in intangible assets” have been combined to combined a have form in been intangibleows forinvestments assets” nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ow fromfi ows for investments in property, plant and equipment and intan- and equipment and plant in property, ows forinvestments ned as the cash fl asthecash ned ow statement has been adjusted accordingly. adjusted hasbeen ow statement nancing activities. ow” indicator has also been introduced forinformation introduced indicator been hasalso ow” ows for investments in property, plant and equipment” equipment” and plant in property, ows forinvestments ow from operating activities lesstheoutfl activities ow fromoperating ed asinvestinged orfi provide the readers oftheconsolidated fi thereaders provide these changes. The previous year column of previous The changes. these come”; this means that the adjustments of this thattheadjustments come”; means justed by theinterest similarjusted and as income us year; this reduction is dueto this thecom- reduction us year; the structure oftheconsolidated fl cash thestructure eenet AG held on July 6, 2010 hadtheeff 2010 AGeenet heldonJuly6, instead of the “Result of continued and of continued and instead ofthe“Result s are disclosed under operating activities. operating under s aredisclosed ion, which is equivalent to a reduction of which ision, to equivalent areduction nancial position of the Group asaresult nancial oftheGroup position e Group and also the expiry oftheinterest also theexpiry and e Group 58.1 million mainly 58.1 fortheloans euros, nancial yearnancial 2010 nancing invest- activities”. Under nancing activities” aswell as nancing activities” ow statement ed asinvestinged or ows for ows nan- ow ect ect concerning fi concerning 34. Additional Additional 34. information nancial nancial instruments Consolidated fi nancial statements: ries under IAS 39: IAS ries under catego- reconciliation valuation and to withthecorresponding classes allocation related the 2009, 31, asofDecember and 2010 31, asofDecember in theGroup instruments instruments. cial Group, and provides additional informatio additional provides and Group, ofthesignifi anoverview provides This section inaccordance Disclosures withIFRS 7 34.1 refer to item 24). fromthebreakdownalso oftheresultdi ofcalculating this theprocess and out resultfromtheconsolidated statement income following sets The discontinued ofthecontinued and operations. (EBIT) taxes and est fordetermining point fl thecash starting The 35 fordetermining starting-point ofthe Calculation 33.5 ’0s1. 1.— €’000s otne n icniudoeain 3,5 352,528 139,058 –10,722 238,769 85 166 –6,295 –272 36,733 0 –233 –15,188 operations discontinued and continued 102,640 103,042 of (EBIT) taxes and interest before Earnings operations ofdiscontinued similar and income receivable Interest –18,163 operations ofdiscontinued similarexpenses and payable Interest 61,024 operations ofdiscontinued Taxes income on Result from discontinued operations operations ofcontinued similarincome and receivable Interest operations ofcontinued similarexpenses and payable Interest operations ofcontinued taxes before Earnings We have thefollowing out set inform the consolidated fl the cash Notes to the consolidated fi consolidated tothe Notes ow statement nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ation for the presentation ofthefi ation forthepresentation n on balance sheet itemsn onbalance which fi sheet include scontinued operations for the period (please (please fortheperiod scontinued operations ow statement is the earnings before inter- is theearnings before ow statement cance offi cance nancial instruments forthe nancial instruments 31. 12. 2010 12. 31. nancial yearnancial 2010 Annual Report 2010 nancial 31. 12. 2009 12. 31. 1. 1.— nan- 133

Consolidated financial statements Consolidated financial statements Annual Report 2010 134 fprhs FA)FA 11581–,9,8 –1,197,297 616,504 –1,195,881 –1,195,881 FLAC 616,504 355,578 800,018 616,504 LR 4,427 4,427 427,069 143,878 (FLAC) purchase of cost amortised at measured liabilities Financial profi 355,578 through value at measured instruments 1,053 Financial (LR) receivables and Loans 800,018 355,578 fi Held-for-sale 174,334 174,334 1,053 39: toIAS according 800,018 categories byvaluation aggregated Thereof FLAC FLAC deferrals and liabilities other of Sum Non-fi 4,427 Other non-derivative fi 55,506 427,069 HFS 427,069 fi of Sum Derivative fi LR tobanks) due (liabilities debt Financial payable accounts Trade Liabilities 174,334 174,334 1,053 174,334 174,334 assets other and receivables other of Sum Non-fi HFS LR Derivative fi assets other Held-for-sale Other non-derivative fi receivable accounts Trade fi Total inequity) directly value fair at (measured fi Other fi Other equivalents cash and cash Total equivalents cash and Cash Assets €’000s 2010 31 of December as to classes according instruments Financial to os(IL IL8888838 838 838 FIPL (FIPL) loss t or nnillaiiis103,593 35,140 nancial liabilities nancial assets Consolidated fi nnilast 2,258 nancial assets nnilast maue tcs fprhs)HS125125– 1,205 1,205 HFS nancial assets purchase) of cost at (measured assets nancial nnillaiiis8008800,018 800,018 nancial liabilities nnillaiiisFP 0 0 838 838 0 FIPL 838 FIPL nancial liabilities nancial assets nnilisrmns(F)HS6651255405,480 5,480 1,205 6,685 HFS (HFS) instruments nancial nancial statements: nnillaiiisFA 0254,8 41,701 15,101 40,285 40,285 FLAC nancial liabilities 15,101 15,101 LR nancial assets Notes to the consolidated fi consolidated tothe Notes according according Valuation to IAS 39 to IAS category nancial statements of freenet AG for the fi the AGfor freenet of statements nancial 31. 12. 2010 12. 31. Carrying amount Amortised purchase cost of of cost purchase Cost of Approach nancial yearnancial 2010 statement in income in income Fair value value Fair Fair value value Fair in equity 31. 12. 2010 12. 31. Fair value Fair fprhs FA)FA 17526–,6,9 –1,766,906 1,001,234 –1,765,296 –1,765,296 FLAC 1,001,234 390,292 1,001,234 1,256,621 LR 5,174 5,174 491,051 232,065 (FLAC) of purchase cost amortised at measured liabilities Financial 987 profi through value at measured instruments Financial Loans 390,292 and receivables (LR) 987 fi Held-for-sale 480,291 480,291 39: toIAS according 390,292 1,256,621 categories byvaluation aggregated Thereof 1,256,621 FLAC FLAC deferrals and liabilities other of Sum Non-fi 5,174 Other non-derivative fi 491,051 63,506 HFS 491,051 fi of Sum Derivative fi Liabilities from fi LR tobanks) due (liabilities debt Financial Trade accounts payable 480,291 480,291 987 Liabilities 480,291 480,291 assets other and receivables other of Sum HFS LR Non-fi assets other Held-for-sale Other non-derivative fi Trade accounts receivable fi Total inequity) directly value fair at (measured fi Other fi Other equivalents cash and Total cash equivalents cash and Cash Assets €’000s 2009 31 of December as to classes according instruments Financial to os(IL IL–340–340–13,460 –13,460 –13,460 FIPL (FIPL) loss t or nnillaiiis113,682 28,440 nancial liabilities nancial assets nnilast 2,190 nancial assets nnilast maue tcs fprhs)HS123123– 1,203 1,203 HFS nancial assets purchase) of cost at (measured assets nancial nnillaiiis120011,270,081 1,270,081 nancial liabilities nnillaiiisFP 3401,6 13,460 13,460 13,460 FIPL liabilities nancial nnilisrmns(F)HS7341236116,161 6,161 1,203 7,364 HFS (HFS) instruments nancial nnelae LC000 0 0 FLAC nance leases nnillaiiisFA 1,8 1,8 119,993 29,892 118,383 118,383 FLAC nancial liabilities 29,892 29,892 LR nancial assets Consolidated fi nancial statements: according according Valuation to IAS 39 to IAS category Notes to the consolidated fi consolidated tothe Notes 31. 12. 2009 12. 31. Carrying amount Amortised purchase nancial statements of freenet AG for the fi the AGfor freenet of statements nancial cost of of cost purchase Cost of Approach statement in income in income Fair value value Fair Fair value value Fair in equity nancial yearnancial 2010 Annual Report 2010 31. 12. 2009 12. 31. Fair value Fair 135

Consolidated financial statements Consolidated financial statements Annual Report 2010 136 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes are any indications of lower fair values, these are recognised. arerecognised. these are any oflowerfair values, indications arenopl There forthem. market exists active no to sharesarenot and listed exchange, reliably onastock The determine thefair value. market asthemarketin value. anactive to themarket asaresu values fi ofthese values book The parameters. withdueconsider withtheassets, associated ofthepayments remaining values to thebook thanoneyear terms correspond ofmore fi This value. to equivalent thebook roughly fi current 7. notliabilities covered ofIFRS by thescope deferrals” and forward curves and arethendiscounted to and curves forward the fi counted cash fl cash counted is byonthebasis determined (dis- theGroup traded actuarial ofrecognised methods remainingthe short terms involved. an active market. an active not 7. covered ofIFRS by other thescope assets” bles and non-fi The in accordance asfollows: withIFRS 7 valuing the fi shows following overview The market value. remaining fi terms; therecognised short internally. calculated which havevalues been partners fromtheexternal tions obtained nancial instruments. nancial instruments. nancial instrument are calculated on the basis of the relevant rate structure and and onthebasis arecalculated nancial rate structure oftherelevant instrument For theother held-for-sale defi theGroup assets, other fi The fi For those market ofthenon- values The other receivable, accounts trade equivalents, cash and market ofcash value The The market value of the derivative fi market ofthederivative value The The market ofthefi value The non-fi The Trade other payable accounts fi and nancial assets, trade accounts payable and other fi current payable and accounts trade nancial assets, nancial assets constitute that part of constitute thatpart nancial assets nancial instruments measured at fair value. The individual levels individual aredefi The value. atfair measured nancial instruments nancial liabilities constitute thatpa ow method or option price models). The expected future fl cash oroptionprice expected models). The ow method nancial instruments measured at market value, the Group uses the price theprice uses theGroup at market value, measured nancial instruments nancial assets are normally measured at cost because itis not possible because atcost arenormally measured nancial assets nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial debt is equivalent to the book value asaresultof value nancial is to debt equivalent thebook lt of the discounting process. lt ofthediscounting process. current receivables and other fi and receivables current nancial instruments areapproximately equivalent nancial instruments gures areapproximately to equivalent the nancial liabilities accruals normally have and nancial instruments which arenot exchange- nancial instruments are periodically compared withthemarket compared are periodically theclosing market confi value date. The is due to the short remainingis dueto theshort terms ofthese the major parameters used asthebasis used for the majorparameters ation being givenation being to interest therelevant ans at present to sell these assets. Ifthere to assets. ans atpresent sell these the balance sheet item “Other receiva- item thebalance “Other sheet rt of the balance sheet item “Other item ofthebalance “Other sheet rt nancial yearnancial 2010 nes themarket astheprice in value nancial assets with nancial assets nancial obligations is ows from rma- ned Fair value hierarchy 2009 (€’000s) Total Level 1 Level 2 Level 3 Level 5,174 2 Level 5,174 1 Level 3 Level 4,427 Total 2 Level 4,427 1 Level Total Total Derivative fi fi Other assets other Held-for-sale (€’000s) 2009 hierarchy Fair value Total Derivative fi fi Other assets other Held-for-sale 2010 (€’000s) hierarchy Fair value nnilast 8 987 987 1,053 1,053 nancial assets nancial assets nnillaiiis–340–13,460 838 –13,460 838 nancial liabilities nancial liabilities Consolidated fi nancial statements: Use of factors which are not based onobse which arenot based offactors Use Level 3: the fi (i. directly for fromprices) in derived ofaprice)e. theform (i.e. observable orindirectly which which but are arenot thelisted in prices recognised Level 1, ofinput factors Use Level 2: liabilities fi foridentical markets ofprices onactive use Unchanged Level 1: cial orthefi asset nancial orthefi asset Notes to the consolidated fi consolidated tothe Notes nancial liability (input factors not based on observable market data). onobservable notnancial based liability (input factors nancial liability. nancial statements of freenet AG for the fi the AGfor freenet of statements nancial 729611–13,460 6,161 –7,299 ,1 ,8 838 5,480 6,318 rvable market formeasuring thefi data rvable nancial assets orfi nancial assets nancial yearnancial 2010 Annual Report 2010 nancial nan- 137

Consolidated financial statements Consolidated financial statements Annual Report 2010 138 (adjusted, €’000s) 2009 categories byvaluation results Net (€’000s) 2010 categories byvaluation results Net on n eevbe L)53800–20056–26,156 506 –32,040 0 –50,419 0 0 0 –42,766 5,378 –64 0 –46,114 profi through value atfair measured instruments Financial 0 0 (LR) receivables and Loans fi Held-for-sale category Valuation –50,419 0 3,412 (FLAC) cost amortised at measured liabilities Financial profi through value atfair measured instruments Financial (LR) receivables and Loans fi Held-for-sale category Valuation mrie ot(LC 8,9 –88,891 0 0 0 0 –88,891 (FLAC) cost amortised at measured liabilities Financial Consolidated fi nnilisrmns(F)001 12 0 0 12 22 0 0 0 0 (HFS) instruments nancial 22 0 0 (HFS) instruments nancial to os(IL 4438190003,646 0 0 0 13,460 8,109 0 –4,463 0 (FIPL) loss t or 0 13,460 0 (FIPL) loss t or nancial statements: Notes to the consolidated fi consolidated tothe Notes market valuation of money market paper. ofmoney market valuation the market ofthein valuation profi through value wereshownin thefi lowing netresults For theindividual categories offi previously written-off previously aswell asinfl fromderecognition gains losses and receiv fromloansand gains losses and Net gains or losses from derecognition. gains fromderecognition. orlosses as well fromderecognition. asgains losses and comprise impairments Net gains and losses from the category ofavailable-for-sale gains fromthecategory losses and Net fi Net gains and losses from the category offi gains fromthecategory losses and Net Net gains fromfi losses and Net 4,0 3402 4,1 6 –79,703 –64 –46,114 22 13,460 –47,007 8,7 ,0 2–20056–111,389 506 –32,040 12 8,109 –87,976 interest interest From From From nancial statements of freenet AG for the fi the AGfor freenet of statements nancial statement) statement) t and loss include the income and expenses frominterest aswell as expenses and theincome lossinclude t and (income (income (income loans and receivables. loansand At fair At fair At fair From subsequent measurement From subsequent measurement value value terest swap and interest aswell and cap fromthe asincome swap terest nancial liabilities at amortised cost of purchase comprise comprise ofpurchase cost nancial liabilities atamortised nancial instruments in accordance with IAS 39, thefol- in accordancenancial withIAS 39, instruments (equity) (equity) At fair At fair At fair nancial year 2010 and in the previous year: in theprevious and nancial year 2010 value value ables include changes in the impairments, changesinables include theimpairments, Impairment/ Impairment/ nancial instruments measured at fair atfair measured nancial instruments receivables receivables receivables ows and recoveriesows and in of thevalue nancial yearnancial 2010 losses losses nancial instruments disposal disposal From From From Net result Net result Consolidated fi nancial statements: able to changes in interest rates and currency exchange rates. able to changesin currency interest and rates to fi thatitis mean primarily exposed Group ofour activities The 34.3 Market risk issuing newshares. in to in this debt order reduce way,assets to is take suchas entitled and also measures 0.75). as oftheclosing year: 0.55 was date (previous Gearing risk management. ofcapital is parameter arelevant (gearing) ance withIFRS date. asofthereporting weremet covenants All tions segment. Communica- EBITDA)oftheMobile recurring and netdebt coverdebt (ratio between netinterestEBITDA and income) in theMobi fi fi such the fi partners. sales and ers to thefailure orimpa attributable the costs is main to minimise objectives ofits One department. in Management theReceivables risks. forthese lar internal risk reporting aswell other B2Bpartners) asregu- and dealers distributors, (inmajor debtors particular lines. maintaining in ofcredit theform reserves adequate monitoring thefi by permanently arereduced risks Liquidity tions. lines commitment ofcredit ofclosing thepossibility adequate market and posi- open ofobtaining thepossibility fi ofliquid assets, reserve an adequate involves holding Treasury by controlled theGroup management liquidity department is to optimise objective netinterestminimising Prudent income. important afurther risk; is of theprinciple Treasury fortheGroup department overriding priority The extent. and onthebasis which therisks analyses of regularinternal ofdegree risk reporting by way oftheGroup segments withtheoperating associated risks market liquidity and accessco-ordinates to thefi fi certain addition, to limit fi and themby operational risks. default and risks liquidity to market risks, particular in is exposed Group thefreenet liabilities transactions, planned and assets, its With offi objectives and Principles 34.2 loss areshownusing theeff fi nancial covenants aredefi nancial covenants nancial assets and fi and nancial assets nancial covenants specifi nancial covenants In order to actively manage the capital structure, management is permitted to sell is permitted management structure, manage thecapital toIn order actively in accord- equity Group and netdebt Group between theratio level, At theGroup is risk oftheGroup to ofthecapital management monitor objective primary The of is risks responsible formonitoring the default Treasury Group department The and segments to theoperating services provides Treasury Group department The offi aspects fundamental The offi objective The In addition, information concerningIn addition, intere nancial covenants might involve in immediately. called theloansbeing main The Notes to the consolidated fi consolidated tothe Notes nancial transactions require thepr nancial transactions nancial liabilities profi through atfair value not recognised nancial risk is and to management risks monitor these constantly ned in relationtoned theinterest recurring cover (ratio between ective interest rate method. rate interest ective nancial markets. In addition, it monitors and managesthe and itmonitors Inaddition, nancial markets. ed in the syndicate loan agreement, where failure to meet wherefailure to meet loanagreement, in thesyndicate ed nance-oriented nance-oriented activities. nancial policy aredefi nancial policy nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial riskmanagement Receivables due from end users are monitored aremonitored users duefromend Receivables irment of receivables due from end custom- duefromend ofreceivables irment le Communications segment aswell asthe segment le Communications st income and interest expenses ofthe interest and income expenses st ior approval of the Executive Board. oftheExecutive ior approval ned by the Executive Board. In Board. by theExecutive ned nancial attribut- risks nance by way ofan nance status and by and status nance nancial yearnancial 2010 Annual Report 2010 t and 139

Consolidated financial statements Consolidated financial statements Annual Report 2010 140 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes loans, outfl loans, which liesestimates, within ofbe arange to liabilities. thebasis these On ofanintere forafi requirement mandatory liabilities. At atwhich thepoint fi these bank onthese charged was percent to 4.7 3.1 Interest in of arange 2010. 31, the short-term long-term asofDecember and borrowings orLIBOR). onEURIBOR based ontheoccasion ofthefi loan agreement of 2,180 thousand euros on results after tax (previous year: 240 thousand euros), a and 240 thousand year: (previous tax after eurosonresults of 2,180 thousand of50 basis points shift upward aparallel out, liabilities, taken which and taking have account been ofthehedgingassets instruments onthenet position ofvariable rate Based in 2011. bankborrowings the above-mentioned variables to thefi equity. shareholders’ shows theeff sensitivities. in on netinterest areincluded income and which to were originally interest atavariable ratements might subject have animpact to fl subject participate. Group nies ofthefreenet in which themainthe basis compa- existing internal ofseveral agreements pooling cash centrally ofliquid on theinvestment aremanaged in forand funds theGroup Demand aswell asthevari disposal planning atits available forinvesting an theliquid assets million covered euroswas by theinterest 750.0 rate caps. 2010, 31, shown onDecember able rates in relationto thenominal amount the diff receive itwould atdefi ofapremium—that payment third parties—against with in interest agreed theGroup theinterest rate taken hedging. was When caps out, witheff purchased interest corresponding were caps InMay 2010, in line withtheterms oftheagreement. long-t which cover ofthetwo swaps percent 70 by way in oftaking reduced considerably out which interest atavariable therisk is rate, ofrising applied hasbeen interest costs able to thelong-term fi signifiprimarily most withvariable The interest rates. companies take theGroup ondebt to interest because rate risks is Group exposed The rate risk Interest 34.3.1 Of the above liabilities theabove 215, Of dueto banks, liabilitiesIn thebalance sheet, dueto ba Changes in market interest rates forthenetinterest income offi The periodic eff th to themarketIn order present risks, short-termThe long-term and bankloansrais opportunities thevarious monitors constantly Treasury Group department The erence between the contractually agreed interest theprevailing and agreed (higher) thecontractually vari- erence between ows of 34,442 thousand euros would be be euroswould ows of34,442 thousand oating interest rates and were taken out subject to theterms specifi oating interest weretaken subject rates and out ects of theoretical changes in releva oftheoretical ects nancial statements of freenet AG for the fi the AGfor freenet of statements nancial nancial holdings asoftheclosing instrument reference date. ect from July 30, 2010 in to order 2010 fromJuly30, ect ects are determined by relating aredetermined ects nancial liabilities. long-term Forthese fi gure of approx. 69 million in repaid 69 relation eurosto be gure ofapprox. nancial statements were prepared, thereis a wereprepared, nancial statements nancing acquisition ofthedebitel (fi ous options available for scheduling the debt. optionsavailableous forscheduling thedebt. tween 3.2 and 5.1 percent fortheindividual 5.1 percent and 3.2 tween d debt onthebasisd debt ofthedaily liquidity the process ofcalculating theresult-relatedthe process e Group uses a sensitivity analysis asensitivity which uses e Group st rate expected in accordance withmarket rate expected st . Of the borrowings of 800.0 million euros of800.0 theborrowings . Of borrowings as of the balance sheet date. asofthebalance sheet borrowings terest swaps or interest caps. The interest The orinterestterest caps. swaps nks of 800.0 million eurosare shownunder of800.0 nks in the interest curve would have an impact have would animpact in theinterest curve 435 eurosis thousand shownasshort-term erm bank loans, expired on July 30, 2010 2010 onJuly30, expired bankloans, erm nt risk variables ontheresultand ed as of the balance sheet date areall asofthebalance sheet ed nancial yearnancial 2010 guarantee that there was nobreak thattherewas guarantee incurred forinterest in relationtoincurred the theoretical changesin theriskthe theoretical cant interestcant rate risk is attribut- nancial liabilities for nancial instru- ned ned intervals xed margins ed ined the Consolidated fi nancial statements: there is market noorganised capital interests. forthese their to at sale holdings, sell these essary nec- to arenoplans Ifitbecame notice. sell any There oftheholdings. liquidated at short cate loanagreement. to upto use additionally halfoftheamount AG freenet is able conditions, certain Under euros. revolving line credit of150.0 million ing fl cash liabilities. Reconciliations are also performed for the maturity profi forthematurity Reconciliations performed arealso fl cash actual and monitoring by also constantly and lines theforecast atbanks data. current following liaison with Treasury department daily Th basis forthefollowing months. three ranging upto oneyear. short-term The ona planning liquidity control aredone and control liquidity.monitor and Diff purchase obligations and obligations fi its to meet riskis liquidity defi oftheGroup The Liquidity34.4 risk holdings denominatedof cash in foreign currency. futures risk by or, concluding is generally currency hedged currency by means ifnecessary, to foreign aminor within areconducted The extent theGroup. trades Foreign currency euros). -245 thousand year: (previous tax eurosontheresultafter sand of-2,180 thou- have would animpact in therate curve of50 basis points shift downward 432 Foreign currency risk 34.3.2 liabilities. and euros). –216 thousand year: (previous equity holders’ have in would theprice decline an 5 percent equity eurosonshareholders’ –193 thousand in ofth theprice increase a5 percent ments, other fi aswell asunder other assets theother and receivables under defi contractually areno short-term There investedhave in onavery funds fortrading). been basis (held However,is always apossibility ofprice losses. therisk is not signifi fi the changein theprice oftheinstrument nancial investments in money market in fu money nancial investments As ofthe closing haddr date, theGroup As Securities (money market funds and bonds in (money bonds Securities market and funds other obligations ofoperat- anticipates out Group its thatitwill abletoThe meet be The Group also manages liquidity risks by holding appropriate cash at banks, credit credit by holding atbanks, risks cash managesliquidity appropriate also Group The Comprehensive fi to marginal interest market aresubject rate fl funds Money The risk ofinterestThe rate changesis negl Overall, the Group considers thatthefore considers theGroup Overall, ows and the proceeds ofmaturing fi theproceeds ows and nancial obligations, for instance it might not be able to repay debt, pay itmight forinstance nancial ableto not obligations, repay be debt, Notes to the consolidated fi consolidated tothe Notes ned maturity dates maturity orinterestned adju nancing planning instruments are used throughout the Group to theGroup throughout areused nancing planning instruments erent planning horizons are considered in this respect, erent planning horizons in areconsidered this respect, nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ned astheriskned thattheCompany might able not be arising fromleasing agreements. short notice would possibly be more diffi more notice be possibly would short and any dividend payments. Based onthe Based payments. any and dividend nds and bonds shownin thebalance sheet bonds and nds oftherevolving line thesyndi- credit under Accounting Controlling and onthebasis of igible fortheother interest-bearing assets impact of –193 thousand eurosonshare- of–193 thousand impact e acquired shares would have an impact of e acquired have shareswould animpact awn down 146.6 million euros out ofthe eurosout 146.6 million awn down (previous year: 216 thousand euros), a and 216 thousand year: (previous e planning daily is by updated theGroup nancial assets. ign currency risk isign ofnegligible currency signifi the securities deposit account) deposit be can thesecurities stment dates; a return results from areturn dates; results stment les ofthefi uctuations so thatthere so uctuations cant as the moneys asthe moneys cant nancial assets and and nancial assets nancial invest- nancial yearnancial 2010 Annual Report 2010 ows. ows. cult as cance. 141

Consolidated financial statements Consolidated financial statements Annual Report 2010 142 (€’000s) liabilities Financial (€’000s) liabilities Financial iblte 3252,8 ,8 2,815 8,981 387 517,916 28,489 46,096 66,667 33,677 43,285 355,191 215,435 34,442 355,578 800,018 liabilities non-derivativeOther fi tobanks) due (liabilities Debt payable accounts Trade iblte 1,8 4254,9 14,046 40,092 651,540 114,598 64,245 66,667 42,464 118,383 13,505 538,414 43,116 13,460 390,292 1,256,621 liabilities non-derivativeOther fi 390,292 liabilities) fi (derivative debt Financial shareholders) and tobanks due (liabilities Debt payable accounts Trade Consolidated fi nancial statements: nancial nancial nancial nancial nancial nancial Notes to the consolidated fi consolidated tothe Notes Carrying Carrying amount amount 31. 12. 12. 31. 12. 31. fi oftheoriginal payments fi redemption in ofsecurity. theform to intangible thelenders well ascertain assets amou considerable ofliquidthe form assets, companies haveThese mainly assigned their to withregard thisrowers loanagreement, ofthedebitel acquisition. freenet as part 2009 2010 nancial years 2010 and 2009: and 2010 nancial years following showthecontractua The tables raised forthedebt assecurity provided have oftheGroup also been assets Major Inter- Inter- (fi (fi est est x) x) Cashfl Cashfl nancial statements of freenet AG for the fi the AGfor freenet of statements nancial (vari- (vari- os21 Cashfl ows 2011 os21 Cashfl ows 2010 Inter- Inter- abel) abel) est est Repay- Repay- ment ment Inter- Inter- (fi (fi nancial liabilities ofthe attheend oftheGroup est est x) x) AG companies arebor- as well asmajorGroup or act as guarantors for the loan agreement. fortheloanagreement. asguarantors or act nts of their receivables and other assets as other assets oftheir and receivables nts receivables due from banks which in exist duefrombanks receivables os21 Cashfl ows 2012 (vari- (vari- os21 Cashfl ows 2011 Inter- Inter- lly agreed undiscounted interest and interest and undiscounted lly agreed abel) abel) est est nancial yearnancial 2010 Repay- Repay- ment ment Inter- Inter- (fi (fi est est x) x) ows 2012 and later and 2012 ows ows 2013 and later and 2013 ows (vari- (vari- Inter- Inter- abel) abel) est est Repay- Repay- ment ment Consolidated fi nancial statements: and other assets are derecognised iftheGrou arederecognised other assets and notifi TreasuryGroup department key the in (dealers communications). distributors mobile accounts and month, Every with ofsales to percentage minimise hasinsured acertain theGroup risk, thecredit ifthelimit is imposed is reached. restriction adelivery appropriate, Where monitored. limits defi arealso Credit partners. franchise and duefromdealers accounts minimising risk in thedefault Group. our monitoring monitoringlong-term aswell arekey ashigh-spender collection for measures and companies in benchmarking collection withseveral process dunning collection and customer. ar customer formajorcontract out are carried of tion is devoted to thecreditworthiness atten- particular Inthemassbusiness Group, ofour risks. to withregard default Group party default is equivalent to the book value of these instruments. ofthese value is to equivalent default thebook party available-for-sale and the lents investments, will their payment obligations. not meet as therearenoindications due forpayment, future yields oftheinvestments. expected rent and signifi is base thecustomer riskcredit because is nosignifi date. There thebalance sheet and weregranted ment be taken ofany changein creditworthiness out. is not carried transaction rating have keylimit to general, withapoor accounts pay orthe in system—in advance, to keyattributable whoarenot accounts in insurer this uses The notifi isthe customer not his ableto meet A credit riskA credit is defi Riskofdefault 34.5 Securities and liquid assets aremainly inve liquid and assets Securities Receivables risks. takes account ofdefault creationofimpairments appropriate An covered arealso Inorder by way insurance. risks ofcommercial credit credit Major to withregard is operated process also ongoing collection dunningAn debt and regular and ofarapid into, entered theperformance hasbeen acontract Once Trade arethemain customers item fromend receivable accounts in thefreenet With regard to regard With theother fi which receivable accounts areneitherimpaired to regard trade With norover- those dueaccount receivable, to is accounts In order determine animpairment oftrade cant risk of default. The Group Treasury department constantly monitors thecur- monitors constantly Treasury Group department The riskcant of default. Notes to the consolidated fi consolidated tothe Notes ned as the unexpected loss of cash or revenue. This orrevenue. lossof cash risk materialises if astheunexpected ned cation to calculate the sales volume to be insured. The risks risks The insured. to tocation volume calculate be thesales nancial assets of the Group, such as cash and cash equiva- cash and ascash such Group, ofthe nancial assets es theinsurer ofthecurren nancial statements of freenet AG for the fi the AGfor freenet of statements nancial obligations within the agreed period. obligations period. within theagreed broad and because therearenocorrelations. because broad and customers and sales partners. Credit checks checks Credit partners. sales and customers tween the point atwhich thepoint theterms ofpay- tween sured arelimited ofaninternalsured by means maximum credit risk ofcounter- credit maximum in thecase of the balance sheet date of thebalance thatthedebtors sheet p considers the receivable isp considers thereceivable irrecoverable. eas before a contract is taken withthe out acontract eas before sted at major German banks. There is no There banks. atmajorGerman sted t sales ofeachkeyt sales account. cant concentration of concentration cant nancial yearnancial 2010 Annual Report 2010 ned ned and 143

Consolidated financial statements Consolidated financial statements Annual Report 2010 144 Consolidated fi 35. Transactions 35. with nancial statements: related parties related Notes to the consolidated fi consolidated tothe Notes parties: related and theGroup have taken place between following majortransactions The 35.1 Overview uDrd mH abr 513 0 73 7,425 15 73 2 181 447 5,340 175 Netherlands the B. Holding TelcoV., Hoofddorp, (Netherlands) 2009 infl amajor with Companies 6,428 38 loans vendor from expenses Interest 177 2010 s. Media r. Republic NetCon Czech Hlucin, o., Hamburg GmbH, FunDorado Pulheim GmbH, Media new siXXup Joint ventures 1,640 Kiel Kommunikation, für Gesellschaft GmbH KielNET companies Associated charging onward and services Purchased 1,197 Montabaur AG, Internet 1&1 infl amajor with Companies Hamburg GmbH, FunDorado Joint ventures Kiel Kommunikation, für Gesellschaft GmbH KielNET companies Associated toservices attributable income and Sales €’000s

nancial statements of freenet AG for the fi the AGfor freenet of statements nancial uence on freenet AG freenet on uence AG freenet on uence nancial yearnancial 2010 ,0 7,155 7,802 2 533 128 Consolidated fi nancial statements: been shown in 2009 fromthis sale. shownin 2009 been profi adisposal after eurosin 2010 thousand 4,513 company profi consolidated to Group entity. arelated adisposal generated This sale GmbH Breitband offreenet thesale In addition, ofthefi of theend following li duefromand majorreceivables The were negotiated on an arm’s length basis. were negotiated onanarm’s length the fi control over AG. freenet exert thatUnited AG Internet means AG—this in is freenet nolongerableto 4.98 percent the Company received offi the Company received thatdate, On since 2010. 23November shownasrelated parties have nolongerbeen uDrd mH abr 4 4 145,623 43 n. 4,422 a. 20 n. a. 0 Netherlands the B. Holding TelcoV., Hoofddorp, (Netherlands) 27 infl amajor with Companies 2009 12. 31. fromDebt vendor loans 2010 12. 31. Hamburg GmbH, FunDorado 164 Joint ventures Kiel Kommunikation, für Gesellschaft GmbH KielNET companies Associated 13 Liabilities transactions regular from Montabaur AG, Internet 1&1 infl amajor with Companies Hamburg GmbH, FunDorado Joint ventures Kiel Kommunikation, für Gesellschaft GmbH KielNET companies Associated transactions regular from Receivables €’000s nancial year, (n. nocomparison disclosed information was prices transaction All a.). United AGaffi Internet aswell asits werenot classifi to be If theparties Notes to the consolidated fi consolidated tothe Notes nancial nancial year: uence on freenet AG freenet on uence AG freenet on uence cial notifi cation thatUnitedcation AG Internet of astake owned nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ed as related in accordance with IAS 24 during 24 in asrelated accordanceed withIAS liated companies, such as 1&1 Internet AG, AG, Internet suchas1&1 liated companies, abilities due to related parties existed as existed abilities dueto parties related to 1&1 Internet AG Internet ofafully thesale to was 1&1 t of 16,948 thousand euroshadalready thousand t of16,948 nancial yearnancial 2010 04,606 40 447 Annual Report 2010 t of 145

Consolidated financial statements Consolidated financial statements Annual Report 2010 146 (€’000s) fi the for Compensation (€’000s) fi the for Compensation rcBre³25126 409 1,192 1,082 680 62 1,153 29 212 1,101 137 400 142 1,110 267 367 216 211 331 233 620 424 1,043 299 230 53 205 400 503 400 327 –663 422 –362 –205 410 28 Spoerr⁴ Eckhard 575 Berger³ Eric 365 Axel Krieger 425 Esch Stephan Preisig Joachim 615 Christoph Vilanek² Axel Krieger Stephan Esch Preisig Joachim Christoph Vilanek Consolidated fi nancial statements: nancial year 2009 year nancial 2010 year nancial Notes to the consolidated fi consolidated tothe Notes former members of the Executive Board in 2010. Board oftheExecutive members former ofpost-emp euros arising fromrestriction eurosfor Mr.Mr. thousand Esch Preisig, 595 eu thousand 1,015 resultin 2010: pensation ofcom- thefollowing amounts rights, appreciation ofstock component compensation in theprovisionthe reduction ofnegativethe form fi oftheCompany. Board oftheExecutive to themembers In thefi agree- employment ofthe termination untilthe compensation variable other and compensation Fixed 3 agree- employment ofthe termination untilthe compensation variable other and compensation Fixed 3 to 1May i. AG, period the for offreenet e. Board Executive tothe appointed being after Compensation 2 fi 2inthe IFRS with inaccordance measured compensation and compensation non-cash Incl. 1 fi 2inthe IFRS with inaccordance measured compensation and compensation non-cash Incl. 1 follows: ofthecompany is broken Board as oftheExecutive down ofmembers compensation The compensation Board Executive 35.2 programme for the full year2009. full the for programme appreciation stock the from compensation variable 2009; January 1to23 from i. ment, period the for e. year2009. full the for programme appreciation stock the from compensation variable 2009; September to30 1January from i. ment, period the for e. 2009. December 31 compensation compensation In addition to the amounts set out in the above table, payments of 200 thousand thousand of200 payments in out table, theabove set toIn addition theamounts shownin was appreciation programme fromthestock variable compensation The nancial year 2010, no new stock appreciation rights or stock options wereissued orstock rights appreciation nonewstock nancial year 2010, ,8 1221392,107 1,329 –1,202 1,980 ,2 ,9 ,0 5,617 1,107 2,590 1,920 Fixed Fixed nancial statements of freenet AG for the fi the AGfor freenet of statements nancial gures in 2010 for Messrs. Preisig, Esch and Krieger; this is dueto Krieger; and Preisig, Esch forMessrs. gures in 2010 Variable compensation from from Variable compensation from Variable compensation stock appreciation rights¹ appreciation stock rights¹ appreciation stock for stock appreciation rights. Disregarding the non-cash Disregarding thenon-cash rights. appreciation for stock loyment competition clauses were made to weremade clauses loyment competition ros forMr. eurosfor 825 thousand Vilanek, and 874 eurosforMr. and thousand Krieger. nancial yearnancial 2010 Other variable variable Other variable Other compensation compensation compensation compensation nancial nancial year. nancial year. Total Total Consolidated fi nancial statements: Board. wereissued warranties other or guarantees commitments. as aresultofthepension Board euros)thousand ex areshownin personnel euros). thousand 1,827 year: (previous 2010 31, eurosasofDecember thousand totalled 2,096 Board oftheExecutive members Mr. and forMr. asformer Berger euros). Spoerr thousand DBOs The 244 year: (previous forMr. euros theDBO Preisig thousand to amounted 347 2010, 31, ofDecember As to overfreenet AG took Mr. commitment granted thepension Preisig by AG. debitel 1,128 year: euros forMr. (previous Krieger year eurosforMr. (previous Esch 518 thousand eurosforMr. thousand Vi 265 as follows: theDefi 2010, 31, ofDecember As May 1, 2009. to Mr. Vilanek onthe occasion Offi ofhis asChief Executive appointment Mr. Krieger. Inthefi in thefi rights appreciation stock options and euros). thousand 1,921 year: (previous Board oftheExecutive members former Mr. and forMr. as Berger Spoerr 2010 31, euroswereshownas ofDecember thousand euros). thousand Provisions totalling rights appreciation forstock 719 148 year: (previous eu thousand 392 year: for Mr. (previous Esch eurosforMr.thousand year Preisig (previous eurosforMr. thousand 452 follows: Vilane (fair in 2). accordance value withIFRS in 2009 granted issued torights Mr. withtheir Vilanek tota euros to appreciation Mr. thestock plus to in claims, order cover Berger contractual of508 thousand including thepayments euros, to amounted 4,044 thousand HGB 6a (1) in accordance Board no. withsection 314 oftheExecutive formembers compensation thousa clauses) tocompetition 3,509 amounted asaresultofpost-employment Board oftheExecutive members to former payments (1) (cash-eff 314 HGB accordance no.6a withsection No loans were extended to any of the members of the Executive Board, and no and Board, oftheExecutive to any ofthemembers loanswereextended No 820 year: euros(previous thousand of373 expenses time service past and Current to Mr. granted was and commitment pension Esch anindirect 2004, In November year, in theprevious As nocash-eff wereas theprovisions rights appreciation forstock 2010, 31, ofDecember As in in 2010 Board oftheExecutive paid to themembers compensation Overall, Notes to the consolidated fi consolidated tothe Notes nancial year 2009, an indirect pension commitment was granted granted was commitment pension anindirect nancial year 2009, nancial statements of freenet AG for the fi the AGfor freenet of statements nancial ective compensation was paid from stock fromstock paid was compensation ective lanek (previous year: 115 thousand euros), thousand 115 year: lanek (previous thousand euros). As of 1 September 2008, euros). of1 September 2008, thousand As l value of 509 thousand euroswhentheywere of509 thousand l value k (previous year: 424 thousand euros), thousand 181 424 year: k (previous penses for the members of the Executive oftheExecutive forthemembers penses for any of the members of the Executive oftheExecutive forany of the members ros) and 56 thousand eurosforMr.ros) thousand Krieger 56 and nancial year 2010. nancial year 2010. : 386 thousand euros), euros thousand thousand 30 : 386 ned Benefi : 386 thousand euros) and 1,416 thousand thousand euros) thousand 1,416 and : 386 nd euros. In the previous year 2009, the year 2009, In theprevious euros. nd ective compensation incl. the incl. compensation ective t Obligations (DBOs) were (DBOs) t Obligations nancial yearnancial 2010 cer as of Annual Report 2010 147

Consolidated financial statements Consolidated financial statements Annual Report 2010 148 Consolidated fi nancial statements: Notes to the consolidated fi consolidated tothe Notes after the decimal point. thedecimal after this ahalftimes one and amount. thevice this chairperson receives double amount, Board oftheSupervisory chairperson tion is limited to which is that amount The payable in ofbasic theform compensation. senting subtotals fi senting and note Please diff thatrounding tables. a resultofexercising their offi euros. thousand thus968.0 was activities tion forthefi ontheprofi depends paid out be will compensation indeed based this performance- Whether asanexpense. recognised also euroswas 405.0 thousand of compensation Performance-based euros. thousand of158.0 fees attendance and fi oftheCompany received Board sory uted to theshareholde shareofthecompany which euro per is distrib- in excess in dividends of0.10 0.01 euro eurosforeach of 500 in theamount compensation year, variable performance-based this receives double amount. person eurosforeachmeet of1,000 fee attendance in an addition MitbestG—receive (3) 27 in accordance formed committee with section Boar to aSupervisory whobelong members Board he/she Supervisory meeting Board attends. foreach Supervisory 1,000 euros this ahalftimes oneand amount. thevice chairperson thisdouble amount, receives Board oftheSupervisory chairperson The Board. ontheSupervisory bership receive fi withfi Starting ing of7 July 2009. modifi was basic compensation The ■ ■ ■ consists of three components: ofthree consists and ofassociation, by thearticles is governed compensation Board Supervisory The compensation Board Supervisory 35.3

For their activity during thefi For their activity Individualised fi Individualised as incurred forexpenses arereimbursed members Board Supervisory Furthermore, ofeachfi theend after receive, also members Board Supervisory The of fee receives anattendance in addition member Board Supervisory Every Performance-linked compensation fees Attendance Basic compensation xed basic compensation of 30,000 eurosforeachfull fi of30,000 basicxed compensation nancial year 2010. The total compensation paid for Supervisory Board Board total forSupervisory paid compensation The nancial year 2010. nancial statements of freenet AG for the fi the AGfor freenet of statements nancial gures for the last two fi two gures forthelast nal totals, because thefi because nal totals, rs for the previous fi fortheprevious rs ce aswell asforturnover taxes. nancial year 2009, the Supervisory Board members members Board theSupervisory nancial year 2009, nancial year 2010, the members oftheSupervi- themembers nancial year 2010, ed with a resolution of the Annual General Meet- General oftheAnnual witharesolution ed erences may result from the format used forpre- mayerences used resultfromtheformat xed compensation of 405.0 thousand euros thousand of405.0 xed compensation nancial year. ofthecompensa- extent The nancial areshownin years the following d committee—with theexception ofthe d committee—with ing of the committee. The committee chair- committee The ing ofthecommittee. gures have been rounded to oneposition rounded gures have been nancial yearnancial 2010 nancial year ofmem- t appropriation resolu- t appropriation nancial ihr o 562. . 38.2 19.2 26.2 2.6 22.0 30.2 2.6 2.6 60.0 95.2 20.0 2.4 2.6 46.0 1.0 31.0 60.0 21.0 60.0 23.0 8.0 68.5 5.0 7.6 15.6 5.0 12.0 5.0 84.0 15.6 2.4 5.0 2.4 5.0 2.4 15.6 7.5 25.0 42.0 15.6 14.6 7.4 11.0 69.0 14.0 25.0 4.0 25.0 6.0 16.0 30.0 45.6 78.0 72.0 32.0 30.0 14.6 30.0 30.0 Richard Roy 66.0 81.0 P.Lars Reichelt 71.0 14.6 30.0 Priester Prof. Dr. Hans-Joachim 14.6 65.0 Leuering Dr. Dieter 72.0 45.0 71.0 Former members 30.0 30.0 44.5 102.0 9.0 30.0 150.0 30.0 Achim Weiss 30.0 Steff 30.0 Thoma² Prof. Dr. Helmut 30.0 30.0 Schneider³ Matthias 45.0 Klempau³ Hans-Jürgen 18.0 12.0 Maarten Henderson 30.0 6.0 60.0 Halefeld³ Joachim 21.0 11.0 Bahlmann Dr. Arnold 5.0 Anderleit³ Claudia 12.0 11.0 Aha Dr. Christof 12.0 Franziska Oelte³ 30.0 30.0 Kraemer¹ Thorsten 30.0 30.0 Active members 30.0 30.0 30.0 30.0 30.0 45.0 60.0 Weiss Achim Steff Prof. Thoma Dr. Helmut Schneider¹ Matthias Hans-Jürgen Klempau¹ Henderson Maarten Halefeld¹ Joachim Bahlmann Arnold Dr. Anderleit¹ Claudia Aha Dr. Christof Franziska Oelte¹ Kraemer Thorsten Active members (€’000s) fi the for Compensation (€’000s) fi the for Compensation e oe³3. 405049.0 5.0 14.0 30.0 71.0 30.0 11.0 en Vodel³ 30.0 en Vodel¹ nancial year 2009 year nancial 2010 year nancial Consolidated fi nancial statements: 3 Employee representative in accordance with section 7 (1) clause 1 no. 1 MitbestG of 4 May 1976. of4May 1MitbestG 7(1) 1no. clause section with inaccordance representative Employee 3 2009. until7July Board Supervisory ofthe Chairman 2 2009. 7July since Board Supervisory ofthe Chairman 1 1976. of4May 1MitbestG 7(1) 1no. clause section with inaccordance representatives Employee 1 ai opnainAtnac esPerformance-based fees Attendance compensation Basic Performance-based fees Attendance compensation Basic Notes to the consolidated fi consolidated tothe Notes 0. 6. 76733.3 67.6 260.0 405.8 4. 1. 73619.7 57.3 219.0 343.5 0. 5. 0. 968.0 405.0 158.0 405.0 234. 03113.6 10.3 41.0 62.3 nancial statements of freenet AG for the fi the AGfor freenet of statements nancial compensation compensation nancial yearnancial 2010 Annual Report 2010 Total Total 149

Consolidated financial statements Consolidated financial statements Annual Report 2010 150 Consolidated fi 36. Disclosures Disclosures 36. in nancial statements: section 315a HGB section 315a accordance with Notes to the consolidated fi consolidated tothe Notes and 24 thousand eurosrelated to other thousand services. 24 and eurosrelated to other thousand certifi 642 related to auditing services, section 314 (1) 314 during thefi section no.9HGB wa eurosin fees thousand A total of1,784 parties”. related (1) with referto 314 “Transactions itemof theCompany (section please 35 no.6HGB), expenses”. shown in item 7“Personnel (1) 314 (section in hasbeen theGroup ofemployees no.4HGB) average number The nently available in to shareholders perma- made Ithasbeen 2010. oftheCompany in December Board Supervisory and Board by theExecutive submitted was AktG 161 inof conformity accordance withsection http://www.freenet.ag/media/Entsprechenserklaerung_freenet_AG_2010.pdf (1) 314 In accordance no.8HG withsection to regard With thedisclosures concerni nancial statements of freenet AG for the fi the AGfor freenet of statements nancial the internet atthefollowing address: nancial year. this fi Of s paid tos paid theauditor in accordance with ng compensation of the executive bodies oftheexecutive bodies ng compensation B, we hereby declare that the declaration thatthedeclaration wehereby declare B, nancial yearnancial 2010 gure, 1,118 thousand euros thousand 1,118 gure, cation services Consolidated fi nancial statements: view for the companies included in theconsolidatedview forthecompanies included fi siXXup new Media GmbH, Pulheim 25 25 % 50 % 50 % 100 % 25 % 100 % 100 100 % % 100 % 100 % 100 % Kiel Kommunikation, für Gesellschaft GmbH 100 KielNET % 51 % 100 % 100 % Associated companies Pulheim GmbH, Media new siXXup 100 s. Media % r. Netcon Republic Czech Hlucin, o., Hamburg GmbH, FunDorado 100 % 100 % 100 % Joint ventures 100 % Stuttgart goGmbH, debitel Cologne GmbH, MIDRAY 100 % 100 % Hamburg GmbH, Verwaltungs callmobile Hamburg KG, &Co. GmbH callmobile Oberkrämer GmbH, Logistik DEG Oberkrämer GmbH, Shop 100 mobilcom-debitel % 100 % 100 % Stuttgart AG, 100 % mobilcom-debitel Oberkrämer &PR, IT für GmbH Stanniol 100 % 100 % debitel Hamburg GmbH, Konzernfi 4Players Karlsruhe air2mp3 GmbH, 100 % Hamburg GmbH, meOme Hamburg GmbH, Direkt freenet 100 % 100 % 100 % Hamburg 100 GmbH, directions % new 100 % Crailsheim GmbH, altnetsurf 100 % (Spain) Madrid S. L., CLAROMOVIL Hamburg GmbH, technologies ID Next Bonn GmbH, Next-ID Büdelsdorf GmbH, klarmobil Schleswig GmbH, Multimedia MobilCom Schleswig GmbH, Logistik mobilcom-debitel Schleswig GmbH, mobilcom-debitel Hamburg GmbH, 01083.com Hamburg GmbH, tellfon Hamburg GmbH, Datenkommunikations freenet Hamburg GmbH, 01050.com Kiel GmbH, 01024Telefondienste Hamburg GmbH, Telefondienste 01019 Hamburg GmbH, Zugangsdienste freenet freeXmedia GmbH, Hamburg Hamburg GmbH, freenet.de Kiel GmbH, Cityline freenet companies consolidated Fully

In accordance with section 313 (2) to (3) HGB, wehave thefollowing over- provided HGB, (2) 313 toIn accordance (3) withsection Notes to the consolidated ﬁ consolidated tothe Notes nanzierungs GmbH, Stuttgart 100 100 % Stuttgart GmbH, nanzierungs nancial statements of freenet AG for the ﬁ the AGfor freenet of statements nancial nancial statements. nancial yearnancial 2010 Annual Report 2010 Holding 151

Consolidated financial statements Consolidated financial statements Annual Report 2010 152 Consolidated fi the balance sheet date balancethe sheet 37. Major events after after events Major 37. nancial statements: Notes to the consolidated fi consolidated tothe Notes hitp iae JahmPesg Stephan Esch Preisig Joachim Christoph Vilanek Board Executive The freenet AG 2011 6, March Büdelsdorf, operations”. “Discontinued to itemto 24 comments our stores in Saturn Germany. stores and in all Media ownproducts aswell asits E-Plus and off ofTelefonica theexception o2 With Germany, ofproducts will freenet continue to2013. comp two these between that thecooperation earnings. forthefi ment pay- adividend Board to theSupervisory to propose hasdecided Board Executive The er the mobile communications products of the network operators T-Mobile, Vodafone operators ofthenetwork communicationser themobile products The sale of the Next ID Group was completed on January 1, 2011—please also refer 2011—please 1, completed onJanuary was IDGroup oftheNext sale The agreed GmbH Deutschland Media-Saturn and Group thefreenet 2011, In January nancial year 2010 in the amount of 80 cents per share from retained sharefromretained per cents of80 in theamount nancial year 2010 nancial statements of freenet AG for the fi the AGfor freenet of statements nancial anies would be continued until of theend anies be would nancial yearnancial 2010 Niklas Wilke ppa. Marko Schipper Marko Schipper ppa. Public (German Auditor) Wirtschaftsprüfer Niklas Wilke Wirtschaftsprüfungsgesellschaft Aktiengesellschaft PricewaterhouseCoopers 7, March 2011 Hamburg, offuture risks development. and theopportunities presents suitably fi is consistent withtheconsolidated report management group The requirements. these fi net assets, to commercial fair viewofthe give and § lawpursuant and atrue German 1HGB Abs. 315a of by requirements theEU as adopted theadditional and comply withtheIFRSs ments management report. We believe that our audit We thatour believe report. management oftheconsolidatedevaluating fi theoverall presentation signifi and ciples used in consol included tion oftheentitiesto be the annualfi primarily basis onatest within theframewor in theconsolidated fi system control internal accounting-related are taken eff into The account in thedetermination ofauditprocedures. environment and nomic legal and oftheGroup Knowle assurance. withreasonable detected fi the applicable in theconsolidated fi ofoperations results and aff materially misstatements theauditsuchthat perform require and thatweplan standards Those Germany) (IDW). (Institute ofPublic in Auditors Wirtschaftsprüfer by theInstitut der promulgated ments § fortheauditoffi generally accepted standards German and HGB 317 audit. onour based report ment to anopinion express ontheconsolidated fi of Board Company’s oftheparent responsibility Commercial Code) is German the (“Handelsgesetzbuch”: 1HGB (paragraph) Abs. cle) 315a to commercial §(Arti- lawpursuant ofGerman requirements by the EU, theadditional and asadopted in accordance withtheIFRSs, report management thegroup and statements oftheconsolidated fi preparation The 2010. 31, to December 2010 1, from January fi ofchangesin equity, fl statement cash of statement and ing statement theincome We have theconsolidated audited fi Auditor’s Report nancial statements and as a whole provides asawholeprovides and nancial statements nancial statements, together withthegrou nancial statements, In our opinion Inour onthefi based to audithasnot any led Our reservations. auditoftheconsolidated our fi We conducted nancial statements of those entitiesin ofthose nancial statements nancial position and results ofoperat results nancial and position nancial reporting framework and in the group management report are report in management thegroup and framework nancial reporting nancial statements and the group management report are examined areexamined report management thegroup and nancial statements cant estimates made by the Board of Managing Directors, aswell as ofManaging Directors, by estimates theBoard cant made ecting the presentation of the net assets, fi ofthenetassets, thepresentation ecting ndings of our audittheconsolidated ofour fi ndings nancial statements prepared by freenet AG, compris- AG, by freenet prepared nancial statements ow statement and thenotes and toow statement theconsolidated Consolidated fi idation, theaccounting consolidationidation, prin- and nancial statements and on the group manage- onthegroup and nancial statements and the evidence supporting the disclosures supporting theevidence and comprehensive income, the balance sheet, comprehensive thebalance sheet, income, p management report forthebusiness year report p management dge of the business activities and theeco- and dge ofthebusiness activities k of the audit. The audit includes assessing auditincludes The k oftheaudit. a suitable view of the Group’s position and and position viewoftheGroup’s a suitable nancial statements in accordance with nancial statements Wirtschaftsprüfer (German Public (German Auditor) Wirtschaftsprüfer provides a reasonable basis areasonable provides opinion. forour expectations as to possible misstatements asto misstatements possible expectations Managing Directors. Our responsibility is Our Managing Directors. ions of the Group in accordanceions oftheGroup with nancial statements in accordance with nancial statements cluded in thedetermina- consolidation, cluded nancial statements: nancial statements and the group thegroup and nancial statements Auditor’s Report Auditor’s nancial state- ectiveness ofthe ectiveness nancial position nancial state- Annual Report 2010 nancial 153

Consolidated financial statements Consolidated financial statements Annual Report 2010 154 Consolidated fi nancial statements: Responsibility statement hitp iae JahmPesg Stephan Esch Preisig Joachim Christoph Vilanek Board Executive The AGfreenet 2011 6, March Büdelsdorf, oftheGroup. development withtheexpected associated tion of the Group, together withadescript tion oftheGroup, an afair reviewofthedevelopment includes fi the consolidated fi inTo and accordan knowledge, ofour thebest Responsibility statement nancial position and profi nancial and position nancial statements give a true and fair view of the assets, liabilities, fair viewoftheassets, give and atrue nancial statements t or loss of the Group, and the Group management report report management theGroup and t orlossoftheGroup, ion of the principal opportunities and risks risks and ion oftheprincipal opportunities d performance ofthebusiness theposi- and d performance ce with the applicable reporting principles, principles, reporting ce withtheapplicable Annual Report 2010 155

Consolidated financial statements Further information

No two customers are alike.

“Good telecommunications consultants face the challenge of dispensing professional and empathetic advice, despite ever-shrinking product cycles and changing ﬁ elds of application, to inspire their customers with practical solutions,” says Michael Deppner, coach at mobilcom-debitel. “The fact that we can provide independent consultation is our greatest advantage.” mobilcom-debitel’s sales consultants listen, advise and put together individual telecommunications packages to match the needs and habits of their customers. Olaf Iwersen, sales consultant:

“I’ve always wanted to work with people. Now, I successfully connect people with smartphones, tariff s, options, accessories and exclusive off ers each day. My recipe for success? A good mix of empathy, professional expertise, and another major factor: I enjoy my job.“ Further information EBIT DTAG DSL Diluted earnings per share per earnings Diluted Consult Dialog DBO insurance D&O CGU Broadband B2C B2B ARPU App AktG COSO Business withbusiness (B2B=Business customers to Business). Digital Line; ADigital Subscriber Subscriber Business with consumers (B2C=Business Business to withconsumers Consumer). Short form of“Application”. form Short Earnings before interest taxes. and before Earnings Cash Generating Unit; A cash genera Acash Unit; Generating Cash Defi German: Aktiengesetz; English: German Stock Corporation Act. English: Stock Corporation German Aktiengesetz; German: Deutsche Telekom Deutsche AG. Average Revenue PerUser. Committee of Sponsoring Organizations oftheTreadway Organizations ofSponsoring Committee Commission; avoluntary Digital data transmission with a speed of more than 128 kbps. than128 ofmore transmission Digital data witha speed Dialog Consult GmbH; Management consul Management ConsultGmbH; Dialog Directors’ and Offi and Directors’ Diluted earnings per share are calculated by d sharearecalculated per earnings Diluted 128 kbps. compared inThis is speed amajorincrease kbps). (up athigh receiving data and transmission to speed 52,000 for transmitting the event they are sued for wrongful ac forwrongful the event theyaresued offi grammes valued at the subscription price and and atthesubscription price valued grammes optionpro- to stock employee sharesattributable thepotential ordinary between ofpotentially diluting number asthediff sharesis The calculated diluting shares. by ofsh theweighted averageholders number focus on telecommunication among others. ontelecommunication among focus Industry strategy; market entry and competitive in theareasofcorporate, experience rate governance. onthebasis ofethical behaviour,reporting eff to improving dedicated offi organization thequality in theUS, private-sector Glossary assets or groups of assets. ofassets. groups or assets infl that generates cash cers ofacompany,cers in to itself, cover costs orto damagesordefense thecorporation ned Benefi t Obligation. cers’ Liability Insurance; Insurance payable to the directors and and to payable Insurance thedirectors Liability Insurance; cers’ ows that are largely independent of the cash infl ofthecash ows thatarelargelyindependent ting unit is identifi thesmallest ts while theywerewiththatcompany.ts with modem or ISDN connections ofupto connections orISDN with modem tancy company with international project company withinternational project tancy Line is used by households and companies and Line by households is used ective internal controls and good corpo- internal controls good and ective ividing theresultattr the ordinary shares issuable atfair value. the ordinary ares in circulation increased by potentiallyares in circulation increased Further information: Further ibutable toibutable theshare- able group of assets ofassets able group ows fromother Annual Report 2010 Glossary nancial erence 159

Further information Further information FIPL Agency Network Federal HFS Annual Report 2010 EBITDA 160 LR KStG IT migration IT ISIN IFRS HGB Gross profi GewStG Free fl cash FLAC Fixed network EPS EBT Information Technology; describes any technology that helps to produce, store and com- thathelps store and to produce, any technology describes Technology; Information Loans and receivables. and Loans Earnings per share;this specifi per ratio Earnings Earnings before taxes. Held-for-sale fi Financial instruments measured at fair value through profi through value atfair measured Financial instruments International Securities Identifi Securities International International Financial Reporting Standards; A collection of standards for the external fortheexternal ofstandards Acollection Standards; International Financial Reporting German: Handelsgesetzbuch; English: Commercial Code. Handelsgesetzbuch; German German: German: Körperschaftsteuergesetz; English: Tax Corporation Act. Körperschaftsteuergesetz; German: Financial liabilities measured at amortised cost. Financial liabilities atamortised measured Further information: Further Earnings before interest, taxes, depreciation and amortisation. and depreciation taxes, interest, before Earnings German: Gewerbesteuergesetz; English: Trade German Tax Gewerbesteuergesetz; German: Act. t ow Revenue minus ofmaterials. cost IT migration involves moving a set of instructions or programmes, from one platform to fromoneplatform orprogrammes, ITmigration involves moving ofinstructions a set Free fl cash In general language, this concept is used to describe a telecommunications network this atelecommunications network language, concept Ingeneral to is describe used Glossary Federal Network Agency for Electricity, Gas, Telecommunication, Posts and Railways and Telecommunication, Posts Gas, forElectricity, Agency Network Federal Eisenbahnen). Telekommunikation, Gas, und Post fürElektrizität, Bundesnetzagentur (German: net profi to which anindividual share. is attributable municate ofelec information withtheuse reporting ofcompanies. reporting which forproviding is services. used line-borne another within acompany. intangible and assets. equipment and plant property, of fromthedisposal proceeds plus intangible and assets, equipment and plant property, t/net loss by ofissued shares. theweighted average number ow is defi nancial instruments. ned as cash fl ascash ned cation Number. ow from operating activities, minus investments in minus investments activities, ow fromoperating es the portion ofconsolidated netprofi es theportion tronic computers and computertronic and software. computers It is by dividing calculated theconsolidated t and loss. t and t orloss SMS Smartphone EBIT Recurring Wirtschaftsprüfungsgesellschaft Aktiengesellschaft PricewaterhouseCoopers Portal Surfstick Warentest Stiftung SIM card SAR EBITDA Recurring Pay services Narrowband provider service Mobile MitbestG Stock rights. appreciation Short message service. message Short Central website Central which generally comprises acomprehensive ofnavigation range func- Subscriber Identity Module; chip with card Module; Identity Subscriber Here “Internet dongle”: An internet dongle is a UMTS radio modem for fast mobile mobile forfast modem radio internet is An dongle aUMTS dongle”: “Internet Here German: Mitbestimmungsgesetz; English: Act. Codetermination Mitbestimmungsgesetz; German: Paid services describes theoff describes Paid services Mobile device with touch and/or qwertz keyboard and feature set for easy internet foreasy feature and set keyboard device withtouch and/or Mobile qwertz Analogue or digital data transmission with a speed of up to 128 kbps. ofupto 128 ordigital transmission data Analogue withaspeed EBIT adjusted forone-off adjusted EBIT EBITDA adjusted forone-off EBITDA adjusted Germany’s leading consumer safety group, tests consumer goods and services accord- services and goods consumer tests group, leading safety consumer Germany’s Provider of mobile communications servic ofmobile Provider Auditing and consulting services organisation in Germany. consulting Auditing and services bits per second. per bits mega- ofupto 7.2 HSDPA speed withadownload standard extension theUMTS support to havebles users access fast to theworl Itena- ornetbook. ofanotebook in to is port and theUSB also stick plugged memory internet is ininternet The dongle comparable size access withanotebook. withaUSB access and/or e-mail). (for push transfer example e-mail tor, which identifi and opera- by allocated thenetwork storing including information, number various theuser suchase-mail. content services, additional and aggregated tions, to acharge. subject magazines. ing to scientifi in their suchasSMS, services, aswell telephones added mobile asvalue and sell cards telephony mobile minutes, SIM c methods in independent institutes in publishes its and in independent theresults c methods es the user ines theuser themobile network. items. items. ering provisioning and in digital media ofdigital services own name and fortheir and ownaccount. own name d wide web on the go. Most internet dongles webonthego.Most d wide es without their own mobile network; they theires without ownmobile network; a processor and memory of GSM telephones, telephones, ofGSM memory and aprocessor Further information: Further Annual Report 2010 Glossary 161

Further information Further information WACC VorstAG VATM service Value-added Annual Report 2010 share per earnings Undiluted UmwStG Nord TÜV 162 WKN WpHG German: Wertpapierkennnummer; English: identifi securities Wertpapierkennnummer; German: Further information: Further German: Verband der Anbieter von Telekommunikations- und Mehrwertdiensten e.V.; Anbieter von Telekommunikations- Verband der German: Mehrwertdiensten und Weighted average cost of capital; the rate that a company is expected to pay onaverage Weighted therate thatacompany average ofcapital; cost is expected German: Wertpapierhandelsgesetz; English: German Securities Trading English: Securities German Act. Wertpapierhandelsgesetz; German: German: Gesetz zur Angemessenheit der Vorstandsvergütung; English: Vorstandsvergütung; onthe der zur Act Angemessenheit Gesetz German: German: Umwandlungssteuergesetz; English: Reorganisation Tax Umwandlungssteuergesetz; German: Act. Technical service provider in Germany, providing a broad range of advisory, service, and and Technical in provider Germany, service, providing ofadvisory, service abroadrange A value added service is an independent range of services within atelecommunications ofservices range is anindependent service added Avalue Glossary Undiluted earnings per share are calculated by sharearecalculated per earnings Undiluted to all its security holders to fi holders security to all its charging orcontent services. independent Appropriateness of the compensation for the Executive Board. fortheExecutive ofthecompensation Appropriateness by special which is characterised service, English: oftelecommunic association The fi by theweighted average numb shareholders Training fi HumanResources and and Natural Resources International, in theMobility, Services, Industrial testing services nancial nancial year. nance its assets. its nance elds. ations and value added service providers. service added value ations and connection treatment, virtual connections, connections, virtual treatment, connection er ofsharesin circulation during the dividing theresult cation number. attributable to the attributable 1 Probable 1 Probable dates. III/2011 Publication ofinterim report 2011¹ 10, November II/2011 Publication ofinterim report 2011¹ 10, August Annual General Meeting 2011¹ 30, June I/2011 Publication ofinterim report 2011¹ 11, May 2010 Financial ofConsolidated Publication Statements/Annual Report 2011 25, March Financial calendar Further information: Further Financial calendar Annual Report 2010 163

Further information Further information Annual Report 2010 164 Further information: Further Imprint, contact, publications is available website onour at informationCurrent concerning share AG thefreenet freenet and is legally binding. version ofthis Report Annual German The Report. Annual is EnglishThe Report version oftheAnnual http://www.freenet-group.de/investor-relations/publikationen/quartals-geschaeftsberichte available arealso at: interim our and reports Report Annual The 70 9 – 6 0 13 E-mail: [email protected] 40/5 78 –7 (0) 6 0 +49 13 40/5 Fax: (0) +49 Phone: 22297 Hamburg Deelbögenkamp 4c Investor Relations AG freenet Internet: www.freenet-group.de 00 (0) 43 31/69–10 +49 Phone: 24782 Büdelsdorf Hollerstraße 126 AG freenet publications contact, Imprint, www.freenet-group.de. a translation of the German version ofthe oftheGerman a translation 6170135 freenet AG · Hollerstraße 126 · 24782 Büdelsdorf ·24782 126 ·Hollerstraße AG freenet