Basic accounting principles

These consolidated annual accounts have been prepared in conformity with the International Financial Reporting Stan-dards (IFRS) as they are to be applied in the EU and the relevant interpretations issued by the International Accounting Standards Board (IASB). Moreover, the commercial law provisions to be applied in accordance with Section 315a (1) HGB [German Commercial Code] have been observed.

The consolidated annual accounts have been prepared in euros. Unless other-wise specifically indicated, all of the amounts are shown in thousand euros (€k). Assets and liabilities are broken down into long-term and short-term as-sets and liabilities according to the at-tributable periods. The consolidated in-come statement is structured according to the cost summary method. The fiscal year is the equivalent of the calendar year.

Beginning in fiscal year 2014, applicati-on of the following standards and inter-pretations as revised or newly published by the IASB was mandatory:

CONSOLIDATED ANNUAL ACCOUNTS

Consolidated Notes

Standards/Interpretations

Mandatory application for fiscal years beginning with

Standards

IFRS 10 Consolidated Financial Statements 01.01.2014

IFRS 11 Joint Arrangements 01.01.2014

IFRS 12 Disclosure of Interests in Other Entities 01.01.2014

IAS 27 Separate Financial Statements 01.01.2014

IAS 28 Investments in Associates and Joint Ventures 01.01.2014

IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments)

01.01.2014

IAS 36 Disclosure of Recoverable Amount of Non-financial Assets (Amendments)

01.01.2014

IAS 39 Reclassification of Derivatives and Continuation of Hedge Accounting (Amendments)

01.01.2014

IFRS 10/11/12 Transition Guidance (Amendments) 01.01.2014

IFRS 10/12, IAS 27 Investment Entities (Amendments) 01.01.2014

The new regulations did not materially affect the consolidated annual accounts.

The IASB and IFRIC (International Fi-nancial Reporting Interpretations Com-mittee) have issued the following stan-dards, interpretations and amendments to current standards. However, their application is not yet mandatory, and Drillisch AG does not apply them

pre-maturely. The application of these IFRS presumes that they have been adopted by the EU within the scope of the IFRS endorsement procedure.

The application of the following stan-dards and interpretations which have already been adopted, revised or newly issued by the IASB was not yet mandato-ry in fiscal year 2014:

CONSOLIDATED ANNUAL ACCOUNTS

Consolidated Notes

Standards/Interpretations

Mandatory application for fiscal years beginning with

adoption by EU Commission

Standards

IAS 19 Employee Benefits (Amendment) 01.02.2015 Yes

Various Improvements to IFRS 2010-2012 01.02.2015 Yes

Various Improvements to IFRS 2011-2013 01.07.2014 Yes

IFRS 14 Regulatory Deferral Accounts 01.01.2016 No

IFRS 11 Accounting for Acquisition of Interests in Joint Operations

(Amendment) 01.01.2016 No

IAS 16, IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation

(Amendment) 01.01.2016 No

IAS 16, IAS 41 Agriculture: Bearer Plants

(Amendment) 01.01.2016 No

IFRS 10/12, IAS 28 Investment Entities: Applying the Consolidation Exception

(Amendment) 01.01.2016 No

IAS 1 Disclosure Initiative (Amendment) 01.01.2016 No

Various Improvements to IFRS 2012-2014 01.07.2016 No

IFRS 10, IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

(Amendment) 01.01.2016 No

IAS 27 Equity Method in Separate Financial

Statements (Amendments) 01.01.2016 No

IFRS 15 Revenue from Contracts with

Customers 01.01.2017 No

IFRS 9 Financial Instruments 01.01.2018 No

Interpretations

IFRIC 21 Levies 17.06.2014 Yes

As the situation stands today, we do not expect any major effects on the consolida-ted annual accounts from the new regulations.

CONSOLIDATED ANNUAL ACCOUNTS

Consolidated Notes

C. Consolidation

Consolidation principles and consolida-ted companies

Corporate mergers are measured ac-cording to the acquisition method. The purchase price is distributed among the identified assets and liabilities, including contingent liabilities, of the acquired subsidiary. The value relationships at the point in time at which the control over the subsidiary is obtained are authorita-tive. The measurable assets and the as-sumed liabilities, including contingent liabilities, are measured in full at their fair values irrespective of the amount of the holding. Any remaining positive dif-ference is recognised as goodwill. Any remaining negative difference is recog-nised directly as operating results after being reviewed once again. The disclo-sed hidden reserves and hidden encum-brances are carried forward to the fol-lowing periods in the same way as the handling of the corresponding assets and liabilities, written off as scheduled or reversed.

Joint ventures and interests which are unilaterally controlled are included in accordance with the equity method. The balance sheets for these companies are prepared with their identified, propor-tionate assets which have been revalua-ted (plus any goodwill) and liabilities in one item. The equity method is always updated by the proportionate period re-sults, disbursements and hidden reserves carried forward. Profits and losses from business transactions with these compa-nies are eliminated proportionately.

Consistent accounting and valuation methods are applied to the separate ac-counts included in the consolidated an-nual accounts of Drillisch AG.

All of the receivables and payables as well as income and expenditures among the companies included in the consoli-dated annual accounts are eliminated, as are interim results.

The parent company´s annual accounts as well as those of all of the important subsidiaries controlled by the former, whether directly or indirectly, were in-cluded in the consolidated annual ac-counts of Drillisch AG per 31 December 2014. There is control of a company if the parent company, legally or de facto, has the opportunity to determine the fi-nancial and business policies of a compa-ny with the aim of obtaining commercial benefits.

A company is included in the consoli-dated accounts for the first time from the moment at which control can be exercised or the criteria for joint ventu-res and associated companies are met.

Companies which are not included are singly and in their totality of only min-or impmin-ortance, both from quantitative and qualitative perspectives, and the ba-lance sheets are prepared in accordance with IAS 39.

CONSOLIDATED ANNUAL ACCOUNTS

Consolidated Notes

The following companies are included in the consolidated annual accounts:

Share of

held capital in

% No.

1. Drillisch AG, Maintal

2. Drillisch Telecom GmbH, Maintal 100 1

3. IQ-optimize Software AG (“IQ-optimize AG”), Maintal 100 1

4. MS Mobile Services GmbH (“MS Mobile GmbH”), Maintal 100 2

5. MSP Holding GmbH, Maintal 100 1

6. Mobile Ventures GmbH, Maintal 100 5

7. eteleon AG, Munich 100 5

On 2 January 2015, Drillisch AG executed the letter of intent regarding the purcha-se of 100% of the shares of yourfone GmbH, Hamburg, concluded with E-Plus Mobilfunk GmbH & Co. KG in November 2014 and acquired the company, inclu-ding all of the trademark rights and the clientele. yourfone GmbH is a wireless ser-vices provider operating in Germany. This acquisition further expanded the Drillisch portfolio to include another brand name well established on the German wireless services market, thereby not only increa-sing the number of subscribers, but also the potential for future growth.

The provisional net purchase price amounts to €51.4m and is calculated as the purchase price less acquired cash and a receivable from the seller. The fi-nal calculation of the purchase price and a detailed breakdown of the purchase price among the identifiable assets and liabilities at the attributable fair value in accordance with the provisions of IFRS 3 cannot yet be provided with these ac-counts because the final values and their allocation were not yet available at the time of preparation of the accounts. The value from the purchase price less cash which must be broken down essentially

comprises the trademark yourfone, the clientele of yourfone GmbH and good-will.

Moreover, Drillisch AG acquired 97.5% of the shares of GTCom GmbH, Düsseldorf, at the beginning of February 2015. GT-Com GmbH is a mobile virtual network operator (MVNO) operating in Germany and has had many years of experience in marketing prepaid products.

The purchase price amounted to €1.6m.

A detailed breakdown of the purchase price among the identifiable assets and liabilities at the attributable fair value in accordance with the provisions of IFRS 3 cannot yet be provided with these ac-counts because a final purchase price al-location was not yet available at the time of their preparation. The value from the purchase price less cash which must be broken down essentially comprises the clientele of GTCom GmbH and goodwill.

CONSOLIDATED ANNUAL ACCOUNTS

Consolidated Notes