Tiscali Group Annual Financial Report as at 31 December 2016 _____________________ Issue date 31 December 2016 This report is available on the website www.tiscali.it Tiscali S.p.A. Registered office: SS195 Km 2.3, Sa Illetta, Cagliari, Italy Share Capital EUR 91,200,922.89 Cagliari Companies’ Register and VAT No. 02375280928 Econ. & Admin. - 191784 Relazione finanziaria annuale al 31.12.2016 Table of contents 1 Highlights ..................................................................................................................................................................... 1 2 Alternative performance indicators ......................................................................................................................... 2 3 Directors and Auditors .............................................................................................................................................. 3 4 Report on Operations ................................................................................................................................................ 5 4.1 Tiscali’s position within the market scenario ..........................................................................................................5 4.2 Main results obtained in 2016 ..................................................................................................................................8 4.3 Regulatory background ...........................................................................................................................................11 4.4 Tiscali Shares ...........................................................................................................................................................16 4.5 Relevant events during the financial year ............................................................................................................19 4.6 Analysis of the economic, equity and financial situation of the Group .............................................................26 4.7 Analysis of the income, financial position and cash-flow statement of Tiscali S.p.A. ....................................45 4.8 Assessment of the business as a going-concern and future outlook ...............................................................48 4.9 Other events subsequent to year end ...................................................................................................................52 4.10 Disputes, contingent liabilities and commitments ................................................................................................54 5 Corporate Government and Assets Report .......................................................................................................... 59 5.1 Introduction ...............................................................................................................................................................59 5.2 Corporate Governance Structure ..........................................................................................................................59 5.2.1 General principles ....................................................................................................................................................59 5.2.2 Adopted Model .........................................................................................................................................................60 5.2.3 Company bodies and independent auditors. .......................................................................................................60 5.2.4 Shareholding ............................................................................................................................................................65 5.2.5 Amendments to significant agreements of the Company following a control change ....................................67 5.3 Information on the implementation of the recommendations detailed in the Self-Governing Code .............67 5.3.1 Board of Directors ....................................................................................................................................................67 5.3.2 Shareholders' Meetings ..........................................................................................................................................72 5.3.3 Board of Auditors .....................................................................................................................................................73 5.3.4 Committees established within the Board of Directors and other Governance bodies ..................................74 5.3.5 Internal Control .........................................................................................................................................................75 5.4 Internal controls related to accounting and financial information ......................................................................78 5.4.1 Introduction ...............................................................................................................................................................78 5.4.2 Description of the main features of existing risk management and internal control systems in relation to the financial information process ......................................................................................................................78 5.5 Model of organization, management and control pursuant to Legislative Decree 231/2001 ........................79 5.6 Procedure regarding related-party transactions ..................................................................................................80 5.7 Confidential information and market information. Investor Relations ...............................................................80 6 Consolidated financial statements and explanatory notes ............................................................................... 83 6.1 Income Statement ....................................................................................................................................................83 6.2 Comprehensive Income Statement .......................................................................................................................84 6.3 Statement of Assets and Liabilities .......................................................................................................................85 6.4 Cash Flow Statement ..............................................................................................................................................87 6.5 Net Assets Variations ..............................................................................................................................................89 6.6 Income statement pursuant to deliberation Consob No.15519 dated July 27, 2006 .....................................90 6.7 Balance sheet pursuant to deliberation Consob No.15519 dated July 27, 2006 ............................................91 6.8 Explanatory Notes ...................................................................................................................................................92 6.9 Considerations regarding business continuity and foreseeable development of the management .............93 7 Tiscali SpA – Accounting Statements and Explanatory Notes ....................................................................... 156 7.1 Income statement ..................................................................................................................................................156 7.2 Comprehensive income statement ......................................................................................................................157 7.3 Financial and economic results ...........................................................................................................................158 7.4 Statement of changes in shareholders’ equity (EUR) .......................................................................................159 Relazione finanziaria annuale al 31.12.2016 7.5 Cash Flow Financial statement ............................................................................................................................160 7.6 Explanatory notes ..................................................................................................................................................160 8 Glossary ................................................................................................................................................................... 197 9 Reports ..................................................................................................................................................................... 205 1 Highlights Income statement (*) (**) 2016 – 2015 – 2016 – after 2015 – after before before IFRS 5 IFRS 5 IFRS 5 IFRS 5 reclass. reclass. reclass. reclass. (EUR mln) Revenue 207.2 196.9 202.1 192.6 Adjusted Gross Operating Result (EBITDA) 41.5 38.4 56.2 53.5 Gross Operating Result (EBITDA) 30.1 27.1 39.1 36.4 Operating profit (35.5) (28.4) (1.9) (2.1) Statement of financial position 31 December 31 31 December 2016 December 2015 2015 (EUR mln) Total assets 291.8 290.5 Net Financial Debt (186.7) (165.6) Net Financial Debt as per Consob (191.0) (173.1) Shareholders' equity (167.6) (121.4) Investments 56.7 38.1 Operating figures 31 December 31 31 December 2016 December 2015 2015 (000) Total number of Clients 697.1 686