ELECTRONIC TRANSMISSION DISCLAIMER

STRICTLY NOT TO BE FORWARDED TO ANY OTHER PERSONS

IMPORTANT: You must read the following disclaimer before continuing. This electronic transmission applies to the attached document and you are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of the attached prospectus (the "Prospectus") relating to Avast plc (the "Company") dated 10 May 2018 accessed from this page or otherwise received as a result of such access and you are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of the attached document. In accessing the attached document, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from us as a result of such access. You acknowledge that this electronic transmission and the delivery of the attached document is confidential and intended for you only and you agree you will not forward, reproduce, copy, download or publish this electronic transmission or the attached document, in whole or in part, whether electronically or otherwise to any other person. The Prospectus has been prepared solely in connection with the proposed offer to certain institutional and professional investors (the "Global Offer") of ordinary shares (the "Shares") of the Company. The Prospectus has been published in connection with the admission of the Shares to the premium listing segment of the Official List of the UK Financial Conduct Authority (the "FCA") and to trading on the London Stock Exchange plc's main market for listed securities (together, "Admission"). The Prospectus has been approved by the FCA as a prospectus prepared in accordance with the Prospectus Rules made under section 73A of the FSMA. The Prospectus has been published and is available from the Company's registered office and on the Company's website at http://investors.avast.com. Pricing information and other related disclosures have also been published on this website. Prospective investors are advised to access such information prior to making an investment decision.

THIS ELECTRONIC TRANSMISSION AND THE ATTACHED DOCUMENT MAY ONLY BE DISTRIBUTED IN CONNECTION WITH "OFFSHORE TRANSACTIONS" AS DEFINED IN, AND IN RELIANCE ON, REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") ("REGULATION S") OR WITHIN THE UNITED STATES TO QUALIFIED INSTITUTIONAL BUYERS ("QIBs") AS DEFINED IN RULE 144A UNDER THE U.S. SECURITIES ACT ("RULE 144A") OR PURSUANT TO ANOTHER EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE ATTACHED DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS NOTICE MAY RESULT IN A VIOLATION OF THE U.S. SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. NOTHING IN THIS ELECTRONIC TRANSMISSION AND THE ATTACHED DOCUMENT CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO.

THE SHARES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON THAT THE SELLER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QIB IN RELIANCE ON RULE 144A OR PURSUANT TO ANOTHER EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT OR (2) IN AN "OFFSHORE TRANSACTION" AS DEFINED IN, AND IN ACCORDANCE WITH RULE 903 OR RULE 904 OF, REGULATION S, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.

This electronic transmission and the attached document and the Global Offer when made are only addressed to and directed at persons in member states of the European Economic Area who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) and amendments thereto ("Qualified Investors"). In addition, in the United Kingdom, this electronic transmission and the attached document is being distributed only to, and is directed only at, Qualified Investors (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"); (ii) who are high net worth companies, unincorporated associations and other persons falling within Article 49(2)(a) to (d) of the Order, and (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as "relevant persons"). This electronic transmission and the attached document must not be acted on or relied on (i) in the United Kingdom, by persons who are not relevant persons, and (ii) in any member state of the European

Economic Area other than the United Kingdom, by persons who are not Qualified Investors. Any investment or investment activity to which this document relates is available only to (i) in the United Kingdom, relevant persons, and (ii) in any member state of the European Economic Area other than the United Kingdom, Qualified Investors, and will be engaged in only with such persons.

Confirmation of your Representation: This electronic transmission and the attached document is delivered to you on the basis that you are deemed to have represented to Morgan Stanley & Co. International plc ("Morgan Stanley"), UBS Limited ("UBS"), Barclays Bank PLC, acting through its Investment Bank ("Barclays"), Merrill Lynch International ("BofA Merrill Lynch"), Credit Suisse Securities (Europe) Limited ("Credit Suisse"), Jefferies International Limited ("Jefferies"), and KeyBanc Capital Markets Inc. ("KeyBanc" and together with Morgan Stanley, UBS, Barclays, BofA Merrill Lynch, Credit Suisse and Jefferies, the "Underwriters"), N M Rothschild & Sons Limited (the "Financial Adviser"), the Company, each of the Selling Shareholders and the Over-allotment Shareholders (as defined in Part 15 "Definitions and Glossary") that (i) you are (a) a QIB acquiring such securities for its own account or for the account of another QIB or (b) acquiring such securities in "offshore transactions", as defined in, and in reliance on, Regulation S; (ii) if you are in the United Kingdom, you are a relevant person, and/or a relevant person who is acting on behalf of, relevant persons in the United Kingdom and/or Qualified Investors to the extent you are acting on behalf of persons or entities in the United Kingdom or the EEA; (iii) if you are in any member state of the European Economic Area other than the United Kingdom, you are a Qualified Investor and/or a Qualified Investor acting on behalf of, Qualified Investors or relevant persons, to the extent you are acting on behalf of persons or entities in the EEA or the United Kingdom; (iv) if you are outside of the EEA and the United States, you are a person to whom this electronic transmission and the attached document may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and (v) you are an institutional investor that is eligible to receive this document and you consent to delivery by electronic transmission.

You are reminded that you have received this electronic transmission and the attached document on the basis that you are a person into whose possession this document may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliver this document, electronically or otherwise, to any other person. This document has been made available to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of the Company, the Selling Shareholders, the Overallotment Shareholders, the Underwriters, the Financial Adviser nor any of their respective affiliates accepts any liability or responsibility whatsoever in respect of any difference between the document distributed to you in electronic format and the hard copy version. By accessing the attached document, you consent to receiving it in electronic form. None of the Underwriters, the Financial Adviser nor any of their respective affiliates accepts any responsibility whatsoever for the contents of the attached document or for any statement made or purported to be made by it, or on its behalf, in connection with the Company, the Global Offer or the Shares. To the fullest extent permitted by law, the Underwriters, the Financial Adviser and each of their respective affiliates, each accordingly disclaims all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of such document or any such statement. No representation or warranty express or implied, is made by any of the Underwriters, the Financial Adviser or any of their respective affiliates as to the accuracy, completeness, reasonableness, verification or sufficiency of the information set out in the attached document.

The Underwriters and the Financial Adviser are acting exclusively for the Company and no one else in connection with the Global Offer. They will not regard any other person (whether or not a recipient of this document) as their client in relation to the Global Offer and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients nor for giving advice in relation to the Global Offer or any transaction or arrangement referred to the attached document.

Restriction: Nothing in this electronic transmission constitutes, and this electronic transmission may not be used in connection with, an offer of securities for sale to persons other than the specified categories of institutional buyers described above and to whom it is directed and access has been limited to that it shall not constitute a general solicitation. If you have gained access to this transmission contrary to the foregoing restrictions, you will be unable to purchase any of the securities described herein.

You are responsible for protecting against viruses and other destructive items. Your receipt of this document via electronic transmission is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature.

Prospectus May 2018

This document comprises a prospectus (the "Prospectus") for the purposes of Article 3 of European Union Directive 2003/71/EC, as amended (the "Prospectus Directive") relating to Avast plc (the "Company") prepared in accordance with the Prospectus Rules of the Financial Conduct Authority (the "FCA") made under section 73A of the Financial Services and Markets Act 2000 (the "FSMA"). The Prospectus has been approved by the FCA in accordance with section 87A of the FSMA and has been made available to the public in accordance with Prospectus Rule 3.2.1.

Application has been made to the FCA for all of the ordinary shares of the Company (the "Shares") issued and to be issued in connection with the Global Offer to be admitted to the premium listing segment of the Official List of the FCA and to London Stock Exchange plc (the "London Stock Exchange") for all of the Shares to be admitted to trading on the London Stock Exchange's main market for listed securities (together, "Admission"). Admission in trading on the London Stock Exchange's main market for listed securities constitutes admission to trading on a regulated market. In the global offering (the "Global Offer"), 58,977,478 new Shares are being offered by the Company (the "New Shares") and 181,815,424 existing Shares (the "Existing Shares") are being offered by certain existing holders of Shares. Conditional dealings in the Shares are expected to commence on the London Stock Exchange on 10 May 2018. It is expected that Admission will become effective and that unconditional dealings in the Shares will commence on 15 May 2018. All dealings before the commencement of unconditional dealings will be of no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned. No application is currently intended to be made for the Shares to be admitted to listing or dealt with on any other exchange. The New Shares issued by the Company will rank pari passu in all respects with the Existing Shares. No application has been made or is currently intended to be made for the Shares to be admitted to listing or dealt with on any other exchange.

The directors of the Company, whose names appear on page 50 of this Prospectus (the "Directors"), and the Company accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Directors and the Company (each of whom has taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and contains no omission likely to affect the import of such information.

Prospective investors should read this Prospectus in its entirety before making any decision as to whether to subscribe for or purchase Shares. See in Part 1—"Risk Factors" for a discussion of certain risks and other factors that should be considered prior to any investment in the Shares.

AVAST PLC

(Incorporated under the Companies Act 2006 and registered in England and Wales with registered number 07118170)

Global Offer of 240,792,902 Shares at an Offer Price of 250 pence per Share and admission to the Premium Listing Segment of the Official List and to trading on the Main Market of the London Stock Exchange

Joint Global Co-ordinators, Joint Bookrunners and Joint Sponsors

Morgan Stanley UBS Investment Bank

Joint Bookrunners

Barclays BofA Merrill Lynch

Credit Suisse Jefferies

Co-Lead Manager

KeyBanc Capital Markets

Financial Adviser

Rothschild

ORDINARY SHARE CAPITAL IMMEDIATELY FOLLOWING ADMISSION

Issued and fully paid

Number Nominal Value

952,639,185 10 pence

The contents of this Prospectus are not to be construed as legal, business or tax advice. Each prospective investor should consult his or her own lawyer, independent financial adviser or tax adviser for legal, financial or tax advice in relation to any subscription, purchase or proposed subscription or purchase of Shares. Prospective investors should be aware that an investment in the Company involves a degree of risk and that, if certain of the risks described in the Prospectus occur, investors may find their investment materially adversely affected. Accordingly, an investment in the Shares is only suitable for investors who are particularly knowledgeable in investment matters and who are able to bear the loss of the whole or part of their investment.

Each of Morgan Stanley & Co. International plc ("Morgan Stanley"), UBS Limited ("UBS"), Barclays Bank PLC, acting through its Investment Bank ("Barclays"), Merrill Lynch International ("BofA Merrill Lynch") and Credit Suisse Securities (Europe) Limited ("Credit Suisse") is authorised by the Prudential Regulation Authority (the "PRA") and regulated by the FCA and the PRA in the United Kingdom. Jefferies International Limited ("Jefferies") and N M Rothschild & Sons Limited ("Rothschild" or the "Financial Adviser") are authorised and regulated by the FCA in the United Kingdom. KeyBanc Capital Markets Inc. ("KeyBanc Capital Markets") is regulated by the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority. Morgan Stanley, UBS, Barclays, Credit Suisse, Jefferies, BofA Merrill Lynch and KeyBanc Capital Markets (together, the "Underwriters") and Rothschild (together with the Underwriters, the "Banks") are acting exclusively for the Company and no-one else in connection with the Global Offer. None of the Banks will regard any other person (whether or not a recipient of this Prospectus) as a client in relation to the Global Offer and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for the giving of advice in relation to the Global Offer or any transaction, matter, or arrangement referred to in this Prospectus. Apart from the responsibilities and liabilities, if any, which may be imposed on the Banks by the FSMA or the regulatory regime established thereunder or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Banks nor any of their respective affiliates accepts any responsibility whatsoever for the contents of this Prospectus including its accuracy, completeness and verification or for any other statement made or purported to be made by them, or on their behalf, in connection with the Company, the Shares or the Global Offer. Each of the Banks and each of their respective affiliates accordingly disclaim, to the fullest extent permitted by applicable law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise be found to have in respect of this Prospectus or any such statement. Investors should rely only on the information contained in this Prospectus. No representation or warranty express or implied, is made by any of the Banks or any of their respective affiliates as to the accuracy, completeness, verification or sufficiency of the information set out in this Prospectus, and nothing in this Prospectus will be relied upon as a promise or representation in this respect, whether or not to the past or future. This Prospectus is not intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by the Company, the Directors, the Selling Shareholders or any of the Banks or any of their representatives or affiliates that any recipient of this Prospectus should subscribe for or purchase Shares.

In connection with the Global Offer of the Shares, each of the Underwriters and any of their respective affiliates or agents acting as an investor for its or their own account(s) may purchase Shares and, in that capacity, may retain, purchase, sell, offer to sell or otherwise deal for its or their own account(s) in such securities, any other securities of the Company or other related investments in connections with the Global Offer or otherwise. Accordingly, references in this Prospectus to Shares being offered, sold or otherwise dealt with should be read as including any offer to purchase or dealing to any of the Underwriters or any of them or any of their respective affiliates acting in such capacity as an investor for its or their own account(s). In addition, certain of the Underwriters and any of their respective affiliates may in the ordinary course of their business activities enter into financing arrangements (including swaps) with investors in connection with which such Underwriters (or their affiliates) may from time to time acquire, hold or dispose of Shares. The Underwriters do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.

Each of the Underwriters and their respective affiliates may have engaged in transactions with, and provided various investment banking, financial advisory and other services for, the Company and/or the Selling Shareholders for which they would have received customary fees. Each of the Underwriters and their respective affiliates may provide such services to the Company and/or the Selling Shareholders and any of its affiliates in the future.

This Prospectus does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities other than the securities to which it relates or any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, such securities by any person in any circumstances or in any jurisdiction in which such offer or solicitation is unlawful.

Information to Distributors: Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Shares the subject of the Global Offer have been subject to a product approval process, which has determined that such Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Shares may decline and investors could lose all or part of their investment; the Shares offer no guaranteed income and no capital protection; and an investment in the Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Offer. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Underwriters will only procure investors who meet the criteria of professional clients and eligible counterparties. For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Shares. Each distributor is responsible for undertaking its own target market assessment in respect of the Shares and determining appropriate distribution channels.

Notice to overseas shareholders

The Shares have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"). The Shares offered by this Prospectus may not be offered or sold in the United States, except to qualified institutional buyers ("QIBs"), as defined in, and in reliance on, the exemption from the registration requirements of the U.S. Securities Act provided in Rule 144A under the U.S. Securities Act ("Rule 144A") or another exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. Prospective investors are hereby notified that the sellers of the Shares may be relying on the exemption from the provisions of section 5 of the U.S. Securities Act provided by Rule 144A. Outside of the United States, the Global Offer is being made in offshore transactions as defined in Regulation S of the U.S. Securities Act. No actions have been taken to allow a public offering of the Shares under the applicable securities laws of any jurisdiction, including Canada, Australia or Japan. Subject to certain exceptions, the Shares may not be offered or sold in any jurisdiction, or to or for the account or benefit of any national, resident or citizen of any jurisdiction, including Canada, Australia or Japan. This Prospectus does not constitute an offer of, or the solicitation of an offer to subscribe for or purchase any of the Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction.

The Shares have not been and will not be registered or qualified for distribution by this Prospectus under the applicable securities laws of Canada, Australia or Japan. Subject to certain exceptions, the Shares may not be offered or sold in any jurisdiction, or to or for the account or benefit of any national, resident or citizen in Australia or Japan or to any person located or resident in Canada. The Shares have not been recommended by any U.S. federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Prospectus. Any representation to the contrary is a criminal offence in the United States.

The distribution of this Prospectus and the offer and sale of the Shares in certain jurisdictions may be restricted by law, including, without limitation, the United States, Australia, Canada, Dubai, Hong Kong, Japan, Singapore, South Africa and Switzerland. No action has been or will be taken by the Company, the Selling Shareholders (as defined in Part 15—"Definitions and Glossary") or the Banks to permit a public offering of the Shares under the applicable securities laws of any jurisdiction. Other than in the United Kingdom, no action has been taken or will be taken to permit the possession or distribution of this Prospectus (or any other offering or publicity materials relating to the Shares) in any jurisdiction where action for that purpose may be required or where doing so is restricted by law. Accordingly, neither this Prospectus, nor any advertisement, nor any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Prospectus comes should inform themselves about and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, no actions have been or will be taken to

permit a public offering of the Shares under the applicable securities laws of any jurisdiction, including the United States, Australia, Canada, Dubai, Hong Kong, Japan, Singapore, South Africa and Switzerland. Accordingly, subject to certain exceptions, the Shares may not be offered, sold or delivered within the United States, Australia, Canada, Dubai, Hong Kong, Japan, Singapore, South Africa and Switzerland.

For a description of these and certain further restrictions on the offer, subscription, sale and transfer of the Shares and distribution of this Prospectus, please see Part 13—"Details of the Global Offer" of this Prospectus. Please note that by receiving this Prospectus, subscribers and purchasers shall be deemed to have made certain representations, acknowledgements and agreements set out herein including, without limitation, those set out in Part 13—"Details of the Global Offer" of this Prospectus.

Available information

For so long as any of the Shares are in issue and are "restricted securities" within the meaning of Rule 144(a)(3) under the U.S. Securities Act, the Company will, during any period in which it is not subject to section 13 or 15(d) under the U.S. Securities Exchange Act of 1934, as amended (the "U.S. Exchange Act"), nor exempt from reporting under the U.S. Exchange Act pursuant to Rule 12g3-2(b) thereunder, make available to any holder or beneficial owner of a Share, or to any prospective purchaser of a Share designated by such holder or beneficial owner, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the U.S. Securities Act.

SUMMARY	1
PART 1 RISK FACTORS	19
PART 2 PRESENTATION OF FINANCIAL AND OTHER INFORMATION	38
PART 3 DIRECTORS, SECRETARY, REGISTERED AND HEAD OFFICE AND ADVISERS	50
PART 4 EXPECTED TIMETABLE OF PRINCIPAL EVENTS AND OFFER STATISTICS	52
PART 5 INDUSTRY OVERVIEW	53
PART 6 BUSINESS	61
PART 7 DIRECTORS AND CORPORATE GOVERNANCE	81
PART 8 SELECTED FINANCIAL INFORMATION	89
PART 9 OPERATING AND FINANCIAL REVIEW	95
PART 10 CAPITALISATION AND INDEBTEDNESS	145
PART 11 HISTORICAL FINANCIAL INFORMATION	147
PART 12 UNAUDITED PRO FORMA FINANCIAL INFORMATION	264
PART 13 DETAILS OF THE GLOBAL OFFER	268
PART 14 ADDITIONAL INFORMATION	277
PART 15 DEFINITIONS AND GLOSSARY	319

SUMMARY

Summaries are made up of disclosure requirements known as "Elements". These Elements are numbered in Sections A-E (A. 1 - E. 7). This summary contains all the Elements required to be included in a summary for this type of security and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.

Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of "not applicable".

Section A—Introductions and warnings

A.1 Warning

This summary should be read as an introduction to the prospectus (the "Prospectus").

Any decision to invest in the securities should be based on consideration of the Prospectus as a whole by the investor. Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the prospectus before the legal proceedings are initiated.

Civil liability attaches only to those persons who have tabled the summary including any translation thereof, and applied its notification, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities.

A.2 Subsequent resale of securities or final placement of securities through financial intermediaries

Not applicable. No consent has been given by the Company or any person responsible for drawing up this Prospectus to the use of the Prospectus for subsequent resale or final placement of securities by financial intermediaries.

Section B—Issuer

B.1 Legal and commercial name

Avast plc (the "Company").

B.2 Domicile and legal form

The Company was incorporated and registered in England and Wales on 7 January 2010 as a private company limited by shares with the name Avast Limited and with the registered number 07118170. On 18 April 2018, the Company was acquired by Sybil Holdings S.à r.l. Prior to acquisition, the Company was a dormant company. On 3 May 2018, the Company was re-registered as a public limited company with the name Avast plc.

The principal legislation under which the Company operates and under which the New Shares will be created is the Companies Act 2006, as amended (the "Act").

B.3 Key factors affecting current operations and principal activities

The Group is the number one provider of security software to the consumer market as measured by number of users. The Group has been delivering security solutions to the consumer market for the last 30 years and offers a range of products that protect users' security, device performance and privacy (collectively, their "digital lives"). Headquartered in the Czech Republic, the Group has users in almost every country in the world, with more than 435 million users worldwide as of 31 December 2017, including more than 290 million desktop users. Of these desktop users, approximately 4% were users of paid products ("customers"). As of the same date, there were 59 countries in which the Group had at least one million users. The Group's consumer personal computer ("PC") software products had over 290 million users as of 31 December 2017, approximately six times more than the Group's nearest competitor.

The Group offers products in two segments: consumer products (which generate direct and indirect revenue streams) and products for the small and medium business ("SMB") market. These products secure not just the devices of users, but also their data, families, networks and homes. The Group offers next-generation consumer PC antivirus security software under the Avast and AVG brands, each in the form of both free offerings and paid premium products. In addition to security products, the Group also offers value-added solutions for PCs and mobile devices focused on performance and privacy, such as optimisation products (including CCleaner, Avast Cleanup and AVG Tune Up), VPN products (including HideMyAss ("HMA") and Avast SecureLine and AVG Secure VPN), password manager products (including Avast Passwords) and family safety products (such as Location Labs' mobile parental controls products). The Group is also developing products to address the Smart Home market and the privacy and security threats posed by the rapid growth of connected devices, collectively known as the internet of things ("IoT"). In addition, the Group monetises its users indirectly through advertisements and third party software distribution agreements, as well as through its secure browser, Avast Secure Browser; its e-commerce offering, SafePrice; and its data analytics business, Jumpshot. Specifically designed for the SMB market, the Group offers cloud and on-premises antivirus protection and IT administrative solutions under both the Avast and AVG brands.

The Group's antivirus solutions use artificial intelligence ("AI") and employ machine-learning capabilities to conduct behavioural analysis and improve detection abilities. With both local and cloud-based deep learning capabilities, the Group's security engine is powered by a continuous data loop of inputs from the Group's users, who act as a geographically dispersed global threat detection system. The Group's security engine stopped approximately two billion attacks per month in the year ended 31 December 2017. The Group places a heavy focus on the continuous development and improvement of these technologies, with more than 45% of its employees working in research and development ("R&D"). The Group believes this focus on R&D strongly contributes to the fact that the Group's products are consistently ranked among the highest-rated antivirus solutions by both users and editors on leading download websites, as well as in popular media globally.

The Group offers versions of its high-performance consumer PC antivirus security software to consumers free of charge. The Group focuses on promoting these free products as a part of its user acquisition strategy. The Group monetises its user base by converting users of its free antivirus software to paid antivirus customers and selling existing customers of its paid antivirus products a higher tier of paid antivirus software (collectively, "up-selling") or adjacent (non-antivirus) paid products, such as VPN products or PC optimisation tools ("cross-selling"). The large user base not only drives direct revenues by growing the market to which the Group can target its up-selling and cross-selling campaigns, but it also improves the accuracy and effectiveness of the Group's machinelearning-powered consumer monetisation platform. The platform becomes more effective with increased inputs, improving the Group's ability to market and advertise its products to its existing user base by learning the most effective time and manner to message and prompt users to purchase premium paid antivirus software or value-added solutions. The Group's free products provide comprehensive malware protection to users, while imposing low user support and servicing costs on the Group, amounting to, on average, \$0.02 per free incremental PC antivirus software user per annum for the year ended 31 December 2017.

Group's Adjusted Revenues increased 6% from \$736.5 million for the year ended 31 December 2016 to \$779.5 million for the year ended 31 December 2017 and 2% from \$720.5 million for the year ended 31 December 2015 to \$736.5 million for the year ended 31 December 2016. Piriform contributed \$6.1 million to the Group's 2017 Adjusted Revenues of \$779.5 million from the date of its acquisition on 18 July 2017 to 31 December 2017, and, had Piriform always been a part of the Group, it would have contributed an additional \$15.6 million. Discontinued Business contributed \$38.5 million to 2017, \$66.7 million to 2016, and \$101.4 million to 2015 Adjusted Revenue. Excluding Piriform and Discontinued Business, on a like-for-like basis, the Group's Adjusted Revenue increased 7% from 2016 to 2017, and 8% from 2015 to 2016.

B.4a Significant recent trends affecting the Group and the industry in which it operates

The Group offers products directly to consumers and SMBs in several markets encompassing cybersecurity, device computing performance and data privacy. The Group also generates revenue indirectly through the analytics, affiliate publishing and web browsing markets. Despite operating in several varied markets, the core of the Group's business is its global user base. The Group has achieved significant scale and success by developing products for hundreds of millions of consumers who have recognised the growing need for solutions that enable them to live their online lives safely and securely.

As increasingly larger segments of consumers' lives become digital, fear of financial losses to hackers has risen. The primary attack vectors fuelling these fears include ransomware, identity theft and socially engineered malware. Ransomware enables hackers to extort consumers and businesses by first encrypting all of the data at the centre of consumers' digital lives and then demanding monetary compensation to prevent the permanent deletion of that data. Identity theft involves stealing key personal information, often online or in a digital form, to gain benefits, financial or otherwise. Socially engineered malware disguises malware inside seemingly innocuous links, email attachments and images to covertly collect consumer information. As a result, consumers reported worrying approximately twice as often about digital crimes such as identity theft and online financial hacking compared to physical crimes such as car theft, home burglary and terrorism (source: Gallup—Gallup Poll Social Series: Crime; October 2017).

Furthermore, the scale and magnitude of broader cybercrime has increased. According to Norton, 53% of consumers have experienced a cybercrime or know someone who has, and the average affected consumer spends approximately 24 hours of total time recovering from a cybercrime. This reduction in consumers' sense of safety has culminated in 51% of consumers believing it has become more difficult to stay secure online over the last five years (source: Norton Cyber Security Insights Report 2016). In total, 978 million consumers were impacted by a cybercrime in 2017, generating \$172 billion in losses to cybercrime during the same period (source: Norton Cyber Security Insights Report 2017).

The Group's markets can be divided into three categories: Consumer Direct, Consumer Indirect, and SMB. The Consumer Direct category includes consumer security, performance and privacy products and services sold directly to customers to protect their devices and data and to improve device performance. Consumer Indirect includes a broad range of products and services which aim to generate revenue from the Group's existing user community without the direct sale of products or services. These products and services include analytics, affiliate publishing, secure web browsing, advertising within applications and distribution of third party software. The SMB category includes endpoint and network security products for small and medium-sized businesses as well as tools for managed service providers to maintain and monitor security on a customer's behalf.

The Group believes its current addressable market achieved total revenue of \$14.5 billion in 2017 and that the market will reach revenues of \$21.3 billion in 2021, representing a CAGR of 10.1% (source: Company market study). The Consumer Direct segment revenue projections have been based on global consumer spend on desktop & mobile antivirus ("AV"), VPN, PC utilities, other consumer endpoint products and protection products for home-centric IoT devices. The Consumer Indirect segment revenue projections have been based on the market for paid distribution of consumer software, the non-network half of the e-commerce affiliate publishing market, the search distribution market represented by third-party browsers, the market for advertising within applications and a combination of the clickstream analytics and specialised analytics markets. The SMB segment revenue projections include the global SMB endpoint spend and the total SMB network security spend attributable to cloud-based, Software-as-a-Service (SaaS) products.

B.5 Group description

The term "Group" refers to Avast Holding B.V. and each of its consolidated subsidiaries and subsidiary undertakings prior to the completion of a Group reorganisation (the "Reorganisation") (which is expected to be immediately prior to Admission) and, thereafter, the Company and its consolidated subsidiaries and subsidiary undertakings from time to time. The main trading entity of the Group is Avast Software s.r.o. Upon completion of the Reorganisation, the Company will, immediately prior to Admission, become the holding company of the Group. The term "Admission" refers to admission of the ordinary shares of the Company of 10 pence each ("Shares") to the premium listing segment of the Official List of the FCA (the "Official List") and to trading on the London Stock Exchange's main market for listed securities.

B.6 Major shareholders

As at the date of this Prospectus, the Company is owned or controlled by Sybil Holdings S.à r.l., which is owned by funds advised by affiliates of CVC Capital Partners Advisory Company (Luxembourg) S.à r.l. ("Sybil"); Pavel Baudisˇ; Eduard Kucˇera; funds advised by Summit Partners, L.P. and its affiliates ("Summit Partners" and together with Sybil, Pavel Baudisˇ and Eduard Kucˇera, the "Major Shareholders") and current and former Directors and employees, which together hold 100% of the voting rights attached to the issued share capital of the Company. Immediately following the Global Offer and Admission, it is expected that the Major Shareholders will hold approximately 65.9%, assuming no exercise of the Over-allotment Option, and 62.1%, assuming the Over-allotment Option is exercised in full.

As far as it is known to the Company, the following are the interests (within the meaning of Part IV of the Act) (other than interests held by the Directors) which represent, or will represent, directly or indirectly 3% or more of the issued share capital of the Company (assuming no exercise of the option granted to Morgan Stanley & Co. International plc as stabilising manager (the "Stabilising Manager") to purchase, or procure purchasers for, up to 36,118,935 additional Existing Shares (as defined below) (the "Over-Allotment Option")):

	Immediately prior to Admission		Immediately following Admission
Shareholders	Percentage of issued Number of share Shares capital		Number of Shares	Percentage of issued share capital
Sybil Holdings S.à r.l	270,378,756	30.3%	216,303,002	22.7%
Pavel Baudisˇ(1)	317,696,900	35.6%	257,182,165	27.0%
Eduard Kucˇera(2)	123,275,331	13.8%	99,793,912	10.5%
Summit Partners(3)	68,416,648	7.7%	54,733,318	5.7%

Notes

(1) Immediately prior to Admission, Pavel Baudisˇ will hold Shares in the Company directly and through PaBa Software s.r.o. Mr. Baudisˇ will hold 60,514,735 Shares on an individual basis immediately prior to Admission (and 0 Shares immediately following Admission). Mr. Baudisˇ will hold 257,182,165 Shares through PaBa Software s.r.o. immediately prior to Admission (and 257,182,165 Shares immediately following Admission).
(2) Immediately prior to Admission, Eduard Kucˇera will hold Shares in the Company directly and through Pratincole Investments Limited. Mr. Kucˇera will hold 23,481,419 Shares on an individual basis immediately prior to Admission (and 0 Shares immediately following Admission). Mr. Kucˇera held 99,793,912 Shares through Pratincole Investments Limited immediately prior to Admission (and 99,793,912 Shares immediately following Admission).
(3) Immediately prior to Admission, Summit Partners will hold Shares in the Company through its funds Leia 1 S.a` r.l, Summit Investors I, LLC and Summit Investors I (UK), L.P.

The Shares owned by the Major Shareholders rank pari passu with other Shares in all respects.

Sybil Relationship Agreement

On 10 May 2018, the Company entered into a relationship agreement with Sybil (the "Sybil Relationship Agreement"), which will take effect on Admission. Pursuant to the Sybil Relationship Agreement, Sybil shall, and shall (so far as it is legally able to do so) procure that certain of its affiliates (excluding any portfolio or investee companies in which funds advised by affiliates of CVC Capital Partners Advisory Company (Luxembourg) S.à r.l. hold an interest or investment) ("CVC Affiliates") shall:

(a) (i) conduct all transactions, agreements or arrangements entered into between any member of the Group and Sybil and/or any CVC Affiliates (or the enforcement, implementation or amendment thereof) and all relationships between any member of the Group and Sybil and/or any CVC Affiliates at arm's length and on normal commercial terms; and (ii) where applicable, enter into

all transactions, agreements or arrangements in accordance with the related party transaction rules set out in Chapter 11 of the listing rules of the FCA made under section 74(4) of the FSMA (the "Listing Rules");
(b) not take any action which would have the effect of preventing the Company or any other member of the Group from carrying on its business independently of Sybil and/or any CVC Affiliates;
(c) not take any action which would have the effect of preventing the Company or any other member of the Group from complying with its obligations under the Listing Rules, the Disclosure Guidance and Transparency Rules of the FCA (the "DGTRs"), Regulation (EU) 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (the "Market Abuse Regulation"), the FSMA, the Financial Services Act 2012 (the "FS Act") or the principles of good governance set out in the UK Corporate Governance Code issued by the Financial Reporting Council from time to time in force (the "Governance Code") save in respect of any matters of non compliance with the Governance Code which are disclosed in this Prospectus or in the Company's annual report or which have been agreed to in writing by a majority of the Independent Non-Executive Directors;
(d) not exercise any of their voting rights in a manner which would prevent the Company from making decisions for the benefit of the Shareholders taken as a whole;
(e) not exercise any of their voting rights in a manner that would require the Company to operate or make decisions solely for the benefit of Sybil and/or any CVC Affiliates;
(f) not propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules;
(g) without prejudice to (f) above, not exercise any of their voting rights to vary the articles of association of the Company to be adopted upon Admission (the "Articles") which would:
(A) be contrary to the maintenance of the Company's independence (including the Company's ability to operate and make decisions independently of Sybil and/or any CVC Affiliates); or
(B) prevent the election of independent directors; or
(C) be inconsistent with, undermine or breach any provision of the Sybil Relationship Agreement or the Listing Rules, the DGTRs or the Market Abuse Regulation; and
(h) abstain from voting on any resolution required by paragraph 11.1.7R(3) of the Listing Rules to approve a related party transaction where Sybil or any of its associates is the related party for the purposes of the Listing Rules and, in any event that any of Sybil's associates are shareholders at the relevant time, Sybil shall take all reasonable steps to ensure that such associates also abstain from voting on such resolution.

In addition, pursuant to the Sybil Relationship Agreement:

(a) Sybil has agreed that, for a period of two years from Admission, or, if earlier, the date which is three months after the date of termination of the Sybil Relationship Agreement, subject to limited exceptions, it shall not, and will (insofar as it is legally able to do) direct the CVC Affiliates not to, solicit for service or employment any of the executive Directors of the Company or any other member of the executive management team of the Group, in each case without the prior written consent of the Company;
(b) Sybil is entitled to appoint one natural person to be a non-executive director of the Company for so long as Sybil and/or CVC Affiliates hold in aggregate 10% or more of the voting rights attaching to the issued share capital of the Company;
(c) for so long as Sybil and/or CVC Affiliates hold in aggregate 10% or more of the voting rights attaching to the issued share capital of the Company, the Company shall, if requested by Sybil, procure that the director appointed by Sybil is permitted to attend as an observer at the Board's Nomination Committee, Audit Committee and Remuneration Committee;
(d) the Company has agreed, to the extent permitted by applicable laws and regulation, to provide certain information to Sybil on an ongoing basis in order to enable Sybil and certain connected persons to complete any tax return, compilation or filing or to comply with any audit or regulatory request or any other laws or regulations which apply to Sybil or any such person;
(e) the Company has agreed, subject to compliance with relevant regulatory requirements, to procure that the Group's senior management shall provide reasonable assistance to Sybil or any CVC Affiliate in relation to any proposed sale of Shares by Sybil or any CVC Affiliate at any time following Admission; and
(f) the Company agrees not to undertake any transaction in the Shares which may reasonably be expected to give rise to an obligation for Sybil or any CVC Affiliate (and/or persons with whom they are acting in concert within the meaning of the UK City Code on Takeovers and Mergers (the "City Code") to make a general offer in accordance with Rule 9 of the City Code unless the Company has first obtained a waiver of Rule 9 in accordance with the City Code, or the Company has otherwise obtained the necessary waivers or consents from the Takeover Panel to prevent such obligations from applying.

The Sybil Relationship Agreement will be effective as from Admission and remain in effect for so long as Sybil and/or any of the CVC Affiliates hold, in aggregate, 10% of voting rights attaching to the Shares and the Shares continue to be admitted to listing on the Official List of the FCA.

Founder Relationship Agreement

On 10 May 2018, the Company entered into a relationship agreement with Pavel Baudisˇ and Eduard Kucˇera and their respective investment vehicles. PaBa Software s.r.o. and Pratincole Investments Limited (each a "Founder" and together, the "Founders") (the "Founder Relationship Agreement", and, together with the Sybil Relationship Agreement, the "Relationship Agreements"), which will take effect on Admission. Pursuant to the Founder Relationship Agreement, each Founder shall, and shall (so far as he or it is legally able to do so) procure that any of his or its associates shall:

(a) conduct all transactions, agreements or arrangements entered into between any member of the Group and such Founder and/or any of his or its associates (or the enforcement, implementation or amendment thereof) and all relationships between any member of the Group and such Founder and/or any of his or its associates at arm's length and on normal commercial terms and where applicable, enter into all transactions, agreements or arrangements in accordance with the related party transaction rules set out in Chapter 11 of the Listing Rules;
(b) not take any action which would have the effect of preventing the Company or any other member of the Group from carrying on its business independently of the Founders and/or any of their associates;
(c) not take any action which would have the effect of preventing the Company or any other member of the Group from complying with its obligations under the Listing Rules, the DGTRs, the Market Abuse Regulation, the FSMA, the FS Act or the principles of good governance set out in the Governance Code (save in respect of any matters of non compliance with the Governance Code which are disclosed in this Prospectus or in the Company's annual report or which have been agreed to in writing by a majority of the Independent Non-Executive Directors);
(d) not exercise any of their voting rights in a manner which would prevent the Company from making decisions for the benefit of the Shareholders taken as a whole;
(e) not exercise any of their voting rights in a manner that would require the Company to operate or make decisions solely for the benefit of any of the Founders and/or any of their associates;
(f) not propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules;
(g) without prejudice to (f) above, not exercise any of their voting rights to vary the Articles which would:
(A) be contrary to the maintenance of the Company's independence (including the Company's ability to operate and make decisions independently of the Founders and/or any of their associates); or
(B) prevent the election of independent directors; or
(C) be inconsistent with, undermine or breach any provision of the Founder Relationship Agreement or the Listing Rules, the DGTRs or the Market Abuse Regulation; and
(h) abstain from voting on any resolution required by paragraph 11.1.7R(3) of the Listing Rules to approve a related party transaction where such Founder or any of his or its associates is the related party for the purposes of the Listing Rules.

In addition, pursuant to the Founder Relationship Agreement:

(a) each Founder has undertaken that, until the later of the termination of the Founder Relationship Agreement and the date falling two years after Admission, he or it shall not, and will procure (insofar as is within his or its power or control) that any of his or its associates shall not, operate, establish, own or acquire a Competing Business. This undertaking shall not prohibit, after Admission, either of Mr. Baudisˇ or Mr. Kucˇera (together with their connected founder investment vehicle) from being entitled to acquire up to 5% in aggregate of the shares of any class of any company engaged in business that would constitute a Competing Business provided the shares of such company are listed on a recognised stock exchange. For the purposes of this Prospectus, "Competing Business" means a company, an undertaking, a business, a business operation or other enterprise or entity which from time to time itself or through one or more of its subsidiary undertakings, operates in the software anti-virus or cyber-security sector, or offers any products or services which compete with such products or services as are offered or marketed by the Group at the date of this Prospectus;
(b) each Founder has agreed that, during the period from the date of the Founder Relationship Agreement to the later of: (i) the termination of such agreement or (ii) the date which is two years after the date of Admission, subject to certain limitations, he or it shall not, and will procure (insofar as is within his or its power or control) that any of his or its associates shall not, solicit for service or employment any employee of the Group;
(c) the Founders are jointly entitled to appoint: (i) one natural person to be a non-executive director of the Company for so long as the Founders and/or their associates hold in aggregate 10% or more (but less than 20%) of the voting rights attaching to the issued share capital of the Company; and (ii) two natural persons to be non-executive directors for so long as the Founders and/or their associates hold 20% or more of the voting rights attaching to the issued share capital of the Company;
(d) for so long as the Founders hold in aggregate 10% or more of the voting rights attaching to the issued share capital of the Company, the Company shall, if requested by the Founders, procure that one of the directors appointed by the Founders is permitted to attend as an observer at the Board's Nomination Committee, Audit Committee and Remuneration Committee;
(e) if, at any time after Admission, either of Mr. Baudisˇ and his connected founder investment vehicle on the one hand and Mr. Kucˇera and his connected founder investment vehicle on the other hand: (i) is in material breach of the Founder Relationship Agreement; or (ii) together with any of his associates, holds, in aggregate, fewer than 5% of the voting rights attaching to the issued share capital of the Company, the other Founders shall become so entitled to appoint (and remove and reappoint) directors or an observer to the committees as described above; and
(f) the Company has agreed, to the extent permitted by applicable laws and regulation, to provide certain information to each Founder on an ongoing basis in order to enable such Founder or any of his associates to complete any tax return, compilation or filing or to comply with any other laws or regulations which apply to such Founder or any of his or its associates.

The Founder Relationship Agreement will be effective as from Admission and remain in effect for so long as the Founders and any of their associates together hold, in aggregate, 10% of voting rights attaching to the Shares and the Shares continue to be admitted to listing on the Official List of the FCA.

The Group believes that the terms of the Relationship Agreements will enable the Group to carry on its business independently of Sybil and the Founders and ensure that all transactions and arrangements between the Group, on the one hand, and Sybil and the CVC Affiliates and/or the Founders and their respective associates, on the other hand, will be conducted at arm's length and on normal commercial terms.

Following Admission, the Articles will allow the election of independent directors to be conducted in accordance with any requirements of the Listing Rules.

In all other circumstances, the Company's major shareholders have and will have the same voting rights attached to the Shares as all other shareholders.

B.7 Key financial information and narrative description of significant changes to financial condition and operating results of the Group during or subsequent to the period covered by the historical key financial information

The selected financial information set out below has been extracted without material adjustment from the historical financial information relating to the Group and the historical financial information relating to AVG, each as included in Part 11—"Historical Financial Information".

The Group

Consolidated Income Statement Data

	Group
		Year ended 31 December
	2015	2016	2017
		(in \$ millions)
Revenues	251.0	340.7	652.9
Cost of revenues	(72.8)	(112.1)	(232.8)
Gross profit	178.2	228.6	420.1
Operating costs:
Sales and marketing	(29.0)	(59.6)	(121.4)
Research and development	(23.7)	(46.8)	(75.5)
General and administrative	(25.9)	(90.3)	(98.9)
Total operating costs	(78.6)	(196.7)	(295.8)
Operating profit (loss)	99.6	31.9	124.3
Analysed as:
Underlying Operating Profit	165.7	183.8	299.7
Share-based payment	(6.1)	(2.7)	(7.7)
Exceptional items	(0.8)	(69.8)	(34.8)
Amortisation of acquisition intangible items	(59.2)	(79.4)	(132.9)
Finance income and expenses, net	(27.9)	(12.4)	(153.2)
Profit (loss) before income tax	71.7	19.5	(28.9)
Income tax	(0.2)	5.1	(4.9)
Profit (loss) for the financial year	71.5	24.6	(33.8)

Consolidated Balance Sheet Data

	Group
		As at 31 December
	2015	2016	2017
		(in \$ millions)
Assets
Current assets
Cash and cash equivalents	141.2	240.7	176.3
Trade and other receivables	34.7	71.4	93.2
Prepaid expenses	3.1	14.8	35.8
Inventory Tax receivables	— 1.6	— 3.4	0.5 7.5
Other financial assets	0.4	2.0	1.0

Total current assets	181.0	332.3	314.3
Non-current assets
Property, plant and equipment	10.1	34.7	29.5
Intangible assets Deferred tax asset	255.5 6.4	492.3 46.9	394.3 66.3
Other financial assets	0.4	3.6	1.9
Prepaid expenses	1.5	1.8	0.5
Goodwill	720.5	1,895.8	1,986.7
Total non-current assets	994.4	2,475.1	2,479.2

Total assets	1,175.4	2,807.4	2,793.5
Shareholders' equity and liabilities
Current liabilities
Trade and other payables	9.5	44.3	35.4
Lease liability	0.3	1.6	1.7
Provisions	1.0	27.9	6.2
Income tax liability	9.6	25.0	28.1
Deferred revenues	121.9	201.1	324.3
Other current liabilities	13.5	81.1	38.7
Term loan Financial liability	263.1 —	81.5 0.3	92.5 —

Total current liabilities	418.9	462.8	526.9
Non-current liabilities
Lease liability	—	4.3	3.3
Provisions Deferred revenues	0.2 15.1	1.6 30.0	1.2 54.5
Term loan	—	1,476.5	1,688.8
Financial liability	0.5	—	3.2
Other non-current liabilities	—	0.9	2.2
Deferred tax liability	46.4	106.8	78.3
Total non-current liabilities	62.2	1,620.1	1,831.5
Shareholders' equity
Share capital	565.3	565.3	371.7
Share premium, statutory and other reserves	70.7	73.1	3.3
Translation differences	—	2.9	1.3
Retained earnings	57.9	82.5	57.9
Equity attributable to equity holders of the parent	693.9	723.8	434.2
Non-controlling interest	0.4	0.7	0.9
Total shareholders' equity	694.3	724.5	435.1

Total shareholders' equity and liabilities	1,175.4	2,807.4	2,793.5

Consolidated Cash Flow Data

	Group
	Year ended 31 December
	2015 2016 2017
		(in \$ millions)
Net cash flows from operating activities	202.3	224.6	306.5
Net cash used in investing activities		(30.5) (1,250.0) (173.8)
Net cash used in financing activities	(154.3)	1,124.9	(193.7)
Cash and cash equivalents at end of period	141.2	240.7	176.3

Certain significant changes to the Group's financial condition and results of operations occurred during the years ended 31 December 2015, 2016 and 2017, respectively, which are set out below.

The Group's Revenues increased by \$312.2 million, or 92%, from \$340.7 million in 2016 to \$652.9 million in 2017, and by \$89.7 million, or 36%, from \$251.0 million in 2015 to \$340.7 million in 2016. The Group's Adjusted Revenue increased by \$358.0 million, or 85%, from \$421.5 million in 2016 to \$779.5 million in 2017, and by \$126.8 million, or 43%, from \$294.7 million in 2015 to \$421.5 million in 2017. On a like-for-like basis, with 2017 including full year Piriform results, Adjusted Revenue for the Group for the year ended 31 December 2016 as compared to the year ended 31 December 2017 increased (by \$43.0 million, from \$736.5 million in 2016 to \$779.5 million in 2017). Excluding the impact of the AVG Acquisition in the fourth quarter of 2016, Adjusted Revenue for the Group for the year ended 31 December 2015 as compared to the year ended 31 December 2016 increased on a like-for-like basis (by 8% or \$23.2 million, from \$294.7 million in 2015 to \$317.9 million in 2016). Excluding Piriform and Discontinued Business, on a like-for-like basis, the Group's Adjusted Revenue increased 7% from 2016 to 2017, and 8% from 2015 to 2016.

Net Income decreased by \$58.4 million, from \$24.6 million in 2016 to a net loss of \$33.8 million in 2017, and decreased by \$46.9 million, from \$71.5 million in 2015 to \$24.6 million in 2016. Adjusted Net Income increased by \$84.6 million, or 53%, from \$159.5 million in 2016 to \$244.1 million in 2017 and increased by \$29.0 million, or 22%, from \$130.5 million in 2015 to \$159.5 million in 2016. On a like-for-like basis, with 2017 including Piriform results from date of acquisition, Adjusted Net Income for the Group for the year ended 31 December 2016 as compared to the year ended 31 December 2017 increased (by \$46.6 million, from \$197.5 million in 2016 to \$244.1 million in 2017), due to the factors described above. Excluding the impact of the AVG Acquisition, Adjusted Net Income for the Group for the year ended 31 December 2015 as compared to the year ended 31 December 2016 decreased on a like-for-like basis (by \$11.6 million, from \$130.5 million in 2015 to \$118.9 million in 2016).

There has been no significant change in the financial position or results of operations of the Group since 31 December 2017, the date to which the last audited consolidated financial information of the Group was prepared.

AVG Consolidated Income Statement Data

	AVG
		Year ended 31 December
	2015	2016
		(in \$ millions)
Revenues	425.8	418.6
Cost of revenues	(64.4)	(85.8)
Gross profit Operating costs:	361.4	332.8
Sales and marketing	(126.6)	(123.2)
Research and development	(88.4)	(91.5)
General and administrative	(69.1)	(118.3)
Total operating costs	(284.1)	(333.0)
Operating profit (loss)	77.3	(0.2)
Analysed as:
Underlying Operating Profit	132.6	131.6
Share-based payment	(15.3)	(14.8)
Exceptional items	(9.0)	(86.9)
Amortisation of acquisition intangible items	(31.0)	(30.1)
Finance income and expenses, net	(16.7)	(24.1)
Profit (loss) before income tax	60.6	(24.3)
Income tax	(11.4)	(4.1)
Profit (loss) for the financial year	49.2	(28.4)

Consolidated Balance Sheet Data

	AVG
	As at 31 December
	2015	2016
	(in \$ millions)
Assets
Current assets
Cash and cash equivalents	123.8	33.2
Trade and other receivables	44.0	38.0
Prepaid expenses	16.6	17.6
Inventory	1.0	—
Tax receivables	8.7	2.1
Other financial assets	27.3	1.7
	221.4	92.6
Total current assets Non-current assets

Property, plant and equipment	23.5	23.9
Intangible assets	105.7	76.3
Deferred tax asset	36.6	43.1
Other financial assets	0.8	3.1
Prepaid expenses	4.0	2.8
Goodwill	296.8	297.1
Total non-current assets	467.4	446.3
Total assets	688.8	538.9
Shareholders' equity and liabilities
Current liabilities
Trade and other payables	33.4	25.6
Lease liability	1.8	1.6
Provisions	4.1	26.9
Income tax liability	1.1	6.0
Deferred revenues	167.1	157.4
Other current liabilities	90.3	22.4
Term loan	2.3	38.5
Financial liability	1.8	0.1

Total current liabilities	301.9	278.5
Non-current liabilities
Lease liability	4.1	4.3
Provisions	1.0	0.9
Deferred revenues	33.0	29.9
Term loan	212.8	—
Financial liability	2.3	—
Other non-current liabilities	5.4	2.7
Deferred tax liability	28.7	27.3
Total non-current liabilities	287.3	65.1
Shareholders' equity
Share capital	0.7	0.7
Share premium, statutory and other reserves	(49.9)	2.6
Treasury shares	(62.8)	—
Translation differences	(14.2)	(4.2)
Retained earnings	225.8	196.2
Equity attributable to equity holders of the parent	99.6	195.3
	688.8	538.9
Total shareholders' equity and liabilities

Consolidated Cash Flow Data

	AVG Year ended 31 December

	2015 2016
		(in \$ millions)
Net cash flows from operating activities	114.9	101.1
Net cash used in investing activities	(82.4)	(46.1)
Net cash used in financing activities	(47.4)	(143.0)
Cash and cash equivalents at end of period	123.8	33.2

Certain significant changes to AVG's financial condition and results of operations occurred during the years ended 31 December 2015 and 2016, respectively, which are set out below.

AVG's Revenue decreased by \$7.2 million, or 2%, from \$425.8 million for the year ended 31 December 2015 to \$418.6 million for the year ended 31 December 2016. AVG's Adjusted Revenue decreased by 2% from \$425.8 million for the year ended 31 December 2015 to \$418.6 million for the year ended 31 December 2016.

AVG's Net Income decreased by \$77.6 million, or 158%, from \$49.2 million for the year ended 31 December 2015 to a net loss of \$28.4 million for the year ended 31 December 2016. AVG's Adjusted Net Income decreased by \$8.3 million, or 10%, from \$86.9 million in 2015 to \$78.6 million in 2016.

No audited consolidated financial information of AVG has been prepared since 31 December 2016, and all financial reporting presented in this Prospectus is consolidated at the level of the Group from 1 January 2017 onward.

B.8 Key pro forma financial information

The unaudited pro forma statement of net assets set out below has been prepared to illustrate the effects of the Global Offer and the repayment and repricing of its existing credit agreement on the consolidated net assets of the Group as at 31 December 2017 as if they had taken place on that date. The unaudited pro forma net assets statement is based on the audited consolidated net assets of the Group as at 31 December 2017 and has been prepared in a manner consistent with the accounting policies adopted by the Group in preparing its historical financial information for the period ending 31 December 2017.

This unaudited pro forma information has been prepared for illustrative purposes only and, by its nature, addresses a hypothetical situation and therefore does not represent the Group's actual financial position or results, nor is it indicative of results that may or may not be achieved in the future. The unaudited pro forma statement of net assets is compiled on the basis set out in the notes below and in accordance with the requirements of Annex II of the Prospectus Directive Regulation. The unaudited pro forma statement of net assets does not constitute financial statements within the meaning of section 434 of the Act.

		Adjustments
	As at 31 December 2017(1)	Net proceeds of the Global Offer(2)	Repayment and Repricing of its Existing Credit Agreement(3)	Unaudited pro forma total(4)
Current assets	314.3	170.0	(303.1)	181.2
Non-current assets	2,479.2	—	—	2,479.2
Total assets	2,793.5	170.0	(303.1)	2,660.4
Current liabilities	526.9	—	(16.5)	510.4
Non-current liabilities	1,831.5	—	(286.6)	1,544.9
Total liabilities	2,358.4	—	(303.1)	2,055.3
Net assets	435.1	170.0	—	605.1

Notes

(1) The net assets of the Group as at 31 December 2017 have been extracted without material adjustment from the historical financial information set out in Part 11— "Historical Financial Information".
(2) The adjustment reflects the receipt by the Group of the net proceeds of the Global Offer of £125.3 million based on 58,977,478 Ordinary Shares being issued by the Company at an Offer Price of 250 pence (gross proceeds of £147.4 million (\$200.0 million) less estimated expenses payable by the Company of \$30.0 million. The estimated costs of the Global Offer are the estimated costs and fees incurred in respect of the Global Offer, relating principally to investment banking, underwriting commissions, legal and accounting fees. The gross and net proceeds from the Global Offer have been converted from £ to \$ at the exchange rate of £1.00000 per \$1.35645, being the Thomson Reuters hourly fix rate published at 12:05pm (London time) on 9 May 2018.
(3) The Company intends to use the net proceeds of the Global Offer, as set out in Part 13 "Details of the Global Offer", along with existing cash and cash equivalents to repay \$300.0 million of the dollar term loan as part of the repricing of its credit agreement. The Company expects to pay and capitalise \$3.1 million of fees in connection with the repricing agreement.
(4) No adjustment has been made to reflect any change in the trading performance of the Group since 31 December 2017, nor of any other event, save as disclosed above.

B.9 Profit forecast

Not applicable. There is no profit forecast or estimate.

B.10 Description of the nature of any qualifications in the audit report on the historical financial information

Not applicable. There are no qualifications to the accountant's report on the Group's historical financial information or to the accountant's report on AVG's historical financial information.

B.11 Insufficient working capital

Not applicable. In the opinion of the Company, taking into account the net underwritten proceeds receivable by the Company from the Global Offer and the bank and other facilities available to the Group, the Group has sufficient working capital for its present requirements, that is for at least the next 12 months following the date of this Prospectus.

Section C—Securities

C.1 Type and class of securities

Pursuant to the Global Offer, the Company intends to issue 58,977,478 new Shares (the "New Shares"), raising proceeds of approximately £125.3 million, net of base underwriting commissions and other estimated fees and expenses of approximately £22.1 million. The New Shares will represent approximately 6.2% of the expected issued ordinary share capital of the Company immediately following Admission.

Approximately 181,815,424 existing Shares (the "Existing Shares") are expected to be sold by the Selling Shareholders. In addition, a further 36,118,935 Shares are being made available by the Overallotment Shareholders (the "Over-allotment Shares") pursuant to the Over-allotment Option.

When admitted to trading, the Shares will be registered with ISIN GB00BDD85M81 and SEDOL number BDD85M8.

C.2 Currency

United Kingdom pounds sterling.

C.3 Number of securities to be issued

As at the date of this Prospectus, assuming that the Reorganisation has been completed in full, the issued share capital of the Company is £89.4 million, comprising 893,661,707 Shares of 10 pence each (all of which were fully paid or credited as fully paid). Immediately following completion of the Global Offer, the issued share capital of the Company is expected to be £95.3 million, comprising 952,639,185 Shares of 10 pence each (all of which will be fully paid or credited as fully paid).

C.4 Description of the rights attaching to the securities

The rights attaching to the Shares will be uniform in all respects and they will form a single class for all purposes, including with respect to voting and for all dividends and other distributions thereafter declared, made or paid on the ordinary share capital of the Company.

On a show of hands, every Shareholder who is present in person shall have one vote and, on a poll, every Shareholder present in person or by proxy shall have one vote per Share.

Except as provided by the rights and restrictions attached to any class of shares, Shareholders will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings.

C.5 Restrictions on the free transferability of the securities

There are no restrictions on the free transferability of the Shares.

C.6 Admission

Application has been made to the FCA for all of the Shares, issued and to be issued, to be admitted to the premium listing segment of the Official List of the FCA and to the London Stock Exchange for such Shares to be admitted to trading on the London Stock Exchange's main market for listed securities.

C.7 Dividend policy

The Group expects to adopt a dividend policy that focuses on providing significant returns to shareholders, whilst also ensuring that the Group retains the flexibility to continue to deploy capital towards profitable growth. There can be no guarantees that the Company will pay future dividends. The determination of the level of future dividends, if any, will depend upon the Group's results of operations, financial condition, capital requirements, contractual restrictions, business prospects and any other factors the Board may deem relevant. The Group currently expects to maintain dividend payments of approximately 40% of levered free cash flow in the short to medium term.

Dividend payments will be made on an approximate one-third:two-thirds split for interim and final dividends, respectively. The Group intends to commence dividend payments with a final dividend payment in respect of 2018, which will be payable in the first half of 2019.

The Group may revise its dividend policy from time to time.

Section D—Risks

D.1 Key information on the key risks specific to the issuer and its industry

The occurrence of any of the key risks below would have a material adverse effect on the Group's business, results of operations, financial condition and/or prospects:

• The Group is subject to risks related to revenue concentration in the consumer desktop market, and it may be unable to sufficiently diversify its offerings and monetise its user base to increase or maintain its revenues.

Actual, possible or perceived defects, disruptions or vulnerabilities in the Group's products, solutions or cloud infrastructure, including risks from security attacks, may lead to negative publicity, damage to its reputation, and cause a decline in revenues and profits.
If computing platforms make it harder or impossible for users to install the Group's security solutions, or for the Group to communicate with or distribute products to its users, or for the Group to retrieve information that the Group believes it needs, this will restrict the Group's ability to acquire new users, retain existing ones or distribute additional products to existing users.
If the Group fails to maintain its user engagement and continue to attract new users, it may be unable to maintain its scale and improve the quality of its user base on a cost-effective basis, if at all, and the Group's revenues and profits may not increase even if it continues to gain additional users.
The Group derives a material portion of its revenues from short-term contracts and runs the risk that the parties to these contracts will not renew them.
The Group operates in a highly competitive environment and may not be able to compete successfully.
The Group depends on search engines, download sites and app stores to attract a significant percentage of its users and if those search engines, download sites or app stores change their rankings, it could adversely affect the Group's ability to attract new users.
The Group may be unable to successfully integrate its recently acquired companies or any business it may acquire in the future, and those acquisitions may fail to provide the benefits the Group had anticipated.
The Group's current operations are international in scope and it plans further geographic expansion, creating a variety of operational challenges.
If the Group fails to keep up with rapid changes in technologies and the evolution of malware and virus threats, its business may be materially and adversely affected.

D.3 Key information on the key risks specific to the securities

There is no existing market for the Shares and an active trading market for the Shares may not develop or be sustained. Moreover, even if a market develops, Shares may be subject to market price volatility and the market price of the Shares may decline disproportionately in response to developments that are unrelated to the Group's operating performance, or as a result of sales of substantial amounts of such Shares in the public markets, for example following the expiry of the lock-up period, or the issuance of additional Shares in the future, and shareholders could earn a negative or no return on, or otherwise experience a dilution, of their investment in the Company.

In addition, each of Sybil and the Founders will retain a significant interest in and will continue to exert substantial influence over the Group following the Global Offer and their respective interests may differ from or conflict with those of other shareholders.

Finally, shareholders in the United States and other jurisdictions may not be able to participate in future equity offerings.

Section E—Global Offer

E.1 Net proceeds and costs of the offer

Pursuant to the Global Offer, the Company intends to issue 58,977,478 New Shares, raising proceeds of approximately £125.3 million, net of base underwriting commissions and other estimated fees and expenses of approximately £22.1 million.

Pursuant to the Global Offer, the Major Shareholders intend to sell 151,755,238 Existing Shares and Equiniti Financial Services Limited (acting as agent for and on behalf of the other Selling Shareholders under the Deeds of Election) expects to sell 30,060,186 Existing Shares, resulting in proceeds to the Selling Shareholders of approximately £454.5 million.

The fees and expenses to be borne by the Company in connection with Admission, including the FCA's fees, professional fees and expenses and the costs of printing and distribution of documents are estimated to amount to approximately £22.1 million (assuming that no Over-allotment Shares are acquired pursuant to the Over-allotment Option).

E.2a Reasons for the offer and use of proceeds

The Company intends to use the net proceeds from the issue of the New Shares to redeem the Redeemable Shares (as defined in Part 14), reduce the Group's overall indebtedness and repay debt on its outstanding dollar term loan facility under a credit agreement dated 30 September 2016, which is expected to provide the Company with greater financial flexibility to drive the future growth of the business.

The Group believes that the Global Offer will:

further increase the Group's profile, brand recognition and credibility with its users, suppliers and employees;
assist in recruiting, retaining and incentivising key management and employees; and
provide the Selling Shareholders with a partial realisation of their investment in the Group.

E.3 Terms and conditions of the offer

The Global Offer consists of an institutional offer only. In the Global Offer, Shares will be offered (i) to certain institutional investors in the United Kingdom and elsewhere outside the United States and (ii) in the United States only to QIBs in reliance on Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act.

The Shares allocated under the Global Offer have been fully underwritten, subject to certain conditions, by the Underwriters. Allocations under the Global Offer will be determined at the sole discretion of the Company and the Selling Shareholders after having received a recommendation from the Joint Global Co-ordinators. All Shares issued or sold pursuant to the Global Offer will be issued or sold, payable in full, at the Offer Price.

Conditional dealings in the Shares are expected to commence on the London Stock Exchange at 8.00 a.m. on 10 May 2018. The earliest date for such settlement of such dealings will be 15 May 2018. It is expected that Admission will become effective, and that unconditional dealings in the Shares will commence on the London Stock Exchange, at 8.00 a.m. (London time) on 15 May 2018. Settlement of dealings from that date will be on a two-trading day rolling basis.

E.4 Material interests

There are no interests, including conflicting interests, which are material to the Global Offer, other than those disclosed in B.6 above.

E.5 Selling Shareholders and Lock-up

Expected interests of the Selling Shareholders immediately prior to and following Admission

The indicative interests in Shares of the Selling Shareholders immediately prior to Admission, together with the number of Shares to be sold pursuant to the offer (assuming no exercise of the Over-Allotment Option) and their interests in Shares immediately following Admission, are set out in the table below.

	Immediately prior to Admission			Shares to be sold pursuant to the Global Offer	Immediately following Admission
Shareholders	Number of Shares	Percentage of issued share capital	Number of Shares	Percentage of issued share capital	Number of Shares	Percentage of issued share capital
Sybil Holdings S.à r.l	270,378,756	30.3%	54,075,754	6.1%	216,303,002	22.7%
Pavel Baudisˇ(1)	317,696,900	35.6%	60,514,735	6.8%	257,182,165	27.0%
Eduard Kucˇera(2)	123,275,331	13.8%	23,481,419	2.6%	99,793,912	10.5%
Summit Partners(3)	68,416,648	7.7%	13,683,330	1.5%	54,733,318	5.7%
Other(4)	113,894,072	12.7%	30,060,186	3.4%	83,833,886	8.8%

Notes:

(1) Immediately prior to Admission, Pavel Baudisˇ will hold Shares in the Company directly and through PaBa Software s.r.o.
(2) Immediately prior to Admission, Eduard Kucˇera will hold Shares in the Company directly and through Pratincole Investments Limited.
(3) Immediately prior to Admission, Summit Partners will hold Shares in the Company through its funds Leia 1 S.a` r.l, Summit Investors I, LLC and Summit Investors I (UK), L.P.
(4) Equiniti Financial Services Limited will sell as nominee for the other Selling Shareholders, being the beneficial owners of such Existing Shares. The business address of Equiniti Financial Services is Aspect House, Spencer Road, Lancing Business Park, West Sussex BN99 6DA, United Kingdom.

Lock-up Arrangements

Pursuant to the Underwriting Agreement, the Company has agreed that, subject to certain exceptions, during the period of 180 days from the date of Admission, it will not, without the prior written consent of the Joint Global Co-ordinators, issue, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein or in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing.

Pursuant to the Underwriting Agreement and the Deeds of Election, the Selling Shareholders the Directors and certain members of the Company's management team have agreed that, subject to certain exceptions, during the period of 180 days in respect of the Major Shareholders, and 360 days in respect of the other Directors and other Selling Shareholders, they will not, without the prior written consent of the Joint Global Co-ordinators or the majority of the Underwriters, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing.

Certain other shareholders who are not party to the Underwriting Agreement have separately agreed, subject to certain exceptions, during the period of 360 days from the date of Admission, they will not, without the prior written consent of the Joint Global Co-ordinators or the majority of the Underwriters, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing.

E.6 Dilution

Pursuant to the Global Offer, existing Shareholders will experience a 6.6% dilution from the issue of 58,977,478 New Shares.

E.7 Expenses charged to the investor

Not applicable. No expenses will be charged by the Company or the Selling Shareholders to any investor who subscribes for or purchases Shares pursuant to the Global Offer.

PART 1 RISK FACTORS

Any investment in the Shares is subject to a number of risks. Prior to investing in the Shares, prospective investors should carefully consider risk factors associated with any investment in the Shares, the Group's business and the industry in which it operates, together with all other information contained in this Prospectus including, in particular, the risk factors described below.

Prospective investors should note that the risks relating to the Group, its industry and the Shares summarised in the section of this Prospectus headed "Summary" are the risks that the Directors and the Company believe to be the most essential to an assessment by a prospective investor of whether to consider an investment in the Shares. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the section of this Prospectus headed "Summary" but also, among other things, the risks and uncertainties described below.

The risk factors described below are not an exhaustive list or explanation of all risks which investors may face when making an investment in the Shares and investors should use them as guidance only. The risk factors detailed below and additional risks and uncertainties relating to the Group that are not currently known to the Group, or that the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group's business, results of operations, financial condition, prospects and/or ability to pay dividends and, if any such risk should occur, the price of the Shares may decline and investors could lose all or part of their investment. Prospective investors should consider carefully whether an investment in the Shares is suitable for them in the light of the information in this Prospectus and their personal circumstances.

Risks relating to the Group's business and industry

1. The Group is subject to risks related to revenue concentration in the consumer desktop market, and it may be unable to sufficiently diversify its offerings and monetise its user base to increase or maintain its revenues.

The Group derives a substantial portion of its revenues from consumer antivirus desktop products and expects these products to continue to account for a large percentage of its revenues in the near term. The Group derives a significant portion of its revenues from converting its free antivirus users to its paid antivirus products and selling paid users ("customers") of its paid antivirus products to a higher tier of paid antivirus software (collectively, "up-selling"). The Group generates the remainder of its revenues by selling adjacent (non-antivirus) products to any existing free user or customer ("cross-selling"), by indirect monetisation channels, including through advertising and third party software distribution agreements, and through the sale of products to the small and medium business ("SMB") market. If the Group's installed base decreases significantly, or consumer demand shifts away from consumer antivirus desktop products or desktop computers generally, and the Group is unable to correspondingly grow in sales of adjacent products or otherwise increase the direct monetisation of its user base, the Group's revenues could significantly reduce and its business would be harmed. If the Group is less successful in either directly or indirectly monetising its user base than it has been historically, it will harm the Group's business.

The Group expects the consumer desktop antivirus market to be \$2.6 billion in 2021. If the market experiences low growth or declines and the Group is unable to address the market for other security products or otherwise replace this revenue by monetising its users in other ways, it will harm the Group's business, results of operations and financial condition and affect its ability to pay dividends.

2. Actual, possible or perceived defects, disruptions or vulnerabilities in the Group's products, solutions or cloud infrastructure, including risks from security attacks, may lead to negative publicity, damage to its reputation, and/or cause a decline in revenues and profits.

Defects. The Group's software is inherently complex and may contain material defects, errors or vulnerabilities that may cause it to fail to perform in accordance with user expectations. As may happen to any vendor of software, end users may find errors, failures and bugs in some new offerings after their initial distribution, particularly given that end users may deploy such products in computing environments with operating systems, software and/or hardware different than those in which the Group tests products before release. In addition, certain of the Group's products operate in conjunction with third party systems which may contain vulnerabilities that the Group fails to remedy. These defects may cause the Group's products or services to be vulnerable to

security attacks, cause them to fail to help secure networks, temporarily interrupt users' networking traffic, or fail to detect or prevent viruses, worms or similar threats. The costs incurred in analysing, correcting or eliminating any material defects or errors in software may be substantial. Furthermore, the Group may not be able to correct any defects or errors or address vulnerabilities promptly, or at all, causing significant harm to its reputation and competitive position.

Attacks. The Group has been the target of hackers' intentional spam attacks on its email addresses and denial of service and other sophisticated attacks on its websites, mail system, network cloud infrastructure and firewalls. For example, the Group's optimisation product CCleaner was the subject of a malware attack in 2017. Although the attack occurred before the Group completed the acquisition of Piriform, which owns CCleaner, the updated (and infected) version of CCleaner was released following the acquisition, affecting approximately two million of the Group's users. Although the Group has found no evidence that the attack harmed any of its users, in the future the Group may not be able to prevent or mitigate such attacks on its products. The Group believes that security companies are particularly attractive targets for such attacks, and the impact of any attack would be more serious than in other industries, given the negative optics of a security provider being itself insecure. Such attacks may result in security breaches, disruption or damage to users' computers or networks and theft of confidential information or other negative consequences. This may result in negative publicity, damage to the Group's brands, withdrawals from contracts, loss of or delay in market acceptance of the Group's products, loss of competitive position or claims by users or others against the Group. Experienced computer programmers, including programmers on the Group's staff, could also attempt to exploit weaknesses in the Group's computer systems or those of the Group's third party hosting providers, or attempt to penetrate the Group's network security or the security of solutions, with the intention of misappropriating proprietary information or cause industrial sabotage. Because the techniques used by such computer programmers to access or sabotage the Group's networks change frequently and may not be recognised until launched against a target, the Group may be unable to anticipate these attacks. Even if a security vulnerability and its remedy have been made public, the Group may not be able to put the fix in place in advance of the attack. The Group may roll out upgrades to fix vulnerabilities over an extended period of time in order to minimise service disruption. While the Group deploys sophisticated physical and electronic security protections and policies, procedures and protocols to protect against attacks and to help identify suspicious activity, no system or combination of systems can provide a guarantee of protection. If these intentionally disruptive efforts are, or the market perceives them to be, successful, the Group may face legal liability and these efforts could adversely affect the Group's activities or harm its reputation, brand and future sales.

False positives. Furthermore, security software products and solutions may falsely identify programs or websites as malicious or otherwise undesirable (i.e., false positives). These "false positives" may impair the perceived reliability of the Group's services and may therefore harm its market reputation. Also, the Group's anti-spam and anti-spyware services may falsely identify emails or programs as unwanted spam or potentially unwanted programs, or alternatively fail to properly identify unwanted emails or programs, particularly as hackers often design spam emails or spyware to circumvent internet security software. Parties whose programs are incorrectly blocked by these products or solutions, or whose websites are incorrectly identified as unsafe or malicious, may seek redress against the Group for labelling them as malicious and interfering with their businesses. In addition, false identification of emails or programs as unwanted spam or potentially unwanted software may reduce the popularity and adoption of the Group's services. Moreover, these false positives may render a device's entire operating system unusable and disrupt or damage users' devices. The Group and other providers of security software products have experienced problems with false positives in the past that have impacted large numbers of users. Alleviating any of these problems could require significant expenditures of capital and other resources and could cause interruptions, delays, or cessation of product licensing, which could result in the loss of both existing and potential users and could materially and adversely affect the Group's results of operations.

Any actual, possible or perceived defects, errors or vulnerabilities may cause interruptions to the availability of software and result in lost or delayed market acceptance and sales, or may require the Group to issue refunds to users. Security products are critical to the businesses of many users, which may make them more sensitive to defects in such products than to defects in other types of software. The Group could face claims for product liability, tort, breach of warranty or damages caused by faulty installation of, or defects in, its products. In the event of claims, provisions in contracts relating to warranty disclaimers and liability limitations may be unenforceable. Defending a lawsuit, regardless of its merit, could be costly and divert management attention. Defects, errors and vulnerabilities may also lead to the loss of existing or potential users, diversion of development resources, or increasing services, warranty, product replacement and product liability insurance costs, and may damage the Group's reputation. The Group's insurance coverage may be inadequate or future coverage may be unavailable on acceptable terms or at all.

3. If computing platforms make it harder or impossible for users to install the Group's security solutions, or for the Group to communicate with or distribute products to its users, or for the Group to retrieve information that the Group believes it needs, this will restrict the Group's ability to acquire new users, retain existing ones or distribute additional products to existing users.

Platform vendors, notably Microsoft with Windows but also Google with Android and Apple with MacOS and iOS, could restrict third party antivirus software's access to their platforms. The Group's products are designed to interface with the existing computing platforms. As new versions of platforms are introduced that include antivirus software offered by the platform vendors themselves, there is a risk that such platform vendors may close their platforms to third party antivirus software such as the Group's, or make it more difficult to install and use such third party antivirus software. For example, the Windows operating system includes built-in antivirus protection through Windows Defender. If in the future, Microsoft were to close the Windows platform to third party antivirus software, to restrict the ability of third party antivirus providers to access the platform or communicate with the Group's common users, or to promote Windows Defender aggressively while restricting the ability of third party antivirus software providers to do the same, the Group's competitive position and business prospects would be harmed.

In addition, as the Group's products and service offerings expand, there is a risk that platform vendors will regard one or other of the Group's offerings as a competitive threat and will impose restrictions on the Group's ability to offer those products or services. For example, if Google prevents software application providers from being able to use mobile data from Android phones, it would limit the Group's ability to continue to offer and improve its mobile products and could impact the Group's direct and indirect monetisation outcomes. If either Microsoft or Google were to impose further restrictions on the Group's ability to offer additional products or services to its existing users, or to obtain vital information that the Group believes it needs to improve its products and services, it may harm the Group's business.

4. If the Group fails to maintain its user engagement and continue to attract new users, it may be unable to maintain its scale and improve the quality of its user base on a cost-effective basis, if at all, and the Group's revenues and profits may not increase even if it continues to gain additional users.

Consumer software has greater user turnover than software sold to enterprises, because the cost to switch providers is typically lower for consumer products than for businesses. In addition, users replace their computers every few years and may not reinstall the software on their new computer or may delay doing so. A significant portion of the Group's users stop using its products or switch to competing products in any given period. To continue to maintain its user base, the Group must retain existing users to the extent possible and continuously attract new users to replace those who exit the Group's user base. Free antivirus products protected approximately 75% of personal computers ("PCs") in the year ended 31 December 2017. As the market for PC antivirus products, and specifically for free PC antivirus products, becomes more saturated, competition for users will continue to increase. Any failure to maintain the Group's user base could impact the Group's direct and indirect monetisation outcomes, and a significant loss of users could also impact the Group's ability to monitor and detect new malware threats given that each user acts as a sensor for the network.

The Group is dependent on the acquisition of new users to replace lost users, and its ability to attract new users depends on the perceived value of its products and online services versus that of the premium and free products and online services offered by competitors. The Group relies heavily on viral marketing as a strategy to attract new users to its solutions. This viral marketing ensures low user acquisition costs. If the Group's current marketing strategy is not successful or becomes less effective, or if marketing costs were to significantly increase, it may not be able to maintain or expand its user base on a cost-effective basis or at all.

Numerous factors could adversely impact the growth of revenues and profits even if the Group continues to gain additional users. In particular, the Group can provide no assurance that revenues will grow or remain at current levels even if it continues to gain new users. If the Group needs to expend additional resources in order to maintain existing users, it could have a significant impact on the Group's business and financial condition. The failure to maintain a high number of users would also affect the Group's ability to indirectly monetise its user base through, for example, distribution agreements or advertising.

5. The Group derives a material portion of its revenues from short-term contracts and runs the risk that the parties to these contracts will not renew them.

The Group contracts with many partners in order to expand its service offerings and to receive additional revenue streams. Certain of these agreements are short-term contracts put in place with an expectation that they will be

regularly extended. This arrangement allows the Group to maintain flexibility and negotiating power on pricing and terms, but also introduces a risk that the parties to these agreements will not agree to extend them as regularly as anticipated or at all.

One such short-term agreement is a promotion and distribution agreement Avast entered into with Google, which originally became effective as of 1 July 2012 (to replace an original agreement entered into on 1 September 2009 and a subsequent agreement entered into on 1 December 2010) and (following several amendments to extend the term by short-term intervals) terminates on 31 March 2020, or earlier if the Group reaches a pre-determined limit on payments in accordance with the terms of the contract. The Group has a similar promotion and distribution agreement which Piriform entered into with Google, which became effective as of 1 April 2017 and will terminate on 31 March 2019, or earlier if a pre-determined limit on payments is reached, unless it is renewed or amended. Under these agreements, the Group receives fees in connection with the Group's offers to users of the Google Chrome browser and Google Toolbar. The Group derived material billings from these promotion and distribution agreements with Google for the year ended 31 December 2017. If Google decides not to pursue renewal of these promotion and distribution agreements, or if Google seeks via any renewal discussion to impose restrictions on the Group's products or services or other conditions which are unacceptable to the Group, the Group's business and results of operations could be adversely affected unless it is able to either replace the contract with another provider or develop its own alternative products in time to offset any lost revenue.

The Group depends on the renewal of one to two year contracts in other parts of its business, including, for example, in its Location Labs business, where it partners with certain mobile network operators to provide parental control solutions. One of Location Labs' mobile network partners has notified the Group that it does not intend to renew its contract, although there is currently no impact on the Group's operations as a result of such non-renewal, as the Group continues to provide the service to existing users, and the Group expects that such non-renewal will not result in a meaningful loss of revenue. If any of Location Labs' other partners decide not to extend their contracts and Location Labs is unable to replace the related revenue with new contracts, it could adversely affect the Group's Location Labs business.

6. The Group operates in a highly competitive environment and may not be able to compete successfully.

The Group has a broad set of product offerings and faces competition from a large set of companies for each of its different products. The markets for the products offered by the Group are subject to rapid technological changes and market dynamics. The Group expects that competition will continue to increase in the future, and the Group may not be able to compete successfully against current or new competitors. In particular, some such competitors may make acquisitions or enter into agreements or other strategic relationships to offer more comprehensive products and/or services, and new competitors may enter the market through acquisitions, agreements or strategic or other such relationships. Further, platform vendors, such as those with operating systems or browsers, may integrate their own security solutions into their platforms to the exclusion of competitors or make it more difficult for competitors to attract and retain users.

The Group and other vendors compete on price and functionality at different price points. While the Group has historically been able to withstand pricing pressure on premium solutions, there can be no assurance that pricing pressure from competition will not adversely affect subscription revenues, which would have a material adverse effect on the Group's business and results of operations. Similarly, across the Group's markets, competitors may offer free products perceived to be superior to, or not materially worse than, the Group's consumer offerings, causing the Group's free users and/or customers to switch and shrinking its monetiseable consumer user base if the Group is not able to differentiate itself.

The Group's main competitors fall into the following categories:

PC security competitors (including Windows Defender and Avira, which use a free model; and McAfee, Symantec and Kaspersky Lab which use a paid model);
PC utilities competitors (including UniBlue), mobile security and utilities competitors (including Cheetah Mobile);
personal VPN competitors (including AnchorFree);
parental controls and insights competitors (including Net Nanny);
Smart Home security market competitors (including Luma and Linksys); and
SMB security market competitors (including Symantec, McAfee and Microsoft).

The Group is also seeing competition emerge from network and cloud-based security vendors such as Cisco.

Some of these competitors have greater brand name recognition and financial resources to devote to the development, promotion and sale of their products and/or services than the Group does. Microsoft, for example, has achieved success in the security market through Windows Defender, free but basic malware protection that is included with, and built into, Windows computers. Similarly, Google could begin to aggressively promote its own native security solution in Android at the expense of third party solutions. If in the future, this were to happen, or if any platform provider were to prohibit or impede the inclusion or promotion of third party security or utility software offerings, it could harm the Group's competitive position and business prospects. In addition, other competitors may leverage their greater resources to develop relationships with original equipment manufacturers ("OEMs") or operating system vendors, thereby diminishing demand for the Group's products and adversely affecting its ability to acquire and retain users.

7. The Group depends on search engines, download sites and app stores to attract a significant percentage of its users and if those search engines, download sites or app stores change their rankings, it could adversely affect the Group's ability to attract new users.

Many users locate the Group's products and online services and the Group's websites through search engines, download sites and app stores. Search engines and app stores typically provide two types of search results organic (unpaid) search rankings and paid advertising—and the Group relies on both types to attract new users. Companies cannot purchase organic rankings, which are determined and displayed based on criteria formulated by the relevant search engine or app store. Search engines and app stores may revise their algorithms from time to time in an attempt to optimise their search results. If the search engines, download sites or app stores modify their algorithms in a manner that reduces the prominence of the Group's rankings, fewer potential users could click through to the Group's websites or view the Group's products, requiring the Group to resort to more costly methods of attracting this traffic. Furthermore, the majority of the Group's traffic from search engines comes from a single source, Google, and the majority of the Group's traffic from app stores comes from Google Play. The concentration of search traffic from a single search engine and a single app store increases the Group's vulnerability to potential algorithm modification. The failure to replace any lost traffic could reduce revenue or require the Group to increase user acquisition costs by, for example, paying for purchased rankings.

8. The Group may be unable to successfully integrate its recently acquired companies or any business it may acquire in the future, and those acquisitions may fail to provide the benefits the Group had anticipated.

The Group has acquired other companies and services to expand its technological capabilities, its product breadth and functionalities, its user base and its geographical presence, and the Group intends to continue to make acquisitions and investments in the future. In 2016, the Group acquired AVG Technologies N.V. (along with its subsidiaries as at the date of the acquisition, "AVG"), a leading security software company which developed business, mobile and PC security software applications on a free and paid basis, similar to the Group. As of the date of this Prospectus, the integration of AVG into the Group is continuing in line with expectations, with the closure or reduction of certain redundant offices and the completion of the integration of Mac, VPN and mobile product offerings, among others. In 2017, the Group acquired Piriform Group Limited (along with its subsidiaries as at the date of the acquisition, "Piriform"), the leading provider of device performance optimisation software including its flagship product, CCleaner, to expand the Group's product offerings in the PC and smartphone optimisation market. As of the date of this Prospectus, the integration of Piriform into the Group is continuing, with the integration of support functions in progress and the full implementation of cross-sell offerings of Avast products during the installation process for CCleaner. Although the Group has a successful track record of integration, there is no guarantee that the Group will be able to successfully integrate any business it may acquire in the future or that the integration of AVG and Piriform will continue to be successful. The integration of AVG, Piriform and other businesses and their respective operations, technologies and products involves the incurrence of acquisition costs and may expose the Group to a number of risks. These include unanticipated liabilities and tax liabilities, operating difficulties and expenditures associated with the assimilation and retention of employees of the acquired business, acquisition legal contingencies, risks related to maintaining procedures, controls and quality standards and other risks and difficulties. The Group may not be able to achieve the anticipated benefits from any acquisition or investment and the consideration paid for an acquisition or investment may also affect

financial results. Such acquisitions and investments could divert management's time and focus from operating the business and divert other resources needed in other parts of the business. The financing of acquisitions or investments in other companies may require the Group to use a substantial portion of its available cash; raise debt, which would increase interest expense; or to issue shares or other rights to purchase shares, which may result in dilution to existing shareholders and decrease the Group's earnings per share. Moreover, acquisitions may result in write-offs and restructuring charges as well as in creation of goodwill and other intangible assets that are subject to regular impairment testing, which could result in future impairment charges. All of these factors could adversely affect the Group's business, results of operations and financial condition.

Even if the Group obtains indemnification from the seller of an acquired business, the indemnification may be insufficient or unavailable for the particular liabilities incurred. Any inability to integrate completed combinations or acquisitions in an efficient and timely manner could have an adverse impact on the Group's results of operations. In addition, the Group may not recognise the expected benefits in connection with a future acquisition. If the Group is not successful in completing acquisitions that it pursues in the future, the Group may incur substantial expenses and devote significant management time and resources without a successful result.

9. The Group's current operations are international in scope and it plans further geographic expansion, creating a variety of operational challenges.

The Group's offices, employees and users are dispersed around the world. This creates operational challenges including:

costs associated with developing software and providing support in many languages;
varying patterns of use in different countries, different payment cycles and difficulties in implementing auto-renewal in some currencies;
legal challenges associated with international operations;
the effect of tariffs and trade barriers (resulting from, for example, trade wars or the withdrawal or renegotiation of multilateral trade agreements);
a variety of regulatory or contractual limitations on its ability to operate and reduced protection of intellectual property rights in some countries;
potential additional financial costs to the Group, such as potential adverse movements in currency exchange rates and adverse tax events; and
a geographically and culturally diverse workforce and user base.

Failure to overcome any of these difficulties could negatively affect results of operations or increase the Group's expenses. The Group intends to further expand its operations globally, focusing on key local markets such as Latin America, Southeast Asia and Japan. If these efforts are unsuccessful in creating and expanding the Group's global user base, or if its expansion increases the difficulties of running a global company, it could harm the Group's results of operations.

Further, the Group derives a meaningful portion of its revenues from emerging markets, such as Brazil, which are subject to greater risks than more developed markets, including legal, economic, tax and political risks. For example, the Group derived \$28.7 million of Billings and \$25.9 million of Revenues from Brazil in the year ended 31 December 2017 and had approximately 44 million users in Brazil as of 31 December 2017. In 2017, 4% of the Group's Billings and 3% of the Group's Revenues derived from Brazil. During the same year, the Group derived \$11.6 million of Billings and \$10.6 million of Revenues from Russia, and the Group had approximately 26 million users in Russia as of 31 December 2017. In 2017, 1% of the Group's Billings and 1% of the Group's Revenues derived from Russia. Expanding the business in these and other emerging markets may present additional risks beyond those associated with more developed international markets. Emerging markets are particularly vulnerable to restrictive, inconsistent or frequently changing government policies. For example, Russia implemented legislation in November 2017 regulating VPN products and imposing restrictions on proxy avoidance tools, specifically restricting VPN products from allowing users to access certain banned websites, and China tries to block the use of VPNs entirely. Moreover, emerging markets have higher instances of piracy and licence misuse, and therefore may require additional time, precautions and resources to develop the Group's business and presence in such markets. In order to enter new markets in highly regulated countries such as China or Russia, modifications to the Group's business plan or operations to comply with changing regulations or certain actions taken by regulatory authorities may increase the costs of providing products and solutions and materially and adversely affect the Group's financial condition.

10. If the Group fails to keep up with rapid changes in technologies and the evolution of malware and virus threats, its business may be materially and adversely affected.

The security software industry is characterised by rapid technological change. The needs of the Group's users and the threats they face evolve constantly. Hackers and cybercriminals continuously develop and employ increasingly sophisticated techniques to penetrate systems and networks and access information. The Group needs to introduce software solutions to respond to new threats quickly. The nature of future threats is not always known, which is also a challenge to the development of these solutions. The Group may experience delays in the introduction of new solutions, updates, enhancements and features. If the Group fails or is perceived to fail to respond to the rapidly changing needs of users by developing and introducing internet security solutions that do not effectively protect against new security threats quickly enough, its competitive position, reputation and business prospects could be harmed.

The Group's future success will depend on its ability to respond to rapidly changing threats and improve the performance and reliability of its products and solutions. The Group's users rely on its security software products and related solutions for safe access to the internet. Hackers are continuously creating and modifying new malware and malicious websites with increasing sophistication, such as the "WannaCry" ransomware, which infected a number of Windows PCs worldwide in 2017. Responding to (and proactively preparing for) this type of new threat requires significant expertise and technical resources. Although the Group's software was able to protect its users from WannaCry, the detection technologies underlying the Group's products and solutions may not immediately detect all forms of malware or malicious websites to which its users are exposed.

The development and introduction of products and functionalities that address risks such as these involve a significant commitment of time and resources and is subject to a number of risks and challenges. Further, the categories of connected devices are expanding, and the Group will need to continue to expand its product offerings to protect users across various devices, platforms and networks. Responding to the challenges posed by these new platforms and their corresponding new threats can be difficult and require significant reengineering of software. The Group may therefore fail or be perceived to fail to provide solutions for these new technology platforms as threats to them arise. If the Group does not succeed in keeping pace with the rapid technological change in the security software industry or if its new products and product upgrades fail to achieve widespread acceptance, its revenues and competitive position could be materially and adversely affected.

11. The Group operates in a number of jurisdictions with strict consumer laws and regulations, and any failure to comply with such laws and regulations may adversely affect its business.

Data Protection. A wide variety of local, national and international laws and regulations apply to consumer businesses such as the Group's, including the collection, use, retention, protection, disclosure, transfer and other processing of personal data. These consumer compliance laws and regulations, such as those related to personal data and privacy, are evolving and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. Failure to comply with applicable laws and regulations, or to protect such data, could result in enforcement action, including fines, imprisonment of company officials and public censure, claims for damages by users and other affected individuals, damage to reputation and loss of goodwill (both in relation to existing users and prospective users). Any of these consequences could have a material adverse effect on the Group's operations, financial performance and prospects. Evolving and changing definitions of personal data and personal information, both within the European Union and elsewhere, especially relating to classification of IP addresses, machine identification, location data and other information, may limit or inhibit the ability of the Group to operate or expand its business, including limiting strategic partnerships that may involve the sharing of data. For example, the General Data Protection Regulation (GDPR) (Regulation (EU) 2016/679) (the "EU Data Protection Regulation") came into effect in May 2016 and will become directly applicable in Member States from 25 May 2018. The EU Data Protection Regulation introduces substantial changes to the EU data protection regime and will impose a substantially higher compliance burden on the Group, may increase its data protection costs and may restrict its ability to use data. Even the perception of privacy concerns, whether or not valid, may harm the Group's reputation and inhibit adoption of its solutions by current and future users. Any regulatory changes could also impair the Group's ability to continue to use its consumer data in such systems in the way in which it currently uses them (specifically in its analytics business, Jumpshot), or failure by the Group to comply with applicable privacy, data protection and related laws or regulations, may have a material adverse effect on the Group's financial condition, financial returns or results of operations.

Auto-Renewal. The Group sells the great majority of its paid consumer products online through e-commerce shopping cart and online payment processing service providers such as Digital River ("E-commerce Partners") who act as resellers and are the seller of record and merchant of record for such sales to customers. The Group's E-commerce Partners offer the Group's paid consumer products to customers on a subscription basis. At the end of the subscription period, the subscription is automatically extended (for periods equal in length to the initial subscription period) and the end user is charged the undiscounted price as in effect when the subscription is extended until the end user cancels their subscription. Many jurisdictions worldwide have existing laws and regulations applicable to online sales of continuing subscriptions or may propose to introduce such laws and regulations in future. Any legal and regulatory restriction that impairs the Group's ability or that of the Group's E-commerce Partners to automatically extend subscriptions, or failure to comply with applicable laws and regulations, may have a material adverse effect on the Group's financial condition, financial returns or results of operations.

Consumer Sales. There are different laws in the various jurisdictions in which the Group operates that relate to how online sales may be made, particularly to consumers, including laws regulating the size and prominence of lettering, regulations surrounding the use of opt-in as compared to opt-out provisions and other specifics as to how sales may be made. The Group operates globally and must continue to monitor changes to, understand, and comply with the relevant laws in each jurisdiction. The consumer protection laws are currently under review in the EU, which may lead to additional obligations on the Group and expenditures and resources may be required to implement these. Furthermore, the Group must rely on its third party partners, over whom it has no control, to also comply with such laws and regulations. The failure to comply with any consumer laws and regulations in any jurisdiction could have a material adverse effect on the Group's financial condition, financial returns or results of operations.

12. Accurately measuring the number and retention of the Group's users is difficult and the failure to accurately measure the number and retention of users at any time will compromise the Group's ability to monitor key performance indicators, which in turn could adversely affect the Group's ability to manage its business.

Certain of the Group's users may have the same Group products installed on multiple devices or may have more than one of the Group's products installed on a single device. While certain of the Group's products have systems in place that allow for the tracking of unique users and de-duplication of user numbers, not all of the Group's products use the same method to count users, partially due to the Group's acquisition history and the different methods employed by various companies prior to their acquisition by the Group.

The Group defines "users" as unique devices, which include PCs, Macs and mobile devices (primarily Android and iOS), which have at least one of the Group's free or paid software products installed and which have connected to the Group's servers at least once in the previous 30 days. Even where the Group can identify the fact that its products were installed on a unique device, there is no reliable method of measuring the number of individuals who use each device or the number of devices used by a single individual.

The Group defines users of paid products as "customers". The Group is able to more accurately measure the number of its customers compared to free users, as customers are required to provide the Group with certain identifying information, such as their e-mail address for PC desktop customers. The Group is able to measure the number of mobile subscribers through collecting unique user IDs for mobile customers. Similarly, the number of SMB customers can be calculated by collecting specific company information from SMB customers.

The Group therefore is able to count its customers within product categories relatively accurately, and can de-duplicate to ensure that customers are not double-counted in its user estimates to the extent they use the same identifying information more than once. The Group's non-financial metrics are calculated using internal company data collections and have not been validated by an independent third party. However, the Group has data quality assurance processes in place to ensure accuracy.

There is also a risk that one customer may register different of the Group's products under different identifying information, which could lead to duplication in customer counts in certain situations, including when a customer uses their e-mail address to register a PC desktop product and a unique user ID to install a mobile product (i.e. when a mobile customer doesn't supply an e-mail address), or when a single customer has more than one e-mail address and registers different of the Group's products under different e-mail addresses. In addition, there is a risk that the Group under-reports customer numbers in certain situations, for example, where a single e-mail address or unique user ID is used by multiple individuals in the same household.

The Group continues to attempt to improve the accuracy of its measurement of the number of users, but there can be no assurance that it will be successful in doing so. Although the Group believes that it is able to calculate

customer numbers with reasonable accuracy and that the Group's internal and third party estimates of users are reasonably accurate, there are certain products which do not allow the Group to precisely track user duplication. The Directors' understanding and management of the business depends on accurate measures of the numbers of users and other key performance indicators derived from these metrics, and management decisions may be suboptimal if measurements of these key metrics are inaccurate. Furthermore, the Group compares itself against its competitors and peer companies who may count their users using different methods. If a significant understatement or overstatement of user metrics were to occur, the market might perceive the Group to be underperforming or to have inadequate systems, which would adversely affect the price of its shares.

13. If the Group is unable to maintain and enhance its brands' reputations, it may harm the Group's business and operating results.

As a consumer business, the Group's business depends on its brand recognition and the Group believes that maintaining and enhancing its brands is critical to the Group's business. In particular, the Group relies on its users as primary drivers of its user-driven marketing strategy for its security products and any negative change to the perception of the Group's brands among its users could have a material adverse effect on its business. For example, any negative discussions in user forums or online review sites, any negative media attention or any negative comments online regarding customer support or other services could have a significant adverse effect on the Group's brands. In addition, negative reviews of the Group's security software solutions or the company generally could harm the Group's brands. Furthermore, the Group depends upon certain third party distributors of its solutions, online download sites and actions by those third parties could have a negative effect on the Group's brands.

The successful promotion of the Group's brands will depend largely upon the quality of the internet security solutions offered, the ability of the Group to differentiate itself from its competitors and the effectiveness of the Group's marketing and public relations efforts. The promotion of the Group's brands may require substantial expenditures, which will likely increase as the market becomes more competitive and as the Group expands into new markets. If the Group is not successful at maintaining and enhancing its brands, it could adversely affect its ability to attract new users and it could lose users, third party distributors and resellers.

The Group has in the past and may in the future be the target of so-called "cybersquatters" who seek to register internet domain names that are confusingly similar to the Group's domains or marks. Some cybersquatters may take the Group's free products, or other non-Group products, and sell them to users, which could lead to confusion among users and could have a material adverse effect on the Group's reputation and brands.

14. The Group currently relies on one e-commerce service provider to process and collect a significant portion of its consumer segment revenues.

The Group's online sales model enables consumers and SMBs to purchase products through the Group's websites. In the year ended 31 December 2017, the Group derived 27% of its revenues from sales of licensed software processed by Digital River, Inc. and Digital River Ireland Limited (together, "Digital River"), the Group's primary e-commerce service provider. The Group has a framework services agreement with Digital River which has an initial term until 4 November 2020. The framework agreement automatically renews for further periods of one year unless terminated by either party with at least three months' notice. Digital River collects payments and user data from transactions for the Group. While Digital River is not the exclusive supplier of such services to the Group, it is the Group's primary supplier of such services for new online consumer sales: in 2017, online sales processed by Digital River accounted for 36% of the Group's billings. The Group has partnered with Digital River since 2002 as a primary e-commerce service provider. Any disruption to Digital River's ability to provide the Group with services could materially and adversely affect operations. In the event that Digital River is unable or unwilling to provide its services, the Group believes it would be able to find a comparable alternative e-commerce provider on similar terms that it has with Digital River. However, it may take the Group a number of days or weeks to fully transition to one of its other e-commerce service providers for the processing of first purchases and manual renewals, and it would likely take up to several months to fully transition the processing of auto-renewals. A number of challenges would come with the migration of all autorenewal payment information from Digital River to a new service provider (including those related to the logistics of transferring the contact names, email addresses and payment information for each customer). Any interruption to the normal processing of auto-renewals could have a material adverse effect on the Group's business and results of operations. Further, if Digital River or another e-commerce provider experiences financial difficulties and fail to forward the payments owed to the Group within 15 days from the end of the month in which those payments were made, the Group's cash flow and income may be significantly affected. Additionally,

the Group runs sales to the SMB segment through a proprietary e-commerce payment platform that it has developed in-house, and may in the future decide to perform these operations for the consumer segment as well, which would increase the demand on personnel and technological resources. Any such occurrence could materially and adversely affect the Group's business and results of operations.

15. Currency exchange rates may materially adversely affect the Group's results of operations.

Fluctuations in currency exchange rates may impact the business significantly, as the Group conducts business in multiple countries. For the year ended 31 December 2017, the Group generated 54% of its Adjusted Billings in the Americas, 40% in EMEA and 6% in Asia Pacific. For the year ended 31 December 2017, 52% of the Group's billings were denominated in U.S. dollars, 19% were denominated in Euros and 9% were denominated in British pounds. Conversely, in the same year, 59% of the Group's adjusted total costs (excluding currency losses and changes in deferred tax) were denominated in U.S. dollars, 21% in Czech korunas and 8% in Euros. As a result, a substantial weakening of the U.S. dollar and the Euro relative to the Czech koruna would present an increase in the Group's costs. Further, the Group is also exposed to translation effects given that its financial statements are stated in U.S. dollars. Any strengthening in the U.S. dollar relative to other currencies in which the Group derives its revenues will result in reductions in reported revenue. For example, for the year ended 31 December 2017, the Group reported a loss from the effect of exchange rate changes on cash and cash equivalents held in foreign currencies of \$3.4 million (compared to zero for the year ended 31 December 2016 and a loss of \$2.6 million for the year ended 31 December 2015). Likewise, if the U.S. dollar declines in value relative to the other currencies in which the Group derives its revenues, reported revenue will increase, but the Group's profitability may be lower. If there is a significant change in the value of the U.S. dollar relative to foreign currencies, the profits of the Group may be materially adversely affected. In addition, the majority of the Group's tax liabilities are denominated in Czech koruna. The Group's effective tax rate is impacted by foreign exchange gains and losses from U.S. dollars as compared to the Czech koruna, which is the functional currency of the Group for local GAAP and tax purposes. For the year ended 31 December 2017, the Group had \$56.8 million of losses resulting from the impact of foreign exchange rate differences (functional as compared to statutory) (as compared to a loss of \$4.6 million for the year ended 31 December 2015 and a gain of \$24.3 million for the year ended 31 December 2016).

16. The Group depends on the attraction and retention of specialised personnel. If these individuals leave without effective replacements or if personnel costs increase, the Group's operations may suffer.

The Group's performance largely depends on the talents and efforts of highly skilled individuals. The Group's future success depends on the continuing ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of the organisation. As a technology company, the Group's primary cost is personnel costs. While the Group's personnel costs are currently low compared to its peers given the location of many of its employees in the Czech Republic, in the future, the Group may incur increased expenses to recruit qualified personnel in the Czech Republic or in other countries. There is currently low unemployment in the Czech Republic, resulting in a shortage of labour. If high market demand forces the Group to increase wages, it would raise the Group's personnel costs, which would impact the Group's business and results of operations and reduce its competitive advantage.

Further, the success of the Group's business is dependent to a large degree on the continued services of its directors and executive officers and other key personnel who have extensive experience in the industry. If the services of any of these integral personnel are lost and the Group fails to manage a smooth transition to new personnel, the business could suffer. The Group does not carry key person insurance on any executive officers or other key personnel. The Group has entered into employment agreements with certain executive officers and key employees that contain non-compete covenants. However, despite these agreements, the Group may not be able to retain these officers and employees. Further, the non-compete covenants may themselves not be enforceable in certain jurisdictions (for example, in California, where the Group has operations, they are only enforceable in limited circumstances). This means that the Group may be unable to prevent its competitors from benefiting from the expertise of such former employees, which could materially and adversely affect the Group's business and results of operations.

17. The Group faces risks related to its operation of VPN products, which could have a material adverse effect on its reputation and/or future sales.

The Group's VPN products offer anonymity and secure communication channels to its users online, which is often a key reason its customers purchase such products. There is a risk that a user will use the Group's VPN

products for illegal purposes. Governmental law enforcement agencies in some countries frequently ask the Group to provide information on certain of its VPN users which such governments cannot otherwise access, related to ongoing investigations or otherwise. The Group has a policy to comply with such requests when required by law and has published a report for all of these requests from 2017 with full transparency. If the Group's compliance with such an order were characterised by users as potentially compromising their privacy or anonymity, the Group may suffer reputational harm and future sales of VPN products, or sales of other of the Group's products by association, may decrease.

Further, the use of the Group's VPN products may at times violate government laws. For example, the government of China has banned the use of VPN products within the country. In addition, certain governments restrict specific uses of VPN products: for example, the Russian government has outlawed the use of VPNs to connect to certain banned websites. Any use of the Group's VPN products in China, misuse of the products in Russia, or use of the products in a way that conflicts with any other government's laws, could potentially expose the Group to penalties or have a material adverse effect on the Group's reputation.

18. The Group may be unable to protect its intellectual property rights and proprietary information and prevent third parties from making unauthorised use of its products and technology.

The Group's intellectual property rights and proprietary information are important to its business. The Group attempts to protect its intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as restrictions in its licensing-out agreements and third-party nondisclosure and assignment agreements. The Group's policy requires that employment contracts include clauses requiring employees to assign all of the inventions and intellectual property rights they develop in the course of their employment, or the economic benefits thereof, to the Group and that all employees and contractors sign confidentiality agreements in which they agree not to disclose or misuse any confidential information. However, the Group cannot guarantee that its confidentiality agreements or other agreements with employees and independent contractors adequately protect the Group's intellectual property rights, know-how and other proprietary information. In particular, because the protection of confidential information ultimately relies on the discretion of individuals who hold this information, the Group cannot guarantee that they will not breach these agreements. Furthermore, the steps the Groups has taken and may take in the future may not prevent misappropriation of the Group's proprietary solutions or technologies, particularly in respect of former officers and employees or in foreign countries where laws or law enforcement practices may not protect the Group's intellectual property rights and other proprietary information as fully as in the United States, the United Kingdom and the EU.

Trade Secrets. Additionally, some of the Group's trade secrets and know-how, such as the Group's virus databases and development tools, are stored electronically and thus highly portable. The Group employs physical and electronic security systems designed to protect its servers from unauthorised access. Despite these efforts, third parties could gain access to the Group's know-how and trade secrets, which could cause the Group to lose any competitive advantage resulting from such know-how or trade secrets. In addition, third parties could successfully reverse engineer the Group's products. If any of the Group's competitors were to gain access to any of the Group's trade secrets, know-how or other technologies not protected by a patent, or otherwise independently develop this information, it could materially adversely affect the Group's business, financial condition and results of operations.

Patents. The Group has filed various patent applications for its products and solutions. The Group cannot ensure that any of the patent applications will proceed to grant or that the claims allowed on any issued patents will be sufficiently broad to protect the Group's technology or products. Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually provide adequate defensive protection or competitive advantages. The majority of the Group's patents are filed in the United States. Patent applications in the United States are typically not published until 18 months after filing, or, in some cases, not at all, and publications of discoveries in industry-related literature lag behind actual discoveries. The Group cannot be certain that it was the first to make the inventions claimed in its pending patent applications or that it was the first to file for patent protection. Because some patent applications are confidential for a period of time, there is also a risk that the Group could adopt a technology without knowledge of a pending patent application, and that the technology would infringe a third party patent once that patent is issued. Additionally, the process of obtaining patent protection is expensive and time-consuming, and the Group may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. The Group may choose not to pursue patents or other protection for innovations that later turn out to be important.

Trademarks. The Group relies on its trademarks, trade names, and brand names to distinguish its solutions from the products of its competitors, and has registered or applied to register many of these trademarks in key markets. However, occasionally third parties may have already registered identical or similar signs for products or solutions that also address the software market. If the Group is unable to adequately protect its trademarks, third parties may use the Group's brand names or trademarks similar to the Group's in a manner that may cause confusion to users and confusion in the market, which could decrease the value of the brand and harm the Group's reputation. The Group relies in part on brand names and trademark protection to enforce its intellectual property rights. Efforts by third parties to limit use of the Group's brand names or trademarks and barriers to the registration of its brand names and trademarks in various countries may restrict the Group's ability to promote and maintain a cohesive brand throughout key markets. There can also be no assurance that pending or future United States or foreign applications will proceed to registration in a timely manner or at all, or that such registrations will effectively protect the Group's brand names and trademarks.

From time to time, the Group may discover that third parties are infringing or otherwise violating its intellectual property rights. To protect its intellectual property rights, the Group may become involved in litigation, which could result in substantial expenses, divert the attention of management, cause significant delays to the development or launch of products, materially disrupt the conduct of its business or adversely affect revenues, financial condition and results of operations. Any infringement of the Group's intellectual property rights by third parties may eliminate any competitive advantage such intellectual property rights provide and harm the Group's results of operations.

19. The Group may become subject to claims of intellectual property infringement by third parties that, regardless of merit, could result in litigation and materially adversely affect its business, results of operations or financial condition.

The Group's success largely depends on its ability to use and develop its technology without infringing the intellectual property rights of third parties, including patents, copyrights, trade secrets and trademarks. The Group may be subject to litigation involving claims of patent infringement or violation of other intellectual property rights of third parties. The Group has also in the past, and expects in the future, to be the target of so-called "patent trolls", companies that do not manufacture or sell products and whose sole activity is to assert patent rights against accused infringers in an attempt to collect licensing fees. In addition, the Group licenses and utilises certain third party "proprietary" and "open source" software as part of its solutions offering. An author or another third party that distributes such third party or open source software could allege that the Group had not complied with the conditions of one or more of these licences. Any such claims, regardless of merit, could (i) result in litigation, which could result in substantial expenses, (ii) divert the attention of management, (iii) cause significant delays, (iv) materially disrupt the conduct of the business and (v) have a material and adverse effect on the Group's financial condition and results of operations.

As a consequence of such claims, the Group could be required to pay substantial damages, develop non-infringing technology, enter into royalty-bearing licensing agreements, stop selling some or all of its products or re-brand certain products. The Group is also frequently required to indemnify its third party partners in the event of infringement claims against such partners who offer the Group's products, such as mobile network operators who partner with the Group to offer its Location Labs products. If it appears necessary, the Group may seek to license the intellectual property which the Group is alleged to have infringed, potentially even if the Group believes such claims to be without merit. However, such licencing agreements may not be available on acceptable terms, or at all. If the Group cannot obtain required licences, or if existing licences are not renewed, litigation could result. Litigation is inherently uncertain and any adverse decision could result in a loss of proprietary rights, subject the Group to significant liabilities, require the Group to seek licences from others and otherwise negatively affect the Group's business operations.

20. In addition to direct sales and distribution channels, the Group relies on third party distributors and resellers to sell its software. Any failure by the Group to sell its products effectively through third party distributors and resellers could adversely affect the Group's results of operations.

The Group sells and markets its products to users indirectly through third party distributors and resellers, as well as directly by the Group. For example, the Group currently sells its SMB products through approximately 9,000 active partners, the Group distributes its Location Labs products to users via mobile network operators and certain of the Group's consumer antivirus products are offered at physical retail outlets. If third party distributors or resellers are ineffective at marketing or promoting the Group's products, the Group's sales could decline or it could damage the Group's brand. Further, the Group has limited control over the amount of software that these indirect sales partners purchase from the Group or sell on the Group's behalf. Weakness in the end-user market could also negatively affect the cash flow of distributors and resellers who could, in turn, delay paying their

obligations. A change in the credit quality of a distributor or other counterparty can increase the risk that such counterparty is unable or unwilling to pay amounts owed, which could directly or indirectly (through a disruption in the Group's distribution network) have a material adverse effect on results of operations. Any material decrease in the volume of revenue generated by the Group's indirect sales channels could adversely affect its revenue and results of operations.

21. Increased user demands on technical support services may adversely affect the Group's relationships with its users and its financial results.

The Group offers technical support for its products, primarily in the form of web forums, email, chat and call centres that are in some cases operated by third parties. The Group may be unable to modify the format of its support services to compete with changes in support services provided by competitors or successfully integrate support for users. Further user demand for these services, without corresponding revenues, could increase costs and adversely affect results of operations.

The Group has outsourced a substantial majority of its support functions to third party service providers. The Group has approximately 135 technical support staff in-house and contracts with third parties to outsource an additional approximately 600 technical support staff. If these third party service providers experience financial difficulties, do not maintain sufficiently skilled workers and resources to satisfy their contracts, or otherwise fail to perform at a sufficient level under these contracts, the level of support services to users may be significantly disrupted, which could materially harm the Group's relationships with these users. In addition, some of the Group's third party service providers provide general support services in the area of electronics/IT to users who request it. While the Group does randomly monitor technical support calls and all complaints of any third party service providers or their agents which are escalated for resolution, it is not feasible for the Group to monitor all calls or identify all up-sells or charges which may be unnecessary or inflated. If third party service providers do not maintain the appropriate balance between providing support and selling their solutions, the Group's reputation and relationship with its users could be materially harmed.

22. The Group is subject to evolving sanctions laws as well as governmental export controls, and any breaches of such laws could subject the Group to fines or other forms or criminal or administrative penalties, as well as reputational damage.

The Group is subject to complex export control and economic sanctions laws in the jurisdictions where it operates, including the United States, the European Union and the United Kingdom. Economic sanctions laws prohibit most dealings with listed persons, entities or bodies designated under the applicable sanctions regime, and restrict or prohibit certain business activities in certain sanctioned territories (notably, in respect of U.S. sanctions, Cuba, Iran, North Korea, Syria and the Ukrainian territory of Crimea). Export control laws impose controls, export licence requirements and restrictions on the export of certain items, including software, and technology, such as encryption software and VPNs.

The Group has in the past grown by acquisitions, and anticipates that such growth may continue in the future. Historically, the Group has acquired businesses that the Group has discovered, subsequent to the acquisition, may not have had adequate procedures in place to prevent inadvertent violations of certain applicable sanctions laws. When this has occurred, the Group has taken steps to remediate these failings and ensure compliance with Group policies. Accordingly, there is a risk that the Group may in the future acquire businesses that the Group determines do not have adequate compliance controls to prevent inadvertent violations of export control and economic sanctions laws, and will in such instances need to implement remedial procedures.

Further, in light of the complexity of laws and regulations applicable to the export of software and other products that the Group produces, and as the technical means by which persons can access its products are constantly evolving, the systems that the Group needs to put in place to prevent violations of sanctions and export control laws needs to evolve to reflect those changes. In the past, the Group has experienced instances of non-compliance with U.S. sanctions and export control laws. The Group has worked with specialised U.S. sanctions and export control counsel to evaluate such occurrences, and the Group continues to work with its outside counsel to enhance its procedures and safeguards to ensure future compliance. There is a risk that, despite the procedures and controls that the Group implements to prevent breaches of sanctions and export control laws, sanctioned persons or users in sanctioned territories could download and use the Group's products in breach of applicable sanctions or export control laws. Such downloads and exports could have negative consequences to the Group, including government investigations, fines and other forms of criminal or administrative penalties and reputational damage, to the extent that the Group's ongoing compliance efforts and remedial actions taken to prevent further persons from accessing its products in breach of sanctions are ineffective.

23. The Company's ability to pay dividends in the future depends, among other things, on the Group's financial performance and capital requirements.

There can be no guarantee that the Group's historical performance will be repeated in the future, particularly given the competitive nature of the industry in which it operates, and its sales, profit and cash flow may significantly underperform market expectations. If the Group's cash flow deteriorates, then the Company's capacity to pay a dividend will suffer. The Directors will make any decision to declare and pay dividends at their discretion. This decision will depend on, among other things, applicable law, regulation, restrictions, the Group's financial position (including the existence of sufficient distributable reserves and cash in the Group), regulatory capital requirements, working capital requirements, finance costs, general economic conditions and other factors the Directors deem significant from time to time. Further, the total amount of dividends that can be distributed by the Group to shareholders is restricted under the Group's credit agreement entered into by Avast Software B.V. (among others) unless the Group has capacity available in applicable baskets or other exceptions apply, and may be restricted by such future agreements.

24. The use of open source and third party software could impose unanticipated conditions or restrictions on the Group's ability to commercialise its solutions.

The Group has in the past and could in the future combine its proprietary software with certain open source software in a certain manner, which could, under the terms of certain of the open source licences, require the Group to release the source code of such proprietary software and make it publicly available at no cost. Open source software is accessible, usable and modifiable by anyone, provided that users and modifiers abide by restrictions and requirements imposed by the applicable open source licence. In addition to risks related to licence requirements, usage of certain open source software can lead to greater risks than use of third party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. The Group has internal control procedures governing the usage of open source software but the Group cannot be sure that it deals with all open source code in accordance with this procedure, nor that it will be riskfree even if the Group complies with such procedure. In addition, some of the risks associated with the usage of open source software may be difficult to eliminate and could, if not properly addressed, negatively affect the Group's business. Under certain conditions, the use of some open source code to create derivative code may obligate the Group to make the resulting derivative code available to others at no cost. The Group monitors the use of open source code in an effort to avoid situations that would require making parts of the Group's core proprietary technology freely available as open source code and generally use only code licensed under open source licences that allow free redistribution and selling of the resulting products without restriction. However, the Group cannot guarantee that it will not use code governed by more restrictive licences or that a court will not interpret a licence to require certain source code to be made available to the public without charge. Under that circumstance, if the Group fails to make the code available, the Group would be in breach of the licence which could cause its termination and liability for copyright infringement or breach of contract. As a result, the Group may have to take remedial action, such as replacing certain code used in its products, paying a royalty to use some proprietary code, making certain proprietary source code available to others or discontinuing certain products.

The Group relies on software, and other patented technology, licensed from third parties to offer its services. In addition, the Group may need to obtain future licences from third parties to use their intellectual property rights associated with the development of its solutions, which might not be available on acceptable terms, or at all. Any loss of the right to use any third party software required for the development and maintenance of solutions could result in delays in the provision of until equivalent technology is either developed by the Group or, if available, identified, obtained and integrated, which could harm the Group's business. Any errors or defects in third party software could result in errors or a failure of the Group's solutions which could harm the business.

25. The Group operates its servers worldwide and faces significant challenges responding to disruption of its servers.

The Group owns a number of key servers, and the Group rents additional servers, data centre space and internet connectivity bandwidth capacity from third party providers. The Group's server content is located in data centres worldwide. The Group is using distributed server infrastructure for critical services and has also developed back-up storage for key data; however, there can be no assurance that such back-up storage arrangements or redundant or distributed server infrastructure will become operational, or, if they do, will be effective if it becomes necessary to rely on them. In the past, third party database providers for the Group have experienced service disruptions, which have led to customers not being able to process payments until such providers have

restored operations. Further, disruption of the servers and/or internet bandwidth connectivity due to technical reasons, natural disaster or other unanticipated catastrophic events, including power interruptions, storms, fires, floods, earthquakes, terrorist attacks and wars could significantly impair the Group's ability to continue its usual business operations and could materially and adversely affect the Group's business and results of operations. In situations where there is no geographic redundancy built into the back-up system and both a main server and its backup are located in the same place, there is a risk that such an event would lead to a shutdown of both servers, which could in turn lead to a particular product or network. The Group is continuously working to improve its disaster recovery response and to better understand which servers and how many servers can go down before the business is interrupted. Although the Group believes it has the technical knowledge necessary to mitigate problems relating to such systems and system architecture, the Group may at any time be required to expend significant capital or other resources (including staff and management time and resources) to protect against network failure and disruption. This may include the replacement or upgrading of existing business continuity systems, procedures and security measures. In addition, the Group will require continuing expansion and upgrading of systems to support additional users, localities, products and online services. These expansions and upgrades may consume significant capital and managerial resources.

26. Changes in applicable tax rulings and taxation requirements could materially affect the Group's business, financial condition and results of operations.

The Group is subject to income tax in the Czech Republic, the United Kingdom, the United States, Germany, the Netherlands and other jurisdictions in which it does business. The Group determines the amount of taxes it is required to pay based on its interpretation of the applicable laws and regulations in the jurisdictions in which it operates and its application of the general transfer pricing principles to intercompany transactions. Many countries' tax laws and international treaties impose taxation upon entities that conduct a trade or business or operate through a permanent establishment in those countries. However, these applicable laws and treaties are subject to interpretation. The tax authorities in these countries may contend that a greater portion of the income of the Group should be subject to income or other tax in their respective jurisdictions. This may result in an increase to the Group's effective tax rate and adversely affect the Group's results of operations. Further, there is a risk that a country may consider implementing new laws related to the taxation of the digital economy or to broadly interpret its existing laws, for example by construing permanent establishment in a country based solely on a digital presence within the country (without the company having any physical presence). If any taxing authority takes such a view, there is a risk that the Group would be subject to additional taxes and potentially double taxation, which would adversely affect its results of operations.

Sales tax

Sales of the Group's products are also subject to tax in a number of jurisdictions. Such taxes include value-added tax ("VAT"), corporate tax, goods and services tax ("GST") and excise duties. In certain jurisdictions, particularly those in emerging markets, there is limited guidance or interpretation of the laws related to these taxes, many of which have not been in force for a significant period. As a result, implementing regulations are often unclear or non-existent. While the Group makes a portion of its sales through third party hosted resellers who undertake to comply with any local taxing requirements, it does make certain sales itself. Furthermore, local taxing authorities could seek to impose penalties notwithstanding the Group's agreement with hosted resellers. If the Group or any of the third parties on which the Group relies do not comply with any local taxing requirements as determined by the taxing local authorities, the Group may be subject to unexpected taxes which could adversely affect its results of operations.

Tax audits

The Group's tax position for all taxes, including matters related to its corporate structure and intercompany transactions, is subject to review and audit by taxing authorities in accordance with the relevant local statute of limitations, who may impose significant fines, penalties and interest charges. The Group is currently subject to a corporation tax audit in the United Kingdom for the 2013, 2014 and 2015 financial years. The corporate income tax returns in the Czech Republic for the 2016 financial year and Canada for the 2014, 2015 and 2016 financial years are also under review. Additionally, a review of the VAT returns and reporting systems in the United Kingdom (in relation to Piriform) are under a routine VAT compliance review. If the tax authorities dispute any of the Group's tax positions, the Group could be subject to substantial tax liabilities that could have a material adverse effect on its financial position and results of operations.

Changes in law

Changes in tax laws or their interpretations could decrease the amount of cash the Group receives, the value of any tax loss carry forwards and tax credits recorded on its balance sheet and the amount of the Group's net cash flow, and have a material adverse impact on its business, financial condition and results of operations. Furthermore, owing to and following the changes in the international tax regulations and international initiatives, such as the OECD Base Erosion and Profit Shifting Action Plan ("OECD BEPS"), tax authorities are likely to be more focused on areas such as transfer pricing and, as a result of the increasing exchange of information between tax authorities, more challenges may arise. Most jurisdictions in which the Group operates have transfer pricing regulations that require transactions involving associated companies to be made on arm's length terms. It is the Group's policy that arrangements between Group companies are carried out on an arm's length basis. However, if the tax authorities in any relevant jurisdiction do not regard such arrangements as being made on an arm's length basis or being properly documented and successfully challenge those arrangements, the amount of tax payable, in respect of both current and previous years, may increase materially and penalties or interest may be payable. The same applies in case of changes in the transfer pricing system, which may result in challenges of the past or new set-up. Further, in some jurisdictions in which the Group operates the tax authorities undertake lengthy reviews of transfer pricing arrangements, with the result that the Group's tax positions in those jurisdictions remains open and subject to review for several years. Any challenge to the Group's transfer pricing arrangements or changes in the transfer pricing system could have a material adverse effect on the Group's business, financial condition and results of operations.

Taxation of digital businesses

On 21 March 2018, the European Commission published two proposals for Council Directives for taxation of digital businesses. The first proposed Directive (COM(2018)147 final inclusive of Annexes 1 to 3) will allow a member state to tax digital businesses, regardless of physical presence that state, by extending the meaning of "permanent establishment" to include a "significant digital presence" in that member state. Such a presence exists if certain digital services are supplied to users there through a digital interface and those services exceed certain thresholds. Profits will be attributed to such a presence according to the "economically significant activities" performed by such a presence. The Directive will apply to entities regardless of their tax residence, and so may alter the allocation of taxable profits between member states.

The second proposed Directive (COM(2018)148 final) will introduce a temporary "digital services" tax ("DST"), to be removed once permanent measures are introduced. DST will be levied by each member state, at 3%, on revenues from certain digital activities:

placing advertising on a digital interface targeted at users of that interface located in that member state;
making available to users in that member state a multi-sided digital interface which allows users to find (and interact with) other users; and
transmission of data collected about users in that member state generated from users' activities on digital interfaces.

The proposed DST would only apply to entities with worldwide revenues exceeding €750 million and taxable EU revenues exceeding €50 million.

According to the two proposals, member shares shall implement the provisions included in the proposals by the end of 2019 and shall apply the provisions from 1 January 2020.

27. The Group is currently and may be in the future subject to periodic litigation and other regulatory proceedings, which could result in unexpected expense of time and resources that could have a material adverse impact on its results of operation, financial condition and liquidity.

From time to time the Group may be called upon to defend itself against lawsuits and regulatory actions in the ordinary course of business. The Group is currently involved in two related litigation matters concerning the former Chief Executive Officer of AVG, Gary Kovacs, following the termination of his employment by the Group. Mr. Kovacs has filed suit in the United States with the San Francisco County Superior Court for breach of contract and wrongful termination, inter alia (the "California Matter"), and has also filed suit in the Netherlands with the Sub District Court of Amsterdam to enforce the payment of the value of certain equity award agreements (the "Netherlands Matter"). Mr. Kovacs is seeking approximately \$1,181,400 in the California Matter and approximately €8,444,600 in the Netherlands Matter. A hearing has been conducted in the Netherlands Matter, and the Group is currently in pre-trial proceedings in the California Matter with a trial date in June 2018, unless such date is otherwise extended. The Group believes that it is too early in the proceedings to assess the likelihood of its success in defending Mr. Kovacs' claims.

Any future litigation could generate negative publicity that significantly harms the Group's reputation, which could materially and adversely affect the user community and the number of customers. In addition to the related cost, managing and defending litigation and related indemnity obligations can significantly divert management's and the board of directors' attention from operating the business. The Group may also need to pay damages or settle the litigation with a substantial amount of cash. All of these could have a material adverse effect on the Group's business, results of operation and cash flows.

Risks relating to the Global Offer and the Shares

1. Each of Sybil and the Founders will retain a significant interest in and will continue to exert substantial influence over the Group following the Global Offer and their respective interests may differ from or conflict with those of other shareholders.

Immediately following Admission, Sybil Holdings S.à r.l., which is owned by funds advised by affiliates of CVC Capital Partners Advisory Company (Luxembourg) S.à r.l. ("Sybil") will continue to beneficially own approximately 22.7%, of the issued ordinary share capital of the Company (assuming no exercise of the Overallotment Option) and 19.7%, if the Over-allotment Option is exercised in full, and Pavel Baudisˇ and Eduard Kucˇera and their respective investment vehicles, PaBa Software s.r.o. and Pratincole Investments Limited (the "Founders") will continue to beneficially own approximately 37.5%, of the issued ordinary share capital of the Company (assuming no exercise of the Over-allotment Option) and 37.5%, if the Over-allotment Option is exercised in full. As a result, each of Sybil and the Founders will possess sufficient voting power to have a significant influence over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. The respective interests of Sybil and the Founders may not always be aligned with those of other holders of Shares.

The Company entered into a relationship agreement with Sybil (the "Sybil Relationship Agreement") and a relationship agreement with the Founders (the "Founder Relationship Agreement", and, together with the Sybil Relationship Agreement, the "Relationship Agreements") (details of which are set out in Part 7—"Directors and Corporate Governance—Relationship Agreements with Sybil and the Founders") to regulate their relationship following Admission and, in particular, to help to ensure that the Company will be capable of operating and making decisions for the benefit of Shareholders as a whole and independently of each of Sybil and the Founders, respectively, at all times after Admission. Notwithstanding the Relationship Agreements, the concentration of ownership in Sybil and the Founders may have the effect of delaying, deferring or preventing a change of control, merger, consolidation, takeover or other business combination or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company, which in turn could have an adverse effect on the trading price of the Shares.

2. The market price of the Shares could be negatively affected by sales of substantial amounts of such Shares in the public markets, including following the expiry of the lock-up period, or the perception that these sales could occur.

Following completion of the Global Offer, the Major Shareholders will own beneficially, in aggregate, 65.9% of the Company's issued ordinary share capital (assuming no exercise of the Over-allotment Option) and 62.1% if the Over-allotment Option is exercised in full. The Company, the Selling Shareholders, the Directors and certain members of the Company's management team are subject to restrictions on the issue, sale and/or transfer, as applicable, of their respective holdings in the Company's issued share capital as described in Part 13—"Details of the Global Offer—Lock up arrangements". The issue or sale of a substantial number of Shares by the Company, Selling Shareholders, the Directors or certain members of the Company's management team in the public market after the lock up restrictions in the Underwriting Agreement and related arrangements expire (or are waived by the Joint Global Co-ordinators or the majority of the Underwriters), or the perception that these sales may occur, may depress the market price of the Shares and could impair the Company's ability to raise capital through the sale of additional equity securities.

3. There is no existing market for the Shares and an active trading market for the Shares may not develop or be sustained.

Prior to Admission, there has been no public trading market for the Shares. Although the Company has applied to the UK Listing Authority for admission to the premium listing segment of the Official List and has applied to the London Stock Exchange for admission to trading on its main market for listed securities, the Company can give no assurance that an active trading market for the Shares will develop or, if developed, could be sustained following the closing of the Global Offer. If an active trading market is not developed or maintained, the liquidity and trading price of the Shares could be adversely affected. In addition, the Offer Price for the Shares has been determined by the Company and the Selling Shareholders (in consultation with the Underwriters) and may not be indicative of prices that will prevail in the open market following the Global Offer. Consequently, investors may not be able to sell Shares at prices equal to or greater than the price they paid in the Global Offer.

4. Shares in the Company may be subject to market price volatility and the market price of the Shares in the Company may decline disproportionately in response to developments that are unrelated to the Group's operating performance.

The Offer Price is not indicative of the market price of the Shares following Admission. The market price of the Shares may be volatile and subject to wide fluctuations. The market price of the Shares may fluctuate as a result of a variety of factors, including, but not limited to, those referred to in these Risk Factors or as a result of the negotiations related to the United Kingdom's exit from the European Union, as well as period to period variations in operating results or changes in revenue or profit estimates by the Group, industry participants or financial analysts. The market price could also be adversely affected by developments unrelated to the Group's operating performance, such as the operating and share price performance of other companies that investors may consider comparable to the Group, speculation about the Group in the press or the investment community, unfavourable press, strategic actions by competitors (including acquisitions and restructurings), changes in market conditions and regulatory changes. Any or all of these factors could result in material fluctuations in the price of Shares, which could lead to investors getting back less than they invested or a total loss of their investment.

5. Shareholders in the United States and other jurisdictions may not be able to participate in future equity offerings.

The Articles provide for pre-emption rights to be granted to shareholders in the Company, unless such rights are dis-applied by a shareholder resolution. However, securities laws of certain jurisdictions may restrict the Group's ability to allow participation by shareholders in future offerings. In particular, shareholders in the United States may not be entitled to exercise these rights, unless either the Shares and any other securities that are offered and sold are registered under the U.S. Securities Act, or the Shares and such other securities are offered pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. The Company cannot assure prospective investors that any exemption from such overseas securities law requirements would be available to enable U.S. or other shareholders to exercise their pre-emption rights or, if available, that the Company will utilise any such exemption.

6. The issuance of additional Shares in the Company in connection with future acquisitions, any share incentive or share option plan or otherwise may dilute all other shareholdings.

The Group may seek to raise financing to fund future acquisitions and other growth opportunities. The Group may, for these and other purposes, issue additional equity or convertible equity securities. The Group may also make awards of Shares under share-incentive or share-option plans in the future. As a result, existing holders of Shares may suffer dilution in their percentage ownership or the market price of the Shares may be adversely affected.

7. Non-U.K. shareholders may be subject to exchange rate risk.

The Shares are, and any dividends to be paid in respect of them will be, denominated in pounds sterling. An investment in Shares by an investor whose principal currency is not pounds sterling exposes the investor to foreign currency exchange rate risk. Any depreciation of pounds sterling in relation to such foreign currency will reduce the value of the investment in the Shares or any dividends in foreign currency terms.

8. Not all rights available to shareholders under U.S. law will be available to holders of the Shares.

Rights afforded to shareholders under English law differ in certain respects from the rights of shareholders in typical U.S. companies. The rights of holders of the Shares are governed by English law and the Articles. In particular, English law currently limits significantly the circumstances under which the shareholders of English companies may bring derivative actions. Under English law, in most cases, only the Company may be the proper plaintiff for the purposes of maintaining proceedings in respect of wrongful acts committed against it and, generally, neither an individual shareholder, nor any group of shareholders, has any right of action in such circumstances. In addition, English law does not afford appraisal rights to dissenting shareholders in the form typically available to shareholders in a U.S. company.

9. The Company is a holding company with substantially all of its operations conducted through its subsidiaries. Its ability to pay dividends on the Shares depends on its ability to obtain cash dividends and other payments or obtain loans from the Group's subsidiaries.

Following the Reorganisation, the Company will be a holding company with substantially all of its operations conducted through its subsidiaries. Its ability to pay dividends on the Shares depends on its ability to obtain cash dividends and other cash payments or obtain loans from the Group's subsidiaries. The Company conducts substantially all of its operations through subsidiaries that generate substantially all of the Group's operating income and cash flow. Because the Company has no direct operations or significant assets other than the share capital of its subsidiaries, it relies on those entities for cash flows to pay dividends, if any, on the Shares and, in the long-term, to pay other obligations at the holding company level that may arise from time to time. The ability of the Company's subsidiaries to make payments to the Company depends largely on their financial condition and ability to generate profits. In addition, because the Company's subsidiaries are separate and distinct legal entities, they will have no obligation to pay dividends or to lend or advance the Company funds and may be restricted from doing so by contract (including financing arrangements), other shareholders or the applicable laws and regulations of the countries in which they operate. There can be no assurances that the Group's subsidiaries will generate sufficient profits and cash flows to pay dividends or lend or advance to the Company sufficient funds to enable it to meet its obligations, including obligations to pay interest and other expenses, and to pay dividends, if any, on the Shares. Consequently, holders of the Shares may not receive any return on their investment unless they sell their Shares for a price greater than that which they paid for them, which may not be possible. These risks could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

PART 2 PRESENTATION OF FINANCIAL AND OTHER INFORMATION

General

Investors should only rely on the information in this Prospectus. No person has been authorised to give any information or to make any representations in connection with the Global Offer, other than those contained in this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorised by or on behalf of the Company, the Directors, the Selling Shareholders, or the Banks. No representation or warranty, express or implied, is made by any of the Banks or any selling agent as to the accuracy or completeness of such information, and nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation by any of the Banks or any selling agent as to the past, present or future. Without prejudice to any obligation of the Company to publish a supplementary prospectus pursuant to the FSMA, neither the delivery of this Prospectus nor any subscription or sale of Shares pursuant to the Global Offer shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Group since the date of this Prospectus or that the information contained herein is correct as of any time subsequent to its date.

The Company will update the information provided in this Prospectus by means of a supplement hereto if a significant new factor that may affect the evaluation by prospective investors of the Global Offer occurs after the publication of the Prospectus or if this Prospectus contains any mistake or substantial inaccuracy. The Prospectus and any supplement thereto will be subject to approval by the FCA and will be made public in accordance with the Prospectus Rules. If a supplement to the Prospectus is published prior to Admission, investors shall have the right to withdraw their applications for Shares made prior to the publication of the supplement. Such withdrawal must be made within the time limits and in the manner set out in any such supplement (which shall not be shorter than two clear business days after publication of the supplement).

None of the Company, the Directors, the Selling Shareholders or any of the Banks or any of their representatives is making any representation to any offeree, subscriber or purchaser of the Shares regarding the legality of an investment by such offeree, subscriber or purchaser under the laws applicable to such offeree, subscriber or purchaser.

The contents of this Prospectus are not to be construed as legal, business or tax advice and related aspects of a purchase of the Shares. Each prospective investor should consult his or her own lawyer, financial adviser or tax adviser for legal, financial or tax advice. In making an investment decision, each investor must rely on their own examination, analysis and enquiry of the Company and the terms of the Global Offer, including the merits and risks involved.

This Prospectus is not intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by any of the Company, the Directors, the Selling Shareholders, any of the Banks or any of their representatives that any recipient of this Prospectus should subscribe for or purchase the Shares. Prior to making any decision as to whether to subscribe for or purchase the Shares, prospective investors should read this Prospectus. Investors should ensure that they read the whole of this Prospectus carefully and not just rely on key information or information summarised within it. In making an investment decision, prospective investors must rely upon their own examination, analysis and enquiry of the Company and the terms of this Prospectus, including the risks involved.

Investors will be deemed to have acknowledged that: (i) they have not relied on any of the Banks or any person affiliated with any of them in connection with any investigation of the accuracy of any information contained in this Prospectus or their investment decision; and (ii) they have relied on the information contained in this Prospectus, and no person has been authorised to give any information or to make any representation concerning the Group or the Shares (other than as contained in this Prospectus) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company, the Directors, the Selling Shareholders or any of the Banks.

In connection with the Global Offer of the Shares, each of the Underwriters and any of their respective affiliates, may take up a portion of the Shares in the Global Offer as a principal position and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Shares and other securities of the Company or related investments in connection with the Global Offer or otherwise. Accordingly, references in this Prospectus to the Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be

read as including any or issue, offer, subscription, acquisition, dealing or placing to any of the Underwriters and any of their affiliates acting in that capacity as investors for their own accounts. None of the Underwriters intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

Over-allotment and stabilisation

In connection with the Global Offer, Morgan Stanley & Co. International plc, as Stabilising Manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Shares or effect other stabilisation transactions with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings of the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Shares above the Offer Price. Except as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Global Offer.

In connection with the Global Offer, the Stabilising Manager may, for stabilisation purposes, over-allot Shares up to a maximum of 15% of the total number of Shares comprised in the Global Offer. For the purposes of allowing the Stabilising Manager to cover short positions resulting from any such overallotments and/or from sales of Shares effected by it during the stabilising period, it is expected that the Over-allotment Shareholders will grant the Stabilising Manager the Over-allotment Option, pursuant to which the Stabilising Manager may purchase or procure purchasers for additional Shares up to a maximum of 15% of the total number of Shares comprised in the Global Offer (the "Over-allotment Shares") at the Offer Price. The Over-allotment Option will be exercisable in whole or in part, upon notice by the Stabilising Manager, at any time on or before the 30th calendar day after the commencement of conditional dealings of the Shares on the London Stock Exchange. Any Over-allotment Shares made available pursuant to the Over-allotment Option will rank pari passu in all respects with the Shares, including for all dividends and other distributions declared, made or paid on the Shares, will be purchased on the same terms and conditions as the Shares being issued or sold in the Global Offer and will form a single class for all purposes with the other Shares.

Presentation of financial information

The financial information in this Prospectus has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"). The significant IFRS accounting policies applied in the financial information of the Group are applied consistently in the financial information in this Prospectus.

Financial information

The Company's financial year runs from 1 January to 31 December. The financial information for the Group and AVG included in Part 11— "Historical Financial Information" is covered by the accountant's reports included in Section A and Section C, which were prepared in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom.

None of the financial information used in this Prospectus has been audited in accordance with auditing standards generally accepted in the United States of America ("U.S. GAAS") or auditing standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"). In addition, there could be differences between the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom and U.S. GAAS or the auditing standards of the PCAOB. Potential investors should consult their own professional advisers to gain an understanding of the "Historical Financial Information" in Part 11— "Historical Financial Information" and the implications of differences between the auditing standards noted herein.

Non-IFRS financial information

This Prospectus contains certain financial measures that are not defined or recognised under IFRS, including Adjusted Billings, Adjusted Billings by Segment, Adjusted Revenue, Adjusted Revenue by Segment, Adjusted EBITDA, Adjusted Cash EBITDA, Adjusted Net Income and Unlevered Free Cash Flow, each as defined below. These non-IFRS financial measures and other metrics are unaudited and are not measures recognised under IFRS or any other internationally accepted accounting principles, and prospective investors should not consider such measures as an alternative to the IFRS measures included in the Group's historical financial information. The non-IFRS financial measures and other metrics, each as defined herein, may not be comparable to similarly titled measures presented by other companies as there are no generally accepted principles governing the calculation of these measures and the criteria upon which these measures are based can vary from company to company. Even though the non-IFRS financial measures and other metrics are used by management to assess the Group's financial results and these types of measures are commonly used by investors, they have important limitations as analytical tools, and investors should not consider them in isolation or as substitutes for analysis of the Group's position or results as reported under IFRS. The Group believes that each of these measures provides useful information with respect to the performance of the Group's business and operations.

For further description of these non-IFRS financial measures, see Part 9 "Operating and Financial Review—Key Performance Indicators ("KPIs")".

Unaudited financial measures and other metrics in relation to the Group have been derived from (i) management accounts for the relevant accounting periods presented; (ii) internal financial reporting systems supporting the preparation of the Group's historical financial information contained in Part 11— "Historical Financial Information"; and (iii) the Group's other business operating systems and records. Management accounts are prepared using information derived from accounting records used in the preparation of the Group's historical financial information contained in Part 11— "Historical Financial Information" but may also include certain other assumptions and analyses.

Adjusted Billings

Billings represents the full value of products and services, the majority of which are delivered under subscription agreements and include sales to new customers plus renewals and additional sales to existing customers ("Billings"). Under the subscription model, customers pay the Group for the entire amount of the subscription in cash up front upon initial delivery of the applicable products. Although the cash is paid up front, under IFRS, subscription revenue is deferred and recognised ratably over the life of the subscription agreement, whereas non-subscription revenue is typically recognised up front. Adjusted Billings ("Adjusted Billings") is comprised of the Group's Billings (including the Billings of Piriform from the date of its acquisition by the Group on 18 July 2017) as adjusted for the Gross-Up Adjustment (as defined below) and adding Piriform's Billings for the period prior to its acquisition, from 1 January 2017 to 17 July 2017 ("Piriform Pre-Acquisition Billings").

Eighty-four percent of Adjusted Billings for the year ended 31 December 2017 were comprised of Billings from subscription agreements of between one and three years (and 88% of Adjusted Billings for the year ended 31 December 2017, excluding Discontinued Business), the majority of which lasted approximately one year.

The "Gross-Up Adjustment" refers to the estimated impact of the additional amount of 2015 and 2016 revenue and expenses and their deferral that would have been recognised by Avast had the contractual arrangements with certain customers qualified to have been recognised on a gross (of commissions to e-commerce shopping cart and online payment processes service providers) rather than a net basis prior to 2017 (AVG had historically recognised Billings and revenues on a gross basis, whereas Avast recognised them on a net basis). From 2017, the revenue and expenditure for these arrangements have been recognised by the Group on a gross basis.

Adjusted Billings

	Year ended 31 December				Three months ended 31 December
	AVG			Group		AVG
	2015	2016	2015	2016	2017	2016
		(in \$ millions)			(in \$ millions) (unaudited)
Revenue	425.8	418.6	251.0	340.7	652.9	49.4
Net deferral of revenue	(1.8)	(12.7)	36.2	76.8	147.5	54.6
Billings	424.0	405.9	287.2	417.5	800.4	104.0
Gross-Up Adjustment	—	—	27.8	26.0	—	—
Piriform Pre-Acquisition Billings	—	—	—	—	10.9	—
Adjusted Billings	424.0	405.9	315.0	443.5	811.3	104.0

The following is a reconciliation of the Group's Billings to the Group's Adjusted Billings by segment for the years ended 31 December 2015, 2016 and 2017, and the reconciliation of AVG's Billings to Adjusted Billings by segment for the years ended 31 December 2015 and 2016 and the three months ended 31 December 2016, is as follows:

	Year ended 31 December				Three months ended 31 December
		AVG	Group			AVG
	2015	2016	2015	2016	2017	2016
Billings			(in \$ millions)			(in \$ millions) (unaudited)
Consumer	360.9	352.5	275.6	393.9	736.3	91.3
Direct	278.8	286.3	210.0	317.4	622.5	75.8
Indirect	5.5	11.3	40.8	53.5	75.3	4.3
Discontinued Business	76.6	54.9	24.8	23.0	38.5	11.2
SMB	63.1	53.4	11.6	23.6	64.1	12.7
Total Billings	424.0	405.9	287.2	417.5	800.4	104.0
Gross-Up Adjustment
Consumer	—	—	27.3	25.5	—	—
Direct	—	—	27.3	25.5	—	—
Indirect	—	—	—	—	—	—
Discontinued Business	—	—	—	—	—	—
SMB	—	—	0.5	0.5	—	—
Total Gross-Up Adjustment	—	—	27.8	26.0	—	—
Piriform Pre-Acquisition Billings
Consumer	—	—	—	—	10.1	—
Direct	—	—	—	—	6.1	—
Indirect	—	—	—	—	4.0	—
Discontinued Business	—	—	—	—	—	—
SMB Total Piriform Pre-Acquisition Billings	— —	— —	— —	— —	0.8 10.9	— —
Adjusted Billings by Segment
Consumer	360.9	352.5	302.9	419.4	746.4	91.3
Direct	278.8	286.3	237.3	342.9	628.6	75.8
Indirect	5.5	11.3	40.8	53.5	79.3	4.3
Discontinued Business	76.6	54.9	24.8	23.0	38.5	11.2
SMB	63.1	53.4	12.1	24.1	64.9	12.7
Total Adjusted Billings	424.0	405.9	315.0	443.5	811.3	104.0
Total Adjusted Billings (excl. Discontinued
Business)	347.4	351.0	290.2	420.5	772.8	92.8

Adjusted Revenue

Adjusted Revenue represents the Group's reported revenue (including Piriform from the date of its acquisition by the Group on 18 July 2017) adjusted for the Deferred Revenue Haircut Reversal (as defined below) ("Underlying Revenue"), as further adjusted for the Gross-Up Adjustment (as defined above), and the Piriform Revenue Adjustments (as defined below).

Under IFRS 3, Business Combinations, an acquirer must recognise assets acquired and liabilities assumed at fair value as of the acquisition date. The process of determining the fair value of deferred revenues acquired often results in a significant downward adjustment to the target's book value of deferred revenues. The reversal of the downward adjustment to the book value of deferred revenues of companies the Group has acquired during the periods under review is referred to as the "Deferred Revenue Haircut Reversal".

"Piriform Revenue Adjustment" is defined as the additional revenue that the Group would have recognised in 2017 had the Piriform business always been a part of the Group, following consistent accounting policies and assuming there would not have been any business combination deferred revenue haircut recorded under IFRS.

This differs to the pro forma revenue referred to in the business combination footnote in the Group Historical Financial Information, which discloses the additional revenue that would have been recorded had the business combination occurred on 1 January 2017 (which would exclude the impact of revenue recognised for Billings made prior to 1 January 2017).

The reconciliation of the Group's reported revenue to Adjusted Revenue for the years ended 31 December 2015, 2016 and 2017, and the reconciliation of AVG's reported revenue to Adjusted Revenue for the years ended 31 December 2015 and 2016 and the three months ended 31 December 2016, is as follows:

Adjusted Revenue

			Year ended 31 December			Three months ended 31 December
		AVG Group				AVG
	2015	2016	2015 2016 2017		2016
			(in \$ millions)			(in \$ millions) (unaudited)
Revenue	425.8	418.6	251.0	340.7	652.9	49.4
Deferred Revenue Haircut Reversal	—	—	17.9	56.7	98.0	54.2
Underlying Revenue	425.8	418.6	268.9	397.4	750.9	103.6
Gross-Up Adjustment	—	—	25.8	24.1	12.9	—
Piriform Revenue Adjustment	—	—	—	—	15.6	—
Adjusted Revenue	425.8	418.6	294.7	421.5	779.5	103.6

The reconciliations of the Group's reported revenue by segment to Adjusted Revenue by segment for the years ended 31 December 2015, 2016 and 2017, and the reconciliation of AVG's reported revenue by segment to Adjusted Revenue by segment for the years ended 31 December 2015 and 2016 and the three months ended 31 December 2016, is as follows:

			Year ended 31 December			Three months ended 31 December
		AVG		Group		AVG
	2015	2016	2015	2016	2017	2016
			(in \$ millions)			(in \$ millions) (unaudited)
Revenue
Consumer	361.9	358.1	240.7	324.2	604.8	43.9
Direct	279.8	291.9	175.3	249.8	491.1	28.4
Indirect	5.5	11.3	40.6	51.4	75.2	4.3
Discontinued Business	76.6	54.9	24.8	23.0	38.5	11.2
SMB	63.9	60.5	10.3	16.5	48.1	5.5
Total Revenue	425.8	418.6	251.0	340.7	652.9	49.4
Deferred Revenue Haircut Reversal
Consumer	—	—	14.5	45.8	79.3	44.6
Direct	—	—	14.5	45.8	79.3	44.6
Indirect	—	—	—	—	—	—
Discontinued Business	—	—	—	—	—	—
SMB	—	—	3.4	10.9	18.7	9.6
Total Deferred Revenue Haircut Reversal	—	—	17.9	56.7	98.0	54.2

Underlying Revenue
Consumer	361.9	358.1	255.2	370.0	684.1	88.5
Direct	279.8	291.9	189.8	295.6	570.4	73.0
Indirect	5.5	11.3	40.6	51.4	75.2	4.3
Discontinued Business	76.6	54.9	24.8	23.0	38.5	11.2
SMB Total Underlying Revenue	63.9 425.8	60.5 418.6	13.7 268.9	27.4 397.4	66.8 750.9	15.1 103.6
Gross-Up Adjustment
Consumer	—	—	25.2	23.6	12.6	—
Direct	—	—	25.2	23.6	12.6	—
Indirect	—	—	—	—	—	—
Discontinued Business	—	—	—	—	—	—
SMB	—	—	0.6	0.5	0.3	—
Total Gross-Up Adjustment	—	—	25.8	24.1	12.9	—

Piriform Revenue Adjustment
Consumer	—	—	—	—	14.4	—
Direct	—	—	—	—	10.4	—
Indirect	—	—	—	—	4.0	—
Discontinued Business	—	—	—	—	—	—
SMB	—	—	—	—	1.2	—
Total Piriform Revenue Adjustment	—	—	—	—	15.6	—
Adjusted Revenue by Segment
Consumer	361.9	358.1	280.4	393.6	711.1	88.5
Direct	279.8	291.9	215.0	319.2	593.4	73.0
Indirect	5.5	11.3	40.6	51.4	79.2	4.3
Discontinued Business	76.6	54.9	24.8	23.0	38.5	11.2
SMB	63.9	60.5	14.3	27.9	68.3	15.1
Total Adjusted Revenue	425.8	418.6	294.7	421.5	779.5	103.6

Total Adjusted Revenue (excl. Discontinued Business)	349.2	363.7	269.9	398.5	741.0	92.4

Adjusted EBITDA

Adjusted earnings before interest, taxation, depreciation and amortisation ("Adjusted EBITDA") is defined as the Group's operating loss/profit before depreciation, amortisation of non-acquisition acquisition intangible assets, share-based payments, exceptional items, amortisation of acquisition intangible assets, capitalised research and development costs, the Deferred Revenue Haircut Reversal (as described above), and the COGS Deferral Adjustments (as described below). Piriform has been included from the date of its acquisition by the Group (18 July 2017). No adjustment has been made to reverse any Piriform Deferred Revenue Haircut that would have been recognised had Piriform followed Avast's accounting policies pre-acquisition.

There was no deferred cost of goods sold ("COGS") balance consolidated by the Group in the acquisition balance sheet of AVG in 2016 and thus no subsequent expense was recorded as the revenue in respect of pre-acquisition date billings was recognised. The "COGS Deferral Adjustments" refers to an adjustment to reflect the recognition of deferred cost of goods sold expenses that would have been recorded in 2016 and 2017 in respect of pre-acquisition date AVG billings, had the AVG and the Group's businesses always been combined and had AVG always been deferring cost of goods sold.

The reconciliation of the Group's reported operating profit to Adjusted EBITDA for the years ended 31 December 2015, 2016 and 2017, and the reconciliation of AVG's reported operating profit to Adjusted EBITDA for the years ended 31 December 2015 and 2016 and the three months ended 31 December 2016, is as follows:

Adjusted EBITDA

			Year ended 31 December			Three months ended 31 December
	AVG			Group		AVG
	2015	2016	2015	2016	2017	2016
			(in \$ millions)			(in \$ millions) (unaudited)
Operating profit	77.3	(0.2)	99.6	31.9	124.3	(38.3)
Share-based payments(1)	15.3	14.8	6.1	2.7	7.7	—
Exceptional items(2)	9.0	86.9	0.8	69.8	34.8	27.6
Amortisation of acquisition intangible assets	31.0	30.1	59.2	79.4	132.9	—
Underlying Operating Profit	132.6	131.6	165.7	183.8	299.7	(10.7)
Deferred Revenue Haircut Reversal	—	—	17.9	56.7	98.0	54.2
COGS Deferral Adjustments	—	—	—	(5.1)	(7.8)	(5.1)
Depreciation	9.8	11.4	3.3	6.7	15.0	3.0
Capitalised research and development costs(3)	(3.9)	(5.3)	—	—	—	—
Amortisation of non-acquisition intangible assets	5.5	5.9	0.7	1.7	3.7	0.8
Adjusted EBITDA	144.0	143.6	187.6	243.8	408.6	42.2

(1) Refers to remuneration of employees in the form of share-based payment transactions whereby employees render services as consideration for equity instruments. The cost of equity-settled transactions is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled.
(2) Refers to material and non-recurring items of income and expense which Group believes should be separately disclosed to show the underlying business performance of the Group more accurately. Exceptional items include primarily costs related to AVG Acquisition, such as consultancy and professional fees, and integration such as severance payments, retention bonuses and office related costs. See Note 13 of the audited consolidated financial information for the periods indicated for additional information.
(3) The decision of whether to capitalise costs incurred in developing assets that will have a useful economic life exceeding one year is based on management's judgment of whether such developing assets' technological and economic feasibility are confirmed.

Adjusted Cash EBITDA

Cash earnings before interest, taxation, depreciation and amortisation ("Adjusted Cash EBITDA") is defined as Adjusted EBITDA plus the net deferral of revenue, the net change in deferred cost of goods sold and reversal of the COGS Deferral Adjustments. Piriform has been included from the date of its acquisition by the Group (18 July 2017).

The reconciliation of the Group's Adjusted EBITDA to Adjusted Cash EBITDA for the years ended 31 December 2015, 2016 and 2017, and the reconciliation of AVG's Adjusted EBITDA to Adjusted Cash EBITDA for the years ended 31 December 2015 and 2016 and the three months ended 31 December 2016, is as follows:

Adjusted Cash EBITDA

	Year ended 31 December					Three months ended 31 December
	AVG			Group		AVG
	2015	2016	2015	2016	2017	2016
			(in \$ millions)			(in \$ millions) (unaudited)
Adjusted EBITDA	144.0	143.6	187.6	243.8	408.6	42.2
Net deferral of revenue	(1.8)	(12.7)	18.4	20.1	49.5	0.4
Net change in deferred cost of goods sold	(5.5)	(1.6)	—	(6.6)	(20.6)	(6.3)
Reversal of COGS Deferral Adjustments	—	—	—	5.1	7.8	5.1
Adjusted Cash EBITDA	136.7	129.3	206.0	262.4	445.3	41.4

Adjusted Net Income

Adjusted Net Income represents net income plus the Deferred Revenue Haircut Reversal, share-based payments, exceptional items, amortisation of acquisition intangible assets, amortisation of capitalised research and development costs, unrealised foreign exchange gain/loss on EUR tranche of bank loan, tax impact on foreign exchange difference on intercompany loans, recognition of capitalised debt issuance costs as a result of early extinguishment of external loan, and the COGS Deferral Adjustments, less capitalised research and development costs and the tax impact of the foregoing adjusting items. Piriform has been included from the date of its acquisition by the Group (18 July 2017).

The reconciliation of the Group's reported net income to Adjusted Net Income for the years ended 31 December 2015, 2016 and 2017, and the reconciliation of AVG's reported net income to Adjusted Net Income for the years ended 31 December 2015 and 2016 and the three months ended 31 December 2016, is as follows:

Adjusted Net Income

			Year ended 31 December			Three months ended 31 December
	AVG			Group		AVG
	2015	2016	2015	2016	2017	2016
			(in \$ millions)			(in \$ millions) (unaudited)
Net income	49.2	(28.4)	71.5	24.6	(33.8)	(19.6)
Deferred Revenue Haircut Reversal	—	—	17.9	56.7	98.0	54.2
Share-based payments(1)	15.3	14.8	6.1	2.7	7.7	—
Exceptional items(2)	9.0	86.9	0.8	69.8	34.8	27.6
Amortisation of acquisition intangible assets	31.0	30.1	59.2	79.4	132.9	—
Amortisation of capitalised research and development
costs	1.2	2.0	—	—	—	—
Capitalised research and development costs(3)	(3.9)	(5.3)	—	—	—	—
Unrealised foreign exchange gain/loss on EUR tranche of
bank loan	—	—	—	(26.7)	63.0	—
Tax impact on foreign exchange difference on
intercompany loans	—	—	(10.0)	(8.6)	19.0	—
Recognition of capitalised debt issuance costs as a result of
early extinguishment of external loan(4)	—	8.5	—	—	—	—
COGS Deferral Adjustments	—	—	—	(5.1)	(7.8)	(5.1)
Tax impact on adjusting items	(14.9)	(30.0)	(15.0)	(33.3)	(69.7)	(16.5)
Adjusted Net Income	86.9	78.6	130.5	159.5	244.1	40.6

⁽¹⁾ Refers to remuneration of employees in the form of share-based payment transactions whereby employees render services as consideration for equity instruments. The cost of equity-settled transactions is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled.

(2) Refers to material and non-recurring items of income and expense which the Group believes should be separately disclosed to show the underlying business performance of the Group more accurately. See Note 13 of the audited consolidated financial information for the periods indicated for additional information.
(3) The decision of whether to capitalise costs incurred in developing assets that will have a useful economic life exceeding one year is based on management's judgment of whether such developing assets' technological and economic feasibility are confirmed.
(4) Relates to arrangement fees associated with the third-party loan entered into in 2014 which were capitalised and amortised over the term of the loan using the effective interest method. On 30 September 2016, the Company repaid the loan early as part of the AVG Acquisition and therefore recognised all remaining capitalised arrangement fees.

Unlevered Free Cash Flow

Unlevered Free Cash Flow represents Adjusted Cash EBITDA (as adjusted for exceptional items as per the definition of "Adjusted Cash EBITDA" above) less purchases of property, plant and equipment and intangibles, plus cash flows in relation to changes in working capital (excluding change in deferred revenue and change in deferred cost of goods sold as these were already included in Adjusted Cash EBITDA) and taxation. Changes in working capital and taxation are as per the cash flow statement on an unadjusted historical basis and unadjusted for exceptional items. Piriform has been included from the date of its acquisition by the Group (18 July 2017).

The reconciliation of the Group's Adjusted Cash EBITDA to Unlevered Free Cash Flow for the years ended 31 December 2015, 2016 and 2017, and the reconciliation of AVG's Adjusted Cash EBITDA to Unlevered Free Cash flow for the years ended 31 December 2015 and 2016 and the three months ended 31 December 2016, is as follows:

Unlevered Free Cash Flow

	Year ended 31 December					Three months ended 31 December
	AVG			Group		AVG
	2015	2016	2015 2016 2017				2016
	(in \$ millions)				(in \$ millions) (unaudited)
Adjusted Cash EBITDA	136.7	129.3	206.0	262.4	445.3	41.4
Capital expenditure	(14.6)	(18.8)	(12.2)	(9.2)	(15.9)	(4.3)
Change in working capital:
Change in trade and other receivables
(excluding change in deferred COGS)	(9.4)	3.5	(6.7)	8.9	(24.5)	1.0
Change in trade and other payables	4.3	(2.7)	6.4	10.8	(10.6)	3.2
Income tax paid	(6.1)	(2.2)	—	(21.0)	(54.8)	(0.4)
Unlevered Free Cash Flow(1)	110.9	109.1	193.5	251.9	339.5	40.9

⁽¹⁾ Ignores the Gross-Up Adjustment as impact is nil.

Currency presentation

Unless otherwise indicated, all references to "U.S. dollars", "USD", "\$" or "US\$" are to the lawful currency of the United States. The Company prepares its financial statements in U.S. dollars. All references in this Prospectus to "sterling", "pounds sterling", "GBP", "£", or "pence" are to the lawful currency of the United Kingdom.

The following tables set out, for the periods set forth below, the high, low, average and period-end Bloomberg Composite Rate expressed as U.S. dollar per £1.00. The Bloomberg Composite Rate is a "best market" calculation, in which, at any point in time, the composite bid rate is equal to the highest bid rate of all currently active, contributed, bank indications, and the composite ask rate is equal to the lowest ask rate offered by these same bank indications. The Bloomberg Composite Rate is a mid-value rate between the composite bid rate and the composite ask rate. The rates may differ from the actual rates used in the preparation of the combined historical financial information and other financial information appearing in this Prospectus.

The average rate for a year, a month, or for any shorter period, means the average of the final daily Bloomberg Composite Rates during that year, month, or shorter period, as the case may be.

Period (Year/Month)	Period end	Average	High	Low
		(GBP per \$1.00)
2015	0.6787	0.6545	0.6827	0.6298
2016	0.8101	0.7408	0.8224	0.6753
2017	0.7395	0.7768	0.8285	0.7362
January 2018	0.7050	0.7242	0.7407	0.7015
February 2018	0.7253	0.7161	0.7253	0.7028
March 2018	0.7125	0.7156	0.7280	0.7030

Source: Bloomberg

Roundings

Certain data in this Prospectus, including financial, statistical, and operating information has been rounded. As a result of the rounding, the totals of data presented in this Prospectus may vary slightly from the actual arithmetic totals of such data. Percentages in tables have been rounded and accordingly may not add up to 100%.

Market, economic and industry data

Unless the source is otherwise stated, the market, economic and industry data in this Prospectus constitute the Directors' estimates, using underlying data from independent third parties. The Company obtained market data and certain industry forecasts used in this Prospectus from internal surveys, reports and studies, where appropriate, as well as market research, publicly available information and industry publications, including publications and data compiled by the Boston Consulting Group.

The Company confirms that all such data contained in this Prospectus has been accurately reproduced and, so far as the Company is aware and able to ascertain, no facts have been omitted that would render the reproduced information inaccurate or misleading.

Service of process and enforcement of civil liabilities

The Company has been incorporated under English law. Service of process upon Directors and officers of the Company may be difficult to obtain within the United States. Furthermore, since most directly owned assets of the Company are outside the United States, any judgment obtained in the United States against it may not be collectible within the United States. There is doubt as to the enforceability of certain civil liabilities under U.S. federal securities laws in original actions in English courts, and, subject to certain exceptions and time limitations, English courts will treat a final and conclusive judgment of a U.S. court for a liquidated amount as a debt enforceable by fresh proceedings in the English courts.

No incorporation of website information

The contents of the Company's website do not form part of this Prospectus.

Definitions and glossary

Certain terms used in this Prospectus, including all capitalised terms and certain technical and other items, are defined and explained in Part 15—"Definitions and Glossary".

Information not contained in this Prospectus

No person has been authorised to give any information or make any representation other than those contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been so authorised. Neither the delivery of this Prospectus nor any subscription or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this Prospectus or that the information in this Prospectus is correct as of any time subsequent to the date hereof.

Information regarding forward-looking statements

This Prospectus includes forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Group's control and all of which are based on the Directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Prospectus and include statements regarding the intentions, beliefs or current expectations of the Directors or the Group concerning, among other things, the results of operations, financial condition, prospects, growth, strategies, and dividend policy of the Group and the industry in which it operates. In particular, the statements under the headings "Summary", "Risk Factors", "Business" and "Operating and Financial Review" regarding the Company's strategy and other future events or prospects are forward-looking statements.

These forward-looking statements and other statements contained in this Prospectus regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Such risks, uncertainties and other important factors include, but are not limited to, those listed under the heading "Risk Factors", including changes in economic conditions, the Group's competitive environment, the Group's ability to execute its strategies, including new product development and launches, as well as other factors within and beyond the Group's control that may affect its planned strategies and operational initiatives including actions taken by counterparties.

The following include some but not all of the factors that could cause actual results or events to differ materially from the anticipated results or events:

risks related to revenue concentration in the consumer desktop market;
actual, possible or perceived defects, disruptions or vulnerabilities in the Group's products, solutions and cloud infrastructure;
if computing platforms make it harder or impossible for users to install the Group's security solutions, or for the Group to communicate with or distribute products to its users, or for the Group to retrieve information that the Group believes it needs;
failure to maintain user engagement and continue to attract new users;
non-renewal of short-term contracts;
highly competitive environment;
if search engines, download sites or app stores change their rankings;
inability to successfully integrate recently acquired companies or any business it may acquire in the future;
operational challenges related to international scope;
failure to keep up with rapid changes in technologies and the evolution of malware and virus threats;
failure to comply with consumer laws and regulations;
failure to accurately measure the number and retention of users at any time;
inability to maintain and enhance its brands' reputations;
reliance on one e-commerce service provider;
fluctuations in currency exchange rates;
attraction and retention of specialised personnel;
risks related to its operation of VPN products;
failure to protect its intellectual property rights and proprietary information and prevent third parties from making unauthorised use of its products and technology;
claims of intellectual property infringement by third parties;
failure to sell products effectively through third party distributors and resellers;
increased user demands on technical support services;
evolving sanctions laws as well as governmental export controls;
the use of open source and third party software;
disruption of servers;
periodic litigation and other regulatory proceedings; and
changes in applicable tax rulings and taxation requirements.

Should one or more of these risks or uncertainties materialise or should any of the assumptions underlying the above or other factors prove to be incorrect, the Group's actual future business, results of operations, financial condition, liquidity, performance, prospects, anticipated growth, strategies or opportunities could differ materially from those described herein as currently anticipated, believed, estimated or expected.

Investors or potential investors should not place undue reliance on the forward looking statements in this Prospectus. Investors should read the sections of this Prospectus titled "Risk Factors", "Industry Overview", "Business" and "Operating and Financial Review" for a more complete discussion of the factors that could affect the Group's future performance and the markets in which it operates. In light of the possible changes to the Group's beliefs, assumptions and expectations, the forward looking events described in this Prospectus may not occur. Additional risks currently not known to the Group or that the Group has not considered material as of the date of this Prospectus could also cause the forward looking events discussed in this Prospectus not to occur.

Forward looking statements involve inherent risks and uncertainties and speak only as of the date they are made. Such forward-looking statements contained in this Prospectus speak only as of the date of this Prospectus. The Company, the Directors, the Selling Shareholders and the Banks expressly disclaim any obligation or undertaking to update these forward-looking statements contained in the Prospectus to reflect any change in their expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules, or the DGTRs.

PART 3 DIRECTORS, SECRETARY, REGISTERED AND HEAD OFFICE AND ADVISERS

Directors ..................................... John Schwarz (Independent Chairman) Vincent Steckler (Chief Executive Officer) Ondrej Vlcek (Executive Vice President, General Manager of Consumer, Chief Technology Officer) Philip Marshall (Chief Financial Officer) Pavel Baudisˇ (Non-Executive Director) Eduard Kucˇera (Non-Executive Director) Lorne Somerville (Non-Executive Director) Warren Finegold (Senior Independent Non-Executive Director) Ulf Claesson (Independent Non-Executive Director) Erwin Gunst (Independent Non-Executive Director) Company Secretary ............................ Alan Rassaby Registered and head office of the Company . . . . . . . . 110 High Holborn London WC1V 6JS United Kingdom Joint Global Co-ordinators, Joint Bookrunners and Joint Sponsors .............................. Morgan Stanley & Co. International plc 25 Cabot Square Canary Wharf London E14 4QA United Kingdom 1585 Broadway New York, New York 10036 United States UBS Limited 5 Broadgate London EC2M 2QS United Kingdom 1285 Avenue of the Americas New York, New York 10019 United States Joint Bookrunners ............................. Barclays Bank PLC 5 The North Colonnade London E14 4BB United Kingdom Merrill Lynch International 2 King Edward Street London EC1A 1HQ United Kingdom Credit Suisse Securities (Europe) Limited One Cabot Square London E14 4QJ

United Kingdom

Jefferies International Limited

Vintners Place

68 Upper Thames Street London EC4V 3BJ United Kingdom

Co-Lead Manager ............................. KeyBanc Capital Markets Inc.

127 Public Square Cleveland, Ohio 44114 United States of America

Financial Adviser .............................. NM Rothschild & Sons Limited

New Court St. Swithin's Lane London EC4N 8AL United Kingdom

English and U.S. legal advisers to the Company ..... White & Case LLP

5 Old Broad Street London EC2N 1DW United Kingdom

English and U.S. legal advisers to the Joint Global

Co-ordinators, Joint Bookrunners, Sponsor and Co-Lead Manager ........................... Latham & Watkins (London) LLP

99 Bishopsgate London EC2M 3XF United Kingdom

Reporting Accountants and Auditors ............. Ernst & Young LLP

1 More London Place London, SE1 2AF United Kingdom

Registrars .................................... Equiniti Limited

Aspect House Spencer Road

Lancing Business Park West Sussex BN99 6DA

United Kingdom

PART 4 EXPECTED TIMETABLE OF PRINCIPAL EVENTS AND OFFER STATISTICS

Expected timetable of principal events

Event	Time and Date
Announcement of Offer Price and allocation	7.00 a.m. on 10 May 2018
Publication of Prospectus	10 May 2018
Commencement of conditional dealings on the London Stock
Exchange	8.00 a.m. on 10 May 2018
Admission and commencement of unconditional dealings in the
Shares on the London Stock Exchange	8.00 a.m. on 15 May 2018
Crediting of Shares to CREST accounts	15 May 2018
Despatch of definitive share certificates (where applicable)	On or before 30 May 2018

It should be noted that, if Admission does not occur, all conditional dealings will be of no effect and any such dealings will be at the sole risk of the parties concerned. Temporary documents of title will not be issued.

All times are London times. Each of the times and dates in the above timetable is subject to change without further notice.

Global Offer statistics(1)

Offer Price (per Share)	250 pence
Number of Shares being offered in the Global Offer(2)	240,792,902
—New Shares	58,977,478
—Existing Shares	181,815,424
Percentage of the issued Share capital being offered in the Global Offer(2)	25.3%
Number of Existing Shares subject to the Over-allotment Option(3)	36,118,935
Number of Shares in issue immediately following the Global Offer(4)	952,639,185
Market capitalisation of the Company on Admission at the Offer Price(5)	£2,381.6 million
Estimated net proceeds of the Global Offer receivable by the Company(6)	£125.3 million
Estimated net proceeds of the Global Offer receivable by the Selling Shareholders(2)(7)	£445.8 million

Notes:

(1) Assumes all of the steps set out in paragraph 2 of Part 14—"Additional Information—Reorganisation" are completed in full. To the extent that these steps are not completed in full, the Global Offer will not proceed and Admission will not be sought.
(2) Does not include any Over-allotment Shares that may be sold pursuant to the Over-allotment Option.
(3) The maximum number of Shares subject to the Over-allotment Option is 15% of the total number of Shares being offered in the Global Offer.
(4) On Admission, options under the Share Option Plans will be outstanding over a total of 82,242,591 Shares, of which 34,317,475 Shares will relate to vested options and 47,925,116 Shares will related to unvested options. All of the 34,317,475 Shares related to vested options have an exercise price below the IPO price ("in the money"). Of the 47,925,116 Shares related to unvested options, 36,969,335 Shares relate to options with an exercise price below the IPO price and 10,955,781 Shares relate to options with an exercise price at or above the IPO price ("out of the money"). It is anticipated that, on Admission, the average weighted exercise price payable in relation to a vested Share under option will be 55 pence; the average weighted exercise payable related to a unvested Share under option will be (i) 110 pence for those unvested Shares under option which are in the money, and (ii) 266 pence for those unvested Shares under option which are out of the money.
(5) The market capitalisation of the Company at any given time will depend on the market price of the Shares at that time. There can be no assurance that the market price of a Share will equal or exceed the Offer Price.
(6) The estimated net proceeds receivable by the Company are stated after deduction of the estimated base underwriting commissions and other fees and expenses of the Global Offer payable by the Company, which are currently expected to be approximately £22.1 million. The Company will not receive any of the net proceeds from the sale of the Existing Shares in the Global Offer by the Selling Shareholders or the sale of Shares pursuant to the Over-allotment Option.
(7) The estimated net proceeds receivable by the Selling Shareholders are stated after deduction of the estimated base underwriting commissions and other fees and expenses of the Global Offer (excluding any stamp duties) payable by the Selling Shareholders, which are currently expected to be approximately £8.8 million.

PART 5 INDUSTRY OVERVIEW

Overview of the Group's addressable market

The Group offers products directly to consumers and small and medium sized businesses ("SMB") in several markets encompassing cybersecurity, device computing performance and data privacy. The Group also generates revenue indirectly through the analytics, affiliate publishing and web browsing markets. Despite operating in several varied markets, the core of the Group's business is its global user base. The Group has achieved significant scale and success by developing products for hundreds of millions of consumers who have recognised the growing need for solutions that enable them to live their online lives safely and securely.

As increasingly larger segments of consumers' lives become digital, fear of financial losses to hackers has risen. The primary attack vectors fuelling these fears include ransomware, identity theft and socially engineered malware. Ransomware enables hackers to extort consumers and businesses by first encrypting all of the data at the centre of consumers' digital lives and then demanding monetary compensation to prevent the permanent deletion of that data. Identity theft involves stealing key personal information, often online or in a digital form, to gain benefits, financial or otherwise. Socially engineered malware disguises malware inside seemingly innocuous links, email attachments and images to covertly collect consumer information. As a result, consumers reported worrying approximately twice as often about digital crimes such as identity theft and online financial hacking compared to physical crimes such as car theft, home burglary and terrorism (source: Gallup —Gallup Poll Social Series: Crime; October 2017).

2017 Gallup Poll—How often do you, yourself, worry about the following things? (% frequently or occasionally)

Source: Gallup–American's Greatest Fears

Furthermore, the scale and magnitude of broader cybercrime has increased. According to Symantec, 53% of consumers have experienced a cybercrime or know someone who has, and the average affected consumer spends approximately 24 hours of total time recovering from a cybercrime. This reduction in consumers' sense of safety has culminated in 51% of consumers believing it has become more difficult to stay secure online over the last five years (source: Norton Cyber Security Insights Report 2016). In total, 978 million consumers were impacted by a cybercrime in 2017, generating \$172 billion in losses to cybercrime during the same period (source: Norton Cyber Security Insights Report 2017).

desktop & mobile antivirus ("AV"), VPN, PC utilities, other consumer endpoint products and protection products for home-centric IoT devices. The Consumer Indirect segment revenue projections have been based on the market for paid distribution of consumer software, the non-network half of the e-commerce affiliate publishing market, the search distribution market represented by third-party browsers, the market for advertising within applications and a combination of the clickstream analytics and specialised analytics markets. The SMB segment revenue projections include the global SMB endpoint spend and the total SMB network security spend attributable to cloud-based. Software-as-a-Service ("SaaS") products.

Total Addressable Market by Business Segment

Note: in billions

Source: Company market study

Consumer Direct

The Consumer Direct market consists broadly of the consumer security and smart home markets which include the AV, utilities, passwords, customer care, virtual private network ("VPN") services and smart home markets. The Group believes that the total Consumer Direct market is projected to grow at a 7.4% CAGR from \$5.9 billion in 2017 to \$7.8 billion in 2021 (source: Company market study).

Consumer Direct Addressable Market by Sub-segment

Note: in billions

Source: Company market study

Key Consumer Direct Growth Drivers

Expanding attack surface driven by rapid device growth—Security vendors face significant challenges in protecting devices as the variety and number of consumer devices rapidly expand. Smartphones, tablets, and IoT devices have greater capacity to create, store, access and share data resulting in a significantly larger number of attack vectors available for exploitation. With greater connections between devices, the number of vulnerabilities and avenues of attack increase dramatically. IoT device growth especially necessitates more sophisticated protection to defend an increasing number of new connected devices in consumers' homes. New smart home products will require home network protection capabilities to defend the most weakly secured hardware.
Increasing hacker sophistication and number of data breaches—Hackers have industrialised with highly developed research and development, business operations and money laundering infrastructure. This professionalisation of hacking enables teams to design more sophisticated attacks that utilise leading technology, tactics, techniques and procedures. Device makers and security providers must develop

solutions to meet these rising and dynamic challenges. The global scale and variety of victims of the 2017 WannaCry ransomware attack exemplifies the current capability of highly developed cybercriminals to build mass attacks capable of disrupting broad based infrastructure.

Users prefer freemium distribution followed by upsell—Anti-virus distribution models have also changed as users move from paid-only products to freemium vendors with 75% of AV users now using a freemium brand in 2017, up from just 19% in 2005 (source: Company market study). Given the proliferation of the free model, vendors have increasingly relied on premium features and capabilities to up-sell users to paid products.
Increasing connected time and applications will increase desire for privacy products—As connected devices, and online applications grow, users are spending more time online. Users are increasingly mobile, and thus at a higher risk of connecting to unsecured public Wi-Fi connections. VPN solutions address the need to secure personally identifiable information over unsecured networks.
Consumer confidence in corporate data governance falling—Several large corporate hacks exposed hundreds of millions of highly sensitive consumer records to hackers in 2017. As a result, consumer faith in corporate security dwindled in 2017 as 68% of UK and US consumers no longer trust corporations to handle their personal information safely. Data privacy has become a top concern for many consumers as 63% believe they bear responsibility for protecting their own data creating opportunity for data privacy solutions to cater to this growing consumer fear (source: Gigya 2017 State of Consumer Privacy Trust).
Users require PC optimisation tools—Given the size and scale of applications and data running on personal computers, users understand how regular maintenance and clean up tasks can improve system performance significantly. As a result, users will demand maintenance of the performance of their PC thorough optimisation tools. Traditional users are also now beginning to utilise higher levels of system processing power and therefore will continue to drive utilisation of PC optimisation tools.

Consumer security

The Consumer security market encompasses four key product categories: next-generation ("next-gen") antivirus, utilities, password management, and VPN services. Next-gen antivirus and mobile security utilise a variety of pattern recognition, threat detection and device monitoring methodologies to protect computing devices. Utilities and password management allow more advanced users to optimise their device's speed and storage usage as well as manage their various passwords across devices. VPN services protect user privacy by encrypting user data and network traffic before sending out information through a public connection. The Group believes the consumer security market achieved total revenue of \$5.5 billion in 2017 and will remain stable through 2021.

Next-gen antivirus

Next-gen antivirus products for PC and mobile devices protect against malicious programs such as malware and ransomware that attempt to steal, destroy or alter users' information. PC AV solutions block viruses, provide firewalls, block spam, prevent webcam spying and more for desktops, laptops (notebooks) and premium ultramobile devices. Additionally, mobile AV solutions enable users to safely connect to Wi-Fi networks, browse securely online and remove malicious messages for mobile operating systems.

Growth in device shipments, install base totals, and in consumer preference for freemium solutions drives growth opportunities for AV providers. PC shipments will stay flat between 2017 and 2021, while the total protected PC install base will decline slightly over the same period (source: Company market study).

Growth in mobile device shipments and total install base stems from the continued penetration of smartphones globally. Developing countries will see significant growth in mobile install base, benefiting vendors with a broad geographical user base.

Utilities & Passwords

Utilities optimise hard drive space and decrease device start-up times to improve overall performance. Password management tools enable users to securely save their passwords all in one place allowing for ease of access and safekeeping. Fragmentation in the utilities market divides standalone products provided by independent brands and AV suites' bundled solutions. Like utilities, the password management market is divided between independent brands and bundled solutions associated with AV providers. AV providers' ability to cross-sell password solutions lends a significant advantage to the AV providers with the security expertise to build password vaults that hackers cannot reach.

VPN

Virtual private network services utilise a network of servers to securely access private information over the public internet without sharing personal information over a connection. VPN providers must maintain a network of servers that user information can move through before eventually moving to its final location. Thus, the technology requires significant data centre operations to maintain servers across continents.

Market consolidation and efforts to monetise a mostly freemium market signify substantial opportunities for vendors in the VPN market. Over 150 independent brands earn 82% of revenues, but consolidation has begun as the top participants in the market secure competitive advantages through inexpensive, scaled servers (source: Company market study). As maintaining a wide geographic range of servers is critical to VPN services, economies of scale play a significant role in shaping the market.

Smart Home

Smart Home includes solutions that protect the numerous devices connected to the internet, including kitchen appliances, baby monitors, smart locks and more. Both hardware and software solutions are available to protect users from attacks on their connected home devices. Given the variety of potential Smart Home devices, the market focuses on the network's safety and possible vectors of attack created by each device.

The exponential growth of Smart Home devices and the growing awareness of risks associated with IoT devices creates an opportunity for Smart Home solutions. The number of smart homes is expected to grow from 7 million in 2017 to 50 million in 2021, creating a significant new customer base (source: Company market study). Consumer awareness of IoT security risks is also growing. Today only 8% of consumers perceive IoT security to be a risk but 54% expect IoT to represent a much larger risk in the future (source: Company market study). Recent major hacks include the Mirai botnet attack which scanned specifically for IoT devices and took over hundreds of thousands of devices and shut off major sites like Twitter, Netflix and Airbnb. This growing awareness of hacks creates a significant opportunity to sell into the expanding customer base. In addition, market fragmentation between hardware and software providers has created an opportunity for a software vendor tightly integrated into a significant number of hardware providers to capture market share. As a result of these factors, the Group believes the Smart Home market achieved total revenue of \$400 million in 2017 and is expected to achieve total revenue of \$2.3 billion by 2021, representing a CAGR of 54.9% (source: Company market study).

Smart Home Devices are Ripe for Hacking

Total Consumer Direct Addressable Market

The Consumer Direct category includes the PC AV, smart home protection, family safety, device clean-up, password management, customer care, and VPN services markets. The commissioned market study calculated the total Consumer Direct market as growing at 7.4% CAGR from \$5.9 billion in 2017 to \$7.8 billion in 2021 (source: Company market study).

Consumer Indirect

The Consumer Indirect category consists of analytics, advertising, third party product distribution and secure browsing. The analytics market anonymises user data and develops insights into wider consumer behaviour

trends for advertisers and consumer brands. The advertising market provides content and referral links to users to connect them to e-commerce sites. Secure browsing tools help users to stay safe online and achieve better control of the sharing of their personal, geographic and device data.

The category is further driven by two forces: the development of consumer digital behaviour and the strength of the platform and analytics end markets: e-commerce and digital advertising. Broad consumer digital consumption is primarily driven by the increasing digitalisation of services and the addition of approximately one billion users to the internet. The strong demand in e-commerce and digital advertising for analytics solutions is expected to further drive the Consumer Indirect category (source: Company market study).

The Group believes the total Consumer Indirect market will grow at an 11.0% CAGR from 2017 to 2021, from \$6.9 billion in 2017 to \$10.4 billion in 2021. The Group further believes that the advertising and distribution market will grow at a 9.5% CAGR from \$4.6 billion in 2017 to \$6.6 billion in 2021, that the analytics market will grow at a 17.6% CAGR from \$1.5 billion in 2017 to \$2.8 billion in 2021 and that the Group's total achievable secure browsing market will grow at a 5.7% CAGR from \$0.8 billion in 2017 to \$1.0 billion in 2021 (source: Company market study).

Consumer Indirect Addressable Market by Sub-segment

Note: in billions.

Source: Company market study

Key Consumer Indirect Drivers

Several broad market trends are driving the wider Consumer Indirect industries' growth:

High customer acquisition costs drive demand for efficient software distribution—Customer acquisition costs rise quickly as a business scales forcing companies to invest additional resources to acquire each incremental customer. To reduce these costs, vendors leverage a variety of customer acquisition channels including third party distribution. Distributors are typically scaled platforms with broad reach that bundle other products with their more popular offerings and charge a fee to the third party vendor for each customer or download acquired. Consumer focused technology companies often have large user bases and less costly product distribution process creating demand from third party vendors to develop partnerships. As vendors aim to distribute their products as cost effectively as possible, successful distribution platforms with large user bases will see significant demand for partnerships.
Growing number of global e-commerce platforms need affiliate referrals from trusted sources to drive user traffic—Fuelled by the dramatic growth of the e-commerce market and its need for greater user traffic, the affiliate referral market will experience significant growth. The two primary vendor categories in the market, affiliate networks and publishers, aid e-commerce platforms by either publishing content (articles, coupons, etc.) that drive traffic to brands or working with an affiliate network to push the brand onto many publishers. A 15% CAGR in e-commerce market revenues from \$1.4 trillion in 2017 to \$2.3 trillion in 2021 underpins continued growth for affiliates (source: Company market study).
Providing accurate and meaningful insights into consumer online behaviour requires large consumer data sets—Advertisers have deployed an increasing amount of targeted advertising and brand awareness campaigns as the return on investment has proven greater than untargeted efforts. However, targeted campaigns require content-rich and accurate data to find audiences and match their interests effectively. Given the varied consumer base advertisers want to target, analytics providers need data sets with both significant geographic and demographic breadth as well as deep consumer behaviour insights.

• Demand for large consumer data sets growing—The underlying growth in the data licensing and market research industries, two of the largest buyers of consumer data sets, will drive significant growth in the analytics industry. Data collection should be with user consent, and sensitive Personally Identifiable Information ("PII") must be protected. The Group believes that anonymised data, such as that collected by the Group, will be increasing in demand. In addition, the percentage share of data licensing and market research spend dedicated to buying data sets is increasing, compounding the growth in the analytics market. The importance of online consumer behaviour trends to market research and broad consumer consumption data is also driving the market.

Advertising and Distribution

Affiliate publishers create content or provide value that pushes user traffic to their website or software application. Examples of affiliate publishers include coupon or cash back sites, price comparison websites, paid review or news sites, and social media. The publisher offers a referral link to an e-commerce site alongside their content and takes a small fee for driving traffic from their site to the e-commerce site. In addition to linking to e-commerce sites, the Group distributes third party software through its applications. For additional downloads made as a result of distribution programs, a third party software provider pays fees to the Group.

The underlying growth of e-commerce into a multi-trillion dollar industry fuels growth in the global affiliate market given the number of new platform and affiliate spend available. Often publishers partner with affiliate networks that have relationships with numerous e-commerce brands and provide dozens of referral links for publishers to serve to their users. While the affiliate network market consolidates around the top competitors, publishing remains fragmented with many competitors across a variety of publisher categories.

eCommerce Affiliate Ecosystem

Source: Company market study

Analytics

Three categories of markets make up the broader analytics market: clickstream data and analytics, data management platforms and analytic applications. Clickstream providers license large data sets and provide analytics tools to derive insights from the click-by-click activity of consumers online. Data management platforms integrate multiple sources of client data into a single platform to develop broad omni-channel analytics capabilities. Analytic applications providers develop niche analytical capabilities in areas like social media listening and predictive analytics to provide deeper consumer behaviour insights.

Within the analytics market, the Group focuses on the clickstream data and analytics and analytic applications subsectors through its analytics business, Jumpshot. The Group believes it is careful in its collection and use of user data: before the Group's data is shared with Jumpshot, it is anonymised and devoid of any PII. As a result, no user will see a third party product targeted uniquely for them from Jumpshot customers. Consumer brands and advertising agencies use clickstream data and analytics to understand user behaviour on a granular level and develop insights into how consumers interact with websites and applications. Analytic applications capabilities allow advertisers and brands to measure the efficacy of their targeted ad campaigns, gain real-time visibility into consumer sentiment on topics and more.

Demand for large consumer data sets from brands, advertisers, and market researchers drive the clickstream market. Strong data licensing and digital advertising growth as well as stable market research data spend will generate significant growth in the clickstream market. The analytic applications market's fragmented collection of analytical vendors and niche capabilities make scaling difficult, but overall demand for analytic applications is far greater than clickstream data. Developing significant share of the analytic applications market for any player will depend upon their capability to not only gain access to significant quantities of data but also expand their offerings through deep analytical expertise.

Secure Browsing

Secure desktop browsers provide a safe method of accessing the internet through a web portal. Browsers earn fees from search providers for driving traffic to search engines, typically on a per search basis. Large search engines pay significant fees to browser partners who drive traffic to their platforms while increasing internet usage increases market revenues for the overall ecosystem.

The rapid growth in new internet users, which is projected to increase from 3.7 billion in 2017 to 4.7 billion in 2021, is generating strong secular tailwinds within web browsing (source: Company market study). An additional one billion internet users represent significant future demand for web browsers and the opportunity to earn substantial search revenue. While the top market participants represent the vast majority of browser share, substantial demand for fast, secure, and lightweight browsers creates the opportunity for additional market participants to capture tens of millions of users. As a result, the Group believes secure web browsing represents a considerable market opportunity.

SMB

Small and medium sized businesses face several unique security challenges given (1) their lack of dedicated resources and (2) the substantial rise in cybercrime focused on attacking SMBs' systems. Current solutions in the market mainly include endpoint AV and network security solutions. Endpoint AV protects individual devices on a corporate network with firewalls, anti-malware programs and spam blockers. Network security programs employ hardware and/or software maintained by the business itself that track network activity and protect against potential hackers. However, a new hybrid solution, the unified threat management platforms ("UTM"), offers the capability to efficiently manage and secure small businesses with integrated endpoint and network protection without requiring significant business resources. With the shift to cloud-deployed UTM, SMBs can protect themselves more effectively at more attractive prices with vendor-managed solutions that do not drain business resources.

The SMB addressable market includes the SMB cloud networking security and endpoint AV markets. The Group believes the total SMB market for these solutions will grow at a 14.6% CAGR from \$1.8 billion in 2017 to \$3.1 billion in 2021 (source: Company market study).

SMB Addressable Market

Note: in billions.

Source: Company market study

Key SMB Drivers

• SMBs lack adequate cybersecurity budgets and expertise—For most SMBs, the greatest challenge to developing better security equates to a lack of expertise and budget to spend on software and hardware. With 62% of businesses in 2017 stating they do not have the expertise to build strong cybersecurity programs, the security skills gap remains a major hurdle (source: 2017 State of Cybersecurity in Small & Medium-Sized Businesses, Ponemon Institute). In addition, a majority of SMBs also do not have the budget to build out their programs, as 69% do not believe their current spend was adequate in 2017, up from 63% in 2016 (source: 2017 State of Cybersecurity in Small & Medium-Sized Businesses, Ponemon Institute). For an SMB security vendor to succeed in the market, offerings must meet tight resource and labour and skill constraints.

Cybercriminals specifically target SMBs—Hackers attack SMBs because they often do not have the budget to build significant security capabilities but still hold sensitive employee and financial data. Attack rates have risen with 61% of SMBs experiencing a cyber-attack in 2017, up from 55% in 2016 (source: 2017 State of Cybersecurity in Small & Medium-Sized Businesses, Ponemon Institute). For 60% of small companies, an attack forces the business to close down within six months of the event (source: US National Cyber Security Alliance).
Unified Threat Management platforms are moving to the cloud—Historically SMBs have relied on either hardware appliances or virtual appliances for threat management capabilities with significant time and resources spent maintaining appliances or private cloud. SMBs plan on transitioning to public cloud-based solutions with 52% of SMBs deploying their UTM in the cloud by 2021, up from 37% in 2017 (source: Company market study).

Unified Threat Management: Endpoint Protection & Network Security All-in-One

SMBs have historically not adopted extensive security programs due to the high cost of hardware, software, and staff needed to manage these solutions. To meet increasingly complex security demands in the face of tight budgets, SMBs need a unified, cloud-based solution to manage their security services with endpoint and network security capabilities integrated for both cost savings and efficiency. Cloud-based SaaS unified threat management platforms meet these requirements by managing network and endpoint security needs in a single console while significantly reducing security costs. As next generation UTM platforms are cloud-based SaaS solutions with vendor managed updates, hardware spend and staffing needs are minimised. Broadly, SMBs plan on moving away from standalone products in favour of cloud-based and especially SaaS solutions to simplify the management process. In addition, SMBs plan to expand beyond just employing basic endpoint protection to also add secure web gateway (SWG) and UTM platforms, as only 13% of SMBs are expected to rely primarily on just basic endpoint protection in 2021, down from 34% of SMBs in 2017 (source: Company market study).

SMB Security Environment—Unified Threat Platform

PART 6

BUSINESS

Investors should read this Part 6—"Business" in conjunction with the more detailed information contained in this Prospectus including the financial and other information appearing in Part 5—"Industry Overview" and Part 9—"Operating And Financial Review".

Overview

The Group is the number one provider of security software to the consumer market as measured by number of users. The Group has been delivering security solutions to the consumer market for the last 30 years and offers a range of products that protect users' security, device performance and privacy (collectively, their "digital lives"). Headquartered in the Czech Republic, the Group has users in almost every country in the world, with more than 435 million users worldwide as of 31 December 2017, of which approximately 4% were users of paid products ("customers"). As of the same date, there were 59 countries in which the Group had at least one million users. The Group's consumer personal computer ("PC") software products had over 290 million users as of 31 December 2017, approximately six times more than the Group's nearest competitor.

The Group's antivirus solutions use artificial intelligence ("AI") and employ machine-learning capabilities to conduct behavioural analysis and improve detection abilities. With both local and cloud-based deep learning capabilities, the Group's security engine is powered by a continuous data loop of inputs from the Group's users, who act as a geographically dispersed global threat detection system. The Group's security engine stopped approximately two billion attacks per month in the year ended 31 December 2017. The Group places a heavy focus on the continuous development and improvement of these technologies, with more than 45% of its employees working in research and development ("R&D"). The Group believes this focus on R&D strongly contributes to the fact that the Group's products are consistently ranked among the highest-rated antivirus solutions by both users and editors on leading download websites, as well as in popular media globally.

The Group offers versions of its high-performance consumer PC antivirus security software to consumers free of charge. The Group focuses on promoting these free products as a part of its user acquisition strategy. The Group monetises its user base by converting users of its free antivirus software to paid antivirus customers and selling existing customers of its paid antivirus products a higher tier of paid antivirus software (collectively, "up-selling") or adjacent (non-antivirus) paid products, such as VPN products or PC optimisation tools ("crossselling"). The large user base not only drives direct revenues by growing the market to which the Group can target its up-selling and cross-selling campaigns, but it also improves the accuracy and effectiveness of the Group's machine-learning-powered consumer monetisation platform. The platform becomes more effective with increased inputs, improving the Group's ability to market and advertise its products to its existing user base by learning the most effective time and manner to message and prompt users to purchase premium paid antivirus software or value-added solutions. The Group's free products provide comprehensive malware protection to users, while imposing low user support and servicing costs on the Group, amounting to, on average, \$0.02 per free incremental PC antivirus software user per annum for the year ended 31 December 2017.

The Group has successfully grown its business in recent years while maintaining strong levels of profitability. Further, the Group's billings are primarily composed of subscription agreements, which enhance the predictability and visibility of the Group's future revenue streams. Subscription agreements are typically paid in full up front with revenue being recognised on a deferred basis over the life of the agreements, which typically vary from one to three years. On a like-for-like basis, the Group's Adjusted Billings increased from \$745.4 million for the year ended 31 December 2016 to \$811.3 million for the year ended 31 December 2017 and increased from \$739.0 million for the year ended 31 December 2015 to \$745.4 million for the year ended 31 December 2016. Piriform contributed \$10.6 million to the Group's 2017 Adjusted Billings from the date of its acquisition on 18 July 2017 to 31 December 2017, and, had Piriform always been a part of the Group, it would have contributed an additional \$10.9 million. Both of these amounts are included in the Group's 2017 Adjusted Billings of \$811.3 million. The Discontinued Business contributed \$38.5 million to the Group's Adjusted Billings in 2017, \$66.7 million in 2016, and \$101.4 million in 2015. On a like-for-like basis, the Group's Adjusted Revenues increased from \$736.5 million for the year ended 31 December 2016 to \$779.5 million for the year ended 31 December 2017 and from \$720.5 million for the year ended 31 December 2015 to \$736.5 million for the year ended 31 December 2016. Piriform contributed \$6.1 million to the Group's 2017 Adjusted Revenues from the date of its acquisition on 18 July 2017 to 31 December 2017, and, had Piriform always been a part of the Group, it would have contributed an additional \$15.6 million. Both of these amounts are included in the Group's 2017 Adjusted Revenues of \$779.5 million. Discontinued Business contributed \$38.5 million to 2017, \$66.7 million to 2016, and \$101.4 million to 2015 Adjusted Revenue.

The Group calculates its organic growth over time by adjusting for two elements. First, growth figures exclude Piriform, which the Group acquired in the third quarter of 2017. Second, as the company is exiting its toolbarrelated search distribution business, which had previously been an important contributor to AVG's revenues (referred to above and throughout the Prospectus, with the Group's browser clean-up business, as Discontinued Business), the growth figures exclude Discontinued Business, which the Group expects to be negligible by 2019. On a like-for-like basis, excluding Piriform and Discontinued Businesses, the Group's Adjusted Billings increased 11% from 2016 to 2017, and 6% from 2015 to 2016. On a like-for-like basis, excluding Piriform and Discontinued Business, the Group's Adjusted Revenue increased 7% from 2016 to 2017, and 8% from 2015 to 2016.

Competitive strengths

The Group believes that it benefits from the following key competitive strengths:

Global leader in security, performance and privacy, specialising in protecting consumers' digital lives.

The Group is the number one provider of security software to the consumer market as measured by number of users. With more than 435 million users worldwide as of 31 December 2017, the Group had a user base of comparable magnitude to other leading global online consumer brands such as Twitter (which had approximately 330 million users as of 30 September 2017 based on estimates), Amazon (which had approximately 310 million users as of 31 March 2016 based on estimates) and Pinterest (which had approximately 200 million users as of 30 September 2017 based on estimates). The Group has a penetration rate of 4% globally, with approximately 35% of its users in the Americas, 48% of its users in Europe, the Middle East and Africa, and 17% of its users in Asia Pacific for the year ended 31 December 2017.

The Group had more than 145 million mobile users and more than 290 million consumer PC users as of 31 December 2017, which was approximately six times the number of consumer PC users as Symantec, its nearest competitor, and more than double the number of consumer PC users of Symantec, McAfee and Trend Micro combined, each as of the same date. The Group has also continued to achieve sustained growth in the wake of Windows Defender, pre-installed antivirus software on Windows 10 devices which applies as default protection if the user has not selected a third party provider. Specifically, the Group's installation data shows that the share of the Group's users using Windows 10 devices has closely tracked the overall market share of Windows 10 in both the U.S. and globally. The Group believes that this data suggests users are continuing to install the Group's antivirus products on Windows 10 devices rather than relying on the default protection provided by Windows Defender.

Highly recognisable leading consumer brand.

The Group has high brand awareness among consumers. According to data from Google Trends, which tracked trends in Google searches for antivirus vendors (and their name variations) for the year ended 31 December

2017, the Group's two major brands, Avast and AVG, together generated 21.4% of named searches worldwide. These brand awareness results were best-in-class in the industry, outranking all the Group's competitors, including Symantec (20.1%), ESET (9.5%), Kaspersky Lab (8.6%) McAfee (6.6%) and Avira (3.6%).

Further, the Group has also been recognised by the online security community as a leading and trusted provider in consumer security. For example, the Group's free antivirus products under both the Avast and AVG brands have been recognised by PC Mag as an Editors' Choice in 2018 and have been given the title of "best free antivirus". AV Test rated the Group's Mobile Security product as the best antivirus software for Android in November 2017, giving it a perfect score for its antivirus capabilities. In 2017, CNET ranked the Group's products as the #1 download for PC. These and other such recognitions have helped the Group improve its brand's visibility and promote its reputation and its products.

Advanced next-generation security engine, driven by cloud-based machine-learning capabilities.

The Group has developed a next-generation security engine which uses a combination of behavioural detection, machine-learning capabilities and signature-based detection to drive best-in-class protection. Unlike signaturebased antivirus products that can only detect known viruses, the Group's proprietary scanning engine proactively searches for previously unknown viruses and malware, as well as new variants of known viruses and malware undetectable with normal definitions and virus signatures. The security engine adds additional layers of defence to protect against more sophisticated and advanced threats and will flag anomalous behaviours (e.g., the creation of new binary files, the execution of files or the modification of certain registry entries), even if such behaviours have not previously been identified as known viruses. The Group's threat detection engine is continuously refined through technology that uses a global network of sensors to provide the Group with data gathered anonymously from the online experiences of its users. This threat detection engine uses advanced techniques, such as these behavioural insights as well as machine-learning capabilities, to leverage the data collected in order to provide effective protection for users. The Group has a highly specialised team of researchers, including a core team of individuals with advanced degrees, who have a specific focus in developing the Group's next-generation technology and machine-learning capabilities, with the task of continuing to improve the Group's security engine and core technologies.

The Group's security engine is supported by more than 10,000 servers handling more than 60 million simultaneous connections, enabling a high level of automation and scalability to process extensive data sets from users to drive industry leading protection against file and memory attacks as well as network-based attacks. This powerful technology, together with the large collections of data from users, helped the Group discover approximately 200,000 new, unique malware samples per day on average in the year ended 31 December 2017. The multi-layered security protection integrated into the Group's products successfully defended users against specific attacks, including the WannaCry attack which affected millions of PCs worldwide in 2017 (in which the devices of many well-known organisations were infected with ransomware, which encrypted these organisations' files and threatened to delete them unless the hackers were paid a ransom) and the BankBot router attack in 2017.

Sophisticated consumer platform with strong monetisation opportunities from the Group's existing user base.

The Group believes that its consumer monetisation platform is a key driver of its success, allowing the Group to leverage data from and monitor the behaviour of its base of more than 435 million users. The Group uses this consumer monetisation platform to promote up-sells and cross-sells within its existing user base in an efficient manner. The Group believes that the most powerful features of its consumer monetisation platform are those underpinned by machine-learning algorithms. Through this predictive modelling method (which statistically analyses potential outcomes of various campaigns), the Group optimises its marketing campaigns to better identify monetisation opportunities through price optimisation (which provides customised prices for different users), campaign muting (which minimises the number of messages in order to optimise effectiveness), and churn prediction (which predicts when and how likely a user is to leave the Group so the Group can take proactive measures).

The Group's consumer monetisation platform is a sophisticated predictive platform which uses contextual messaging to convert, up-sell and cross-sell the Group's users, targeting users at the most appropriate moment. The Group believes these messages are minimally intrusive and provide offers for quality products that add value for the user in the appropriate context. For example, the consumer monetisation platform will push a message to users who have connected to an unsecure Wi-Fi network to suggest downloading the Group's paid VPN products, or warn antivirus users of device performance issues that could be resolved by downloading the Group's paid optimisation products. These messages are applied to the Group's indirect consumer offerings as

well. For example, if a user were to go to a banking website, a tailored message would appear prompting the user to download the Group's secure browser, Avast Secure Browser. The Group continuously tracks and tests this consumer monetisation system, applying machine-learning to optimise yield.

The combination of the Group's large user base and powerful consumer monetisation platform provides the Group with strong monetisation and marketing capabilities for new and existing product offerings. The Group has been successful in converting, up-selling and cross-selling its wide range of products and solutions to its user base: as of 31 December 2017, 25% of customers had purchased more than one Group product, compared to 19% as of 31 December 2015. The Group believes that up-sells and cross-sells will continue to drive the Group's growth in the future.

Differentiated and cost-effective user acquisition model.

The Group believes its direct sales model promotes a low sales and marketing expense that distinguishes the Group from competitors in the traditional retail channel or OEM channel. In the traditional retail channel, antivirus software is promoted through material marketing spend, requiring fees in the form of slotting, promotions and stocking, in addition to the revenues shared with the retailer (which can be up to 100%). In the OEM partnership channel, software companies will pay large fees to OEMs to pre-install their software on equipment. There is generally a large loss of users who will stop using the pre-installed product upon the expiry of a free trial, and there are fees (often more than 50%) that are shared with the OEM for revenues from users who opt to continue to use the product.

By contrast, the Group's differentiated and cost-effective business model primarily focuses on online sales with low user acquisition costs. The Group believes that its most effective marketing tool is the quality of the Group's free antivirus software: users have positive experiences with these products, which promotes viral marketing through interactive marketing channels, including through word-of-mouth recommendations and reviews. At the same time, the Group also maintains low user support and servicing costs even after successfully acquiring new users, due to its community forum user support platform. For the Group's free PC antivirus products, there is a service cost of, on average, \$0.02 per free incremental PC antivirus software user per annum for the year ended 31 December 2017. Further, the Group still generates revenues from these free PC users through indirect monetisation methods.

For the Group's customers, the Group retains the majority of the revenues it generates. Certain revenue share agreements with mobile network operators for certain mobile offerings result in a revenue share of up to 50% The Group believes that its direct sales model provides strong benefits as compared to the traditional retail or OEM partnership channels and allows the Group to cost-effectively scale its business globally.

Highly scalable business model benefitting from significant network effects.

The Group operates in a large and robust market, which is estimated to have reached \$14.5 billion for the year ended 31 December 2017, and the Group believes the market will reach revenues of \$21.3 billion in 2021, according to Group estimates. Within this market, the Group believes it is well-positioned to grow, given the Group's history of growth and of increasing its market share. Furthermore, as the Group continues to expand its product offerings, its total addressable market is expected to continue to expand to include the markets of such product offerings.

The large size of the Group's user base promotes strong network effects and a continuing cycle of growth. The Group's large user base generates large amounts of data with unique insights into their behaviour, which acts as an input to improve the Group's machine-learning-based technology platform, including its virus detection capabilities and its consumer monetisation platform. As the Group's technology platform improves and successfully protects users, the Group earns more trust from its users, promoting strong global brand awareness. As the Group's global brands strengthen, there is an increase in demand for its products. This increased demand leads, in turn, to more users. Together, this cycle enables continued company growth, and the Group believes the related network effects create high barriers for new market entrants.

Attractive financial profile with robust cash flow generation and high cash conversion.

The Group's business model provides a high level of billings and revenue visibility, driven by a high proportion of subscription agreements, which are typically paid up front, enhancing the predictability and visibility of the Group's future revenue streams. For the year ended 31 December 2017, 84% of Adjusted Billings were

attributable to subscription agreements, compared to 83% for the year ended 31 December 2016 and 79% for the year ended 31 December 2015. Revenues are predictable as a result of primarily being driven by prior period billings that were recorded as deferred revenue to be recognised in future periods, as the revenue from subscription agreements is recognised on a deferred basis over the life of the agreement, which are typically from one to three years. Further, 88% of the Group's consumer direct desktop renewal revenues are from existing customers auto-renewing their subscriptions.

The Group has established a track record of consistent growth and strong profitability and cash flow generation. As a technology company, the Group benefits from low overhead costs, and its primary cost is personnel costs, which remain low compared to its peers given the location of many of its employees in the Czech Republic, a relatively low-cost jurisdiction. The Group also maintains a cost efficient distribution model with low user acquisition costs and low sales and marketing costs compared to competitors.

The Group also benefits from a high cash conversion profile, resulting from a combination of low capital expenditure, limited working capital requirements and high margins. The Group had 76% cash conversion for the year ended 31 December 2017, driven by deferred revenue inflows and its low capital expenditure requirements. On a like-for-like basis, the Group had capital expenditures of \$15.9 million for the year ended 31 December 2017, \$23.7 million for the year ended 31 December 2016 and \$26.8 million for the year ended 31 December 2015.

Experienced management team with a strong track record of execution.

The Group's management team has significant experience in sales, technology, product development and marketing and each member has years of experience in the security software industry. The Group's Chief Executive Officer, Vincent Steckler, has been with the Group for nine years and has worked in the security software industry for over eighteen years. Ondrej Vlcek, the head of the Group's Consumer business, has been with the Group for over twenty years. Mr. Steckler, Mr. Vlcek and the other members of the management team have led the Group through its growth into the leading global provider of software to consumers, growing both organically and through the acquisition and integration of AVG, a leading security software company with \$418.6 million in revenue for the year ended 31 December 2016, and Piriform, a leading provider of device performance optimisation software, in 2017, among other key strategic acquisitions. The Group's management team has experience working at blue-chip companies such as Google, Apple, Symantec, General Electric and NETGEAR, and has been key in attracting and retaining talent from similar companies. The Group believes that the experience of the Group's management team has driven the Group's strong performance, increasing total users from approximately 100 million in 2009 to more than 435 million in 2017.

Strategy

The Group has the following key business strategies:

Continue to drive direct monetisation by up-selling users to paid premium security products and to higher tier premium security products

The Group generates revenues from users who upgrade to paid antivirus security products with advanced functionalities. The Group plans to further differentiate its premium antivirus products from its free antivirus products to continue driving users toward its paid premium security products by adding better add-on products to its premium antivirus offerings and by improving its bundling options for paid antivirus products. Four percent of the Group's desktop antivirus users were premium security software customers in the year ended 31 December 2017 (and 96% were free desktop antivirus users), with over 11 million desktop customers (and over 5 million mobile customers). The Group therefore continues to have a large percentage of its user base which it can convert to its premium paid security products.

The Group also seeks to directly monetise its user base by continuing to sell existing antivirus customers higher tier premium security products. The Group has been successful in recent years with its up-sell campaigns, with average revenue per customer for the Group's antivirus products increasing from \$43.09 in 2015 to \$45.35 in 2017. As only a small portion of the Group's customers subscribed to its top-tier products within the Avast and AVG brand offerings as of 31 December 2017, the Group continues to have a significant opportunity to up-sell the majority of its customers to higher-tier security offerings.

Continue to drive direct monetisation by successful cross-selling across multiple platforms and services

As the Group's user base grows, the Group utilises its consumer monetisation engine, powered by machinelearning, to effectively push cross-selling campaigns to its users to promote its paid value-added products. The Group has a proven model of driving success with cross-selling its value-added non-antivirus solutions in past years, with the portion of the Group's revenues driven by non-antivirus solutions increasing from 2015 to 2017. In addition to achieving success in cross-selling to the Group's free antivirus users, the Group has also been successful at increasing the average spend of customers on value-added products. The Group plans to continue to improve the breadth and quality of its value-added solutions through product innovation and acquisitions, which the Group believes will further increase its direct monetisation from cross-sales. As the markets grow, the Group believes it is well-positioned to continue to increase its billings and revenues from such products.

Leverage scale, historical expertise and user data to find new ways of indirect monetisation

The Group has powerful methods by which to indirectly monetise its large user community. The Group earns revenues through its distribution agreements with Google to promote Chrome downloads, advertising on its free mobile applications, distribution of promotion codes to drive traffic and user acquisition for online retailers in exchange for e-commerce affiliate payments, its analytics business and its secure desktop web browser product. Through these channels, the Group is able to monetise its user base, including its free users, at different points throughout their relationship with the Group.

The Group plans to specifically focus on continued distribution of third party products as well as improving its secure web browsing product, e-commerce rewards business and analytics business to continue to strengthen its success with, and variety of, indirect monetisation methods.

On 5 March 2018, the Group began a process by which existing installations of the Group's SafeZone browser product are being updated globally to the newly launched Avast Secure Browser, the Group's updated and renamed successor product, which the Group markets together with, and as an extension of, its online security offerings. The browser is expected to earn the Group a share of advertising revenue generated by user search activity.

The Group also plans to launch an upgrade and successor to its existing SafePrice e-commerce affiliate product, offering improved discounts or rebates to users during their online shopping activities through a browser plugin or mobile application. The Group earns revenues reflecting the value that retailers receive in the form of increased traffic, user acquisition and sales.

Further, the Group intends to continue to grow its analytics business, Jumpshot, to enhance its brand recognition to be able to target business partners on a larger scale. As the business continues to build products focused on solving today's digital marketing problems, the Group believes it will continue to become more valuable and attractive to market research firms, advertising agencies and consumer brands.

Achieve product innovation to continually improve its product offerings

The Group has a strong portfolio of existing products to improve PC and mobile security, privacy and performance. The Group seeks to more deeply penetrate this market by continuing to innovate and improve upon its offerings, leveraging the Group's large global footprint and customer understanding to feed its product innovation pipeline. The Group believes that its strong focus on R&D, which accounts for over 45% of its employees, will help the Group implement this strategy and continue to improve its offerings. Further, the Group's employees are based in the Czech Republic, which the Group believes is a benefit not only for its cost efficient model but also for its welcoming environment for innovation: the Czech Republic was identified as one of the top ten most innovative countries in the Consumer Technology Association's 2018 International Innovation Scorecard.

The Group's near-term product pipeline includes new and updated products such as anti-tracking products, parental controls, identity theft monitoring and Smart Home security, among others. The Group also plans to continue to improve its SMB offerings to expand its market share in that sector and drive growth.

The Group plans to release its first Smart Home security product in 2018. The Group believes that this market will continue to come into increasing user focus as IoT growth increases. Smart Home devices are complex with high threats to privacy, potentially worse than those threats to PCs, as once a hacker breaks into the network

through its weakest link (i.e., a Smart Home product), that hacker could gain access to all devices on that network, resulting in a greater potential for harm. To enter the Smart Home security market, the Group plans to market to its existing users using its consumer monetisation platform. It will also focus on a partnership model with internet service providers, with the potential to also partner with OEMs to offer its products direct to consumers pre-installed on Smart Home equipment.

In addition, the Group plans to release a new anti-tracking product which, similarly to its VPN products, will protect users' privacy online. The anti-tracking product will shield users' internet browsing by masking a user's location, detecting threats, scheduling browser cleanings and allowing private searching and browsing. The Group will also offer a new free service to monitor whether users have been hacked or had their personal details stolen online, providing regular alerts and reports. This hack checking service will allow the Group to establish regular communications with users, which will include product promotions for the purpose of up-selling and cross-selling. Further, the Group also plans to finalise a new parental control innovation which will increase the variety of functionalities as compared to its existing offering, such as location tracking and smart alerts. The Group intends to market this parental control offering both on a direct-to-consumer basis and to consumers through mobile carriers and internet service providers as intermediaries.

Continue strong track record of successful acquisitions

The Group strategically seeks out acquisitions that will consolidate the market and grow the Group's scale and market share, such as the acquisition of AVG in 2016. The Directors recognised that AVG was very similar to the Group in terms of its product offerings, culture and strategy: it offered a free consumer PC antivirus product, with a business model focused on converting free users to paid products, and had its main office in the Czech Republic. The Group believed the two businesses would integrate well, increasing the scale of the Group, expanding its product offerings and creating significant synergies and cost savings compared to running the two as separate entities. The acquisition of AVG brought approximately 141 million new users to the Group's user base, and, by combining the two businesses, the Group expects to over-deliver by approximately \$10 million on the Group's original cost synergy projections of \$118 million, in particular related to payroll cost reductions in the Czech Republic and the U.S. The Group plans to continue to integrate the two brands and their products over time to achieve further synergies. The Group continues to monitor the market for any other similar security companies which it could acquire to increase its scale. For example, the Group is continuously monitoring companies focusing on the SMB security market, with the possibility of growing its presence in that market through future acquisitions.

The Group also believes that there is value in acquiring well-recognised companies and brands that will increase its distribution network and user base. The addition of new product lines and offerings increases the Group's functionalities and ability to sell adjacent products to its users, while also increasing its total addressable market. For example, the Group acquired Piriform (including its main brand, CCleaner) in 2017. The Group sought out this acquisition because it added a compatible optimisation product through CCleaner and brought with it a significant number of users who did not already use Avast or AVG products to whom the Group could cross-sell. As of the date of the acquisition, of CCleaner's approximately 90 million users, approximately 79% (or 71 million users) did not yet use any Group products as of 31 December 2017. In addition, CCleaner was seen as a well-regarded product with strong brand recognition which the Group could cross-sell to its existing users who use more recent versions of the product; users with older versions of the product cannot be communicated with in the same manner. The Group continues to monitor the market for other complementary businesses focused on adjacent products which it could acquire to increase its distribution.

The Group has a strong track record in diversifying its business and expanding its product breadth in recent years through acquisitions. The Group acquired a small PC optimisation company in 2013 and launched its first organic PC optimisation product, Avast Cleanup, in 2014. Also in 2014, AVG acquired Location Labs to enter the parental controls market. These acquisitions, among others, allowed the Group to broaden its offerings and focus more on cross-selling its value added products, such as its VPN and PC cleaner, to its users. The Group plans to continue to seek out opportunities for acquisitions that will diversify its product offerings, and in turn, grow the size of its total addressable market.

History

The Group was founded in 1988 in what is now the Czech Republic when founders Pavel Baudisˇ and Eduard Kucˇera established the ALWIL cooperative and released one of the first antivirus programs in the market.

In 2001, the company made a pivotal business model change by offering fully-featured security products to consumers for free, with the opportunity to upgrade to premium paid products with advanced functionalities. User growth accelerated, doubling twice in one year and by 2006, reached 20 million users.

In 2009, Vincent Steckler was appointed CEO, bringing years of cybersecurity and management experience to the Group.

In 2010, funds advised by U.S.-based private equity firm Summit Partners, L.P. and its affiliates became shareholders of the Group, and ALWIL was rebranded to Avast. In 2012, Avast Free Mobile Security became the best-rated security app on Google Play, Avast Free Antivirus was the most downloaded software on Download.com, and the Group launched its first Mac product.

By 2014, Avast had 100 million mobile antivirus users, reaching that download milestone faster than any mobile security tool in Google Play history. Also in 2014, funds advised by affiliates of CVC Capital Partners Advisory Company (Luxembourg) S.à r.l. invested in the Group.

In 2016, the Group acquired AVG, a group of companies with a very similar business to that of the Group: developing PC, mobile and business security software applications, including both free and paid products. The acquisition further diversified the Group's product portfolio, geographic base, and revenue streams.

In 2017, the Group acquired Piriform, a leading provider of device performance optimisation software including its flagship product, CCleaner. With the addition of Piriform, the Group expanded its product offerings in the PC and mobile optimisation markets. As at and for the year ended 31 December 2017, the Group had over 435 million users and \$811.3 million in Adjusted Billings.

Other acquisitions of the Group since 2015 include, but are not limited to, the acquisitions of Privax (a leading provider of PC and mobile privacy services for consumers, including its flagship product HMA) in 2015, Flavyr Media (an Israeli photo-management start-up) in 2015 and Remotium (an enterprise mobility company) in 2015.

Products

The Group's business has two segments: the consumer segment and the SMB segment. Within the consumer segment, the Group offers products and solutions for protection, performance, privacy and additional tools. In the SMB segment, the Group secures small businesses with managed protection. For the year ended 31 December 2017, the consumer segment generated approximately 92% of the Group's Adjusted Billings and the SMB segment generated approximately 8% of the Group's Adjusted Billings.

Consumer offerings

The Group's consumer products include direct revenue streams through its offerings for desktop security, server protection and mobile device protection and consist of free and premium paid products for the individual consumer market ("Consumer Direct"). The Group also has several value-added solutions for performance, privacy and other tools. The Group will continue to expand its offerings of products and solutions to secure additional platforms, such as Smart Home devices. These direct revenue sources comprised approximately 77% of the Group's Adjusted Billings for the year ended 31 December 2017.

The Group's business model also involves a number of opportunities for monetisation that do not involve any direct payment ("Consumer Indirect"). Through its partners, the Group additionally receives revenues through its distribution of third party software, advertising, analytics, secure desktop web browsing and e-commerce rewards. These indirect revenue sources comprised approximately 15% of the Group's Adjusted Billings for the year ended 31 December 2017.

Consumer Direct

Security

The Group's antivirus products secure users' online lives and activities.

Avast Free Antivirus is the Group's core free security software product for Windows users branded under Avast. It uses Avast's core security engine, AI-assisted intelligent scanner, machine-learning technologies and cloudbased malware identification and blocking technologies. It detects and blocks viruses, malware, spyware, ransomware and phishing. It automatically sends suspicious files for analysis in the cloud and pushes a cure to all Avast users if it is a threat. Using a smart scan, it finds vulnerabilities to malware, from unsafe settings and passwords to suspicious add-ons and out-of-date software. It can automatically detect weaknesses in home Wi-Fi networks and identifies when unauthorised users access the network. It stores passwords securely in one place. It contains a feature called "Behavior Shield" which is able to identify zero-day attacks by their behaviour (for example, code execution behaviour, and network communication behaviour). This layer of protection is specifically efficient against new strains of ransomware. It has modes for specific scenarios, such as game mode to automatically detect full-screen applications, disabling pop-ups and other notifications to allow maximum processing power and speed for gaming without compromising security. Browser cleanup deletes unwanted browser toolbars, add-ons and extensions.

Avast Security for Mac is Avast's free consumer security software for Macs running Mac OS X. It is based on a central virus-scanning daemon—a computer program that runs in the background, rather than under the direct control of a user—and contains many of the features included in Avast Free Antivirus.

AVG Antivirus FREE and AVG Antivirus for Mac are the Group's core free security software products for both Windows and Mac users branded under AVG. These products offer features similar to those in the Avast branded free products.

The Group also offers several levels of its premium paid desktop security products for Windows customers: Avast Pro Antivirus, Avast Internet Security, Avast Premier, Avast Ultimate, AVG Internet Security and AVG Ultimate. The pricing of these products increases with increased functionality.

Avast Pro Antivirus comes with all the functionalities of Avast Free Antivirus, and adds (a) Sandbox to allow users to test suspicious files in a safe environment before they run on, and potentially infect, a user's computer, and (b) Real Site, which protects against hackers who attempt to hijack system settings to direct a user to fake websites.

Avast Internet Security and AVG Internet Security build on the functionalities contained in Avast Pro Antivirus with additional capabilities, including a ransomware shield that blocks ransomware and other untrusted apps from changing, deleting, or encrypting personal photos and files; a firewall to monitor and control what goes in and out of a PC; and anti-spam functionalities to stop phishing and spam emails.

Avast Premier builds on the functionalities in Avast Internet Security with additional capabilities, including a webcam shield which requires applications to ask for permission in order to use the webcam; an automatic software updater to keep software up to date automatically; and a data shredder to permanently delete sensitive files so they cannot be recovered.

Avast Ultimate and AVG Ultimate come with certain performance and privacy features in addition to those security features included in Avast Premier and AVG Internet Security.

The Group offers a premium paid desktop security product for Mac users through Avast Security Pro for Mac. This product offers all of the functionalities available in Avast Security for Mac, in addition to a Wi-Fi Inspector to automatically detect weaknesses in home Wi-Fi networks and identifies when unauthorised users access the network; and a ransomware shield to block ransomware and other untrusted apps from changing, deleting, or encrypting personal photos and files.

For mobile devices, the Group offers Avast Mobile Security and AVG AntiVirus, mobile security products designed to protect Android-based mobile phones and tablets. These products come in both a free version and a paid version. These products keep Android phones protected from malware and viruses from installed apps and offer additional functionalities such as call blocking and the ability to lock apps or track a lost phone. The Group also offers AVG Anti-Virus for Xperia, another mobile operating system, which offers similar functionalities to its Android products and is also offered in both a free version and a paid version.

Performance (Utilities)

In addition to its security software, the Group also offers a number of utilities products that improve mobile or computer performance by cleaning devices for optimal operation.

Avast Cleanup (including Cleanup Premium for Windows and Cleanup Pro for Mac) is the Group's PC optimiser and tune-up toolkit under the Avast brand name. AVG TuneUp and AVG Cleaner for Mac are the Group's PC optimiser and tune-up toolkits under the AVG brand name. Each of these optimisers, among other things, scans a PC to remove unused files from applications and browsers to free up space; updates a user's computer to prevent security holes and bugs; removes leftover files and cleans a computer; restores a computer's speed by switching off unnecessary features, putting unused programs to sleep and identifying and uninstalling unused programs; stops freezing and crashing by de-cluttering, reorganising and cleaning a device's registry; fixing hard drive problems and deleting "dead" desktop shortcuts; and works automatically to check and update key programs, performs routine maintenance and regular updates.

AVG Driver Updater is designed to fix and update a device's drivers. It scans a computer for outdated, missing or corrupt drivers, in real-time, chooses optimal drivers for individual users, backs up drivers to allow restoration of unwanted changes and installs drivers one by one to reduce hardware problems.

With its recent acquisition of Piriform, the Group added CCleaner to its product line. CCleaner comes in three versions: free, professional and professional plus. These programs improve a computer's speed by allowing users to control which apps use the computer's resources and protect users' privacy by removing tracking files and browsing data. The paid versions also, among other things, cleans more thoroughly, guards against junk files and automatically clears a browser's history whenever the browser is closed.

The Group also offers certain optimisation products for mobile devices. Avast Cleanup for Android quickly cleans up unnecessary data, system caches, gallery thumbnails, installation files, and residual files, identifies the largest categories of data usage, and allows users to transfer their data to cloud storage systems. Battery Saver extends battery life by stopping apps that a user is not using and optimising device settings. Photo Space includes unlimited photo storage, optimises photos to reduce the amount of space they take up, saves original unoptimised photos to the cloud, and includes a camera app.

Privacy

The Group offers several products and solutions which are focused on protecting users' privacy on their connected devices.

VPN

The Group offers VPN products, which encrypt data sent or received and hide a user's location and identity to privatise online communication, browsing, uploads and downloads. The Group has three paid VPN product offerings: Avast's SecureLine VPN, AVG's Secure VPN and the HMA VPN which was acquired by AVG in 2015 and subsequently by the Group in 2016. These products can be used on Windows and Mac computers and on Android and Apple mobile devices.

Passwords

Additional privacy-based offerings of the Group include Avast Passwords, which allows users to manage accounts with one secure password, autofill login details safely and sync login details across devices. The free version is a browser add-on which can auto-fill web forms when using protected accounts. A paid version is also available, which will notify users when one of their protected accounts has been attacked.

Family Safety

The Group also has a number of products for mobile devices which protect privacy, including but not limited to the following:

Avast Locator helps consumers track their family's or friends' phones and find their own lost phones;
Avast Controls & Insights alerts parents to critical calls and messages sent to their children's phones to protect against cyber-bullying; and
Call Blocker warns of spam calls or automatically blocks them and allows users to choose additional numbers to block.

In the United States, for example, the Group has partnered with major mobile network operators to implement its family safety solutions such as Avast Locator and Avast Controls & Insights.

Tools

The Group's offerings include certain other miscellaneous tools which improve the functionality of computers and mobile devices, including but not limited to the following:

Wi-Fi Finder and Secure Me help users find free public Wi-Fi locations nearby and allow the user to connect securely with an encrypted connection; and
Alarm Clock Xtreme is an alarm clock, timer, stopwatch and sleep tracker for mobile phones.

Smart Home products

The Group is developing new Smart Home products to protect users' connected home and all its devices. Such products will be hardware in the form of a dongle which can attach to third party routers and will provide protection against attacks and other threats related to the Smart Home environment. Smart Home products may also be provided via carriers (with no hardware requirements). No Smart Home product offerings by the Group are yet available as of the date of this Prospectus, however, the Group's first product, Avast Smart Home, including a companion network monitor called Avast Scout, is currently under development.

Consumer indirect

The Group's business model also involves a number of revenue streams which do not involve any direct user payment. Through its partners, the Group additionally receives revenues through its distribution of third party software, advertising, analytics, secure desktop web browsing and e-commerce affiliate activities. These indirect consumer revenue sources comprised approximately 15% of the Group's Adjusted Billings for the year ended 31 December 2017.

Distribution

The Group is a party to certain contractual agreements whereby it promotes third party software and earns revenue for such promotional activity. The Group has promotion and distribution agreements with Google under which it offers users Google Chrome for download in connection with installing Avast software, in return for which the Group is paid by Google.

Advertising

The Group places advertisements on its mobile applications to generate revenue through its free offerings. These advertisements are syndicated to both Facebook and Google, among other companies.

E-commerce affiliate agreements

Through its partnerships with e-commerce providers, the Group offers users a price comparison and discounting service via its Avast SafePrice browser extension that operates as a plug-in to leading browsers. Users receive price comparisons and discounts on products for which they are shopping, and the Group earns, via its partners, e-commerce affiliate revenues reflecting the value that retailers receive in the form of increased traffic, user acquisition and sales. In 2018, the Group plans to introduce an upgrade and successor to the current Avast SafePrice product to improve the product and its performance.

Secure Browsing

The Group offers secure desktop web browsing through its Avast SafeZone browser product, which it markets together with and as an extension of its online security offerings. Since the beginning of March 2018, the Group has been engaged in a process of introducing Avast Secure Browser as a major update and successor, which it will continue to market in the same manner. The existing browser earns the Group a share of advertising revenue generated by end user search activity, and the successor browser is expected to continue to earn such search revenues.

Analytics

The Group offers big data and marketing analytics through its entity Jumpshot. The Group provides Jumpshot with anonymised and aggregated data that is collected from scanning the 150 billion websites that the Group's users visit each month. The Group is a key data source for Jumpshot. Data provided from the Group is only provided from users who accepted the data collection, and all data is anonymised and aggregated before it is provided to Jumpshot. The Group's policies require that no Personally Identifiable Information (PII) is provided. Jumpshot operates as a standalone company within the Group. Jumpshot aggregates anonymised data from users' behaviours from their full internet usage, not just the data of a user's usage on a single company's website. Jumpshot unlocks walled-garden data to provide user interaction insights on products and service, and helps customers to target and optimise their campaigns. Customers of Jumpshot include market research firms, investment and advisory firms, advertising agencies and consumer brands.

Discontinued Products

The Group offers search engine capabilities through its legacy AVG extensions, plug-ins and toolbar business. The Group earns revenues through third party products and advertisements which come installed on the search toolbar. The Group discontinued this product after the acquisition of AVG, believing that this product is incompatible with the Group's strategy as it provides low value for users and may be an unwanted product. No new development is being applied to this product and the Group has discontinued distribution (although the Group will continue to receive diminishing revenues from users who continue to use the already-installed product).

The Group is also discontinuing its Browser Cleanup product, which was created to remove unwanted products that were often installed without user consent. Browsers have improved protections against these unwanted products, thus the need for the Browser Cleanup product is significantly diminished. The Group has stopped further development of the product, and, while it still allows for its distribution from the Group's website and bundled within certain of its PC antivirus packages, the Group has no plans to continue to update or improve the product in the future.

SMB offerings

The Group offers security solutions specifically designed for small businesses. The SMB business comprised approximately 8% of the Group's Adjusted Billings for the year ended 31 December 2017.

Avast Business Antivirus is the Group's entry-level product under the Avast brand name designed for companies that want to protect their business data and online communications. It includes many of the functions of the consumer security products such as Intelligent Antivirus, Behaviour Shield, CyberCapture, SmartScan, Wi-Fi Inspector, Firewall, Web Shield, Email Shield, Anti-Spam and Sandbox, with the addition of remote installation and update functions and a central management console which saves both time and costs associated with traditional deployment and management at individual devices. In case of infection, the central console receives immediate real-time alerts. Avast Business Antivirus will automatically detect new or unprotected (or "rogue") computers on the network. It also offers file server protection by scanning all traffic on the servers.

Avast Business Antivirus Pro is the next level of protection for companies under the Avast brand name. It includes all of the functions of Avast Business Antivirus along with additional data protection through Software Defender (which lists out-of-date programs and applications on a device and allows customers to update them with a single click), Data Shredder, Exchange Protection (which encrypts deleted data and scans email attachments) and Sharepoint Protection (which scans files before they are uploaded onto the Sharepoint server to ensure they are not infected).

Avast Business Antivirus Pro Plus is the Group's product under the Avast brand name designed for companies that require network security with maximum protection. It includes all of the functions of Avast Business Antivirus Pro product along with additional identity protection: Passwords, SecureLine VPN and Browser Cleanup.

Avast Managed Workplace is a complete remote monitoring and management platform with integrated security tools and services for home office or SMB customers. With Managed Workplace, managed service providers can deliver enhanced security services all from a single dashboard. Managed Workplace brings a cost-effective, multi-tenant security lens to remote monitoring management. Managed Workplace will, for example, notify an administrator upon identifying an unprotected computer on the network.

Avast Business CloudCare is a cloud-based, endpoint security platform that makes it easier for managed service providers to monitor threats, resolve issues, and deliver multiple layers of protection to their clients. From the

single, cloud-based dashboard, managed service providers can remotely secure multiple clients and protect networks with both pay-as-you-go and subscription services, including antivirus, antispam, content filtering, and backup.

AVG File Server Edition is the Group's entry level product under the AVG brand name designed for companies that want to protect their business data and online communications. It includes free business technical support services, remote installation and update functions and a central management console, protection of Microsoft File Servers and Windows Sharepoint Servers, and scans, detects and removes malware and viruses from PCs and laptops.

AVG Antivirus Business Edition includes all of the functions of AVG File Server Edition, along with additional antivirus and privacy protections: advanced detection of malware through crowd intelligence; privacy protection while on public Wi-Fi networks; firewall to help stop spam, viruses, hackers and malware; and protection from online threats including suspicious email attachments or links.

AVG Internet Security Business Edition is the Group's product under the AVG name designed for companies who require full protection. It includes all the functions of AVG Antivirus Business Edition, and adds email server security (defending the server against hackers, malware and spam) and spam protection.

Avast Cloud Secured Web Gateway (SWG) and Unified Threat Management (UTM) are new products which the Company expects to launch later in 2018 following the signing of a four year contract with Zscaler in April 2018 to sell integrated white label network security services to SMBs.

The Group's technology, infrastructure and operations

Core technologies

The Group's security products offer holistic protection against cyber threats, including protection against viruses and other types of malware, network-based attacks, privacy controls and password and identity management. These security capabilities are implemented through a proprietary security engine which uses a combination of behavioural detection, machine-learning capabilities and signature-based detection to drive best-in-class protection. The innovative security engine provides for industry-leading detection rates and scanning speeds while using minimal resources and contains components that run both locally on the device as well as in the Group's bespoke internet cloud, resulting in constant updates of new detections and definitions and continuous protection against the latest threats.

Unlike signature-based antivirus products that can only detect known viruses, the Group's proprietary security engine proactively detects previously unknown viruses and malware, as well as new variants of known viruses and malware undetectable with normal definitions and virus signatures. The security engine adds additional layers of specialised fortification for more sophisticated and advanced threats and will flag anomalous behaviours (e.g., the creation of new binary files, the execution of files or the modification of certain registry entries), even if such behaviours have not previously been identified as known viruses.

This security engine uses advanced techniques, such as these behaviour insights as well as artificial intelligence and machine-learning capabilities, to leverage the collected data to provide rapid protection for users. The first layer of protection is called "WebShield", which protects at the entry level against network-based exploits, malicious websites and anomalies. The second layer is "Static Scanner", which performs real-time security assessments using cloud-based reputation data and the local classification engine. The third layer is "Emulator", which detects possible malicious content by executing code in a fully emulated environment. The Group's security engine analyses unknown files using its proprietary technology called "DeepScreen" in the fourth layer of protection. DeepScreen takes a snapshot of the currently running system, clones it, and analyses the scanned file (in a process referred to as "sandboxing"). On top of that, the engine is also capable of performing cloudbased sandboxing using another proprietary technology called "CyberCapture", the fifth layer of protection. DeepScreen and CyberCapture work together to minimise the likelihood of any malicious file executing on the device. In addition, the sixth layer "Behavior Shield", monitors each environment as programs run and protects against malicious behaviour.

The Group's security engine is continuously refined through technology that uses a global network of sensors to provide the Group with data gathered anonymously from the online experiences of its users. The Group's security engine is supported by more than 10,000 servers supporting more than 60 million simultaneous

connections, enabling a high level of automation and scalability to process huge data sets from users to drive industry leading protection against file and memory attacks as well as network-based attacks. By using advanced techniques such as artificial intelligence and machine-learning, the engine leverages the collected data to effectively protect users and provide rapid protection. It takes less than 12 hours to add new features, train and deploy into production.

The Group's security products feature an intelligent scanner which creates a baseline of files to be scanned by creating lists of files that have been identified as safe and are not rescanned unless they change. This process speeds up the scan by reducing the number of scanned files. The infected files are automatically processed without requiring user instructions.

This powerful technology, together with the large collections of data from users, helped the Group discover about 200,000 new, unique malware samples per day on average during the year ended 31 December 2017. The Group has a highly specialised team of researchers, including a core team of individuals with advanced degrees, who have a specific focus on the Group's next-generation technology and machine-learning capabilities, with the task of continuing to improve the Group's security engine and core technologies.

The Group's network infrastructure and operations

The Group's infrastructure includes servers and bandwidth capacity leased from third parties. The Group owns certain key servers that are located in its headquarters in Prague and in its offices in Brno, both in the Czech Republic. The Group uses its own servers for R&D activities and the ThreatLab, to operate office applications, to store user data and to generate licence codes that users need to activate the Group's products. Through the ThreatLab, the Group automatically processes virus samples, generates virus definitions, tests for false positives and releases new definitions to the public. For network infrastructure and redundancy, the Group's servers are distributed, virtualised and mirrored in a separate data centre located in Brno, Czech Republic. The Group also owns servers in Europe (Czech Republic, Germany, the Netherlands, United Kingdom) and North America (both the east and west coasts of the United States) to support the Group's products and backend infrastructure. The Group manages these servers while the third party providers of hosting facilities manage their data centres and other third party suppliers bandwidth capacities needed to maintain the network infrastructure and operations.

The Group also leases servers located in North America (United States, Canada and Mexico), Latin America (Brazil and Argentina), Europe (Italy, Spain, Poland, France, Denmark, Sweden and Russia) and the Asian Pacific (Japan, Hong Kong, Singapore, Australia, India and Vietnam) on a monthly basis. Most leased servers are servers for the Group's VPN products. The Group has 59 VPN locations in 34 countries. The remaining leased servers fulfil various functions, including web servers from which the Group operates its websites, e-commerce servers procuring orders made by users on the Group's websites and redirecting them to Digital River or other e-commerce service providers, and servers powering the Group's cloud backends needed on those locations. The Group leases these servers for internet connectivity capacities under agreements with its providers. For its website and product downloads, the Group utilises content delivery networks from major providers like Akamai. The Group manages the security of its leased servers through host-based firewalls or security appliances in cloud deployments. The Group manages vulnerabilities of systems operated on leased servers, while the lessors provide physical security and hardware maintenance.

Sales and marketing

The Group's business model and high quality security products have enabled the Group to build strong brands and loyal user communities for the Group's products. As a result, the Group benefits from significant efficiencies in its marketing activities for its consumer products. Further, as a large portion of the Group's revenues are generated from subscription agreements and are renewed through auto-renewals, there is significant revenue visibility and minimal sales or marketing expense is required to maintain these users.

The Group primarily sells its consumer products directly online and primarily sells its SMB products through resellers and distributors. The Group's resellers include its SMB partners and managed service providers, and its resellers and distributors for its consumer products include certain mobile network providers (for example, for Location Labs products), certain affiliates (for example, for HMA) and big box retail stores (for example, for the Group's premium consumer antivirus products).

Consumer products

The substantial majority of the Group's desktop sales to consumers are generated through online sales. The Group's primary task in marketing is to pull consumers to its websites. Consumers are typically directed to the Group's websites from search engines. A significant portion of the Group's mobile sales are processed through the app store Google Play. On Google Play, the high ratings of the Group's products help attract new users. For example, the Group's product Avast Mobile Security has over 100 million installations and approximately five million reviews with an average rating of 4.5 out of 5.

The Group regularly publishes threat intelligence security research reports and other security blog posts, video and helpful information to attract consumers to its website from search engines in addition to advertising through video, podcasts, and industry sponsorships. The Group has a completion rate of 61% for its online videos, compared to a 41% industry average. The Group also engages on social media, with 7.7 million followers combined on Facebook, Twitter, LinkedIn, YouTube and Instagram, which is over double the Group's nearest competitor (Kaspersky, with 3.7 million followers combined on the same platforms). This engagement with users helps to drive viral marketing: users have positive experiences with these products, which they share through interactive marketing channels, including through social media, word-of-mouth recommendations and reviews.

The Group realises efficiencies in sales operations since they are predominantly online-based. The online sales model enables individual businesses and consumers to purchase products through the Group's website. The Group does not process any online payments directly, but through partners. Generally, the checkout web page (including cart, payment, email communication and vender of record) is provided by e-commerce vendors ("E-commerce Partners"). While the Group continually tests and works with payment processing competitors, its primary online third party payment processing service provider is Digital River. Digital River collects payments and user data from the transaction. In 2017, online sales procured through Digital River accounted for 36% of the Group's Billings. Other E-commerce Partners with whom the Group works include Cleverbridge and Avangate, and 47% of the Group's Adjusted Billings for the year ended 31 December 2017 were processed by E-commerce Partners. The Group does not consider its E-Commerce Partners to be resellers or distributors for internal analysis purposes or for reporting purposes, though they are the merchant of sale on record for consumer product transactions.

Although the majority of the Group's sales are direct to consumers, the Group also partners with certain resellers of its products to sell and market its solutions in certain situations, including OEMs, internet service providers and mobile service providers. For example, in the United States, the Group has partnered with major mobile network operators to implement its privacy and safety solutions such as Avast Controls & Insights and Avast Locator. These and other partnerships increase sales for the Group and also increase brand visibility. Certain of the Group's paid antivirus security products are also available as box sets at brick-and-mortar retailers such as Dixon's and Best Buy.

SMB products

The Group sells premium paid products for businesses, targeting primarily the SMB market, through partners and managed service providers that support SMBs as well as through direct online sales from its websites. In 2017, approximately 60% of SMB revenues were generated through sales made by partners. Direct online sales to SMBs are mainly made to small office or home office customers (i.e., businesses with one to ten workers) and other direct sales are mainly educational institutions (e.g., schools and universities).

The Group has approximately 9,000 active partners in its SMB unit. The in-country partner sales and marketing teams focus on both renewals of existing customers (including up-sell and cross-sell opportunities) and on first purchases of new customers. The sales and marketing teams acquire new customers by developing a pipeline of leads that they work to convert into buying customers over a prospect lifecycle, originally sourced through search, social media, webinars, regional events and other marketing campaigns. In 2017, the Group implemented a new partner program which compensates partners based on their technical skills, sales skills and annual revenue.

Managed service providers are service providers who manage and assume responsibility for a set of services to their SMB clients. The Group strategically partners with managed service providers, distributors and resellers, with the goal that such partners recommend the use of the Group's products to their SMB clients who are seeking security solutions.

Customer support

Consumer

The Group provides customer support, technological support and billing support services for its users. The Group operates a community forum on which users provide support to other users, and it also operates more traditional customer support functions. The Group has approximately 100 employees working in product technological support in-house in Prague, Czech Republic, Brno, Czech Republic and Belgrade, Serbia.

The Group has out-sourced providers of technological support for its products in addition to its own employees. The Group has oversight of agent recruitment, training and general policy with the service providers. In addition, the Group monitors individual agent performance: reviewing sample calls, recording customer satisfaction measures and conducting regular KPI reviews and governance meetings with both operational staff and management to check on quality. The Group has agreements with customer service providers to provide approximately 300 additional product technological support staff providing services to users. The Group also has premium paid customer service offerings such as Avast Total Care and AVG Go. In order to service the technological support needs of these customers, the Group has out-sourced with a service provider to engage another approximately 300 support staff.

The Group also provides billing and payment support for users. The Group makes use of shared (not dedicated) out-sourced agents for these purposes. Generally, these support services are managed by the Group's E-commerce Partners: for example, approximately 150 agents in Digital River support the Group's customers, but also support other companies' customers.

SMB

The Group offers customer support specifically tailored for its SMB customers. The Group has approximately 40 employees working in SMB technical support in-house in Prague, Czech Republic; Charlotte, North Carolina, United States and Ottawa, Canada. None of the Group's SMB support for the Group's products is out-sourced.

Geographic area

The Group operates globally, with its user footprint being the largest in the United States, Canada, Brazil, France, Germany and Russia. In the year ended 31 December 2017, approximately 35% of the Group's users were in the Americas, 48% of its users were in Europe, the Middle East and Africa, and 17% of its users were in Asia Pacific.

Research and development

The Group had research and development costs of \$75.5 million in the year ended 31 December 2017, 12% of the Group's total revenues. The Group's research and development costs were \$46.8 million for the year ended 31 December 2016 and \$23.7 million for the year ended 31 December 2015, or 14% and 9% of revenues, respectively. The Group's research and development costs consist primarily of compensation and related benefits for personnel engaged in research and development. A small portion of research and development costs and expenses is the cost of bandwidth and utilities, licence and technical service fees and depreciation of equipment and amortisation of acquired intangible assets.

As of 31 December 2017, the Group had more than 600 employees focused on R&D, representing greater than 45% of its total headcount. Of these employees, approximately 70% were located in the Czech Republic. The majority of the remaining R&D employees were located in the United States or Canada. The Group's R&D personnel focus primarily on product development and quality assurance.

The Group has teams which specifically focus on cloud technology and machine-learning capabilities. The Group has more than 50 data scientists and threat researchers, including the Avast machine-learning team. Approximately 60% of the Group's R&D employees have either a master's level degree or doctorate.

The Group invests in R&D in order to enhance and expand its product offerings. The Group's development strategy is to identify updates, features and new products based on users' needs and expectations. Additionally, a number of the Group's R&D personnel focus on quality assurance.

The Group continuously looks to identify new malware and deliver effective responses to protect users. The ThreatLab team relies heavily on sophisticated, internally-developed tools to process the substantial majority of these samples automatically. This automated AI-based infrastructure and use of machine-learning are the primary reasons that the Group can maintain a relatively small team of employees focused on daily updates of malware definitions. In addition to employees dedicated to improving the Group's core security technologies, the Group also has employees dedicated to enhancing its consumer monetisation platform.

For the predominately Czech Republic-based R&D team, the Group recruits talented individuals through a variety of techniques, including cooperation with local universities where the Group's employees regularly teach courses. The Group ranks as one of the top technology employers in the region, which further enhances its ability to recruit talented individuals. The Group is a member of key industry organisations, is heavily involved in various technological communities and regularly attends and participates in organising industry events where the Group's employees are frequent speakers. Further, the Czech Republic was identified as one of the top ten most innovative countries by the Consumer Technology Association for their 2018 International Innovation Scorecard.

Intellectual property

The Group's intellectual property rights are important to its business. The Group relies on a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third party nondisclosure and assignment agreements to protect its intellectual property and know-how. It is customarily required when their relationship with the Group begins that employees and independent contractors execute confidentiality agreements or otherwise agree to keep the Group's proprietary information confidential. The Group's policy requires that employment contracts also include clauses requiring employees to assign all of the inventions and intellectual property rights they develop in the course of their employment, or the economic benefits thereof, to the Group and to agree not to disclose or misuse any confidential information. Since some of the Group's trade secrets and know-how, such as the Group's virus databases and development tools, are stored electronically, the Group employs security systems designed to protect its servers from unauthorised external access.

As of 31 December 2017, the Group owned 144 patents, with the majority granted in the United States, and some also in other jurisdictions. As of 31 December 2017, the Group had also applied for over 70 additional patent applications which are pending in various jurisdictions, with the vast majority of them in the United States. Of the Group's patent portfolio, a total of 14 patents (and 36 pending patents) relate to antivirus technology, 14 patents (and 25 pending patents) relate to artificial intelligence and machine-learning, 43 patents (and 12 pending patents) relate to location technology and one patent (and 7 pending patents) relates to the IoT, in addition to its other mobile, PC and backend related patents.

The Group has obtained trademark registrations that it considers material to the marketing of its products, including Avast and AVG. While the Group aims to acquire adequate protection of its brand through trademark registrations in all key markets, occasionally third parties may have already registered identical or similar signs for identical or similar products or solutions. As the Group relies in part on brand names and trademark protection to enforce its intellectual property rights, barriers to the registration of the Group's brand names and trademarks in various countries may restrict its ability to promote and maintain a cohesive brand throughout key markets.

Pursuant to a licence agreement that the Group entered into in November 2008 with the Group's founders, Pavel Baudisˇ and Eduard Kucˇera, as subsequently amended, the Group was granted an exclusive, unrestricted, perpetual, worldwide, sublicensable licence to use all versions of its antivirus software created before 1 January 2007, including all virus and user databases, development and administration software tools and computer programs related to updating, supporting and distributing the antivirus software. The Group also licenses all know-how related to the development and distribution of antivirus software created by the founders before 1 January 2007. After 1 January 2007, all such activities were conducted by the Group such that all subsequent upgrades, updates and new versions of formerly developed products and newly developed products are owned by the Group. The Group pays no royalties or other fees to maintain the licence (as these were payable under the license agreement only until 31 December 2016). The licence agreement may not be terminated pursuant to its terms and may not be assigned pursuant to Czech law by the licensors. However, under Czech law, the license can be terminated if there is a material breach or if the Group ceases to use the licensed software. Given that the Group has no obligations under the licence, the Group is comfortable that there is minimal risk of this licence being terminated while the Group continues to use the software and related know-how.

The Group maintains "click-wrap" licencing agreements for its products which grant the user a non-exclusive licence to use the software and documentation for the agreed term at the time of purchase pursuant to the terms of the agreements.

Competition

The markets for the products offered by the Group are highly competitive and subject to rapid technological changes and market dynamics. It is expected that competition will continue to increase in the future.

In particular, some such competitors may make acquisitions or enter into agreements or other strategic relationships to offer more comprehensive products and/or services, and new competitors may enter the market through acquisitions, agreements or strategic or other such relationships. Further, platform vendors, such as those with operating systems or browsers, may integrate security solutions into their platforms to the exclusion of competitors or make it more difficult for competitors to attract and retain users.

The Group believes that the key competitive factors in the market include:

product quality such as detection rate and scanning speed;
size of user base;
the ability to grow into market adjacencies in the face of the flat consumer PC antivirus market;
product and brand awareness;
brand reputation, user ratings and third party reviews;
ability to develop and introduce new security functionalities, keeping up with rapid changes in malware and virus threats as well as emerging market demands;
product design and ease of use;
ability to support multiple device types and operating systems;
cost of user acquisition;
the ability to reach large groups of users;
cost of service delivery; and
pricing flexibility.

The Group faces competition from a number of companies in its consumer business due to the diversity of its product offerings. The Group's main competitors include:

antivirus companies offering free products, such as Avira, Panda and Qihoo 360 (primarily in China); vendors with a traditional paid model such as McAfee, Symantec (Norton), Bitdefender, ESET, Kaspersky Lab, Sophos, and Webroot; and Microsoft with Windows Defender;
utilities competitors such as UniBlue, Iolo, Ashampoo, and Glarysoft;
mobile security and utilities competitors such as Cheetah Mobile, Baidu, Qihoo 360, and Lookout;
personal VPN competitors such as AnchorFree, ExpressVPN, NordVPN, VyperVPN, IP Vanish, and CyberGhost;
parental controls and insights competitors such as many of the antivirus companies cited above; pure-play vendors such as Net Nanny, CyberPatrol, Qustodio, and uKnow; and mobile carriers, although currently significant channel partners for the Group, may potentially become competitors if they were to develop their own solutions for their users; and
smart home security market competitors such as hardware vendors delivering solutions through home networking equipment such as Luma, Eero, Circle, Cujo, and Keezel; established router vendors such as Netgear and Linksys; and antivirus competitors with hardware-based solutions such as Symantec, Bitdefender, and F-Secure.
SMB security market competitors include Symantec, McAfee, Sophos, Kaspersky Lab, ESET, Bitdefender, Webroot and Microsoft. The Group is also seeing competition emerge from network and cloud-based security vendors such as Barracuda, WatchGuard, Check Point, Fortinet and Cisco.

Some of these companies have significantly greater brand recognition and greater financial, technical, marketing and other resources than the Group. In particular, Microsoft has achieved success in the security market through Windows Defender, free malware protection that is included with and built into Windows computers. At present, Windows Defender is embedded in Windows 10 as a default antivirus protection, but it could become more aggressive in preventing other security providers from placing their products on the Windows platform. Similarly, Google could begin to aggressively promote its own native security solution in Android at the expense of third party solutions.

Employees

As of 31 December 2017, the Group had approximately 1,464 full time employees, of which approximately 570 worked in Prague, Czech Republic and approximately 300 worked in Brno, Czech Republic. The remaining employees are primarily located in the United States, the United Kingdom, Canada, the Netherlands and Serbia. In addition to employees, the Group had approximately 100 independent contractors and approximately 125 long-term and short-term employees as of 31 December 2017.

As of 31 December 2016, the Group had approximately 1,785 full time employees following its acquisition of AVG, and as of 31 December 2015 the Group had approximately 600 full time employees.

The Group employed over 650 engineers as of 31 December 2017, over 40% of full time employees. The Group also employed, as of the same date, over 60 data scientists and threat researchers.

The following table details the breakdown of the Group's employees by function in the years ended 31 December 2015, 2016 and 2017:

Employees by function (full time)

	Year ended 31 December
	2015	2016	2017
Consumer	60%	46%	49%
SMB	7%	16%	16%
Corporate functions(1)	33%	37%	35%
Total(2)	100%	100%	100%

(1) Includes executive management, finance, human resources, IT, legal, marketing and technology and innovation.
(2) Numbers may not sum due to rounding.

The following table details the breakdown of the Group's employees by location for the years ended 31 December 2015, 2016 and 2017:

Employees by location (full time)

	Year ended 31 December
	2015	2016	2017
Czech Republic	83%	57%	60%
Americas	11%	24%	25%
Europe (excluding the Czech Republic)	3%	18%	15%
Asia Pacific	2%	0%	0%
Total(1)	100%	100%	100%

(1) Numbers may not sum due to rounding.

Labour laws in the Czech Republic (applicable to employees but not to independent contractors) provide minimum standards regarding annual paid and unpaid leave, sick leave, maternity leave and other provisions regarding leave from work and other terms of employment. The Group contributes to pension schemes for its employees in the Czech Republic, Germany, the United States and the United Kingdom.

None of the Group's employees are represented by a labour organisation or covered by collective bargaining agreements. To date, the Group has not experienced a labour-related work stoppage. The Directors consider the Group's relations with its employees to be good.

Properties

The Group has 25 offices worldwide. The Group's offices are located in leased premises. Individual office leases vary as to their terms, rental provisions and expiration dates. The Group's principal facilities are located in Prague, Czech Republic and Brno, Czech Republic. The Group's Prague office consists of approximately 16,000 square meters of leased office space. The lease for this facility expires on 4 August 2024, with the possibility of extension upon request. The Group's Brno office consists of approximately 8,500 square meters of leased office space. The lease for this facility expires on 1 May 2020, with the possibility of extension upon request. Certain of the Group's leases have a term as short as one year while others are indefinite in length. Rent on the majority of the Group's offices is paid monthly in advance. The Group also has offices or other facilities in the United States (Kansas City, Fort Walton Beach, Emeryville, Charlotte, San Francisco, Redwood City and Brooklyn), the United Kingdom (Lincoln, Maidenhead and London), Brazil (Sao Paolo), Canada (Ottawa), Germany (Friedrichshafen, Muenchen, Darmstadt and Dusseldorf), the Netherlands (Amsterdam and Schiphol), Norway (Lysaker), Serbia (Belgrade), Switzerland (Basel and Baar), Hong Kong, China (Beijing), Taiwan (Taipei), Russia (Moscow and Novosibirsk) and Japan (Tokyo).

Environment

The Group believes that it does not have any material environmental compliance costs or environmental liabilities.

Insurance

The Group maintains insurance coverage for property damage, professional liability and commercial general liability. The Group also maintains business travel insurance and directors' and officers' insurance. The Group believes that its current insurance coverage is appropriate for its business, in respect of its level and applicable excesses and deductibles. The Group does not have any material outstanding insurance claims.

Dividend policy

The Group may revise its dividend policy from time to time.

Legal proceedings

See paragraph 18 of Part 14—"Additional Information".

Regulatory matters

The Group is subject to the laws and regulations of a number of countries covering a wide variety of areas affecting international transactions, including data protection and privacy, consumer protection, export controls, anti-corruption legislation, labour laws, laws related to internet commerce, and information technology.

PART 7 DIRECTORS AND CORPORATE GOVERNANCE

Directors

The following table lists the names, positions and ages of the Directors. Each of the Directors became a director of the Company on 9 May 2018.

Name	Age	Position
John Schwarz	67	Independent Chairman
Vincent Steckler	59	Chief Executive Officer
Ondrej Vlcek	40	Executive Vice President, General Manager of Consumer, Chief
		Technology Officer
Philip Marshall	48	Chief Financial Officer
Pavel Baudisˇ	58	Non-Executive Director
Eduard Kucˇera	65	Non-Executive Director
Lorne Somerville	54	Non-Executive Director
Warren Finegold	61	Senior Independent Non-Executive Director
Ulf Claesson	65	Independent Non-Executive Director
Erwin Gunst	58	Independent Non-Executive Director

The business address of each of the Directors is 110 High Holborn, London WC1V 6JS, United Kingdom.

The management experience and expertise of each of the Directors is set out below.

John Schwarz (Independent Chairman)

Mr. Schwarz has served as one of the Group's Directors since December 2011 and as Chairman of the Group since January 2014. Mr. Schwarz will be the Independent Chairman of the Company at Admission. Since May 2010, Mr. Schwarz has served as co-founder and Chief Executive Officer of Visier, Inc., a business analytics software firm. Mr. Schwarz joined SAP AG through its acquisition of Business Objects S.A. in January 2008 and served on the executive board of SAP from March 2008 to February 2010, where he led the successful integration of the two companies. From September 2005 until 2010, Mr. Schwarz was the Chief Executive Officer of Business Objects S.A., later SAP Business Objects, a provider of business intelligence software and services that was acquired by SAP in January 2008. Before joining Business Objects, Mr. Schwarz served as President and Chief Operating Officer of Symantec Corporation from December 2001 to September 2005. Prior to joining Symantec, from January 2000 to November 2001, Mr. Schwarz served as President and Chief Executive Officer of Reciprocal Inc., which provided business-to-business secure e-commerce services to the media industry. Before joining Reciprocal, Mr. Schwarz spent 25 years at IBM Corporation, working in various development, manufacturing, sales and marketing roles. His last position was general manager of IBM's Industry Solutions unit, a worldwide organisation focused on building business applications and related services for IBM's large industry customers. Mr. Schwarz currently serves as a director of Synopsys, Inc. and Teradata, Inc. in addition to his role as an advisor to Dalhousie University in Halifax, Nova Scotia. Mr. Schwarz holds a B.S. in Computer Science from the University of Manitoba, a Diploma in Business Administration from the University of Toronto, and an honorary Ph.D. from Dalhousie University.

Vincent Steckler (Chief Executive Officer)

Mr. Steckler has served as Chief Executive Officer and Director of the Group since January 2009. Prior to joining the Group, Mr. Steckler was the Senior Vice President of Worldwide Consumer Sales at Symantec Corporation, where he was in charge of multi-channel international consumer sales valued at \$2.0 billion. Mr. Steckler joined Symantec in 2000 as Vice President of Public Sector Business and started Symantec's business of serving U.S. local, state and federal governments. Mr. Steckler also served over two years as Symantec's Vice President for Asia Pacific and Japan and was responsible for all enterprise and consumer business in that region. Prior to joining Symantec, Mr. Steckler had 20 years of experience in software development, systems analysis and engineering, project management, and business development. Mr. Steckler holds two B.S.'s from the University of California, Irvine, one in Mathematics and the other in Information and Computer Science.

Ondrej Vlcek (Executive Vice President and General Manager of Consumer, and Chief Technology Officer)

Mr. Vlcek serves as the Group's Executive Vice President, the General Manager for the Consumer business and Chief Technology Officer ("CTO"), leading the largest business unit at Avast. Mr. Vlcek has architected the Group's cloud based security network for the newly announced IoT security solutions and has led his team to significant growth. Serving as the Group's CTO since 2009, Mr. Vlcek has pioneered Avast's transformation from a traditional PC antivirus vendor into the leading provider of next-gen security solutions it is today. In 2003, Mr. Vlcek led the team that developed one of the first antivirus programs for Windows. He has worked for the Group since 1996. Mr. Vlcek holds an MS in Mathematics from Czech Technical University in Prague.

Philip Marshall (Chief Financial Officer)

Mr. Marshall has served as the Chief Financial Officer and Director of the Group since February 2018. Prior to joining the Group, Mr. Marshall was the Chief Financial Officer and Board Member at Exova Group plc from 2015 to 2017. Mr. Marshall was a Non-Executive Director and Audit Committee Member at PhotonStar LED plc from 2013 to 2016 and Chief Financial Officer and Board Member at Wood Mackenzie from 2014 to 2015. Prior to this, Mr. Marshall worked at General Electric from 1996 to 2013. He also currently serves as a Supervisory Board and Audit Committee Member at Waberer's International. Mr. Marshall holds a BA in Accounting Studies from University of West London.

Rene-H Bienz was the Group's Chief Financial Officer from October 2014 until February 2018. Mr. Bienz has agreed to continue working with the Group as finance advisor to the CEO until the end of 2018 to assist with the transition and on-boarding of Mr. Marshall.

Pavel Baudisˇ (Non-Executive Director)

Mr. Baudisˇ is one of the Group's co-founders and has served as a Director of the Group since the incorporation of Avast Software a.s. in December 2006. Mr. Baudisˇ will be a Non-Executive Director of the Company at Admission. In 1988, Mr. Baudisˇ wrote the original program from which the Group's portfolio of products is generated. Since 1991, Mr. Baudisˇ has played a leading role in the development of the Group's business with its predecessor entity, ALWIL Software partnership. Prior to co-founding Avast, Mr. Baudisˇ was a graphics specialist at the Czech Computer Research Institute (VUMS). Mr. Baudisˇ holds an M.S. in Information Technology from the Prague School of Chemical Engineering.

Eduard Kucˇera (Non-Executive Director)

Dr. Kucˇera is one of the Group's co-founders and has served as a Director of the Group from the incorporation of Avast Software a.s. in December 2006, including as Chairman from January 2007 to February 2014. Dr. Kucˇera will be a Non-Executive Director of the Company at Admission. Since 1991, Dr. Kucˇera was responsible for the activities of the Group's predecessor entity, ALWIL Software partnership. From 1991 to 2009, Dr. Kucˇera served as Chief Executive Officer of the Group, directing day-to-day operations that included the transition to a free software distribution model in 2002. Prior to co-founding the Group, Dr. Kucˇera was a computer hardware specialist at the Czech Computer Research Institute (VUMS). Dr. Kucˇera holds a doctorate in experimental physics from the Charles University in Prague.

Lorne Somerville (Non-Executive Director)

Mr. Somerville has been one of the Group's Directors since 2014. Mr. Somerville will be a Non-Executive Director of the Company at Admission. Mr. Somerville is a Managing Partner at CVC Capital Partners Limited ("CVC Capital Partners"), having joined CVC Capital Partners in 2008 and led the team investing on behalf of funds advised by CVC Capital Partners Advisory Company (Luxembourg) S.à r.l. in 2014. Mr. Somerville is the Co-Head of the CVC Strategic Opportunities Fund and is the Head of the CVC Capital Partners Telecommunications, Media, and Technology team. Prior to joining CVC Capital Partners, he worked for UBS, where he was Joint Global Head of Telecommunications and Head of the European Communications Group, and Swisscom AG as Head of Swisscom International. Lorne holds an MA in Computer Sciences from the University of Cambridge and an MBA from IMD, Lausanne.

Warren Finegold (Senior Independent Non-Executive Director)

Mr. Finegold has been one of the Group's Directors since February 2015. Mr. Finegold will be the Senior Independent Director of the Company at Admission. Mr. Finegold retired from the Vodafone Group Executive Committee in June 2016 having served for 10 years, most recently as Group Business Development Director. He had previously served as Group Strategy and Business Development Director and CEO Global Business Development. While a member of the Executive Committee, Mr. Finegold was responsible for strategy, business development, mergers and acquisitions and partner networks. From 1985 to 1995, he was an Executive Director at Goldman Sachs International in New York and London. From 1996 to 2006, he served as a Managing Director of UBS Investment Bank and head of its technology team in Europe. He has been a Member of Supervisory Board at VodafoneZiggo Group B.V. since 31 December 2016. He has been an Independent Non-Executive Director at Inmarsat plc since August 2017. He has been a Non-Executive Director at UBM plc since 19 May 2017 and its Senior Independent Director since January 2018. Mr. Finegold holds a M.A. in Philosophy, Politics and Economics from Oxford University and a Masters degree in Business Administration from London Business School.

Ulf Claesson (Independent Non-Executive Director)

Mr. Claesson has been one of the Group's Directors since October 2012. Mr. Claesson will be an Independent Non-Executive Director of the Company at Admission. Since 2009, Mr. Claesson has served as a Partner at BLR & Partners AG, a private equity firm in Zurich, Switzerland where he advises technology companies and investors. In addition, since 1997, Mr. Claesson has served as founder and Managing Director of Whitecap GmbH and Whitecap LLP. From 2006 to 2009, Mr. Claesson served as General Manager and Vice President at Hewlett-Packard Corporation. Prior to founding Whitecap in 1997, Mr. Claesson worked for 20 years at IBM Corporation serving in various engineering, sales, management and director positions. Mr. Claesson currently serves as a member of the board of the Swiss Federal Commission for Innovation and Technology. He is also a lecturer at the Swiss Federal Institute of Technology in Zurich. Mr. Claesson holds a M.Sc. from Chalmers University of Technology.

Erwin Gunst (Independent Non-Executive Director)

Mr. Gunst has been one of the Group's Directors since October 2012. Mr. Gunst will be an Independent Non-Executive Director of the Company at Admission. From July 2008 to March 2010, Erwin served as Chief Operating Officer and a Member of the Executive Board of SAP AG where he was responsible for global operations, information technology, human resources and the management of all SAP Labs worldwide. From October 2004 to July 2008, Erwin served as a Corporate Officer of SAP AG and President of Customer and Solutions Operations for Europe, the Middle East and Africa. From 1988 to 2004, Erwin served in a variety of positions with SAP, including Managing Director of SAP AG subsidiaries in Belgium, Switzerland and the United Kingdom. Erwin holds a M.S. degree in Commercial Engineering from the Free University (Solvay) in Brussels, Belgium.

Corporate governance

UK Corporate Governance Code

The Board is committed to the highest standards of corporate governance. As of the date of this Prospectus and on and following Admission, the Board will comply with the UK Corporate Governance Code (the "Governance Code") published in April 2016 by the Financial Reporting Council except as set out below. As envisaged by the Governance Code, the Board has established an audit and risk committee, a nomination committee and a remuneration committee. If the need should arise, the Board may set up additional committees as appropriate.

The Governance Code recommends that at least half of the board of directors of a UK-listed company, excluding the chairman, should comprise non-executive directors determined by the board to be independent in character and judgment and free from relationships or circumstances which may affect, or could appear to affect, the director's judgment. As six of the Directors are not independent, the Company will not at Admission comply with the recommendation of the Governance Code that at least half the board of directors, excluding the chairman, should comprise non-executive directors. The Company intends to achieve full compliance with the Governance Code over time.

The Board considers its Independent Non-Executive Directors and Senior Independent Director to bring strong judgment and considerable knowledge and experience to the Board's deliberations. The Governance Code requires a company to state its reasons if it determines that a director is independent in certain circumstances, including where a director holds cross-directorships or participates in the company's share option or performance related pay scheme. Although Mr. Schwarz, Mr. Finegold, Mr. Claesson and Mr. Gunst participate in the Group's existing share option plan, it should be noted (as mentioned in paragraph 8.1.1 of Part 14—"Additional Information") that this plan will no longer continue to operate following Admission. Further, the other Directors have concluded that the judgement, experience and challenging approach of each of them should ensure that they make a significant contribution to the work of the Board and its committees. Accordingly, the Company is satisfied that Mr. Schwarz, Mr. Finegold, Mr. Claesson and Mr. Gunst are independent as defined in the Governance Code and free from any business or other relationship which could materially interfere with the exercise of their independent judgement. The Governance Code provides that the chairman of a company should be independent on appointment. The Board further considers that Mr. Schwarz, the Chairman, was independent upon appointment .

The Governance Code also recommends that the Board appoint one of the independent non-executive directors to be the senior independent director. On Admission, Warren Finegold will fulfil this position. As noted above, the Board considers Warren Finegold to be independent.

The Group believes the Board and Committees at Admission will act in the best interests of the Company and all its future shareholders, and will provide appropriate corporate governance and experience. The Board believes that the non-independent directors will ensure stability and continuity, as well as relevant experience and expertise, and that the independent Non-Executive Directors of the Company will bring strong judgment and considerable knowledge to the Board's deliberations.

Audit and risk committee

The audit and risk committee's role is to assist the Board with the discharge of its responsibilities in relation to financial reporting, including reviewing the Group's annual and half year financial statements and accounting policies, internal and external audits and controls, reviewing and monitoring the scope of the annual audit and the extent of the non-audit work undertaken by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the internal audit, internal controls, whistleblowing, cybersecurity controls and readiness and fraud systems in place within the Group. The audit and risk committee will normally meet not less than three times a year.

The audit and risk committee is chaired by Erwin Gunst and its other members are Ulf Claesson and Warren Finegold. The Governance Code recommends that all members of the audit and risk committee be non-executive directors, independent in character and judgment and free from any relationship or circumstance which may, could or would be likely to, or appear to, affect their judgment and that one such member has recent and relevant financial experience. The Board considers that the Company complies with the requirements of the Governance Code in this respect.

Nomination committee

The nomination committee assists the Board in reviewing the structure, size, performance and composition of the Board. It is also responsible for reviewing succession plans for the Directors, including the Chairman and Chief Executive and other senior executives. The nomination committee will normally meet not less than once a year.

The nomination committee is chaired by Warren Finegold and its other members are John Schwarz and Erwin Gunst. The Governance Code recommends that a majority of the nomination committee be non-executive directors, independent in character and judgment and free from any relationship or circumstance which may, could or would be likely to, or appear to, affect their judgment. The Board considers that the Company complies with the requirements of the Governance Code in this respect.

Remuneration committee

The remuneration committee recommends the Group's policy on executive remuneration, recommends the levels of remuneration for Executive Directors, the Chairman and other senior executives, grants awards under the Group's incentive plans and prepares an annual remuneration report for approval by the Shareholders at the annual general meeting. The remuneration committee will normally meet not less than twice a year.

The remuneration committee is chaired by Ulf Claesson, and its other members are John Schwarz and Warren Finegold. The Governance Code recommends that all members of the remuneration committee be non-executive directors, independent in character and judgment and free from any relationship or circumstance which may, could or would be likely to, or appear to, affect their judgment. The Board considers that the Group complies with the requirements of the Governance Code in this respect.

Share dealing code

The Company has adopted, with effect from Admission, a code of securities dealings in relation to the Shares which is based on the requirements of the Market Abuse Regulation. The code adopted will apply to the Directors and other relevant employees of the Group.

Relationship Agreements with Sybil and the Founders

On 10 May 2018, the Company entered into a relationship agreement with Sybil Holdings S.à r.l. ("Sybil"), which is owned by funds advised by affiliates of CVC Capital Partners Advisory Company (Luxembourg) S.à r.l. (the "Sybil Relationship Agreement"), which will take effect on Admission. Pursuant to the Sybil Relationship Agreement, Sybil shall, and shall (so far as it is legally able to do so) procure that certain of its affiliates (excluding any portfolio or investee companies in which funds advised by affiliates of CVC Capital Partners Advisory Company (Luxembourg) S.à r.l hold an interest or investment) ("CVC Affiliates") shall:

(a) (i) conduct all transactions, agreements or arrangements entered into between any member of the Group and Sybil and/or any CVC Affiliates (or the enforcement, implementation or amendment thereof) and all relationships between any member of the Group and Sybil and/or any CVC Affiliates at arm's length and on normal commercial terms and (ii) where applicable, enter into all transactions, agreements or arrangements in accordance with the related party transaction rules set out in Chapter 11 of the listing rules of the FCA made under section 74(4) of the FSMA (the "Listing Rules");
(b) not take any action which would have the effect of preventing the Company or any other member of the Group from carrying on its business independently of Sybil and/or any CVC Affiliates;
(c) not take any action which would have the effect of preventing the Company or any other member of the Group from complying with its obligations under the Listing Rules, the Disclosure Guidance and Transparency Rules of the FCA (the "DGTRs"), Regulation (EU) 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (the "Market Abuse Regulation"), the FSMA, the Financial Services Act 2012 (the "FS Act") or the principles of good governance set out in the UK Corporate Governance Code issued by the Financial Reporting Council from time to time in force (the "Governance Code") save in respect of any matters of non-compliance with the UK Corporate Governance Code which are disclosed in this Prospectus or in the Company's annual report or which have been agreed to in writing by a majority of the Independent Non-Executive Directors;
(d) not exercise any of their voting rights in a manner which would prevent the Company from making decisions for the benefit of the Shareholders taken as a whole;
(e) not exercise any of their voting rights in a manner that would require the Company to operate or make decisions solely for the benefit of Sybil and/or any CVC Affiliates;
(f) not propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules;
(g) without prejudice to (f) above, not exercise any of their voting rights to vary the articles of association of the Company to be adopted upon Admission (the "Articles") which would:
(i) be contrary to the maintenance of the Company's independence (including the Company's ability to operate and make decisions independently of Sybil and/or any CVC Affiliates); or
(ii) prevent the election of independent directors; or
(iii) be inconsistent with, undermine or breach any provision of the Sybil Relationship Agreement or the Listing Rules, the DGTRs or the Market Abuse Regulation; and
(h) abstain from voting on any resolution required by paragraph 11.1.7R(3) of the Listing Rules to approve a related party transaction where Sybil or any of its associates is the related party for the purposes of the Listing Rules and, in any event that any of Sybil's associates are shareholders at the relevant time, Sybil shall take all reasonable steps to ensure that such associates also abstain from voting on such resolution.

In addition, pursuant to the Sybil Relationship Agreement:

(a) Sybil has agreed that, for a period of two years from Admission or, if earlier, the date which is three months after the date of termination of the Sybil Relationship Agreement, subject to limited exceptions it shall not, and will (insofar as it is legally able to do so) direct the CVC Affiliates not to, solicit for service or employment any of the executive Directors of the Company or any other member of the executive management team of the Group, in each case without the prior written consent of the Company;

(b) Sybil is entitled to appoint one natural person to be a non-executive director of the Company for so long as Sybil and/or any CVC Affiliates hold in aggregate 10% or more of the voting rights attaching to the issued share capital of the Company;
(c) for so long as Sybil and/or CVC Affiliates hold in aggregate 10% or more of the voting rights attaching to the issued share capital of the Company, the Company shall, if requested by Sybil, procure that the director appointed by Sybil is permitted to attend as an observer at the Board's Nomination Committee, Audit Committee and Remuneration Committee;
(d) the Company has agreed, to the extent permitted by applicable laws and regulation, to provide certain information to Sybil on an ongoing basis in order to enable Sybil and certain connected persons to complete any tax return, compilation or filing or to comply with any audit or regulatory request or any other laws or regulations which apply to Sybil or any such person;
(e) the Company has agreed, subject to compliance with relevant regulatory requirements, to procure that the Group's senior management shall provide reasonable assistance to Sybil or any CVC Affiliate in relation to any proposed sale of Shares by Sybil or any CVC Affiliate at any time following Admission; and
(f) the Company agrees not to undertake any transaction in the Shares which may reasonably be expected to give rise to an obligation for Sybil or any CVC Affiliate (and/or persons with whom they are acting in concert within the meaning of the UK City Code on Takeovers and Mergers (the "City Code")) to make a general offer in accordance with Rule 9 of the City Code unless the Company has first obtained a waiver of Rule 9 in accordance with the City Code, or the Company has otherwise obtained the necessary waivers or consents from the Takeover Panel to prevent such obligations from applying.

On 10 May 2018, the Company entered into a relationship agreement with Pavel Baudisˇ and Eduard Kucˇera and their respective investment vehicles PaBa Software s.r.o. and Pratincole Investments Limited (each a "Founder" and together, the "Founders") (the "Founder Relationship Agreement", and, together with the Sybil Relationship Agreement, the "Relationship Agreements"), which will take effect on Admission. Pursuant to the Founder Relationship Agreement, each Founder shall, and shall (so far as he or it is legally able to do so) procure that any of his or its associates shall:

(a) conduct all transactions, agreements or arrangements entered into between any member of the Group and such Founder and/or any of his or its associates (or the enforcement, implementation or amendment thereof) and all relationships between any member of the Group and such Founder and/or any of his or its associates at arm's length and on normal commercial terms and where applicable, enter into all transactions, agreements or arrangements in accordance with the related party transaction rules set out in Chapter 11 of the Listing Rules;
(b) not take any action which would have the effect of preventing the Company or any other member of the Group from carrying on its business independently of the Founders and/or any of their associates;
(c) not take any action which would have the effect of preventing the Company or any other member of the Group from complying with its obligations under the Listing Rules, the DGTRs, the Market Abuse Regulation, the FSMA, the FS Act or the principles of good governance set out in the Governance Code (save in respect of any matters of non-compliance with the Governance Code which are disclosed in this Prospectus or in the Company's annual report or which have been agreed to in writing by a majority of the Independent Non-Executive Directors);
(d) not exercise any of their voting rights in a manner which would prevent the Company from making decisions for the benefit of the Shareholders taken as a whole;
(e) not exercise any of their voting rights in a manner that would require the Company to operate or make decisions solely for the benefit of any of the Founders and/or any of their associates;
(f) not propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules;
(g) without prejudice to (f) above, not exercise any of their voting rights to vary the Articles which would:
(i) be contrary to the maintenance of the Company's independence (including the Company's ability to operate and make decisions independently of the Founders and/or any of their associates); or
(ii) prevent the election of independent directors; or
(iii) be inconsistent with, undermine or breach any provision of the Founder Relationship Agreement or the Listing Rules, the DGTRs or the Market Abuse Regulation; and
(h) abstain from voting on any resolution required by paragraph 11.1.7R(3) of the Listing Rules to approve a related party transaction where such Founder or any of his or its associates is the related party for the purposes of the Listing Rules.

In addition, pursuant to the Founder Relationship Agreement:

(a) each Founder has undertaken that, until the later of the termination of the Founder Relationship Agreement and the date falling two years after Admission, he or it shall not, and will procure (insofar as is within his or its power or control) that any of his or its associates shall not, operate, establish, own or acquire a Competing Business. This undertaking shall not prohibit, after Admission, either of Mr. Baudisˇ or Mr. Kucˇera (together with their connected founder investment vehicle) from being entitled to acquire up to 5% in aggregate of the shares of any class of any company engaged in business that would constitute a Competing Business provided the shares of such company are listed on a recognised stock exchange. For the purposes of this Prospectus, "Competing Business" means a company, an undertaking, a business, a business operation or other enterprise or entity which from time to time itself or through one or more of its subsidiary undertakings, operates in the software anti-virus or cyber-security sector, or offers any products or services which compete with such products or services as are offered or marketed by the Group at the date of the Founder Relationship Agreement;
(b) each Founder has agreed that, during the period from the date of the Founder Relationship Agreement to the later of: (i) the termination of such agreement or (ii) the date which is two years after the date of Admission, subject to limited expectations, he or it shall not, and will procure (insofar as is within his or its power or control) that any of his or its associates shall not solicit for service or employment any employee of the Group;
(c) the Founders are jointly entitled to appoint: (i) one natural person to be a non-executive director of the Company for so long as the Founders and/or their associates hold in aggregate 10% or more (but less than 20%) of the voting rights attaching to the issued share capital of the Company; and (ii) two natural persons to be non-executive directors for so long as the Founders and/or their associates hold 20% or more of the voting rights attaching to the issued share capital of the Company;
(d) for so long as the Founders hold in aggregate 10% or more of the voting rights attaching to the issued share capital of the Company, the Company shall, if requested by the Founders, procure that one of the directors appointed by the Founders is permitted to attend as an observer at the Board's Nomination Committee, Audit Committee and Remuneration Committee;
(e) if, at any time after Admission, either of Mr. Baudisˇ and his connected founder investment vehicle on the one hand and Mr. Kucˇera and his connected founder investment vehicle on the other hand: (i) is in material breach of the Founder Relationship Agreement; or (ii) together with any of his associates, holds, in aggregate, fewer than 5% of the voting rights attaching to the issued share capital of the Company, such Founder shall cease to be jointly entitled, and the other Founders shall become entitled, to appoint (and remove and reappoint) directors or an observer to the committees as described above; and
(f) the Company has agreed, to the extent permitted by applicable laws and regulation, to provide certain information to each Founder on an ongoing basis in order to enable such Founder or any of his associates to complete any tax return, compilation or filing or to comply with any other laws or regulations which apply to such Founder or any of his or its associates.

Conflicts of interest

programs related to updating, supporting and distributing the antivirus software. The Group also licenses all know-how related to the development and distribution of antivirus software created by the founders before 1 January 2007. After 1 January 2007, all such activities were conducted by the Group such that all subsequent upgrades, updates and new versions of formerly developed products and newly developed products are owned by the Group. The Group pays no royalties or other fees to maintain the licence (as these were payable under the license agreement only until 31 December 2016).

Save as set out in the paragraph above, there are no potential conflicts of interest between any duties owed by the Directors to the Company and their private interests or other duties.

PART 8 SELECTED FINANCIAL INFORMATION

The selected financial information set out below has been extracted without material amendment from Section B and Section D of Part 11—"Historical Financial Information" of this Prospectus, where it is shown with important notes describing some of the line items.

Group consolidated income statement

	Group
	Year ended 31 December
	2015	2016	2017
		(in \$ millions)
Revenues	251.0	340.7	652.9
Cost of revenues	(72.8)	(112.1)	(232.8)
Gross profit	178.2	228.6	420.1
Operating costs:
Sales and marketing	(29.0)	(59.6)	(121.4)
Research and development	(23.7)	(46.8)	(75.5)
General and administrative	(25.9)	(90.3)	(98.9)
Total operating costs	(78.6)	(196.7)	(295.8)
Operating profit (loss)	99.6	31.9	124.3
Analysed as:
Underlying Operating Profit	165.7	183.8	299.7
Share-based payments	(6.1)	(2.7)	(7.7)
Exceptional items	(0.8)	(69.8)	(34.8)
Amortisation of acquisition intangible items	(59.2)	(79.4)	(132.9)
Finance income and (expenses), net	(27.9)	(12.4)	(153.2)
Profit (loss) before tax	71.7	19.5	(28.9)
Income tax	(0.2)	5.1	(4.9)
Profit (loss) for the financial year	71.5	24.6	(33.8)

Group consolidated balance sheet

	Group
	As at 31 December
	2015	2016	2017
		(in \$ millions)
Assets
Current assets
Cash and cash equivalents	141.2	240.7	176.3
Trade and other receivables	34.7	71.4	93.2
Prepaid expenses	3.1	14.8	35.8
Inventory	—	—	0.5
Tax receivables	1.6	3.4	7.5
Other financial assets	0.4	2.0	1.0
Total current assets	181.0	332.3	314.3
Non-current assets
Property, plant and equipment	10.1	34.7	29.5
Intangible assets	255.5	492.3	394.3
Deferred tax asset	6.4	46.9	66.3
Other financial assets	0.4	3.6	1.9
Prepaid expenses	1.5	1.8	0.5
Goodwill	720.5	1,895.8	1,986.7
Total non-current assets	994.4	2,475.1	2,479.2
Total assets	1,175.4	2,807.4	2,793.5
Shareholders' equity and liabilities
Current liabilities
Trade and other payables	9.5	44.3	35.4
Lease liability	0.3	1.6	1.7
Provisions	1.0	27.9	6.2
Income tax liability	9.6	25.0	28.1
Deferred revenues	121.9	201.1	324.3
Other current liabilities	13.5	81.1	38.7
Term loan	263.1	81.5	92.5
Financial liability	—	0.3	—
Total current liabilities	418.9	462.8	526.9
Non-current liabilities
Lease liability	—	4.3	3.3
Provisions	0.2	1.6	1.2
Deferred revenues	15.1	30.0	54.5
Term loan	—	1,476.5	1,688.8
Financial liability	0.5	—	3.2
Other non-current liabilities	—	0.9	2.2
Deferred tax liability	46.4	106.8	78.3
Total non-current liabilities	62.2	1,620.1	1,831.5
Shareholders' equity
Share capital	565.3	565.3	371.7
Share premium, statutory and other reserves	70.7	73.1	3.3
Translation differences	—	2.9	1.3
Retained earnings	57.9	82.5	57.9
Equity attributable to equity holders of the parent	693.9	723.8	434.2
Non-controlling interest	0.4	0.7	0.9
Total shareholders' equity	694.3	724.5	435.1

Total shareholders' equity and liabilities	1,175.4	2,807.4	2,793.5

Group consolidated cash flow statement

	Group
		Year ended 31 December
	2015	2016	2017
		(in \$ millions)
Cash flows from operating activities
Profit (loss) for the financial year	71.5	24.6	(33.8)
Non-cash adj. to reconcile profit to net cash flows:
Income tax Depreciation	0.2 3.3	(5.1) 6.8	4.9 15.4
Impairment	—	15.9	—
Amortisation	59.9	81.1	136.6
Loss on disposal of property, plant and equipment	—	—	0.7
Movement of provisions and allowances	(0.4)	13.6	(17.8)
Interest income	—	—	(0.1)
Interest expense, changes of fair values of derivatives and other non-cash financial
expense	23.2	39.5	96.3
Shares granted to employees	6.1	2.7	7.7
Effect of exchange rate changes on cash and cash equivalents held in foreign
currencies	2.6	—	3.4
Unrealised foreign exchange gains and losses and other non-cash transactions	(0.2)	(22.8)	56.0
Working capital adjustments:
(Increase)/Decrease in trade and other receivables	(6.7)	2.3	(45.1)
Increase/(Decrease) in trade and other payables	6.4	10.8	(10.6)
Increase in deferred revenues	36.4	76.2	147.7
Income tax paid	—	(21.0)	(54.8)
Net cash flows from operating activities	202.3	224.6	306.5
Cash flows from investing activities
Acquisition of property and equipment	(8.5)	(8.6)	(10.1)
Acquisition of intangible assets	(3.7)	(0.6)	(5.8)
Investment in subsidiary, net of cash acquired	(16.3)	(1,236.2)	(157.6)
Settlement of contingent consideration	(2.0)	(4.6)	(1.0)
Restricted cash	—	—	0.5
Interest received	—	—	0.2
Net cash used in investing activities	(30.5)	(1,250.0)	(173.8)
Cash flows from financing activities
Capital distribution	—	—	(264.8)
Exercise of options	—	—	3.0
Repayment of borrowings	(137.1)	(27.1)	(67.8)
Proceeds from borrowings	—	1,182.8	214.0
Interest paid	(16.8)	(29.4)	(77.6)
Lease repayments	(0.4)	(1.4)	(0.5)
Net cash used in financing activities	(154.3)	1,124.9	(193.7)
Net increase/(decrease) in cash and cash equivalents	17.5	99.5	(61.0)
Effect of exchange rate changes on cash and cash equivalents held in foreign
currencies	(2.6)	—	(3.4)
Cash and cash equivalents at beginning of period	126.3	141.2	240.7
Cash and cash equivalents at end of period	141.2	240.7	176.3

AVG consolidated income statement

	AVG Year ended 31 December

	2015	2016
	(in \$ millions)
Revenues	425.8	418.6
Cost of revenues	(64.4)	(85.8)
Gross profit	361.4	332.8
Operating costs:
Sales and marketing	(126.6)	(123.2)
Research and development	(88.4)	(91.5)
General and administrative	(69.1)	(118.3)
Total operating costs	(284.1)	(333.0)
Operating profit (loss)	77.3	(0.2)
Analysed as:
Underlying Operating Profit	132.6	131.6
Share-based payment	(15.3)	(14.8)
Exceptional items	(9.0)	(86.9)
Amortisation of acquisition intangible items	(31.0)	(30.1)
Finance income and (expenses), net	(16.7)	(24.1)
Profit (loss) before tax	60.6	(24.3)
Income tax	(11.4)	(4.1)
Profit (loss) for the financial year	49.2	(28.4)

AVG consolidated balance sheet

	AVG
		As at 31 December
	2015	2016
		(in \$ millions)
Assets
Current assets
Cash and cash equivalents	123.8	33.2
Trade and other receivables	44.0	38.0
Prepaid expenses	16.6	17.6
Inventory	1.0	—
Tax receivables	8.7	2.1
Other financial assets	27.3	1.7
Total current assets	221.4	92.6
Non-current assets
Property, plant and equipment	23.5	23.9
Intangible assets	105.7	76.3
Deferred tax asset	36.6	43.1
Other financial assets	0.8	3.1
Prepaid expenses	4.0	2.8
Goodwill	296.8	297.1
Total non-current assets	467.4	446.3
Total assets	688.8	538.9
Shareholders' equity and liabilities
Current liabilities
Trade and other payables	33.4	25.6
Lease liability	1.8	1.6
Provisions	4.1	26.9
Income tax liability	1.1	6.0
Deferred revenues	167.1	157.4
Other current liabilities	90.3	22.4
Term loan	2.3	38.5
Financial liability	1.8	0.1
Total current liabilities	301.9	278.5
Non-current liabilities
Lease liability	4.1	4.3
Provisions	1.0	0.9
Deferred revenues	33.0	29.9
Term loan	212.8	—
Financial liability	2.3	—
Other non-current liabilities	5.4	2.7
Deferred tax liability	28.7	27.3
Total non-current liabilities	287.3	65.1
Shareholders' equity
Share capital	0.7	0.7
Share premium, statutory and other reserves	(49.9)	2.6
Treasury shares	(62.8)	—
Translation differences	(14.2)	(4.2)
Retained earnings	225.8	196.2
Equity attributable to equity holders of the parent	99.6	195.3

Total shareholders' equity and liabilities	688.8	538.9

AVG consolidated cash flow statement

	AVG
		Year ended 31 December
	2015	2016
Cash flows from operating activities		(in \$ millions)
Profit / (Loss) for the financial year	49.2	(28.4)
Non-cash adj. to reconcile profit to net cash flows:
Income tax	11.4	4.1
Depreciation	9.8	11.4
Impairment	—	0.1
Amortisation	39.3	36.0
(Gain) / Loss on disposal of property and equipment	—	(0.2)
Movement of provisions and allowances	(3.0)	23.1
Interest income	(0.1)	(0.1)
Interest expense, changes of fair values of derivatives and other non-cash financial expense	10.0	24.1
Shares granted to employees	15.3	37.0
Effect of exchange rate changes on cash and cash equivalents held in foreign
currencies	0.2	2.6
Unrealised foreign exchange gains and losses and other non-cash transactions Working capital adjustments:	1.3	7.1
(Increase)/Decrease in trade and other receivables	(14.9)	1.9
Increase/(Decrease) in trade and other payables	4.3	(2.7)
(Decrease) in deferred revenues	(1.8)	(12.7)
Income tax paid	(6.1)	(2.2)
Net cash flows from operating activities	114.9	101.1
Cash flows from investing activities
Acquisition of property and equipment	(9.0)	(12.4)
Acquisition of intangible assets	(5.6)	(6.4)
Proceeds from sale of property and equipment	0.2	0.5
Investment in subsidiary, net of cash acquired	(34.5)	—
Settlement of contingent consideration	(22.1)	(25.8)
Settlement of deferred consideration	(2.2)	(2.1)
Restricted cash	(9.3)	—
Interest received	0.1	0.1
Net cash used in investing activities	(82.4)	(46.1)
Cash flows from financing activities
Capital distribution	—	—
Exercise of share options	11.2	9.2
Excess tax benefit from options	0.9	1.3
Repayment of borrowings	(2.3)	(96.1)
Interest paid	(16.3)	(11.7)
Debt issuance costs	(0.7)	—
Location Labs Class B redemption payments	(25.2)	(16.8)
Repurchases of own shares	(14.6)	(26.5)
Lease repayments Net cash used in financing activities	(0.4) (47.4)	(2.3) (143.0)

Net (decrease) in cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents held in foreign	(14.9)	(88.0)
currencies	(0.2)	(2.6)
Cash and cash equivalents at beginning of period	138.9	123.8
Cash and cash equivalents at end of period	123.8	33.2

PART 9 OPERATING AND FINANCIAL REVIEW

This Part 9—"Operating and Financial Review" should be read in conjunction with Part 2—"Presentation of Financial and Other Information", Part 5—"Industry Overview", Part 6—"Business" and Part 11—"Historical Financial Information". Prospective investors should read the entire document and not just rely on the summary set out below. The financial information considered in this Part 9—"Operating and Financial Review" is extracted from the financial information set out in Part 11—"Historical Financial Information".

The following discussion of the Group's results of operations and financial conditions contains forward-looking statements. The Group's actual results could differ materially from those that it discusses in these forwardlooking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Prospectus, particularly under Part 1—"Risk Factors" and Part 2—"Presentation of Financial and Other Information". In addition, certain industry issues also affect the Group's results of operations and are described in Part 5—"Industry Overview".

Company overview

The Group's antivirus solutions use artificial intelligence ("AI") and employ machine-learning capabilities to conduct behavioural analysis and improve detection abilities. With both local and cloud-based deep learning capabilities, the Group's security engine is powered by a continuous data loop of inputs from the Group's users, who act as a geographically dispersed global threat detection system. The Group's security engine stopped approximately two billion attacks per month in the year ended 31 December 2017. The Group places a heavy focus on the continuous development and improvement of these technologies, with more than 45% of its employees working in research and development ("R&D"). The Group believes this focus on R&D strongly contributes to the fact that the Group's products are consistently ranked among the highest-rated antivirus solutions by both users and editors on leading download websites, as well as in popular media globally.

target its up-selling and cross-selling campaigns, but it also improves the accuracy and effectiveness of the Group's machine-learning-powered consumer monetisation platform. The platform becomes more effective with increased inputs, improving the Group's ability to market and advertise its products to its existing user base by learning the most effective time and manner to message and prompt users to purchase premium paid antivirus software or value-added solutions. The Group's free products provide comprehensive malware protection to users, while imposing low user support and servicing costs on the Group, amounting to, on average, \$0.02 per free incremental PC antivirus software user per annum for the year ended 31 December 2017.

On a like-for-like basis, with 2017 including full year Piriform results, the Group's Adjusted Billings increased 9% from \$745.4 million for the year ended 31 December 2016 to \$811.3 million for the year ended 31 December 2017, and increased 1% from \$739.0 million for the year ended 31 December 2015 to \$745.4 million for the year ended 31 December 2016. The Group's 2017 Adjusted Billings include Piriform pre-acquisition billings of \$10.9 million and Piriform post-acquisition billings of \$10.6 million. Discontinued Business contributed \$38.5 million to 2017, \$66.7 million to 2016, and \$101.4 million to 2015 Adjusted Billings. Excluding Piriform and Discontinued Business, on a like-for-like basis, the Group's Adjusted Billings increased 11% from 2016 to 2017, and 6% from 2015 to 2016.

On a like-for-like basis, with 2017 including full year Piriform results, the Group's Adjusted Revenues increased 6% from \$736.5 million for the year ended 31 December 2016 to \$779.5 million for the year ended 31 December 2017, and increased by 2% from \$720.5 million for the year ended 31 December 2015 to \$736.5 million for the year ended 31 December 2016. 2017 Adjusted Revenue includes the Piriform Revenue Adjustment of \$15.6 million and Piriform post-acquisition Adjusted Revenue of \$6.1 million. Discontinued Business contributed \$38.5 million to 2017, \$66.7 million to 2016, and \$101.4 million to 2015 Adjusted Revenue. Excluding Piriform and Discontinued Business, on a like-for-like basis, the Group's Adjusted Revenue increased 7% from 2016 to 2017, and 8% from 2015 to 2016.

Current trading information and outlook

In the three months ended 31 March 2018 ("Q1 2018"), the Group has performed in line with management expectations, achieving estimated Adjusted Revenue growth of 10% on a like-for-like basis and 9% on a like-for-like and constant currency basis (each excluding Discontinued Business) compared to the three months ended 31 March 2017 ("Q1 2017"). Within the Group's Consumer segment, the Group estimates strong organic constant currency revenue growth of 12% in Consumer Direct Desktop in Q1 2018 as compared to Q1 2017. Desktop Customers grew by approximately 150,000 in Q1 2018 to 11.52 million, in line with expectations. The Group continues to expect high-single digit Adjusted Revenue growth on a constant currency basis in 2018 (excluding Discontinued Business). Billings growth is estimated ahead of revenue growth in Q1 2018 on a constant currency basis, driven by growth in Consumer Direct Desktop, where the Group is benefitting from low double digit growth in its AVG brand. Historical Adjusted Revenue growth on a constant currency basis is calculated using the exchange rates in the quarter ending 31 March 2017.

Financial guidance

The Group expects increases in both Average Revenue Per Desktop Customer and Average Products Per Desktop Customer over the medium term. As a result of these factors, the Group expects Consumer Direct Desktop Adjusted Revenue to grow in the high single digits over the medium term, with double digit growth in 2018, on a constant currency basis. The Group expects Consumer Direct Mobile Adjusted Revenue to be flat in 2018 due to the loss of a customer contract but to continue to grow in the high teens over the medium term, on a constant currency basis. The Group expects total Consumer Direct Adjusted Revenue as a percentage of Adjusted Billings to gradually increase in the medium term as compared to the current average.

In Consumer Indirect, the Group expects Adjusted Revenue to grow in the mid- single digits in 2018 and midteens over the medium term, on a constant currency basis, excluding Discontinued Business. The Group expects Discontinued Business to decline materially in 2018 and become negligible in 2019. The Group expects Consumer Indirect Adjusted Billings to be broadly in line with Consumer Indirect Adjusted Revenue given the limited amount of deferred revenue in Consumer Indirect.

In the Group's SMB segment, the Group expects Adjusted Revenue to grow in the mid- single digits over the medium term, although the Group expects it to decline in the mid- single digits in 2018, on a constant currency basis, due to ongoing integration work and re-positioning of the business post the AVG Acquisition. The Group expects SMB Adjusted Billings to be broadly in line with SMB Adjusted Revenue over the medium term.

The Group expects Adjusted Cash EBITDA margin % to remain broadly in line with levels for the year ended 31 December 2017 (including the realisation of synergies and excluding annual listed company costs of approximately \$7.0 million per year) over the medium term.

The Group expects its effective tax rate to be steady at approximately 20% overall over the medium term (with a one-off cash tax payment relating to the Group's exit from the Netherlands as agreed with the relevant tax authorities of approximately \$50.0 million in 2019, which will impact the Group's profit and loss statement in the year ended 31 December 2018).

The Group expects that its ratio of net indebtedness (debt less cash and cash equivalents) to Adjusted Cash EBITDA (for the last twelve months ("LTM")) at the time of IPO would be approximately 3.0x, taking into account the primary proceeds from the IPO. In the absence of unforeseen circumstances, the Company expects a floor of 1.5x for net indebtedness to LTM Adjusted Cash EBITDA in the medium-term.

Proposed Amendments to CS Credit Agreement

On 16 April 2018, Avast Software B.V. requested consent from its lenders to certain amendments to the terms of its credit agreement dated 30 September 2016 (the "CS Credit Agreement"), effect a repricing of the revolving credit facility under the CS Credit Agreement and effect a repricing of the term loans made under the CS Credit Agreement (to be effected through a refinancing of those loans) which, if agreed to by the lenders and other market participants, would reduce the applicable interest rate on the facilities.

As of 25 April 2018, Avast Software B.V. had responses from lenders and other market participants sufficient to approve amendments to help facilitate an initial public offering, which are to become effective immediately upon the consummation of an initial public offering, including adjustments to the Total Net First Lien Leverage Ratio covenant testing to (x) increase the threshold to \$35 million outstanding under the revolving credit facility at the end of a fiscal half-year and (y) be tested (if (and only if) such amount is outstanding) semiannually, as of the end of such fiscal half-year. In addition to the above the applicable lenders have also approved or otherwise agreed to transactions which will provide for the following reduction in interest rate margin, repricing protection and, in the case of the revolving credit facility, maturity extension, subject to the occurrence of an initial public offering, the delivery of certain customary conditions consistent with prior refinancing and payment of certain fees and expenses to the applicable parties: (i) with respect to loans under the dollar denominated term loan facility, 25 basis points to 2.50% (subject to a step-down to 2.25% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 2.50:1.00), (ii) with respect to loans under the euro denominated term facility, 25 basis points to 2.75% (subject to a step-down to 2.50% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 2.50:1.00), (iii) refresh the repricing protection of a 1.00% prepayment premium for six months after the occurrence of the refinancing of the term loans in connection with the repricing contemplated above, (iv) with respect to loans under the revolving credit facility, 150 basis points to 2.25% (subject to a stepdown to 2.00% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 2.50:1.00) and (v) extend the termination/final maturity date of the revolving commitments by one year, to 30 September 2022. The Group will use approximately \$200 million of proceeds from the Global Offering, along with cash on hand, to prepay \$300 million in principal amounts outstanding under the dollar term loan facility.

Presentation of financial information

The Group completed the acquisition of AVG Technologies N.V. on 30 September 2016 (the "AVG Acquisition"). The consolidated financial information of AVG has been included in the consolidated financial statements of the Group from the date of the AVG Acquisition (i.e., from 1 October 2016). The sections below entitled "—Key performance indicators ("KPIs")", "—Factors affecting the Group's results of operations," "—Components of statements of income," "—Critical accounting policies and estimates," and "—Recent accounting pronouncements" are presented on a combined basis for the Group (including AVG from the date of acquisition). This "Operating and Financial Review" also includes a supplemental description of the results of AVG ("—AVG Results of Operations") for the years ended 31 December 2015 and 31 December 2016 and supplemental unaudited financial information for the three months ended 31 December 2016 to assist potential investors in assessing changes in the Group's underlying business performance between 31 December 2016 and 31 December 2017.

Unless otherwise indicated, "Group" refers to Avast (including AVG from the date of its acquisition (i.e., from 1 October 2016) and "AVG" refers to AVG for the years ended 31 December 2015 and 2016 (or for the three months ended 31 December 2016, as the case may be) on a standalone basis.

Key performance indicators ("KPIs")

The Group considers the following metrics to be the KPIs it uses to help evaluate growth trends, establish budgets and assess operational performance and efficiencies. In addition to the Group's results determined in accordance with IFRS, the Group believes the following non-IFRS financial measures are useful in evaluating the Group's operating performance. See also Part 2—"Presentation of Financial and Other Information— Non-IFRS financial information":

Adjusted Billings;
Adjusted Billings by Segment;
Adjusted Revenue;
Adjusted Revenue by Segment;
Adjusted EBITDA;
Adjusted Cash EBITDA;
Adjusted Net Income; and
Unlevered Free Cash Flow,

in each case, as described more fully below.

The Group considers Adjusted Billings (including Adjusted Billings by Segment) and Adjusted EBITDA to be the primary KPIs for the Group. Adjusted Billings represents the full value of products and services, the majority of which are delivered under a subscription agreement and include sales to new customers plus renewals and additional sales to existing customers. Under the subscription model, customers pay the Group for the entire amount of the subscription in cash up front upon initial delivery of the applicable products. Although the cash is paid up front, under IFRS, subscription revenue is deferred and recognised ratably over the life of the subscription agreement, whereas non-subscription revenue is typically recognised up front. Billings are recognised when the customer pays the payment gateway provider. This provides the Group with a substantial amount of deferred revenue, as under IFRS, subscription revenue is deferred and recognised ratably over the life of the subscription agreement. Eighty-four percent of Adjusted Billings over the year ended 31 December 2017 were comprised of billings from subscription agreements of between one and three years (88% of Adjusted Billings over the year ended 31 December 2017 excluding Discontinued Business), the majority of which lasted approximately one year. Accordingly, the growth in revenue in any period reflects the performance of billings from both prior and current periods. The Group thus considers billings to be a valuable supplemental measure of short-term cash receipts and revenues for future periods as an indicator of future growth. The Group believes that Adjusted EBITDA is another key metric for the Group as it allows it to evaluate underlying operating performance by excluding non-recurring and other items that the Group does not consider indicative of the Group's core operating performance.

The Group also tracks Adjusted Revenue (including Adjusted Revenue by Segment), Adjusted Cash EBITDA, and Adjusted Net Income. The Group believes that Adjusted Cash EBITDA and Adjusted Net Income are appropriate supplemental measures of earnings as they facilitate evaluating operating performance on a period-to-period basis by excluding non-recurring and other items that the Group does not consider indicative of the Group's core operating performance. The Directors also use Unlevered Free Cash Flow as a key performance indicator of the Group's business and as an indicator of the Group's ability to make strategic investments, repay its debt, pay dividends, and meet other payment obligations.

The table below presents the KPIs for the Group and AVG as at and for the periods indicated. All figures are at actual currency rates unless otherwise indicated and exclude the results of discontinued operations.

						Three months ended 31 December
		Year-ended 31 December AVG Group		AVG
	2015	2016	2015	2016	2017	2016
			(in \$ millions)			(in \$ millions) (unaudited)
Adjusted Billings Adjusted Billings by Segment:	424.0	405.9	315.0	443.5	811.3	104.0
Consumer	360.9	352.5	302.9	419.4	746.4	91.3
Direct	278.8	286.3	237.3	342.9	628.6	75.8
Indirect	5.5	11.3	40.8	53.5	79.3	4.3
Discontinued Business	76.6	54.9	24.8	23.0	38.5	11.2
SMB	63.1	53.4	12.1	24.1	64.9	12.7
Total Adjusted Billings (excluding Discontinued
Business)	347.4	351.0	290.2	420.5	772.8	92.8
Adjusted Revenue Adjusted Revenue by Segment:	425.8	418.6	294.7	421.5	779.5	103.6
Consumer	361.9	358.1	280.4	393.6	711.1	88.5
Direct	279.8	291.9	215.0	319.2	593.4	73.0
Indirect	5.5	11.3	40.6	51.4	79.2	4.3
Discontinued Business	76.6	54.9	24.8	23.0	38.5	11.2
SMB	63.9	60.5	14.3	27.9	68.3	15.1
Total Adjusted Revenue (excluding Discontinued
Business)	349.2	363.7	269.9	398.5	741.0	92.4
Adjusted EBITDA Adjusted Cash EBITDA Adjusted Net Income	144.0 136.7 86.9	143.6 129.3 78.6	187.6 206.0 130.5	243.8 262.4 159.5	408.6 445.3 244.1	42.2 41.4 40.6
Unlevered Free Cash Flow	110.9	109.1	193.5	251.9	339.5	40.9

The following is a table showing adjustments made to each of the KPIs of the Group and AVG as at and for the periods indicated to assist potential investors in assessing changes in the Group's and AVG's underlying business performance for the periods indicated:

			Year ended 31 December			Three months ended 31 December
	AVG			Group		AVG
	2015	2016	2015	2016	2017	2016
			(in \$ millions)			(in \$ millions) (unaudited)
Revenue	425.8	418.6	251.0	340.7	652.9	49.4
Net deferral of revenue	(1.8)	(12.7)	36.2	76.8	147.5	54.6
Billings	424.0	405.9	287.2	417.5	800.4	104.0
Gross-up Adjustment	—	—	27.8	26.0	—	—
Piriform pre-acquisition billings	—	—	—	—	10.9	—
Adjusted billings	424.0	405.9	315.0	443.5	811.3	104.0
Revenue	425.8	418.6	251.0	340.7	652.9	49.4
Deferred Revenue Haircut Reversal	—	—	17.9	56.7	98.0	54.2
Underlying Revenue	425.8	418.6	268.9	397.4	750.9	103.6
Gross-Up Adjustment	—	—	25.8	24.1	12.9	—
Piriform Revenue Adjustment	—	—	—	—	15.6	—
Adjusted revenue	425.8	418.6	294.7	421.5	779.5	103.6

Year ended 31 December						ended 31 December
	AVG			Group		AVG
	2015	2016	2015	2016	2017	2016
			(in \$ millions)			(in \$ millions) (unaudited)
Operating profit	77.3	(0.2)	99.6	31.9	124.3	(38.3)
Share-based payments(1)	15.3	14.8	6.1	2.7	7.7	—
Exceptional items(2)	9.0	86.9	0.8	69.8	34.8	27.6
Amortisation of acquisition intangible assets	31.0	30.1	59.2	79.4	132.9	—
Underlying Operating Profit	132.6	131.6	165.7	183.8	299.7	(10.7)
Deferred Revenue Haircut Reversal	—	—	17.9	56.7	98.0	54.2
COGS Deferral Adjustments Depreciation	— 9.8	— 11.4	— 3.3	(5.1) 6.7	(7.8) 15.0	(5.1) 3.0
Capitalised research and development costs(3)	(3.9)	(5.3)	—	—	—	—
Amortisation of non-acquisition intangible assets	5.5	5.9	0.7	1.7	3.7	0.8
Adjusted EBITDA	144.0	143.6	187.6	243.8	408.6	42.2
Net deferral of revenue	(1.8)	(12.7)	18.4	20.1	49.5	0.4
Net change in deferred cost of goods sold	(5.5)	(1.6)	—	(6.6)	(20.6)	(6.3)
Reversal of COGS Deferral Adjustments	—	—	—	5.1	7.8	5.1
Adjusted Cash EBITDA	136.7	129.3	206.0	262.4	445.3	41.4
Net income	49.2	(28.4)	71.5	24.6	(33.8)	(19.6)
Deferred Revenue Haircut Reversal	—	—	17.9	56.7	98.0	54.2
Share-based payments(1)	15.3	14.8	6.1	2.7	7.7	—
Exceptional items(2) Amortisation of acquisition intangible assets	9.0 31.0	86.9 30.1	0.8 59.2	69.8 79.4	34.8 132.9	27.6 —
Amortisation of capitalised research and development
costs	1.2	2.0	—	—	—	—
Capitalised research & development costs(3)	(3.9)	(5.3)	—	—	—	—
Unrealised financial exchange gain/loss on EUR tranche
of bank loan Tax impact on foreign exchange difference on	—	—	—	(26.7)	63.0	—
intercompany loans	—	—	(10.0)	(8.6)	19.0	—
Recognition of capitalised debt issuance costs as a result
of early extinguishment of external loan(4)	—	8.5	—	—	—	—
COGS Deferral Adjustments Tax impact on adjusting items	— (14.9)	— (30.0)	— (15.0)	(5.1) (33.3)	(7.8) (69.7)	(5.1) (16.5)
Adjusted Net Income	86.9	78.6	130.5	159.5	244.1	40.6

Adjusted Cash EBITDA Capital expenditure	136.7 (14.6)	129.3 (18.8)	206.0 (12.2)	262.4 (9.2)	445.3 (15.9)	41.4 (4.3)
Change in working capital:
Change in trade and other receivables (excluding
change in deferred COGS)	(9.4)	3.5	(6.7)	8.9	(24.5)	1.0
Change in trade and other payables Income tax paid	4.3 (6.1)	(2.7) (2.2)	6.4 —	10.8 (21.0)	(10.6) (54.8)	3.2 (0.4)
Unlevered Free Cash Flow(5)	110.9	109.1	193.5	251.9	339.5	40.9

Cost of revenues Share-based payments	(64.4) 0.2	(85.8) 0.2	(72.8) 0.2	(112.1) 0.1	(232.8) 0.1	(18.4) —
Amortisation of acquisition intangible assets	—	—	59.2	77.4	132.9	—
Exceptional items(2)	0.3	2.0	—	1.8	1.7	1.6
Underlying cost of revenues	(63.9)	(83.6)	(13.4)	(32.8)	(98.1)	(16.8)
COGS Deferral Adjustment	—	—	—	(5.1)	(7.8)	(5.1)
Gross-Up Adjustment	—	—	(25.8)	(24.1)	(12.9)	—
Depreciation and amortisation (excluding amortisation
of acquisition intangible assets)	6.2	8.2	1.9	4.1	9.8	2.1
Adjusted Cost of revenues	(57.7)	(75.4)	(37.3)	(57.9)	(109.0)	(19.8)

Three months ended

Year ended 31 December						ended
	AVG			Group		31 December AVG
	2015	2016	2015	2016	2017	2016
			(in \$ millions)			(in \$ millions) (unaudited)
Sales and marketing costs	(126.6)	(123.2)	(29.0)	(59.6)	(121.4)	(24.2)
Share-based payments	2.9	3.4	2.3	—	3.1	—
Amortisation of acquisition intangible assets	19.9	21.1	—	—	—	—
Depreciation & Amortisation (excluding amortisation of
acquisition intangible assets)	3.3	2.5	0.1	0.7	1.5	0.6
Exceptional amortisation	2.8	—	—	—	—	—
Exceptional items(2)	3.7	17.8	—	9.1	3.4	8.6
Adjusted Sales and marketing costs	(94.0)	(78.4)	(26.6)	(49.8)	(113.4)	(15.0)
Research and development costs	(88.4)	(91.5)	(23.7)	(46.8)	(75.5)	(22.2)
Share-based payments	2.8	2.4	1.2	0.5	0.5	—
Amortisation of acquisition intangible assets	11.0	9.0	—	—	—	—
Depreciation & Amortisation (excluding amortisation of
acquisition intangible assets) Capitalised R&D, gross	4.0 (3.9)	4.0 (5.3)	0.8 —	0.8 —	1.7 —	0.3 —
Exceptional items(2)	3.6	13.2	—	9.4	3.2	9.2
Adjusted Research and development costs	(70.9)	(68.2)	(21.7)	(36.1)	(70.1)	(12.7)
General and administrative costs	(69.1)	(118.3)	(25.9)	(90.3)	(98.9)	(22.9)
Share-based payments	9.4	8.8	2.4	2.1	4.0	—
Amortisation of acquisition intangible assets Depreciation & Amortisation (excluding amortisation of	0.1	—	—	2.0	—	—
acquisition intangible assets)	1.8	2.6	1.2	2.7	5.6	0.8
Exceptional depreciation	—	—	—	0.1	0.4	—
Exceptional items(2)	(1.4)	53.9	0.8	49.4	26.1	8.1
Adjusted General and administrative costs	(59.2)	(53.0)	(21.5)	(34.0)	(62.8)	(14.0)
Finance income and expenses, net	(16.7)	(24.1)	(27.9)	(12.4)	(153.2)	(1.1)
Unrealised foreign exchange gain/loss on EUR tranche
of bank loan	—	—	—	(26.7)	63.0	—
Recognition of capitalised debt issuance costs as a result
of early extinguishment of external loan	—	8.5	—	—	—	—
Adjusted finance income and expenses, net	(16.7)	(15.6)	(27.9)	(39.1)	(90.2)	(1.1)
Income tax	(11.4)	(4.1)	(0.2)	5.1	(4.9)	19.9
Tax impact of FX difference on intercompany loans	—	—	(10.0)	(8.6)	19.0	—
Tax impact on adjusting items	(14.9)	(30.0)	(15.0)	(33.3)	(69.7)	(16.5)
Adjusted income tax	(26.3)	(34.1)	(25.2)	(36.8)	(55.6)	3.4

Three months

Adjusted Billings

Billings represents the full value of products and services, the majority of which are delivered under a subscription agreement and include sales to new customers plus renewals and additional sales to existing customers. Under the subscription model, customers pay the Group for the entire amount of the subscription in cash up front upon initial delivery of the applicable products. Although the cash is paid up front, under IFRS,

⁽²⁾ Refers to material and non-recurring items of income and expense which the Group believes should be separately disclosed to show the underlying business performance of the Group more accurately. See Note 10 of the audited consolidated financial information for the periods indicated for additional information.

⁽³⁾ The decision of whether to capitalise costs incurred in developing assets that will have a useful economic life exceeding one year is based on management's judgment of whether such developing assets' technological and economic feasibility are confirmed.

⁽⁴⁾ Relates to arrangement fees associated with the third-party loan entered into in 2014 which were capitalised and amortised over the term of the loan using the effective interest method. On 30 September 2016, the Company repaid the loan early as part of the AVG Acquisition and therefore recognised all remaining capitalised arrangement fees.

⁽⁵⁾ Ignores the Gross-Up Adjustment as impact is nil.

subscription revenue is deferred and recognised ratably over the life of the subscription agreement, whereas non-subscription revenue is typically recognised up-front. Eighty-four percent of Adjusted Billings over the year ended 31 December 2017 were comprised of billings from subscription agreements (and 88% of Adjusted Billings over the year ended 31 December 2017 excluding Discontinued Business). The Group's subscription agreements typically last between one and three years. For the year ended 31 December 2017, the Group had an average subscription contract length of 15 months and the Group's Consumer Direct Desktop business had an average subscription contract length of 15 months. In 2017, 51% of the Group's Adjusted Billings were generated by non-antivirus products, compared to 39% in 2015.

The following table sets out the split of the Group's subscription billings by the length of revenue recognition period for the periods indicated.

	Year ended 31 December
	AVG			Group
	2015	2016	2015	2016	2017
			(in %)
Up to 12 Months	67.4%	72.0%	79.3%	77.4%	76.0%
13 – 24 Months	27.0%	22.8%	16.6%	18.5%	19.7%
25 – 36 Months	4.9%	4.6%	4.1%	3.9%	4.1%
Over 36 Months	0.7%	0.6%	—	0.2%	0.2%

Adjusted Billings represents the Group's billings (including Piriform from the date of its acquisition by the Group on 18 July 2017) adjusted for the Gross-Up Adjustment (as defined in Part 2—"Presentation of Financial and Other Information—Non-IFRS financial information—Adjusted Billings") and Piriform Pre-Acquisition Billings. Adjusted Billings are unaudited and are presented to enhance comparability of the Group's results from period to period. See Part 2—"Presentation of Financial and Other Information—Non-IFRS financial information—Adjusted Billings" for a reconciliation of Adjusted Billings to revenue.

The Group's Adjusted Billings increased by 83%, from \$443.5 million for the year ended 31 December 2016 to \$811.3 million for the year ended 31 December 2017 and increased by 41%, from \$315.0 million for the year ended 31 December 2015 to \$443.5 million for the year ended 31 December 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's Adjusted Billings for the three months ended 31 December 2016 were \$104.0 million and AVG's Adjusted Billings for the year ended 31 December 2016 were \$405.9 million. Piriform contributed \$10.6 million to the Group's 2017 Adjusted Billings of \$811.3 million from the date of its acquisition on 18 July 2017 to 31 December 2017, and, had Piriform always been a part of the Group, it would have contributed an additional \$10.9 million.

On a like-for-like basis, with 2017 including full year Piriform results, the Group's Adjusted Billings increased from the year ended 31 December 2016 to the year ended 31 December 2017 (by \$65.9 million, from \$745.4 million in 2016 to \$811.3 million in 2017), primarily due to growth in Consumer Direct and Consumer Indirect billings, partly offset by the decline in Discontinued Business. Growth in Consumer Direct was mainly driven by the inclusion of full year 2017 Piriform results, as well as growth in VPN, Utilities and Mobile Subscriptions. Growth in Consumer Indirect was mainly driven by the inclusion of full year 2017 Piriform results, as well as billings from our Google Distribution contracts. Excluding Discontinued Business and the contribution of Piriform in 2017, the Group's Adjusted Billings increased on a like-for-like basis by 11% from \$678.7 million in 2016 to \$751.2 million in 2017.

Excluding the impact of the AVG Acquisition in the fourth quarter of 2016, Adjusted Billings for the Group increased on a like-for-like basis from the year ended 31 December 2015 to the year ended 31 December 2016 (by \$24.5 million, from \$315.0 million in 2015 to \$339.5 million in 2016), primarily due to growth in Consumer Direct and Consumer Indirect, partly offset by the decline in Discontinued Business and slight decline in SMB. Growth in Consumer Direct was mainly driven by growth in AV, Utilities and VPN with Consumer Direct Desktop Adjusted Billings increasing by 13% over the period. Growth in Consumer Indirect was mainly driven by Jumpshot and Mobile Advertising.

AVG's Adjusted Billings decreased by 4% from \$424.0 million for the year ended 31 December 2015 to \$405.9 million for the year ended 31 December 2016, primarily due to the decline in Discontinued Business as well as a decline in the SMB segment. AVG's Consumer Direct Desktop Adjusted Billings decreased by 3% over the period.

Adjusted Revenue

Adjusted Revenue represents the Group's revenue (including Piriform from the date of its acquisition by the Group on 18 July 2017) adjusted for the Deferred Revenue Haircut Reversal, the Gross-Up Adjustment and the Piriform Revenue Adjustment. See Part 2— "Presentation of Financial and Other Information—Non-IFRS financial information—Adjusted Revenue" for a reconciliation of Adjusted Revenue to revenue.

Eighty-four percent of Adjusted Revenue for the year ended 31 December 2017 was comprised of Adjusted Revenue from subscription agreements (88% of the Group's Adjusted Revenue for the year ended 31 December 2017, excluding Discontinued Business; 96% of Consumer Direct Desktop Adjusted Revenue for the year ended 31 December 2017). Forty-two percent of the Group's Adjusted Revenue (excluding Discontinued Business) for 2017 came for previous period deferred revenue and 23% came from renewal revenue. Of the renewal revenue, 84% came from auto renewals. Similarly, 53% of the Group's Consumer Direct Desktop Adjusted Revenue for 2017 came from previous period deferred revenue and 28% came from renewal revenue. Of the renewal revenue, 88% came from auto renewals.

The Group's Adjusted Revenue increased by 85% from \$421.5 million for the year ended 31 December 2016 to \$779.5 million for the year ended 31 December 2017 and increased by 43% from \$294.7 million for the year ended 31 December 2015 to \$421.5 million for the year ended 31 December 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's Adjusted Revenue for the quarter ended 31 December 2016 was \$103.6 million and AVG's Adjusted Revenue for the year ended 31 December 2016 were \$418.6 million. Piriform contributed \$6.1 million to the Group's 2017 Adjusted Revenues of \$779.5 million from the date of its acquisition on 18 July 2017 to 31 December 2017, and, had Piriform always been a part of the Group, it would have contributed an additional \$15.6 million.

On a like-for-like basis, with 2017 including full year Piriform results, Adjusted Revenue for the Group for the year ended 31 December 2016 as compared to the year ended 31 December 2017 increased (by \$43.0 million, from \$736.5 million in 2016 to \$779.5 million in 2017), primarily due to growth in Consumer Direct and Consumer Indirect, partly offset by the decline in Discontinued Business and SMB. Growth in Consumer Direct was mainly driven by the inclusion of full year 2017 Piriform results, as well as growth in AV, VPN, Utilities and Mobile Subscriptions. Growth in Consumer Indirect was mainly driven by the inclusion of full year 2017 Piriform results, as well as revenue from Google Distribution contracts. Excluding Discontinued Business and the contribution of Piriform in 2017, the Group's Adjusted Revenue increased on a like-for-like basis by 7% from \$669.8 million in 2016 to \$719.2 million in 2017.

Excluding the impact of the AVG Acquisition in the fourth quarter of 2016, Adjusted Revenue for the Group for the year ended 31 December 2015 as compared to the year ended 31 December 2016 increased on a like-for-like basis (by 8% or \$23.2 million, from \$294.7 million in 2015 to \$317.9 million in 2016), primarily due to growth in Consumer Direct and Consumer Indirect revenues, partly offset by the decline in Discontinued Business and SMB. Growth in Consumer Direct was mainly driven by growth in VPN, AV, and Utilities, with Consumer Direct Desktop Adjusted Revenue increasing by 15% over the period. Growth in Consumer Indirect was mainly driven by Jumpshot and Mobile Advertising.

AVG's Adjusted Revenue decreased by 2% from \$425.8 million for the year ended 31 December 2015 to \$418.6 million for the year ended 31 December 2016, primarily due to the decline in Discontinued Business as well as a slight decline in the SMB segment, partly offset by growth in Consumer Direct and Consumer Indirect revenues. AVG's Consumer Direct Desktop Adjusted Revenue decreased by 1% over the period.

Adjusted EBITDA

Adjusted earnings before interest, taxation, depreciation and amortisation ("Adjusted EBITDA") is defined as the Group's operating loss/profit before depreciation, amortisation of non-acquisition intangible assets, sharebased payments, certain exceptional items, amortisation of acquisition intangible assets, capitalised research and development costs, the Deferred Revenue Haircut (as described above), and the COGS Deferral Adjustments. Piriform has been included from the date of its acquisition by the Group (18 July 2017). See Part 2— "Presentation of Financial and Other Information—Non-IFRS financial information—Adjusted EBITDA" for a reconciliation of Adjusted EBITDA to operating (loss)/profit.

The Group's Adjusted EBITDA increased by 68%, from \$243.8 million for the year ended 31 December 2016 to \$408.6 million for the year ended 31 December 2017 and increased by 30% from \$187.6 million for the year ended 31 December 2015 to \$243.8 million for the year ended 31 December 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's Adjusted EBITDA for the quarter ended 31 December 2016 was \$42.2 million and AVG's Adjusted EBITDA for the year ended 31 December 2016 was \$143.6 million.

On a like-for-like basis, with 2017 including Piriform results from date of acquisition, Adjusted EBITDA for the Group for the year ended 31 December 2016 as compared to the year ended 31 December 2017 increased (by \$63.4 million, from \$345.2 million in 2016 to \$408.6 million in 2017), primarily due to growth in adjusted revenue, realisation of cost synergies from the acquisition of AVG, partly offset by a decrease in Discontinued Business, which has very limited incremental costs, and therefore impacts EBITDA in line with revenue. The majority of realised synergies related to cost reductions at AVG, in particular related to payroll cost reductions in the Czech Republic and the US. \$9 million synergies were realised in 2016 and \$82 million synergies were realised in 2017. Had Piriform always been part of the Group, it would have contributed an additional \$10.9 million in Adjusted EBITDA (including \$4 million Piriform deferred revenue haircut reversal), corresponding to the Piriform Revenue Adjustment. Excluding the contribution of Piriform in 2017, the Group's Adjusted EBITDA increased on a like-for-like basis by 18% from \$345.2 million in 2016 to \$406.9 million in 2017.

Excluding the impact of the AVG Acquisition in the fourth quarter of 2016, Adjusted EBITDA for the Group for the year ended 31 December 2015 as compared to the year ended 31 December 2016 increased on a like-for-like basis (by \$14.0 million, from \$187.6 million in 2015 to \$201.6 million in 2016), primarily due to growth in revenue driven by Consumer Direct and Consumer Indirect, partly offset by the decline in Discontinued Business and higher office costs and marketing expenditure.

AVG's Adjusted EBITDA decreased by 0.3%, from \$144.0 million for the year ended 31 December 2015 to \$143.6 million for the year ended 31 December 2016, primarily due to a decline in adjusted gross profit driven by a decrease in discontinued business, offset by a reduction in sales and marketing costs.

Adjusted Cash EBITDA

Cash earnings before interest, taxation, depreciation and amortisation ("Adjusted Cash EBITDA") is defined as Adjusted EBITDA plus the deferral of revenue, the net change in deferred cost of goods sold and reversal of the COGS Deferral Adjustments. Piriform has been included from the date of its acquisition by the Group (18 July 2017).

The Group believes that Adjusted Cash EBITDA is an appropriate supplemental measure of earnings due to the recognition of revenue from subscription billings ratably over subsequent periods and accordingly the Group believes it provides visibility on actual cash earned during the period, even if the associated revenue has not yet been recognised. See Part 2—"Presentation of Financial and Other Information—Non-IFRS financial information—Adjusted Cash EBITDA" for a reconciliation of Adjusted Cash EBITDA to operating (loss)/profit.

The Group's Adjusted Cash EBITDA increased by 70%, from \$262.4 million for the year ended 31 December 2016 to \$445.3 million for the year ended 31 December 2017 and increased by 27%, from \$206.0 million for the year ended 31 December 2015 to \$262.4 million for the year ended 31 December 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's Adjusted Cash EBITDA for the quarter ended 31 December 2016 was \$41.4 million and AVG's Adjusted Cash EBITDA for the year ended 31 December 2016 was \$129.3 million.

On a like-for-like basis, with 2017 including Piriform results from date of acquisition, Adjusted Cash EBITDA for the Group for the year ended 31 December 2016 as compared to the year ended 31 December 2017 increased (by \$95.0 million, from \$350.3 million in 2016 to \$445.3 million in 2017) primarily due to growth in change in deferred revenue less change in deferred cost of goods sold and Adjusted EBITDA. Had Piriform always been part of the Group, it would have contributed an additional \$6.2 million in Adjusted Cash EBITDA. Excluding the contribution of Piriform in 2017, the Group's Adjusted Cash EBITDA increased on a like-for-like basis by 25% from \$350.3 million in 2016 to \$439.1 million in 2017.

Excluding the impact of the AVG Acquisition in the fourth quarter of 2016, Adjusted Cash EBITDA for the Group for the year ended 31 December 2015 as compared to the year ended 31 December 2016 increased on a like-for-like basis (by \$15.0 million, from \$206.0 million in 2015 to \$221.0 million in 2016), primarily due to the increase in Adjusted EBITDA.

AVG's Adjusted Cash EBITDA decreased by 5% from \$136.7 million for the year ended 31 December 2015 to \$129.3 million for the year ended 31 December 2016, primarily due to negative impact of net deferral of revenue.

Adjusted Net Income

Adjusted Net Income represents net income plus the Deferred Revenue Haircut Reversal, share-based payments, exceptional items, amortisation of acquisition intangible assets, amortisation of capitalised research and development costs, unrealised foreign exchange gain/loss on EUR tranche of bank loan, tax impact on foreign exchange difference on intercompany loans, recognition of capitalised debt issuance costs as a result of early extinguishment of external loan, and the COGS Deferral Adjustment, less capitalised research and development costs and less the tax impact of the foregoing adjusting items. Piriform has been included from the date of its acquisition by the Group (18 July 2017).

The Group believes that Adjusted Net Income is an appropriate supplemental measure that provides useful information to the Group and investors about the Group's underlying business performance. Accordingly, the Group believes that Adjusted Net Income provides useful information to management to run the Group's business and allocate resources. See Part 2—"Presentation of Financial and Other Information—Non-IFRS financial information—Adjusted Net Income" for a reconciliation of Adjusted Net Income to net income.

The Group's Adjusted Net Income increased by 53%, from \$159.5 million for the year ended 31 December 2016 to \$244.1 million for the year ended 31 December 2017 and increased by 22%, from \$130.5 million for the year ended 31 December 2015 to \$159.5 million for the year ended 31 December 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's Adjusted Net Income for the quarter ended 31 December 2016 was \$40.6 million and AVG's Adjusted Net Income for the year ended 31 December 2016 was \$78.6 million.

On a like-for-like basis, with 2017 including Piriform results from date of acquisition, Adjusted Net Income for the Group for the year ended 31 December 2016 as compared to the year ended 31 December 2017 increased (by \$46.6 million, from \$197.5 million in 2016 to \$244.1 million in 2017), due to the factors described above.

Excluding the impact of the AVG Acquisition, Adjusted Net Income for the Group for the year ended 31 December 2015 as compared to the year ended 31 December 2016 decreased on a like-for-like basis (by \$11.6 million, from \$130.5 million in 2015 to \$118.9 million in 2016), primarily due to an increase in finance expense and income tax.

AVG's Adjusted Net Income decreased by 10% from \$86.9 million for the year ended 31 December 2015 to \$78.6 million for the year ended 31 December 2016, primarily due to decrease in revenue and increase in cost of revenue driven by higher sales commissions, license fees and fees for distribution of digital content.

Unlevered Free Cash Flow

Unlevered Free Cash Flow represents Adjusted Cash EBITDA (as adjusted for exceptional items as per the definition of "Adjusted Cash EBITDA" above) less capital expenditures (purchases of property, plant and equipment and intangibles), plus cash flows in relation to changes in working capital (excluding Change in Deferred Revenue and Deferred Cost of Goods Sold since already included in Adjusted Cash EBITDA) and taxation. Changes in working capital and taxation are as per the cash flow statement on an unadjusted historical basis and unadjusted for exceptional items. Piriform has been included from the date of its acquisition by the Group (18 July 2017).

The Group believes that Unlevered Free Cash Flow is an appropriate supplemental measure that provides useful information to the Group and investors about the amount of cash generated by the Group's business. Accordingly, the Group believes that Unlevered Free Cash Flow provides useful information to management to run the Group's business and allocate resources. See Part 2—"Presentation of Financial and Other Information— Non-IFRS financial information—Unlevered Free Cash Flow" for a reconciliation of Unlevered Free Cash Flow to Adjusted Cash EBITDA.

The Group's Unlevered Free Cash Flow increased by 35%, from \$251.9 million for the year ended 31 December 2016 to \$339.5 million for the year ended 31 December 2017 and increased by 30%, from \$193.5 million for the year ended 31 December 2015 to \$251.9 million for the year ended 31 December 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's Unlevered Free Cash Flow for the quarter ended 31 December 2016 was \$40.9 million and AVG's Unlevered Free Cash Flow for the year ended 31 December 2016 was \$109.1 million.

On a like-for-like basis, with 2017 including Piriform results from date of acquisition, Unlevered Free Cash Flow for the Group for the year ended 31 December 2016 as compared to the year ended 31 December 2017 increased (by \$19.4 million, from \$320.1 million in 2016 to \$339.5 million in 2017), primarily due to growth in Adjusted Cash EBITDA, as well as a decrease in capital expenditure offset by an increase in cash taxes and changes in working capital. The growth in cash taxes was driven by earnings growth in the business as well as a smaller unrealised foreign exchange loss in 2016 compared to 2015.

Excluding the impact of the AVG Acquisition, Unlevered Free Cash Flow for the Group for the year ended 31 December 2015 as compared to the year ended 31 December 2016 increased on a like-for-like basis (by \$17.5 million, from \$193.5 million in 2015 to \$211.0 million in 2016), primarily due to an increase in Adjusted Cash EBITDA, decrease in capital expenditures and positive impact of change in working capital, offset by an increase in cash taxes driven by earnings growth in the business as well as a smaller unrealised foreign exchange loss in 2015 than in 2014.

AVG's Unlevered Free Cash Flow decreased by 2%, from \$110.9 million for the year ended 31 December 2015 to \$109.1 million for the year ended 31 December 2016, primarily due to positive impact of change in working capital, offset by increase in capital expenditures.

Operating metrics

The Group also tracks and monitors the Consumer Direct Desktop business using the following non-financial operating metrics:

Direct Desktop Customers ("Desktop Customers");
Average Revenue per Desktop Customer ("ARPC");
Average Products per Desktop Customer ("APPC")

The Group considers Desktop Customers, ARPC and APPC to be important measures in analysing its results of operations for the Consumer Direct Desktop business which represents 66% of Adjusted Revenue in 2017 (69% of Adjusted Revenue excluding Discontinued Business).

The table below presents the operating metrics for the Group as at and for the periods indicated. Data for 2017 includes Piriform as if it had been acquired on 1 January 2017.

	Group
		Year ended 31 December
	2015	2016	2017
Desktop Customers (in millions)	10.8	11.2	11.4
ARPC (in \$)	43.09	41.98	45.35
APPC (number of products)	1.21	1.26	1.32

Desktop Customers

The Group defines Desktop Customers as users who have at least one valid paid Consumer Direct Desktop subscription (or license) at the end of the relevant period. The Group measures Desktop Customers based on customer IDs in the form of email addresses obtained from the order. For example, if a person uses two different email addresses for two separate paid subscriptions, the Group would count that person as two Desktop Customers. Similarly, if a person purchases two subscriptions with the same email address, the Group would count that person as one Desktop Customer.

The Group's Desktop Customers increased on a like-for-like basis, with 2017 including full year Piriform results, by 1.9%, from 11.2 million for the year ended 31 December 2016 to 11.4 million for the year ended 31 December 2017, primarily due to the acquisition of Piriform. The Group's number of Desktop Customers in 2017 was impacted by the AVG integration as well as an increase in renewal prices in the second half of 2017. The Group's Desktop Customers increased on a like-for-like basis by 2.9%, from 10.8 million for the year ended 31 December 2015 to 11.2 million for the year ended 31 December 2016, primarily driven by free to paid conversion. The Group's Desktop Customer retention rate has been stable at approximately 65% over the last three years.

Average Revenue per Desktop Customer ("ARPC")

The Group defines ARPC as the Consumer Direct Desktop revenue for the period presented divided by the average Desktop Customers during the same period. Average Desktop Customers are calculated based on adding the number of Desktop Customers as of the beginning of the period to the number of Desktop Customers as of the end of the period, and then dividing by two.

The Group's ARPC increased on a like-for-like basis, with 2017 including full year Piriform results, by 8.0%, from \$41.98 for the year ended 31 December 2016 to \$45.35 for the year ended 31 December 2017, primarily due to increasing the number of products per Desktop Customer (APPC) and price increases for flagship antivirus and VPN products. The Group's ARPC decreased on a like-for-like basis by 2.6%, from \$43.09 for the year ended 31 December 2015 to \$41.98 for the year ended 31 December 2016, primarily due to pricing discounts driving higher billings as planned as well as an increase in multi-year subscriptions, and was partially offset by increased cross-sell driving APPC.

Average Products per Desktop Customer ("APPC")

The Group defines APPC as the total valid licenses or subscriptions for the period presented divided by the average Desktop Customers during the same period. Average Desktop Customers are calculated based on adding the number of Desktop Customers as of the beginning of the period to the number of Desktop Customers as of the end of the period, and then dividing by two. Certain products which are sold as bundles are counted as up to four products.

The Group's APPC increased on a like-for-like basis, with 2017 including full year Piriform results, by 4.4%, from 1.26 for the year ended 31 December 2016 to 1.32 for the year ended 31 December 2017, primarily due to strong utilities and VPN cross sells and increases in bundle selling. The Group's APPC increased by 4.8%, from 1.21 for the year ended 31 December 2015 to 1.26 for the year ended 31 December 2016, primarily due to strong utilities cross sells and adding VPN to the AVG product portfolio.

Factors affecting the Group's results of operations

The Group's results have been affected, and are expected to be affected in the future, by a variety of factors. A discussion of key factors that have had, or may have an effect on the Group's results is set forth below (For a further discussion of the factors affecting the Group's results of operations, see Part 1—"Risk Factors"):

Acquisitions. The Group has acquired and made investments in other companies and services to expand its technological capabilities, its product breadth and functionalities, user base and geographical presence, and the Group intends to continue to make acquisitions and investments in the future. The Group has recently made certain strategic acquisitions, most significantly the AVG Acquisition on 30 September 2016, as well as its recent acquisition of Piriform in July 2017. Acquisitions affect the Group's results of operations in several ways. First, the Group's results for the period during which an acquisition takes place are affected by the inclusion of the results of the acquired business in the Group's consolidated results. Because acquired businesses are included in the Group's consolidation perimeter from the date of completion of each relevant acquisition, their full impact is only reflected in the Group's financial statements in the subsequent period. In addition, the results of the acquired businesses after their acquisition may be impacted positively by synergies. Furthermore, for larger strategic acquisitions, the Group may experience a temporary increase in investments and both operational and personnel expenses as the Group integrates the acquired business into its operations.
Consumer Direct and SMB user monetisation opportunities. The Group's ability to monetise its users drives the Group's results of operations. In its Consumer Direct business, the Group derives its billings and revenues from converting its free users to paid users ("customers") and selling customers higher tier products and bundles. As of 31 December 2017, 25% of Desktop Customers had purchased more than one Group product. The Group also generates billings and revenues through the sale of products to the SMB market. The Group believes that continued monetisation in the Consumer Direct and SMB business will continue to drive the Group's growth in the future.
Indirect user monetisation opportunities. The Group receives indirect revenues through its distribution of third party software, advertising, analytics, secure desktop web browsing and e-commerce affiliate activities. These indirect consumer revenue sources comprised approximately 9.8% of the Group's Adjusted Billings for the year ended 31 December 2017.
Discontinued Business. In 2015, AVG generated \$76.6 million of Adjusted Billings and the Group generated \$24.8 million of Adjusted Billings from Discontinued Business. This decreased to \$38.5 million of Group Adjusted Billings from Discontinued Business in 2017. Discontinued Business includes the following discontinued products:
Search engine capabilities offered through the Group's legacy AVG extensions, plug-ins and toolbar business. The Group earns revenues through third party products and advertisements which come installed in these extensions, plug-ins and toolbars. The Group discontinued this product area after the acquisition of AVG, based on the view that this product area is incompatible with the Group's strategy as it provides low value for users and may be unwanted by users. The Group has stopped investing in this area and has discontinued distribution (although the Group will continue to receive diminishing revenues from users who continue to use the already-installed product).
The Group's Browser Cleanup product, which was created to remove unwanted products that were often installed without user consent. Browsers have improved protections against these unwanted products, thus the need for the Browser Cleanup product is significantly diminished. The Group has stopped further development of the product, and, while it still allows for its distribution from the Group's website and bundled within certain of its PC antivirus packages, the Group has no plans to continue to update or improve the product in the future.

The Discontinued Business has impacted the historical trajectory of AVG and the Group. In 2017, these products represented \$38.5 million of Adjusted Billings and are expected to continue to decline in the future. Management evaluates the performance of the Group excluding the Discontinued Business as it now represents a small and rapidly declining legacy portion of Group Adjusted Billings.

Investment in Product Development and Updates. The Group's products and services are complex to develop and maintain. More than 45% of the Group's employees as of 31 December 2017 were engaged in research and development activities and the Group's performance is dependent on the continuing investments it makes in research and development in order to continue to innovate, improve functionality, and adapt to new technologies or changes to existing technologies.
Renewal Rates. The Group's results are currently largely driven by revenue generated from subscriptions for its products. Changes in renewal rates will have an impact on the Group's billings, revenue growth, cash flows and operating results.
Fluctuations in exchange rates. Fluctuations in currency exchange rates may impact the business significantly, as the Group conducts business in multiple countries. For the year ended 31 December 2017, 54% of Adjusted Billings were generated in the Americas, 40% in EMEA and 6% in Asia Pacific. For the year ended 31 December 2017, 52% of the Group's Adjusted Billings were denominated in U.S. dollars, 19% were denominated in Euros and 9% were denominated in British pounds. Conversely, in the same year, 59% of the Group's adjusted total costs (excluding currency losses and changes in deferred tax) were denominated in U.S. dollars, 21% in Czech korunas and 8% in Euros. As a result, a substantial weakening of the U.S. dollar and the Euro relative to the Czech koruna would present an increase in the Group's costs. Further, the Group is also exposed to translation effects given that its financial statements are stated in U.S. dollars. Any strengthening in the U.S. dollar relative to other currencies in which the Group derives its revenues will result in reductions in reported revenue. For example, for the year ended 31 December 2017, the Group reported a loss from the effect of exchange rate changes on cash and cash equivalents held in foreign currencies of \$3.4 million (compared to zero for the year ended 31 December 2016 and a loss of \$2.6 million for the year ended 31 December 2015). Likewise, if the U.S. dollar declines in value relative to the other currencies in which the Group derives its revenues, reported revenue will increase, but the Group's profitability may be lower. If there is a significant change in the value of the U.S. dollar relative to foreign currencies, the profits of the Group may be materially adversely affected. In addition, the majority of the Group's tax liabilities are denominated in Czech koruna. The Group's effective tax rate is impacted by foreign exchange gains and losses from U.S. dollars as compared to the Czech koruna, which is the functional currency of the Group for local GAAP and tax purposes. For the year ended 31 December 2017, the Group had \$56.8 million of losses resulting from the impact of foreign exchange rate differences (functional as compared to statutory) (as compared to a loss of \$4.6 million for the year ended 31 December 2015 and a gain of \$24.3 million for the year ended 31 December 2016).
Global Regulatory Environment. A wide variety of local, national and international laws and regulations apply to consumer businesses such as the Group's, including the collection, use, retention, protection, disclosure, transfer and other processing of personal data. These consumer compliance laws and regulations, such as those related to personal data and privacy, are evolving and may result in ever-increasing regulatory

and public scrutiny and escalating levels of enforcement and sanctions. Failure to comply with applicable laws and regulations, or to protect such data, could result in enforcement action, including fines, imprisonment of company officials and public censure, claims for damages by users and other affected individuals, damage to reputation and loss of goodwill (both in relation to existing users and prospective users), any of which could have a material adverse effect on the Group's operations, financial performance and prospects. Evolving and changing definitions of personal data and personal information, both within the European Union and elsewhere, especially relating to classification of IP addresses, machine identification, location data and other information, such as has occurred under the General Data Protection Regulation (GDPR) (Regulation (EU) 2016/679), may also limit or inhibit the ability of the Group to operate or expand its business, including limiting strategic partnerships that may involve the sharing of data. Even the perception of privacy concerns, whether or not valid, may harm the Group's reputation and inhibit adoption of its solutions by current and future users. The Group's analytics business, Jumpshot, offers data and marketing analytics. The ability of the Group to obtain this data depends on its access to platforms, its navigation of privacy laws and its adequate disclosure to consumers in order to comply with consumer laws. The Group's ability to capture data and make secondary use of such data through this business could be limited as laws and regulations continue to evolve in various jurisdictions.

Segment reporting

Subsequent to the AVG Acquisition, the Group underwent a significant restructuring and integration process which also included changes in the Group's operating structure and its internal reporting. The Group has applied the criteria set by IFRS 8 Operating Segments to determine the number and type of reportable segments. Based on the nature of the business and how the business is managed, two operating segments have been identified: Consumer and SMB.

The Group evaluates the performance of its segments based on Billings, Underlying Revenue and Underlying Operating Profit, in addition to the KPIs outlined above. Underlying Revenue represents revenue adjusted for the Deferred Revenue Haircut Reversal (as defined in Part 2—"Presentation of Financial and Other Information— Non-IFRS financial information—Adjusted Revenues"). "Underlying Operating Profit" represents operating profit as adjusted for share based payments, certain exceptional items and amortisation of acquisition intangible assets.

Any costs incurred that are directly applicable to the segments are allocated to the appropriate segment. Certain costs that are not directly applicable to the segments are identified as "Corporate Overhead" costs and represent general corporate costs that are applicable to the Group. However, due to the acquisition, the Group decided to centralise some relevant costs unlike in previous years. Corporate overhead still includes administrative overheads such as IT, human resources, finance, central marketing, and legal but also rentals and utilities that are no longer allocated to the revenue generating business unit.

Components of statements of income

Revenues

Sources of revenues

Consumer (93% of Group Revenue and 91% of 2017 Group Adjusted Revenue)

Direct (76% of 2017 Group Adjusted Revenues). The Group offers paid products that protect users' security, online privacy and device performance. The majority of these revenues come from the sale of software subscriptions to users, typically with terms of one to three years, entitling such users to services and updates provided by the Group's paid software. The majority of the Group's Consumer Direct revenues in 2017 were generated by subscriptions. The remainder of the Group's Consumer Direct revenues were generated from Piriform products and third-party customer support. Piriform currently operates perpetual licenses, but the Group expects to change these to subscriptions. Consumer Direct billings and revenue are generated from Desktop and Mobile products. On a like-for-like basis, with 2017 including full year Piriform results, the Mobile business accounted for Adjusted Billings of \$85.9 million, \$77.7 million, and \$65.5 million, in 2017, 2016 and 2015, respectively, and Adjusted Revenue of \$82.6 million, \$76.1 million, and \$64.2 million, in 2017, 2016 and 2015, respectively.

Indirect (10% of 2017 Group Adjusted Revenues). The Group derives a portion of its revenues from distribution agreements with third parties, most notably with Google. These distribution agreements accounted for 6% of the Group's Adjusted Revenue in 2017. The Group also derives revenues from advertisements, as well as through its secure browser, SafeZone, and its successor, Avast Secure Browser, its e-commerce offering, SafePrice, and its data analytics business, Jumpshot.

Discontinued Business (5% of 2017 Group Adjusted Revenues). The Group earns revenues through third party products and advertisements which come installed on its legacy AVG extensions, plug-ins and toolbar business. The Group also earns revenues from its Browser Cleanup product, which removes extensions, plug-ins and toolbars from browsers. Revenues from these two products, which the Group considers to be discontinued products and of which the Group has stopped further development, accounted for 5% of the Group's total Adjusted Revenue in 2017.

SMB (7% of Group Revenue and 9% of 2017 Group Adjusted Revenues)

The Group also derives a portion of its revenues from subscriptions to corporates, specifically small to medium sized businesses. The Group sells software subscriptions to SMB customers also on terms of approximately one to three years. The Group sells paid products to the SMB market primarily through resellers. Sales to SMB customers accounted for 9% of the Group's total Adjusted Revenue in 2017.

Payment and revenue recognition.

Consumer

Direct. The principal revenue stream of the Group is derived from the sale of its software and related services for desktop and mobile which protect users' security, online privacy and device performance. The Group mainly sells software licenses through direct sales (mainly through e-commerce services providers including Digital River and the Group's e-shop) to customers and also sells a small portion through indirect sales via the Group's retailers and resellers. Direct sales to customers are recognised at gross sales prices, before the deduction of transaction and other fees.

From the period commencing 1 January 2017 and going forward, the Group recognises online revenues gross of discounts, commissions to e-commerce service providers and resellers. Prior to 1 January 2017, Avast recognised revenue net of discounts, commissions to e-commerce service providers, resellers (but AVG historically recognised this revenue gross of such items).

The Group's e-commerce service providers fulfil administrative functions, such as collecting payment and remitting any required sales tax. For the year ended 31 December 2017, the Group derived \$212.1 million, or 27%, of its Adjusted Revenue from sales of licenced software through Digital River. The Group's e-commerce service providers collect the fees and transfer cash payments to the Group on a monthly basis within 15 days after the end of the month with respect to which payment is being made.

License agreements with customers include a pre-defined subscription period during which the customer is entitled to the usage of the products, including updates and upgrades of the software. The Group sells software licenses for various periods, but mostly for the period of 1, 12, 24 or 36 months with payment received at the beginning of the license term. Revenues are recognised ratably over the subscription period covered by the agreement. The portion of deferred revenues that will be recognised within 12 months following the balance sheet date is classified as current, and the remaining balance is classified as non-current. The Group also sells a small amount of perpetual licenses (including Piriform) which includes free maintenance and support services (which include the right to bug fixes, but excludes the right to receive unspecified upgrades/enhancements of the Group's product on a when-and-if-available basis), for which the fair value of undelivered elements cannot be determined. The revenue is recognised from the arrangement ratably over the expected term for providing maintenance and support services. Some of the Group's products can be used on a one-time basis (VPN and Utilities), in which case sales are recognised immediately as revenue.

Location Labs provides mobile security solutions that partnered with Mobile Network Operators ("MNOs"), providing locator, phone controls and drive safe products to their customers. The revenues generated by these arrangements are based on revenue share percentages as stated in the MNO agreements. Revenue is recognised on a net basis, after deduction of partners commissions, based on the delivery of monthly services.

The Group also provides premium support services via arrangements with third parties. The Group recognises revenue net of providers' fees when the service is outsourced and no deferral is made as the Group has no

performance obligations after the date of sale. The Group also sells a limited amount of physical CDs through its distributors which then sell the Group's products (Internet Security and Antivirus Software) to retail stores. The retail revenue is recognised on a gross basis, before the deduction of distributor commissions, ratably over the subscription period. The Group reduces revenue for estimated sales returns. End users may return the Group's products, subject to varying limitations, through resellers or to the Group directly for refund within a reasonably short period from the date of purchase. The Group estimates and records provisions for sales returns based on historical experience.

Indirect. Consumer Indirect revenues arise from several products and distribution arrangements that represent the monetisation of the user base. The most significant sources of revenues are:

Google—The Group has two distribution arrangements with Google Ireland Limited ("Google") pursuant to which the Group is paid fees in connection with the Group's offers to users of Google Chrome or Google Toolbar. The Group recognises revenue from Google in full in the month these fees are earned as the Group has no subsequent performance obligations after the date of sale.
SafePrice—Through its partnerships with e-commerce providers, the Group also earns e-commerce revenues. Users receive price comparisons and discounts on products for which they are shopping, and the Group earns, via its partners, e-commerce affiliate revenues reflecting the value that retailers receive in the form of increased traffic, user acquisition and sales. Revenue is recognised immediately as the Group has no performance obligation after the date of sale.
Secure Browsing—The Group's existing SafeZone browser earns the Group a share of advertising revenue generated by end user search activity, and its successor, Avast Secure Browser, is expected to continue to earn such search revenues. Revenue is recognised immediately as the Group has no performance obligation after the moment of sale.
Advertising—Other Consumer Indirect derived revenues are comprised of advertising fees and product fees. Advertising fees are earned through advertising arrangements the Group has with third parties whereby the third party is obligated to pay the Group a portion of the revenue they earn from advertisements to the Group's users. Amounts earned are reflected as revenue in the month the advertisement is delivered to the user. The Group also receives product fees earned through arrangements with third parties, whereby the Group incorporates the content and functionality of the third party into the Group's product offerings. Fees earned during a period are based on the number of active clients with the installed third party content or functionality multiplied by the applicable client fee.
Analytics—The Group offers big data and marketing analytics through its entity Jumpshot earning recurring subscription revenue as well as a small portion of non-recurring revenue related to data sales. Subscriptions are recognised ratably over the subscription period covered by the contract. The portion of deferred revenues that will be recognised within 12 months following the balance sheet date is classified as current and the remaining balance is classified as non-current.

Discontinued Business. The Group receives a share of the search revenue from certain search engine companies to which the Groups' users change their browser for as long as the users continue to use that engine. Browser Cleanup highlights unwanted toolbars and allows users to change to one of a list of recommended search providers. Revenue is recognised immediately as the Group has no further performance obligation after the date of sale.

SMB

SMB includes subscription revenue targeted at small and medium-sized businesses. Revenue is generated through the sale of security software, both on-premise and cloud-based. In addition, the Group sells IT management solutions (including CloudCare and AVG Managed Workplace). SMB customers typically purchase the Group's products through partners and managed service providers who support SMB clients as well as through direct online sales from the Group's websites. Direct online sales to SMBs are mainly made to small office or home office customers (i.e., businesses with one to ten workers) and to educational institutions (e.g., universities). For the year ended 31 December 2017, approximately 60% of SMB revenues were generated through sales made by the Group's partners. SMB subscription revenues are recognised ratably over the term of the subscription in the same way as consumer subscription revenues, commencing in the month in which the SMB customer entered into the subscription agreement. Revenues from sales of Cloudcare and AVG Managed Workplace are recognised on a gross basis, before deduction of the gateways fees, ratably over the subscription period covered by the agreement.

Cost of revenues and operating costs

Cost of revenues. Cost of revenues consists primarily of costs directly associated with the distribution of products and provision of services, namely, amortisation of assets recognised in a business combination (including amortisation of trademarks, customer relationships, and other amortisation of acquired products), leased assets, digital content distribution costs (including the rental cost of servers), customer support and maintenance costs relating to the installation and operation of the Group's products and costs of daily virus updates provided to users and licence fees paid to third parties. Costs are generally recognised up front, as distinct from costs of goods sold which are associated with subscription revenues (such as fees paid to E-Commerce Providers), which are deferred and recognised over the life of the subscription agreement. For the year ended 31 December 2017, 57% of the Group's cost of revenues were comprised of the amortisation of assets recognised in a business combination.

Sales and marketing. The Group's sales and marketing costs consist primarily of compensation and related benefits for personnel engaged in sales, marketing, distribution and technical support, as well as paid search, advertising and promotional expenses, support and hosting service expenses.

Research and development. The Group's research and development costs consist primarily of compensation and related benefits for personnel engaged in research and development. A small portion of research and development costs and expenses is the cost of bandwidth and utilities, licence and technical service fees and depreciation of equipment. The Group generally expenses research and development costs.

General and administrative. The Group's general and administrative costs and expenses primarily consist of compensation and related benefits for management and administrative personnel, office costs and fees paid to legal, accounting and other professional service providers. General and administrative costs and expenses also include charitable contributions. Under Czech corporate income tax laws, up to 10% of a company's tax base is deductible for charitable contributions. Each year since 2012, the Group has given part of its profits to its own charitable foundation, the Avast Foundation in order to make a positive difference to the communities in which the Group's employees live. The Foundation supports a wide variety of causes but focusses in particular on promoting innovative programmes in the areas of palliative care, early childhood intervention and education. The Group donated \$3.7 million to the Avast Foundation in the year ended 31 December 2017, and any future payments are subject to Board approval.

Finance income and expenses, net

The Group's finance income and expenses, net, primarily consist of interest income and expense, other expenses such as bank fees, and interest expense related to currency translation gains and losses on monetary assets and liabilities, primarily cash and cash equivalents, denominated in currencies other than the U.S. dollar. Interest income primarily represents interest from term deposits. Interest expense, which is the largest component of finance income and expenses, net, relates to interest from term loans and finance leases. A small component of finance income and expenses, net, relates to changes in the fair value of derivatives (i.e., changes in the fair value of the cap of the Group's term loans).

Foreign currency gains or losses impact the dollar value of the Group's non-dollar denominated cash and cash equivalents and result from changes in reported values due to exchange rate fluctuations between the beginning and the end of reporting periods.

Income tax

Income tax represents the income tax payable by Avast Software s.r.o. and other Group subsidiaries. The largest part of the corporate tax payable by the Group is in the Czech Republic, which has a 19.0% standard tax rate applicable to corporations. The Group also paid in other jurisdictions, such as in the U.S., the U.K. and the Netherlands.

Group Results of Operations

The following tables set forth the Group's results of operations for the periods presented and as a percentage of revenues for those periods:

	Group
		Year ended 31 December
	2015	2016	2017
		(in \$ millions)
Revenues	251.0	340.7	652.9
Cost of revenues	(72.8)	(112.1)	(232.8)
Gross profit	178.2	228.6	420.1
Operating costs:
Sales and marketing	(29.0)	(59.6)	(121.4)
Research and development	(23.7)	(46.8)	(75.5)
General and administrative	(25.9)	(90.3)	(98.9)
Total operating costs	(78.6)	(196.7)	(295.8)
Operating profit (loss)	99.6	31.9	124.3
Analysed as:
Underlying Operating Profit	165.7	183.8	299.7
Share-based payment	(6.1)	(2.7)	(7.7)
Exceptional items	(0.8)	(69.8)	(34.8)
Amortisation of acquisition intangible items	(59.2)	(79.4)	(132.9)

Finance income and expenses, net	(27.9)	(12.4)	(153.2)
Profit (loss) before income tax	71.7	19.5	(28.9)
Income tax	(0.2)	5.1	(4.9)
Profit (loss) for the financial year	71.5	24.6	(33.8)

		Group

		Year ended 31 December
	2015	2016	2017
		(as a % of revenues)
Revenues	100%	100%	100%
Cost of revenues	(29%)	(33%)	(36%)
Gross profit	71%	67%	64%
Operating costs:
Sales and marketing	(12%)	(17%)	(19%)
Research and development	(9%)	(14%)	(12%)
General and administrative	(10%)	(27%)	(15%)
Total operating costs	(31%)	(58%)	(45%)
Operating profit (loss)	40%	9%	19%
Analysed as:
Underlying Operating Profit	66%	54%	46%
Share-based payment	(2%)	(1%)	(1%)
Exceptional items	(0%)	(20%)	(5%)
Amortisation of acquisition intangible items	(24%)	(23%)	(20%)
Finance income and expenses, net	(11%)	(4%)	(23%)
Profit (loss) before income tax	29%	6%	(4%)
Income tax	(0%)	1%	(1%)

For a description of the results of AVG for the years ended 31 December 2015 and 2016 and three months ended 31 December 2016, as referenced below, see "—AVG Results of Operations".

For a further reconciliation of adjustments made to the Group's financial information referred to in the narratives below, see "—Key Performance Indicators ("KPIs")".

Revenues

	Group
	Year ended 31 December
	2015	2016	2017
		(in \$ millions)
Revenues	251.0	340.7	652.9
Consumer	240.7	324.2	604.8
Direct	175.3	249.8	491.1
Indirect	40.6	51.4	75.2
Discontinued Business	24.8	23.0	38.5
SMB	10.3	16.5	48.1

		Group
		Year ended 31 December
	2015	2016	2017
		(in \$ millions)
Revenues	251.0	340.7	652.9
Deferred Revenue Haircut Reversal	17.9	56.7	98.0
Underlying Revenue	268.9	397.4	750.9
Gross-Up Adjustment	25.8	24.1	12.9
Piriform Revenue Adjustment	—	—	15.6
Adjusted Revenues	294.7	421.5	779.5
Consumer	280.4	393.6	711.1
Direct	215.0	319.2	593.4
Indirect	40.6	51.4	79.2
Discontinued Business	24.8	23.0	38.5
SMB	14.3	27.9	68.3

2016-2017

Revenues increased by \$312.2 million, or 92%, from \$340.7 million in 2016 to \$652.9 million in 2017, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's revenues for the quarter ended 31 December 2016 were \$49.4 million and AVG's revenues for the year ended 31 December 2016 were \$418.6 million.

The Group's Adjusted Revenue increased by 85% from \$421.5 million for the year ended 31 December 2016 to \$779.5 million for the year ended 31 December 2017. AVG's Adjusted Revenue for the quarter ended 31 December 2016 was \$103.6 million and AVG's Adjusted Revenue for the year ended 31 December 2016 were \$418.6 million. Piriform contributed \$6.1 million to the Group's 2017 Adjusted Revenues of \$779.5 million from the date of its acquisition on 18 July 2017 to 31 December 2017, and, had Piriform always been a part of the Group, it would have contributed an additional \$15.6 million.

On a like-for-like basis, with 2017 including full year Piriform results, Adjusted Revenue for the year ended 31 December 2016 as compared to the year ended 31 December 2017 increased (by \$43.0 million, from \$736.5 million in 2016 to \$779.5 million in 2017), primarily due to growth in Consumer Direct and Consumer Indirect, partly offset by the decline in Discontinued Business and SMB. Growth in Consumer Direct was mainly driven by the inclusion of full year 2017 Piriform results, as well as growth in AV, VPN, Utilities and Mobile Subscriptions. Growth in Consumer Indirect was mainly driven by the inclusion of full year 2017 Piriform results, as well as Google Distribution. Excluding Discontinued Business and the contribution of Piriform in 2017, the Group's Adjusted Revenue increased on a like-for-like basis by 7% from \$669.8 million in 2016 to \$719.2 million in 2017.

2015-2016

Revenues increased by \$89.7 million, or 36%, from \$251.0 million in 2015 to \$340.7 million in 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016. AVG's revenues for the quarter ended 31 December 2016 were \$49.4 million.

Adjusted Revenue for the year ended 31 December 2015 as compared to the year ended 31 December 2016 increased by 43%, from \$294.7 million for the year ended 31 December 2015 to \$421.5 million for the year ended 31 December 2016 primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016.

Excluding the impact of the AVG Acquisition in September 2016, Adjusted Revenue for the Group for the year ended 31 December 2015 as compared to the year ended 31 December 2016 increased on a like-for-like basis (by \$23.2 million, from \$294.7 million in 2015 to \$317.9 million in 2016), primarily due to growth in Consumer Direct and Consumer Indirect, partly offset by the decline in Discontinued Business and SMB. Growth in Consumer Direct was mainly driven by growth in VPN, AV, and Utilities. Growth in Consumer Indirect was mainly driven by Jumpshot and Mobile Advertising.

Cost of revenues

	Group
	Year ended 31 December
	2015	2016	2017
		(in \$ millions)
Cost of revenues	(72.8)	(112.1)	(232.8)
Share-based payments	0.2	0.1	0.1
Amortisation of acquisition intangible assets	59.2	77.4	132.9
Exceptional items	—	1.8	1.7
Underlying cost of revenues	(13.4)	(32.8)	(98.1)
Depreciation & amortisation (excluding amortisation of acquisition
intangible assets)	1.9	4.1	9.8
Gross-Up Adjustment	(25.8)	(24.1)	(12.9)
COGS Deferral Adjustment	—	(5.1)	(7.8)
Adjusted cost of revenues (excl. depreciation and amortisation)	(37.3)	(57.9)	(109.0)

2016-2017

Cost of revenues increased by \$120.7 million, or 108%, from \$112.1 million in 2016 to \$232.8 million in 2017, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's costs of revenues for the quarter ended 31 December 2016 were \$18.4 million and AVG's cost of revenue for the year ended 31 December 2016 were \$85.8 million.

Adjusted cost of revenues increased by \$51.1 million, or 88%, from \$57.9 million in 2016 to \$109.0 million in 2017, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's adjusted costs of revenues for the quarter ended 31 December 2016 were \$19.8 million and AVG's adjusted cost of revenue for the year ended 31 December 2016 were \$75.4 million.

On a like-for-like basis, with 2017 including Piriform results from date of acquisition, adjusted cost of revenue for the year ended 31 December 2016 as compared to the year ended 31 December 2017 decreased (by \$4.5 million, from \$113.5 million in 2016 to \$109.0 million in 2017), partially due to synergies in distribution of digital content as part of the AVG Acquisition and primarily offset by an increase in revenue.

2015-2016

Cost of revenues increased by \$39.3 million, or 54%, from \$72.8 million in 2015 to \$112.1 million in 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016. AVG's costs of revenues for the quarter ended 31 December 2016 were \$18.4 million.

Adjusted cost of revenues increased by \$20.6 million, or 55%, from \$37.3 million in 2015 to \$57.9 million in 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016. AVG's adjusted costs of revenues for the quarter ended 31 December 2016 were \$19.8 million.

Excluding the impact of the AVG Acquisition, adjusted cost of revenues on a like-for-like basis increased (by \$0.8 million, from \$37.3 million in 2015 to \$38.1 million in 2016), primarily due to growth in the underlying business and decline in Discontinued Business.

Operating costs

	Group
	Year ended 31 December
	2015	2016	2017
		(in \$ millions)
Operating costs:
Sales and marketing	(29.0)	(59.6)	(121.4)
Research and development	(23.7)	(46.8)	(75.5)
General and administrative	(25.9)	(90.3)	(98.9)
Total operating costs	(78.6)	(196.7)	(295.8)

Adjusted Operating Costs

	Group Year ended 31 December

	2015	2016	2017
	(in \$ millions)
Operating costs	(78.6)	(196.7)	(295.8)
Share-based payments	5.9	2.6	7.6
Amortisation of acquisition intangible assets	—	2.0	—
Depreciation and amortisation (excluding amortisation of
acquisition intangible assets)	2.1	4.2	8.8
Capitalised R&D, gross	—	—	—
Exceptional items	0.8	68.0	33.1
Adjusted Operating costs (excluding depreciation and
amortisation)	(69.8)	(119.9)	(246.3)

Sales and marketing

	Group
	Year ended 31 December
	2015	2016	2017
	(in \$ millions)
Sales and marketing	(29.0)	(59.6)	(121.4)
Share-based payments	2.3	—	3.1
Amortisation of acquisition intangible assets	—	—	—
Depreciation and amortisation (excluding amortisation of
acquisition intangible assets)	0.1	0.7	1.5
Exceptional items	—	9.1	3.4
Adjusted Sales and marketing costs (excluding depreciation
and amortisation)	(26.6)	(49.8)	(113.4)

2016-2017

Sales and marketing costs increased by \$61.8 million, or 104%, from \$59.6 million in 2016 to \$121.4 million in 2017, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's sales and marketing costs for the quarter ended 31 December 2016 were \$24.2 million and AVG's sales and marketing costs for the year ended 31 December 2016 were \$123.2 million.

Adjusted sales and marketing costs increased by \$63.6 million, or 128%, from \$49.8 million in 2016 to \$113.4 million in 2017, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's adjusted sales and marketing costs for the quarter ended 31 December 2016 were \$15.0 million and AVG's adjusted sales and marketing costs for the year ended 31 December 2016 were \$78.4 million.

On a like-for-like basis, with 2017 including Piriform results from date of acquisition, adjusted sales and marketing costs for the year ended 31 December 2016 as compared to the year ended 31 December 2017 increased (by \$0.2 million, from \$113.2 million in 2016 to \$113.4 million in 2017), primarily due to paid search, partially offset by synergies related to the AVG Acquisition.

2015-2016

Sales and marketing costs increased by \$30.6 million, or 106%, from \$29.0 million in 2015 to \$59.6 million in 2016. This increase was primarily due to the inclusion of AVG in the Group's results from 1 October 2016. AVG's sales and marketing costs for the quarter ended 31 December 2016 were \$24.2 million.

Adjusted sales and marketing costs increased by \$23.2 million, or 87%, from \$26.6 million in 2015 to \$49.8 million in 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016. AVG's adjusted sales and marketing costs for the quarter ended 31 December 2016 were \$15.0 million.

Excluding the impact of the AVG Acquisition, adjusted sales and marketing costs increased by \$8.2 million, or 31%, from \$26.6 million in 2015 to \$34.8 million in 2016, primarily due to increased costs in public relations, advertising and paid search.

Research and development

	Group
	Year ended 31 December
	2015	2016	2017
		(in \$ millions)
Research and development	(23.7)	(46.8)	(75.5)
Share-based payments	1.2	0.5	0.5
Amortisation of acquisition intangible assets	—	—	—
Depreciation and amortisation (excluding amortisation of
acquisition intangible assets)	0.8	0.8	1.7
Capitalised R&D, gross	—	—	—
Exceptional items	—	9.4	3.2
Adjusted Research and development costs (excluding
depreciation and amortisation)	(21.7)	(36.1)	(70.1)

2016-2017

Research and development costs increased by \$28.7 million, or 61%, from \$46.8 million in 2016 to \$75.5 million in 2017. This increase was primarily due to the inclusion of AVG in the Group's results from 1 October 2016 as well as the full year 2017. AVG's research and development costs for the quarter ended 31 December 2016 were \$22.2 million and AVG's research and development costs for the year ended 31 December 2016 were \$91.5 million.

Adjusted research and development costs increased by \$34.0 million, or 94%, from \$36.1 million in 2016 to \$70.1 million in 2017, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's adjusted research and development costs for the quarter ended 31 December 2016 were \$12.7 million and AVG's adjusted research and development costs for the year ended 31 December 2016 were \$68.2 million.

On a like-for-like basis, with 2017 including Piriform results from date of acquisition, adjusted research and development costs for the year ended 31 December 2016 as compared to the year ended 31 December 2017 decreased (by \$21.5 million, from \$91.6 million in 2016 to \$70.1 million in 2017), primarily due to a reduction in payroll costs driven by realisation of synergies related to the AVG Acquisition as well as a shift of R&D activities towards the Czech Republic.

2015-2016

Research and development costs increased by \$23.1 million, or 97%, from \$23.7 million in 2015 to \$46.8 million in 2016. This increase was primarily due to the inclusion of AVG in the Group's results from 1 October 2016. AVG's research and development costs for the quarter ended 31 December 2016 were \$22.2 million.

Adjusted research and development costs increased by \$14.4 million, or 66%, from \$21.7 million in 2015 to \$36.1 million in 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016. AVG's adjusted research and development costs for the quarter ended 31 December 2016 were \$12.7 million.

Excluding the impact of the AVG Acquisition, adjusted research and development costs increased by \$1.7 million, or 8%, from \$21.7 million in 2015 to \$23.4 million in 2016, primarily due to an increase in personnel and non-personnel costs.

General and administrative

	Group
	Year ended 31 December
	2015	2016	2017
		(in \$ millions)
General and administrative	(25.9)	(90.3)	(98.9)
Share-based payments	2.4	2.1	4.0
Amortisation of acquisition intangible assets	—	2.0	—
Depreciation and amortisation (excluding amortisation of
acquisition intangible assets)	1.2	2.7	5.6
Exceptional depreciation	—	0.1	0.4
Exceptional items	0.8	49.4	26.1
Adjusted General and administrative costs (excluding
depreciation and amortisation)	(21.5)	(34.0)	(62.8)

2016-2017

General and administrative costs increased by \$8.6 million, or 10%, from \$90.3 million in 2016 to \$98.9 million in 2017. This increase was primarily due to the inclusion of AVG in the Group's results from 1 October 2016 as well as the full year 2017. AVG's general and administrative costs for the quarter ended 31 December 2016 were \$22.9 million and AVG's general and administrative costs for the year ended 31 December 2016 were \$118.3 million.

Adjusted general and administrative costs increased by \$29.1 million, or 85%, from \$34.0 million in 2016 to \$62.8 million in 2017, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's adjusted general and administrative costs for the quarter ended 31 December 2016 were \$14.0 million and AVG's adjusted general and administrative costs for the year ended 31 December 2016 were \$53.0 million.

On a like-for-like basis, with 2017 including Piriform results from date of acquisition, adjusted general and administrative costs for the year ended 31 December 2016 as compared to the year ended 31 December 2017 decreased (by \$10.2 million, from \$73.0 million in 2016 to \$62.8 million in 2017), primarily due to realisation of synergies related to the AVG Acquisition.

2015-2016

General and administrative costs increased by \$64.4 million, or 249%, from \$25.9 million in 2015 to \$90.3 million in 2016. This increase was primarily due to the inclusion of AVG in the Group's results from 1 October 2016 and acquisition related exceptional cost items. AVG's general and administrative costs for the quarter ended 31 December 2016 were \$22.9 million.

Adjusted general and administrative costs increased by \$12.6 million, or 58%, from \$21.5 million in 2015 to \$34.0 million in 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016. AVG's adjusted general and administrative costs for the quarter ended 31 December 2016 were \$14.0 million.

Excluding the impact of the AVG Acquisition, adjusted general and administrative costs decreased (by \$1.5 million, or 7%, from \$21.5 million in 2015 to \$20.0 million in 2016), primarily due to a reduction in consultancy and professional fees and charitable donation to the Avast Foundation, partially offset by an increase in office costs.

	Group
	Year ended 31 December
	2015	2016	2017
	(in \$ millions)
Finance income and expenses, net	(27.9)	(12.4)	(153.2)
Unrealised foreign exchange gain/loss on EUR tranche of bank
loan	—	(26.7)	63.0
Adjusted Finance income and expenses, net	(27.9)	(39.1)	(90.2)

2016-2017

Finance income and expenses, net, increased by \$140.8 million from finance expenses of \$12.4 million in 2016 to \$153.2 million in 2017. This increase was primarily due to the unrealised foreign exchange loss in 2017 from the Euro denominated debt (compared to a foreign exchange gain in 2016), as well as an increase in interest expense following the acquisitions of AVG and Piriform. AVG's finance income and expenses, net for the quarter ended 31 December 2016 were \$1.1 million and AVG's finance income and expenses, net for the year ended 31 December 2016 were \$24.1 million.

Adjusted finance income and expenses, net, increased by \$51.1 million, from \$39.1 million in 2016 to \$90.2 million in 2017. AVG's adjusted finance income and expenses, net, for the quarter ended 31 December 2016 were \$1.1 million and AVG's adjusted finance income and expenses, net, for the year ended 31 December 2016 were \$15.6 million.

2015-2016

Finance income and expenses, net, decreased by \$15.5 million, or 56%, from \$27.9 million in 2015 to \$12.4 million in 2016. This decrease was primarily due to the unrealised foreign exchange gain in 2016 from the Euro denominated debt, partially offset by an increase in interest expense following the acquisition of AVG. AVG's finance income and expenses, net for the quarter ended 31 December 2016 were \$1.1 million.

Adjusted finance income and expenses, net, increased by \$11.2 million, or 40%, from \$27.9 million in 2015 to \$39.1 million in 2016. AVG's adjusted finance income and expenses, net, for the quarter ended 31 December 2016 were \$1.1 million.

Income tax

	Group
	Year ended 31 December
	2015	2016	2017
	(in \$ millions)
Income tax	(0.2)	5.1	(4.9)
Tax impact on foreign exchange difference on intercompany
loans	(10.0)	(8.6)	19.0
Tax impact on adjusting items	(15.0)	(33.3)	(69.7)
Adjusted Income tax	(25.2)	(36.8)	(55.6)

Income tax expenses increased from a \$5.1 million benefit in 2016 to a \$4.9 million expense in 2017, as the current income tax increased from \$29.1 million in 2016 to \$58.9 million due to higher taxable income, offset by the movement in deferred income tax from (\$34.2) million in 2016 to (\$54.0) million in 2017.

Income tax benefit increased by \$5.3 million, from an expense of \$0.2 million in 2015 to a benefit of \$5.1 million in 2016. In 2016, multiple Group companies incurred tax losses, resulting in a deferred tax asset of \$15.7 million as of 31 December 2016 (compared to \$6.5 million as of 31 December 2015), taking into account the specific effective tax rates of each relevant company, all the accumulated tax losses and expected future profitability. This was offset by an increase in the Group's effective tax rate due to non-deductible expenses (e.g., business combination related expenses, share-based compensation expenses, non-cash interest expenses and fair value adjustments to financial derivatives) and other differences (foreign exchange gains and losses from the Group's credit agreement denominated in U.S. dollars and cash and other balance sheet items of Avast Software s.r.o., which had the Czech koruna as its functional currency for local GAAP and tax purposes).

	Group
	Year ended 31 December
	2015	2016	2017
		(in \$ millions)
Net income	71.5	24.6	(33.8)
Deferred Revenue Haircut Reversal	17.9	56.7	98.0
Share-based payments	6.1	2.7	7.7
Exceptional items	0.8	69.8	34.8
Amortisation of acquisition intangible assets	59.2	79.4	132.9
Capitalised research & development costs	—	—	—
Unrealised FX gain/loss on EUR tranche of bank loan	—	(26.7)	63.0
Tax impact on FX difference on intercompany loans	(10.0)	(8.6)	19.0
COGS deferral adjustments	—	(5.1)	(7.8)
Tax impact on adjusting items	(15.0)	(33.3)	(69.7)
Adjusted Net Income	130.5	159.5	244.1

2016-2017

Net Income decreased by \$58.4 million, from \$24.6 million in 2016 to a net loss of \$33.8 million in 2017. This decrease was primarily due to the inclusion of AVG in the Group's results from 1 October 2016 as well as the full year 2017. AVG's net loss for the quarter ended 31 December 2016 was \$19.6 million and AVG's net loss for the year ended 31 December 2016 was \$28.4 million.

Adjusted net income increased by \$84.6 million, or 53%, from \$159.5 million in 2016 to \$244.1 million in 2017, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016 as well as the full year 2017. AVG's adjusted net income for the quarter ended 31 December 2016 was \$40.6 million and AVG's adjusted net income for the year ended 31 December 2016 was \$78.6 million.

On a like-for-like basis, with Piriform included in 2017 from the date of acquisition, adjusted net income for the year ended 31 December 2016 as compared to the year ended 31 December 2017 increased (by \$46.6 million, from \$197.5 million in 2016 to \$244.1 million in 2017), primarily due to an increase in revenue.

2015-2016

Net Income decreased by \$46.9 million, or 66%, from \$71.5 million in 2015 to \$24.6 million in 2016. This decrease was primarily due to the inclusion of AVG in the Group's results from 1 October 2016. AVG's net loss for the quarter ended 31 December 2016 was \$19.6 million.

Adjusted net income increased by \$29.0 million, or 22%, from \$130.5 million in 2015 to \$159.5 million in 2016, primarily due to the inclusion of AVG in the Group's results from 1 October 2016, which increased Group results for the fourth quarter of 2016. AVG's adjusted net income for the quarter ended 31 December 2016 was \$40.6 million.

Excluding the impact of the AVG Acquisition, adjusted net income decreased (by \$11.6 million, or 9%, from \$130.5 million in 2015 to \$118.9 million in 2016), primarily due to an increase in adjusted finance costs, driven by an increase in interest expense following the acquisition of AVG.

Piriform Results of Operations

The following tables set forth Piriform's results of operations for the year ended 31 December 2017. Piriform was acquired by the Group on 18 July 2017 and has been included in the Group's consolidated results from that date. Information for the pre-acquisition period (1 January 2017 to 17 July 2018) has not been audited, although it has been included herein for comparison purposes and to assist potential investors in assessing changes in the group's underlying business performance between 31 December 2016 and 31 December 2017.

	Piriform
		Year ended 31 December 2017
	Pre-Acquisition (unaudited)	Post-Acquisition
		(in \$ millions)
Revenue Consumer	10.9	6.0
Direct	5.6	2.3
Indirect	5.3	3.7
Discontinued Business	—	—
SMB	0.7	0.1
Total Revenue	11.6	6.1
Deferred Revenue Haircut
Consumer	—	3.5
Direct	—	3.5
Indirect	—	—
Discontinued Business	—	—
SMB	—	0.5
Deferred Revenue Haircut	—	4.0
Net deferral of revenue
Consumer	(0.7)	0.4
Direct	0.6	0.4
Indirect	(1.3)	—
Discontinued Business	—	—
SMB	—	0.1
Net deferral of revenue	(0.7)	0.5
Adjusted billings
Consumer	10.2	9.9
Direct	6.2	6.2
Indirect	4.0	3.7
Discontinued Business	—	—
SMB	0.7	0.7
Total Adjusted billings	10.9	10.6
		Piriform
		Year ended 31 December
	Pre-Acquisition (unaudited)	Post-Acquisition
		(in \$ millions)
Revenue
Consumer	10.9	6.0
Direct	6.9	2.3
Indirect Discontinued Business	4.0 —	3.7 —
SMB	0.7	0.2
Total Revenue	11.6	6.1
Deferred Revenue Haircut
Consumer	—	3.5
Direct	—	3.5
Indirect	—	—
Discontinued Business	—	—
SMB	—	0.5
Deferred Revenue Haircut	—	4.0

	Piriform
	Year ended 31 December
	Pre-Acquisition (unaudited)	Post-Acquisition
		(in \$ millions)
Adjusted Revenue
Consumer	10.9	9.5
Direct	6.9	5.8
Indirect	4.0	3.7
Discontinued Business	—	—
SMB	0.7	0.6
Total Adjusted Revenue	11.6	10.1
Operating profit	6.9	1.6
Share-based payments	—	—
Exceptional items	—	—
Amortisation of acquisition intangible assets	—	—
Underlying operating profit	6.9	1.6
Depreciation	—	0.2
Adjusted EBITDA	6.9	1.7
Deferred revenue haircut	—	4.0
Adjusted EBITDA post-Deferred Revenue Haircut
Reversal	6.9	5.7
Net deferral of revenue	(0.7)	0.5
Adjusted Cash EBITDA	6.2	6.2

AVG Results of Operations

The following tables set forth AVG's results of operations as of and for the years ended 31 December 2015 and 31 December 2016 and for the three-month period ended 31 December 2016. AVG was acquired by the Group on 30 September 2016 and has been included in the Group's consolidated results from that date, although information for the full year ended 31 December 2016 has been included for comparison purposes herein.

The information for the three months ended 31 December 2016 has been provided to assist potential investors in assessing changes in the Group's underlying business performance between 31 December 2016 and 31 December 2017 and has not been audited.

	AVG
	Year ended 31 December
	2015	2016
	(in \$ millions)
Revenues(1)	425.8	418.6
Cost of revenues	(64.4)	(85.8)
Gross profit	361.4	332.8
Operating costs:
Sales and marketing	(126.6)	(123.2)
Research and development	(88.4)	(91.5)
General and administrative	(69.1)	(118.3)
Total operating costs	(284.1)	(333.0)
Operating profit (loss)	77.3	(0.2)
Analysed as:
Underlying Operating Profit	132.6	131.6
Share-based payment	(15.3)	(14.8)
Exceptional items	(9.0)	(86.9)
Amortisation of acquisition intangible items	(31.0)	(30.1)
Finance income and expenses, net	(16.7)	(24.1)
Profit (loss) before income tax	60.6	(24.3)
Income tax	(11.4)	(4.1)
Profit (loss) for the financial year	49.2	(28.4)

(1) Revenues as shown for the year ended 31 December 2016 reflect the carrying value of deferred revenues of AVG at the time of the AVG Acquisition and do not reflect adjustments from IFRS 3, Business Combinations.

The following table presents AVG's consolidated results of operations for the periods indicated as a percentage of total revenue. Percentages from certain line items do not sum to the subtotal or total line items due to rounding. The period-to-period comparisons of results are not necessarily indicative of results for future periods.

	AVG
	Year ended 31 December
	2015	2016
	(as a % of revenues)
Revenues	100%	100%
Cost of revenues	(15%)	(20%)
Gross profit	85%	80%
Operating costs:
Sales and marketing	(30%)	(29%)
Research and development	(21%)	(22%)
General and administrative	(16%)	(28%)
Total operating costs	(67%)	(80%)
Operating profit (loss)	18%	(0%)
Analysed as:
Underlying Operating Profit	31%	31%
Share-based payment	(4%)	(4%)
Exceptional items	(2%)	(21%)
Amortisation of acquisition intangible items	(7%)	(7%)
Finance income and expenses, net	(4%)	(6%)
Profit (loss) before income tax	14%	(6%)
Income tax	(3%)	(1%)
Profit (loss) for the financial year	12%	(7%)

The following table presents AVG's consolidated results of operations for the three months ended 31 December 2016.

	AVG
	Three months ended 31 December
	2016
	(in \$ millions) (unaudited)
Revenues(1)	49.4
Cost of revenues	(18.4)
Gross profit	31.0
Operating costs:
Sales and marketing	(24.2)
Research and development	(22.2)
General and administrative	(22.9)
Total operating costs	(69.3)
Operating profit (loss)	(38.3)
Finance income and expenses, net	(1.1)
Profit (loss) before income tax	(39.4)
Income tax	19.9
Profit (loss) for the financial year	(19.5)

⁽¹⁾ Revenues as shown for the year ended 31 December 2016 reflect the carrying value of deferred revenues of AVG at the time of the AVG Acquisition and do not reflect adjustments from IFRS 3, Business Combinations.

For a further reconciliation of adjustments made to AVG's financial information referred to in the narratives below, see "—Key Performance Indicators ("KPIs")".

Years ended 31 December 2016 and 2015

Revenues

	AVG
	Year ended 31 December
	2015	2016
	(in \$ millions)
Revenues(1)	425.8	418.6
Consumer	361.9	358.1
Direct	279.8	291.9
Indirect	5.5	11.3
Discontinued Business	76.6	54.9
SMB	63.9	60.5

	AVG
	Year ended 31 December
	2015	2016
	(in \$ millions)
Revenues	425.8	418.6
Deferred Revenue Haircut Reversal	—	—
Gross-Up Adjustment	—	—
Piriform Revenue Adjustment	—	—
Adjusted Revenues	425.8	418.6
Consumer	361.9	358.1
Direct	279.8	291.9
Indirect	5.5	11.3
Discontinued Business	76.6	54.9
SMB	63.9	60.5

Revenue decreased by \$7.2 million, or 2%, from \$425.8 million for the year ended 31 December 2015 to \$418.6 million for the year ended 31 December 2016.

AVG's Adjusted Revenue decreased by 2%, primarily due to the decline in Discontinued Business as well as a slight decline in the SMB, partly offset by a growth in Consumer Direct (mainly driven by growth in Mobile Subscriptions) and Consumer Indirect (mainly driven by Mobile Advertising).

Cost of revenue

	AVG
	Year ended 31 December
	2015	2016
	(in \$ millions)
Cost of revenues	(64.4)	(85.8)
Share-based payments	0.2	0.2
Depreciation & Amortisation (excluding amortisation of
acquisition intangible assets)	6.2	8.2
Exceptional items	0.3	2.0
Adjusted Cost of revenues	(57.7)	(75.4)

Cost of revenue increased by \$21.4 million, or 33%, from \$64.4 million for the year ended 31 December 2015 compared to \$85.8 million for the year ended 31 December 2016.

AVG's adjusted cost of revenue increased by \$17.7 million, or 31%, from \$57.7 million in 2015 to \$75.4 million in 2016, primarily due to higher sales commissions, license fees and fees for distribution of digital content.

	AVG
	Year ended 31 December
	2015	2016
	(in \$ millions)
Operating costs:
Sales and marketing	(126.6)	(123.2)
Research and development	(88.4)	(91.5)
General and administrative	(69.1)	(118.3)
Total operating costs	(284.1)	(333.0)
Adjusted Operating costs
	AVG
	Year ended 31 December
	2015	2016
Operating costs	(in \$ millions) (284.1)	(333.0)
Share-based payments	15.1	14.6
Amortisation of acquisition intangible assets	31.0	30.1
Depreciation and amortisation	9.1	9.1
Capitalised R&D, gross	(3.9)	(5.3)
Exceptional items	8.7	84.9
Adjusted operating costs (excluding depreciation and
amortisation)	(224.1)	(199.6)

Sales and marketing
	AVG
	Year ended 31 December 2015	2016
	(in \$ millions)
Sales and marketing	(126.6)	(123.2)
Share-based payments	2.9	3.4
Amortisation of acquisition intangible assets	19.9	21.1
Depreciation and amortisation	3.3	2.5
Exceptional amortisation	2.8	—
Exceptional items	3.7	17.8
Adjusted Sales and marketing costs (excluding depreciation and
amortisation)	(94.0)	(78.4)

Sales and marketing costs decreased by \$3.4 million, or 3%, from \$126.6 million for the year ended 31 December 2015 to \$123.2 million for the year ended 31 December 2016.

AVG's adjusted sales and marketing costs decreased by \$15.6 million, or 17%, from \$94.0 million in 2015 to \$78.4 million in 2016, primarily due to a reduction in non-personnel costs driven by paid search, marketing, consultancy and outsourced services.

Research and development.

	AVG
	Year ended 31 December
	2015	2016
	(in \$ millions)
Research and development	(88.4)	(91.5)
Share-based payments	2.8	2.4
Amortisation of acquisition intangible assets	11.0	9.0
Depreciation and amortisation	4.0	4.0
Capitalised R&D, gross	(3.9)	(5.3)
Exceptional items	3.6	13.2
Adjusted Research and development costs (excluding
depreciation and amortisation)	(70.9)	(68.2)

Research and development costs increased by \$3.1 million, or 4%, from \$88.4 million for the year ended 31 December 2015 to \$91.5 million for the year ended 31 December 2016.

AVG's adjusted research and development costs decreased by \$2.7 million, or 4%, from \$70.9 million in 2015 to \$68.2 million in 2016, primarily due to a reduction in payroll costs and travel, training and office costs.

General and administrative.

	AVG Year ended 31 December

	2015	2016
	(in \$ millions)
General and administrative	(69.1)	(118.3)
Share-based payments	9.4	8.8
Amortisation of acquisition intangible assets	0.1	—
Depreciation and amortisation	1.8	2.6
Exceptional items	(1.4)	53.9
Adjusted General and administrative costs (excluding
depreciation and amortisation)	(59.2)	(53.0)

General and administrative costs increased by \$49.2 million, or 71%, from \$69.1 million for the year ended 31 December 2015 to \$118.3 million for the year ended 31 December 2016

AVG's adjusted general and administration costs decreased by \$6.2 million or 10% from \$59.2 million in 2015 to \$53.0 million in 2016, primarily due to a reduction in consultancy and professional fees driven by the one-time Sarbanes Oxley Act of 2002 remediation cost in 2015, offset by an increase in personnel costs.

Finance income and expense, net

	AVG
	Year ended 31 December
	2015	2016
	(in \$ millions)
Finance income and expenses, net	(16.7)	(24.1)
Recognition of capitalised debt issuance costs as a result of early
extinguishment of external loan	—	8.5
Adjusted Finance income and expenses	(16.7)	(15.6)

Finance expenses increased by \$7.4 million from \$16.7 million in 2016 to \$24.1 million in 2015, primarily due to a \$7.9 million increase in the aggregated cost of interest on AVG's outstanding debt and amortisation of finance costs. This amount included one-off early-settlement fee resulting from early repayment of a loan, due to acquisition by Avast, which was therefore excluded from Adjusted Finance expenses.

Adjusted Finance income and expenses decreased by \$1.1 million, from \$16.7 million in 2015 to \$15.6 million in 2016, primarily due to lower interest charges.

Income tax

	AVG
	Year ended 31 December
	2015	2016
	(in \$ millions)
Income tax	(11.4)	(4.1)
Tax impact on adjusting items	(15.6)	(30.8)
Capitalised research & development, tax impact	1.0	1.3
Amortisation of capitalised research & development, tax impact	(0.3)	(0.5)
Adjusted Income tax	(26.3)	(34.1)

The statutory income tax rate in the Netherlands, the jurisdiction in which AVG was domiciled, was 25%. In addition, AVG also benefitted from the "innovation box" tax regime with respect to income from technology IP generated in the Netherlands.

AVG's effective tax rate was 18.8% in 2015 and (16.9)% in 2016. The primary reason for the decrease in income tax for the year ended 31 December 2016 was a decrease in taxable income, largely due to a decrease in revenue. The effective Dutch tax rate is typically significantly lower than the statutory tax rate in the Netherlands primarily as a result of the innovation box tax regime in the Netherlands and the deemed depreciation rulings that have been concluded with the Dutch tax authorities. However, in 2016, the change in effective tax rate year over year was due to an increased level of non-deductible costs as a result of the acquisition by Avast, such as advisor costs and accelerated vesting of unvested share options.

Net income

	AVG
	Year ended 31 December
	2015	2016
	(in \$ millions)
Net income	49.2	(28.4)
Share-based payments(1)	15.3	14.8
Exceptional items(2)	9.0	86.9
Amortisation of acquisition intangible assets	31.0	30.1
Amortisation of capitalised research and development	1.2	2.0
Capitalised research and development costs(3)	(3.9)	(5.3)
Recognition of capitalised debt issuance costs as a result of early
extinguishment of external loan(4)	—	8.5
Tax impact on adjusted items(5)	(14.9)	(30.0)
Adjusted Net Income	86.9	78.6

Net income decreased by \$77.6 million from \$49.2 million for the year ended 31 December 2015 to a net loss of \$28.4 million for the year ended 31 December 2016.

AVG's Adjusted Net Income decreased by \$8.3 million, or 10%, from \$86.9 million in 2015 to \$78.6 million in 2016.

Group liquidity and capital resources

Since the Group's inception, it has financed its operations through cash generated from operations as well as term loans and revolving credit facilities. The Group generated significant amounts of cash compared to the amount of revenues the Group recognised in any particular period since the Group's users pay the entire licence fee when they register for the Group's software. Amounts not recognised are reflected on the Group's balance sheet as deferred revenues. At 31 December 2017, the Group had cash and cash equivalents of \$176.3 million.

The Group expects capital expenditures to remain stable at approximately 3% of Adjusted Revenue for the year ended 31 December 2018.

The following table presents the major components of the Group's cash flows for the periods presented:

	Group
	Year ended 31 December
	2015 2016 2017
		(in \$ millions)
Net cash flows from operating activities	202.3	224.6	306.5
Net cash used in investing activities	(30.5)	(1,250.0)	(173.8)
Net cash used in financing activities (154.3) 1,124.9

⁽⁵⁾ Reflects individual tax rate.

Net cash flows from operating activities

The Group's net cash flow from operating activities increased by \$81.9 million, or 36%, from \$224.6 million in the year-ended 31 December 2016 to \$306.5 million in the year-ended 31 December 2017. The increase was primarily due to the inclusion of AVG in the Group's results from 1 October 2016 as well as the full year 2017.

The Group's net cash flow from operating activities increased by \$22.3 million, or 11%, from \$202.3 million in the year-ended 31 December 2015 to \$224.6 million in the year-ended 31 December 2016. The increase was primarily due to the inclusion of AVG in the Group's results from 1 October 2016.

Net cash used in investing activities

The Group's net cash flow used in investing activities decreased by \$1,076.2 million, from \$1,250,0 million in the year-ended 31 December 2016 to \$173.8 million in the year-ended 31 December 2017. The decrease was primarily due to the 2016 significant investment in subsidiary, net of cash required, of \$1,236.2 million which related to the AVG Acquisition, offset by the 2017 investment in subsidiary, net of cash required, of \$157.6 million of which \$118.9 million were related to the acquisition of Piriform and \$38.7 million related to the squeeze out proceedings from the AVG Acquisition.

The Group's net cash flow used in investing activities increased by \$1,219.5 million from \$30.5 million in the year-ended 31 December 2015 to \$1,250.0 million in the year-ended 31 December 2016. The increase was primarily due to the 2016 significant investment in subsidiary, net of cash required, of \$1,236.2 million which related to the AVG Acquisition.

Net cash from/used in financing activities

Cash used in financing activities decreased by \$1,318.6 million from a positive financing cash flow of \$1,124.9 million in 2016 to a financing cash outflow of \$193.7 million in 2017. The decrease was primarily due to the Group entering into a credit agreement to finance the AVG Acquisition in 2016, resulting in a net inflow of borrowings of \$1,182.8 million in the year ended 31 December 2016. In 2017, the Group increased the borrowings under its credit agreements to finance the Piriform acquisition and to make a capital distribution of \$264.8 million to shareholders. On a like-for-like basis, with 2017 including Piriform results from date of acquisition, cash interest and lease repayments in 2016 and 2017 were \$42 million and \$78 million, respectively.

Cash used in financing activities increased by \$1,279.2 million from a financing cash outflow of \$154.3 million in 2015, driven by mandatory and voluntary debt repayment of \$137.1 million, to a positive inflow of borrowings of \$1,124.9 million in 2016. The increase was primarily due to the Group entering into a credit agreement to finance the AVG Acquisition in 2016, resulting in a net inflow of borrowing of \$1,182.8 million in the year ended 31 December 2016. On a like-for-like basis, with 2017 including Piriform results from date of acquisition, cash interest and lease repayments in 2015 and 2016 were \$34 million and \$42 million, respectively.

Contractual commitments and contingencies

The Group's significant contractual obligations and commitments as of 31 December 2017 are summarised in the following table:

	Payments Due by Period
	Total	Less than 1 year	1–5 years	More than 5 years

Operating lease commitments(1)	76.6	12.6	40.0	23.9
Finance lease commitments(2)	1.5	1.5	—	—
Total	78.1	14.1	40.0	23.9

⁽¹⁾ Consists of future lease payments for rented office facilities.

Off-balance sheet items

The Group does not currently engage in off-balance sheet financing arrangements. In addition, the Group does not have any interest in entities referred to as variable interest entities, which includes special purpose entities and other structured finance entities.

⁽²⁾ Consists of other intangibles asset, servers and minor office facilities.

Critical accounting policies and estimates

The Group's accounting policies affecting financial condition and results of operations are more fully described in the consolidated financial statements included elsewhere in this Prospectus. The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the amounts reflected in the consolidated financial statements and accompanying notes, and related disclosure of contingent assets and liabilities. The Group bases estimates upon various factors, including past experience, where applicable, external sources and on other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and could have a material adverse effect on reported results.

In many cases, the accounting treatment of a particular transaction, event or activity is specifically dictated by accounting principles and does not require management's judgment in its application, while in other cases, management's judgment is required in the selection of the most appropriate alternative among the available accounting principles, that allow different accounting treatment for similar transactions.

The Group believes that the accounting policies discussed below are critical to its financial results and to the understanding of its past and future performance as these policies relate to the more significant areas involving management's estimates and assumptions. The Group considers an accounting estimate to be critical if: (1) it requires the Group to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time the Group was making the estimate; and (2) changes in the estimate or different estimates that the Group could have selected may have had a material impact on its financial condition or results of operations.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group based on a customer arrangement in places whereby the service or obligation has been provided, revenue can be reliably measured and collection is probable. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. Each contract is evaluated to determine whether the Group is the principal in the revenue arrangements.

Cost of revenues

Expenses directly connected with the sale of products and the provision of services are recognised as cost of revenues. Costs that are not incremental to the sale of an additional product or service or that are not directly connected to the sale of products or provision of services are classified as operating costs.

Deferral of expenses

Expenditures such as rental payments, insurance and marketing expenditures and other purchased services that relate to multiple accounting periods are deferred and recognised over those accounting periods irrespective of the timing of the consideration given or liability incurred. The basis for the allocation of the expenses is assessed individually to reflect the nature of the expenditure.

Expenses directly connected with the sale of the antivirus software, such as software licensed from third parties that are bundled together with Avast proprietary software, are deferred and recognised ratably over the subscription period of the individual Avast license to which they relate. Accordingly, the revenue and compensation paid to third parties is deferred over the same period for each individual license.

Taxes

Current income tax

Current income tax assets and liabilities recognised are the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the country where the Group operates and generates taxable income.

The estimated current income tax expense recorded in each quarter is calculated using the accounting profit for the period and an estimate of non-deductible expenses of each entity of the Group and the corresponding income tax rate applicable to the given country and accounting period.

Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax liabilities are recognised for all temporary differences, except:

where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forwards of unused tax credits and unused tax losses, to the extent that it is probable that taxable profits will be available, whereby the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses, can be utilised, except:

where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect to deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised 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 utilised.

The carrying amount of deferred tax assets is reviewed at each reporting 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 utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits 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 in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date for the respective tax jurisdiction.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Foreign currency translation

The Group's historical financial information are presented in USD. The functional currencies of all Group entities are presented in the table below. Each entity in the Group (including branch offices not representing incorporated entities) determines its own functional currency, and items included in the financial statements of each entity are measured using that functional currency. For the purposes of inclusion in the historical financial information, the statement of financial position of entities with non-USD functional currencies are translated into USD at the exchange rates prevailing at the balance sheet date and the income statements are translated at the average exchange rate for each month of the relevant year. The resulting net translation difference is recorded in other comprehensive income.

The Group's entities with non-USD functional currencies in 2017 are listed below:

Company or branch	Functional currency
Norman Data Defense Systems B.V.	EUR
Jumpshot s.r.o.	CZK
FileHippo s.r.o.	CZK
AVAST Software, Inc.—Beijing Branch	CNY
AVAST Software (Asia) Limited—Seoul Branch	KRW
AVAST Software Deutschland GmbH	EUR
TuneUp Software GmbH	EUR
AVG Technologies Deutschland GmbH	EUR
AVG Technologies UK Limited	GBP
Privax Services (UK) Limited	GBP
Piriform Software Ltd	GBP
AVAST Software (Asia) Limited	HKD
AVAST Software (Asia) Limited—Taipei Branch	TWD
AVG Mobile Technologies Ltd	ILS
Piriform Group Ltd	GBP
Piriform Ltd	GBP
AVG Technologies AU Pty Ltd	AUD
AVG Technologies Canada Inc.	CAD
AVG Technologies CZ, s.r.o.*	CZK
AVG Distribuidora de Tecnologias do Brasil Ltda.	BRL
AVG Technologies Norway AS	NOK
Norman Data Defense Systems AB	SEK
Norman Data Defense Systems A/S	DKK
AVG Technologies Switzerland AG	CHF
Privax d.o.o Beograd	RSD
Avast Software Japan Godo Kaisha	JPY
Piriform (Barbados) Ltd	BBD
Norman Data Defense Systems (UK) Ltd.	GBP

^* merged with Avast Software s.r.o. on 1 December 2017

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are recalculated at the functional currency spot rate of exchange valid at the reporting date. All differences are recorded in the statement of comprehensive income as finance income and expenses.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates valid at the date when the fair value is determined.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. It is then considered in the determination of goodwill.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and measurement. Contingent consideration is measured at fair value with changes in fair value recognised in profit or loss. Contingent consideration that is classified as equity is not re-measured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in business combination is their fair value as at the date of acquisition.

Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets with finite lives are amortised over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss in the expense category consistent with the function of the intangible assets.

The useful economic lives of intangible assets are as follows:

	Years
Software	2-5
Customer relationships and user base	4
Other licensed intangible assets	10
AVG Trademark	6
AVG Developed Technology	4
Piriform Trademark	10
FileHippo Trademark	indefinite

Research and development costs

Research costs are expensed when incurred as the criteria for capitalisation are not met. Development expenditures are recognised as an intangible asset when the Group can demonstrate:

the technical feasibility of completing the intangible asset so that the asset will be available for use or sale;
its intention to complete and its ability and intention to use or sell the asset;
how the asset will generate future economic benefits;
the availability of resources to complete the asset; and
the ability to measure reliably the expenditure during development.

Trademarks and domains

The Group's trademarks and domains are assessed as having indefinite and definite useful lives. Indefinite lived intangibles are not amortised but are tested for impairment annually and for impairment indicators on a quarterly basis. The assessment of indefinite life is reviewed annually to determine whether the indefinite life assumption continues to be appropriate. Definite lived intangibles are amortised over the estimated useful life.

Goodwill

Goodwill is assessed as having an indefinite useful life and is tested for impairment annually and for impairment indicators on a quarterly basis.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is de-recognised.

Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.

The present value of the expected cost for the restoration of rented premises after the end of their use is included in the cost of construction if the recognition criteria for a provision are met.

Ordinary repairs and maintenance costs are charged to the statement of profit and loss during the accounting period during which they are incurred.

Depreciation is recorded on a straight-line basis over the estimated useful life of an asset, as follows:

	Years
Leasehold improvements	over the lease term
Machinery and equipment	2-5
Vehicles	4-5

Gains or losses arising from the de-recognition of tangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is de-recognised.

Impairment

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's ("CGU") fair value less costs of disposal or its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.

Impairment losses of continuing operations are recognised in the statement of profit and loss in those expense categories consistent with the function of the impaired asset. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. The reversal is limited so that the carrying amount of the asset does not exceed the lesser of its recoverable amount or the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit and loss.

Goodwill and intangible assets with indefinite useful lives are tested for impairment annually as at 31 December, either individually or at the cash-generating unit level, as appropriate and when circumstances indicate that the carrying value may be impaired.

Leases

Operating leases

Leases where the lessee does not obtain substantially all the risks and rewards of ownership of the asset are classified as operating leases. Operating lease payments, other than contingent rentals, are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term.

Finance leases

Leases which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item are classified as finance leases and are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability in order to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance expenses in the statement of profit and loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Employee stock option plans

Employees of the Group receive remuneration in the form of share-based payment transactions whereby employees render services as consideration for equity instruments (equity-settled transactions).

Equity-settled transactions

The cost of equity-settled transactions is determined by fair value at the date when the grant is made using appropriate valuation model. The cost is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in compensation expense.

No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

When terms of an equity-settled transaction are modified, where the modification increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification, additional expense is recognised. When an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award. The dilutive effect of outstanding options is reflected in the computation of diluted earnings per share.

Employee benefits

Pension obligations

Contributions are made to the Government's health, retirement benefit and unemployment plan at statutory rates applicable during the period and are based on gross salary payments. The arrangements of the Government's health, retirement benefit and unemployment plans qualify as defined contribution plans. The Group has no further payment obligations once the contributions have been paid. The expense for the contributions is charged to profit and loss in the same period as the related salary expense. As a benefit for employees, the Group also makes contributions to defined contribution schemes operated by external (third party) pension companies. These contributions are charged to profit and loss in the period to which the contributions relate.

Defined contribution plans

The Group maintains a defined contribution 401(k) retirement savings plan for its U.S. employees. Each participant in the 401(k) retirement savings plan may elect to contribute a percentage of his or her annual compensation up to a specified maximum amount allowed under U.S. Internal Revenue Service regulations. The Group matches employee contributions to a maximum of 4% of the participant annual compensation.

Defined benefit plan

The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. The current service cost of the defined benefit plan, recognised in the statement of profit and loss in personnel expenses reflects the increase in the defined benefit obligation resulting from employee service in the current year.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in personnel expenses in the statement of profit and loss.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity and are reflected in other comprehensive income in the period in which they arise.

Redundancy and termination benefits

Redundancy and termination benefits are payable when employment is terminated before the normal retirement or contract expiry date. The Group recognises redundancy and termination benefits when it is demonstrably committed to have terminated the employment of current employees according to a detailed formal plan without possibility of withdrawal. Benefits falling due more than 12 months after the balance sheet date are discounted to present value. There are no redundancy and termination benefits falling due more than 12 months after the balance sheet date.

Key management personnel

The Group discloses the total remuneration of key management personnel ("KMP") as required by IAS 24—Related party disclosures. The Group includes within KMP all individuals (and their family members, if applicable) who have authority and responsibility for planning, directing and controlling the activities of the Group. KMP include all members of the Management Board and Supervisory Board and the senior executives of the Group.

Financial instruments

Financial assets and liabilities are recognised on the Group's statement of financial position when the Group becomes a contractual party to the instrument. When financial instruments are recognised initially, they are measured at fair value, which is the transaction price plus, in the case of financial assets and financial liabilities not measured at fair value through profit and loss, directly attributable transaction costs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1—Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2—Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and
Level 3—Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

Trade and other receivables

Trade receivables are carried at the original invoice amount, including value-added tax and other sales taxes, less an allowance for doubtful receivables. Trade receivables are deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. An allowance is recorded based on the best available estimate of expected losses.

Bad debts are written off in the period in which they are determined to be completely unrecoverable.

Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and shortterm deposits with a maturity of three months or less.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and shortterm deposits as defined above.

The cash flow statement of the Group is prepared based on the indirect method from the consolidated statement of financial position, consolidated statement of profit and loss and consolidated statement of profit and loss.

Pledged or restricted assets

Financial assets transferred to third parties as collateral, assets that are pledged and assets as to which the Group has otherwise restricted dispositions are classified as other long term receivables, if the period until which the restriction ends or return of the assets in question will take place is more than 12 months from the balance sheet date.

Trade and other payables

Trade payables are recognised at their amortised cost which is deemed to be materially the same as the fair value.

Loans

Loans are initially recognised at their fair value, net of direct costs which are accrued and released to financial expenses on a time-based basis using the effective interest rate method. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial liability. Interest income is included in finance income in the statement of profit and loss.

De-recognition of financial instruments

A financial asset or liability is generally de-recognised when the contract that gives right to it is settled, sold, cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of profit and loss.

Derivative financial instruments

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently re-measured at fair value at the end of each reporting period. The resulting gain and loss is recognised in profit and loss immediately. None of the derivatives presently qualify as hedge accounting.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Restructuring provisions

Restructuring provisions are recognised only when the Group has a constructive obligation, which is when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, and an appropriate timeline, and the employees affected have been notified of the plan's main features.

Operating profit

Operating profit is defined as profit before financial results and taxes and represents profit from business operations.

Underlying operating profit

Underlying operating profit is defined as operating profit less share based payments, exceptional items and amortisation of intangible assets acquired through business combinations.

Financial income and expenses, net

Financial income and expenses, net consist of foreign exchange gains and losses, interest income, interest expense and other financial expense. When a non-current liability is discounted to a net present value the unwinding of the discount is presented as an interest expense.

Exceptional items

Exceptional items are material or non-recurring items of income and expense which the Group believes should be separately disclosed to show the underlying business performance of the Group more accurately. Such items are separately disclosed on the face of the consolidated statement of profit and loss and in the notes to the consolidated financial statement. Examples of such items include legal and advisory costs related to acquisition, integration, strategic restructuring program costs and cost of impairment.

Development costs

The decision of whether to capitalise costs incurred in developing assets that will have a useful economic life exceeding one year is based on management's judgment as to whether the technological and economic feasibility are confirmed. When determining the amounts to be capitalised, management makes assumptions about future cash flows, the discount rate and the useful economic life of capitalised intangibles. The Group evaluates its development costs for capitalisation for individual business units and projects. During the years ended 31 December 2015, 2016 and 2017, no costs were capitalised as the criteria for capitalisation were not met.

Share-based payment transactions

The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. Estimation of the fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the fair value of the shares, the expected term of the share option, volatility and dividend yield. The assumptions and models used for the estimation of the fair value for share-based payment transactions are discussed in Note 34 to the Group Financial statements.

Functional currency

The Group's historical financial information are presented in USD, which is also the functional currency of numerous Group entities. For each entity, the Group determines the functional currency based on the denomination of their primary operations.

Gross versus net revenue accounting

Each contract is evaluated to determine whether the Group is the principal in the revenue arrangement. When the Group concludes that it has control over the revenue arrangement, revenues are recognised on a gross basis, otherwise revenues are recognised net of resellers' commissions and fees.

With effect from 1 January 2017, the Group amended contract terms with all of its significant E-Commerce Partners. Management evaluated the amended contracts and determined that the Group is the principal in the amended arrangements. Consequently, beginning 1 January 2017, the Group accounts for sales of products through E-Commerce partners on a gross basis before deduction of the E-Commerce partners' commissions and fees. The Group sets the retail list prices and controls the promised products before transferring them to the customer. As a result of this change, the revenues and cost of revenues for the Group are approximately \$14.3 million higher in the year ended 31 December 2017 (nil impact on operating profit). Prepaid expenses and deferred revenue balances as of 31 December 2017 are also \$15.0 million higher as a result of this change. The contract terms AVG had with its significant E-Commerce partners as of the acquisition date of 30 September 2016 allowed AVG to recognise revenues gross of E-Commerce partners' commissions, as a result, sales by AVG were not impacted by the contract term amendment and are not included in the quantification of the change in this paragraph.

The Group also sells subscription software licenses through an e-shop directly to end customers in cooperation with certain payment gateway providers. Revenue from sales through the e-shop are accounted for on a gross basis before the deduction of payment gateway fees. The Group sets the final retail prices and fully controls the revenue arrangement with the end customers.

Consumer indirect monetisation such as the Google Chrome and other similar arrangements are accounted for on a net basis in an amount corresponding to the fee the Group receives from the monetisation arrangement.

Sales of third party solutions are accounted for net of the costs from the third party providing the product or service to the end customer. The factors supporting the net principle of recording revenues include:

the third party suggests to the Group a final retail price; however, individual resellers of the Group have the discretion to set final prices;
provision of the service or product to the end customer is primarily the responsibility of the third party, and the third party provides the actual service or product purchased by the end customer; and
the Group has no material incremental costs from the provision of the service or product to the customer after the moment of sale.

Premium support services are accounted on a gross basis as the Group controls the pricing and services being provided.

The Group partnered with Mobile Network Operators ("MNOs") providing various products of Location Labs. The Group is entitled to certain revenue share on their sales, which is recognised by the Group net of partners' commissions for the following reasons:

MNO partners have full discretion to set the final price; and
the Group has no material incremental costs from the provision of the service or product to the end customer after the moment of sale.

Interest payments

Fees paid in connection with the arrangement of the term loan are being amortised to profit and loss over the term of the facility using the effective interest method. The Group made estimates about voluntary and mandatory repayments of the term loan and future development of market interest rates. Due to the floating rate nature of the loan, changes in the effective interest rate are accounted for prospectively from the moment the change in estimate takes place.

Impairment testing

Significant management judgment and estimates are required to determine the individual cash generating units ("CGUs") of the Group, the allocation of assets to these CGUs and the determination of the value in use or fair value less cost to sell of these individual assets. Management has concluded that the reporting segments used for segment reporting correspond to groups of CGUs at which goodwill is tested for impairment. To determine the value in use management has used the discounted cash flow model which requires estimating the future financial results and an appropriate discount rate.

Trademarks

Avast trademarks and domains were assessed by the Group as having indefinite useful economic lives. The AVG trademark was assessed as having a definite useful economic life. The Group has the intention and ability to prolong the registered trademarks and domains upon their expiration. The Group is considered a going concern and the trademarks and domains are linked to the flagship product of the Group. Management performed an assessment of impairment indicators as of 31 December 2017. No indication of impairment was identified.

Business combinations and initial recognition of assets and liabilities

The Group identified Avast Software B.V. as the acquirer in the business acquisition on 18 July 2017 and 30 September 2016. The Group identified Avast Software s.r.o. as the acquirer in the business acquisition on 30 June 2015. For an overview of the assets and their valuation basis, refer to Notes 4, 5, 6 and 25 of the Group's Historical Financial Information.

The Group accounts for acquisitions of entities which include inputs and processes and have the ability to create outputs as business combinations. The purchase price of the acquisition is allocated to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition dates. The excess of the purchase price over those fair values is recorded as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Group may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Consolidated Statement of Profit and Loss.

Accounting for business combinations requires significant estimates and assumptions at the acquisition date, including estimated fair value of acquired intangible assets, estimated income tax assets and liabilities assumed, and determination of the fair value of contractual obligations, where applicable. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users and customers, acquired technology, and trade names from a market participant perspective, useful lives, and discount rates. Although the management believes the assumptions and estimates made in the past have been reasonable and appropriate, these estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

Deferred tax

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.

In order to calculate the deferred tax impact from the fair value adjustments as part of the AVG acquisition, the management analysed the most likely development of tax regulations, the distribution of taxable profits within the Group (assumed to be primarily in the Czech Republic and the Netherlands) and the timing of tax credit utilisation and determined that 20% is the most suitable tax rate for the years 2018-2022 (to be re-assessed at each balance sheet date as new information becomes available). The expiration of tax losses is considered, as is the impact of business combinations.

Quantitative and qualitative disclosure about market risk

The Group's classes of financial instruments correspond with the line items presented in the consolidated statement of financial position.

The management of the Group identifies the financial risks that may have an adverse impact on the business objectives and through active risk management mitigates these risks to an acceptable level.

The specific risks related to the Group's financial assets and liabilities and sales and expenses are interest rate risk, credit risk and exposure to the fluctuations of foreign currency.

Credit risk

The outstanding balances of receivables are monitored on a regular basis, and the aim of management is to minimise exposure of credit risk to any single counterparty or group of similar counterparties. The credit quality of larger customers is assessed based on the credit rating and individual credit limits are defined in accordance with the assessment.

The Group did not issue any guarantees or credit derivatives. The ageing of receivables is regularly monitored by Group management. The Group does not consider credit risk related to cash balances held with banks to be material.

A significant portion of sales is realised through the Group's online resellers, Digital River and Nexway. The Group recorded trade and other receivables from Digital River in the amount of \$24.8 million and Nexway totalling \$10 million as of 31 December 2017.

The Group evaluates the concentration of risk with respect to accounts receivable as medium, due to relatively low balance of trade receivables that is past due. On the other hand, the risk is reduced by the fact that its customers are located in several jurisdictions and operate in largely independent markets and the exposure to its largest individual distributors is also medium.

Foreign currency risk

Foreign currency risk is the risk that the fair value of future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's operating activities (when revenue or expense is denominated in foreign currency).

At the parent company level, the functional and presentation currency is the U.S. dollar and the Group's revenue and costs are reported in U.S. dollars. The Group is exposed to translation risk resulting from the international sales and costs denominated in currencies other than U.S. dollars and the resulting foreign currency balances held on the balance sheet. The Group is exposed to transaction and translation currency risk from fluctuations in currency rates between USD, CZK, GBP and Euro.

The following table shows payments for Group's products and services by end users (either directly to Group or paid to an e-commerce service provider) in individual currencies. Based on agreements with the Group e-commerce service providers may convert billings collected on behalf of the Group in specific currencies to a remittance currency (usually USD and EUR) at the then existing market rates which does not remove the underlying foreign exchange risk. The table below shows the original currency composition of payments made by end users to illustrate the foreign exchange risk to billings and revenues.

	2015	2016	2017
USD	58%	55%	52%
EUR	17%	18%	19%
GBP	9%	8%	8%
Other	16%	19%	21%
Total	100%	100%	100%

As the majority of revenues represent sales of software licenses, the revenues are recognised over the duration of the licence period, despite payment being received at the start of the license period. Because the release of deferred revenues is performed using the exchange rates valid at the start of the license term, they are not subject to foreign currency risk.

The Group enters into foreign exchange contracts to economically hedge transactional exposures between the functional and transactional currencies, reducing most of the Group's exposures but not eliminating them.

The following table shows financial assets and liabilities in individual currencies, net:

	2015	2016	2017
		(in \$ millions)
USD	(150.2)	(891.3)	(712.8)
EUR	40.6	(430.3)	(404.7)
CZK	(2.5)	19.2	(217.8)
GBP	3.8	6.3	78.3
Other	2.1	(44.8)	(15.8)
Total	(106.2)	(1,341.0)	(1,241.2)

Financial assets and liabilities include cash and cash equivalents, trade and other receivables and trade and other payables, term loan, lease liabilities, other current liabilities and non-current financial assets and liabilities.

The table below presents the sensitivity of the profit before tax to a hypothetical change in EUR, CZK and other currencies and the impact on financial assets and liabilities of the Group. The sensitivity analysis is prepared under the assumption that the other variables are constant. The analysis against USD is based solely on the net balance of cash and cash equivalents, trade and other receivables and trade and other payables.

	% change	31 December 2015	% change	31 December 2016	% change	31 December 2017
				(in \$ millions, except for percentages)
EUR	+/-10%	4.1/(4.1)	+/-10%	(43.0)/43.0	+/-10%	(40.5)/40.5
CZK	+/-10%	0.3/(0.3)	+/-10%	1.9/(1.9)	+/-10%	(21.8)/21.8
GBP	+/-10%	0.4/(0.4)	+/-10%	0.6/(0.6)	+/-10%	7.8/(7.8)
Other	+/-10%	0.2/(0.2)	+/-10%	(4.5)/4.5	+/-10%	1.6/(1.6)

The sensitivity analysis above is based on the consolidated assets and liabilities, i.e. excluding intercompany receivables and payables. However, Avast Software s.r.o. has a significant intercompany loan from Avast Operations B.V. denominated in USD. As the functional currency of Avast Software s.r.o. is the USD but the tax basis of Avast Software s.r.o. is denominated in CZK the income tax gains or losses of Avast Software s.r.o. are exposed to significant foreign exchange volatility. If the CZK depreciates against the USD, the corporate income tax expense would decrease. Avast Operations B.V. is not exposed to any similar volatilities as its functional and tax currency is the USD.

Interest rate risk

Cash held by the Group is not subject to any material interest. The only liabilities held by the Group subject to interest rate risk are the loan and derivatives described in Note 32 of the Historical Financial Information. The discount rates used in calculating lease liabilities (see Note 36 of the Historical Financial Information) and provisions (see Note 26 of the Historical Financial Information) represent implicit interest rates used only to determine the present value of liabilities. The liabilities and provisions themselves are not subject to interest rate risk. The Group keeps all its available cash in current bank accounts or term deposit contracts (see Note 21 of the Historical Financial Information) with a fixed interest rate and maturity not exceeding three months.

As at 31 December 2017 the Group has a term loan with an interest rate of 3-month USD LIBOR plus a margin of 2.75% per year for USD tranche and 3-month EURIBOR plus a margin of 3.00% per year for EUR tranche. The 3-month USD LIBOR is subject to a 1% interest rate floor and the 3-month EURIBOR is subject to a 0% interest rate floor. As of 31 December 2017 the 3-month USD LIBOR was 1.33% per year and 3-months EURIBOR was -0.33% per year.

To reduce the interest rate risk Avast Software B.V. entered into an interest rate cap ("Cap") with certain counterparties on 20 February 2017 effective from 31 March 2017. Under the Cap, 3 month USD-LIBOR is limited to 2.75% per year for a notional amount of \$844 million.

For details about embedded derivatives refer to Note 32 to the Historical Financial Information.

Liquidity risk

The Group performs regular monitoring of its liquidity position to maintain sufficient financial sources to settle its liabilities and commitments. The Group is dependent on a long-term credit facility and so it must ensure that is compliant with its terms. As it generates positive cash flow from operating activities, the Group is able to cover the normal operating expenditures, pay outstanding short-term liabilities as they fall due without requiring additional financing and has sufficient funds to make meet the capital expenditure requirement. The Group considers the impact on liquidity each time it makes an acquisition in order to ensure it does not adversely affect its ability to meet the financial obligation as they fall due.

The Group has established long-term credit ratings of "Ba3" with Moody's and "BB-" with Standard & Poor's. The credit ratings are subject to regular review by the credit rating agencies and may change in response to economic and commercial developments.

The following table shows the ageing structure of financial liabilities as of 31 December 2015:

	As of 31 December 2015
	On demand	Less than 3 months	3 to 12 months (in \$ millions)	1 to 5 years	> 5 years	Total
Term loan	—	—	263.1	—	—	263.1
Interest payment	—	2.6	2.7	—	—	5.3
Lease liability	—	—	0.3	—	—	0.3
Provisions	—	—	1.0	—	0.2	1.2
Trade and other payables	—	9.5	—	—	—	9.5
Income tax liability	—	—	9.6	—	—	9.6
Other current liabilities	—	6.0	5.3	2.2	—	13.5
Derivative financial instruments	—	0.3	—	0.5	—	0.8
Total	—	18.4	282.0	2.7	0.2	303.3

The following table shows the ageing structure of financial liabilities as of 31 December 2016:

	As of 31 December 2016
	On demand	Less than 3 months	3 to 12 months	1 to 5 years	> 5 years	Total
			(in \$ millions)
Term loan	—	20.8	60.7	241.3	1,235.2	1,558.0
Interest payment	—	18.7	57.9	287.4	50.1	414.1
Lease liability	—	—	1.6	2.2	2.1	5.9
Provisions	—	—	28.3	1.0	0.2	29.5
Trade and other payables	—	44.3	—	—	—	44.3
Income tax liability	—	—	25.0	—	—	25.0
Other current liabilities	—	65.1	16.0	—	—	81.1
Derivative financial instruments	—	—	0.3	—	—	0.3
Other non-current liabilities	—	—	—	—	0.9	0.9
Total	—	148.9	189.8	531.9	1,288.5	2,159.1

The following table shows the ageing structure of financial liabilities as of 31 December 2017:

	As of 31 December 2017
	On demand	Less than 3 months	3 to 12 months	1 to 5 years	> 5 years	Total
			(in \$ millions)
Term loan	—	19.1	73.4	334.7	1,354.1	1,781.3
Interest payment	—	18.0	55.8	283.0	47.5	404.3
Lease liability	—	1.0	1.0	2.8	0.2	5.0
Provisions	—	—	6.1	1.0	0.3	7.4
Trade and other payables	—	28.7	6.7	—	—	35.4
Income tax liability	—	—	28.1	—	—	28.1
Other current liabilities	—	22.5	16.2	—	—	38.7
Derivative financial instruments	—	0.4	1.2	1.6	—	3.2
Other non-current liabilities	—	—	—	1.5	0.7	2.2
Total	—	89.7	188.5	624.6	1,402.8	2,305.6

Capital management

The Group manages its capital structure and makes adjustments to it in light of changes in circumstances, including economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

The Group monitors capital using the net liability position and gearing ratio (the net liability position divided by the sum of the net liability position and equity). The Group includes within net liability position all current and non-current liabilities, less cash and cash equivalents.

	31 December 2015	31 December 2016	31 December 2017
		(in \$ millions)
Current and non-current liabilities	481.1	2,106.0	2,363.5
Less: cash and short-term deposits	(141.2)	(240.7)	(176.3)
Net liability position	339.9	1,865.3	2,187.2
Equity	694.3	724.5	435.1
Gearing ratio	32.9%	72.0%	83.4%

Recent accounting pronouncements

There are a number of pending standards and interpretations issued but not yet effective under IFRS. The Group believes that the only standards that are likely to have an impact on the Group's financial statements when they become effective are listed below.

IFRS 9 Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 – Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before 1 February 2015. The Group did not adopt this standard early. The Group is still finalizing an analysis of the implementation of this standard but does not expect the adoption to have a material impact on the Group's historical financial information.

IFRS 15 Revenue from Contracts with Customers

The objective of IFRS 15 is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. The standard is initially effective for annual periods beginning on or after 1 January 2018, with earlier application permitted. The Group applies the standard as of 1 January 2018.

The Group decided to apply the modified retrospective method of the adoption under which IFRS 15 requires restatement of those contracts which are not completed as at the date of adoption. The Group performed an analysis of these contracts and concluded that the impact of adoption has no material impact on the Group's historical financial information.

IFRS 2 Classification and Measurement of Share-based Payment Transactions—Amendments to IFRS 2

The IASB issued amendments to IFRS 2 - Share-based Payments in relation to the classification and measurement of share-based payment transactions. The amendments address three main areas: (1) the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; (2) the classification of a share-based payment transaction with net settlement features for withholding tax obligations; (3) the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled. IFRS 2 is effective for annual periods beginning on or after 1 January 2018. No significant impact from the implementation of this standard is expected by the Group.

IFRS 16 Leases

On 13 January 2016, IASB issued a new standard that sets out the principles for the recognition, measurement, presentation and disclosure of leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has low value. Lessor accounting is substantially unchanged. The standard applies to annual reporting periods beginning on or after 1 January 2019. The Group will not apply the standard early. Adoption of IFRS 16 will result in an increase of the Group's assets and liabilities due to the recognition of the lease contracts within the statement of financial position, increase in EBITDA from the effect of a decrease in operating costs and an increase in amortisation and depreciation and interest expense in the Consolidated Statement of Profit and Loss. The Group is in the process of quantifying these changes. See Note 36 for disclosure of lease commitments

PART 10 CAPITALISATION AND INDEBTEDNESS

The table below sets out the Group's capitalisation and indebtedness as at 31 December 2017.

The information has been extracted without material adjustment from the Group's financial information included in Part 11—"Historical Financial Information" as at 31 December 2017.

The following tables do not reflect the impact of the Reorganisation on the Group's capitalisation and indebtedness.

	As at 31 December 2017
Total current debt	(in \$ millions) 92.5
Guaranteed Secured(1) Unguaranteed/unsecured	— 92.5 —
Total non-current debt (excluding current portion of long-term debt) Guaranteed Secured(1) Unguaranteed/unsecured	1,688.8 - 1,688.8 —
Shareholders' equity (excluding retained earnings) Share capital Share premium, statutory and other reserves Translation differences	376.3 371.7 3.3 1.3
Total Capitalisation	2,157.6

⁽¹⁾ Secured debt comprises a \$1.3 billion dollar term loan facility and a €0.5 billion euro term loan facility.

There has been no material change in the Group's capitalisation since 31 December 2017.

The carrying amount of borrowings presented above is net of the total costs incurred on the arrangement of the term loan (including repricings), which are being amortized to profit and loss over the term of the term facility using the effective interest rate method. At 31 December 2017 the balance of these borrowing fees was \$33.6 million and €0.8 million (\$1.1 million using the 31 December 2017 exchange rate). The 31 December 2017 balance of current debt included \$0.6 million of accrued interest.

As of 31 December 2017, the actual nominal value of the liability to Credit Suisse International was \$1,214 million and €502 million (\$602 million using the 31 December 2017 exchange rate), including accrued interest.

As of 31 December 2017, the Group had issued letters of credit and bank guarantees for a total amount of \$4.4 million. The Group did not have any indirect or contingent indebtedness as at 31 December 2017.

The table below sets out the Group's net indebtedness as at 31 March 2018. This statement of indebtedness has been extracted without material adjustment from the Group's unaudited management accounts.

	As at 31 March 2018
	(unaudited) (in \$ millions)
Cash	232.2
Cash equivalents	—
Liquidity	232.2
Current bank debt	—
Current portion of non-current debt	93.4
Current Financial Debt	93.4
Net current Financial Indebtedness/(surplus)	(138.8)
Non-current bank loans	1,686.5
Non-current Financial Indebtedness	1,686.5
Net Financial Indebtedness	1,547.7

The carrying amount of borrowings presented above is net of the total costs incurred on the arrangement of the term loan (including repricings), which are being amortized to profit and loss over the term of the term facility using the effective interest rate method. At 31 March 2018 the balance of these borrowing fees was \$28.8 million and €0.4 million (\$0.5 million using the 31 March 2018 exchange rate). The 31 March 2018 balance of current debt included \$0.7 million of accrued interest.

As of 31 March 2018, the actual nominal value of the liability to Credit Suisse International was \$1,199 million and €495 million (\$610 million using the 31 March 2018 exchange rate), including accrued interest.

As of 31 March 2018, the Group had issued letters of credit and bank guarantees for a total amount of \$16.7 million. The Group did not have any indirect or contingent indebtedness as at 31 March 2018.

PART 11 HISTORICAL FINANCIAL INFORMATION

Section A—Accountant's Report relating to Group Historical Financial Information

The Directors Avast plc 110 High Holborn London WC1V 6JS

Dear Sirs

10 May 2018

Avast Holding B.V.

We report on the financial information set out in Section B of Part 11 below for the years ended 31 December 2015, 2016 and 2017 (the "Financial Information"). This Financial Information has been prepared for inclusion in the prospectus dated 10 May 2018 of Avast plc (the "Company") on the basis of the accounting policies set out in Note 7 of the Financial Information. This report is required by item 20.1 of Annex I of Commission Regulation (EC) 809/2004 and is given for the purpose of complying with that item and for no other purpose.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to Commission Regulation (EC) 809/2004, consenting to its inclusion in the prospectus.

Responsibilities

The Directors of the Company are responsible for preparing the Financial Information in accordance with International Financial Reporting Standards as adopted by the European Union.

It is our responsibility to form an opinion on the Financial Information and to report our opinion to you.

Basis of opinion

We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the Financial Information. It also included an assessment of significant estimates and judgments made by those responsible for the preparation of the Financial Information and whether the accounting policies are appropriate to the entity's circumstances, consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Financial Information is free from material misstatement whether caused by fraud or other irregularity or error.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion, the Financial Information gives, for the purposes of the prospectus dated 10 May 2018, a true and fair view of the state of affairs of Avast Holding B.V. as at the dates stated and of its profits, cash flows and changes in equity for the periods then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

Declaration

For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the prospectus in compliance with item 1.2 of Annex I of Commission Regulation (EC) 809/2004.

Yours faithfully

Ernst & Young LLP

Section B—Group Historical Financial Information

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

(\$'m)

	Note	Year-ended 31 December 2015	Year-ended 31 December 2016	Year-ended 31 December 2017
REVENUES	11	251.0	340.7	652.9
Cost of revenues	14	(72.8)	(112.1)	(232.8)
GROSS PROFIT		178.2	228.6	420.1
Sales and marketing		(29.0)	(59.6)	(121.4)
Research and development		(23.7)	(46.8)	(75.5)
General and administrative		(25.9)	(90.3)	(98.9)
Total operating costs	15	(78.6)	(196.7)	(295.8)
OPERATING PROFIT		99.6	31.9	124.3
Analysed as:
Underlying Operating profit		165.7	183.8	299.7
Share-based payments	34	(6.1)	(2.7)	(7.7)
Exceptional items	13	(0.8)	(69.8)	(34.8)
Amortisation of acquisition intangible assets	16	(59.2)	(79.4)	(132.9)
Finance income and (expenses), net	18	(27.9)	(12.4)	(153.2)
PROFIT (LOSS) BEFORE TAX		71.7	19.5	(28.9)
Income tax	19	(0.2)	5.1	(4.9)
PROFIT (LOSS) FOR THE FINANCIAL YEAR		71.5	24.6	(33.8)
Earnings/(losses) per share (in \$ per share):
Basic EPS	20	0.76	0.26	(0.36)
Diluted EPS	20	0.71	0.24	(0.36)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(\$'m)

	Year-ended	Year-ended	Year-ended
	31 December 2015	31 December 2016	31 December 2017
Profit (loss) for the financial year Other comprehensive gains (losses):	71.5	24.6	(33.8)
Items that will not be reclassified subsequently to profit or loss: —Defined benefit plan actuarial gain Items that may be reclassified subsequently to profit or	—	—	0.1
loss: —Translation differences	—	2.9	(1.6)
Total other comprehensive gains (losses)	—	2.9	(1.5)
Comprehensive income (loss) for the year	71.5	27.5	(35.3)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (\$'m)

	Note	31 December 2015	31 December 2016	31 December 2017
ASSETS
Current assets
Cash and cash equivalents	21	141.2	240.7	176.3
Trade and other receivables	23	34.7	71.4	93.2
Prepaid expenses	24	3.1	14.8	35.8
Inventory		—	—	0.5
Tax receivables		1.6	3.4	7.5
Other financial assets	22	0.4	2.0	1.0

		181.0	332.3	314.3
Non-current assets
Property, plant and equipment	25	10.1	34.7	29.5
Intangible assets	25	255.5	492.3	394.3
Deferred tax asset	19	6.4	46.9	66.3
Other financial assets	22	0.4	3.6	1.9
Prepaid expenses	24	1.5	1.8	0.5
Goodwill	25	720.5	1,895.8	1,986.7
		994.4	2,475.1	2,479.2
TOTAL ASSETS		1,175.4	2,807.4	2,793.5

SHAREHOLDERS' EQUITY AND LIABILITIES Current liabilities

Trade and other payables	28	9.5	44.3	35.4
Lease liability	36	0.3	1.6	1.7
Provisions	26	1.0	27.9	6.2
Income tax liability		9.6	25.0	28.1
Deferred revenue	30	121.9	201.1	324.3
Other current liabilities	27	13.5	81.1	38.7
Term loan	31	263.1	81.5	92.5
Financial liability	32	—	0.3	—
		418.9	462.8	526.9
Non-current liabilities
Lease liability	36	—	4.3	3.3
Provisions	26	0.2	1.6	1.2
Deferred revenues	30	15.1	30.0	54.5
Term loan	31	—	1,476.5	1,688.8
Financial liability	32	0.5	—	3.2
Other non-current liabilities	29	—	0.9	2.2
Deferred tax liability	19	46.4	106.8	78.3

		62.2	1,620.1	1,831.5
Shareholders' equity
Share capital	33	565.3	565.3	371.7
Share premium, statutory and other reserves	33	70.7	73.1	3.3
Translation differences		—	2.9	1.3
Retained earnings	33	57.9	82.5	57.9
Equity attributable to equity holders of the parent		693.9	723.8	434.2
Non-controlling interest	33	0.4	0.7	0.9
		694.3	724.5	435.1
TOTAL SHAREHOLDERS' EQUITY AND
LIABILITIES		1,175.4	2,807.4	2,793.5

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(\$'m)

	Note	Share capital	Share premium, statutory and other reserves	Translation differences	Retained earnings	Equity attributable to equity holders of the parent	Non-controlling interests	Total equity
At 31 December 2014		565.3	65.0	—	(13.6)	616.7	—	616.7
Profit (loss) for the year Other comprehensive		—	—	—	71.5	71.5	—	71.5
income		—	—	—	—	—	—	—
Comprehensive income for the
period		—	—	—	71.5	71.5	—	71.5
Share-based payments	34	—	5.7	—	—	5.7	0.4	6.1
At 31 December 2015		565.3	70.7	—	57.9	693.9	0.4	694.3
Profit (loss) for the year Other comprehensive		—	—	—	24.6	24.6	—	24.6
income		—	—	2.9		2.9	—	2.9
Comprehensive income for the
period		—	—	2.9	24.6	27.5	—	27.5
Share-based payments	34	—	2.4	—	—	2.4	0.3	2.7
At 31 December 2016		565.3	73.1	2.9	82.5	723.8	0.7	724.5
Profit (loss) for the year Other comprehensive		—	—	—	(33.8)	(33.8)	—	(33.8)
income		—	0.1	(1.6)	—	(1.5)	—	(1.5)
Comprehensive income for the
period		—	0.1	(1.6)	(33.8)	(35.3)	—	(35.3)
Transfer within equity	33	23.0	(77.9)	—	54.9	—	—	—
Capital distribution	33	(219.1)	—	—	(45.7)	(264.8)	—	(264.8)
Share-based payments	34	—	7.5	—	—	7.5	—	7.5
Exercise of options	34	2.5	0.5	—	—	3.0	0.2	3.2
At 31 December 2017		371.7	3.3	1.3	57.9	434.2	0.9	435.1

(\$'m)

	Note	For the year ended 31 December 2015	For the year ended 31 December 2016	For the year ended 31 December 2017
Cash flows from operating activities
Profit (loss) for the financial year		71.5	24.6	(33.8)
Non-cash adj. to reconcile profit to net cash flows:
Income tax	19	0.2	(5.1)	4.9
Depreciation	16	3.3	6.8	15.4
Impairment	25	—	15.9	—
Amortisation Loss on disposal of property, plant and	25	59.9	81.1	136.6
equipment		—	—	0.7
Movement of provisions and allowances		(0.4)	13.6	(17.8)
Interest income		—	—	(0.1)
Interest expense, changes of fair values of derivatives and other non-cash financial
expense	18	23.2	39.5	96.3
Shares granted to employees	34	6.1	2.7	7.7
Effect of exchange rate changes on cash and cash
equivalents held in foreign currencies		2.6	—	3.4
Unrealised foreign exchange gains and losses and
other non-cash transactions		(0.2)	(22.8)	56.0
Working capital adjustments:
(Increase)/Decrease in trade and other
receivables		(6.7)	2.3	(45.1)
Increase/(decrease) in trade and other payables		6.4	10.8	(10.6)
Increase in deferred revenues	30	36.4	76.2	147.7
Income tax paid		—	(21.0)	(54.8)
Net cash flows from operating activities		202.3	224.6	306.5
Cash flows from investing activities
Acquisition of property and equipment	25	(8.5)	(8.6)	(10.1)
Acquisition of intangible assets	25	(3.7)	(0.6)	(5.8)
Investment in subsidiary, net of cash acquired	4,5,6	(16.3)	(1,236.2)	(157.6)
Settlement of contingent consideration		(2.0)	(4.6)	(1.0)
Restricted cash		—	—	0.5
Interest received		—	—	0.2
Net cash used in investing activities		(30.5)	(1,250)	(173.8)
Cash flows from financing activities
Capital distribution	33	—	—	(264.8)
Exercise of options	33	—	—	3.0
Repayment of borrowings Proceeds from borrowings	31 31	(137.1) —	(27.1) 1,182.8	(67.8) 214.0
Interest paid		(16.8)	(29.4)	(77.6)
Lease repayments		(0.4)	(1.4)	(0.5)
Net cash used from financing activities		(154.3)	1,124.9	(193.7)

Net increase/(decrease) in cash and cash equivalents		17.5	99.5	(61.0)
Effect of exchange rate changes on cash and cash equivalents held in foreign currencies Cash and cash equivalents at beginning of		(2.6)	—	(3.4)
period		126.3	141.2	240.7
Cash and cash equivalents at end of period	21	141.2	240.7	176.3

1. GENERAL INFORMATION

Avast Holding B.V. ("Avast Holding") was incorporated on 27 January 2014 in the Netherlands as a non-trading holding company for the purpose of facilitating the acquisition of Avast Software B.V. ("Avast BV") and its subsidiaries (collectively the "Group"). The acquisition was completed on 21 March 2014.

On 30 September 2016, Avast BV acquired AVG Technologies B.V., formerly AVG Technologies N.V ("AVG"). See Note 5 for further details.

On 18 July 2017 Avast BV acquired Piriform Group Ltd ("Piriform") and, in connection with the same transaction, Avast Software s.r.o. ("Avast CZ") acquired the FileHippo business ("FileHippo") from Well Known Media Ltd. See Note 4 for further details.

2. BASIS OF PREPARATION

The historical financial information for the three years ended 31 December 2017 has been prepared specifically for the purposes of this Prospectus and in accordance with the requirements of the Prospectus Directive Regulation and UK Listing Rules, and in accordance with the basis of preparation.

The historical financial information of the Group has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"). The historical financial information does not constitute statutory accounts for these periods.

The historical financial information has been prepared on a historical cost basis and are presented in US dollars. All values are rounded to the nearest 0.1 million (\$'m), except where otherwise indicated.

The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the historical financial information has been prepared on a going concern basis. The Group has considerable financial resources together with contracts with a large number of customers and across different geographic areas. Therefore, the directors believe that the Group is well placed to manage its business risks successfully. In addition, Note 35 to the financial statements includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, and its exposures to credit risk and liquidity risk.

3. BASIS OF CONSOLIDATION

The historical financial information comprises the consolidated balance sheets of Avast Holding and its subsidiaries (see Note 10) as at 31 December 2015, 2016 and 2017, and the consolidated statements of profit and loss, consolidated statements of comprehensive income, changes in equity and cash flows for the years ended 31 December 2015, 2016 and 2017.

The Group uses the direct method of consolidation, under which the financial statements are translated directly into the presentation currency of the Group, USD. Subsidiaries are fully consolidated from the date of the acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. All intra-group balances, transactions, unrealised gains and losses resulting from intragroup transactions and dividends are eliminated in full on consolidation.

A significant part of the commercial activities of the Group are now carried out by AVG, which was acquired on 30 September 2016 (see Note 5). A significant portion of the operating costs of the Group consists of the operating costs of AVG whose results have been included in the historical financial information of the Group since 30 September 2016.

4. BUSINESS COMBINATION IN 2017

Acquisition of Piriform and FileHippo

On 18 July 2017, Avast BV acquired a 100% stake in Piriform Group Ltd. for consideration of \$121.4 million. In connection with the same transaction, Avast CZ acquired FileHippo, being a download website, for consideration of \$6 million from Well Known Media Ltd.

Piriform Group Ltd. develops popular cleaning and optimisation software for PCs and mobile devices. FileHippo is a download website that offers computer software. The primary reason for the acquisition was to obtain access to the user base of Piriform Group Ltd. and leverage revenue synergies between the two companies and product lines.

Under IFRS 3: Business Combinations ("IFRS 3"), the transaction represents a business combination with both Avast BV and Avast CZ being the acquirers. The acquisition date was determined to be 18 July 2017.

The fair value of the consideration at the acquisition date was determined by the Group to be \$127.4 million for 100% ownership. The consideration given was paid in cash.

The fair value of assets acquired and liabilities incurred on the acquisition date was determined on a final basis as follows:

(\$'m)	Carrying value at 18 July 2017	Fair value at 18 July 2017
ASSETS
Current assets
Cash and cash equivalents	8.5	8.5
Trade and other receivables	2.3	2.3
Prepaid expenses	0.2	0.2
Tax receivables	0.1	0.1
	11.1	11.1
Non-current assets
Property, plant and equipment	0.3	0.3
Intangible assets	4.2	32.6
	4.5	32.9
TOTAL ASSETS	15.6	44.0

SHAREHOLDERS' EQUITY AND LIABILITIES
Current liabilities
Trade and other payables	1.4	1.4
Deferred revenues	0.2	—
	1.6	1.4
Non-current liabilities
Deferred tax liabilities	0.4	6.1
	0.4	6.1
TOTAL LIABILITIES	2.0	7.5
NET ASSETS	13.6	36.5
CONSIDERATION GIVEN	—	127.4

GOODWILL Recorded	—	90.9

The business combination resulted in the recognition of goodwill of \$90.9 million which is tested for impairment at least annually. The goodwill of \$90.9 million comprises of value that can be derived from cross-sales of Avast and Piriform products and increase of conversion rate from trial to premium products and from one-off to recurring licences. The carrying value of goodwill is not expected to be tax deductible.

The Group's determination of the fair value of acquired assets and liabilities comprised:

Current assets—the fair values of all current assets of the acquiree have been determined to correspond to their carrying values;
Property, plant and equipment—the fair values of Property, plant and equipment of the acquiree have been determined to correspond to their carrying value;
Intangible assets—the business combination resulted in the recognition or revaluation of intangible assets (see Note 25);
Deferred revenues—due to negligible incremental costs resulting from the obligation to provide support and maintenance services in the future, the fair value of deferred revenues was revalued to zero;
Other liabilities—there was no significant difference between the carrying and fair value of the other liabilities as of the acquisition date; and
A deferred tax liability of \$6.1 million was recognised, of which \$0.4 million relates to the carrying value of deferred tax liabilities of the Piriform Group Ltd. as of the acquisition date.

The Group incurred acquisition-related transactions costs of \$2.6 million which were recorded as General and administrative expenses in the statement of profit and loss.

The revenues of the Group for the year ended 31 December 2017 are \$652.9 million, to which Piriform Group Ltd. and FileHippo contributed \$6.1 million. If the business combination had occurred at the beginning of the reporting period (1 January 2017) the revenues of the Group would have been \$663.6 million and the contribution of Piriform Group Ltd. and FileHippo would have been \$16.8 million.

The net result of the Group for the year ended 31 December 2017 is a net loss of \$33.8 million, to which Piriform Group Ltd. and FileHippo contributed a net profit of \$0.4 million. If the business combination had occurred at the beginning of the reporting period (1 January 2017), the net loss of the Group would have been a net loss of \$32.4 million and the contribution of Piriform Group Ltd. and FileHippo would have been a net profit of \$1.8 million.

5. BUSINESS COMBINATION IN 2016

Acquisition of AVG Technologies B.V.

On 6 July 2016, Avast BV and its parent company, Avast Holding, signed a Purchase Agreement to acquire all of the outstanding ordinary shares of AVG Technologies B.V. (formerly AVG Technologies N.V., the legal form of which changed on 11 November 2016) for a cash purchase price of \$25.00 per share. AVG is a leading provider of software services to secure devices, data and consumers. AVG's consumer portfolio includes internet security, performance optimisation, location services, data controls and insights, and privacy and identity protection, for mobile devices and desktop devices. Prior to the acquisition, AVG was a public company listed on the New York Stock Exchange ("NYSE"). With the acquisition, the Group expanded its Small and Medium sized Business ("SMB") and Mobile businesses and added AVG's reseller base, enabling the Group to support more and larger organisations.

On 30 September 2016, Avast Group closed the acquisition and paid the full acquisition price for 100% of the shares of \$1,276 million to an escrow agent. On 30 September 2016, Avast obtained a total of 44,543,555 shares, representing approximately 87.3% of the aggregate number of the outstanding shares. The subsequent offering period, during which time the Group was obliged to purchase the remaining shares under the same conditions, ended on 28 October 2016. During the subsequent offering Avast BV acquired an additional 4,942,506 shares for \$123 million (paid by the escrow agent), increasing the Avast ownership up to approximately 97.0% of the outstanding shares. At the end of the subsequent offering period, the escrow agent returned the remaining \$38.8 million, corresponding to the outstanding 3% of AVG Technologies B.V. shares, to the Group. Following the subsequent offering period, the Group commenced squeeze-out proceedings in the Dutch Enterprise Court in order to acquire the remaining outstanding shares and to become the sole shareholder. During the squeeze-out proceedings, the Group was obliged to purchase remaining the 3% of shares under the same conditions. Liability due to the acquisition of shares in the squeeze-out process of \$38.8 million was paid on 16 March 2017.

On 8 November 2016, AVG voluntarily de-listed from the NYSE and on 23 March 2017 AVG filed Form 15 with the Securities and Exchange Commission ("SEC") and was formally de-registered.

Under IFRS 3, the transaction represents a business combination with Avast BV being the acquirer. The acquisition date was determined to be 30 September 2016.

The fair value of the consideration at the acquisition date was determined by the Group to be \$1,307.7 million for 100% ownership.

Purchase price

	(\$'m)
Acquisition of shares in AVG during the initial and subsequent offering period (97%)	1,237.2
Acquisition of shares in squeeze-out process (3%)	38.8
Cash settlement of vested AVG options, PSUs and RSUs	7.4
Cash settlement of accelerated AVG options, PSUs and RSUs (post-closing)	24.3
Total consideration	1,307.7
Unsettled accelerated AVG options	(8.4)
Total consideration paid by 31 December 2017	1,299.3

The cash settlement of vested options of \$7.4 million was paid on 30 September 2016. Of the total amount of accelerated options with a change in control clause of \$24.3 million, \$15.9 million was paid by the Group by 31 December 2017 and \$8.4 million remained unpaid. A corresponding liability was recorded by the Group within Other current liabilities as of 31 December 2017 (see Note 27).

The following represents the final allocation of purchase price related to the AVG acquisition, based on the fair values determined as of the acquisition dates of the assets and liabilities acquired:

(\$'m)	Carrying value at 30 September 2016	Fair value at 30 September 2016
ASSETS
Current assets
Cash and cash equivalents	23.7	23.7
Trade and other receivables	33.7	33.7
Other current financial assets	10.2	10.2
Tax receivables	2.4	2.4
Prepaid expenses and other current assets	10.5	10.5
Inventory	1.0	1.0
	81.5	81.5
Non-current assets
Property, plant and equipment	23.3	23.3
Intangible assets	84.0	317.5
Deferred tax asset	41.1	7.2
Goodwill	298.1	—
Other financial assets	3.3	3.3
	449.8	351.3
TOTAL ASSETS	531.3	432.8

SHAREHOLDERS' EQUITY AND LIABILITIES
Current liabilities
Trade and other payables	31.4	31.4
Lease liability	1.7	1.7
Provisions	13.1	13.1
Income tax payable	8.9	8.9
Deferred revenues	157.0	15.0
Other current liabilities	22.8	22.8
Financial liability*	151.8	151.8
	386.7	244.7
Non-current liabilities
Lease liability	2.8	2.8
Deferred revenues	30.4	2.9
Provisions	1.5	1.5
Financial liability	2.2	2.2
Other non-current liabilities	0.9	0.9
Deferred tax liabilities	18.1	61.3
	55.9	71.6
TOTAL LIABILITIES	442.6	316.3
NET ASSETS	88.7	116.5
CONSIDERATION GIVEN	—	1,307.7
GOODWILL Recorded	—	1,191.2

^* Financial liabilities include an intercompany loan of \$151 million due to Avast BV, which was paid by AVG subsequently to the acquisition.

The business combination resulted in the recognition of goodwill of \$1,191.2 million which is tested for impairment at least annually. The goodwill of \$1,191.2 million comprises the workforce in place and the value of expected synergies arising from the acquisition. The carrying value of goodwill is not expected to be tax deductible.

The Group's determination of the fair value of acquired assets and liabilities comprised:

Current assets—the fair values of all current assets of the acquiree have been determined to correspond to their carrying values;
Property, plant and equipment—the fair values of Property, plant and equipment of the acquiree have been determined to correspond to their carrying values;
Intangible assets—the business combination resulted in the recognition or revaluation of intangible assets (see Note 25);
Deferred tax asset—the business combination resulted in the revaluation of the deferred tax asset by \$33.9 million (see Note 19) relating to the 30 September 2016 fair value adjustment to the carrying value of deferred revenues of \$169 million;
Deferred revenues—the deferred revenue balance of AVG on the acquisition date was revalued to reflect the fair value of the costs of servicing these software licenses from the acquisition date until their expiration, taking into account a discount rate of 9.6% p.a. The revalued acquisition date balance of deferred revenues of \$17.9 million will be deferred ratably over the individual subscription periods;
A deferred tax liability of \$61.3 million was recognised (see Note 19), of which \$46.7 million is the deferred tax impact in the recognition and revaluation of intangible assets to fair value and \$14.6 million is the carrying value of deferred tax liabilities of AVG as of the acquisition date (primarily derived from deferred revenues, past acquisitions and other temporary tax differences);
Other liabilities—there was no significant difference between the carrying and fair value of the other liabilities as of the acquisition date.

The Group incurred transaction costs of \$68.95 million, of which \$49.42 million related to the external bank financing. The financing costs are being allocated to financial expenses over the term of the drawn term loan using the effective interest rate method. The remaining transactions costs were recorded as General and administrative expenses in the statement of profit and loss (the majority in 2016 with the balance expensed in 2017).

The revenues of the Group for the year ended 31 December 2016 are \$340.7 million, to which AVG contributed \$49.4 million (if the acquisition date deferred revenue balance of AVG had not been revalued the contribution would have been \$103.6 million). If the business combination had occurred at the beginning of the reporting period (1 January 2016), the revenues of the Group would have been \$565.2 million and the contribution of AVG would have been \$274.0 million (if the 1 January 2016 deferred revenue balance of AVG had not been revalued AVG's contribution to revenues would have been \$418.6 million).

The net result of the Group for the year ended 31 December 2016 is \$24.6 million, to which AVG contributed a net loss of \$50.7 million (primarily due to the impact of the purchase price allocation of the acquisition on the deferred revenue balance and amortisation of intangible assets newly recognised during the acquisition). If the business combination had occurred at the beginning of the reporting period (1 January 2016) the net profit of the Group would have been a net loss of \$92.7 million and the contribution of AVG would have been a net loss of \$168.0 million.

6. BUSINESS COMBINATION IN 2015

On 30 June 2015, Avast CZ purchased a 100% stake in the US based company Remotium, Inc. ("Remotium"), a developer of virtualised enterprise mobility. Remotium's technology provides enterprises with secure access to business-critical applications from anywhere and from any mobile or desktop devices. With this product, corporate mobile users have all their personal data and applications available on their mobile (iOS or Android) while all their corporate data and applications reside and execute on a server and are only displayed on the mobile. The reason for the acquisition was to expand the Group's mobile offerings into the enterprise market and to leverage Remotium's innovative technology.

The transaction represented a business combination with Avast CZ being the acquirer.

The fair value of the consideration at the acquisition date was determined by the Group to be \$18.4 million and comprised the following components:

• Initial payment—on the acquisition date \$16.5 million was paid to the owners of Remotium.

• Earn-out payment—the earn-out of up to \$3.1 million represented a contingent consideration payable 24 months after the acquisition date to the extent financial performance targets of Remotium for the period from 1 July 2015 through 30 June 2017 are met. As of the acquisition date, the probability weighted discounted present value of the earn-out was determined to be \$1.9 million (with a nominal value of \$2.7 million).

The fair value of assets acquired and liabilities incurred on the acquisition date was determined on a final basis as follows:

(\$'m)	Carrying value 30 June 2015	Fair value 30 June 2015
ASSETS
Cash and cash equivalents Intangible assets	0.2 —	0.2 2.8
TOTAL ASSETS	0.2	3.0
LIABILITIES
Accounts payable	0.2	0.2
Loan Payable	0.1	0.1
Deferred revenues	0.6	0.1
Deferred tax liability	—	0.1
TOTAL LIABILITIES	0.8	0.5
NET ASSETS	(0.7)	2.5
CONSIDERATION PAID	—	16.5
CONTINGENT CONSIDERATION		1.9
TOTAL CONSIDERATION GIVEN		18.3
GOODWILL Recorded	—	15.9

As of 31 December 2016, the management reviewed financial performance of Remotium and concluded that targets were not achieved. Therefore, no earn-out was paid out. The Group released the contingent consideration liability.

The business combination resulted in the recognition of goodwill of \$15.9 million and intangible assets of \$2.8 million with a useful economic life of 5 years. No changes to the purchase price allocation were made since 30 June 2015. As of 30 September 2016, the Group observed certain indications of impairment for Remotium due to negative future cash flow projections. As a result, goodwill was impaired in full and intangible assets of \$2.8 million were written off (see Note 25).

Revenues of the Group for the year ended 31 December 2015 would not have been significantly different had the acquisition occurred at the beginning of the reporting period (1 January 2015). Net profit of Remotium after the acquisition for the period from 1 July 2015 through 31 December 2015 was USD 3.3 million. The net profit of the Group for the year ended 31 December 2015 would have been a net profit of \$67 million had the transaction occurred at the beginning of the reporting period (1 January 2015).

7. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies used in preparing the historical financial information are set out below. These accounting policies have been consistently applied in all material respects to all periods presented.

Revenue recognition

Revenues from individual products and services are aggregated into the following categories:

Consumer

Direct

The principal revenue stream of the Group is derived from the sale of its software and related services for desktop and mobile which protect users' security, online privacy and device performance. The Group mainly sells software licenses through direct sales (mainly through e-commerce services providers including Digital River and the Group's e-shop) to customers, however, also sells a small portion through indirect sales via the Group's retailers and resellers. Direct sales to customers are recognised at gross sales prices, before the deduction of transaction and other fees.

The Group's e-commerce service providers fulfil administrative functions, such as collecting payment and remitting any required sales tax. The Group's e-commerce service providers collect the fees and transfer cash payments to the Group on a monthly basis within 15 days after the end of the month with respect to which payment is being made.

Location Labs, Inc. ("Location Labs") provides mobile security solutions that partnered with Mobile Network Operators ("MNOs") providing locator, phone controls and drive safe products to their customers. The revenues generated by these arrangements are based on revenue share percentages as stated in the MNO agreements. Revenue is recognised on a net basis, after deduction of partners commissions, based on the delivery of monthly services.

The Group also provides premium support services via arrangements with third parties. The Group recognises revenue net of providers fees providers when the service is outsourced and no deferral is made as the Group has no performance obligations after the date of sale. The Group also sells a limited amount of physical CDs through its distributors which then sell the Group's products (Internet Security and Antivirus Software) to retail stores. The retail revenue is recognised on a gross basis, before the deduction of distributors commissions, ratably over the subscription period. The Group reduces revenue for estimated sales returns. End users may return the Group's products, subject to varying limitations, through resellers or to the Group directly for refund within a reasonably short period from the date of purchase. The Group estimates and records provisions for sales returns based on historical experience.

Indirect

Consumer indirect revenues arise from several products and distribution arrangements that represent the monetisation of the user base. The most significant sources of revenues are:

Google—The Group has two distribution arrangements with Google Ireland Limited ("Google") pursuant to which the Group is paid fees in connection with the Group's offers to users of Google Chrome or Google Toolbar. The Group recognises revenue from Google in full in the month they are earned as the Group has no subsequent performance obligations after the date of sale.
SafePrice—Through its partnerships with e-commerce providers, the Group also earns e-commerce revenues. Users receive price comparisons and discounts on products for which they are shopping, and the Group earns, via its partners, e-commerce affiliate revenues reflecting the value that retailers receive in the form of increased traffic, user acquisition and sales. Revenue is recognised immediately as the Group has no performance obligation after the date of sale.
Secure Browsing—The Group's existing SafeZone browser earns the Group a share of advertising revenue generated by end user search activity, and its successor Avast Secure Browser is expected to continue to earn such search revenues. Revenue is recognised immediately as the Group has no performance obligation after the date of sale.
Advertising—Other Consumer Indirect derived revenues are comprised of advertising fees and product fees. Advertising fees are earned through advertising arrangements the Group has with third parties whereby the third party is obligated to pay the Group a portion of the revenue they earn from advertisements to the Group's end users. Amounts earned are reflected as revenue in the month the advertisement is delivered to the end user. The Group also receives product fees earned through arrangements with third parties, whereby the Group incorporates the content and functionality of the third party into the Group's product offerings. Fees earned during a period are based on the number of active clients with the installed third-party content or functionality multiplied by the applicable client fee.
Analytics—The Group offers big data and marketing analytics through its entity, Jumpshot Inc. ("Jumpshot"), earning recurring subscription revenue as well as a small portion of non-recurring revenue related to data sales. Subscriptions are recognised ratably over the subscription period covered by the contract. The portion of deferred revenues that will be recognised within 12 months following the balance sheet date is classified as current and the remaining balance is classified as non-current.

Other product

PC users' chosen search engines are frequently changed, often without their knowledge or consent. The Group's user community has identified many of these search engines as having a poor reputation. The Group has distribution arrangement several search engines. The Group receives a share of the search revenue from certain search engine companies to which the Groups' users change their browser for as long as the users continue to use that engine. Browser Clean-Up ("BCU") highlights unwanted toolbars and allows users to change to one of a list of recommended search providers. Revenue is recognised immediately as the Group has no further performance obligation after the date of sale.

SMB

SMB includes subscription revenue targeted at small and medium-sized businesses. Revenue is generated through the sale of security software, both on-premise and cloud-based. In addition, the Group sells IT management solutions (including CloudCare and AVG Managed Workplace). SMB customers typically purchase the Group's products through partners and managed service providers ("MSPs") which support SMB clients as well as through direct online sales from the Group's websites. Direct online sales to SMBs are mainly made to small office or home office customers (i.e., businesses with one to ten workers) and to educational institutions (e.g., universities). For the year ended 31 December 2017, approximately 60% of SMB billings were generated through sales made by the Group's partners. SMB subscription revenues are recognised ratably over the term of the subscription in the same way as consumer subscription revenues, commencing in the month in which the SMB customer entered into the subscription agreement. Revenues from sales of Cloudcare and AVG Managed Workplace are recognised on a gross basis, before deduction of the gateways fees, ratably over the subscription period covered by the agreement.

Cost of revenues

Deferral of expenses

subscription period of the individual Avast license to which they relate. Accordingly, the revenue and compensation paid to third parties is deferred over the same period for each individual license.

Taxes

Current income tax

Deferred tax liabilities are recognised for all temporary differences, except:

where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect to deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised 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 utilised.

Foreign currency translation

The Group's historical financial information are presented in US dollars ("USD" or "\$"). The functional currencies of all Group entities are presented in the table below. Each entity in the Group (including branch offices not representing incorporated entities) determines its own functional currency, and items included in the financial statements of each entity are measured using that functional currency. For the purposes of inclusion in the historical financial information, the statement of financial position of entities with non-USD functional currencies are translated into USD at the exchange rates prevailing at the balance sheet date and the income statements are translated at the average exchange rate for each month of the relevant year. The resulting net translation difference is recorded in other comprehensive income.

The Group's entities with non-USD functional currencies are listed below:

Company or branch	Functional currency
Norman Data Defense Systems B.V.	EUR
Jumpshot s.r.o.	CZK
FileHippo s.r.o.	CZK
AVAST Software, Inc.—Beijing Branch	CNY
AVAST Software (Asia) Limited—Seoul Branch	KRW
AVAST Software Deutschland GmbH	EUR
TuneUp Software GmbH	EUR
AVG Technologies Deutschland GmbH	EUR
AVG Technologies UK Limited	GBP
Privax Services (UK) Limited	GBP
Piriform Software Ltd	GBP
AVAST Software (Asia) Limited	HKD
AVAST Software (Asia) Limited—Taipei Branch	TWD
AVG Mobile Technologies Ltd	ILS
Piriform Group Ltd	GBP
Piriform Ltd	GBP
AVG Technologies AU Pty Ltd	AUD
AVG Technologies Canada Inc.	CAD
AVG Technologies CZ, s.r.o.*	CZK
AVG Distribuidora de Tecnologias do Brasil Ltda.	BRL
AVG Technologies Norway AS	NOK
Norman Data Defense Systems AB	SEK
Norman Data Defense Systems A/S	DKK
AVG Technologies Switzerland AG	CHF
Privax d.o.o Beograd	RSD
Avast Software Japan Godo Kaisha	JPY
Piriform (Barbados) Ltd	BBD
Norman Data Defense Systems (UK) Ltd.	GBP

^* Merged with Avast Software s.r.o. on 1 December 2017

Business combinations

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and measurement. Contingent consideration is measured at fair value with changes in fair value recognised in profit or loss. Contingent consideration that is classified as equity is not re-measured and subsequent settlement is accounted for within equity.

Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in business combination is their fair value as at the date of acquisition.

Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses.

The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss in the expense category consistent with the function of the intangible assets.

The useful economic lives of intangible assets are as follows:

	Years
Software	2-5
Customer relationships and user base	4
Other licensed intangible assets	10
AVG Trademark	6
AVG Developed Technology	4
Piriform Trademark	10
FileHippo Trademark	indefinite

Research and development costs

Research costs are expensed when incurred as the criteria for capitalisation are not met. Development expenditures are recognised as an intangible asset when the Group can demonstrate:

the technical feasibility of completing the intangible asset so that the asset will be available for use or sale;
its intention to complete and its ability and intention to use or sell the asset;
how the asset will generate future economic benefits;
the availability of resources to complete the asset; and
the ability to measure reliably the expenditure during development.

Trademarks and domains

Goodwill

Goodwill is assessed as having an indefinite useful life and is tested for impairment annually and for impairment indicators on a quarterly basis.

Property, plant and equipment

The present value of the expected cost for the restoration of rented premises after the end of their use is included in the cost of construction if the recognition criteria for a provision are met.

Ordinary repairs and maintenance costs are charged to the statement of profit and loss during the accounting period during which they are incurred.

Depreciation is recorded on a straight-line basis over the estimated useful life of an asset, as follows:

	Years
Leasehold improvements	over the lease term
Machinery and equipment	2-5
Vehicles	4-5

Impairment

The Group assesses at each reporting date whether there is an indication that an asset may be impaired.

If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's ("CGU") fair value less costs of disposal or its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Leases

Operating leases

Finance leases

Employee stock option plans

Employees of the Group receive remuneration in the form of share-based payment transactions whereby employees render services as consideration for equity instruments (equity-settled transactions).

Equity-settled transactions

The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in compensation expense.

Employee benefits

Pension obligations

Defined contribution plans

Defined benefit plan

Redundancy and termination benefits

Key management personnel

The Group discloses the total remuneration of key management personnel ("KMP") as required by IAS 24— Related party disclosures. The Group includes within KMP all individuals (and their family members, if applicable) who have authority and responsibility for planning, directing and controlling the activities of the Group. KMP include all members of the Management Board and Supervisory Board and the senior executives of the Group.

Financial instruments

Level 1—Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2—Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and
Level 3—Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

Trade and other receivables

Trade receivables are carried at the original invoice amount, including value-added tax and other sales taxes, less an allowance for doubtful receivables. Trade receivables are deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. An allowance is recorded based on the best available estimate of expected losses.

Bad debts are written off in the period in which they are determined to be completely unrecoverable.

Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and shortterm deposits with a maturity of three months or less.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and shortterm deposits as defined above.

Pledged or restricted assets

Financial assets transferred to third parties as collateral, assets that are pledged and assets as to which the Group has otherwise restricted dispositions are classified as other long-term receivables, if the period until which the restriction ends or return of the assets in question will take place is more than 12 months from the balance sheet date.

Trade and other payables

Trade payables are recognised at their amortised cost which is deemed to be materially the same as the fair value.

Loans

De-recognition of financial instruments

A financial asset or liability is generally de-recognised when the contract that gives right to it is settled, sold, cancelled or expires.

Derivative financial instruments

Provisions

Restructuring provisions

Operating profit

Operating profit is defined as profit before financial results and taxes and represents profit from business operations.

Underlying operating profit

Underlying operating profit is defined as operating profit less share based payments, exceptional items and amortisation of intangible assets acquired through business combinations.

Financial income and expenses, net

Exceptional items

Segment Reporting

The Group has applied the criteria set by IFRS 8 Operating Segments to determine the number and type of operating segments. Based on the nature of the business and how the business is managed, two operating segments of Consumer and Small and Medium- sized business (''SMB'') have been identified.

Decisions by the Chief Operating Decision Maker about the allocation of the Group's resources are done on an aggregated level between the two operating segments.

The Group evaluates the performance of its segments based primarily on Revenue, Underlying revenue and Segment underlying operating profit. Total segment underlying profit is derived from underlying revenues and decreased by cost of revenues and operating costs directly attributable to the relevant segment. Underlying revenues represent revenues adjusted for business combination accounting (revenues recognised by the acquiree from the beginning of the year until the acquisition date and the effects of the fair value revaluation of the acquiree's pre-acquisition deferred revenues). Any costs incurred that are directly applicable to the segments are allocated to the appropriate segment. Certain costs that are not directly applicable to the segments are identified as "Corporate Overhead" costs and represent general corporate costs that are applicable to the consolidated group. However, due to the acquisition, the Group decided to centralise some relevant costs unlike in previous years. Corporate overhead still includes administrative overheads such as IT, HR, Finance, Central Marketing,

and Legal but also rentals and utilities that are no longer allocated to the revenue generating business unit. In addition, costs relating to share-based payments and exceptional items are not allocated to the segments since these costs are not directly applicable to the segments, and therefore not included in the evaluation of performance of the segments.

The principal products and services offered by each segment are summarised below:

Consumer—The Group's consumer products include direct revenue streams through its offerings for desktop security and mobile device protection and consist of free and premium paid products for the individual consumer market. The Group also has several value-added solutions for performance, privacy and other tools. The Group also focuses on monetising user base indirectly, via dynamic secure search solution, including our browser toolbar, which gives users a convenient way to access a search engine at any time.

In addition, the Group offers big data and marketing analytics through its entity Jumpshot. The Group provides Jumpshot with anonymised and aggregated data that is collected from scanning the 150 billion URLs that the Group's users visit each month. Jumpshot aggregates anonymised data from users' full internet usage, not just the data of a user's usage on a single company's website.

SMB—The Group's SMB segment focuses on delivering high-level security and protection solutions for Small and Medium sized business customers.

The Group's statutory financial statements for the year ended 31 December 2017 included the restatement of comparative information in accordance with IAS 8. The errors, for which the comparative information was restated, are explained below. The historical financial information presented herein reflects this restatement.

Deferred tax

Certain errors were noted in the recording of deferred tax balances. Due to the omission of certain temporary differences, the Group reported an understated deferred tax asset as at 31 December 2016 and the income tax charge for the year then ended by \$3.9 million. In addition, certain temporary differences had not been properly offset, resulting in an overstatement of the deferred tax asset and deferred tax liability balances by \$23.1 million as of 31 December 2016.

Overstatement of deferred tax liability resulted from business combination accounting

Upon the acquisition of AVG, the Group revalued the assets and liabilities of AVG as of 30 September 2016 and calculated the corresponding deferred tax liability. The Group identified that due to errors in the computation of deferred tax from the revaluation, the balance of related deferred tax liability and goodwill as at 30 September 2016 was overstated by \$3.5 million. As at 31 December 2016, the Group reported overstated goodwill of \$3.5 million and an overstated deferred tax liability of \$4 million. Income tax charge for the year ended 31 December 2016 was understated by \$0.5 million.

Other corrections of errors

As of 31 December 2016, the Group omitted to record allowances for overdue trade receivables of \$0.3 million and obsolete inventory in total amount of \$0.8 million and omitted to release accruals of \$1.4 million as of 31 December 2016. As a result of these errors, the goodwill was understated by \$0.5 million and income tax liability and deferred taxes asset was understated by \$2.6 million and deferred tax liability was overstated by \$0.3 million as of 31 December 2016.

8. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in accordance with IFRS requires the use of judgements, estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during reporting periods.

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the historical financial information:

Development costs

Share-based payment transactions

The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. Estimation of the fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the fair value of the shares, the expected term of the share option, volatility and dividend yield. The assumptions and models used for the estimation of the fair value for share-based payment transactions are described in Note 34 to the Group's Historical Financial Statements.

Functional currency

Gross versus net revenue accounting

Consumer Indirect monetisations such as the Google Chrome and other similar distribution arrangements are accounted for on a net basis in an amount corresponding to the fee the Group receives from the monetisation arrangement.

Sales of third-party solutions are accounted for net of the costs from the third party providing the product or service to the end customer. The factors supporting the net principle of recording revenues include:

the third party suggests to the Group a final retail price; however, individual resellers of the Group have the discretion to set final prices;
provision of the service or product to the end customer is primarily the responsibility of the third party, and the third party provides the actual service or product purchased by the end customer; and
the Group has no material incremental costs from the provision of the service or product to the end customer after the moment of sale.

Premium support services are accounted on a gross basis as the Group controls the pricing and services being provided.

The Group partnered with Mobile Network Operators ("MNOs") providing various products of Location Labs. The Group is entitled to certain revenue share on their sales, which is recognised by the Group net of partners' commissions for the following reasons:

MNO partners have full discretion to set the final price; and
the Group has no material incremental costs from the provision of the service or product to the end customer after the moment of sale.

Interest payments

Fees paid in connection with the arrangement of the term loan are being amortised to profit and loss over the term of the facility using the effective interest method. The Group made estimates about voluntary and mandatory repayments of the term loan and future development of market interest rates (see Note 7 for a description of the method). Due to the floating rate nature of the loan, changes in the effective interest rate are accounted for prospectively from the moment the change in estimate takes place.

Impairment testing

Significant management judgment and estimates are required to determine the individual cash generating units ("CGUs") of the Group, the allocation of assets to these CGUs and the determination of the value in use or fair value less cost to sell of these individual assets. Management has concluded that the reporting segments used for segment reporting correspond to groups of CGUs at which goodwill is tested for impairment. To determine the value in use management has used the discounted cash flow model which requires estimating the future financial results and an appropriate discount rate.

Trademarks

Business combinations and initial recognition of assets and liabilities

The Group identified Avast Software B.V. as the acquirer in the business acquisition on 18 July 2017 and 30 September 2016. The Group identified Avast CZ as the acquirer in the business acquisition on 30 June 2015. For an overview of the assets and their valuation basis, refer to Notes 4, 5, 6 and 25 of the Group's Historical Financial Information.

The Group accounts for acquisitions of entities which include inputs and processes and has the ability to create outputs as business combinations. The purchase price of the acquisition is allocated to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition dates. The excess of the purchase price over those fair values is recorded as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Group may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Consolidated Statement of Profit and Loss.

Deferred tax

9. ADOPTION OF NEW AND REVISED STANDARDS

Standards issued but not yet effective

The Group has not applied the following new or revised standards and interpretations that have been issued, but are not yet effective:

IFRS 9 Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9—Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39—Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before 1 February 2015. The Group did not adopt this standard early. The Group is still finalizing an analysis of the implementation of this standard but does not expect the adoption to have a material impact on the Group's historical financial information.

IFRS 15 Revenue from Contracts with Customers

IFRS 2 Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2

The IASB issued amendments to IFRS 2—Share-based Payments in relation to the classification and measurement of share-based payment transactions. The amendments address three main areas: (1) the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; (2) the classification of a share-based payment transaction with net settlement features for withholding tax obligations; (3) the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled. IFRS 2 is effective for annual periods beginning on or after 1 January 2018. No significant impact from the implementation of this standard is expected by the Group.

IFRS 16 Leases

10. CORPORATE INFORMATION

The Group consists of the following companies as of 31 December 2017:

Registered office	Identification number	Place of Incorporation
Avast Holding B.V.	598 25 898	Netherlands
Avast Software B.V	598 27 874
Avast Operations B.V	662 94 843
Avast Corporate Services B.V	577 68 277
Norman Data Defense Systems B.V	332 41 995
Avast Software s.r.o.	021 76 475	Czech Republic
Jumpshot s.r.o.	032 17 167
FileHippo s.r.o	CZ05711916
AVAST Software Deutschland GmbH	HRB 192 944	Germany
TuneUp Software GmbH	HRB 101 364
AVG Technologies Deutschland GmbH	HRB 51785
AVG Technologies UK Limited	6301720	United Kingdom
Privax Limited	07207304
AVG VPN Technologies UK Limited*	09960966
Privax Services (UK) Limited	08417876
Piriform Software Ltd	08235567
AVAST Software, Inc	5012545	USA
Remotium Inc.	5206130
Avast Ancillary Services LLC	5398602
TACR SERVICES, INC	5307360
Fero, Inc	5445557
Sybil Software LLC	5472686
Jumpshot, Inc	5505650
AVG Technologies USA, Inc	3678645
Location Labs, Inc	3255648
Piriform Inc	4964997
AVAST Software (Asia) Limited	197 74 72	Hong Kong
AVG Mobile Technologies Ltd*	514 310 986	Israel
AVG Ecommerce CY Limited	HE285123 (Cyprus)	Cyprus
	593 96 385 (Netherlands)
Piriform Group Ltd	HE 344119
Piriform Ltd	HE 258272
AVG Technologies AU Pty Ltd	159 743 978	Australia
AVG Technologies Canada Inc	BC0971717	Canada
AVG Distribuidora de Tecnologias do Brasil Ltda	35.2.2873356-1	Brasil
AVG Technologies Norway AS	998527864	Norway
Norman Data Defense Systems AB	556276-6237	Sweden
Norman Data Defense Systems A/S	25839080	Denmark
AVG Technologies Switzerland AG	CH-270.3.002.417-2	Switzerland
Privax d.o.o Beograd	20848413	Serbia
Limited Liability Company '1337'	38935062	Ukraine
Avast Software Japan Godo Kaisha	0100-03-025097	Japan
Piriform (Barbados) Ltd	32723	Barbados

^* In the process of liquidation

On 23 March 2017, Avast Software Japan Godo Kaisha (Avast Japan) was incorporated as a 100% owned subsidiary of Avast CZ with a share capital of \$9 thousand.

As part of the integration of AVG three Dutch AVG legal entities were successively merged through a series of statutory mergers into Avast Software B.V. On 30 August 2017, AVG Technologies Holdings B.V. merged with AVG Netherlands B.V. with AVG Technologies Holdings B.V. being the surviving company.

On 31 August 2017, AVG Technologies B.V. merged with AVG Technologies Holdings B.V. with AVG Technologies B.V. being the surviving company. On 1 September 2017, Avast Software B.V. merged with AVG Technologies B.V. with Avast Software B.V. being the surviving company.

On 1 December 2017, Avast CZ merged with AVG Technologies CZ, s.r.o. with Avast CZ being the successor company.

11. SEGMENT INFORMATION AND OTHER DISCLOSURES

Billings is one of the important metrics used to evaluate and manage operating segments. Billings represent the full value of products and services delivered under subscription and other agreements and include sales to new end customers plus renewals and additional sales to existing end customers. Under the subscription model, end customers pay the Group for the entire amount of the subscription in cash upfront upon initial delivery of the applicable products. Although the cash is paid up front, under IFRS, subscription revenue is deferred and recognised ratably over the life of the subscription agreement, whereas non-subscription revenue is typically recognised immediately.

Billings is not defined or recognised under IFRS and considered as a non-IFRS financial measure used to evaluate current business performance.

The management of the Group reviews financial information that is principally the same as that based on the accounting policies described in Note 7. Management also reviews the Underlying operating profit of the segment. Total segment underlying operating profit is derived from underlying revenues and decreased by cost of revenues and operating costs directly attributable to the relevant segment. Underlying revenues are adjusted for the effects of the fair value revaluation of the acquiree's pre-acquisition deferred revenues ("Deferred revenue haircut reversal").

The following tables present summarised information by segment reconciled from the underlying operating profit of the segment to consolidated operating profit (segment costs are net of depreciation and amortisation, Sharebased payments, exceptional items and corporate overhead costs and exclude the deferred revenue haircut):

For the year ended 31 December 2015 (\$'m)	Consumer	SMB	Total
Billings	275.6	11.6	287.2
Deferral of revenue	(34.9)	(1.3)	(36.2)
Revenues	240.7	10.3	251.0
Deferred revenue haircut reversal	14.5	3.4	17.9
Segment underlying revenue	255.2	13.7	268.9
Segment cost of revenues	(7.3)	—	(7.3)
Segment sales and marketing costs	(16.1)	(3.4)	(19.5)
Segment research and development costs	(15.4)	(1.1)	(16.5)
Segment general and administrative costs	(2.3)	(0.5)	(2.8)
Total Segment underlying operating profit	214.1	8.7	222.8
Corporate overhead			(35.2)
Deferred revenue haircut reversal			(17.9)
Depreciation and amortisation			(63.2)
Exceptional items			(0.8)
Share-based payments			(6.1)
Consolidated operating profit			99.6

For the year ended 31 December 2016 (\$'m)	Consumer	SMB	Total
Billings	393.9	23.6	417.5
Deferral of revenue	(69.7)	(7.1)	(76.8)
Revenues	324.2	16.5	340.7
Deferred revenue haircut reversal	45.8	10.9	56.7
Segment underlying revenue	370.0	27.4	397.4
Segment cost of revenues	(20.8)	(3.2)	(24.0)
Segment sales and marketing costs	(27.0)	(7.4)	(34.4)
Segment research and development costs	(22.5)	(3.1)	(25.6)
Segment general and administrative costs	(2.6)	—	(2.6)
Total Segment underlying operating profit	297.1	13.7	310.8
Corporate overhead			(61.8)
Deferred revenue haircut reversal			(56.7)
Depreciation and amortisation			(87.9)
Exceptional items			(69.8)
Share-based payments			(2.7)
Consolidated operating profit			31.9

For the year ended 31 December 2017 (\$'m)	Consumer	SMB	Total
Billings	736.30	64.1	800.4
Deferral of revenue	(131.5)	(16.0)	(147.5)
Revenues	604.8	48.1	652.9

Deferred revenue haircut reversal Segment underlying revenue	79.3 684.1	18.7 66.8	98.0 750.9
Segment cost of revenues	(54.2)	(8.9)	(63.1)
Segment sales and marketing costs	(64.5)	(25.9)	(90.4)
Segment research and development costs	(42.3)	(9.9)	(52.2)
Segment general and administrative costs	(3.4)	—	(3.4)
Total Segment underlying operating profit	519.7	22.1	541.8

Corporate overhead Deferred revenue haircut reversal			(125.0) (98.0)
Depreciation and amortisation			(152.0)
Exceptional items			(34.8)
Share-based payments			(7.7)

Corporate overhead costs primarily include the costs of the Group's IT, HR, finance and central marketing functions and legal and rent costs, which are not allocated to the individual segments. The Group does not include depreciation and amortisation, exceptional items and share-based payments in the total Segment underlying operating profit.

The following table presents depreciation and amortisation by segment, these costs are not included in the total Segment underlying operating profit above:

(\$'m)	2015	2016	2017
Consumer	61.7	82.3	142.0
SMB	—	1.4	4.0
Corporate overhead	1.5	4.2	6.0
Total depreciation and amortisation	63.2	87.9	152.0

The following table presents goodwill by segment:

(\$'m)	31 December 2015	31 December 2016	31 December 2017
Consumer	720.5	1,876.9	1,962.8
SMB	—	18.9	23.9
Total goodwill	720.5	1,895.8	1,986.7

The following table presents the Group's non-current assets, net of accumulated depreciation and amortisation, by country. Non-current assets for this purpose consist of property and equipment and intangible assets.

		31 December 2015 31 December 2016		31 December 2017
	(\$'m)	(in %)	(\$'m)	(in %)	(\$'m)	(in %)
Czech Republic	261.2	98.3%	211.3	40.1%	156.0	36.8%
Netherlands	0.9	0.3%	297.9	56.5%	227.2	53.6%
Other countries*	3.5	1.4%	17.8	3.4%	40.6	9.6%
Total	265.6	100%	527.0	100%	423.8	100%

^* No individual country represented more than 5% of the respective totals.

The following table presents Underlying revenue attributed to countries based on the location of the end user:

	2015		2016		2017
	(\$'m)	(in %)	(\$'m)	(in %)	(\$'m)	(in %)
United States	91.5	34.0%	157.6	39.7%	341.9	45.5%
United Kingdom	16.1	6.0%	29.6	7.4%	63.5	8.5%
France	35.6	13.2%	40.5	10.2%	53.6	7.1%
Germany	13.3	5.0%	20.8	5.2%	41.6	5.6%
Brazil	20.7	7.7%	20.1	5.1%	25.6	3.4%
Other foreign countries*	91.7	34.1%	128.8	32.4%	224.7	30.0%
Total	268.9	100.0%	397.4	100.0% 750.9		100.0%

^* No individual country represented more than 5% of the respective totals.

Revenues from relationships with certain third parties exceeding 10% of the Group's total revenues were as follows:

(\$'m)	2015	2016	2017
Revenues realised through online resellers:
Digital River	121.9	162.2	212.1

12. ALTERNATIVE PERFORMANCE MEASURES

Underlying operating profit, Underlying EBITDA, Underlying Net Income and Cash EBITDA

To supplement its historical financial information, which are prepared and presented in accordance with IFRS, the Group uses the following non-GAAP financial measures that are not defined or recognised under IFRS: Underlying operating profit, Underlying earnings before interest, taxation, depreciation and amortisation ("Underlying EBITDA"), Underlying Net Income and Underlying Cash EBITDA.

Underlying operating profit, Underlying EBITDA, Underlying Net Income and Underlying Cash EBITDA provide supplemental measures of earnings that facilitates a review of operating performance on a year-over-year basis by excluding non-recurring and other items that are not indicative of the Group's underlying operating performance.

Underlying operating profit is defined as the Group's operating loss/profit before: (i) amortisation charges of intangible assets recognised as part of a business combinations; (ii) stock-based compensation expenses; and (iii) exceptional items.

Underlying EBITDA is defined as the Group's operating loss/profit before: (i) depreciation and amortisation charges; (ii) deferred revenue haircut reversal; (iii) stock-based compensation expenses; and (iv) exceptional items.

(\$'m)	2015	2016	2017
Operating profit	99.6	31.9	124.3
Share-based payments	6.1	2.7	7.7
Exceptional items	0.8	69.8	34.8
Amortisation of acquisition intangible assets	59.2	79.4	132.9
Underlying operating profit	165.7	183.8	299.7
Deferred revenue haircut reversal	17.9	56.7	98.0
Depreciation	3.3	6.7	15.0
Amortisation of non-acquisition intangible assets	0.7	1.7	3.7
Underlying EBITDA	187.6	248.9	416.4

Underlying Net Income represents profit for the financial year before the effect of business combination accounting (the fair value revaluation of pre-acquisition deferred revenue), Share-based payments, exceptional items, amortisation of acquisition intangible assets the unrealised FX gain/ loss on the EUR tranche of the bank loan (see Note 18), the tax impact from the unrealised exchange differences on intercompany loans (see Note 19) and the tax impact of the foregoing adjusting items. The Group believes that Underlying Net Income is an appropriate supplemental measure that provides useful information to the Group and investors about the Group's underlying business performance.

(\$'m)	2015	2016	2017
Profit / (loss) for the year	71.5	24.6	(33.8)
Deferred revenue haircut reversal	17.9	56.7	98.0
Share-based payments	6.1	2.7	7.7
Exceptional items	0.8	69.8	34.8
Amortisation of acquisition intangible assets	59.2	79.4	132.9
Unrealised FX gain/loss on EUR tranche of bank loan	—	(26.7)	63.0
Tax impact from foreign exchange difference on intercompany
loans	(10.0)	(8.6)	19.0
Tax impact on adjusted items	(15.0)	(34.5)	(71.5)
Underlying Net Income	130.5	163.4	250.1

The tax impact of the adjusted items has been calculated by applying the tax rate that the Group determined to be applicable to the relevant item.

Cash earnings before interest, taxation, depreciation and amortisation ("Cash EBITDA") is defined as Underlying EBITDA plus the increase in deferred revenue (net of impact from foreign exchange and business combination accounting) less the net increase in prepaid expenses related to cost of goods sold.

(\$'m)	2015	2016	2017
Underlying EBITDA	187.6	248.9	416.4
Net change in deferred revenue including FX re-translations	18.4	20.1	49.5
Change in prepaid expenses—cost of revenue	—	(6.6)	(20.6)
Cash EBITDA	206.0	262.4	445.3

13. EXCEPTIONAL ITEMS

The following table presents the exceptional items by function:

(\$'m)	2015	2016	2017
Cost of revenues	—	1.8	1.7
Sales and marketing	—	9.1	3.4
Research and development	—	9.4	3.2
General and administration	0.8	49.5	26.5
Total	0.8	69.8	34.8

The following table presents the exceptional items by activities:

(\$'m)	2015	2016	2017
Acquisition related costs	0.3	22.4	3.8
Integration costs	—	30.2	26.2
Restructuring	0.5	4.0	0.7
Other projects related costs	—	—	4.1
Impairment	—	13.2	—
Total	0.8	69.8	34.8

Acquisition related costs

Acquisition related costs in 2016 related to the acquisition of AVG on 30 September 2016, with minor residual expenses also in 2017, with the balance in 2017 representing the Piriform transactions costs of \$2.6 million.

Integration costs

Integration costs are expenses connected with the integration of AVG and consist primarily of severance and other personnel costs (\$22 million and \$11 million in 2016 and 2017, respectively) and consultancy and professional fees (\$6 million and \$8 million in 2016 and 2017, respectively).

Restructuring

Restructuring costs are primarily consultancy and service fees and other cost optimisation initiatives.

Other projects related costs

Other projects related costs include one-time advisory, legal and other professional service fees related to the preparation of the Group going public.

Impairment

Impairment expenses represent the \$15.9 million impairment of the Remotium goodwill (see Note 25) net of the cancellation of the earn-out accrual of \$2.7 million.

14. COST OF REVENUES

Costs of revenues include the amortisation of assets recognised in a business combination (refer to Note 25) as well as leased assets, digital content distribution costs (including rental cost of servers), customer support and maintenance costs relating to the installation and operation of our products and costs of daily virus updates provided to users and license fees paid to third parties.

Cost of revenues:

(\$ 'm)	2015	2016	2017
Amortisation of developed technology	44.6	46.3	51.5
Amortisation of customer relationships and user base	11.5	23.9	61.2
Amortisation of trademarks	—	3.7	15.0
Amortisation of Grime Fighter	3.2	3.2	5.1
Amortisation of other assets	0.5	1.0	2.2
Depreciation	1.3	3.4	7.8
Personnel costs of product support and virus updates	3.9	8.2	17.2
Digital content distribution costs	3.8	8.5	17.0
Third party license costs	3.4	5.6	7.6
Other product support and virus update costs	0.6	4.4	22.4
Commissions, payment and other fees	—	3.9	25.8
Total	72.8	112.1	232.8

The significant increase in the cost of revenue is mainly attributed to the AVG acquisition that occurred on 30 September 2016 and Piriform acquisition that occurred on 18 July 2017.

15. OPERATING COSTS

Operating costs are internally monitored by function; their allocation by nature is as follows:

(\$ 'm)	2015	2016	2017
Depreciation	2.0	3.4	7.6
Amortisation	0.1	3.0	1.6
Personnel expenses	48.7	97.0	160.1
Purchases of services from third party vendors	22.9	76.3	118.1
Gifts and charities	4.4	3.6	3.8
Other operating expenses	0.5	0.2	4.6
Impairment	—	13.2	—
Total	78.6	196.7	295.8

The significant increase in operating costs is mainly attributed to the AVG acquisition that occurred on 30 September 2016 and the Piriform acquisition that occurred on 18 July 2017.

For the year ended December 2016 and 2017, personnel expenses include retention and severance pay in the amount of \$20.2 million and \$10 million, respectively.

Third party service expenses for the year ended 31 December 2016 and 2017 include legal, advisory, marketing and audit costs related to the acquisition of AVG in the amount of \$21.0 million and \$1.5 million, respectively. In addition, the Group incurred legal and advisory costs in regards to the AVG integration in the amount of \$5.6 million and \$8.2 million for the year ended 31 December 2016 and 2017.

In 2016, the Group recorded impairment of the Remotium goodwill of \$15.9 million, which is presented net of release of the earn-out of \$2.7 million in accordance with the Remotium purchase agreement (see Notes 25). The Group also wrote off other intangible assets of \$2.8 million (presented within amortisation).

For details on Gifts and charities see Note 34.

16. DEPRECIATION AND AMORTISATION

Amortisation by function:

(\$ 'm)	2015	2016	2017
Cost of revenues	59.2	77.4	132.9
General and administration	—	2.0	—
Total amortisation of acquisition intangible assets	59.2	79.4	132.9
Cost of revenues	0.6	0.7	2.1
Sales and marketing	—	0.3	0.8
Research and development	—	—	0.1
General and administration	0.1	0.7	0.7
Total amortisation of non-acquisition intangible assets	0.7	1.7	3.7
Total amortisation	59.9	81.1	136.6

Depreciation by function:

(\$ 'm)	2015	2016	2017
Cost of revenues	1.3	3.4	7.8
Sales and marketing	0.1	0.4	0.7
Research and development	0.8	0.8	1.5
General and administration	1.1	2.2	5.4
Total depreciation	3.3	6.8	15.4

Tangible and intangible assets are allocated to each department of the Group. The depreciation and amortisation of these assets is reported as part of operating costs and cost of revenues.

17. PERSONNEL EXPENSES

Personnel expenses consist of the following:

(\$ 'm)		2015	2016			2017
	Employees	Key management personnel	Employees	Key management personnel	Employees	Key management personnel
Wages and salaries	30.6	7.3	57.6	7.1	124.4	9.7
Share-based payments	2.1	4.0	1.3	1.4	1.6	6.1
Social security and health insurance	6.8	0.5	10.6	0.5	21.6	0.8
Social cost	0.7	0.1	5.9	0.2	7.8	0.2
Severance payments and termination
benefits	—	0.5	20.6	—	5.1	—
Total personnel expense	40.2	12.4	96.0	9.2	160.5	16.8

The number of full time employees as at 31 December 2015, 2016 and 2017 was as follows:

	Employees
31 December 2015	588
31 December 2016	1,684
31 December 2017	1,464

Key management personnel also include members of the Board of Directors.

Personnel expenses by function:

(\$ 'm)	2015	2016	2017
Cost of revenues	3.9	8.2	17.2
Sales and marketing	18.1	30.8	59.0
Research and development	18.9	38.2	62.5
General and administrative	11.7	28.0	38.6
Total	52.6	105.2	177.3

Costs of individual departments are allocated to one of the four functional expense categories. Cost of revenues includes customer support and the portion of the virus laboratory which is responsible for daily virus updates provided to users. Sales and marketing includes the sales, support and eCommerce departments. Research and development includes the personnel costs of programmers, a portion of the virus laboratory and the quality assurance department. General and administration represents finance and administration, legal, HR, information technology and management costs and other miscellaneous expenses.

18. FINANCE INCOME AND EXPENSES

Finance income and expenses include foreign currency gains and losses, interest income and expense and other expenses such as bank fees. Interest income primarily represents interest from term deposits. Interest expense consists of interest on the term loan (see Note 31) and on finance leases (see Note 36). Changes in the fair values of derivatives represent changes in the fair value of the interest rate floor and cap of the bank loan (see Note 31). In relation to the external term loan denominated in EUR, significant foreign exchange revaluation amounts may arise along with foreign exchange rates movements.

Finance income and expenses:

(\$ 'm)	2015	2016	2017
Term loan interest	(22.6)	(37.9)	(88.4)
Changes of fair values of derivatives	0.9	(0.3)	(3.2)
Revolving loan—commitment fee	(0.2)	(0.5)	(0.4)
Foreign currency gains (losses)	(4.6)	24.3	(56.8)
Other interest revenues/(expense)	(0.7)	(0.7)	(0.7)
Other financial income/(expense)	(0.7)	2.7	(3.7)
Total	(27.9)	(12.4)	(153.2)

19. INCOME TAX

In some jurisdictions, laws related to these taxes are unclear and few precedents with regard to the application and implementation of these laws have been established. The Group's tax position (including matters related to its corporate structure and intercompany transactions) is subject to possible review and audit by a number of authorities, which are enabled by law to impose significant fines, penalties and interest charges. Management believes that it has adequately provided for the tax liabilities in the accompanying financial statements. However, if for any reason the Group's tax position were to be disputed by tax authorities, and the Group did not prevail in connection with such dispute, the Group could be subject to substantial tax liabilities which could have a material impact on its financial position and results of operations.

The major components of income tax in the consolidated statement of profit and loss are:

(\$ 'm)	2015	2016	2017
Current income tax (expense)	(19.0)	(29.1)	(58.9)
Deferred tax credit	18.8	34.2	54.0
Total (expense)/credit	(0.2)	5.1	(4.9)

The effective tax rate is significantly impacted by non-deductible expenses (e.g. business combination related expenses, share-based payments expenses, non-cash interest expenses and fair value adjustments to financial derivatives) and other differences (foreign exchange gains and losses from USD loan and cash and other balance sheet items of Avast CZ which has the CZK as the functional currency for local GAAP and tax purposes).

The effective tax rate is further impacted by the non-recognition of deferred tax assets from tax losses or the recognition of deferred tax assets from prior year tax losses.

On 1 January 2016, Avast Holding and Avast BV formed a fiscal unity and their tax bases will be prospectively combined for corporate income tax purposes. As a result, the taxable losses of one company can be offset against the taxable income of the other company. Tax losses incurred by either company before 1 January 2016 can only be offset against future taxable profits of the respective company.

The reconciliation of income tax benefit applicable to accounting profit before income tax at the statutory income tax rate to income tax expenses at the Group's effective income tax rate is as follows:

(\$ 'm)	2015	2016	2017
Profit/(loss) before tax	71.7	19.5	(28.9)
Group effective income tax rate (19% in 2015, 20% in 2016 and 2017)	(13.6)	(3.9)	5.8
Non-deductible expenses	—	(5.9)	(2.9)
Amortisation deduction	—	6.5	14.5
Foreign exchange difference on intercompany loans	10.0	8.6	(19.0)
Share-based payments	(1.2)	(0.5)	(1.5)
Current year tax losses not recognised in deferred tax	(0.3)	(2.0)	(1.2)
Prior year tax losses recognised in current years deferred tax	2.6	—	—
Write off prior year's deferred tax asset	—	(1.0)	(4.5)
Remaining impact of functional vs. statutory foreign exchange rate
differences and other	2.3	3.3	3.9
Total tax	(0.2)	5.1	(4.9)

In 2017, multiple Group companies incurred tax losses, which resulted in a deferred tax asset of \$6.9 million as of 31 December 2017 (\$15.7 million as of 31 December 2016 and \$6.5 million 31 December 2015, respectively), taking into account the specific effective tax rates of each relevant company, all the accumulated tax losses and expected future profitability. The most significant balances by company are described below.

Avast BV incurred tax losses of \$2.2 million, \$16.1 million and \$8.3 million in 2017, 2016 and 2015, respectively. As of 31 December 2017 the Group derecognised a deferred tax asset from tax losses of \$4.5 million due to uncertainty of utilisation of tax losses upon planned transfer of the intellectual property from the Netherlands to the Czech Republic. As of 31 December 2016 and 2015, the Group recognised a deferred tax asset of \$5 million and \$1 million, respectively, from accumulated tax losses.

Jumpshot, Inc. incurred estimated tax losses of \$6.1 million, \$6.1 million and \$6.5 million in 2017, 2016 and 2015, respectively. As of 31 December 2017, 2016 and 2015 the Group recognised a deferred tax asset of \$6.8 million, \$7.9 million and \$5.4 million, respectively, from accumulated tax losses. The lower deferred tax asset recognised is a result of decrease of the federal corporate tax rate in the United States from 35 percent to 21 percent as of 1 January 2018. Tax losses can be carried forward for 20 years in the United States.

Based on rulings obtained from Dutch tax authorities by AVG, the Group may utilize several tax incentives. Under one of these rulings the Group is able to apply, for tax purposes, a deemed tax amortisation corresponding to 50% of the EBITDA calculated in accordance with the applicable tax rules. Tax benefit of the deemed tax amortisation was \$14.5 million in 2017 and \$6.5 million for the post-acquisition period starting 1 October 2016.

In 2016, tax non-deductible expenses include the cost of Remotium's impairment and the write-off of related intangible assets in total amount of \$16 million less the earn-out.

The calculation of deferred tax is as follows:

(\$ 'm)	31 December 2015	31 December 2016	31 December 2017
Temporary differences	Asset / (Liability)	Asset / (Liability)	Asset / (Liability)
Difference between net book value of fixed assets for accounting and tax purposes Difference in deferred revenue and unbilled	(47.1)	(97.7)	(76.2)
receivables	0.2	11.9	31.2
Tax loss carryforward	6.5	15.7	6.9
Tax credits carryforward	—	3.0	3.6
Difference between carrying value of loans and derivatives for accounting and tax
purposes	(0.8)	(6.3)	14.0
Carryforward of unutilised interest	—	—	3.4
Provisions	0.2	5.8	1.5
Other	1.0	7.7	3.6
Net	(40.0)	(59.9)	(12.0)

Changes in deferred tax:

(\$ 'm)	2015	2016	2017
	Asset / (Liability)	Asset / (Liability)	Asset / (Liability)
Deferred tax as at 1 January	(58.7)	(40.0)	(59.9)
Effect of business combination (Note 4,5,6)	(0.1)	(54.1)	(6.1)
Deferred tax charge for the period	18.8	34.2	54.0
Total	(40.0)	(59.9)	(12.0)

20. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to equity holders of the Group by the weighted average number of shares of common stock outstanding during the year. The diluted earnings per share amounts consider the weighted average number of shares of common stock outstanding during the year adjusted for the effect of dilutive options.

Earnings per share:

	2015	2016	2017
Net profit attributable to equity holders (\$ 'm)	71.5	24.6	(33.8)
Basic weighted average number of shares	94,212,768	94,212,768	94,695,165
Effect of stock options	6,101,793	7,632,591	—
Dilutive weighted average number of shares	100,314,561	101,845,359	94,695,165
Basic earnings/(losses) per share (\$/share)	0.76	0.26	(0.36)
Diluted earnings/(losses) per share (\$/share)	0.71	0.24	(0.36)

Supplementary earnings per share measures:

	2015	2016	2017
Net profit attributable to equity holders (\$ 'm)	71.5	24.6	(33.8)
Deferred revenue haircut reversal	17.9	56.7	98.0
Share-based payments	6.1	2.7	7.7
Exceptional items	0.8	69.8	34.8
Amortisation of acquisition intangible assets	59.2	79.4	132.9
Unrealised FX gain/loss on EUR tranche of bank loan	—	(26.7)	63.0
Foreign exchange difference on intercompany loans	(10.0)	(8.6)	19.0
Tax relating to above items	(15.0)	(34.5)	(71.5)
Underlying net profit attributable to equity holders (\$ 'm)	130.5	163.4	250.1
Basic weighted average number of shares	94,212,768	94,212,768	94,695,165
Underlying basic earnings per share (\$/share)	1.38	1.73	2.64

For the purpose of determining diluted earnings per share, the exercise price of the individual options is compared to the average market value of the shares of the Group during the relevant period. If the adjusted exercise price of an option is lower than the average market value of shares, the option is considered dilutive. However, if the result of the Avast Group is a loss for the relevant period such options are considered antidilutive and are not included in calculating diluted earnings per share. The analysis only includes options granted before 31 December 2017.

21. CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, cash and cash equivalents comprise of the following:

(\$ 'm)	31 December 2015	31 December 2016	31 December 2017
Cash on hand and cash equivalents	—	—	—
Cash in bank	141.2	240.7	176.3
Total	141.2	240.7	176.3

22. OTHER FINANCIAL ASSETS

(\$ 'm)	31 December 2015	31 December 2016	31 December 2017
Restricted cash
—acquisition agreements	—	0.8	0.6
—office lease agreements	0.5	3.0	1.3
—other	0.3	0.8	0.3
Total	0.8	4.6	2.2
Derivatives—foreign currency contracts	—	0.3	0.1
Investment in equity securities	—	0.7	0.6
Total	0.8	5.6	2.9
Total current	0.4	2.0	1.0
Total non-current	0.4	3.6	1.9

23. TRADE AND OTHER RECEIVABLES

(\$ 'm)	31 December 2015	31 December 2016	31 December 2017
Trade receivables	7.1	33.7	57.3
Unbilled revenues	26.5	40.1	39.6
Other receivables	1.3	2.6	4.1
Trade receivables, gross	34.9	76.4	101.0
Less: Allowance for doubtful accounts	(0.2) 34.7	(2.7) 73.7	(5.3) 95.7

Less: Reserve for returns	—	(2.3)	(2.5)
Trade receivables, net	34.7	71.4	93.2

Trade receivables are non-interest bearing and are generally payable on 14-day terms. The fair value of receivables approximates their carrying value due to their short-term maturities.

Unbilled revenues represent sold products (for which the revenue has been deferred over the term of the product license) but for which an invoice has not yet been issued.

Other receivables represent mainly advances to and receivables from employees.

Allowances against outstanding receivables that are considered doubtful are charged to income based on an analysis of their collectability. In general, the Group creates a 100% allowance against any receivable overdue more than 90 days but with the possibility for making specific exceptions depending on the circumstances of each specific receivable based on the historical experience.

(\$ 'm)	Amount (\$ 'm)
Allowances at 31 December 2014	—
Charged Utilised	0.2 —
Allowances at 31 December 2015	0.2
Charged Business combination	0.6 2.1
Utilised	(0.2)
Allowances at 31 December 2016	2.7
Charged Utilised	5.3 (2.7)
Allowances at 31 December 2017	5.3

As of 31 December 2015, 2016 and 2017, the nominal value of receivables overdue for more than 360 days are \$32 thousand (carrying value: nil), \$0.6 million (carrying value: nil) and \$2.8 million (carrying value: nil), respectively.

The ageing analysis of trade receivables, unbilled receivables and other receivables was as follows (carrying amounts after valuation allowance):

		Past due but not impaired
(\$ 'm)	Neither past due nor impaired	Past due 1 - 90 days	Past due more than 90 days	Past due more than 180 days	Past due more than 360 days	Total
31 December 2015	28.9	5.7	0.1	=	=	34.7
31 December 2016	67.0	5.0	1.1	0.6		73.7
31 December 2017	87.7	8.0	_	_	_	95.7

Doct due but not immeired

24. PREPAID EXPENSES AND OTHER CURRENT ASSETS

(\$ 'm)	31 December 2015	31 December 2016	31 December 2017
Deferred commissions, payment and
other fees	_	6.3	27.1
System licensing and
maintenance	1.3	4.0	1.3
Deferred third party license costs	2.2	1.3	2.2
Other prepaid expenses	1.1	5.0	5.7
Total	4.6	16.6	36.3
Total current	3.1	14.8	35.8
Total non-current	1.5	1.8	0.5

Other prepaid expenses consist of items such as prepaid rent, marketing and advertising costs, accrued office services, insurance costs paid up front etc.

Since 1 January 2017, following the change in the contractual terms with significant e-commerce providers, the Group defers cost of revenues connected with subscription revenue over the term of the relevant license sold to customers which are recorded in the current and non-current liabilities. See Note 7 for details. The fees included in the prepaid and other current assets consist of commissions, payment and other fees.

25. NON-CURRENT ASSETS

Property, plant and equipment

(\$ 'm)	Equipment, furniture and fixtures	Vehicles	Leasehold improvements	Other	In progress	Total
Cost at 31 December 2014	4.8	0.4	0.3	0.5	0.6	6.6
Additions	3.5	_	2.7		2.5	8.7
Transfers	0.6	_		_	(0.6)	_
Business combination		_	_		_
Disposals	(0.8)	(0.1)	(0.3)	(0.5)	_	(1.7)
Cost at 31 December 2015	8.1	0.3	2.7	_	2.5	13.6
Additions	4.5		1.5		2.2	8.2
Transfers	2.8	_	2.1	—	(4.9)	_
Business combination	15.2	_	4.9	_	3.1	23.2
Net foreign currency exchange difference	(0.2)	_	0.1	_	_	(0.1)
Disposals	(2.3)	(0.1)	(0.7)	_	_	(3.1)
Cost at 31 December 2016	28.1	0.2	10.6	=	2.9	41.8
Additions	5.9	0.1	1.4	_	2.7	10.1
Transfers	2.4	_	_		(2.4)
Net foreign currency exchange difference	0.4	_	_	—	_	0.4
Disposals	(0.3)			_	_	(0.3)
Cost at 31 December 2017	36.5	0.3	12.0	_	3.2	52.0

(\$ 'm)	Equipment, furniture and fixtures	Vehicles	Leasehold improvements	Other	In progress	Total
Acc. depreciation at 31 December 2014	(1.4)	(0.1)	(0.1)	(0.2)	—	(1.8)
Depreciation	(2.7)	(0.1)	(0.3)	(0.2)	—	(3.3)
Disposals	0.8	0.1	0.3	0.4	—	1.6
Acc. depreciation at 31 December 2015	(3.3)	(0.1)	(0.1)	—	—	(3.5)
Depreciation	(5.8)	(0.1)	(0.9)	—	—	(6.8)
Disposals	2.4	0.1	0.7	—	—	3.2
Acc. depreciation at 31 December 2016	(6.7)	(0.1)	(0.3)	—	—	(7.1)
Depreciation	(13.2)	(0.1)	(2.1)	—	—	(15.4)
Acc. depreciation at 31 December 2017	(19.9)	(0.2)	(2.4)	—	—	(22.5)
NBV at 31 December 2015	4.8	0.2	2.6	—	2.5	10.1
NBV at 31 December 2016	21.4	0.1	10.3	—	2.9	34.7
NBV at 31 December 2017	16.6	0.1	9.6	—	3.2	29.5

In December 2015, the Group moved its Prague headquarters to new rented premises at Enterprise Office Centre in Prague 4. According to the agreement, the monthly rent is €249 thousand (\$271 thousand) with an eight-month rent-free period. Related leasehold improvements of CZK 56 million (\$2.3 million) were capitalised by the Group in 2015. The rent-free period was allocated proportionately over the lease term of 104 months.

On 30 September 2016 the Group acquired non-current tangible assets with a book value, which approximated of \$23.3 million, as part of the business combination with AVG.

Intangible assets

(\$ 'm)	Developed Technology	Trade marks	Software	Customer relationship and user base	Goodwill	Other	In progress	Total
Cost at 31 December 2014	223.2	70.0	15.5	46.2	704.6	0.5	0.1	1,060.1
Business combination	—	—	—	—	15.9	2.8	—	18.7
Additions	—	—	—	—	—	3.4	0.2	3.6
Transfers	—	—	—	—	—	0.1	(0.1)	—
Disposals	—	—	—	—	—	(0.1)	—	(0.1)
Cost at 31 December 2015	223.2	70.0	15.5	46.2	720.5	6.7	0.2	1,082.3
Business combination	27.3	89.3	—	197.1	1,191.2	3.6	0.2	1,508.7
Additions	—	—	—	—	—	0.3	0.1	0.4
Disposals	—	—	—	—	—	(0.1)	—	(0.1)
Cost at 31 December 2016	250.5	159.3	15.5	243.3	1,911.7	10.5	0.5	2,591.3
Business combination	—	4.8	24.5	3.3	90.9	—	—	123.5
Additions	—	—	—	—	—	4.3	1.5	5.8
Net foreign currency exchange
difference	—	—	—	—	—	0.2	—	0.2
Cost at 31 December 2017	250.5	164.1	40.0	246.6	2,002.6	15.0	2.0	2,720.8

(\$ 'm)	Developed Technology	Trade marks	Software	Customer relationship and user base	Goodwill	Other	In progress	Total
Acc. amortisation at
31 December 2014	(34.8)	—	(2.5)	(9.0)	—	(0.2)	—	(46.5)
Amortisation	(44.6)	—	(3.2)	(11.6)	—	(0.5)	—	(59.9)
Disposals	—	—	—	—	—	0.1	—	0.1
Acc. amortisation at
31 December 2015	(79.4)	—	(5.7)	(20.6)	—	(0.6)	—	(106.3)
Amortisation	(46.3)	(3.7)	(3.2)	(23.9)	—	(4.0)	—	(81.1)
Impairment	—	—	—	—	(15.9) —		—	(15.9)
Disposals	—	—	—	—	—	0.1	—	0.1
Acc. amortisation at
31 December 2016	(125.7)	(3.7)	(8.9)	(44.5)	(15.9) (4.5)		—	(203.2)
Amortisation	(51.5)	(15.0)	(5.3)	(61.2)	—	(3.6)	—	(136.6)
Acc. amortisation at
31 December 2017	(177.2)	(18.7)	(14.2)	(105.7)	(15.9) (8.1)		—	(339.8)
NBV at 31 December 2015	143.8	70.0	9.8	25.6	720.5	6.1	0.2	976.0
NBV at 31 December 2016	124.8	155.6	6.6	198.8	1,895.8	6.0	0.5	2,388.1
NBV at 31 December 2017	73.3	145.4	25.8	140.9	1,986.7	6.9	2.0	2,381.0

Acquisition in 2015 (Remotium)

The Group recognised several significant intangible assets as of the acquisition date of 30 June 2015 which approximated fair value of \$2.8 million and goodwill of \$15.9 million. The Group has identified certain indications of impairment for Remotium due to negative future cash flow in 2016. As a result, the Group wrote off Remotium's intangible assets and recognised impairment of goodwill of \$15.9 million as of 30 September 2016.

Acquisition in 2016 (AVG)

As part of the business combination (see Note 5) the Group recognised several significant intangible assets as of the acquisition date of 30 September 2016. The fair value of each of the assets below was determined by an independent external valuer using cash flows, margins and discount rates applicable to each asset.

The specific recognised assets in regards to the business combination as of 30 September 2016 were:

AVG Technology

AVG Technology consists of the engine, platform, Location Labs and VPN (Hide My Ass or HMA) which was internally developed. The value of technology was determined using the relief from royalty method. The useful economic life is expected to be 4 years.

In determining the value the Group used the following parameters:

projected sales for the following 4 years from the acquisition date;
applicable EBIT margins over the 4 year period;
pre-tax royalty rate in range of 0% and 9.6%;
pre-tax discount interest rate of 10.4%;
estimated tax rate of 20%; and
perpetuity growth of 1.5%

AVG Customer Relationship

AVG's customers largely consist of individual users that buy the products to secure or optimise their personal devices. In addition, AVG sells its products/services to SMBs either directly or through distributors. AVG also has a relationship with the large carriers through the Location Labs products that are sold via the carriers to end users and with large search engine operators for search monetisation. The business combination fair value was determined using the multi-period excess earnings method (MEEM). The useful economic life is expected to be 4 years.

In determining the value, the Group used the following parameters:

projected sales from existing customers;
applicable EBIT margins;
estimated tax rate of 20%;
pre-tax discount interest rate of 10.9%; and
relevant customer attrition rates

AVG Trademarks

AVG Trademarks include the AVG brand name and other trademarks and domains such as Location Labs and HMA. The value of technology was determined using the relief from royalty method. The useful economic life is expected to be 6 years.

In determining the value the Group used the following parameters:

projected sales for the following 6 years from the acquisition date;
applicable EBIT margins over the 5 year period;
pre-tax royalty rate in range of 0% and 14.4%;
pre-tax discount interest rate of 10.4%;
estimated tax rate of 20%; and
perpetuity growth of 1.5%.

Goodwill

Goodwill was calculated as the difference between the acquisition date fair value of consideration transferred less the fair value of acquired net assets. See Note 5 for further details and Note 11 for details of the allocation to individual business segments.

Acquisitions in 2017

On 17 March 2017,Avast CZ entered into an Asset Purchase Agreement to acquire substantially all of the assets and retain the employees of Safer Technologies, LLC, ("Safer"). The business purpose of the transaction was to obtain access to the intellectual property. The intellectual property was recognised by Avast as an intangible asset in the amount of \$3.5 million. The useful economic life is expected to be 3 years. According to the agreement, the Group agreed to pay a quarterly earn out payment upon the achievement of certain performance-based targets relating to future product sales beginning on 1 January 2018 and ending 31 December 2020.

As part of the business combination (see Note 4) the Group recognised several significant intangible assets as of the acquisition date of 18 July 2017. The fair value of each of the assets below was determined by an independent external valuer using cash flows, margins and discount rates inherent to each asset.

The specific recognised assets in regards to the business combination as of 18 July 2017 are:

FileHippo Trademark

The FileHippo Trademark includes the FileHippo brand name and domain. The value of the trademark was determined using the relief from royalty method. The useful economic life is expected to be indefinite. In determining the value, the Group used the following parameters:

projected sales for the following 10 years from the acquisition date;
pre-tax royalty rate of 7.6%;
pre-tax discount interest rate of 16.0%; and
estimated tax rate of 20.0%.

FileHippo Technology

The FileHippo technology includes the technology platform for a file download site that was internally developed. The value of technology was determined using the multi-period excess earnings method (MEEM). The useful economic life is expected to be 5 years.

In determining the value, the Group used the following parameters:

projected sales for the following 5 years from the acquisition date;
applicable EBITDA margins over the 5 year period;
total asset contributory charges, which represents a deduction for the contribution of supporting assets; to the generation of the prospective cash flows;
pre-tax discount interest rate of 14.0%; and
estimated tax rate of 20.0%.

Piriform Trademark

The Piriform trademark includes the trademarks and brands of the software products CCleaner, Defraggler, Recuva and Speccy. The value of the trademark was determined using the relief from royalty method. The useful economic life is expected to be 10 years.

In determining the value, the Group used the following parameters:

projected sales for the following 10 years from the acquisition date;
pre-tax royalty rate of 3.6%;
pre-tax discount interest rate of 16.0%; and
estimated tax rate of 20.0%.

Piriform Software

Piriform software includes the internally developed software tools of CCleaner, Defraggler, Recuva and Speccy. The value of software was determined using the MEEM. The useful economic life is expected to be 5 years.

In determining the value, the Group used the following parameters:

projected sales for the following 5 years from the acquisition date;
total asset contributory charges, which represents a deduction for the contribution of supporting assets to the generation of the prospective cash flows;
applicable EBITDA margins over the 5 year period;
pre-tax discount interest rate of 14.0%; and
estimated tax rate of 20.0%.

Piriform Customer Relationships

The Piriform customer relationships include the subscription and premium users of Piriform products. The business combination fair value was determined using the MEEM. The useful economic life is expected to be 4 years.

In determining the value, the Group used the following parameters:

projected sales for the following 10 years from the acquisition date;
total asset contributory charges, which represents a deduction for the contribution of supporting assets to the generation of the prospective cash flows;
applicable EBITDA margins over the 10 year period;
pre-tax discount interest rate of 15.0%; and
estimated tax rate of 20.0%.

Goodwill

Goodwill was calculated as the difference between the acquisition date fair value of consideration transferred less the fair value of acquired net assets. See Note 4 for further details and Note 11 for the details of the allocation to individual business segments.

Impairment testing

The Group performed an impairment test as of 31 December 2015, 2016 and 2017 of all its non-current assets.

In determining the value in use as of 31 December 2015, the Group used the following parameters:

projected 2016-2020 free cash flows based on the most current financial plan of the Group (with an annual growth rate compared to 2015 of 10.3% p.a. and a perpetuity growth rate of 3% p.a. after 2020) allocated to individual operating segments; and
after-tax discount interest rate representing the weighted average cost of capital ("WACC") of the Group. The WACC was calculated from the cost of equity and the cost of debt at a ratio typical for the industry of 90% equity and 10% debt. The cost of equity of 19.4% p.a. is derived a risk-free rate of 2.6% p.a., plus a capital markets risk premium of 7% p.a., plus a size premium of 1.8% p.a., industry premium of 1.0% p.a. and a company specific premium (7% p.a. for the Consumer operating unit and 10% p.a. for the remaining smaller operating segments). The cost of debt is based on the projected average 7.62% p.a. finance cost less 19% tax rate applicable to the primary operating company of the Group. These parameters result in a WACC of 18.08% p.a. for the Consumer operating segment and 22.40% p.a. for the SMB segment.

There is no significant correlation between most of the individual factors as they include Group-specific factors, market and industry specific factors and macroeconomic factors. Only the Remotium specific premium in the cost of equity has an inverse correlation to the annual growth rate of the projected free cash flows.

Changes to the individual parameters used by the Group would impact the value in use to varying degrees:

an increase in the WACC of 100 basis points would decrease the value in use by 5%;
an increase in the cost of debt by 100 basis points would change the value in by less than 1%;
a decrease in the projected free cash flows (due to decreased sales or increased costs) by 10% in each of the projected periods would decrease the value in use also by 10%;
a decrease in the perpetuity growth rate from 3% p.a. to 1.5% p.a. would decrease the value in use
by 5%; and
part of the income and expenses of the Group are in other currencies. The impairment tests performed by the Group are carried out in USD and are not significantly sensitive to foreign exchange volatilities.

The impact of the above changes to the parameters would not lead to significantly different results of the impairment tests of individual reportable segments. A sensitivity analysis has been performed based on the changes to the above parameters and shows none of the above changes would result in impairment as of 31 December 2015.

In determining the value in use as of 31 December 2016, the Group used the following parameters:

projected 2017-2021 free cash flows based on the most current financial plan of the Group (with an annual growth rate compared to 2016 of 18.8% p.a. and a perpetuity growth rate of 3% p.a. after 2021) allocated to individual operating segments; and
an after-tax discount interest rate representing the WACC of the Group. The WACC was calculated from a cost of equity and cost of debt at a ratio typical for an industry of 70% equity and 30% debt. The cost of equity of 22.8% p.a. and 24.8% p.a. is derived from a risk-free rate of 2.0% p.a., a capital

markets risk premium of 6.9% p.a., a size premium of 1.6% p.a., an industry premium of 1.3% p.a. and a company specific premium (11% p.a. for the "Core" reportable units—Consumer, SMB, Platform and Mobile and 13% p.a. for the Analytics operating segments). The cost of debt is based on the projected average 4.99% p.a. finance cost less a 20% blended tax rate applicable to the Group. These parameters result in a WACC of 17.16% p.a. for all operating segments.

There is no significant correlation between most of the individual factors as they include Group-specific factors, market and industry specific factors, and macroeconomic factors.

Changes to the individual parameters used by the Group would impact the value in use to varying degrees:

an increase in the WACC of 100 basis points would decrease the value in use by 7%;
an increase in the cost of debt by 100 basis points would change the value in by less than 2%;
a decrease in the projected free cash flows (due to decreased sales or increased costs) by 10% in each of the projected periods would decrease the value in use also by 10%;
a decrease in the perpetuity growth rate from 3% p.a. to 1.5% p.a. would decrease the value in use by 6%; and
part of the income and expenses of the Group are in other currencies. The impairment tests performed by the Group are carried out in USD and are not significantly sensitive to foreign exchange volatilities.

The impact of these changes to the parameters would not lead to significantly different results of the impairment tests of individual operating segments. The Mobile segment, one of the cash generating units tested for impairment as of 31 December 2016, showed the lowest difference between the value in use and the net carrying value of assets allocated. Even though no indicators of impairment exist as of the date of these financial statements, the impairment test calculation shows that an increase in the discount rate from 17.16% p.a. to 22.16% p.a. would result in impairment, as would a decrease in the projected free cash flows by more than 16.3% in every year included in the calculation (2017-2022 plus perpetuity).

In determining the value in use as of 31 December 2017, the Group used the following parameters:

projected 2018-2021 free cash flows ("FCF") based on the most current financial plan of the Group (with an annual FCF growth rate during 2018-2021 of 17.1% p.a. and a perpetuity growth rate of 3% p.a. after 2021) allocated to individual operating segments; and
an after-tax discount interest rate representing the weighted average cost of capital ("WACC") of the Group; The WACC was calculated from a cost of equity and cost of debt at a ratio typical for an industry of 70% equity and 30% debt. The cost of equity of 26.2% p.a. is derived from a risk-free rate of 2.7% p.a., a capital markets risk premium of 6.9% p.a., a size premium of 1.7% p.a., an industry premium of 0.9% p.a. and a company specific premium of 14% p.a. The cost of debt is based on the projected average 4.60% p.a. finance cost less a 20% blended tax rate applicable to the Group. These parameters result in a WACC of 19.44% p.a.

There is no significant correlation between most of the individual factors as they include Group-specific factors, market and industry specific factors, and macroeconomic factors.

Changes to the individual parameters used by the Group would impact the value in use to varying degrees:

an increase in the WACC of 100 basis points would decrease the value in use by 6%;
an increase in the cost of debt by 100 basis points would change the value in by less than 2%;
a decrease in the projected free cash flows (due to decreased sales or increased costs) by 10% in each of the projected periods would decrease the value in use also by 10%;
a decrease in the perpetuity growth rate from 3% p.a. to 1.5% p.a. would decrease the value in use by 6%; and
part of the income and expenses of the Group are in other currencies. The impairment tests performed by the Group are carried out in USD and are not significantly sensitive to foreign exchange volatilities.

The impact of these changes to the parameters would not lead to significantly different results of the impairment tests of individual cash generating units. The impairment test as of 31 December 2017 is performed on the basis

of two cash generating units that correspond to the two operating segments, refer to Note 11. The recoverable amount of tested assets exceeded their carrying value. As the Group's management is not aware of any indications of impairment and given the results of the impairment tests, no impairment was recorded.

26. PROVISIONS

The movements in the provision accounts were as follows:

(\$ 'm)	Accrued vacation provision	Building restoration provision	Provision for restructuring	Legal provision and other	Total
As at 31 December 2014	0.8	0.4	—	—	1.2
Additions	0.2	0.1	—	—	0.3
Utilisation	—	(0.3)	—	—	(0.3)
As at 31 December 2015	1.0	0.2	—	—	1.2
Business combination	3.8	—	2.3	8.5	14.6
Additions	—	—	13.3	1.5	14.8
Utilisation	(1.1)	—	—	—	(1.1)
As at 31 December 2016	3.7	0.2	15.6	10.0	29.5
Additions	2.0	—	—	—	2.0
Utilisation	(3.7)	—	(11.4)	(9.0)	(24.1)
As at 31 December 2017	2.0	0.2	4.2	1.0	7.4

The provision for accrued vacation decreased due to lower headcount after restructuring took place in 2017. The provision is also subject to the seasonal drawing of vacation.

As of 31 December 2016, the Group recorded a provision of \$15.6 million for restructuring. Restructuring charges consist of costs associated with the integration of the AVG business with existing Avast entities. These charges include employee retention and severance pay in the amount of \$13.6 million and facility restructuring costs, contract termination and other costs associated with the termination of facilities in the amount of \$2 million.

In 2017, the Group utilised \$11.4 million related to the restructuring provision. As of 31 December 2017, the Group reported a remaining balance of \$4.2 million. Restructuring charges provided for as of 31 December 2017 include employee retention and severance pay in the amount of \$3.4 million and facility restructuring costs, contract termination and other costs associated with the termination of facilities in the amount of \$0.8 million.

As of 30 September 2016, AVG recorded legal provision of \$7.7 million for potential legal disputes over alleged patent infringement. On 24 March 2017, the Group entered into a licensing agreement and paid \$7.7 million for a settlement with the plaintiff. The provision was used in 2017 with a nil impact on profit and loss in 2017.

The Group evaluates its contracts upon signing and quarterly thereafter to assess whether the unavoidable costs of meeting the obligations under the contract exceed the economic benefit. If the obligations exceed the economic benefits, the amount of the present obligation is recognised. As a result, as of 31 December 2017 and 2016, a provision of \$0.8 million and \$1.3 million, respectively, was recognised in the other provisions.

27. OTHER CURRENT LIABILITIES

Other current liabilities:

(\$ 'm)	31 December 2015	31 December 2016	31 December 2017
Accrued personnel costs	2.4	12.8	14.0
Accrued executives' bonuses	3.0	3.3	3.1
Accrued foundation donation	1.1	1.3	—
Contingent consideration liability	4.1	—	—
VAT and other taxes	0.4	7.5	8.3
Liability due to acquisition of shares in
squeeze out process (see Note 5)	—	38.8	—
Accrued cost of settlement of accelerated
AVG options (see Note 5)	—	9.0	8.4
Other	2.5	8.4	4.9
Total	13.5	81.1	38.7

As described in Note 5, of the total amount of accelerated options with a change in control clause of \$24.3 million, \$15.9 million was paid by the Group by 31 December 2017 and \$8.4 million remains unpaid due to legal proceedings.

28. TRADE AND OTHER PAYABLES

Trade and other payables:

(\$ 'm)	31 December 2015	31 December 2016	31 December 2017
Trade payables	3.3	14.3	6.8
Other payables	1.6	0.1	0.2
Accrued rent	0.7	2.3	2.3
Accrued advisory and audit services	0.3	7.9	6.3
Accrued legal services	0.2	3.1	3.6
Accrued license fees	1.6	0.9	2.9
Accrued marketing and advertising	1.5	4.9	2.9
Other accrued expenses	0.3	10.8	10.4
Total	9.5	44.3	35.4

29. POST RETIREMENT BENEFIT PLANS

The Company operates a defined contribution pension plan and a defined benefit plan in accordance with local regulations and practices. These plans cover a portion of the Company's employees and provide benefits to employees in the event of death, disability, or retirement. The measurement date used for the Company's employee benefit plans is 31 December. The funding policies of the Company's plans are consistent with the local government and tax requirements and several of the plans are not required to be funded according to local government and tax requirements. For all employees not part of a defined contribution pension or defined benefit plan, the Company does not pay or reimburse pension premiums other than any applicable statutory national premiums for state pension.

The Company recognises in its Consolidated Statement of Financial Position within the Other non-current liabilities the funded status of its defined benefit pension plans as the difference between the fair value of the plan assets and the benefit obligation.

Defined Contribution Plans

The Company maintains a defined contribution 401(k) retirement savings plan for its U.S. employees and a retirement savings plan for its U.K. employees. Each participant in the 401(k) retirement savings plan may elect to contribute a percentage of his or her annual compensation up to a specified maximum amount allowed under U.S. Internal Revenue Service regulations. The Company matches employee contributions to a maximum of 4% of the participant annual compensation.

Defined Benefit Plan

The Group maintains a defined benefit plan for its Swiss employees. The development of obligations and assets, the fair value of plan assets and funded status were as follows:

(\$ 'm)	2016	2017
Benefit obligation at 1 January	—	(2.4)
Service cost	(0.2)	(0.1)
Employee contributions by plan participants	(0.1)	(0.1)
Past service cost / Plan amendments	—	0.1
Benefit obligations of businesses acquired	(2.2)	—
Benefit payments	—	0.2
Actuarial gain (loss)	—	0.1
Exchange rate differences	0.1	—
Benefit obligation at 31 December	(2.4)	(2.2)


(\$ 'm)	2016	2017
Plan assets of plan assets at 1 January	—	1.5
Contributions by employer	0.1	0.1
Contributions by plan participants	0.1	0.1
Plan assets of business acquired	1.3	—
Benefit payments	—	(0.2)
Fair value of plan assets at 31 December	1.5	1.5

Net periodic benefit cost consisted of the following:

(\$ 'm)	2016	2017
Current service cost	(0.2)	(0.1)
Interest cost	—	—
Expected return on plan assets	—	—
Curtailment, settlement, plan amendment gain (loss)	—	0.1
Administration expenses	—	—
Net periodic benefit cost	(0.2)	—

The weighted-average principal actuarial assumptions were used to determine the Net periodic benefit costs and the benefit obligations. The discount rate assumptions are based upon AA-rated corporate bonds. The assumptions include a discount rate of 0.70% p.a., an average future salary increase of 2.00% p.a., a pension increase assumption of 0.25% p.a. and a rate of compensation increase of 2.00% p.a. at 31 December 2016 and 2017.

In accordance with IAS 19, the plan assets of the fund, consisting of cash and cash equivalents, are at fair value of \$1.5 million and \$1.4 million as of 31 December 2016 and 2017, respectively. The asset allocation on a weighted-average basis is as follows:

Asset class	31 December 2016	31 December 2017
Cash	2	2
Equity	52	50
Fixed income	24	25
Real estate	9	9
Other	13	14
Total	100	100

The sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the statement of financial position.

The sensitivity of the benefit obligations to changes in the discount rate is as follows:

(\$ 'm)	31 December 2016	31 December 2017
Discount rate increased by 0.25%	0.1	0.1
Discount rate decreased by 0.25%	(0.1)	(0.1)
Salary increased by 0.25%	—	—
Salary decreased by 0.25%	—	—
Pension increased by 0.25%	(0.1)	(0.1)
Pension decreased by 0.25%	—	—
Increase of one year life expectancy at
retirement age	(0.1)	(0.1)

The future expected benefit payments by the Group's pension plan which reflects the expected future services, as appropriate as at 31 December 2017, are as follows:

(\$ 'm)	Amount
2018	0.2
Years 2019 - 2026	0.4

30. DEFERRED REVENUE

The Group sells consumer and corporate antivirus products for periods of 12, 24 or 36 months with payment received at the beginning of the license term. Revenues are recognised ratably over the subscription period covered by the agreement.

The movements in the deferred revenue were as follows:

(\$ 'm)	2015	2016	2017
As at 1 January	100.6	137.0	231.1
Business combination—initial recognition at fair value	0.1	17.9	—
Additions—billings	287.2	417.5	800.4
Deductions—revenue	(251.0)	(340.7)	(652.9)
Translation adjustments	0.1	(0.6)	0.2
As at 31 December	137.0	231.1	378.8
Current	121.9	201.1	324.3
Non-current	15.1	30.0	54.5
Total	137.0	231.1	378.8

31. TERM LOAN

On 30 September 2016, Avast BV entered a term loan with a USD and EUR tranche of \$1,200 million and €400 million, respectively and a maturity of six years. The term facility was drawn from a syndicate of lenders, with Credit Suisse International ("CSI") as administrative agent.

The term loan was subject to quarterly amortisation payments of 1.25% of the original principal amount, \$15 million and €5 million per quarter beginning on 31 December 2016. Avast BV may voluntarily prepay term loans in whole or in part without premium or penalty.

The Credit Agreement ("CA") requires the following mandatory repayments in addition to the quarterly amortisation payments: Excess Cash Flow (defined in the Credit agreement as the Avast BV consolidated net increase in cash and cash equivalents for the period adjusted for potential future business combinations and results of Jumpshot, Inc. and Jumpshot s.r.o. and other adjustments)—commencing with the full fiscal year of the Group ending 31 December 2017, 50% of Excess Cash Flow (as defined, and subject to certain reductions and to the extent in excess of \$40,000,000), with a reduction to 25% and elimination based upon achievement of Total Net First Lien Leverage Ratios ("Net debt ratio") not exceeding 3.0:1 and 2.5:1, respectively. The net debt ratio

is defined as in the CA as the nominal value of debt less cash on hand as of the relevant date divided by adjusted operating profit for the preceding four calendar quarters. The operating profit is adjusted for amortisation and depreciation, non-cash expenses such as Share-based payments, the effects of business combination accounting and other non-cash items as defined in the CA.

The following pledge agreements existed as of the date of issuance of these historical financial information. All of these pledge agreements were executed as of 31 December 2016.

Avast BV pledged its 100% share in Avast CZ and 100% share in Avast Operations
Avast BV pledged its receivables which arise from intercompany loan with AVG Technologies N.V.
Avast BV pledged its securities
Avast Holding pledged its 100% share in Avast BV
Avast Operations pledged its receivables from intragroup loan agreements

Avast CZ pledged its receivables from bank accounts, trade receivables, receivables from insurance policies, trademarks, receivables from intragroup loan agreements, its movable assets, domain names, source codes and virus databases.

The interest rate on the term loan is defined as an indexed-based rate (subject to a floor) elected by the borrower plus an additional percentage (applicable interest rate) per annum. To date, the Group has elected 3-month USD LIBOR and 3-month EURIBOR as the base rate for USD tranche and EUR tranche, respectively.

The CA provides that if indexed-based rate is less than 1.0% p.a., then it shall be deemed to be 1.0% p.a. (the "interest rate floor") for purposes of calculating interest on the loan with a USD tranche.

On 31 March 2017, Avast BV entered into a repricing agreement ("Repricing") with Credit Suisse International as the lead arranger. Under the Repricing agreement the maturity of the term loan increased from 6 years to 7 years. Consequently, the due date is now 30 September 2023. The interest rate margin on the USD tranche decreased by 0.75% p.a. and represents prospectively from 1 April 2017 3-month USD LIBOR + 3.25% p.a. with a 1% p.a. floor. The interest rate on the EUR tranche has been reduced to 3-month EURIBOR + 3.50% p.a. with a 0% p.a. floor. The loan principal has increased by \$25 million and EUR 50 million. The Group applied the reduced interest rates including the floor and the increase of the principal in calculation of the effective interest rate prospectively since 1 January 2017. Proceeds received on 31 March 2017 were net of drawing fees of approximately \$2.2 million. The mandatory amortisation increases to \$15.1 million and €5.6 million commencing with the first increased payment due 30 June 2017. The effective interest rate has been recalculated to 3.96% p.a. for the EUR tranche and 6.09% p.a. for the USD tranche and applied prospectively. All covenants, pledged assets, collateral and restrictions remain unchanged with the exception of Avast BV's limit for making Restricted Payments (as defined by the CA, e.g. investments, distributions, loans) being increased from \$100 million to \$270 million.

On 4 August 2017, Avast BV entered into an Incremental Amendment with Credit Suisse International as the lead arranger. Under this amendment, the existing USD and EUR term loans were increased by \$50 million and €75 million. The annual amortisation increased to 5.06% and remains payable in equal quarterly instalments. No other changes were applied to the existing loan term.

On 21 November 2017, Avast BV entered into a Refinancing Amendment with Credit Suisse International as the lead arranger. Under this amendment, the interest rate margin on the both tranches decreased by 0.5% p.a. to 2.75% p.a. for the USD tranche and 3% p.a. for the EUR tranche. The annual amortisation decreased to 5% p.a. No other changes were applied to the existing loan term.

The interest rate details as follows:

	until 31 March 2017		from 1 April 2017		from 21 November 2017
	USD tranche	EUR tranche	USD tranche	EUR tranche	USD tranche	EUR tranche
Indexed-based rate Applicable interest rate	3m USD LIBOR 3m EURIBOR 3m USD LIBOR 3m EURIBOR 3m USDLIBOR 3m EURIBOR
(spread)	4.00% p.a.	3.75% p.a.	3.25% p.a.	3.50% p.a.	2.75% p.a.	3.00% p.a.
Floor	1.00% p.a.	1.00% p.a.	1.00% p.a.	0.00% p.a.	1.00% p.a.	0.00% p.a.

Term loan balance is as follows:

(\$ 'm)	31 December 2015	31 December 2016	31 December 2017
Current term loan	263.1	81.5	92.5
Long-term term loan	—	1,476.5	1,688.8
Total term loans	263.1	1,558.0	1,781.3

The carrying amount of borrowings is net of the total costs incurred on the arrangement of the term loan (including repricings) of \$50.5 million and €2.2 million which are being amortised to profit and loss over the term of the term facility using the effective interest rate method.

As of 31 December 2017 the actual nominal value of the liability to Credit Suisse International is \$1,214 million and €502 million (31 December 2016 – \$1,185 million and €395 million).

Term loan balance reconciliation

The table below reconciles the movements of the balance of the Term loan with the information on above and the statement of cash flows.

(\$ 'm)	2015	2016	2017
Term loan balance 1 January	393.6	263.1	1,558.0
Additional loan drawn (gross of fees)	—	1,232.2	217.5
Drawing fees	—	(49.4)	(3.5)
Non-cash interest expense	7.0	9.7	12.8
Loan repayment	(137.1)	(27.1)	(67.8)
Unrealised foreign exchange changes	—	(26.7)	63.0
Acquisition payments		151.1	—
Other	(0.4)	5.1	1.3
Total	263.1	1,558.0	1,781.3

In 2015, the loan repayments consisted of a voluntary repayment of \$125 million with the balance representing mandatory quarterly repayments.

In 2016, the Group concluded with its lenders an agreement to net settle the original loan and accumulated interest of \$263.1 million and drew a new loan for the acquisition of AVG. The incremental loan of \$1,232.2 million is gross of drawing fees of \$49.4 million which were retained by the lenders. An additional \$151.1 million of new debt was paid directly by Credit Suisse International to the lenders of AVG as part of the acquisition on 30 September 2016. Loan repayments of \$27.1 million represent mandatory quarterly repayment of the term loan and \$26.7 million is the unrealised foreign exchange movement gain on the EUR tranche of the loan as of 31 December 2016.

In 2017, the Group borrowed additional funds on 31 March 2017 and 4 August 2017 (see above) of \$217.5 million (less drawing fees of \$3.5 million) and made mandatory quarterly loan repayments of \$67.8 million. As of 31 December 2017, the Group recognised an unrealised foreign exchange loss of \$63.0 million for the year then ended.

Revolving facility

Avast BV also obtained a revolving credit facility of \$85.0 million for operational purposes which has not been drawn as of the date of these historical financial information. The Credit Agreement includes a financial covenant that is triggered if at any time \$25.0 million or more is outstanding under the revolving credit agreement. If the revolving credit facility exceeds \$25.0 million then Avast BV must maintain, on a consolidated basis, a leverage ratio of less than 6.50:1.00 (measured as of the ratio of "Consolidated First Lien Net Debt" to Consolidated EBITDA). This covenant is tested quarterly at such time as it is in effect.

32. DERIVATIVES

The carrying amount of derivative financial instruments held by the Group was as follows:

(\$ 'm)	31 December 2015		31 December 2016		31 December 2017
	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
Type of derivative
Embedded derivative	—	0.3	—	—	—	—
Interest rate Cap	—	0.5	—	0.2	—	3.2
Foreign currency contracts	—	—	0.3	0.1	0.1	—
Total	—	0.8	0.3	0.3	0.1	3.2
Classified as
Non-current financial liability	—	0.5	—	—	—	3.2
Other current liabilities	—	0.3	—	—	—	—
Current financial liability	—	—	—	0.3	—	—
Current financial assets	—	—	0.3	—	0.1	—
Total	—	0.8	0.3	0.3	0.1	3.2

The Group has not designated the derivatives as hedging instruments, and therefore changes in the fair value during the period are recorded in the statement of profit and loss.

Interest rate floor embedded derivative

The term loan issued on 30 September 2016 also included interest rate floors that constitute embedded derivative. On inception of the term loan both the 3-month USD LIBOR and 3-month EURIBOR market interest rates were lower than the floor (1%) and, according to IFRS the embedded derivatives was therefore separated from the host term loan. The embedded derivative at inception was recorded as a debit to bank loans and a credit to financial liabilities. Along with the Repricing, the embedded derivative associated with EUR tranche was reduced to 0% p.a., the embedded derivative related to USD tranche remains 1% p.a.

Foreign currency contracts

The Group periodically enters into foreign currency contracts to reduce the risks associated with changes in foreign currency exchange rates. Foreign currency contract fair values are classified within Level 2 of the fair value hierarchy as the values are determined based on the quoted prices for similar assets in active markets using inputs such as currency rates and forward points.

The notional amounts and fair value of foreign currency contracts outstanding are as follows:

(\$ 'm)	31 December 2015		31 December 2016		31 December 2017
	Other financial asset	Other financial liability	Other financial asset	Other financial liability	Other financial Asset	Other financial liability
Nominal value	—	—	47.7	11.6	9.6	—
Fair value	—	—	0.3	0.1	0.1	—

Interest rate cap

As of 30 June 2016, the interest rate cap from 11 June 2014 expired. On 20 February 2017, Avast BV entered into a new interest rate cap with an effective date from 31 March 2017 until 31 March 2021 ("Cap"). As of 30 June 2017 the 3-month USD LIBOR is capped at 2.75% p.a. for a notional amount of \$844 million and 1.5% p.a. for a notional amount of \$75 million. The capped notional amount will gradually decrease to \$709 million by 31 December 2020. The fee for a new cap is \$0.4 million paid quarterly until 31 December 2020.

Interest rate cap is classified within Level 3 of the fair value hierarchy. During the reporting period ended 31 December 2017 there were no transfers between Level 2 and Level 3 fair value measurements.

The movement in fair value of the derivatives was as follows:

(\$ 'm)	Interest rate Cap	Interest rate Floor
31 December 2014	0.2	1.5
Change in fair value through profit and loss	0.3	(1.2)
31 December 2015	0.5	0.3
Change in fair value through profit and loss	(0.3)	(0.3)
31 December 2016	0.2	—
Change in fair value through profit and loss	3.0	—
31 December 2017	3.2	—

33. SHAREHOLDERS' EQUITY

As of 31 December 2017, the share capital of Avast Holding represents 52,377,659 common and 43,137,243 preferred shares. Nominal value of the 51,264,275 class A common shares is \$6.24 per share with a share premium of \$0.044 and nominal value of the 1,113,384 class B common shares is \$1.57 with a nil share premium. Nominal value of the 43,136,243 preferred shares is \$1.16 with a share premium of \$0.044 and nominal value of the 1,000 management preferred shares is \$6.24 per share with a share premium of \$104.76 per share.

The movements in selected components of shareholders' equity were as follows:

(\$ 'm)	Number of shares— common stock	Number of shares —preferred stock	Share capital	Share premium	Other reserves	Retained earnings	Non-controlling interest
As at 31 December 2014	51,075,525	43,137,243	565.3	23.4	41.6	(13.6)	—
Profit for the year	—	—	—	—	—	71.5	—
Share-based payments Share-based payments	—	—	—	—	5.7	—	—
non-controlling interest	—	—	—	—	—	—	0.4
As at 31 December 2015	51,075,525	43,137,243	565.3	23.4	47.3	57.9	0.4
Profit for the year	—	—	—	—	—	24.6	—
Share-based payments Share-based payments	—	—	—	—	2.4	—	—
non-controlling interest	—	—	—	—	—	—	0.3
As at 31 December 2016	51,075,525	43,137,243	565.3	23.4	49.7	82.5	0.7
Loss for the year	—	—	—	—	—	(33.8)	—
Defined benefit plan
actuarial gain Transfer within equity	— —	— —	— 23.0	— (23.0)	0.1 (54.9)	— 54.9	— —
Capital distribution	—	—	(219.1)	—	—	(45.7)	—
Exercise of options	1,302,134	—	2.5	0.5	—	—	—
Share-based payments	—	—	—	—	7.5	—	—
Share-based payments non-controlling interest	—	—	—	—	—	—	0.2
As at 31 December 2017	52,377,659	43,137,243	371.7	0.9	2.4	57.9	0.9

Preferred shares

Of the 95,514,902 authorised and issued shares, 43,136,243 are preferred shares and 1,000 are management preferred shares. The holders of preferred shares have superior economic rights in the case of a liquidity event impacting Avast Holding. The superior economic rights comprise a right on the part of the preferred shareholders to receive priority return equal to the amount of their equity subscription in the event of a liquidity event or distribution. The priority receipt of distributions proportionately decreases the entitlement to participate in a future liquidity event. In addition, the returns to Sybil Holdings S.à r.l. ("Sybil") (holder of 40,800,461 preferred shares) are reduced by 25% once the funds advised by affiliates of CVC Capital Partners Advisory Company

(Luxembourg) S.a` r.l. (the "CVC Investor Funds") which own Sybil achieve a return of both EUR 570.5 million (\$684.2 million as of 31 December 2017) and 30% p.a. since 21 March 2014. The management preferred shares are also entitled to a return of approximately 1% of all proceeds from a liquidity event in the event the CVC Investor Funds achieve a return of EUR 570.5 million (\$684.2 million as of 31 December 2017).

The Investment Agreement does give specific shareholders certain rights, specifically to Sybil (holder of 40,800,461 preferred shares) and Pavel Baudisˇ (holder of 31,420,533 common shares), such as:

Sybil is entitled to appoint one of the three members of the Management Board of Avast Holding and up to two independent and two non-independent directors to the Supervisory Board; and
Pavel Baudisˇ is entitled to appoint up to three directors to the Supervisory Board.

In addition to the specific rights above, certain actions of the Group require consent of Sybil and Pavel Baudisˇ, such as:

changes to share capital;
declaration or payment of any dividends or distributions;
winding-up or dissolution of Avast Holding;
any disposals of assets in excess of \$5 million or acquisitions of assets exceeding \$10 million in a year;
entering or modifying contracts with related parties (including shareholders, managers)
entering or modifying specific contracts over certain thresholds;
providing or drawing loans over specific limits; and
approval of the annual budget of the Group;

Capital distribution

On 11 October 2017, the Management Board and Shareholders of Avast Holding approved the Distribution of \$264.9 million. The Distribution consisted of two sources:

reduction in the nominal value of all Preferred Shares resulting in a Distribution of \$219.1 million; and
payment of a regular dividend to holders of all Preferred Shares of \$45.7 million.

On 10 October 2017, the other reserves were decreased by \$54.9 million (with a corresponding increase in retained earnings) for the purpose of dividend distribution. On 11 October 2017, the share premium was decreased by \$23.0 million with a corresponding increase in share capital. The Distribution is presented as a \$219.1 million reduction in share capital and \$45.7 million reduction in retained earnings.

Other reserves

The fair value of stock options granted to employees and directors is recorded over the vesting periods of individual options granted as a personnel expense with a corresponding entry to statutory and other reserves. Refer to Note 34 for further details.

The other reserves are also used to record the actuarial gains/(losses) of the defined benefit plan which the Group maintains for its Swiss employees. Refer to Note 29 for further details.

Non-controlling interest

There is a non-controlling interest in the Group due to Jumpshot, Inc.'s independent stock option plan. The non-controlling interest is recorded in the shareholder's equity section of the Group's consolidated statement of financial position, separate from the Group's equity. The fair value of stock options granted to employees and directors in subsequent accounting periods is recorded over the vesting periods of individual options granted as a personnel expense with a corresponding entry to statutory and other reserves. Refer to Note 34 for further details of this plan.

34. RELATED PARTY DISCLOSURES

Compensation of key management personnel of the Group

The members of statutory and supervisory bodies, directors and executive officers were granted no loans, guarantees or advances in the year ended 31 December 2015, 2016 and 2017.

Benefits granted to members of statutory and supervisory bodies and to directors and executive officers, aside from salaries and social security contributions, consist of the use of company cars and mobile phones for both business and private purposes and of a contribution for additional pension insurance.

Compensation of key management persons for the period is as follows:

(\$ 'm)	2015	2016	2017
Short term employee benefits (including salaries)	8.5	8.0	10.9
Share-based payments	4.0	1.4	6.1
Total	12.5	9.4	17.0

The amounts in the table above include, in addition to the compensation of key management personnel of the Group, the remuneration of employees of the Group that are considered related parties under IAS 24—Related party disclosures.

Share-based payments

Avast Holding B.V. 2014 Share Option Plan "Avast Option Plan"

The purpose of the Avast Option Plan is to further the growth, development and success of the Group Companies by enabling employees and directors of the Group Companies to acquire a continuing equity interest in the Company.

The total number of options under the Option Plan that may be granted is limited at 7,526,882. Each option converts into one ordinary share of Avast Holding on exercise. Options that are forfeited are available to be granted again. Options generally vest over a four-year period in four equal instalments. Some of the options granted to the key management are performance-based. The contractual life of all options is 10 years.

On 30 April 2017, the Board approved by resolution to increase the Option Plan by 5,000,000 options.

The following table sets forth the total Share-based payments recognised in the Consolidated Statement of Profit and Loss:

(\$ 'm)	2015	2016	2017
Cost of revenues	0.2	0.1	0.1
Sales and marketing	2.3	—	3.1
Research and development	1.2	0.3	0.4
General and administration	2.0	2.0	3.9
Total	5.7	2.4	7.5

Jumpshot Inc., 2015 Share Option Plan "Jumpshot Option Plan"

The Jumpshot Option Plan was designed in order to grant options to purchase shares of common stock of Jumpshot, Inc. to certain employees and directors of Jumpshot, Inc. The purpose of the Jumpshot Option Plan is to provide employees with an opportunity to participate directly in the growth of the value of Jumpshot by receiving options for shares.

The total number of shares of common stock that may be delivered pursuant to options granted under the Jumpshot Option Plan is 7,335,750. Each option converts into one ordinary share of Jumpshot, Inc. on exercise. Options that are forfeited are available to be granted again. Options generally vest over a four-year period in four equal installments. Some of the options granted to the key management are performance-based. The contractual life of all options is 10 years.

The following table sets forth the total Share-based payments recognised in our Consolidated Statement of Profit and Loss:

(\$ 'm)	2015	2016	2017
Research and development	—	0.2	0.1
General and administration	0.4	0.1	0.1
Total	0.4	0.3	0.2

The fair value of each stock option award is estimated, based on the several assumptions, on the date of the grant award using the Black-Scholes option valuation model.

The following table illustrates the weighted average inputs into the Black-Scholes model in the year:

Avast Option Plan	2015	2016	2017
Number granted in year	2,452,500	2,042,500	3,198,398
Weighted average grant date fair value (per
share)	2.48	3.16	2.35
Weighted average exercise price (in USD cents)	6.98	8.68	13.17
Expected volatility	34.04%	33.69%	32.66%
Weighted average expected lives (years)	6.28	6.25	6.12
Risk free interest rate	1.19%	1.73%	1.93%
Expected dividends	Nil	Nil	Nil
Jumpshot Option Plan	2015	2016	2017
Number granted in year	6,542,000	1,315,486	861,789
Weighted average grant date fair value (per share)	0.15	0.19	0.26
Weighted average exercise price (in USD cents)	0.30	0.36	0.56
Expected volatility	50.00%	53.16%	45.34%
Weighted average expected lives (years)	6.28	6.25	6.25
Risk free interest rate	1.26%	1.02%	2.07%
Expected dividends	Nil	Nil	Nil

Expected volatility was determined by calculating the historical share price volatility of comparable listed companies over the expected life of the options. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not be necessarily be the actual outcome. An increase in the expected volatility will increase the estimated fair value.

The following table summarises share option activity of Avast Option Plan:

	2015		2016		2017
	Number of shares	Weighted average exercise	Number of shares	Weighted average exercise	Number of shares	Weighted average exercise
Outstanding—1 January	4,898,500	6.28	5,906,000	6.50	6,739,000	6.90
Granted	2,452,500	6.98	2,042,500	8.39	3,198,398	13.17
Forfeited	(1,445,000)	6.41	(1,209,500)	6.35	(365,250)	7.44
Exercised	—	—	—	—	(188,750)	6.48
Outstanding—31 December	5,906,000	6.50	6,739,000	6.90	9,383,398	8.99
Vested—31 December	509,625	6.28	1,402,989	6.42	2,985,992	6.86

Options outstanding at the end of the year had the following range of exercise prices and weighted average remaining contractual life:

		2015 2016			2017
Exercise price:	Number of shares outstanding	Weighted average remaining life (years)	Number of shares outstanding	Weighted average remaining life (years)	Number of shares outstanding	Weighted average remaining life (years)
\$6.28	3,818,500	8.48	2,768,500	7.51	2,601,000	6.41
\$6.80	1,037,500	9.38	878,000	8.38	634,500	7,35
\$7.22	1,050,000	9.89	1,642,500	9.00	1,542,500	7.99
\$9.27	—	—	1,450,000	9.94	2,196,365	9.06
\$14.37	—	—	—	—	2,349,033	9,30
\$15.22	—	—	—	—	60,000	9.95
Outstanding—31 December	5,906,000	8.89	6,739,000	8.51	9,383,398	8.10

The following table summarises share option activity of Jumpshot Option Plan:

	2015 2016			2017
	Number of shares	Weighted average exercise	Number of shares	Weighted average exercise	Number of shares	Weighted average exercise
Outstanding—1 January	—	—	6,392,000	0.30	6,365,986	0.31
Granted	6,542,000	0.30	1,315,486	0.36	861,789	0.56
Forfeited	(150,000)	0.30	(1,339,000)	0.30	(280,500)	0.33
Exercised	—	—	(2,500)	0.30	(131,750)	0.30
Outstanding—31 December	6,392,000	0.30	6,365,986	0.31	6,815,525	0.34
Vested—31 December	458,572	0.30	1,446,893	0.30	2,767,836	0.31

Options outstanding at the end of the year had the following range of exercise prices and weighted average remaining contractual life:

	2015		2016		2017
Exercise price:	Number of shares outstanding	Weighted average remaining life (years)	Number of shares outstanding	Weighted average remaining life (years)	Number of shares outstanding	Weighted average remaining life (years)
\$0.30	6,392,000	9.21	5,050,500	8.21	4,703,250	7.19
\$0.36	—	—	1,315,486	9.32	1,265,486	8.53
\$0.56	—	—	—	—	846,789	9.50
Outstanding—31 December	6,392,000	9.21	6,365,986	8.44	6,815,525	7.73

Replacement options

Out of 7,717,640 options that were fully vested as of 21 March 2014 as part of business combination, 1,113,384 of these options were exercised with the exercise price of 1.57 during the year ended 31 December 2017.

Other related party transactions

Nadacˇní fond Avast ("Foundation")

The Foundation was established by Avast CZ and distributes the gifts to other charities and foundations in the Czech Republic. The Foundation is considered to be a related party as the spouses of Messrs. Kucˇera and Baudisˇ are members of the management board of the foundation.

The Investment Agreement was amended in November 2014 to enable Avast CZ to make donations to the Avast Foundation up to an amount estimated to 2.5% of the consolidated adjusted profit before tax of Avast Holding.

On 24 February 2017, the Supervisory Board of Avast Holding approved that the donation for 2017 will be \$4 million, paid in quarterly instalments during the year.

In 2017, Avast CZ made donations of CZK 117.2 million (\$5.0 million) to the Foundation. As of 31 December 2017, the Group recorded no accrual.

In 2016, Avast CZ made donations of CZK 55.9 million (\$2.3 million) to the Foundation.

In 2015, Avast CZ made donations of CZK 84.6 million (\$3.4 million) to the Foundation.

The movements in the accrual for the Foundation were as follows:

(\$ 'm)	2015	2016	2017
At 1 January	—	1.1	1.3
Annual donations—expense	4.5	2.5	3.7
Payments to Foundation	(3.4)	(2.3)	(5.0)
At 31 December	1.1	1.3	—

CVC Administration Services S.à r.l.

On 20 March 2014, Avast BV and Avast Holding signed sub-rental agreements with CVC Administration Services S.à r.l. for the lease of office premises which is automatically renewed every year. Each company pays €5 thousand (\$5 thousand) per year.

On 29 August 2016, Avast Operations signed sub-rental agreements with CVC Administration Services S.à r.l. for the lease of office premises with an annual rent of €2 thousand (\$1.8 thousand).

Enterprise Office Center

On 15 November 2016, Enterprise Office Center (owned by Erste Group Immorent) where Avast CZ resides was sold by a third party to a group of investors including co-founders of Avast Group, Eduard Kucˇera and Pavel Baudisˇ for \$119.5 million (ca. €110 million). The annual rent is €2.8 million (\$3.3 million).

Management Board

One of the members of the Avast Holding Management Board is also a member of the Supervisory Board of Verizon Nederland B.V. (a non-executive position). Verizon Nederland B.V. is part of the Verizon Group which includes Verizon Sourcing LLC (a Delaware registered company), a key customer of Location Labs. The membership on the Verizon Nederland B.V. Supervisory Board was established before Avast BV acquired AVG.

35. FINANCIAL RISK MANAGEMENT

The Group's classes of financial instruments correspond with the line items presented in the consolidated statement of financial position.

The management of the Group identifies the financial risks that may have an adverse impact on the business objectives and through active risk management mitigates these risks to an acceptable level.

The specific risks related to the Group's financial assets and liabilities and sales and expenses are interest rate risk, credit risk and exposure to the fluctuations of foreign currency.

Credit risk

Foreign currency risk

At the parent company level, the functional and presentation currency is the US dollar and the Group's revenue and costs are reported in US dollars. The Group is exposed to translation risk resulting from the international sales and costs denominated in currencies other than US dollars and the resulting foreign currency balances held on the balance sheet. The Group is exposed to material transaction and translation currency risk from fluctuations in currency rates between USD, GBP, CZK and Euro.

	2015	2016	2017
USD	58%	55%	52%
EUR	17%	18%	19%
GBP	9%	8%	8%
Other	16%	19%	21%
Total	100%	100%	100%

As the majority of revenues represent sales of software licenses, the revenues are recognised over the duration of the license period, despite payment being received at the start of the license period. Because the release of deferred revenues is performed using the exchange rates valid at the start of the license term, they are not subject to foreign currency risk.

The Group enters into foreign exchange contracts to economically hedge exposures between the functional and transactional currencies, reducing most our exposures but not eliminating them.

The following table shows financial assets and liabilities in individual currencies, net:

(\$ 'm)	2015	2016	2017
USD	(150.2)	(891.3)	(712.8)
EUR	40.6	(430.3)	(404.7)
CZK	(2.5)	19.2	(217.8)
GBP	3.8	6.3	78.3
Other	2.1	(44.8)	15.8
Total	(106.2)	(1,341.0)	(1,241.2)

under the assumption that the other variables are constant. The analysis against USD is based solely on the net balance of cash and cash equivalents, trade and other receivables and trade and other payables.

(\$ 'm)	% change	31 December 2015	31 December 2016	31 December 2017
EUR	+/-10%	4.1 /(4.1)	(43.0)/43.0	(40.5)/40.5
CZK	+/-10%	0.3 /(0.3)	1.9/(1.9)	(21.8)/21.8
GBP	+/-10%	0.4/(0.4)	0.6/(0.6)	7.8/(7.8)
Other	+/-10%	0.2 /(0.2)	(4.5)/4.5	1.6/(1.6)

The sensitivity analysis above is based on the consolidated assets and liabilities, i.e. excluding intercompany receivables and payables. However, Avast CZ has a significant intercompany loan from Avast Operations B.V. denominated in USD. As the functional currency of Avast CZ is the USD but the tax basis of Avast CZ is denominated in CZK the income tax gains or losses of Avast CZ are exposed to significant foreign exchange volatility. If the CZK depreciates against the USD, the corporate income tax expense would decrease. Avast Operations B.V. is not exposed to any similar volatilities as its functional and tax currency is the USD.

Interest rate risk

Cash held by the Group is not subject to any material interest. The only liabilities held by the Group subject to interest rate risk are the loan and derivatives described in Note 32. The discount rates used in calculating lease liabilities (see Note 36) and provisions (see Note 26) represent implicit interest rates used only to determine the present value of liabilities. The liabilities and provisions themselves are not subject to interest rate risk. The Group keeps all its available cash in current bank accounts or term deposit contracts (see Note 21) with a fixed interest rate and maturity not exceeding three months.

As at 31 December 2017, the Group has a term loan with an interest rate of 3-month USD LIBOR plus a 2.75% p.a. mark-up for USD tranche and 3-month EURIBOR plus a 3.00% p.a. mark-up for EUR tranche. The 3-month USD LIBOR is subject to a 1% interest rate floor and the 3-month EURIBOR is subject to a 0% interest rate floor. As of 31 December 2017 the 3-month USD LIBOR was 1.33% p.a. and 3-months EURIBOR was -0.33%.

To reduce the interest rate risk Avast BV entered into an interest rate cap ("Cap") with certain counterparties on 20 February 2017 effective from 31 March 2017. Under the Cap, 3-month USD-LIBOR is limited to 2.75% p.a. for a notional amount of \$844 million.

For derivatives detail refer to Note 32.

Liquidity risk

The Group performs regular monitoring of its liquidity position to maintain sufficient financial sources to settle its liabilities and commitments. The Group is dependent on a long-term credit facility and so it must ensure that is compliant with its terms. As it generates positive cash flow from operating activities the Group is able to cover the normal operating expenditures, pay outstanding short-term liabilities as they fall due without requiring additional financing and has sufficient funds to make meet the capital expenditure requirement. The Group considers the impact on liquidity each time it makes an acquisition in order to ensure it does not adversely affect its ability to meet the financial obligation as they fall due.

As at 31 December 2017, the Group's current ratio (current assets divided by current liabilities) was 0.60. As at 31 December 2016 and 2015, the Group's current ratio (current assets divided by current liabilities) was 0.72 and 0.43, respectively. The ratio is significantly impacted by the high current deferred revenue balance due to the sales model where subscription revenue is collected in advance from end users and deferred over the license period. The reason the ratio decreased as of 31 December 2017 compared to 31 December 2016 is due to the significant outflows of cash in October 2017 of \$265 million (see Note 31) and also due to the increase in deferred revenues compared to 31 December 2016 (caused by the fair value adjustments to the acquisition date balance of deferred revenues of AVG on 30 September 2016, see Note 5).

The Group has established long-term credit ratings of Ba3 with the Moody's and BB- with Standard & Poor's. The credit ratings are subject to regular review by the credit rating agencies and may change in response to economic and commercial developments.

The following table shows the ageing structure of financial liabilities as of 31 December 2015:

(\$ 'm)	On demand	Less than 3 months	3 to 12 months	1 to 5 years	> 5 years	Total
Term loan	—	—	263.1	—	—	263.1
Interest payment	—	2.6	2.7	—	—	5.3
Lease liability	—	—	0.3	—	—	0.3
Provisions	—	—	1.0	—	0.2	1.2
Trade and other payables	—	9.5	—	—	—	9.5
Income tax liability	—	—	9.6	—	—	9.6
Other current liabilities	—	6.0	5.3	2.2	—	13.5
Derivative financial		0.3	—	0.5	—	0.8
instruments	—
Total	—	18.4	282.0	2.7	0.2	303.3

The following table shows the ageing structure of financial liabilities as of 31 December 2016:

(\$ 'm)	On demand	Less than 3 months	3 to 12 months	1 to 5 years	> 5 years	Total
Term loan	—	20.8	60.7	241.3	1,235.2	1,558.0
Interest payment	—	18.7	57.9	287.4	50.1	414.1
Lease liability	—	—	1.6	2.2	2.1	5.9
Provisions	—	—	28.3	1.0	0.2	29.5
Trade and other payables	—	44.3	—	—	—	44.3
Income tax liability	—	—	25.0	—	—	25.0
Other current liabilities	—	65.1	16.0	—	—	81.1
Derivative financial		—	0.3	—	—	0.3
instruments	—
Other non-current liabilities	—	—	—	—	0.9	0.9
Total	—	148.9	189.8	531.9	1,288.5	2,159.1

The following table shows the ageing structure of financial liabilities as of 31 December 2017:

(\$ 'm)	On demand	Less than 3 months	3 to 12 months	1 to 5 years	> 5 years	Total
Term loan	—	19.1	73.4	334.7	1,354.1	1,781.3
Interest payment	—	18.0	55.8	283.0	47.5	404.3
Lease liability	—	1.0	1.0	2.8	0.2	5.0
Provisions	—	—	6.1	1.0	0.3	7.4
Trade and other payables	—	28.7	6.7	—	—	35.4
Income tax liability	—	—	28.1	—	—	28.1
Other current liabilities	—	22.5	16.2	—	—	38.7
Derivative financial		0.4	1.2	1.6	—	3.2
instruments	—
Other non-current liabilities	—	—	—	1.5	0.7	2.2
Total	—	89.7	188.5	624.6	1,402.8	2,305.6

Capital management

The Group manages its capital structure and makes adjustments to it in the light of changes in circumstances, including economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

The Group monitors capital using the net liability position and gearing ratio (the net liability position divided by the sum of the net liability position and equity). The Group includes within the net liability position all current and non-current liabilities, less cash and cash equivalents.

(\$ 'm)	31 December 2015	31 December 2016	31 December 2017
Current and non-current liabilities	481.1	2,106.0	2,363.5
Less: cash and short—term deposits	(141.2)	(240.7)	(176.3)
Net liability position	339.9	1,865.3	2,187.2
Equity	694.3	724.5	435.1
Gearing ratio	32.9%	72.0%	83.4%

36. COMMITMENTS

Operating lease commitments

The Group incurred a lease expense of \$2.8 million for the year ended 31 December 2015. The minimum future rentals on operating leases are as follows as of 31 December 2015:

(\$ 'm)	Less than 1 year	1 to 5 years	> 5 years	Total
Lease	2.8	19.5	8.8	31.1
Sublease income	(0.3)	(0.2)	—	(0.5)
Net lease	2.5	19.3	8.8	30.6

The Group incurred \$8.9 million of the lease expense for the year ended 31 December 2016. The minimum future rentals on operating leases are as follows as of 31 December 2016:

(\$ 'm)	Less than 1 year	1 to 5 years	> 5 years	Total
Lease	16.9	36.0	19.2	72.1
Sublease income	(0.6)	(1.0)	—	(1.7)
Net lease	16.3	35.0	19.2	70.4

As of 31 December 2016, the Group recorded a lease liability of \$4 million which represents deferred costs of lease incentives granted by the lessor. Out of the total amount, \$0.2 million is presented as a current lease liability and \$3.8 million is presented as a non-current lease liability.

The Group incurred a lease expense of \$17.3 million for the year ended 31 December 2017. The minimum future rentals on operating leases are as follows as of 31 December 2017:

(\$ 'm)	Less than 1 year	1 to 5 years	> 5 years	Total
Lease	12.6	40.0	23.9	76.6
Sublease income	(0.4)	(1.6)	—	(2.0)
Net lease	12.2	38.4	23.9	74.6

As of 31 December 2017, the Group recorded a lease liability of \$3.6 million which represents the deferred costs of lease incentives granted by the lessor. Out of the total amount, \$0.3 million is presented as a current lease liability and \$3.3 million is presented as a non-current lease liability.

Finance lease commitments

The Group leases other intangible assets, servers and minor office facilities under finance lease. The lease of other intangible assets terminated as at 31 December 2016 and there are no related commitments as of this date. The gross value of leased servers is \$4 million, the associated commitments are \$1.4 million as at 31 December 2017. The rental period is 3 years which terminates in November 2018.

Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

(\$ 'm)	31 December 2015		31 December 2016		31 December 2017
	Minimum payments	Present value of payments	Minimum payments	Present value of payments	Minimum payments	Present value of payments
Within one year	0.3	0.3	1.5	1.4	1.5	1.4
After one year but not more than five years	—	—	0.5	0.5	—	—
More than five years	—	—	—	—	—	—
Total minimum lease payments	0.3	0.3	2.0	1.9	1.5	1.4
Less amounts representing finance charges	—	—	(0.1)	—	—	—
Present value of minimum lease payments	0.3	0.3	1.9	1.9	1.5	1.4

37. SUBSEQUENT EVENTS

From 1 January 2018, Avast CZ. applies hedge accounting in its Czech statutory financial statements which have the CZK as the functional currency for statutory and tax purposes. The hedged items are future USD revenues of the Company and the hedging instrument is an intercompany loan received from Avast Operations B.V. with a principal amount of \$536 million. Hedge accounting is applied only for statutory purposes and the hedging instrument is an intercompany loan that is eliminated in the historical financial information of Avast Holding, as a result the only impact in the consolidated financial statements of Avast Holding will be in the corporate income tax calculations starting from 1 January 2018.

On 1 February 2018, the Board approved a grant of 250,000 options to purchase shares in Avast Holding under the 2014 stock option plan with an exercise price of \$25.00 per share. The grant date of these options is 1 February with vesting generally over a period of 1-4 years. The fair value of the option grant is \$19.30. As of the date of this Prospectus the Group expects the total costs of the option grants over the vesting period to be approximately \$1.2 million.

On 12 February 2018, the Jumpshot Board approved a grant 493,392 options to purchase shares in Jumpshot Inc. under the 2015 stock option plan with an exercise price of \$0.86 per share. The grant date of these option is 12 February 2018 with vesting generally over a period of 1-4 years except for performance options (financial performance of Jumpshot) which have event-driven vesting conditions. The total costs of the option grants over the vesting period is estimated to be approximately \$0.5 million.

On 1 March 2018, AVG Technologies Norway AS merged as a successor company with Norman Data Defense Systems AB.

On 22 March 2018, AVG Technologies Norway AS merged as a successor company with Norman Data Defense Systems A/S.

On 30 March 2018, the Board approved a grant of 1,560,000 options to purchase shares in Avast Holding under the 2014 stock option plan with an exercise price of \$28.00 per share. The grant date of these options is 30 March with vesting generally over a period of 2-4 years. The Group is still in the process of determining the total cost of the option grants as of the date of this Prospectus.

As of 25 April 2018, Avast BV had responses from lenders and other market participants sufficient to approve amendments to help facilitate an initial public offering, which are to become effective immediately upon the consummation of an initial public offering, including adjustments to the Total Net First Lien Leverage Ratio covenant testing to (x) increase the threshold to \$35 million outstanding under the revolving credit facility at the end of a fiscal half-year and (y) be tested (if (and only if) such amount is outstanding) semiannually, as of the end of such fiscal half-year. In addition to the above the applicable lenders have also approved or otherwise agreed to transactions which will provide for the following reduction in interest rate margin, repricing protection and, in the case of the revolving credit facility, maturity extension, subject to the occurrence of an initial public offering, the delivery of certain customary conditions consistent with prior refinancing and payment of certain fees and expenses to the applicable parties: (i) with respect to loans under the dollar denominated term loan facility, 25 basis points to 2.50% (subject to a step-down to 2.25% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 2.50:1.00), (ii) with respect to loans under the euro denominated term facility, 25 basis

points to 2.75% (subject to a step-down to 2.50% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 2.50:1.00), (iii) refresh the repricing protection of a 1.00% prepayment premium for six months after the occurrence of the refinancing of the term loans in connection with the repricing contemplated above, (iv) with respect to loans under the revolving credit facility, 150 basis points to 2.25% (subject to a stepdown to 2.00% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 2.50:1.00) and (v) extend the termination/final maturity date of the revolving commitments by one year, to 30 September 2022. The Group will use approximately \$200 million of proceeds from the Global Offering, along with cash on hand, to prepay \$300 million in principal amounts outstanding under the dollar term loan facility.

On 1 May 2018, the AVG E-comm web shop was transferred to Avast BV and consequently, the former Dutch AVG business from Avast BV was sold to Avast CZ. The transaction will increase deferred tax assets by approximately \$147.7 million. In addition, an exit change of \$49.4 million has been agreed upon with the Dutch tax authorities.

Section C—Accountant's Report relating to AVG Historical Financial Information

The Directors Avast plc 110 High Holborn London WC1V 6JS

10 May 2018

Dear Sirs

AVG Technologies N.V.

We report on the financial information set out in Section D of Part 11 below for the years ended 31 December 2015 and 2016 (the "AVG Financial Information"). This AVG Financial Information has been prepared for inclusion in the prospectus dated 10 May 2018 of Avast plc (the "Company") on the basis of the accounting policies set out in Note 4 of the AVG Financial Information. This report is required by item 20.1 of Annex I of Commission Regulation (EC) 809/2004 and is given for the purpose of complying with that item and for no other purpose.

Responsibilities

The Directors of the Company are responsible for preparing the AVG Financial Information in accordance with International Financial Reporting Standards as adopted by the European Union.

It is our responsibility to form an opinion on the AVG Financial Information and to report our opinion to you.

Basis of opinion

We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the AVG Financial Information. It also included an assessment of significant estimates and judgments made by those responsible for the preparation of the AVG Financial Information and whether the accounting policies are appropriate to the entity's circumstances, consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the AVG Financial Information is free from material misstatement whether caused by fraud or other irregularity or error.

Opinion

In our opinion, the AVG Financial Information gives, for the purposes of the prospectus dated 10 May 2018, a true and fair view of the state of affairs of AVG Technologies N.V. as at the dates stated and of its profits, cash flows and changes in equity for the periods then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

Declaration

Yours faithfully

Ernst & Young LLP

Section D—AVG Historical Financial Information

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

	Note	Year-ended 31 December 2015	Year-ended 31 December 2016
REVENUES	8	425.8	418.6
Cost of revenues	11	(64.4)	(85.8)
GROSS PROFIT		361.4	332.8
Sales and marketing		(126.6)	(123.2)
Research and development		(88.4)	(91.5)
General and administrative		(69.1)	(118.3)
Total operating costs	12	(284.1)	(333.0)
OPERATING PROFIT / (LOSS)		77.3	(0.2)
Analysed as:
Underlying Operating profit		132.6	131.6
Share-based payments(1)	31	(15.3)	(14.8)
Exceptional items	10	(9.0)	(86.9)
Amortisation of intangible assets acquired through business
combinations	13	(31.0)	(30.1)
Finance income and (expenses), net	15	(16.7)	(24.1)
PROFIT (LOSS) BEFORE TAX		60.6	(24.3)
Income tax	16	(11.4)	(4.1)
PROFIT (LOSS) FOR THE FINANCIAL YEAR		49.2	(28.4)
Earnings / (losses) per share (in \$ per share):
Basic EPS	17	0.97	(0.55)
Diluted EPS	17	0.95	(0.55)

⁽¹⁾ An additional \$22.2 million of share-based payments is included in Exceptional items in 2016 (2015: nil). Please refer to Note 10.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Year-ended	Year-ended
	31 December 2015	31 December 2016
Profit / (loss) for the financial year	49.2	(28.4)
Other comprehensive gains / (losses):
Items that will not be reclassified subsequently to profit or loss:
Defined benefit plan actuarial gain (loss), net of tax	(0.1)	0.1
Items that may be reclassified subsequently to profit or loss:
Translation differences, net of tax	(1.5)	8.8
Total other comprehensive gains / (losses)	(1.6)	8.9
Comprehensive income / (loss) for the year	47.6	(19.5)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Note	31 December 2015	31 December 2016
ASSETS
Current assets
Cash and cash equivalents	18	123.8	33.2
Trade and other receivables	20	44.0	38.0
Prepaid expenses	21	16.6	17.6
Inventory		1.0	—
Tax receivables		8.7	2.1
Other financial assets	19	27.3	1.7

		221.4	92.6
Non-current assets
Property, plant and equipment	22	23.5	23.9
Intangible assets	22	105.7	76.3
Deferred tax asset	16	36.6	43.1
Other financial assets	19	0.8	3.1
Prepaid expenes	21	4.0	2.8
Goodwill	22	296.8	297.1
		467.4	446.3
TOTAL ASSETS		688.8	538.9

SHAREHOLDERS' EQUITY AND LIABILITIES
Current liabilities
Trade and other payables	25	33.4	25.6
Lease liability		1.8	1.6
Provisions	23	4.1	26.9
Income tax liability		1.1	6.0
Deferred revenues	27	167.1	157.4
Other current liabilities	24	90.3	22.4
Term loan	28	2.3	38.5
Financial liability	29	1.8	0.1
		301.9	278.5
Non-current liabilities

Lease liability		4.1	4.3
Provisions	23	1.0	0.9
Deferred revenues	27	33.0	29.9
Term loan	28	212.8	—
Financial liability	29	2.3	—
Other non-current liabilities	26	5.4	2.7
Deferred tax liability	16	28.7	27.3
		287.3	65.1
Shareholders' equity
Share capital	30	0.7	0.7
Share premium, statutory and other reserves	30	(49.9)	2.6
Treasury shares	30	(62.8)	—
Translation differences	30	(14.2)	(4.2)
Retained earnings	30	225.8	196.2

Equity attributable to equity holders of the parent		99.6	195.3
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES		688.8	538.9

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

	Note	Share capital	Share premium, statutory and other reserves	Treasury Shares	Translation differences	Retained earnings	Total equity
At 31 December 2014		0.7	(56.5)	(62.9)	(12.7)	176.6	45.2
Profit for the year		—	—	—	—	49.2	49.2
Other comprehensive income		—	(0.1)	—	(1.5)	—	(1.6)
Comprehensive income for the
period		—	(0.1)	—	(1.5)	49.2	47.6
Exercise of share options	30	—	(5.2)	14.7	—	—	9.5
Repurchase of own shares	30	—	—	(14.6)	—	—	(14.6)
Share-based compensation	31	—	11.9	—	—	—	11.9
At 31 December 2015		0.7	(49.9)	(62.8)	(14.2)	225.8	99.6
Profit for the year		—	—	—	—	(28.4)	(28.4)
Other comprehensive income		—	0.1	—	8.8	—	8.9
Reclassification	30	—	—	—	1.2	(1.2)	—
Comprehensive income for the
period		—	0.1	—	10.0	(29.6)	(19.5)
Exercise of share options	30	—	(11.6)	17.1	—	—	5.5
Repurchase of own shares	30	—	—	(26.5)	—	—	(26.5)
Sale of own shares	30	—	20.9	72.2	—	—	93.1
Share-based compensation	31	—	43.1	—	—	—	43.1
At 31 December 2016		0.7	2.6	—	(4.2)	196.2	195.3

	Note	For the year ended 31 December 2015	For the year ended 31 December 2016
Cash flows from operating activities
Profit/(loss) for the year		49.2	(28.4)
Non-cash adjustments to reconcile profit to net cash flows:
Income tax	16	11.4	4.1
Depreciation	13	9.8	11.4
Amortisation	13	39.3	36.1
Movement of provisions and allowances	23	(3.0)	23.1
Interest income		(0.1)	(0.1)
Loss on disposal of property and equipment Interest expense, changes of fair values of derivatives and other	22	—	(0.2)
non-cash financial expense	15	10.0	24.1
Shares granted to employees Effect of exchange rate changes on cash and cash equivalents held in	31	15.3	37.0
foreign currencies		0.2	2.6
Unrealised foreign exchange gains and losses and other non-cash
transactions Working capital adjustments:		1.3	7.1
(Increase)/decrease in trade and other receivables		(14.9)	1.9
Increase in trade and other payables		4.3	(2.7)
Decrease in deferred revenues	27	(1.8)	(12.7)
Income tax paid		(6.1)	(2.2)
Net cash flows from operating activities		114.9	101.1
Cash flows from investing activities
Acquisition of property and equipment	22	(9.0)	(12.4)
Acquisition of intangible assets	22	(5.6)	(6.4)
Proceeds from sale of property and equipment		0.2	0.5
Investment in subsidiary, net of cash acquired	5	(34.5)	—
Settlement of contingent consideration	24	(22.1)	(25.8)
Settlement of deferred consideration	24	(2.2)	(2.1)
Decrease/(increase) in restricted cash	19	(9.3)	—
Interest received		0.1	0.1
Net cash used in investing activities		(82.4)	(46.1)
Cash flows from financing activities Exercise of share options	31	11.2	9.1
Excess tax benefit from options		0.9	1.3
Repayment of borrowings	28	(2.3)	(96.1)
Interest paid		(16.3)	(11.7)
Debt issuance costs		(0.7)	—
Location Labs Class B redemption payments	24	(25.2)	(16.8)
Repurchases of own shares	30	(14.6)	(26.5)
Lease repayments		(0.4)	(2.3)
Net cash used in financing activities		(47.4)	(143.0)
Net decrease in cash and cash equivalents		(14.9)	(88.0)
Effect of exchange rate changes on cash and cash equivalents held in foreign currencies		(0.2)	(2.6)
Cash and cash equivalents at beginning of period		138.9	123.8
Cash and cash equivalents at end of period	18	123.8	33.2

1. CORPORATE INFORMATION

AVG Technologies B.V. ("AVG"), formerly AVG Technologies N.V., is a limited liability company incorporated under Dutch law by a deed of incorporation dated 3 March 2011, under the name AVG Holding Coöperatief U.A. ("AVG Coop"). On 25 November 2011, AVG Coop was converted into a public company with limited liability and changed its name to AVG Technologies N.V.

On 6 July 2016, Avast Software B.V. and its parent company, Avast Holding (the "Avast Group"), signed a Purchase Agreement to acquire all of the outstanding ordinary shares of the Company for a cash purchase price of \$25.00 per share. The acquisition closed on 30 September 2016. On 28 October 2016 the Company voluntarily filed a request to delist from the New York Stock Exchange and, on 23 March 2017, AVG filed Form 15 with the Securities and Exchange Commission. AVG was formally de-registered and became AVG Technologies B.V.

On 1 September 2017, AVG merged with Avast Software B.V. with Avast Software B.V. being the surviving entity.

The registered office of AVG Technologies B.V. was located at Zuidplein 36, H-Tower, 1077XV Amsterdam, the Netherlands.

The accompanying historical financial statements include the financial statements of AVG Technologies B.V. and its wholly owned subsidiaries (collectively, the "Company" or the "Group") for the two years ended 31 December 2016.

AVG Technologies Holdings B.V and its subsidiaries consist of the following companies as of 31 December 2016:

Registered office	Identification number	Place of Incorporation
AVG Technologies B.V. (formerly AVG Technologies N.V.)	521 97 204
AVG Netherlands B.V	528 39 761
AVG Technologies Holdings B.V	533 22 053	Netherlands
AVG Corporate Services B.V	577 68 277
Norman Data Defense Systems B.V	332 41 995
AVG Technologies CZ, s.r.o.	440 17 774	Czech Republic
AVG Technologies UK Limited	6301720
Privax Limited	7207304
Privax Services (UK) Limited	08417876	United Kingdom
Norman Data Defense Systems (UK) Ltd.*	03360208
AVG VPN Technologies UK Limited*	09960966
TuneUp Software GmbH	HRB 101 364
AVG Technologies GER GmbH	HRB 51785	Germany
AVG Technologies USA, Inc	4964997	USA
Location Labs, Inc.	3255648
AVG Mobile Technologies Ltd*	514 310 986	Israel
AVG Ecommerce CY Limited	HE285123 (Cyprus)
	593 96 385	Cyprus
	(Netherlands)
AVG Technologies AU Pty Ltd	159 743 978	Australia
AVG Technologies Canada Inc.	BC0971717	Canada
AVG Distribuidora de Tecnologias do Brasil Ltda.	35.2.2873356-1	Brasil
AVG Technologies Norway AS	998527864	Norway
Norman Data Defense Systems AB	556276-6237	Sweden
Norman Data Defense Systems A/S	25839080	Denmark
AVG Technologies Switzerland AG	CH-270.3.002.417-2	Switzerland
AVG Distribution Switzerland AG	CH-170.3.034.593-2
Privax d.o.o Beograd	20848413	Serbia
Limited Liability Company '1337'	38935062	Ukraine
Privax Development (Malta) Limited	56362	Guernsey
AVG (Beijing) Internet Security Technologies Company
Limited*	D1110000450137642	China

^* In the process of liquidation

On 1 January 2016, AVG Technologies Holdings B.V. acquired the entire issued share capital of TuneUp Software.

In 2014 AVG Technologies USA, Inc. acquired 99.6% of the outstanding share capital of Location Labs, Inc. ("Location Labs") and 99.9% of the voting rights. In April 2016, Location Labs became a wholly owned subsidiary of AVG Technologies USA, Inc.

Safely Mobile, S.L. (100% subsidiary of Location Labs) was liquidated as of 11 March 2016.

2. BASIS OF PREPARATION

The historical financial information for the two years ended 31 December 2016 has been prepared specifically for the purposes of this prospectus and in accordance with the requirements of the Prospectus Directive (PD) Regulation and the UK Listing Rules, and in accordance with this basis of preparation. The accounting policies applied to the historical financial information are consistent with the accounting policies adopted in the historical financial information of Avast Group, included elsewhere in the prospectus.

The historical financial information of the Company has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"). This historical financial information does not represent statutory financial statements under the laws of the Netherlands or any other jurisdiction.

The historical financial information has been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair value, and are presented in USD. All values are rounded to the nearest 0.1 million (\$M), except where otherwise indicated.

The historical financial information has been prepared on a going concern basis. The merger with Avast Software B.V. in September 2017, the funding available to the Company and its successor, Avast Software B.V., and the business' forecast and projections have been considered, taking into account possible changes in trading performance. On this basis, the Company and its successor will be able to operate at adequate levels of both liquidity and capital for the foreseeable future. Consequently, the directors of the Company have a reasonable expectation that the Company and its successor has adequate resources to continue in operational existence for the foreseeable future.

3. BASIS OF CONSOLIDATION

The historical financial information is comprised of the consolidated statement of financial position of the Company and its subsidiaries as at 31 December 2015 and 2016, and the consolidated statements of profit and loss, comprehensive income, changes in equity and cash flows for the years ended 31 December 2015 and 31 December 2016.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies used in preparing the consolidated financial statements are set out below. These accounting policies have been consistently applied in all material respects to all periods presented.

Revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group based on a customer arrangement in place where the service or obligation has been provided, revenue can be reliably measured and collection is probable. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. Each contract is evaluated to determine whether the Group is the principal in the revenue arrangements.

Revenues from individual products and services are aggregated into the following categories:

Consumer

Direct

The principal revenue stream of the Group is derived from sales of its software and related services for desktop and mobile that protect users' security, online privacy and device performance. The Group mainly sells software licenses through direct sales (mainly through e-commerce services providers, including the Group's e-shop) to customers, however, sells a small proportion through indirect sales via the Group's retailers and resellers. Direct sales to customers are recognised at gross sale prices, before the deduction for transaction and other fees.

License agreements with customers contain a pre-defined subscription period during which the customer is entitled to the usage of the products, including updates and upgrades of the software. The Group sells software licenses for various periods, but mostly for a period of 1, 12, 24 or 36 months with payment received at the beginning of the license term. Revenues are recognised ratably over the subscription period covered by the agreement. The portion of deferred revenues that will be recognised within 12 months following the balance sheet date is classified as current, and the remaining balance is classified as non-current. The Group also sells a small amount of perpetual licenses, which includes free maintenance and support services (which include the right to bug fixes, but excludes the right to receive unspecified upgrades/enhancements of the Group's product on a when-and-if-available basis), for which the fair value of undelivered elements cannot be determined. The revenue is recognised from the arrangement ratably over the expected term for providing maintenance and support services. Some of the Group's products can be used on a one-time basis (VPN and Utilities), in which case sales are recognised immediately as revenue.

Location Labs develops mobile security solutions and partners with Mobile Network Operators ("MNOs") to provide locator, phone controls and drive safe products to their customers. The revenues generated by these arrangements are based on revenue share percentages as stated in the MNO agreements. Revenue is recognised on a net basis, after deduction of partners commissions, based on the delivery of monthly services.

The Group also provides premium support services via arrangements with third parties. The Group recognises revenue net of providers fees when the service is outsourced and no deferral is made as the Group has no performance obligations after the date of sale. The Group also sells a limited amount of physical CDs through its distributors which then sell the Group's products (Internet Security and Antivirus Software) to retail stores. The retail revenue is recognised on a gross basis, before the deduction of distributors commissions, ratably over the subscription period. The Group reduces revenue for estimated sales returns. End users may return the Group's products, subject to varying limitations, through resellers or to the Group directly for refund within a reasonably short period from the date of purchase. The Group estimates and records provisions for sales returns based on historical experience.

Indirect

Consumer indirect revenues arise from several products and distribution arrangements which represent the monetisation of the user base. The most significant sources of revenues are:

Platform revenue—The Group has search agreements with multiple providers, pursuant to which the Group receives fees in exchange for directing its active users' search queries to certain search engines. Amounts earned from search providers are reflected as revenue in the period in which the search queries are performed as the Group has no further performance obligation after the date of sale.
Advertising—Other Consumer Indirect derived revenues are comprised of advertising fees and product fees. Advertising fees are earned through advertising arrangements the Group has with third parties, whereby the third party is obligated to pay the Group a portion of the revenue they earn from advertisements to the Group's end users. Amounts earned are reflected as revenue in the month the advertisement is delivered to the end user. The Group also receives product fees earned through

arrangements with third parties, whereby the Group incorporates the content and functionality of the third party into the Group's product offerings. Fees earned during a period are based on the number of active clients with the installed third party content or functionality multiplied by the applicable client fee.

SMB

SMB includes subscription revenue targeted at small and medium-sized businesses ("SMB"). Revenue is generated through the sale of security software, both on-premise and cloud-based. In addition, the Group sells IT management solutions (including CloudCare and AVG Managed Workplace). SMB customers typically purchase the Group's products through partners and MSPs that support SMB clients as well as through direct online sales from the Group's websites. Direct online sales to SMBs are mainly made to small office or home office customers (i.e., businesses with one to ten workers) and to educational institutions (e.g., universities). SMB subscription revenues are recognised ratably over the term of the subscription in the same way as consumer subscription revenues, commencing in the month in which the SMB customer entered into the subscription agreement. Revenues from sales of Cloudcare and AVG Managed Workplace are recognised on a gross basis, before the deduction of the gateways fees, ratably over the subscription period covered by the agreement.

Cost of revenues

Expenses directly connected with the sale of products and the provision of services are recognised as cost of revenues. Costs which are not incremental to the sale of an additional product or service or that are not directly connected to the sale of products or provision of services are classified as operating costs.

Deferral of expenses

Expenditures such as rental payments, insurance and marketing expenditures and other purchased services which relate to multiple accounting periods are deferred and recognised over those accounting periods irrespective of the timing of the consideration given or liability incurred. The basis for the allocation of the expenses is assessed individually to reflect the nature of the expenditure.

Expenses directly connected with the sale of the antivirus software, such as software licensed from third parties which are bundled together with the Company's proprietary software, are deferred and recognised ratably over the subscription period of the individual license to which they relate. Accordingly, the revenue and compensation paid to third parties is deferred over the same period for each individual license.

Taxes

Current income tax

Deferred tax liabilities are recognised for all temporary differences, except:

where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect to deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised 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 utilised.

Foreign currency translation

The Group's consolidated financial statements are presented in USD. The functional currencies of all Group entities are presented in the table below. Each entity in the Group (including branch offices not representing incorporated entities) determines its own functional currency, and items included in the financial statements of each entity are measured using that functional currency. For the purposes of inclusion in the consolidated financial statements, the statement of financial position of entities with non-USD functional currencies are translated into USD at the exchange rates prevailing at the balance sheet date and the income statements are translated at the average exchange rate for each month of the relevant year. The resulting net translation difference is recorded in Other comprehensive income.

The Group's entities with non-USD functional currencies are listed below:

Company or branch	Functional
Norman Data Defense Systems B.V	EUR
AVG Technologies CZ, s.r.o.	CZK
AVG Technologies UK Limited	GBP
AVG Technologies FRA, SAS	EUR
AVG (Beijing) Internet Security Technologies Company Limited	CNY
AVG Mobile Technologies Ltd	ILS
TuneUp Software GmbH	EUR
AVG Distribution Switzerland AG	CHF
AVG Technologies AU Pty Ltd	AUD
AVG Technologies Canada Inc.	CAD
AVG Distribuidora de Tecnologias do Brasil Ltda.	BRL
AVG Technologies Norway AS	NOK
Norman Data Defense Systems AB	SEK
Norman Data Defense Systems A/S	DKK
AVG Technologies Deutschland GmbH	EUR
AVG Technologies Switzerland AG	CHF
Privax d.o.o Beograd	RSD

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at the acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in Administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. It is then considered in the determination of goodwill.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement is measured at fair value with changes in fair value recognised in profit or loss. Contingent consideration that is classified as equity is not re-measured and subsequent settlement is accounted for within equity.

Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in business combination is their fair value as at the date of acquisition.

Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with finite lives are amortised over their useful economic life, generally between two and five years, and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible assets.

The useful economic lives of intangible assets are as follows:

	Years
Software	2-5
Customer relationships and user base	2-7
Trademarks and patents	8-14
Developed technology	3-5
Indefinite-lived trade names and other intangibles	indefinite

Research and development costs

Research costs are expensed when incurred if the criteria for capitalisation are not met. Development expenditures are recognised as an intangible asset when the Group can demonstrate:

the technical feasibility of completing the intangible asset so that the asset will be available for use or sale;
its intention to complete and its ability and intention to use or sell the asset;
how the asset will generate future economic benefits;
the availability of resources to complete the asset; and
the ability to measure reliably the expenditure during development.

Trademarks and domains

Group's trademarks and domains are assessed as having indefinite and definite useful lives. Indefinite lived intangibles are not amortised but are tested for impairment annually and for impairment indicators on a quarterly basis. The assessment of indefinite life is reviewed annually to determine whether the indefinite life assumption continues to be appropriate. Definite lived intangibles are amortised over the estimated useful life.

Goodwill

Goodwill is assessed as having an indefinite useful life and is tested for impairment annually and for impairment indicators on a quarterly basis.

Gains or losses arising from the de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is de-recognised.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.

Ordinary repairs and maintenance costs are charged to the income statement during the accounting period during which they are incurred.

Depreciation is recorded on a straight-line basis over the estimated useful life of an asset, as follows:

	Years
Leasehold improvements	over the lease term
Machinery and equipment	2-5
Vehicles	4-5

Impairment

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's ("CGU") fair value less costs of disposal or its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. The reversal is limited so that the carrying amount of the asset does not exceed the lesser of its recoverable amount or the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement.

Goodwill and intangible assets with indefinite useful lives are tested for impairment annually in the fourth quarter, either individually or at the cash-generating unit level, as appropriate and when circumstances indicate that the carrying value may be impaired.

Leases

Operating leases

Leases where the lessee does not obtain substantially all the risks and rewards of the ownership of the asset are classified as operating leases. Operating lease payments, other than contingent rentals, are recognised as an expense in the income statement on a straight-line basis over the lease term.

Finance leases

Leases which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item are classified as finance leases and are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and a reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as finance expenses in the consolidated statement of profit and loss.

Employee stock option plans

Employees of the Group receive remuneration in the form of share-based payment transactions whereby employees render services as consideration for equity instruments (equity-settled transactions).

Equity-settled transactions

The cost of equity-settled transactions is determined by fair value at the date where the grants is made using an appropriate valuation model. The cost is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in compensation expense.

When the terms of an equity-settled transaction are modified, whereby the modification increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification, an additional expense is recognised. When an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award. The dilutive effect of outstanding options is reflected in the computation of diluted earnings per share.

Cash-settled transactions

Where the Group settles the employee's tax withholding liability using its own cash, the award is bifurcated between a cash-settled portion and an equity-settled portion. The portion of the award relating to the estimated tax payment is treated as a cash-settled award and marked-to-market in each period end until settlement of the actual tax liability. The remaining portion is treated as an equity settled award.

Employee benefits

Pension obligations

Contributions are made to the Government's health, retirement benefit and unemployment plan at statutory rates applicable during the period and are based on gross salary payments. The arrangements of the Czech Government's health, retirement benefit and unemployment plans qualify as defined contribution plans. The Group has no further payment obligations once the contributions have been paid. The expense for the contributions is charged to profit or loss in the same period as the related salary expense. As a benefit for employees, the Group also makes contributions to defined contribution schemes operated by external (third party) pension companies. These contributions are charged to profit or loss in the period to which the contributions relate.

Defined contribution plans

Defined benefit plan

The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. The current service cost of the defined benefit plan, recognised in the income statement in employee benefit expense reflects the increase in the defined benefit obligation resulting from employee service in the current year.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the income statement.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity and are reflected in Other comprehensive income in the period in which they arise.

Redundancy and termination benefits

Key management personnel

The Group discloses the total remuneration of key management personnel ("KMP") as required by IAS 24 – Related party disclosures. The Group includes within KMP all individuals (and their family members, if applicable) who have authority and responsibility for planning, directing and controlling the activities of the Group. KMP include all members of the Management Board and Supervisory Board and the senior executives of the Group. See Note 31.

Financial instruments

Level 1 Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and
Level 3 Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

Trade and other receivables

Trade receivables are carried at the original invoice amount, including value-added tax and other sales taxes, less an allowance for doubtful receivables. Trade receivables are deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. An allowance is recorded based on the best available estimate of expected losses.

Bad debts are written off in the period in which they are determined to be completely unrecoverable.

Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and shortterm deposits with a maturity of three months or less.

For the purpose of the Consolidated statement of cash flows, cash and cash equivalents consist of cash and shortterm deposits as defined above.

The cash flow statement of the Group is prepared based on the indirect method from the Consolidated statement of financial position and the Consolidated statement of comprehensive income.

Available-for-sale investments

After initial measurement, available-for-sale investments are subsequently measured at fair value with unrealised gains or losses recognised as Other comprehensive income in the Consolidated statement of comprehensive income until the investment is derecognised, at which time the cumulative gain or loss is recognised in profit or loss, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for-sale reserve (in equity) to profit or loss.

At each reporting date, the Group assesses whether there is objective evidence that an available-for-sale investment is impaired. Objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost.

Pledged or restricted assets

Financial assets transferred to third parties as collateral, assets that are pledged and assets as to which the Group has otherwise restricted dispositions are classified as other long-term receivables, if the period until which the restriction ends or return of the assets in question will take place is more than 12 months from the balance sheet date.

Redeemable equity instrument

Financial instruments which contain an obligation for the Group to purchase the minority share in its subsidiary for cash or another financial asset give rise to a financial liability for the present value of the redemption amount. If the contract expires without delivery, the carrying amount of the financial liability is reclassified to equity.

Trade and other payables

Trade payables are recognised at their nominal value which is deemed to be materially the same as the fair value.

Loans and debt

Loans and debt are initially recognised at their fair value, net of direct costs which are accrued and released to financial expenses on a time-based basis using the effective interest rate method. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included as finance income in the income statement.

De-recognition of financial instruments

A financial asset or liability is generally de-recognised when the contract that gives right to it is settled, sold, cancelled or expires.

Derivative financial instruments

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

The embedded derivatives are separately valued upon inception and at each balance sheet date using an appropriate valuation model, with the changes in fair value recognised in profit or loss.

Committed repurchase of own shares

The conditional commitments to repurchase own shares are recognised as a financial liability and measured at the present value of the redemption amount, i.e. the amount of the conditional purchase obligation under the share repurchase contract at the beginning of the non-cancelable period. Any changes of redemption amount during the non-cancelable period are recognised in Comprehensive income.

Treasury shares

Treasury shares refer to the Group's own outstanding shares that were reacquired by the Group. Treasury shares that were repurchased for purposes other than retirement, or whose ultimate disposition has not yet been decided, are recognised at cost and deducted from shareholders' equity. When treasury shares are reissued, proceeds in excess of cost are credited to Distributions in excess of capital. Any deficiency is charged to Retained earnings. Any ordinary shares that the Group holds in its own capital may not be used for voting and no dividends are allocated to the treasury shares.

Provisions

Restructuring provisions

Operating profit

Operating profit is defined as profit before financial results and taxes and represents profit from business operations.

Underlying operating profit

Underlying operating profit is defined as operating profit less share based payments, exceptional items and amortisation of intangible assets acquired through business combinations.

Financial income and expenses, net

Exceptional items

Exceptional items are material and non-recurring items of income and expense which management believes should be separately disclosed to show the underlying business performance of the Group more accurately. Such items are separately disclosed on the face of the Consolidated statement of profit and loss and in the notes to the consolidated financial statements. Examples of such items include acquisition, integration, restructuring and accelerated share-based compensation due to change in control costs.

Segment reporting

The Group has applied the criteria set by IFRS 8—Operating Segments to determine the number and type of operating segments. Based on the nature of the business and how the business is managed, two operating segments have been identified: Consumer and SMB.

The Group evaluates the performance of its segments based primarily on revenue and underlying operating profit, the latter of which was introduced as a performance measure from 1 November 2017. The total segment underlying profit is derived from underlying revenues and decreased by cost of revenues and operating costs directly attributable to the relevant segment. Underlying revenues represent revenues adjusted for business combination accounting (revenues recognised by the acquiree from the beginning of the year until the acquisition date and the effects of the fair value revaluation of the acquiree's pre-acquisition deferred revenues). Any costs incurred that are directly applicable to the segments are allocated to the appropriate segment. Certain costs that are not directly applicable to the segments are identified as "Corporate Overhead" costs and represent general corporate costs that are applicable to the consolidated group. However, due to the acquisition, the Group decided to centralise some relevant costs unlike in previous years. Corporate overhead still includes administrative overheads such as IT, HR, Finance, Central Marketing, and Legal but also rentals and utilities that are no longer allocated to the revenue generating business unit. In addition, costs relating to share-based payments and exceptional items are not allocated to the segments since these costs are not directly applicable to the segments, and therefore not included in the evaluation of performance of the segments.

The principal products and services offered by each segment are summarised below:

Consumer—The Group's consumer products include direct revenue streams through its offerings for desktop security, server protection and mobile device protection and consist of free and premium paid products for the individual consumer market. The Group also has several value-added solutions for performance, privacy and other tools. The Group also focuses on monetising user base indirectly, via dynamic secure search solution, including our browser toolbar, which gives users a convenient way to access a search engine at any time.

SMB—The Group's SMB segment focuses on delivering high-level security and managed protection solutions for Small and Medium sized business customers.

Correction of prior period information

The year ended 31 December 2015 has been restated to reflect the reversal of revenue which should have been recorded in the year ending 31 December 2014. The impact of this out of period correction was a decrease of revenue of \$2.5 million and a corresponding decrease in tax expense of \$0.6 million.

5. BUSINESS COMBINATIONS IN 2015

Acquisition of the business of Privax Ltd.

On 5 May 2015, the Company completed the acquisition of all of the outstanding shares of Privax Ltd. ("Privax"), a leading global provider of desktop and mobile privacy services for consumers. The acquisition of Privax added to the existing portfolio of security software and services available to the Company's customer base. Supplemental pro forma information for Privax was not material to the Company's financial results and was therefore not included. AVG incurred acquisition-related transaction costs of \$2.0 million which were recorded in General and administrative expenses in 2015.

Under IFRS 3, the transaction represents a business combination with AVG Technologies UK Limited being the acquirer. The acquisition date was determined to be 5 May 2015.

The fair value of the consideration at the acquisition date was determined by the Group to be \$61.6 million and comprises of the following components:

Initial payment—on the acquisition date \$35.9 million was paid to the owners.
Deferred payment—Consists of \$9.0 million cash held in escrow, which had a fair value of \$8.4 million on the date of acquisition, reported on the face of the consolidated balance sheet in current other financial assets; and
Earn-out payment—the acquisition date fair value of the following additional cash consideration to be measured and expected to be paid in the third quarter of 2016 upon the achievement of the following:
payments of \$10.0 million upon the achievement of certain product and integration milestones; and
payments of \$10.0 million upon the achievement of certain performance-based targets relating to future product sales.

The pay outs were independent of one another and, as of acquisition date, were expected to be fully achieved. As of the acquisition date, the probability weighted discounted present value was \$17.3 million. The contingent consideration was remeasured at 31 December 2015, including the updated expectation based on events after the acquisition. The change in fair value is recognised in the Consolidated statement of profit loss and resulted in a \$9.4 million gain. This gain is included in acquisition costs and presented as an exceptional item in the Consolidated statement of profit loss. Please refer to Note 10.

The fair value of assets acquired and liabilities incurred on the acquisition date was determined on final basis as follows (\$M):

	Carrying value 5 May 2015	Fair value 5 May 2015
ASSETS
Cash and cash equivalents	4.4	4.4
Trade and other accounts receivables	1.1	1.1
Property, plant and equipment	0.3	0.3
Other assets acquired	2.0	2.0
Intangible assets	2.2	18.4
Goodwill	0.1	—
TOTAL ASSETS	10.1	26.2
LIABILITIES
Deferred revenue	7.1	4.4
Other liabilites	1.8	1.8
Deferred tax liability	—	5.5
TOTAL LIABILITIES	8.9	11.7

NET ASSETS	1.2	14.5
TOTAL CONSIDERATION GIVEN		61.6
GOODWILL RECORDED(1)		47.1

⁽¹⁾ The goodwill primarily represents the Company's expectation of synergies from the integration of Privax products with the Company's existing solutions and is allocated to the Company's Consumer segment. The balance of goodwill is not expected to be deductible for tax purposes.

The business combination resulted in the recognition of the following intangible assets:

	Estimated fair values	Useful lives (years)
Trademarks	3.8	8
Developed technology	6.2	3
Customer relationships	8.4	2
Total intangible assets(2)	18.4

⁽²⁾ Amortisation for developed technology is recognised in Cost of revenues. Amortisation for trademarks and customer relationships is recognised in Sales and marketing.

Acquisition of certain assets of Flayvr Media Ltd.

On 6 October 2015, the Company acquired certain assets of Flayvr Media Ltd. ("Flayvr") in an asset purchase agreement designed to consolidate its current presence in the mobile market. The acquisition is accounted for as a business combination. The total consideration of the purchase agreement consists of two components to be paid in cash: (i) consideration of approximately \$3.0 million, and (ii) earn-out payments in the amount of up to \$2.4 million which is dependent on the achievement of certain performance metrics, subsequent to the acquisition. Supplemental pro forma information for Flayvr was not material to the Company's financial results and was therefore not included. The Company incurred acquisition-related transaction costs of \$0.2 million which were recorded in General and administrative expenses in 2015.

Under IFRS 3, the transaction represents a business combination with AVG Netherlands B.V., AVG Ecommerce CY Limited and AVG Mobile Technologies Ltd. being the acquirers. The acquisition date was determined to be 6 October 2015.

The fair value of the consideration at the acquisition date was determined by the Group to be \$4.1 million and comprises of the following components:

Initial payment—on the acquisition date \$2.5 million was paid to the owners.
Deferred payment—the purchase consideration with an acquisition date fair value of \$0.5 million was deferred for a period of 24 months after the acquisition date and serves as security for the indemnification obligations of the selling shareholders.
Earn-out payments—The acquisition date fair value of the following additional cash consideration was \$1.1 million and was remeasured until the expected payment date in the last quarter of 2016, upon the achievement of the following:
payment of \$0.4 million upon the achievement of certain integration milestones; and
payment of \$0.8 million upon the achievement of certain performance-based targets relating to future product sales.

Pay outs are exclusive of one another and were fully achieved.

The fair value of assets acquired and liabilities incurred on the acquisition date was determined on a final basis as follows (\$M):

	Carrying value 6 October 2015	Fair value 6 October 2015
ASSETS
Intangible assets(1)	—	1.5
Deferred tax	—	0.2
TOTAL ASSETS	—	1.7
NET ASSETS	—	1.7
TOTAL CONSIDERATION GIVEN		4.1
GOODWILL RECORDED(2)		2.4

(1) Intangible assets consist of developed technology, which is amortised over the estimated useful life of 3 years.
(2) The goodwill primarily resulted from the Company's expectation of synergies from the integration of Flayvr technology with the Company's existing solutions and is allocated to the Company's Consumer segment. The balance of goodwill is not expected to be deductible for tax purposes.

At the time of acquisition, the Company also entered into employment agreements with certain employees of Flayvr. The employee agreements included an incentive compensation arrangement for these employees for up to a maximum of \$1.1 million of payments contingent upon these employees providing continued service to the Company and achieving certain technical milestones over twenty-four months after the acquisition date. Such payments are accounted for as compensation expense in the periods incurred. During the years ended 31 December 2015 and 31 December 2016, the Company recorded compensation expenses of \$0.6 million and \$0.2 million, respectively, which were recorded in Research and development expenses.

6. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

In the process of applying the Group's accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the consolidated financial statements:

Development costs

The decision of whether to capitalise costs incurred in developing assets that will have a useful economic life exceeding one year is based on management's judgment as to whether the technological and economic feasibility are confirmed. When determining the amounts to be capitalised, management makes assumptions about future cash flows, the discount rate and the useful economic life of capitalised intangibles. The Group evaluates its development costs for capitalisation for individual business units and projects. During the year ended 31 December 2015 and 2016, costs of USD 3.9 million and USD 5.3 million, respectively, were capitalised as the criteria for capitalisation were met.

Share-based payment transaction

determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the fair value of the shares, the expected term of the share option, volatility and dividend yield. The assumptions and models used for estimation of the fair value for share-based payment transactions are described in Note 31.

Where the Group settles the employee's tax withholding liability using its own cash, the award is bifurcated between a cash-settled portion and an equity-settled portion. The portion of the award relating to the estimated tax payment is treated as a cash-settled award and marked-to-market in at each period end until settlement of the actual tax liability. The remaining portion is treated as an equity settled award. Changes in the estimate of the tax withholding percentage will affect the liability and cost.

Functional currency

The Group's consolidated financial statements are presented in USD, which is also the functional currency of numerous Group entities (please refer to Note 4). For each entity, the Group determines the functional currency based on the denomination of their primary operations.

Gross versus net revenue accounting

Each contract is evaluated to determine whether the Group is the principal in the revenue arrangement. When the Group concludes that it has a control over the revenue arrangement, revenues are recognised on a gross basis, otherwise revenues are recognised net of resellers' commissions and fees.

The Group sells subscription software licenses through an e-shop directly to end customers in cooperation with certain payment gateway providers. Revenue from sales through the e-shop are accounted for on gross basis before deduction transaction and other fees. The Group sets the final retail prices and fully controls the revenue arrangement with the end customers.

The Group also sells subscription software licenses through certain resellers. Revenues from sales through resellers are accounted for on a gross basis. The Group sets the final retail prices and controls the promised good or service before transferring that good or service to the customer.

Consumer Indirect arrangements are accounted for on a net basis in an amount corresponding to the fee the Group receives from the monetisation arrangement.

Sales of third-party solutions and premium support services are accounted for gross of the costs from the third party providing the product or service to the end customer. The Group sets the final retail prices and fully controls the revenue arrangement with the end customers.

The Group partnered with Mobile Network Operators ("MNOs") providing various products of Location Labs (please refer to Note 5). The Group is entitled to certain revenue share on their sales, which is recognised by the Group net of partners' commissions as the MNO partners have full discretion to set the final price and the Group has no material incremental costs from the provision of the service or product to the end customer after the moment of sale.

Interest payments

Fees paid in connection with the arrangement of the term loan entered into on15 October 2014 were being amortised to profit and loss over the original term of the facility using the effective interest method. Due to the floating rate nature of the loan, changes in the effective interest rate are accounted for prospectively from the moment the change in estimate takes place. The loan was extinguished on 30 September 2016 and the remaining unrecognised fees of \$8.5 million were recognised.

Impairment testing

Significant management judgment and estimates are required to determine the individual cash generating units ("CGUs") of the Group, the allocation of assets to these CGUs and determination of the value in use or fair value less cost to sell of these individual assets. Management has concluded that the reporting segments used for segment reporting correspond to groups of CGUs at which goodwill is tested for impairment. To determine the value in use management uses the discounted cash flow model which requires estimating the future financial results and an appropriate discount rate. Please refer to Note 22.

Business combinations and initial recognition of assets and liabilities

The Company accounts for acquisitions of entities that include inputs and processes and has the ability to create outputs as business combinations. The purchase price of the acquisition is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition dates. The excess of the purchase price over those fair values is recorded as goodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of profit and loss.

Accounting for business combinations requires significant estimates and assumptions at the acquisition date, including estimated fair value of acquired intangible assets, estimated income tax assets and liabilities assumed, and determination of the fair value of contractual obligations, where applicable. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users and customers, acquired technology, and trade names from a market participant perspective, useful lives, and discount rates. Although management believe the assumptions and estimates made in the past have been reasonable and appropriate, these estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

For an overview of the assets and their valuation basis, please refer to Note 5.

Deferred tax

7. ADOPTION OF NEW AND REVISED STANDARDS

Standards that have not been adopted

The Group has not applied the following new or revised standards and interpretations that have been issued, but are not yet effective:

IAS 7 Disclosure Initiative – Amendments to IAS 7

The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). On initial application of the amendment, entities are not required to provide comparative information for preceding periods. The standard is effective for annual periods beginning on or after 1 January 2017. Early application is permitted. There is no significant impact from the implementation of this standard except for additional disclosures.

IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses-Amendments to IAS 12

The IASB issued amendments to IAS 12 – Income Taxes to clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value. The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. The standard is effective for annual periods beginning on or after 1 January 2017. Early application is permitted. If an entity applies the amendments for an earlier period, it must disclose that fact. There is no significant impact from the implementation of this standard.

IFRS 9 Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement,

impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before 1 February 2015. The Group did not adopt this standard early. There is no significant impact from the implementation of this standard.

IFRS 15 Revenue from Contracts with Customers

The Group decided to apply modified retrospective method of the adoption under which IFRS 15 requires restatement of those contracts which are not completed as at the date of adoption. The Group performed an analysis of these contracts and concluded that the impact of adoption has no material impact on the Group's consolidated financial statements.

IFRS 2 Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2

The IASB issued amendments to IFRS 2 – Share-based Payments in relation to the classification and measurement of share-based payment transactions. The amendments address three main areas: (1) the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction, (2) the classification of a share-based payment transaction with net settlement features for withholding tax obligations, (3) the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled. IFRS 2 is effective for annual periods beginning on or after 1 January 2018. No significant impact from the implementation of this standard is expected by the Group.

IFRS 16 Leases

On 13 January 2016, IASB issued new standard that sets out the principles for the recognition, measurement, presentation and disclosure of leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessor accounting is substantially unchanged. The standard applies to annual reporting periods beginning on or after 1 January 2019. The Group will not apply the standard early. Adoption of IFRS 16 will result in an increase of the Group's assets and liabilities due to the recognition of the lease contracts within the statement of financial position, increase in amortisation and depreciation and interest expense and decrease of operating costs in the statement of comprehensive income. The exact quantification of these changes has not yet been completed. See an overview of operating lease expenses in Note 33.

8. SEGMENT INFORMATION AND OTHER DISCLOSURES

The Group has two segments, Consumer and SMB, which reflects how the Group's operations are managed, how operating performance within the Group is evaluated by management and the structure of its internal financial reporting.

Billings are one of the key metrics used to evaluate and manage operating segments. Billings represent the full value of products and services delivered under an agreement, and include sales to new end customers plus renewals and additional sales to existing end customers. Under the subscription model, end customers pay the Group for the entire amount of the subscription in cash upfront upon initial delivery of the applicable products. Although the cash is paid up front, under IFRS, subscription revenue is deferred and recognised ratably over the life of the subscription agreement, whereas non-subscription revenue is typically recognised immediately.

Billings are not defined or recognised under IFRS and considered as non-IFRS financial measure used to evaluate current business performance.

The management of the Group reviews financial information that is principally the same as that based on the accounting policies described in Note 5. Management also reviews segment underlying operating profit. Total segment underlying profit is derived from underlying revenues and decreased by cost of revenues and operating costs directly attributable to the relevant segment.

The following tables present summarised information by segment reconciled from the segment underlying operating profit to consolidated operating profit (segment costs are net of depreciation and amortisation, Sharebased payments, exceptional items and corporate overhead costs):

For the year ended 31 December 2015 (\$ M)	Consumer	SMB	Total
Billings	360.9	63.1	424.0
Net deferral of revenue	1.0	0.8	1.8
Segment revenue	361.9	63.9	425.8
Segment cost of revenues	(30.0)	(3.8)	(33.8)
Segment sales and marketing costs	(50.5)	(27.7)	(78.2)
Segment research and development costs	(44.1)	(10.3)	(54.4)
Total segment underlying operating profit	237.3	22.1	259.4
Corporate overhead			(111.5)
Depreciation and amortisation(1)			(46.3)
Exceptional items			(9.0)
Share-based payments			(15.3)
Consolidated operating profit			77.3

(1) Excludes \$2.8 million of accelerated amortisation of capitalised research and development costs included in exceptional item

For the year ended 31 December 2016 (\$ M)	Consumer	SMB	Total
Billings Deferral of revenue	352.5 5.6	53.4 7.1	405.9 12.7
Segment revenue	358.1	60.5	418.6
Segment cost of revenues	(40.3)	(9.4)	(49.7)
Segment sales and marketing costs	(42.6)	(21.4)	(64.0)
Segment research and development costs	(38.4)	(9.8)	(48.2)
Total segment underlying profit	236.8	19.9	256.7
Corporate overhead			(107.9)
Depreciation and amortisation			(47.3)
Exceptional items			(86.9)
Share-based payments			(14.8)
Consolidated operating profit			(0.2)

Corporate overhead costs primarily include costs of the Group's IT, HR, finance and central marketing functions and legal and rent costs, which are not allocated to the individual segments.

The following table represents depreciation and amortisation by segment:

Total depreciation and amortisation	(49.1)	(47.4)
Corporate overhead	(23.4)	(26.8)
SMB	(7.4)	(6.4)
Consumer	(18.3)	(14.2)
(\$ M)	2015	2016

The following table represents goodwill by segment:

(\$ M)	31 December 2015	31 December 2016
Consumer	269.9	270.1
SMB	26.9	27.0
Total goodwill	296.8	297.1

The table below lists the Group's non-current assets, net of accumulated depreciation and amortisation, by country. Non-current assets for this purpose consist of property and equipment and intangible assets.

	31 December 2015		31 December 2016
	(\$ M)	(in %)	(\$ M)	(in %)
United States	69.3	53.7%	59.2	59.1%
Netherlands	20.3	15.7%	18.3	18.3%
Czech Republic	12.4	9.6%	9.3	9.3%
United Kingdom	9.3	7.2%	5.1	5.1%
Other countries*	17.9	13.8%	8.3	8.2%
Total	129.2	100.0% 100.2		100.0%

^* No individual country represented more than 5% of the respective totals.

The following table represents revenue attributed to countries based on the location of the end user:

	2015		2016
	(\$ M)	(in %)	(\$ M)	(in %)
United States	231.5	54.4%	226.7	54.1%
United Kingdom	58.5	13.7%	50.6	12.1%
Other foreign countries*	135.8	31.9%	141.3	33.8%
Total	425.8	100.0% 418.6		100.0%

^* No individual country represented more than 5% of the respective totals.

Revenues from relationships with certain third parties exceeding 10% of the Group's total revenues were as follows:

(\$ M)	2015	2016
Revenues from distribution arrangements:
Yahoo!	63.7	49.7

9. ALTERNATIVE PERFORMANCE MEASURES

Underlying operating profit, Underlying EBITDA, Underlying Net Income and Underlying Cash EBITDA

To supplement its consolidated financial statements, which are prepared and presented in accordance with IFRS, the Group uses the following non-GAAP financial measures that are not defined or recognised under IFRS: Underlying operating profit, Underlying earnings before interest, taxation, depreciation and amortisation ("Underlying EBITDA"), Underlying Net Income and Underlying Cash EBITDA.

Underlying operating profit, Underlying EBITDA, Underlying profit and Underlying Cash EBITDA provide supplemental measures of earnings that facilitates review of operating performance on a year-over-year basis by excluding non-recurring and other items that are not indicative of the Group's underlying operating performance.

Underlying EBITDA is defined as the Group's operating loss/profit before: (i) depreciation and amortisation charges; (ii) the impact from business combination accounting; (iii) share-based compensation expenses; and (iv) exceptional items.

Underlying operating profit is defined as the Group's operating loss/profit before: (i) amortisation charges of intangible assets recognised as part of a business combinations; (ii) share-based compensation expenses; and (iii) exceptional items.

(\$ M)	2015	2016
Operating profit	77.3	(0.2)
Share-based compensation	15.3	14.8
Exceptional items	9.0	86.9
Amortisation of intangible assets acquired through business
combinations	31.0	30.1
Underlying operating profit	132.6	131.6
Depreciation and Amortisation	15.3	17.1
Underlying EBITDA	147.9	148.7

Underlying Net Income represents profit for the financial year plus the effect of share-based compensation, exceptional items, amortisation of intangible assets recognised as part of business combinations, accelerated recognition of capitalised arrangement fees as a result of early extinguishment of term and the tax impact of the foregoing adjusting items. Management believes that Underlying Net Income is an appropriate supplemental measure that provides useful information to the Group and investors about the Group's underlying business performance. The tax impact of adjusted items has been calculated by applying the tax rate that the Group determined to be applicable to the relevant item.

(\$ M)	2015	2016
Profit for the year	49.2	(28.4)
Share-based compensation	15.3	14.8
Exceptional items	9.0	86.9
Amortisation of acquisition intangible assets through business combinations	31.0	30.1
Accelerated recognition of capitalised arrangement fees as a result of early extinguishment of
term loan	—	8.5
Tax impact on adjusted items	(15.5)	(30.8)
Underlying Net Income	89.0	81.1

Cash earnings before interest, taxation, depreciation and amortisation ("Underlying Cash EBITDA") is defined as Underlying EBITDA plus the increase in deferred revenue (net of impact from foreign exchange and business combination accounting) less the net increase in prepaid expenses related to cost of goods sold.

(\$ M)	2015	2016
Underlying EBITDA	147.9	148.7
Net change in deferred revenue including FX re-translations	(1.8)	(12.7)
Prepaid expenses—cost of goods sold	(5.5)	(1.6)
Underlying Cash EBITDA	140.6	134.4

10. EXCEPTIONAL ITEMS

The following table sets forth the exceptional items recognised in our Consolidated Statement of Profit and Loss:

(\$ M)	2015	2016
Cost of revenues	0.3	2.0
Sales and marketing	6.5	17.8
Research and development	3.6	13.2
General and administration	(1.4)	53.9
Total	9.0	86.9

Exceptional items consist of the following activities:

(\$ M)	2015	2016
Acquisition related costs	0.7	23.9
Integration costs	—	23.3
Restructuring	3.3	4.3
Litigation	2.2	7.7
Accelerated amortisation of capitalised research and development project	2.8	0.1
IT Transformation	—	5.4
Accelerated recognition of share-based payments	—	22.2
Total	9.0	86.9

Acquisition related costs

Non-recurring costs directly relating to business combinations are presented as an exceptional item. Costs include advisor fees, fair value changes on contingent consideration and compensation related items that are not related to termination benefits, such as retention compensation arrangements. Included in 2015 is a \$9.4 million gain from the change in the fair value of contingent consideration.

Integration costs

Non-recurring costs directly related to the integration activities and initiatives implemented by the Company after the acquisition by the Avast Group. These costs primarily consist of restructuring activities, including severance payments and retention bonuses, professional fees in association with the integration activities, and IT and office related costs. Of these costs, \$21.3 million are retention and severance payments in 2016.

Restructuring

The Company implemented several cost and structural rationalisation programmes to manage its cost base in the light of changing market conditions and demand for its products. As part of this rationalisation, the Company reduced and restructured its workforce and has also reduced the number of its global offices.

Litigation

These costs are related to litigation and settlement claims that were settled in 2015. In 2016, a provision of \$7.7 million was created for a claim that was settled in 2017. Please refer to Note 23.

Capitalised research and development projects

In 2015, the Company reassessed the useful life of its capitalised research and development costs and concluded that the useful life needed to be reduced. As a result, the cumulative impact of \$2.8 million of amortisation expense was recognised. In 2016, this same project was reassessed and impaired.

IT Transformation

The Company invested in an initiative to transform its global IT infrastructure and IT environment. The initiative was to replace the many on-premise, in-house developed and maintained systems with a hybrid cloud infrastructure based on several foundational applications. The initiative intended to bring efficiency, scalability and more control over the Company. The systems being replaced included organisational, operational and financial systems, including but not limited to the Company's e-shop, content management systems, marketing campaigns, financial reporting, employment management, contract and vendor management and customer relationship management. The costs related to the design, testing and implementation, including the costs of consultants and advisors, of the new infrastructure are regarded as exceptional and do not represent the on-going operations of the business. These costs are incremental to the normal IT investments made on an annual basis.

Accelerated recognition of share-based payments

As a result of the acquisition of the Company by the Avast Group, the accelerated vesting clauses of certain previously granted restricted stock units (RSUs) and options were triggered, resulting in the immediate

recognition of any expense not yet recognised. In addition, equity-settled awards that were not vested were cancelled. Cancelled awards are treated as if they had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately.

11. COST OF REVENUES

Costs of revenues include the amortisation of assets recognised in a business combination (refer to Note 13) as well as leased assets, digital content distribution costs (including rental cost of servers), customer support and maintenance costs relating to the installation and operation of our products and costs of daily virus updates provided to users and license fees paid to third parties.

Cost of revenues (\$ M):

	2015	2016
Amortisation of developed technology	1.1	1.5
Depreciation	5.1	6.7
Personnel costs of product support and virus updates	12.6	13.0
Digital content distribution costs	12.9	17.2
Third party license costs	7.6	13.7
Other product support and virus update costs	9.0	10.2
Commissions, payment and other fees	16.1	23.5
Total	64.4	85.8

12. OPERATING COSTS

Operating costs are internally monitored by function; their allocation by nature is as follows (\$ M):

	2015	2016
Depreciation	4.7	4.7
Amortisation	38.2	34.5
Personnel expenses	141.6	186.8
Purchases of services from third party vendors	109.5	110.7
Capitalised research and development costs	(3.9)	(5.3)
Other operating expenses	0.6	1.0
Fair value changes of contingent consideration	(6.6)	0.6
Total	284.1	333.0

Personnel expenses for the year ended 31 December 2015 and 2016 include retention and severance pay arising from restructuring activities in the amount of \$3.3 million and \$25.6 million, respectively. Please refer to Note 10.

13. DEPRECIATION AND AMORTISATION

Amortisation by function:

(\$ M):

	2015	2016
Cost of revenues	—	—
Sales and marketing	19.9	21.1
Research and development	11.0	9.0
General and administration	0.1	—
Total amortisation of intangible assets acquired through

business combinations	31.0	30.1
Cost of revenues	1.1	1.5
Sales and marketing	4.8	1.3
Research and development	1.9	2.5
General and administration	0.5	0.6

Depreciation by function (USD '000):

	2015	2016
Cost of revenues	5.1	6.7
Sales and marketing	1.3	1.2
Research and development	2.1	1.5
General and administration	1.3	2.0
Total	9.8	11.4

Tangible and intangible assets are allocated to each department of the Group. The depreciation and amortisation of these assets is reported as part of operating costs and cost of revenues.

14. PERSONNEL EXPENSES

Personnel expenses consist of the following (\$ M):

	2015	2016
Wages and salaries	103.9	110.1
Share-based compensation	15.3	37.0
Social security and health insurance	18.3	18.4
Social cost	7.2	6.1
Other payroll costs	6.2	2.6
Severance payments and termination benefits	3.3	25.6
Total personnel expense	154.2	199.8

Personnel expenses for the year ended 31 December 2015 and 2016 include retention and severance pay arising from restructuring activities, which include integration activities, in the amount of \$3.3 million and \$25.6 million, respectively. Please refer to Note 10.

Please refer to Note 31 for compensation of key management personnel of the Group.

The number of full time employees as at 31 December 2015 and 2016 is as follows:

	Employees
31 December 2015	1,486
31 December 2016	1,135

Personnel expenses by function (\$ M):

	2015	2016
Cost of revenues	12.6	13.0
Sales and marketing	46.3	58.4
Research and development	62.8	69.5
General and administrative	32.5	58.9
Total	154.2	199.8

Costs of individual departments are allocated to one of the four functional expense categories. Cost of revenues includes customer support and the portion of the virus laboratory that is responsible for daily virus updates provided to users. Sales and marketing includes the sales, support and eCommerce departments. Research and development includes the personnel costs of programmers, a portion of the virus laboratory and the quality assurance department. General and administration represents finance and administration, legal, HR, information technology and management costs and other miscellaneous expenses.

15. FINANCE INCOME AND (EXPENSES)

Finance income and expenses include foreign currency gains and losses, interest income and expense and other expenses such as bank fees. Interest income primarily represents interest from term deposits. Interest expense consists of interest from the term loan and from finance leases (see Note 32). Changes in the fair values of derivatives represent changes in the fair value of the interest rate floor and cap of the bank loan (see Note 28).

Finance income and expenses (\$ M):

	2015	2016
Term loan interest	(16.4)	(17.4)
Accelerated recognition of arrangement fees (1)	—	(8.5)
Changes of fair values of derivatives	(0.1)	2.3
Foreign currency gains (and losses)	0.3	(0.2)
Interest revenues and expenses – other	(0.1)	—
Other financial income and (expense)	(0.4)	(0.3)
Total	(16.7)	(24.1)

⁽¹⁾ Due to early extinguishment of the third-party loan. Please refer to Note 15.

16. INCOME TAX

Applicable taxes include value added tax ("VAT"), corporate income tax, payroll (social) taxes and excise duties, among others. In some jurisdictions, laws related to these taxes are unclear and few precedents with regard to the application and implementation of these laws have been established. The Group's tax position (including matters related to its corporate structure and intercompany transactions) is subject to possible review and audit by a number of authorities, which are enabled by law to impose significant fines, penalties and interest charges. Management believes that it has adequately provided for the tax liabilities in the accompanying financial statements. However, if for any reason the Group's tax position were to be disputed by tax authorities, and the Group did not prevail in connection with such disputes, the Group could be subject to substantial tax liabilities which could have a material impact on its financial position and results of operations.

The major components of income tax in the consolidated statement of comprehensive income are (\$ M):

	2015	2016
Current income tax expense	(1.4)	(12.5)
Deferred tax expense	(10.0)	8.4
Total	(11.4)	(4.1)

The effective tax rate is impacted by non-deductible expenses (e.g. business combination related expenses, sharebased compensation expenses and non-cash interest expenses).

The effective tax rate is further impacted by the non-recognition of deferred tax assets from tax losses or the recognition of deferred tax assets from prior year tax losses.

	2015	2016
Profit / (loss) before tax	60.6	(24.3)
Group statutory income tax rate is 25%	(15.1)	6.1
Foreign tax rate differential	0.4	(3.1)
Dutch tax ruling	1.6	0.8
Non-deductible expenses	0.8	(7.2)
Unrecognised deferred tax assets	0.6	(0.4)
Other	0.3	(0.3)
Total tax	(11.4)	(4.1)

Dutch tax ruling

On 1 June 2011, the Company entered into an innovation box regime in the Netherlands, resulting in the recognition of tax benefits (deferred tax assets), which significantly impacted its effective tax rate in 2011. Under the innovation box regime, the income attributable to certain research and development activities is subject to an effective rate of 5%, in lieu of the Dutch statutory corporate income tax rate of 25%. As a consequence, the enacted Dutch tax rate was 10% and 13% for 2015 and 2014, respectively. The current innovation box ruling will end in December 2020.

Simultaneously, the Company entered into an agreement regarding special deductions on acquired intellectual property, which was updated in December 2012 and December 2013. This agreement on special deduction will end on 31 December 2018. On 1 January 2014, the Company entered into a similar agreement regarding special deductions on acquired intellectual property which will end on 31 December 2023.

After the completion of the centralisation of all intellectual property in the Netherlands in 2013, the Company implemented changes in its intercompany transfer pricing methodology. As a consequence, the revenue is deferred in the Netherlands resulting in a domestic loss for accounting purposes, which is offset against additional gains in the foreign countries, and results in a tax charge in the effective income tax reconciliation for the innovation box.

The calculation of deferred tax as at 31 December 2015 and 2016 is as follows (\$ M):

	31 December 2015	31 December 2016
Temporary differences	Asset / (Liability)	Asset / (Liability)
Difference between net book value of fixed assets for accounting and tax purposes Difference in deferred revenue and unbilled	(25.8)	(20.0)
receivables	19.5	18.2
Tax loss carry-forward	1.3	0.1
Provisions	7.6	8.0
Other	5.3	9.5
Net	7.9	15.8

Changes in deferred tax (\$ M):

	2015 Asset /(Liability)	2016 Asset /(Liability)
Balance as at 1 January	22.9	7.9
Income statement charge / (credit)	(10.0)	8.4
Acquisition through business combination	(5.3)	—
Tax charge / (credit) directly to other
comprehensive income	0.7	(1.0)
Effect of foreign currency exchange	(0.4)	0.5
Balance as at 31 December	7.9	15.8

Deferred tax charged directly to the other comprehensive income during 2016 of \$1.0 million (2015: income of \$0.7 million) related to the currency translation difference.

17. EARNINGS / (LOSSES) PER SHARE

Basic earnings per share amounts are calculated by dividing the net income for the year attributable to equity holders of the Group by the weighted average number of shares of common stock outstanding during the year. The diluted earnings per share amounts consider the weighted average number of shares of common stock outstanding during the year adjusted for the effect of dilutive options.

Earnings per share (\$ M, except for share and per share information):

2015	2016
	(28.4)

1.1	—
50.3	(28.4)
	51,569,360
	—
	51,569,360
	(0.55)
	(0.55)

	49.2 51,979,048 1,046,915 53,025,963 0.97 0.95

Supplementary earnings per share measures (\$ M, except for share and per share information):

	2015	2016
Net income attributable to equity holders	50.3	(28.4)
Share-based compensation (Note 31)	15.3	14.8
Exceptional items (Note 10)	9.0	86.9
Amortisation of intangible assets acquired through business combinations (Note 13) Accelerated recognition of previously capitalised debt issuance costs due to early	31.0	30.1
extinguishment of term loan(1)	—	8.5
Tax relating to above items	(15.6)	(30.8)
Underlying net income attributable to equity holders (USD '000)	90.0	81.1
Basic weighted average number of shares	51,979,048	51,569,360
Underlying basic earnings per share (USD/share)	1.73	1.57

⁽¹⁾ Arrangement fees associated with the third-party loan entered into in 2014 were capitalised and being amortised to profit and loss over the term of the loan using the effective interest method. On 30 September 2016, the Company repaid the loan early and therefore recognised all remaining capitalised arrangement fees.

For the purpose of determining diluted earnings per share, the exercise price of the individual options is compared to the average market value of the shares of the Group during the relevant period. If the adjusted exercise price of an option is lower than the average market value of shares, the option is considered dilutive. However, if the result of the Group is a loss for the relevant period such options are considered anti-dilutive and are not included in calculating diluted earnings per share. The analysis only includes options granted before 31 December 2016. Additionally, there are no outstanding options or awards as of 31 December 2016.

18. CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, cash and cash equivalents comprise of the following:

(\$ M)	31 December 2015	31 December 2016
Cash in bank	123.8	33.2
Total	123.8	33.2

19. OTHER FINANCIAL ASSETS

Other financial assets (\$ M):

	31 December 2015	31 December 2016
Restricted cash
- acquisition agreements	26.3	0.9
- office lease agreements	0.2	0.2
- other	0.6	0.6
	27.1	1.7
Derivatives	0.3	0.2
Investment in equity securities	0.7	0.7
Other receivables	—	2.2
Total	28.1	4.8
Total current	27.3	1.7
Total non-current	0.8	3.1

As of 31 December 2015, the restricted cash balance of \$26.3 million related to the acquisitions of Privax in 2015 and Location Labs in 2014, which represented \$ 9.0 million and \$17.3 million, respectively. These amounts, less amounts withheld for identified potential claims, were released in 2016 as per the terms of the agreements.

As of 31 December 2016, other receivables of \$2.2 million as of 31 December 2016 consists primarily of a deposit payment made in relation to a leased office facility.

20. TRADE AND OTHER RECEIVABLES

Trade and other receivables (\$ M):

	31 December 2015	31 December 2016
Trade receivables	28.6	26.9
Unbilled revenues	9.0	10.3
Other receivables	8.3	5.5
Trade and other receivables, gross	45.9	42.7
Less: Allowance for doubtful accounts	(0.9)	(2.4)
	45.0	40.3
Less: Reserve for returns	(1.0)	(2.3)
Trade and other receivables, net	44.0	38.0

Trade receivables are non-interest bearing and are generally payable on 30-day terms. The fair value of receivables approximates their carrying value due to their short-term maturities.

Unbilled revenues represent sold products (for which the revenue has been deferred over the term of the product license) but with invoice not yet issued.

As of 31 December 2015, the Company had \$1.9 million in advances for share repurchases in other receivables. As of 31 December 2016, the Company had a receivable from Avast Software B.V. of \$3.4 million relating to the acquisition by Avast Software B.V. The remaining balances in both 2015 and 2016 consists primarily of reimbursement of leasehold improvements of new offices, advances to and receivables from employees.

Allowances against outstanding receivables that are considered doubtful are charged to income based on an analysis of their collectability.

(\$ M)	Amount
Allowances at 31 December 2014	1.1
Charged Utilised	— (0.2)
Allowances at 31 December 2015	0.9
Charged Utilised	2.4 (0.9)
Allowances at 31 December 2016	2.4

As of 31 December 2015 and 2016, the nominal value of receivables overdue for more than 365 days are USD nil (carrying value: nil) in both years.

The ageing analysis of trade receivables was as follows (carrying amounts after valuation allowance):

	Past due but not impaired
(in \$ M)	Neither past due nor impaired	Past due 1 - 90 days	Past due more than 90 days	Past due more than 180 days	Past due more than 360 days	Total
31 December 2015	38.9	4.3	0.2	1.6	—	45.0
31 December 2016	35.5	4.0	0.2	0.6	—	40.3

21. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses (\$ M):

	31 December 2015	31 December 2016
Deferred commissions, payment and other
fees	13.8	15.4
Other prepaid expenses	6.8	5.0
Total	20.6	20.4
Total current	16.6	17.6
Total non-current	4.0	2.8

Recognition of expense from deferred commissions, payment and other fees as of 31 December 2016 is estimated as follows:

(\$ M) 2017	13.0
2018	2.2
2019	0.2
Total	15.4

Other prepaid expenses consist of items such as prepaid rent, marketing and advertising costs, accrued office services, insurance costs paid up front etc.

22. NON-CURRENT ASSETS

Property, plant and equipment

(\$ M)	Equipment, furniture and fixtures	Vehicles	Leasehold improvements	Total
Cost at 31 December 2014	38.9	1.5	5.3	45.7
Additions	13.7	—	2.7	16.4
Business combination	0.2	—	0.1	0.3
Net foreign currency exchange difference Disposals	(2.3) (1.2)	(0.1) (0.4)	(0.4) (0.1)	(2.8) (1.7)

Cost at 31 December 2015	49.3	1.0	7.6	57.9
Additions	6.6	—	5.8	12.4
Net foreign currency exchange difference	(1.1)	—	(0.1)	(1.2)
Disposals	(2.3)	(0.7)	(0.9)	(3.9)
Cost at 31 December 2016	52.5	0.3	12.4	65.2
(\$ M)	Equipment, furniture and fixtures	Vehicles	Leasehold improvements	Total
Acc. depreciation at 31 December 2014	(23.4)	(1.2)	(3.1)	(27.7)
Depreciation	(8.6)	(0.2)	(1.0)	(9.8)
Disposals	1.0	0.4	—	1.4
Net foreign currency exchange difference	1.4	0.1	0.2	1.7
Acc. depreciation at 31 December 2015	(29.6)	(0.9)	(3.9)	(34.4)
Depreciation	(9.9)	(0.1)	(1.4)	(11.4)
Disposals	2.2	0.7	0.8	3.7
Net foreign currency exchange difference	0.7	—	0.1	0.8
Acc. depreciation at 31 December 2016	(36.6)	(0.3)	(4.4)	(41.3)
NBV at 31 December 2015	19.7	0.1	3.7	23.5
NBV at 31 December 2016	15.9	—	8.0	23.9

Intangible assets

(\$ M)	Developed Technology	Trade marks	Software	Customer relationship and user base	Goodwill	Other	Total
Cost at 31 December 2014	55.4	14.7	25.8	95.8	249.0	0.3	441.0
Business combinations	7.7	3.8	—	8.4	49.5	—	69.4
Additions Net foreign currency exchange	3.9	0.1	1.6	—	—	—	5.6
difference Disposals	(0.4) —	(0.1) —	(0.9) —	(2.6) —	(1.7) —	— —	(5.7) —
Cost at 31 December 2015	66.6	18.5	26.5	101.6	296.8	0.3	510.3
Additions	5.3	—	1.1	—	—	—	6.4
Impairment Net foreign currency exchange	—	—	(0.1)	—	—	—	(0.1)
difference	(0.1)	—	(0.4)	0.1	0.3	—	(0.1)
Disposals	—	(1.0)	(0.1)	—	—	—	(1.1)
Cost at 31 December 2016	71.8	17.5	27.0	101.7	297.1	0.3	515.4
Acc. amortisation at 31 December
2014	(32.6)	(5.3)	(15.6)	(16.7)	—	—	(70.2)
Amortisation Accelerated amortisation of capitalised	(8.0)	(3.0)	(6.7)	(17.6)	—	—	(35.3)
research and development Amortisation of capitalised research and	(2.8)						(2.8)
development Net foreign currency exchange	(1.2)	—	—	—	—	—	(1.2)
difference	0.2	—	0.6	0.9	—	—	1.7
Acc. amortisation at 31 December
2015	(44.4)	(8.3)	(21.7)	(33.4)	—	—	(107.8)
Amortisation Amortisation of capitalised research and	(9.2)	(2.6)	(3.4)	(18.8)	—	—	(34.0)
development	(2.0)	—	—	—	—	—	(2.0)
Disposals Net foreign currency exchange	—	1.0	0.1	—	—	—	1.1
difference	0.1	—	0.4	0.2	—	—	0.7
Acc. amortisation at 31 December
2016	(55.5)	(9.9)	(24.6)	(52.0)	—	—	(142.0)
NBV at 31 December 2015	22.2	10.2	4.8	68.2	296.8	0.3	402.5
NBV at 31 December 2016	16.3	7.6	2.4	49.7	297.1	0.3	373.4

Acquisitions in 2015

The Group recognised intangible assets from the acquisition of Privax as of the acquisition date of 5 May 2015 with a fair value of \$18.4 million and goodwill of \$47.7 million, which includes a measurement period adjustment of \$0.6 million. Additionally, the Group recognised intangible assets from the acquisition of Flayvr as of the acquisition date of 6 October 2015 with a fair value of \$1.5 million and goodwill of \$2.4 million.

Goodwill was calculated as the difference between the acquisition date fair value of consideration transferred less the fair value of acquired net assets. See Note 5 for further discussion and Note 8 for allocation to individual business segments.

Additions of intangible assets

During the years ended 31 December 2015 and 2016, the Group capitalised \$3.9 million and \$5.3 million of research and development costs, respectively.

Impairment testing

The Company performed an impairment test in the fourth quarter of the year ended 31 December 2015 and of all its non-current assets. The Company performed the analysis using two groups of cash generating units, Consumer and SMB, which are also the Company's operating segments.

In determining the value in use in 2015, the Company used the following parameters:

projected 2016-2020 free cash flows based on the most current financial plan of the Group (with an annual growth rate compared to 2015 of 3% to 11% per annum and a perpetuity growth rate of 1% per annum after 2020 for the Consumer segment and an annual growth rate compared to 2015 of 8% to 23% per annum and a perpetuity growth rate of 1% per annum after 2010 for the SMB segment) allocated to individual operating segments; and
after-tax discount interest rate representing the weighted average cost of capital ("WACC") of the Company. Management estimated the discount rate based on the Company's WACC and have taken into consideration information about risk-free rates from current capital markets, current information about comparable software companies, the size of AVG relative to the market and any other factors specific to the Company. The pre-tax discount rate WACC applied to the five-year cash flow projections is 12.9% and 11.0% for the Consumer and SMB segment, respectively.

Changes to the individual parameters used by the Company would not impact the carrying value to materially exceed the value in use. As a result, no impairment loss on goodwill or intangibles has been recognised during the financial year ended 31 December 2015.

On 30 September 2016, the Company was acquired by Avast Software B.V. for a cash purchase price of \$25.00 per share, or a total consideration of \$1,308 million. The total consideration was considered an observable input and is considered the fair value of the Group as of 1 October 2016. The total consideration significantly exceeded the equity value of the Company. Considering this significant excess, from the date of acquisition date until 31 December 2016, there were no circumstances identified that would indicate a material change to the carrying value. As a result, no impairment loss on goodwill or intangibles has been recognised during the financial year ended 31 December 2016.

23. PROVISIONS

The movements in the provision accounts were as follows (\$ M):

	Accrued vacation provision	Provision for restructuring	Legal provision and other	Total
31 December 2014	(3.9)	(1.7)	(2.3)	(7.9)
Additions	—	(3.3)	(0.5)	(3.8)
Exchange gain	—	0.1	—	0.1
Utilisation	0.7	3.5	2.3	6.5
31 December 2015	(3.2)	(1.4)	(0.5)	(5.1)
Additions	—	(15.6)	(9.0)	(24.6)
Exchange gain	—	—	—	—
Utilisation	0.5	1.4	—	1.9
31 December 2016	(2.7)	(15.6)	(9.5)	(27.8)

Legal claims

As of 31 December 2015, the provision for legal claims relates primarily to the settlement of class action litigations relating to the design, sale and marketing of PC TuneUp software and settlement of patent infringement claims. Settlements of these legal claims were paid in the first quarter of 2016.

At 30 September 2016, the Group recorded a legal provision of \$7.7 million for potential legal disputes over alleged patent infringement. On 24 March 2017, a settlement of \$7.7 million was paid.

Provision for restructuring

Except for the contractual obligations of provisions for restructuring, the provisions above have not been discounted as the effect of discounting on the carrying amounts of provisions is not considered material by the management. The increase in the restructuring provision as of 31 December 2016 is directly related to integration activities by the Company after the acquisition by Avast Software B.V. The integration activities included restructuring and reduction of the workforce. These activities were announced and implemented in the fourth quarter of 2016. Please refer to Note 10.

24. OTHER CURRENT LIABILITIES

Other current liabilities (\$ M):

	31 December 2015	31 December 2016
Accrued personnel costs	(14.3)	(16.3)
Deferred consideration liability	(45.1)	(1.3)
Contingent consideration liability	(25.4)	(0.1)
VAT and other taxes	(4.8)	(4.2)
Other	(0.7)	(0.5)
Total	(90.3)	(22.4)

As of 31 December 2015, deferred consideration liability consisted of \$17.3 million held in escrow accounts relating to the Location Labs acquisition in 2014, \$16.8 million related to Location Labs Class B redemption payments, \$8.9 million held in escrow accounts relating to the Privax acquisition in 2015 and \$2.1 million relating to the Flayvr acquisition in 2015. As of 31 December 2016, the balance consisted of \$0.2 million and \$0.6 million held in escrow accounts for the acquisition of Location Labs and Privax, respectively. Additionally, \$0.5 million related to deferred consideration relating to the Flayvr acquisition. The change in the liability was primarily due to cash payments made during the year ended 31 December 2016.

As of 31 December 2015, contingent consideration liability consisted of \$14.7 million for earn-outs relating to the Location Labs acquisition, \$9.5 million for earn-outs relating to the Privax acquisition and \$1.1 million for earn-outs relating to the acquisition of Flayvr. As of 31 December 2016, the balance consisted of \$0.1 million relating to the acquisition of Privax. The change in the liability was primarily due to cash payments made during the year ended 31 December 2016.

For 2015 acquisitions, please refer to Note 5.

25. TRADE PAYABLES AND OTHER PAYABLES

Trade and other payables (\$ M):

	31 December 2015	31 December 2016
Trade payables	(11.8)	(9.1)
Other payables	(3.0)	(0.7)
Accrued rent	(0.3)	(0.3)
Accrued advisory and audit services	(4.9)	(3.6)
Accrued legal services	(1.4)	(0.9)
Accrued commissions to third parties	(2.8)	(2.3)
Accrued marketing and advertising	(3.6)	(2.6)
Other accrued expenses	(5.6)	(6.1)
Total	(33.4)	(25.6)

26. POST RETIREMENT BENEFIT PLAN

The Company operates a defined contribution pension and a defined benefit plan in accordance with local regulations and practices. These plans cover a portion of the Company's employees and provide benefits to employees in the event of death, disability, or retirement. The measurement date used for the Company's employee benefit plans is 31 December. The funding policies of the Company's plans are consistent with the local government and tax requirements and several of the plans are not required to be funded according to local government and tax requirements. For all employees not part of a defined contribution pension or defined benefit plan, the Company does not pay or reimburse pension premiums other than any applicable statutory national premiums for state pension.

The Company recognises in its Consolidated Balance Sheets within the Other non-current liabilities the funded status of its defined benefit pension plans as the difference between the fair value of the plan assets and the benefit obligation.

Defined Contribution Plans

Defined Benefit Plans

The Company maintains a defined benefit plan for its Swiss employees. The development of obligations and assets, the fair value of plan assets and funded status were as follows:

(\$ M)	2015	2016
Benefit obligation at 1 January	(2.4)	(2.2)
Service cost	(0.2)	(0.2)
Employee contributions by plan participants	(0.1)	(0.1)
Past service cost / Plan amendments	0.1	—
Benefit payments	0.4	—
Actuarial gain / (loss)	(0.1)	—
Other	0.1	—
Exchange rate differences	—	0.1
Benefit obligation at 31 December	(2.2)	(2.4)


(\$ M)	2015	2016
Plan assets of plan assets at 1 January	1.5	1.4
Actual return on plan assets	—	—
Contributions by employer	0.1	0.1
Contributions by plan participants	0.1	—
Benefit payments	(0.3)	—
Fair value of plan assets at 31 December	1.4	1.5

Net periodic benefit cost consisted of the following:

(\$ M)	2015	2016
Current service cost	(0.1)	(0.2)
Past service cost / Plan amendments	0.1	—
Other	(0.1)	—
Net periodic benefit cost	(0.1)	(0.2)

The weighted-average principal actuarial assumptions were used to determine the Net periodic benefit costs and the benefit obligations. The discount rate assumptions are based upon AA-rated corporate bonds. The assumptions include a discount rate of 0.70% per annum, an average future salary increase of 2.00% per annum, a pension increase assumption of 0% per annum and a rate of compensation increase of 2.00% per annum at 31 December 2015 and 2016.

In accordance with IAS 19, the plan assets, consisting of cash and cash equivalents, are at fair value of \$1.5 million as of 31 December 2016. The asset allocation on a weighted-average basis will be as follows:

Asset class (%)	31 December 2015	31 December 2016
Cash	—	2
Equity	25	52
Fixed income	54	24
Real estate	9	9
Other	12	13
Total	100	100

The sensitivity of the benefit obligations to changes in the discount rate is as follows (\$ M):

	31 December 2015	31 December 2016
Discount rate increased by 0.25%	0.1	0.1
Discount rate decreased by 0.25%	(0.1)	(0.1)
Pension increased by 0.25%	—	(0.1)
Increase of one year life expectancy at retirement age	—	(0.1)

The future expected benefit payments by the Group's pension plan which reflects the expected future services, as appropriate as at 31 December 2016, are as follows:

	Amount
2017	0.1
Years 2018 - 2026	0.5

27. DEFERRED REVENUE

The Group sells consumer and SMB products for a period of 1 to 36 months with payment received at the beginning of the license term. Revenues are recognised rateably over the subscription period covered by the agreement.

The movements in the deferred revenue were as follows (\$ M):

	2015	2016
1 January	(198.3)	(200.1)
Additions—billings	(424.0)	(405.9)
Deductions—revenue recognised	425.8	418.6
Net deferral	1.8	12.7
Business combination—initial recognition at fair value	(4.4)	—
Translation adjustments	0.8	0.1
31 December	(200.1)	(187.3)
Total current	167.1	157.4
Total non-current	33.0	29.9

28. BORROWINGS

Term facility

In 2014, we entered into senior secured credit facilities ("Credit Facility) consisting of a term loan (the "Term Loan") of up to \$230 million and a revolving credit facility ("RCF") of up to \$50 million.

The facilities have been primarily used for the acquisition of Location Labs, but may also be used for other general corporate purposes, including the Location Labs Class B redemption payments, future deferred merger considerations, contingent payments for completed acquisitions and certain potential future acquisitions.

The term loan bears interest at an adjusted LIBOR rate plus 4.75% or a Base Rate plus 3.75% and in the case of adjusted LIBOR a floor of 1.0% applies. The effective interest rate is 6.90% for the Term Loan. Interest on the Term Loan is payable in arrears. The Company determined that the floor of 1.0% is an embedded derivative, which is required to be separately accounted for as a derivative. The effective interest rate is 7.37% for the Term Loan and the embedded derivative is measured at fair value.

The term loan amortises in equal quarterly installments in an aggregate annual amount equal to 1.0% of the original principal amount thereof with any remaining balance payable on the final maturity date of the Term Loan. The Company is required to make mandatory prepayments of the Term Loan with: (i) net cash proceeds from certain asset sales (subject to reinvestment rights); (ii) insurance/condemnation proceeds; (iii) net cash proceeds from certain issuances of debt; and (iv) 50% of excess cash flow (after deduction of voluntary prepayments).

In connection with the acquisition of the Company by Avast Software B.V., the term loan was fully repaid on 30 September 2016. Unamortised deferred financing costs and premiums of USD 8.5 million as of the repayment date were immediately recognised as a finance expense.

Term loan balance under the Credit Facility (\$M)

	31 December 2015	31 December 2016
Current term loan	(2.3)	—
Long-term term loan	(212.8)	—
Total term loans	(215.1)	—

Revolving facility

The revolving credit facility ("RCF") bears interest at an adjusted LIBOR rate plus 1.75% or a Base Rate plus 0.75% based on the leverage ratio of 1.19. Interest on the loan is payable in arrears. the Company pays: (i) a commitment fee of 0.50% per annum on the actual daily amount by which the revolving credit commitment exceeds then-outstanding loans and letters of credit under the RCF; and (ii) a fronting fee of 0.125% per annum, calculated on the daily amount available to be drawn under each letter of credit issued under the RCF. As of 31 December 2015, the RCF was left undrawn. The RCF was terminated on 30 September 2016.

The Credit Facility was collateralised by certain tangible, intangible, and current assets of the Company with covenants obliging the Company to also pledge new assets over a certain threshold. The collateral granted by the borrower and certain of its subsidiaries includes, without limitation, present and future pledges, mortgages, first priority floating and fixed charges and security interests with respect to, but not limited to, equity rights, shares and related rights (ownership interests), fixed assets, intellectual property rights (trademarks, copyrights and patents), intercompany and trade receivables, bank accounts, insurance claims and commercial claims. Certain assets presented on the consolidated balance sheets have been pledged as collateral as of 31 December 2015, including property and equipment with a carrying value of \$18.5 million intangible assets with a carrying value of \$26.5 million, trade accounts receivable of \$23.0 million, inventories with a carrying value of \$1.0 million, as well as cash and cash equivalents amounting to \$111.0 million.

Intragroup loan with Avast Software B.V.

On 30 September 2016, the Company entered into an intercompany loan with Avast Software B.V., the lender. The uncommitted term loan of \$151.6 million was to be paid in full on the maturity date of 31 December 2020 or on demand with at least five business days notice. Interest on the loan is payable in quarterly in arrears. The loan bears an interest rate of a Base Rate plus an average margin communicated by the lender. The interest in 2016 was the aggregate of the Base Rate of 5.00% plus a margin of 1.69%. During the year ended 31 December 2016, the Company settled \$113.1 million of the loan and the outstanding balance as of 31 December 2016 was \$38.5 million.

29. DERIVATIVES

The carrying amount of derivative financial instruments held by the Group was as follows (\$ M):

		31 December 2015		31 December 2016
		Assets	Liabilities	Assets	Liabilities
Type of derivative
	Embedded derivative	—	(2.3)	—	—
	Foreign currency contracts	0.4	—	0.3	(0.1)
	Total	0.4	(2.3)	0.3	(0.1)
Classified as
	Non-current financial liability	—	(2.3)	—	—
	Other current liabilities	—	—	—	—
	Current financial liability	—	—	—	(0.1)
	Current financial assets	0.4	—	0.3	—
	Total	0.4	(2.3)	0.3	(0.1)

Embedded derivative

The Group had an embedded derivative in the Term Loan, which was entered into in 2014 and extinguished on 30 September 2016. Please refer to Note 28.

Foreign currency contracts

The Group periodically enters into foreign currency contracts to reduce the risks associated with changes in foreign currency exchange rates. Foreign currency contract fair values are classified within Level 2 of fair value hierarchy as the values are determined based on the quoted prices for similar assets in active markets using inputs such as currency rates and forward points.

The notional amounts and fair value of foreign currency contracts outstanding are as follows:

		31 December 2015		31 December 2016
	Other financial asset	Other financial liability	Other financial asset	Other financial liability
Nominal value	75.8	1.8	47.7	11.6
Fair value	0.4	—	0.3	(0.1)

30. SHAREHOLDERS' EQUITY

The Company's authorised share capital consists of 120 million ordinary shares with a par value of € 0.01 per share. The movements in selected components of shareholders' equity were as follows (\$ M, except for share information):

	Number of shares issued— common stock	Share capital	Treasury shares— common stock	Treasury shares	Share premium	Other reserves	Translation differences	Retained earnings
31 December 2014	54,763,151	0.7	(3,121,646)	(62.9)	(72.6)	16.1	(12.7)	176.6
Profit for the year	—	—	—	—	—	—	—	49.2
Translation differences	—	—	—	—	—	—	(1.5)	—
Defined benefit plan
actuarial gain Repurchase of own	—	—	—	—	—	(0.1)	—	—
shares	—	—	(741,332)	(14.6)	—	—	—	—
Exercise of options	—	—	727,931	14.7	4.4	(9.6)	—	—
Share-based
compensation	—	—	—	—	—	11.9	—	—
31 December 2015	54,763,151	0.7	(3,135,047)	(62.8)	(68.2)	18.3	(14.2)	225.8
Profit for the year	—	—	—	—	—	—	—	(28.4)
Translation
differences	—	—	—	—	—	—	8.8	—
Reclassification	—	—	—	—	—	—	1.2	(1.2)
Defined benefit plan actuarial gain	—	—	—	—	—	0.1	—	—
Repurchase of own
shares	—	—	(1,393,808)	(26.5)	—	—	—	—
Exercise of options	—	—		17.1	(11.5)	(0.1)	—	—
Sales of own shares	—	—	4,528,855	72.2	20.9	—	—	—
Share-based compensation	—	—	—	—	—	43.1	—	—
Cancellation of options
and awards	—	—	—	—	61.5	(61.5)	—	—
31 December 2016	54,763,151	0.7	—	—	2.7	(0.1)	(4.2)	196.2

Share repurchase program

In 2015, the Company entered into a share repurchase program (the 2015 Share repurchase program) with the intention to repurchase shares to cover obligations to deliver shares under its employee stock options incentive and restricted share units plans. Under the share repurchase program the Company was allowed, between 10 November 2015 and 10 May 2016, to repurchase from time to time in both open market and privately negotiated transactions up to \$40.0 million subject to maximum number of shares equal to 1,666,666 ordinary shares, plus broker commission fees. The Company purchased 741,332 and 1,393,808 shares under this program in the years ended 31 December 2015 and 2016, respectively, for a total cost of \$14.6 million and \$26.5 million, respectively. The share repurchase program concluded in 2016.

Treasury shares

As of 31 December 2015, there were 3,135,047 shares held in treasury at a carrying value of \$62.8 million. In conjunction with the acquisition of the Company by Avast Software B.V. on 30 September 2016, Avast Software B.V. purchased the shares held in treasury for \$93.1 million, reducing the loan from Avast Software B.V. to the Company by the same amount. Therefore, as of 31 December 2016 there were no shares held in treasury.

Share premium

The share premium reserve includes the surplus on issued shares (the additional paid in capital) and in prior years also used for any distributions to shareholders in excess of capital. The share premium reserve is also used for the effects of exercise and cancellations of options and awards, and sales of own shares for any excess/deficit over the related share capital amount. In conjunction with the acquisition by Avast Group, on 30 September 2016 all vested equity-settled stock options were exercised and all unvested equity-settled stock options and restricted share units were cancelled. In addition, all unvested cash-settled restricted share units were cancelled.

Other reserves

The other reserves are also used to record the actuarial gains/(losses) of the defined benefit plan which the Group maintains for its Swiss employees. Refer to Note 26.

Reclassification

An intercompany loan, that had been considered part of the Company's net investment, was settled in a prior year. Upon settlement, the cumulative amount of foreign exchange differences that was recognised in other comprehensive income should have been recognised in profit and loss. Therefore \$1.2 million is reclassified from Other comprehensive income to Retained earnings.

31. RELATED PARTY DISCLOSURES

Compensation of key management personnel of the Group

The members of statutory and supervisory bodies, directors and executive officers were granted no loans, guarantees or advances in the year ended 31 December 2015 and 2016.

Benefits granted to members of management and supervisory board, aside from salaries and social security contributions, consist of the use of company cars and mobile phones for both business and private purposes and of a contribution for additional pension insurance.

Compensation of key management persons for the period is as follows (\$ M):

	2015	2016
Short term employee benefits (including salaries)	(4.7)	(1.6)
Share-based payments	(7.0)	(16.7)
Total	(11.7)	(18.3)

Share-based Compensation

AVG TECHNOLOGIES N.V. Share Option Plan ("AVG Option plan")

The purpose of the AVG Option Plan is to further the growth, development and success of the Group Companies by enabling employees and directors of the Group Companies to acquire a continuing equity interest in the Company.

The total number of options under the Option Plan that may be granted is limited at 12,209,948. Each option converts into one ordinary share of AVG N.V. on exercise. Options that are forfeited are available to be granted again.

The following table sets forth the total share-based compensation recognised in the Consolidated Statement of Comprehensive Income (\$ M):

	2015	2016	2016 exceptional item	Total 2016
Cost of revenues	(0.2)	(0.2)	(0.1)	(0.3)
Sales and marketing	(2.9)	(3.4)	(4.8)	(8.2)
Research and development	(2.8)	(2.4)	(3.1)	(5.5)
General and administration	(9.4)	(8.8)	(14.2)	(23.0)
Total	(15.3)	(14.8)	(22.2)	(37.0)

The Company has presented \$22.2 million of share-based compensation as an exceptional item. Please refer to Note 10.

Compensation costs related to employee share option and (market)/restricted stock units granted are based on the fair value of the options on the date of grant, net of estimated forfeitures. Management estimates the forfeiture rate based on analysis of actual forfeitures and management will continue to evaluate the adequacy of the forfeiture rate based on actual forfeiture experience. The impact from a forfeiture rate adjustment will be recognised in full in the period of adjustment, and if the actual number of future forfeitures differs from that estimated by management, the Company may be required to record adjustments to share-based compensation expense in future periods. Compensation costs on share-based awards with graded vesting are recognised on an accelerated basis as though each separately vesting portion of the award was, in substance, a separate award.

Option Plan

The Option Plan was designed in order to grant options on ordinary shares in the capital of AVG Technologies N.V. to certain employees of the Company. The purpose of the Option Plan is to provide employees with an opportunity to participate directly in the growth of the value of the Company by receiving options for shares.

Each option converts into one ordinary share of AVG Technologies N.V. on exercise.

The Option Plan was initially approved and adopted by a General Meeting of Shareholders on 8 June 2009 and was subsequently amended and restated effective on 1 October 2009, 30 June 2010, 11 March 2011, 29 September 2011, 30 January 2012, 7 May 2013 and 4 December 2014. Currently the Option Plan also includes a restricted share unit plan.

The total number of shares which may be granted as options and restricted stock units under the Option Plan is limited at 12,209,948. Options and restricted share units that lapse or are forfeited are available to be granted again. Options and restricted share units granted to members of the Management Board of the Company and the Supervisory Board require prior approval of the General Meeting of Shareholders. On 19 June 2013, the General Meeting authorised the Supervisory Board to grant up to a maximum of 500,000 options or restricted share units in the aggregate in a year to members of the Management Board.

The vesting of certain restricted share units granted to the former CEO was subject to satisfaction of market based financial performance criteria, the market restricted share units. The market restricted share units will vest if the average closing price of the Company's shares on the New York Stock Exchange during a 30 consecutive trading day period exceeds 2.5 times the closing price of the shares on the Start Date, as defined in the RSU agreement, (the "Share Price Goal"), provided that: (i) if the Share Price Goal is achieved prior to the first anniversary of the Start Date, the vesting shall occur on the first anniversary of the Start Date; and (ii) the former CEO remains employed through the applicable vesting date and has not provided a notice of termination as of the applicable vesting date.

Options and restricted share units generally vest over a period of four years, whereby 25% of the options vest on the first anniversary of the start date and the remaining options vest quarterly thereafter, in equal portions during the remaining vesting period. The contractual life of all options is 10 years.

Participants have no voting rights with respect to shares represented by restricted share units until the date of the issuance of such shares. Participants included in our Option Plan may, if the Supervisory Board of the Company so determines, be credited with dividend equivalents paid with respect to shares underlying a restricted share unit award. Dividend equivalents shall be forfeited in the event that the restricted share units with respect to which such dividend equivalents were credited are forfeited. The Company did not pay any dividends in 2014 and 2015. On 30 June 2011, the Supervisory Board approved an amendment to the Option Plan to remove performancebased vesting conditions on options, including for options that were granted but unvested at such time by splitting such options into two awards, one for two-thirds as many options ("Base options") and another for one-third as many options ("Additional options"). The Base options remained subject to service period vesting requirements as per the terms of the original plan. The Additional options were granted on the date of occurrence of a listing with service period vesting requirements after such date. The amendment is accounted for as a share option modification. The modification resulted in no incremental share-based compensation expense.

The fair value of each stock option award is estimated, based on the several assumptions, on the date of the grant using the Black-Scholes option valuation model.

The following table illustrates the weighted average inputs into the Black-Scholes model in the year:

AVG Option Plan		2015		2016
Number granted in year	815,500		246,000
Weighted average grant date fair value (per share)	\$	7.83	\$	6,85
Weighted average exercise price (in USD)	\$	23.22	\$	19.73
Expected volatility		38.26%		40.07%
Weighted average expected lives (years)		4.5		4.5
Risk free interest rate		1.42%		1.18%
Expected dividends		Nil		Nil

As of 30 September 2016, all unvested share options granted to employees were cancelled. As of 31 December 2016, total compensation cost related to unvested share options granted to employees not yet recognised was nil (2015: USD \$4,376 thousand, net of estimated forfeitures).

The following table summarises share option activity of AVG Option Plan:

	2015		2016
	Number of shares	Weighted average exercise	Number of shares	Weighted average exercise
Outstanding—1 January	3,241,511	18.67	3,105,511	20.21
Granted	815,500	23.22	246,000	19.73
Forfeited	(272,355)	18.65	(941,687)	19.60
Expired	(26,780)	21.34	(461,119)	25.45
Exercised	(651,965)	16,64	(1,948,705)	18.69
Outstanding—31 December	3,105,911	20.27	—	—
Vested—31 December	2,997,994	20.21	—	—

Options outstanding at the end of the year had the following range of exercise prices and weighted average remaining life:

		2015		2016
	Number of shares	Weighted average remaining life	Weighted Average Exercise Price	Number of shares	Weighted average remaining life	Weighted Average Exercise Price
Exercise price:	outstanding	(years)	Per Share	outstanding	(years)	Per Share
\$0,01 - \$5.00	—	—	—	—	—	—
\$5.00 - \$12.00	67,721	3.44	8.10	—	—	—
\$12.00 - \$20.00	1,624,640	7.43	17.56	—	—	—
\$20.00 - \$25.72	1,413,550	8.27	23.95	—	—	—
Outstanding—31 December	3,105,911	7.72	20.27	—	—	—

Market restricted share units activity

The market restricted share units will vest if the average closing price of the Company's shares on the New York Stock Exchange during a 30 consecutive trading day period exceeds 2.5 times the closing price of the shares on the Start Date, as defined in the RSU agreement (the "Share Price Goal"), provided that: (i) if the Share Price Goal is achieved prior to the first anniversary of the Start Date, the vesting shall occur on the first anniversary of the Start Date and (ii) continued service through the applicable vesting date and has not provided a notice of termination as of the applicable vesting date.

The following table summarises market restricted share units activity:

	Number of market restricted share units outstanding	Weighted average ordinary fair value per share at grant date
Outstanding—1 January 2016	100,000	5.56
Granted	—	—
Paid	50,000	5.56
Forfeited	50,000	5.56
Outstanding —31 December 2016	—	—

Determining the fair value of market restricted share units activity

The fair value and requisite service period of the market RSU's was calculated using the Monte Carlo method. The inputs for expected volatility, expected dividends, and the risk-free rate used in estimating the fair value and requisite service period of the market RSU's are the same as those used to calculate the fair value of options issued under the employee share option plan.

As of 31 December 2016, total compensation cost related to unvested market restricted share units granted to employees not yet recognised was nil (2015: \$0.3 million) net of estimated forfeitures.

Restricted share units activity

The following table summarises restricted share units activity:

	Number of restricted share units outstanding	Weighted average ordinary fair value per share at grant date
Outstanding—1 January 2016	1,132,145	21.35
Granted	1,555,250	19.45
Paid	(1,280,698)	20.38
Forfeited	(1,406,697)	20.03
Outstanding—31 December 2016	—	—

As of 31 December 2016, total compensation cost related to unvested restricted share units granted to employees not yet recognised was nil (2015: USD 6.0 million), net of forfeitures.

32. FINANCIAL RISK MANAGEMENT

The Group's classes of financial instruments correspond with the line items presented in the consolidated statement of financial position.

The management of the Group identifies the financial risks that may have adverse impact on the business objectives and through active risk management mitigates these risks to an acceptable level.

The particular risks related to the Group's financial assets and liabilities and sales and expenses are interest rate risk, credit risk and exposure to the fluctuations of foreign currency.

Credit risk

The outstanding balances of receivables are monitored on a regular basis, and the aim of management is to minimise the credit risk exposure to any single counterparty or group of similar counterparties. The credit quality of larger customers is assessed based on the credit rating and individual credit limits are defined in accordance with the assessment.

The Group did not issue any guarantees or credit derivatives. The ageing of receivables is regularly monitored by Group management. The Group does not consider the credit risk related to cash balances to be material.

At 31 December 2016, there was only one customer that accounted for more than 10% of the Company's trade and other receivables balance, Yahoo represented 16% or \$6.4 million of trade and other receivables.

At 31 December 2016, there was only one customer that accounted for more than 10% of the Company's trade and other receivables balance; Yahoo! represented 16%, or \$6.7 million of trade and other receivables.

Foreign currency risk

At the parent company level, the functional and presentation currency is the US dollar and the Group's revenue and costs are reported in US dollars. The Group is exposed to translation risk resulting from the international sales and costs denominated in currencies other than US dollars and the resulting foreign currency balances held on the balance sheet. The Group is exposed to transaction and translation currency risk from fluctuations in currency rates between USD, GBP, CZK and EUR.

The following table shows revenues in individual currencies, as recorded in the statement of comprehensive income.

	2015	2016
USD	70%	62%
EUR	11%	12%
GBP	12%	11%
CZK	1%	2%
Other	6%	13%
Total	100%	100%

The Group enters into foreign exchange contracts to economically hedge transactional exposures between the US dollar and exposure currencies, reducing most our exposures but not eliminating them.

The following table shows financial assets and liabilities in individual currencies, net (\$ M):

	2015	2016
USD	(209.4)	(46.3)
EUR	29.5	23.7
GBP	6.6	1.9
CZK	(2.9)	(1.5)
Other	7.0	10.2
Total	(169.2)	(12.0)

(USD '000)	% change	31 December 2015	31 December 2016
EUR	+/-10%	3.0 / (3.0)	2.4 / (2.4)
GBP	+/-10%	0.7 /(0.7)	0.2 / (0.2)
CZK	+/-10%	(0.3) / 0.3	(0.2) / 0.2
Other	+/-10%	0.7 / (0.7)	1.0 / (1.0)

The sensitivity analysis above is based on the consolidated assets and liabilities, i.e. excludes intercompany receivables and payables.

Interest rate risk

Cash held by the Group is not subject to any material interest. There are no liabilities held by the Company as of 31 December 2016 that is subject to a material interest rate risk. The discount rates used in calculating lease liabilities (see Note 33) and provisions (see Note 23) represent implicit interest rates used only to determine the present value of liabilities. The liabilities and provisions themselves are not subject to interest rate risk. The Group keeps all its available cash in current bank accounts or term deposit contracts (see Note 18) with a fixed interest rate and maturity not exceeding three months.

Liquidity risk

The Group performs regular monitoring of its liquidity position to keep sufficient financial sources to settle its liabilities and commitments. The Group is dependent on a long-term credit facility and so it must ensure that is compliant with its terms. As it generates positive cash flow from operating activities the Group is able to cover the normal operating expenditures, pay outstanding short-term liabilities as they fall due without requiring additional financing and has sufficient funds to make meet the capital expenditure requirement. The Group considers the impact on liquidity each time it makes an acquisition in order to ensure it does not adversely affect its ability to meet the financial obligation as they fall due.

As at 31 December 2015 and 2016, the Group's current ratio (current assets divided by current liabilities) was 0.74 and 0.39, respectively.

The following table shows the ageing structure of financial liabilities as of 31 December 2015 (\$ M):

	On demand	within 12 months	1 to 5 years	> 5 years	Total
Term loan	—	2.3	225.4	—	227.7
Interest payment	—	13.5	49.6	—	63.1
Lease liability	—	1.8	4.1	—	5.9
Provisions	—	4.1	1.0	—	5.1
Trade and other payables	—	33.4	—	—	33.4
Redeemable equity instruments	—	16.8	—	—	16.8
Deferred acquisition payments	—	1.6	0.5	—	2.1
Income tax liability	—	1.1	—	—	1.1
Other financial liabilities	—	1.8	2.3	—	4.1
Other non-current liabilities		—	—	0.9	0.9
Total	—	76.4	282.9	0.9	360.2

The following table shows the ageing structure of financial liabilities as of 31 December 2016 (\$ M):

	On demand	within 12 months	1 to 5 years	> 5 years	Total
Loan with Avast Software B.V	38.5	—	—	—	38.5
Finance Lease liability	—	1.6	4.3	—	5.9
Provisions	—	26.9	0.9	—	27.8
Trade and other payables	—	25.6	—	—	25.6
Deferred acquisition payments	—	1.3	—	—	1.3
Income tax liability	—	6.0	—	—	6.0
Other financial liabilities	—	0.1	—	—	0.1
Other non-current liabilities	—	—	—	0.9	0.9
Total	38.5	61.5	5.2	0.9	106.1

The Credit Facility is collateralised by certain tangible, intangible, and current assets of the Company with covenants obliging the Company to also pledge new assets over a certain threshold. The collateral granted by the borrower and certain of its subsidiaries includes, without limitation, present and future pledges, mortgages, first priority floating and fixed charges and security interests with respect to, but not limited to, equity rights, shares and related rights (ownership interests), fixed assets, intellectual property rights (trademarks, copyrights and patents), intercompany and trade receivables, bank accounts, insurance claims and commercial claims.

Capital management

The Company monitors capital using net liability position and gearing (net liability position divided by the sum of net liability position and equity). The Company includes within net liability position all current and non-current liabilities, less cash and cash equivalents.

(USD '000)	31 December 2015	31 December 2016
Current and non-current liabilities	589.2	343.6
Less: cash and short—term deposits	(123.8)	(33.2)
Net liability position	465.4	310.4
Equity	99.6	195.3
Gearing ratio	82.4%	61.4%

33. COMMITMENTS

The Group incurred a lease expense of \$10.5 million for the year ended 31 December 2015. The minimum future rentals on operating leases are as follows as of 31 December 2015:

	Less than 1 year	1 to 5 years	> 5 years	Total
Lease	9.9	22.8	8.3	41.0
Sublease income	(0.4)	(1.1)	(0.2)	(1.7)
Net lease	9.5	21.7	8.1	39.3

The Group incurred \$12.9 million of lease expense for the year ended 31 December 2016. The minimum future rentals on operating leases are as follows as of 31 December 2016:

	Less than 1 year	1 to 5 years	> 5 years	Total
Lease	9.2	29.6	12.1	50.9
Sublease income	(0.4)	(2.1)	(0.2)	(2.7)
Net lease	8.8	27.5	11.9	48.2

The Group recorded a lease liability of \$5.9 million which represents deferred costs of lease incentives granted by the lessor. Out of the total amount, \$1.6 million is presented as a current lease liability and \$4.3 million as non-current lease liability.

34. SUBSEQUENT EVENTS

As part of the integration of the Company with Avast Group, three Dutch AVG legal entities were successively merged through a series of statutory mergers into Avast Software B.V. On 30 August 2017, AVG Technologies Holdings B.V. merged with AVG Netherlands B.V., with AVG Technologies Holdings B.V. being the surviving company. On 31 August 2017, AVG Technologies B.V. merged with AVG Technologies Holdings B.V., with AVG Technologies B.V. being the surviving company. On 1 September 2017, Avast Software B.V. merged with AVG Technologies B.V., with Avast Software B.V. being the surviving company.

At 30 September 2016, the Group recorded a legal provision of \$7.7 million for potential legal disputes over alleged patent infringement. On 24 March 2017, a settlement of \$7.7 was paid. The provision was used as of 31 March 2017 with a nil impact in the statement of comprehensive income.

The Company repaid \$38.5 million of the loan from Avast Software B.V. in the first quarter of 2017, thereby fully repaying the loan.

PART 12 UNAUDITED PRO FORMA FINANCIAL INFORMATION

Section A—Unaudited pro forma financial information

The unaudited pro forma statement of net assets set out below has been prepared to illustrate the effects of the Global Offer and the repayment and repricing of the Group's existing credit agreement on the consolidated net assets of the Group as at 31 December 2017 as if they had taken place on that date. The unaudited pro forma net assets statement is based on the audited consolidated net assets of the Group as at 31 December 2017 and has been prepared in a manner consistent with the accounting policies adopted by the Group in preparing its historical financial information for the period ending 31 December 2017.

		Adjustments




































NET ASSETS	435.1	170.0	—	605.1

Notes

⁽¹⁾ The net assets of the Group as at 31 December 2017 has been extracted without material adjustment from the historical financial information set out in Part 11— "Historical Financial Information".

⁽²⁾ The adjustment reflects the receipt by the Group of the net proceeds of the Global Offer of £125.3 million based on 58,977,478 Ordinary Shares being issued by the Company at an Offer Price of 250 pence (gross proceeds of £147.4 million (\$200.0 million) less estimated expenses payable by the Company of \$30.0 million. The estimated costs of the Global Offer are the estimated costs and fees incurred in respect of the Global Offer, relating principally to investment banking, underwriting commissions, legal and accounting fees. The gross and net proceeds from the Global Offer have been converted from £ to \$ at the exchange rate of £1.00000 per \$1.35645, being the Thomson Reuters hourly fix rate published at 12:05pm (London time) on 9 May 2018.

⁽³⁾ The Company intends to use the net proceeds of the Global Offer, as set out in Part 13 "Details of the Global Offer", along with existing cash and cash equivalents to repay \$300 million of the dollar term loan as part of the repricing of its credit agreement. The Company expects to pay and capitalise \$3.1 million of fees in connection with the repricing agreement.

⁽⁴⁾ No adjustment has been made to reflect any change in the trading performance of the Group since 31 December 2017, nor of any other event, save as disclosed above.

Section B—Accountant's report on the unaudited pro forma statement of net assets

The Directors Avast plc 110 High Holborn London WC1V 6JS

10 May 2018

Dear Sirs

We report on the unaudited pro forma statement of net assets(the "Pro Forma Financial Information") set out in Part 12 of the Prospectus of Avast plc (the "Company") dated 10 May 2018 which has been prepared on the basis described in the notes 1 to 4 in Part 12 of the Prospectus, for illustrative purposes only, to provide information about how the Global Offer and the Repayment and Repricing of Existing Credit Agreement might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the Avast B.V. historical financial information for the period ended 31 December 2017 included in Section A of Part 11 of the Prospectus. This report is required by item 7 of Annex II of Commission Regulation (EC) No 809/2004 and is given for the purpose of complying with that item and for no other purpose.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to Commission Regulation (EC) No 809/2004, consenting to its inclusion in the Prospectus.

Responsibilities

It is the responsibility of the directors of the Company to prepare the Pro Forma Financial Information in accordance with item items 1 to 6 of Annex II of Commission Regulation (EC) No 809/2004.

It is our responsibility to form an opinion, as required by item 7 of Annex II of the Commission Regulation (EC) No 809/2004, as to the proper compilation of the Pro Forma Financial Information and to report that opinion to you.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro Forma Financial Information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro Forma Financial Information with the directors of the Company.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro Forma Financial Information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company.

Opinion

In our opinion:

the Pro Forma Financial Information has been properly compiled on the basis stated; and
such basis is consistent with the accounting policies of the Company.

Declaration

For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of Commission Regulation (EC) No 809/2004.

Yours faithfully

Ernst & Young LLP

PART 13 DETAILS OF THE GLOBAL OFFER

Background

The Company is currently a private limited company with the name Avast Limited. In accordance with section 755 of the Companies Act 2006, as amended (the "Act"), and as part of the terms of the Global Offer, it has undertaken to re-register as a public limited company with the name Avast plc prior to Admission.

Pursuant to the Global Offer, the Company intends to issue 58,977,478 New Shares, raising proceeds of £125.3 million, net of base underwriting commissions and other estimated fees and expenses of approximately £22.1 million. The New Shares will represent approximately 6.2% of the expected issued ordinary share capital of the Company immediately following Admission.

Approximately 151,755,238 Existing Shares are expected to be sold by the Major Shareholders and 30,060,186 Existing Shares are expected to be sold by Equiniti Financial Services Limited (acting as agent for and on behalf of the other Selling Shareholders under the Respective Deeds of Election). In addition, a further 36,118,935 Over-allotment Shares are being made available by the Over-allotment Shareholders pursuant to the Overallotment Option described below.

The Existing Shares will be diluted by the issue of 58,977,478 New Shares pursuant to the Global Offer. Assuming full exercise of the Over-allotment Option, the New Shares and the Existing Shares to be sold pursuant to the Global Offer will represent approximately 31.0% of the existing Share capital of the Company immediately prior to Admission, and approximately 29.1% of the enlarged Share capital of the Company immediately following Admission, including the Shares being subscribed for by the Independent Non-Executive Directors on Admission.

In the Global Offer, Shares will be offered (i) to certain qualified investors in certain states of the European Economic Area, including to certain institutional investors in the United Kingdom and elsewhere outside the United States and (ii) in the United States only to qualified institutional buyers in reliance on Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act.

Certain restrictions that apply to the distribution of this Prospectus and the Shares being issued and sold under the Global Offer in jurisdictions outside the United Kingdom are described below.

When admitted to trading, the Shares will be registered with ISIN GB00BDD85M81 and SEDOL (Stock Exchange Daily Official List) number BDD85M8 and trade under the symbol "AVST".

Immediately following Admission, it is expected that in excess of 25.3% of the Company's issued ordinary share capital will be held in public hands (within the meaning of paragraphs 6.14.1R to 6.14.3R of the Listing Rules) assuming that no Over-allotment Shares are acquired pursuant to the Over-allotment Option (increasing to 29.1% if the maximum number of Over-allotment Shares are acquired pursuant to the Over-allotment Option).

The rights attaching to the Shares will be uniform in all respects and they will form a single class for all purposes.

The Shares allocated under the Global Offer have been underwritten, subject to certain conditions, by the Underwriters as described in the paragraph headed "Underwriting arrangements" below and in paragraph 10 of Part 14—"Additional Information".

Use of proceeds

The Company expects to receive gross proceeds of approximately £147.4 million from the issue of New Shares in the Global Offer before estimated base underwriting commissions and other estimated fees and expenses incurred in connection with the Global Offer of approximately £22.1 million. As a result, the Company expects to receive net proceeds of approximately £125.3 million from the Global Offer.

The Company intends to use the net proceeds from the issue of the New Shares to redeem the Redeemable Shares (defined in Part 14) reduce the Group's overall indebtedness and repay debt on its outstanding dollar term loan facility under a credit agreement dated 30 September 2016, which is expected to provide the Company with greater financial flexibility to drive the future growth of the business. As of 31 December 2017, the outstanding amount under the dollar term loan facility was \$1,214 million.

The sale of the Sale Shares is being conducted to provide the Selling Shareholders with an opportunity for a partial realisation of their respective investment in the Company. As such, the Company will not receive any portion of the proceeds from the sale of Existing Shares by the Selling Shareholders.

The Company will also not receive any proceeds from the sale of the Over-Allotment Shares by the Over-Allotment Shareholders.

Reasons for the Global Offer

The Group believes that the Global Offer will:

further increase the Group's profile, brand recognition and credibility with its users, suppliers and employees;
assist in recruiting, retaining and incentivising key management and employees; and
provide the Selling Shareholders with a partial realisation of their investment in the Group.

Allocation and pricing

Allocations under the Global Offer will be determined at the sole discretion of the Company and the Selling Shareholders after having received a recommendation from, and having consulted with, the Joint Global Co-ordinators. All Shares issued or sold pursuant to the Global Offer will be issued or sold, payable in full, at the Offer Price. Liability for UK stamp duty and stamp duty reserve tax is described in paragraph 15.3 of Part 14—"Additional Information". There is no minimum or maximum number of Shares which can be applied for.

A number of factors will be considered in determining the Offer Price and the basis of allocation, including the level and nature of demand for Shares and the objective of establishing an orderly after market in the Shares.

Upon accepting any allocation, prospective investors will be contractually committed to acquire the number of shares allocated to them at the Offer Price and, to the fullest extent permitted by law, will be deemed to have agreed not to exercise any rights to rescind or terminate, or withdraw from, such commitment. Dealing may not begin before notification is made.

Dealing arrangements

Application has been made to the FCA for the Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for such Shares to be admitted to trading on the London Stock Exchange's main market for listed securities.

Conditional dealings in the Shares are expected to commence on the London Stock Exchange on 10 May 2018. Dealings on the London Stock Exchange before Admission will only be settled if Admission takes place. The earliest date for such settlement of such dealings will be 15 May 2018. It is expected that Admission will become effective, and that unconditional dealings in the Shares will commence on the London Stock Exchange at 8.00 a.m. (London time) on 15 May 2018. Settlement of dealings from that date will be on a two-trading day rolling basis. All dealings before the commencement of unconditional dealings will be on a "when issued basis" and of no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned. These dates and times may be changed without further notice.

Each investor in the underwritten portion of the Global Offer will be required to undertake to pay the Offer Price for the Shares issued or sold to such investor in such manner as shall be directed by the Joint Global Co-ordinators.

It is expected that Shares allocated to investors in the Global Offer will be delivered in uncertificated form and settlement will take place through CREST on Admission. No temporary documents of title will be issued. Dealings in advance of crediting of the relevant CREST stock account shall be at the risk of the person concerned.

Over-allotment and stabilisation

In connection with the Global Offer, Morgan Stanley & Co. International plc, as Stabilising Manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Shares or effect other stabilising transactions with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings in the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. In no event will measure be taken to stabilise the market price of the Shares above the Offer Price. Except as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilising transactions conducted in relation to the Global Offer.

In connection with the Global Offer, the Stabilising Manager may, for stabilisation purposes, over-allot Shares up to a maximum of 15% of the total number of Shares comprised in the Global Offer. For the purposes of allowing the Stabilising Manager to cover short positions resulting from any such overallotments and/or from sales of Shares effected by it during the stabilising period, the Over-allotment Shareholders will have granted to the Stabilisation Manager the Over-allotment Option, pursuant to which the Stabilising Manager may purchase or procure purchasers for additional Shares up to a maximum of 15% of the Over-allotment Shares at the Offer Price. The Over-allotment Option will be exercisable in whole or in part, upon notice by the Stabilising Manager, at any time on or before the 30th calendar day after the commencement of conditional dealings of the Shares on the London Stock Exchange. Any Over-allotment Shares made available pursuant to the Over-allotment Option will rank pari passu in all respects with the Shares, including for all dividends and other distributions declared, made or paid on the Shares, will be purchased on the same terms and conditions as the Shares being issued or sold in the Global Offer and will form a single class for all purposes with the other Shares.

For a discussion of certain stock lending arrangements entered into in connection with the Over-allotment Option, see paragraph 10.2 of Part 14—"Additional Information—Stock lending agreement".

CREST

CREST is a paperless settlement system allowing securities to be transferred from one person's CREST account to another's without the need to use share certificates or written instruments of transfer. With effect from Admission, the Articles will permit the holding of Shares in the CREST system.

Application has been made for the Shares to be admitted to CREST with effect from Admission. Accordingly, settlement of transactions in the Shares following Admission may take place within the CREST system if any shareholder so wishes. CREST is a voluntary system and holders of Shares who wish to receive and retain share certificates will be able to do so.

Withdrawal rights

In the event that the Company is required to publish any supplementary prospectus at any time before Admission, investors who have applied for Shares shall have at least two clear business days following publication of the relevant supplementary prospectus within which to withdraw their offer to subscribe for or purchase Shares in its entirety. The right to withdraw an application to subscribe for or purchase Shares in these circumstances will be available to all investors in the Global Offer and may be effected by instantaneous electronic communication to the Company. If the application is not withdrawn within the time limits set out in the relevant supplementary prospectus, any offer to subscribe for or purchase Shares will remain valid and binding.

Underwriting arrangements

The Underwriters have entered into commitments under the Underwriting Agreement pursuant to which they have agreed, subject to certain conditions, to procure subscribers for the New Shares to be issued by the Company and purchasers for the Existing Shares to be sold by the Major Shareholders and Equiniti Financial Services Limited (acting as agent for the other Selling Shareholders pursuant to the Deeds of Election) in the Global Offer, or, failing which, for the Underwriters to subscribe for or purchase such Shares, at the Offer Price. The Underwriting Agreement contains provisions entitling the Underwriters to terminate the Underwriting Agreement (and the arrangements associated with it) at any time prior to Admission in certain circumstances. If this right is exercised, the Underwriting Agreement and these arrangements will lapse and any moneys received in respect of the Global Offer will be returned to applicants without interest. The Underwriting Agreement provides for the Underwriters to be paid commission in respect of the Shares issued and sold in the

Global Offer, including any Over-allotment Shares sold following exercise of the Over-allotment Option. Any commissions received by the Underwriters may be retained, and any Shares acquired by them may be retained or dealt in, by them, for their own benefit.

Further details of the terms of the Underwriting Agreement are set out in paragraph 10.1 of Part 14—"Additional Information—Underwriting arrangements". Certain selling and transfer restrictions are set out below.

Lock-up arrangements

Pursuant to the Underwriting Agreement, the Company has agreed that, subject to the exceptions set out in paragraph 10.1.4 of Part 14—"Additional Information", during the period of 180 days from the date of Admission, it will not, without the prior written consent of the Joint Global Co-ordinators or the majority of the Underwriters, issue, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein or in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing.

Pursuant to the Underwriting Agreement and the Deeds of Election, the Selling Shareholders, the Directors and certain members of the Company's management team have agreed that, subject to certain exceptions, during the period of 180 days in respect of the other Major Shareholders, and 360 days in respect of the other Directors and other Selling Shareholders in each case from the date of Admission, they will not, without the prior written consent of the Joint Global Co-ordinators or the majority of the Underwriters, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing.

Further details of these arrangements, which are contained in the Underwriting Agreement, are set out in paragraph 10 of Part 14—"Additional Information—Underwriting arrangements".

Selling restrictions

The distribution of this Prospectus and the offer of Shares in certain jurisdictions may be restricted by law and therefore persons into whose possession this Prospectus comes should inform themselves about and observe any restrictions, including those set out in the paragraphs that follow. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

No action has been or will be taken in any jurisdiction that would permit a public offering of the Shares, or possession or distribution of this Prospectus or any other offering material in any country or jurisdiction where action for that purpose is required. Accordingly, the Shares may not be offered or sold, directly or indirectly, and neither this Prospectus nor any other offering material or advertisement in connection with the Shares may be distributed or published in or from any country or jurisdiction except in circumstances that will result in compliance with any and all applicable rules and regulations of any such country or jurisdiction. Persons into whose possession this Prospectus comes should inform themselves about and observe any restrictions on the distribution of this Prospectus and the offer of Shares contained in this Prospectus. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. This Prospectus does not constitute an offer to subscribe for or purchase any of the Shares to any person in any jurisdiction to whom it is unlawful to make such offer of solicitation in such jurisdiction.

European Economic Area

In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") no Shares have been offered or will be offered pursuant to the Global Offer to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that offers of Shares may be made to the public in that Relevant Member State at any time under the following exemptions under the Prospectus Directive, if they are implemented in that Relevant Member State:

(a) to any legal entity which is a qualified investor as defined under the Prospectus Directive;

(b) to fewer than 100, or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons in a Relevant Member State (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the Joint Global Co-ordinators; or
(c) in any other circumstances which do not require the publication by the Company of a prospectus pursuant to Article 3(2) of the Prospectus Directive,

provided that no such offer of Shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a Relevant Member State or of a supplement to a prospectus pursuant to Article 16 of the Prospectus Directive and each person who initially acquires Shares or to whom any offer is made will be deemed to have represented, warranted and agreed to and with the Underwriters and the Company that it is a "qualified investor" within the meaning of the law in that relevant EEA Member State which has implemented Article 2(1)(e) of the Prospectus Directive.

In the case of any Shares being offered to a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, such financial intermediary will also be deemed to have represented, acknowledged and agreed that the Shares subscribed for or acquired by it in the Global Offer have not been subscribed for or acquired on a non-discretionary basis on behalf of, nor have they been subscribed for or acquired with a view to their offer or resale to persons in circumstances which may give rise to an offer of any Shares to the public other than their offer or resale in a Relevant Member State to qualified investors (as so defined) or in circumstances in which the prior consent of the Underwriters has been obtained to each such proposed offer or resale. The Company, the Directors, the Selling Shareholders, the Banks and their affiliates, and others will rely upon the truth and accuracy of the foregoing representation, acknowledgement and agreement. Notwithstanding the above, a person who is not a qualified investor and who has notified the Underwriters of such fact in writing may, with the consent of the Underwriters, be permitted to subscribe for or purchase Shares in the Global Offer.

For the purposes of this provision, the expression an "offer to the public" in relation to any Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any Shares to be offered so as to enable an investor to decide to purchase any Shares, as the same may be varied in that member state by any measure implementing the Prospectus Directive in that member state. The expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

United States

The Shares have not been and will not be registered under the U.S. Securities Act or under any applicable securities laws or regulations of any state of the United States and, subject to certain exceptions, may not be offered or sold within the United States except to persons reasonably believed to be QIBs in reliance on Rule 144A or another exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. The Shares are being offered and sold outside the United States in offshore transactions in reliance on Regulation S.

In addition, until 40 days after the commencement of the Global Offer of the Shares an offer or sale of Shares within the United States by any dealer (whether or not participating in the Global Offer) may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the U.S. Securities Act.

The Underwriting Agreement provides that the Underwriters may directly or through their respective United States broker-dealer affiliates arrange for the offer and resale of Shares within the United States only to QIBs in reliance on Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the U.S. Securities Act.

Each acquirer of Shares that are part of the underwritten portion of the Global Offer within the United States, by accepting delivery of this Prospectus, will be deemed to have represented, agreed and acknowledged that it has received a copy of this Prospectus and such other information as it deems necessary to make an investment decision and that:

(a) it is (a) a QIB within the meaning of Rule 144A, (b) acquiring the Shares for its own account or for the account of one or more QIBs with respect to whom it has the authority to make, and does make, the representations and warranties set forth herein, (c) acquiring the Shares for investment purposes, and not with a view to further distribution of such Shares, and (d) aware, and each beneficial owner of the Shares has been advised, that the sale of the Shares to it is being made in reliance on Rule 144A or in reliance on another exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act.

(b) it understands that the Shares are being offered and sold in the United States only in a transaction not involving any public offering within the meaning of the U.S. Securities Act and that the Shares have not been and will not be registered under the U.S. Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold, pledged or otherwise transferred except (a) to a person that it and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, or another exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act, (b) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S, (c) pursuant to an exemption from registration under the U.S. Securities Act provided by Rule 144 thereunder (if available) or (d) pursuant to an effective registration statement under the U.S. Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. It further (a) understands that the Shares may not be deposited into any unrestricted depositary receipt facility in respect of the Shares established or maintained by a depositary bank, (b) acknowledges that the Shares (whether in physical certificated form or in uncertificated form held in CREST) are "restricted securities" within the meaning of Rule 144(a)(3) under the U.S. Securities Act and that no representation is made as to the availability of the exemption provided by Rule 144 for resales of the Shares and (c) understands that the Company may not recognise any offer, sale, resale, pledge or other transfer of the Shares made other than in compliance with the above-stated restrictions.
(c) it understands that the Shares (to the extent they are in certificated form), unless otherwise determined by the Company in accordance with applicable law, will bear a legend substantially to the following effect:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON THAT THE SELLER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE U.S. SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE U.S. SECURITIES ACT FOR RESALES OF THE SHARES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THE SHARES REPRESENTED HEREBY MAY NOT BE DEPOSITED INTO ANY UNRESTRICTED DEPOSITARY RECEIPT FACILITY IN RESPECT OF THE SHARES ESTABLISHED OR MAINTAINED BY A DEPOSITARY BANK. EACH HOLDER, BY ITS ACCEPTANCE OF SHARES, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING RESTRICTIONS; and
(d) it represents that if, in the future, it offers, resells, pledges or otherwise transfers such Shares while they remain "restricted securities" within the meaning of Rule 144, it shall notify such subsequent transferee of the restrictions set out above.

The Company, the Underwriters and their affiliates and others will rely on the truth and accuracy of the foregoing acknowledgements, representations and agreements.

Canada

The Shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Shares must be made in

accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this Prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the Underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Australia

This Prospectus does not constitute a prospectus or other disclosure document under the Corporations Act 2001 (Cth) ("Australian Corporations Act") and does not purport to include the information required of a disclosure document under the Australian Corporations Act. This Prospectus has not been, and will not be, lodged with the Australian Securities and Investments Commission (whether as a disclosure document under the Australian Corporations Act or otherwise). Any offer in Australia of the Shares under this Prospectus or otherwise may only be made to persons who are "sophisticated investors" (within the meaning of section 708(8) of the Australian Corporations Act), to "professional investors" (within the meaning of section 708(11) of the Australian Corporations Act) or otherwise pursuant to one or more exemptions under section 708 of the Australian Corporations Act so that it is lawful to offer the Shares in Australia without disclosure to investors under Part 6D.2 of the Australian Corporations Act.

Any offer for on-sale of the Shares that is received in Australia within 12 months after their issue by the Company is likely to need prospectus disclosure to investors under Part 6D.2 of the Australian Corporations Act, unless such offer for on-sale in Australia is conducted in reliance on a prospectus disclosure exemption under section 708 of the Australian Corporations Act or otherwise. Any persons acquiring Shares should observe such Australian on-sale restrictions.

The Company is not licensed in Australia to provide financial product advice in relation to the Shares. Any advice contained in this Prospectus is general advice only. This Prospectus has been prepared without taking account of any investor's objectives, financial situation or needs, and before making an investment decision on the basis of this Prospectus, investors should consider the appropriateness of the information in this Prospectus, having regard to their own objectives, financial situation and needs. No cooling off period applies to an acquisition of the Shares.

Japan

The Shares have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended; the FIEA). Neither the Shares nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or entity organised under the laws of Japan), or to others for reoffering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.

Hong Kong

This Prospectus has not been approved by or registered with the Securities and Futures Commission of Hong Kong or the Registrar of Companies of Hong Kong. No person may offer or sell in Hong Kong, by means of any document, any Shares other than (i) to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance, or (ii) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance.

No person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Shares which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

Switzerland

The Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange ("SIX") or on any other stock exchange or regulated trading facility in Switzerland.

The Prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under article 652a or article 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under article 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither the Prospectus nor any other offering or marketing material relating to the Shares or the Global Offer may be publicly distributed or otherwise made publicly available in Switzerland.

Neither the Prospectus nor any other offering or marketing material relating to the Global Offer, the Company or the Shares has been or will be filed with, and the offer of the Shares will not be supervised by, the Swiss Finance Market Supervisory Authority FINMA, and the offer of the Shares has not been and will not be authorised under the Swiss Federal Act on collective investment schemes ("CISA"). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the Shares.

Singapore

This Prospectus has not been and will not be registered as a prospectus with the Monetary Authority of Singapore and the securities will be offered pursuant to exemptions under the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"). Accordingly, this Prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Shares may not be circulated or distributed, nor may the Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 27 4 of the SFA; (2) to a relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the Shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) (as defined in Section 4A of the SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries' rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the securities under Section 275 of the SFA except:

i. to an institutional investor or to a relevant person defined in Section 275(2) of the SFA or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
ii. where no consideration is or will be given for the transfer;
iii. where the transfer is by operation of law;
iv. as specified in Section 276(7) of the SFA;
v. or as specified in Regulation 32 of the Securities and Futures (Offers and Investments) (Shares and Debentures) Regulations 2005 of Singapore.

DIFC

This Prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority ("DFSA"). This Prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this Prospectus nor taken steps to verify the information set forth herein and has no responsibility for the Prospectus. The Shares to which this Prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Shares offered should conduct their own due diligence on the Shares. If you do not understand the contents of this Prospectus you should consult an authorised financial advisor.

Information to Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Shares have been subject to a product approval process, which has determined that the Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, Distributors should note that: the price of the Shares may decline and investors could lose all or part of their investment; the Shares offer no guaranteed income and no capital protection; and an investment in the Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Global Offer. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Underwriters will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Shares.

Each distributor is responsible for undertaking its own target market assessment in respect of the Shares and determining appropriate distribution channels.

PART 14 ADDITIONAL INFORMATION

1. INCORPORATION AND SHARE CAPITAL

1.1 The Company was incorporated and registered in England and Wales on 7 January 2010 as a private company limited by shares under the Act with the name Avast Limited and with the registered number 07118170.
1.2 The principal laws and legislation under which the Company operates and the ordinary shares have been created are the Act and regulations made thereunder.
1.3 The Company's registered office is at 110 High Holborn, London WC1V 6JS, United Kingdom and its principal place of business is at Enterprise Office Center, Pikrtova 1737/1A, 140 00 Prague 4, Czech Republic. The Company's telephone number is +420 247 005 666.
1.4 On incorporation the share capital of the Company was £1.00 being one ordinary share of £1.00 which was allotted to Simon McManus. One subscriber share was issued for cash consideration at par pursuant to the authority to issue shares set out in the Company's articles of association.
1.5 On 18 April 2018, the Company's one ordinary share of £1.00 was transferred by Simon McManus (of Safenames Ltd) to Sybil Holdings S.à.r.l.
1.6 In accordance with section 755 of the Act and as part of the terms of the Global Offer, the Company re-registered as a public limited company with the name Avast plc on 3 May 2018.
1.7 On 3 May 2018, Sybil Holdings S.à.r.l. subscribed for 50,000 redeemable non-voting preference shares of £1.00 each in the Company (the "Redeemable Shares"). The Company's one ordinary share of £1.00 will be converted into and re-designated as a subscriber share (the "Subscriber Share"), the rights attaching to which will be deferred upon the New Shares in connection with the Global Offer being admitted to the Official List and to trading on the Main Market of the London Stock Exchange. It is expected that, following Admission, the Redeemable Shares will be redeemed and the Subscriber Share will be repurchased by the Company at its nominal value and then cancelled.
1.8 Effective upon Admission, the shares of Avast Holding B.V. will be transferred to the Company as described in paragraph 2 below and the Company will become the new holding company of the Group.
1.9 Immediately prior to Admission and assuming that the Reorganisation described in paragraph 2 of Part 14 below has been completed in full, the issued share capital of the Company will be £89.4 million, comprising 893,661,707 Shares of 10 pence each, (all of which were fully paid or credited as fully paid). Immediately following completion of the Global Offer, the issued share capital of the Company is expected to be £95.3 million comprising 952,639,185 Shares of 10 pence each (all of which will be fully paid or credited as fully paid).
1.10 On 9 May 2018, the Company's sole member resolved at a general meeting:
1.10.1 in substitution for any prior authority conferred upon the Board, the Board be generally and unconditionally authorised for the purposes of section 551 of the Act and in relation to article 11 of the Articles so that the Board may exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for or to convert any security into shares in the Company up to and including 844,058,216 ordinary shares of £0.10 in the Company in connection with the contribution to the Company of the entire issued share capital of Avast Holding B.V. by the shareholders of Avast Holding B.V., such authority to be conferred for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) at the end of the next annual general meeting of the Company (or, if earlier, at close of business on the date falling 15 months after 9 May 2018), but in each case, during this period the Company may make offers and enter into agreements which would, or might, require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after the authority ends and the directors of the Company may allot or grant rights to subscribe for or convert securities into shares in the Company under any such offer or agreement as if the authority had not ended.
1.10.2 conditional upon Admission, in substitution for any prior authority conferred upon the Board (excluding the authority conferred upon the Board pursuant to the resolution described in paragraph 1.10.1 above), the Board be generally and unconditionally authorised for the purposes of section 551 of the Act and in relation to article 11 of the Articles so that the Board may exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for or to convert any security into shares in the Company:
(a) up to and including 58,977,478 ordinary shares of £0.10 in the Company in connection with the Global Offer;
(b) following Admission:
(i) up to an aggregate nominal amount of £31,754,639.50 (such amount to be reduced by the nominal amount of any shares in the Company or rights to subscribe for or convert any security into shares in the Company granted under sub-paragraph (ii) below in excess of such sum); and
(ii) comprising equity securities (as defined in section 560(1) of the Act) up to an aggregate nominal amount of £63,509,279 (such amount to be reduced by any allotments of any shares in the Company or grants of rights to subscribe for or convert any security into shares in the Company made under sub-paragraph (i) above) in connection with an offer by way of a rights issue:
- (A) to holders of shares in the Company in proportion (as nearly as practicable) to their existing holdings; and
- (B) to people who are holders of other equity securities if this is required by the rights of those securities or, if the Board consider it necessary, as permitted by those securities,

and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter,

the authorities described in 1.10.1 and 1.10.2 to be conferred for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) at the end of the next annual general meeting of the Company (or, if earlier, at close of business on the date falling 15 months after the resolution is passed), but in each case, during this period the Company may make offers and enter into agreements which would, or might, require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after the authority ends and the Board may allot or grant rights to subscribe for or convert securities into shares in the Company under any such offer or agreement as if the authority had not ended.

1.10.3 in substitution for any prior power conferred upon the Board, the power conferred on the Board by sections 570(1) and 573 of the Act and article 11 of the Articles be so conferred so that the Board may exercise all the powers of the Company to allot equity securities (as defined in section 560(1) of the Companies Act 2006) for cash under the section 551 authority as if section 561 of the Companies Act 2006 did not apply to any such allotment, such power to be limited:
(a) to the allotment of up to and including 58,977,478 ordinary shares of £0.10 in the Company in connection with the Global Offer;
(b) to the allotment of equity securities for cash in connection with an offer of, or invitation to apply for, equity securities (but in the case of the authority described in sub-paragraph (b)(ii) of 1.10.2 above by way of a rights issue only):
- (i) to holders of shares in the Company in proportion (as nearly as practicable) to their existing holdings; and
- (ii) to holders of other equity securities as required by the rights of those securities or as the Board otherwise considers necessary,

(c) to the allotment (otherwise than under paragraph (b) above) of equity securities up to a nominal amount of £4,763,195,

such power to be conferred for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) at the end of the next annual general meeting of the Company (or, if earlier, at close of business on the date falling 15 months after this resolution is passed), but in each case, during this period the Company may make offers and enter into agreements which would, or

might, require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after the power ends and the Board may allot or grant rights to subscribe for or convert securities into shares in the Company under any such offer or agreement as if the power had not ended.

1.10.4 conditional upon Admission, the Company was generally and unconditionally authorised to make market purchases (within the meaning of section 693(4) of the Companies Act 2006) of Shares each subject to the following conditions:
(a) the maximum aggregate number of Shares authorised to be purchased is 9,526,382, representing 10% of the Company's issued ordinary share capital immediately fol1owing Admission;
(b) the minimum price (excluding expenses) which may be paid for each share is £0.10 (being the nominal value of a Share);
(c) the maximum price (excluding expenses) which may be paid for each Share is the higher of (i) 105% of the average of the middle market quotations for the Shares as derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the date on which the Share is contracted to be purchased; and (ii) an amount equal to the higher of the price of the last independent trade of a Share and the highest current independent bid for a Share as derived from the London Stock Exchange Trading System;
(d) the authority shall expire at the end of the next annual general meeting of the Company (or, if earlier at close of business on the date falling 15 months after this resolution is passed) so that the Company may, before the expiry of the authority enter into a contract to purchase Shares which will or may be executed wholly or partly after the expiry of such authority; and
(e) a contract to purchase Shares under this authority may be made before the expiry of this authority, and concluded in whole or in part after the expiry of this authority.
1.10.5 the Company and all companies that are its subsidiaries, at any time up to the end of the next annual general meeting of the Company (or, if earlier, at the close of business on the date that is 15 months after the date this resolution is passed), be authorised, in aggregate, to:
(a) make political donations to political parties and/or independent election candidates not exceeding £100,000 in total;
(b) make political donations to political organisations other than political parties not exceeding £100,000 in total; and
(c) incur political expenditure not exceeding £100,000 in total.
1.11 Save as disclosed above and in paragraphs 6 and 8 below:
1.11.1 no share or loan capital of the Company has, within three years of the date of this Prospectus, been issued or agreed to be issued, or is now proposed to be issued (other than pursuant to the Global Offer), fully or partly paid, either for cash or for a consideration other than cash, to any person;
1.11.2 no commissions, discounts, brokerages or other special terms have been granted by the Company in connection with the issue or sale of any share or loan capital of any such company; and
1.11.3 no share or loan capital of the Company is under option or agreed conditionally or unconditionally to be put under option.
1.12 The Company will be subject to the continuing obligations of the FCA with regard to the issue of shares for cash. The provisions of section 561(1) of the Act (which confer on shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in cash other than by way of allotment to employees under an employees' share scheme as defined in section 1166 of the Act) apply to the issue of shares in the capital of the Company except to the extent such provisions have been disapplied as referred to above.

2. REORGANISATION

In connection with the Global Offer, and as part of the Reorganisation steps set out below, the shares of Avast Holding B.V. will be transferred to the Company immediately prior to Admission, and the Company will become the new holding company prior to Admission.

Prior to the Reorganisation, the shareholding and corporate structure of the major operating subsidiaries and companies referred to in this Prospectus was as follows:

Effective upon Admission, each of the shareholders of Avast Holding B.V. will contribute all of their shares in Avast Holding B.V. in consideration for the issue to them of ordinary shares (with equivalent value) in the share capital of the Company. This is effected by the Company entering into contribution agreements with each of the shareholders of Avast Holding B.V. along with a Dutch notarial deed of transfer.

On 3 May 2018, the Company was re-registered as a public limited company with the name Avast plc.

All of the Reorganisation steps set out above will have been completed prior to Admission.

Following Admission, it is anticipated that the following steps may be implemented ("Post-Admission Reorganisation"):

(a) the Company will use the proceeds from the Global Offer to subscribe for additional shares in Avast Holding B.V., which will in turn subscribe for additional shares in Avast Software B.V.; and
(b) the Company will undertake a capital reduction in order to create additional distributable reserves.

Following completion of the Reorganisation and the Post-Admission Reorganisation, the shareholding and corporate structure of the Company's major operating subsidiaries, the companies involved in the Reorganisation and the Post-Admission Reorganisation and the companies referred to in this Prospectus will be as follows (reflecting the addition of the Company to the holding structure):

3. ARTICLES OF ASSOCIATION

The Articles include provisions to the following effect:

3.1 Share rights

Subject to the provisions of the Act, and without prejudice to any rights attached to any existing shares or class of shares: (i) any share may be issued with such rights or restrictions as the Company may by ordinary resolution determine or, subject to and in default of such determination, as the Board shall determine; and (ii) shares may be issued which are to be redeemed or are liable to be redeemed at the option of the Company or the holder and the Board may determine the terms, conditions and manner of redemption of such shares provided that it does so prior to the allotment of those shares.

3.2 Voting rights

Subject to any rights or restrictions attached to any shares, on a show of hands every member who is present in person shall have one vote and on a poll every member present in person or by proxy shall have one vote for every share of which he is the holder.

No member shall be entitled to vote at any general meeting in respect of a share unless all moneys presently payable by him in respect of that share have been paid.

If at any time the Board is satisfied that any member, or any other person appearing to be interested in shares held by such member, has been duly served with a notice under section 793 of the Act and is in default for the prescribed period in supplying to the Company the information thereby required, or, in purported compliance with such a notice, has made a statement which is false or inadequate in a material particular, then the Board may, in its absolute discretion at any time thereafter by notice to such member direct that, in respect of the shares in relation to which the default occurred, the member shall not be entitled to attend or vote either personally or by proxy at a general meeting or at a separate meeting of the holders of that class of shares or on a poll.

3.3 Dividends and other distributions

Subject to the provisions of the Act, the Company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the Board. Except as otherwise provided by the rights and restrictions attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid, but no amount paid on a share in advance of the date on which a call is payable shall be treated for these purposes as paid on the share.

Subject to the provisions of the Act, the Board may pay interim dividends if it appears to the Board that they are justified by the profits of the Company available for distribution.

If the share capital is divided into different classes, the Board may also pay, at intervals determined by it, any dividend payable at a fixed rate if it appears to the Board that the profits available for distribution justify the payment. If the Board acts in good faith it shall not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on any shares having deferred or non-preferred rights.

No dividend or other moneys payable in respect of a share shall bear interest against the Company unless otherwise provided by the rights attached to the share.

Except as otherwise provided by the rights and restrictions attached to any class of shares, all dividends will be declared and paid according to the amounts paid-up on the shares on which the dividend is paid.

The Board may, if authorised by an ordinary resolution of the Company, offer any holder of shares the right to elect to receive shares, credited as fully paid, by way of scrip dividend instead of cash in respect of the whole (or some part, to be determined by the Board) of all or any dividend.

Any dividend which is and remains unclaimed, or in respect of which the Board determines that payment is to be made to a nominated account but no such account is nominated or payment to such account is rejected, shall, after a period of 12 years from the date when it became due for payment, if the Board so resolves, be forfeited and cease to remain owing by the Company.

Except as provided by the rights and restrictions attached to any class of shares, the holders of the Company's shares will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings. A liquidator may, with the sanction of a special resolution and any other sanction required by the Insolvency Act 1986, divide among the members in specie the whole or any part of the assets of the Company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members.

3.4 Variation of rights

Rights attached to any class of shares may be varied or abrogated with the written consent of the holders of three-quarters in nominal value of the issued shares of the class, or the sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class.

3.5 Lien and forfeiture

The Company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys payable to the Company (whether presently or not) in respect of that share. The Company may sell, in such manner as the Board determines, any share on which the Company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within 14 clear days after notice has been sent to the holder of the share demanding payment and stating that if the notice is not complied with the share may be sold.

The Board may from time to time make calls on the members in respect of any moneys unpaid on their shares. Each member shall (subject to receiving at least 14 clear days' notice) pay to the Company the amount called on his or her shares. If a call or any instalment of a call remains unpaid in whole or in part after it has become due and payable, the board may give the person from whom it is due not less than 14 clear days' notice requiring payment of the amount unpaid together with any interest which may have accrued and any costs, charges and expenses incurred by the Company by reason of such non-payment. The notice shall name the place where payment is to be made and shall state that if the notice is not complied with the shares in respect of which the call was made will be liable to be forfeited.

3.6 Transfer of shares

A member may transfer all or any of his or her certificated shares by an instrument of transfer in any usual form or in any other form which the Board may approve. An instrument of transfer shall be signed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the transferee. An instrument of transfer need not be under seal.

The Board may, in its absolute discretion, refuse to register the transfer of a certificated share which is not a fully paid share, provided that the refusal does not prevent dealings in shares in the Company

from taking place on an open and proper basis. The Board may also refuse to register the transfer of a certificated share unless the instrument of transfer:

3.6.1 is lodged, duly stamped (if stampable), at the office or at another place appointed by the Board accompanied by the certificate for the share to which it relates and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer;
3.6.2 is in respect of one class of share only; and
3.6.3 is in favour of not more than four transferees.

If the Board refuses to register a transfer of a share in certificated form, it shall send the transferee notice of its refusal within two months after the date on which the instrument of transfer was lodged with the Company.

No fee shall be charged for the registration of any instrument of transfer or other document relating to or affecting the title to a share.

Subject to the provisions of the Regulations, the Board may permit the holding of shares in any class of shares in uncertificated form and the transfer of title to shares in that class by means of a relevant system and may determine that any class of shares shall cease to be a participating security.

3.7 Restriction on shares

Where the holder of any shares in the Company, or any other person appearing to be interested in those shares, fails to comply within the relevant period (as defined below) with any notice under section 793 of the Companies Act in respect of those shares (in this sub-section, a "statutory notice"), the Company may give the holder of those shares a further notice (in this sub-section, a "restriction notice") that the Shareholder shall not, nor shall any transferee otherwise than permitted by the articles, be entitled to be present or vote or count as part of the quorum at any general meeting of the Company or separate general meeting of the holders of any class of shares of the Company.

If the Board is satisfied that the default in respect of which the restriction notice was issued no longer continues, any restriction notice shall cease to have effect on or within seven days of that decision. The Company may (at the absolute discretion of the Board) at any time given notice to the Member cancelling, or suspending for a stated period the operation of, a restriction notice in whole or in part.

The relevant period referred to above is the period of 14 days following service of a statutory notice.

Where the restricted shares represent at least 0.25% (in nominal value) of the issued shares of the same class, the restriction notice may also direct that:

(a) any dividend or other monies payable in respect of the restricted shares shall be withheld, bear no interest and shall be payable only when the restriction notice ceases to have effect; and/or
(b) where an offer of the right to elect to receive shares of the Company instead of cash in respect of any dividend has been made, any election make thereunder in respect of such restricted shares shall not be effective; and/or
(c) no transfer of any of the shares held by such Member shall be recognised or registered by the Directors unless the transfer is a permitted transfer or:
(1) the Member is not in default as regards supplying the information required; and
(2) the transfer is of part only of the Member's holding and, when presented for registration, is accompanied by a certificate by the Member in a form satisfactory to the Directors to the effect that after due and careful enquiry the Member is satisfied that none of the shares the subject of the transfer are restricted shares.

3.8 Alteration of share capital

Subject to the Act, the Company may by ordinary resolution increase, consolidate or sub-divide its share capital.

3.9 Purchase of own shares

Subject to the Act and without prejudice to any relevant special rights attached to any class of shares, the Company may purchase any of its own shares of any class in any way and at any price (whether at par or above or below par).

3.10 General meetings

The Board shall convene and the Company shall hold general meetings as annual general meetings in accordance with the requirements of the Act. The Board may call general meetings whenever and at such times and places as it shall determine.

3.11 Directors

3.11.1 Appointment of Directors

Unless otherwise determined by ordinary resolution, the number of Directors shall be not less than two but shall not be subject to any maximum in number. Directors may be appointed by ordinary resolution of Shareholders or by the Board.

3.11.2 No share qualification

A Director shall not be required to hold any shares in the capital of the Company by way of qualification.

3.11.3 Annual retirement of Directors

At every annual general meeting, all Directors at the date of notice of annual general meeting shall retire from office.

3.11.4 Remuneration of Directors

The emoluments of any Director holding executive office for his or her services as such shall be determined by the Board, and may be of any description.

The ordinary remuneration of the Directors who do not hold executive office for their services (excluding amounts payable under any other provision of the Articles) shall not exceed in aggregate \$2.0 million per annum or such higher amount as the Company may from time to time by ordinary resolution determine. Subject thereto, each such Director shall be paid a fee for that service (which shall be deemed to accrue from day to day) at such rate as may from time to time be determined by the Board.

In addition to any remuneration to which the Directors are entitled under the Articles, they may be paid all travelling, hotel and other expenses properly incurred by them in connection with their attendance at meetings of the Board or committees of the Board, general meetings or separate meetings of the holders of any class of shares or of debentures of the Company or otherwise in connection with the discharge of their duties.

The Board may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any past or present Director or employee of the Company or any of its subsidiary undertakings or any body corporate associated with, or any business acquired by, any of them, and for any member of his or her family or any person who is or was dependent on him or her.

3.11.5 Permitted interests of Directors

Subject to the provisions of the Act, and provided that he has disclosed to the Board the nature and extent of his or her interest (unless the circumstances referred to in section 177(5) or section 177(6) of the Act apply, in which case no such disclosure is required), a Director notwithstanding his or her office:

3.11.5.1 may be a party to, or otherwise interested in, any transaction or arrangement with the Company or in which the Company is otherwise (directly or indirectly) interested;
3.11.5.2 may act by himself or for his or her firm in a professional capacity for the Company (otherwise than as auditor), and he or his or her firm shall be entitled to remuneration for professional services as if he or she were not a Director;
3.11.5.3 may be a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate in which the Company is (directly or indirectly) interested as a shareholder or otherwise or with which he has such relationship at the request or direction of the Company; and

3.11.5.4 shall not, by reason of his or her office, be accountable to the Company for any remuneration or other benefit which he derives from any such office or employment or from any such transaction or arrangement or from any interest in any such body corporate the acceptance, entry into or existence of which has been approved by the Board pursuant to Article 144 of the Articles or which he is permitted to hold or enter into by virtue of paragraph 3.10.5.1, 3.10.5.2 or 3.10.5.3.

3.11.6 Restrictions on voting

Except as otherwise provided by the Articles, a Director shall not vote on any resolution of the Board concerning a matter in which he has an interest which can reasonably be regarded as likely to give rise to a conflict with the interests of the Company, unless his or her interest arises only because the resolution concerns one or more of the following matters:

3.11.6.1 the giving of a guarantee, security or indemnity in respect of money lent or obligations incurred by him or any other person at the request of, or for the benefit of, the Company or any of its subsidiary undertakings;
3.11.6.2 the giving of a guarantee, security or indemnity in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which the Director has assumed responsibility (in whole or part and whether alone or jointly with others) under a guarantee or indemnity or by the giving of security;
3.11.6.3 a contract, arrangement, transaction or proposal concerning an offer of shares, debentures or other securities of the Company or any of its subsidiary undertakings for subscription or purchase, in which offer he is or may be entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which he is to participate;
3.11.6.4 a contract, arrangement, transaction or proposal concerning any other body corporate in which he or any person connected with him is interested, directly or indirectly, and whether as an officer, shareholder, creditor or otherwise, if he and any persons connected with him do not to his or her knowledge hold an interest (as that term is used in sections 820 to 825 of the Act) representing 1% or more of either any class of the equity share capital (excluding any shares of that class held as treasury shares) of such body corporate (or any other body corporate through which his or her interest is derived) or of the voting rights available to members of the relevant body corporate (any such interest being deemed for the purpose of this Article to be likely to give rise to a conflict with the interests of the Company in all circumstances):
3.11.6.1.1 a contract, arrangement, transaction or proposal for the benefit of employees of the Company or of any of its subsidiary undertakings which does not award him any privilege or benefit not generally accorded to the employees to whom the arrangement relates; and
3.11.6.1.2 a contract, arrangement, transaction or proposal concerning any insurance which the Company is empowered to purchase or maintain for, or for the benefit of, any Directors or for persons who include Directors.

3.11.7 Indemnity of officers

Subject to the provisions of the Act, but without prejudice to any indemnity to which the person concerned may otherwise be entitled, every Director or other officer of the Company (other than any person (whether an officer or not) engaged by the Company as auditor) shall be indemnified out of the assets of the Company against any liability incurred by him for negligence, default, breach of duty or breach of trust in relation to the affairs of the Company, provided that this Article shall be deemed not to provide for, or entitle any such person to, indemnification to the extent that it would cause this Article, or any element of it, to be treated as void under the Act.

4. CONCERT PARTY AND APPLICATION OF THE CITY CODE

4.1 Concert Party

Pavel Baudisˇ, Eduard Kucˇera, PaBa Software s.r.o. and Pratincole Investments Limited, together with certain of Eduard Kucˇera's close relatives, are considered to be acting in concert with each other in relation to the Company for the purposes of the City Code following Admission (the "Concert Party").

Immediately following Admission and assuming the issue of all of the New Shares and the sale of all of the Existing Shares as described in Part 13 – Details of the Global Offer, members of the Concert Party will hold, in aggregate, 357,044,417 Shares, representing approximately 37.5% of the Company's issued share capital.

The Concert Party members and their respective holdings are detailed below:

Concert Party Member	No. of Shares held in the Company	Percent of issued share capital following Admission
Pavel Baudisˇ(1)	257,182,165	27.0%
Eduard Kucˇera(2)	99,793,912	10.5%
Eduard Kucˇera relatives(3)	68,340	0.0%

Notes

(1) As of the date of this Prospectus, Pavel Baudisˇ holds shares in the Company directly and through PaBa Software s.r.o. The business address of PaBa Software s.r.o. is Brabcova 1159/2, Podolí 147 00 Prague 4, Czech Republic.
(2) As of the date of this Prospectus, Eduard Kucˇera holds shares in the Company directly and through Pratincole Investments Limited. The business address of Pratincole Investments Limited is PO Box 186, Royal Chambers, St. Julian's Avenue, St. Peter Port, Guernsey, GY1 4HP.
(3) The name of the relatives of Eduard Kucˇera are Eduard Kucˇera jr and Krystina Salatova who own 24,197 and 44,143 Shares respectively.

4.2 Mandatory Bid

The Company is incorporated in England and Wales and, on Admission, its Shares will be admitted to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange's main market for listed securities. Accordingly, the City Code applies to the Company.

Under Rule 9 of the City Code ("Rule 9"), where any person acquires an interest in shares (as defined in the City Code), whether by a series of transactions over a period of time or not, which (taken together with any interest in shares held or acquired by persons acting in concert (as defined in the City Code) with him) in aggregate, carry 30% or more of the voting rights in a company which is subject to the City Code, that person is normally required by the Panel to make a general offer to all of the remaining shareholders to acquire their shares.

Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30% of the voting rights of such a company but does not hold shares carrying more than 50% of such voting rights, a general offer will normally be required if any further interests in shares are acquired by any such person which increases the percentage of shares carrying voting rights in which he is interested.

An offer under Rule 9 must be in cash or be accompanied by a cash alternative and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.

Under the City Code, a concert party arises where persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control of a company or to frustrate the successful outcome of an offer for a company. "Control" for these purposes means an interest or interests in shares carrying in aggregate 30% or more of the voting rights of the company, irrespective of whether the interest or interests give de facto control.

Immediately following Admission and assuming the issue of all of the New Shares and the sale of all of the Existing Shares as described in Part 13 – Details of the Global Offer, the Concert Party will be interested in, in aggregate, 357,044,417 Shares, representing approximately 37.5% of the Company's issued share capital. Should any individual member of the Concert Party: (i) acquire any interest in Shares, where such person, together with persons acting in concert with him, is interested in Shares which in aggregate carry not less than 30% of the voting rights of the Company; or (ii) acquire any interest in Shares such that they are interested in 30% or more of the voting rights of the Company; or (iii) (where such individual member is interested in 30% or more of the voting rights of the Company but does not hold Shares carrying more than 50% of the voting rights of the Company) acquire any further interest in Shares, the Panel may regard this as giving rise to an obligation upon that member of the Concert Party to make an offer for the entire issued share capital of the Company at a price no less than the highest price paid by the individual member of the Concert Party or any other member of the Concert Party in the previous 12 months.

4.3 Squeeze out

Under the Act, if an offeror were to acquire 90% of the Shares within four months of making the offer, it could then compulsorily acquire the remaining 10%. It would do so by sending a notice to outstanding shareholders telling them that it will compulsorily acquire their shares and then, six weeks later, it would execute a transfer of the outstanding shares in its favour and pay the consideration to the Company, which would hold the consideration on trust for outstanding shareholders. The consideration offered to the shareholders whose shares are compulsorily acquired under the Act must, in general, be the same as the consideration that was available under the takeover offer.

4.4 Sell out

The Act also gives minority shareholders in the Company a right to be bought out in certain circumstances by an offeror who has made a takeover offer. If a takeover offer related to all the Shares and at any time before the end of the period within which the offer could be accepted the offeror held or had agreed to acquire not less than 90% of the Shares, any holder of shares to which the offer relates who has not accepted the offer can require the offeror to acquire his shares. The offeror would be required to give any shareholder notice of his right to be bought out within one month of that right arising. The offeror may impose a time limit on the rights of minority shareholders to be bought out, but that period cannot end less than three months after the end of the acceptance period. If a shareholder exercises its rights, the offeror is bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.

5. DIRECTORS' INTERESTS

5.1 The interests in the share capital of the Company of the Directors (all of whom, unless otherwise stated, are beneficial or are interests of a person connected with a Director) were as follows:

	Immediately prior to Admission(1)		Shares to be sold pursuant to the Global Offer		Immediately following Admission(1)
Directors	Number of Shares	Percentage of issued share capital	Number of Shares	Percentage of issued share capital	Number of Shares	Percentage of issued share capital
John Schwarz	3,694,088	0.4%	775,758	0.1%	2,918,330	0.3%
Vincent Steckler	44,667,269	5.0%	13,015,857	1.5%	31,651,412	3.3%
Ondrej Vlcek	24,236,178	2.7%	4,890,191	0.5%	19,345,987	2.0%
Philip Marshall	0	0.0%	0	0.0%	0	0.0%
Pavel Baudisˇ	317,696,900	35.6%	60,514,735	6.8%	257,182,165	27.0%
Eduard Kucˇera	123,275,331	13.8%	23,481,419	2.6%	99,793,912	10.5%
Lorne Somerville	0	0.0%	0	0.0%	0	0.0%
Warren Finegold	250,055	0.0%	141,923	0.0%	108,132	0.0%
Ulf Claesson	2,905,883	0.3%	485,771	0.1%	2,420,112	0.3%
Erwin Gunst	2,293,811	0.3%	552,117	0.1%	1,741,694	0.2%

Notes:

⁽¹⁾ The interests of Shares as at the date of this Prospectus have been stated on the basis that the steps described in paragraph 2 of this Part 14—"Additional Information" have been completed in full and assuming no exercise of the Over-allotment Option.

5.2 In addition to the interest in Shares described above, it is anticipated that the Directors will, immediately prior to and following Admission, be interested in options to acquire Shares as set out below:

Director(1)(2)	Number of Shares under vested options	Weighted average exercise price per vested option (£)	Number of Shares under unvested options	Weighted average exercise price per unvested option (£)
John Schwarz	0	0.00	0	0.00
Vincent Steckler	13,266,598	0.46	7,767,475	1.20
Erwin Gunst	923,723	0.84	0	0.00
Ondrej Vlcek	0	0.00	4,369,197	1.20
Philip Marshall(3)	0	0.00	3,107,796	2.22
Pavel Baudisˇ	0	0.00	0	0.00
Eduard Kucˇera	0	0.00	0	0.00
Lorne Somerville	0	0.00	0	0.00
Ulf Claesson	0	0.00	0	0.00
Warren Finegold	672,576	0.92	0	0.00

Notes:

(1) The interests of Shares as at the date of this Prospectus have been stated on the basis that the steps described on paragraph 2 of this Part 14—"Additional Information" have been completed in full.
(2) All options to acquire Shares were granted between 15 May 2013 and 30 March 2018.
(3) Philip Marshall has transferred the options granted to him to his wife, Agnes Marshall.
5.3 No Director has or has had any interest in any transactions which are or were unusual in their nature or conditions or are or were significant to the business of the Group or any of its subsidiary undertakings and which were effected by the Group or any of its subsidiaries during the current or immediately preceding financial year or during an earlier financial year and which remain in any respect outstanding or unperformed.
5.4 There are no outstanding loans or guarantees granted or provided by any member of the Group to or for the benefit of any of the Directors.

6. MAJOR INTERESTS IN SHARES

6.1 In so far as is known to the Directors, the following are the Major Shareholders' interests (within the meaning of Part VI of the Act) (other than interests held by the Directors) which represent, or will represent, directly or indirectly, 3% or more of the issued share capital of the Company on 9 May 2018 (the latest practicable date prior to printing of this Prospectus) assuming no exercise of the Overallotment Option:

	Immediately prior to Admission(1)		Immediately following Admission(1)
Major Shareholders	Percentage of issued Number of share Shares capital		Number of Shares	Percentage of issued share capital
Sybil Holdings S.à r.l	270,378,756	22.7%	216,303,002	22.7%
Pavel Baudisˇ(2)	317,696,900	27.0%	257,182,165	27.0%
Eduard Kucˇera(3)	123,275,331	10.5%	99,793,912	10.5%
Summit Partners(4)	68,416,648	5.7%	54,733,318	5.7%

Notes:

(1) The interests of Shares as at the date of this Prospectus have been stated on the basis that the Reorganisation has been completed in full.
(2) Immediately prior to Admission, Pavel Baudiš holds Shares in the Company directly and indirectly through PaBa Software s.r.o. Mr. Baudiš held 60,514,735 Shares on an individual basis immediately prior to Admission (and 0 Shares immediately following Admission). Mr. Baudiš held 257,182,165 Shares through PaBa Software s.r.o. immediately prior to Admission (and 257,182,165 Shares immediately following Admission).
(3) Immediately prior to Admission, Eduard Kuc˘era holds Shares in the Company directly and indirectly through Pratincole Investments Limited. Mr. Kuc˘era held 23,481,419 Shares on an individual basis immediately prior to Admission (and 0 Shares immediately following Admission). Mr. Kuc˘era held 99,793,912 Shares through Pratincole Investments Limited immediately prior to Admission (and 99,793,912 Shares immediately following Admission).
(4) Immediately prior to Admission, Summit Partners holds Shares in the Company through its funds Leia 1 S.a` r.l, Summit Investors I, LLC and Summit Investors I (UK), L.P.

Save as disclosed above, in so far as is known to the Directors, there is no other person who is or will be immediately following Admission, directly or indirectly, interested in 3% or more of the issued share capital of the Company, or of any other person who can, will or could, directly or indirectly, jointly or severally, exercise control over the Company. The Directors have no knowledge of any arrangements the operation of which may at a subsequent date result in a change of control of the Company. None of the Company's major shareholders have or will have different voting rights attached to the shares they hold in the Company.

6.2 The following table sets out the interests of each of the Selling Shareholders (all of which, unless otherwise stated, are beneficial or are interests of a person connected with the Selling Shareholder), prior to the Global Offer and the number of Shares such Selling Shareholder is selling in the Global Offer.

	Interests immediately prior to Admission(1)		Interests immediately following Admission(1)
Selling Shareholder	Number of Shares	% of issued share capital	Number of Shares	% of issued share capital
Sybil Holdings S.à r.l.(2)	270,378,756	30.3%	216,303,002	22.7%
Pavel Baudisˇ(3)	317,696,900	35.6%	257,182,165	27.0%
Eduard Kucˇera(4)	123,275,331	13.8%	23,481,419	10.5%
Summit Partners(5)	68,416,648	7.7%	54,733,318	5.7%
Other Selling Shareholders(6)	113,894,072	12.7%	83,833,886	8.8%

Notes:

(1) The interests of Shares as at the date of this Prospectus have been stated on the basis that the Reorganisation has been completed in full.
(2) The business address of Sybil Holdings S.à r.l. is 20, Avenue Monterey, L-2163 Luxembourg, Grand Duchy of Luxembourg.
(3) Immediately prior to Admission, Pavel Baudisˇ will hold shares in the Company directly and through PaBa Software s.r.o. The business address of PaBa Software s.r.o. is Brabcova 1159/2, Podolí 147 00 Prague 4, Czech Republic. The business address of Pavel Baudisˇ is Plamínkové 1581/33, 144 00 Prague 4 - Nusle, Czech Republic.
(4) Immediately prior to Admission, Eduard Kuc˘era will hold shares in the Company directly and through Pratincole Investments Limited. The business address of Pratincole Investments Limited is PO Box 186, Royal Chambers, St. Julian's Avenue, St. Peter Port, Guernsey, GY1 4HP. The business address of Eduard Kuc˘era is Bulharská 1213/21, 101 00 Prague 10, Czech Republic.
(5) Immediately prior to Admission, Summit Partners will hold shares in the company through three of its funds: SUMMIT INVESTORS I, LLC, Summit Investors I (UK), L.P. and Leia 1 S.à r.l. The business address of SUMMIT INVESTORS I, LLC, is c/o Corporation Trust Center, 1209 Orange Street, Wilmington Delaware 19801, United States. The business address of SUMMIT INVESTORS I (UK) LP is c/o Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. The business address of Leia 1 S.à r.l. is L-1882 Luxembourg, 7, rue Guillaume Kroll, Grand Duchy of Luxembourg.
(6) Equiniti Financial Services Limited will sell as nominee for the other Selling Shareholders, being the beneficial owners of such Existing Shares. The business address of Equiniti Financial Services Limited is Aspect House, Spencer Road, Lancing Business Park, West Sussex BN99 6DA, United Kingdom.

7. DIRECTORS' TERMS OF SERVICE

7.1 The Directors and their functions are set out in Part 7—"Directors and Corporate Governance". Each of the Executive Directors entered into service agreements effective from 1 May 2018 for the Chief Executive Officer and effective on or around the date of Admission for the Chief Financial Officer and the EVP Consumer and Chief Technology Officer. Each of the Executive Directors and Non-Executive Directors also entered into letters of appointment with the Company effective from 9 May 2018.

7.2 Non-Executive Directors

7.2.1 The appointments of each of the Non-Executive Directors are for a fixed term of three years, commencing upon 9 May 2018, and are subject to annual re-election by the Company in general meeting.

7.2.2 From Admission:

(i) All Non-Executive Directors are entitled to receive an annual fee of \$100,000 (or equivalent) save for Lorne Somerville (see section 7.2.2(ii)); and
(ii) The Company will donate an annual amount of \$100,000 to a charity in lieu of the annual fee that would otherwise be payable to Lorne Somerville for his service as a Non-Executive Director.

7.2.3 In addition to the above, from Admission:

(i) John Schwarz (Chairman) is entitled to an additional fee of \$250,000 (inclusive of any fee he would otherwise receive as a chairman or member of any committee);
(ii) Warren Finegold is entitled to an additional fee of \$15,000 for his role as Senior Independent Director of the Company;
(iii) an additional fee of \$15,000 is payable to the chairman of each of the three board committees;
(iv) an additional fee of \$7,500 is payable to each other member of each of the three board committees; and
(v) an additional allowance of \$5,000 per meeting is payable where transatlantic travel is required.
7.2.4 Fees are payable monthly or quarterly in arrears. The Directors are also entitled to reimbursement of reasonable expenses.
7.2.5 Pursuant to sections 439 and 439A of the Act, the Chairman's and Non-Executive Directors' remuneration will be subject to shareholder approval. In the event that such approval is not obtained when required, the appointment letters provide that they will have no entitlement to compensation or damages in respect of loss suffered as a consequence.
7.2.6 The Chairman and Non-Executive Directors are subject to confidentiality undertakings without limitation in time. They are also subject to non-competition restrictive covenants for the duration of their appointments.
7.2.7 The Chairman and Non-Executive Directors will have the benefit of a qualifying third party indemnity from the Company (the terms of which are in accordance with the Act) and appropriate directors' and officers' liability insurance.
7.2.8 Save as set out in this paragraph 7, there are no existing or proposed service agreements or letters of appointment between the Directors and any member of the Group.

7.3 Directors' Remuneration

Under the terms of their service contracts, letters of appointment and applicable incentive plans, for the year ended 31 December 2017, the aggregate remuneration and stock based compensation to the Directors who served during the year ended 31 December 2017, consisting of 10 individuals, was \$5,074,165.

Under the terms of their service contracts, letters of appointment and applicable incentive plans, for the year ended 31 December 2017, the Directors were remunerated as set out below:

Name	Position	Annual Director Remuneration (\$)	Stock based compensation (\$)	Date of Joining the Group
John Schwarz	Independent Chairman	75,000	108,000	December 2011
Vincent Steckler Chief Executive Officer		1,182,500	1,522,000	May 2009
Erwin Gunst	Independent Non-Executive
	Director	62,500	108,000	October 2012
Ondrej Vlcek EVP Consumer and Chief
	Technology Officer	621,328	663,000	May 1995
Philip Marshall Chief Financial Officer		N/A	N/A	February 2018
Pavel Baudisˇ Non-Executive Director		207,932	N/A	April 1991
Eduard Kucˇera	Non-Executive Director	207,905	N/A	April 1991
Lorne Somerville	Non-Executive Director	N/A	N/A	March 2014
Ulf Claesson Independent Non-Executive
	Director	60,000	108,000	October 2012
Warren Finegold Senior Independent
	Non-Executive Director	55,000	93,000	February 2015

7.4 There is no arrangement under which any Director has waived or agreed to waive future emoluments nor has there been any waiver of emoluments during the financial year immediately preceding the date of this Prospectus.

7.5 Remuneration arrangements for Executive Directors and members of the Executive Management Team

Set out below is information on the current arrangements for the Chief Executive Officer, the Chief Financial Officer and the EVP Consumer and Chief Technology Officer (together with any other executive directors, the "Executive Directors") and members of the executive management team of the Company (the "Executive Management Team").

7.5.1 Approach to remuneration

The Group's overall philosophy to remuneration is based on the approach that remuneration should be linked to the performance and behaviour of an individual, business results and shareholder and customer outcomes.

The remuneration approach is intended to:

provide competitive, transparent and fair rewards;
reward achievement of short and long-term financial objectives and support delivery of the business strategy; and
align the interests of employees and shareholders through share ownership.

Reward levels are set to attract, retain and engage high calibre talent to support the business strategy and reflect both the location of the individual and the impact of reward levels in the San Francisco Bay Area on the reward levels prevalent in the industry more generally.

Selected employees are able to share in the success of the Group through participation in an annual bonus plan. Executive Directors, other members of the Executive Management Team and key employees are also eligible for participation in a long term incentive plan and all employees and Executive Directors are eligible to participate in a share matching plan.

7.5.2 Executive Directors' service agreements

The Chief Executive Officer, the Chief Financial Officer and the EVP Consumer and Chief Technology Officer are engaged under service agreements which are appropriate, executive-style agreements. Key terms of the service agreements (other than as relate to remuneration and benefits, which are addressed separately, below) are as follows:

Each of the Chief Executive Officer, the Chief Financial Officer and the EVP Consumer and Chief Technology Officer is subject to a notice period of up to twelve months (applicable whether given or received).
The service agreements of these Executive Directors can be terminated immediately by serving notice and undertaking to pay the relevant Executive Director in lieu of notice.

These are subject to any mandatory provisions of local law of the jurisdiction in which these Executive Directors work.

7.5.3 Executive Director Remuneration Policy

In anticipation of Admission, the Company undertook a review of its remuneration policy for the Executive Directors and other members of the Executive Management Team, to ensure that it is appropriate for the listed company environment. It took due account of the Company's particular circumstances.

Following this review, a new policy has been established, the principal objectives of which are to attract, retain and motivate executive management of the quality required to run the Company successfully without paying more than is necessary, having regard to the views of Shareholders and other stakeholders.

The remuneration committee of the Board (the "Remuneration Committee") will oversee the implementation of this policy and will seek to ensure that the Executive Directors are fairly rewarded for the Group's performance over the short and long-term. A significant proportion of potential total reward is therefore performance-related.

Executive Directors' fixed and variable remuneration packages which shall apply following Admission have been determined taking into account:

the role, experience, location and performance of the Executive Director;
remuneration arrangements at UK listed companies of a similar size and complexity;
remuneration arrangements at US high-technology companies of a similar size and complexity, including companies with which the Company competes for talent; and
best practice guidelines for UK listed companies set by institutional investor bodies.

In accordance with the regulations set out in the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, formal Shareholder approval of the remuneration policy will be sought at the 2019 annual general meeting of the Company. It is intended that the policy will be operated for the period from Admission until that annual general meeting, and will apply for three years from its approval at that annual general meeting.

A summary of the remuneration policy for Executive Directors is set out below.

7.5.3.1 Base remuneration

Base remuneration will be reviewed annually with any increases taking effect from April 1 of each year. The level of increases for Executive Directors will take due account of the increases awarded to the workforce as a whole, as well as consideration of the performance of the Company and the individual, skill set and experience and external indicators such as inflation and market competitiveness.

Base remuneration from 1 May 2018 for the Chief Executive Officer is \$800,000, for the Chief Financial Officer is \$525,000 and for the EVP Consumer and Chief Technology Officer is \$450,000.

7.5.3.2. Benefits and pensions

The Company provides minimal benefits to its Executive Directors. Other benefits, including relocation allowances or expatriate benefits may be provided, as appropriate.

7.5.3.3. Annual bonus

Executive Directors and members of the Executive Management Team will be eligible to participate in an annual bonus plan operated by the Company.

It is intended that the annual bonus for Executive Directors and the Executive Management Team will be settled in cash unless an individual has not met the required shareholding guideline (as to which, see Section 7.5.3.8 below), in which case it will be settled through a combination of cash and deferred share awards.

Annual bonuses are payable at the sole discretion of the Remuneration Committee. Under the remuneration policy bonuses for the Executive Directors will be capped at two times target potential. On-Target potential is currently set at 100% of base remuneration for the Chief Executive Officer and the EVP Consumer and Chief Technology Officer and 75% of base remuneration for the Chief Financial Officer.

The Remuneration Committee will set performance targets for the annual bonus at the start of each financial year. It is anticipated that the performance targets will be primarily based on one or more financial metrics measuring the Company's financial performance, although there may also be an element subject to personal and/or strategic measures.

Where an Executive Director has not met the required shareholding guideline, 50% of any bonus earned will be required to be deferred into Shares as a deferred bonus award under the Avast Deferred Bonus Plan (the "DBP"), the key terms of which are set out in Section 8.4 of this Part 14 (Additional Information). Deferred bonus awards will ordinary vest on the second anniversary of grant of the deferred bonus award. The Board adopted the DBP on 9 May 2018, conditional upon Admission.

7.5.3.4. Long-term incentives

The Avast Long Term Incentive Plan (the "LTIP") will form the primary long-term incentive arrangement for the Executive Directors and Executive Management Team. The key terms of the LTIP are set out in Section 8.2 of this Part 14 (Additional Information).

Under the LTIP, it is intended that long-term incentive awards (which may be either performance related awards or non-performance related awards (for further information, see Section 8.2.4 of this Part 14 (Additional Information)) will be granted on an annual basis.

The Company expects to make annual awards over Shares to the Chief Executive Officer equal in value to 275% of base remuneration for On-Target performance capped at 500% for over-achievement. For other executives, depending on the executive's role, the Company expects to make annual awards equal in value to between 135% and 195% of base remuneration for On-Target performance, capped at between 250% and 350% of base remuneration. In exceptional circumstances, Awards may be granted over Shares equal in value to a maximum of to 750% of the relevant executive's base remuneration at the discretion of the Remuneration Committee.

In the normal course of events awards will vest three years from the date of grant of the award (or, in the case of performance related awards, upon the assessment of performance conditions if later), subject to the participant's continued service and (in the case of performance related awards) the extent to which the performance conditions specified for the awards are satisfied.

It is the Company's current intention that Executive Directors and members of the Executive Management Team will receive performance related awards. It is not the Company's current intention to grant non-performance related awards to Executive Directors or members of the Executive Management Team, and any such awards would only be granted to Executive Directors or members of the Executive Management Team following consultation with major shareholders.

Other participants are expected to receive performance related awards or non-performance related awards.

The current intention is that the performance conditions applying to the first awards are likely to include earnings per share growth and revenue growth.

7.5.3.5. Share matching plan

In addition, all employees, Executive Directors and members of the Executive Management Team will be eligible to participate, on an annual basis, in the Avast Share Matching Plan ("SMP"). Under the SMP, eligible participants will be invited to invest in Shares, up to a maximum of \$34,000 per annum. Any such Shares acquired will, if retained for a period of three years, normally result in the eligible participant receiving further free Shares in proportion to the number of Shares acquired, up to and no more than one free Share for every one Share acquired by the eligible participant. The Remuneration Committee will determine the matching ratio that will be applied to each annual invitation. The Remuneration Committee currently anticipates that the matching ratio that shall be offered to participants shall be one free Share for every three Shares acquired by the participant.

7.5.3.6. Holding periods

The terms of the LTIP include that Executive Directors (and such others, if any, as the Remuneration Committee requires which is currently expected to include all of the Executive Management Team) will ordinarily be required to retain their net of tax number of vested shares (if any) delivered under the LTIP for at least two years from the time of vesting of the relevant award.

Where such holding period terms apply, the Remuneration Committee shall retain discretion to allow the relevant participants to sell, transfer, assign or dispose of some or all of such Shares before the end of the holding period, subject to such additional terms and conditions (if any) that the Remuneration Committee may specify.

7.5.3.7. Malus and clawback provisions

Malus and Clawback provisions may be operated, at the discretion of the Remuneration Committee, in respect of awards granted under the annual bonus plan, the LTIP and the DBP (but not the SMP) in certain circumstances (including where there has been a misstatement of the Group's financial results, an error in assessing any performance condition or in the event of serious misconduct on the part of the participant).

7.5.3.8. Share ownership guidelines

While the majority of the current Executive Directors have shareholdings in the Company, the Remuneration Committee wishes to ensure that a shareholding guideline is in place to cater for future Executive Directors (and such others as the Remuneration Committee requires) who may not hold Shares at the time of their appointment. Accordingly, the Group has adopted formal shareholding guidelines in order to require Executive Directors (and such others as the Remuneration Committee requires) to build or maintain (as appropriate) a shareholding in the Company equivalent in value of 200% of base remuneration within three years.

Shares held on Admission, together with any Shares acquired following Admission, will count towards the threshold.

If an individual subject to the guidelines does not meet the guidelines, 50% of any bonus earned will be required to be deferred into Shares as a Deferred Bonus award and they will be expected to retain at least half of the net shares vesting under the Company's discretionary share based employee incentive schemes until the guideline is met.

7.5.3.9. Recruitment policy

Consistent with best practice, new Executive Director hires (including those promoted internally) will be offered remuneration packages in line with the Company's shareholder approved remuneration policy in force at the time.

The Remuneration Committee recognises that it may be necessary in some circumstances to provide compensation for amounts foregone from a previous employer ("buyout awards"). Any buyout awards would be limited to what is felt to be a fair estimate of the value of the remuneration foregone when leaving the former employer and would be structured so as to be, to the extent possible, no more generous in terms of the fair value and other key terms (e.g., time to vesting and performance targets) than the incentives it is replacing.

7.5.3.10. Termination policy

In the event of termination (save in circumstances of summary dismissal), the service contracts of the Chief Executive Officer, Chief Financial Officer and EVP Consumer and Chief Technology Officer provide for payments of base remuneration and contractual benefits over the notice period. The Company may elect to make a payment in lieu of notice. In the event of termination (save in circumstances of summary dismissal), the Chief Financial Officer and EVP Consumer and Chief Technology Officer will also receive an additional payment equal to six months' base remuneration. It is anticipated that the Chief Executive Officer, Chief Financial Officer and EVP Consumer and Chief Technology Officer will be subject to 12 month post-termination covenants. There is no contractual right to any bonus payment (or pro rata portion thereof) in the event of termination of engagement prior to the end of the financial year to which a bonus relates, although the Remuneration Committee may exercise its discretion to pay a bonus for the period of service performed and based on performance assessed after the end of the financial year.

The default treatment for any awards under the LTIP is that any outstanding awards lapse on cessation of employment or engagement. However, in certain prescribed circumstances, or at the discretion of the Remuneration Committee, "good leaver" status may apply. In these circumstances a participant's award will ordinarily vest on such date(s) that they would otherwise have vested, subject to the satisfaction of the relevant performance criteria (if any) and, ordinarily, on a time pro-rata basis, with the balance of the awards lapsing.

The default treatment for any deferred bonus award under the DBP is that any outstanding awards held by a participant on cessation of employment or engagement will ordinarily vest on such date(s) that they would otherwise have vested. If a relevant participant leaves the Company's group in circumstances where they are a bad leaver, any outstanding deferred bonus awards shall lapse.

7.6 Directors' current and past directorships and partnerships

Set out below are the directorships and partnerships held by the Directors (other than, where applicable, directorships held in the Company and/or any other company in the Group), in the five years prior to the date of this Prospectus:

Name	Current directorships / partnerships	Past directorships
Vincent Steckler N/A		N/A
Ondrej Vlcek N/A		N/A
	Eduard Kuc˘era PEGAS NONWOVENS a.s. PEGAS NONWOVENS International s.r.o. SlidesLive s.r.o. PEGAS NONWOVENS Czech s.r.o. Comprimato Systems s.r.o. Thunovská, a.s. Codasip s.r.o. Starship Interprise, a. s. R2G Rohan Sarl	N/A
Ulf Claesson	Swiss Federal Commission for Innovation and Technology BLR Partners AG Clinerion AG AO Technology AG AO Invest AG Blank Page AG	Econis AG Koubachi AG Procedural AG
John Schwarz Synopsys, Inc.	Teradata. Inc. Visier, Inc.	Verity Inc. Success Factors, Inc. SAP AG Business Objects S.A. Reciprocal Inc.
	Lorne Somerville CVC Capital Partners Limited First Media Linknet (Indonesia) eTraveli AB Sebia SA	Sunrise Communications Group AG Hong Kong Broadband

Name	Current directorships / partnerships	Past directorships
Philip Marshall	Waberer's International	Photonstar plc General Electric, Budapest Wood Mackenzie Exova plc
	Pavel Baudisˇ PEGAS NONWOVENS Czech s.r.o. PEGAS NONWOVENS International s.r.o. Starship Enterprise, a.s.	N/A
Warren Finegold UBM plc	Inmarsat plc VodafoneZiggo Group Holding B.V. R H Properties (Swindon) Ltd Rutland House Investments Ltd Hertfordshire Investments Ltd Frognal Associates Ltd St Christopher's School (Hampstead) Limited	Vodafone Ventures Ltd Vodafone Global Enterprise Ltd
Erwin Gunst N/A		N/A

7.7 Within the period of five years preceding the date of this Prospectus, none of the Directors:
(a) has had any convictions in relation to fraudulent offences;
(b) has been a member of the administrative, management or supervisory bodies or director or senior manager (who is relevant in establishing that a company has the appropriate expertise and experience for management of that company) of any company at the time of any bankruptcy, receivership or liquidation of such company; or
(c) has received any official public incrimination and/or sanction by any statutory or regulatory authorities (including designated professional bodies) or has ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of affairs of a company.
7.8 In 2005, in settlement of a civil injunction action brought by the United States Securities and Exchange Commission ("SEC") against Mr. Steckler, alleging certain violations of the Securities Exchange Act of 1934, without admitting or denying the SEC's allegations, Mr. Steckler agreed to a permanent injunction against violating certain provisions of the U.S. securities laws and paid a civil penalty of \$35,000.

The action was brought in connection with violations by Legato Systems, Inc. ("Legato") resulting from material overstatements in Legato's third quarter 1999 financial results relating to a software sales contract entered into with Logicon, Inc. ("Logicon"), an unaffiliated reseller for Legato. The SEC alleged that the overstatements resulted from misrepresentations made knowingly by Legato's senior sales executives and that certain employees of Logicon, including Mr. Steckler, contributed to Legato's violations due to improperly recorded revenue and income from contingent sales transactions arranged by its senior sales executives. At the time, Mr. Steckler was a Vice President in charge of a business unit at Logicon.

Logicon placed a \$7.0 million order with Legato, which Logicon had the right to cancel pursuant to a side agreement. Under U.S. Generally Accepted Accounting Principles ("GAAP"), the cancellation provision in the side agreement prevented Legato from recognising any part of the order as a current sale. The SEC alleged that Mr. Steckler knowingly or recklessly assisted in Legato's violations, and his actions were a cause of Legato's misstatements. The SEC also alleged that Mr. Steckler knew or was reckless in not knowing that by placing the right to cancel in a separate side agreement, Legato's finance department would not learn of Logicon's right to cancel the order when determining whether to recognise revenue for the transaction. The SEC further alleged that certain employees of Logicon, including Mr. Steckler, contributed to Legato's violations.

8. EMPLOYEE SHARE PLANS

8.1 Existing Employee Share Plan (the "Existing Plan")
8.1.1. Summary of the Plan
8.1.1.1. The Company has a share option plan (the "Existing Plan") in place under which options in either A Ordinary or B Ordinary Shares of Avast Holding B.V. ("Shares") have been granted. Options under this Existing Plan have been adjusted to substitute shares in the Company in exchange for Avast Holding B.V. shares.
8.1.1.2. It is not intended that this Existing Plan will operate following Admission, although some awards granted under the Existing Plan will remain outstanding.
8.1.1.3. The purpose of the Existing Plan is to further the growth, development and success of the Group by enabling employees and directors to acquire a continuing equity interest in the Company, thereby increasing their personal interests and motivating them to exert their best efforts on behalf of the Group. It also allows the Group to maintain the ability to attract and retain employees and directors of outstanding ability.

8.1.2. Eligibility

Employees and directors (whether or not also employees) of any Group are eligible to participate in the Existing Plan.

8.1.3. Administration of the Plan

The Remuneration Committee has the exclusive authority to operate, manage and administer the Existing Plan. The Board, at its absolute discretion, may exercise the rights, duties and responsibilities of the Remuneration Committee under the Existing Plan.

8.1.4. Grant of options
8.1.4.1. Below is a description of how options to acquire Shares (an "Option") were granted under the Existing Plan. It is not intended that any new Options will be granted under this Existing Plan following Admission, although some awards granted under the Existing Plan will remain outstanding.
8.1.4.2. The Remuneration Committee could, at its discretion, grant Options at any time.
8.1.4.4. Options could be granted subject to a performance condition ("Performance Vesting Option") or vest over time ("Time Vesting Options").
8.1.4.5. Options which were granted to members of the senior management team (a "Management Option") generally comprised of 30% of Time Vesting Options and 70% Performance Vesting Options. All Options which are not Management Options are Time Vesting Options.
8.1.4.6. Each grant was evidenced by an agreement which set out the individual terms of the award.
8.1.5. Exercise of options
8.1.5.1. Each Option will become exercisable in accordance with the conditions set by the Remuneration Committee at the time of grant.
8.1.5.2. Time Vesting Options typically become exercisable over a four year period in equal tranches.
8.1.5.3. Performance Vesting Options typically become exercisable over a four year period subject to certain performance thresholds being achieved.
8.1.5.4. Options which have not been exercised will lapse on the tenth anniversary of grant.

8.1.6. Exercise Price

The exercise price per share subject to each Option is determined by the Remuneration Committee and stated in the individual award agreement. The exercise price of any Option cannot be less than 100% of the fair market value of a Share subject to such Option at the time that the Option is granted.

8.1.7. Scheme Limits

The number of Shares which may be issued under the Existing Plan is subject to the following limits:

(a) for the options over B Ordinary Shares of Avast Holding B.V. ("Rollover Options"), 7,716,640; and
(b) for options that are not Rollover Options, 12,526,882.

For the purpose of these limits, no account will be taken of any Shares where the right to the shares has lapsed.

8.1.8. Transfer of Options

Generally, Options may not be transferred, sold, pledged, assigned, encumbered or otherwise and are exercisable only by the Optionholder.

8.1.9. Termination of Employment or Engagement

An Option may only be exercised if an Optionholder is an employee or director of any company within the Group, unless the Committee exercises its discretion to allow otherwise.

8.1.10. Amendments

The Remuneration Committee may amend or alter the terms of any Option which has been granted. Such amendment can be retroactive, but cannot be inconsistent with the terms and conditions of the Plan or materially impair the accrued rights of the Optionholder without their consent.

8.1.11. Termination

The Board of Directors may, at any time, terminate the Existing Plan.

8.2 Long Term Incentive Plan ("LTIP")

The Company's first directors' remuneration policy shall be tabled (and, if approved, become effective on such approval) at the Company's 2019 Annual General Meeting. Awards to Executive Directors shall be granted on terms that are within the scope of the relevant shareholder approved directors' remuneration policy.

8.2.1. Summary of the Plan

(a) The Company has adopted the Avast Long Term Incentive Plan ("LTIP") for employees and Executive Directors of the Group. The LTIP will operate on and following Admission.
(b) The purpose of the LTIP is to incentivise employees and Executive Directors whose contributions are essential to the continued growth and success of the business of the Company, in order to strengthen their commitment to the Company and, in turn, further the growth, development and success of the Company.
(c) The LTIP provides for the grant of conditional share awards, options and cash settled equivalents, which can be subject to either performance or time vesting or a combination of both.

8.2.2. Eligibility

Employees and Executive Directors of the Group are eligible to participate in the LTIP at the discretion of the Remuneration Committee.

8.2.3. Administration of the LTIP

The Remuneration Committee has the exclusive authority to operate, manage and administer the LTIP.

8.2.4. Grant of Awards

(a) The LTIP permits the grant of conditional share awards, options and cash settled equivalents, which may be granted subject to performance vesting or time vesting or continued service conditions, or a combination (each an "Award").
(b) Awards may be granted:
i. at any time within 42 days of Admission;
ii. at any time within 42 days of the announcement of the Company's results for any period; and
iii. at any other time where the Remuneration Committee determines that exceptional circumstances justify the grant of an Award.
(c) It is anticipated that the following types of Awards will be granted to the following categories of participants.

i. Performance Stock Units ("PSUs")

It is anticipated that PSUs will be granted to Executive Directors and members of the Executive Management Team.

Each PSU entitles a participant to receive a Share upon the attainment, over a three year performance period, of challenging performance conditions determined by the Remuneration Committee. For Awards granted on or immediately following Admission, the current intention is that the performance conditions are expected to be earnings per share growth and revenue growth. Following the expiry of the three year performance period, the Remuneration Committee shall determine the extent to which the performance conditions have been achieved and the number of Shares which will vest. Vesting will normally occur on the later of the third anniversary of the grant and the date the Remuneration Committee determines the achievement of the aforementioned conditions.

Unless otherwise permitted by the Remuneration Committee, each participant will be required to retain the net Shares delivered, after any tax liabilities have been met, under the LTIP, for at least two years from the expiry of the three year performance period.

ii. Restricted Stock Units ("RSUs")

It is anticipated that RSUs will be granted to key employees of the Group who are not Executive Directors or members of the Executive Management Team.

Each RSU entitles a participant to receive a Share upon vesting of the RSU. Each Award of RSUs will ordinarily vest either in three equal proportions over a three year period or on the third anniversary of grant or over such other period as the Committee may determine, provided the participant remains in service.

iii. Stock Options ("Options")

It is anticipated that Options may be granted (as an alternative to RSUs) to key employees of the Group who are not Executive Directors or members of the Executive Management Team.

Each Option entitles a participant to the right to acquire a Share upon vesting of the Option, at the exercise price and on the terms determined by the Remuneration Committee. Each Option will be granted with an exercise price of no less than the market value of a Share at the date of grant which will be: (A) for grants on Admission, the Admission price; and (B) for later grants, the closing price on the grant date, the dealing day before the grant date or the average of the closing prices for a period determined by the Remuneration Committee. Each Award of Options will ordinarily become exercisable either in three equal proportions over a three year period or on the third anniversary of the grant, or over such other period as the Committee may determine.

(d) Each Award granted under the LTIP is evidenced by an award agreement in a form prescribed by the Remuneration Committee. The award agreements will set out the individual terms and conditions which apply to each Award.

8.2.5 Individual Limits

In any financial year, participants may not generally receive Awards over Shares having a market value in excess of 500% of their annual base remuneration the case of performance related awards to the Chief Executive Officer and 350% of base remuneration for other executives. In exceptional circumstances, this limit may be increased to 750% at the discretion of the Remuneration Committee.

8.2.6. Dilution Limits

(a) In any 10 year period, not more than 10% of the issued ordinary share capital of the Company for the time being may, in aggregate, be issued or issuable under the LTIP and any other employee share scheme operated by the Company.
(b) For the purposes of this limit, no account will be taken of any Shares where the right to the Shares has lapsed or of any awards made prior to Admission under any previous employee share schemes.

8.2.7. Termination of employment or engagement

(a) For the purposes of the LTIP, a participant shall be:
i. a "Good Leaver" if they cease to be employed or engaged by the Group as a result of their: death; long-term injury; disability; their employing company or business for which they work ceasing to be part of the Group; or in any other circumstances at the discretion of the Remuneration Committee; and
ii. a "Bad Leaver" if they cease to be employed or engaged by the Group in any circumstances in which they are not a Good Leaver.
(b) Where a participant becomes a Good Leaver, their Awards will normally vest on the date when vesting would otherwise have occurred. The Remuneration Committee may, in its discretion, decide that their Awards will vest on (or a specified date following) their cessation or that their entitlement shall be pro-rated by reference to their period of service. In the case of PSUs, the participant's entitlement shall

be determined by reference to the extent to which the relevant performance conditions have been satisfied over (in the case of retained Awards) the entire performance period and (in the case of early vesting) the period from grant to termination.

8.2.8. Malus and Clawback

(a) The Remuneration Committee may decide that the LTIP malus and clawback provisions shall apply if, within three years of the date on which an Award vests, it is discovered that the Award was granted to a greater extent than warranted as a result of: (i) a material misstatement in the Group's financial results; (ii) an error in assessing any applicable performance measure achievement; or (iii) in the event of the discovery of serious misconduct, and in each case which, in the opinion of the Remuneration Committee, justifies the operation of the malus and clawback provisions
(b) Malus and clawback may be satisfied by way of a reduction in the amount of any future bonus, subsisting Award or future share awards and/or a requirement to make a cash payment.

8.2.9. Corporate events

(a) As a general rule, in the event of a takeover or winding-up of the Company (not being an internal corporate reorganisation), there shall not be automatic acceleration of Awards. However, the Remuneration Committee may, in its discretion, determine that some or all Awards will vest early. If the Remuneration Committee does so determine, it shall take into account: (i) the extent to which the Remuneration Committee considers that the performance conditions (if any) are satisfied; and (ii) if the Remuneration Committee determines appropriate, the pro-rating of the Awards to reflect the period of time between their grant and vesting. The Remuneration Committee can decide to reduce or remove the pro-rating of an Award.
(b) In the event of an internal corporate reorganisation, Awards will be replaced by equivalent new awards over shares in another company, unless the Remuneration Committee decides that Awards should vest on the basis which would apply in the case of a takeover.
(c) If a demerger, special dividend or other similar event is proposed which, in the opinion of the Remuneration Committee, would affect the market price of Shares to a material extent, the Remuneration Committee may decide that Awards will vest on the basis which would apply in the case of a takeover.

8.2.10. Dividend equivalents

The Remuneration Committee may decide that participants will receive a payment (in cash and/or Shares) on or shortly following the vesting (or exercise, as relevant) of their Awards of an amount equivalent to the dividends that would have been paid on those Shares between the time the Awards were granted and the time they vest (or where an Award is structured as an option and subject to a holding period, the date of expiry of the holding period or if earlier the exercise of such Award). This amount may assume the reinvestment of dividends. Alternatively, participants may have their Awards increased as if dividends were paid on the Shares subject to their Award and then reinvested in further Shares.

8.2.11. Cash settlement

The Remuneration Committee may decide to satisfy awards in cash, although it does not currently intend to do so.

8.2.12. Variation of share capital

In the event of any variation of the Company's share capital, demerger, payment of a special dividend or similar event which materially affects the market price of the Shares, the Remuneration Committee and/or the Board (as relevant) may make such adjustment as it considers appropriate, including to the number of Awards and/or the number and type of Shares subject to an Award and/or the exercise price and/or applicable performance conditions. Any new performance conditions should not be materially easier or more difficult to attain.

8.2.13. Amendments

The Board and/or the Remuneration Committee may amend the terms of the LTIP or any Awards granted under the LTIP. Such amendment can be retroactive, but cannot be inconsistent with the terms and conditions of the LTIP or materially impair the accrued rights of a participant without their consent.

8.2.14. Termination

The LTIP shall terminate upon the tenth anniversary of its adoption by the Company, unless terminated earlier by the Board in its discretion. Termination of the LTIP shall be without prejudice to the subsisting rights of participants.

Any Award which has not previously lapsed, vested or been exercised will lapse automatically on the tenth anniversary of the date of the grant.

8.2.15. Overseas plans

The LTIP allows the Remuneration Committee to establish further plans for overseas territories, or to adopt appropriate schedules to the LTIP, any such plans or schedules to be similar to the LTIP, but modified to take account of local tax, exchange control or securities laws, provided that any Shares made available under such further plans or schedules are treated as counting against the limits on individual and overall participation in the LTIP.

8.3. Share Matching Plan ("SMP")

8.3.1. Summary of the Plan

(a) The Company has adopted the Avast Share Matching Plan ("SMP") for employees and Executive Directors of the Group. The SMP will operate following Admission.
(b) The purpose of the SMP is to encourage and enable employees and Executive Directors to acquire a significant stake in the Company so that they can share in the future growth, development and success of the Company, and to further align the interests of such employees with the interests of the shareholders of the Company.
(c) The SMP allows for the Company to match Shares purchased by employees in accordance with a matching ratio determined by the Remuneration Committee.

8.3.2 Eligibility

Employees and Executive Directors of the Group are eligible to participate in the SMP.

8.3.3. Administration of the SMP

The Remuneration Committee has the exclusive authority to operate, manage and administer the SMP.

8.3.4. Investment and Matching Shares

(a) Participants can voluntarily invest up to \$34,000 per year to acquire Shares. Participants can make such investment via deductions from their base remuneration or by direct investment. It is expected that deductions will accrue over a period of up to 12 months, at the end of which, the participant shall use the accrued savings to purchase Shares at such price as the Remuneration Committee determines in its discretion, which may be the then prevailing share price, the share price as at the start of the savings period or an average share price.
(b) For the Shares purchased by a participant ("Purchased Shares"), the Company will grant the participant an award of matching Shares ("Matched Shares") according to a matching ratio of one Matched Share to every three Purchased Shares, or such other matching ratio as the Remuneration Committee determines from time to time.
(c) The matching ratio cannot exceed one Matched Share to one Purchased Share.
(d) Purchased Shares shall be locked up until the end of a three year holding period, at which time they shall be released to the participant together with the related Matched Shares, provided that the related Matched Shares shall only be released if the participant remains employed or engaged by the Group, and has not given or received notice of the termination of his employment or engagement with the Group, at this time.
(e) Should a participant transfer any Purchased Shares during the holding period, he/she shall forfeit any corresponding Matched Shares.

8.3.5. Limits

(a) In any 10 year period, not more than 10% of the issued ordinary share capital of the Company for the time being may, in aggregate, be issued or issuable under the SMP and any other employee share scheme operated by the Company.
(b) For the purposes of this limit, no account will be taken of any Shares where the right to the Shares has lapsed or of any awards made prior to Admission under any previous employee share schemes.

8.3.6. Termination of employment or engagement

As a general rule, no Matched Share will be released to a participant who ceases to be employed or engaged within the Group prior to the end of the three year holding period, unless the Remuneration Committee determines otherwise.

If a participant becomes a Good Leaver, the Remuneration Committee may determine that the participant will receive a pro rata proportion of Matched Shares assessed by reference to the period of time served in their employment or engagement during the three year holding period.

8.3.7. Corporate events

In the event of a takeover or winding-up of the Company or an internal corporate reorganisation, the Remuneration Committee may, in its discretion, take such steps as it considers appropriate, which may include releasing all Purchased Shares and Matched Shares to the participant early.

8.3.8. Variation of share capital

In the event of any variation of the Company's share capital, the Remuneration Committee and/or the Board (as relevant) may make such adjustment as it considers appropriate, including to the matching ratio.

8.3.9 Dividend equivalents

The Remuneration Committee may decide that participants will receive a payment (in cash and/or Shares) on or shortly following the release of their Matched Shares of an amount equivalent to the dividends that would have been paid on those Shares between the start of the holding period and the time the Matched Shares were released to the participant. This amount may assume the reinvestment of dividends. Alternatively, participants may have their Matched Shares increased as if dividends were paid on the Shares subject to their Matched Shares and then reinvested in further Shares.

8.3.10 Cash settlement

The Remuneration Committee may decide to satisfy Matched Shares in cash, although it does not currently intend to do so.

8.3.11 Amendments

The Board and/or the Remuneration Committee may amend the terms of the SMP or any Awards granted under the SMP. Such amendment can be retroactive, but cannot be inconsistent with the terms and conditions of the SMP or materially impair the accrued rights of a participant without their consent.

8.3.12 Termination

The SMP shall terminate upon the tenth anniversary of its adoption by the Company, unless terminated earlier by the Board in its discretion. Termination of the SMP shall be without prejudice to the subsisting rights of participants.

8.4. Deferred Bonus Plan ("DBP")

8.4.1 Operation and Eligibility

The Remuneration Committee has exclusive authority to operate, manage and administer the DBP. It is the Company's current intention that only Executive Directors will be eligible to participate in the DBP at the discretion of the Remuneration Committee.

8.4.2. Grant of awards under the DBP

Where a participant is required to defer a portion of their annual bonus into Shares under the terms of the Company's annual bonus arrangements, the Remuneration Committee may grant an award to acquire Shares under the DBP in order to facilitate such deferral.

8.4.3 Timing of grants

Awards may be granted (i) at any time within 42 days of Admission; (ii) at any time within 42 days of the announcement of the Group's results for any period, or (iii) at any other time when the Remuneration Committee determines there to be exceptional circumstances which justify the granting of awards.

8.4.4 Individual limits

A participant may not receive awards in any financial year over Shares which have a market value in excess of the value of the portion of their annual bonus being deferred under the DBP.

8.4.5 Dilution Limits

In any 10 year period, not more than 10% of the issued ordinary share capital of the Company for the time being may, in aggregate, be issued or issuable under the DBP and any other employee share scheme operated by the Company. For the purposes of this limit, no account will be taken of any Shares where the right to the Shares has lapsed or of any awards made prior to Admission under any previous employee share schemes.

8.4.6 Vesting of awards

Awards will ordinarily vest on the second anniversary of the date of grant.

8.4.7 Termination of employment or engagement

As a general rule, when a participant ceases to be employed or engaged within the Group their awards will ordinarily vest on the date when vesting would have occurred if they had not so ceased, unless the Remuneration Committee determines otherwise in its discretion.

8.4.8 Malus and clawback

The Remuneration Committee may decide that the malus and clawback provisions shall apply if, within three years of the date on which an award is granted, it is discovered that the award was granted to a greater extent than warranted as a result of: (i) a material misstatement in the Group's financial results; (ii) an error in assessing any applicable bonus condition; or (iii) in the event of the discovery of serious misconduct, and in each case which, in the opinion of the Remuneration Committee, justifies the operation of the recovery and withholding provisions.

Malus and clawback may be satisfied by way of a reduction in the amount of any future bonus, subsisting award or future share awards and/or a requirement to make a cash payment.

8.4.9 Corporate events

8.4.10 Variation of share capital

In the event of any variation of the Company's share capital, the Remuneration Committee and/or the Board (as relevant) may make such adjustment as it considers appropriate.

8.4.11 Dividend equivalents

The Remuneration Committee may decide that participants will receive a payment (in cash and/or Shares) on or shortly following the vesting of their award of an amount equivalent to the dividends that would have been paid on those Shares between the time the award was granted and the time it vests. This amount may assume the reinvestment of dividends. Alternatively, participants may have their award increased as if dividends were paid on the Shares subject to their award and then reinvested in further Shares.

8.4.12 Cash settlement

The Remuneration Committee may decide to satisfy awards in cash, although it does not currently intend to do so.

8.4.13 Amendments

The Board and/or the Remuneration Committee may amend the terms of the DBP or any awards granted under the DBP. Such amendment can be retroactive, but cannot be inconsistent with the terms and conditions of the DBP or materially impair the accrued rights of a participant without their consent.

8.4.14 Termination

The DBP shall terminate upon the tenth anniversary of its adoption by the Company, unless terminated earlier by the Board in its discretion. Termination of the DBP shall be without prejudice to the subsisting rights of participants.

8.5 Employee Benefit Trust

The Company is establishing the Employee Benefit Trust which will have the flexibility to acquire Shares to hold or distribute them in respect of awards granted pursuant to the Company's share plan arrangements from time to time. The Employee Benefit Trust will be an offshore trust and the trustees will buy Shares on the market or subscribe for them. The Employee Benefit Trust will be funded by way of loans and other contributions from the Group.

9. PENSIONS

9.1 The Company does not operate a defined benefit pension scheme for the benefit of its Directors or Senior Managers.

10. UNDERWRITING ARRANGEMENT AND STOCK LENDING AGREEMENT

10.1 Underwriting Agreement

On 10 May 2018, the Company, the Directors, Major Shareholders, Equiniti Financial Services Limited (for itself and as agent for and on behalf of the other Selling Shareholders) and the Underwriters entered into the Underwriting Agreement. Pursuant to the Underwriting Agreement:

10.1.1 the Company has agreed, subject to certain conditions, to allot and issue, at the Offer Price, the New Shares to be issued in connection with the Global Offer;
10.1.2 the Selling Shareholders have agreed, subject to certain conditions, to sell the Existing Shares in the Global Offer at the Offer Price;
10.1.3 the Underwriters have severally agreed, subject to certain conditions, to use reasonable endeavours to procure subscribers or, to the extent they fail to procure such subscribers, to subscribe for the New Shares (in such proportions as will be set out in the Underwriting Agreement) and to procure purchasers for or, failing which, for the Underwriters to purchase the Existing Shares pursuant to the Global Offer;
10.1.4 the Company has agreed that during the period of 180 days from the date of Admission, it will not, issue, offer, sale, contract to sell, grant or sale of options over, purchase of any option or contract to sell, transfer, charge, pledge, grant any right or warrant to purchase or otherwise dispose, transfer or lend, directly or indirectly, any Shares or any securities convertible into or exchangeable for or substantially similar to Shares or any interest in Shares or the entry into of any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of Shares whether any such transaction described above is to be settled by the delivery of Shares or such other securities,

in cash or otherwise, or any other disposal or any agreement to dispose of any Shares or any announcement or other publication of the intention to do any of the foregoing (each a "Disposal"), save that the above restriction shall not apply to the Disposals as set out in paragraph 10.1.5. Further, the Selling Shareholders, the Directors and certain members of the Company's management team (the "Locked-up Parties") have agreed that during the period of 180 days in respect of the Major Shareholders (under their respective Deeds of Election), and 360 days in respect of the other Directors and the other Selling Shareholders, in each case from the date of Admission, they will not effect a Disposal of any Shares save that the above restriction shall not apply to the Disposals as set out in paragraph 10.1.5. In addition, for any Shares transferred prior to Admission, Pavel Baudisˇ will procure that PaBa Software s.r.o. shall comply in full with such restrictions as if it were a Locked-up Party and Eduard Kucˇera will procure that Pratincole Investments Limited shall comply in full with such restrictions as if it were a Locked-up Party.

10.1.5 The restrictions in page 10.1.4 shall not apply to:
(a) any Disposal of the Existing Shares and the Over-allotment Shares made in and for the purposes of the Global Offer pursuant to the Underwriting Agreement;
(b) any Disposal of Over-allotment Shares pursuant to the Securities Lending Agreement;
(c) any acceptance of a general offer for the ordinary share capital of the Company made in accordance with the City Code (a "Takeover Offer"), the provision of an irrevocable undertaking to accept a Takeover Offer or a sale of Shares to an offeror or potential offeror during an offer period (within the meaning given in the City Code) or any Disposal of Shares pursuant to any offer by the Company to purchase its own securities which is made on identical terms to all holders of Shares or in connection with the taking up of any rights granted in respect of a rights issue or other pre-emptive share offering by the Company;
(d) any Disposal of Shares pursuant to a compromise or arrangement pursuant to a scheme of arrangement under Part 26 of the Companies Act providing for the acquisition by any person (or group of persons acting in concert, as such expression is defined in the City Code) of 50% or more of the ordinary share capital of the Company;
(e) any Disposal of Shares pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986 in relation to the Company;
(f) any Disposal by way of gift by any Locked-up Party that is an individual:
- (i) to his or her spouse or civil partner, parent, widow, widower, cohabite, adult sibling, child or grandchild (including such child or grandchild by adoption, or step-child) of such individual (each a "Family Member"); or
- (ii) to any person or persons acting in the capacity of trustee or trustees of a trust created by such individual or, upon any change of trustees of a trust so created, to the new trustee or trustees, provided that the trust is established for charitable purposes only or there are no persons beneficially interested under the trust other than the individual and his Family Members, or any Disposal by any such trustee or trustees to any person beneficially interested under such trust; or
- (iii) to a foundation created by such individual established for charitable purposes only or in which there are no persons beneficially interested under the foundation other than the individual and his Family Members, or any disposal by any administrator or administrators of such foundation to any person beneficially interested under such foundation,

provided that, prior to the making of any such Disposal,

(A) in the case of 10.1.5(f)(i) and 10.1.5(f)(ii) only, the relevant individual shall have satisfied the Joint Global Co-ordinators that the transferee is such a person; and
(B) the transferee shall have agreed to be bound by these restrictions as if it were the transferor by executing and delivering to Joint Global Co-ordinators a deed of adherence in agreed form.
(g) any Disposal to or by the personal representatives of an individual who dies during the lock-up period;
(h) any Disposal by the Company pursuant to an employee share or share option scheme as described in this Prospectus;
(i) in respect of the Directors only, any Disposals made solely to satisfy taxation liabilities arising out of the sale of Existing Shares in the Global Offer;
(j) any Disposal to which (i) the Joint Global Co-ordinators (acting on behalf of themselves and the Underwriters) have given their prior written consent (not to be unreasonably withheld or delayed); or (ii) provided the relevant Locked-up Party has first requested the consent of the Joint Global Co-ordinators, a majority of the Underwriters have given their prior written consent (not to be unreasonably withheld or delayed); and
(k) the future granting of pledges, security or collateral ("Pledges") granted to one or more of the Joint Global Coordinators or their affiliates ("Pledgees") having been agreed by the Joint Global Coordinators, any transfers of shares to one or more of the Pledgees pursuant to enforcement of any such Pledge, or transfers to third parties to whom the Pledgees seek to transfer the shares, provided in each case that the Pledgee or a subsequent third party agrees to be bound by a lock-up undertaking in substantially the same terms as set out in paragraph 10 (but excluding this paragraph 10.1.4(k)). The lock-up period applicable to the Pledgee or subsequent third party will be the same period applicable to the Locked-up Party who granted the Pledge, or transferred the Shares, to such Pledgee or subsequent third party.
10.1.6 an underwriting commission of £2.2 million shall be payable by the Company and an underwriting commission of £8.2 million shall be payable by the Selling Shareholders (assuming exercise of the Overallotment Option in full), in each case to the Underwriters. \$3.5 million of the underwriting commission payable by the Selling Shareholders will be paid by the Company (in addition to the underwriting commission otherwise payable by the Company). The Underwriters will deduct any commissions payable from the proceeds of the Global Offer;
10.1.7 in addition, the Company may, at the sole discretion of it and the Selling Shareholders, pay an additional commission of up to £1.5 million and the Selling Shareholders may, at the sole discretion of the Company and the Selling Shareholders, pay an additional commission of up to £5.4 million (assuming exercise of the Over-allotment Option in full);
10.1.8 the obligations of the Underwriters to use reasonable endeavours to procure subscribers and/or purchasers for and, to the extent that they fail to procure such subscribers and/or purchases, the obligations of the Underwriters to subscribe for or purchase Shares on the terms of the Underwriting Agreement are subject to certain conditions. These conditions include the absence of any breach of representation or warranty under the Underwriting Agreement and Admission occurring on or before the closing date of the Global Offer. In addition, the Joint Global Co-ordinators have the right to terminate the Underwriting Agreement, exercisable in certain circumstances, prior to Admission;
10.1.9 Morgan Stanley & Co. International plc, as Stabilising Manager, has been granted the Over-allotment Option by the Over-allotment Shareholders pursuant to which it may purchase or procure purchasers for up to 36,118,935 Over-allotment Shares at the Offer Price for the purposes of covering short positions arising from over-allocations, if any, in connection with the Global Offer and/or from sales of Shares, if any, effected during the stabilising period. Except as required by law or regulation, neither the Stabilising Manager, nor any of its agents, intends to disclose the extent of any over-allotments and/ or stabilising transactions conducted in relation to the Global Offer. The number of Over-allotment Shares to be transferred pursuant to the Over-allotment Option, if any, will be determined not later than 23:59 (London time) on 13 June 2018. Settlement of any purchase of Over-allotment Shares will take place shortly after such determination (or if acquired on Admission, at Admission). If any Overallotment Shares are acquired pursuant to the Overallotment Option, the Stabilising Manager will be committed to pay to the Over-allotment Shareholders, or procure that payment is made to it of, an amount equal to the Offer Price multiplied by the number of Over-allotment Shares purchased from such Over-allotment Shareholder, less commissions and expenses;
10.1.10 the Selling Shareholders have agreed to pay any stamp duty and/or stamp duty reserve tax arising on the sale of their respective Existing Shares;
10.1.11 the Company has agreed to pay the costs, charges, fees and expenses of the Global Offer (together with any related value added tax);
10.1.12 each of the Company, the Directors, the Major Shareholders and the other Selling Shareholders (under their respective Deeds of Election) have given certain representations, warranties and undertakings, subject to certain limits, to the Underwriters;
10.1.13 the Company has given an indemnity to the Underwriters on customary terms; and
10.1.14 the parties to the Underwriting Agreement have given certain covenants to each other regarding compliance with laws and regulations affecting the making of the Global Offer in relevant jurisdictions.

10.2 Stock lending agreement

In connection with settlement and stabilisation, Morgan Stanley & Co. International plc, as Stabilising Manager, has entered into a stock lending agreement with Sybil Holdings S.à.r.l., Summit Investors I, LLC, Summit Investors I (UK), L.P. and Leia 1 S.à r.l. Pursuant to this agreement, the Stabilising Manager will be able to borrow up to a maximum of 15% of the total number of Shares comprised in the Global Offer (excluding the Shares subject to the Over-allotment Option) on Admission for the purposes, amongst other things, of allowing the Stabilising Manager to settle, on Admission, overallotments, if any, made in connection with the Global Offer. If the Stabilising Manager borrows any Shares pursuant to the stock lending agreement, it will be required to return equivalent securities to the relevant Over-allotment Shareholders by no later than four business days after the date that is 30 days after the date of the agreement.

11. SUBSIDIARIES, INVESTMENTS AND PRINCIPAL ESTABLISHMENTS

The Company is the principal operating and holding company of the Group. The principal subsidiaries and subsidiary undertakings of the Company are as follows:

11.1 Subsidiaries and subsidiary undertakings

Name	Country of incorporation and registered office	% ownership interest and voting power	Field of activity

Avast Holding B.V.* Netherlands		100.0%	Holding company
Avast Software B.V. Netherlands		100.0%	Holding company
Avast Software s.r.o. Czech Republic		100.0%	Operating company
Jumpshot, Inc. United States		100.0%	Holding company
Avast Operations B.V Netherlands		100.0%	Operating company
Sybil Software LLC United States		100.0%	Operating company
Avast Software Deutschland GmbH	Germany	100.0%	Operating company
Avast Software (Asia) Limited	Hong Kong	100.0%	Operating company
Piriform Group Ltd Cyprus		100.0%	Holding company
Piriform Ltd. Cyprus		100.0%	Holding company
Piriform, Inc. United States		100.0%	Holding company
Piriform Software Limited United Kingdom		100.0%	Operating company
Piriform (Barbados) Ltd Barbados		100.0%	Operating company
Jumpshot s.r.o Czech Republic		100.0%	Operating company
FileHippo s.r.o. Czech Republic		100.0%	Operating company
Avast Software, Inc United States		100.0%	Holding company
Avast Software Japan Godo Kaisha Japan		100.0%	Operating company
TACR Services, Inc United States		100.0%	Operating company
AVG Technologies Norway AS Norway		100.0%	Holding company
Privax Limited United Kingdom		100.0%	Operating company
Privax Services (UK) Limited United Kingdom		100.0%	Operating company
AVG Technologies Switzerland AG Switzerland		100.0%	Operating company
AVG Technologies Deutschland GmbH Germany		100.0%	Operating company
Norman Data Defense Systems B.V Netherlands		100.0%	Operating company
AVG Ecommerce CY Limited Cyprus/Netherlands		100.0%	Operating company
Avast Corporate Services B.V.	Netherlands	100.0%	Operating company
AVG Technologies USA, Inc United States		100.0%	Holding company
Location Labs, Inc. United States		100.0%	Operating company
AVG Technologies AU Pty Ltd Australia		100.0%	Operating company
AVG Technologies Canada, Inc Canada		100.0%	Operating company
AVG Technologies UK Limited	United Kingdom	100.0%	Holding company
AVG Distribuidora de Tecnologias do
Brasil Ltda Brazil		100.0%	Operating company
Privax d.o.o. Beograd Serbia		100.0%	Operating company
TuneUp Software GmbH Germany		100.0%	Operating company
Remotium, Inc United States		100.0%	Operating company
Fero, Inc. United States		100.0%	Operating company
Avast Ancillary Services LLC United States		100.0%	Operating company
AVG Mobile Technologies Ltd Israel		100.0%	Operating company

^* Direct subsidiary. All others are indirect.

11.2 Principal establishments

The Group's offices are located in leased premises. Individual office leases vary as to their terms, rental provisions and expiration dates. The Group's principal facilities are located in Prague, Czech Republic and Brno, Czech Republic. The Group's Prague office consists of approximately 16,000 square meters of leased office space. The lease for this facility expires on 4 August 2024. The Group's Brno office consists of approximately 8,500 square meters of leased office space. The lease for this facility expires on 1 May 2020. Certain of the Group's leases have a term as short as one year while others are indefinite in length. Rent on the majority of the Group's offices is paid monthly in advance. The Group also has offices or other facilities in the United States (Kansas City, Fort Walton Beach, Emeryville, Charlotte, San Francisco, Redwood City and Brooklyn), the United Kingdom (Lincoln, Maidenhead and London), Brazil (Sao Paolo), Canada (Ottawa), Germany (Friedrichshafen, Muenchen, Darmstadt and Dusseldorf), the Netherlands (Amsterdam and Schiphol), Norway (Lysaker), Serbia (Belgrade), Switzerland (Basel and Baar), Hong Kong, China (Beijing), Taiwan (Taipei), Russia (Moscow and Novosibirsk) and Japan (Tokyo).

12. STATUTORY AUDITORS

The auditors of the Company are Ernst & Young LLP, whose registered address is at 1 More London Place, London SE1 2AF, England. Ernst & Young LLP is registered to carry out audit work by the Institute of Chartered Accountants in England and Wales. Ernst & Young LLP has provided the accountant's report on the financial information of the Group for the years ended 31 December 2015, 31 December 2016 and 31 December 2017 and the accountant's report on the financial information of AVG for the years ended 31 December 2015 and 31 December 2016 (each as set out in Part 11— "Historical Financial Information").

13. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Company or another member of the Group: (a) within the two years immediately preceding the date of this Prospectus which are, or may be, material to the Company or any member of the Group, and (b) at any time and contain provisions under which the Company or any member of the Group has an obligation or entitlement which is, or may be, material to the Company or any member of the Group as at the date of this Prospectus:

13.1 Underwriting Agreement and Stock Lending Agreement

The Underwriting Agreement and Stock Lending Agreement are described in paragraph 10 of this Part 14—"Additional Information".

13.2 Relationship Agreements

The Relationship Agreements are described in Part 7—"Directors and Corporate Governance— Relationship Agreements with Sybil and the Founders".

13.3 Contribution Agreements

On 9 May 2018, the Company entered into contribution agreements with each of the shareholders of Avast Holding B.V., effective conditional on Admission, under which each of the shareholders of Avast Holding B.V. contributed all of their shares in Avast Holding B.V. in consideration for the issue to them of ordinary shares (with equivalent value) in the share capital of the Company. On the same day, the Company entered into Dutch notarial deeds of transfer along with Avast Holding B.V. and each of the shareholders.

The Reorganisation is described in Section 2 of this Part 14—"Additional Information".

13.4 Google Promotion and Distribution Agreements

The Group has entered into two promotion and distribution agreements with Google: one through Avast Software s.r.o. and one through Piriform Software Limited.

Avast Software s.r.o. entered into a promotion and distribution agreement with Google Ireland Limited on 1 July 2012. The agreement (including all amendments thereto) will terminate on 31 March 2020, or earlier if a pre-determined limited on payments is reached, unless it is renewed or amended. Under this agreement, Avast Software s.r.o. agrees to bundle the Google Chrome and Google Toolbar products with distributions of its consumer antivirus products under the Avast and AVG brand names and certain utility applications as approved by Google from time to time. Google Ireland Limited in turn agrees to pay Avast Software s.r.o. monthly fees in connection with offering users the Google Chrome browser and Google Toolbar. The fee arrangements are provided in the agreement and vary based on the country in which the user is based, what product the user installs, and whether the user is newly installing or merely reactivating the product.

Piriform Software Limited entered into to a promotion and distribution agreement with Google Ireland Limited on 1 April 2017. The agreement will terminate on 31 March 2019, or earlier if a pre-determined limit on payments is reached, unless it is renewed or amended. Under this agreement, Piriform Software Limited agrees to bundle the Google Chrome and Google Toolbar products with distributions of its applications CCleaner, Recuva, Speccy and Defraggler. Google Ireland Limited in turn agrees to pay Piriform Software Limited monthly fees in connection with offering users the Google Chrome Browser and Google Toolbar. The fee arrangements are provided in the agreement and vary based on the country in which the user is based and whether the user is newly installing or merely reactivating the product.

13.5 Digital River Framework Services Agreement

Avast Software B.V is party to a framework services agreement with Digital River, Inc. and Digital River Ireland Limited (together, "Digital River") dated 4 November 2015. Such agreement has an initial term of five years (unless terminated sooner in accordance with the provisions of the agreement) and shall thereafter be automatically renewed for further periods of one year each unless terminated by either party by a minimum of three months' notice. In accordance with this agreement, Digital River agrees to provide members of the Group with e-commerce and payment processing services on the terms of specific work orders as agreed by the Group and Digital River or its affiliates. The agreement does not require the Group to purchase or pay for a minimum volume of the services from Digital River.

14. BANKING FACILITIES

CS Credit Agreement

On 30 September 2016, Avast Software B.V. and other parties entered into a credit agreement (the "CS Credit Agreement") with Credit Suisse International as administrative agent (the "Agent") and collateral agent (the "Collateral Agent"). The CS Credit Agreement originally provided for a \$1.2 billion dollar term loan facility, a €400 million euro term loan facility and an \$85 million revolving credit facility (collectively, the "Senior Facilities"). Since such date there have been a number of amendments made, including, but not limited to, incurrences of incremental loans and refinancing loans.

The committed financing in respect of the revolving credit facility is available for utilisation by way of revolving loans and letters of credit, subject to the satisfaction of certain conditions precedent. Although all of the initial conditions precedent have been satisfied, certain customary further conditions precedent must be satisfied as at the date of each utilisation request and each proposed utilisation date, in each case, in respect of the revolving credit facility.

The borrowers under the CS Credit Agreement are (i) in the case of the term loan facilities, Avast Software B.V. and Sybil Software LLC, on a joint and several basis and (ii) in the case of the revolving credit facility, Avast Software B.V., Sybil Software LLC, Avast Software s.r.o. on a several and not joint basis (collectively, the "Borrowers"). The facilities are jointly and severally guaranteed on a senior secured basis by Avast Holding B.V., the direct parent of Avast Software B.V., and certain of its subsidiaries as guarantors (collectively, the "Guarantors"). Borrowings under the facilities and the related guarantees are secured by first ranking liens on certain assets of the Borrowers and the Guarantors. The Senior Facilities bear interest at a rate per annum equal to LIBOR or EURIBOR, as applicable, and subject to a 1.00% floor in the case of the U.S. dollar denominated term loans and a 0% floor in the case of Euro denominated term loans and loans under the revolving credit facility, plus a margin of (i) with respect to loans under the dollar term loan facility, 2.75% (subject to a stepdown to 2.50% upon achievement of a Total Net First Lien Leverage Ratio (as defined below) equal to or less than 2.50:1.00), (ii) with respect to loans under the euro term facility, 3.00% (subject to a step-down to 2.75% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 2.50:1.00) and (iii) with respect

to loans under the revolving credit facility, 3.75% (subject to step-downs to 3.50% and 3.25% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 3.50:1.00 and 3.00:1.00, respectively). Any loans under the Senior Facilities in U.S. dollars may, at the option of the Borrowers under the applicable U.S. dollar facility, bear interest at a rate per annum equal to a base rate (the higher of (x) federal funds rate plus 1⁄2 of 1%, (y) prime rate and (z) 1 month LIBOR plus 1%, subject to a 2.00% floor in the case of the U.S. dollar denominated term loans) plus a margin equal to the margin applicable to U.S. dollar denominated LIBOR loans for the applicable facility described above less 1.00%. Avast Software B.V. is also required to pay commitment fees in arrears on the last business day of each fiscal quarter on available but unused commitments under the revolving credit facility at a rate of 0.50% (subject to a step-down to 0.375% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 3.00:1.00).

For the purposes of this section, "Total Net First Lien Leverage Ratio" means, for the most recent period of four consecutive fiscal quarters as of any date of calculation for which financials have been delivered or are required to be delivered, the ratio of (i) consolidated first lien net debt to (ii) consolidated EBITDA, in each case, of Avast Software B.V. and its restricted subsidiaries.

The outstanding term loans mature on 30 September 2023 and the revolving commitment terminates (and the outstanding loans thereunder mature) on 30 September 2021 (in each case, unless extended in accordance with the relevant terms) and any amount still outstanding on such maturity date, or in relation to any part of the facility which is extended, on such extended maturity date, will become immediately due and payable.

The CS Credit Agreement requires Avast Holding B.V., Avast Software B.V. and its restricted subsidiaries to observe certain customary affirmative covenants. The CS Credit Agreement also contains customary information and negative covenants, subject to certain agreed exceptions, applicable to Avast Software B.V. and its restricted subsidiaries and, in the case of a holding company covenant, Avast Holding B.V. In this respect, the financial and operating performance of Avast Software B.V. and its restricted subsidiaries is monitored by a financial covenant which requires such entities to ensure that the Total Net First Lien Leverage Ratio does not exceed 6.50:1.00 at any time when more than \$25 million is outstanding under the revolving credit facility at the end of a fiscal quarter. If (and only if) such amount is outstanding under the revolving credit facility, the financial covenant is tested quarterly.

Subject to certain conditions (including, in respect of prepayments of term loans in connection with a repricing on or prior to 21 May 2018, the payment of a 1.00% prepayment premium (which is subject to certain exceptions including for any repricing in connection with any initial public offering and is therefore not applicable in connection with the repricing of the term loans described below)), the Borrowers may voluntarily prepay term loans or revolving loans and/or permanently terminate all or part of the available commitments under the revolving credit facility by giving prior notice to the Agent. Amounts repaid or prepaid under the revolving credit facility (but not the dollar term loan facility or the euro term loan facility) may be reborrowed. In addition, the CS Credit Agreement requires mandatory prepayment in certain circumstances.

The CS Credit Agreement also contains a change of control event of default provision that will not be triggered by the offer of Shares.

On 16 April 2018, Avast Software B.V. requested consent from its lenders to certain amendments to the credit agreement dated 30 September 2016 (the "CS Credit Agreement"), effect a repricing of the revolving credit facility under the CS Credit Agreement and to effect a repricing of the term loans made under the CS Credit Agreement (to be effected through a refinancing of those loans) which, if agreed to by the lenders and other market participants, would reduce the applicable interest rate on the facilities.

Ratio equal to or less than 2.50:1.00), (ii) with respect to loans under the euro denominated term facility, 25 basis points to 2.75% (subject to a step-down to 2.50% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 2.50:1.00), (iii) refresh the repricing protection of a 1.00% prepayment premium for six months after the occurrence of the refinancing of the term loans in connection with the repricing contemplated above, (iv) with respect to loans under the revolving credit facility, 150 basis points to 2.25% (subject to a stepdown to 2.00% upon achievement of a Total Net First Lien Leverage Ratio equal to or less than 2.50:1.00) and (v) extend the termination/final maturity date of the revolving commitments by one year, to 30 September 2022. The Group will use approximately \$200 million of proceeds from the Global Offering, along with cash on hand, to prepay \$300 million in principal amounts outstanding under the dollar term loan facility.

As of 31 December 2017, the outstanding amount under the dollar term loan facility was \$1,214 million, the outstanding amount under the euro term loan facility was €502 million and the revolving credit facility had not been drawn.

HSBC Credit Agreement

On 16 June 2009, AVG Technologies CZ, s.r.o., as borrower, entered into a credit agreement with HSBC Bank plc, as lender (the "HSBC Credit Agreement"). As of 1 December 2017, AVG Technologies CZ, s.r.o. merged into Avast Software s.r.o., which thereby became the successor company and as such entered into the borrower's rights and obligations under the HSBC Credit Agreement. The HSBC Credit Agreement originally provided for up to €250,000 credit line but has since been amended several times up to the current committed aggregate amount of \$15.65 million. The committed financing is available for utilisation by way of letters of credit and/or credit lines for guarantees issued on behalf of any member of the Group approved by the lender on the basis of instructions delivered by the borrower to the lender. The current committed financing in the maximum aggregate amount of \$15.65 million may be drawn by way of (i) credit line for guarantees and letters of credit with validity not exceeding 36 months up to the total amount of \$15.65 million, (ii) credit line for guarantees with validity not exceeding 108 months up to the total amount of \$1 million, and/or (iii) credit line for a guarantee not exceeding 61 months issued in favour of Mr. Gary Kovacs in the amount of €9,619,060. The HSBC Credit Agreement also requires the borrower to observe certain customary covenants.

The committed financing under the HSBC Credit Agreement shall be available until terminated by the lender on the basis of not less than 30 day prior notice.

As of 31 March 2018, the Group had issued letters of credit and bank guarantees under the HSBC Credit Agreement for a total amount of \$16.7 million.

15. UK TAXATION

The following statements are intended only as a general guide to certain UK tax considerations and do not purport to be a complete analysis of all potential UK tax consequences of acquiring, holding or disposing of Shares. They are based on current or announced UK legislation and what is understood to be the current practice of HMRC as at the date of this Prospectus, both of which may change, possibly with retroactive effect. They apply only to Shareholders who are resident and, in the case of individuals domiciled, for tax purposes in (and only in) the UK (except insofar as express reference is made to the treatment of non-UK residents), who hold their Shares as an investment (other than in an individual savings account or exempt pension arrangement) and who are the absolute beneficial owner of both the Shares and any dividends paid on them. The tax position of certain categories of Shareholders who are subject to special rules (such as persons acquiring their Shares in connection with employment, dealers in securities, insurance companies and collective investment schemes) is not considered.

The statements summarise the current position and are intended as a general guide only. Prospective investors who are in any doubt as to their tax position or who may be subject to tax in a jurisdiction other than the UK are strongly recommended to consult their own professional advisers.

15.1 Taxation of dividends

The Company is not required to withhold tax when paying a dividend. Liability to tax on dividends will depend upon the individual circumstances of a Shareholder.

15.1.1 UK resident individual Shareholders

With effect from April 2016, the UK income tax rules applicable to dividends changed. Dividend income no longer carries a UK tax credit, and instead new rates of tax apply. These include a nil rate of tax for the first

£5,000 of dividend income in any tax year (the "nil rate band") and different rates of tax for dividend income that exceeds the nil rate band. However, pursuant to the Finance (No.2) Act 2017, the nil rate band will be reduced to £2,000 from 6 April 2018. For these purposes, "dividend income" includes UK and non-UK source dividends and certain other distributions in respect of shares.

An individual Shareholder who is resident for tax purposes in the United Kingdom and who receives a dividend from the Company will not be liable to UK tax on the dividend to the extent that (taking account of any other dividend income received by the Shareholder in the same tax year) that dividend falls within the nil rate band.

To the extent that (taking account of any other dividend income received by the Shareholder in the same tax year) the dividend exceeds the nil rate band, it will be subject to income tax at 7.5% to the extent that it falls below the threshold for higher rate income tax. To the extent that (taking account of other dividend income received in the same tax year) it falls above the threshold for higher rate income tax then the dividend will be taxed at 32.5% to the extent that it is within the higher rate band, or 38.1% to the extent that it is within the additional rate band (each such rate as applicable in 2017/2018). For the purposes of determining which of the taxable bands dividend income falls into, dividend income is treated as the highest part of a Shareholder's income. In addition, dividends within the nil rate band which (in the absence of the nil rate band exemption) would otherwise have fallen within the basic or higher rate bands will use up those bands respectively and so will be taken into account in determining whether the threshold for higher rate or additional rate income tax is exceeded.

15.1.2 UK resident corporate Shareholders

It is likely that most dividends paid on the Shares to UK resident corporate shareholders would fall within one or more of the classes of dividend qualifying for exemption from corporation tax. However, it should be noted that the exemptions are not comprehensive and are also subject to anti-avoidance rules.

15.1.4 Non-UK resident Shareholders

No tax credit will attach to any dividend paid by the Company. A Shareholder resident outside the United Kingdom may also be subject to non-UK taxation on dividend income under local law. A Shareholder who is resident outside the United Kingdom for tax purposes should consult its, his or her own tax adviser concerning its, his or her tax position on dividends received from the Company.

15.2 Taxation of disposals

A disposal or deemed disposal of Shares by a Shareholder who is resident in the United Kingdom for tax purposes may, depending upon the Shareholder's circumstances and subject to any available exemption or relief (such as the annual exempt amount for individuals and indexation allowance for corporate shareholders), give rise to a chargeable gain or an allowable loss for the purposes of UK taxation of capital gains.

For such individual Shareholders, any chargeable gain on their disposal of Shares will be subject to capital gains tax at 10% to the extent it is within the basic rate band and 20% to the extent it is within the higher or additional rate bands (each such rate as applicable in 2017/2018). For such corporate Shareholders, any chargeable gain will be subject to corporation tax at 19% for the years starting 1 April 2017, 2018 and 2019, falling to 17% for the year starting 1 April 2020).

Shareholders who are not resident in the United Kingdom will not generally be subject to UK taxation of capital gains on the disposal or deemed disposal of Shares unless they are carrying on a trade, profession or vocation in the United Kingdom through a branch or agency (or, in the case of a corporate Shareholder, a permanent establishment) in connection with which the Shares are used, held or acquired. Non-UK tax resident Shareholders may be subject to non-UK taxation on any gain under local law.

An individual Shareholder who acquires shares whilst resident for tax purposes in the United Kingdom but subsequently ceases to be so resident or is subsequently treated as resident outside the United Kingdom for the purposes of a double tax treaty ("Treaty non-resident") for a period of five years or less (or, for departures before 6 April 2013, ceases to be resident or ordinarily resident or becomes Treaty non-resident for a period of less than five tax years) and who disposes of all or part of his or her Shares during that period may be liable to capital gains tax on his or her return to the United Kingdom, subject to any available exemptions or reliefs.

15.3 Stamp duty and Stamp Duty Reserve Tax ("SDRT")

15.3.1 The Global Offer

The stamp duty and SDRT treatment of the subscription or purchase of Shares under the Global Offer will be as follows:

The transfer of, or agreement to transfer, Shares sold by the Selling Shareholders under the Global Offer will generally give rise to a liability to stamp duty and/or SDRT at a rate of 0.5% of the Offer Price (in the case of stamp duty, rounded up to the nearest multiple of £5). Under the terms of the Underwriting Agreement and the Deeds of Election, as applicable, the Selling Shareholders have agreed to meet such liability. An exemption from stamp duty is available on an instrument transferring Shares where the amount or value of the consideration is £1,000 or less, and it is certificated on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions for which the aggregate consideration exceeds £1,000.

15.3.2 Subsequent transfers

Stamp duty at the rate of 0.5% (rounded up to the next multiple of £5) of the amount or value of the consideration given is generally payable on an instrument transferring Shares. An exemption from stamp duty is available on an instrument transferring Shares where the amount or value of the consideration is £1,000 or less, and it is certificated on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions for which the aggregate consideration exceeds £1,000. A charge to SDRT will also arise on an unconditional agreement to transfer Shares (at the rate of 0.5% of the amount or value of the consideration payable). However, if within six years of the date of the agreement becoming unconditional an instrument of transfer is executed pursuant to the agreement, and stamp duty is paid on that instrument, any SDRT already paid will be refunded (generally, but not necessarily, with interest) provided that a claim for repayment is made, and any outstanding liability to SDRT will be cancelled. The liability to pay stamp duty or SDRT is generally satisfied by the purchaser or transferee.

15.3.3 Shares transferred through paperless means including CREST

Paperless transfers of Shares, such as those occurring within CREST, are generally liable to SDRT rather than stamp duty, at the rate of 0.5% of the amount or value of the consideration. CREST is obliged to collect SDRT on relevant transactions settled within the system. The charge is generally borne by the purchaser. Under the CREST system, no stamp duty or SDRT will arise on a transfer of Shares into the system unless such a transfer is made for a consideration in money or money's worth, in which case a liability to SDRT (usually at a rate of 0.5%) will arise.

15.3.4 Shares held through clearance systems or depositary receipt arrangements

Special rules apply where Shares are issued or transferred to, or to a nominee or agent for, either a person whose business is or includes issuing depositary receipts within Section 67 or Section 93 of the Finance Act 1986 or a person providing a clearance service within Section 70 or Section 96 of the Finance Act 1986, under which SDRT or stamp duty may be charged at a rate of 1.5% of the amount or value of the consideration given. Following litigation, HMRC has confirmed that they will no longer seek to apply the 1.5% SDRT charge on an issue of shares into a clearance service or depositary receipt arrangement on the basis that the charge is not compatible with EU law. However, this view has not been reflected in a change to the UK rules. HMRC's view is that the 1.5% SDRT or stamp duty charge will continue to apply to transfers of shares into a clearance service or depositary receipt arrangement unless they are an integral part of an issue of share capital. Further litigation indicates that this view is not correct (at least in respect of certain transfers of legal title to clearance services) but HMRC have not yet confirmed whether they will cease applying the charge. Accordingly, specific professional advice should be sought before incurring a 1.5% stamp duty or stamp duty reserve tax charge in any circumstances.

At the Autumn Budget 2017, the government announced that HMRC will continue to not charge stamp duty and SDRT on issues of shares to overseas clearance services and depositary receipt issuers following Brexit. These proposals, however, have not yet been enacted in legislation.

Except in relation to clearance services that have made an election under Section 97A(1) of the Finance Act 1986 (to which special rules apply), no stamp duty or SDRT is payable in respect of transfers within clearance services or depositary receipt systems. There is an exception from the 1.5% charge on the transfer to, or to a nominee or agent for, a clearance service where the clearance service has made and maintained an election under section 97A(1) of the Finance Act 1986, which has been approved by HMRC. In these circumstances, SDRT at the rate of 0.5% of the amount or value of the consideration payable for the transfer will arise on any transfer of shares in the Company into such an account and on subsequent agreements to transfer such shares within such account.

The statements in this paragraph 15.3.4 apply to any holders of Shares irrespective of their residence, summarise the current position and are intended as a general guide only. Special rules apply to agreements made by, amongst others, intermediaries.

15.4 Inheritance tax

The Shares will be assets situated in the UK for the purposes of UK inheritance tax. A gift of such assets by, or the death of, an individual holder of such assets may (subject to certain exemptions and reliefs) give rise to a liability to UK inheritance tax even if the holder is neither domiciled in the UK nor deemed to be domiciled there under certain rules relating to long residence or previous domicile. For inheritance tax purposes, a transfer of assets at less than full market value may be treated as a gift and particular rules apply to gifts where the donor reserves or retains some benefit.

Special rules also apply to close companies and to trustees of settlements who hold Shares, bringing them within the charge to inheritance tax. Shareholders should consult an appropriate tax adviser if they make a gift or transfer at less than market value or intend to hold any Shares through trust arrangements.

16. CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a description of certain U.S. federal income tax consequences to U.S. Holders, as defined below, of acquiring, owning and disposing of Shares, but does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular person's decision to acquire Shares. This discussion applies only to a U.S. Holder that acquires Shares pursuant to the Offering and holds the Shares as capital assets for U.S. federal income tax purposes. In addition, this discussion does not describe all of the tax consequences that may be relevant in light of a U.S. Holder's particular circumstances, including alternative minimum tax consequences, the Medicare contribution tax on net investment income, estate and gift tax laws and U.S. state or local tax laws, and does not describe differing tax consequences applicable to U.S. Holders subject to special rules, such as:

financial institutions;
regulated investment companies;
real estate investment trusts;
insurance companies;
dealers or traders in securities;
dealers or traders in currencies and commodities;
persons holding Shares as part of a hedging transaction, straddle, wash sale, conversion transaction or integrated transaction or persons entering into a constructive sale with respect to the Shares;
persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
entities classified as partnerships or pass-through entities for U.S. federal income tax purposes;
tax-exempt entities, including "individual retirement accounts" or "Roth IRAs";
certain former citizens or long-term residents of the United States;
persons holding Shares in connection with a branch, agency or permanent establishment within the United Kingdom; or
persons that own, directly, indirectly or constructively, ten% (10%) or more, by vote or value, of the stock of the Company.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds Shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding Shares should consult their tax advisers as to the particular U.S. federal income tax consequences to their partners of acquiring, owning and disposing of such Shares.

This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the "Code"), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, any of which is subject to change, possibly with retroactive effect.

A "U.S. Holder" is a holder who, for U.S. federal income tax purposes, is a beneficial owner of Shares and is:

a citizen or individual resident of the United States;
a corporation, or other entity taxable as a corporation, created or organised in or under the laws of the United States, any state therein or the District of Columbia;
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust if a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all substantial decisions of the trust (or otherwise if the trust has a valid election in effect under current Treasury regulations to be treated as a United States person).

U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of acquiring, owning and disposing of the Shares based on their particular circumstances.

16.1 Taxation of distributions

Subject to the discussion below under "—Passive foreign investment company rules," distributions paid on the Shares will be treated as dividends to the extent paid out of the Company's current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of the Company's current and accumulated earnings and profits will be treated first as a non-taxable return of capital, thereby reducing a U.S. Holder's adjusted tax basis in the Shares (but not below zero), and thereafter as either long-term or short-term capital gain depending upon whether such U.S. Holder held the Shares for more than one year as of the time such distribution is actually or constructively received. Because the Company does not maintain calculations of its earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Holders as dividends and be taxable at ordinary income tax rates.

The amount of a dividend paid on the Shares will be treated as foreign-source dividend income and will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code. Subject to certain holding period requirements and applicable limitations, dividends paid by the Company to certain non-corporate U.S. Holders may be eligible for reduced rates of taxation if the dividends are "qualified dividends" for U.S. federal income tax purposes. Such dividends received with respect to the Shares will be qualified dividends if the Company (i) is eligible for the benefits of a comprehensive income tax treaty with the United States that the U.S. Internal Revenue Service ("IRS") has approved for the purposes of the qualified dividend rules and (ii) was not, in the year prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid, a passive foreign investment company ("PFIC") for U.S. federal income tax purposes.

The income tax treaty between the United States and the United Kingdom (the "U.S.-UK Treaty") has been approved by the IRS for purposes of the qualified dividend rules and the Company expects that it will generally be eligible for the benefits of the U.S.-UK Treaty. In addition, the Company was formed in 2018 and, although no assurances can be given, does not anticipate becoming a PFIC for its current taxable year or any foreseeable future taxable year. See the discussion below under "—Passive foreign investment company rules".

A dividend will be included in a U.S. Holder's income on the date of the U.S. Holder's actual or constructive receipt of the dividend. The amount of any dividend income paid in pounds sterling will be the U.S. dollar amount calculated by reference to the spot rate of exchange in effect on the date the dividend is actually or constructively received by the U.S. Holder, regardless of whether the payment is in fact converted into U.S. dollars. For purposes of calculating the foreign tax credit, dividends paid on the Shares will be treated as income from sources outside the United States and will generally constitute passive category income. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognise foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt. In general, foreign currency gain or loss will be treated as U.S.-source ordinary income or loss. The rules governing the foreign tax credit are complex. U.S. Holders should consult their own tax advisors regarding the availability of the foreign tax credit under their particular circumstance.

16.2 Sale or other disposition of the Shares

Subject to the discussion below under "—Passive foreign investment company rules," for U.S. federal income tax purposes, gain or loss realised by a U.S. Holder on the sale or other taxable disposition of Shares will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held such Shares for more than one year. In general, a loss may nonetheless be a long-term capital loss regardless of a U.S. Holder's actual holding period to the extent the U.S. Holder has received qualified dividends eligible for reduced rates of tax described above under "—Taxation of distributions" prior to a sale or other taxable disposition of its Shares that, alone or combined with any other dividends received from the Company within an 85-day period, exceed 10% of the U.S. Holder's basis in such Shares. Preferential tax rates currently apply to long-term capital gain of a U.S. Holder that is an individual, estate or trust.

The amount of the gain or loss will equal the difference between the amount realised on the disposition and the U.S. Holder's tax basis in the Shares disposed of, in each case as determined in U.S. dollars. This gain or loss generally will be U.S.-source gain or loss. The deductibility of capital losses is subject to limitations.

A U.S. Holder's initial tax basis in the Shares will be the U.S. dollar value of the pound sterling-denominated purchase price determined on the date of purchase. If the Shares are treated as traded on an "established securities market," a cash basis U.S. Holder (or, if it elects, an accrual basis U.S. Holder) will determine the U.S. dollar value of the cost of such Shares by translating the amount paid at the spot rate of exchange on the settlement date of the purchase.

A U.S. Holder that receives pounds sterling from a sale or other taxable disposition of Shares generally will realise an amount equal to the U.S. dollar value of such pounds sterling received on the date such Shares are disposed of. However, if the Shares are treated as being "traded on an established securities market" pursuant to the Code, a cash basis or electing accrual basis U.S. Holder will determine the U.S. dollar value of the amount realised by translating such amount at the spot rate on the settlement date of the disposition. If an accrual basis U.S. Holder makes the election described above, such election must be applied consistently from year to year and cannot be revoked without the consent of the IRS. A U.S. Holder will have a tax basis in any pounds sterling received in respect of a disposition of Shares equal to the U.S. dollar value of such pounds sterling on the settlement date. Any gain or loss recognised upon a subsequent disposition of such pounds sterling will be treated as ordinary income or loss to such U.S. Holder and generally will be U.S.-source income or loss. If a U.S. Holder is an accrual basis taxpayer that is not eligible to or does not elect to determine the amount realised using the spot rate on the settlement date, it will recognise foreign currency gain or loss to the extent of any difference between the U.S. dollar amount of the pounds sterling realised on the date of the disposition and the U.S. dollar value of the pounds sterling received at the spot rate on the settlement date.

16.3 Passive foreign investment company rules

In general, a non-U.S. corporation is treated as a passive foreign investment company (a "PFIC"), for any taxable year if: (1) 75% or more of its gross income consists of passive income; or (2) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For this purpose, passive income generally includes, among other things, dividends, interest, rents, royalties and gains from the disposition of investment assets, subject to various exceptions. The asset test described in (2) above is applied using the fair market value of such non-U.S. corporation's assets. For purposes of the PFIC asset test, the Company intends to take the position that the aggregate fair market value of the Company's assets is equal to the sum of the aggregate value of the Company's outstanding stock and the total amount of the Company's liabilities (the Company's "Market Capitalisation"), and that the excess of the Company's Market Capitalisation over the book value of all of the Company's assets ("Goodwill") may be treated as a non-passive asset to the extent attributable to the Company's non-passive activities. If the Company owns at least 25% (by value) of the stock of another corporation, it will be treated, for purposes of the PFIC tests, as owning its proportionate share of the other corporation's assets and receiving its proportionate share of the other corporation's income.

Based upon the current and anticipated composition of the Company's gross income and gross assets and the nature of the Company's business, the Company does not expect to be a PFIC for the 2018 tax year, which is the Company's first tax year, or in the foreseeable future. The Company's PFIC status in any tax year will depend on the Company's income, assets, activities and the Company's Market Capitalisation in those years. The Company has no reason to believe that its activities will change in a manner that would cause it to be classified as a PFIC. However, because the PFIC determination is made on an annual basis, there can be no assurance that the

Company will not be considered a PFIC for any taxable year as a result of an increase in the value or amount of the Company's passive assets, an increase in the amount of the Company's passive income, a decrease in the value of the Company's active assets or a decrease in the amount of the Company's active income. In addition, if the Company is classified as a PFIC in any year during which a U.S. Holder is a shareholder, the Company will continue to be treated as a PFIC with respect to that U.S. Holder in all succeeding years during which such U.S. Holder holds Shares, regardless of whether the Company continues to meet the income or asset test described above.

If the Company was a PFIC for any taxable year during which a U.S. Holder held the Shares, gain recognised by a U.S. Holder on a sale or other taxable disposition (including certain pledges) of the Shares would generally be allocated ratably over the U.S. Holder's holding period for the Shares. The amounts allocated to the taxable year of the sale or other taxable disposition and to any year before the Company became a PFIC would be taxed as ordinary income.

The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations for that year, as appropriate, and an interest charge would be imposed. Further, to the extent that any distribution received by a U.S. Holder on its Shares exceeds 125.0% of the average of the annual distributions on the Shares received during the preceding three years or the U.S. Holder's holding period, whichever is shorter, that distribution would be subject to taxation in the same manner as gain, as described immediately above. Certain elections may be available that would result in alternative treatments (such as mark-to market treatment) of the Shares. U.S. Holders are encouraged to consult their own tax advisors to determine whether any of these elections would be available and, if so, what the consequences of the alternative treatments would be in their particular circumstances. If a U.S. Holder owns the Shares during any year in which the Company is treated as a PFIC, such U.S. Holder generally must file IRS Form 8621 with respect to the Company, generally with the U.S. Holder's federal income tax return for that year. If the Company is treated as a PFIC for a given taxable year, then U.S. Holders of the Shares should consult their tax advisors concerning their annual filing requirements.

16.4 Information reporting and backup withholding

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless (1) the U.S. Holder is a corporation or other exempt recipient; or (2) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.

Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder's U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.

16.6 Foreign asset reporting

Certain U.S. Holders who are individuals (or certain specified entities) may be required to report information relating to an interest in the Shares by attaching a complete IRS Form 8938, Statement of Specified Foreign Financial Assets, to their tax return for each year in which they hold Shares, subject to certain exceptions (including an exception for Shares held in accounts maintained by U.S. financial institutions). U.S. Holders should consult their tax advisers regarding the application of these rules in their particular circumstances.

The above summary is not intended to constitute a complete analysis of all U.S. federal income tax consequences relating to the acquisition, holding and disposition of the Shares. Prospective purchasers of Shares should consult their own tax advisers concerning the tax consequences based on their particular situations.

17. ENFORCEMENT AND CIVIL LIABILITIES UNDER U.S. FEDERAL SECURITIES LAWS

The Company is a public limited company incorporated under English law. Certain of the Directors are citizens of the United Kingdom (or other non-U.S. jurisdictions), and a portion of the Company's assets are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon the Directors or to enforce against them in the U.S. courts judgments obtained in U.S. courts predicated upon the civil liability provisions of the U.S. federal securities laws. There is doubt as to the enforceability in England, in original actions or in actions for enforcement of judgments of the U.S. courts, of civil liabilities predicated upon U.S. federal securities laws.

18. LITIGATION

The Group is currently involved in two related litigation matters concerning the former Chief Executive Officer of AVG, Gary Kovacs, following the termination of his employment by the Group. Mr. Kovacs has filed suit in the United States with the San Francisco County Superior Court for breach of contract and wrongful termination, inter alia (the "California Matter"), and has also filed suit in the Netherlands with the Sub District Court of Amsterdam to enforce the payment of the value of certain equity award agreements (the "Netherlands Matter"). Mr. Kovacs is seeking approximately \$1,181,400 in the California Matter and approximately €8,444,600 in the Netherlands Matter. A hearing has been conducted in the Netherlands Matter, and the Group is currently in pre-trial proceedings in the California Matter with a trial date in June 2018, unless such date is otherwise extended.

There are no other governmental, legal or arbitration proceedings (including such proceedings which are pending or threatened of which the Company is aware) during the 12 months preceding the date of this Prospectus, which may have, or have had in the recent past, a significant effect on the Company's and/or the Group's financial position or profitability.

19. RELATED PARTY TRANSACTIONS

On 15 November 2016, the Group's headquarters in Prague, the Enterprise Office Center (owned by Erste Group Immorent), was sold to a group of investors including the Group's founders, Pavel Baudisˇ and Eduard Kucˇera, for \$119.5 million.

Save as described in the paragraphs above and in the Company's audited consolidated financial information for the three years ended 31 December 2017 set out in Section B of Part 11—"Historical Financial Information", there are no related party transactions between the Company or members of the Group that were entered into during the years ended 31 December 2015, 2016 or 2017, respectively.

20. WORKING CAPITAL

In the opinion of the Company, taking into account the net underwritten proceeds receivable by the Company from the Global Offer and the bank and other facilities available to the Group, the Group has sufficient working capital for its present requirements, that is for at least the next 12 months following the date of this Prospectus.

21. NO SIGNIFICANT CHANGE

There has been no significant change in the financial or trading position of the Group since 31 December 2017, the date to which the last audited consolidated accounts of the Group was prepared.

22. CONSENTS

Ernst & Young LLP has given and has not withdrawn its written consent to the inclusion of the reports in Section A and Section C of Part 11—"Historical Financial Information" and Section B of Part 12—"Unaudited Pro Forma Financial Information", in the form and context in which they appear and has authorised the contents of those parts of this Prospectus which comprise its reports for the purposes of Rule 5.5.3R(2)(f) of the Prospectus Rules.

A written consent under the Prospectus Rules is different from a consent filed with the U.S. Securities and Exchange Commission under Section 7 of the U.S. Securities Act. Ernst & Young LLP has not filed and will not be required to file a consent under Section 7 of the U.S. Securities Act.

23. GENERAL

23.1 The fees and expenses to be borne by the Company in connection with Admission including the Underwriters' base commission, the FCA's fees, London Stock Exchange fees, professional fees and expenses and the costs of printing and distribution of documents are estimated to amount to approximately £22.1 million. Each Selling Shareholder will bear the amount of any stamp duty or stamp duty reserve tax chargeable on the sale of his/its Shares as well as a share of any base and additional underwriting commissions as set out in paragraphs 10.1.6, 10.1.7 and 10.1.10 of this Part 14—"Additional Information".
23.2 The financial information contained in this Prospectus does not amount to statutory accounts within the meaning of section 434(3) of the Act. Full audited accounts have been delivered to the Registrar of Companies for Avast Holding B.V. for the period from 1 January 2015 to 31 December 2015, and from 1 January 2016 to 31 December 2016, and for AVG for the period from 1 January 2015 to 31 December 2015.
23.3 Each New Share is expected to be issued at a premium of 240 pence to its nominal value of 10 pence.

24. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) for a period of 12 months following the date of this Prospectus at the offices of White & Case LLP, 5 Old Broad Street, London EC2N 1DW, United Kingdom:

(a) the Articles;
(b) the audited historical financial information of the Group in respect of the financial years ended 31 December 2017, 2016 and 2015 together with the related accountant's report from Ernst & Young LLP, which is set out in Part 11—"Historical Financial Information";
(c) the audited historical financial information of AVG in respect of the financial years ended 31 December 2016 and 2015, together with the related accountant's report from Ernst & Young LLP, which is set out in Part 11—"Historical Financial Information";
(d) the consent letter referred to in "Consents" in paragraph 22 above; and
(e) this Prospectus.

Dated: 10 May 2018

PART 15 DEFINITIONS AND GLOSSARY

The following definitions apply throughout this Prospectus unless the context requires otherwise:

"Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . the UK Companies Act 2006, as amended "Admission" . . . . . . . . . . . . . . . . . . . . . . the admission of the Shares to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities "Articles" . . . . . . . . . . . . . . . . . . . . . . . . the articles of association of the Company to be adopted upon Admission "Avast" . . . . . . . . . . . . . . . . . . . . . . . . . . the Group, excluding AVG, Piriform and HMA "AVG" . . . . . . . . . . . . . . . . . . . . . . . . . . AVG Technologies B.V., as merged with Avast Software B.V., being the surviving entity, on or around 1 September 2017, and its subsidiaries "Banks" . . . . . . . . . . . . . . . . . . . . . . . . . . the Underwriters and the Financial Adviser "Barclays" ....................... Barclays Bank PLC, acting through its Investment Bank "Board" . . . . . . . . . . . . . . . . . . . . . . . . . . the board of directors of the Company "BofA Merrill Lynch" .............. Merrill Lynch International "CAGR" ......................... compound annual growth rate "City Code" . . . . . . . . . . . . . . . . . . . . . . the UK City Code on Takeovers and Mergers "Co-Lead Manager" ............... KeyBanc Capital Markets "Company"....................... Avast plc "Credit Suisse".................... Credit Suisse Securities (Europe) Limited "CREST" . . . . . . . . . . . . . . . . . . . . . . . . the UK-based system for the paperless settlement of trades in listed securities, of which Euroclear UK and Ireland Limited is the operator "Deeds of Election" . . . . . . . . . . . . . . . . the deeds of share sale election pursuant to which the Selling Shareholders (other than the Major Shareholders) have irrevocably instructed Equiniti Financial Services Limited to agree the sale of Existing Shares as their agent and on their behalf "EEA" . . . . . . . . . . . . . . . . . . . . . . . . . . . the European Economic Area "EU" . . . . . . . . . . . . . . . . . . . . . . . . . . . . the European Union "EURIBOR"...................... Euro Interbank Offered Rate "Executive Directors" . . . . . . . . . . . . . . the executive Directors of the Company "Existing Shares" . . . . . . . . . . . . . . . . . . the Shares sold as part of the Global Offer by the Selling Shareholders (excluding, for the avoidance of doubt, the Overallotment Shares)

"FATCA"	the U.S. Foreign Account Tax Compliance Act, as amended
"FCA"	the UK Financial Conduct Authority
"Financial Adviser" or
"Rothschild"	NM Rothschild & Sons Limited
"Founder Relationship Agreement"	the relationship agreement entered into between the Company and Pavel Baudisˇ and Eduard Kucˇera and their respective investment vehicles, PaBa Software s.r.o. and Pratincole Investments Ltd as described in Part 7—"Directors and Corporate Governance— Relationship Agreements with Sybil and the Founders"
"FSMA"	the Financial Services and Markets Act 2000, as amended
"Global Offer"	the issue of New Shares by the Company, the sale of Existing Shares by the Selling Shareholders and the sale of Over-allotment Shares pursuant to the Over-allotment Option described in Part 13—"Details of the Global Offer"
"Governance Code"	the UK Corporate Governance Code issued by the Financial Reporting Council, as amended from time to time
the "Group"	Avast Holding B.V. and each of its consolidated subsidiaries and subsidiary undertakings prior to the completion of the Reorganisation (which is expected to be immediately prior to Admission) and, thereafter, the Company and its consolidated subsidiaries and subsidiary undertakings from time to time
"Historical Financial Information"	The historical financial information contained in Section B and Section D of Part 11—"Historical Financial Information"
"HMRC"	HM Revenue and Customs
"IASB"	International Accounting Standards Board
"IFRIC"	IFRS Interpretations Committee (previously the International Financial Reporting Interpretations Committee)
"IFRS"	International Financial Reporting Standards, as adopted by the European Union
"IT"	Information Technology
"Jefferies"	Jefferies International Limited
"Joint Bookrunners"	Morgan Stanley, UBS, Barclays, BofA Merrill Lynch, Credit Suisse and Jefferies
"Joint Global Co-ordinators"	Morgan Stanley and UBS
"Joint Sponsors"	Morgan Stanley and UBS
"KeyBanc Capital Markets"	KeyBanc Capital Markets Inc.
"KPIs"	key performance indicators
"LIBOR"	London Interbank Offered Rate
"Listing Rules"	the listing rules of the FCA made under section 74(4) of the FSMA

"London Stock Exchange" .......... London Stock Exchange plc "Major Shareholders".............. Sybil Holdings S.à r.l., Pavel Baudisˇ, Eduard Kucˇera, Summit Partners "Market Abuse Regulation" ......... Regulation (EU) 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse "Morgan Stanley" ................. Morgan Stanley & Co. International plc "New Shares" . . . . . . . . . . . . . . . . . . . . . new Shares in the Company to be allotted and issued as part of the Global Offer "Non-Executive Directors" . . . . . . . . . . the non-executive Directors of the Company "Offer Price" . . . . . . . . . . . . . . . . . . . . . the price at which each Share is to be issued or sold pursuant to the Global Offer "Official List" . . . . . . . . . . . . . . . . . . . . . the Official List of the FCA "Over-allotment Option" . . . . . . . . . . . the option granted to the Stabilising Manager by the Over-allotment Shareholders to purchase, or procure purchasers for, up to 36,118,935 additional Shares as more particularly described in Part 13—"Details of the Global Offer" "Over-allotment Shareholders" ...... Summit Investors I, LLC, Summit Investors I (UK), L.P., Leia 1 S.à r.l. and Sybil Holdings S.à r.l. "Over-allotment Shares" . . . . . . . . . . . . the Existing Shares the subject of the Over-allotment Option "Piriform" ....................... Piriform Group Limited along with its subsidiaries as at 17 July 2017 "PCAOB" . . . . . . . . . . . . . . . . . . . . . . . . the Public Company Accounting Oversight Board (United States) "Prospectus" . . . . . . . . . . . . . . . . . . . . . . the final prospectus approved by the FCA as a prospectus prepared in accordance with the Prospectus Rules made under section 73A of the FSMA "Prospectus Directive" ............. Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU "Prospectus Directive Amending Directive" ...................... Directive (2010/73/EU) "Prospectus Rules" . . . . . . . . . . . . . . . . the prospectus rules of the FCA "qualified institutional buyers" or "QIBs" . . . . . . . . . . . . . . . . . . . . . . . . has the meaning given by Rule 144A "Qualified Investors"............... persons who are "qualified investors" within the meaning of Article 2(l)(e) of the Prospectus Directive "Registrar" ....................... Equiniti Limited whose registered address is Aspect House, Spencer Road, Lancing Business Park, West Sussex, BN99 6DA, United Kingdom, with company number 06226088

"Regulation S"	Regulation S under the U.S. Securities Act
"Relationship Agreements"	the Founder Relationship Agreement and the Sybil Relationship Agreement, together
"Remuneration Committee"	the remuneration committee of the Board (or such other delegated committee of the Board authorised to consideration remuneration and/or share scheme matters)
"Reorganisation"	the reorganisation of the Company in preparation for the Global Offer as described in paragraph 2 of Part 14—"Additional Information"—Reorganisation
"Rollover Options"	in connection with the Plan, options over B Ordinary Shares of Avast Holding B.V.
"Rule 144A"	Rule 144A under the U.S. Securities Act
"SDRT"	stamp duty reserve tax
"Selling Shareholders"	Sybil Holdings S.à r.l., Pavel Baudiš, Eduard Kučera, Summit Partners and certain Directors, employees and former employees of the Company
"Shareholders"	the holders of Shares in the capital of the Company
"Shares"	the ordinary shares of the Company, having the rights set out in the Articles
"Stabilising Manager"	Morgan Stanley & Co. International plc
"sterling", "pounds sterling", "GBP" or "pence"	the lawful currency of the United Kingdom
"Sybil Relationship Agreement"	the relationship agreement entered into between the Company and Sybil Holdings S.à r.l., which is owned by funds advised by affiliates of CVC Capital Partners Advisory Company (Luxembourg) S.à r.l., as described in Part 7—"Directors and Corporate Governance—Relationship Agreements with Sybil and the Founders"
"UBS"	UBS Limited
"UK"	the United Kingdom of Great Britain and Northern Ireland
"Underwriters"	Morgan Stanley, UBS, Barclays, BofA Merrill Lynch, Credit Suisse, Jefferies and KeyBanc Capital Markets
"Underwriting Agreement"	the underwriting agreement entered into between the Company, the Directors, the Selling Shareholders and the Underwriters described in paragraph 10.1 of Part 14—"Additional Information—Underwriting Agreement"
"United States" or "U.S."	the United States of America, its territories and possessions, any State of the United States of America, and the District of Columbia
"U.S. dollars", "USD", "\$" or "US\$"	the lawful currency of the United States
"U.S. Exchange Act"	United States Securities Exchange Act of 1934, as amended
"U.S. GAAP"	accounting principles generally accepted in the United States
"U.S. GAAS"	auditing standards generally accepted in the United States
"U.S. Securities Act"	United States Securities Act of 1933, as amended

AI assistant

AVATION PLC — Prospectus 2018

4886_prs_2018-05-10_b2b64631-327e-4668-b201-08e856953ea6.pdf

ELECTRONIC TRANSMISSION DISCLAIMER

STRICTLY NOT TO BE FORWARDED TO ANY OTHER PERSONS

Prospectus May 2018

AVAST PLC

Rothschild

ORDINARY SHARE CAPITAL IMMEDIATELY FOLLOWING ADMISSION

Notice to overseas shareholders

Available information

TABLE OF CONTENTS

SUMMARY

Section A—Introductions and warnings

A.1 Warning

A.2 Subsequent resale of securities or final placement of securities through financial intermediaries

Section B—Issuer

B.1 Legal and commercial name

B.2 Domicile and legal form

B.3 Key factors affecting current operations and principal activities

B.4a Significant recent trends affecting the Group and the industry in which it operates

B.5 Group description

B.6 Major shareholders

Notes

Sybil Relationship Agreement

Founder Relationship Agreement

B.7 Key financial information and narrative description of significant changes to financial condition and operating results of the Group during or subsequent to the period covered by the historical key financial information

The Group

Consolidated Income Statement Data

Consolidated Balance Sheet Data

Consolidated Cash Flow Data

Consolidated Balance Sheet Data

Consolidated Cash Flow Data

B.8 Key pro forma financial information

Notes

B.9 Profit forecast

B.10 Description of the nature of any qualifications in the audit report on the historical financial information

B.11 Insufficient working capital

Section C—Securities

C.1 Type and class of securities

C.2 Currency

C.3 Number of securities to be issued

C.4 Description of the rights attaching to the securities

C.5 Restrictions on the free transferability of the securities

C.6 Admission

C.7 Dividend policy

Section D—Risks

D.1 Key information on the key risks specific to the issuer and its industry

D.3 Key information on the key risks specific to the securities

Section E—Global Offer

E.1 Net proceeds and costs of the offer

E.2a Reasons for the offer and use of proceeds

E.3 Terms and conditions of the offer

E.4 Material interests

E.5 Selling Shareholders and Lock-up

Notes:

Lock-up Arrangements

E.6 Dilution

E.7 Expenses charged to the investor

PART 1 RISK FACTORS

Risks relating to the Group's business and industry

6. The Group operates in a highly competitive environment and may not be able to compete successfully.

9. The Group's current operations are international in scope and it plans further geographic expansion, creating a variety of operational challenges.

10. If the Group fails to keep up with rapid changes in technologies and the evolution of malware and virus threats, its business may be materially and adversely affected.

11. The Group operates in a number of jurisdictions with strict consumer laws and regulations, and any failure to comply with such laws and regulations may adversely affect its business.

13. If the Group is unable to maintain and enhance its brands' reputations, it may harm the Group's business and operating results.

14. The Group currently relies on one e-commerce service provider to process and collect a significant portion of its consumer segment revenues.

15. Currency exchange rates may materially adversely affect the Group's results of operations.

16. The Group depends on the attraction and retention of specialised personnel. If these individuals leave without effective replacements or if personnel costs increase, the Group's operations may suffer.

17. The Group faces risks related to its operation of VPN products, which could have a material adverse effect on its reputation and/or future sales.

18. The Group may be unable to protect its intellectual property rights and proprietary information and prevent third parties from making unauthorised use of its products and technology.

19. The Group may become subject to claims of intellectual property infringement by third parties that, regardless of merit, could result in litigation and materially adversely affect its business, results of operations or financial condition.

21. Increased user demands on technical support services may adversely affect the Group's relationships with its users and its financial results.

22. The Group is subject to evolving sanctions laws as well as governmental export controls, and any breaches of such laws could subject the Group to fines or other forms or criminal or administrative penalties, as well as reputational damage.

23. The Company's ability to pay dividends in the future depends, among other things, on the Group's financial performance and capital requirements.

24. The use of open source and third party software could impose unanticipated conditions or restrictions on the Group's ability to commercialise its solutions.

25. The Group operates its servers worldwide and faces significant challenges responding to disruption of its servers.

26. Changes in applicable tax rulings and taxation requirements could materially affect the Group's business, financial condition and results of operations.

Sales tax

Tax audits

AVATION PLC Prospectus 2018