title

annual report 2016 annual report 2016

key figures net income (in € million) sales(1) ebitda(1) ebit(1) ebt(1) balance sheet (in € million) current assets non-current assets shareholders’ equity total assets cash flow (in € million) operative cash flow cash flow from operating activities(2) cash flow from investing activities free cash flow(3) employees germany abroad total personnel expenses (in € million) share (in €) share price at year-end (xetra) earnings per share(1) earnings per share before ppa amortization(1) 2016 2015 3,948.9 3,715.7 840.6 647.2 622.0 631.4 3,442.3 1,197.8 4,073.7 644.2 587.0 -422.7 423.0 6,438 1,644 8,082 445.7 37.10 2.13 2.29 757.2 541.7 521.1 564.9 3,320.5 1,149.8 3,885.4 554.5 533.2 -766.0 300.5 6,502 1,737 8,239 429.7 50.91 1.73 1.89 customer contracts (in million) 31.12.2016 31.12.2015 access contracts, total thereof mobile internet thereof dsl complete packages (ull) thereof t-dsl / r-dsl business applications contracts, total thereof “domestic” thereof “foreign” consumer applications contracts, total thereof with premium mail subscription thereof with value added subscription thereof free accounts 8.72 4.31 4.23 0.18 6.05 2.34 3.71 36.49 1.72 0.48 34.29 7.80 3.48 4.08 0.24 5.99 2.35 3.64 35.33 1.77 0.41 33.15 (1) key earnings figures 2015 without special items from sale of goldbach shares and part of stake in virtual minds (ebitda, ebit, ebt effect = € +14.0 million; eps effect = € +0.07); key earnings figures 2016 without special items from writedowns on financial assets, especially rocket impairment (ebt effect = € -254.9 million; eps effect = € -1.25) (2) cash flow from operating activities 2015 without capital gains tax refund (net) of € 326.0 million; cash flow from operating activities 2016 without income tax payment (originally planned for the fourth quarter of 2015) of around € 100.0 million (3) free cash flow 2015 without capital gains tax refund (net) of € 326.0 million and including income tax payment (originally due in fourth quarter of 2015) of around € 100.0 million; free cash flow 2016 adjusted for income tax payment (originally due in fourth quarter of 2015) of around € 100.0 million

content content 4 m a n a g e m e n t 1 2 7 f i n a n c i a l s tat e m e n t s 4 letter to our shareholders 8 interview with ralph dommermuth 10 report of the supervisory board 1 2 8 balance sheet 1 3 0 net income 1 32 cash flow 15 u n i t e d i n t e r n e t at a g l a n c e 16 vision 16 business model 18 internet factories 18 success factors 20 growth opportunities 29 m a n a g e m e n t r e p o r t 134 changes in shareholders’ equity 136 notes to the consolidated financial statements 224 development of fixed assets 226 audit opinion 227 responsibility statement 228 m i s c e l l a n e o u s 228 locations 230 glossary 232 imprint 30 company and group profile 233 financial calendar 30 business model strategy control systems 35 36 37 research and development cover 41 economic report key financial figures at a glance 41 45 60 67 69 general economic and sector conditions highlights business development position of the group position of the company non-financial performance indicators net income by quarter 80 subsequent events 8 1 risk, opportunity and forecast report 81 risk report 90 opportunity report 93 forecast report 99 accounting-related internal control and risk management system s i g n s a n d s y m b o l s 1 01 disclosures required by takeover law 106 declaration of company management / internet link corporate governance report 117 remuneration report 124 dependent company report a glossary page reference

2005 web.de acquisition of the e-mail service web.de 2004 start of r-dsl resale via the 1&1 brand internationalization 1&1 market launch in austria internetx acquisition of internetx – one of the largest providers of domains, webspace and hosting products for resellers “the facebook” social network is launched by dustin moskovitz, chris hughes, eduardo saverin and mark zuckerberg 2006 united internet media ag founding of united internet media ag in february 2006, under which the portals web.de, gmx and 1&1 are marketed fasthosts acquisition of the largest webhoster in uk 2008 united-domains acquisition of one of the leading domain registrars in europe 2007 versatel strategic investment of 25.05% ull dslcomplete packages from 1&1. separate telephone connections by deutsche telekom are no longer required more than 100 million telecommunications users iphone is launched on the market 2015 highest stock market value market capitalization for the first time higher than € 10 billion home.pl acquisition of the polish webhosting market leader drillisch acquisition of an equity stake of approx. 20% 2014 employees 7,800 colleagues in germany and abroad ´sales € 3,065.0 million ´versatel takeover of versatel gmbh ´rocket internet strategic investment with a stake of 10.7% 2016 tele columbus acquisition of approx. 25% stake warburg pincus strategic partnership and 33% stake in business applications division strato agreement for a complete takeover of the webhosting specialist 2013 de-mail start of the de-mail service and the sector’s initiative “e-mail made in germany” arsys takeover of the spanish webhosting and cloud specialist 2010 mail.com united internet takes over the us service mail.com mobile internet start of the mobile internet business with 1&1 all-net-flat 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 canada usa germany poland uk austria / switzerland france spain italy

17 customer contractsmio. over mobile internet contracts mobility n o i l l i m 1 3 . 4 servers in europe and usa 70,000 51 million approx. customer accounts in 11 countries internationality n o trust i l l i m dsl connections 4 . 4 . x o r p a 36.5 million consumer accounts success 6 million contracts in business applications over

a t a g l a n c e m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 5 m a n a g e m e n t letter to shareholders ceo interview report of the supervisory board we would also like our shareholders to participate in our strong operating result and will therefore propose an increase in the dividend to € 0.80 per share (prior year: € 0.70) at the annual shareholders' meeting in may. we will include strato ag – which we acquired in december 2016 – in our consolidated financial statements for the first time as of april 1, 2017. however, we expect an opposing burden on earnings in 2017 from regulatory topics and the scaling down of the dsl network of our pre-service provider telefónica. taking account of these effects, we plan to achieve sales growth of about 7% in 2017. our ebitda is expected to improve by around 12%. the number of fee-based customer contracts is likely to grow organically by approximately 800,000 contracts. the takeover of strato will result in the addition of a further 1.8 million or so fee-based customer contracts. at the same time, we want to lay the foundation for a successful anniversary year in 2018 – in march of next year, united internet will have been a listed company for 20 years. in 2018, we expect to reach over 20 million customer contracts in total. ebitda is expected to grow by around 10% and thus exceed € 1 billion for the first time. we feel very well prepared for the next steps in our company’s development and are upbeat about our future prospects. in view of the past year and the challenges that lie ahead, we would like to express our particular gratitude to all employees for their dedicated efforts as well as to our shareholders and customers for the trust they continue to place in united internet ag. montabaur, march 2017 ralph dommermuth robert hoffmann frank krause jan oetjen martin witt

a t a g l a n c e m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 7 m a n a g e m e n t letter to shareholders ceo interview report of the supervisory board frank krause cfo since 2015 frank krause (born in 1965) has been a member of the management board of united internet ag since june 1, 2015 and is responsible as cfo for finance, corporate controlling & accounting, tax, investment management, investor relations, legal, corporate governance, compliance, risk management, corporate audit, procurement and human resources. in his role as cfo, frank krause implemented the new group-wide employee stock ownership plan (esop) in fiscal year 2016 and managed the m&a processes for the investment of warburg pincus in the business applications division as well as the takeover of competitor strato. jan oetjen management board member responsible for “consumer applications” since 2014 with effect from october 1, 2014, the supervisory board appointed mr. jan oetjen to the management board of united internet. in this position, jan oetjen is responsible for the company’s consumer applications business. in addition to his role as member of the management board of united internet ag, jan oetjen is ceo of the sub-group 1&1 mail & media applications se with responsibility for product management. born in 1972, jan oetjen joined the united internet group in october 2008 and has since headed the e-mail and portal businesses of the gmx and web.de brands. under his leadership, united internet acquired the international e-mail portal mail.com in 2010. he also headed the group’s launch of de-mail services in 2013 as well as the security initiative “e-mail made in germany”. martin witt management board member responsible for “access” since 2014 also with effect from october 1, 2014, the supervisory board appointed mr. martin witt to the management board of united internet. in this position, martin witt is responsible for the company’s access business. in addition to his role as member of the management board of united internet ag, martin witt is ceo of the sub-group 1&1 telecommunication se with responsibility for product management. born in 1955, martin witt has been working for the united internet group since june 2009 and has headed the group’s access business since july 2011. in 2013, martin witt was elected to the executive committee of the german association of telecommunications and value-added service providers (verband der anbieter von telekommunikations- und mehrwertdiensten e. v. – vatm) and elected as its president on october 1, 2014.

a t a g l a n c e m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 9 m a n a g e m e n t letter to shareholders ceo interview report of the supervisory board shortly after announcing the strategic partnership, in december 2016 to be precise, you also announced the complete takeover of strato. a further step in the planned consolidation of the market? exactly! with around 1.8 million customer contracts, expected annual revenue in 2016 of about € 127 million and an expected ebitda 2016 of around € 48 million, strato is a leading provider of webhosting and cloud products in germany and europe. now that the german federal cartel office has approved the takeover, we can extend our leading market position in the european hosting and cloud application business and drive the consolidation of a market which is still heavily fragmented. and with our combined and thus even greater resources, e.g. in product development and product management, we’ll be able to serve our customers with even more powerful products and services in the future. united internet launched measures to help the integration of refugees in 2015. what’s the current situation? as part of the “1&1 welcome” campaign, many of our employees work as volunteers in local projects. we act as a sponsor for selected integration programs and together with local staff our employees offer regular activities – such as sports courses, day trips and childcare – for new arrivals to facilitate their transition into everyday german life. our employees can use up to 10% of their working time for these activities. in addition, we’ve provided mobile classrooms with free internet access to enable e-learning programs for language acquisition. since april 2016, our main focus has been on training measures to prepare refugees for the german labor market. together with local authorities and social institutions, we developed a modular program called “fit for job”. at our major facilities, course participants are given a general overview of office work, the cultural environment, and possible careers in the it industry. over 140 refugees and immigrants have participated in the program so far. many of our employees have also volunteered to act as trainers in the “fit for job” program, in addition to their daily work. the common goal of the partnership with warburg pincus is to extend our market leadership in europe with top-quality, innovative webhosting products and cloud applications, as well as first-class customer service. what are your expectations for fiscal year 2017? we’ll be including strato ag, which we acquired in december 2016, in our consolidated financial statements for the first time as of april 1, 2017. however, we expect an opposing burden on earnings in 2017 from regulatory topics and the scaling down of the dsl network of our pre-service provider telefónica. taking account of these effects, we plan to achieve sales growth of about 7% in 2017. our ebitda is expected to improve by around 12%. the number of fee-based customer contracts is likely to grow organically by approximately 800,000 contracts. the takeover of strato will result in the addition of a further 1.8 million or so fee-based customer contracts.

a t a g l a n c e m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 11 m a n a g e m e n t letter to shareholders ceo interview report of the supervisory board in addition to the regular statutory reports, the supervisory board discussed and reviewed the following issues in greater detail: the annual financial statements and consolidated financial statements for fiscal year 2015 the report of the supervisory board to the annual shareholders' meeting for fiscal year 2015 and the updated declaration of conformity with the german corporate governance code determining the management board’s target achievement in fiscal year 2015 and approving the payment of variable compensation components, as well as agreeing new targets for the management board for fiscal year 2016 the invitation to the annual shareholders' meeting 2016, as well as the agenda and motions for resolutions the dividend proposal for the annual shareholders' meeting audit planning and the quarterly reports of the internal audit department the compliance report 2015 the quarterly reports on risk management and the risk management strategy the issuance of sars (stock appreciation rights) the implementation of a new employee stock ownership plan the development of a quota for the proportion of women the harmonization of articles and rules of procedure within the group the new eu market abuse regulation the eu reform of the statutory audit of annual accounts and the auditor reform law the conclusion of important rental agreements the development of the company during the year group planning and the investment projects for fiscal year 2017 sales and earnings planning 2017 of united internet ag (parent company) the purchase of shares in tele columbus ag the examination of an investment in the business applications division the investment of warburg pincus in the business applications division the acquisition of strato ag the setting of dates for the supervisory board’s meetings and the financial calendar for fiscal year 2017 meetings and participation: the supervisory board held four meetings during fiscal year 2016 during which the management board presented detailed information about the business situation and the development of the company and group, as well as about significant business events. the meetings were each attended by all members. in addition to the meetings, further resolutions on current topics were adopted by means of circular written consent.

a t a g l a n c e m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 13 m a n a g e m e n t letter to shareholders ceo interview report of the supervisory board audit of the management board’s report on relations with affiliated companies the management board presented its report on relations with affiliated companies (dependent company report) for fiscal year 2016 to the supervisory board in good time. the report prepared by the management board about relations with affiliated companies was also audited by the external auditors. the following certificate was awarded in this respect: “on the basis of our statutory examination and evaluation, we can confirm that 1. the details made in the report are accurate, 2. the company was compensated adequately for each transaction mentioned in the report, 3. in the case of those measures mentioned in the report, there is no evidence to suggest a significantly different assessment to that provided by the management board.” the external auditors submitted the audit report to the supervisory board. the dependent company report and audit report were made available to the supervisory board in good time. the supervisory board reviewed the management board’s dependent company report and the audit report. the supervisory board performed the final review at its meeting on march 22, 2017. the external auditors attended this meeting and reported on their audit of the dependent company report and their main audit results, explained their audit report, and answered questions from members of the supervisory board. on the basis of our final examination, we concur with the management board’s dependent company report and the audit report and have no objections to raise regarding the management board’s declaration at the end of the dependent company report. the supervisory board thanks the management board and all employees for their outstanding commitment to the company in fiscal year 2016. montabaur, march 22, 2017 for the supervisory board kurt dobitsch

united internet at a glance united internet at a glance 16 vision 16 business model 18 internet factories 18 success factors 20 growth opportunities

business model m a n a g e m e n t m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 17 at a g l a n c e vision business model internet factories success factors growth opportunities business model access applications motivated team 8,100 employees, of which approx. 2,600 in product management, development and networks data centers sales strength approx. 3.2 million contracts p. a. 50,000 registrations for free services every day user equipment operational excellence 51 million accounts in 11 countries 8 data centers 70,000 servers in europe and usa powerful network infrastructure 42,000 km of fiber network content standard software brands and investments (as of: december 31, 2016) access consumer business consumer applications business (1) partner companies listed investments 25.10% 30.20% 27.28% 25.01% 30.34% 20.11% 25.11% 8.31% 10.46% (1) rebranding of versatel gmbh effective from july 1

m a n a g e m e n t m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 19 at a g l a n c e vision business model internet factories success factors growth opportunities we have already picked up a number of customer wishes and successfully transformed them into new solutions or new business fields: we meet the privacy demands of our customers with a variety of initiatives. within the “e-mail made in germany” alliance, for example, e-mails are automatically encrypted, while “de-mail” also offers customers legally binding communication via e-mail. our state-of-the- art data centers meet the strictest security standards with geo-redundant operation. applications and data are constantly mirrored at geographically separate data centers. our mobile internet products reflect the trend toward ever greater mobility in internet usage. a clear and simple tariff structure offering great value for money and excellent service helps us achieve high customer retention rates and customer satisfaction, while securing a top-quality client base in a dynamic market environment. from our domestic market in germany, our cloud and e-business solutions are now being marketed in new target markets as part of our internationalization strategy. at the same time, the cultural diversity of our employees is steadily growing. the resulting potential for new ideas and innovation is strengthening our competitive edge and enhancing our long-term opportunities in future markets. 1&1 mywebsite offers small businesses a simple and flexible way to establish their online presence. with its integrated sales and marketing tools, 1&1 mywebsite lays the perfect foundation for the digital commercial success of our customers. trust is the basis for our customer relationships. data protection and security, 24/7 availability of our competent contact partners, and 24-hour replacement of defective equipment, for example, are all elements of the so-called 1&1 principle which ensure customers can rely on us at all times. new domain endings change the digital landscape and offer customers new opportunities to present themselves online. the new top-level domains (ntlds) greatly expand the previously limited address space and increase the possibilities for personalized domain names. wherever it makes good business sense, we cover the entire value chain – from product development and data center operation, to effective sales and marketing and active customer support. economies of scale represent a further key success factor for our business. every new customer enhances the profitability of our “internet factories”. after making the investments in our “factories” and developing products in the form of applications, it is then a question of utilizing them as fully as possible. the greater the number of customers using products provided by our “internet factories”, the greater our profit will be. a further advantage is our marketing strategy tailored to specific target groups. every united internet customer gets the exact product he needs. our brands such as gmx, mail.com, web.de, 1&1, fasthosts, arsys, home.pl, united-domains and internetx are positioned differently and target a wide variety of user groups. last but not least, the exportability of our applications is a further trump card. they can often be used anywhere in the world and work on the same principle in frankfurt as they do in london, paris or new york.

m a n a g e m e n t m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 21 at a g l a n c e vision business model internet factories success factors growth opportunities powerful fi ber-optic infrastructure for business customers business authorities fttb fttb network expansion for private customers homes vdsl/ vectoring dtag ftth city carriers fiber-optic network with a length of 41,644 km (prior year: 40,825 km) in 250 german cities, including 19 of the 25 largest cities a › fttb use of dtag’s vdsl/vectoring house connections (successive expansion of layer 2 infrastructure) use of fiber-optic house connections of well-known city carriers a › vdsl

m a n a g e m e n t m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 23 at a g l a n c e vision business model internet factories success factors growth opportunities applications segment our applications segment comprises the group’s application business – whether ad-financed or via fee-based subscriptions. these applications include domains, home pages, webhosting, servers and e-shops, personal information management applications (e-mail, to-do lists, appointments, addresses), group work, online storage and office software. the applications are developed by our “internet factory”, or in cooperation with partner firms, and operated at our seven data centers. we also offer our customers performance-based advertising and sales platforms on the internet via the sedo and affilinet brands. in our applications segment, we are also a leading global player with activities in european countries (germany, france, the uk, italy, austria, poland, switzerland and spain) as well as north america (canada, mexico and the usa). applications are marketed to specific target groups via our differently positioned brands gmx, mail.com, web.de, 1&1, arsys, fasthosts, home.pl, internetx and united-domains. our applications business is broken down into ad-financed and fee-based applications, whereby the latter are in turn divided into consumer and business applications. our ad-financed applications (free accounts) and fee-based consumer applications are marketed via the gmx and web.de brands primarily in germany, austria and switzerland, where we are among the leading players. since our acquisition of the us provider mail.com in late 2010, we have also been driving our internationalization in this business and are now targeting markets like the usa, uk, spain, france and india. over the past few years, we have expanded our brands – gmx, web.de and mail.com – from pure e-mail service providers to complete command centers for the communication, information and identity management needs of our users. our free accounts are monetized via online advertising, which is marketed by united internet media (uim). uim also exclusively markets certain third-party sites, like ‘das telefonbuch’, ‘das örtliche’ and ‘gelbe seiten’ (german telephone directories and yellow pages). in addition, our affilinet brand – one of europe's leading performance marketing networks – offers platforms for publishers in germany, austria, switzerland, the uk, france, benelux and spain. in the field of consumer applications, the main focus in fiscal year 2016 was still on monetizing ad-financed accounts via online advertising. we therefore limited the ad space for our own pay products once again in 2016.

m a n a g e m e n t m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 25 at a g l a n c e vision business model internet factories success factors growth opportunities business applications: from webhoster to e-business solutions provider e-mail marketing website design mobile apps sector content business apps local listings display advertisement e-payment solutions e-shops seo tools in the field of business applications, we are active in both europe (target markets: germany, france, the uk, italy, poland, austria, switzerland, and spain) and north america (target markets: mexico, canada, and the usa). with 6.05 million customer contracts in total, we are one of the world’s leading companies in this business. in particular, we are targeting further growth with the aid of powerful applications which will open up business opportunities on the internet for our customers and help them digitize their processes. we have therefore expanded our product range over the past few years – based on our proven hosting packages – with the addition of numerous cloud-based e-business solutions.

m a n a g e m e n t m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 27 at a g l a n c e vision business model internet factories success factors growth opportunities

management report management report 30 company and group profile 30 business model 35 strategy 36 control systems 37 research and development 41 economic report 41 general economic and sector conditions 45 business development 60 position of the group 67 position of the company 69 signifi cant non-fi nancial performance indicators 80 subsequent events 81 risk, opportunity and forecast report 81 risk report 90 opportunity report 93 forecast report 99 accounting-related internal control and risk management system 101 disclosures required by takeover law 106 declaration of company management / corporate governance report 117 remuneration report 124 dependent company report

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 31 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report united internet ag 1&1 telecommunication se (100%) 1&1 telecom (100 %) versatel (100 %) 1&1 internet se (100%) 1&1 internet usa (100%) arsys (100%) 1&1 internet uk (100%) fasthosts (100%) 1&1 internet fr (100%) home.pl (100%) 1&1 internet es (100%) internetx (95.56%) sedo (100%) united-domains (100%) 1&1 mail & media applications se (100%) 1&1 de-mail (100%) affilinet (100%) 1&1 mail & media (100%) united internet media (100%) united internet ventures ag (100%) drillisch (20.11%) epages (25.01%) hi-media (10.46%) open-xchange (27.28%) rocket internet (8.31%) profitbricks (30.20%) tele columbus (25.11%) uberall (30.34%) virtual minds (25.10%) simplified illustration of the group structure of united internet (as of december 31, 2016) with significant operating subsidiaries and investments

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 33 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report applications segment the applications segment comprises the group’s application business – whether ad-financed or via fee-based subscriptions. these applications include domains, home pages, webhosting, servers and e-shops, personal information management applications (e-mail, to-do lists, appointments, addresses), group work, online storage and office software. the applications are developed by the company’s “internet factory” or in cooperation with partner firms and operated at the company’s data centers. united internet also offers its customers performance-based advertising and sales platforms on the internet via the sedo and affilinet brands. in its applications segment, united internet is also a leading global player with activities in european countries (germany, france, the uk, italy, austria, poland, switzerland and spain) as well as north america (canada, mexico and the usa). applications are marketed to specific home-user and business-user target groups via the differently positioned brands gmx, mail.com, web.de, 1&1, arsys, fasthosts, home.pl, internetx, and united-domains. management as in the previous year, the management board of united internet ag comprised the following five members in fiscal year 2016: ralph dommermuth, company founder and chief executive officer (with the company since 1988) robert hoffmann, deputy chair, management board member responsible for business applications (with the company since 2006) jan oetjen, management board member responsible for consumer applications (with the company since 2008) martin witt, management board member responsible for access (with the company since 2009) frank krause, chief financial officer (with the company since 2015) as in the previous year, the supervisory board of united internet ag elected by the annual shareholders' meeting 2015 comprised the following three members in fiscal year 2016: kurt dobitsch, chair michael scheeren, deputy chair kai-uwe ricke main markets and competition germany is the most important sales market of the united internet group by far and accounts for around 89% of total sales. in addition to germany, the group’s other major sales markets include the uk, the usa, spain, france, poland, austria, and canada. in terms of its competitive standing, united internet (in the purely domestically aligned access segment) is among the top three suppliers in germany’s broadband market with its dsl products and one of germany’s fastest growing companies with its mobile internet products. united internet is the market leader in germany for hosting and cloud applications (in the globally aligned applications segment).

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 35 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report location main activity company / brand chesterbrook / lenexa (usa) applications business, dc operation and customer service in north america 1&1 düsseldorf access business (b-to-b and wholesale) cologne stuttgart essen applications business (domain marketing) access business (b-to-b and wholesale) access business (b-to-b and wholesale) regensburg applications business (reselling) 1&1 versatel sedo 1&1 versatel 1&1 versatel internetx starnberg applications business (domains) united-domains 1.2 strategy united internet’s business model is based predominantly on customer contracts (electronic subscriptions) with fixed monthly amounts and contractually agreed terms. such a business model ensures stable and plannable revenue and cash flows, protects against macroeconomic effects and provides the financial scope to grasp opportunities in new business fields and markets – organically or via acquisitions and investments. a large number of customer relationships also helps the company to utilize so-called economies of scale: the greater the customer demand for products created by our development teams and operated at our own data centers, the greater our profit will be. these profits can then be invested in new customers, new products and new business fields. from the current perspective, cloud applications and mobile internet will be the growth markets over the coming years. with its clear positioning in the access and applications segments, united internet is well placed to exploit the expected market potential. in view of the dynamic market development of cloud applications and mobile internet, the company’s growth opportunities are clearly apparent: universally accessible, increasingly powerful broadband connections are enabling new and more sophisticated cloud applications. these internet-based programs for end users and companies will be united internet’s growth drivers in the years ahead – both as stand-alone products in the applications business field as well as in combination with landline and mobile access products in the access segment business field. with its many years of experience as an access and application provider, its expertise in software development and data center operation, marketing, sales and customer support, as well as its strong and well-known brands (such as 1&1, gmx and web.de), and customer relationships with millions of private users, freelancers and small companies in germany and abroad (currently over 51 million user accounts world-wide), the company is excellently positioned. in order to leverage this positioning for further sustainable growth, united internet will also invest heavily in new customers, new products and business fields in future, as well as in its further internationalization. in addition to organic growth, united internet also continually seeks possibilities for company acquisitions, investments and cooperations, in order to extend its market positions, competencies and product portfolios.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 37 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report 1.4 research and development as an internet service provider, the united internet group does not engage in research and development (r&d) on a scale comparable with manufacturing companies. against this backdrop, united internet does not disclose key figures for r&d. at the same time, the united internet brands stand for high-performance internet access, solutions and innovative web-based products and applications which are mostly developed in-house. the success of united internet is rooted in an ability to develop, combine or adapt innovative products and services and launch them on major markets. thanks to its own development teams, united internet is able to react fast and flexibly to new ideas and trends and continually enhance its established products, adapting them to changing market needs – a key success factor in the fast-moving internet market. the company’s expertise in product development, enhancement and roll-out minimizes its reliance on third party development work and supplies in many areas and thus ensures decisive competitive and time-to- market advantages. at united internet’s own development centers (especially in karlsruhe and bucharest), around 2,600 developers, product managers and technical administrators (corresponding to around 32% of all employees) use mainly open source code in clearly defined and modeled development environments. third-party programming services are also used to swiftly and efficiently implement specific projects. this enables the company to quickly change existing products and adapt them to changing customer needs. united internet also procures solutions from partners, which are then modified according to needs and integrated into its systems. with the aid of its self-developed and integrated applications, united internet has a set of modules which can be easily combined and provided with product-specific or country-specific user interfaces in order to create a variety of powerful and integrated applications – a huge benefit when tailoring products to varying target groups or for international rollouts. due to the steady growth in customer figures, the demands placed on reliability and availability are constantly rising. in addition to the further development of existing products and continual optimization of back-end operations, the company also focuses on continually enhancing existing processes in order to raise system reliability and thus also customer satisfaction. focus areas 2016 access launch of 1&1 fiber-optic business tariff in july 2016, 1&1 launched its first two fiber-optic business tariffs with speeds of up to 1 gigabit/s tailored to the needs of small and mid-sized companies. the new tariffs are offered in over 250 cities. download speeds of 1,000 mbit/s and upload speeds of 200 mbit/s are possible. in contrast to dsl, the bandwidth of fiber-optic connections are guaranteed irrespective of the line quality. the performance of the fiber-optic connections can be adapted in future to the customer’s rising needs. if more performance is required, greater bandwidth can be provided via the same line – 1&1 currently offers customers up to 100 gbit/s. network connections are provided into the customer’s premises.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 39 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report as of august 2016, preconfigured sections are available to users. unlike smaller-scale elements, sections automatically adopt the overall website design and provide an ideal mix of structural flexibility and high design value – an absolute first for modular website kits. in october 2016 the mywebsite set-up assistant was completely revamped. users are guided through simple steps which help them set up and subsequently publish their website. as a first step, an online business card was launched which enables users to put their most important contact data online just minutes after ordering the product. all of these product innovations are based on an ongoing analysis of market and customer needs and were brought to market with the aid of acceptance tests. by integrating feedback possibilities directly into the product or application context, users can express their criticism – or praise. numerous improvements were also made to operations during the course of the year. the use of modern container technology (caas) based on docker, kubernetes and openshift enables faster release cycles across all sites as well as the automated set-up of development and test environments with high comparability to live installation. launch of 1&1 cloud app center in february 2016, the 1&1 cloud app center was introduced. it was developed in cooperation with bitnami, an international supplier of server applications and development environments. bitnami provides over 100 open source apps on the server infrastructures of selected partners as one-click installations. thanks to the new partnership, 1&1 customers can now roll out and run web applications and development stacks in the cloud with a single click. as the apps are supplied centrally, they can be installed within minutes – thus simplifying access to the powerful 1&1 cloud platform even more. introduction of 1&1 marketing toolbox for smes in april 2016, a new online marketing package for small and mid-size enterprises (smes) was introduced. the new 1&1 marketing toolbox is a complete package comprising search engine optimization (seo) and marketing (sem), company entries in online directories, and email marketing. it thus bundles the most important marketing tools for companies seeking to attract new customers and increase their online success. in order to ensure the best-possible interaction of the individual products, the 1&1 control panel also provides a new overview in which customers can quickly see the current status of their online marketing activities. this “center page” displays the relevant performance indicators. in addition, customers receive customized tips and help about online marketing and can also easily switch to any product from here. in the case of the performance indicators in particular, a possibility was created to enable data exchange between products and the 1&1 control panel in order to quickly provide customers with all relevant information – also outside the actual product. 1&1 managed cloud hosting in july 2016, the cloud portfolio was expanded with the addition of a new 1&1 managed cloud hosting product. customers will benefit in future from an easy-to-use, even more flexible cloud solution which in contrast to the previous root variant no longer requires any administrative effort.

2 economic report m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 41 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report 2 economic report 2.1 general economic and sector conditions general economic development the international monetary fund (imf) repeatedly downgraded its forecasts for the global economy throughout 2016. in the latest update to its “world economic outlook” on january 16, 2017, the fund calculated growth for the global economy of 3.1% in 2015 (compared to 3.2% in the previous year). this is 0.3 percentage points less than the imf had forecast in january 2016. global growth in the past year was thus the weakest since the global financial and economic crisis of 2008 / 2009. the fund named the following reasons for this weaker-than-expected trend in 2016: slowdown in development of emerging and developing countries strong decline in commodity prices uncertainty surrounding brexit from the point of view of united internet, the economies of its current target markets performed quite differently in the reporting period. whereas the economic trend in the north american target countries was much worse than expected, the performance of the european target countries was more uneven. with growth of 1.6% in 2016, the us economy fell short of its prior-year growth rate (2.6%) and was also 1.0 percentage point below the imf forecast issued at the beginning of the year (outlook january 2016). although economic growth of 1.3% in canada was well above the prior-year figure (0.9%), it still fell 0.4 percentage points short of original expectations. mexico’s growth rate of 2.2% was well down on the previous year (2.6%) and also 0.4 percentage points below the imf’s original forecast. although growth in the eurozone of 1.7% was slower than in the previous year (2.0%), it matched the original expectations of the imf. in france, the 1.3% increase in economic output was on a par with the previous year and in line with original expectations. spain was able to build on its prior-year performance with growth of 3.2% and exceeded the original expectations by 0.5 percentage points. italy also exceeded its prior-year level (0.7%) slightly with growth of 0.9%, but still fell 0.4 percentage points short of expectations. the economic trend in the non-euro country uk was also weaker than expected. growth of 2.0% was down on the previous year (2.2%) and also 0.2% below original expectations – in part due to the brexit vote. the imf calculated economic growth of 1.7% for germany, united internet’s most important market (sales share 2016: around 89%), in 2016. this is 0.2 percentage points more than in 2015 and in line with original expectations. the imf’s calculations for germany largely correspond with the preliminary figures of the country’s federal statistics office (destatis), which calculated growth in gross domestic product (gdp) of 1.8% (after price and calendar adjustments). this growth was driven in particular by consumer spending, as well as public sector spending (including costs for the immigration of refugees).

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 43 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report (stationary) broadband market in germany in view of the high level of household coverage already achieved and the strong trend toward mobile internet usage, demand for new landline broadband connections in germany has slowed since 2008. with expected growth of 0.5 million to 31.2 million in 2016, the number of new connections was again well below previous record years and also 0.6 million below the previous year (prior year: 1.1 million new connections). these figures were calculated by the association of telecommunications and value-added service providers (verband der anbieter von telekommunikations- und mehrwertdiensten – vatm) and dialog consult in their joint “t market analysis for germany 2016” (october 19, 2016). in its survey “german entertainment and media outlook 2016-2020” (october 25, 2016), pricewaterhousecoopers expected sales of landline broadband connections to rise by 1.3% to around € 7.97 billion in 2016. according to calculations of dialog consult / vatm, the average volume of data used is rising much more strongly than the number of newly activated connections and sales of broadband connections – as an indicator of continued growth in usage of e.g. iptv and cloud applications – with growth of 17.0% to 37.2 gb (per connection and month). key market figures: broadband access (landline) in germany broadband connections (in million) broadband revenues (in € billion) data volume per connection and month (in gb) source: dialog consult / vatm; pricewaterhousecoopers mobile internet market in germany 2016 31.2 7.97 37.2 2015 30.7 7.87 31.8 change + 1.6% + 1.3% + 17.0% the german mobile internet market continues to display dynamic growth. according to pricewaterhousecoopers (pwc), the number of mobile internet users rose by 14.0% to 70.2 million in 2016. at the same time, sales of mobile data services grew by 7.9% to € 7.36 billion in 2016. according to forecasts of dialog consult / vatm, the average volume of data used (per connection and month) – as an indicator of the growing use of mobile data services – rose even more strongly in the same period by 22.9% to 510 mb. key market figures: mobile internet access (cellular) in germany mobile internet users (in million) mobile internet revenues (in € billion) data volume per connection and month (in mb) source: pricewaterhousecoopers; dialog consult / vatm 2016 70.2 7.36 510 2015 61.6 6.82 415 change + 14.0% + 7.9% + 22.9%

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 45 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report legal conditions / significant events in 2016, the legal parameters for united internet’s business activities remained largely unchanged from fiscal year 2015 and thus had no significant influence on the development of the united internet group. there were also no significant events in fiscal 2016 which had a material effect on the development of business. 2.2 business development use and definition of relevant financial performance measures in order to ensure the clear and transparent presentation of united internet’s business trend, the group’s annual financial statements and interim financial statements include key financial performance measures – in addition to the disclosures required by international financial reporting standards (ifrs) – such as ebitda, the ebitda margin, ebit, the ebit margin and free cash flow. united internet defines these measures as follows: ebit: earnings before interest and taxes represents the operating result disclosed in the statement of comprehensive income. ebit margin: presents the ratio of ebit to sales. ebitda: earnings before interest, taxes, depreciation and amortization are calculated as ebit / operating result plus the depreciation and amortization (disclosed in the consolidated financial statements) of intangible assets and property, plant and equipment, as well as assets capitalized in the course of company acquisitions. ebitda margin: presents the ratio of ebitda to sales. free cashfl ow: calculated as cash flow from operating activities (disclosed in the consolidated financial statement), less capital expenditure for intangible assets and property, plant and equipment, plus payments from the disposal of intangible assets and property, plant and equipment. insofar as necessary for a clear and transparent presentation, these indicators are adjusted for special items. such special items usually refer solely to those effects capable of restricting the validity of the key financial performance measures with regard to the group’s financial and earnings performance – due to their nature, frequency and/or magnitude. all special items are presented and explained for the purpose of reconciliation with the unadjusted financial figures in the relevant section of the financial statements. in order to ensure comparability with the guidance issued at the beginning of 2016, currency- adjusted sales and earnings figures are calculated by converting the sales and earnings figures of the current reporting period with the standard conversion rates used at year-end 2015.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 47 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report reconciliation of ebitda, ebit and eps with figures adjusted for special items (in € million; eps in €) fiscal year 2016 fiscal year 2015 ebitda special items from share sales (2015) ebitda before special items ebit special items from share sales (2015) ebit before special items eps special items from writedowns (2016) special items from share sales (2015) eps before special items actual development 840.6 - 840.6 647.2 - 647.2 0.88 + 1.25 - 2.13 771.2 - 14.0 757.2 555.7 - 14.0 541.7 1.80 - - 0.07 1.73 united internet continued to invest heavily in new customer relationships in fiscal year 2016 and succeeded in raising the number of fee-based customer contracts organically by 1 million contracts, thus easily exceeding its forecasts (march forecast: + approx. 800,000; august specification: + approx. 900,000; november specification: + 940,000 – 960,000). despite the further decline in the value of the british pound following the brexit decision, consolidated sales rose by 6.3% (currency-adjusted: 6.8%) – from € 3.716 billion to the new record figure of € 3.949 billion. this figure is thus within the targeted range of the most recent forecast (€ 3.94 – € 3.96 billion). despite heavier than planned investment in customer growth and the related increase in customer acquisition costs, ebitda rose by 11.0% (currency-adjusted: 11.8%), from € 757.2 million (comparable prior-year figure without special items) to € 840.6 million. this figure is thus also within the targeted range of the most recent forecast (€ 835 - € 845 million). there was also a strong year-on-year improvement in ebit and eps, as forecast. ebit increased by 19.5%, from € 541.7 million (comparable prior-year figure) to € 647.2 million, while eps rose 23.1% from € 1.73 in the previous year (comparable prior-year figure) to € 2.13 (without special items). the key earnings figures stated above also include costs for major m&a projects in fiscal year 2016, i.e. especially the investment of warburg pincus in the “business applications” division and the takeover of strato (approval by the anti-trust authorities still pending at the end of the reporting period, but granted on february 10, 2017).

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 49 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report development of access contracts in fiscal year 2016 (in million) access, total contracts thereof mobile internet thereof dsl complete (ull) thereof t-dsl / r-dsl dec. 31, 2016 dec. 31, 2015 change 8.72 4.31 4.23 0.18 7.80 3.48 4.08 0.24 + 0.92 + 0.83 + 0.15 - 0.06 development of access contracts in the fourth quarter of 2016 (in million) access, total contracts thereof mobile internet thereof dsl complete (ull) thereof t-dsl / r-dsl dec. 31, 2016 sep. 30, 2016 change 8.72 4.31 4.23 0.18 8.50 4.10 4.20 0.20 + 0.22 + 0.21 + 0.03 - 0.02 thanks to this dynamic customer growth, sales of the access segment rose in line with expectations by 6.4% in 2016, from € 2,742.6 million in the previous year to € 2,917.2 million. in the fiscal years 2015 and 2016, key earnings figures were affected by various factors. earnings in 2015 were positively influenced by a disproportionately high ebitda contribution from key account business (1&1 versatel) in the fourth quarter of the previous year, while there was an opposing burden on key earnings figures for 2016 from one-off expenses for the migration of dsl connections purchased as a pre-service from the telefónica landline network to other dsl networks started in the fourth quarter of 2016. this migration was necessitated by telefónica deutschland’s decision to scale down its own landline network, meaning that it can no longer be considered as a pre-service provider in the future. specifically, segment ebitda increased by 6.8% from € 492.1 million in the previous year to € 525.6 million, while segment ebit rose by 15.9% from € 336.4 million in the previous year to € 389.9 million. as a result, the ebitda margin improved from 17.9% in the previous year to 18.0% in fiscal year 2016 and the ebit margin from 12.3% to 13.4%. all customer acquisition costs for dsl and mobile internet products, as well as costs for the migration of resale dsl connections to complete dsl packages (ull = unbundled local loop) and upgrades to vdsl connections, continue to be charged directly as expenses. as a result of the expansion of business and staff transfers from the applications segment, the number of employees in this segment rose by 10.7% to 3,478 as of december 31, 2016 (prior year: 3,142).

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 51 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report development of business applications contracts in fiscal year 2016 (in million) dec. 31, 2016 dec. 31, 2015 change business applications, total contracts thereof “domestic” thereof “foreign” 6.05 2.34 3.71 5.99 2.35 3.64 development of business applications contracts in the fourth quarter of 2016 (in million) business applications, total contracts thereof “domestic” thereof “foreign” dec. 31, 2016 sep. 30, 2016 6.05 2.34 3.71 6.05 2.34 3.71 + 0.06 - 0.01 + 0.07 change +/- 0.00 +/- 0.00 +/- 0.00 in the field of consumer applications, the main focus in fiscal year 2016 was on monetizing ad-financed accounts. united internet therefore limited ad space for its own pay products once again in 2016. despite this limitation, the number of pay accounts was raised by 20,000 contracts to 2.20 million. at the same time, the number of free accounts rose by 1.14 million to 34.29 million in the reporting period. consequently, the total number of consumer accounts increased by 1.16 million to 36.49 million accounts in fiscal year 2016. development of consumer applications contracts in fiscal year 2016 (in million) consumer applications, total accounts thereof with premium mail subscription thereof with value-added subscription thereof free accounts dec. 31, 2016 dec. 31, 2015 change 36.49 1.72 0.48 34.29 35.33 1.77 0.41 33.15 + 1.16 - 0.05 + 0.07 + 1.14 development of consumer applications contracts in the fourth quarter of 2016 (in million) consumer applications, total accounts thereof with premium mail subscription thereof with value-added subscription thereof free accounts dec. 31, 2016 sep. 30, 2016 change 36.49 1.72 0.48 34.29 35.64 1.73 0.47 33.44 + 0.85 - 0.01 + 0.01 + 0.85 by successfully expanding business with existing customers, focusing on high-quality customer relationships, increasingly monetizing free accounts via advertising, and the first-time consolidation of home.pl, sales of the applications segment rose by 6.9% in fiscal year 2016 (currency-adjusted: 8.8%), from € 1,001.2 million in the previous year to € 1,070.7 million in 2016 – despite the further devaluation of the british pound following the brexit decision. as already announced in the interim statement on the first nine months of 2016, weaker than expected revenues from online advertising in the third quarter of 2016 were largely offset by “catch-up effects” on the part of advertisers in the final quarter of the year. foreign business grew by 10.7% (currency-adjusted: 15.5%), from € 383.6 million to € 424.7 million. key earnings figures easily outpaced this growth in sales: for example, segment ebitda rose by 18.8% (currency-adjusted: 21.0%) from eur 281.9 million in the previous year to € 335.0 million, and segment ebit by 25.1% from € 222.5 million in the previous year to € 278.3 million.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 53 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report significant changes in investments acquisition of a 25.11% stake in tele columbus following the purchase of a 9.8% stake in tele columbus ag, united internet contractually secured the acquisition of a further share package amounting to approx. 15.31% of shares in tele columbus on february 10, 2016 via the subsidiary united internet ventures ag. at the time, the closing of the acquisition was subject to approval by the german federal cartel office (“bundeskartellamt”). this approval was granted on march 7, 2016. after closing the acquisition, united internet has a total indirect shareholding of 25.11% in tele columbus as of december 31, 2016. united internet believes that tele columbus ag is well positioned with attractive market opportunities. as a strategic investor, it plans to accompany the company’s ongoing development and benefit from its growth in value. united internet ag does not, however, currently intend to acquire an equity stake of 30% or more in tele columbus ag – which would oblige it to submit a mandatory bid to all other shareholders of tele columbus ag – nor to make a voluntary takeover bid. sale of hipay shares on may 2, 2016, united internet sold its stake (8.37%) in the listed company hipay group s.a., france. the share sale resulted in proceeds of around € 4.5 million. warburg pincus acquires stake in united internet’s “business applications” division as part of strategic alliance on november 8, 2016, united internet ag and wp xii venture holdings s.à.r.l., an affiliate of private equity funds managed by warburg pincus llc (together: “warburg pincus”), signed an agreement regarding a 33.33% stake of warburg pincus in the united internet division business applications. the transaction values the business currently pooled by united internet within the company 1&1 internet se at € 2.55 billion. this corresponds to a multiple of approx. 12.5 times the division’s planned ebitda result for fiscal 2016. the “business applications” division pooled under 1&1 internet se (part of the overall “applications” segment of united internet) includes the hosting business with domains, home pages, webhosting, servers and e-shops, professional e-mail solutions, online storage and marketing tools. 1&1’s business applications products are mainly targeted at freelancers and smes in numerous european countries (germany, france, uk, italy, austria, poland, spain) as well as north america (canada, mexico, usa). the “business applications” division also comprises the foreign companies belonging to 1&1 internet se as well as their subsidiaries (e.g. fasthosts, arsys, home.pl, internetx, united- domains and sedo) and the respective service companies.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 55 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report the acquisition of 100% of shares in strato ag will be made via a newly founded holding structure as part of the recently announced investment of warburg pincus in united internet’s business applications division. the purchase price tranche of € 566 million due in 2017 at the holding structure level will be financed by an internal loan from united internet of € 350 million as well as by prorated equity capital contributions of united internet and warburg pincus. in the course of the strato acquisition, warburg pincus is to retain its 33.33% stake in united internet’s “business applications” division in accordance with the partnership agreement. by acquiring its competitor strato, united internet will be able to expand its leading market position in the european hosting and cloud application business and drive the consolidation of a market which is currently still strongly fragmented. at the end of the reporting period on december 31, 2016, the share purchase was still subject to approval by the german federal cartel office (approval granted on february 10, 2017). in addition to its (fully consolidated) core operating companies in the access and applications segments, united internet also held investments in the following companies as of december 31, 2016. significant investments in listed companies united internet has held a stake in hi-media s. a., paris / france since the transfer of the group’s display marketing business “adlink media” to hi-media in july 2009. as of december 31, 2016, this shareholding amounted to 10.46%. the company’s market capitalization on december 31, 2016 amounted to around € 21 million (prior year: € 13 million). united internet has held an investment in rocket internet se since august 2014. as of december 31, 2016 the share of voting rights amounted to 8.31%. the company’s market capitalization as of december 31, 2016 was around € 3.161 billion (prior year: € 4.664 billion). in april 2015, united internet announced that it had acquired an equity stake in drillisch ag. as of december 31, 2016, the share of voting rights amounted to 20.11%. the company’s market capitalization as of december 31, 2016 was around € 2.240 billion (prior year: € 2.141 billion). in february 2016, united internet announced its investment in tele columbus ag. as of december 31, 2016, the share of voting rights amounted to 25.11%. the company’s market capitalization as of december 31, 2016 was around € 1.003 billion (prior year: € 1.193 billion). minority holdings in partner companies united internet has held a stake in virtual minds ag since february 2008 (main activity: media technologies, digital advertising and hosting). as of december 31, 2016, united internet’s share of voting rights amounted to 25.10%. via its adition brand also an adserving supplier of united internet portals, virtual minds generated a positive result once again in its fiscal year 2016. in november 2010, united internet acquired a stake in profi tbricks gmbh (main activity: iaas solutions: iaas = infrastructure-as-a-service). as of december 31, 2016, united internet’s share of voting rights amounted to 30.20%. profitbricks closed its fiscal year 2016 with a negative result.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 57 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report in fiscal year 2016, average daily trading via the xetra electronic computer trading system amounted to around 407,000 shares (prior year: 355,000) with an average value of € 16.30 million (prior year: € 15.28 million). multi-period overview: share performance (in €; all stock exchange figures are based on xetra trading) year-end performance year-high year-low 2012 16.31 2013 30.92 2014 37.49 2015 50.91 + 18.2% + 89.6% + 21.2% + 35.8% 17.55 12.49 31.00 16.11 37.95 28.35 51.94 36.17 2016 37.10 - 27.1% 49.89 34.42 average daily turnover 4,906,732 8,554,509 13,731,799 15,279,407 16,301,156 average daily turnover (units) 332,898 367,102 420,640 354,904 407,372 number of shares at year-end 215 million 194 million 205 million 205 million 205 million market value at year-end 3.51 billion 6.00 billion 7.69 billion 10.44 billion 7.61 billion eps adjusted eps(1) 0.56 0.70 1.07 1.07 2.28 1.46 1.80 1.73 0.88 2.13 (1) without special items: 2012 without negative one-off effect from impairment charges (eps effect: € -0.23) and without positive one-off effect from sale of freenet shares (eps effect: € +0.09); 2014 without positive one-off effect from versatel acquisition and portfolio optimization (eps effect: € +0.82); 2015 without effects from sale of goldbach shares and part of stake in virtual minds (eps effect: € +0.07); 2016 without negative one-off effect from impairment (eps effect: € -1.25) share data share type notional share of capital stock german securities identification number (wkn) international securities identification number (isin) ticker symbol xetra reuters ticker symbol bloomberg ticker symbol segment index sector shareholder ralph dommermuth ralph dommermuth gmbh & co. kg beteiligungsgesellschaft (39.02%) rd holding gmbh & co. kg (0.98%) allianz global investors flossbach von storch blackrock united internet (treasury stock) free float as of december 31, 2016; fi gures based on the last respective notifi cation of voting rights registered common stock € 1.00 508903 de0005089031 utdi utdi.de utdi.gr prime standard tecdax software shareholding 40.00% 4.78% 3.09% 3.05% 1.64% 47.44%

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 59 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report capital stock and treasury shares on june 30, 2016, the management board of united internet ag resolved to launch a new share buyback program. in the course of this new share buyback program, up to 5,000,000 company shares (corresponding to approx. 2.44% of capital stock) are to be bought back via the stock exchange. the buyback is based on the authorization of the annual shareholders’ meeting of may 22, 2014 to buy back treasury shares representing up to 10% of the company’s capital stock. the authorization was issued for the period up to september 22, 2017. at the same time, the previous share buyback program adopted by the company’s management board on june 13, 2014 – also on the basis of the authorization granted by the annual shareholders' meeting of may 22, 2014 – was ended. within the framework of these two share buyback programs, a total of 3,000,000 treasury shares were repurchased in fiscal year 2016 at an average price of € 37.39 and with a total volume of € 112.17 million. as of december 31, 2016, united internet held 3,370,943 treasury shares (december 31, 2015: 917,859), corresponding to 1.64% of the current capital stock of € 205 million. the net increase in treasury stock over the year results from the aforementioned buyback of treasury shares and – with an opposing effect – the issue of shares for employee stock ownership plans. investor relations in fiscal year 2016, the management board and investor relations department of united internet ag once again provided institutional and private investors with regular and comprehensive information. information was provided to the capital market via the quarterly statements, half- yearly financial report and annual report, as well as at press and analyst conferences. the company’s management and investor relations department explained the company’s strategy and financial results in numerous one-on-one discussions at the company’s offices in montabaur, as well as at roadshows and conferences in germany, finland, france, the uk, canada, the netherlands, switzerland, spain and the usa. around 30 national and international investment banks are in contact with the company’s investor relations department and publish regular studies and comments on the company’s progress and share performance. apart from such one-on-one meetings, shareholders and potential future investors can also receive the latest news on the company around the clock via the company’s website (www.united-internet.de).

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 61 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report key earnings figures for the fiscal years 2015 and 2016 were influenced by special items with opposing effects. hereby have an effect: in fiscal year 2015, special items from the sale of shares (goldbach shares and part of stake in virtual minds) had a positive impact on key earnings figures (ebitda, ebit, ebt effect = € +14.0 million; net income effect = € +13.7 million; eps effect = € +0.07), whereas in fiscal year 2016, special items from writedowns on financial assets (especially impairment of shares held by united internet in rocket internet se) had a negative impact on key earnings figures (ebt, net income effect: € -245.9 million; eps effect: € -1.25). reconciliation of ebitda, ebit, ebt, net income and eps with figures adjusted for special items (in € million; eps in €) fiscal year 2016 fiscal year 2015 ebitda special items from share sales (2015) ebitda before special items ebit special items from share sales (2015) ebit before special items ebt special items from writedowns (2016) special items from share sales (2015) ebt before special items net income special items from writedowns (2016) special items from share sales (2015) net income before special items eps special items from writedowns (2016) special items from share sales (2015) eps before special items eps before ppa special items from writedowns (2016) special items from share sales (2015) eps before ppa before special items 840.6 - 840.6 647.2 - 647.2 367.1 + 254.9 - 622.0 179.2 + 254.9 - 434.1 0.88 + 1.25 - 2.13 1.04 + 1.25 - 2.29 771.2 - 14.0 757.2 555.7 - 14.0 541.7 535.1 - - 14.0 521.1 366.6 - -13.7 352.9 1.80 - - 0.07 1.73 1.96 - - 0.07 1.89 despite stronger than planned customer growth and the related increase in customer acquisition costs, ebitda rose by 11.0% (currency-adjusted: 11.8%), from € 757.2 million (comparable prior-year figure) to € 840.6 million. ebit increased by 19.5%, from € 541.7 million (comparable prior-year figure) to € 647.2 million. as a result, the ebitda margin improved from 20.4% in the previous year to 21.3% in the fiscal year 2016 and the ebit margin from 14.6% to 16.4%. without consideration of special items in 2016, ebt rose by 19.4% from € 521.1 million (comparable prior-year figure) to € 622.0 million and net income by 23.0% from € 352.9 million (comparable prior-year figure) to € 434.1 million. eps rose correspondingly by 23.1% from € 1.73 (comparable prior-year figure) to € 2.13. before amortization from purchase price allocations (ppa), which mainly relate to the versatel acquisition, eps grew by 21.2% from € 1.89 (comparable prior-year figure) to € 2.29.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 63 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report net cash outfl ows from investing activities amounted to € 422.7 million in the reporting period (prior year: € 766.0 million). this resulted mainly from capital expenditures of € 168.9 million (prior year: € 140.4 million) and disbursements for the acquisition of shares in associated companies of € 266.4 million (especially for the stake in tele columbus). apart from capital expenditures, net cash outflows from investing activities in the previous year were dominated by payments for the acquisition of shares in affiliated companies of € 154.5 million (acquisition of home.pl), disbursements for the acquisition of shares in associated companies of € 417.8 million (especially for the stake in drillisch), and investments in other financial assets of € 93.9 million (especially for the increase in shares held in rocket internet se during the company’s capital increase). there was an opposing effect in the previous year from payments received for the sale of associated companies amounting to € 13.3 million (from part of the shareholding in virtual minds), and proceeds from the sale of financial assets totaling € 18.2 million (especially from the sale of shares in goldbach). free cash fl ow, i.e. net cash inflows from operating activities, less capital expenditures, plus payments from disposals of intangible assets and property, plant and equipment, fell from € 400.5 million (comparable prior-year figure without the aforementioned capital gains tax refund of € 242.7 million net) to € 323.0 million in fiscal year 2016. this decline was due to the shift of an income tax payment of € 100.0 million planned for the fourth quarter of 2015 to the first quarter of 2016. without consideration of this purely closing-date effect, free cash flow rose from € 300.5 million in the previous year to € 423.0 million in fiscal year 2016 – whereby free cash flow in 2016 was positively influenced by closing-date effects from the purchase of pre-services. net cash fl ow for fi nancing activities in fiscal year 2016 was dominated by the purchase of treasury shares amounting to € 112.2 million (prior year: € 0), the assumption of loans totaling € 224.2 million (prior year: € 161.4 million) – especially for the purchase of tele columbus shares – and the dividend payment of € 142.9 million (prior year: € 122.3 million). cash and cash equivalents amounted to € 101.7 million as of december 31, 2016 – compared to € 84.3 million on the same date last year. multi-period overview: development of key cash flow figures (in € million) operative cash flow cash flow from operating activities cash flow from investing activities free cash flow(1) cash flow from financing activities cash and cash equivalents on december 31 2012 214.1 260.5 1.9 204.7 -284.4 2013 280.1 268.3 2014 380.6 2015 554.5 454.0(2) 533.2(2) -207.8 -1.349.8 211.6 -59.2 386.6(2) 1.240.9 -766.0 300.5(3) 23.1 2016 644.2 587.0(2) -422.7 423.0(3) -43.2 42.8 42.8 50.8 84.3 101.7 (1) free cash fl ow is defi ned as net cash infl ows from operating activities, less capital expenditures, plus payments from disposals of intangible assets and property, plant and equipment (2) 2014 without consideration of a capital gains tax payment due to closing-date effects of € 335.7 million; 2015 without consideration of a capital gains tax refund (net) of € 242.7 million (3) 2015 without consideration of a capital gains tax refund (net) of € 242.7 million and including an income tax payment (originally planned for the fourth quarter of 2015) of around € 100.0 million; 2016 without consideration of the aforementioned income tax payment (originally planned for the fourth quarter of 2015) of around € 100.0 million

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 65 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report multi-period overview: development of relative indebtedness net bank liabilities(2) / ebitda net bank liabilities(2) / free cash flow(3) 2012 0.75 1.26 2013 0.73 1.40 2014(1) 1.79 3.42 2015 1.88 3.63 2016 1.97 3.92 (1) 2014: increase in net bank liabilities mainly due to versatel acquisition, rocket investment and closing-date effects from capital gains tax payment (2) net bank liabilities = balance of bank liabilities and cash and cash equivalents (3) free cash fl ow 2014 and 2015 without consideration of closing-date effects from a capital gains tax payment of € 335.7 million (2014) and a capital gains tax refund (net) of € 242.7 million (2015) and an income tax payment (originally due in the fourth quarter of 2015) of around € 100.0 million (2016) further details on the objectives and methods of the group’s financial risk management are provided under point 42 of the notes to the consolidated financial statements. see page 209 multi-period overview: development of key balance sheet items (in € million) total assets 1,107.7 1,270.3 3,673.4 3,885.4 4,073.7 2012 2013 2014 2015 2016 cash and cash equivalents shares in associated companies other financial assets property, plant and equipment intangible assets goodwill liabilities due to banks capital stock treasury stock equity equity ratio 42.8 90.9(1) 70.1 109.2 151.8 356.2(4) 300.3(5) 215.0 263.6 198.1 17.9% 42.8 115.3 47.6 116.2 165.1 50.8 34.9(1) 695.3(2) 689.3(3) 385.5(3) 84.3 468.4(1) 449.0(2) 665.2 389.5 452.8(4) 977.0(4) 1,100.1(4) 101.7 755.5(1) 287.7(2) 655.0 369.5 1,087.7 340.0 1,374.0(5) 1,536.5(5) 1,760.7(5) 194.0(6) 205.0(6) 5.2(6) 307.9 24.2% 35.3 1,204.7(7) 32.8% 205.0 26.3 1,149.8 29.6% 205.0 122.5 1,197.8 29.4% (1) repurchase of versatel shares via versatel’s holding company (2012); decrease due to contribution of the gfc and eff funds to rocket and complete takeover of versatel (2014); increase due to investment in drillisch (2015); increase due to investment (2) (3) (4) decrease due to impairment charges for sedo holding (2012); increase due to arsys acquisition (2013); increase due to complete takeover in tele columbus (2016) increase due to investment in rocket (2014), decrease due to sale of goldbach shares and subsequent valuation on shares in listed companies (2015); decrease due to subsequent valuation of shares in listed companies (2016) increase due to complete takeover of versatel (2014) of versatel (2014); increase due to acquisition of home.pl (2015) (5) decrease due to repayment of loans (2012); increase due to rocket investment and takeover of versatel (2014); increase due to increased stake in rocket, drillisch investment, and acquisition of home.pl; increase due to investment in tele columbus (6) decrease due to share cancellations (2013); increase due to capital increase (2014) (7) increase due to capital increase (2014) management board’s overall assessment of the group’s business situation on the whole, the macroeconomic conditions in the main target countries of the united internet group developed more negatively than expected during the reporting period. whereas the economies of the usa, canada and mexico, as well as the uk and italy, lagged well behind the imf’s original forecast in some cases, only spain actually exceeded expectations. france and germany – united internet’s most important market – at least developed within the expected range. the german ict market trended in line with the german economy during fiscal year 2016 and also exceeded the original expectations with growth of 1.7%.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 67 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report 2.4 position of the company earnings of united internet ag as a pure holding company, the earnings position of united internet ag is dominated by its investment and financial result. in the period under review, sales of the parent company amounted to € 2.0 million (prior year: € 1.4 million) and result mainly from services rendered to the group’s subsidiaries. other operating income rose to € 6.2 million (prior year: € 1.9 million) and mainly comprises income relating to other periods from the reversal of accruals (especially for the employee stock ownership program) as well as foreign currency effects. adjusted for effects from employee stock ownership programs, personnel expenses in fiscal year 2016 amounted to € 1.3 million (prior year: € 1.8 million). the decline results from the decision of ceo ralph dommermuth to waive his right to management board remuneration for the fiscal year 2016 and the following years. as in the past, mr. ralph dommermuth will continue to drive the company’s long-term development and value growth, and will participate in the company’s success as the major shareholder via dividends. other operating expenses increased to € 14.0 million (prior year: € 9.3 million) and mostly comprise legal, auditing and consulting fees (€ 12.2 million; prior year: € 4.4 million). income from profi t transfer agreements of € 103.2 million (prior year: € 80.4 million) result from the profit transfer of 1&1 mail & media applications se. income from investments of € 120.0 million (prior year: € 0) relate to a dividend paid from the balance sheet profit 1&1 internet se. expenses for loss assumptions of € 249.1 million (prior year: € 15.1 million) mainly result from the compensation expense of united internet ventures ag (€ 229.7 million – especially from the writedown of shares held by the company in rocket internet), as well as united internet corporate services gmbh (€ 6.7 million) and 1&1 telecommunication se (€ 12.5 million). the parent company’s result before taxes amounted to € -17.7 million (prior year: € 74.3 million). income taxes of € 29.6 million (prior year: € 23.0 million) comprise deferred tax expenses of € 10.6 million, current taxes of 2016 of € 24.9 million (of which € 12.5 million for corporation tax and the solidarity surcharge and € 12.3 million for trade tax). there was an opposing effect from tax income not relating to the period amounting to € 5.8 million. the net loss in the separate financial statements of united internet ag amounted to € -47.3 million (prior year: net income of € 51.3 million).

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 69 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report management board’s overall assessment of the current business situation of united internet ag due to its role as the group’s holding company, the economic position of united internet ag at parent company level is mainly influenced by its investment result. the above statements on the group’s economic position therefore also apply qualitatively for united internet ag itself. 2.5 significant non-financial performance indicators united internet ag believes that its entrepreneurial activities are not solely restricted to the pursuit and implementation of economic objectives, but also involve a commitment and responsibility towards society and the environment. united internet assumes this responsibility in a variety of ways. the most important aspects are summarized in the following sections. sustainable business policy united internet is committed to pursuing a sustainable business policy. this sustainability is illustrated in particular by its high level of investment in customer relationships, in service quality, customer retention and customer satisfaction, in product and network quality, as well as in security and data privacy – and thus also in sustainable growth. customer growth in its fiscal year 2016, united internet once again invested heavily in customer growth and raised the number of fee-based customer contracts organically by 1.00 million to 16.97 million contracts. in addition to these fee-based contracts, united internet also operates 34.29 million active free accounts (prior year: 33.15 million) at its data centers that are refinanced via advertising revenue. in total, therefore, united internet manages a total of 51.26 million customer accounts (prior year: 49.12 million) globally. multi-period overview: development of customer relationships (in million) growth of “fee-based contracts” growth of “free accounts” growth of “total accounts” 2012 + 1.18 + 1.00 + 2.18 2013(1) + 1.41 - 0.05 + 1.36 2014(2) + 1.33 + 0.61 + 1.94 2015(3) + 1.19 + 1.03 + 2.22 2016 + 1.00 + 1.14 + 2.14 (1) (2) (3) including 0.33 million fee-based contracts from the takeover of arsys including 0.42 million fee-based contracts from the takeover of versatel including 0.34 million fee-based contracts from the takeover of home.pl and an opposing 0.08 million from contract streamlining

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 71 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report security and data privacy with the launch of the “e-mail made in germany” initiative in 2013 (in cooperation with a network also comprising deutsche telekom and freenet), united internet also offers its customers high standards with regard to the security and privacy of e-mail communication. this includes the encrypted transmission of all e-mails on all network routes, the processing and storage of all data in germany according to german data protection regulations and the identification of secure e-mail addresses within the e-mail applications. as of april 29, 2014, only ssl keys certified in germany are used within the “e-mail made in germany” network and all transmission routes are fully encrypted. as an important enhancement of the security standard “e-mail made in germany”, the united internet e-mail services gmx and web.de developed an encryption system based on the globally recognized “pretty good privacy” (pgp) standard in 2015. the new e-mail security level works on all commonly used devices, is provided free to all customers of the two mail services, and is compatible with all previous pgp applications. in 2016, the pgp solution of gmx and web.de was also rolled out in the foreign markets of france, spain and the uk via the international e-mail brand mail.com. with the introduction of the de-mail standard in 2012, a legally secure e-mail communication system was established in germany. it can be used, for example, to make official registrations with local authorities or legally binding business transactions. web.de, gmx and 1&1 have been accredited de-mail service providers since 2013. with the certification received in 2016 according the eu regulation eidas, web.de, gmx and 1&1 can also offer their users legally secure e-mail communication in all other eu member states in future on the basis of this certified infrastructure. the eidas (“electronic identification and signature”) regulation provides an eu-wide standard for the unambiguous identification of all participants and the digital signing of electronic, cross- border data transmission. this creates uniform conditions for trustworthy, verifiable document traffic and legally secure communication between citizens, authorities and companies in all eu member states. employees the internet sector is a highly dynamic and globally networked industry with short innovation cycles. united internet ag has risen to these challenges with great success over many years now. one of the key factors for the success and growth of the united internet group are its dedicated and highly competent employees and executives with their entrepreneurial and autonomous approach to work. the company therefore attaches great importance to a sustainable and balanced strategy across all aspects of its hr activities: from employee recruitment, to targeted entry-level and vocational training formats, tailored skills training programs, support with individual career paths, through to sustainable management development programs and the retention of high potentials and top performers. united internet ag was once again recognized as a top employer in 2016. based on an independent study of the “top employers institute”, united internet received the “top employers germany” award – as in the preceding years. certification is only awarded to organizations which offer staff attractive working conditions. assessment is based on career opportunities, employer benefits, working conditions, training and development opportunities, and the corporate culture.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 73 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report sales per employee, based on annual average headcount, amounted to approx. € 484 thousand in fiscal year 2016 (prior year: approx. € 461 thousand). targeted staff support and ongoing development in order to keep pace with or even anticipate new technologies, competitive ideas and market trends, it is important to continuously develop the company’s employees. pooling and retaining knowledge in-house requires a sustainable policy for aligning the company and market requirements for various functions with the individual career objectives and prospects of staff. united internet attaches great importance to giving all employees at all locations – regardless of departments and functions – the same opportunities for development. a transparent, group-wide framework for staff development was therefore defined from an early stage. the range comprises standard programs and support measures, as well as various function-based offerings which are tailored to the respective employee and skills profile. specifically, this involves a gradual assumption of responsibility and an expansion of competencies within the specific field of work function – from beginner to expert. staff are supported both in their daily work (“on the job”) as well as with targeted training measures. united internet is also moving with the times in this respect by offering a wide range of training via a digital platform (1&1 campus) in addition to the existing program. everybody recognizes it on a day-to-day basis: learning is no longer restricted to school and vocational education. social, economic and above all technological developments both call for and enable a permanent learning process. this new platform offers flexible learning opportunities, a wide range of formats, easy usage possibilities, and requires users to display a high degree of inner drive during the learning process. in addition to vertical development paths, horizontal development is also possible between different functions. in addition, the organization’s permeability allows transfers between products or segments and thus enables the interdisciplinary development of employees. for employees who have reached the highest competency level (“senior”) for their respective function and would like to assume more responsibility for a special topic or in a management role, the company offers two career models: the “management track” and the “expert track”. whereas employees choosing the “management track” gradually assume more and more staff responsibility, “experts” have a high degree of specialist knowledge. however, they have no direct line responsibility, but are top performers, “know-how owners”, and advisors on strategic questions in their specific field and act as multipliers for their knowledge inside and outside the company. both the management and expert tracks are “permeable”, i.e. horizontal movement is also possible and an expert can become a manager and vice versa. discovering and nurturing potential and performance from an early stage with the aid of junior management programs, such as the 1&1 graduate or master+ plans, united internet develops young talents fresh from university from an early stage. the main target is to be able to recruit and train future managers and specialists from within the company. further development programs are offered for staff with exceptional abilities and potential in all areas of the company. such employees are then accompanied through a structured program of individual development and training plans in order to prepare them for their future personal challenges, and those of the company (myway+ for staff and 1&1 move for management and experts).

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 75 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report at the beginning of the new apprenticeship year 2016, a total of eight refugees were given the opportunity of a future career (with an apprenticeship contract). over 160 young people were serving their apprenticeships with group companies at year-end 2016. after successfully passing their examinations, united internet endeavors to take on as many apprentices as possible and to make an attractive job offer to every graduate. in fiscal year 2016, 32 apprentices and dhbw students were given full-time jobs. as part of the “fair company initiative”, united internet is committed to providing fair conditions for interns and thus guaranteeing a high level of benefit from their internships. in addition to adequate financial compensation, interns receive dedicated personal support from their respective departments and hr. interns and former interns regularly emphasize this aspect and stress the high learning effect achieved during their internships. internships are offered every year for students of it, product management and online marketing, as well as finance and hr. united internet is also a sponsor of the “germany scholarship” program, in which companies and the state play an equal role in promoting future graduates and helping them complete successful and challenging degree courses. the scholarship program supports students whose achievements promise future excellence in their studies and careers. since the program was launched in 2011, united internet has sponsored students at the two elite universities lmu and tu munich. however, united internet does not limit its activities to financial support, but also offers the current five students personal mentoring by colleagues in the respective departments. this often leads to internships or jobs as working students. diversity without the individual strengths of its employees, united internet would not be what it is today – an internationally successful, innovative company on track for growth. united internet attaches great importance to the constructive use of diversity management and the handling of social differences between its employees. the united internet group’s corporate culture is based on mutual respect and a positive attitude toward individual differences with regard to culture, nationality, gender, age and religion – in other words, everything that makes the company’s employees unique and distinctive. a work force composed of diverse personalities offers ideal conditions for creativity and productivity. the resulting potential for new ideas and innovation strengthens united internet’s competitive position and enhances its opportunities in future markets. in accordance with this principle, the company strives to find the field of activity and function for each employee which allows them to fully exploit their individual potential and talents. in addition to productivity, diversity also helps raise the general level of satisfaction among employees. these are key reasons for many applicants to select their future employer. as united internet’s customers also have a wide variety of needs and wishes, they appreciate a business partner who can live up to their own diversity. however, the promotion of diversity is not simply a one-size-fits-all solution. employees and applicants are recruited, employed and promoted on the basis of objective criteria, such as skills, aptitude and expertise. in corporate divisions in which women are structurally under-represented, united internet seeks to raise their representation provided they have the same qualifications, skills and suitability. however, the company always decides on a case-by-case basis.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 77 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report united internet has been using electricity from renewable energy sources at its data centers in germany since december 2007. the servers at our german data centers in karlsruhe and baden airpark, for example, are powered 100% by electricity from norwegian and french hydroelectric power plants supplied by stadtwerke karlsruhe. the data centers in the usa were also converted to climate-neutral electricity in 2008. and the data centers in spain and the uk also use power from regenerative sources. the main elements of our energy-saving efforts at data centers in germany are: an intelligent cooling system. the warm cooling water is first led through open-air coolers on the roof of the data center that do not require energy-hungry compressors and use the “natural” outdoor temperature for cooling. the server hardware. a proportion of our computers are built-to-order for united internet. we leave out unnecessary components and specify, for example, energy-saving processors and power supplies with low heat loss. this means that less heat is radiated and data rooms do not have to be cooled as intensively. the software used. the webhosting operating system used by united internet is our own development, based on linux. the modification enables us to manage the data of several thousand customers on a single computer and at the same time and thus utilize our resources as sensibly as possible. the virtualization. the server hardware used in data centers is often only utilized at an average rate of 15% to 25%. with the aid of virtualization, efficiency can be increased significantly – thus saving energy. social responsibility “united internet for unicef” foundation “united internet for unicef” was set up in september 2006 as an independent foundation under german civil law. it primarily supports projects of unicef, the united nation’s children’s fund. we carefully select projects from the wide range of unicef topics and present them on the high- reach portals of the united internet group (1&1, gmx und web.de) in order to attract as many donors as possible – for the particular project or as long-term unicef sponsors. during emergency situations, such as hurricane matthew in haiti in october 2016, our newsletters can reach over 30 million people within 24 hours and thus facilitate the effective collection of donations. in 2016, united internet for unicef celebrated its ten-year anniversary. since its foundation, it has already collected over € 35 million and is thus one of the most important partners of unicef germany. various interviews and events were held throughout the anniversary year to mark the occasion. one highlight was the “donated day” campaign on february 29, 2016 together with patron mats hummels and unicef. the additional day was to be used to help children in crisis-ridden countries. from the donations received, five lucky donors and their friends were given the opportunity to meet german national soccer team player and unicef patron mats hummels in person and watch the match between borussia dortmund and vfl wolfsburg.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 79 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report in 2016, many united internet employees worked as volunteers in local projects as part of the “1&1 welcome” campaign. united internet ag acts as a sponsor for selected integration offerings and refugee homes at its major german locations karlsruhe, montabaur, munich and zweibrücken. together with local organizers, our employees offered regular activities to facilitate the transition into everyday german life, such as sports activities, playing music together, day trips and childcare. united internet employees can use up to 10% of their working time for such activities. in addition, united internet provided funds to enable the purchase of items needed quickly in refugee homes. mobile classrooms with free internet access were also provided to enable e-learning programs for language acquisition. since april 2016, the main focus of activities has been a training program to prepare refugees for the german labor market. together with local authorities and social institutions, united internet developed a modular program called “fit for job”. participants are given a general overview of office work, the cultural environment, and possible careers in the it industry. graduates of this program will then also be offered internships or entry-level jobs. armed with the knowledge from this training program, graduates are able to successfully apply for jobs at german companies – whether at united internet or other employers. over 140 refugees and immigrants have so far participated in the program at our sites in montabaur, karlsruhe and munich. around 40 participants subsequently completed an internship at companies of the united internet group. numerous employees volunteer to act as trainers in the “fit for job” program, in addition to their daily work. with its various programs, united internet is also active in the “we together” initiative, in which over 150 companies so far pool their integration activities and exchange notes on their experiences.

4 risk, opportunity and forecast report m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 81 m a n a g e m e n t r e p o r t company and group profile economic report subsequent events risk, opportunity and forecast report declaration of corporate governance ics and rms remuneration report disclosures required by takeover law dependent company report 4 risk, opportunity and forecast report the risk and opportunity policy of the united internet group is based on the objective of maintaining and sustainably enhancing the company’s values by utilizing opportunities while at the same time recognizing and managing risks from an early stage in their development. a risk and opportunity management system which is “lived” ensures that united internet ag can exercise its business activities in a controlled company environment. the risk and opportunity management system regulates the responsible handling of those uncertainties involved with economic activity. 4.1 risk report risk management the concept, organization and task of united internet ag’s risk management system are defined by the management board and supervisory board and documented in a risk management strategy and risk manual which is valid for and available to all members of the group. these requirements are regularly adapted to changing legal conditions and continually developed. the corporate risk management department coordinates the implementation and ongoing development of the risk management system and is responsible for the centrally managed risk management process on behalf of the management board of united internet ag. the corporate audit department regularly examines the functioning and efficiency of the risk management system. as part of his statutory auditing obligations for the annual financial statements and consolidated financial statements, the external auditor also examines whether the risk early recognition system is generally suitable for the early identification of risks and developments which might endanger the company so that suitable countermeasures can be swiftly introduced. the system complies with statutory requirements regarding risk early recognition systems, as well as with the german corporate governance code. its design is based on the specifications of the international iso standard iso/iec 31000. in accordance with the regulations of the german stock corporation act, the supervisory board also examines the efficacy of the risk management system. methods and objectives of risk management the risk management system comprises those measures which enable united internet ag to identify, classify in terms of money and scenario, steer and monitor from an early stage all possible risks for the attainment of its corporate objectives with the aid of assessments and early warning systems. the aim of the group-wide risk management system is to provide maximum transparency for management regarding the actual risk situation, its changes and the available options for action so that a conscious decision can be taken to accept or avoid such risks. there is always an established indirect connection to central group-wide risk management via the regular reporting channels throughout the group and a direct connection for all major divisions. this ensures the completeness of registered risks in the risk management system.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 83 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report following the decision of the uk to leave the european union, the advertising market has been noticeably more cautious. this has implications for the applications segment of united internet. further effects in the uk, such as the adoption of new regulations (regarding company or tax legislation etc.), are possible but cannot be reliably estimated with regard to their financial impact. business development and innovations a key success factor for united internet is the development of new and constantly improved products and services in order to constantly raise the number of our customer contracts and strengthen customer retention. there is always a risk, however, that new developments might be launched too late on the market or not accepted by the target group. united internet counters such risks by closely observing market trends and the competition as well as by undertaking product development which constantly responds to customer feedback. legal & political regulation in the access segment, the decisions of the german federal network agency and federal cartel office have an influence on the pricing of internet access tariffs. price increases of network providers from whom united internet purchases pre-services for its own customers can have a negative impact on the profitability of tariffs. in the same way, there is also the possibility that a lack of regulation may lead to a deterioration of market circumstances for united internet. united internet attempts to counter this tendency toward an increasing regulation risk by cooperating with various pre-service providers and by actively participating in the activities of industry associations. with its complete takeover of versatel on october 1, 2014, united internet now also has its own network. this network infrastructure gives united internet the possibility to gradually expand its vertical integration procure fewer internally produced dsl pre-services. the eu’s general data protection regulation (gdpr) was adopted by the eu parliament on 14 april 2016 and published in the official journal of the european union on 4 may 2016. the new rules will apply from may 2018 onwards and include increased sanctions for breaches of duty, a revision of the requirement for consent declarations and new obligations for reporting to authorities and those affected in the case of data loss. data protection united internet stores the data of its customers on servers according to international security standards at its own and at rented data centers. the handling of these data is subject to extensive legal regulations. the company is aware of this great responsibility and attaches great importance and care to data protection. at the same time, however, the possibility can never be excluded that data protection regulations are contravened due to human error or technical weaknesses. by using state-of-the-art technologies, continually monitoring all data-protection and other legal regulations, providing extensive staff training on data protection regulations, and involving data protection aspects and requirements as early as possible in product development, the company continually invests in improving the standard of its data security. litigation the united internet group is currently involved in various legal disputes and arbitration proceedings arising from its normal business activities. the outcome is by definition uncertain and thus represents a risk. insofar as the size of the obligation can be reliably estimated, accruals are formed for such risks from litigation.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 85 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report provision of services threat potential of the internet united internet ag generates its commercial success largely within the environment of the internet. in order to provide products and services, the company uses information and telecommunication technologies (data centers, transmission systems, connection nodes etc.) in its business processes which are closely networked with the internet and whose availability may be endangered by threats from the internet. for example, there is a risk of dddos attacks (ddos = distributed denial of service), which may lead to an overloading of technical systems and server downtime. in order to deal with such risks more quickly, the existing monitoring and alarm system, together with the necessary processes and documentation, is continually optimized. a › ddos there is also the risk of hacker attacks with the aim of stealing or deleting customer data or using services fraudulently. united internet counters this risk with the aid of virus scanners, firewalling concepts, self-initiated tests and various technical monitoring mechanisms. over the past years there has been a steady increase in the amount of spam e-mails on the internet. there is a risk that spammer abuse the company’s e-mail systems and that these are then blocked by other e-mail providers. in order to counter this risk, various precautions are taken to keep spam to a minimum. united internet’s active participation in cross-border working groups also enables it to play a role in the ongoing development of mail security standards. it was possible to observe an increasing professionalization of the attackers and their attack methods during the reporting period. according to germany’s federal office for information security (bsi), the number of known malicious program variants was 560 million in august 2016. the threat posed by so-called ransomware, i.e. the danger of encryption trojans, has grown significantly in germany since the end of 2015. the threat potential of the internet represents the largest threat group for united internet with regard to its effects, which are all monitored by numerous technical and organizational measures. of particular relevance in this respect are the operation and continuous improvement of the security management system and the steady enhancement of system resilience. complexity and possible manipulation of hardware and software used united internet’s products and related business processes are based on a complex technical infrastructure and a number of success-critical software systems (servers, customer relationship databases and statistics systems etc.). constantly adapting this infrastructure to changing customer needs leads to greater complexity and regular changes. in addition to major events like the migration of databases, this may lead to various disruptions or defects. should this affect our business systems or their databases, for example, daily account debiting may be delayed or no longer possible. should this affect our performance systems, for example, united internet may not be able to provide its customers with the promised service, on a temporary or longer-term basis. the company meets these risks by making targeted adjustments to the architecture, introducing quality assurance measures, and establishing spatially separated (geo-redundant) core functionalities.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 87 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report liquidity the general liquidity risk of united internet consists of the possibility that the company may not be able to meet its financial obligations, such as the redemption of financial debts. the company’s objective is to continually cover its financial needs and secure flexibility, for example by using overdraft facilities and loans. our group-wide cash requirements and surpluses are managed centrally by our cash management system. by netting these cash requirements and surpluses within the group, we can minimize the amount of external bank transactions. netting is managed via our cash pooling process. the company has established standardized processes and systems to manage its bank accounts and internal netting accounts as well as for the execution of automated payment transactions. in addition to operating liquidity, united internet also holds other liquidity reserves, available at short notice. these liquidity reserves consist of syndicated credit lines with varying terms. the strong expansion of business over the past few years has increased the company’s exposure to possible credit default. despite the increased possibility of occurrence (due to customer growth), the effects on united internet’s liquidity are classified as very low. the company still has no significant concentration of liquidity risks. financial covenants some of the company’s existing credit lines are tied to so-called financial covenants. an infringement of these covenants may cause the lender to terminate the financial arrangement and demand immediate repayment of the amounts drawn. the covenants contained in the loan agreements of united internet require the company to maintain a specified net financial debt-to- ebitda ratio and a specified ebitda-to-interest ratio. these ratios are used to calculate the relative burden which the financial liabilities (e.g. from interest payments) place on the company. compliance with the covenants is regularly monitored by the company’s management board. financial market the activities of united internet ag are exposed in particular to financial risks from changes in interest rates, exchange rates and stock exchange prices. interest the company is fundamentally exposed to interest risks as the major share of its borrowing bears variable interest rates with varying terms. as part of its liquidity planning, the company constantly monitors the various investment possibilities and debt conditions. any borrowing requirements are met by using suitable instruments to manage liquidity. surplus cash is invested on the money market to achieve the best possible return. due to developments on the global finance markets, the interest risk remained largely unchanged. market interest rate changes might have an adverse effect on the interest result and are included in our calculation of sensitive factors affecting earnings. in order to present market risks, united internet has developed a sensitivity analysis which shows the impact of hypothetical changes to relevant risk variables on pre-tax earnings. the reporting period effects are illustrated by applying these hypothetical changes in risk variables to the stock of financial instruments as of the balance sheet date.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 89 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report although the assessment of key risk areas or individual risks changed over the course of fiscal year 2016 due to the development of external conditions or as a consequence of the company’s own countermeasures, the overall risk situation for united internet is virtually unchanged compared to the previous year and against the background of corporate development. in the assessment of the overall risk situation, the opportunities which exist for united internet were not taken into consideration. there were no risks which directly jeopardized the continued existence of the united internet group in the fiscal year 2016 nor as of the preparation date for this management report, neither from individual risk positions nor from the overall risk situation. probability of occurrence / possible impact of company risks probability of occurrence possible impact risks in the field of “strategy” internationalization low (2015: low) high (2015: high) risks in the field of “market” competition high (2015: low) high (2015: high) business development and innovations risks in the field of “law & politics” low (2015: low) high (2015: high) regulation data protection litigation high (2015: high) low (2015: very low) high (2015: high) high (2015: high) high (2015: high) high (2015: high) risks in the field of “personnel” employees low (2015: low) high (2015: high) risks in the field of “fraud” fraud high (2015: low) high (2015: low) risks in the field of “service provision” threat potential of the internet low (2015: low) extremely high (2015: very high) complexity / possible manipulation of hardware and software low (2015: low) complexity in development low (2015: low) high (2015: high) high (2015: high) risks in the field of “financial instruments and financial risk management” liquidity very high (2015: low) very low (2015: very low) financial covenants very low (2015: very low) very low (2015: very low) financial market low (2015: very high) high (2015: very high) capital management very low (2015: very low) very low (2015: very low)

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 91 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report broad strategic positioning in growth markets in view of its broad positioning in current growth markets, the company’s purely strategic growth opportunities are clearly apparent: universally accessible, permanently available and increasingly powerful broadband connections are enabling new and more sophisticated cloud applications. from the current perspective, these internet-based programs for home users, freelancers and small companies are likely to be united internet’s growth drivers over the coming years – both as stand-alone products in the applications segment as well as in combination with fixed-line and mobile access products in our access segment. participation in market growth despite the uncertain macroeconomic conditions, united internet – as well as many of the sector’s leading analysts – expects further progress in those markets of importance to the company. united internet is one of the leading players in these markets. at home and abroad. with its highly competitive access products, its growing portfolio of cloud applications, its strong and specialized brands, its high sales strength, and already established business relationships with millions of private and business customers (cross-selling and up-selling potential), united internet is also well positioned to participate in the expected market growth of both its business segments. expansion of market positions united internet ag is now one of the leaders in many of its business fields. based on its existing technological know-how, its high level of product and service quality, the widespread popularity of group brands such as 1&1, gmx, web.de, united-domains, internetx and fasthosts, its business relationships with millions of private and business customers, and its high customer retention ratio, united internet sees good opportunities to build on its current market shares. entry into new business fields one of united internet's core competencies is to recognize customer wishes, trends and thus new markets at an early stage. with its broadly based value chain (from product development and data center operation, to effective marketing, powerful sales organization and active customer support), united internet is often faster at placing innovations on the market and – thanks to the high level of cash generation in its existing business fields – capable of providing them with strong marketing support. when new opportunities appear on the horizon, such as de-mail, united internet is well prepared and also capable of financing many years of cost-intensive preparation thanks to its strong cash generation in existing business fields. with the high market share of all german e-mail users, the company is excellently placed to participate in the digital, legally secure post business (especially from “postal charges” and “ad mailings”). the same applies to the “electricity market” in germany, in which the company has been active since mid-2016 via its high-reach gmx and web.de portals.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 93 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report 4.3 forecast report expectations for the economy in its global economic outlook published in january 2017, the international monetary fund (imf) updated its forecasts for the development of the global economies in 2017 and 2018. all in all, the imf’s outlook for the global economy is slightly more optimistic than in its previous forecasts. according to the imf, a major cause for the improved growth prospects is the ongoing recovery of those major emerging and developing countries which suffered economic crises in 2016. the imf also believes that growth prospects have improved in the usa, china, europe and japan. at the same time, the imf refers to the current considerable uncertainty surrounding the future economic direction of the new us government. specifically, the imf still predicts (compared to its outlook of october 2016) that the global economy will grow by 3.4% in 2017 and 3.6% in 2018 – following growth of 3.1% in 2016. the latest imf forecasts paint a varied picture for united internet’s target markets in north america (the usa, canada and mexico). the us economy is expected to grow by 2.3% in 2017 and 2.5% in 2018 – after growth of 1.6% in 2016. the imf has thus upgraded its previous forecasts by 0.1 and 0.4 percentage points. following growth of 1.3% in 2016, the canadian economy is expected to grow by 1.9% and 2.0% in 2017 and 2018, respectively (and thus 0.0 and 0.1 percentage point more than previously forecast). the economy in mexico is expected to grow by 1.7% in 2017 and 2.0% in 2018, following growth of 2.2% in 2016. for both years, this is 0.6 percentage points less than previously forecast. the imf anticipates growth in the eurozone to reach 1.6% in both 2017 and 2018 – compared to 1.6% in 2016. the imf has thus upgraded its forecast for 2017 slightly by 0.1 percentage points and left 2018 unchanged. the imf expects diverging economic trends in united internet’s main european markets (france, spain, italy and the non-euro country uk). following growth of 1.3% in 2016, the imf’s forecast for france remains unchanged at 1.3% for 2017 and 1.6% for 2018. by contrast, spain is expected to grow by 2.3% and 2.1% in 2017 and 2018 – after growth of 3.2% in 2016 – and thus by 0.1 and 0.2 percentage points more than previously forecast. the imf forecasts growth in italy of 0.7% in 2017 and 0.8% in 2018, following growth of 0.9% in 2016. this is 0.2 and 0.3 percentage points less than previously expected. and after growing by 2.0% in 2016, the imf forecasts growth for the uk in 2017 and 2018 of 1.5% and 1.4%, respectively. this corresponds to 0.4 and 0.3 percentage points less than previously expected. for united internet’s most important market, germany, the imf forecasts economic growth of 1.5% in both 2017 and 2018 – following on from 1.7% in 2016. these forecasts are both 0.1 percentage point more than previously expected.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 95 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report mobile internet market in germany by contrast, all experts continue to predict further strong growth for the mobile internet market. following market growth of 7.9% to € 7.36 billion in 2016, pricewaterhousecoopers also forecasts an increase in mobile data services of 6.8% to € 7.86 billion in 2017. this growth will be driven above all by favorable – and thus for the consumer attractive – prices, as well as by the boom in smartphones and tablet pcs and the respective applications (apps). market forecast: mobile internet access (cellular) in germany (in € billion) sales source: pricewaterhousecoopers cloud computing market 2017e 7.86 2016 7.36 change + 6.8% in an update of its study “forecast analysis: public cloud services, worldwide”, gartner forecasts global growth for public cloud services of 18.2%, from $ 208.2 billion to $ 246.0 billion in 2017. market forecast: global cloud computing (in $ billion) global sales of public cloud services thereof business process services (bpaas) thereof application infrastructure services (paas) thereof application services (saas) thereof management and security services thereof system infrastructure services (iaas) thereof cloud advertising source: gartner 2017e 246.0 44.2 8.9 46.5 7.7 34.2 104.5 2016 208.2 40.9 7.2 38.6 6.3 24.9 90.3 change + 18.2% + 8.1% + 23.6% + 20.5% + 22.2% + 37.3% + 15.7% online advertising market in germany despite the uncertainties surrounding brexit, advertisers continued to display a strong willingness to invest in online advertising activities in 2016. experts also forecast further growth for 2017. pricewaterhousecoopers expects an increase of 6.6% to € 6.98 billion. the strongest growth is expected once again for mobile online advertising and video advertising with increases of 16.0% and 17.9%, respectively. market forecast: online advertising in germany (in € billion) online advertising revenues thereof search marketing thereof display advertising thereof affiliate / classifieds thereof mobile online advertising thereof video advertising source: pricewaterhousecoopers 2017e 6.98 3.48 1.46 1.00 0.58 0.46 2016 6.55 3.24 1.44 0.98 0.50 0.39 change + 6.6% + 7.4% + 1.4% + 2.0% + 16.0% + 17.9%

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 97 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report at the same time, united internet expects a net burden on earnings of around € 30 million in 2017 from these regulation issues, as well as from the migration of dsl connections purchased as a pre-service from the telefónica landline network to other dsl networks. this migration was necessitated by telefónica deutschland’s decision to scale down its own landline network, meaning that it can no longer be considered as a pre-service provider in the future. against this backdrop, united internet expects the following growth at group level for its fiscal year 2017 – including the consolidation of strato as of april 1, 2017: consolidated sales are expected to rise by approx. 7% in fiscal year 2017 from € 3.95 billion in the previous year. this includes sales of approx. € 95 million from the first-time consolidation of strato and an opposing effect from the burden on sales of approx. € 60 million from regulation issues (roaming / termination charges). ebitda is expected to improve by approx. 12% in fiscal year 2017 from € 841 million in the previous year. this includes ebitda of approx. € 36 million from the first-time consolidation of strato as of april 1, 2017 as well as an opposing effect from the net burden on ebitda of around € 30 million from regulation issues and the telefónica dsl migration. the number of fee-based customer contracts is expected grow organically by approx. 800,000 contracts. with the takeover of strato, approx. 1.8 million further fee-based customer contracts will be added. the company also anticipates significant year-on-year growth in ebit – in its operating business – in the fiscal year 2017. the expected increase in earnings in fiscal 2017 will not impact eps, which is likely to be virtually unchanged from the previous year (€ 2.13) for the group’s operating business. this is due to several reasons. the initial earnings contribution of strato (as of april 1, 2017) will be opposed by ppa writedowns from the strato takeover which will largely offset the earnings contribution at eps level. in addition, there will be a negative impact on eps growth from the strong rise in minority interests in fiscal year 2017 (“non-controlling interests” – according to the income statement) due to the 33.33% stake of warburg pincus in the “business applications” division completed in the first quarter of 2017 and a one-off tax effect arising from this transaction. due to its role as a holding company, the earnings of united internet ag at parent company level are mainly influenced by its investment result (profit transfers and dividends) and the interest result. the net income of united internet ag for fiscal year 2017 according to german commercial law will be dominated by proceeds from the sale of shares in 1&1 internet se to 1&1 internet holding se within the group. this transaction is likely to produce one-off, non-cash income of € 1.4 billion before taxes. in addition, united internet ag will recognize additional interest income from a vendor loan resulting from the sale of shares. against this backdrop, the management board expects strongly positive net income for fiscal year 2017. united internet ag plans to maintain its shareholder-friendly dividend policy based on continuity in the coming years. dividend payouts will continue to represent 20-40% of adjusted net income after minority interests (net income attributable to “shareholders of united internet ag” – according to the income statement) in the future, unless funds are required for further company development.

5 accounting-related internal controland risk management system m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 99 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report 5 accounting-related internal control and risk management system in accordance with sec. 289 (5) and sec. 315 (2) no. 5 german commercial code (hgb), united internet ag is obliged to describe the main features of its accounting-related internal control and risk management system in its management report. united internet ag regards risk management as part of its internal control system (ics). the ics is understood as an ongoing process comprising organizational, controlling and monitoring structures to ensure permanent compliance with legal and corporate requirements. the management board of united internet ag is responsible for the scope and structure of its ics and takes account of the company’s specific requirements. the monitoring of the ics’s effectiveness is one of the duties of the supervisory board of united internet ag, which is regularly informed by the management board about the status of the ics and the findings of the company’s internal audit system. within the united internet group, the corporate audit department is responsible for independently auditing the appropriateness, effectiveness and functionality of the ics and has been granted extensive rights with regard to information, examination and access in order to exercise its duties. its audits are based on a risk-oriented audit plan which also includes regular audits of subsidiaries. in addition, the corporate audit department conducts fundamental audits regarding the proper functioning of important asset and inventory stock-taking. in addition, those areas of ics of relevance for financial reporting are audited with regard to efficiency by the external auditors as part of their risk-oriented audit approach. the accounting-related ics is continually being developed and comprises principles, procedures and measures to secure the effectiveness, economic efficiency and compliance of the accounting system and to ensure that the relevant laws and standards are observed. during preparation of the consolidated financial statements, the ics is used in particular to ensure the application of international financial reporting standards (ifrs), as endorsed by the european union, and the additional provisions under commercial law pursuant to sec. 315a of the german commercial code (hgb). when preparing the annual financial statements and management report, the ics also helps ensure that regulations under commercial law are observed. however, a fundamental aspect of every ics, irrespective of its particular design, is that it cannot provide absolute safety that material misstatements in accounting are avoided or detected. this may be due, for example, to incorrect discretionary decisions of individuals, faulty controls or criminal acts. the following statements refer solely to the fully consolidated subsidiaries included in the annual financial statements of united internet ag, for which united internet ag has the direct or indirect possibility of determining their financial and monetary policy in order to derive a benefit from the activity of these companies. the task of united internet ag’s risk management system includes setting measures to detect and assess risks, reduce them to an acceptable level, and monitor recognized risks. a risk management system requires organized action to deal suitably with uncertainty and threats and urges employees to utilize the regulations and instruments required to ensure compliance with the risk management principles. in addition to operative risk management, it also includes the systematic early recognition, management and monitoring of risks. the accounting-related risk management system focuses on the risk of false statements in accounting and external reporting.

6 disclosures required by takeover law m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 101 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report 6 disclosures required by takeover law the following disclosures according to secs. 289 (4) and 315 (4) german commercial code (hgb) represent conditions as of the balance sheet date. as required by sec. 176 (1) sentence 1 aktg, the disclosures are explained in the sections below. composition of capital the subscribed capital of united internet ag as of december 31, 2016 amounts to € 205,000,000 divided into 205,000,000 no-par value, registered shares. each share entitles the owner to one vote. there are no other share categories. in the case of a capital increase, the commencement of dividend entitlement for new shares may be determined separately from the moment of contribution. all shares are listed on the stock exchange. limitations affecting voting rights or the transfer of shares there are legal limitations affecting voting rights of certain shares pursuant to sec. 71b aktg and sec. 71d s. 4 in conjunction with sec. 71b aktg. at the end of the reporting period, united internet holds 3,370,943 shares representing 1.64% of capital stock. there are also legal limitations affecting voting rights regarding a conflict of interests pursuant to sec. 136 (1) aktg for shares held by the management board and supervisory board. among the members of the management board, mr. ralph dommermuth holds 82,000,000 shares (40.00% of capital stock) as of december 31, 2016. moreover, mr. robert hoffmann holds 211,907 shares (0.10% of capital stock), mr. jan oetjen holds 14,033 shares (0.01% of capital stock), mr. martin witt holds 23,195 shares (0.01% of capital stock), and mr. frank krause holds 920 shares (0.00% of capital stock). among the members of the supervisory board, mr. michael scheeren holds 300,000 shares (0.15% of capital stock) at the end of the reporting period. there are no limitations affecting the transfer of shares. direct and indirect participations in capital with over 10% of voting rights the company’s ceo, mr. ralph dommermuth, owns 82,000,000 shares or 40.00% of the 205,000,000 shares in united internet ag as of december 31, 2016. the management board is not aware of further participations in capital exceeding 10% of voting rights.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 103 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report capital stock has been conditionally increased by up to a further € 25,000,000.00, divided into 25,000,000 no-par shares (conditional capital 2015). the conditional capital increase is earmarked for shares to be granted to bearers or holders of warrant or convertible bonds, which the shareholders’ meeting on may 21, 2015 authorized the company or a subordinated group company to issue in the period ending may 20, 2020, providing the issue is in return for cash and no cash settlement is granted or the warrant or convertible bonds are serviced from the stock of treasury shares or approved capital. powers of the management board to buy back shares the authorization of the annual shareholders' meeting granted on may 23, 2013 and originally limited until november 22, 2014 to acquire, sell or cancel treasury shares was cancelled by the annual shareholders' meeting of may 22, 2014 on expiration of may 22, 2014 with a future effect. in accordance with sec. 71 (1) no. 8 aktg, the annual shareholders' meeting of may 22, 2014 at the same time authorized the management board to acquire, sell or cancel treasury shares of up to ten percent of its capital stock in the period directly following the expired authorization and ending on september 22, 2017. the authorization may be exercised by the company wholly or in installments, once or several times for the pursuit of one or more purposes; it can, however, also be exercised by dependent or majority-owned corporations of the company or by third parties for the company’s or their own account. the authorization may not be used for the purposes of trading with company shares. united internet shares may be purchased in all legally permissible manners, especially via the stock exchange and/or by means of a public bid. in the case of a purchase via the stock exchange, the price for the acquisition of united internet shares (excluding transaction costs) may not be more than ten percent lower or higher than the stock market price. the price for the purchase of united internet shares by means of bids can be settled by a cash payment or by transfer of shares in a listed company pursuant to sec. 3 (2) aktg (“exchange shares”). the management board is authorized, subject to the approval of the supervisory board, to use these and previously acquired shares for all legally permissible purposes, in particular a sale of treasury shares other than via the stock exchange or by offering to all shareholders or for cash compensation. the authorization to sell for cash contribution is reduced by that proportion of capital stock attributable to shares excluded from subscription rights in direct or corresponding application of sec. 186 (3) sentence 4 aktg. moreover, the management board is authorized to use the acquired treasury shares, subject to the approval of the supervisory board, to grant shares to members of the management board and other company employees, as well as the management and employees of affiliated companies pursuant to secs. 15 ff. aktg, should such persons be entitled to subscription on the basis of employee stock ownership plans. insofar as treasury shares are to be transferred to members of the company’s management board, the decision shall be incumbent upon the supervisory board. the management board is further authorized to use the acquired treasury shares, subject to the approval of the supervisory board, to fulfill conversion and warrant rights or conversion obligations.

7 declaration on company management /corporate governance report m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 105 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report 7 declaration on company management / corporate governance report as a german public company listed on the stock exchange, the management of united internet ag is primarily determined by the german stock corporation act (aktg) and the rules set forth in the currently valid version of the german corporate governance code (gcgc). the term corporate governance stands for responsible corporate management and control geared to long-term value creation. efficient cooperation between management board and supervisory board, respect for stockholder interests, openness and transparency of corporate communications are key aspects of good corporate governance. the management board and supervisory board of united internet ag regard it as their duty to secure the company's continued existence and sustainable value creation through responsible corporate governance focused on the long term. the following report contains the “declaration on company management”, in accordance with sec. 289a hgb for the parent company and in accordance with sec. 315 (5) hgb for the group, as well as the “corporate governance report” of the management board and supervisory board pursuant to section 3.10 of the german corporate governance code. management and corporate structure in accordance with its legal status, united internet ag operates a dual management and monitoring structure comprising two corporate bodies: the management board and the supervisory board. the third body is the shareholders’ meeting. all three bodies are committed to serving the company’s interests. supervisory board working procedures of the supervisory board the supervisory board is elected by the annual shareholders' meeting and consisted of three members in fiscal year 2016. the members of the supervisory board are generally elected for a period of five years. in accordance with german law, the company’s articles, its rules of procedure, and the corresponding recommendations of the german corporate governance code – unless deviations are declared pursuant to sec. 161 aktg – the supervisory board is in regular contact with the management board and monitors and advises it with regard to the management of business, and the company’s risk and opportunity management system.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 107 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report targets for the composition of the supervisory board / status of implementation following the resolution of past uncertainties in the regulatory environment, the supervisory board specified first concrete objectives regarding its composition in a resolution adopted on december 16, 2015 and will take these objectives into consideration when making election proposals at future annual shareholders' meetings. it was decided not to set a regular limit for the duration of membership to the supervisory board as the supervisory board believes that such a limitation is not appropriate compared to other criteria for nominating supervisory board members and that it is ultimately at the discretion of the annual shareholders' meeting to elect those candidates to the supervisory board whom they believe are best suited to represent their interests. in view of the size of the supervisory board (three members), the business in which the company operates, the size and structure of the company, the scope of the company’s international activities the company’s stock market listing and its current shareholder structure, the supervisory board of united internet ag has adopted the following targets for its future composition: the members of the supervisory board must collectively have the knowledge, skills and professional experience necessary for them to carry out their tasks in the correct manner. the supervisory board will take this and the following targets into consideration when making its nomination proposals to the annual shareholders' meeting. in consideration of this requirement, the following targets apply for the composition of the supervisory board. the specific situation of the company at the time must always be considered when implementing these targets. the supervisory board aims to ensure that it always includes at least one member with several years of experience working abroad or working for a company with international activities. supervisory board members should not have any activities elsewhere which are likely to result in frequent conflicts of interest. this includes executive positions held with major competitors. the supervisory board aims to ensure that at least two of its three members are independent within the meaning of section 5.4.2 of the german corporate governance code (gcgc). at the time of their election or re-election, members of the supervisory board should not have reached the age of 70. the supervisory board aims to achieve a composition which reflects as wide a spectrum of relevant experience for the company as possible. with regard to the representation of women, reference is made to the separate targets set in accordance with mandatory guidelines. the supervisory board aims to ensure that at least one of its members has special knowledge and experience in the application of accounting principles and internal control processes. the supervisory board aims to ensure that all its members have sufficient time to exercise their duties with due care throughout the entire period of office. it will take this aspect into consideration when making its nomination proposals and check with the respective candidates that this is the case. the supervisory board of united internet ag is of the opinion that the stated targets for the composition of the supervisory board are currently fulfilled without exception.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 109 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report the management board members inform each other about important events within their divisions. matters of greater importance which are not approved in the budget must be discussed and decided by at least two management board members, whereby one of the two management board members must be responsible for the finance division. irrespective of their areas of responsibility, all management board members constantly monitor those data which are crucial for the company’s business development so they are always able to help avert potential disadvantages, or implement desirable improvements and expedient changes by drawing them to the attention of the full management board. the full management board resolves on all matters of particular importance and scope for the company or its subsidiaries and investment companies. resolutions are adopted by the full management board with a simple majority. should the vote result in a tie, the chairman of the management board has a casting vote. the resolutions of the management board are recorded in the minutes. the full management board meets regularly once a month and otherwise as required. each management board member immediately discloses any conflict of interest to the supervisory board. current composition of the management board as in the previous year, the management board of united internet ag comprised the following five members in fiscal year 2016: ralph dommermuth, company founder and chief executive officer (with the company since 1988) robert hoffmann, deputy chair, management board member responsible for business applications (with the company since 2006) jan oetjen, management board member responsible for consumer applications (with the company since 2008) martin witt, management board member responsible for access (with the company since 2009) frank krause, chief financial officer (with the company since 2015) targets for the share of women on the supervisory board, management board and in management positions / status of implementation the “law on equal participation of men and women in private-sector and public-sector management positions” (führposgleichberg) of april 24, 2015 resulted in amendments to the german stock corporation law and a number of other laws.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 111 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report compliance compliance is an integral component of corporate and management culture throughout the united internet group. for united internet ag, compliance means ensuring its activities comply with all relevant laws for its business, as well as with its own principles and regulations. this includes open and fair communication with our employees, customers, business partners, shareholders and the public. as an internet service provider with several million customers and a large number of business partners, united internet’s legally and ethically compliant behavior is vital for retaining the trust of its customers and business associates. to ensure conduct in line with our corporate culture, the management board has created a binding framework for the company’s ethical principles and values. moreover, it has defined values and management guidelines, and compiled the most important rules of behavior in a code of conduct. this “culture of cooperation” provides guidance for employees in their everyday work and creates a secure framework for making the correct decisions. the framework applies equally to the management board, directors, managers and all employees. in the interest of all employees and the company, compliance violations are investigated, resolved and punished by taking the appropriate measures. to this end, the company’s management board has established a compliance organization to ensure adherence to legal and internal regulations, including the company’s values, and to anchor them firmly in the organization. the compliance organization is part of an holistic risk management system which not only includes the “grc” functions corporate governance, risk management & compliance, but also the corporate audit and legal department. these risk-mitigating functions are headed by the group general counsel, who reports directly to the cfo of united internet ag. the compliance organization is responsible for the creation of suitable structures and processes to support the implementation of compliance throughout the company and to efficiently introduce measures. the compliance organization present and anchored in the business units via functional and local compliance managers (fcms and lcms). in addition to their normal functions, the fcms and lcms support the area of compliance. with its three levels of action prevent, detect, and respond, the overarching element of the compliance system remains the responsibility of all managers for compliance. this includes acting as a role model, as enshrined in the company’s management guidelines, and goes beyond this: all managers of the company must set an example with regard to compliance and ensure that decisions and actions in their area of responsibility are always in line with the relevant legal provisions and the company’s own values and rules. financial disclosures / transparency it is the declared aim of united internet to inform institutional investors, private shareholders, financial analysts, employees and the public simultaneously and with equal treatment about the company’s situation by means of regular, open and up-to-date communication.

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 113 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report stock option plans the principles of the stock-based compensation plan of united internet ag are described in the remuneration report in section 8 of this management report. further details are provided in section 36 of the notes to the consolidated financial statements. see pages 117 and 193 directors’ dealings according to sec. 15a of the german securities trading act (wertpapierhandelsgesetz - wphg) and article 19 of the market abuse regulation (mar), members of the management board and supervisory board of united internet ag are legally obliged to declare their purchase and sale of shares or debt instruments in united internet ag traded on the financial markets, or financial instruments related to them, whenever the transaction conducted by an executive body or related persons reaches or exceeds the amount of € 5,000 within one calendar year. in fiscal year 2016, the management board and supervisory board of united internet ag conducted the following securities transactions (in chronological order): on june 13, 2016, mr. martin witt sold 12,000 shares at a price of € 38.258875 each. the total volume amounted to € 459k. on august 12, 2016, mr. martin witt sold 5,000 shares at a price of € 40.1449160 each. the total volume amounted to € 201k. on november 18, 2016, mr. martin witt exercised 15,000 subscription rights and received in return 5,331 shares in united internet ag at a price of € 37.420 each. the total volume amounted to € 199k. on december 19, 2016, mr. martin witt sold 2,000 shares at a price of € 36.6010 each. the total volume amounted to € 73k. no further directors’ dealings were reported to the company by its executive bodies. the following table shows the number of shares held by members of the management board and supervisory board (in shares, corresponding to voting rights and the notional share of capital stock in €). shareholdings of management board and supervisory board members shareholding jan. 1, 2016 dec. 31, 2016 management board direct indirect total direct indirect total ralph dommermuth 0 82,000,000 82,000,000 0 82,000,000 82,000,000 robert hoffmann 100,000 frank krause jan oetjen martin witt 920 14,033 3,139 0 0 0 0 100,000 211,907 920 14,033 3,139 920 14,033 23,195 0 0 0 0 211,907 920 14,033 23,195 118,092 82,000,000 82,118,092 250,055 82,000,000 82,250,055

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 115 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report in accordance with section 161 german stock corporation act (aktg), the management board and supervisory board of united internet ag declare that: since submitting its last declaration of conformity issued on march 5, 2016, united internet ag complied with the recommendations of the “government commission german corporate governance code” in its applicable version dated may 5, 2015 (“code”) and plans to continue to comply with these recommendations with the following exceptions: deductibles in the case of d&o insurance policies for supervisory board members (section 3.8 para. 3 of the code) the d&o insurance policy for supervisory board members does not include any deductible. this is also not planned in the future as united internet ag does not generally believe that the motivation and responsibility with which the members of the supervisory board conduct their duties can be improved by such a deductible. capping management board compensation (section 4.2.3 para. 2 sentence 6 of the code) the agreements regarding management board compensation do not include payment caps for the total amount. although provision is made for caps on variable components, these are not expressed as a total but as a percentage of a fixed amount. as the supervisory board believes that the general capping of management board compensation intended by the code’s recommendation is already suitably reflected by the provisions of the current compensation agreements, it does not intend to comply in full with the code’s recommendation acc. to section 4.2.3 para. 2 sentence 6 in the future. formation of committees (section 5.3 of the code) in view of its current size with only three members, the supervisory board has not formed any committees and fulfills all its duties as a whole. under these circumstances, the supervisory board cannot recognize how the formation of committees would improve the efficiency of its work. targets for the composition of the supervisory board (section 5.4.1 para. 2 and 3 of the code) following the resolution of past uncertainties in the regulatory environment, the supervisory board specified first concrete objectives regarding its composition in a resolution adopted on december 16, 2015 and will take these objectives into consideration when making election proposals at future annual shareholders' meetings. it was decided not to set a regular limit for the duration of membership to the supervisory board as the supervisory board believes that such a limitation is not appropriate compared to other criteria for nominating supervisory board members and that it is ultimately at the discretion of the annual shareholders' meeting to elect those candidates to the supervisory board whom they believe are best suited to representing their interests. the specific objectives of the supervisory board and the status of their implementation are published in the company’s corporate governance report. consideration of the deputy chair when setting compensation for supervisory board members (section 5.4.6 para. 1 sentence 2 of the code) when setting compensation for supervisory board members, the position of the deputy chair of the supervisory board is not considered. the deputy chair of the supervisory board does not currently undertake any additional duties which would represent a greater burden compared to those of a regular supervisory board member.

8 remuneration report m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 117 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report 8 remuneration report principles of the management board remuneration system the supervisory board is responsible for determining the remuneration of management board members. the total compensation of individual members of the management board is determined by the supervisory board based on a performance assessment, taking into account any payments made by group companies. criteria for determining the appropriateness of remuneration are based on the responsibilities of the individual management board member, their personal performance, the economic situation, the performance and outlook of the company, as well as a review of the comparability of compensation with peer companies and the remuneration structure in place in other areas of the company. the size of the remuneration components is regularly reviewed, whereby the supervisory board also takes account of management board remuneration in relation to compensation for senior management and the workforce of united internet ag as a whole over time. the remuneration received by the members of the management board of united internet ag is performance-oriented and consists of fixed and variable elements. the fixed remuneration component is paid monthly as a salary. the size of the variable remuneration component depends on reaching certain, fixed financial targets agreed at the beginning of the fiscal year. these targets are based mainly on key sales and earnings figures. the target attainment corridor is generally between 90% to 120%. no bonus is paid below 90% of the agreed target and the bonus calculation is capped at 120% of the agreed target. there is no provision for subsequent amendment of the performance targets. no minimum payment of the variable remuneration component is guaranteed. in the case of four management board members, there is a component providing long-term incentives in the form of a compensation program based on virtual shares (sars). the exercise hurdle of this program is 120% of the share price. payment of value growth is capped at 100% of the calculated share price when the virtual options were granted. fringe benefits generally include a company car commensurate with the respective position, which is taxable as a benefit in kind. there are no retirement benefits from the company to members of the management board. with regard to severance pay for members of the management board, united internet bases its regulations on the recommendations of the german corporate governance code: payments made to a management board member on premature termination of their contract, including fringe benefits, are limited to the value of two years’ compensation (severance pay cap) and to the remaining term of the employment contract the severance pay cap is calculated on the basis of total compensation for the past fiscal year and the expected total compensation for the current fiscal year if the employment contract is terminated for a serious cause for which the management board member is responsible, no payments are made to the management board member

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 119 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report the tables below provide details on management board remuneration in accordance with the recommendations of the german corporate governance code. value of benefits granted for the reporting period the table below shows the value of benefits granted for the reporting period. it also shows the minimum and maximum values that can be achieved. for the one-year variable compensation, the target value (i.e. the value in the event of 100% target achievement) granted for the reporting period is stated. in addition, the multi-year variable compensation granted in the reporting period is broken down into different plans and the relevant periods of time are stated. for subscription rights and other share-based payments, the fair value at the time of granting is calculated. norbert lang(1) – cfo until june 30, 2015 frank krause(2) – cfo since june 30, 2015 2015 2016 2016 (min) 2016 (max) 2015 2016 2016 (min) 2016 (max) 150 11 161 95 0 256 0 256 0 0 0 210 106 316 82 1.213 1.213 1,611 0 1,611 360 111 471 140 465 465 1,076 0 1,076 360 111 471 58 0 0 529 0 529 360 111 471 168 - - 639 0 639 jan oetjen(3) – consumer applications since october 1, 2014 martin witt(3) – access since october 1, okt. 2014 2015 2016 2016 (min) 2016 (max) 2015 2016 2016 (min) 2016 (max) 300 13 313 200 0 513 0 513 300 13 313 200 0 513 0 513 300 13 313 0 0 313 0 313 300 13 313 240 0 553 0 553 300 12 312 200 0 512 0 512 300 12 312 200 0 512 0 512 300 12 312 0 0 312 0 312 300 12 312 240 0 552 0 552

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 121 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report principles of the supervisory board remuneration system the 3 members of the supervisory board of united internet ag also form the supervisory board of the most important subsidiaries, i.e. the sub-groups 1&1 telecommunication se, 1&1 internet se and 1&1 mail & media applications se, as well as united internet ventures ag. the supervisory board members each receive separate compensation for their work on behalf of the companies mentioned. in each case, this compensation consists of a fixed element and an attendance fee. the new remuneration system for the supervisory board of united internet ag adopted by the annual shareholders' meeting 2015 consists of a fixed remuneration component for an ordinary member and the deputy chairman of the supervisory board of € 15,000 each per full fiscal year and for the chairman of the supervisory board of € 30,000 per full fiscal year. in addition, each member of the supervisory board receives a payment of € 1,000 for each meeting they attend in person, or via telephone, video conference or corresponding connection. there are no stock option plans for members of the supervisory board. in the course of their duties for 1&1 telecommunication se, the fixed remuneration component for an ordinary member of the supervisory board is € 50,000 per full fiscal year, for the deputy chairman of the supervisory board € 55,000 per full fiscal year and for the chairman of the supervisory board € 60,000 per full fiscal year. in addition, each member of the supervisory board receives a payment of € 1,000 for each meeting they attend in person, or via telephone, video conference or corresponding connection. frank krause(2) cfo since june 1, 2015 robert hoffmann business applications since january 1, 2013 jan oetjen(3) consumer applications since october 1, 2014 martin witt(3) access since october 1, 2014 2016 360 111 471 139 0 0 610 0 610 2015 210 106 316 82 0 0 398 0 398 2016 300 12 312 199 2015 300 12 312 130 4,917 4,917 902 902 4,015 4,015 0 0 5,428 5,359 0 0 5,428 5,359 2016 300 13 313 199 0 0 512 0 512 2015 300 13 313 207 896 896 0 1,416 0 1,416 2016 300 12 312 199 1,681 121 199 402 959 0 2,192 0 2,192 2015 300 12 312 201 722 121 199 402 0 1,235 0 1,235

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 123 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report stock-based compensation for employees in addition to its long-standing employee stock ownership program for management, united internet ag introduced a second and wide-ranging program for its employees in germany in may 2016. with the aid of this program, united internet aims to involve its employees more directly in the development of the company and its share, raise staff motivation and performance, honor the loyalty of staff to the united internet group, and at the same time support the development of the company. against this backdrop, the new employee stock ownership program (“esop”) was designed in the form of a stock-based compensation plan. the program consists of two components: firstly, qualifying employees received the option to buy a specific number of shares in united internet ag at a reduced price, which they must then hold for a period of two years (vesting period). on completion of the vesting period, participants are granted further shares for free, provided they are still working for the company – whereby employees of companies participating in “performance matching” receive additional shares if certain pre-defined targets are reached. both the discounted acquisition of the shares and the free allocation of additional shares after the end of the vesting period represent a taxable non-cash benefit. employees at international locations were offered a different (non-stock-based) incentive system for tax reasons. further details on employee stock ownership plans are provided in section 36 of the notes to the consolidated financial statements. see page 193

m a n a g e m e n t a t a g l a n c e f i n a n c i a l s t a t e m e n t s m i s c e l l a n e o u s 125 m a n a g e m e n t r e p o r t company and group profile risk, opportunity and forecast report declaration of corporate governance economic report ics and rms remuneration report subsequent events disclosures required by takeover law dependent company report

consolidated financial statement consolidated financial statement 128 balance sheet 130 net income 132 cash fl ow 134 changes in shareholders’ equity 136 notes to the consolidated fi nancial statements 224 development of fi xed assets 226 audit opinion 227 responsibility statement

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 129 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement liabilities and equity liabilities current liabilities trade accounts payable liabilities due to banks advance payments received income taxes liabilities deferred revenue other accrued liabilities other financial liabilities other non-financial liabilities non-current liabilities liabilities due to banks deferred tax liabilities trade accounts payable deferred revenue other accrued liabilities other financial liabilities total liabilities equity capital stock capital reserves accumulated profit treasury stock revaluation reserves currency translation adjustment equity attributable to shareholders of the parent company non-controlling interests total equity total liabilities and equity notes december 31, 2016 december 31, 2015* 29, 35 30, 35 35 31, 35 32, 35 33, 35 34.1, 35 34.2, 35 373,710 395,862 422,236 12,326 64,145 235,503 13,237 114,748 33,528 1,269,433 29,332 15,084 129,586 231,979 23,835 105,445 36,805 967,928 30, 35 1,338,417 1,507,170 14 29, 35 32, 35 33, 35 34.3, 35 37 38 38 38 38 39 94,211 9,479 33,820 39,671 90,891 97,946 4,042 26,856 36,209 95,521 1,606,489 1,767,744 2,875,922 2,735,672 205,000 205,000 377,550 724,213 -122,493 30,988 -17,794 372,203 695,799 -26,318 -96,021 -1,443 1,197,464 1,149,220 348 538 1,197,812 1,149,758 4,073,734 3,885,430 * prior year figures adjusted in connection with the final purchase price allocation for an acquisition in the prior-year, please refer to note 4.2. see page 159

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 131 f i n a n c i a l s t at e m e n t s balance sheet notes income statement cash flow fixed assets audit opinion shareholders’ equity responsibility statement result per share of shareholders of united internet ag (in €) - basic - diluted weighted average shares (in million units) - basic - diluted statement of comprehensive income net income 2016 january - december 2015 january - december notes 15 15 15 15 0.88 0.88 1.80 1.79 203.26 203.84 203.92 205.20 a › diluted 179,162 366,579 items that may be reclassified subsequently to profit or loss currency translation adjustment - unrealized -14,136 11,003 market value changes of available-for-sale financial instruments before taxes - unrealized tax effect market value changes of available-for-sale financial instruments before taxes - realized tax effect categories that are not reclassified subsequently to profit or loss share in other comprehensive income of associated companies other comprehensive income total comprehensive income attributable to non-controlling interests shareholders of united internet ag 23 23 23 23 21,059 -313,403 38 3,102 106,873 0 -2,519 54 -961 0,0 112,873 -301,763 292,035 64,816 164 174 291,871 64,642

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 133 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 2016 january - december 2015 january - december notes cash paid for business acquisitions net of cash acquired capital expenditure for intangible assets and property, plant and equipment payments from disposals of intangible assets and property, plant and equipment payments for company acquisitions less cash received 4.2 purchase of shares in associated companies 4.1, 22, 45 -266,384 investments in other financial assets payments for loans granted payments from loans granted cash received from the disposal of associated companies payments from the disposal of financial assets refunding from other financial assets 23, 45 40 4.3, 22 4.3, 23 23 0 -657 3,548 0 4,464 0 -168,861 -140,442 4,894 309 7,732 -154,483 -417,821 -93,885 -1,141 250 13,303 18,165 2,283 cash paid for business acquisitions net of cash acquired -422,687 -766,039 cash flow from financing activities purchase of treasury stock sale of treasury stock in connection with an employee stock ownership plan taking out of loans repayment of loans redemption of finance lease liabilities dividend payments dividend payments to non-controlling interests payments in connection with the investment of warburg pincus cash flow from financing activities net increase in cash and cash equivalents cash and cash equivalents at beginning of fiscal year currency translation adjustments of cash and cash equivalents cash and cash equivalents at end of fiscal year 37 37 30 30 44 16 47 -112,167 6,964 0 0 360,000 191,411 -135,849 -30,000 -18,178 -15,721 -142,857 -122,260 -354 -717 -377 0 -43,158 23,053 21,138 32,886 84,261 50,829 -3,656 546 101,743 84,261

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 135 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement revaluation reserves 38 €k currency translation adjustments 38 €k equity attributable to shareholders of united internet ag non- controlling interests €k 216,745 -12,446 1,203,988 -312,766 -312,766 -96,021 -96,021 127,009 127,009 30,988 11,003 11,003 -1,443 -1,443 -14,136 -14,136 -2,215 -17,794 366,405 -301,763 64,642 0 2,850 -122,260 0 1,149,220 1,149,220 178,998 112,873 291,871 -112,167 6,964 4,433 -142,857 0 0 1,197,464 total equity €k 1,204,729 366,579 -301,763 64,816 0 2,850 -122,260 -377 1,149,758 1,149,758 179,162 112,873 292,035 -112,167 6,964 4,433 -142,857 -354 0 1,197,812 39 €k 741 174 174 -377 538 538 164 164 -354 348

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 137 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 2.1 explanation of main accounting and valuation methods consolidation principles the consolidated group comprises united internet ag and all domestic and foreign subsidiaries (majority shareholdings) controlled by it. according to ifrs 10, control exists if an investor has the power to make decisions, is exposed to variable returns, and is able to use power to affect the amount of variable returns. the annual financial statements of subsidiaries are prepared as to the same balance sheet date and using the same standardized accounting and valuation methods as those applied by the parent company. all intercompany balances, transactions, income, expenses, profits and losses from intercompany transactions contained in the carrying value of assets are fully eliminated. subsidiaries are fully consolidated from the point of acquisition, i.e. from the date on which the company gained control. consolidation ends as soon as the parent company no longer has control over the subsidiary. upon loss of control, a gain or loss from the disposal of the subsidiary is recognized in the consolidated statement of comprehensive income in the amount of the difference between the (i) proceeds from the disposal of the subsidiary, the fair value of the remaining shares, the carrying amount of the non-controlling interests, and the cumulative amounts of other comprehensive income attributable to the subsidiary, and (ii) the carrying amount of the subsidiary’s net assets to be disposed of. non-controlling interests represent the proportion of the result and net assets which is not attributable to the group. non-controlling interests are disclosed separately in the consolidated balance sheet. they are disclosed in the consolidated balance sheet as part of shareholders’ equity, but separate to the equity capital attributable to the shareholders of united internet ag. for purchases of shares without a controlling influence (minority shareholding) or disposals of shares with a controlling influence but without loss of the controlling influence, the carrying values of shares with or without a controlling influence are adjusted to reflect the change in the respective shareholding. the amount by which compensation paid or received for the change in shareholding exceeds the carrying value of the respective share without a controlling influence is recognized directly in equity as a transaction with the shareholders. revenue recognition revenue is recognized separately for each of the group’s different segments (see also explanations on segment reporting in note 5). see page 162 revenue is recognized when it is probable that the group will receive an economic benefit and the amount of revenue can be reliably determined. revenue is measured at the fair value of the compensation received. sales tax or other charges are not considered. the recognition of revenue must also fulfill the measurement criteria described below.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 139 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement in addition to application revenues, the segment also generates revenue from the performance- based advertising formats domain marketing and affiliate marketing. in domain marketing, united internet operates (via sedo gmbh) a trading platform for the secondary domain market (domain trading). at the same time, the company offers domain owners the possibility to market unused domains to advertisers (domain parking). in addition to these customer domains, the company also holds its own portfolio of marketable and salable domains. in domain trading, the company receives sales commission from the successful sale of domains via the platform and also generates revenue from services relating to domain value assessments and transfers. the sales commissions and services are generally based on a percentage of the sales price achieved, whereas fixed prices are generally charged for the other services. in domain parking, domains are mainly marketed using text links, i.e. links on the parked domains to offers of the advertisers (primarily via cooperation agreements with search engines). the company receives performance-based payment on a monthly basis from the cooperation partner on a pay-per-click basis, according to the number of clicks registered by the cooperation partner. the company recognizes sales commissions as revenue when the service is rendered. revenue is thus recognized on completion of the transaction or provision of the service. in the case of domain parking, the monthly payments credited by cooperation partners are recognized as revenue. united internet operates an internet platform for affiliate marketing via the company affilinet gmbh. an affiliate program (partner program) is an internet-based sales solution whereby a merchant (the advertiser) pays a performance-oriented commission to his sales partner (the affiliate). the advertiser places the respective advertising message on the platform, which the affiliate can then use on his website to promote the advertiser’s offer. the advertiser recruits, controls and remunerates affiliates via the common platform. as the platform operator, affilinet is compensated by the advertiser for the use of administration and management tools provided on the platform, as well as for the calculation of transactions and the monthly payments to affiliates. invoicing is based on the commission to be paid to the affiliate. this can be on a cost-per-click, cost-per-action or cost-per-sale basis, or a mixture of these three. revenue is recognized on completion of performance. amounts invoiced in advance are recognized less performance completed as advance payments received. disclosure of disposal gains and losses from the sale of investments insofar as they concern effects on the income statement, regular carrying amounts and valuations, especially of investments in associated companies and available-for-sale shares, are disclosed in the financial result (see explanations on the financial result). gains from the sale of such investments are always disclosed under other operating income, losses under other operating expenses.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 141 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement the useful life periods can be found in the following summary: leasehold improvements buildings vehicles telecommunication equipment distribution networks other operational and office equipment office furniture and fixtures servers useful life in years up to 10 10 or 50 5 to 6 7 to 10 20 3 to 10 5 to 13 3 to 5 for property, plant and equipment acquired in connection with company acquisitions, the applicable remaining useful life is determined primarily on the basis of the aforementioned useful lives and the useful lives elapsed at the time of acquisition. impairment tests and the recognition of impairment losses or reversals are conducted in the same way as for intangible assets with limited useful lives (see below). borrowing costs borrowing costs are expensed in the period in which they are incurred, unless they are connected with the production or purchase of a qualifying asset. as in the previous year, there was no need to capitalize borrowing costs during the reporting period. business combinations and goodwill business combinations are accounted for using the purchase method. this involves the recognition of all identifiable assets and liabilities of the acquired operation at fair value. goodwill arising from a business combination is initially measured at cost, being the excess of the acquisition cost of the operation over the fair value of the identifiable assets, liabilities and contingent liabilities acquired. following initial recognition, goodwill is valued at amortized cost. goodwill is subjected to an impairment test at least once annually or whenever there is any event or change in circumstances which might indicate impairment. in order to test whether there is any impairment, goodwill acquired in the course of a business combination must be allocated from the date of acquisition to each of the cash-generating units of the group which are to profit from the synergy effects of the combination. this does not depend on whether other assets and liabilities of the group are already allocated to these cash-generating units.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 143 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement a review is also conducted on each balance sheet date to determine whether there is any indication that a previously recognized impairment loss no longer exists or has decreased in size. in the case of such an indication, the company makes an estimate of the recoverable amount. a previously recognized impairment loss is only reversed if there has been a change in the assumption used to determine the recoverable amount since recognition of the last impairment loss. if this is the case, the asset’s carrying value is raised to its recoverable amount. this amount may not exceed the carrying amount, less depreciation, that would have been determined had no impairment loss been recognized for the asset in prior years. investments in associated companies investments in associated companies are valued according to the equity method. an associated company is an entity over which the group has significant influence and that is neither a subsidiary nor an interest in a joint venture. in the case of successive acquisition of company shares, the carrying value is measured using the equity method as of the date on which the prerequisites for accounting as an associated company are met. united internet measures the old shares in the case of successive share purchases according to the retrospective method (cost-based approach). the original purchase cost of the old shares is included as acquisition cost using the equity method. unrealized gains or losses previously recognized in the revaluation reserve are not considered. using the equity method, investments in associated companies are carried in the balance sheet at cost as adjusted for post-acquisition changes in the company’s share of the net assets of the associated company. goodwill connected with an associated company is included in the carrying value of the investment and not subjected to scheduled amortization. the income statement includes the company’s portion of the success of the associated company. changes recognized directly in the equity capital of the associated company are recognized by the company in proportion to its shareholding and – where applicable – reported in “changes in shareholders’ equity”. profits and losses from transactions between the company and the associated company are eliminated in proportion to the shareholding in the associated company. upon loss of significant influence, a gain or loss from the disposal of the associated company is recognized in the amount of the difference between the (i) proceeds from the disposal of the shares, the fair value of the remaining shares, and the cumulative amounts of other comprehensive income attributable to the associated company, and (ii) the carrying amount of the investment to be disposed of. the annual financial statements of the associated company are generally prepared as to the same balance sheet date as those of the parent company. where necessary, adjustments are made to bring the methods in line with standard group-wide accounting and valuation methods. on application of the equity method, the company ascertains whether it is necessary to recognize an additional impairment loss for the company’s investments in associated companies. on each balance sheet date, the company assesses whether there are objective indications for the impairment of an investment in an associated company. with regard to the underlying criteria,

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 145 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement leases the determination of whether an arrangement contains a lease is based on the economic substance of the arrangement at the time of signing and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. group as lessee finance leases, which transfer to the company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease period. the leased property is carried at fair value or, if lower, at the present value of the minimum lease payments. lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. finance expenses are charged directly against income. capitalized leased assets are fully depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the company will obtain ownership by the end of the lease term. significant agreements classified as finance leases relate to iru agreements (indefeasible rights of use) and the use of leased city networks of the versatel group. irus are amortized over the contract term or, if there is a favorable purchase option, over their economic useful life. operating lease payments are recognized as an expense in the income statement on a straight- line basis over the lease term. group as lessor in those cases where group companies agree finance leases as the lessor, a receivable is recognized at an amount equal to the net investment in the lease. the lease payments are apportioned between repayment of principal and finance income. if the group bears all substantial risks and rewards (operating lease), the leased asset is recognized in the balance sheet by the lessor. measurement of the leased asset is then based on the accounting policies applicable to that asset. the lease payments are recognized in profit or loss by the lessor. financial instruments – financial assets the group’s financial assets comprise cash and short-term deposits, trade receivables, receivables from loans and other receivables, as well as listed and non-listed financial instruments. financial assets are carried at fair value on initial recognition. in the case of other financial investments than those classified as held at fair value through profit or loss, transaction costs directly attributable to the acquisition of the asset are also considered. financial assets are classified according to the valuation categories loans and receivables available-for-sale financial assets at the moment of initial recognition.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 147 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement a significant decrease is assumed if the decline in fair value of an equity instrument at the end of the reporting period is more than 25% below its average cost. this does not apply if the prevailing circumstances and situation in exceptional cases clearly indicate that there is no impairment. if an impairment is recognized for an available-for-sale financial asset, all further declines in the fair value in subsequent periods must also be recognized as impairments. consequently, in the case of available-for-sale financial assets, an impairment charge equal to the difference between the fair value and the original costs less impairment charges of previous periods must be recognized at the end of each reporting period. impairment charges recognized in profit or loss for available-for-sale equity instruments may not be reversed in profit or loss, but are reclassified from equity to the income statement as soon as the equity instrument is sold. write-backs of debt instruments classified as available-for-sale, are recognized in the income statement if the increase in the instrument’s fair value objectively results from an event which occurred after recognizing an impairment charge. financial instruments – financial liabilities the group’s financial liabilities mainly comprise trade accounts payable, liabilities due to banks, and liabilities from finance leases. financial liabilities are initially recognized at the fair value of the consideration received less transaction costs relating to the loan. liabilities from finance leases are initially recognized at the present value of the minimum lease payments. after initial recognition, they are measured at amortized cost using the effective interest method. financial instruments – derivative financial instruments and hedging relationships the group occasionally uses derivative financial instruments in order to hedge against interest and exchange rate risks. derivative financial instruments are recognized at fair value on the date of the agreement and carried at fair value in the subsequent periods. the fair value of interest derivatives is calculated on the basis of present value models using market information (interest rate curves) as well as – where material – the individual credit risk of the company. derivative financial instruments are recognized as assets if their fair value is positive and as liabilities if their fair value is negative. profit or loss resulting from changes in the fair value of derivative financial instruments which do not meet the criteria for recognition as hedging relationships are recognized immediately in the income statement.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 149 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement provisions provisions are formed if the group has a current (legal or actual) obligation resulting from a past event which will probably give rise to the outflow of resources with an economic benefit to fulfill the obligation, provided that the level of the obligation can be reliably estimated. such estimates are subject to significant uncertainties. if the group expects at least partial compensation for a recognized provision (e.g. in the case of an insurance policy), this compensation is recognized as a separate asset if the reimbursement is virtually certain. the expense from forming the provision is recognized in the income statement after deducting the reimbursement. if the interest effect from discounting is significant, provisions are discounted at a pre-tax interest rate which reflects the specific risk of the debt, if so required by the individual case. in the event of a discount, the increase in provisions caused by the passage of time is recognized as a financial expense. share-based payment group employees receive share-based payments as remuneration for their work in the form of equity instruments and the granting of value growth rights, which may be settled in cash or via equity instruments at the company’s discretion. as the united internet group has no agreements with a current obligation for cash settlement, all share-based payment transactions are carried in the balance sheet as equity-settled payment transactions. the cost of granting equity instruments is measured using the fair value of such equity instruments on the date of granting. fair value is measured using a suitable option price model. with the aid of the respective valuation process, the value component is determined at the time of granting, also for subsequent valuation until the end of the term. on every valuation date, however, the expected exercise volume is to be reassessed with a corresponding adjustment of the additional amount under consideration of additions already made. any necessary adjustment bookings are to be made in the period in which new information about the exercise volume becomes available. the measurement of cost from the granting of equity instruments and the corresponding increase in equity occurs over the period in which the vesting or performance conditions have to be satisfied (the so-called vesting period). this period ends after the vesting date, i.e. the date on which the employee concerned has gained irrevocable entitlement. the cumulative expenses recognized on each balance sheet date for equity-settled transactions until the vesting date reflect the extent to which the vesting period has expired and the number of equity instruments which, according to the group’s best-possible estimate, will actually be vested after the vesting period. the income or expense recognized in the income statement represents the development of cumulative expenses recognized at the beginning and end of the reporting period. no expense is recognized for payment rights which are not vested. earnings per share undiluted or basic earnings per share are calculated by dividing the result attributable to the holders of registered shares by the weighted average number of shares outstanding during the period. diluted earnings per share are calculated similarly to basic earnings per share with the exception that the average number of shares outstanding increases by the portion which would result if the exercisable subscription rights resulting from employee stock participation programs had been exercised.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 151 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement in respect of taxable temporary differences associated with investments in subsidiaries, associated companies and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. the carrying value of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. unrecognized deferred tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted as of the balance sheet date. deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 153 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 2.4 accounting standards already published but not yet mandatory apart from the ifrss mentioned above whose application is mandatory, the iasb has also published further ifrss and ifrics which have already partly received eu endorsement but which will not become mandatory until a later date. united internet ag will probably only implement these standards when their adoption becomes mandatory. standard ifrs 2 classification and measurement of share-based payment transactions ifrs 9 financial instruments (standard and further amendments) ifrs 15 revenue from contracts with customers mandatory for fiscal years beginning on or after endorsed by eu commission jan. 1, 2018 no jan. 1, 2018 jan. 1, 2018 yes yes no no no no ifrs 15 clarifications to ifrs 15 'revenue from contracts with customers' jan. 1, 2018 ifrs 16 leases ias 12 recognition of deferred tax assets for unrealized losses ias 7 disclosure initiative jan. 1, 2019 jan. 1, 2017 jan. 1, 2017 ifrs 10 / ias 28 sale or contribution of assets between an investor and its associate or joint venture postponed until further notice in july 2014, the iasb issued the final version of ifrs 9 - financial instruments which replaces ias 39 - financial instruments: recognition and measurement and all previous versions of ifrs 9. ifrs 9 combines the three project phases of accounting for financial instruments “classification and measurement”, “impairment”, and “hedge accounting”. ifrs 9 is mandatory for the first time in fiscal years beginning on or after january 1, 2018. apart from hedge accounting, the standard is to be applied retroactively. however, the disclosure of comparative information is not required. the regulations concerning hedge accounting are generally to be used prospectively, with a few exceptions. united internet is currently analyzing the effects on the presentation of its financial position and performance or cash flows. the impact for the united internet group may include effects on the classification and measurement of assets currently classified as “available-for-sale”. ifrs 15 - revenue from contracts with customers provides a single, principles-based five-step model for the determination and recognition of revenue to be applied to all contracts with customers. the new standard replaces the existing standards ias 18 - revenue and ias 11 - construction contracts. application of ifrs 15 is mandatory for the first time in fiscal years beginning on or after january 1, 2018. transition to the new standard can be either modified or completely retrospective. the united internet group will exercise its right to use the modified retrospective transitional method. the prior-year figures in the consolidated financial statements for fiscal year 2018 will not therefore be adjusted. as of january 1, 2018, the conversion effects will be recognized in equity.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 155 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 3. significant accounting judgments, estimates and assumptions the application of accounting and valuation methods in preparing the consolidated financial statements requires management to make certain accounting judgments, estimates and assumptions. these have an effect on the disclosed amounts of earnings, expenditure, assets and liabilities, as well as contingent liabilities, as of the balance sheet date. actual amounts may differ from these estimates and assumptions, which may lead in future to significant adjustments to the carrying values of the assets and liabilities concerned. accounting judgments in the application of accounting and valuation methods, management made the following accounting judgments which significantly affect amounts in the annual financial statements. the consolidated financial statements are affected in particular by irus (indefeasible rights of use). with this form of lease, management assesses whether all substantial risks and rewards related to the asset are transferred. if management concludes that all risks and rewards from usage are transferred to the group company or to the customer, the contract is accounted for in accordance with ias 17 as a finance lease. the carrying value of liabilities from finance leases amounted to € 99,189k as of december 31, 2016 (prior year: € 103,564k) a significant or prolonged decline in the fair value of an available-for-sale equity instrument below its cost represents objective evidence of impairment. the decision on when a significant or prolonged decline has taken place requires judgment. in making this assessment, the group considers in particular the percentage size of the decline in fair value and the duration of the decline, among other factors. the group holds a strategic investment in rocket internet se (share of capital stock 8.31%). since rocket internet se’s ipo on october 2, 2014, the share price of this strategic investment has been strongly volatile. at the at the end of the reporting period, the share price of rocket internet se was 47% below the group’s average acquisition costs. on the basis of the accounting and valuation principles described in section 2, the decline was classified as significant. in the first and second quarters, impairment charges were therefore recognized for the investment. compared to june 30, 2016, the share price recovered slightly as of the end of the reporting period. in this connection, there is positive accumulated other comprehensive income of € 22,912k for the investment in rocket internet se as of december 31, 2016. the carrying value of available-for-sale equity instruments amounted to € 273,559k as of december 31, 2016 (prior year: € 436,870k). at the end of the reporting period, the stock market value of shares in tele columbus ag, carried as an associated company, are below the amortized carrying amount using the equity method. according to the accounting and measurement principles described in section 2, this fall below the carrying amount is not classified as impairment.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 157 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement share-based payments the group measures the cost of granting equity instruments to employees by using the fair value of these equity instruments at the moment they were granted. a suitable valuation model must be used to estimate fair value when granting equity instruments; this depends on the contractual terms. suitable data must also be chosen for the valuation process, including the expected option term, volatility, exercise behavior and dividend yield, as well as the corresponding assumptions. in the reporting period, expenses for share-based remuneration (stock appreciation rights and employee stock ownership plan) amounted to € 4,433k (prior year: € 2,850k). taxes uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. given the complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. the group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. the amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective group company's domicile. the carrying value of income tax liabilities as of december 31, 2016 amounted to € 64,145k (prior year: € 129,586k). trade accounts receivable trade accounts receivable are carried in the balance sheet less impairment charges made. allowances for doubtful claims are made on the basis of a systematic review as well as valuations conducted as part of credit monitoring. assumptions concerning the payment behavior and creditworthiness of customers are subject to significant uncertainties. the carrying value of trade receivables amounted to € 283,866k as of december 31, 2016 (prior year: € 255,505k). inventories inventories are valued at the lower of cost and net realizable value. net realizable value comprises the estimated sales proceeds less the necessary expected costs up to the time of sale. valuation is also based in part on write-downs for inventories. the size of such write-downs represents a best- possible estimation of net realizable value and is thus subject to uncertainties. the carrying values of inventories as of the balance sheet date amounted to € 39,490k (prior year: € 42,509k). please refer to note 19 for further information. see page 177

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 159 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 4. business combinations and investments 4.1. investments in fiscal year 2016 via its subsidiary united internet ventures ag, united internet contractually secured the acquisition of a share package amounting to approx. 15.31% of shares in tele columbus ag, berlin, germany, on february 10, 2016. at the time, the closing of the acquisition was subject to approval by the german anti-trust authority (“bundeskartellamt”). this approval was granted on march 7, 2016. after closing the acquisition, united internet has a total indirect shareholding – together with further shares acquired – of 25.11% in tele columbus and carries it as an associated company. in the second quarter, united internet sold its 430,454 shares (8.37% stake) in hipay group s.a., paris / france, in an over-the-counter transaction at a price of € 10.37 per share and thus for a total of € 4.5 million. this share sale resulted in other operating income of € 935k. 4.2. business combinations in the previous year on december 30, 2015, 1&1 internet se acquired 100% of shares in home.pl s.a., stettin (poland) from the private equity company v4c eastern europe. for the acquisition of all shares in the home. pl s.a. group, 1&1 internet se paid a total amount of € 159,028k on december 30, 2015 (in cash as well as in the form of a redemption of the interest-bearing liabilities of the group) (transferred consideration). the subsequent adjustment of the purchase price agreed in the course of the acquisition, depending on free cash available on the closing date december 31, 2015, led to a subsequent purchase price reduction of € 309k. the final transferred consideration was as follows: final transferred consideration for the acquisition of home.pl s.a. cash purchase price assumption of financial debt free cash adjustment transferred consideration €k 136,013 23,015 -309 158,719 due to the short period between the company acquisition and the reporting date of december 31, 2015, the purchase price allocation was subsequently made in the current fiscal year 2016 within the 12-month valuation period pursuant to ifrs 3. the preliminary goodwill from company acquisition before purchase price allocation amounted to € 158,866k in the previous year. the purchase price allocation completed in the reporting period resulted in a reduction in goodwill of € 37,672k. goodwill as of december 30, 2015 after purchase price allocation (ppa) amounted to € 121,194k.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 161 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement preliminary ppa €k final ppa €k 4,545 431 4,761 57 5 18 91 15 1,583 1,891 1,416 1,182 148 388 11,353 776 113 292 0 326 14 221 59 158,866 4,545 431 4,761 57 5 18 91 15 1,583 47,063 1,416 1,182 148 388 10,296 776 113 292 8,866 326 14 37,584 59 121,194 assets current cash and cash equivalents trade accounts receivable prepaid expenses other financial assets other non-financial assets non-current trade accounts receivable other financial assets prepaid expenses property, plant and equipment intangible assets deferred tax assets liabilities current trade accounts payable advance payments received income tax liabilities deferred revenue other financial liabilities other non-financial liabilities non-current trade accounts payable deferred tax liabilities deferred revenue other financial liabilities total identifiable net assets non-controlling interests goodwill from company acquisition transferred consideration 159,028 158,719

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 163 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement applications segment €k corporate segment €k reconciliation €k united internet group €k 189 189 0 -19,902 -21,087 -1,613 -254,899 -1,995 -279,594 301,648 299,406 29,208 270,198 0 2,242 0 2,242 0 341 1,185 1,185 0 198 198 0 -39,150 -39,150 0 0 0 -24,761 -6 3,242 646,713 -187,957 – – – – – – – – – – – – – – – – 3,948,939 3,524,194 424,745 840,629 647,151 -26,374 -254,905 1,247 367,119 -187,957 179,162 2,130,919 1,833,470 753,934 275,843 803,693 297,449 1,612 11,845 283,992 177,594 193,478 146,809 46,669 8,082 6,438 1,644 2016 segment revenues - thereof domestic - thereof non-domestic ebitda ebit financial result writedowns on investments result from at-equity companies ebt tax expense net income assets (non-current) - thereof domestic - thereof shares in associated companies - thereof other financial assets - thereof goodwill - thereof non-domestic - thereof shares in associated companies - thereof other financial assets - thereof goodwill access segment €k 2,917,169 2,917,169 0 525,564 389,890 1,236,115 1,236,115 724,726 4,907 506,482 0 0 0 0 1,070,731 645,986 424,745 334,967 278,348 593,156 297,949 0 738 297,211 295,207 1,612 9,603 283,992 investments in intangible assets, property, plant and equipment (without goodwill) 133,411 43,842 amortization/depreciation 135,674 56,619 - thereof intangible assets and property, plant and equipment 98,975 46,649 - thereof assets capitalized during company acquisitions number of employees - thereof domestic - thereof non-domestic 36,699 3,478 3,478 0 9,970 4,406 2,762 1,644

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 165 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 2016 €k 1.765.131 396.152 178.972 135.856 118.467 2015 €k 1.633.941 376.911 164.320 139.530 122.523 2.594.578 2.437.225 6. cost of sales cost of services cost of goods personnel expenditure depreciation others total cost of sales in relation to sales revenue remained constant at 65.7% compared with the previous year (65.6%). as a result, gross margin was virtually unchanged at 34.3% (prior year: 34.4%). 7. selling expenses selling expenses developed less than proportionately from € 557,220k (15.0% of sales) to € 523,616k (13.3% of sales). they include personnel expenses of € 191,367k (prior year: € 185,258k), depreciation of € 23,516k (prior year: € 44,875k) and other selling expenses of € 308,733k (prior year: € 327,087k). the decline in depreciation results mainly from the final depreciation in the previous year of the customer base of freenet ag acquired in fiscal year 2009. other selling expenses mostly comprise customer acquisition costs, advertising, customer care and product management. 8. general and administrative expenses compared to the previous year, general and administrative expenses rose more slowly than sales from € 182,245k (4.9% of sales) to € 183,634k (4.7% of sales). they include personnel expenses of € 75,330k (prior year: € 80,170k), depreciation of € 34,117k (prior year: € 31,060k) and other general and administrative expenses of € 74,187k (prior year: € 71,015k). the other general and administrative expenses mostly comprise expenses for accounts receivable management, rent, legal and consulting fees, and maintenance costs.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 167 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement income from the processing of an investment transaction refers to the recognition of a derivative financial instrument during the year which was measured at fair value. income from foreign currency translation mainly comprise gains from exchange rate changes between the date of origination and time of payment of foreign currency receivables and payables as well as gains from valuation at the balance sheet date. currency losses from these items are reported under other operating expenses. for information the valuation of liabilities, please refer to note 34.3. see page 190 10. depreciation and amortization depreciation and amortization of intangible assets and property, plant and equipment consist of the following: cost of sales selling expenses general and administrative expenses total 2016 €k 135,845 23,516 34,117 193,478 2015 €k 139,530 44,875 31,060 215,465 depreciation and amortization also includes the amortization of capitalized assets resulting from business combinations. these are divided between the capitalized assets as follows: intangible assets customer base / order backlog software technology tangible assets network infrastructure operational equipment total 2016 €k 25,521 1,191 1,442 28,154 18,515 0 46,669 2015 €k 22,816 276 1,442 24,534 21,407 782 46,723 amortization of capitalized assets resulting from business combinations is divided between the business combinations as follows: versatel arsys home.pl fasthosts web.de portal business 2016 €k 36,699 5,096 4,132 705 37 46,669 2015 €k 39,571 6,116 0 999 37 46,723

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 169 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 2016 €k 27,742 2,266 639 529 31,176 2015 €k 22,136 2,228 456 2,319 27,139 12. financial expenses loans and overdraft facilities financial expense from finance leases interest expense from tax audit other the year-on-year increase in borrowing costs results mainly from higher finance volumes. please refer to note 44 for an explanation of the financial expense from finance leases. see page 214 13. financial income interest income from tax audit interest income from finance leases income from dividends income from loans to associated companies other total financial income 2016 €k 2,409 899 589 306 599 4,802 2015 €k 498 523 10,640 285 1,183 13,129 income from dividends in the previous year mainly comprised income from a dividend of € 10,472k distributed by drillisch ag. in fiscal year 2016, drillisch ag is carried under associated companies using the equity method; we refer to note 22. see page 178 other financial income mainly comprises interest income from credit balances with banks. with regard to income from loans to associated companies, please refer to note 41. see page 208

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 171 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement deferred tax assets for loss carryforwards of german companies mainly refer to the versatel group. the following time limits apply for the use of tax loss carryforwards in different countries: usa: germany: france: poland: 20 years indefinite, but minimum taxation indefinite, but minimum taxation 5 years tax loss carryforwards for which no deferred tax assets have been formed, refer to the following countries (excluding germany): usa federal * usa state ** polen * tax rate 30.6% ** tax rate 10.0% 2016 €k 10,342 11,532 11 21,885 2015 €k 8,711 9,862 1,369 19,942 a breakdown of income tax types results in the following loss carryforwards for germany for which no deferred taxes have been formed: germany 90,315 31,553 85,710 32,953 2016 2015 corporation tax in €k trade tax in €k corporation tax in €k trade tax in €k loss carryforwards in germany for which no deferred tax assets have been formed mainly refer to loss carryforwards of the versatel group. in fiscal year 2016, no significant loss carryforwards were used (prior year: € 3,626k). in fiscal year 2016, a deferred tax expense from the devaluation of deferred tax assets amounting to € 1,527k was recognized (prior year: € 0k).

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 173 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement the change in the net balance of deferred taxes compared to the previous year is reconciled as follows: deferred tax expense (prior year: tax income) deferred tax expense recognized directly in equity (prior year: tax income) addition in connection with business combinations change in the net balance of deferred taxes 2016 €k -1,458 -188 0 -1,646 2015 €k 3,762 2,642 -8,900 -2,496 the net liability balance of deferred taxes recognized directly in equity amounted to € 1,377k as of december 31, 2016 (prior year: € 1,189k). the aggregate tax rate is reconciled to the effective tax rate of continued operations as follows: anticipated tax rate - actual and deferred taxes for previous years - transaction costs in connection with business combinations which must be capitalized for tax purposes - writedowns on financial assets not deductible from tax - amortization of intangible assets (not) deductible from tax - tax-reduced profit from disposals and income from investments - tax effect in connection with internal group dividends and disposals - differences in foreign tax rates - employee stock ownership plan - tax losses of the fiscal year for which no deferred taxes have been capitalized - value adjustment of tax loss carryforwards and temporary differences capitalized in previous years - use of losses carryforwards and temporary differences capitalized in previous - non-taxable at-equity results - recognition of deferred tax liabilities for outside basis differences - balance of other tax-free income and non-deductible expenses effective tax rate 2016 % 30.2 -1.5 0.0 21.0 -0.8 -0.5 0.6 -0.5 1.4 0.2 0.4 0.0 -0.1 1.2 -0.4 51.2 2015 % 30.3 -0.5 0.2 0.0 0.5 -2.5 4.3 -0.4 -0.6 0.0 0.0 -0.2 0.1 0.0 0.3 31.5 the non-tax-deductible writedowns refer to the impairment of shares in rocket internet se. the non-tax-deductible amortization of intangible assets results from differences in assets recognized in equity on initial booking, for which no deferred taxes are formed pursuant to ias 12. the expected tax rate corresponds to the tax rate of the parent company, united internet ag.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 175 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 16. dividend per share the annual shareholders' meeting of united internet ag on may 19, 2016 voted to accept the proposal of the management board and supervisory board to pay a dividend of € 0.70 per share. the total dividend payment of € 142.9 million was made on may 20, 2016. according to section 21 of the by-laws of united internet ag, the annual shareholders' meeting decides on the appropriation of retained earnings. for the fiscal year 2016, the management board proposes a dividend of € 0.80 per share to the supervisory board. the management board and supervisory board will discuss this dividend proposal for fiscal year 2016 at the supervisory board meeting on march 22, 2017. pursuant to sec. 71b aktg, the company does not accrue any rights from treasury shares and thus has no pro-rated dividend rights. as at the date of signing the consolidated financial statements, the united internet group holds 5,370,943 treasury shares (prior year: 917,859).

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 177 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement all overdue receivables not adjusted individually are subjected to lump-sum allowances. as of december 31, the age profile of trade accounts receivable less the aforementioned allowances was as follows: trade accounts receivable, net < 30 days 30 - 60 days 60 - 90 days 90 - 120 days > 120 days 19. inventories as of december 31, inventories consisted of the following items merchandise - mobile telephony / mobile internet - dsl hardware - ip-tv - sim cards - other domain stock held for sale - domain stock less allowances 2016 €k 2015 €k 268,288 237,030 6,706 3,322 1,864 3,686 6,466 5,543 3,695 2,771 283,866 255,505 2016 €k 37,021 4,970 4,043 761 0 3,805 50,600 2015 €k 40,014 4,993 1,920 468 48 4,088 51,531 -11,110 -9,022 inventories, net goods recognized as material expense from inventories in cost of sales amounted to € 396,152k in the reporting period (prior year: € 376,911k). of this total, an amount of € 698k refers to impairment of inventories (prior year: € 438k). 42,509 39,490 allowances include € 7,508k for mobile telephony/mobile internet and ip-tv (prior year: € 5,375k) and € 3,602k for domain stock (prior year: € 3,647k).

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 179 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement united internet holds 20.11% of shares in drillisch ag, maintal, germany. the company operates exclusively in germany as a mobile virtual network operator (mvno) offering products and services in the field of telecommunications and software services. in the case of both associated companies, the shareholding corresponds to the proportion of voting rights. they are valued using the equity method. the following table contains summarized financial information on the two main associated companies on the basis of a 100% shareholding: summarized financial information on the main associated companies: current assets non-current assets current liabilities non-current liabilities shareholders’ equity sales revenue other comprehensive income net profit/loss total comprehensive income drillisch ag €k tele columbus ag €k 203,798 2,306,829 -170,644 -215,657 2,124,326 522,145 0 24,742 24,742 136,204 2,730,609 -159,708 -1,533,149 1,173,956 354,166 -3,827 -29,421 -33,248 as financial information on both investments as of december 31, 2016 had not yet been published at the time of preparation, the summarized financial information is based on the quarterly statements as of september 30, 2016, taking account of adjustments which the united internet group believe to be necessary at this time. there were no results from discontinued operations for either company. a reconciliation of the main associated companies with the carrying amounts in the consolidated financial statements as of december 31, 2016 – with an estimation of investment results for the fourth quarter – is presented below: united internet group’s share in the net asset values as of september 30, 2016 closing date-related reconciliation effects carrying amount as of december 31, 2016 fair value of shares as of december 31, 2016 dividend received in 2016 drillisch ag €k tele columbus ag €k 427,202 3,066 430,268 450,421 19,272 294,780 -127 294,653 253,037 0 as of december 31, 2016, the other associated companies disclosed an aggregated carrying value of € 30,625k (prior year: € 28,094k) and an aggregated loss of € 1,901k (prior year: € 4,893k) in fiscal year 2016.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 181 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement the additions mainly relate to the increase in shares held in tele columbus ag. the reclassification of shares in tele columbus was due to the purchase of further shares, taking the total stake to 25.11%, and the resulting classification as an associated company. we refer to note 22. see page 178 a non-cash-effective writedown of listed shares in rocket internet of € 156.7 million was already made in the first quarter of fiscal year 2016. after initial recognition of impairment for an available- for-sale financial asset, all further declines in the fair value in subsequent periods must also be recognized as impairments. in this connection, a further non-cash-effective writedown of shares in rocket internet of € 97.9 million was made in the second quarter of the reporting period. the share price of rocket internet increased again as of the reporting date. the impairment reversal of € 22.9 million was thus added to the revaluation reserve through other comprehensive income. based on the same impairment rules, a non-cash-effective writedown of shares in hipay amounting to € 263k was made in the reporting period. the sale of shares in hipay resulted in other operating income of € 935k. 24. property, plant and equipment acquisition costs – telecommunication equipment – operational and office equipment – network infrastructure – payments on account – land and buildings less accumulated depreciation property, plant and equipment, net 2016 €k 554,077 492,166 187,323 26,749 17,082 2015 €k 474,050 466,093 184,132 14,584 17,144 1,277,397 1,156,003 -622,391 655,006 -490,808 665,195 an alternative presentation of the development of property, plant and equipment in the fiscal years 2016 and 2015 is shown in the exhibit to the notes of the consolidated financial statements (assets movement schedule). the carrying value of property, plant and equipment held as part of finance leases amounts to € 96,506k as of december 31, 2016 (prior year: € 104,579k). as of balance sheet date, there are purchase obligations for non-current assets totaling € 32.6 million (prior year: € 22.3 million).

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 183 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 2016 €k 62,000 25,887 17,173 7,553 4,198 4,031 10,962 131,804 2015* €k 62,000 25,065 17,173 7,553 4,198 4,698 11,361 132,048 the following table provides an overview of trademarks: versatel mail.com web.de arsys united-domains fasthosts home.pl * prior-year figures adjusted in connection with the final purchase price allocation of home.pl. for further details, please refer to note 4.2. see page 159 the useful life of trademarks is determined as being indefinite, as there are no indications that the flow of benefits will end in future. 26. goodwill a presentation of the development of goodwill in the fiscal years 2016 and 2015 is shown in the exhibit to the notes of the consolidated financial statements (assets movement schedule). see page 224 27. impairment of goodwill and intangible assets with indefinite useful lives goodwill and intangible assets with indefinite useful lives are subjected to an impairment test at least once per year. with reference to its internal budgeting process, the company has chosen the last quarter of its fiscal year to conduct its statutory annual impairment test. goodwill acquired in the course of business combinations is allocated for impairment test purposes to cash-generating units. impairment charges are always disclosed separately in the income statement and the consolidated assets movement schedule.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 185 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement scheduled impairment test on december 31, 2016 the recoverable amounts of the cash-generating units are calculated on the basis of a calculation of fair value less disposal costs using cash flow forecasts. the hierarchy of fair value less disposal costs as defined by ifrs 13 is set at level 3 for all impairment tests. the cash flow forecasts are based on the company’s budgets for fiscal 2017. these budgets were prepared by management on the basis of external market studies and internal assumptions, extrapolated for a period of up to 12 years. following this period, management assumes an annual increase in cash flow of 0.5% for the access segment (prior year: 0.5% to 1.0%), and between 0.5% and 0.6% for the applications segment (prior year: 1.0%), corresponding to long-term average growth of the sector in which the respective cash-generating unit operates. the discount rates after tax used for cash flow forecasts are 5% for the access segment (prior year: 6% to 7%), and between 5% and 8% for the applications segment (prior year: 5% to 9%). the following table presents the basic assumptions used when checking impairment of individual cash-generating units, to which goodwill has been allocated, in order to determine their fair value less disposal costs: reporting year total proportion of goodwill long-term growth rate discount rate after taxes cgus access segment versatel 1&1 telecom cgu's application segment 1&1 mail & media arsys fasthosts united-domains affiliate-marketing internetx domain-marketing home.pl* 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 36.6% 36.2% 9.9% 9.8% 21.0% 20.8% 9.2% 9.1% 5.8% 6.7% 3.3% 3.3% 2.1% 2.0% 0.5% 0.5% 0.5% 0.5% 11.0% 11.1% 0.5% 0.5% 0.5% 1.0% 0.5% 1.0% 0.5% 2.4% 0.5% 1.3% 0.5% 1.0% 0.5% 1.0% 0.5% 1.0% 0.5% 1.0% 0.6% n/a 4.5% 5.8% 4.9% 6.7% 5.3% 5.5% 8.7% 8.9% 6.7% 7.3% 6.1% 6.8% 5.3% 5.5% 6.1% 6.8% 6.1% 6.8% 7.3% n/a * due to the short period between the company acquisition and the preparation of the consolidated financial statements 2015, no purchase price allocation nor impairment test were conducted in the previous year for the reporting year 2015.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 187 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 29. trade accounts payable trade accounts payable amount to € 383,189k (prior year: € 399,904k), of which liabilities with terms of more than one year total € 9,479k (prior year: € 4,042k). 30. liabilities due to banks a) liabilities due to banks bank loans less current portion of liabilities due to banks non-current portion of liabilities due to banks short-term loans/overdrafts current portion of liabilities due to banks total 2016 €k 2015 €k 1,760,653 1,536,502 -422,236 1,338,417 422,236 422,236 1,760,653 -29,332 1,507,170 29,332 29,332 1,536,502 bank liabilities of € 1,761 million as of december 31, 2016 result mainly from a syndicated loan totaling € 750 million concluded in august 2014, comprising two tranches with terms to august 2017 and august 2019, a promissory note loan of € 600 million divided into 4 tranches with varying terms from december 2017 to december 2022, and several drawings from revolving syndicated loan facilities of € 810 million negotiated in july 2015 with a term until july 2020. the syndicated loan has a variable interest rate. the effective interest rates for interest periods of 1, 3 and 6 months are tied to the respective euribor rate plus a margin p.a.. this margin depends on key performance indicators of the united internet group and is within a range of 0.6% to 1.4%. redemption payments are possible at any time. the interest rates for the promissory note loan are partly variable, tied to the respective 6-month euribor rate plus a margin p.a., and partly fixed. the fixed interest rates vary between 1.32% and 2.15% p.a. depending on the term. there are variable interest rates for drawings from the revolving syndicated loan of € 810 million. the effective interest rates for the interest periods of one, three or six months are tied to the euribor rate plus a margin p.a.. the margin depends on key performance indicators of the united internet group. the applicable interest rate including margin p.a. as of the reporting date amounts to 1.35% (prior year: 1.00%). as of december 31, 2016, an amount of € 407 million had been drawn from the revolving syndicated loan facility (prior year: € 163 million). an amount of € 403 million is therefore still available from the portion of the revolving syndicated loan facility not yet drawn (prior year: € 647 million). as of december 31, 2016, there are also current account overdrafts. no collateral was provided for any of the liabilities due to banks.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 189 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 32. deferred revenue customers pay for certain contracts in advance. these contracts are mostly for webhosting and internet access services, as well as one-off provision charges of the versatel group. the prepaid charges are allocated and recognized as revenues over the underlying contractual period. 33. other accrued liabilities the development of accruals in fiscal year 2016 was as follows: january 1, 2016 utilization reversal addition of accrued interest addition december 31, 2016 restoration obligations €k litigation risks €k 34,949 0 5,816 516 40 29,689 19,328 1,379 4,326 250 4,094 17,967 others €k 5,767 5,288 185 0 4,958 5,252 total €k 60,044 6,667 10,327 766 9,092 52,908 the accruals for restoration obligations mainly refer to possible obligations to remove active telecommunication technology in leased main distribution frames (mdfs). litigation risks consist of various legal disputes of group companies. other accruals refer mainly to provisions for warranties and impending losses. accruals of € 16,426k (prior year: € 10,267k) have a term of one to five years and accruals of € 23,245k (prior year: € 25,942k) a term of over five years. long-term accruals mainly refer to restoration obligations.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 191 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 35. maturities of liabilities the maturities of liabilities are as follows: financial liabilities liabilities due to banks -revolving syndicated loan facility -syndicated loan -promissory note loan -current account overdrafts trade accounts payable other financial liabilities -finance leases -other 31.12.2016 total €k up to 1 year €k 1 to 5 years €k over 5 years €k 406,929 749,338 599,386 5,000 383,189 99,189 106,450 736 351,207 65,293 5,000 373,710 16,333 98,415 406,193 398,131 436,821 0 4,480 47,734 5,924 0 0 97,272 0 4,999 35,122 2,111 total financial liabilities 2,349,481 910,694 1,299,283 139,504 non-financial liabilities advance payments received income tax liabilities deferred revenue other accrued liabilities other non-financial liabilities total non-financial liabilities total financial liabilities 12,326 64,145 269,323 52,908 33,528 432,230 2,781,711 12,326 64,145 235,503 13,237 33,528 358,739 0 0 33,820 16,426 0 50,246 1,269,433 1,349,529 0 0 0 23,245 0 23,245 162,749

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 193 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 36. share-based payment – employee stock ownership plans there were two different employee stock ownership plans in the reporting period 2016. one model with so-called stock appreciation rights (sar) is aimed at the group of senior executives and managers and based on virtual stock options. the second model, the employee stock ownership plan (esop), was introduced in the second quarter of 2016 for active core employees of those group companies in which united internet ag holds a stake of at least 50%. 36.1 stock appreciation rights (sar) the sar program 2006 to 2010 and 2010 to 2017 employs so-called stock appreciation rights (sars) and is treated as an equity-settled shared-based payment transaction. sars refer to the commitment of united internet ag (or a subsidiary) to pay the beneficiary a cash amount equivalent to the difference between the share price on the date of granting the option (strike price) and the share price on exercising the option. the exercise hurdle is 120% of the share price, which is calculated as the average closing price in electronic trading (xetra) of the frankfurt stock exchange over the ten days preceding issuance of the option. payment of value growth to the entitled person is limited to 100% of the calculated share price. an sar corresponds to a virtual subscription right for one share of united internet ag. however, it is not a share right and thus not a (genuine) option to acquire shares of united internet ag. united internet ag retains the right, however, to fulfill its commitment (or the commitment of a subsidiary) to pay the sar in cash by also transferring united internet ag shares from its stock of treasury shares to the beneficiary, at its own discretion. up to 25% of the option right may be converted at the earliest 24 months after the date of issue of the option; up to 50% at the earliest 36 months after the date of issue of the option. a total of up to 75% may be exercised at the earliest 48 months after the date of issue of the option; the full amount may be exercised at the earliest 60 months after the date of issue of the option. using an option pricing model on the basis of a binominal model in accordance with ifrs 2, the fair value of options issued was calculated as follows: issue date fair value average market value per option strike price share price dividend yield volatility of the share expected term (years) risk-free interest rate 22.06.15 1,213 €k 6.07 € 40.00 € 40.59 € 1.5% 29% 5 0.05% valuation parameters 01.03.16 1,142 €k 7.61 € 43.76 € 46.19 € 1.3% 31 % 5 0% 01.04.16 12.04.16 827 €k 6.89 € 43.49 € 44.54 € 1.4% 30% 5 0% 971 €k 6.47 € 44.06 € 43.97 € 1.4% 30% 5 0%

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 195 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement the changes in the virtual stock options granted and outstanding are shown in the following table: outstanding as of december 31, 2014 issued exercised exercised exercised exercised exercised exercised expired / forfeited expired / forfeited expired / forfeited exercised exercised exercised outstanding as of december 31, 2015 issued issued issued issued issued issued issued expired / forfeited exercised exercised exercised exercised exercised exercised exercised exercised exercised exercised exercised exercised outstanding as of december 31, 2016 exercisable as of december 31, 2015 exercisable as of december 31, 2016 weighted average remaining term as of december 31, 2015 (in months) weighted average remaining term as of december 31, 2016 (in months) united internet ag average strike price (€) 20.07 40.00 18.13 12.12 12.03 16.06 21.95 13.43 18.13 32.79 16.24 8.96 13.30 16.24 22.78 37.49 43.76 43.51 44.06 43.45 36.27 43.49 44.06 31.02 12.12 18.13 30.11 12.03 16.06 21.95 13.43 32.79 13.30 31.15 16.24 29.46 0.00 31.15 sar 3,860,000 200,000 -75,000 -20,000 -125,000 -325,000 -75,000 -100,000 -100,000 -100,000 -75,000 -100,000 -15,000 -75,000 2,875,000 20,000 150,000 75,000 250,000 30,000 100,000 120,000 -100,000 -25,000 -20,000 -75,000 -15,000 -125,000 -325,000 -75,000 -100,000 -25,000 -15,000 -85,000 -75,000 2,560,000 0 75,000 31 42 the range of strike prices for stock options outstanding at the end of the reporting period is between € 13.30 and € 44.06 (prior year: € 8.96 and € 40.00).

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 197 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement following the purchase of 3,000,000 treasury shares under the new share buyback program and issues of 546,916 shares for existing employee stock ownership plans (prior year: 314,479), the group held 3,370,943 treasury shares as of december 31, 2016 (prior year: 917,859) corresponding to 1.64% of capital stock (prior year: 0.45%). treasury shares reduce equity and have no dividend entitlement. authorized capital the management board is authorized, subject to the approval of the supervisory board, to increase the capital stock in the period ending may 20, 2020 by a maximum of € 102,500,000.00 by issuing on one or more occasions new no-par value shares in return for cash and/or non-cash contributions, whereby the subscription rights of shareholders can be excluded under certain conditions (authorized capital 2015). the previous authorization to increase capital stock in the period ending may 26, 2016 by a maximum of € 112,500,000.00 by issuing on one or more occasions new no-par value shares was cancelled on expiry of may 21, 2015 with effect for the future. in the case of a capital increase, shareholders shall be granted subscription rights. pursuant to section 186 (5) aktg, shareholders can also be granted subscription rights indirectly. however, the management board is authorized, subject to the approval of the supervisory board, to exclude the rights of shareholders to subscribe: in the case of fractional amounts arising from the subscription ratio; in the case of a capital increase in return for cash contribution if the new shares are issued at an issuance price which is not substantially below the market price (as defined by section 203 (1) and (2) in conjunction with section 186 (3) sentence 4 aktg) of those company shares already listed of the same type and with the same terms at the time of the final determination of the issuance price by the management board, which should be as near as possible to the share issue date, and the proportionate amount of the capital stock attributable to the new shares for which subscription rights are excluded does not exceed ten percent of the existing capital stock, neither at the time this authorization becomes effective nor when it is exercised. this amount includes the proportionate share of capital stock attributable to shares issued or used during the term of the authorization in direct or corresponding application of section 186 (3) sentence 4 aktg under exclusion of subscription rights. this amount also includes the proportionate share of capital stock attributable to shares issued or to be issued to serve conversion or warrant rights, providing the underlying bonds are issued during the term of this authorization under exclusion of subscription rights pursuant to section 186 (3) sentence 4 aktg; to the extent that this should be necessary in order to grant subscription rights for new shares to bearers of bonds with warrant or conversion rights or obligations issued by the company or subordinated group companies in the amount to which they are entitled on exercise of their warrant or conversion rights or fulfillment of their warrant or conversion obligation; in the case of capital increases in return for non-cash contribution to grant shares for the purpose of acquiring companies, parts of companies, interests in companies or other assets, including rights and receivables, or as part of business combinations.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 199 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement the revaluation reserve from available-for-sale financial assets includes gains and losses from subsequent measurement at fair value. provided there is no indication of impairment, these are recognized directly in other comprehensive income net – i.e. less deferred taxes – and after non-controlling interests. translation differences from the annual financial statements of foreign subsidiaries without an effect on profit or loss are recognized in the currency translation adjustment. an overview of the composition and changes in the reserves described above for the fiscal years 2016 and 2015 is provided in the statement of changes in shareholders’ equity. 39. non-controlling interests non-controlling interests as of december 31, 2016 mainly comprise the shares of the minority shareholders of internetx gmbh, regensburg, (4.44% of capital stock) and subsidiaries of the home.pl s.a. group.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 201 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement the following net results were stated for the individual categories of financial instruments acc. to ias 39 in fiscal year 2016: net result acc. to categories 2016 (in €k) loans and receivables (lar) available for sale (afs) - of which not affecting net income - of which affecting net income financial liabilities measured at amortised cost (flac) financial assets held for trading valuation category acc. to ias 39 from interest and dividends lar afs flac hd 905 - 589 -28,271 net profits and losses from subsequent valuation fair value currency translation value adjusted net results - 219 -34,642 -33,518 128,867 - - 0 - 128,867 -254,905 -254,316 - - -28,177 6,592 -289,547 -180,552 - - 94 313 - of which affecting net income - 6,592 -26,777 135,459 with the exception of trade accounts receivable in connection with finance leases, cash and cash equivalents, trade accounts receivable, and other current financial assets mostly have short remaining terms. their carrying values on the balance sheet date are thus similar to fair value. as in the previous year, the fair value of other non-current financial assets differs from the carrying amount as prorated loss assumptions from accounting using the equity method were allocated to existing loans. in the case of the remaining other non-current financial assets carried at amortized cost, it is assumed that their carrying values correspond to fair value. trade accounts payable mostly have short remaining terms. their carrying values on the balance sheet date are thus similar to fair value. the same applies to current liabilities due to banks. non-current liabilities due to banks are loans which can be prematurely redeemed. in addition, both the basic interest rate and the margin are variable. the margin depends on predefined kpis of the united internet group. due to these factors, it is assumed that their carrying values of non-current liabilities correspond approximately to fair value. in spite of the promissory note loan of € 600 million concluded in fiscal year 2014 at favorable conditions, the fair values of these liabilities rose slightly year-on-year by €2 million, from € 617 million to € 619 million, due to the positive risk assessment of the group by the banks. the valuation is based on level 3 disclosures. due to changed interest rates, there are slight deviations between the carrying value and fair value of receivables and liabilities in connection with finance leases. in the case of the remaining other non-current financial liabilities carried at amortized cost, it is assumed that their carrying values correspond to fair value.

net result acc. to categories 2015 (in €k) loans and receivables (lar) available for sale (afs) - of which not affecting net income - of which affecting net income financial liabilities measured at amortised cost (flac) financial assets held for trading lar afs flac hd - -315,922 10,640 -24,455 - - - - -7 - -24 - -315,922 -5,317 - - 5,323 -24,462 21,140 -38,475 -345,628 m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 203 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement the following net results were stated for the individual categories of financial instruments acc. to ias 39 in fiscal year 2015: net profits and losses from subsequent valuation valuation category acc. to ias 39 from interest and dividends fair value currency translation value adjusted net results 1,468 - -17 -33,158 -31,707 - of which affecting net income - 21,140 -12,347 -294,782 the fair value of financial assets and liabilities is stated at the amount at which the instrument concerned might be exchanged in a current transaction (excluding a forced sale or liquidation) between willing business partners. the methods and assumptions used to determine fair values are shown below: cash and short-term deposits, trade receivables, trade payables, and other current assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. based on this evaluation, allowances are taken to account for the expected losses of these receivables. as at 31 december 2016, and as in the previous year, the carrying amounts of such receivables, net of allowances, are not materially different from their calculated fair values. the fair value of unquoted instruments, loans from banks and other financial liabilities, as well as other non-current financial liabilities, is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. fair values of available-for-sale financial assets are derived from quoted market prices in active markets, if available. the fair value of unquoted available-for-sale financial assets is estimated using appropriate valuation techniques.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 205 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement united internet’s premises in montabaur and karlsruhe are leased from mr. ralph dommermuth, the chief executive officer and a major shareholder of the company. the corresponding lease agreements have different terms between the end of 2017 and september 2025. the resulting rent expenses are customary and amounted to € 8,378k in fiscal year 2016 (prior year: € 7,206k). at the ordinary shareholders’ meeting on may 21, 2015, mr. kurt dobitsch (chairman), mr. michael scheeren (deputy chairman), and mr. kai-uwe ricke were re-elected as members of the company’s supervisory board. the supervisory board was elected for the period ending with the annual shareholders' meeting which adopts the resolution to release the supervisory board members from their responsibility for fiscal year 2019. in fiscal year 2016, the members of the supervisory board also held seats on supervisory boards or similar committees of the following companies: kurt dobitsch 1&1 internet se, montabaur united internet ventures ag, montabaur 1&1 telecommunication se 1&1 mail & media applications se nemetschek ag, munich (chair) bechtle ag, gaildorf graphisoft s.e., budapest / hungary singhammer it consulting ag, munich vectorworks inc., columbia / usa kai-uwe ricke 1&1 internet se, montabaur united internet ventures ag, montabaur 1&1 telecommunication se, montabaur 1&1 mail & media applications se, montabaur susi partners ag, zurich / switzerland (chair) eunetworks group ltd., singapore / singapore (until october 31, 2016) delta partners fz-llc, dubai / emirate of dubai (chair) zalando se, berlin virgin mobile cee, amsterdam / netherlands eun holdings llp, delaware / usa (since october 19, 2016) michael scheeren 1&1 internet se, montabaur (chair) united internet ventures ag, montabaur (chair) 1&1 telecommunication se, montabaur (chair) 1&1 mail & media applications se, montabaur (chair) on may 21, 2015, the annual shareholders' meeting adopted a new remuneration system which complies fully with the german corporate governance code. it consists of a fixed remuneration component and an attendance fee per meeting. the fixed remuneration for an ordinary member of the supervisory board amounts to € 15k per full fiscal year. the chairman of the supervisory board receives the double amount. the attendance fee amounts to € 1k for each meeting.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 207 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement the following table provides details on the compensation received by members of the management board: 2016 ralph dommermuth robert hoffmann frank krause jan oetjen martin witt total 2015 ralph dommermuth robert hoffmann frank krause (since june 1, 2015) norbert lang (until june 30, 2015) jan oetjen martin witt total total fixed, variable and fringe benefits €k fringe benefits €k market value of share- based payments granted in 2016* €k 0 12 111 13 12 0 511 610 512 511 148 2,144 - - 465 - - 465 total fixed, variable and fringe benefits €k fringe benefits €k market value of share- based payments granted in 2015* t€ 0 12 106 24 13 12 167 540 442 398 269 520 513 - - 1,213 - - - 2,682 1,213 fixed €k variable €k 0 300 360 300 300 1,260 0 199 139 199 199 736 fixed €k variable €k 300 300 210 150 300 300 1,560 240 130 82 95 207 201 955 * share-based payments (so-called stock appreciation rights) are compensation components with a long-term incentive and paid out over a total period of 6 years. total management board remuneration as defined by section 314 (1) no. 6 a and b hgb, i.e. including the market value of share-based payments, amounted to € 2,609k in the fiscal year (prior year: € 3,895k). members of the management board were not granted any advances or loans in the reporting period nor in the previous year. in fiscal year 2016, mr. ralph dommermuth waived his claim in full to management board remuneration with effect from january 1, 2016. as a consequence, mr. ralph dommermuth received no remuneration in fiscal year 2016. on his retirement from the management board of united internet ag in the previous year, mr. norbert lang received a special payment of € 13k to compensate for holiday claims, which is included in the fringe benefits. no further benefits were agreed on the departure of mr. lang. as in the previous year, mr. frank krause received a special payment of € 100k in fiscal year 2016. this special payment was included in the fringe benefits. in the fiscal year 2016, mr. martin witt exercised 125,000 (prior year: 50,000) and mr. robert hoffmann 325,000 subscription rights (prior year: 325,000). in addition, mr. jan oetjen exercised 100,000 subscription rights in the previous year. 100,000 virtual stock options were granted to mr. frank krause in the reporting period (prior year: 200,00) (for conditions see note 36). see page 193

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 209 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement the following table presents the outstanding balances and total transactions volumes with associated companies in the respective fiscal year: purchases/services from sales/services to related liabilities due to related receivables from related related parties parties parties parties 2016 €k 11,978 2015 €k 9,066 2016 €k 962 2015 €k 25 2016 €k 2,470 2015 €k 373 2016 €k 10,279 2015 €k 8,214 receivables from other related parties mainly result from loans to profitbricks gmbh. interest income of € 285k (prior year: € 285k) accrued in this connection. financial income financial expenses 2016 €k 306 2015 €k 385 2016 €k 0 2015 €k 0 42. objectives and methods of financial risk management principles of risk management the risk management system introduced by the united internet group is based on the coso-erm framework and is described in detail in the management report. the principles of finance policy are set by the management board and monitored by the supervisory board. certain transactions require the prior approval of the supervisory board. the main financial liabilities used by the group include bank loans, promissory note loans and overdraft facilities, trade accounts payable and other financial liabilities. the group holds various financial assets which result directly from its business activities. they consist mainly of trade accounts receivable, available-for-sale financial investments and short- term deposits. as of the balance sheet date, the group mainly held primary financial instruments. the aim of financial risk management is to limit these risks through ongoing operating and financial activities. the company is hereby exposed to certain risks with regard to its assets, liabilities and planned transactions, especially liquidity risks and market risks, as described below.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 211 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement market risk the activities of united internet are mainly exposed to financial risks from changes in interest rates, exchange rates, stock exchange prices, and credit or contingency risks. interest risk the interest (rate) risk refers to the risk that fair values or future interest payments on existing and future financial liabilities may fluctuate due to changes in market interest rates. the group is fundamentally exposed to interest risks as the major share of its borrowing as of the balance sheet date bears variable interest rates with varying terms. with the aid of the liquidity planning, various investment possibilities or possibilities to reduce surplus liquidity are constantly examined. the maturity profile and amount of the group’s variable- rate financial instruments are regularly reviewed and appropriate measures are taken to ensure liquidity and the management of interest risks. market interest rate changes might have an adverse effect on the interest result and are included in our calculation of sensitive factors affecting earnings. in order to present market risks, united internet has developed a sensitivity analysis which shows the impact of hypothetical changes to relevant risk variables on pre-tax earnings. the reporting period effects are illustrated by applying these hypothetical changes in risk variables to the stock of financial instruments as of the balance sheet date. due to the ongoing expansionary interest policy of the european central bank, the relevant euribor interest rate is negative at the end of the reporting period. the company does not expect any material changes in risk premiums in the foreseeable future. united internet currently regards the interest risk for its existing variable-rate financial instruments as low. the interest risk is negligible for other interest-bearing liabilities. at the end of the reporting period, there were no external interest-hedging transactions. currency risk a currency risk is the risk that fair values or future cash flows of financial instruments may fluctuate due to changes in exchange rates. the group companies are mainly exposed to currency risks as a result of their operations (if revenue and/or expenses are in a currency other than the functional currency of the respective company). in order to cover such foreign currency risks, united internet strives to achieve an equilibrium between the incoming and outgoing payments of group companies (so-called natural hedging). currency risks which do not affect cash flows (i.e. risks from translating the assets and liabilities of the group’s foreign companies) are not hedged against. with regard to operating activities, individual group companies perform their business mainly in their respective functional currencies. as in the previous year, the currency risk from operations is therefore regarded as low. in the reporting period, there were no currency risks which significantly affected cash flows. at the end of the reporting period, there were no external currency-hedging transactions. the currency risks arising from original financial instruments in a currency and of a monetary nature other than that of the functional currency as of the balance sheet date were valued by the company. no material currency risks arose from this analysis.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 213 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement risks from financial covenants the existing financial instruments of united internet ag are tied to so-called financial covenants. an infringement of these covenants may cause the lender to terminate the outstanding financial arrangement and demand repayment of the amounts drawn. the covenants contained in the loan agreements of united internet require the company to maintain a specified net debt-to-ebitda ratio and a specified ebitda-to-interest ratio. these ratios are used to calculate the relative burden which the financial liabilities and interest payments place on the company. in view of the far superior ratios of united internet at present, the probability of infringement is regarded as low. compliance with the covenants is regularly monitored by the company’s management board and was met throughout the year. capital management in addition to the legal provisions for stock corporations, the company has no further obligations to maintain capital according to its statutes or other agreements. the key financial indicators used by the company are mainly performance-oriented. the targets, methods and processes of capital management are thus subordinate to these performance-oriented financial indicators. in order to maintain and adapt its capital structure, the company can adjust dividend payments or pay capital back to its shareholders, can purchase treasury shares and place them again if required, or issue new shares. please refer to the statement of changes in shareholders’ equity. as of december 31, 2016 and december 31, 2015, no changes were made to the company’s targets, methods and processes. 43. specific contingencies and commitments litigation litigation risks mainly relate to various legal disputes of 1&1 and versatel. accruals for litigation were formed for any commitments arising from these disputes (see note 33). see page 189 guarantees as of the balance sheet date, the company has issued no guarantees.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 215 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement group as lessor finance leases the group acts as the lessor of finance leases via the versatel group acquired in 2014. receivables from finance leases are disclosed in trade accounts receivable. the following table shows a reconciliation of gross investments in leases and the present value of outstanding minimum lease payments, as well as their maturities: gross investment (thereof unguaranteed residual values) thereof due within 1 year thereof due in 1-5 years thereof due after more than 5 years unearned finance income net investment accumulated impairment receivables from sales taxes carrying amount of finance lease receivables previously present value of unguaranteed residual values present value of outstanding minimum lease payments thereof due within 1 year thereof due in 1-5 years thereof due after more than 5 years dec. 31, 2016 dec. 31, 2015 €k €k 5.738 21.379 38.669 -7.722 58.064 0 3.711 61.775 0 58.064 5.738 20.154 32.172 3.635 14.420 27.528 -5.916 39.667 0 2.334 42.001 0 39.667 3.635 13.542 22.490 finance lease receivables relate solely to leases for the provision and use of dark fiber. in fiscal year 2016, several new finance lease agreements were concluded with three lessees regarding the provision of fiber pairs. an amount of € 22.0 million (previous year: € 16.4 million) is recognized in gross investment less unrealized financial income for these leases. the maturities range from 13 to 19 years. guarantees and other obligations the company is jointly and severally liable for credit lines granted to companies of the united internet group by a bank. the credit facilities had only been utilized with regard to guarantees as of the balance sheet date. the management board has no knowledge of any other facts which could have a significant, adverse effect on the business activities, the financial situation or the operating result of the company.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 217 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement united internet ventures ag, montabaur united internet service holding gmbh, montabaur 1&1 versatel gmbh, berlin (formerly versatel gmbh) 1&1 versatel deutschland gmbh, düsseldorf (formerly versatel deutschland gmbh) versatel beteiligungs gmbh, düsseldorf versatel holding gmbh, berlin versatel telecommunications gmbh, düsseldorf tropolys service gmbh, düsseldorf 47. subsequent events investment of warburg pincus on november 8, 2016, united internet ag and wp xii venture holdings s.a.r.l., an affiliate of private equity funds managed by warburg pincus llc (together: “warburg pincus”), signed an agreement regarding a 33.33% stake of warburg pincus in the united internet division business applications. following approval by the german federal cartel office (“bundeskartellamt”), the transaction was closed over several stages in february 2017. united internet ag contributed its shares in 1&1 internet se initially to its subsidiary 1&1 internet holding se in the form of a mixed capital increase against the issue of new common shares and one preferred share, as well as a long-term vendor loan. the long-term vendor loan of united internet ag to 1&1 internet holding se amounting to € 1.2 billion has a fixed interest rate and a term of 10 years. in a second step, united internet ag contributed all common shares in 1&1 internet holding se to a newly founded 1&1 internet topco se against the issue of 66.67% of capital stock. the remaining 33.33% of shares in 1&1 internet topco se are held by warburg pincus. a purchase price of up to € 450 million was agreed for the 33.33% of shares held by warburg pincus. united internet expects a payment of approx. € 370 million from the share sale in fiscal year 2017. in addition, the share sale will result in a one-off tax effect and have a future impact on earnings per share (eps). acquisition of strato on december 15, 2016, united internet ag signed an agreement with the owner of strato ag, deutsche telekom ag, regarding the acquisition of strato ag. based in berlin, strato employs over 500 people with operations mainly in germany and the netherlands. with over 1.8 million customer contracts, strato’s annual revenue for fiscal year 2016 is expected to be around € 127 million with anticipated ebitda in 2016 of around € 48.5 million. the share purchase will be made via 1&1 internet holding se. the purchase price for 100% of strato’s shares is around € 600 million and will be settled in cash. a partial amount of up to € 566 million is payable after the expected closing in the first half of 2017. a further amount of up to € 34 million is due at a later point subject to certain performance goals.

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 219 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement 49. list of shareholdings of the united internet ag group acc. to sec. 313 (2) hgb as of december 31, 2016, the group includes the following subsidiaries in which united internet ag holds a direct or indirect majority interest (as indicated by the shareholdings in brackets). unless otherwise stated, the shareholding corresponds to the proportion of voting rights: 1&1 internet se, montabaur (100.0%) 1&1 datacenter sas, strasbourg / france (100.0%) 1&1 internet development srl, bucharest / romania (100.0%) 1&1 internet españa s.l.u., madrid / spain (100.0%) 1&1 internet inc., chesterbrook / usa (100.0%) a1 media usa llc, chesterbrook / usa (100.0%) 1&1 cardgate llc, chesterbrook / usa (100.0%) 1&1 internet ltd., gloucester / uk (100.0%) 1&1 internet s.a.r.l., saargemünd / france (100.0%) 1&1 internet service gmbh, montabaur (100.0%) 1&1 internet (philippines) inc., cebu city / philippines (100.0%) 1&1 internet sp. z o.o., warsaw / poland (100.0%) 1&1 uk holdings ltd., gloucester / uk (100.0%) fasthosts internet ltd., gloucester / uk (100.0%) fasthosts internet inc., chesterbrook / usa in liquidation (100.0%) arsys internet s.l., logroño / spain (100.0%) arsys internet e.u.r.l., perpignan / france (100.0%) tesys internet s.l., logroño / spain (100.0%) nicline internet s.l., logroño / spain (100.0%) internetx gmbh, regensburg (95.56%) internetx lac s.a., buenos aires / argentina (100.0%) schlund technologies gmbh, regensburg (100.0%) psi-usa, inc., las vegas / usa (100.0%) domain robot enterprises inc., vancouver / canada (100.0%) domain robot servicos de hospedagem na internet ltda., são paulo / brazil (100.0%) myllc gmbh, regensburg (100.0%) myllp gmbh, regensburg (100.0%) internetx corp., miami / usa (100.0%) sedo holding gmbh, montabaur (100.0%) sedo gmbh, cologne (100.0%) domcollect worldwide intellectual property ag in liquidation, zug / switzerland (100.0%) domcollect international gmbh, montabaur (100.0%) sedo.com llc, cambridge / usa (100.0%) united-domains ag, starnberg (100.0%) united-domains reselling gmbh, starnberg (100.0%) united domains inc., cambridge / usa (100.0%) immobilienverwaltung ab gmbh, montabaur (100.0%) immobilienverwaltung nmh gmbh, montabaur (100.0%)

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 221 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement united internet ventures ag, montabaur (100.0%) others mip multimedia internet park gmbh, zweibrücken (100.0%) united internet corporate services gmbh, montabaur (100.0%) a1 marketing kommunikation und neue medien gmbh, montabaur (100.0%) 1&1 telecom service holding montabaur gmbh, montabaur (100.0%) united internet service se, montabaur (100.0%) united internet service holding gmbh, montabaur (100.0%) 1&1 internet holding se, montabaur (100.0%) associated companies investments over whose financial and business policies the company has a significant influence are carried as associated companies using the equity method pursuant to ias 28 and comprise the following main companies: intellectual property management company inc., dover / usa (49.0%) domainsbot s.r.l, rome / italy (49.0%) uberall gmbh, berlin (30.34%) profitbricks gmbh, berlin (30.2%) open-xchange ag, nuremberg (27.28%, voting rights 24.9%) tele columbus ag, berlin (25.11%) virtual minds ag, freiburg (25.1%) victorianfibre holding & co. s.c.a. in liquidation, luxembourg / luxembourg (25.10%, voting rights 24.9%) epages gmbh, hamburg (25.01%) drillisch ag, maintal (20.11%) other investments companies in which the company has invested and over whose financial and business policies it has no significant influence (< 20% of voting shares) are included as financial instruments pursuant to ias 39 and held as available-for-sale financial assets: mmc investments holding company ltd., port louis / mauritius (11.36%) hi-media s.a., paris / france (10.46%) afilias ltd., dublin / ireland (9.82%) rocket internet se, berlin (8.31%) changes in the reporting unit the following companies were founded by the company in fiscal year 2016: 1&1 energy gmbh, montabaur (100.0%) the following companies were acquired and renamed in fiscal year 2016: 1&1 internet holding se, montabaur (100.0%) (formerly atrium 93. europäische vv se, berlin) the following companies were renamed in fiscal year 2016: 1&1 versatel gmbh, berlin (100.0%) (formerly versatel gmbh, berlin) 1&1 versatel deutschland gmbh, düsseldorf (100.0%) (formerly versatel deutschland gmbh, düsseldorf) the following companies were liquidated in the reporting period: cleafs b.v. groningen / netherlands (100.0%)

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 223 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 225 f i n a n c i a l s t at e m e n t s balance sheet notes income statement cash flow fixed assets audit opinion shareholders’ equity responsibility statement * prior year figures adjusted in connection with the final purchase price allocation for an acquisition in the prior-year, please refer to note 4.2. see page 159 accumulated depreciation net book value jan. 1, 2016 additions disposals reclassi fications translation dec. 31, 2016 dec. 31, 2015 dec. 31, 2016 currency 27,230 785 86,902 984 91,301 64,408 271,610 7,705 92,498 36,260 351,574 2,771 490,808 762,418 6,539 431 9,263 11 617 873 25,504 2,833 41,737 4,334 1,039 74,247 28,202 48,110 143 151,741 193,478 5,457 597 13,261 0 19,315 23,649 0 -26 -1,024 26 1,024 0 0 38 -39 -14 33,796 1,216 95,509 111 113,958 64,408 0 869 134 35,191 132,048 221,272 1,288 252 39,355 131,804 194,421 1,100,123 1,087,685 0 2,350 -15 308,998 1,489,637 1,457,155 -1 -842 -843 -858 8,717 160,264 63,865 385,607 3,938 9,439 381,552 147,872 114,519 11,813 622,391 665,195 931,389 2,154,832 8,365 393,813 123,458 106,559 22,811 655,006 2,112,161 accumulated depreciation net book value jan. 1, 2015 28,204 95 82,241 933 177,599 64,322 353,394 6,343 18,871 7,541 308,882 278 341,915 695,309 additions disposals reclassi fications currency translation dec. 31, 2015* dec. 31, 2014 dec. 31, 2015* 6,109 691 7,762 42,773 57,335 923 74,012 29,366 51,336 2,493 158,130 215,465 7,124 1 3,179 130,478 140,782 385 647 16,744 17,776 158,558 -2 2 0 439 -439 0 0 43 76 51 1,407 86 1,663 8,539 8,539 10,202 27,230 785 86,902 984 91,301 64,408 271,610 7,705 92,498 36,260 351,574 2,771 1,424 350 32,292 117,837 233,571 869 134 35,191 132,048 221,272 977,043 1,100,123 1,362,517 1,489,637 9,921 9,439 379,359 381,552 174,188 109,219 16,615 147,872 114,519 11,813 490,808 689,302 665,195 762,418 2,051,819 2,154,832

responsibility statement m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t m i s c e l l a n e o u s 227 f i n a n c i a l s t at e m e n t s balance sheet notes income statement fixed assets cash flow audit opinion shareholders’ equity responsibility statement responsibility statement to the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group, and the management report and group management report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal opportunities and risks associated with the expected development of the group. montabaur, march 17, 2017 the management board ralph dommermuth robert hoffmann frank krause jan oetjen martin witt

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s 229 m i s c e l l a n e o u s locations glossary imprint / financial calendar switzerland spain zug zurich logroño madrid e u ro p e germany montabaur berlin dortmund dresden düsseldorf essen flensburg frankfurt hanover france paris perpignan austria vienna saargemund poland strassburg united kingdom warszaw szczecin gloucester romania london bucharest karlsruhe netherlands amsterdam kiel cologne munich regensburg starnberg stuttgart zweibrücken

m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s 231 m i s c e l l a n e o u s locations glossary imprint / financial calendar ifrs (international financial reporting standards) international accounting standard. lte (long term evolution) is a mobile telecommunications standard which enables even higher speeds than the umts standard. the corresponding frequencies were auctioned off by the german federal network agency in 2010. the network development work commenced in summer 2010 focused initially on covering the “gaps on the map”, i.e. those areas of germany which do not yet have broadband internet. market capitalization market price of a listed company. the result of share price multiplied by the number of shares. open access model for open, non-discriminatory access to high-speed data networks, e.g. by connecting different infrastructures. ntld (new top level domains). as most of the internet addresses with domain endings such as .de or .com have already been taken, icann plans to release hundreds of new domain endings over the next two years. the introduction of additional domain endings, such as .shop, .web, .sport or .berlin, gives website owners the opportunity to indicate the nature of their online presence more clearly via the new domain, e.g. in a certain sector or region. portal central internet access point or start page. usually contains a wide range of navigation functions, content and additional services, such as e-mail. ppa = purchase price allocation. allocation of the purchase price into various assets and liabilities in context of the initial consolidation of an acuired company or partial acquisition. r-dsl (resale-dsl) in the case of resale-dsl connections, the internet service provider purchases switched dsl connections on the customer’s premises as a pre-service product from deutsche telekom and markets them to the customer as its own product together with a data tariff. r-dsl requires participants to have their own fixed-line deutsche telekom connection for which they are responsible themselves. risk management systematic process to identify and evaluate potential risks as well as to select and implement measures to deal with such risks. t-dsl in contrast to r-dsl connections, customers with a t-dsl connection receive both their telephone and dsl connections from deutsche telekom. the internet service provider only markets data tariffs to the customer as an independent product. tecdax index of the frankfurt stock exchange. the tecdax is calculated from the market price of germany’s top 30 technology shares. umts (universal mobile telecommunications system) is a mobile telecommunications standard with much higher transmission rates (see also hspa) than are possible with the older gsm standard (gsm: global system for mobile communications). unbundled local loop (ull) by unbundling the local loop, competing fixed-line operators can have direct access to customers without having their own “last mile”. they are allowed to rent the local loop from deutsche telekom at regulated conditions. internet service providers in turn purchase “complete packages” as a pre-service product from alternative fixed-line operators (e.g. qsc, telefonica, vodafone) and then market them as their own product to end users. a comparable complete package can also be bought from deutsche telekom. in contrast to r-dsl/t-dsl connections, the end user does not need a separate telephone connection from deutsche telekom. vatm association of telecommunications and value-added service providers (verband der anbieter von telekommunikations- und mehrwertdiensten – vatm) the vatm is an association of over 90 telecommunications and value-added service providers operating on the german market, who are all in competition with the ex-monopolist deutsche telekom ag. v-dsl (very high speed digital subscriber line). vdsl is a dsl technology which provides higher data transfer rates than conventional dsl connections. in germany, maximum transfer rates of 50 mbit/s downstream and 10 mbit/s upstream are currently offered. vectoring vectoring is a transmission technology which can significantly increase data throughput via existing copper lines with relatively little effort. the technology is based on vdsl, whereby “crosstalking” (mutual interference between neighboring subscriber lines) is canceled by monitoring the signals in one cable. vectoring currently enables speeds of up to 100 mbit/s. video on demand (vod) service of an internet provider enabling subscribers to select and watch films at any time for money. webhosting see “hosting”.

financial calendar m a n a g e m e n t a t a g l a n c e m a n a g e m e n t r e p o r t f i n a n c i a l s t a t e m e n t s 233 m i s c e l l a n e o u s locations glossary imprint / financial calendar financial calendar march 23, 2017 annual financial statements for fiscal year 2016 press and analyst conference may 15, 2017 may 18, 2017 august 10, 2017 3-month report 2017 annual shareholders’ meeting, alte oper, frankfurt/main 6-month report 2017 press and analyst conference november 14, 2017 9-month report 2017

quarterly development quarterly development in € million sales cost of sales gross profit q1 2016 q2 2016 q3 2016 q4 2016 q4 2015 968.6 982.6 981.1 1,016.7 960.9 -635.7 -657.2 -651.5 -650.1 -602.6 332.9 325.3 329.5 366.6 358.3 selling expenses general and administrative expenses -133.9 -46.1 -135.8 -46.5 -125.8 -44.6 other operating income / expense 1.1 6.5 5.8 operating result 154.0 149.4 164.8 -128.0 -46.3 -13.3 178.9 -10.4 0.0 0.2 -134.2 -52.7 -7.6 163.7 -6.2 -5.3 0.0 156.7 168.7 152.2 -47.1 109.6 -52.9 115.8 -59.6 92.6 -7.3 0.0 -0.8 -8.8 -156.9 0.9 -10.8 -44.8 -55.6 -4.6 -98.0 1.0 47.8 -43.2 4.6 financial result amortization of financial assets result from associated companies pre-tax result income taxes net income (from continued operations) attributable to non-controlling interests shareholders of united internet ag result per share of shareholders of united internet ag (in €) - basic - diluted 0.0 -55.6 0.1 4.5 0.1 109.5 -0.27 -0.27 0.02 0.02 0.54 0.54 0.0 115.8 0.59 0.59 0.1 92.5 0.46 0.46

united internet ag elgendorfer straße 57 56410 montabaur germany www.united-internet.com