Annual Report 2009 Consolidated financial statements of freenet AG freenet AG · Hollerstraße 126 · 24782 Büdelsdorf List of contents 1. To our shareholders . 5 1.1 Key fi gures . 7 1.2 Key events of the fi nancial year 2009 in the freenet Group . 9 1.3 Letter to shareholders . 11 1.4 Supervisory Board report . 13 1.5 The freenet share . 19 1.6 Corporate Governance report . 24 2. Group management report . 33 2.1 Business operations and Group structure . 35 2.2 Business and macroeconomic conditions . 37 2.3 Sustainability report . 44 2.4 Assets, fi nancial position and results . 46 2.5 Risk report . 52 2.6 Information required under takeover law (clause 315 paragraph 4 of the German Commercial Code HGB) . 60 2.7 Compensation report of the Executive Board and the Supervisory Board . 62 2.8 Supplementary report . 67 2.9 Opportunities and forecast . 68 3. Consolidated fi nancial statements . 71 3.1 Overview . 73 3.2 Consolidated income statement and consolidated statement of comprehensive income for the period from 1 January to 31 December 2009 . 74 3.3 Consolidated balance sheet as of 31 December 2009 . 76 3.4 Schedule of changes in equity for the period from 1 January to 31 December 2009 . 78 3.5 Consolidated statement of cash fl ows from 1 January to 31 December 2009 . 79 3.6 Consolidated statements of movements in non-current assets as of 31 December 2009 . 80 Consolidated statements of movements in non-current assets as of 31 December 2008 . 82 3.7 Notes to the consolidated fi nancial statements of freenet AG for the period ended 31 December 2009. 84 3.8 Auditor’s Report . 163 3.9 Responsibility statement . 164 4. Further information . 165 4.1 Historical time series of quarterly fi gures Q1/2008 to Q3/2009 according to IFRS (retro spective adjustment) as well as Q4/2009 . 167 4.2 Mobile Communications segment: Historical time series of pro-forma quarterly fi gures Q1/2008 to Q3/2008 as well as Q4/2008 to Q4/2009 . 168 4.3 Glossary . 169 4.4 Financial Calender . 174 4.5 Imprint, contact, publications . 175 annual report 2009 3 1. To our shareholders From left to right: Christoph Vilanek, Chief Executive Offi cer (CEO) Axel Krieger, Chief Financial Offi cer (CFO) Joachim Preisig, Chief Offi cer Operations&Integration Stephan Esch, Chief Technical Offi cer (CTO) 1. To our shareholders 1.1 Key fi gures Result in € million 2009 2008 Q4/2009 Q3/2009 Q4/2008 adjusted¹ adjusted² adjusted¹ Third-party revenue 3,650.7 2,776.5 941.1 929.8 1,065.8 Gross profi t 774.6 563.6 208.8 191.7 201.8 EBITDA 327.1 172.1 100.6 80.8 6.9 EBITDA recurring 393.1 255.0 120.9 98.8 80.4 EBIT 123.3 58.9 48.1 32.3 –44.1 EBT 35.6 –28.8 27.5 14.5 –92.5 Group result from continued operations 16.6 127.5 11.9 –11.3 –73.6 Group result from discontinued operations 239.9 –15.9 232.6 13.4 21.0 Group result 256.5 111.6 244.4 2.1 –52.6 Earnings per share (€) 2.00 1.01 1.91 0.02 –0.41 Balance 2009 2008 Q4/2009 Q3/2009 Q4/2008 adjusted¹ adjusted² adjusted¹ Balance sheet total in € million 3,033.5 3,107.5 3,033,5 2,982.1 3,107.5 Shareholders’ equity in € million 1,047.8 791.3 1,047.8 802.8 791.3 Equity ratio in % 34.5 25.5 34.5 26.9 25.5 Finances and investments in € million 2009 2008 Q4/2009 Q3/2009 Q4/2008 adjusted¹ adjusted² adjusted¹ Cash fl ow from operating activities³ 295.5 73.6 38.1 92.0 3.4 Depreciation and amortisation 203.8 113.1 52.5 48.5 50.9 Investments³ 69.9 42.8 18.4 14.0 14.2 Net cash³, ⁴ –789.8 –1,303.8 –789.8 –1,138.4 –1,303.8 Share 2009 2008 Q4/2009 Q3/2009 Q4/2008 Closing price XETRA (€) 9.39 4.15 9.39 9.33 4.15 Number of ordinary shares (in thousand) 128,061 128,061 128,061 128,061 128,061 Market capitalisation (in € thousand) 1,202,493 531,453 1,202,493 1,194,809 531,453 1 The previous year comparison fi gures have been adjusted retrospectively due to IFRS 5 (presentation of the STRATO Group as a discontinued operation). Furthermore retrospective reclassifi cations were made within the income statement items relating to continued operations because the contract between freenet AG and 1&1 Inter- net AG regarding the sale of the DSL business has now been signed. 2 The comparison fi gures have been adjusted retrospectively due to IFRS 5 (inclusion of the DSL distribution unit in the discontinued operation “DSL Business”). 3 This information relates to the overall Group (including discontinued operations). 4 Starting in Q4/2009, freenet has decided to present the key fi gure “net cash” as the balance of cash and cash equivalents and fi nancial liabilities. The inclusion of the retirement benefi t obligations, which had a reducing eff ect, is no longer made. The previous year fi gures were adjusted accordingly. annual report 2009 7 1. to our shareholders 2. group management report 3. consolidated financial statements 4. further information Business performance by segment in € million 2009 2008 Q4/2009 Q3/2009 Q4/2008 adjusted¹ adjusted² adjusted¹ Third-party revenue for the Group³ 3,650.7 2,776.5 941.1 929.8 1,065.8 1. Revenue Mobile Communications 3,508.8 2,654.7 907.2 897.3 1,058.2 2. Revenue Broadband 232.3 302.6 42.0 61.1 68.8 3. Revenue Portal 43.3 47.8 12.7 9.9 11.5 4. Revenue Hosting 91.1 87.7 23.2 22.8 22.4 5. Revenue B2B 70.1 101.0 16.1 16.3 27.5 6. Revenue Narrowband 42.1 76.0 9.1 9.5 15.3 Group gross profi t³ 774.6 563.6 208.8 191.7 201.8 1. Gross profi t Mobile Communications 708.2 468.9 191.6 175.8 185.5 2. Gross profi t Broadband 67.1 64.1 14.9 22.0 11.1 3. Gross profi t Portal 25.3 35.2 6.2 6.3 9.1 4. Gross profi t Hosting 74.8 71.6 19.5 18.8 17.8 5. Gross profi t B2B 17.7 25.6 5.5 3.5 6.2 6. Gross profi t Narrowband 27.8 48.9 6.1 6.2 9.7 Selected key data 2009 2008 Q4/2009 Q3/2009 Q4/2008 Total customers freenet Group in million⁴ 18.94 21.05 18.94 19.02 21.05 Thereof contract customers (incl. no-frills) in million 9.10 9.63 9.10 9.19 9.63 Mobile Communications⁵ Mobile Communications customers in million 17.58 19.12 17.58 17.62 19.12 Thereof contract customers in million 8.43 8.83 8.43 8.46 8.83 Thereof prepaid customers in million 9.15 10.29 9.15 9.16 10.29 Gross new customers in million 4.28 17.21 1.27 1.09 1.42 Net additions in million –1.54 13.42 –0.04 –0.33 –0.85 Monthly average revenue per user (ARPU) Contract customer in € 24.2 25.3 24.1 24.8 25.2 No-frills customer in € 5.4 5.7 5.3 6.0 5.5 Prepaid customer in € 3.0 3.2 3.1 3.2 3.0 Active Narrowband customers (internet + telephony) in million 0.87 1.41 0.87 0.88 1.41 Active registered members in million 6.88 7.92 6.88 7.16 7.92 Paid service customers Portal in million 0.48 0.52 0.48 0.52 0.52 Employees at the end of period 4,394 7,255 4,394 6,311 7,255 1 The previous year comparison fi gures have been adjusted retrospectively due to IFRS 5 (presentation of the STRATO Group as a discontinued operation). Furthermore retrospective reclassifi cations were made within the income statement items relating to continued operations because the contract between freenet AG and 1&1 Inter- net AG regarding the sale of the DSL business has now been signed. 2 The comparison fi gures have been adjusted retrospectively due to IFRS 5 (inclusion of the DSL distribution unit in the discontinued operation “DSL Business”). 3 The diff erences in revenue/gross profi t between the sum of the individual segments and the total segments are the result of eff ects under IFRS 5 and interdivision set- tlements. 4 Without DSL and without Hosting. 5 Only Germany. 8annual report 2009 1.2 Key events of the fi nancial year 2009 in the freenet Group January ■ freenet and the Media-Saturn group sign an early renewal of their exclusive distribution partnership in marketing mobile communications products in the group’s electronic stores. April ■ Christoph Vilanek is appointed Chief Executive Offi cer of freenet AG with eff ect from 1 May 2009. ■ freenet signs a reconciliation of interests and redundancy programme with the workers’ councils at the Stuttgart/Ettlingen and Elmshorn sites. May ■ Launch of the newly created mobile communications brand “mobilcom-debitel”, accompanied by a major advertising campaign. ■ freenet sells its DSL business to 1&1 Internet AG, a subsidiary of United Internet AG.