MS INTERNATIONAL PLC — M&A Activity 2017

Jul 28, 2017

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

This Prospectus, which comprises a prospectus prepared in accordance with the Prospectus Rules, has been approved by the FCA and has been filed with the FCA and made available to the public in accordance with Rule 3.2 of the Prospectus Rules.

The Existing Ordinary Shares are, and it is expected that the New Ordinary Shares and the Consideration Shares will be, admitted to the premium listing segment of the Official List and to trading on the Main Market for listed securities. As the Merger is classified as a reverse takeover under the Listing Rules, upon Completion the listing on the premium listing segment of the Official List of all of the Existing Ordinary Shares will be cancelled, and application will be made for the admission of the New Ordinary Shares (or, if the Share Capital Consolidation is not implemented, the readmission of the Existing Ordinary Shares) and the Consideration Shares to the premium listing segment of the Official List and to trading on the Main Market for listed securities. It is expected that Admission will become effective and dealings in the Ordinary Shares, including the Consideration Shares, will commence at 8:00 a.m. on 1 September 2017.

All of the Consideration Shares will be issued to the Depositary and ADSs representing the Consideration Shares will be issued by the Depositary to HPE Shareholders. This Prospectus is not an offer or invitation to the public to subscribe for or purchase Ordinary Shares or ADSs and is issued solely for the purposes of Admission.

Micro Focus International plc (the "Company") and each of the Directors and Proposed Directors, whose names appear in Part X (Directors, Proposed Directors, Corporate Governance and Employees) of this Prospectus, accept responsibility for the information contained in this Prospectus. To the best of the knowledge and belief of the Company, the Directors and the Proposed Directors (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 does not omit anything likely to affect the import of such information.

The distribution of this Prospectus into jurisdictions other than the United Kingdom may be restricted by law. Persons into whose possession this Prospectus comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of securities laws of any such jurisdiction. In particular, such documents should not be released in, distributed in, forwarded to or transmitted in or into Australia, Canada, Hong Kong, Japan, New Zealand, Singapore, the United States or any other state or jurisdiction in which the same would be unlawful.

YOU SHOULD READ THIS PROSPECTUS AND ALL DOCUMENTS INCORPORATED INTO IT BY REFERENCE IN THEIR ENTIRETY. IN PARTICULAR, YOU SHOULD TAKE ACCOUNT OF THE SECTION OF THIS PROSPECTUS ENTITLED 'RISK FACTORS' FOR A DISCUSSION OF THE RISKS THAT MIGHT AFFECT THE VALUE OF YOUR SHAREHOLDING IN THE COMPANY. YOU SHOULD NOT RELY SOLELY ON INFORMATION SUMMARISED IN THE SECTION ENTITLED "SUMMARY".

MICRO FOCUS INTERNATIONAL PLC

(Incorporated and registered in England and Wales with number 5134647)

Proposed Merger with Seattle SpinCo, Inc., which will hold the Software Business Segment of Hewlett Packard Enterprise Company

Application for admission of the Ordinary Shares and the Consideration Shares to the premium listing segment of the Official List and to trading on the Main Market of the London Stock Exchange

J.P. Morgan Limited (which conducts its UK investment banking activities as J.P. Morgan Cazenove, "J.P. Morgan Cazenove"), which is authorised and regulated in the United Kingdom by the FCA, is acting as sole sponsor and lead financial adviser to the Company in connection with Admission. J.P. Morgan Cazenove is acting exclusively for the Company in connection with Admission and for noone else and will not be responsible to anyone other than the Company for providing the protections afforded to the clients of J.P. Morgan Cazenove nor for providing any advice in relation to the Transaction or the contents of this Prospectus or any transaction, arrangement or matter referred to herein.

Numis Securities Limited ("Numis"), which is authorised and regulated in the United Kingdom by the FCA, is acting as corporate broker and joint financial adviser to the Company in connection with Admission. Numis is acting exclusively for the Company in connection with Admission and for noone else and will not be responsible to anyone other than the Company for providing the protections afforded to the clients of Numis nor for providing any advice in relation to the Transaction or the contents of this Prospectus or any transaction, arrangement or matter referred to herein.

Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan Cazenove or Numis by the FSMA or the regulatory regime established thereunder or under the regulatory regime of any jurisdiction where the exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, J.P. Morgan Cazenove, Numis and any person affiliated with them assumes no responsibility whatsoever and makes no representation or warranty, express or implied, in relation to the contents of this Prospectus, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Ordinary Shares, the ADSs, the Transaction or Admission. Each of J.P. Morgan Cazenove, Numis and their respective affiliates accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise be found to have in respect of this Prospectus or any such statement. Any reproduction or distribution of this Prospectus, in whole or in part, and any disclosure of its contents or use of any information contained in this Prospectus for any purpose other than considering the terms of the Transaction and Admission is prohibited.

No person has been authorised to give any information or make any representations to any investor or potential investor with respect to the Transaction or Admission other than those contained in this Prospectus and, if given or made, any such information or representations must not be relied upon as having been so authorised by or on behalf of the Company, the Directors, the Proposed Directors, J.P. Morgan Cazenove, Numis or any other person. None of the Company, the Directors, the Proposed Directors, J.P. Morgan Cazenove, Numis or any other person take any responsibility or liability for, and can provide no assurance as to the reliability of, other information that you may have been given. The Company will comply with its obligation to publish supplementary prospectuses containing further updated information required by law or by any regulatory authority but assumes no further obligation to publish additional information.

Subject to the FSMA, the Listing Rules, the Market Abuse Regulation, the Disclosure Guidance and Transparency Rules and the Prospectus Rules, neither the delivery of this Prospectus, Admission, 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, HPE or HPE Software since the date of this Prospectus or that the information in this Prospectus is correct as at any time after such date. Without limitation, the contents of the Micro Focus Group's or the HPE Group's websites do not form part of this Prospectus.

The contents of this Prospectus or any subsequent communication from the Company, J.P. Morgan Cazenove, Numis or any of their respective affiliates, officers, directors, employees or agents are not to be construed as legal, financial or tax advice. Each prospective investor should consult his, her or its own legal adviser, financial adviser or tax adviser for legal, financial or tax advice.

This Prospectus does not constitute or form any part of any offer for or invitation to sell or issue, and may not be used for the purposes of, an offer to sell or an invitation to sell, or the solicitation of an offer to subscribe for or buy, any securities by any person in any circumstances in which such offer or solicitation is unlawful.

The securities referred to in this Prospectus may not be offered, sold or transferred, directly or indirectly, in or into the United States absent registration under the Securities Act or an applicable exemption therefrom and compliance with the securities laws of any applicable state or other jurisdiction of the United States. There has not been, nor will there be, any public offering of the New Ordinary Shares or the Consideration Shares in the United States absent registration under the Securities Act or an applicable exemption therefrom.

This Prospectus may not be distributed, directly or indirectly within the United States. Neither the US Securities Exchange Commission nor any state securities commission has approved or disapproved of the securities referred to in this Prospectus or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offence in the United States.

CONTENTS

		Page
SUMMARY		3
	RISK FACTORS 21
	PRESENTATION OF FINANCIAL AND OTHER INFORMATION	46
	EXPECTED TIMETABLE OF PRINCIPAL EVENTS	52
	DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS	53
PART I	INTRODUCTION AND SUMMARY OF THE TRANSACTION	54
PART II	INFORMATION ON THE MICRO FOCUS GROUP	57
PART III	OPERATING AND FINANCIAL REVIEW OF THE MICRO FOCUS GROUP	71
PART IV	HISTORICAL FINANCIAL INFORMATION OF THE MICRO FOCUS GROUP	73
	SECTION A: THE MICRO FOCUS GROUP SECTION B: THE ATTACHMATE GROUP	73 75
PART V	INFORMATION ON HPE SOFTWARE	132
PART VI	OPERATING AND FINANCIAL REVIEW OF HPE SOFTWARE	140
PART VII	HISTORICAL FINANCIAL INFORMATION OF HPE SOFTWARE	157
PART VIII	UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP	247
PART IX	CAPITALISATION AND INDEBTEDNESS	254
PART X	DIRECTORS, PROPOSED DIRECTORS, CORPORATE GOVERNANCE AND EMPLOYEES	256
PART XI	ADDITIONAL INFORMATION	277
PART XII	TAXATION	311
PART XIII	DOCUMENTS INCORPORATED BY REFERENCE	318
	GLOSSARY AND DEFINITIONS	319
Section A: Section B:	Glossary Definitions	319 322

SUMMARY

Summaries are made up of disclosure requirements known as "Elements". These Elements are numbered in Sections AE (A.1 — E.7).

This summary contains all the Elements required to be included in a summary for this type of securities 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 might 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 the words "not applicable".

	Section A – Introduction and warnings
Element	Disclosure requirement	Disclosure
A.1	Introduction and warning	This summary should be read as an introduction to this Prospectus. Any decision to invest in the securities should be based on consideration of this Prospectus as a whole by the investor. Where a claim relating to the information contained in this Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the member states of the EEA, have to bear the costs of translating this Prospectus before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of this Prospectus or it does not provide, when read together with the other parts of this 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: the Company is not engaging any financial intermediaries for any resale of securities or final placement of securities after publication of this Prospectus.

	Section B – Issuer
Element	Disclosure requirement	Disclosure
B.1	Legal and commercial name	Micro Focus International plc.
B.2	Domicile, legal form, legislation and country of incorporation	The Company is a public limited company incorporated in England and Wales on 21 May 2004 under the Companies Act 1985 with its registered office situated in the United Kingdom. The Company is subject to the Takeover Code.

B.3	Current operations,	The Micro Focus Group
	principal activities and markets	The Micro Focus Group is a global enterprise software provider supporting the technology needs and challenges of the Forbes Global 2000. The Micro Focus Group's solutions help organisations leverage existing IT investments, enterprise applications and emerging technologies to address complex, rapidly evolving business requirements, including the protection of corporate information at all times.
		The Micro Focus Group's product portfolios are Micro Focus and SUSE. Within Micro Focus, the solution portfolios are CDMS, Host Connectivity, Identity and Access Security, Development and IT Operations Management Tools, and Collaboration and Networking. SUSE, a pioneer in Open Source software, provides reliable, interoperable Linux, Cloud infrastructure and storage solutions. The Company has also announced plans to add a Container­as­a­Service Platform product and a Platform­as­a­Service product.
		The Micro Focus Group has more than 4,500 employees in over 90 global locations and has over 20,000 customers, including 91 of the Fortune 100 companies.
		HPE Software
		HPE Software is a leading global infrastructure software provider offering a broad range of software products, services and solutions, including big data platform analytics, application testing and delivery management, security and information governance and IT operations management solutions for businesses and other enterprises of all sizes. HPE Software's offerings include licences, support, professional services and SaaS.
		HPE Software's products are available worldwide. HPE Software has over 30,000 customers worldwide, including 98 of the Fortune 100 companies.
B.4a	Recent trends	Industry
		Information technology has become an increasingly important component of the global business landscape and today forms one of the core assets of any enterprise. Software applications and infrastructure are at the heart of IT systems and provide the means for users and consumers to interact with business information. The software market has historically exhibited high growth and the Directors expect it to continue at a similar rate. However, much of this growth has been, and the Directors expect will continue to be, driven by emerging technologies and applications, rather than infrastructure software, where many technologies have reached maturity and are growing slower relative to the wider software industry, and in some cases are in steady decline.
		Infrastructure software incorporates a range of technologies which help interconnect, manage, monitor, report on and secure mission critical IT systems. Within the infrastructure software landscape, technologies that provide access to and integration with information are among the most critical to any enterprise. Despite the industry's relative youth, over the past four decades a huge amount of

		complexity has developed within organisations' IT architectures. A typical characteristic of many enterprise IT systems is that they were built over time and as a result their components are often disparate in nature, based on different technology standards and built for distinct purposes. Furthermore, as technology has advanced, software has evolved to become more efficient and serve new business processes not originally conceived when legacy IT systems were implemented. This heterogeneous systems environment makes engineering the interaction between newer applications and older legacy systems a very complicated task. The products and services that form the backbone of these increasingly complex systems are typically very deeply embedded within an organisation's IT systems and are necessary to perform mission critical functions. However, the market for software to perform these core functions typically does not exhibit substantial growth as many potential customers typically have an existing solution in place.
		Further, as a result of their mission critical nature and the complexity of the systems within which they operate, removing or switching the software that performs these tasks is usually very complex and fraught with risk for the organisation. The end result is that, while they have minimal growth, mature infrastructure revenues are typically reliably recurring as the risk of undertaking such a switch is not matched by the potential benefits of switching.
		Both the Company and HPE Software are leading providers of products addressing a variety of segments of the infrastructure software market, many of which are categorised by low growth but reliably recurring revenues. Key competitors in some or all of these segments include CA Inc., Cisco Systems Inc., Citrix Systems, Inc., IBM Corp., Microsoft Corp, Open Text Corp., Oracle Corp. and SAP SE.
B.5	Group structure	The Company is the listed parent company of the Micro Focus Group and will be the parent company of the Enlarged Group. As a result of the Separation and Merger, respectively, Seattle SpinCo will acquire HPE Software and become an indirect wholly­owned subsidiary of the Company.
B.6	Notifiable interests, different voting rights and controlling interests	As at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), the Company has been notified, or was otherwise aware, of the following persons who were interested, directly or indirectly, in three per cent. or more of the issued share capital of the Company:
		Number of Existing
		Ordinary Shares FMR LLC 22,559,483 Old Mutual plc 15,786,879 Artemis Investment Management LLC 8,117,983
		The Company is not aware of any persons who, as at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), directly or indirectly, jointly or severally, exercise or could exercise control over the Company nor is it aware of any arrangements the operation of which may at a subsequent date result in a change of control of the Company. The Shareholders set out above do not have different voting rights from any other Shareholder of the same class.

B.7	Selected historical key	Micro Focus Group
	financial information	The selected historical consolidated financial information relating to the Company for the years ended 30 April 2017 and 30 April 2015* has been extracted without material adjustment from the audited reports and consolidated accounts of the Company prepared under IFRS for the financial years then ended. The selected historical consolidated financial information relating to the Company for the year ended 30 April 2016 has been extracted without material adjustment from the comparative of the audited report and consolidated accounts of the Company prepared under IFRS for the
		financial year ended 30 April 2017:
		1. Consolidated statement of comprehensive income
			For the	For the	For the
			financial	financial	financial
			year ended	year ended	year ended
			30 April 2017	30 April 2016*	30 April 2015*
			––––––––– \$'000	––––––––– \$'000	––––––––– \$'000
		Continuing operations
		Revenue	1,380,702	1,245,049	834,539
		Cost of sales	(237,169) –––––––––	(230,174) –––––––––	(140,547) –––––––––
		Gross profit	1,143,533	1,014,875	693,992
		Selling and distribution costs Research and development	(467,084)	(416,333)	(290,475)
		expenses	(180,104)	(164,646)	(113,292)
		Administrative expenses	(202,902) –––––––––	(138,962) –––––––––	(142,989) –––––––––
		Operating profit	293,443	294,934	147,236
		Analysed as: Adjusted Operating Profit Share­based compensation	638,068	533,514	347,773
		charge Amortization of purchased	(34,506)	(28,793)	(15,561)
		intangibles	(212,861)	(181,934)	(88,298)
		Exceptional items	(97,258)	(27,853)	(96,678)
		Operating profit	293,443 –––––––––	294,934 –––––––––	147,236 –––––––––
		Share of results of associates	(1,254)	(2,190)	(788)
		Finance costs Finance income	(96,824) 979	(98,357) 1,009	(56,231) 1,210
		Profit before tax Taxation	196,344 (38,541) –––––––––	195,396 (32,424) –––––––––	91,427 10,024 –––––––––
		Profit for the year	157,803 –––––––––	162,972 –––––––––	101,451 –––––––––
		Total comprehensive income for the year	152,057	163,570	90,181
		Basic earnings in cents per share Diluted earnings in cents per	––––––––– 68.88	––––––––– 74.50	––––––––– 58.54
		share	66.51	71.61	56.71
		Basic earnings in pence per share	53.25	49.59	36.64
		Diluted earnings in pence per
		share	51.42	47.66	35.50
		* In the year ended 30 April 2017, the Company has reviewed its consolidated statement of comprehensive income presentation and has decided to re­classify both amortization of product development costs and amortization of acquired technology intangibles from research and development expenses to costs of sales. The year ended 30 April 2016 and 30 April 2015 comparatives have also been reclassified.

	2. Consolidated statement of financial position
		For the	For the	For the
		financial	financial	financial
		year ended	year ended	year ended
		30 April	30 April	30 April
		2017	2016	2015
		––––––––– \$'000	––––––––– \$'000	––––––––– \$'000
	Total assets	4,645,957	4,635,693	4,340,601
	Total liabilities	3,032,467	3,041,965	3,062,540
	Net assets	1,613,490	1,593,728	1,278,061
	Total equity attributable	–––––––––	–––––––––	–––––––––
	to owners of parent	1,612,536	1,592,671	1,277,082
		–––––––––	–––––––––	–––––––––
	3. Consolidated statement of cash flows
		For the	For the	For the
		financial	financial	financial
		year ended	year ended	year ended
		30 April	30 April	30 April
		2017	2016*	2015
		–––––––––	–––––––––	–––––––––
		\$'000	\$'000	\$'000
	Net cash generated from
	operating activities	452,379	283,219	200,323
	Net cash (used in)/generated from investing activities	(589,724)	(53,614)	139,329
	Net cash (used in)/generated
	from financing activities	(375,298)	205,800	(115,718)
	Net (decrease)/increase in	–––––––––	–––––––––	–––––––––
	cash and cash equivalents	(516,195)	425,854	208,524
	Cash and cash equivalents	–––––––––	–––––––––	–––––––––
	at 30 April	150,983	667,178	241,324
	* In the year ended 30 April 2017 the Company has reviewed its consolidated statement of cash flows presentation and has revised the presentation of provision utilisation from provision movements to working capital movements. The presentation in the year ended 30 April 2016 and 30 April 2015 comparatives has also been revised.

	Attachmate Group
	The selected historical consolidated financial information relating to
	the Attachmate Group set out below has been extracted without
	material adjustment from the audited reports and consolidated
	accounts of the Attachmate Group prepared under IFRS for the
	13 months ended 30 April 2015 and the 12 months ended 31 March
	2014:
	1. Consolidated statement of comprehensive income
		13 months to	12 months to
		30 April 2015	31 March 2014
		\$'000	––––––––––– ––––––––––––– \$'000
	Revenue	986,428	956,829
	Cost of sales	(163,023) ––––––––	(189,777) ––––––––
	Gross profit	823,405	767,052
	Other income	14,935	–
	Selling and distribution costs	(338,411)	(341,833)
	Research and development expenses	(189,523)	(174,286)
	Administrative expenses	(208,371) ––––––––	(78,086) ––––––––
	Operating profit	102,035	172,847
	Analysed as:
	Operating profit before exceptional
	items	258,171	204,088
	Exceptional items	(156,136)	(31,241)
	Operating profit	102,035 ––––––––	172,847 ––––––––
	Share of results of associates	(1,784)	(1,586)
	Finance costs	(71,233)	(116,966)
	Finance costs – exceptional	(9,888)	–
	Finance income	1,744	320
	Net finance costs	(79,377) ––––––––	(116,646) ––––––––
	Profit before tax	20,874	54,615
	Taxation	(10,601) ––––––––	(27,224) ––––––––
	Profit for the period/year	10,273	27,391
	Attributable to:	––––––––	––––––––
	Equity shareholders of the parent	10,049	27,035
	Non­controlling interests	224 ––––––––	356 ––––––––
	Profit for the period/year	10,273	27,391
	Total comprehensive (expense)/income	––––––––	––––––––
	for the period/year	(20,544)	30,172
		––––––––	––––––––

	2. Consolidated statement of financial position
		13 months to	12 months to
		30 April 2015	31 March 2014 ––––––––––– –––––––––––––
		\$'000	\$'000
	Total assets	1,807,580	1,812,856
	Total liabilities	899,350	2,282,255
	Net (liabilities)/assets	908,230 ––––––––	(469,399) ––––––––
	Total (deficit)/equity attributable
	to owners of parent	907,251	(470,154)
	3. Consolidated statement of cash flows	––––––––	––––––––
		13 months to	12 months to
		30 April 2015	31 March 2014
		\$'000	––––––––––– ––––––––––––– \$'000
	Net cash generated from operating
	activities	117,994	149,519
	Net cash (used in)/generated from
	investing activities	(196,917)	(13,750)
	Net cash (used in)/generated from
	financing activities	100,274 ––––––––	(143,399) ––––––––
	Net (decrease)/increase in cash and
	cash equivalents	9,804 ––––––––	(8,148) ––––––––
	Cash and cash equivalents at end of
	period	162,022	152,218

HPE Software

Unless otherwise stated, the selected historical financial information relating to HPE Software set out below has been extracted without material adjustment from the audited accounts of HPE Software for the financial years ended 31 October 2014, 31 October 2015 and 31 October 2016 and the three months ended 31 January 2017 and the unaudited accounts of HPE Software for the three months ended 31 January 2016, and has been prepared in accordance with IFRS and the conventions set out in SIR 2000 for the preparation of carveout financial statements:

1. Combined statement of comprehensive income

		Three months ended 31 January		Years ended 31 October
	–––––––––––––––– 2017	2016	2016	–––––––––––––––––––––––––– 2015	2014
In millions USD	–––––––	––––––– (unaudited)	–––––––	–––––––	–––––––
Revenue Cost of sales	724 (232)	781 (249)	3,198 (987)	3,629 (1,118)	3,929 (1,202)
Gross profit Selling and distribution costs Research and development	––––––– 492 (232)	––––––– 532 (270)	––––––– 2,211 (1,110)	––––––– 2,511 (1,205)	––––––– 2,727 (1,374)
expenses Administrative expenses	(129) (143) –––––––	(155) (97) –––––––	(608) (284) –––––––	(681) (332) –––––––	(683) (302) –––––––
Operating (loss)/profit	(12)	10	209	293	368
Analyzed as: Adjusted Operating Profit Share­based compensation Amortization of intangible assets	146 (16) (35)	120 (22) (43)	598 (91) (161)	732 (62) (254)	766 (62) (281)
Exceptional items	(107)	(45)	(137)	(123)	(55)
Operating (loss)/profit	(12)	10	209	293	368
Finance costs Finance income	(2) 15	(1) –	(73) 1	(45) 1	(5) 2
Net finance income/(costs)	13 –––––––	(1) –––––––	(72) –––––––	(44) –––––––	(3) –––––––
Other expense, net Loss on available­for­sale securities reclassified into	—	—	—	—	(2)
earnings	— –––––––	— –––––––	— –––––––	(3) –––––––	(2) –––––––
Profit before tax Taxation	1 (29) –––––––	9 24 –––––––	137 (82) –––––––	246 108 –––––––	361 (37) –––––––
(Loss)/profit for the period Other comprehensive income (loss):	(28)	33	55	354	324
Items that will not be reclassified to profit or loss before taxation Actuarial gain/(loss) on pension liabilities schemes Items that may be subsequently reclassified to profit or loss before taxation Unrealized gain on available­for	58	(17)	(67)	(15)	(12)
sale securities Unrealized gain/(loss) on cash	—	2	—	3	—
flow hedges Currency translation differences Taxation	1 — — –––––––	1 (1) — –––––––	1 5 — –––––––	5 (32) (2) –––––––	(5) (4) 2 –––––––
Other comprehensive income/ (expense) for the period, net of taxation	59	(15)	(61)	(41)	(19)
Total comprehensive income/ (expense) for the period	––––––– 31 –––––––	––––––– 18 ––––––– –––––––	––––––– (6)	––––––– 313	––––––– 305

		2. Combined statement of financial position
		In millions USD	31 January 2017 ––––––––	31 October 2016 ––––––––	31 October 2015 ––––––––		31 October 2014 ––––––––
		Total assets Total liabilities Net assets	10,428 1,879 8,549	10,670 2,175 8,495	10,959 2,257 8,702		11,592 2,245 9,347
		Total equity	–––––––– 8,549 ––––––––	–––––––– 8,495 ––––––––	–––––––– 8,702 ––––––––		–––––––– 9,347 ––––––––
		3. Combined statement of cash flows
				Three months ended 31 January		Years ended 31 October
			––––––––––––––––– 2017 –––––––	2016 –––––––	–––––––––––––––––––––––––– 2016 –––––––	2015 –––––––	2014 –––––––
		In millions USD Net cash generated from		(unaudited)
		operating activities Net cash (used in)/generated	148	191	481	536	1,014
		from investing activities Net cash used in financing	(8)	(6)	211	40	(16)
		activities	(161) –––––––	(152) –––––––	(712) –––––––	(623) –––––––	(1,119) –––––––
		Net (decrease)/increase in cash and cash equivalents	(21) –––––––	33 –––––––	(20) –––––––	(47) –––––––	(121) –––––––
		Cash and cash equivalents at end of period	109	183	130	150	197
B.8	Selected key pro forma	Pro forma financial information	–––––––	–––––––	–––––––	–––––––	–––––––
	financial information	The unaudited pro forma income statement and the unaudited pro forma statement of net assets of the Enlarged Group set out in this Prospectus have been prepared on the basis set out in the notes
		below to illustrate the effect of the Transaction and the associated financing on the Micro Focus Group's net assets as if the Transaction had taken place as at 30 April 2017, and on the Micro Focus Group's income statement for the financial year ended 30 April 2017 as if the Transaction had taken place on 1 May 2016.
		The unaudited pro forma information has been prepared for illustrative purposes only and, by its nature, addresses a hypothetical situation and does not, therefore, represent the Enlarged Group's actual financial position or results. It does not purport to represent what the Enlarged Group's financial position or results actually would have been if the Transaction had been completed on the dates indicated nor does it purport to represent the financial condition of the Company, HPE Software or the Enlarged Group at any future date.

	Unaudited pro forma income statement
				Adjustments ––––––––––––––––––––––––––––––
			HPE Micro Software
		Focus for	for the
		the year	year ended ended 31				Pro
		30 April	October	Financing	Merger		forma
	(\$ millions)	2017 (Note 1)	2016	(Note 2) (Notes 3 & 5)	adjustments adjustments Enlarged (Note 4)	Group
	Revenue	––––––– 1,381	––––––– 3,198	–––––––––– –	––––––– ––––––– –		4,579
	Cost of Sales	(237) –––––––	(987) –––––––	– –––––––	– ––––––– –––––––		(1,224)
	Gross Profit	1,144 –––––––	2,211 –––––––	– –––––––	– ––––––– –––––––		3,355
	Selling and distribution costs	(467)	(1,110)	–	–		(1,577)
	Research and development
	expenses	(180)	(608)	–	–		(788)
	Administrative expenses	(203) –––––––	(284) –––––––	– –––––––	(61) ––––––– –––––––		(548)
	Operating profit Share of results of	294 –––––––	209 –––––––	– –––––––	(61) ––––––– –––––––		442
	associates	(1)	–	–	–		(1)
	Finance costs	(97)	(73)	(148)	–		(318)
	Finance income Net finance costs	1 (96)	1 (72)	– (148)	– –		2 (316)
	Profit before tax	––––––– 197	––––––– 137	––––––– (148)	––––––– ––––––– (61)		125
Taxation		––––––– (39)	––––––– (82)	––––––– 30	––––––– ––––––– –		(91)
	Profit for the period	––––––– 158	––––––– 55	––––––– (118)	––––––– ––––––– (61)		34
2.	HPE Software's financial information for the 12 months ended 31 October 2016 has been extracted, without material adjustment, from the financial information in Part VII (Historical Financial Information of HPE Software) of this Prospectus.
	Financing adjustments reflect an interest cost of \$109 million which would have been incurred on the expected drawdown on the Seattle Term Loan Facility, the Micro Focus Term Loan Facilities and the Revolving Credit Facility as described in Note 4 to the Unaudited Pro Forma Statement of Net Assets less the interest cost incurred on outstanding indebtedness under the Existing Facilities Agreement that has been re­financed in connection with the Merger. For purposes of the Unaudited Pro Forma Income Statement, the foregoing indebtedness is treated as if the full amount had been drawn as at 1 May 2016 and therefore represents a charge for a 12 month period.
	In addition, the finance costs adjustment includes \$39 million of debt issuance costs amortisation over the term of the new financing. The Company and HPE Software expect, as of 30 April 2017 and 31 October 2016, respectively, to incur remaining transaction and related costs in connection with the Merger of \$15 million and \$46 million, respectively. An adjustment to administrative expenses in the Unaudited Pro Forma Income Statement of \$61 million has been included to represent the estimated total remaining transaction and related costs expected to be incurred in connection with the Merger.

	6. The nature of the adjustments described in Notes 3 and 5 of the Unaudited Pro Forma Income Statement means that adjustments of a similar nature will have a continuing impact on the Enlarged Group following Completion.
	7. In preparing the Unaudited Pro Forma Income Statement, no account has been taken of the trading or transactions of the Micro Focus Group since 30 April 2017 and HPE Software since 31 October 2016.
	As described in Note 3 to the Unaudited Pro Forma Statement of Net Assets, on Completion a full fair value exercise will be completed
	which may result in separate intangible assets being identified. The
	Unaudited Pro Forma Income Statement does not reflect the impact
	of the amortisation of any additional intangible assets that may be
	recognised.
	Unaudited pro forma statement of net assets
				Adjustments ––––––––––––––––––––––––––––––
		Micro	HPE
		as at	Focus Software as at			Pro
		30 April	30 April	Merger	Financing	forma
		2017	2017	adjustments	adjustment Enlarged
	(\$ millions)	(Note 1) –––––––	–––––––	(Note 2) (Notes 3 & 5) ––––––––––	(Note 4) ––––––– –––––––	Group
	ASSETS
	Non­current assets Goodwill	2,829	8,095	308	–	11,232
	Other intangible assets	1,089	339	–	–	1,428
	Property, plant and
	equipment	41	147	44	–	232
	Investments in associates Long­term pension assets	12 22	– –	– –	– –	12 22
	Other non­current assets	3	139	–	–	142
	Deferred tax assets	208	964	–	–	1,172
		––––––– 4,204	––––––– 9.684	––––––– 352	––––––– ––––––– –	14,240
	Current assets	–––––––	–––––––	–––––––	––––––– –––––––
	Inventories	–	5	–	–	5
	Trade and other receivables Current tax receivables	289 2	604 ­	– –	– –	893 2
	Cash and cash equivalents	151	167	285	–	603
	Assets classified as
	held for sale	– –––––––	– –––––––	– –––––––	– ––––––– –––––––	–
		442 –––––––	776 –––––––	285 –––––––	– ––––––– –––––––	1,503
	Total assets	4,646 –––––––	10,460 –––––––	637 –––––––	– ––––––– –––––––	15,743
	LIABILITIES
	Current liabilities: Trade and other payables	170	499	6	–	675
	Borrowings	71	16	–	–	87
	Provisions	20	43	–	–	63
	Current tax liabilities Deferred income	43 641	153 750	– –	– –	196 1,391
	Total current liabilities	––––––– 945	––––––– 1,461	––––––– 6	––––––– ––––––– –	2,412
	Non­current liabilities:	–––––––	–––––––	–––––––	––––––– –––––––
	Deferred income	224	164	–	–	388
	Borrowings	1,490	23	–	3,278	4,791
	Retirement benefit
	obligations Long­term provisions	31 12	80 6	– –	– –	111 18
	Other non­current liabilities	4	31	–	–	35
	Deferred tax liabilities	327 –––––––	5 –––––––	– –––––––	– ––––––– –––––––	332
		2,088	309	–	3,278	5,675
	Total liabilities	––––––– 3,033	––––––– 1,770	––––––– 6	––––––– ––––––– 3,278	8,087
	Net assets	––––––– 1,613	––––––– 8,690	––––––– 631	––––––– ––––––– (3,278)	7,656
		–––––––	–––––––	–––––––	––––––– –––––––

	1.	The Micro Focus Group's financial information as at 30 April 2017 has been extracted, without material adjustment from the Micro Focus International plc Annual Report and Accounts 2017.
	2.	HPE Software's financial information as at 30 April 2017 has been extracted, without material adjustment, from Section C of Part VII (Historical Financial Information of HPE Software) of this Prospectus.
	3.	The adjustments arising from the Merger are set out below:
		i. The Company will issue the Consideration Shares (the "Equity Consideration") after the Return of Value and Share Capital Consolidation have been completed. Additionally, prior to the Merger, Seattle will incur indebtedness pursuant to the Seattle Term Loan Facility and make a cash payment of US\$2.5 billion (subject to certain adjustments in limited circumstances set forth in the Separation and Distribution Agreement) to HPE.
		a. Prior to Completion, the Company will issue one B Share for each Ordinary Share held by Existing Shareholders and redeem the B Shares for their nominal value. The total cost of the Return of Value to the Company will be \$500 million (inclusive of any currency hedging costs or proceeds). It is assumed for purposes of the Unaudited Pro Forma Financial Information that there will be 221.18 million Ordinary Shares outstanding (on a fully diluted basis) immediately prior to the Merger (assuming completion of the Return of Value and Share Capital Consolidation).
		b. Equity Consideration – The Equity Consideration is determined for purposes of the Unaudited Pro Forma Financial Information by multiplying the aggregate number of ADSs representing Consideration Shares expected to be issued to HPE Shareholders in the Merger by the closing price of an Ordinary Share of £22.47 as at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus) translated to USD using the mid¬market exchange rate on that date of \$1.3022: £1 to arrive at a price of an Ordinary Share of \$29.26.
		c. The Merger Agreement provides that HPE Shareholders will receive ADSs representing 50.1 per cent. of the fully diluted share capital of the Company immediately following the Merger and, therefore, for purposes of the Unaudited Pro Forma Financial Information, it is assumed that HPE Shareholders will receive 222.06 million ADSs representing the Ordinary Shares to be issued by the Company. Based on an assumed price of an Ordinary Share of \$29.26, this results in an aggregate Equity Consideration valued at \$6,498 million.
		The Equity Consideration is estimated using the issued share capital of the Company as at 25 July 2017 (the latest practicable date prior to the publication of this Prospectus), with the number of Ordinary Shares being rounded to the nearest million. The actual Equity Consideration will vary depending on the actual number of Ordinary Shares outstanding (on a fully diluted basis) immediately prior to the Merger, the actual price of an Ordinary Share and applicable exchange rates at the date of Completion.
		ii. The estimated goodwill arising from the Merger is \$308 million. This has been calculated as the excess of the total purchase price (including debt of the Seattle Group assumed by the Enlarged Group at Completion) of \$8,998 million over the book value of the net assets acquired.
		\$ millions
		Total purchase price 8,998
		Less: Seattle net assets acquired 8,690 ––––––––
		Pro forma goodwill adjustment 308 ––––––––

		The Merger will be accounted for using the acquisition method of accounting and with the Company as the accounting acquiror. The excess of the purchase price over the book value of the HPE Software net assets acquired has been reflected in intangible assets as goodwill. A full fair value exercise to allocate the purchase price will be completed following Completion, therefore no account has been taken in the Unaudited Pro Forma Financial Information of any fair value adjustments that may arise in connection with the Merger or for the value of any customer­related or other intangibles to be recognised at the date of Completion. iii. As of 30 April 2017, the Company and HPE Software expected to incur remaining transaction costs and related costs in connection with the Merger of \$15 million and \$45 million, respectively. An adjustment to cash in the Unaudited Pro Forma Statement of Net Assets of \$60 million has been included to represent the estimated remaining transaction and related costs expected to be incurred in connection
	4.	with the Merger. Total new loans and borrowings of the Micro Focus Group and the Seattle Group in connection with the Merger, comprising the \$2,600 million Seattle Term Loan Facility and \$885 million new tranches of the Micro Focus Term Loan Facilities, amount to \$3,278 million (net of debt issuance costs of \$207 million).
		Seattle will use \$2,500 million of the \$2,600 million Seattle Term Loan Facility to make the \$2.5 billion payment in cash to HPE in connection with the Contribution and the Separation. The remaining amount is expected to be used to fund debt issuance costs and for general corporate purposes.
		The Micro Focus Group has amended the Existing Facilities Agreement to refinance \$1.5 billion, and has drawn incremental borrowings against those facilities of \$885 million. The Micro Focus Group has entered into the Revolving Credit Facility of \$500 million, which it does not intend to draw down on.
	5.	At or prior to Completion, pursuant to the terms of the Separation and Distribution Agreement and the Merger Agreement, HPE will engage in the following transactions with Seattle:
		i. Transfer certain IT assets not presented in the historical financial statements of HPE Software included elsewhere in this Prospectus (see Part VII (Historical Financial Information of HPE Software)) in connection with the Separation of HPE Software from HPE. Accordingly, \$44 million of PP&E have been added to the Unaudited Pro Forma Statement of Net Assets.
		ii. Transfer certain liabilities that are associated with former employees of HPE Software to the Seattle Group. Accordingly, \$6 million of liabilities have been included in the Unaudited Pro Forma Statement of Net Assets.
		iii. Effect cash infusions, if and to the extent necessary, so that at Completion the Seattle Group will have on hand the minimum cash amounts specified in the Separation and Distribution Agreement. Accordingly, a cash adjustment of \$67 million has been included in the Unaudited Pro Forma Statement of Net Assets.
	6.	The estimated impact to cash is summarised as follows:
			\$ millions
		Return of Value payment (Note 3.i.a)	(500)
		Estimated transaction and financing costs (Note 3.iii)	(60)
		Borrowings, net (Note 4) Cash payment to HPE (Note 4)	3,278 (2,500)
		Seattle cash adjustment (Note 5.iii)	67
			–––––––– 285
			––––––––
	7.	In preparing the Unaudited Pro Forma Statement of Net Assets, no account has been taken of the trading or transactions of the Micro Focus Group or HPE Software since 30 April 2017.

B.9	Profit forecasts	Not applicable; this Prospectus does not contain profit forecasts or estimates.
B.10	Qualifications in the audit report	Not applicable; the accountant's reports on the historical financial information contained in, or audit reports incorporated by reference into, this Prospectus do not contain any qualifications.
B.11	Insufficient working capital	Not applicable; the Company is of the opinion that, taking into account the cash resources and bank facilities available to the Micro Focus Group, the working capital available is sufficient for its present requirements, that is, for at least the next 12 months from the date of this Prospectus.

Section C – Securities
Element	Disclosure requirement	Disclosure
C.1	Description of type and class of securities being admitted to trading	Ordinary Shares of 10 pence each. The ISIN of the Existing Ordinary Shares is GB00BQY7BX88 and the SEDOL is BQY7BX8. If the Transaction completes, the ISIN of the New Ordinary Shares following the Share Capital Consolidation (or the Existing Ordinary Shares if the Share Capital Consolidation is not implemented) and the Consideration Shares will be GB00BD8YM01 and the SEDOL will be BD8YWMO.
C.2	Currency of securities	The Ordinary Shares are and will be priced in pounds sterling.
C.3	Number of Ordinary Shares issued and par value	As at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), the Company had in issue 229,732,879 fully paid Existing Ordinary Shares of which none were held in treasury.
		As a consequence of the Return of Value, the Share Capital Consolidation and any Ordinary Shares which may be issued prior to Completion, it is not possible at the date of this Prospectus to calculate the number of Consideration Shares to be issued pursuant to the Merger Agreement or, if the Share Capital Consolidation is implemented, the New Ordinary Shares which will be the subject of Admission. However, the number of Consideration Shares to be issued at Completion pursuant to the Merger Agreement shall equal 50.1 per cent. of the fully diluted share capital of the Company at Completion.1
C.4	Rights attaching to the Ordinary Shares	The Consideration Shares will be issued credited as fully paid and will rank in full for all dividends and other distributions declared, made or paid on the ordinary share capital of the Company with a record date after Completion and otherwise will rank pari passu in all respects with the remaining Ordinary Shares. The Consideration Shares shall not rank for the Return of Value or the dividends declared for the financial year ended 30 April 2017 as described in paragraph 6 of Part II (Information on the Micro Focus Group) of this Prospectus as these will take place prior to the issue of the Consideration Shares. Subject to any special rights, restrictions or prohibitions as regards
		voting for the time being attached to any Ordinary Shares

1 Excluding any Ordinary Shares to be issued pursuant to a de minimis number of replacement awards to be granted to HPE Software employees at Completion under their existing employee incentive arrangements.

		(for example, in the case of joint holders of a share, the only vote which will count is the vote of the person whose name is listed before the other voters on the register for the share), Shareholders shall have the right to receive notice of and to attend and vote at general meetings of the Company. Subject to the provisions of the Companies Act, the Company may from time to time declare dividends and make other distributions on the Ordinary Shares. Shareholders are entitled to participate in the assets of the Company attributable to their shares in a winding­up of the Company or other return of capital, but they have no rights of redemption. Subject to the provisions of the Companies Act, any equity securities issued by the Company for cash must first be offered to Shareholders in proportion to their holdings of Ordinary Shares. The Companies Act and the Listing Rules allow for the disapplication of pre­emption rights which may be granted by a special resolution of the Shareholders, either generally or specifically, for a maximum period not exceeding five years.
C.5	Restrictions on free transferability of the Ordinary Shares	The Ordinary Shares are freely transferable and there are no restrictions on transfer in the UK.
C.6	Admission	As the Merger is classified as a reverse takeover under the Listing Rules, upon Completion the listing on the premium listing segment of the Official List of all of the Existing Ordinary Shares will be cancelled. An application will be made for the admission of the New Ordinary Shares (or, if the Share Capital Consolidation is not implemented, the re­admission of the Existing Ordinary Shares) and the Consideration Shares to the premium listing segment of the Official List and to trading on the Main Market for listed securities. It is expected that Admission will become effective, and that dealings in the Ordinary Shares will commence at 8:00 a.m. on 1 September 2017.
C.7	Dividend policy	The Company announced on 14 July 2016 an increase in its dividend policy such that its current policy is to pay an annual dividend that is approximately twice covered by Adjusted earnings per share. For the financial year ended 30 April 2016, the Company paid a total dividend of 66.68 cents per share (consisting of 16.94 cents paid as an interim dividend and 49.74 cents paid as a final dividend). The interim dividend announced in December 2016 for the financial year ended 30 April 2017 was 29.73 cents per share which was a 75.5 per cent. increase on the interim dividend paid in the previous financial year reflecting the increase in Adjusted net income and increase in dividend policy. As announced on 12 July 2017, the Company intends to pay a second interim dividend of 58.33 cents per share on 25 August 2017 in lieu of its final dividend for the financial year ended 30 April 2017. The Consideration Shares shall not rank for such dividend as they will be issued after the record date. Following Completion and subject to the Enlarged Group's performance (and, in particular, the Company being able to comply with the restrictions on paying dividends imposed by the New Micro Focus Facility Agreement), the Board intends to continue its stated

dividend policy of paying an annual dividend that is approximately twice covered by Adjusted earnings per share. The New Micro Focus Facility Agreement permits the payment of dividends provided that no event of default is continuing under such agreement and, taking into account such payment, the ratio of secured debt (net of free cash) of the Enlarged Group to its EBITDA is less than 3:1. Until that financial metric is achieved, under the New Micro Focus Facility Agreement the Company will have access to the available basket of US\$100 million plus an additional basket for restricted payments of US\$250 million, providing US\$350 million of dividend payment

capacity.

Section D – Risks
Element	Disclosure requirement	Disclosure
D.1	Information on the key risks that are specific to the Company or its industry	The Micro Focus Group operates in a number of competitive markets and in an industry that is currently undergoing consolidation as certain of its competitors seek to offer more extensive suites of software products and integrated solutions. The Micro Focus Group and, following Completion, the Enlarged Group may not be able to compete effectively against its competitors, in which case it is likely to lose market share which could result in decreased sales and weaker financial performance.
		The Enlarged Group's success will be dependent, among other factors, upon its ability to attract and retain senior management and other key employees, protection and enforcement of its intellectual property rights and its investment in and development of products and services that meet the needs of its customers.
		The success of the Enlarged Group's business will also be dependent upon the availability, integrity and security of its IT systems. The Enlarged Group may not be able to adequately protect its IT systems and/or its customers' personal information from hacking or other cybersecurity threats.
		The Enlarged Group's operational and financial flexibility may be restricted by its level of indebtedness and covenants, and the Enlarged Group's access to debt, equity and other financing as a source of funding for its operations and for refinancing maturing debt will be subject to many factors, many of which will be beyond its control. In addition, in order to remain in compliance with the restrictive covenants under the New Facilities, and depending on the future performance of its business, the Enlarged Group may be required to take actions that it would not otherwise have chosen or may be unable to pursue opportunities it otherwise would have pursued, and any future debt financing that the Enlarged Group may need to obtain may impose additional restrictions on its financing and operating activities.
		The success of the Enlarged Group will also depend on its ability to realise the anticipated benefits and operational efficiencies of the Merger, which will require the successful integration of the businesses of both the Micro Focus Group and HPE Software.

		The Enlarged Group may face significant difficulties and challenges in combining the businesses, some of which may not be known until after Completion, which could result in an interruption to the Enlarged Group's operations and require significant management time and attention. In particular, the Enlarged Group may encounter delays or difficulties in integrating the Micro Focus Group's existing IT systems with HPE Software's IT systems through a shared infrastructure.
D.3	Information on the key risks that are specific to the Ordinary Shares	Any future issues of Ordinary Shares will further dilute the holdings of Shareholders and could adversely affect the market price of the Ordinary Shares. Additionally, the ADSs representing the Consideration Shares to be issued in the Merger will generally be eligible for immediate resale, and the market price of the Ordinary Shares could decline as a result of sales of a large number of ADSs or Ordinary Shares in the market, or even the perception that these sales could occur.
		The share price of publicly traded companies can be highly volatile, and Shareholders should be aware that, following Admission, the value of an investment in the Ordinary Shares may decrease abruptly which may prevent Shareholders from being able to sell their Ordinary Shares at or above the price they paid for them.
		While the Board intends to continue paying dividends to Shareholders in accordance with its stated dividend policy, there is no assurance that the Company will declare and pay, or have the ability to declare and pay, any dividends on the Ordinary Shares in the future.
		The Company is a public limited company incorporated in England and Wales. The ability of an Overseas Shareholder to bring an action against the Company may be limited under law, and an Overseas Shareholder may not be able to enforce a judgment against some or all of the Company's directors and executive officers of the Enlarged Group.

	Section E – Offer
Element	Disclosure requirement	Disclosure
E.1	Net proceeds and expenses	Not applicable; the Company is not receiving any cash proceeds for the issue of the Consideration Shares.
		The estimated total expenses of the Company in relation to the Transaction, the Return of Value and Admission are approximately US\$267 million.
E.2a	Reasons for the Placing, use of proceeds and estimated net amount of the proceeds	Not applicable; this Prospectus is not an offer or invitation to the public to subscribe for or purchase Ordinary Shares.
E.3	Terms and conditions of the Placing	Not applicable; this Prospectus is not an offer or invitation to the public to subscribe for or purchase Ordinary Shares.

E.4	Interests material to the Placing	Not applicable; there are no interests, known to the Company, material to the issue of the Consideration Shares or which are conflicting interests.
E.5	Offerors and lock up arrangements	Not applicable; there are no selling shareholders.
E.6	Dilution	Upon Completion, the Consideration Shares will represent 50.1 per cent. of the fully diluted share capital of the Company.2 Accordingly, Existing Shareholders will suffer an immediate dilution as a result of the Transaction.
E.7	Expenses	Not applicable; there are no commissions, fees, expenses or taxes to be charged to investors by the Company.

² Excluding any Ordinary Shares to be issued pursuant to a de minimis number of replacement awards to be granted to HPE Software employees at Completion under their existing employee incentive arrangements.

RISK FACTORS

An investment in the Ordinary Shares involves certain risks. Existing Shareholders and prospective investors should carefully consider the risks set forth below in addition to and together with all of the information set forth in this Prospectus prior to making any investment decision with respect to the Ordinary Shares. The risks described below could have a material adverse effect on the Micro Focus Group's and, following Completion, the Enlarged Group's business, financial condition, results of operation, future prospects and the price of the Ordinary Shares and it is possible that Existing Shareholders could lose all or part of their investment in the Ordinary Shares. In addition, the risks below are not the only risks to which the Enlarged Group may be subject. The Company may be unaware of certain risks or believe certain risks to be immaterial which later prove to be material individually or collectively. New risks may also arise.

Existing Shareholders and prospective investors should note that the risks relating to the Enlarged Group, its industry and the Ordinary Shares summarised in the section of this Prospectus headed "Summary" are those risks that the Directors believe to be the most essential in respect of the Enlarged Group and to an assessment by a prospective investor of whether to consider an investment in the Ordinary Shares. However, as the risks which the Enlarged Group faces relate to events and depend on circumstances that may or may not occur in the future, Existing Shareholders and 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 order in which the following risk factors are presented does not necessarily reflect the likelihood of their occurrence or the relative magnitude of their potential material adverse effect on the business, financial condition, results of operation or prospects of the Enlarged Group or the market price of the Ordinary Shares.

The information given is as of the date of this Prospectus, and any forwardlooking statements are made subject to the reservations specified under "ForwardLooking Statements" in the section of this Prospectus headed "Presentation of Financial and Other Information".

For the purposes of the below Risk Factors, references to the "Group" shall (unless the context shall otherwise require) mean prior to Completion, the Micro Focus Group and, following Completion, the Enlarged Group.

Part A – Risks relating to the business of the Group

The Group is dependent upon its senior management team and other key employees, and it may not be able to attract or retain sufficiently qualified management and key employees following Completion.

The Company believes the Group's success is dependent upon its ability to attract and retain senior management as well as other key employees, such as sales management, product management and development personnel that provide expertise and experience critical to the implementation of the Group's strategy. There is and will be competition for qualified personnel in the Group's markets, and the number of people with the appropriate skills and experience is limited. Furthermore, the UK government is currently considering a number of changes to the UK's corporate governance framework, including with respect to executive compensation. Such changes could limit the ability of the Group to attract or retain qualified senior management, which could have a material adverse effect on the business, results of operation, financial condition and prospects of the Group.

In addition, while the Group has taken steps, and intends to take further steps, to reduce any adverse effects on its key employees resulting from the Merger, the Merger could impair its ability to attract, retain and motivate key personnel. The departure of key management or other employees of the Micro Focus Group or HPE Software may materially and adversely affect the ability of the Group to realise the benefits and synergies of the Merger and could cause its customers, suppliers and others that deal with the Group to seek to change existing business relationships.

It is also common in the software industry for employees to enter into noncompete and confidentiality agreements with their employers. The Group or the employees it hires may be subject to claims related to prior agreements with such restrictions, which may delay the impact new employees may be able to have on the Group or otherwise delay the Group's ability to grow its teams. Furthermore, whilst much of the Group's proprietary knowhow will be documented, there can be no guarantee that members of the technical team who contribute valuable skills and knowhow to the business and who may be subject to contractual confidentiality agreements in favour of the Group, will not join its competitors or otherwise compete with the Group in the future. Failure to retain the services of any of these employees may have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group's operational and financial flexibility may be restricted by its level of indebtedness and covenants and financing costs could increase or financing could cease to be available in the long term.

As a result of increased borrowing in relation to the Transaction, the US\$2.5 billion cash payment to HPE and the Return of Value, the Board estimates that the initial pro forma net debt to Facility EBITDA ratio of the Group as at Completion will be approximately 3.3x Facility EBITDA and is targeting to reduce this to its stated target of 2.5x Facility EBITDA within two years following Completion. However, in the event of material disruptions to cash flows, there is a risk that the Group's leverage may not decrease to the intended target at the anticipated rate or at all, or that the Group will not be able to obtain future financing on favourable terms or at all. Under such circumstances, the Board has stated that the Group would be precluded from considering the buyback of any Ordinary Shares or any further returns of value to Shareholders, other than normal dividends.

Although, in the opinion of the Company, the Group's expected available liquidity and working capital will be sufficient for the next 12 months following the date of this document, the Group is subject to the risk that, in the longer term (in relation to which the Group's business prospects and capital requirements are harder to predict) it may be unable to generate sufficient cash flow to service the indebtedness under the terms of the New Facilities.

The Group's level of indebtedness and the covenants contained in the New Facilities may have important consequences for the Group's future prospects and financial condition including:

• increasing the Group's vulnerability to both general and industryspecific adverse economic conditions and its flexibility to respond to such conditions;
• limiting the Group's flexibility in planning for, or reacting to, changes in technology, customer demand and competitive pressures;
• placing the Group at a disadvantage compared to its competitors, who may be less leveraged and restricted by financial covenants than the Group;
• causing the Group to dedicate a substantial portion of its cash flow from operations to service the indebtedness and causing it to reprioritise the uses to which its capital is put to the potential detriment of the Group's other business needs, which, depending on the level of the Group's borrowings, prevailing interest rates and exchange rates fluctuations, could result in reduced funds being available for expansion, dividend payments, returns of value and other general corporate purposes;
• restricting the payment of dividends;
• increasing the cost of servicing the Group's borrowings in the event such covenants are renegotiated; and
• materially and adversely affecting investor perception of the Group, leading to a decline in the price of its securities.

The Group's access to debt, equity and other financing as a source of funding for its operations and for refinancing maturing debt will be subject to many factors, many of which will be beyond its control. The type, timing and terms of any future financing will depend on the Group's cash needs and the then prevailing conditions in the financial markets, including in the corporate bond, term loan and equity markets. There is a risk that these conditions will not be favourable at the time any refinancing is required to be undertaken or that the Group will not be able to complete any such refinancing in a timely manner or on favourable terms, if at all. An increase in the cost, or lack of availability, of financing and capital could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group is exposed to interest rate risk related to its variable rate indebtedness, which could cause its indebtedness service obligations to increase significantly.

Interest rates may and are expected to increase in the future. As a result, interest rates on the New Facilities or other variable rate debt offerings could be higher or lower than current levels. If interest rates increase, the Group's debt service obligations on its variable rate indebtedness would increase even though the amount borrowed remained the same, and the Group's net income and cash flows, including cash available for servicing its indebtedness, would correspondingly decrease. In addition, the Group does not currently use interest rate swaps to manage its cash flow interest rate risk due to low market rates. Interest rate hikes in the future by the Federal Reserve, the Bank of England and various other governmental bodies in the countries where the Group has, or will have, operations could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group may incur materially significant costs if it breaches its covenants under the New Facilities.

The New Facilities will be subject to a number of restrictive covenants, including a first lien net leverage covenant (which covenant is determined as the ratio of (a) total debt of the Group that is secured on a first lien basis (net of unrestricted cash of the Group) to (b) consolidated Adjusted EBITDA of the Group) that will apply only when 35 per cent. of the Revolving Credit Facility (less certain outstanding letters of credit) are drawn at the end of any fiscal quarter. Although the Directors believe that the current financial condition, cash generation and capital reserves of the Group are sufficient to enable it not to trigger, or to comply with, the first lien net leverage covenant for the next 12 months from the date of this document, deterioration in the Group's primary markets created by, for example, continued economic uncertainty or a return to a recessionary economic environment may have a material adverse effect on its earnings, which, in the longer term, could affect the Group's ability to comply with the first lien net leverage covenant or other covenants under the New Facilities. There can be no assurance that the Group can continue to comply with these covenants in the longer term, and to the extent that the Group is in breach of any of these covenants, this could result in the New Facilities becoming immediately repayable. In order to remain in compliance with these covenants and depending on the future performance of its business, the Group may be required to take actions that it would not otherwise have chosen or may be unable to pursue opportunities it otherwise would have pursued, such as possible acquisition opportunities. In addition, any future debt financing that the Group may need to obtain may impose additional restrictions on its financing and operating activities. Any of the above factors could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group is dependent upon its intellectual property, and its rights to such intellectual property may be challenged or infringed by others or otherwise prove insufficient to protect its business.

The Group relies on patent, trade secret, trade mark and copyright law to protect its intellectual property. Failure to protect, maintain and enforce the Group's existing intellectual property rights or pursue registrations for new intellectual property rights may result in the loss of the Group's exclusive right to use technologies which are included in its software products or are otherwise used in its businesses. Most of the Group's intellectual property is not covered by a patent or patent application and includes trade secrets and other knowhow. In addition, some of the Group's intellectual property includes technologies and processes that may be similar to the technologies and processes of third parties that are protected by patent, copyright or trade secret law.

It may also be possible for an unauthorised third party to reverse engineer or decompile the Group's software products, and the Group may be unable to detect the unauthorised use of, or take appropriate steps to enforce, its intellectual property rights, particularly in certain international markets. Litigation may be required to enforce such intellectual property rights and such litigation can be time consuming and expensive and there can be no certainty as to the outcome of any such legal proceedings once initiated. If the Group does not adequately protect its right to use its technologies, it may have to pay others for rights to use their intellectual property, pay damages for infringement or misappropriation or be enjoined from using such intellectual property.

The Group's intellectual property is subject to complex factual and legal issues that may give rise to uncertainty as to the validity, scope and enforceability of a particular intellectual property right. Effective protection for the software of the Group may be unavailable or limited or not applied for in countries in which the Group operates. The Group will seek to protect its proprietary information and trade secrets that may not be patented or patentable and to secure its rights to copyright and patentable inventions by confidentiality agreements and, if applicable, inventors' rights agreements with its customers, partners and employees. These agreements may be breached, and the Group may not have adequate means to remedy any such breach. The inability of the Group to protect its intellectual property, or enforce its rights against third parties, could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group's products and services depend in part on intellectual property and technology licensed from third parties, and third party claims of intellectual property infringement against the Group may disrupt its ability to sell its products and services.

Many of the Group's product offerings and services rely on technologies developed by, and intellectual property licensed from, third parties, including through both proprietary and Open Source software licences. In order to remain in compliance with the terms of its third party licences, the Group must carefully monitor and manage its use of third party technology and intellectual property, including both proprietary and Open Source licence terms that may require the licensing or public disclosure of the Group's own intellectual property, including parts of its source code, without compensation or on undesirable terms.

In addition, these third party technologies and licences may over time become incompatible with the Group's products and services, or the Group's relationship with the third party could deteriorate and lead to the Group facing legal or business disputes with licensors that may threaten or lead to the disruption of inbound licensing relationships. If this were to occur, there can be no assurance that a comparable third party licence or agreement would be available to the Group, or that the Group could otherwise procure the third party technology and intellectual property it requires, in the future on terms that are acceptable or that would allow its product offerings and services to remain competitive, which could have a material adverse effect on the Group's business, financial condition, results of operation and prospects.

In addition, there is a risk that the Group may inadvertently infringe the intellectual property rights of a third party. Claims of intellectual property infringement could require the Group to redesign affected products, enter into costly settlement or licence agreements with the third party, pay costly damage awards or face a temporary or permanent injunction prohibiting the Group from importing, marketing or selling certain of its products. There is also a risk that such claims against the Group could result in litigation, as has been the case with the ongoing patent infringement actions brought against HPE by Realtime Data LLC as described in Section 9.2(c) of Part XI (Additional Information) of this Prospectus. Any intellectual property claims or litigation involving the Group, even those without merit or with a favourable outcome for the Group, can be time consuming, costly to defend against and divert management's attention and resources away from the Group's business. As a result, any such intellectual property claims against, or litigation involving, the Group could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Some of the Group's products utilise Open Source technology which is dependent upon third party developers.

The Group uses Open Source technologies which often rely on a number of largely informal communities of independent Open Source software programmers to develop and enhance the Group's enterprise technologies. If these groups of programmers fail to continue to develop and enhance Open Source technologies adequately, the Group would have to rely on other parties to develop and enhance its offerings or the Group would need to develop and enhance its offerings with its own resources. The Group cannot predict whether further developments and enhancements to these technologies would be available from reliable alternative sources. In either event, the Group's development expenses could be increased and its technology release and upgrade schedules could be delayed. Moreover, if third party software programmers fail to continue to develop or enhance Open Source technologies adequately, the development and adoption of these technologies could be stifled and the Group's offerings could become less competitive. Delays in developing, completing or delivering new or enhanced offerings could result in delayed or reduced revenue for those offerings and could also materially and adversely affect customer acceptance of those offerings.

Moreover, different groups of Open Source software programmers compete with one another to develop new technology. Typically, the technology developed by one group will become more widely used than that developed by others. If the Group acquires, or adopts, new technology and incorporates it into its offerings but competing technology becomes more widely used or accepted, the market appeal of the Group's offerings may be reduced and that could harm the Group's reputation, diminish its brands and materially and adversely affect the business, financial condition, results of operation and prospects of the Group.

The Group's success will depend on its investment in and development of products and services that continue to meet the needs of its customers.

The success of the Group depends on its ability to meet the ongoing needs of its customers by continuing to invest in and develop its products and services. If the Group's products and services do not meet its customers' requirements, they will seek alternative solutions, potentially resulting in the loss of new revenue opportunities and the cancellation of existing contracts. The Group must make longterm investments, develop, obtain and protect appropriate intellectual property and commit significant research and development and other resources before knowing whether its predictions will accurately reflect customer demand for its products, services and solutions. Any failure to make such investments or take such action, or any failure to accurately predict customer demand, control research and development costs or execute the Group's product development strategy could harm its business and financial performance.

The Group has and, following Completion, will have a significant number of products and services at differing stages of their life cycle and the extent of investment in each product will need to be managed and prioritised considering its expected future prospects. Failure to manage and develop its current and, following Completion, enlarged portfolio of products may damage the longterm growth prospects of the Group. Product development and enhancement involves a significant commitment of time and resources and is subject to a number of risks and challenges, including:

• managing the length of the development cycle, which may be longer than anticipated;
• extensive testing compatibility with a wide variety of application software and hardware devices and the need to ensure the quality of products prior to their distribution;
• incorporating acquired products and technologies into the Group's portfolio;
• adapting to (and anticipating) emerging and evolving industry standards and technological developments by the Group's competitors and customers;
• continuously updating the skill sets of employees of the Group with respect to technological developments and the demands of customers;
• managing new product and service strategies; and
• accurately forecasting volumes, mixes of products and configurations that meet diverse customer requirements.

Any resulting delays in the development of new or upgrades to existing products may adversely impact customer acceptance of such products and result in delayed or reduced revenue for the Group.

In addition, the Group must develop and expand its sales channels and ability to deliver its products. For example, the Group's success is dependent on its ability to address the market shift to SaaS and other gotomarket execution challenges. To be successful in addressing these challenges, the Group must improve its gotomarket execution with multiple product delivery models, which better address customer needs and achieve broader integration across the Group's overall product portfolio as it works to capitalise on important market opportunities in cloud computing, big data, enterprise security, applications and mobility. Improvements in SaaS delivery, however, do not guarantee that the Group will achieve increased revenue or profitability. SaaS solutions often have lower margins than other software solutions throughout the subscription period and customers may elect to not renew their subscriptions upon expiration of their agreements.

If the Group is not successful in managing these risks and challenges, or if its products and services are not technologically competitive or do not achieve market acceptance, it could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group operates in a number of competitive markets and success in those markets depends on a variety of factors. Should the Group not be able to compete effectively against its competitors then it is likely to lose market share which may result in decreased sales and weaker financial performance.

The Group currently operates in, and following Completion will operate in an even greater number of, competitive markets. Many of the Group's competitors will have, or may have, greater brand recognition, larger customer bases or greater financial, sales and marketing, distribution, technical and other resources than the Group. As a result, the Group's competitors may be able to respond more quickly to market demands, to devote greater resources to the development, promotion, sale and deployment of their products than the Group or to exert negative pricing pressure on the markets in which the Group operates. Certain of these competitors may expand their product and service offerings and emerging competitors could introduce new technologies and business models that compete directly with the Group. The widespread inclusion of solutions that perform the same or similar functions as the Group's products within other companies' bundled or individual software products, or services similar to those provided by the Group, could reduce the perceived need among customers for the Group's products and services or otherwise render its products obsolete and unmarketable. The Group could be adversely affected through declining product sales if it fails to assess and understand the competitive landscape adequately and thereby identify competitive risks and threats to its business.

In addition, the software industry is currently undergoing consolidation as certain software companies seek to offer more extensive suites and integrated solutions as well as broader arrays of individual software products and services, as well as integrated products and solutions. The Group's competitors, as well as partners and other parties that are not currently in competition with the Group, may establish financial and strategic relationships among themselves or with existing or potential customers or other third parties, which may have the effect of reducing the ability of the Group to promote and sell its products successfully. This trend could create opportunities for large enterprise software companies to increase their market share through the acquisition of companies that dominate certain lucrative market niches or that have loyal installed customer bases. In doing so, these competitors may be able to reduce prices on software that competes with the Group's solutions, in part by leveraging their larger economies of scale. Consolidation may also permit competitors of the Group to offer a broader suite of individual products as well as more comprehensive bundled solutions, including hardware, software and services. This industry consolidation may result in stronger competitors that are better able to compete, either through offering a particularly strong individual solution in a specialised area or as solesource vendors for customers, and could lead to more variability in the Group's operating results due to lengthening of the customer evaluation process, increased pricing pressure and/or loss of business to these larger competitors, which may have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The IT environments of both the Group and its customers may be subject to hacking or other cybersecurity threats, which may harm customer relationships and the market perception of the effectiveness of the Group's products.

There is a risk of actual or perceived breaches of the Group's and its customers' IT security systems resulting in unauthorised access to data centres or other parts of IT environments containing confidential information. The Group incurs, and expects to continue to incur, substantial expense to protect itself, its products and its customers, against, and to remedy, security breaches and their consequences. Despite the Group implementing such protections, it is possible that computer circumvention capabilities, new discoveries or advances or other developments, including the Group's own acts or omissions, could result in a party (whether internal, external, an affiliate or unrelated third party) compromising or circumventing the security systems of either the Group or its customers and obtaining access to sensitive customer and personal data or the Group's proprietary information or causing significant disruptions to the Group's operations. The Group cannot guarantee that its security measures will prevent data breaches or that its customers will be successful in implementing security systems that prevent data breaches. Regardless of whether a breach (whether actual or perceived) is attributable to the Group's products, such a breach could cause contractual disputes and negatively affect the market perception of the effectiveness of the Group's products and reputation. Alleviating any of these problems could require significant expenditures of capital and diversion of resources from development efforts, result in the Group losing existing or potential customers and/or result in the Group being subject to legal action by customers or government authorities, any of which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group's business and products are dependent on the availability, integrity and security of its IT systems.

The Group's IT systems and related software applications are integral to its business and the Group relies on controls and systems to ensure data integrity of critical business information and the proper operation of the Group's systems and networks. Lack of data integrity could create inaccuracies and hinder the Group's ability to analyse its business and make informed business decisions. Despite network security, disaster recovery and systems management measures in place, the Group may encounter unexpected general systems outages or failures that may affect its ability to conduct research and development, provide maintenance and support of its products, manage the Group's contractual arrangements, accurately and efficiently maintain the Group's books and records, record its transactions, provide critical information to its management and prepare its financial statements. Additionally, any unexpected systems outages or failures may require additional personnel and financial resources, disrupt the Group's business or cause delays in the reporting of its financial results.

The Group may also be required to modify, enhance, upgrade or implement new systems, procedures and controls to reflect changes in its business or technological advancements, which could cause it to incur additional costs and require additional management attention, placing burdens on the Group's internal resources. The Group also outsources certain of its ITrelated functions to third parties that are responsible for maintaining their own network security, disaster recovery and systems management procedures. Any of the above factors could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Failure to adequately protect personal information could have a material adverse effect on the Group's business.

The Group and its customers rely on a number of its products (such as email and communications and identity management solutions) to store and access personal information and data, and a wide variety of local, state, national, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other processing of such information and data. These data protection and privacyrelated laws and regulations are becoming increasingly restrictive and complex and may result in greater regulatory oversight and increased levels of enforcement and sanctions. For example, the European Union's General Data Protection Regulation will come into force on 25 May 2018 and will be a major reform of the EU legal framework on the protection of personal data. This increasingly restrictive and complex legal framework has resulted in a greater compliance burden for businesses with customers in Europe, such as the Group's, and could further increase compliance costs for the Group going forward. The Group's failure to comply with this or other applicable laws and regulations, or to protect such personal information and data, could result in significant litigation or enforcement action against the Group, including fines, imprisonment of company officials and public censure, claims for damages by customers and other affected individuals, damage to the Group's reputation and loss of goodwill (both in relation to existing customers and prospective customers), any of which could have a material adverse effect on the Group's business, financial condition, results of operation and prospects.

As personal privacy and data protection become increasingly sensitive issues for regulators and customers, the Group may also become exposed to potential liabilities as a result of differing views between regulators or courts on the protections that should apply to personal data. These and other privacy and security developments, are difficult to anticipate and could materially adversely affect the business, financial condition, results of operation and prospects of the Group.

The Group is dependent upon the effectiveness of its sales force and distribution channels to maintain and grow licence, maintenance and consultancy sales.

The Group is dependent on the success of its sales force, and its failure to develop the skill sets of its sales personnel may lead to poor sales performance. Furthermore, weak organisational alignment and inadequate incentivisation may lead to poor performance amongst employees of the Group. From time to time, the Group may make changes to the organisational structure and compensation plans of the Group's sales organisations, each of which may increase the risk of sales personnel turnover. To the extent that the Group experiences significant turnover within its direct sales force or sales management, there is a risk that the productivity of the sales force would be negatively impacted which could lead to revenue declines. In addition, it can take time to implement new sales management plans and to effectively recruit and train new sales personnel.

In addition to its sales force, the Group uses a variety of other distribution channels to sell its products and services, and the Group's product marketing programmes and strategies to exploit channel opportunities may not be effective and may reduce the prospects for additional revenue streams going forward for the Group. Whilst it is expected that a significant proportion of the Group's sales will be derived from direct sales channels, the Group will continue to depend on indirect channel distributors such as packaged application providers, OEMs, systems integrators and resellers.

Systems integrators, OEMs and packaged application providers develop their respective customer bases and incorporate the software technology of the Group into the software and services such distributors offer to their respective customers. The Group's business, financial condition, results of operation and prospects could be materially adversely affected if systems integrators, OEMs or packaged application providers:

• renegotiate existing contractual arrangements;
• use a competitor's technology;
• are unable to attract additional customers, maintain existing customer relationships or effectively market the solutions of the Group;
• engage in inappropriate practices without the knowledge of the Group which could result in penalties and/or reputational damage to the Group;
• are unable to deliver the same quality or standard of services that the Group provides to its direct customers, which may require the Group to engage with its customers directly (and incur additional costs to the Group) to protect the Group's product and services standards and reputation;
• are in conflict with the activities of the Group's direct sales and marketing activities;
• experience financial difficulties that may impact their ability to market the Group's products and may lead to delays, or even default, in their payment obligations to the Group; and/or
• fail to provide accurate and timely reporting of the Group's channel sales.

In addition, the Group will rely on third parties to sell, distribute and support its software products in territories where the Group does not have a physical presence. If the sales and marketing strategy for the Group were to change in the future, the Group may need to make further investment in sales staff in certain geographic areas. Should any direct or indirect sales channel suffer from a decreased level of effectiveness, the ability of the Group to reach customers and thereby sell its products may be impaired, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group must maintain high customer satisfaction levels in order to retain and grow its customer base.

The Group's ability to maintain customer satisfaction depends in part on the quality of its professional service organisation and technical and other support services, including the quality of the support provided on its behalf by certain partners. Once products are deployed within the IT environments of the Group's customers, these customers depend on the Group's ongoing technical and other support services, as well as the support of the Group's channel partners, to resolve any issues relating to the implementation and maintenance of the Group's products. If the Group or its channel partners do not effectively assist its customers in deploying its products, succeed in helping its customers quickly resolve postdeployment issues, or provide effective ongoing support, the Group may be unable to sell additional products to existing customers and its reputation with potential customers could be damaged. As a result, the failure by the Group to maintain highquality customer support could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group's business and reputation may be harmed by errors or defects in its products.

Software produced by the Group may contain undetected errors or defects when first introduced or as upgrades or newer versions are released. The Group may lose revenue as a result of product defects or errors and suffer damage to its reputation. As a result, the Group may incur significant product development, support and warranty costs and be subject to product liability claims. A product defect or error could also divert the attention of software development and product management personnel and cause significant customer relationship problems or loss of customers, including loss of maintenance service contracts, any or all of which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group's maintenance revenue could decline.

Maintenance revenue is an important source of recurring revenue for the Group and the Group invests significant resources to provide maintenance and support services to its customers. Maintenance revenue generally increases when customers enter into new licence and maintenance agreements or license the Group's products for additional processing capacity. However, increased price competition with respect to enterprise licence agreements may result in the discounting of maintenance fees for higher levels of supplemental processing capacity. In addition, customers are typically entitled to reduced annual maintenance fees for entering into longterm maintenance contracts. Declines in the Group's licence bookings, increases in the proportion of longterm maintenance contracts and/or increased discounting with respect to enterprise licences could lead to declines in the Group's maintenance revenue growth rates. Furthermore, should customers migrate from systems and applications which the Group's products support, use alternatives to the Group's products, including maintenancefree solutions such as on demand, or become dissatisfied with the Group's maintenance services, increased cancellations could lead to declines in the maintenance revenue of the Group. As maintenance revenue is a significant contributor to the Group's total revenue, any such decline could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group's reputation and business may be negatively impacted by decisions to discontinue or restrict development expenditure on certain products.

The Group may, for the purposes of product portfolio rationalisation and optimisation, discontinue particular products. The business of the Group could be adversely affected by negative customer reaction if the Group fails to communicate clearly the possible impacts this may have on its partners, customers and other interested parties. Customers of discontinued products could elect to migrate to other products, including those of the Group's competitors, sooner than they may otherwise have done. Furthermore, limiting new development expenditure with respect to certain "deemphasised" products may cause them to become obsolete prematurely, limiting the potential for new licence sales associated with these products. If the Group fails to promote and maintain the reputation of its brands, incurs excessive costs in doing so or experiences negative customer reaction with respect to discontinued or deemphasised products, it may have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group's businesses may be subject to inherent risks arising from the general and sector specific economic conditions in the markets in which the Group operates.

The Group's business and financial performance depend significantly on global economic conditions and the demand for software and related services in the markets in which it competes. The growth and development of these markets depends on numerous factors, many of which are beyond the Group's control, and the exact effect of which cannot accurately be predicted. Such factors include changes in general economic conditions, political developments (including elections in the jurisdictions in which the Group operates), government regulation and taxation, any of which could result in decreased demand and increased price competition for the Group's products and could cause the Group's expenses to vary materially from its expectations.

Furthermore, any financial turmoil affecting the banking system and financial markets or any significant financial services institution failures could negatively impact the Group's operations, as the financial condition of such institutions may deteriorate rapidly and without notice in times of market volatility and disruption. In addition, poor financial performance of asset markets combined with lower interest rates and the adverse effects of fluctuating currency exchange rates could lead to higher pension and postretirement benefit expenses for the Group, and its interest and other expenses could also vary materially from expectations.

As a result, any deterioration in the political, financial or general economic conditions in the markets in which the Group operates could have a material adverse effect on the business, financial conditions, results of operation and prospects of the Group.

The Group sells and distributes its software products globally and is subject to associated risks and uncertainties.

The Group sells and distributes its software products and services, directly or indirectly, around the world. As a result, the business of the Group is and, following Completion, will be increasingly subject to various risks inherent in international operations, including risks associated with the following:

• ongoing instability or changes in a country's or region's economic or political conditions, including inflation, recession, interest rate fluctuations and actual or anticipated military or political conflicts;
• difficulties in collecting accounts receivable from, or longer collection cycles or financial instability among, customers;
• trade regulations and procedures and actions affecting production, pricing and marketing of products, including policies adopted by countries that may champion or otherwise favour domestic companies and technologies over foreign competitors;
• local labour conditions and regulations, including local labour issues faced by specific suppliers and OEMs;
• managing a geographically dispersed workforce;
• difficulties associated with working with disparate cultures across geographies;
• changes in the international, national or local regulatory and legal environments;
• differing technology standards or customer requirements;
• import, export or other business licensing requirements or requirements relating to making foreign direct investments; and
• difficulties associated with repatriating earnings in a taxefficient manner, and changes in tax laws.

Any of the foregoing factors could materially and adversely affect the business, financial condition, results of operation and prospects of the Group.

The Group is exposed to fluctuations in foreign currency exchange rates.

The Group is exposed to foreign currency rate fluctuations, as it operates in various countries and, following Completion, will operate in a greater number of countries. The Group has significant businesses in the United Kingdom, Europe, Canada and Japan, among other countries, which generate turnover and have associated operating costs in currencies other than its reporting currency, the US dollar. The Group is exposed to currency transaction risks when its subsidiaries enter into transactions using a currency other than their functional currency. This can result in gains or losses with respect to movements in foreign exchange rates and may be material. The Group may enter into financial transactions to hedge a portion of these currency exposures. However, hedging transactions may not be available at a reasonable cost or may prove ineffective in reducing these exposures. Any losses incurred in connection with any hedging transactions could adversely affect the operating results of the Group. In addition, fluctuations in the exchange rate between the Pound Sterling, Euro, Yen, Chinese Renminbi, Canadian Dollar, Australian Dollar, Indian Rupee and other currencies in which the Group transacts and, following Completion, will transact relative to the US dollar may cause fluctuations in reported financial results that may not necessarily relate to the business, financial condition, results of operation or prospects of the Group.

The Group's contracts with government clients subject it to risks, including litigation, early termination, renegotiation, audits, investigations, sanctions and penalties.

Some of the Group's revenue is associated with multiyear contracts signed with federal, state, provincial and local government customers. These contracts are generally subject to annual fiscal funding approval or may be renegotiated or terminated at the discretion of the government, any of which could adversely affect the sales and revenue of the Group. Additionally, the Group's government contracts are generally subject to audits and investigations, which could result in various civil and criminal actions and penalties or administrative sanctions, including the termination of contracts, refunding of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with the relevant government, any of which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group may face operational risks that may not be covered by insurance policies.

The Group maintains insurance policies to cover a variety of operational risks. However, such insurance policies may not fully cover all of the consequences of any event, including damage to persons or property, business interruptions, failure of counterparties to conform to the terms of an agreement or other liabilities. If a significant claim or number of claims is made on any of the Group's insurance policies, the Group may be subject to significant increases in premiums or even find it difficult, prohibitively expensive or impossible to obtain sufficient levels of insurance coverage thereafter. If the Group's insurance coverage is not sufficient for any reason, the Group could incur significant outofpocket expenses, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group may be involved in legal and other proceedings from time to time, and as a result may face damage to its reputation or legal liability.

In the ordinary course of business, the Group may be involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures in a variety of jurisdictions, the outcomes of which will determine its rights and obligations under insurance and other contractual agreements or under tort law or other legal obligations. From time to time, the Group may institute, or be named as a defendant in, legal proceedings, and may be a claimant or respondent in arbitration proceedings or involved in investigations and regulatory proceedings, some of which could result in adverse judgments, settlements, fines and other outcomes. The Group could also be subject to litigation risks arising from potential employee misconduct, including noncompliance with internal policies and procedures. The Group may settle litigation or regulatory proceedings prior to a final judgment or determination of liability in order to avoid the cost, management efforts or negative business, regulatory or reputational consequences of continuing to contest liability, even when it believes it has valid defences to liability. The Group may also do so when the potential consequences of failing to prevail would be disproportionate to the costs of settlement. Furthermore, the Group may, for similar reasons, reimburse counterparties for their losses even in situations in which it does not believe that it is legally compelled to do so. The financial impact of legal risks might be considerable but may be hard or impossible to estimate and to quantify, so that amounts eventually paid may exceed the amount of reserves set aside to cover such risks. Any significant litigation or substantial legal liability could cause the Group significant reputational harm and have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

In addition, while the Group will seek to ensure where possible that the governing law clause of each contract to which a Group member is a party is explicitly and validly set out in the terms of the contract, and identifies a jurisdiction that is acceptable to and appropriate in respect of the Group, it is possible that this legal framework may be deemed invalid or inappropriate by courts in the relevant jurisdiction.

The Group may also be exposed to liability as a result of ongoing litigation involving HPE Software following Completion. For example, HPE Software may be subject to monetary liability or injunctions against selling certain of its products and services as a result of ongoing IPrelated litigation involving HPE. Following Completion, there can be no assurance that either the Group or HPE will be successful in defending such claims or that the amount of the Group's liability will not be significantly higher than anticipated, any of which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group's strategy may involve the making of further acquisitions to protect or enhance its competitive position and failure to identify, manage, complete and integrate acquisitions, divestitures and other significant transactions successfully could have a material adverse effect on the Group's business.

It is possible that acquisition, divestiture and other transaction opportunities may arise which the Company decides to pursue, and that such transactions may continue to form part of the Group's strategy. Should further acquisitions be made, the Group may have difficulty incorporating the acquired technologies or products into its existing product lines and integrating the operations, facilities, personnel and commission plans of the acquired business and may therefore not realise the anticipated benefits of such acquisitions. Such transactions may also place additional strain on the Group's senior management team, as well as the Group's financial and other resources. Difficulties in effectively managing these transactions could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

In addition, the Group may not be able to identify suitable acquisition opportunities or obtain acceptable financing to consummate such acquisitions, in a timely manner or at all. The Group also competes for acquisitions with other potential acquirers, some of which may have greater financial or operational resources than the Group has. This competition may intensify due to the ongoing consolidation in the software industry, which may increase the Group's acquisition costs. If the Group is not able to identify or consummate these transaction opportunities, it could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group has entered into various acquisitions and disposals over recent years and may be subject to or have the benefit of certain residual representations, warranties, indemnities, covenants or other liabilities, obligations or rights.

The Group has entered into various acquisitions and disposals over recent years and may be subject to or have the benefit of certain residual representations, warranties, indemnities, covenants or other liabilities, obligations or rights including change of control provisions which may be triggered by the Transaction. The Group may become subject to or may take legal proceedings if for any reason any such representations, warranties, indemnities, covenants or other liabilities, obligations or rights become enforceable against or by the Group. Any such litigation may be time consuming and expensive and there may be no certainty as to the outcome of any such legal proceedings once initiated. The Group may not have insurance cover for these types of claims or such insurance may not be adequate. Any such litigation may also divert the attention and time of the management of the Group and may materially adversely affect the business, financial condition, results of operation and prospects of the Group.

The Group will be subject to the laws and regulations of a greater number of jurisdictions covering a wide variety of areas affecting international transactions.

Following Completion, the Group will be subject to the laws and regulations of a greater number of jurisdictions covering a wide variety of areas affecting international transactions, including export controls, anticorruption legislation and data protection requirements. The Group may be required to devote more time and resources than it had previously devoted to ensure compliance with all such laws, rules and regulations to which it is subject. In addition, the Group will be subject to changes in any such laws, rules and regulations, including the interpretation or enforcement of existing laws and regulations, in the additional jurisdictions in which the Group will operate and the cost of compliance with such changes, any of which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Exposure to political developments in the United Kingdom, including the process and terms of the UK's withdrawal from the EU following the result of the June 2016 referendum and subsequent triggering of Article 50, could have a material adverse effect on the Group.

On 23 June 2016, a referendum was held on the UK's membership in the EU, the outcome of which was a vote in favour of leaving the EU. On 29 March 2017, the UK government notified the EU that it was triggering the formal process for leaving the EU under Article 50 of the Treaty of the European Union, which allows a Member State to decide to withdraw from the EU in accordance with its own constitutional requirements. The triggering of Article 50 commenced a two year negotiating period for the UK to agree the terms of its exit from the EU, although this period can be extended with the unanimous agreement of the European Council. Without any such extension or agreement on the terms of the UK's withdrawal from the EU, the UK's membership in the EU would end automatically upon the expiration of the two year period.

The result of the referendum and the triggering of Article 50 mean that the long term nature of the UK's relationship with the EU is unclear, which may create an uncertain political and economic environment in the UK and other EU Member States that could potentially last for a number of months or years. There is also considerable uncertainty as to whether the terms of the UK's withdrawal from the EU will be agreed upon within the two year negotiating period and, if an extension of the negotiating period is not agreed, the UK may be forced to exit the EU without mutually acceptable terms having been agreed. The terms of any such exit, and the accompanying political and economic uncertainty surrounding the UK's withdrawal from the EU, could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Future changes to US and nonUS tax laws could adversely affect the Group.

The US Congress, the Organisation for Economic Cooperation and Development and other government agencies in jurisdictions in which the Company and its affiliates will conduct business have had an extended focus on issues related to the taxation of multinational corporations. One example is in the area of "base erosion and profit shifting", including situations where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. The Organisation of Economic Cooperation and Development in particular is contemplating changes to numerous longstanding international tax principles through its socalled BEPS project, which is focused on a number of issues including sharing of profits between affiliated entities in different tax jurisdictions. As a result of BEPS and other similar initiatives, the tax laws in the US, the UK and other countries in which the Company and its affiliates will do business could change on a prospective or retroactive basis, and any such changes could have a material adverse effect on the business, results of operation, financial condition and prospects of the Group.

Members of the Group may not qualify for benefits under the tax treaties entered into between the UK and other countries.

The Group intends to operate in a manner such that the relevant members of the Group are eligible for benefits under the tax treaties entered into between the UK and other countries, particularly the US. However, the ability of such members to qualify for such benefits will depend upon whether they are treated as UK tax residents and upon the requirements contained in each treaty and the applicable domestic laws, as the case may be, on the facts and circumstances surrounding the Group's operations and management, and on the relevant interpretation of the tax authorities and courts.

The failure by the Company or its relevant subsidiaries to qualify for benefits under the tax treaties entered into between the UK and other countries could result in adverse tax consequences to the Company and its subsidiaries, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Company and its subsidiaries will be subject to tax laws of numerous jurisdictions, and the interpretation of those laws is subject to challenge by the relevant governmental authorities.

The Company and its subsidiaries will be subject to tax laws and regulations in the UK, the US and the numerous other jurisdictions in which the Company and its subsidiaries operate. These laws and regulations are inherently complex and the Company and its subsidiaries will be obliged to make judgements and interpretations about the application of these laws and regulations to the Company and its subsidiaries and their operations and businesses. The interpretation and application of these laws and regulations could be challenged by the relevant governmental authorities, which could result in administrative or judicial procedures, actions or sanctions, the ultimate outcome of which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Part B – Risks relating to the Transaction

Integration of HPE Software with the existing businesses carried on by the Micro Focus Group may be more time consuming and costly than anticipated.

The Micro Focus Group and HPE Software currently operate and, until Completion, will continue to operate as two separate businesses. The Merger will require the integration of the businesses, and the success of the Group will depend, in part, on the effectiveness of the integration of the process.

The key potential difficulties of combining the businesses following Completion include the following:

• developing, operating and integrating a large number of different technology platforms and systems, in particular integrating the IT platforms of both businesses;
• coordinating and consolidating services and operations, particularly across different service areas, regulatory systems and business cultures;
• consolidating infrastructure, procedures, systems, facilities, accounting functions, compensation structures and other policies;
• integrating the management teams and retaining and incentivising key employees;
• coordinating communications with and/or the provision of services by the Group to customers of both the Micro Focus Group and HPE Software; and
• disruption to the businesses of each of the Micro Focus Group and HPE Software.

There may also be additional challenges to the combination of the businesses which will not be known until after Completion and any delays or difficulties encountered in connection with the integration of the businesses could result in an interruption to the Group's operations and reputational damage to the Group. In addition, the management teams of both businesses will be required to devote significant attention and resources to integrating their respective business practices and operations. There is a risk that the challenges associated with managing the integration of the Micro Focus Group's and HPE Software's respective businesses may result in management distraction and that, consequently, the underlying businesses may not perform in line with expectations. Any such difficulties or delays encountered in connection with the integration of the business could as a result have an adverse effect on the business, financial condition, results of operation and prospects of the Group.

Completion is subject to a number of conditions which may not be satisfied or waived.

Completion is subject to the satisfaction (or waiver, where applicable) of a number of conditions, some of which are outside of the parties' control, and which are further described in Part VI (Principal Terms of the Transaction) of the Circular incorporated by reference herein. There is no guarantee that these conditions will be satisfied (or waived, if applicable) in a timely manner or at all, in which case Completion may be delayed or may not occur and the benefits expected to result from the Merger may not be achieved. Failure to complete, or a delay in completing, the Merger for whatever reason could have a significant impact on the Group's reputation and business strategy, as considerable resources have been devoted to effect the Merger including substantial expenses and management's time and attention. Therefore the aggregate consequences of a failure to complete or a material delay in completing the Merger could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Company may be obliged to pay a termination payment if the Merger Agreement is terminated under certain circumstances.

The Company has agreed to pay HPE a termination payment equal to approximately US\$60 million in cash under certain circumstances, including among other circumstances (as set out in more detail in Section A of Part VI (Principal Terms of the Transaction) of the Circular incorporated by reference herein) if (a) a Competing Proposal has been publicly announced or communicated to the Board and not withdrawn at least five Business Days prior to the termination of the Merger Agreement, and such Competing Proposal, or a different Competing Proposal, is consummated (or a definitive agreement entered into with respect thereto) within 12 months following the Merger Agreement being terminated in specified circumstances; or (b) the Merger Agreement is terminated as a result of, among other things, the Company breaching in any material respect the specified undertakings in the Merger Agreement prohibiting it and its representatives from soliciting competing proposals.

If the Company is obliged to pay the termination payment under any of the circumstances described above, it could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Costs and expenses related to the Transaction could exceed amounts currently estimated.

The Group expects to incur a number of costs in relation to the Transaction, including integration and post-Completion costs, which could exceed the amounts currently estimated. There may also be further additional and unforeseen expenses incurred in connection with the Transaction either due to delays or otherwise. Whilst the Board believes that the costs related to the Transaction will be offset by the realisation of the benefits of the Merger, there can be no guarantee that any benefits of the Merger that are realised will offset such costs, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group will not be able to recover damages from HPE for any losses suffered as a result of a breach of warranty by HPE under the Merger Agreement following Completion.

The Merger Agreement contains customary representations and warranties by HPE made for the benefit of the Company, Merger Sub and Holdings given as at the date of the signing of the Merger Agreement and repeated as of the date of Completion (unless such representation and warranty is made as of a particular date), subject to specified materiality qualifications. Prior to Completion, the Company's only remedy for any breach (or breaches) of such representations and warranties by HPE will be to terminate the Merger Agreement but only to the extent such breach or breaches would cause a failure of a condition to Completion set forth in the Merger Agreement, subject to a specified cure period. However following Completion, there will be no recourse for any breaches of the representations and warranties, and so the Group will not have contractual recourse against, or otherwise be able to recover from, HPE or any other party, in respect of any losses which it may suffer in respect of a breach of such representations and warranties in the Merger Agreement regardless of whether or not such breach is material or significant. As a result, any such losses following Completion resulting from the breach of any such representation and warranty could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

There can be no guarantee that the Return of Value will be executed as planned or at all.

Shortly prior to Completion, the Company intends to implement a Return of Value to Existing Shareholders of an aggregate principal amount in pounds sterling equivalent of US\$500 million in cash (inclusive of any currency hedging costs or proceeds), by way of the B Share Scheme, the details of which are set out in paragraph 2 of Part I (Introduction and Summary of the Transaction) of this Prospectus.

If the Return of Value is not implemented, the Board may have to consider alternative ways to deliver value to the Shareholders, which may not be possible on commercially similar terms or at all.

The development of IT systems for HPE Software and the integration of the Group's existing IT systems with HPE Software's IT systems could be subject to delays or difficulties.

The success of the Merger and the Group will depend, in part, on the successful development of IT systems for HPE Software and the integration with the Group's existing IT systems. Under the Separation and Distribution Agreement, HPE is obliged to use its commercially reasonable efforts to develop and deliver certain standalone IT systems to HPE Software by the date of the Distribution. HPE may be unable to develop and deliver, or could be delayed in delivering, functional standalone IT systems, in which case HPE Software will remain reliant on HPE's existing IT systems under the Transition Services Agreement for a period of time following Completion. The failure to develop, or delay in developing, functional IT systems could delay or complicate the integration of the Group's existing IT systems with HPE Software's IT systems. In addition, if HPE has not delivered such standalone IT systems to HPE Software by the date of the Distribution, HPE and the Company have agreed to discuss in good faith which party will be responsible for the completion and remaining costs of developing such standalone IT systems, and as such it is possible that the Company will be responsible for all or part of such remaining costs.

Moreover, the integration of the Group's existing IT systems with HPE Software's IT systems through a shared infrastructure will be a complex and time consuming process that will require the dedication of significant management time and resources, with the Group expecting to incur approximately US\$150 million of cash costs to complete the IT systems integration. The Group may encounter significant difficulties in integrating these systems and, as a result, be required to redevelop and replace HPE Software's IT systems with standalone IT systems in order for them to be compatible with the Group's existing infrastructure at significant cost to the Group.

Any delays or difficulties encountered in developing HPE Software's standalone IT systems and integrating the Group's existing infrastructure with these systems, for whatever reason, could adversely affect the coordination and consolidation of the Group's operations, reporting systems and accounting functions, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group may fail to realise the anticipated benefits of the Merger.

The success of the Group will, in part, depend on its ability to realise the anticipated benefits and operational efficiencies from combining the businesses of the Micro Focus Group and HPE Software. These anticipated benefits include, among other things, convergence of businesses operating in adjacent and complementary product areas in order to better serve customers as a global provider of infrastructure software and the improvement of the profitability of HPE Software through the application of the Company's operating model. If the anticipated benefits are not realised, the purposes and rationale for the Merger will not be fully achieved, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

HPE Software may not perform in line with expectations prior to or following Completion.

The anticipated benefits and operational efficiencies to be created by the Merger are based on assumptions regarding, amongst other things, the financial and operational performance of HPE Software, including in the period prior to Completion, when the financial and operational performance of HPE Software is outside the control of the Company. Until Completion, it is possible that an adverse event, or events, could affect the financial or operational performance of HPE Software. In such an event, the value of HPE Software may be less than the consideration paid by the Company and, accordingly, the net assets of the Group could be reduced. This could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Integration and implementation of the business strategies of the Micro Focus Group and HPE Software could fail or not achieve the objectives of the Group.

Following Completion, the implementation and coordination of the Micro Focus Group's and HPE Software's business strategies will be complex, timeconsuming and expensive. The ability of the Group to integrate and implement such strategies depends on a variety of factors, including development of demand for its services and the ability to recruit and retain skilled employees, in particular retention of skilled employees of HPE Software, following Completion. Implementation of the Group's business strategies could fail to be achieved quickly enough or fail to achieve the anticipated growth, efficiency, cost savings, return or customer service improvements, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Merger may result in a loss of customers for the Group.

As a result of the Merger (including as a result of its public announcement and during the pendency of the Merger), some of the Micro Focus Group's or HPE Software's customers or strategic partners may seek to terminate or reduce their business relationships with the Group due to, for example, the interruption of operations that may result from the integration of the businesses or customers not wanting to increase the proportion of services sourced from a single company. Furthermore, potential customers of the Micro Focus Group or HPE Software may delay entering into, or decide not to enter into, a business relationship with the Micro Focus Group or HPE Software until Completion on account of any perceived uncertainty in connection with the Merger. If the Micro Focus Group's or HPE Software's relationships with their current or potential future customers or strategic partners are negatively impacted by the Merger, this could result in a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Third parties may terminate or seek to modify existing contracts with HPE Software as a result of the Merger.

As part of the Separation, members of the Seattle Group will become counterparties by assignment to a number of contracts of the HPE Group or its subsidiaries with third party suppliers, distributors, clients, customers, licensors, licensees, lessees, lessors, lenders, insurers, landlords, other business partners and other counterparties. Some of these contracts require the counterparty's consent to assignment. If these consents cannot be obtained, or if a number of these consents remain outstanding following the Separation, HPE Software may be unable to obtain some of the benefits, assets and/or contractual commitments that are intended to be allocated to it as part of the Separation.

In addition, some of the contracts to be assigned to the Seattle Group following the Separation contain "change of control" or similar clauses that allow the counterparty to terminate or change the terms of their contract as a result of the Merger, or may otherwise enable the counterparty to seek to modify the terms of the existing contract. There can be no assurance that the Group will be able to contract on the same terms as HPE did prior to Completion. If a large number of third party consents cannot be obtained, or the terms of such contracts are modified in a manner that is adverse to the Group, there may be a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group could incur operational difficulties or losses if HPE were unable to perform under the agreements entered into as part of the Separation.

In connection with the Separation, Seattle SpinCo will, prior to Completion, enter into several agreements with HPE or its subsidiaries, including among others, the Transition Services Agreement, which in general provide for the performance of certain services or obligations by each of HPE and Seattle SpinCo for the benefit of each other for a transitional period following the Separation. If either party is unable to satisfy its obligations under such agreements in a timely manner or at all, including for the provision of a standalone IT platform by HPE for the Seattle Group and obtaining third party consent, where necessary, for the transfer of certain assets to Seattle SpinCo, or if the transitional agreements fail to provide for or cover certain essential services needed by Seattle SpinCo during the transitional period, there is limited recourse for the Company and Seattle SpinCo could incur operational difficulties or losses or face liability that could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group may be negatively affected if HPE Software is unable to obtain the same types and level of benefits, services and resources that historically have been provided by HPE, or may be unable to obtain them at the same cost.

HPE Software has historically received benefits and services from HPE. Following Completion, HPE Software will no longer benefit from HPE's services or business relationships to the extent not otherwise addressed in the Separation and Distribution Agreement, Transition Services Agreement or other transaction documents. While HPE has agreed to provide certain transitional services to HPE Software, it cannot be assured that the Group will be able to adequately replace or provide resources formerly provided to HPE Software by HPE, or replace them at the same or lower cost. If the Group is not able to replace the services provided by HPE or is unable to replace them without incurring significant additional costs or is delayed in replacing the services provided by HPE or if the potential customers or other partners of HPE Software do not view the Group's business relationships as equivalent to HPE's, it could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group will have an ongoing relationship with HPE following Completion and, as a result, the future state or actions of HPE or any successor of HPE could adversely affect the Group.

Certain agreements related to the Separation and Merger provide for ongoing services by HPE to the Group. Changes in the strategic direction of HPE, or any successor of HPE, could, over time, impact the positioning and offerings of HPE's brands and programs, including those being made available to the Group. Any such changes impacting the services being provided by HPE, could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group is exposed to funding risks in relation to its pension schemes.

As part of the Separation, the Seattle Group will assume or retain obligations to pay contributions to, and fund the pension benefits of, personnel who are allocated to the Seattle Group globally pursuant to the Separation, in relation to service by such personnel both before and after the Separation. However, this will not apply for personnel in certain jurisdictions, who will instead be either (a) provided with pension benefits under HPE's existing pension arrangements until Completion and the Group's pension arrangements following Completion, or (b) moved from defined benefit plans into defined contribution plans established within the Seattle Group prior to Completion, in which case liabilities in respect of defined benefit accrual prior to the transition to defined contribution plans will not be assumed by the Seattle Group. Following Completion, the Group will be exposed to liabilities for these contributions and pension benefits.

The Group will have obligations to pay contributions to defined contribution schemes and insured or similar arrangements in various jurisdictions that were created, assumed or retained by the Seattle Group as part of the Separation or by the Group with effect from Completion pursuant to the Separation and Merger, which will require contributions to be made to separately administered funds.

The Group will also have obligations to fund defined benefit pension schemes in various jurisdictions (i) that were created, assumed or retained by the Seattle Group as part of the Separation or by the Group with effect from Completion pursuant to the Separation and Merger, or (ii) in which HPE Software staff participated prior to Completion. As at 1 June 2017, HPE Software staff participated in 31 relevant defined benefit arrangements worldwide for which obligations will transfer to the Group and of which 30 were open to further accrual of benefits at varying levels. The combined deficit relating to the relevant defined benefit liabilities to transfer was estimated to be approximately US\$65 million on a US GAAP accounting basis as at 1 June 2017. The Separation and Distribution Agreement provides that, as of Completion, HPE will cause the Seattle Group to have immediately available cash with respect to HPE Software's defined benefits plan liabilities to be assumed by Seattle (or will have prefunded such liabilities in whole or in part prior to Completion) in an aggregate amount agreed by the parties.

The actual pension obligations of the Group may vary depending on the final allocation of employees to the Seattle Group and local legal or collective bargaining or employee consultation outcomes in connection with the Separation and Merger, as well as the nature of the pension arrangements established for the employees within the Seattle Group legal structure prior to Completion or within the Group from Completion.

Defined benefit pension schemes are subject to risks in relation to their liabilities and required funding levels as a result of changes in life expectancy, inflation and future salary increases, volatility regarding the value of investments and the returns derived from such investments, and applicable local legal and regulatory regimes. A significant funding requirement in respect of future years could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Distribution could result in significant tax liabilities to HPE and its stockholders, and, under the Tax Matters Agreement, the Group may in certain circumstances be obliged to indemnify HPE for certain tax liabilities relating to the Separation, which could be material.

Completion is conditional upon the receipt by HPE of the HPE Tax Opinion, substantially to the effect that, among other things, for US federal income tax purposes, the Distribution, taken together with the Contribution, should qualify as a "reorganization" under Sections 368(a)(1)(D) and 355 of the Code. HPE also intends to seek a ruling from the IRS regarding certain issues relevant to the qualification of the Distribution and certain other aspects of the Separation for taxfree treatment for US federal income tax purposes (the "IRS Ruling"). The receipt of any such ruling is not a condition to HPE's and Seattle SpinCo's obligation to consummate the Transaction, and there can be no assurance that any or all of such requested rulings will be received.

Although the IRS Ruling, if received, will generally be binding on the IRS, the continuing validity of the IRS Ruling will be subject to the accuracy of factual representations and assumptions made in the ruling request. In addition, as part of the IRS's general ruling policy with respect to transactions under Section 355 of the Code, the IRS will not rule on the overall qualification of the Distribution for taxfree treatment, but instead only on certain significant issues related thereto.

The HPE Tax Opinion will be based on current law and will rely upon various factual representations and assumptions, as well as certain undertakings made by HPE, the Company and Seattle SpinCo. If any of those representations or assumptions is untrue or incomplete or any of those undertakings is not complied with, or if the facts upon which the HPE Tax Opinion is based are different from the actual facts that exist at the time of the Distribution, the conclusions reached in the HPE Tax Opinion could be adversely affected and the Distribution and/or certain related transactions may not qualify for the intended tax treatment. Furthermore, HPE understands that it is not possible for its tax counsel, Skadden, to reach a more definitive conclusion regarding the characterisation of the Contribution and the Distribution for U.S. federal income tax purposes given the lack of direct authority on which taxpayers can rely involving a foreign counterparty such as the Company (which is incorporated in the United Kingdom). Given the Company's status as a foreign corporation for U.S. tax purposes, unless the IRS Ruling is received and addresses such matters, certain conclusions in the HPE Tax Opinion will relate to matters for which there is no legal authority directly on point and where similar issues are not present in transactions involving domestic counterparties, and such conclusions will therefore necessarily be based upon analysis and interpretation of analogous authorities. Based upon such analysis and authorities, the HPE Tax Opinion will provide that the Distribution, taken together with the Contribution, should qualify as a "reorganization". However, an opinion of counsel is not binding on the IRS or the courts. Accordingly, no assurance can be given that the IRS will not challenge the conclusions set forth in the HPE Tax Opinion or that a court would not sustain such a challenge. The lack of a more definitive conclusion in the HPE Tax Opinion reflects the risk of such challenge and that such challenge may be sustained.

If the Distribution, taken together with the Contribution, were determined not to qualify as a "reorganization" under Sections 368(a)(1)(D) and 355 of the Code, HPE would generally be subject to US federal income tax as if it had sold the Seattle SpinCo common stock for its fair market value in a taxable transaction which could result in a material tax liability for HPE. In addition, HPE Shareholders who receive Seattle SpinCo common stock in the Distribution generally would be subject to US federal income tax as if they had received a taxable distribution in an amount up to the fair market value of such common stock. In addition, HPE could be subject to material tax liability if certain transactions related to the Distribution were not to qualify for their intended tax treatment.

Even if the Distribution, taken together with the Contribution, otherwise qualifies under Section 355 of the Code, the Distribution would be taxable to HPE (but not to HPE Shareholders) pursuant to Section 355(e) of the Code if one or more persons acquire a 50 per cent. or greater interest (measured by vote or value) in the stock of HPE or Seattle SpinCo, directly or indirectly (including through acquisitions of the Company's stock after Completion), as part of a plan or series of related transactions that includes the Distribution. Current law generally creates a presumption that any direct or indirect acquisition of stock of HPE or Seattle SpinCo within two years before or after the Distribution is part of a plan that includes the Distribution, although the parties may be able to rebut such presumption in certain circumstances. The process for determining whether an acquisition is part of a plan under these rules is complex, inherently factual in nature, and subject to a comprehensive analysis of the facts and circumstances of the particular case. Although it is expected that the Merger will be treated as part of such plan, the Merger, standing alone, should not cause Section 355(e) of the Code to apply to the Distribution because holders of Seattle SpinCo common stock immediately before the Merger will hold more than 50 per cent. of the stock of the Company (by vote and value) immediately after the Merger. However, if the IRS were to determine that other direct or indirect acquisitions of stock of HPE or Seattle SpinCo, either before or after the Distribution, were part of a plan that includes the Distribution, such determination could cause Section 355(e) of the Code to apply to the Distribution, which could result in a material tax liability for HPE.

Under the Tax Matters Agreement, subject to certain limited exceptions, Seattle SpinCo and the Company will be required to indemnify HPE against any taxes resulting from any action (or failure to act) by Seattle SpinCo or the Company, any event involving the shares or assets of Seattle SpinCo or the Company or any breach of any representation, warranty or covenant made by Seattle SpinCo in the Tax Matters Agreement that, in each case, would affect the intended tax treatment of the Distribution or certain related transactions. If Seattle SpinCo and the Company were required to indemnify HPE for taxes resulting from the Distribution or such related transactions, that indemnification obligation would likely be substantial and could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Company and Seattle SpinCo will be subject to potentially significant restrictions under the Tax Matters Agreement that could limit the Group's ability to undertake certain corporate actions (such as the issuance of Ordinary Shares or ADSs or the undertaking of a merger or consolidation) that otherwise could be advantageous to the Group.

To preserve the intended tax treatment of the Distribution and certain related transactions to HPE and/or its shareholders, the Company and Seattle SpinCo will, during the twoyear period following the date of the Distribution, be restricted under the Tax Matters Agreement from taking certain actions that could cause the Distribution or certain related transactions to fail to qualify for their intended tax treatment. The Company and Seattle SpinCo may only undertake such restricted actions if the Company or Seattle SpinCo obtains an unqualified opinion from its tax advisers and/or a ruling from the IRS, in each case, satisfactory to HPE confirming that the restricted action or actions will not affect the taxfree treatment of the Distribution or certain related transactions. See Section B of Part VI (Principal Terms of the Transaction) of the Circular, incorporated by reference herein, for a detailed description of the Tax Matters Agreement and such restrictions. These restrictions may limit the Group's ability to pursue certain strategic transactions or engage in other transactions during the restricted period. For example, the Group could be restricted from issuing Ordinary Shares as consideration in connection with the acquisition of additional business assets or a combination with another company. Similarly, the Group could be restricted from issuing Ordinary Shares to raise cash to be used in its business or to acquire additional business assets or other companies. The Group could also be restricted from disposing of certain HPE Software business assets. As a result, the Group might determine to delay or even forgo certain transactions that otherwise could be advantageous, which could have an adverse effect on the business, financial condition, results of operation and prospects of the Group.

Holders of Seattle SpinCo common stock that are US Holders will be subject to US federal income tax on any gain resulting from the Merger without the corresponding receipt of cash.

Completion is conditional upon the receipt by HPE of the HPE Tax Opinion, substantially to the effect that among other things, for US federal income tax purposes, the Merger should qualify as a "reorganization" within the meaning of Section 368(a) of the Code. However, pursuant to certain rules contained in Section 367(a) of the Code and the Treasury Regulations promulgated thereunder, US Holders will generally recognise gain, if any, but not loss, on the exchange of shares of Seattle SpinCo common stock for ADSs pursuant to the Merger. No cash will be distributed in the Distribution or paid in the Merger, except for cash distributed or paid to holders who would otherwise be entitled to fractional ADRs. As a result, US Holders may be subject to tax liability with respect to the Merger without the corresponding receipt of cash.

The Company's US affiliates likely will be subject to certain adverse US federal income tax rules as a result of the Transaction.

Following the acquisition of a US corporation by a foreign corporation, Section 7874 of the Code (and certain related provisions) can limit the ability of the acquired US corporation and its US affiliates to utilise certain tax attributes and subject such US entities to certain other adverse US federal income tax rules. These rules generally apply to the Company and its US affiliates if, following the Merger, (a) the holders of Seattle SpinCo common stock own (within the meaning of Section 7874 of the Code) 60 per cent. or more (by vote or value) of the Company by reason of having held shares of Seattle SpinCo common stock (the "60 per cent. ownership test", and such ownership percentage the "Section 7874 ownership percentage") and (b) the Company's "expanded affiliated group" does not have "substantial business activities" in the United Kingdom when compared to the total business activities of such expanded affiliated group (the "substantial business activities test"). The Section 7874 ownership percentage of the holders of Seattle SpinCo common stock must be calculated in accordance with specific tax rules under the Code and Treasury Regulations, and will likely differ significantly from the calculation of the 50.1 per cent. of the fully diluted share capital of the Company to be owned by holders of Seattle SpinCo common stock following Completion. In particular, under the Temporary Section 7874 Regulations, certain adjustments are required that generally have the effect of increasing, for purposes of determining the Section 7874 ownership percentage, the percentage of shares of a foreign acquiring corporation deemed owned by the former shareholders of an acquired US corporation by reason of holding shares in such US corporation. Certain of these adjustments are calculated based on a threeyear look back period.

Based on the terms of the Merger, the rules for determining the Section 7874 ownership percentage referenced above and certain factual assumptions, it is expected that the 60 per cent. ownership test will be met. It also is expected that the substantial business activities test will not be met. Accordingly, it is expected that several adverse US federal income tax rules could apply to the US affiliates of the Company (including both Seattle SpinCo and its US affiliates and US affiliates historically owned by the Company). In particular, Section 7874 of the Code could limit the ability of such US affiliates to utilise certain US tax attributes (including net operating losses and certain tax credits) to offset any taxable income or gain resulting from certain transactions, including any transfers or licences of property to a foreign related person, during the 10year period following the Merger. Additionally, the Temporary Regulations and certain temporary regulations issued under other provisions of the Code may limit the Company's ability to engage in certain restructuring transactions or access cash earned by certain of its nonUS affiliates, in each case, without incurring substantial US tax liabilities, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The IRS may not agree that the Company should be treated as a nonUS corporation for US federal income tax purposes following the Merger.

Under current US federal income tax law, a corporation is generally classified as US or nonUS based on the jurisdiction of its organisation or incorporation. Because the Company is a company incorporated in England and Wales, the Company would generally be classified as a nonUS corporation for US federal income tax purposes. However, the IRS may assert that the Company should be treated as a US corporation (and therefore subject to US federal income tax on its income regardless of source) pursuant to Section 7874 of the Code.

Under Section 7874 of the Code, if, following the Merger: (a) the Section 7874 ownership percentage (described above) is 80 per cent. or more (the "80 per cent. ownership test") and (b) the substantial business activities test (described above) is not met, then the Company would be treated as a US corporation (and therefore subject to US federal income tax on its income regardless of source) for US federal income tax purposes.

Based on the terms of the Merger, the rules for determining share ownership under Section 7874 of the Code referenced above and certain factual assumptions, holders of Seattle SpinCo common stock are expected to own (within the meaning of Section 7874 of the Code) at least 60 per cent. but less than 80 per cent. (by both vote and value) of the Company after the Merger by reason of holding shares of Seattle SpinCo common stock. Therefore, under current law, it is expected that the Company should not be treated as a US corporation for US federal income tax purposes pursuant to Section 7874 of the Code.

However, certain of the rules under Section 7874 of the Code are relatively new and complex and there is limited guidance regarding their application. Moreover, share ownership for purposes of computing the Section 7874 ownership percentage is subject to various complex adjustments which are uncertain in their application. In particular, under the Temporary Section 7874 Regulations, certain adjustments are required that generally have the effect of increasing, for purposes of determining the Section 7874 ownership percentage, the percentage of the shares of a foreign acquiring corporation deemed owned by the former shareholders of an acquired US corporation by reason of having held shares in such US corporation. Certain of these adjustments are based on a threeyear look back period. In addition, certain of the relevant determinations must be made based on the facts at the time of Completion. As a result, the precise determination of the Section 7874 ownership percentage will be subject to factual and legal uncertainties. Therefore, there can be no assurance that the IRS will agree with the position that the Company should be treated as a nonUS corporation for US federal income tax purposes. If the IRS successfully challenged the Company's status as a nonUS corporation, significant adverse US federal income tax consequences would result for the Company and for certain of the Company's shareholders.

If the 80 per cent. ownership test were met after the Merger and the Company were accordingly treated as a US corporation for US federal income tax purposes under Section 7874 of the Code, the Company would be subject to substantial additional US tax liability. Additionally, in such case, Shareholders that are not US persons for US federal income tax purposes would be subject to US withholding tax on the gross amount of any dividends paid by the Company to such Shareholders (subject to any exemption or reduced rate available under an applicable tax treaty). Regardless of the application of Section 7874 of the Code, the Company is expected to be treated as a tax resident of England and Wales for UK income tax purposes. Consequently, if the Company were to be treated as a US corporation for US federal income tax purposes under Section 7874 of the Code, it could be liable for both US and UK taxes, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group's ability to engage in certain transactions could be limited to prevent the treatment of the Company as a US corporation under Section 7874 of the Code.

Even if the 80 per cent. ownership test (described above) is not met as a result of the Merger, future transactions by the Group could cause the 80 per cent. ownership test to be met, causing the Company to be treated as a US corporation for US federal income tax purposes under Section 7874 of the Code. Therefore, the ability of the Group to engage in certain strategic transactions (including future acquisitions of US businesses in exchange for Company shares) may be limited in order to avoid the Company being treated as a US corporation, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Changes to US tax laws could result in the Company being treated as a US corporation for US federal income tax purposes or in Seattle SpinCo and its US affiliates being subject to certain adverse US federal income tax rules.

As discussed in the risk factor above (The IRS may not agree that the Company should be treated as a nonUS corporation for US federal income tax purposes following the Merger), under current law, the Company is expected, following Completion, to be treated as a nonUS corporation for US federal income tax purposes. However, changes to Section 7874 of the Code, or the US Treasury regulations promulgated thereunder, could affect the Company's status as a nonUS corporation for US federal income tax purposes, or could result in the application of certain adverse US federal income tax rules to the Company and its US affiliates (including Seattle SpinCo and its US affiliates historically owned by the Company). For example, recent legislative and other proposals have aimed to expand the scope of US taxation of certain nonUS corporations, including in such a way as would cause the Company to be treated as a US corporation for US federal income tax purposes if the management and control of the Company were determined to be located primarily in the United States. In addition, recent legislative and other proposals have aimed to expand the scope of Section 7874 of the Code or otherwise to address certain perceived issues arising in connection with socalled inversion transactions. Any such proposals or similar proposals which could have prospective or retroactive application, could cause the Company to be treated as a US corporation for US federal income tax purposes or subject the Company and its US affiliates to certain adverse US federal income tax rules. In such case, the Group could be subject to substantially greater US tax liability than currently contemplated, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Changes to the US Model Income Tax Treaty, if adopted by applicable treaties, could adversely affect the Group.

On 17 February 2016, the US Treasury released a newly revised US model income tax convention (the "model") which is the baseline document used by the US Treasury to negotiate and renegotiate tax treaties. The revisions made to the model treaty modify existing model treaty provisions and introduce entirely new model treaty provisions. Specifically, the new model treaty provisions target (a) permanent establishments subject to little or no foreign tax; (b) special tax regimes; (c) expatriated entities subject to Section 7874 of the Code; (d) the antitreaty shopping measures of the limitation on benefits article; and (e) subsequent changes in treaty partners' tax laws. For this purpose, the model provisions pertaining to expatriated entities fix the definition of "expatriated entity" to the meaning ascribed to such term under Section 7874(a)(2)(A) of the Code as of the date the relevant bilateral treaty is signed.

It is expected that the Merger will result in Seattle SpinCo being an expatriated entity as defined in Section 7874 of the Code as of the date hereof (by reason of the satisfaction of the 60 per cent. ownership test, discussed above). Therefore, if applicable US income tax treaties were subsequently amended to adopt the new model treaty provisions (and Section 7874 of the Code was not amended in a manner that would preclude Seattle SpinCo from being an expatriated entity), payments of interest, dividends, royalties and certain other items of income by or to Seattle SpinCo and/or its US affiliates to or from certain nonUS persons could be subject to such tax treaty provisions and become subject to full withholding tax. Accordingly, if applicable US income tax treaties were amended to adopt the new model provisions, then the Company and its affiliates could incur additional tax expense, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Legislative or other governmental action in the US could adversely affect the Group's business.

Legislative action may be taken by the US Congress that, if ultimately enacted, could limit the availability of tax benefits or deductions that the Group currently expects to claim, override tax treaties upon which the Group is expected to rely or otherwise increase the taxes that the United States may impose on the Group's worldwide operations. Such changes could materially adversely affect the Group's effective tax rate and/or require the Group to take further action, at potentially significant expense, to seek to achieve its intended effective tax rate. In addition, if proposals were enacted that had the effect of limiting the Company's ability, as a company organised under the laws of England and Wales, to take advantage of the income tax treaty between the United Kingdom and the United States, the Group could incur additional tax expense that could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The tax rate that will apply to the Group is uncertain and may vary from expectations.

There can be no assurance that the Merger will improve the Company's ability to maintain any particular worldwide effective corporate tax rate. The Company cannot give any assurance as to what the Group's effective tax rate will be after the Merger because of, among other things, uncertainty regarding the tax policies of the jurisdictions in which the Group and its affiliates will operate. The Group's actual effective tax rate may vary from Seattle SpinCo's and the Company's expectations, and such variance may be material. Additionally, tax laws or their implementation and applicable tax authority practices in any particular jurisdiction could change in the future, possibly on a retroactive basis, and any such change could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

The Group will need to ensure that its internal control over financial reporting complies with Section 404 of the SarbanesOxley Act of 2002.

As part of its disclosure and reporting obligations in the United States, the Group will be required to furnish an annual report by its management on its internal control over financial reporting and include an attestation report issued by its independent registered public accounting firm pursuant to Section 404 of the SarbanesOxley Act of 2002 ("Section 404"). The first report will be required to be produced as of 31 October 2019.

To achieve compliance with Section 404, the Group is engaged in a process to document and evaluate its internal controls over financial reporting. In this regard, the Group will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of its internal control over financial reporting for the purposes of Section 404. This may include taking steps to improve control processes as appropriate, validating that controls are functioning as documented and implementing a continuous reporting and improvement process for internal control over financial reporting.

The Company's internal controls over financial reporting were for the first time subject to review under the PCAOB auditing standards in connection with the audit of the Company's annual consolidated financial statements for the three years ended 30 April 2017 to be included in the registration statement on Form F4 to be filed by the Company with the SEC in connection with the Merger. The PCAOB auditing standards are US standards that registered public accounting firms are required to follow in connection with the audit of the Company's consolidated financial statements. As a result of the work undertaken, certain deficiencies in the Company's internal controls for the purposes of Section 404 have been identified. These relate to the fact that the Company did not for the financial periods under audit have sufficient formally documented and implemented processes and review procedures, nor did it have sufficient formality and evidence of controls over key reports and spreadsheets. The Company has already begun to implement measures to address and remediate these deficiencies.

Whilst the Directors are satisfied that the Group has been and will continue to be in compliance with the internal control and related financial reporting requirements under the UK Corporate Governance Code and the Listing Rules, the PCAOB requirements in connection with Section 404 reporting are more detailed and evidencebased. Whilst the Directors are confident that the Group will be able to remedy the deficiencies that have been identified to date by 31 October 2019, there is a risk that other deficiencies for the purposes of Section 404 may be identified and cannot be remedied by 31 October 2019. Were this to be the case, this could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of the Group's financial statements and could have a material adverse effect on the Group's business, financial condition, results of operation and prospects.

Following Completion, the Group is likely to be deemed to operate under foreign ownership, control or influence, and if so, to participate in and perform under US classified contracts the Group will need to become a party to a mitigation agreement with the US Department of Defense and will be subject to the requirements of the National Industrial Security Program Operating Manual, which will impose significant compliance obligations upon the Group. The Group's failure to comply with these obligations could result in it not being able to continue participating in and performing under US classified contracts.

If a company's ownership structure presents the potential for foreign ownership, control, or influence ("FOCI"), then the US Department of Defense, pursuant to the NISPOM, may require certain protective measures to mitigate the FOCI in order for the Company and its subsidiaries to maintain clearances to access classified US government information or facilities.

Because a significant percentage of the Group's voting equity following Completion is expected to be owned by nonUS persons, the Group is likely to be determined to be under FOCI, and will likely be required to operate pursuant to a mitigation agreement in order for its subsidiaries to be able to maintain the requisite security clearances to access classified information or facilities and perform under classified contracts. The mitigation agreement may place certain securityrelated restrictions on the Group, including restrictions on the composition of the Board, the separation of certain employees and operations, as well as restrictions on access to and control by the Group of the flow of certain information and facilities. The provisions contained in the mitigation agreement may limit certain projected benefits to be realised from the Merger by placing additional costs or restrictions on the Group's operations.

HPE Software currently derives approximately three per cent. of its revenue from classified contracts. If the Group is unable to enter into a mitigation agreement or were to violate the terms and requirements of any such mitigation agreement, the NISPOM, or any other applicable US government industrial security regulations, the Group may not be able to continue to perform any of its classified contracts in effect at that time or enter into new classified contracts, which could have a material adverse effect on the business, financial condition, results of operation and prospects of the Group.

Part C – Risks relating to the Ordinary Shares

Any future issues of Ordinary Shares will further dilute the holdings of Shareholders and could adversely affect the market price of the Ordinary Shares and issuances of Ordinary Shares could also adversely affect the market practice of the Ordinary Shares.

Other than in relation to the Transaction, the Company has no current plans for further issues of Ordinary Shares apart from possible issues in relation to employee share plans and, prior to Completion, the Company is subject to restrictions under the Merger Agreement in respect of such issuances (as set out in more detail in Part VI (Principal Terms of the Transaction) of the Circular, incorporated by reference herein). However, subject to such restrictions, it is possible that the Company may decide to offer additional shares in the future either to raise capital or for other purposes. If Shareholders did not take up such an offer of Ordinary Shares or are not eligible to participate in such an offering, their proportionate ownership and voting interests in the Company will be reduced and the percentage that their Ordinary Shares will represent of the total share capital of the Company will be reduced accordingly. An additional offering, or significant sales of shares by Shareholders, could have a material adverse effect on the market price of the Ordinary Shares as a whole.

Additionally, the Consideration Shares to be issued in the Merger will generally be eligible for immediate resale. The market price of the Ordinary Shares could decline as a result of sales of a large number of Ordinary Shares in the market, or even the perception that these sales could occur. These sales, or the possibility that these sales may occur, may also make it more difficult for the Group to obtain additional capital by selling equity securities in the future on favourable terms when desired.

The Company's share price may fluctuate.

The share price of publicly traded companies can be highly volatile, including for reasons related to differences between expected and actual operating performance, corporate and strategic actions taken by such companies or their competitors, speculation and general market conditions and regulatory changes. Shareholders should be aware that, following Admission, the value of an investment in the Ordinary Shares may decrease abruptly which may prevent Shareholders from being able to sell their Ordinary Shares at or above the price they paid for them. The price of the Ordinary Shares may fall in response to market perception of the Group, the market's response to any delays to or failure of Completion and various other events, including regulatory changes affecting the Group's operations, variations in the Group's operating results and the liquidity of the financial markets. Any of these factors, some of which are outside of the Group's control, may impact the price and performance of the Ordinary Shares.

The Company cannot assure investors that it will make dividend payments in the future.

Dividend payments to Shareholders will depend upon a number of factors, including the results of operation, cashflows and financial position, contractual restrictions and other factors considered relevant by the Board. In addition, under English law, any payment of dividends is subject to the Companies Act and the Articles, which generally require that dividends be recommended by the Board and approved by Shareholders. Moreover, under English law, the Company may pay dividends on the Ordinary Shares only out of profits available for distribution determined in accordance with the Companies Act. Although the Board intends to continue paying dividends to Shareholders in accordance with its stated dividend policy, there is no assurance that the Company will declare and pay, or have the ability to declare and pay, any dividends on the Ordinary Shares in the future.

A Shareholder or an investor whose principal currency is not pounds sterling is exposed to foreign currency risk.

The Ordinary Shares are denominated in pounds sterling. An investment in Ordinary Shares by an investor whose principal currency is not pounds sterling exposes the investor to foreign currency risk. Any depreciation of pounds sterling in relation to such foreign currency would reduce the value of the investment in the Ordinary Shares in foreign currency terms, and any appreciation of pounds sterling against such other currency would increase the value in foreign currency terms.

The ability of Overseas Shareholders to bring actions or enforce judgments against the Company or its directors may be limited.

The ability of an Overseas Shareholder to bring an action against the Company may be limited under law. The Company is a public limited company incorporated in England and Wales. The rights of holders of Ordinary Shares are governed by English law and by the Articles. These rights differ from the rights of shareholders typical in US corporations and some other nonUK corporations. An Overseas Shareholder may not be able to enforce a judgment against some or all of the Company's directors and executive officers of the Group. It may also not be possible for an Overseas Shareholder to effect service of process upon the Company's directors and executive officers within the Overseas Shareholder's country of residence or to enforce against them judgments of courts of the Overseas Shareholder's country of residence based on civil liabilities under that country's securities laws. There can be no assurance that an Overseas Shareholder will be able to enforce any judgments in civil and commercial matters or any judgments under the securities laws of countries other than the UK against the Company's directors or executive officers of the Group who are residents of the UK or countries other than those in which judgment is made. In addition, English or other courts may not impose civil liability on the Company's directors or executive officers of the Group in any original action based solely on foreign securities laws brought against the Company or its directors or executive officers of the Group in a court of competent jurisdiction in England or other countries.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Presentation of financial information

The Company publishes its financial statements in US dollars ("US\$", "\$" or "dollars"). The abbreviations "US\$ million", "\$m" and "US\$m" represent millions of dollars. The abbreviations "£ million" and "£m" represent millions of pounds sterling ("£" or "sterling"). The abbreviations "£ billion" and "£b" represent billions of pounds sterling.

The financial information presented in a number of tables in this Prospectus has been rounded to the nearest whole number or the nearest decimal place. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables in this Prospectus reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers. Differences between figures set out in the text of this Prospectus are based on the differences between the relevant figures rounded to the nearest whole number or nearest decimal place. Such differences may not conform exactly to the relevant figures if the relevant calculations were based on the underlying information prior to rounding.

NonIFRS measures

This Prospectus contains the following unaudited supplementary financial measures, including nonGAAP measures, which are not defined by or recognised under IFRS.

Adjusted Operating Profit is defined as the operating profit before exceptional items, share based compensation and amortisation of purchased intangibles.

Adjusted EBITDA is defined as Adjusted Operating Profit before net finance costs, depreciation of property, plant and equipment and amortisation of purchased software intangibles.

Underlying Adjusted EBITDA is defined as Adjusted EBITDA before net capitalisation/amortisation of development costs, and before foreign exchange movements.

Facility EBITDA is defined as Adjusted EBITDA before amortisation of capitalised development costs.

Adjusted net income is defined as the earnings attributable to Shareholders before the posttax impact of exceptional items, amortisation of purchased intangibles and share based compensation.

Adjusted earnings per share is defined as earnings per share before the posttax impact of exceptional items, amortisation of purchased intangibles and share based compensation.

The table below sets out the reconciliation between operating profit and Adjusted Operating Profit, Adjusted EBITDA, Facility EBITDA and Underlying Adjusted EBITDA for the Micro Focus Group for the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017.

	For the financial year ended 30 April –––––––––––––––––––––––––––––––––––––
	2017 ––––––––	2016 ––––––––	2015 ––––––––
	\$'000	\$'000	\$'000
Operating Profit	293,443	294,934	147,236
Exceptional items	97,258	27,853	96,678
Share based compensation	34,506	28,793	15,561
Amortisation of purchased intangibles	212,861 ––––––––	181,934 ––––––––	88,298 ––––––––
Adjusted Operating Profit	638,068	533,514	347,773
Depreciation of property, plant and equipment	11,794	11,419	7,674
Amortisation of purchased software intangibles	1,175 ––––––––	1,864 ––––––––	2,189 ––––––––
Adjusted EBITDA	651,037	546,797	357,636
Amortisation of capitalised development costs	22,398 ––––––––	19,515 ––––––––	19,589 ––––––––
Facility EBITDA	673,435	566,312	377,225

	For the financial year ended 30 April –––––––––––––––––––––––––––––––––––––
	2017	2016	2015
	–––––––– \$'000	–––––––– \$'000	–––––––– \$'000
Amortisation of capitalised development costs	(22,398)	(19,515)	(19,589)
Foreign exchange (credit)/loss	(4,890)	(2,915)	(9,445)
Net (capitalisation)/amortisation of development costs	(5,266) ––––––––	(11,362) ––––––––	99 ––––––––
Underlying Adjusted EBITDA	640,881	532,520	348,290
	––––––––	––––––––	––––––––

The table below sets out the reconciliation between earnings attributable to Shareholders, Adjusted net income and Adjusted earnings per share for the Micro Focus Group for the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017.

	For the financial year ended 30 April –––––––––––––––––––––––––––––––––––––
	2017	2016	2015
	–––––––– \$'000	–––––––– \$'000	–––––––– \$'000
Earnings attributable to shareholders	157,906	162,894	101,753
Tax adjustments(1)	–	–	(9,939)
Adjusted items(2)	344,625	238,580	202,921
Tax relating to above items	(85,527) ––––––––	(67,766) ––––––––	(62,528) ––––––––
Adjusted net income	417,004	333,708	232,207
	–––––––– pence	–––––––– pence	–––––––– pence
Adjusted earnings per share(3)	135.8	97.65	81.01

• (1) Tax adjustments comprise a \$nil deferred tax benefit for 2017 (2016: \$nil and 2015: \$5.1m) and a prior year current tax benefit for 2017 of \$nil (2016: \$nil and 2015: \$4.8m).
• (2) Adjusted items comprise amortisation of purchased intangibles of \$212,861,000 for 2017 (2016: \$181,934,000 and 2015: \$88,298,000), sharebased compensation of \$34,506,000 for 2017 (2016: \$28,793,000 and 2015: \$15,561,000), exceptional items of \$97,258,000 for 2017 (2016: \$27,853,000 and 2015: \$96,678,000) and exceptional interest costs of \$nil for 2017 (2016: \$nil and 2015: \$2,384,000). Estimated tax relief on these items is as shown above.
• (3) Calculated by reference to the weighted average number of Ordinary Shares and average exchange rate from US dollars to pounds sterling for each financial year.

The Board believes that the nonIFRS measures used in this Prospectus provide investors with a means of evaluating, and an understanding of how the Company evaluates, the Company's performance and results on a comparable basis that is not otherwise apparent on an IFRS basis. This is because nonrecurring, infrequent or noncash items that the Board believes not to be indicative of the core performance of the business may not be excluded when preparing financial measures under IFRS.

The nonIFRS measures used in this Prospectus should not be considered superior to, nor a substitute for, measures calculated in accordance with IFRS. In addition, these nonIFRS measures should not be considered in isolation, but in conjunction with measures calculated in accordance with IFRS. These nonIFRS measures are not uniformly defined by all companies, and therefore comparability may be limited.

The Company evaluates its results of operations on both an as reported and a constant currency basis. The constant currency presentation excludes the impact of fluctuations in foreign currency exchange rates. The Directors believe that providing constant currency information provides valuable supplemental information regarding the results of operations of the Company, consistent with how the Directors evaluate the performance of the Company. Constant currency percentages are calculated by converting priorperiod local currency financial results using the current period exchange rates and comparing these adjusted amounts to the current period reported results.

Currency and exchange rate

In this Prospectus, references to £ and pence are to the currency of the United Kingdom; references to \$ and cents are to the currency of the US.

In this Prospectus, unless otherwise stated, US dollar amounts have been converted into pounds sterling and pounds sterling amounts into US dollars using the Bloomberg closing spot exchange rates on 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), as follows: US\$1.00: £0.7678 and £1.00: US\$1.3025.

Sources of information

Selected historical financial information relating to the Micro Focus Group, unless otherwise stated, has been extracted from the audited consolidated financial statements of the Micro Focus Group for the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017, which are incorporated by reference in Part XIII (Documents Incorporated by Reference) of this Prospectus. Where information has been extracted from the audited consolidated financial statements for the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017, the information is audited unless otherwise stated. From completion of the Company's acquisition of the Attachmate Group on 20 November 2014 onwards, financial information of the Attachmate Group has been consolidated into the audited consolidated financial statements of the Micro Focus Group. The postacquisition period of the Attachmate Group from 20 November 2014 to 30 April 2015 was audited under IFRS as part of the Micro Focus Group's audit for the financial year ended 30 April 2015.

Selected historical financial information relating to the Attachmate Group, unless otherwise stated, has been extracted from the consolidated financial statements of the Attachmate Group for the 12 months ended 31 March 2014 and the 13 months ended 30 April 2015, which are set out in Section B of Part IV (Historical Financial Information of the Micro Focus Group) of this Prospectus. Where information has been extracted from the consolidated financial statements for the 13 months ended 30 April 2015, the information is audited unless otherwise stated. The financial information for the 12 month period ended 30 April 2014 is unaudited.

Selected historical financial information relating to HPE Software, unless otherwise stated, has been extracted from the combined historical financial information of HPE Software for the financial years ended 31 October 2014, 31 October 2015 and 31 October 2016 and the three month periods ended 31 January 2016 and 31 January 2017, which are set out in Section B of Part VII (Historical Financial Information of HPE Software) of this Prospectus or from the combined historical financial information of HPE Software for the six month periods ended 30 April 2016 and 30 April 2017, which are set out in Section C of Part VII (Historical Financial Information of HPE Software) of this Prospectus. Where information has been extracted from the combined historical financial information for the financial years ended 31 October 2014, 31 October 2015, 31 October 2016 or the three month period ended 31 January 2017, the information is audited unless otherwise stated. The financial information for the three month period ended 31 January 2016 and the six month periods ended 30 April 2016 and 30 April 2017 is unaudited.

The selected historical information relating to HPE Software in this Prospectus represents the perimeter of HPE Software as it existed during the periods presented. HPE Software has not in the past constituted a standalone legal group and has not previously prepared or reported any standalone, combined or consolidated financial information.

Certain terms used in this Prospectus, including all capitalised terms and certain technical and other terms, are (unless otherwise stated) defined and explained in the Glossary and Definitions section of this Prospectus.

International Financial Reporting Standards

Unless otherwise stated, financial information of the Micro Focus Group, the Attachmate Group and HPE Software in this Prospectus has been prepared in accordance with IFRS as adopted for use within the European Union, and related interpretations (and, in respect of HPE Software, the conventions set out in SIR 2000 for the preparation of carveout financial statements).

Forwardlooking statements

Information set forth in this Prospectus (including information incorporated by reference in this Prospectus), oral statements made regarding the Transaction, and other information published by the Company, HPE or HPE Software may contain certain statements about the Company, HPE and HPE Software that constitute or are deemed to constitute "forwardlooking statements" (including within the meaning of the US Private Securities Litigation Reform Act of 1995). The forwardlooking statements contained in this Prospectus may include, but are not limited to, statements about the expected effects on the Company, HPE and HPE Software of the Transaction, the anticipated timing and benefits of the Transaction, the Company's and HPE Software's anticipated standalone or combined financial results and outlooks and all other statements in this Prospectus other than historical facts. Without limitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "intends", "will", "likely", "may", "anticipates", "estimates", "projects", "should", "would", "expect", "positioned", "strategy", "future" or words, phrases or terms of similar substance or the negative thereof, are forwardlooking statements. These statements are based on the current expectations of the management of the Company, HPE or HPE Software (as the case may be) and are subject to uncertainty and changes in circumstances and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forwardlooking statements. As such, forwardlooking statements should be construed in light of such factors. Neither the Company, HPE nor HPE Software, nor any of their respective associates or directors, proposed directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forwardlooking statements in this Prospectus will actually occur or that if any of the events occur, that the effect on the operations or financial condition of the Company, HPE or HPE Software will be as expressed or implied in such forwardlooking statements. Forwardlooking statements contained in this Prospectus based on past trends or activities should not be taken as a representation that such trends or activities will necessarily continue in the future. In addition, these statements are based on a number of assumptions that are subject to change. Such risks, uncertainties and assumptions include, but are not limited to: the satisfaction of the conditions to the Transaction and other risks related to Completion and actions related thereto; the Company's and HPE's ability to complete the Transaction on the anticipated terms and schedule; the tax treatment of the Transaction; risks relating to any unforeseen liabilities of the Company or HPE Software; future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, losses and future prospects of the Company, HPE Software and the resulting Enlarged Group; business and management strategies and the expansion and growth of the operations of the Company, HPE Software and the resulting Enlarged Group; the ability to successfully combine the business of the Company and HPE Software and to realise expected operational improvement from the Transaction; the effects of government regulation on the businesses of the Company, HPE Software or the Enlarged Group; the risk that disruptions from the Transaction will impact the Company's or HPE Software's business; and the Company's, HPE Software's or HPE's plans, objectives, expectations and intentions generally, as well as other factors described in the Risk Factors set out in this Prospectus. However, it is not possible to predict or identify all such factors. Consequently, while the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties.

Forwardlooking statements included herein are made as of the date hereof. Subject to any requirement under applicable law (including as required under the Market Abuse Regulation, the Prospectus Rules, the Listing Rules and the Disclosure Guidance and Transparency Rules, as applicable), none of the Company, HPE and HPE Software undertake any obligation to update or revise any forwardlooking statements, whether as a result of new information, future/subsequent events or otherwise. Investors should not place undue reliance on forwardlooking statements, which speak only as of the date of this Prospectus.

Notice to all investors

Investors should rely only on the information in this Prospectus and information incorporated herein by reference. No person has been authorised to give any information or to make any representations other than those contained in this Prospectus in connection with the Transaction or Admission 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 Proposed Directors, HPE, J.P. Morgan Cazenove or Numis. None of the above take any responsibility or liability for, and can provide no assurance as to the reliability of, other information that prospective investors have been given. No representation or warranty, express or implied, is made by J.P. Morgan Cazenove, Numis 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 J.P. Morgan Cazenove, Numis or any selling agent as to the past, present or future.

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, financial adviser or tax adviser for legal, financial or tax advice in relation to any subscription, purchase or proposed subscription or purchase of Ordinary Shares.

All times referred to in this Prospectus, unless otherwise stated, are references to London time.

Each of the times and dates in this Prospectus is indicative only and subject to change by the Company and HPE in accordance with the terms and conditions of the Merger Agreement, in which event details of the new times and dates will be notified to the UKLA and, where appropriate, to Shareholders by RIS, with such announcement being made available on the Company's website (www.microfocus.com).

Notice to US Shareholders

This Prospectus does not constitute an offer to sell or solicitation of an offer to buy securities in the United States. This Prospectus relates to the proposed Merger between the Company and Seattle SpinCo and the admission of the New Ordinary Shares (or, if the Share Capital Consolidation is not implemented, the readmission of the Existing Ordinary Shares) and the Consideration Shares to the premium listing segment of the Official List and to trading on the Main Market of the London Stock Exchange. In connection with the Merger, the Company will file a Registration Statement on Form F4 (the "Registration Statement") with the SEC. This Prospectus is not a substitute for the Registration Statement or other documents that the Company, HPE or Seattle SpinCo may file with the SEC in connection with the Merger. US SHAREHOLDERS ARE URGED TO READ CAREFULLY THE REGISTRATION STATEMENT AND ANY OTHER DOCUMENTS THAT MAY BE FILED WITH THE SEC BY THE COMPANY, HPE, OR SEATTLE SPINCO WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN, OR WILL CONTAIN, AS APPLICABLE, IMPORTANT INFORMATION ABOUT THE COMPANY, SEATTLE SPINCO AND THE MERGER. US Shareholders may obtain free copies of these documents (when they are available) and other related documents filed with the SEC at the SEC's website at http://www.sec.gov/. US Shareholders may request copies of the documents filed with the SEC by directing a request to The Company Secretary, Micro Focus International plc, The Lawn, 2230 Old Bath Road, Newbury, Berkshire RG14 1QN.

The securities referred to in this Prospectus may not be offered, sold or transferred, directly or indirectly, in, into or from the United States absent registration under the Securities Act or pursuant to an applicable exemption therefrom, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with the securities laws of any applicable state or other jurisdiction of the United States. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States and may not be distributed, directly or indirectly within the United States. Neither the SEC nor any state securities commission has approved or disapproved of the securities referred to in this Prospectus or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offence in the United States.

Service of process and enforcement of civil liabilities

The Company is a public limited company incorporated under the laws of England and Wales. Many of the Directors and officers reside outside the United States, principally in the United Kingdom. In addition, although the Micro Focus Group has substantial assets in the United States, a large portion of its assets and the assets of its directors and officers are located outside of the United States. As a result, investors may find it difficult:

• to effect service within the United States upon the Micro Focus Group or its directors and officers located outside the United States;

• to enforce in US courts or outside the United States judgments obtained against the Micro Focus Group or those persons in US courts;

• to enforce in US courts judgments obtained against the Micro Focus Group or those persons in courts in jurisdictions outside the United States; and/or

• to enforce against the Micro Focus Group or those persons in the United Kingdom, whether in original actions or in actions for the enforcement of judgments of US courts, civil liabilities based solely upon the US federal securities laws.

No incorporation of website information

The contents of the Micro Focus Group's websites, the HPE Group's websites, or any website directly or indirectly linked to any of those websites do not form part of this Prospectus and should not be relied upon, without prejudice to the documents incorporated by reference into this Prospectus.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Each of the times and dates in the table below is indicative only and may be subject to change. Please refer to the notes for this timetable set out below.(1) (2)

The following dates assume the satisfaction of the conditions to Completion set forth in the Merger Agreement by 30 August 2017 (other than those conditions that are intended to be satisfied at or shortly prior to Completion) but are indicative only and subject to change.

Latest time and date for dealings in Existing Ordinary Shares, Existing Ordinary Share register closed and Existing Ordinary Shares disabled in CREST	4.30 p.m. 31 August 2017
Record Time for the Return of Value and Share Capital Consolidation	6.00 p.m. 31 August 2017
B Shares issued	7.00 p.m. 31 August 2017
B Shares redeemed	11.59 p.m. 31 August 2017
Share Capital Consolidation effected and New Ordinary Shares admitted to the premium segment of the Official List and to trading on the Main Market for listed securities	8.00 a.m. 1 September 2017
Completion of the Transaction	8.00 a.m. 1 September 2017
Consideration Shares issued and admitted to the premium segment of the Official List and to trading on the Main Market for listed securities	8.00 a.m. 1 September 2017
CREST accounts credited with New Ordinary Shares	8.00 a.m. 1 September 2017
Listing of ADSs on the NYSE	2.30 p.m. 1 September 2017
Despatch of cheques or CREST accounts credited (as appropriate) in respect of the proceeds of the redemption of the B Shares and despatch of share certificates in respect of New Ordinary Shares and, where applicable, despatch of cheques or CREST accounts credited for fractional entitlements
arising from the Share Capital Consolidation	by 15 September 2017
Long Stop Date	7 March 2018

• (1) Each of the times and dates in this expected timetable of principal events above and elsewhere in this Prospectus is indicative only and subject to change by the Company and HPE in accordance with the terms and conditions of the Merger Agreement, in which event details of the new times and dates will be notified to the UKLA and, where appropriate, to Shareholders by RIS, with such announcement being made available on the Company's website (www.microfocus.com).
• (2) References to time in this Prospectus are to London time, unless otherwise stated.

DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS

Directors	Kevin Loosemore (Executive Chairman) Mike Phillips (Chief Financial Officer) Stephen Murdoch (Chief Executive Officer, Micro Focus, to Completion) Nils Brauckmann (Chief Executive Officer, SUSE) Karen Slatford (Senior Independent Non­executive Director) Richard Atkins (Independent Non­executive Director) Amanda Brown (Independent Non­executive Director) Darren Roos (Independent Non­executive Director) Silke Scheiber (Independent Non­executive Director)
Proposed Directors	Chris Hsu (Chief Executive Officer, Enlarged Group, from Completion) John Schultz (Non­independent Non­executive Director, from Completion)
Secretary	Jane Smithard
Registered Office	The Lawn 22­30 Old Bath Road Newbury Berkshire RG14 1QN
Sponsor	J.P. Morgan Limited 25 Bank Street London E14 5JP
Legal advisers to the Company as to English law	Travers Smith LLP 10 Snow Hill London EC1A 2AL
Legal advisers to the Company as to US law	Kirkland & Ellis LLP 601 Lexington Avenue New York NY 10022
Legal advisers to the Sponsor as to English and US law	Ashurst LLP Broadwalk House 5 Appold Street London EC2A 2HA
Auditors and reporting accountants for the Company	PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH
Reporting accountants for the Company	Ernst & Young LLP 1 More London Place London SE1 2AF
Registrars	Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA
Brokers	Numis Securities Limited 10 Paternoster Square London EC4M 7LT

PART I

INTRODUCTION AND SUMMARY OF THE TRANSACTION

1. PRINCIPAL TERMS OF THE TRANSACTION

On 7 September 2016, the Company entered into an agreement and plan of merger (referred to herein as the Merger Agreement) among the Company, Seattle Holdings (a whollyowned direct subsidiary of the Company), Merger Sub (a whollyowned indirect subsidiary of the Company), HPE and Seattle SpinCo. The Merger Agreement provides for the merger of Merger Sub with and into Seattle SpinCo (which will hold HPE Software) in accordance with DGCL and pursuant to, and subject to the terms and conditions of the Merger Agreement. As a result of Completion, the separate corporate existence of Merger Sub will cease and Seattle SpinCo will continue as the surviving corporation and become an indirect whollyowned subsidiary of the Company.

Pursuant to the Merger Agreement, the Company will issue the Consideration Shares to the Depositary and the Depositary will issue ADSs representing the Consideration Shares to HPE Shareholders in exchange for the Seattle SpinCo shares distributed to them in the Distribution so that at Completion, HPE Shareholders will own ADSs representing such number of Consideration Shares as shall equal 50.1 per cent. of the fully diluted share capital of the Company.3 Prior to the Merger, HPE will (i) transfer HPE Software to Seattle SpinCo in exchange for Seattle SpinCo common stock and a cash payment of US\$2.5 billion (subject to certain adjustments in limited circumstances set forth in the Separation and Distribution Agreement), which will be financed by the Seattle Term Loan Facility and (ii) effect the Distribution. The estimated US\$6.5 billion market value of the ADSs representing the Consideration Shares to be issued to HPE Shareholders (calculated for the purposes of this Prospectus by reference to the closing midmarket price of an Ordinary Share as at the close of business on 25 July 2017 and the US\$:£ exchange rate of 1.3022, and assuming payment of the Return of Value, together with the associated Share Capital Consolidation) and the US\$2.5 billion cash payment to HPE together imply an enterprise value for HPE Software of approximately US\$9.0 billion, which represents an effective multiple of 13.7x4 the Underlying Adjusted EBITDA of HPE Software for the financial year ended 31 October 2016.

The Merger is subject to the satisfaction of a number of conditions, including, amongst other things, the completion in all material respects of the Separation, Shareholder approval, Admission, the effectiveness of specified registration statements filed with SEC with respect to the issuance of Seattle SpinCo shares in the Distribution and the issuance of the ADSs representing the Consideration Shares, the approval of the ADSs for listing on the NYSE, applicable antitrust, competition, merger control and governmental clearances having been obtained and receipt by HPE of the HPE Tax Opinion.

As at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), all the required Shareholder resolutions for the Transaction have been passed and all applicable antitrust, competition, merger control and governmental clearances have been given by the relevant authorities in connection with the Transaction.

On Completion, holders of the Ordinary Shares prior to the Transaction and holders of the Company's equity awards outstanding prior to the Transaction will collectively own 49.9 per cent. of the fully diluted share capital of the Company5 at Completion and will have an opportunity to benefit further, through their shareholding, from the operational improvements and combination benefits which are expected to arise from the Transaction.

As a result of the Transaction, the Company will incur a number of onetime costs in respect of due diligence, financing and other adviser fees. Transactionrelated costs payable to advisers are expected to be \$60.0 million, of which \$19.7 million have been incurred within the six months ended 31 October 2016. Financing fees in respect of the Transaction are estimated to be \$206.5 million, all of which are expected to be capitalised and

³ Excluding any Ordinary Shares to be issued pursuant to a de minimis number of replacement awards to be granted to HPE Software employees at Completion under their existing employee incentive arrangements.

⁴ The above effective multiple is adjusted for certain overhead and corporate headcount costs related to parent HPE group functions that support HPE Software and are not expected to transfer as part of the Transaction.

⁵ Excluding any Ordinary Shares to be issued pursuant to a de minimis number of replacement awards to be granted to HPE Software employees at Completion under their existing employee incentive arrangements.

amortised over the life of the financing agreements. The Company also anticipates \$150.0 million in costs to implement certain IT upgrades and to migrate the Enlarged Group on to a single system. All remaining costs are expected to be incurred prior to 31 October 2018, with the exception of \$50.0 million of costs related to the migration on to a single system, which are expected to be incurred in the first half of the financial year ending 31 October 2019. In addition, the Company anticipates that the Enlarged Group will incur further oneoff integration and restructuring costs in relation to headcount reductions and property rationalisation which have yet to be quantified.

2. RETURN OF VALUE AND SHARE CAPITAL CONSOLIDATION

On 26 May 2017, Shareholders approved the relevant resolutions required to implement the Return of Value, which is expected to be implemented on 31 August 2017, being the last Business Day prior to Admission.

The proposed Return of Value will be an aggregate principal amount in sterling equivalent to US\$500 million in cash (inclusive of any currency hedging costs or proceeds) and will be implemented by way of the B Share Scheme. The exchange rate to be used for the Return of Value will be determined by the Board in due course having regard to the prevailing exchange rate as shown by Bloomberg at the time of determination. If the Company announces the sterling equivalent amount of the Return of Value prior to the date of its implementation, it will enter into suitable hedging of economically similar arrangements which ensure that the aggregate cash cost to the Company of the payment of the sterling Return of Value amount to Shareholders pursuant to the Return of Value inclusive of any costs associated with such hedging or economically similar arrangements, based on the USD/GBP exchange rate at the time at which the Return of Value is implemented, will not exceed US\$500 million in the aggregate. An announcement giving details of the exchange rate adopted will be made by RIS once such determination has been made, with such announcement being made available on the Company's website (www.microfocus.com).

It is currently expected that completion of the Return of Value will occur on the Business Day prior to Completion (save for the Share Capital Consolidation which is conditional upon the Return of Value and Admission occurring). The Transaction is not conditional on completion of the Return of Value.

In order that the market price for Ordinary Shares is not materially affected by the implementation of the Return of Value, the Share Capital Consolidation is proposed, which comprises a consolidation, subdivision and redesignation of the Existing Ordinary Shares under which Shareholders will be entitled to receive New Ordinary Shares and Deferred Shares in substitution for each Existing Ordinary Share held by them at the Record Time. The Deferred Shares will have negligible value and it is intended that they will subsequently all be transferred to a nominee and repurchased by the Company for the aggregate price of one penny.

The consolidation ratio for the Share Capital Consolidation to be used in connection with the Return of Value will be determined by the Board not later than three Business Days prior to Admission. An announcement giving details of the Share Capital Consolidation ratio will be made by RIS once a determination has been made, with such announcement being made available on the Company's website (www.microfocus.com).

After the implementation of the Return of Value and the Share Capital Consolidation, and disregarding the dilutive effect of the Merger should it complete, Existing Shareholders will own the same proportion of the Company as they did immediately prior to the implementation of the Return of Value and the Share Capital Consolidation, subject only to fractional roundings. The Consideration Shares shall not be entitled to receive the Return of Value.

3. APPLICATION OF THE LISTING RULES AND ADMISSION

The Merger, due to its classification as a reverse takeover pursuant to the Listing Rules, required the approval of Shareholders. The General Meeting to approve the resolutions required to implement the Merger and Return of Value was convened on 26 May 2017 and all necessary resolutions were passed at the General Meeting.

It is expected that the Transaction will be accounted for as an acquisition of Seattle SpinCo by the Company in its next financial statements.

In connection with the Share Capital Consolidation and as a result of the Merger's classification as a reverse takeover, the Company will be required to apply to the UKLA and to the London Stock Exchange through J.P. Morgan Cazenove (acting in its capacity as sponsor) for the cancellation of the current listing of the Existing Ordinary Shares and for the admission of the New Ordinary Shares (or, if the Share Capital Consolidation is not implemented, the readmission of the Existing Ordinary Shares) and the Consideration Shares to the premium listing segment of the Official List and to trading on the Main Market for listed securities.

Admission is expected to take place and unconditional dealings in the Ordinary Shares are expected to commence on the London Stock Exchange at 8.00 a.m. on 1 September 2017.

Following Admission, the Consideration Shares will be issued to the Depositary and ADSs representing the Consideration Shares will be issued by the Depositary to HPE Shareholders. The Company has applied to list the ADSs on the NYSE. However, there is no guarantee that such application will be accepted or, in particular, that the ADSs will be listed on the NYSE. Holders of ADSs will have the right to receive dividends paid on the Consideration Shares through the Depositary and to vote their underlying Consideration Shares by instructing the Depositary as to any matters put to Shareholders for a vote. Completion is conditional on the approval of the listing of the ADSs on the NYSE.

The Consideration Shares will rank in full for all dividends and other distributions declared, made or paid on the ordinary share capital of the Company with a record date after Completion and otherwise will rank pari passu in all respects with the remaining Ordinary Shares. The Consideration Shares shall not rank for the Return of Value or the dividends declared for the financial year ended 30 April 2017 as described in paragraph 6 of Part II (Information on the Micro Focus Group) of this Prospectus as these will take place prior to the issue of the Consideration Shares.

PART II

INFORMATION ON THE MICRO FOCUS GROUP

1. THE MICRO FOCUS GROUP'S BUSINESS

The Micro Focus Group, headquartered in Newbury, UK, is a global enterprise software company supporting the technology needs and challenges of the Global 2000. Its solutions help organisations leverage existing IT investments, enterprise applications and emerging technologies to address complex, rapidly evolving business requirements while protecting corporate information at all times. The Micro Focus Group's product portfolios are titled 'Micro Focus' and 'SUSE'. The Micro Focus product portfolio comprises CDMS, Host Connectivity, Identity and Access Security, IT DevOps Management Tools, and Collaboration and Networking. SUSE, a pioneer in Open Source software, provides reliable, interoperable Linux, Cloud infrastructure and storage solutions that give enterprises greater control and flexibility. SUSE has also announced plans to add a ContainerasaService Platform Product and a PlatformasaService product.

The Directors believe that over time, most corporate organisations have developed complex IT systems and technology applications that lie at the heart of their operational effectiveness. In most cases, these applications have been developed inhouse over a period of many years and reside on proprietary technology platforms and systems, becoming increasingly complex, inflexible and expensive to maintain. The Micro Focus Group's solutions offer cost effective ways for such organisations to avoid replacing their mission critical applications with expensive, risky and lengthy package software implementations or rewriting custom upgrades. The Directors believe that the key value proposition to clients is that they are enabled to achieve significant incremental benefits from their prior investments in IT by addressing the technical challenges that link the "old" and the "new" such as Cloud, Big Data or virtualisation.

The proliferation of mobile devices and the emergence of the "internet of things" is driving significant growth in transaction volumes which most often occur on the "old" large COBOL and PL/I transaction systems where the Micro Focus Group has deep, often decadeslong experience. These increasing volumes of data drive complexity (in development and testing) and cost (in terms of load and volume), often result in these "old" mature systems becoming ever bigger and more embedded, thereby increasing opportunities for the Micro Focus Group.

To be able to meet its customers' needs, the Micro Focus Group has a number of partnerships and relationships worldwide with system integrators, independent software vendors and independent hardware vendors as well as other leading technology firms to assist it further in reaching its target markets.

Since May 2005, the Ordinary Shares have been admitted to listing on the Official List and to trading on the main market of the London Stock Exchange. As at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), the Company had a market capitalisation of £5,162,097,791 (US\$6,722,083,744). As reported in and extracted without material adjustment from the audited consolidated results of the Micro Focus Group for the financial year ended 30 April 2017, the Micro Focus Group reported revenues of US\$1,380.7 million, an operating profit of US\$293.4 million and an Underlying Adjusted EBITDA of US\$640.9 million.

Seasonality

The Company's quarterly revenues have historically been affected by a variety of seasonal factors typical of an enterprise software business with a licence fee model and the industry in which it operates. In each financial year, the Company's total revenues are typically weighted towards its fourth financial quarter (in line with its financial year end) and third financial quarter (in line with calendar year end). The operating margins of its businesses are generally affected by seasonal factors in a similar manner because its base of largely fixed costs remains consistent throughout the year. The Directors believe that this trend will continue in the future and that the Company's total revenue will continue to peak in the fourth financial quarter of each year. In aligning the financial year end of the Enlarged Group to 31 October following Completion, the Directors anticipate that the fourth quarter licence fee peak will move from 30 April 2018 to 31 October 2018. Maintenance and subscription fee renewals are spread throughout the financial year, however, there is a seasonal peak in the quarter ending 31 January as a result of the calendar year end, which coincides with the financial yearend of a large number of other companies. This results in operating cash flows being weighted to the second half of the current financial year ending 30 April.

2. THE MICRO FOCUS GROUP'S STRATEGY

Following the integration review postcompletion of the acquisition of the Attachmate Group, the Micro Focus Group has operated as two product portfolios, Micro Focus and SUSE, and the business has been reported this way since 1 May 2015. Each product portfolio has a chief executive officer and management team.

The software products offered by the Company enable organisations to achieve improved functionality and performance from their enterprise applications and middleware, whilst lowering their ongoing cost of IT operations. The Micro Focus Group allocates capital and HR to achieve its core objective of delivering Total Shareholder Returns of 15 to 20 per cent. per annum over the long term. The Micro Focus Group executes this strategy with a strong discipline around the uses of cash and optimises Total Shareholder Returns with a combination of organic execution, financial leverage and acquisitions. The Micro Focus Group has a base case model which estimates the returns to Shareholders from organic execution and the return of excess cash. Acquisitions are only made if the Directors believe that they will generate risk adjusted returns greater than the base case. In the absence of material acquisitions, the Micro Focus Group's practice has been to return excess cash to Shareholders through an appropriate mechanism.

3. ACQUISITIONS AND INVESTMENTS

The Micro Focus Group has a successful track record of executing and integrating selected strategic acquisitions. The Micro Focus Group's acquisitions, in addition to delivering shareholder value through cash generation, have supplemented its organic growth strategy by broadening its technology proposition and extending the addressable market and customer base whilst also expanding the geographic reach of the business.

Since its admission to listing on the Official List on 17 May 2005, the Micro Focus Group has made the following acquisitions:

• 3 November 2006: the acquisition of HAL Knowledge Solutions SpA, a provider of application portfolio management software products and services that provide business intelligence to drive information technology governance.
• 4 May 2007: the acquisition of Acucorp, Inc., an application modernisation vendor with particular strengths in the small and medium sized markets. This acquisition brought a solid customer base and revenue stream and enhanced the Micro Focus Group's core COBOL tools offering.
• 17 June 2008: the acquisition of NetManage, Inc., a software vendor providing technologies to transform core applications into internetbased business solutions. NetManage, Inc. provided the Micro Focus Group with terminal emulation technology to broaden the Micro Focus Group's core legacy modernisation capabilities.
• 11 July 2008: the acquisition of Liant Software Corporation, a provider of software tools for developing business information systems and solutions to help transform existing business applications and processes into modern distributed application software systems tools. Liant Software Corporation's PL/I tools complemented the Micro Focus Group's own COBOL tools and, by allowing the Micro Focus Group to address another core programming language, extended the Micro Focus Group's addressable market.
• 30 December 2008: the acquisition of Relativity Technologies, Inc., which offered application modernisation and application portfolio management software. This was the Micro Focus Group's second acquisition in the assessment space and, coupled with HAL Knowledge Solutions SpA, strengthened the Micro Focus Group's position in this market.

• 29 May 2009: the acquisition from Compuware Corporation of the suite of ASQ and all related sales, support and development infrastructure. This was the Micro Focus Group's first extension into this market.

• 27 July 2009: the acquisition of Borland which, when combined with the ASQ business acquired from Compuware Corporation, helped the Micro Focus Group consolidate its position in the ASQ market and was consistent with its strategy of extending into logically adjacent market segments in order to expand its addressable market and further develop its customer proposition.

• 15 February 2013: the purchase of the Iona CORBA assets (Orbacus, Orbix and Artix) from Progress Software strengthening the Micro Focus Group's offering to customers around this technology.
• 9 October 2013: the acquisition of SoforTe GmbH, which enabled the Micro Focus Group to complete its vision of supporting the full application life cycle from maintenance through to full modernisation for mainframe COBOL applications.
• 29 November 2013: the purchase of OpenFusion CORBA assets from PrismTech. By adding OpenFusion to an extensive portfolio that already included Orbacus, Orbix, VisiBroker and Artix, the Micro Focus Group was further able to consolidate its position as one of the leading global providers of CORBA software in the middleware market.
• 31 December 2013: the acquisition of AccuRev Inc. which extended the Borland portfolio of tools further and improved the Micro Focus Group's execution capability enabling coverage of more of the market opportunity and offering a compelling valueadd for existing customers of both companies.
• 20 November 2014: the transformational acquisition of the Attachmate Group, one of the leading global providers of enterprise infrastructure software solutions to businesses, governments and other large organisations in order to extend, manage and secure complex IT environments. The Attachmate Group comprised four principal software product portfolios: Attachmate, which delivers advanced software for terminal emulation, legacy modernisation, managed file transfer and enterprise fraud management; NetIQ, which helps organisations tackle information protection challenges costeffectively and manage the complexity of dynamic, highlydistributed application environments; Novel, which helps businesses work more efficiently and collaborate more effectively; and SUSE Linux, which offers a family of software products centred around SUSE Linux Enterprise, an interoperable platform for core computing needs supported by a shared global support and services organisation.
• 17 July 2015: the acquisition of Authasas BV, a Dutch entity providing Multi Factor Authentication for the security market which is embedded in Identity Access and Security products acquired with the Attachmate Group.
• 2 May 2016: the acquisition of the Serena Group, a leading provider of enterprise software focused on providing Application Lifecycle Management products for both mainframe and distributed systems. The Serena Group's customers are typically highly regulated large enterprises, across a variety of sectors including banking, insurance, telco, manufacturing and retail, healthcare and government. The Serena Group's position in the Source Code Change Management segment complements the Micro Focus product portfolio in COBOL Development and Host Connectivity.
• 4 October 2016: the acquisition of Gwava Inc., a leading company in email security and enterprise information archiving. In addition to GWAVA's award winning product Retain, GWAVA has a full suite of products to protect, optimise, secure and ensure compliance for customers running Micro Focus GroupWise.
• 1 November 2016: the acquisition by SUSE of specific softwaredefined storage management assets including openATTIC together with a team of highly talented engineers (all of whom have strong Open Source development skills and experience).
• 9 March 2017: the acquisition by SUSE of certain assets and employees relating to HPE's Helion OpenStack and Stackato businesses. The acquisition included HPE naming SUSE as its preferred Open Source partner for Linux, OpenStack and Cloud Foundry solutions.

In each case, the Micro Focus Group's management team has successfully integrated the new business into the Micro Focus Group's then existing operations and executed a programme of targeted cost cutting and/or restructuring in order to improve operational efficiencies and group profitability.

In any acquisition, there are integration challenges and risks to varying degrees according to the size and complexity of the transaction. The Micro Focus Group has faced challenges relating to the incorporation of acquired technologies or products into its existing product lines and relating to the integration of the operations, facilities, personnel and commission plans of acquired businesses into the Micro Focus Group. The Micro Focus Group has also faced difficulties coordinating and consolidating the services and operations of acquired businesses across different service areas, regulatory systems and business cultures, including coordinating communications and service offerings with newly acquired customers. Additionally, the senior management team of the Micro Focus Group has periodically experienced unexpected and occasionally burdensome demands on its attention due to these integration challenges. Historically, the Micro Focus Group believes that it has successfully worked through these integration challenges and has not seen a material impact on its ability to obtain the desired integration results or improvements in operations and profitability.

4. ORGANISATIONAL STRUCTURE AND BUSINESS OVERVIEW

The chart below illustrates the current organisational model for the Micro Focus Group:

In creating this organisational model, the SUSE portfolio was separated and the Company brought together the original Micro Focus business units with Net IQ, Attachmate and Novell business units from the Attachmate Group acquisition to create the Micro Focus product portfolio. This resulted in one business with two product portfolios (SUSE and Micro Focus) each built around clear business logic and a recognition that effective execution requires that the need for specialisation and focus is balanced with the need for efficiency and effectiveness overall. For example, sales, product development, product management and professional services are managed separately for each of the Micro Focus and SUSE portfolios to ensure the correct focus and to reflect the collaborative nature of the Open Source community but the infrastructure for each of the Micro Focus and SUSE portfolios (including systems and facilities) is managed together by the Micro Focus Group. This approach to finding the right balance between specialisation and collaboration is a continuous process and wherever compromise is required the Micro Focus Group favours specialisation.

From within the Micro Focus product portfolio there is also managed, for the Micro Focus Group overall, the corporate support functions of HR, IT, facilities, finance, legal and the Project Management Office for acquisitions and integration. In addition, the Micro Focus product portfolio manages the delivery of a shared service for other elements of infrastructure support to the SUSE portfolio. The Directors believe that this enables the Micro Focus Group to operate effectively and SUSE to directly control what they need to execute with speed and flexibility whilst leveraging the larger Micro Focus Group where effective.

The Micro Focus Group operates in approximately 40 countries. Customers span multiple industry vertical sectors and range from small to large enterprises.

The Micro Focus Group's Business Model – strong and established technology franchises

The Micro Focus product portfolio specialises in managing mature infrastructure software assets which have been delivering value to significant numbers of customers over long periods of time. Both product portfolios have some or all of the following attributes:

• broad based covering all industrial sectors;
• significant numbers of customers;
• significant maintenance streams;
• relatively high switching costs; and
• significant market positions.

In any IT system the customers' business logic and data remain critical to their competitive advantage. The key to the Company's approach is unlocking this competitive advantage through exploitation of the latest technology innovation such as "OpenStack", "Softwaredefined Distributed Storage", "mobility", "Big Data", "virtualisation" and "Cloud". All of this needs to be done with the appropriate security to ensure customer data, company data and intellectual property are protected at all times. Typically customers would be forced into costly, disruptive and risky change to make this possible but with the Micro Focus Group's products, customers can take a different approach that bridges the "old" and the "new".

By enabling its customers to link their investments in established technology with the latest innovation, the Micro Focus Group helps customers gain incremental returns on investments they have already made and to preserve and protect their data and business logic. The most striking example of this is that the Company has made an application written in Micro Focus COBOL 39 years ago – before anyone had thought of Linux, Windows, virtualisation, Cloud or wireless communications – that will work today in all of those environments. By contrast, if a COBOL application had been rewritten in another language, to execute in Java or .NET the customer would have to undertake additional incremental rewrites and incur significant costs every time there was a major technology change.

The Micro Focus Group's acquisitions broaden the range and depth of its core infrastructure software solutions and bring outstanding new capabilities in Linux, OpenStack Cloud Infrastructure and security, the combination of which enables it to further extend the philosophy of bridging the "old" and the "new" across much more of its customers' IT footprints.

As the Linux market and Open Source business have unique characteristics, the Micro Focus Group has a dedicated focus on the SUSE product portfolio. The Directors believe that this focus is essential if it is to capitalise on the growth potential of these offerings and be responsive to the Open Source community and strong heritage of SUSE.

Current portfolio – underpinning the business model with clear execution and investment discipline

The typical stages of a product life cycle are from new product introduction through to high growth to broad adoption and maturity, to decline and ultimately obsolescence.

When considering investment priorities, both organic and inorganic, the Micro Focus Group evaluates its options against a set of characteristics mapped to each stage of this adoption cycle enabling the categorisation of its product portfolio into one of the four quadrants represented in the chart below.

Portfolio management

New Models Growth Drivers Optimise Core Products with consistent growth performance and market opportunity to build the future revenue foundations of the Group Products or consumption models (cloud and subscription) that open new opportunities could become growth drivers or represent emerging use cases that we need to be able to embrace Products that have maintained broadly flat revenue performance but represent the current foundations of the Group and must be protected and extended Products with declining revenue performance driven by the market or execution where the trajectory must be corrected to move back to the core category or investments focused to optimise longterm returns

The Micro Focus Group's approach to each category is summarised below:

• New Models: here the focus is on identifying new innovation in the marketplace that is applicable to the Micro Focus Group's core and growth driver propositions. This is the case where new innovation is needed to connect or leverage existing IT or application assets to deliver returns or open new opportunities. An example of this is Silk Performer Cloudburst; a Cloud based implementation of the wellestablished onpremise Silk Performer product. This combination enables customers to execute a hybrid on premise/Cloud solution ensuring day to day operations are handled effectively on premise but offering broadly unlimited additional capacity as and when needed to support business operational peaks, underpinned by the flexibility and ease of use of a common solution in both cases. In SUSE, the investments in OpenStack Cloud Infrastructure and Softwaredefined Distributed Storage are also clear examples.
• Growth Drivers and Core: these categories represent the majority of the Micro Focus Group's revenue and investment focus. They look to identify critical technologies that have delivered significant value for customers and where the costs and risks of replacement or rewrite are high and the returns from such activities are questionable. They determine how to enable these technologies for the latest IT innovations

whether new operating environments such as Linux, OpenStack, Java or .NET or new use cases such as the Cloud or mobile. For example, Visual COBOL enables customers to take COBOL applications forward with confidence into the next phase of IT industry innovation, specifically Cloud and mobile, whilst protecting their investments in business logic and data built up through prior investments. Security is a major focus area for customers as they seek to balance being open and accessible to their customers with the need to protect confidential data and intellectual property. Through the Micro Focus Group's suite of identity, access and security solutions the Micro Focus Group offers wideranging capabilities to help customers find this balance. These capabilities span multiple portfolios and significant opportunities for leverage and cross portfolio synergies exist.

• Optimise: as the IT landscape shifts in response to new opportunities or challenges, some technologies require repositioning or to be refocused to identify and exploit remaining or new growth potential. This requires much more granular analysis and targeted investment. The Micro Focus Group's model forces this discipline. Inevitably, some technologies eventually approach end of life as some customers replace them with new solutions. For the remaining customers they still represent significant value. The Micro Focus Group's approach is to continue to offer flexible commercial and support models to enable customer access to the intellectual property and capabilities of these technologies for extended periods, again ensuring protection of customer investment for as long as possible technically and commercially.

Within this overall portfolio the Micro Focus Group has some products that are growing significantly and others that are stable or in decline. The Micro Focus Group's business model means the way it manages the portfolio is analogous to a 'fund of funds' with the objective of generating moderate growth over the mediumterm, delivering high levels of profitability and strong cash generation and cash conversion ratio with a balanced portfolio approach. The Micro Focus Group will continue to focus investment in growth and core products and will not dispose of declining products unless it can achieve greater than the discounted cash flow they would generate in its ownership.

In addition to strengthening and developing strong franchises across the product portfolio, the Micro Focus Group is well positioned to help customers solve key challenges as they seek to be more effective, more competitive and more efficient. Decades of technology innovation has opened up tremendous opportunities for companies in almost every market but typically this has resulted in very complex IT environments. Most organisations operate infrastructure and applications which have emerged over time, often years apart, such that core legacy platforms sit alongside distributed systems, which more recently have been extended further again with web, Cloud and mobile technologies.

This is set to continue as today's business environment is characterised by unprecedented levels of change. The Directors believe that companies need to embrace this change in a way that protects their most prized assets – their intellectual property, their business logic and their business data.

Micro Focus Product Portfolio

Products in the Micro Focus portfolio are organised into five subportfolios:

• CDMS;
• Host Connectivity;
• IAS;
• Development & IT Operations Management Tools; and
• Collaboration & Networking.

Details of the five subportfolios are provided below.

CDMS

The Company has continued to invest in its core CD products that primarily target the offmainframe distributed development market. The CD products enable programmers to develop and deploy applications written in COBOL across multiple platforms including Windows, UNIX, Linux and the Cloud. Visual COBOL provides the fastest way for customers to move enterprise mainframe application workloads partially or wholly to Java Virtual Machine, .NET or Cloud environments whilst protecting their existing investments and intellectual property.

COBOL applications continue to be at the heart of the world's business transactions and to power the majority of large organisations' key business operations. Maintaining a leadership position in CD is at the core of Micro Focus' value proposition. By embedding its products in industry standard development environments, specifically Visual Studio and Eclipse, it has addressed the perceived skill issues, and expect that COBOL will provide a stable base and strong cash flow for the Micro Focus Group over the coming decades.

Micro Focus' mainframe solutions product set addresses a customer's need to get the most value out of its mainframe environment. These technologies allow customers flexibility in deciding the platform choice for development, testing and deployment of their business applications. Various business and technical drivers would determine if it is best to do these functions either within the mainframe environment or outside of it on distributed Windows, UNIX and Linux machines. Micro Focus offers customers the choice to do either or both, enabling the optimum balance of cost, risk and speed of execution across their mainframe and distributed computing platforms. Increasingly businesses are seeking to reuse existing business logic and data, while also looking to exploit new innovations in technology such as mobile and Cloud. The Micro Focus Group's mainframe solutions allow customers to accomplish both by enabling the redeployment of enterprise mainframe applications to distributed systems, virtualised mobile platforms, and the Cloud. The Directors estimate that the mainframe CD market opportunity is approximately three times as large as that for offmainframe distributed CD.

The Directors believe that Micro Focus will maintain its leadership positions in CDMS through products such as Visual COBOL and Enterprise Developer.

Host Connectivity

The Host Connectivity solution set is the combination of the Attachmate products from the Attachmate Group and the Micro Focus Rumba products. The Directors believe that this combination gives the Micro Focus Group the second largest market share in the provision of host connectivity solutions. Micro Focus specialises in environments with heterogeneous systems or platforms and this product set has, in one form or another, assisted in these tasks for over 30 years.

At the core of the product set are the Reflection and Rumba terminal emulation product families that enable IT organisations to modernise and secure access to their hostbased applications. Micro Focus' products help IT improve user productivity as they extend host access to new web and mobile use cases while ensuring that modern security practices around encryption, authorisation, and authentication can be enforced. During the financial year ended 30 April 2016, Micro Focus delivered capabilities from Reflection to the Rumba customers and vice versa. In addition it has built on its strengths in security to add capabilities from the rest of the Micro Focus portfolio to deliver even more value for customers who have invested in its Host Connectivity products.

The Host Connectivity capabilities are extended by other products that provide legacy integration technologies that enable businesses to put their mainframe assets to work in new ways by exposing applications and data to modern development environments and business analytics systems. There are additional SSH based file transfer solutions that solve a range of tactical and strategic problems for securely transferring files of any size, enabling businesses to work seamlessly with partners and customers.

In Host Connectivity, Micro Focus will seek to build on its existing strengths in terms of technology and customer base combined with its innovations in security to establish a true leadership position.

IAS

This product set offers a broad set of wellestablished solutions for Identity Governance and Administration, Access Management and Authentication, and Security Management. The Micro Focus Group's customers span all sectors with particular strength in regulated industries, including healthcare, finance, government, retail, manufacturing, and energy. In addition, companies in nonregulated industries also implement its IAS products as a best practice for protecting intellectual property or other sensitive information, and to make their organisations more efficient.

Customers use the Identity Governance and Access, Identity Management and Authentication solutions to apply integrated policies across local, mobile, and Cloud environments to govern access to information, administer and manage the identity and access lifecycle of users, and demonstrate compliance with regulations or mandates. Micro Focus provides solutions that address identity lifecycle management, riskbased authentication, SSO, access governance, and multifactor authentication.

The Security Management solutions build upon this identitycentric approach by integrating identity and other contextual information with security monitoring, ensuring organisations have the security intelligence they need, when they need it, to detect and respond to abnormal activity that signals a data breach or compliance gap. The Security Management solutions provide privileged user management, secure configuration management and visibility and control over user activities, security events, and critical systems across an organisation to enable them to quickly address evolving threats.

Key trends driving growth in this area include the continued expansion and diversity of security threats to organisations and the growth of the resulting financial risk, the increasing demand for organisations to demonstrate that they have the processes in place to manage access, and the continued expansion of virtualisation and Cloud deployments increasing the level of complexity of the applications and information over which organisations need to manage access and monitor activity. Additionally organisations have an opportunity to costeffectively implement stronger authentication methods than traditional username/password to help minimise data breaches.

The IAS solutions are well suited to address these trends, using wellestablished identitypowered technologies to help organisations govern and manage user privileges, facilitate and control access to applications and data, and monitor user and system activities. Through helping its customers balance between innovation and risk and by sharpening its focus in IAS, the Directors believe that Micro Focus is well positioned for growth over the longer term.

Development & IT Operations Management Tools

This product set is the combination of the Application Development and Testing products from the original Micro Focus product portfolio, the Data Centre Management and Workload Migration products from the heritage NetIQ brand; and the Endpoint management software from the heritage Novell brand and the Serena product portfolio.

The Application Development and Testing products offer a range of DevOps solutions which span an organisation's software supply chain – from definition (requirements capture) through to delivery (testing and change management). Organisations competing in a global marketplace must deliver innovative applications that meet customer expectations anytime, anywhere. Greater agility is required as software teams rapidly adapt to the volume and velocity of evolving business requirements and the demand to work in more diverse environments including mobile and Cloud. Micro Focus' Application Development and Testing solutions improve communication and collaboration between business, test, and development teams for continuous delivery of a superior applications and user experience across all its device and platform combinations.

The Data Centre Management solutions integrate service management, application management and systems management to give organisations a holistic view of their IT environment and business services, enabling companies to manage increased complexity and capacity with the right balance of cost, risk and speed of execution. Micro Focus provides application performance management, IT process automation, business service management and systems management solutions.

The Workload Migration and Disaster Recovery product suite help organisations complete data centre transformation and migration projects quickly and efficiently with automatic, unattended highspeed PhysicaltoVirtual, VirtualtoVirtual, or "AnywheretoCloud" workload migrations. Additionally, its highperformance disaster recovery solutions offer warmstandby recovery speeds similar to mirroring but at low costs similar to tape backup for all server workloads: physical and virtual, Windows and Linux.

Additionally, the IT Operations Management Tools include the endpoint management products that enable IT staff to handle the complexities of securing and managing a large footprint of personal computers, Macs, tablets and smartphones to provide the proper working environment for each employee.

Using a unified management console, these tools help enable all devices to be patched, compliant, secure and properly equipped. Due to the multifarious and complex nature of the user and system endpoints within today's large organisations, this can be a burdensome and costly undertaking, and accordingly the toolset is both broad and deep. The capabilities include service desk; application virtualisation; asset management; configuration management; software distribution; full disk encryption; mobile device management; and patch management.

The Micro Focus Group offers a broad set of solutions and capabilities for customers. The Micro Focus Group's focus is on delivering the targeted innovation its customers need as they seek to solve complex, real world and ever changing challenges in building, operating and securing complex IT applications and infrastructure.

Collaboration & Networking

This product set has the balance of the Novell products together with CORBA from the original business of the Micro Focus Group and the GWAVA product portfolio.

Micro Focus' collaboration products enable organisations to build and operate work environments that are more secure and easier to manage, regardless of how or where people work. The products form a complete collaboration solution that has long been praised by customers and industry watchers for security and reliability. Key capabilities include email, calendaring, instant messaging, contact management, task management; team workspaces with document management and workflows.

Collaboration brings people, projects, and processes together in one secure place to enhance team productivity and this fits closely with additional products that offer file, print, and networking services designed to enable organisations to securely print and share files both inside and outside their organisation. The products can automate the configuration and management of "high availability" collaboration and networking servers, that are simple to resource, manage and maintain. Suitable for small workgroups right through to global enterprise deployments, the enduser value proposition includes dynamic file services which automates policies data storage, file access, secure file sharing, file reporting, mobile access and online, offline and mobile printing.

Fully distributed networking services such as centralised server management, secure file storage, and storage management, provide full enterprise distributed networking environment suitable for small workgroups right through to global enterprise deployments.

This product set also includes the CORBAbased network and data transport products which provide outstanding functionality and performance to companies with a requirement for high speed and secure transfer of data between systems on their multiplatform networks. This technology is deployed across thousands of customers.

The Micro Focus Group has delivered value to its customer base with these products for decades and is committed to delivering the practical innovation and support its customers want and need to continue to leverage these investments.

The Micro Focus Group expects to maintain its strong positions in CDMS through products such as Visual COBOL and Enterprise Developer. In Host Connectivity, it will seek to build on its existing strengths in terms of technology and customer base combined with its innovations in security to establish a true leadership position. In Development & ITOM and Collaboration & Networking the strength of its existing franchises can be built upon through targeted innovation and customer engagement. By sharpening its focus in IAS the Directors believe that the Micro Focus Group is well positioned for growth over the longer term.

SUSE Product Portfolio

SUSE provides and supports enterprisegrade Linux and Open Source solutions with exceptional service, value and flexibility. For over 20 years SUSE has collaborated with partners and Open Source communities to innovate, adapt and secure Open Source technologies and create solutions for the world's most computeintensive and data intensive IT environments across physical, virtual, containerised and Cloud platforms.

Thousands of customers around the world rely on SUSE for their Open Source, softwaredefined infrastructure needs ranging from enterprise Linux to OpenStack private Cloud to software defined, distributed storage – all combined with comprehensive management capabilities.

By harnessing the power, reliability and flexibility of SUSE solutions, the Directors believe that SUSE customers and partners are able to operate more efficiently, create new products and services faster and ultimately to compete better.

In a world of rapid and continuous technology change, SUSE customers can confidently embrace new development and operational models such as DevOps, Containers, IaaS and PaaS solutions while simultaneously leveraging the benefits of wellestablished mission critical paradigms and platforms.

The SUSE product portfolio comprises:

• Open Source Software;
• Enterprise Linux;
• OpenStack Private Cloud;
• Softwaredefined Storage; and
• Systems Management.

Details of the five subportfolios are provided below.

Open Source Software

SUSE products and solutions are developed from Open Source technologies and brought to market with an Open Source business model. Open Source software source code is made available in the public domain under a number of different licensing models which fosters collaboration and rapid innovation by developers around the world working both as private individuals and from within many of the industry's largest IT companies.

SUSE actively utilises and engages in a wide range of Open Source projects and related industry initiatives where it works together with communities and partners to drive the new innovation and create meaningful industry standards. These projects include the Linux Foundation, OpenStack, Ceph, CloudFoundry, openHPC, OPNFV, Open Mainframe Project, Open Container Initiative and many more.

Enterprise Linux

Linux is one of the first and most successful Open Source software projects in the industry and has now become a wellestablished choice in the enterprise operating system market but also in numerous other use cases including mobile devices, IoT, Cloud computing, Big Data analytics and more. All of the industry's major softwaredefined infrastructure innovations are being developed on and for the Linux operating system.

SUSE was the industry's first provider of an enterprise distribution of the Linux operating system and is the preferred choice on platforms such as IBM z Systems and for workloads such as SAP applications and SAP HANA.

Some of the key drivers behind the continued demand for enterprise Linux solutions such as SUSE Linux Enterprise Server include:

• UNIX to Linux migrations the movement of workloads from proprietary UNIX operating systems on specialised hardware to Linux on industry standard hardware platforms but also IBM z Systems and Power;
• data centre consolidation and virtualisation maximising hardware investments by running multiple operating system instances on the same physical server;
• Cloud computing infrastructure the most prevalent OS for the Cloud infrastructure and also widely used as the OS for the workloads running on the private and public Clouds;
• high performance computing the world's top supercomputing clusters and the growing use of high performance computing systems leverage the flexibility and performance of Linux operating systems; and
• softwaredefined innovations Linux has become the defacto standard OS for the industry's infrastructure software innovations from IoT, Big Data analytics and softwaredefined storage, IaaS and

private Cloud, containers and orchestration, PaaS, network functions virtualisation and softwaredefined networking.

OpenStack Private Cloud

OpenStack has become the industry's clear Open Source standard for IaaS Cloud with active engagement from a number of leading IT companies and enterprises. This technology provides a flexible alternative to proprietary solutions which both commercial companies and endcustomer enterprises can directly engage with through the OpenStack project in addition to utilising distributions such as SUSE OpenStack Cloud.

SUSE was a founding platinum member of the OpenStack Foundation and has held the Foundation's board chair position since its creation. SUSE OpenStack Cloud's streamlined installation capabilities, unattended upgrades, high availability features and support for all leading hypervisors makes it an ideal choice for enterprise private Cloud.

Some of the key drivers creating demand for OpenStack private Cloud solutions such as SUSE OpenStack Cloud include:

• data centre evolution to Serial Digital Interface the next step beyond data centre consolidation and virtualisation is to embrace the flexibility and agility of Cloud capabilities such as selfservice, direct integration with softwaredefined storage and networking;
• on demand services and business agility in a world that expects instant access to everything, the ability to rapidly stand up new products and services for both internal and external customers is essential to competing effectively; and
• cost and value traditional solutions lag in innovation and do not bring the economic scalability in both capital expenditure and operating costs needed to support modern business models the way Open Source solutions can.

Softwaredefined Storage

Enterprises across most industry segments and sizes are struggling to control and manage the impact of rapid data growth at a time when effectively using information is rapidly becoming the key to competitive differentiation. With more data to store in increasingly large and complex formats for longer periods of time, traditional storage solutions are not able to adequately address all the use cases and needs.

SUSE Storage, built on Ceph technology, is a wellpositioned solution with resilient selfmanaging and selfcorrecting capabilities combined with flexibility to dynamically utilise both existing hardware as well as today's latest industry standard hardware components.

Some of the key drivers creating demand for Open Source softwaredefined storage solutions like SUSE Storage include:

• large data growth more data volume, complex, large data formats and requirements to keep data for longer periods of time for analytics and regulatory compliance;
• need for flexibility and elasticity replacing traditional static storage appliances when more capacity is needed is simply not tenable in many cases. Enterprises require the ability to dynamically add capacity using industry standard hardware; and
• cost and value traditional storage solutions are often not economically scalable when faced with the massive data growth, larger complex data formats and need for longer term storage.

Systems Management

For midsized or larger computing environments, comprehensive systems management is a critical factor that many enterprises still struggle to address. Considering the complexity of multiple hardware platforms, a wide variety of infrastructure technologies and the increasing use of combinations of on premise, hosted and public Cloud resources, the business challenges are significant as are the potential benefits.

SUSE Manager is designed with a deep understanding of today's Linuxbased, Open Source enterprise infrastructure technologies whether those are used on premise, virtualised or in a Cloud deployment. SUSE Manager is a powerful tool for integrated management and orchestrations of system provisioning, monitoring, configuration management, automated patching – all designed to support the most complex enterprise and supercomputing scale deployments.

The key drivers behind the demand for systems management solutions like SUSE Manager include:

• managing complexity growth in systems (physical, virtual and Cloud) and new infrastructure technologies like IaaS, Containers, PaaS creates needs for new management methodologies (Development/Operations) and new tooling to manage effectively;
• maintaining security, SLAs and uptime to be most effective, systems and servers, wherever they are deployed, must be secure and able to meet stringent SLAs with maximum uptime;
• reducing operating costs the days of manual systems management processes are past for any enterprise that needs to also innovate and compete. Automation is essential to free up resources and control operating expenditure systems management costs; and
• meeting regulatory compliance requirements to stay compliant, enterprises must have comprehensive monitoring, configuration management controls and remediation capabilities in place.

5. PRODUCT RESEARCH AND DEVELOPMENT

The Micro Focus Group invests heavily in product development and has seen significant enhancements to existing products and has accelerated the development of new products. New versions of products have been released in each subportfolio in the past year. Through its market knowledge and close contact with customers, the Company has sought to refine products to respond to the changing needs of the Micro Focus Group's customers.

During the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017, an aggregate of US\$113.3 million, US\$164.6 million and US\$180.1 million, respectively, were charged to the consolidated statement of comprehensive income of the Micro Focus Group in respect of research and development expenditure. The Directors intend to continue to focus investment in growth and core products and do not intend to dispose of declining products unless such products can achieve greater than the discounted cash flow they would generate in the ownership of the Enlarged Group.

6. DIVIDEND POLICY

The Company announced on 14 July 2016 an increase in its dividend policy such that its current policy is to pay an annual dividend that is approximately twice covered by Adjusted earnings per share. For the financial year ended 30 April 2016, the Company paid a total dividend of 66.68 cents per share (consisting of 16.94 cents paid as an interim dividend and 49.74 cents paid as a final dividend). The interim dividend announced in December 2016 for the financial year ended 30 April 2017 was 29.73 cents per share which was a 75.5 per cent. increase on the interim dividend paid in the previous financial year reflecting the increase in Adjusted net income and increase in dividend policy. As announced on 12 July 2017, the Company intends to pay a second interim dividend of 58.33 cents per share on 25 August 2017 in lieu of its final dividend for the financial year ended 30 April 2017. The Consideration Shares shall not rank for such dividend as they will be issued after the record date.

Following Completion and subject to the Enlarged Group's performance (and, in particular, the Company being able to comply with the restrictions on paying dividends imposed by the New Micro Focus Facility Agreement), the Board intends to continue its stated dividend policy of paying an annual dividend that is approximately twice covered by Adjusted earnings per share. The New Micro Focus Facility Agreement permits the payment of dividends provided that no event of default is continuing under such agreements and, taking into account such payment, the ratio of secured debt (net of free cash) of the Enlarged Group to its EBITDA is less than 3:1. Until that financial metric is achieved, under the New Micro Focus Facility Agreement the Company will have access to the available basket of US\$100 million plus an additional basket for restricted payments of US\$250 million, providing US\$350 million of dividend payment capacity.

7. PROPERTIES

The Micro Focus Group has 90 operational properties with a total of 1.287 million square feet of space worldwide. The Directors believe that the existing properties are in good condition and are suitable for the conduct of its business.

8. FURTHER INFORMATION

Prospective investors should carefully consider the additional information set out in the other parts of this Prospectus and in particular the Risk Factors.

PART III

OPERATING AND FINANCIAL REVIEW OF THE MICRO FOCUS GROUP

The operating and financial review for the financial year ended 30 April 2015, as set out in the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2015, the operating and financial review for the financial year ended 30 April 2016, as set out in the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2016 and the operating and financial review for the financial year ended 30 April 2017, as set out in the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2017, are incorporated by reference into this Prospectus. The audit reports for each of the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017 were unqualified.

Reference should also be made to the financial information incorporated by reference into this Prospectus (see Part IV (Historical Financial Information of the Micro Focus Group)), the Risk Factors, the strategy section in paragraph 2 of Part II (Information on the Micro Focus Group) and Part XI (Additional Information) of this Prospectus.

Investors should read the whole of this Prospectus and the documents incorporated herein by reference and should not just rely on the financial information set out in this Part III (Operating and Financial Review of the Micro Focus Group).

1. CROSS REFERENCE LIST

The following list is intended to enable investors to identify easily specific items of information which have been incorporated by reference into this Prospectus.

1.1 Operating and Financial Review for the financial year ended 30 April 2015 as compared to the financial year ended 30 April 2014

The page numbers below refer to the relevant pages of the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2015:

Page Number(s)	Section
4 to 15	Executive Chairman's statement
16 to 23	Operational and financial review
24 to 25	Key performance indicators
26 to 28	Principal risks and uncertainties
29 to 33	Corporate social responsibility

1.2 Operating and Financial Review for the financial year ended 30 April 2016 as compared to the financial year ended 30 April 2015

The page numbers below refer to the relevant pages of the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2016:

Page Number(s)	Section
3 to 8	Executive Chairman's statement
9 to 15	Financial review
30 to 31	Key performance indicators
32 to 37	Principal risks and uncertainties
39 to 43	Corporate social responsibility

1.3 Operating and Financial Review for the financial year ended 30 April 2017 as compared to the financial year ended 30 April 2016

The page numbers below refer to the relevant pages of the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2017:

Page Number(s)	Section
4 to 12	Executive Chairman's statement
13 to 23	Financial review
40 to 41	Key performance indicators
42 to 47	Principal risks and uncertainties
50 to 54	Corporate social responsibility

2. SUMMARY OF CASH FLOWS

The summary of cash flows relating to the Micro Focus Group set out below is extracted without material adjustment from audited reports and consolidated accounts of the Micro Focus Group prepared under IFRS for the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017:

2.1 Consolidated statement of cash flows

		For the financial For the financial For the financial
	year ended	year ended	year ended
	30 April 2017 ––––––––––	30 April 2016 ––––––––––	30 April 2015 ––––––––––
	\$'000	\$'000	\$'000
Net cash generated from operating activities	452,379	283,219	200,323
Cash flows from investing activities	(589,724)	(53,614)	139,329
Cash flows from financing activities	(375,298) ––––––––––	205,800 ––––––––––	(115,718) ––––––––––
Effects of exchange rate charges	(3,552) ––––––––––	(9,551) ––––––––––	(15,347) ––––––––––
Net (decrease)/increase in cash and cash equivalents	(516,195) ––––––––––	425,854 ––––––––––	208,524 ––––––––––
Cash and cash equivalents at 30 April	150,983	667,178	241,324

The Micro Focus Group's operating cash flow from continuing operations for the financial year ended 30 April 2017 was US\$564.8 million. This represented a cash conversion ratio when compared to Adjusted EBITDA before exceptional items of 102.0 per cent. At 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), the Micro Focus Group's net debt was US\$1,338.5 million.

3. CAPITAL RESOURCES

During the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017, the most significant cash outflows were in respect of the return of value carried out by the Company in connection with the acquisition of the Attachmate Group and other acquisitions (further details of which are set out in paragraph 3 of Part II (Information on the Micro Focus Group) of this Prospectus).

The Micro Focus Group's sources of liquidity include its cash flows from operations, its cash balances and its Existing Facility. Whilst the financial position for the financial year ended 30 April 2017 of the Micro Focus Group is presented as being in net deficit, liquidity risk and working capital are managed effectively as a result of operating cash flows and the Existing Facility.

Upon utilisation of the New Facilities which will be provided to the Micro Focus Borrower and the Seattle Borrower on the Business Day prior to Completion, any amounts outstanding under the Existing Facility will be repaid and commitments thereunder will be cancelled. Further details of the New Facilities Agreements are set out at paragraph 10.1 of Part XI (Additional Information) of this Prospectus.

PART IV

HISTORICAL FINANCIAL INFORMATION OF THE MICRO FOCUS GROUP

SECTION A: THE MICRO FOCUS GROUP

1. BACKGROUND

The consolidated financial statements of the Micro Focus Group for the financial year ended 30 April 2015, as set out in the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2015, the consolidated financial statements of the Micro Focus Group for the financial year ended 30 April 2016, as set out in the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2016, and the consolidated financial statements of the Micro Focus Group for the financial year ended 30 April 2017, as set out in the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2017, are incorporated by reference into this Prospectus. The audit reports for each of the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017 were unqualified.

The consolidated financial statements for the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017 were prepared in accordance with IFRS.

The annual accounts of the Company for the three financial years ended 30 April 2015, 30 April 2016 and 30 April 2017 have been audited by PwC, a member of the Institute of Chartered Accountants in England and Wales, of 1 Embankment Place, London WC2N 6RH.

Investors should read the whole of this Prospectus and the documents incorporated herein by reference (set out in Part XIII (Documents Incorporated by Reference) of this Prospectus) and should not just rely on the financial information set out in this Part IV (Historical Financial Information of the Micro Focus Group).

2. CROSS REFERENCE LIST

The following list is intended to enable investors to identify easily specific items of information which have been incorporated by reference into this Prospectus. A copy of each of these documents incorporated by reference into this Prospectus can be accessed on the Company's website on http://investors.microfocus.com.

2.1 IFRS financial statements for the financial year ended 30 April 2015 and the audit report thereon

The page numbers below refer to the relevant pages of the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2015:

Page Number(s)	Section
84	Consolidated statement of comprehensive income
85	Consolidated statement of financial position
86	Consolidated statement of changes in equity
87	Consolidated statement of cash flows
88 to 94	Summary of significant accounting policies
95 to 130	Notes to the consolidated financial statements
132 to 133	Independent auditors' report to the members of the Company
134	Company balance sheet
135 to 141	Notes to the Company financial statements

2.2 IFRS financial statements for the financial year ended 30 April 2016 and the audit report thereon

The page numbers below refer to the relevant pages of the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2016:

Page Number(s)	Section
92 to 98	Independent auditors' report to the members of the Company
99	Consolidated statement of comprehensive income
100	Consolidated statement of financial position
101	Consolidated statement of changes in equity
102	Consolidated statement of cash flows
103 to 110	Summary of significant accounting policies
111 to 149	Notes to the consolidated financial statements
153	Company balance sheet
156 to 162	Notes to the Company financial statements

2.3 IFRS financial statements for the financial year ended 30 April 2017 and the audit report thereon

The page numbers below refer to the relevant pages of the annual report and accounts of the Micro Focus Group for the financial year ended 30 April 2017:

Page Number(s)	Section
109 to 115	Independent auditors' report to the members of the Company
116 to 117	Consolidated statements of comprehensive income
118 to 119	Consolidated statement of financial position
120	Consolidated statement of changes in equity
121 to 122	Consolidated statement of cash flows
123 to 133	Summary of significant accounting policies
134 to 177	Notes to the consolidated financial statements
182	Company balance sheet
185 to 191	Notes to the Company financial statements

SECTION B: THE ATTACHMATE GROUP

(1) Accountant's Report on the Attachmate Group Historical Financial Information

The Directors Micro Focus International plc The Lawn 2230 Old Bath Road Berkshire RG14 1QN

J.P. Morgan Limited 25 Bank Street Canary Wharf London E14 5JP

28 July 2017

Dear Sirs

Attachmate Group

We report on the financial information as at 30 April 2015 and for the thirteen month period then ended as set out in section B(2) of this Part IV below (the "Attachmate Financial Information Table"). The Attachmate Financial Information Table has been prepared for inclusion in the prospectus dated 28 July 2017 (the "Prospectus") of Micro Focus International plc (the "Company") on the basis of the accounting policies set out in note I.A to the Attachmate Financial Information Table. This report is required by item 20.1 of Annex I to the PD Regulation 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 Financial Information Table in accordance with International Financial Reporting Standards as adopted by the European Union.

It is our responsibility to form an opinion as to whether the Attachmate Financial Information Table gives a true and fair view, for the purposes of the Prospectus and to report our opinion to you.

Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules 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 the PD Regulation, consenting to its inclusion in the Prospectus.

PricewaterhouseCoopers LLP, 1 Embankment Place, London, WC2N 6RH T: +44 (0) 2075 835 000, F: +44 (0) 2072 124 652, www.pwc.co.uk

PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Conduct Authority for designated investment business.

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. 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 Company'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 the United States of America 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 Attachmate Financial Information Table gives, for the purposes of the Prospectus dated 28 July 2017, a true and fair view of the state of affairs of the Attachmate Group as at the date stated and of its profits, cash flows and changes in equity for the period 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 to the PD Regulation.

Yours faithfully

PricewaterhouseCoopers LLP Chartered Accountants

(2) Attachmate Historical Financial Information

The Attachmate Group

Consolidated statement of comprehensive income

for the 13 months ended 30 April 2015

		13 months to	12 months to
		30 April	31 March
		2015 ––––––––––	2014 ––––––––––
	Notes	\$'000	\$'000
Revenue	1	986,428	956,829
Cost of sales comprising:
Cost of sales (excluding amortization of product development
costs and acquired technology intangibles		(148,033)	(151,188)
– Amortization of product development costs	8	(4,723)	(11,013)
– Amortization of acquired technology intangibles	8	(10,267)	(27,576)
Cost of sales		(163,023) ––––––––	(189,777) ––––––––
Gross profit		823,405	767,052
Other income	2	14,935	–
Selling and distribution costs		(338,411)	(341,833)
Research and development expenses comprising:
– Expenditure incurred in the year		(189,523)	(174,286)
– Capitalization of product development costs	8	–	–
Research and development expenses		(189,523)	(174,286)
Administrative expenses		(208,371)	(78,086)
Operating profit		–––––––– 102,035	–––––––– 172,847
Analyzed as:
Operating profit before exceptional items		258,171	204,088
Exceptional items	2	(156,136)	(31,241)
Operating profit		102,035 ––––––––	172,847 ––––––––
Share of results of associates	12	(1,784)	(1,586)
Finance costs	4	(71,233)	(116,966)
Finance costs – exceptional	2,4	(9,888)	–
Finance income	4	1,744	320
Net finance costs		(79,377) ––––––––	(116,646) ––––––––
Profit before tax	2	20,874	54,615
Taxation	5	(10,601)	(27,224)
Profit for the period/year		–––––––– 10,273 ––––––––	–––––––– 27,391 ––––––––
Attributable to:
Equity shareholders of the parent company		10,049	27,035
Non­controlling interests		224	356
Profit for the period/year		–––––––– 10,273 ––––––––	–––––––– 27,391 ––––––––

Consolidated statement of comprehensive income

for the 13 months ended 30 April 2015

		13 months to	12 months to
		30 April	31 March
		2015	2014
	Notes	–––––––––– \$'000	–––––––––– \$'000
Profit for the period/year		10,273 ––––––––	27, 391 ––––––––
Other comprehensive income:
Items that will not be subsequently reclassified to profit or loss
Actuarial loss on employee benefit liabilities	23	(14,412)	(633)
Actuarial gain on long­term pension assets	23	3,917	–
Deferred tax movement on pensions	26	2,459	–
Items that may be subsequently reclassified to profit or loss
Currency translation differences		(22,781) ––––––––	3,414 ––––––––
Other comprehensive (expense)/income for the period/year		(30,817) ––––––––	2,781 ––––––––
Total comprehensive (expense)/income for the period/year		(20,544) ––––––––	30,172 ––––––––
Attributable to:
Equity shareholders of the parent		(20,768)	29,816
Non­controlling interests	30	224 ––––––––	356 ––––––––
		(20,544)	30,172

–––––––– ––––––––

Consolidated statement of financial position

as at 30 April 2015

		30 April	31 March
		2015	2014
	Note	–––––––––– \$'000	–––––––––– \$'000
Non­current assets
Goodwill	7	906,052	906,052
Long term intercompany receivable from Micro Focus International plc		178,205	–
Other intangible assets	8	178,148	268,122
Property, plant and equipment	10	25,150	25,293
Investments in associates	12	14,901	16,685
Long term pension assets	23	17,993	15,991
Long term income tax recoverable		–	10,047
Other non­current assets	13	3,909	6,347
Deferred tax assets	26	165,072	191,162
		–––––––– 1,489,430	–––––––– 1,439,699
Current assets
Inventories	14	54	–
Trade and other receivables	15	156,074	220,051
Cash and cash equivalents	16	162,022	152,218
Assets classified as held for sale	9	– ––––––––	888 ––––––––
		318,150 ––––––––	373,157 ––––––––
Total assets		1,807,580 ––––––––	1,812,856 ––––––––
Current liabilities
Trade and other payables	17	111,722	140,583
Borrowings	18	–	32,383
Provisions	22	31,753	7,571
Current tax liabilities	19	14,194	29,338
Deferred income	20	466,601 ––––––––	502,392 ––––––––
		624,270	712,267
Non­current liabilities
Deferred income	21	193,691	220,429
Borrowings	18	–	1,262,343
Retirement benefit obligations	23	32,742	22,848
Provisions	22	12,449	4,472
Other non­current liabilities	24	8,040	7,259
Deferred tax liabilities	26	28,158 ––––––––	52,637 ––––––––
		275,080 ––––––––	1,569,988 ––––––––
Total liabilities		899,350 ––––––––	2,282,255 ––––––––
Net assets/(liabilities)		908,230 ––––––––	(469,399) ––––––––
Capital and reserves
Share capital	27	–	–
Capital reserve	28	1,395,000	–
Share option reserve	29	–	6,197
Accumulated losses		(459,354)	(470,737)
Foreign currency translation reserve (deficit)		(28,395) ––––––––	(5,614) ––––––––
Total equity/(deficit) attributable to owners of the parent company		907,251 ––––––––	(470,154) ––––––––
Non­controlling interests	30	979 ––––––––	755 ––––––––
Total equity/(deficit)		908,230	(469,399)

–––––––– ––––––––

Consolidated statement of changes in equity

for the 13 months ended 30 April 2015

Balance as at 30 April 2015		– ––––––––	1,395,000 –––––––– ––––––––	–	(459,354) ––––––––	(28,395) ––––––––	907,251 ––––––––	979 ––––––––	908,230 ––––––––
of the acquisition of the Group		– ––––––––	– –––––––– ––––––––	(5,497)	5,497 ––––––––	– ––––––––	– ––––––––	– ––––––––	– ––––––––
Movement in relation to share options as a result
Movement in relation to share options – exercises to date of the acquisition of the Group				(700)	3,873	–	3,173		3,173
Capital contributions	28	–	1,395,000	–	–	–	1,395,000	–	1,395,000
Transactions with owners:
Total comprehensive expense		–	–	–	2,013	(22,781)	(20,768)	224	(20,544)
Deferred tax movement on pension liability	26	– ––––––––	– –––––––– ––––––––	–	2,459 ––––––––	– ––––––––	2,459 ––––––––	– ––––––––	2,459 ––––––––
Remeasurement on long­term pension assets	23	–	–	–	3,917	–	3,917	–	3,917
pension schemes	23	–	–	–	(14,412)	–	(14,412)	–	(14,412)
Remeasurement on defined benefit
Currency translation differences Profit for the period		– –	– –	– –	– 10,049	(22,781) –	(22,781) 10,049	– 224	(22,781) 10,273
Balance as at 31 March 2014		– ––––––––	– –––––––– ––––––––	6,197	(470,737) ––––––––	(5,614) ––––––––	(470,154) ––––––––	755 ––––––––	(469,399) ––––––––
Movement in relation to share options		– ––––––––	– –––––––– ––––––––	(964)	2,800 ––––––––	– ––––––––	1,836 ––––––––	– ––––––––	1,836 ––––––––
Transactions with owners:
Total comprehensive income		–	–	–	26,401	3,414	29,815	356	30,171
pension schemes	23	– ––––––––	– –––––––– ––––––––	–	(634) ––––––––	– ––––––––	(634) ––––––––	– ––––––––	(634) ––––––––
Profit for the year Remeasurements on defined benefit		–	–	–	27,035	–	27,035	356	27,391
Currency translation differences		–	–	–	–	3,414	3,414	–	3,414
Balance as at 31 March 2013		–	–	7,161	(499,938)	(9,028)	(501,805)	399	(501,406)
	Notes	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
		capital ––––––––	reserve –––––––– ––––––––	reserve	losses ––––––––	(deficit) ––––––––	company ––––––––	interests ––––––––	(deficit) ––––––––
		Share	Capital		option Accumulated	reserve		parent controlling	equity/
				Share		translation	owners of	Non­	Total
						currency	to the
							Foreign attributable
							(deficit)
							equity/
							Total

Consolidated statement of cash flows

for the 13 months ended 30 April 2015

		13 months	12 months
		ended	ended
		30 April	31 March
		2015	2014
	Note	–––––––––– \$'000	–––––––– \$'000
Cash generated from operations	31	212,440	284,969
Interest paid		(77,917)	(118,568)
Tax paid		(16,529) ––––––––	(16,882) ––––––––
Net cash generated from operating activities		117,994	149,519
Cash flows from investing activities
Payments for intangible assets	8	(7,764)	(6,745)
Purchase of property, plant and equipment	10	(12,692)	(7,567)
Other investing activities		1,539	562
Funding to Micro Focus International plc		(178,000) ––––––––	– ––––––––
Net cash used in investing activities		(196,917)	(13,750)
Cash flows from financing activities
Repayment of bank borrowings		(1,294,726)	(143,399)
Capital contribution from Micro Focus International plc	28	1,395,000 ––––––––	– ––––––––
Net cash used in financing activities		100,274	(143,399)
Effects of exchange rate changes		(11,547) ––––––––	(518) ––––––––
Net increase/(decrease) in cash and cash equivalents		9,804	(8,148)
Cash and cash equivalents at beginning of year		152,218 ––––––––	160,366 ––––––––
Cash and cash equivalents at end of year	16	162,022 ––––––––	152,218 ––––––––

The Attachmate Group Summary of significant accounting policies for the 13 months ended 30 April 2015

General information

The Attachmate Group Inc. is a private holding company that owns and consolidates both direct and indirect subsidiaries, incorporated under the laws of Delaware and is domiciled in the United States of America. The address of Attachmate's registered office is 515 Post Oak Boulevard, Suite 1200, Houston TX 77027, USA. The consolidated group is known as The Attachmate Group (which is referred to solely for purposes of this section of the Prospectus as the 'Group').

The Group was acquired on 20 November 2014 by Micro Focus International plc, a public limited company incorporated and domiciled in the UK. The address of its registered office is, The Lawn, 2230 Old Bath Road, Newbury, RG14 1QN, UK.

The Group's principal brands include Attachmate, NetIQ, Novell and SUSE which develop, sell and install enterprisequality software that is positioned in the operating systems and infrastructure software layers of the information technology industry. The Group's enterprise solutions include systems and security management and host connectivity to corporations and government agencies worldwide. The Group has a presence in 36 countries worldwide, with its most significant international operations based in Ireland, United Kingdom, Germany, India and Australia and employs approximately 3,300 people.

On acquisition by Micro Focus International plc, the Group's year end was changed from 31 March to 30 April to align the year ends of the Group and Micro Focus International plc. The 13 month period represents the period from 1 April 2014 to 30 April 2015.

On acquisition, Micro Focus International plc made a capital contribution to the Group of \$1,395,000,000 and these funds were used to repay the existing external borrowings in the Group of \$1,294,726,000. As a result of this the Group accelerated its amortization of loan facility fees (\$2,104,000) and incurred bank loan breakage fees of \$7,784,000, both of which are shown within exceptional items.

On the 24 November 2014, the Group entered into an agreement to loan \$50.0m to Micro Focus International plc at an annual interest rate of 0.39%, repayable on 23 November 2017. On the 19 February 2015 the Group entered into a further agreement to loan an additional \$128.0m to Micro Focus International plc at an annual interest rate of 0.48%, repayable on 18 February 2018. At 30 April 2015, the long term loans plus interest amounted to \$178,205,000. In addition to these loan balances there are also current account balances with Micro Focus International plc at 30 April 2015 in receivables of \$25,513,000 and payables of \$12,400,000, which are payable or repayable on demand.

The principal accounting policies adopted by the Group in the preparation of the consolidated financial statements are set out below. These policies have been applied consistently to all periods presented unless otherwise stated.

I Group accounting policies

A Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with EU endorsed International Financial Reporting Standards ('IFRS'), interpretations issued by the IFRS Interpretations Committee. The consolidated financial statements have been prepared on a going concern basis under the historical cost convention.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed below in II, 'Critical accounting estimates and assumptions'.

The principal accounting policies adopted by the Group in the preparation of the consolidated financial statements are set out below. Other than as described below, the accounting policies adopted are consistent with those of the Annual Report and Accounts for the year ended 31 March 2014, apart from standards, amendments to or interpretations of published standards adopted during the year, certain cash flow classification described in consolidated statements of cash flows; and the reclassification of costs in the consolidated statement of comprehensive income.

Reclassification of costs for Consolidated Statement of Comprehensive Income Presentation

The Group has reviewed its consolidated statement of comprehensive income presentation and has decided to reclassify both amortization of product development costs and amortization of acquired technology intangibles from research and development expenses to cost of sales. This presentation complies with IFRS and, in the view of the Group's Audit Committee, provides investors with a consolidated statement of comprehensive income presentation that is more comparable with other software companies listed on both markets. The year ended 31 March 2014 comparatives have also been reclassified and additional detail is provided on the face of the consolidated statement of comprehensive income this year.

B Consolidation

The financial statements of the Group comprise the financial statements of the Attachmate Group Inc. and the entities controlled by Attachmate, its subsidiaries and the Group's share of its interests in associates prepared at the consolidated statement of financial position date.

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group has control over an entity where the Group is exposed to, or has rights to, variable returns from its involvement within the entity and it has the power over the entity to effect those returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing control. Control is presumed to exist when the Group owns more than half of the voting rights (which does not always equal percentage ownership) unless it can be demonstrated that ownership does not constitute control. The results of subsidiaries are consolidated from the date on which control passes to the Group. The results of disposed subsidiaries are consolidated up to the date on which control passes from the Group.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, with costs directly attributable to the acquisition being expensed. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any noncontrolling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

Where new information is obtained within the 'measurement period' (defined as the earlier of the period until which the Group receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable, or one year from the acquisition date) about facts and circumstances that existed as at the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date, the Group recognizes these adjustments to the acquisition balance sheet with an equivalent offsetting adjustment to goodwill. Where new information is obtained after this measurement period has closed, this is reflected in the postacquisition period.

For partly owned subsidiaries, the allocation of net assets and net earnings to outside shareholders is shown in the line 'Attributable to noncontrolling interests' on the face of the consolidated statement of comprehensive income and the consolidated statement of financial position.

Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

At 30 April 2015, the Group had a 68.3% interest in Novell Japan Ltd.

Associates

An associate is an entity, that is neither a subsidiary or a joint venture, over whose operating and financial policies the Group exercises significant influence. Significant influence is presumed to exist where the Group has between 20% and 50% of the voting rights, but can also arise where the Group holds less than 20% if it has the power to be actively involved and influential in policy decisions affecting the entity.

Associates are accounted for under the equity method, where the consolidated statement of comprehensive income and the consolidated financial position includes the Group's share of their profits and losses and net assets, less any impairment in value. This involves recording the investment initially at cost to the Group, which therefore includes any goodwill on acquisition and then, in subsequent periods, adjusting the carrying amount of the investment to reflect the Group's share of the associates' postacquisition profits and losses, which is recognized in the consolidated statement of comprehensive income, and its share of postacquisition comprehensive income, which is recognized within the line item 'results from associates' in the consolidated statement of comprehensive income. Unrealized gains arising from transactions between the Group and its associates are eliminated to the extent of the Group's interests in the associates.

At 30 April 2015 the Group had a 14.3% interest (\$14.9m) investment in Open Invention Network LLC ('OIN'). There are seven equal shareholders of OIN, all holding 14.3% interest, and each shareholder has one board member and one alternative board member. The Group exercises significant influence over OIN's operation and therefore accounts for its investment in OIN as an associate.

C Revenue recognition

The Group recognizes revenues from sales of software Licences (including Intellectual Property and Patent rights, to endusers, resellers and Independent Software Vendors (ISV)), software maintenance, subscription, technical support, training and professional services, upon firm evidence of an arrangement, delivery of the software and determination that collection of a fixed or determinable fee is reasonably assured. ISV revenue includes fees based on end usage of ISV applications that have our software embedded in their applications. When the fees for software upgrades and enhancements, maintenance, consulting and training are bundled with the Licence fee, they are unbundled using the Group's objective evidence of the fair value of the elements represented by the Group's customary pricing for each element in separate transactions. If evidence of fair value exists for all undelivered elements and there is no such evidence of fair value established for delivered elements, revenue is first allocated to the elements where fair value has been established and the residual amount is allocated to the delivered elements.

If the arrangement includes acceptance criteria, revenue is not recognized until the Group can objectively demonstrate that the acceptance criteria have been met, or the acceptance period lapses, whichever is earlier.

The Group recognizes Licence revenue derived from sales to resellers upon delivery to resellers, provided that all other revenue recognition criteria are met; otherwise revenue is deferred and recognized upon delivery of the product to the enduser. Where the Group sells access to a Licence for a specified period of time and collection of a fixed or determinable fee is reasonably assured, Licence revenue is recognized upon delivery, except in instances where future substantive upgrades or similar performance obligations are committed to. Where these future performance obligations are specified in the Licence agreement, and fair value can be attributed to those upgrades, revenue for the future performance obligations is deferred and recognized on the basis of the fair value of the upgrades in relation to the total estimated sales value of all items covered by the Licence agreement.

Where the future performance obligations are unspecified in the Licence agreement, revenue is deferred and recognized rateably over the specified period.

For Subscription revenue where access and performance obligations are provided evenly over a defined term, the revenue is deferred and recognized rateably over the specified period.

Maintenance revenue is derived from providing technical support and software updates to customers. Maintenance revenue is recognized on a straightline basis over the term of the contract, which in most cases is one year. Revenue from consulting and training services is recognized on a percentage of completion basis as the services are performed. The stage of completion is measured on the basis of services performed to date as a percentage of the total services to be performed. Amounts collected prior to satisfying the above revenue recognition criteria are included in deferred income.

Rebates paid to partners as part of a contracted program are netted against revenue where the rebate paid is based on the achievement of sales targets made by the partner, unless the Group receives an identifiable good or service from the partner that is separable from the sales transaction and for which the Group can reasonably estimate fair value.

D Cost of sales

Cost of sales includes costs related to the amortization of product development costs, amortization of acquired technology intangibles, costs of the consulting business and helpline support and royalties payable to third parties.

E Segment reporting

In accordance with IFRS 8, 'Operating Segments', the Group has derived the information for its operating segments using the information used by the Chief Operating Decision Maker ('the Executive Committee'). This has concluded that there is a single operating segment. This operating segment is consistent with those used in the internal management reporting and the measure used by the Executive Committee is the adjusted operating profit for the Group as a whole as set out in note 3.

F Exceptional items

Exceptional items are those significant items which are separately disclosed by virtue of their size, nature or incidence to enable a full understanding of the Group's financial performance. Management of the Group first evaluates group strategic projects such as acquisitions, divestitures and integration activities, company tax restructuring and other one off events such as restructuring programs. In determining whether an event or transaction is exceptional, management of the Group considers quantitative and qualitative factors such as its expected size, precedent for similar items and the commercial context for the particular transaction, while ensuring consistent treatment between favourable and unfavourable transactions impacting revenue, income and expense. Examples of transactions which may be considered of an exceptional nature include major restructuring programmes, cost of acquisitions or the cost of integrating acquired businesses.

G Employee benefit costs

a) Pension obligations

The Group operates various pension schemes, including both defined contribution and defined benefit pension plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.

For defined contribution plans the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as an employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.

Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement. This is usually dependent on one or more factors such as age, years of service and compensation.

The liability recognized in the consolidated 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. Certain longterm pension assets do not meet the definition of plan assets as they have not been pledged to the plan and are subject to the creditors of the Group. Such assets are recorded separately in the consolidated statement of financial position as longterm pension assets. The defined benefit obligation is calculated annually by independent actuaries 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 highquality corporate bonds that have terms to mature approximating to the terms of the related pension obligation.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Pastservice costs are recognized immediately in income.

The current service cost of the defined benefit plan, recognized in the consolidated statement of comprehensive income in employee benefit expense, except where included in the cost of an asset, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements.

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 finance costs in the income statement.

Longterm pension assets relate to the reimbursement right under insurance policies held in the Group with guaranteed interest rates that do not meet the definition of a qualifying insurance policy as they have not been pledged to the plan and are subject to the creditors of the Group. Such reimbursement rights assets are recorded in the consolidated statement of financial position as longterm pension assets. Fair value of the reimbursement right asset is deemed to be the present value of the related obligation because the right to reimbursement under the insurance policies exactly matches the amount and timing of some or all of the benefits payable under the defined benefit plan.

b) Share based compensation

The Group previous owner, Wizard Parent LLC ("Wizard"), issued equity settled stock awards to certain employees. As these awards were in substance for work performed for the benefit of the Group, stockbased compensation expense and the related capital contribution was recorded for these awards. At the date of acquisition by Micro Focus International plc, the Group's remaining stock awards became exercisable.

For stock units granted, the fair value was determined at grant date. The total amount to be expensed over the vesting period is determined by reference to the fair value of the stock units granted. Nonmarket vesting conditions are included in assumptions about the number of stock units that are expected to vest. Market vesting conditions are taken into account when determining the fair value of the stock units at grant date. At each balance sheet date, the Group revised its estimates of the number of stock units that were expected to vest.

It recognized the impact of the revision of original estimates, if any, in the consolidated statement of comprehensive income, and a corresponding adjustment to equity through the share option reserve over the remaining vesting period.

The social security contributions payable in connection with the grant of the stock units was considered an integral part of the grant itself, and the charge was treated as a cashsettled transaction.

H Foreign currency translation

a) Functional and presentation currency

The presentation currency of the Group is US dollars. Items included in the financial statements of each of the Group's entities are measured in the functional currency of each entity. The Group companies uses the local currency as the functional currency, except for two entities based in Ireland (Novell Ireland Software Limited and Novell Ireland Real Estate Limited), where the functional currency is the US dollar.

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of comprehensive income.

c) Group companies

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• i) Assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate at the date of that consolidated statement of financial position;
• ii) Income and expenses for each consolidated statement of comprehensive income item are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
• iii) All resulting exchange differences are recognized as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

d) Exchange rates

The most important foreign currencies for the Group are pounds sterling, the Canadian Dollar, the Australian Dollar, the Euro and Japanese Yen. The exchange rates used are as follows:

	2015		2014
Average	Closing	Average	Closing
£1 = \$	1.60 1.54	1.60	1.68
CAD = \$	0.87 0.83	0.94	0.91
AUD = \$	0.86 0.80	0.93	0.93
€1 = \$	1.24 1.10	1.35	1.38
100 Yen = \$	0.90 0.84	0.81	0.97

I Intangible assets

a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to the cashgenerating unit for the purpose of impairment testing. This cashgenerating unit represents the Group's investment in the reporting segment.

b) Computer software

Computer software Licences are capitalized on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortized using the straightline method over their estimated useful lives of three to five years.

c) Research and development

Research expenditure is recognized as an expense as incurred in the consolidated statement of comprehensive income in research and development expenses. Costs incurred on product development projects relating to the developing of new computer software programmes and significant enhancement of existing computer software programmes are recognized as intangible assets when it is probable that the project will be a success, considering its commercial and technological feasibility, and costs can be measured reliably. Only direct costs are capitalized which are the software development employee costs and third party contractor costs. Product development costs previously recognized as an expense are not recognized as an asset in a subsequent period.

Product development costs are amortized from the commencement of the commercial production of the product on a straightline basis over the period of its expected benefit, typically being three years, and are included in costs of sales in the consolidated statement of comprehensive income.

d) Intangible assets – arising on business combinations

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortization. Amortization is charged to the consolidated statement of comprehensive income on a straightline basis over the estimated useful life of each intangible asset. Intangible assets are amortized from the date they are available for use. The estimated useful lives will vary for each category of asset acquired and to date are as follows:

Purchased software	Three to five years
Trade names	Three to eight years
Technology	Two to seven years
Customer relationships	Five to twelve years
Non­compete agreements	Two years

The Group has indefinite lived trade names and trademarks that are not subject to amortization. These indefinitelived intangible assets are classified as indefinitelived since they are expected to generate perpetual cash flows. They are tested for impairment annually, or when there may be an indication they may be impaired. These indefinitelived intangible assets are carried at cost less accumulated impairment losses.

Amortization of purchased software intangibles is included in administrative expenses, of technology intangibles in cost of sales and of trade names and customer relationships intangibles in selling and distribution costs in the consolidated statement of comprehensive income.

J Property, plant and equipment

All property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance expenditures are charged to the consolidated statement of comprehensive income during the financial year in which they are incurred. Depreciation is calculated using the straightline method to write off the cost of each asset to its residual value over its estimated useful life as follows:

Buildings	Thirty years
Leasehold improvements	Lesser of useful life or life of lease
Fixtures and fittings	Two to seven years
Computer equipment	Three years

Freehold land is not depreciated. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each consolidated statement of financial position date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the consolidated statement of comprehensive income.

Assets held for sale is measured at the lower of its carrying amount or estimated fair value less costs to dispose.

K Impairment of nonfinancial assets

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows – cashgenerating units. Any nonfinancial assets other than goodwill which have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Assets that are subject to amortization and depreciation are also reviewed for any possible impairment at each reporting date.

L Inventories

Inventories are stated at the lower of cost and net realizable value. The cost of finished goods comprises software for resale and packaging materials. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

When work has been performed and the revenue is not yet recognized, the direct costs of third party contractors and staff will be treated as work in progress where the probability of invoicing and evidence of collectability can be demonstrated.

M Trade receivables

Trade receivables are initially recognized at fair value and subsequently measured at amortized cost less provisions for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognized in the consolidated statement of comprehensive income.

N Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other shortterm highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the consolidated statement of financial position.

O Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Subsequent to initial recognition, interest bearing borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the consolidated statement of comprehensive income over the period of borrowing on an effective interest basis.

P Leases

Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the consolidated statement of comprehensive income on a straightline basis over the period of the lease.

Q Taxation

Current and deferred tax are recognized in the consolidated statement of comprehensive income, except when the tax relates to items charged or credited directly to equity, in which case the tax is also dealt with directly in equity.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the consolidated statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Current tax is recognized based on the amounts expected to be paid or recovered under the tax rates and laws that have been enacted or substantively enacted at the consolidated statement of financial position date.

R Ordinary shares, share premium and dividend distribution

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividend distributions to Attachmate's shareholders are recognized as a liability in the Group's financial statements in the period in which the dividends are approved by Attachmate's shareholders. Interim dividends are recognized when they are paid.

S Financial instruments and hedge accounting

Financial assets and liabilities are recognized in the Group's consolidated statement of financial position when the Group becomes a party to the contractual provision of the instrument. Trade receivables are noninterest bearing and are stated at their fair value less the amount of any appropriate provision for irrecoverable amounts. Trade payables are noninterest bearing and are stated at their fair value. In accordance with its treasury policy, the Group does not typically hold or issue derivative financial instruments for hedge accounting or trading purposes.

T Provisions

Provisions for onerous leases, restructuring costs and legal claims are recognized when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognized for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pretax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as an interest expense.

U Adoption of new and revised International Financial Reporting Standards

The accounting policies adopted in these consolidated financial statements are consistent with those of the annual financial statements for the year ended 31 March 2014, with the exception of the following standards, amendments to or interpretations of published standards adopted during the year:

• (a) The following standards, interpretations and amendments to existing standards are now effective and have been adopted by the Group:
• IFRS 10, 'Consolidated financial statements' (endorsed as effective annual periods beginning on or after 1 January 2014). This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements.
• IFRS 12, 'Disclosures of interests in other entities' (endorsed as effective annual periods beginning on or after 1 January 2014) includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other offbalancesheet vehicles.
• Amendments to IFRS 10, 11 and 12 on transition guidance (endorsed as effective annual periods beginning on or after 1 January 2014) provide additional transition relief in IFRSs 10, 11 and 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period.
• IAS 28 (revised 2011) 'Associates and joint ventures' (endorsed as effective annual periods beginning on or after 1 January 2014) includes the requirements for joint ventures, as well as associates to be equity accounted following the issue of IFRS 11.
• Amendments to IAS 32 on Financial instruments asset and liability offsetting (effective annual periods on or after 1 January 2014) updates the application guidance in IAS 32, 'Financial instruments: Presentation', to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.
• Amendment to IAS 36, 'Impairment of assets' on recoverable amount disclosures (effective annual periods on or after 1 January 2014) address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.

• Amendment to IAS 19 regarding defined benefit plans applies for periods beginning on or after 1 July 2014. These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans.

• Annual Improvements 2012 includes amendments to IFRS 2 'Sharebased Payment', IFRS 3 'Business Combinations', IFRS 8 'Operating Segments', IFRS 13 'Fair Value Measurement', IAS 16 'Property, Plant and Equipment', IAS 38 'Intangible Assets', IFRS 9 'Financial Instruments', IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' and IAS 39 'Financial Instruments Recognition and Measurement' applies for periods beginning on or after 1 July 2014.

• Annual Improvements 2013 includes amendments to IFRS 1 'First Time Adoption', IFRS 3 'Business Combinations', IFRS 13 'Fair Value Measurement' and IAS 40 'Investment Property' applies for periods beginning on or after 1 July 2014

The amendments above do not have a material impact to the consolidated financial statements.

• (b) The following standards, interpretations and amendments to existing standards are not yet effective and have not been adopted early by the Group:
• IFRS 15 'Revenue from Contracts with Customers' establishes 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. Application of the standard is mandatory for annual reporting periods starting from 1 January 2018 onwards (pending EU endorsement). Earlier application is permitted. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The Group is currently assessing the impact of IFRS 15 but it is too early to determine how significant the effect on reported results and financial position will be.
• Amendments to IFRS 15 'Revenue from Contracts with Customers' are effective on periods beginning on of after 1 January 2018, subject to EU endorsement. These amendments comprise clarifications of the guidance on identifying performance obligations, accounting for licences of intellectual property and the principal versus agent assessment (gross versus net revenue presentation).
• Amendments to IAS 7, Statement of cash flows on disclosure initiative 1988 are effective on periods beginning on or after 1 January 2017, subject to EU endorsement. Those amendment introduces an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities and is part of the IASB's Disclosure Initiative, which continues to explore how financial statement disclosure can be improved.
• Amendments to IAS 12,'Income taxes' on Recognition of deferred tax assets for unrealized losses are effective on periods beginning on or after 1 January 2017, subject to EU endorsement. These amendments relate to the recognition of deferred tax assets for unrealized losses clarify how to account for deferred tax assets related to debt instruments measured at fair value.
• IFRS 9 'Financial instruments'. This standard replaces the guidance in IAS 39 applies to periods beginning on or after 1 January 2018, subject to EU endorsement. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model.

• IFRS 16, 'Leases' addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on balance sheet for lessees. The standard replaces IAS 17 'Leases', and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted subject to EU endorsement and the entity adopting IFRS 15 'Revenue from contracts with customers' at the same time. The group is currently assessing the impact of IFRS 16.

• Amendments to IFRS 2, 'Share based payments' on clarifying how to account for certain types of share based payment transactions are effective on periods beginning on or after 1 January 2018, subject to EU endorsement. These amendments clarify the measurement basis for cashsettled sharebased payments and the accounting for modifications that change an award from cashsettled to equitysettled. It also introduces an exception to the principles in IFRS 2 that will require an award to be treated as if it was wholly equitysettled, where an employer is obliged to withhold an amount for the employee's tax obligation associated with a share based payment and pay that amount to the tax authority.

• Annual improvements 2014–2016 include amendments to IFRS 1,' Firsttime adoption of IFRS', IFRS 12,'Disclosure of interests in other entities' and IAS 28,'Investments in associates and joint ventures' regarding measuring an associate or joint venture at fair value applies for periods beginning on or after 1 January 2018, subject to EU endorsement.
• IFRIC 22,' Foreign currency transactions and advance consideration addresses foreign currency transactions or parts of transactions where there is consideration that is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made, effective for annual periods beginning on or after 1 January 2018, subject to EU endorsement.

For IFRS 9, IFRS 16, IFRIC 22 and IFRIC 23, it is too early to determine how significant the effect on reported results and financial position will be. The impact of IFRS 15 is discussed below. The impact of the other standards, amendments and interpretations listed above will not have a material impact on the consolidated financial statements.

Impact of IFRS 15 'Revenue from contracts with customers'

On 28 May 2014, the IASB issued IFRS 15 'Revenue from Contracts with Customers'. The new revenue recognition standard will be effective for us starting 1 November 2018, following the announcement of the new yearend date. The Group does not plan to adopt IFRS 15 early. The standard permits two possible transition methods for the adoption of the new guidance:

• Retrospectively to each prior reporting period presented in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors', or
• Retrospectively with the cumulative effect of initially applying the standard recognized on the date of the initial application (cumulative catchup approach).

The Group is currently planning to adopt the new standard using the cumulative catchup approach. The Group is in the process of assessing the impact developing its future IFRS 15 revenue recognition policies and adjusting the relevant business processes to adopt these new policies. The Group has established a project across Micro Focus' business to review the impacts of IFRS 15 and as part of this effort, the most notable difference to date is in relation to certain incremental costs of obtaining a contract. IFRS 15 requires the capitalization and amortization of certain inscope sales commissions and third party costs to match the recognition of the associated revenue. An evaluation study is underway to determine the potential impact to the consolidated financial statements in the year of adoption. There will be no impact to cash flows.

IFRS 15 may change the way the Group allocates a transaction price to individual performance obligations which can impact the classification and timing of revenues. Further analysis of the requirements is currently being undertaken to understand the possible impact, if any.

In addition to the effects on the Group consolidated statements of income, the Group expects changes to its consolidated statement of financial position (in particular due to the recognition of contract assets/contract liabilities, the differentiation between contract assets and trade receivables, the capitalization and amortization of costs of obtaining a contract and an impact in retained earnings from the initial adoption of IFRS 15) and changes in quantitative and qualitative disclosure to be added.

The Group will continue to assess all of the impacts that the application of IFRS 15 will have on its consolidated financial statements in the period of initial application, which will also significantly depend on its business and gotomarket strategy in FY2018. The impacts, if material, will be disclosed, including statements on if and how the Group will apply any of the practical expedients available in the standard.

II Critical accounting estimates and assumptions

In preparing the consolidated financial statements, the Group has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. The Group regularly reviews these estimates and updates them as required. Actual results could differ from these estimates. Unless otherwise indicated, the Group does not believe that it is likely that materially different amounts would be reported related to the accounting estimates and assumptions described below. The Group considers the following to be a description of the most significant estimates, which require the Group to make subjective and complex judgments, and matters that are inherently uncertain.

A Potential impairment of goodwill and indefinitelived intangible assets

The Group tests annually whether goodwill and indefinite lived intangible assets have suffered any impairment in accordance with the accounting policy I. The recoverable amount of the Group's cashgenerating unit has been determined based on the higher of an assets fair value less costs to sell and valueinuse calculations. These calculations require the use of estimates. Details of the Group's impairment review and sensitivities to changes in assumptions are disclosed in note 7 and note 8.

B Provision for income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated settlement of tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

The Group carries appropriate provision, based on best estimates, until tax computations are agreed with the taxation authorities.

C Development expenditure

The Group invests in the product development of future products in accordance with the accounting policy H(c). The assessment as to whether this expenditure will achieve a complete product for which the technical feasibility is assured is a matter of judgment, as is the forecasting of how the product will generate future economic benefit. Finally, the period of time over which the economic benefit associated with the expenditure occurred will arise is also a matter of judgement. These judgements are made by evaluating the development plan prepared by the research and development department and approved by management, regularly monitoring progress by using an established set of criteria for assessing technical feasibility and benchmarking to other products.

D Revenue recognition

The key areas of judgment in respect of recognizing revenue are the timing of recognition and the fair value allocation between Licence and Maintenance revenue, specifically in relation to recognition and deferral of revenue on support contracts where management assumptions and estimates are necessary.

III Financial risk factors

The Group's multinational operations expose it to a variety of financial risks that include the effects of changes in credit risk, foreign currency risk, interest rate risk and liquidity risk. Risk management is carried out by a central treasury department under policies approved by the board of directors. Group treasury identifies and evaluates financial risks alongside the Group's operating units. The board provides written principles for risk management together with specific policies covering areas such as foreign currency risk, interest rate risk, credit risk and liquidity risk, use of derivative financial instruments and nonderivative financial instruments as appropriate, and investment of excess funds.

In accordance with the treasury policy, the Group does not typically hold or issue derivative financial instruments.

A Credit risk

Financial instruments which potentially expose the Group to a concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash equivalents are deposited with highcredit quality financial institutions. The Group provides credit to customers in the normal course of business. Collateral is not required for those receivables, but ongoing credit evaluations of customers' financial conditions are performed. The Group maintains a provision for impairment based upon the expected collectability of accounts receivable. The Group sells products and services to a wide range of customers around the world and therefore believes there is no material concentration of credit risk.

B Foreign currency risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the UK Sterling, Yen and the Euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Foreign exchange risk arises when future commercial transactions, recognized assets and liabilities are denominated in a currency that is not the entity's functional currency.

There were no hedging transactions in place at 30 April 2015. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.

C Interest rate risk

The Group's income and cash generated from operations are substantially independent of changes in market interest rates. The Group's interest rate risk arises from shortterm and longterm borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group does not use interest rate swaps to manage its cash flow interest rate risk at the present time due to low market rates.

D Liquidity risk

Central treasury carries out cash flow forecasting for the Group to ensure that it has sufficient cash to meet operational requirements and to allow the repayment of the bank facility.

Surplus cash in the operating units over and above what is required for working capital needs is transferred to Group treasury. These funds are used to repay bank borrowings or invested in interest bearing current accounts, time deposits or money market deposits of the appropriate maturity period determined by consolidated cash forecasts.

Trade payables arise in the normal course of business and are all current. Onerous lease provisions are expected to mature between less than 12 months and nine years.

The Attachmate Group Notes to the historical financial information for the 13 months ended 30 April 2015

1. Segmental reporting

IFRS 8, 'Operating Segments', requires the Group to determine its operating segments based on information provided internally to the Chief Operating Decision Maker ('the Executive Committee'). Based on the internal reporting information and management structures within the Group, it has been determined that there is one reporting segment being the Group as the information reported to the Executive Committee includes operating results at a consolidated group level only.

There is also considered to be only one reporting segment which is the Group, the results of which are shown in the consolidated statement of comprehensive income.

Analysis by geography

The Group is domiciled in the USA.

The total revenue from external customers in the USA in the 13 months to 30 April 2015 is \$454.0m (12 months to 31 March 2014: \$438.6m).

The total of revenue from external customers from other countries in the 13 months to 30 April 2015 is \$532.4m (12 months to 31 March 2014: \$518.2m).

The total of noncurrent assets other than deferred tax assets and postretirement benefit assets located in the USA as at 30 April 2015 is \$1,034.7m (31 March 2014: \$1,217.8m). The total of such noncurrent assets located in other countries as at 30 April 2015 is \$284.6m (31 March 2014 \$15.6m).

Segmental noncurrent assets are based on the location of the assets. They exclude trade and other receivables, derivative financial instruments and deferred tax.

Within the Group's reporting segment the Executive Board monitors revenues both by geographic region and by product portfolio and further disclosures in this regards are given below.

The Group operates globally, with primary operations in North America; International, which consists of Europe, Middle East, Africa and Latin America; and the Asia Pacific ("APAC") regions. Revenue by geographical region is presented below:

	13 months to	12 months to 31 March 2014
	30 April 2015
	–––––––––– \$'000	–––––––––– \$'000
Geographic Revenue:
North America	496,762	489,383
International	393,518	373,629
APAC	96,148 ––––––––	93,817 ––––––––
Total Revenue	986,428	956,829
	––––––––	––––––––

Revenue by product category is presented below:

	13 months to	12 months to
	30 April	31 March
	2015	2014
	–––––––––– \$'000	–––––––––– \$'000
Product category:
Licence	175,809	192,440
Maintenance and subscription	720,157	681,861
Consulting	90,462 ––––––––	82,528 ––––––––
Total Revenue	986,428	956,829
	––––––––	––––––––

Set out below is an analysis of revenue recognized between the principal product portfolios for the 13 months ended 30 April 2015.

	Attachmate	Novell	NetIQ	SUSE	Total
	–––––––––– \$'000	–––––––– \$'000	–––––––– \$'000	–––––––– \$'000	–––––––– \$'000
Licence	91,435	24,281	60,093	–	175,809
Maintenance and subscription	102,369	209,166	181,463	227,159	720,157
Consulting	4,288	31,508	39,476	15,190	90,462
Total	–––––––– 198,092	–––––––– 264,955	–––––––– 281,032	–––––––– 242,349	–––––––– 986,428
	––––––––	––––––––	––––––––	––––––––	––––––––

Set out below is an analysis of revenue recognized between the principal product portfolios for the year ended 31 March 2014.

	Attachmate	Novell	NetIQ	SUSE	Total
	–––––––––– \$'000	–––––––– \$'000	–––––––– \$'000	–––––––– \$'000	–––––––– \$'000
Licence	79,936	37,752	74,752	–	192,440
Maintenance and subscription	100,367	228,692	170,974	181,828	681,861
Consulting	5,471	18,566	43,621	14,870	82,528
Total	–––––––– 185,774	–––––––– 285,010	–––––––– 289,347	–––––––– 196,698	–––––––– 956,829
	––––––––	––––––––	––––––––	––––––––	––––––––

2. Profit before tax

Profit before tax is stated after charging/(crediting) the following operating costs/(gains) classified by the nature of the costs/(gains):

	13 months to	12 months to
	30 April	31 March
	2015 ––––––––––	2014 ––––––––––
Note	\$'000	\$'000
Staff costs 32	444,299	442,799
Depreciation of property, plant and equipment
– owned assets 10	10,707	12,182
Amortization of intangibles 8	72,218	90,200
Loss on disposal of property, plant and equipment	2,421	357
Operating lease rentals payable:
– plant and machinery	955	3,104
– property	24,003	22,652
Provision for receivables impairment 15	(31)	134
Foreign exchange losses	3,637	4,540
Other income	14,935	–

Other income of \$14,935,000 in the 13 months to 30 April 2015 (12 months to 31 March 2014 \$nil) relates to an agreement with a customer whereby the customer prepaid an advance to the Group. The arrangement was structured such that the Group sold licences to customers and as the licences were sold the advance payment was reduced. At the end of the agreement there was a remaining \$14,935,000 that had not been utilized. This was released to the income statement and classified as other income and not revenue because it related to a termination of the agreement as opposed to license sales.

Operating profit before exceptional items is not defined in IFRS and thus may not be comparable to similarly titled measures by other companies.

Exceptional items

	13 months to	12 months to
	30 April	31 March
	2015 ––––––––––	2014 ––––––––––
	\$'000	\$'000
Reported within operating profit:
Restructuring costs and property rationalization	32,974	18,314
Impairment of intangible assets (note 8)	25,520	12,927
Impairment of prepayments	3,781	–
Integration costs	1,282	–
Costs incurred on acquisition by Micro Focus International plc	92,579 ––––––––	– ––––––––
	156,136	31,241
Reported within finance costs:
Bank loan breakage fees	7,784	–
Accelerated amortization of facility fees	2,104 ––––––––	– ––––––––
	9,888	–
	–––––––– 166,024	–––––––– 31,241
	––––––––	––––––––

The exceptional costs reported within operating profit of \$156.1m shown in the consolidated statement of comprehensive income relate to costs incurred as part of the acquisition of the Group by Micro Focus International plc which was completed on 20 November 2014. The total cash outflow of exceptional items during the period, after acquisition, was \$3.5m.

Restructuring costs and property rationalization include property costs of \$17.3m which relate to the cost of exiting entire buildings or floors of buildings which are being leased following the integration of the Group. The majority of the costs relate to the Group properties in North America. Restructuring costs and property rationalization also include severance costs of \$15.7m which arose from integrating contracted Group staff with Micro Focus International plc staff.

The impairment of intangible assets and prepayments relates to the impairment of indefinitelived trade names based on a valuation performed when the Group was acquired by Micro Focus International plc (\$13.9m) and the write off of certain Group computer systems and applications that have no future value for the Group (\$11.6m) (note 8).

Integration costs arose from the work done in bringing together Micro Focus International plc and the Group organizations into one organization, including the costs of converting the Group results into IFRS.

Costs incurred on acquisition by Micro Focus International plc include the external costs in evaluating and completing the acquisition of the Group by Micro Focus International plc. The costs include \$45.2m of sponsors' fees that were paid to the owners of Wizard Parent LLC on acquisition by Micro Focus International plc (note 35). Also included is \$23.3m of costs arising on acquisition that relate to compensation for loss of office and transition bonuses for Group directors and key management as described in note 32. The remainder of costs relate to due diligence work, legal work on the acquisition agreements and professional advisors on the transaction.

The accelerated amortization of facility fees and breakage fees relates to costs that were expensed early as a result of the repayment of bank borrowings including a breakage fee for early repayment of the bank borrowings.

Services provided by the Group's auditors and network of firms

The Group changed auditors in the period from Grant Thornton to PwC. PwC provide nonaudit services for the Group over and above the external audit, principally audit related assurance services, tax advice and due diligence work. The board of directors review the level of nonaudit fees and is confident that the objectivity and independence of the auditors is not impaired in any way by reason of its nonaudit work. Other nonaudit services in the year relate primarily to the auditors' work as Reporting Accountants in respect of the Prospectus issued for the acquisition of the Group and acquisition due diligence costs.

During the period the Group obtained the following services from the Group's current auditors (PwC) as detailed below:

	13 months to	12 months to
	30 April	31 March
	2015 ––––––––––	2014 ––––––––––
	\$'000	\$'000
Audit of Company	404	–
Audit of subsidiaries	2,123 ––––––––	– ––––––––
Total audit	2,527 ––––––––	– ––––––––
Audit related assurance services	636
Tax compliance services	22
Tax advisory services	180	–
Services related to taxation	202 ––––––––	––––––––
Other non­audit services	5,059 ––––––––	– ––––––––
Total	8,424	–
	––––––––	––––––––

During the period the Group obtained the following services from the Group's previous auditors (Grant Thornton) as detailed below:

	13 months to	12 months to
	30 April	31 March
	2015 ––––––––––	2014 ––––––––––
	\$'000	\$'000
Audit of Company	–	1,819
Audit of subsidiaries	– ––––––––	1,297 ––––––––
Total audit	– ––––––––	3,116 ––––––––
Audit related assurance services	236	–
Tax advisory services	–	50
Services related to taxation	–––––––– – ––––––––	–––––––– 50 ––––––––
Total	236	3,166
	––––––––	––––––––

3. Reconciliation of operating profit to EBITDA

13 months to	12 months to
30 April	31 March
2015	2014 ––––––––––
\$'000	\$'000
102,035	172,847
156,136	31,241
1,817	1,836
70,372	90,163 ––––––––
330,360	296,087
10,707	12,182
1,846	37 ––––––––
342,913	308,306 ––––––––
102,035	172,847
72,218	90,200
10,707	12,182 ––––––––
184,960	275,229
1,817	1,836
156,136	31,241 ––––––––
342,913	308,306
3,637	4,540 ––––––––
346,550	312,846 ––––––––
	–––––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

The directors use EBITDA, EBITDA before exceptional items and share based compensation charge but after amortization and impairment of development costs ('Adjusted EBITDA') and Adjusted EBITDA before foreign exchange gains and losses and net amortization/capitalization of development costs ('Underlying Adjusted EBITDA') as key performance measures of the business.

4. Finance income and finance costs

	13 months to	12 months to
	30 April	31 March
	2015 ––––––––––	2014 ––––––––––
	\$'000	\$'000
Finance costs
Finance costs on bank borrowings	69,797	115,377
Amortization of facility fees	437	–
Net interest expense on retirement obligations (note 23)	663	722
Net gain on derivative financial instruments	–	(4)
Other	336 ––––––––	871 ––––––––
	71,233	116,966
Included with exceptional items (note 2):
Bank loan breakage fees	7,784	–
Accelerated amortization of facility fees	2,104 ––––––––	– ––––––––
	9,888	–
Total	–––––––– 81,121	–––––––– 116,966
	––––––––	––––––––

Finance income
Bank interest
Interest receivable from Micro Focus International plc
Total
Net finance cost
5. Taxation
Current tax
Current year
Adjustments to tax in respect of previous periods
Deferred tax
Current year
Adjustments to tax in respect of previous periods
Total

A deferred tax credit of \$2,459,000 (2014: \$nil) has been recognized in the consolidated statement of changes in equity in the period in relation to the defined benefit pension schemes.

The Group realized a net charge in relation to the trueup of prior year current and deferred tax estimates of \$3.1m (2015: \$0.9m). There was a significant movement in current tax of \$10.2m wholly offset by a movement in deferred tax of \$10.2m, as a result of the Group being able to utilize significantly higher deferred tax assets (i.e. foreign tax credits) against prior year current tax liabilities than previously anticipated.

The tax for the 13 months ended 30 April 2015 is higher (2014: higher) than the standard rate of corporation tax in the USA of 38.25% (2014: 35.0%). The differences are explained below:

	13 months to	12 months to
	30 April 2015	31 March
		2014 ––––––––––
	–––––––––– \$'000	\$'000
Profit before taxation	20,874	54,615
Tax at USA corporation tax rate 38.25% (2014: 35.0%)	7,984	19,115
Effects of:
R&D credits	(752)	(1,969)
Utilization of losses not previously recognized	–	(3,171)
Impact of differences in tax rates	(12,980)	(11,946)
Movement in unrecognized deferred tax	2,290	398
Additional income arising on repatriation	10,950	43,103
Additional foreign tax credits arising on repatriation	–	(20,601)
Adjustments in respect of prior periods	(96)	877
Adjustment to amounts carried in respect of unresolved tax matters	(972)	(4,414)
Other permanent differences	4,177	602
Capital gain on dividends	–	16,658
Utilization of capital losses not previously recognized	–	(11,678)
Movement in deferred tax on unremitted earnings	– ––––––––	250 ––––––––
Total taxation	10,601	27,224

The movement in deferred tax assets and liabilities during the year is provided in note 26.

6. Dividends

No dividends were paid in the 13 months to 30 April 2015 (12 months to 31 March 2014: \$nil).

7. Goodwill

	30 April	31 March
	2015	2014
	–––––––––– \$'000	–––––––––– \$'000
Cost and net book amount
At period beginning and ending	906,052	906,052
	––––––––	––––––––

–––––––– ––––––––

The Group conducts annual impairment tests on the carrying value of goodwill, based on the net present value on the recoverable amount of the Cash Generating Units ("CGU") to which goodwill has been allocated. It has been determined that the Group has one CGU.

31 March 2014 impairment test

An impairment test is a comparison of the carrying value of the assets of the CGU with their recoverable amount, where the recoverable amount is less than the carrying value, an impairment results. The Group has historically carried out its annual impairment testing at 31 March each year.

The recoverable amounts of the CGU, is determined based on the Value in Use ("VIU") calculations. The determination of whether or not goodwill has been impaired requires an estimate to be made of the VIU of the CGU to which goodwill has been allocated. The VIU calculation includes estimates about the future financial performance of the CGU. The cash flow projections in the three financial years following the budget year reflect management's expectation of the medium and longterm operating performance of the CGU and growth prospects in the CGU's market.

Key assumptions in the 31 March 2014 impairment test

The key assumptions in the VIU calculations are the discount rate applied, the longterm operating margin and the longterm growth rate of net operating cash flows. In determining the key assumptions, management has taken into consideration the current economic climate, the resulting impact on expected growth and discount rates, and the pressure this places on impairment calculations.

Discount rate applied

The discount rate applied to the CGU represents a pretax rate that reflects market assessment of the time value of money at the balance sheet date and risks specific to the CGU. The discount rate applied to the CGU's operations was 16.7% at 31 March 2014.

Longterm operating margin

The longterm operating margin for the CGU is primarily based upon past performance adjusted as appropriate where management believes that past operating margins are not indicative of future operating margins. The longterm operating margins applied to the CGU is 33.0% at 31 March 2014.

Longterm growth rates of net operating cash flows

The longterm growth rates of net operating cash flows are assumed to be no greater than the longterm growth rate in the gross domestic product of the countries in which the CGU operates and were 2.4% as at 31 March 2014.

Summary of results for the year end 31 March 2014

During the year to 31 March 2014, all goodwill was tested for impairment, with no impairment charge resulting.

As the VIU calculation is most sensitive to a change in the longterm operating margin, the directors are of the opinion that it would take a systematic change to the market for longterm operating margins to fall to the level where an impairment would be required.

The directors consider that a reduction of 4% as at 31 March 2014 in the absolute value of longterm operating margins of the CGU would be the limit of what could be considered to be reasonably possible on the basis that the Group's cost base is flexible and could quickly respond to market changes. The Group is spread across a range of geographies and sectors and also offers customer cost saving solutions, which help to insulate it from more significant changes. If the longterm margins used in the VIU calculations for the CGU was 4% as at 31 March 2014 lower in absolute terms than management's estimates, the Group would not have any impairment charge. If the operating margins remain in perpetuity at the current year levels then there would also not be any impairment charge.

The Group bases its estimate for the longterm pretax discount rate on its weighted average cost of capital (WACC) using longterm market data and industry data to derive the appropriate inputs to the calculation. The directors have assessed that a 2% change as at 31 March 2014 in the absolute pretax discount rate is the maximum change that could be considered as reasonably possible. If the estimated pretax discount rates applied to the discounted cash flows of the CGU were 2% higher in absolute terms than the management's estimates, the Group would not have any impairment charge.

The Group considers that the longterm growth rates could change and that a 1% change is reasonably possible. If the absolute value of the longterm growth used in the VIU calculation was 1% lower than management's estimates, the Group would not have recognized any goodwill impairment charge.

The directors have considered combinations of a reduction in the longterm operating margins of the CGU combined with a reasonably possible increase in the absolute discount rate and a reasonably possible decrease in the longterm growth rates and no impairment would occur in these scenarios.

30 April 2015 impairment test

An impairment test is a comparison of the carrying value of the assets of the CGU with their recoverable amount, where the recoverable amount is less than the carrying value, an impairment results. The Group has carried out its annual impairment testing at 30 April 2015 (prior periods at 31 March).

During the 13 months to 30 April 2015, all goodwill was tested for impairment, with no impairment charge resulting.

The fair value less cost to sell for goodwill has been assessed based on the transaction price agreed for the acquisition of the Group by Micro Focus International plc on 20 November 2014. The current market data available clearly shows that the value attributable to the Group is in excess of both the amount paid by Micro Focus International plc for the Group of \$1.4bn and in excess of the net assets of that were acquired of \$0.9m as at 30 April 2015. The Group has been trading better than anticipated at the time Micro Focus International plc acquired the Group, and as such the fair value less cost to sell as at 30 April 2015 has been assessed to be not less than the transaction price paid by Micro Focus International plc and therefore there is no reason to believe that that there has been any reduction in the value of the Group. Accordingly, no impairment is considered necessary.

8. Other intangible assets

		Purchased ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
	Internally developed development software	Product costs	Customer relationships	Developed Technology	Non­ compete agreements	Definite­ lived trade names, trademarks and other	Indefinite­ lived trade names, trademarks and other	Total
	––––––––– –––––––––– \$'000	\$'000	–––––––––– \$'000	––––––––– \$'000	–––––––––– \$'000	––––––––– \$'000	–––––––– \$'000	–––––––– \$'000
Cost
At 1 April 2014	8,007	44,703	388,775	198,034	11,700	9,300	111,146	771,665
Additions	7,131	–	–	390	–	243	–	7,764
Reclassifications	(1,254) ––––––––	– ––––––––	– ––––––––	1,254 ––––––––	– ––––––––	– ––––––––	– ––––––––	– ––––––––
At 30 April 2015	13,884 ––––––––	44,703 ––––––––	388,775 ––––––––	199,678 ––––––––	11,700 ––––––––	9,543 ––––––––	111,146 ––––––––	779,429 ––––––––
Accumulated amortization
At 1 April 2014	37	36,159	252,908	180,287	11,700	6,954	15,498	503,543
Charge for the period	1,846	4,723	54,091	10,267	–	1,291	–	72,218
Impairment	11,642	–	–	–	–	–	13,878	25,520
At 30 April 2015	–––––––– 13,525 ––––––––	–––––––– 40,882 ––––––––	–––––––– 306,999 ––––––––	–––––––– 190,554 ––––––––	–––––––– 11,700 ––––––––	–––––––– 8,245 ––––––––	–––––––– 29,376 ––––––––	–––––––– 601,281 ––––––––
Net book amount at
30 April 2015	359 ––––––––	3,821 ––––––––	81,776 ––––––––	9,124 ––––––––	– ––––––––	1,298 ––––––––	81,770 ––––––––	178,148 ––––––––
Net book amount at
31 March 2014	7,970 ––––––––	8,544 ––––––––	135,867 ––––––––	17,747 ––––––––	– ––––––––	2,346 ––––––––	95,648 ––––––––	268,122 ––––––––

		Purchased ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
	Internally developed development software	Product costs	Customer relationships	Developed Technology	Non­ compete agreements	Definite­ lived trade names, trademarks and other	Indefinite­ lived trade names, trademarks and other	Total
	––––––––– –––––––––– \$'000	\$'000	–––––––––– \$'000	––––––––– \$'000	–––––––––– \$'000	––––––––– \$'000	–––––––– \$'000	–––––––– \$'000
Cost
At 1 April 2013	1,457	44,703	388,775	198,022	11,700	9,117	111,146	764,920
Additions	6,550 ––––––––	– ––––––––	– ––––––––	12 ––––––––	– ––––––––	183 ––––––––	– ––––––––	6,745 ––––––––
At 31 March 2014	8,007 ––––––––	44,703 ––––––––	388,775 ––––––––	198,034 ––––––––	11,700 ––––––––	9,300 ––––––––	111,146 ––––––––	771,665 ––––––––
Accumulated amortization
At 1 April 2013	–	25,146	202,978	152,711	11,212	5,798	2,571	400,416
Charge for the year	37	11,013	49,930	27,576	488	1,156	–	90,200
Impairment	– ––––––––	– ––––––––	– ––––––––	– ––––––––	– ––––––––	– ––––––––	12,927 ––––––––	12,927 ––––––––
At 31 March 2014	37 ––––––––	36,159 ––––––––	252,908 ––––––––	180,287 ––––––––	11,700 ––––––––	6,954 ––––––––	15,498 ––––––––	503,543 ––––––––
Net book amount at
31 March 2014	7,970 ––––––––	8,544 ––––––––	135,867 ––––––––	17,747 ––––––––	– ––––––––	2,346 ––––––––	95,648 ––––––––	268,122 ––––––––
Net book amount at
31 March 2013	1,457 ––––––––	19,557 ––––––––	185,797 ––––––––	45,311 ––––––––	488 ––––––––	3,319 ––––––––	108,575 ––––––––	364,504 ––––––––

Intangible assets primarily relate to identifiable assets purchased as part of the Group's historic business combinations. Within trade names there are Indefinitelived intangible assets that are tested for impairment annually, or when there may be an indication they may be impaired. Definitelived intangible assets are amortized on a straightline basis over their expected useful economic life – see accounting policy I (d).

The additions to intangible assets in the 13 months to 30 April 2015 primarily relate to internally developed software.

At 30 April 2015, the weighted average unamortized lives of technology assets were as follows:

	Weighted average lives
	(years)
Customer relationships	3.0
Developed technology	2.0
In­process research and development	2.0
Definite­lived trade names, trademarks and other	1.9

Amortization expense ('Charge for the period') in the table above is included in the following costs in the statement of comprehensive income:

	13 months	12 months
	ended	ended
	30 April	31 March
	2015 ––––––––––	2014 ––––––––––
	\$'000	\$'000
Cost of sales	14,990	38,589
Selling and distribution costs	55,382	51,574
Research and development expense	–	–
Administrative expense	1,846 ––––––––	37 ––––––––
Total amortization charge	72,218	90,200
	––––––––	––––––––

In the 13 months ended 30 April 2015, the Company has reviewed its consolidated statement of comprehensive income presentation and has decided to reclassify both amortization of capitalized product development costs and amortization of acquired technology intangibles from research and development expenses to costs of sales. The year ended 31 March 2014 comparatives have also been reclassified and additional detail is provided on the face of the consolidated statement of comprehensive income.

Reconciliation of previously reported in the year ended 30 April 2016:

	Cost of sales	Research and development expenses
	–––––––––– \$'000	–––––––––– \$'000
As previously reported	151,188	212,974
Amortization of product development costs	11,013	(11,013)
Amortization of acquired technology intangibles	27,576	(27,675)
After re­classification	–––––––– 189,777 ––––––––	–––––––– 174,286 ––––––––

Internally developed software

In the 13 months ended 30 April 2015 the Group made an impairment charge of \$11,642,000 (12 months to 31 March 2014: \$nil) relating to the write off of certain of the Group computer systems and applications that have no future value to the Group.

This impairment charge is included in the statement of comprehensive income in 'Exceptional items'.

There have otherwise been no impairment reversals in the period (2014: nil).

Indefinitelived assets

The Group conducts annual impairment tests on the carrying value of indefinitelived intangible assets, based on the net present value of the recoverable amount of the CGU to which the indefinitelived intangible assets has been allocated.

An impairment test is a comparison of the carrying value of the assets of the CGU with their recoverable amount, where the recoverable amount is less than the carrying value, an impairment results. The Group has carried out its annual impairment testing as at 31 March 2014 and 30 April 2015.

For the 31 March 2014 impairment assessment, this was determined based on VIU calculations. The determination of whether or not indefinitelived intangible assets have been impaired requires an estimate to be made of the VIU of the CGU to which the indefinitelived intangible assets have been allocated. The VIU calculation includes estimates about the future financial performance of the CGU. In all cases the approved budget for the following financial year forms the basis for the cash flow projections for a CGU. The cash flow projections in the three financial years following the budget year reflect management's expectation of the medium and longterm operating performance of the CGU and growth prospects in the CGU's market.

For the 30 April 2015 impairment assessment the determination of whether or not indefinitelived intangible assets have been impaired was based on management's estimate of the fair value less cost to sell of the CGU to which the indefinitelived intangible assets have been allocated. The fair value less cost to sell valuation of individual trade names was determined based on the relief from royalty method. The method considers the cash flows saved by way of internal ownership of an asset rather than having to pay a royalty for use of the asset. Individual product line forecasts form the basis for the cash flow projections.

Key assumptions

The key assumptions in the VIU calculations used for the 31 March 2014 impairment assessment are the pretax discount rate applied, the market royalty rates and the longterm growth rate of net operating cash flows. In determining the key assumptions, management has taken into consideration the current economic climate, the resulting impact on expected growth, market royalty rates and discount rates, and the pressure this places on impairment calculations.

The key assumptions of the fair value less cost of sales calculation used for the 31 April 2015 impairment assessment are the pretax discount rate applied, the market royalty rates and the revenue forecasts for individual product lines. The fair value hierarchy used was categorized as level 2.

Discount rate applied

The discount rate applied to the CGU represents a pretax rate that reflects market assessment of the time value of money at the balance sheet date and risks specific to the CGU.

Royalty rate applied

The royalty rate applied to the CGU was based upon royalty rates charged for the use of similar assets in comparable industries.

Longterm growth rates of net operating cash flows

The longterm growth rates of net operating cash flows are assumed to be no greater than the longterm growth rate in the gross domestic product of the countries in which the CGU operates.

A summary of the rates described above are presented below:

		13 months	12 months
		ended	ended
		30 April	31 March
		2015	2014
Attachmate	Discount rate	8.40%	16.70%
	Royalty rate	1.50%	2.75%
	Long­term growth rate		3.00%
NetIQ	Discount rate	8.40%	16.70%
	Royalty rate	1.50%	2.75%
	Long­term growth rate		3.00%
Novell	Discount rate	8.40%	16.70%
	Royalty rate	2.00%	2.75%
	Long­term growth rate		0.00%
SUSE	Discount rate	8.40%	16.70%
Royalty rate		5.00%	2.75%
Long­term growth rate			3.00%

Summary of results

In the 13 months to 30 April 2015, the Group recorded an impairment charge of \$13,878,000 to reduce the valuation of the Group's indefinite lived intangible assets to \$81,770,000 being the recoverable amount based on the fair value less costs to sell methodology, undertaken as a result of the Group's acquisition by Micro Focus International plc.

This impairment charge is included in the statement of comprehensive income in 'Exceptional items'.

Given that an impairment has arisen in the 13 month period ended 30 April 2015, additional impairment would arise in the scenario that assumptions were to worsen. Should there be a further decrease in royalty rates of 0.5% then there would be an additional impairment of \$3.5m, and should there be an increase in discount rate of 1% then there would be an additional impairment of \$0.9m.

There have been no impairment reversals in the period (2014: nil).

In the year ended 31 March 2014, the Group recorded impairment charges of \$12.9m, related to the Novell indefinitelived trade names which are included in the statement of comprehensive income in 'Exceptional items'. The impairment charge resulted from management's lowered expectations for forward revenue streams from Novell branded products. The lowered revenue expectations were due to competitive intensity.

The Group bases its estimate for the longterm pretax discount rate on its WACC using longterm market data and industry data to derive the appropriate inputs to the calculation. As noted, the Novell indefinitelived trademark has experienced impairment during the year ended 31 March 2014. In arriving at this impairment, the directors have considered combinations of a reduction in the market royalty rates of the CGU combined with a reasonably possible increase in the absolute pretax discount rate and a reasonably possible decrease in the longterm growth rates. An additional impairment of the Novell indefinite lived trademark would occur in the scenario that any of these assumptions were to worsen.

9. Assets classified as held for sale

30 April	31 March
2015	2014
\$'000	–––––––– \$'000
–	888 ––––––––
	–––––––– ––––––––

As of 30 April 2015, the Group had \$0.9m in property heldforsale consisting of a building in South Africa. During the year ended 30 April 2017, the decision was made to utilize the property in the future and as a result the property was reclassified as property, plant and equipment in these financial statements.

10. Property, plant and equipment

	Land and	Leasehold	Computer	Fixtures and
		buildings improvements	equipment	fittings	Total
	\$'000	–––––––– ––––––––––– \$'000	––––––––– \$'000	–––––––––– \$'000	–––––––– \$'000
Cost
At 1 April 2014	1,570	17,011	(49,177)	7,412	75,170
Reclassified from assets held for sale	888	–	–	–	888
Additions	–	6,424	4,643	1,625	12,692
Disposals	–	(1,141)	(14,460)	(484)	(16,085)
Exchange adjustments	– ––––––––	(438) ––––––––	(1,352) ––––––––	(154) ––––––––	(1,944) ––––––––
At 30 April 2015	2,458 ––––––––	21,856 ––––––––	38,008 ––––––––	8,399 ––––––––	70,721 ––––––––
Accumulated depreciation
At 1 April 2014	154	7,294	37,921	4,508	49,877
Charge for the period	57	2,915	6,642	1,093	10,707
Disposals	–	(1,141)	(12,314)	(209)	(13,664)
Exchange adjustments	(2) ––––––––	(621) ––––––––	(622) ––––––––	(104) ––––––––	(1,349) ––––––––
At 30 April 2015	209	8,447	31,627	5,288	45,571
Net book amount at 30 April 2015	–––––––– 2,249	–––––––– 13,409	–––––––– 6,381	–––––––– 3,111	–––––––– 25,150
Net book amount at 31 March 2014	–––––––– 1,416	–––––––– 9,717	–––––––– 11,256	–––––––– 2,904	–––––––– 25,293
	–––––––– Land and	–––––––– Leasehold	–––––––– Computer	–––––––– Fixtures and	––––––––
		buildings improvements	equipment	fittings	Total
	\$'000	–––––––– ––––––––––– \$'000	––––––––– \$'000	–––––––––– \$'000	–––––––– \$'000
Cost
At 1 April 2013	2,719	16,635	47,385	7,728	74,467
Additions	–	2,254	4,305	1,008	7,567
Disposals	–	(875)	(1,668)	(370)	(2,913)
Property held for sale	(995)	–	–	–	(995)
Reclassifications	–	(794)	(907)	(915)	(2,616)
Exchange adjustments	(154) ––––––––	(209) ––––––––	62 ––––––––	(39) ––––––––	(340) ––––––––
At 31 March 2014	1,570 ––––––––	17,011 ––––––––	49,177 ––––––––	7,412 ––––––––	75,170 ––––––––
Accumulated depreciation
At 1 April 2013	184	5,622	31,546	4,362	41,714
Charge for the year	89	2,656	8,392	1,045	12,182
Disposals	–	(562)	(1,639)	(355)	(2,556)
Property held for sale	(107)	–	–	–	(107)
Reclassifications	–	(372)	(910)	(487)	(1,769)
Exchange adjustments	(12) ––––––––	(50) ––––––––	532 ––––––––	(57) ––––––––	413 ––––––––
At 31 March 2014	154 ––––––––	7,294 ––––––––	37,921 ––––––––	4,508 ––––––––	49,877 ––––––––
Net book amount at 31 March 2014	1,416	9,717	11,256	2,904	25,293
Net book amount at 31 March 2013	–––––––– 2,535	–––––––– 11,013	–––––––– 15,839	–––––––– 3,366	–––––––– 32,753

–––––––– –––––––– –––––––– –––––––– ––––––––

Depreciation expense ('Charge for the period') in the above table is included in the following costs in the statement of comprehensive income:

	13 months to	12 months to
	30 April	31 March
	2015 –––––––––––	2014 –––––––––––
	\$'000	\$'000
Cost of sales	367	2,585
Selling and distribution costs	584	2,804
Research and development expense	2,926	5,752
Administrative expense	6,830 ––––––––	1,041 ––––––––
	10,707	12,182
	––––––––	––––––––

The Group carried out a review of the fixed assets in the year and as a result made some reclassifications between categories.

11. Group entities

Subsidiaries

Details of subsidiaries are provided below.

	Country of
Company names	incorporation	Principal activities
Attachmate Corporation Inc.	USA	Development, sale and support of software
NetIQ Corporation Inc.	USA	Development, sale and support of software
Novell Inc.	USA	Development, sale and support of software
SUSE LLC	USA	Development, sale and support of software
Attachmate Sales Argentina SRL	Argentina	Sale and support of software
Attachmate Group Australia Pty. Ltd	Australia	Sale and support of software
Attachmate Group Austria GmbH	Austria	Sale and support of software
Attachmate Group Belgium BV	Belgium	Sale and support of software
Novell do Brazil Software Ltd	Brazil	Sale and support of software
Novell Canada Ltd	Canada	Sale and support of software
Novell Software (Beijing) Limited	China	Sale and support of software
NOVL Czech s.r.o.	Czech Republic	Sale and support of software
SUSE Linux s.r.o.	Czech Republic	Development, sale and support of software
Attachmate Group Denmark AS	Denmark	Sale and support of software
Attachmate Group France S.a.r.l.	France	Sale and support of software
Attachmate Group Germany GmbH	Germany	Sale and support of software
SUSE Linux GmbH	Germany	Development, sale and support of software
Attachmate Group Hong Kong Ltd	Hong Kong	Sale and support of software
Novell Software Development (India)
Private Limited	India	Development, sale and support of software
Attachmate Ireland Limited	Ireland	Sale and support of software
Micro Focus Software (Ireland) Limited	Ireland	Development, sale and support of software
NetIQ Europe Limited	Ireland	Sale and support of software
Attachmate Group Italy srl	Italy	Sale and support of software
Novell Japan Ltd	Japan	Sale and support of software
NetIQ K.K.	Japan	Sale and support of software
Novell Korea Co. Ltd	Korea	Sale and support of software
Novell Corporation (Malaysia) Sdn Bhd	Malaysia	Sale and support of software
Attachmate Group Netherlands BV	Netherlands	Sale and support of software
Novell New Zealand Limited	New Zealand	Sale and support of software
Novell Portugal Informatica Lda.	Portugal	Sale and support of software

	Country of
Company names	incorporation	Principal activities
Attachmate Group South Africa
(Proprietary) Limited	South Africa	Sale and support of software
Attachmate Group Spain S.L.	Spain	Sale and support of software
Attachmate Group Singapore Pte Ltd	Singapore	Sale and support of software
Attachmate Group Sweden AB	Sweden	Sale and support of software
Attachmate Group Schweiz AG	Switzerland	Sale and support of software
Novell (Taiwan) Co. Ltd	Taiwan	Sale and support of software
Attachmate Teknoloji Satis ve
Pazarlama Ltd Sti.	Turkey	Sale and support of software
Attachmate Sales UK Ltd	UK	Sale and support of software
Novell U.K. Ltd	UK	Sale and support of software
Novell UK Software Limited	UK	Sale and support of software
Novell Holdings Deutschland GmbH	Germany	Holding company
NetIQ Ireland Limited	Ireland	Holding company
Novell Software International Limited	Ireland	Holding company
Novell Ireland Real Estate Limited	Ireland	Holding company
Novell Cayman Software Limited	Ireland	Holding company
Novell Cayman Software International
Limited	Ireland	Holding company
SUSE Linux Holdings Limited	Ireland	Holding company
Novell International Holdings Inc.	Ireland	Holding company
Novell Holdings Inc.	Ireland	Holding company
Cambridge Technology Partners do
Brasil s.c.Ltda	Brazil	Dormant
NetIQ Software International Ltd	Cyprus	Dormant
Attachmate Middle East LLC	Egypt	Dormant
Attachmate Hong Kong Limited	Hong Kong	Dormant
NetIQ Asia Ltd	Hong Kong	Dormant
Attachmate India Private Ltd	India	Dormant
Cambridge Technology Partners India
Private Limited	India	Dormant
Novell India Pvt Ltd	India	Dormant
SUSE Linux Ireland Limited	Ireland	Dormant
Novell Israel Software Limited	Israel	Dormant
Cambridge Technology Partners
(Mexico) SA de CV	Mexico	Dormant
CTP Mexico Services SA de CV	Mexico	Dormant
NetIQ Ltd	UK	Dormant
CJDNLD LLC	USA	Dormant

These companies operate principally in the country in which they are incorporated.

12. Investments in associates

The Group uses the equity method of accounting for its interest in associates. The following table shows the aggregate movement in the Group's investment in associates:

	––––––––
At 30 April 2015	14,901
Share of post­tax loss of associates	(1,784) ––––––––
At 31 March 2014	16,685
	\$'000

Details of the Group's principal associates are provided below.

	Country of	Proportion
Company name	incorporation	held	Principal activities
Open Invention Network LLC	USA	14.3%	Sale and support of software

The accounting year end date of the associate consolidated within the Group's financial statements is 31 December, and the Group obtain its results on a quarterly basis. The Group record and adjustment within the consolidated financial statements to align the reporting period of the associate and the Group. The assets, liabilities, and equity of the Group's associate as at 31 March and the revenue and loss of the Group's associate for the period ended 31 March with the corresponding adjustment to align the reporting period was as follows:

	31 March 2015
	–––––––––––– \$'000
Non­current assets	54,779
Current assets	51,488
Current liabilities	(1,425)
Non­current liabilities	(103)
Equity	(104,736)
	––––––––– 31 March 2015
	–––––––––––– \$'000
Revenue	–
Net loss	(3,328)
	––––––––– 30 April 2015
	–––––––––––– \$'000
Loss attributable to the Group for the period ended 31 March (14.3% ownership)	(476)
Adjustment on estimated April result attributable to the Group	(1,308) –––––––––
Loss attributable to the Group for the period ended 30 April (14.3% ownership)	(1,784)
	–––––––––

Open Invention Network LLC, a strategic partnership for the Group, licenses its global defensive patent pool in exchange for a pledge of nonaggression which encourages freedom of action in Linux and the sharing of new ideas and inventions. The accounting year end date of the associate consolidated within these financial statements was the 31 March 2015. There are no significant restrictions on the ability of associated undertakings to transfer funds to the parent. No dividend was received from the associate in the period (12 months to 31 March 2014: \$nil).

13. Other noncurrent assets

	30 April	31 March
	2015	2014
	\$'000	\$'000
Long­term rent deposits	3,214	3,735
Other	695 ––––––––	2,612 ––––––––
	3,909	6,347

–––––––– ––––––––

14. Inventories

	30 April	31 March
	2015 ––––––––	2014 ––––––––
	\$'000	\$'000
Work in progress	50	–
Finished goods	4	–
Total	–––––––– 54	–––––––– –

–––––––– ––––––––

15. Trade and other receivables

	30 April	31 March
	2015	2014
	–––––––– \$'000	–––––––– \$'000
Trade receivables	111,960	187,156
Less: provision for impairment of trade receivables	(244) ––––––––	(950) ––––––––
Trade receivables net	111,716	186,206
Amounts recoverable from Micro Focus International plc	25,513	–
Prepayments	12,550	16,781
Other receivables	6,286	17,056
Accrued income	9 ––––––––	8 ––––––––
Total	156,074	220,051
	––––––––	––––––––

Concentrations of credit risk with respect to trade receivables are limited due to the Group's customer base being large and unrelated. The Group considers the credit quality of trade and other receivables on a customer by customer basis. The Group considers that the carrying value of the trade and other receivables that is disclosed below gives a fair presentation of the credit quality of the assets. This is considered to be the case as there is a low risk of default due to the high number of recurring customers and credit control policies. In determining the recoverability of a trade receivable, the Group considers the ageing of each debtor and any change in the circumstances of the individual receivable. Due to this, management believes there is no further credit risk provision required in excess of the normal provision for doubtful receivables. At 30 April 2015 and 31 March 2014, the carrying amount approximates the fair value of the instrument due to the shortterm nature of the instrument.

At 30 April 2015, trade receivables of \$19.3m (31 March 2014: \$19.0m) were past due but not impaired. These relate to a large number of independent companies for whom there is no recent history of default. The amounts are regarded as recoverable. The average age of these receivables was 74 days, being 14 days in excess of due date (31 March 2014: 74 days).

As at 30 April 2015, trade receivables of \$0.2m (31 March 2014: \$1.0m) were either partially or fully impaired. The amount of the provision was \$0.2m (31 March 2014: \$1.0m). The ageing of these receivables is as follows:

––––––––
\$'000	–––––––– \$'000
125	–
119	950
244	–––––––– 950 ––––––––
	–––––––– ––––––––

Movements in the Group provision for impairment of trade receivables were as follows:

	30 April	31 March
	2015	2014
	–––––––– \$'000	–––––––– \$'000
At 1 April	950	884
Provision for receivables impairment	(31)	134
Receivables written off as uncollectable	(675) ––––––––	(68) ––––––––
At 30 April/31 March	244	950
	––––––––	––––––––

The creation and release of provision for impaired receivables have been included in selling and distribution costs in the consolidated statement of comprehensive income. Amounts charged in the allowance account are generally written off when there is no expectation of recovering additional cash. The Group does not hold any collateral as security.

16. Cash and cash equivalents

	30 April	31 March
	2015	2014
	–––––––– \$'000	–––––––– \$'000
Cash at bank and in hand	159,428	129,663
Short­term bank deposits	2,594	22,555
Cash and cash equivalents	–––––––– 162,022	–––––––– 152,218
	––––––––	––––––––

At 30 April 2015 and 31 March 2014, the carrying amount approximates to the fair value. The Group's credit risk on cash and cash equivalents is limited as most counterparties are well established banks with high credit ratings. The credit quality of cash and cash equivalents is as follows:

	30 April	31 March
	2015	2014
	–––––––– \$'000	–––––––– \$'000
S&P/Moody's/Fitch rating:
AAA	90,794	–
AA	–	56,474
AA–	33,839	–
A+	9,617	5,168
A	14,374	34,491
A–	9,977	54,805
BBB+	147	111
BBB	32	244
BBB–	2,927	–
BB+	80	122
B+	70	–
Not Rated	165 ––––––––	803 ––––––––
Total	162,022	152,218
	––––––––	––––––––

17. Trade and other payables – current

	30 April	31 March
	2015 ––––––––	2014 ––––––––
	\$'000	\$'000
Trade payables	13,764	19,978
Amounts payable to Micro Focus International plc	12,400	–
Tax and social security	7,436	12,469
Accruals	78,122 ––––––––	108,136 ––––––––
Total	111,722	140,583
	––––––––	––––––––

At 30 April 2015 and 31 March 2014, the carrying amount approximates to the fair value.

18. Borrowings

	30 April	31 March
	2015 ––––––––––	2014 ––––––––––
	\$'000	\$'000
First lien – due 22 November 2017	–	905,508
Second lien – due 22 November 2018	– ––––––––––	389,218 ––––––––––
Total borrowings, net	–	1,294,726
Less: current liabilities	– ––––––––––	32,383 ––––––––––
Total borrowings, net of current portion	– ––––––––––	1,262,343 ––––––––––
Cash at bank and in hand	162,022	152,218
Less borrowings	– ––––––––––	(1,294,726) ––––––––––
Net debt	162,022	(1,142,508)
	––––––––––	––––––––––

The borrowings of the Group were repaid as part of the acquisition by Micro Focus International plc on 20 November 2014.

19. Current tax liabilities

	30 April	31 March
	2015 ––––––––	2014 ––––––––
	\$'000	\$'000
Corporation tax	14,194	29,338
20. Deferred income – current	–––––––– 30 April	–––––––– 31 March
	2015	2014
	–––––––– \$'000	–––––––– \$'000
Deferred income	466,601	502,392
	––––––––	––––––––

Revenue not recognized in the consolidated statement of comprehensive income under the Group's accounting policy for revenue recognition is classified as deferred income in the consolidated statement of financial position to be recognized in future periods.

21. Deferred income – noncurrent

31 March
2014
–––––––– \$'000
220,429 ––––––––

Revenue not recognized in the consolidated statement of comprehensive income under the Group's accounting policy for revenue recognition is classified as deferred revenue in the consolidated statement of financial position to be recognized in future periods in excess of one year.

22. Provisions

	30 April	31 March
	2015 ––––––––	2014 ––––––––
	\$'000	\$'000
Legal	3,742	3,551
Restructuring and integration	12,950	4,320
Merger liability	–	4,172
Onerous leases and dilapidations	21,310	–
Other	6,200 ––––––––	– ––––––––
Total	44,202	12,043
Current	–––––––– 31,753	–––––––– 7,571
Non­current	12,449	4,472
Total	–––––––– 44,202	–––––––– 12,043

		Restructuring		Onerous	––––––––	––––––––
	Legal	and integration	Merger	leases and liability dilapidations	Other	Total
	\$'000	–––––––– –––––––––– \$'000	\$'000	–––––––– –––––––––– \$'000	–––––––– \$'000	–––––––– \$'000
At 1 April 2014	3,551	4,320	4,172	–	–	12,043
Additional provision in the year	5,069	12,373	–	19,015	3,200	39,657
Utilization of provision	(1,419)	(3,445)	(1,730)	(102)	–	(6,696)
Transfer	(3,000)	–	(2,442)	2,442	3,000	–
Exchange adjustments	(459) ––––––––	(298) ––––––––	– ––––––––	(45) ––––––––	– ––––––––	(802) ––––––––
At 30 April 2015	3,742	12,950	–	21,310	6,200	44,202
Current	–––––––– 3,742	–––––––– 12,607	–––––––– –	–––––––– 9,204	–––––––– 6,200	–––––––– 31,753
Non­current	–	343	–	12,106	–	12,449
Total	3,742	12,950	–	21,310	6,200	44,202
	–––––––– ––––––––	–––––––– ––––––––	–––––––– ––––––––	–––––––– ––––––––	–––––––– ––––––––	–––––––– ––––––––

		Restructuring		Onerous
		and	Merger	leases and
	Legal	integration –––––––– ––––––––––		liability dilapidations –––––––– ––––––––––	Other ––––––––	Total ––––––––
	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
At 1 April 2013	2,880	736	4,101	–	–	7,717
Additional provision in the year	1,754	18,314	71	–	–	20,139
Utilization of provision	(1,113)	(14,730)	–	–	–	(15,843)
Exchange adjustments	30 ––––––––	– ––––––––	– ––––––––	– ––––––––	– ––––––––	30 ––––––––
At 31 March 2014	3,551 ––––––––	4,320 ––––––––	4,172 ––––––––	– ––––––––	– ––––––––	12,043 ––––––––
Current	3,551	2,290	1,730	–	–	7,571
Non­current	– ––––––––	2,030 ––––––––	2,442 ––––––––	– ––––––––	– ––––––––	4,472 ––––––––
Total	3,551	4,320	4,172	–	–	12,043
	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––

Legal provisions include management's best estimate of the likely outflow of economic benefits associated with ongoing legal matters.

Restructuring provisions relates mostly to severance and integration work undertaken during the 13 month period ended 30 April 2015. The provisions are expected to be fully utilized within 12 months.

The merger liability of \$2.4m (31 March 2014: \$4.2m) acquired as part of the Novell acquisition on 27 April 2011 relates to a leased facility and is expected to be paid over the remaining lease term which extends to 2025.

The onerous lease and dilapidations provision relates to leased Group properties and this position is expected to be fully utilized within nine years. Following the integration work done to date there were surplus buildings and floors of buildings which will be sublet where possible and a provision of \$18.9m has been set up to cover for this onerous position.

Other provisions include a \$3.0m provision relating to potential software licencing issues and a \$3.2m provision for potential customer claims.

23. Pension commitments

a) Defined contribution

The Group has established a number of pension schemes around the world covering many of its employees. The principal funds are those in the US, UK and Germany. These were funded schemes of the defined contribution type. Outside of these territories, the schemes are also of the defined contribution type.

Pension costs for defined contributions schemes are as follows:

		13 months to	12 months to
		30 April	31 March
		2015	2014
		––––––––––– \$'000	––––––––––– \$'000
	Defined contribution schemes (note 32)	10,878	11,387
		––––––––	––––––––
b)	Defined benefit
		30 April	31 March
		2015 ––––––––	2014 ––––––––
		\$'000	\$'000
	Within Non­current assets:
	Long term pension assets	17,993 ––––––––	15,991 ––––––––
	Within Non­current liabilities:
	Retirement benefit obligations	(32,742) ––––––––	(22,848) ––––––––

The Group operates three defined benefit plans in Germany under broadly similar regulatory frameworks. All of the plans are final salary pension plans, which provide benefits to members in the form of a guaranteed level of pension payable for life in the case of retirement, disability and death. The level of benefits provided depends not only on the final salary but also on member's length of service, social security ceiling and other factors. Final pension entitlements are calculated by our Actuary in Swiss Life. They also complete calculations for in cases of death in service and disability. There is no requirement for the appointment of Trustees in Germany. The schemes are administered by locally with the assistance of German pension experts. All three plans were closed for new membership.

Longterm pension assets

Longterm pension assets relate to the reimbursement right under insurance policies held by the Company with guaranteed interest rates that do not meet the definition of a qualifying insurance policy as they have not been pledged to the plan and are subject to the creditors of the Group. Such reimbursement rights assets are recorded in the consolidated statement of financial position as longterm pension assets. Fair value of the reimbursement right asset is deemed to be the present value of the related obligation because the right to reimbursement under the insurance policies exactly matches the amount and timing of some or all of the benefits payable under the defined benefit plan.

	30 April	31 March
	2015 ––––––––	2014 ––––––––
	\$'000	\$'000
As at 1 April	15,991	14,203
Interest on non­plan assets	484	470
Contribution to non­plan assets	562	470
Benefits paid	(143)	–
Actuarial gain on non­plan assets included within other
comprehensive income	3,917	–
Foreign currency exchange gains	(2,818) ––––––––	848 ––––––––
As at 30 April/31 March	17,993	15,991

Retirement benefit obligations

The liability recognized in the consolidated 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 liability included in the consolidated statement of financial position arising from obligations in respect of defined benefit schemes is as follows:

–––––––– ––––––––

	30 April	31 March
	2015	2014
	–––––––– \$'000	–––––––– \$'000
Present value of funded obligations	38,224	28,729
Fair value of plan assets	(5,482)	(6,279)
Deficit of funded plans	–––––––– 32,742	–––––––– 22,450
Fair value of other post retirement obligations	–	398
	–––––––– 32,742	–––––––– 22,848

–––––––– ––––––––

The following amounts have been included in the Consolidated Income Statement in respect of the German defined benefit pension arrangements:

	13 months to	12 months to
	30 April	31 March
	2015 –––––––––––	2014 –––––––––––
	\$'000	\$'000
Current service charge	797	686
Past service charge	– ––––––––	156 ––––––––
Charge to operating profit	797 ––––––––	842 ––––––––
Interest on pension scheme liabilities	835	932
Interest on pension scheme assets	(172) ––––––––	(210) ––––––––
Charge to finance costs	663 ––––––––	722 ––––––––
Total charge to Consolidated Income Statement	1,460	1,564
	––––––––	––––––––

The contributions for the year ended 30 April 2016 is expected to be broadly in line with the current year.

The following amounts have been recognized as movements in equity:

	13 months to	12 months to
	30 April	31 March
	2015 –––––––––––	2014 –––––––––––
	\$'000	\$'000
Actuarial return on assets excluding amounts included in interest income Experience gains and losses arising on scheme liabilities	354	(27)
Changes in assumptions underlying the present value of scheme liabilities:
– Demographic	–	–
– Financial	(15,303)	2,092
– Experience	428 ––––––––	(1,116) ––––––––
	(14,875)	976
Exchange rate movement	463 ––––––––	(342) ––––––––
Movement in the year	(14,058)	607
The key assumptions used for the German scheme were:	––––––––	––––––––
	30 April	31 March
	2015 ––––––––	2014 ––––––––
Rate of increase in final pensionable salary	2.60%	2.00%
Rate of increase in pension payments	2.00%	2.00%
Discount rate	1.45%	3.40%
Inflation	2.00% ––––––––	3.40% ––––––––

The net present value of the defined benefit obligations of the German scheme is sensitive to both the actuarial assumptions used and to market conditions. If the discount rate assumption was 0.5% lower, the obligation would be expected to increase by \$5.2m and if it was 0.5% higher, they would be expected to decrease by \$4.4m. If the inflation assumption was 0.25% lower, the obligations would be expected to decrease by \$1.4m and if it was 0.25% higher, they would be expected to increase by \$1.4m.

The mortality assumptions for the German scheme are set based on actuarial advice in accordance with published statistics and experience in the territory, specifically German pension table 'Richttafeln 2005 G' by Prof. Dr. Klaus Heubeck.

These assumptions translate into an average life expectancy in years for a pensioner retiring at age 65:

	30 April ––––––––	31 March ––––––––
	2015	2014
Retiring at age 65 at the end of the reporting year:
Male	19.0	18.9
Female	23.0	23.0
Retiring 15 years after the end of the reporting year:
Male	19.0	18.8
Female	24.0	23.8
	––––––––	––––––––

The net present value of the defined benefit obligations of the German Schemes are sensitive to the life expectancy assumption. If there was an increase of one year to this assumption the obligation would be expected to increase by \$1,121,000 (2.9%).

The net present value of the defined benefit obligation has moved as follows:

	As at	As at
	30 April	31 March
	2015 ––––––––	2014 ––––––––
	\$'000	\$'000
At beginning	28,729	24,262
Current service cost	797	686
Benefits paid	(170)	(107)
Interest cost	835	932
Past service cost	–	156
Remeasurements – actuarial losses:
Demographic	–	–
Financial	15,303	2,092
Experience	(428)	(1,116)
Foreign currency exchange changes	(6,842) ––––––––	1,824 ––––––––
At end	38,224	28,729
The fair value of scheme assets has moved as follows:	––––––––	––––––––
	As at	As at
	30 April	31 March
	2015	2014
	–––––––– \$'000	–––––––– \$'000
At beginning	6,279	5,309
Interest income	172	210
Remeasurements – actuarial return on assets excluding amounts
included in interest income	354	27
Contributions by plan participants	97	355
Benefits paid	(79)	(21)
Other (transfer to non­plan assets)	(129)	–
Foreign currency exchange changes	(1,212) ––––––––	399 ––––––––

At end 5,482 6,279

None of the plan assets are represented by financial instruments of the Group. None of the plan assets are occupied or used by the Group. The plan assets compromise of reinsurance with guaranteed interest rates. The majority of the plan assets have a guaranteed interest rates of 4.0%, with the remaining at 3.25% or 2.75%.

–––––––– ––––––––

Through its defined benefit schemes the Group is exposed to a number of risks, the most significant of which are detailed below:

• Changes in bond yields A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the pledged and unpledged reinsurance holdings.
• Inflation Some of the Group pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. There is a cap on the level of inflationary increase on one of the plans which protects the plan against extreme inflation. The majority of the plan assets are either unaffected by or loosely correlated with inflation, meaning an increase in inflation will also increase the deficit.
• Life expectancy The majority of the plan obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plan liabilities.
• In the case of the defined benefit plans, the Group ensures that the investment positions are managed within an asset liability matching (ALM) that has been developed by the Group to achieve long term investments that are in line with the obligations under the pension schemes. In addition to the plan assets outlined above, the Group had reinsurance assets valued at \$14.1m at the 30 April, 2015. These assets are designated to fund the pension obligation and do not qualify as plan assets as they have not been pledged to the plan and are subject to the creditors of the Group. Within this framework the Company's objective is to match assets to the pension obligations by investing in reinsurances that match the benefit payments as they fall due and in the appropriate currency.

Sensitivities

The table below provides information on the sensitivity of the defined benefit obligation to changes to the most significant actuarial assumptions. The table shows the impact of changes to each assumption in isolation, although, in practice, changes to assumptions may occur at the same time and can either offset or compound the overall impact on the defined benefit obligation.

These sensitivities have been calculated using the same methodology as used for the main calculations. The weighted average duration of the defined benefit obligation is 25 years.

		Change in defined
	Change in assumption ––––––––––	benefit obligation ––––––––––
Discount rate for scheme liabilities	0.50%	13.5%
Price inflation	0.25%	3.5%
Salary growth rate	0.50% ––––––––	1.8% ––––––––

An increase of one year in the assumed life expectancy for both males and females would increase the defined benefit obligation by 2.9%.

24. Other noncurrent liabilities

	30 April	31 March
	2015	2014
	–––––––– \$'000	–––––––– \$'000
Accruals	8,040	7,259
	––––––––	––––––––

Other noncurrent liabilities relate mostly to deferred rent accruals.

25. Financial instruments

Credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 30 April 2015 was:

	30 April	31 March
	2015 ––––––––	2014 ––––––––
	\$'000	\$'000
Trade receivables net (note 15)	111,716	186,206
Cash and cash equivalents (note 16)	162,022 ––––––––	152,218 ––––––––
Total	273,738	338,424
	––––––––	––––––––

Risk management

The Group's treasury function aims to reduce exposures to interest rate, foreign exchange and other financial risks, to ensure liquidity is available as and when required, and to invest cash assets safely and profitably. The Group does not typically engage in speculative trading in financial instruments. The treasury function's policies and procedures are reviewed and monitored by the audit committee and are subject to internal audit review.

Foreign exchange risk

The Group's currency exposures comprise those that give rise to net currency gains and losses to be recognized in the consolidated statement of comprehensive income as well as gains and losses on consolidation which go to reserves. Such exposures reflect the monetary assets and liabilities of the Group that are not denominated in the operating or functional currency of the operating unit involved and the Group's investment in net assets in currencies other than US\$. Note 2 shows the impact on the consolidated statement of comprehensive income of foreign exchange gains in the year.

Liquidity risk

The Group monitors liquidity risk by monitoring its debt rating and the maturity dates of existing debt. The tables below summarize the maturity profile of the Group's financial liabilities at the following dates based on contractual undiscounted payments:

		30 April 2015
	Less than	1 to 2	2 to 5
On demand	1 year	years	years	>5 years	Total ––––––––
\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
–	–	–	–	–	–
–	13,764	–	–	–	13,764
–	97,958	–	–	–	97,958 ––––––––
–	111,722	–	–	–	111,722
					––––––––
	Less than	1 to 2	2 to 5
On demand	1 year	years	years	>5 years	Total ––––––––
\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
–	32,383	82,500	1,179,843	–	1,294,726
–	19,978	–	–	–	19,978
–	120,605	–	–	–	120,605 ––––––––
–	172,966	82,500	1,179,843	–	1,435,309 ––––––––
	–––––––––– –––––––– –––––––– –––––––––– –––––––– ––––––––	–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––	–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––	–––––––– –––––––– –––––––– 31 March 2014 –––––––– –––––––– ––––––––	–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

Sensitivity analysis

The Group's principal exposures in relation to market risks are the changes in the exchange rates between the US dollar and the Euro and to changes in US LIBOR interest rates. The table below illustrates the sensitivities of the Group's results to changes in these key variables as at the consolidated statement of financial position date. The analysis covers only financial assets and liabilities held at the consolidated statement of financial position date.

13 months to	12 months to
30 April	31 March
2015	2014
Consolidated	Consolidated
statement of	statement of
comprehensive	comprehensive
income	income ––––––––––––
\$'000	\$'000
2,131	1,991
–	13,950 ––––––––
	–––––––––––– ––––––––

Capital risk management

The Group's objective when managing its capital structures is to minimize the cost of capital while maintaining adequate capital to protect against volatility in earnings and net asset values. The strategy is designed to maximize shareholder return over the longterm. The relative proportion of debt to equity will be adjusted over the mediumterm depending on the cost of debt compared to equity and the level of uncertainty facing the industry and the Group.

The only financial covenant affecting the Group's new committed credit facilities is an aggregate net leverage covenant which is applicable in circumstances where more than 35% of the Revolving Facility is outstanding at a fiscal quarter end.

The capital structure of the Group at the consolidated statement of financial position date is as follows:

	30 April 2015	31 March 2014
	–––––––– \$'000	–––––––– \$'000
Bank and other borrowings (see note 18)	–	1,294,726
Less cash and cash equivalents (see note 16)	(162,022) ––––––––	(152,218) ––––––––
Total net debt	(162,022)	1,142,508
Total equity	908,230	(469,399)
Debt/equity %	–––––––– (17.84%)	–––––––– (243.40%)
	––––––––	––––––––

Market risk

The table below sets out the contractual values of financial assets and liabilities.

	Financial 30 April 2015 –––––––– \$'000	Non­ financial 30 April 2015 –––––––– \$'000	Total 30 April 2015 –––––––– \$'000	Financial 31 March 2014 –––––––– \$'000	Non­ financial 31 March 2014 –––––––– \$'000	Total 31 March 2014 –––––––– \$'000
Financial assets – loans and receivables
Current
Cash and cash equivalents
(note 16)	162,022	–	162,022	152,218	–	152,218
Trade and other receivables
(note 15)	111,716	44,358	156,074	186,206	33,845	220,051
Long­term intercompany
receivable	178,205 ––––––––	– ––––––––	178,205 ––––––––	– ––––––––	– ––––––––	– ––––––––
	451,943	44,358	496,301	338,424	33,845	372,269
Financial liabilities – financial liabilities at amortized cost	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
Non­current
Borrowings (note 18)	–	–	–	1,262,343	–	1,262,343
Provisions (note 22)	12,106	343	12,449	3,548	924	4,472
Current
Borrowings (note 18) Trade and other payables –	–	–	–	32,383	–	32,383
(note 17)	13,764	97,958	111,722	19,978	120,605	140,583
Provisions (note 22)	9,204	22,549	31,753	624	6,947	7,571
	–––––––– 35,074	–––––––– 120,850	–––––––– 155,924	–––––––– 1,318,876	–––––––– 128,476	–––––––– 1,447,352

26. Deferred tax

The analysis of deferred tax assets and deferred tax liabilities is as follows:

	30 April 2015	31 March 2014
	–––––––– \$'000	–––––––– \$'000
Group
Deferred tax assets	165,072	191,162
Deferred tax liabilities	(28,158)	(52,637)
Deferred tax asset	–––––––– 136,914	–––––––– 138,525
	––––––––	––––––––

–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

	30 April	31 March
	2015 ––––––––	2014 ––––––––
	\$'000	\$'000
Net deferred tax (liability)/asset
At 1 April	138,525	147,412
Credited to consolidated statement of comprehensive income	561	(6,878)
Credited/(debited) directly to equity	2,459	(2,009)
Foreign exchange adjustment	(4,631) ––––––––	– ––––––––
At 30 April	136,914	138,525

				––––––––	––––––––
	Tax losses	Tax credits	Deferred revenue	Other temporary differences	Total
Deferred tax assets	–––––––– \$'000	–––––––– \$'000	–––––––– \$'000	––––––––– \$'000	–––––––– \$'000
At 31 March 2014	32,418	45,410	–	113,334	191,162
(Charged)/credited to consolidated statement of comprehensive income	(4,093)	11,068	39,697	(70,693)	(24,020)
Credited to other comprehensive income	–	–	–	2,459	2,459
Foreign exchange adjustment	953	555	(105)	(5,931)	(4,528)
At 30 April 2015	–––––––– 29,278 ––––––––	–––––––– 57,033 ––––––––	–––––––– 39,592 ––––––––	–––––––– 39,169 ––––––––	–––––––– 165,072 ––––––––

Deferred tax assets are recognized for tax loss carryforwards to the extent that the utilization of the asset against future taxable profits is probable. The Group did not recognize deferred income tax assets in respect of losses amounting to gross temporary differences of \$39.6m (31 March 2014 of \$86.3m). \$0.5m of the losses not recognized expire in the years from 2020 to 2028 and \$3.5m have no expiry date. The remaining losses are permanently restricted and not available for use.

The Group did not recognize deferred income tax assets as at 30 April 2015 in respect of US federal research and development credits amounting to \$17.4m (31 March 2014: \$33.1m) that can be carried forward against future income tax.

		Other
	Intangible	temporary
	fixed assets	differences	Total
Deferred tax liabilities	––­––––––– \$'000	––––––––– \$'000	–––––––– \$'000
At 31 March 2014	(49,544)	(3,093)	(52,637)
Charged to consolidated statement of
comprehensive income	23,210	1,371	24,581
Foreign exchange	(81)	(21)	(102)
At 30 April 2015	––––––––– (26,415)	––––––––– (1,743)	–––––––– (28,158)
	–––––––––	–––––––––	––––––––

No deferred tax liability was recognized at 30 April 2015 in respect of unremitted earnings of overseas subsidiaries as the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.

27. Share capital

Ordinary shares at US\$0.001 each (2014: US\$0.001 each)

		30 April 2015 –––––––––––		31 March 2014 ––––––––––––
	Shares	\$'000	Shares	\$'000
Issued and fully paid
At beginning and end of period	1,000	–	1,000	–
	–––––––––––	–––––––––––	–––––––––––	–––––––––––
28. Capital reserve
			30 April	31 March
			2015 –––––––––	2014 –––––––––
			\$'000	\$'000
At 1 April			–	–
Capital contribution			1,395,000	–
At 30 April/31 March			––––––––– 1,395,000	––––––––– –
			–––––––––	–––––––––

On acquisition, Micro Focus International plc made a capital contribution to the Group of \$1,395,000,000 and these funds were used to repay the existing external borrowings in the Group of \$1,294,726,000.

29. Share option reserve

	30 April	31 March
	2015 ––––––––	2014 ––––––––
	\$'000	\$'000
Balance as at 1 April	6,197	7,161
Movement in relation to share options	(6,197) ––––––––	(964) ––––––––
Balance as at 30 April/31 March	–	6,197
	––––––––	––––––––

All remaining share options at the date of acquisition of the Group by Micro Focus International plc were exercised as part of the transaction.

Share based payments

Certain employees of the Group participated in various equitysettled share based compensation plans, the details of which are provided below.

Legacy common units (original grant date 1 June 2010)

Though 27 April 2011, the Group has a Stock Incentive Plan authorizing the grant of incentive and nonqualified stock options, restricted stock units and other awards that were denominated or payable in shares or common stock to employees, directors and consultants of the Group. Effective 27 April 2011, all outstanding stock awards under this plan were retired and exchanged for 2,019,107 equivalent legacy common units ("LCU") in Wizard.

Even though these LCU's were in Wizard, the units were in substance for work performed for the benefit of the Group. Therefore, the Group recorded the stockbased compensation expense and related capital contribution for these awards. The fair value of the LCU's was calculated using the fair value of the business based on a market approach. The LCU's vested over four to seven years. Total stockbased compensation expense for these legacy units were \$0.2m for the 13 months to 30 April 2015 (12 months to 31 March 2014: \$0.2m) and is included within administrative expense in the Group's consolidated statements of comprehensive income.

As a result of the acquisition of the Group by Micro Focus International plc, the remaining LCU's became vested as at 20 November 2014 and were settled by Wizard as part of the transaction.

30 April 2015 Weighted average
grant date fair
value per unit –––––––––––
\$
0.82
0.82 –––––––––––
– –––––––––––

Management incentive units (original grant date 12 September 2011)

During the fiscal year 2012, Wizard granted 2,499,650 Management Incentive Units ("MIU") in Wizard to certain employees of the Group. Even though these MIUs are in Wizard, these units were in substance for work performed for the benefit of the Group. Therefore, the Group recorded stockbased compensation expense and a related capital contribution for these awards. The fair value for the MIUs was calculated using the fair value of the business based on a market approach using an analysis of comparable companies. Total stockbased compensation expense was \$1.6m for the 13 months to 30 April 2015 (12 months to 31 March 2014: \$1.6m) and is included within administrative expense in the Group's consolidated statement of comprehensive income. The MIU grants vested over 4 years.

As a result of the acquisition of the Group by Micro Focus International plc, the remaining LCU's vested as at 20 November 2014 and were settled by Wizard as part of the transaction.

		As at
		30 April 2015
		Weighted
		average
		grant date fair
		value per unit –––––––––––
	MIU's	\$
Non­vested at 1 April 2014	609,670	5.60
Vested	(609,670)	5.60
Non­vested at 30 April 2015	––––––––––– – –––––––––––	––––––––––– – –––––––––––
30. Non­controlling interests
		\$'000
At 1 April 2014		755
Share of profit after tax		224 ––––––––
At 30 April 2015		979
		––––––––

Noncontrolling interests relate to the companies detailed below.

	Country of incorporation and
Company name –––––––––––––	principal place of business ––––––––––––––––––––––––	Proportion held –––––––––––––
Novell Japan Ltd	Japan	68.3%

31. Cash generated from operations

30 April 2015 ––––––––––– Note \$'000 10,273 4 79,377 5 10,601	31 March 2014 ––––––––––– \$'000 27,391 116,117
	27,224
1,784	1,586
10,707	12,182
2,421	–
72,218	90,200
25,520	12,927
3,173	1,836
3,637	2,954
39,657	20,139
	–
	–
89,833	(15,597)
	22,981
	(15,843)
	(19,128)
	–
	– ––––––––––
212,440	284,969
	12 10 10 8 8 22 (54) (42,297) (6,696) (69,420) (13,113) (5,181) –––––––––– ––––––––––

32. Employees and directors

	13 months to	12 months to
	30 April	31 March
	2015 –––––––––––	2014 –––––––––––
	\$'000	\$'000
Staff costs
Wages and salaries	375,042	372,890
Social security costs	55,765	55,844
Other pension costs	11,675	12,229
Cost of employee share schemes	1,817 ––––––––––	1,836 ––––––––––
Total	444,299	442,799
	––––––––––	––––––––––

13 months to
30 April
2015
\$'000
	Pension costs comprise:
797	Defined benefit schemes (note 23)
10,878	Defined contribution schemes (note 23)
11,675	Total
2015
Number
	Average monthly number of people
	(including executive directors) employed by the Group:
661	Cost of sales
958	Sales and distribution
1,331	Research and development
378	General and administration
3,328	Total
	––––––––––– –––––––– –––––––– 13 months to 30 April ––––––––––– ––––––––

The acquisition of the Group by Micro Focus International plc resulted in some changes to the key management and directors over the course of the period.

	13 months	12 months
	ended	ended
	30 April	31 March
	2015	2014
	––––––––––– \$'000	––––––––––– \$'000
Key management compensation
Short­term employee benefits	15,067	9,000
Transition bonuses	9,200	–
Share based payments	60	1,836
Other compensation schemes	32	47
Termination payments	6,815 ––––––––	– ––––––––
Total	31,174	10,883
	––––––––	––––––––

The termination payments reported in the 13 months to 30 April 2015 has been included in exceptional items (note 2). \$3.1m of short term employee benefits reported in the 13 months to 30 April 2015 has also been included in exceptional items, representing the accelerated recognition of previous employee incentives on acquisition of the Group by Micro Focus International plc. Transition bonuses relate to the acquisition of the Group by Micro Focus International plc and the transfer of employees from the existing Group to the new Micro Focus group post acquisition.

The key management figures above include the executive management team and directors. Martin Reed, Mike Phillips and Graham Norton were remunerated by the other Group companies and not this Group, and therefore their emoluments are not included above. Martin Reed has since left the Group. There are no postemployment benefits. Directors' remuneration is shown below.

	13 months to	12 months to
	30 April	31 March
	2015	2014
	––––––––––– \$'000	––––––––––– \$'000
Directors
Aggregate emoluments	2,733	3,173
Transition bonus	5,000	–
Aggregate emoluments receivable under long term incentives	–	1,085
Company contributions to the pension scheme	–	5
Compensation for loss of Office	2,250 ––––––––	– ––––––––
Total	9,983	4,263

–––––––– –––––––– The compensation for loss of office reported in the 13 months to 30 April 2015 has been included in exceptional items (note 2).

There is one legal director of the Group and as such total emoluments disclosed above are also those of the highest paid director. Of the compensation for loss of office above, \$2,187,500 has been paid to date with a further \$62,500 payable on 15 May 2016.

33. Operating lease commitments – minimum lease payments

At 30 April 2015 the Group has a number of lease agreements in respect of properties, vehicles, plant and equipment, for which the payments extend over a number of years.

	30 April	31 March
	2015	2014
	–––––––– \$'000	–––––––– \$'000
Commitments under non­cancellable operating leases expiring:
No later than one year	22,734	24,606
Later than one year and no later than five years	67,576	75,572
Later than five years	53,652 ––––––––	70,339 ––––––––
Total	143,962	170,517

–––––––– –––––––– The Group leases various offices under noncancellable operating lease agreements that are included in the table. The leases have various terms, escalation clauses and renewal rights.

34. Contingent liabilities

The Group had contingent liabilities of \$nil at 30 April 2015 (31 March 2014: \$nil).

The Company and several of its subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the ordinary course of business. The directors do not anticipate that the outcome of these proceedings, actions and claims, either individually or in aggregate, will have a material adverse effect upon the Group's financial position.

Legal proceedings

From time to time, the Group is a defendant in claims or lawsuits involving matters which are routine to the nature of our business such as claims involving former employees, or claims for infringement of patents. Management is of the opinion that the ultimate resolution of all such matters will not have a material adverse effect on its results of operations, cash flows, or financial position.

Following the announcement of the proposed acquisition of Novell, certain of Novell's shareholders filed class action lawsuits challenging the proposed transaction alleging the Novell directors breached their fiduciary duties to the Novell shareholders. During the year ended 31 March 2012, the Group accrued US\$5.0m for this claim but during the year ended 31 March 2013 certain of these lawsuits were dismissed and others were settled. As a result, during the year ended 31 March 2013, the Group reduced the US\$5.0m accrual to US\$0.4m, which is the settlement amount, paid in the year ended 31 March 2014. There are no further claims against the Group regarding this matter.

Tax Contingencies

The Group's tax filings for various periods are subjected to audit by tax authorities in jurisdictions in which the Group does business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. The Group believes that they have adequately provided for any assessments that could result from those proceedings where it is more likely than not that the Group will pay some amount.

35. Related party transactions

Transactions within the Group have been eliminated on consolidation. The remuneration of key management personnel of the Group including executive directors is set out in note 32.

Transactions with Micro Focus International plc

On acquisition, Micro Focus International plc made a capital contribution to the Group of \$1,395,000,000 and these funds were used to repay the existing external borrowings in the Group of \$1,294,726,000. As a result of this the Group accelerated its amortization of loan facility fees (\$2,104,000) and incurred bank loan breakage fees of \$7,784,000, both of which are shown within exceptional items.

On the 24 November 2014, the Group entered into an agreement to loan \$50.0m to Micro Focus International plc at an annual interest rate of 0.39%, repayable on 23 November 2017. On the 19 February 2015 the Group entered into a further agreement to loan an additional \$128.0m to Micro Focus International plc at an annual interest rate of 0.48%, repayable on 18 February 2018. At 30 April 2015, the long term loans plus interest amounted to \$178,205,000. In addition to these loan balances there are also current account balances with Micro Focus International plc at 30 April 2015 in receivables of \$25,513,000 and payables of \$12,400,000.

The remuneration of key management personnel of the Group (which is defined as members of the Executive Committee) including executive directors is set out in note 32.

At the time of the acquisition of the Group by Micro Focus International plc, the sponsors' fees had not been paid and were subsequently paid on the date of the acquisition, being \$45.2m to the owners of Wizard Parent LLC.

Advisors

The Group had an advisory agreement with certain private equity firms (the 'Advisors') that became effective with the Novell acquisition on 27 April 2011. The Group were required to make a payment to the Advisors of approximately US\$2.0m per year. The Group was also responsible for reimbursement to the Advisors for any reasonable outofpocket expenses. Advisory fees of approximately \$0.7m was included in the line item, 'administrative expense' in the accompanying consolidated statements of comprehensive income for the 13 months ended 30 April 2015 (\$2.0m for the 12 months ended 31 March 2014). Advisory fees were no longer payable after the acquisition by Micro Focus International plc on 20 November 2014.

The Group had \$nil payable to Advisors for advisory services as at 30 April 2015 (\$0.2m as at 31 March 2014).

Novell Intellectual Property Holdings, Inc.

Novell Intellectual Property Holdings, Inc. ("NIPH") is a separate company also owned by Wizard, the Group's parent, but NIPH is not part of the Group consolidated entity. NIPH is a separate holding company without any operations. The Group is serving as NIPH's billing agent and as at 30 April 2015 \$41,000 (31 March 2014: \$36,000) has been advanced to pay certain legal and patent maintenance fees on behalf of NIPH. As this service is insignificant, the service is being performed without charge to NIPH and likewise NIPH is not charging the Group interest on the cash advance. The cash advance was settled in December 2014 and there have been no further transactions.

36. Controlling parties

The immediate parent undertaking of the Group is Micro Focus (US) Inc. The ultimate parent undertaking and controlling party is Micro Focus International plc, a company incorporated in the United Kingdom. Micro Focus International plc is the parent undertaking of the largest and smallest group of undertakings to consolidate these financial statements at 30 April 2015. The consolidated financial statements of Micro Focus International plc is available from The Lawn, 2230 Old Bath Road, Newbury, Berkshire RG14 1QN United Kingdom.

PART V

INFORMATION ON HPE SOFTWARE

1. OVERVIEW

HPE Software provides big data platform analytics, application testing and delivery management, security and information governance and IT operations management solutions for businesses and other enterprises of all sizes. HPE Software's offerings include licences, support, professional services and SaaS.

HPE Software consists of one reportable segment which engages in the development and sale of software solutions. HPE Software organises its business into the following four product groups:

Big Data Platform Analytics

HPE Software's Big Data Platform Analytics product group provides a full suite of software designed to help organisations capture, store, explore, analyse, protect and share information and insights within and outside their organisations to improve business outcomes.

Application Testing and Delivery Management

HPE Software's Application Testing and Delivery Management product group provides software that enables organisations to deliver highperformance applications, accelerating the application delivery life cycle and automating the testing processes to ensure the quality and scalability of desktop, web, mobile and Cloudbased applications.

Security and Information Governance

HPE Software's Security and Information Governance product group provides comprehensive solutions that span security and risk management, with a focus on protecting users, applications and data, while also enabling customers to manage risks and meet legal obligations.

IT Operations Management

HPE Software's IT Operations Management product group provides the software required to automate routine IT tasks and to pinpoint IT problems as they occur, helping enterprises to reduce operational costs and improve the reliability of applications running in a traditional, Cloud or hybrid environment.

2. HPE SOFTWARE'S STRATEGY

HPE Software is a leading global software provider focused on creating the solutions necessary to deliver, manage, monitor and secure customer applications, information and infrastructure at any scale. Its goal is to provide customers with a bestinclass portfolio of enterprisegrade scalable software with analytics built in. HPE Software believes in putting customers at the centre of its innovation and building high quality products that satisfy customers' needs.

HPE Software's application and delivery management stack ensures that the functional, performance and security needs of the application are met and allows customers to work in traditional or agile (Development and Operations oriented) scenarios. This, coupled with HPE Software's capabilities regarding release automation and IT operations, ensures that customers are able to deploy their applications and data in various modes in open environments and using any infrastructure, whether mainframe, traditional enterprise, Cloud or mobile. Furthermore, HPE Software enables customers to manage their hybrid infrastructure through automated policies with continuous monitoring and optimisation to allow customers to maximise efficiencies and identify any threats in the IT landscape. HPE Software offers risk management solutions, ranging from application and data security to protection against security threats to data backup and recovery, that help customers protect themselves and their data in an increasingly volatile cybersecurity landscape. This allows customers to take a security "built in" vs "bolt on" approach. HPE Software's products and services are informed by decades of IT security experience and help customers to predict and disrupt threats, manage risk and compliance, and extend their internal security team.

HPE Software's products and services are underpinned by big data and analytics to drive insights that enable customers to be proactive, predictive, and preventive rather than reactive. This capability is essential in today's environment given the increasing volumes of data customers are faced with as a result of the number of connected devices in the IT landscape, from Cloud enabled data centres to mobile to IoT. HPE Software's strategy is to leverage its big data technology to enable analytics for business and IT, across application delivery to security to IT operations management. By helping customers address and derive greater value from their volumes of data, HPE Software is also wellpositioned to leverage its analytics platform to address additional customer needs, thereby providing opportunities to drive increased revenue and growth across its product portfolio.

3. RECENT ACQUISITIONS AND DISPOSALS

HPE Software engages in strategic acquisitions and disposals from time to time. The HPE Group has completed the following recent acquisitions and dispositions, among others, involving HPE Software:

• 20 February 2015: the acquisition of Voltage Security, Inc. ("Voltage"), a datacentric security software solutions company, rounded out an already robust security portfolio for HPE Software and aligned with HPE Software's core strategy of security as an anchor point. Voltage's datacentric encryption and tokenisation technology complements HPE Software's solutions. HPE Software's information security and encryption business helps customers protect their most sensitive information whether it resides in the Cloud, across mobile platforms, in big data environments, or within legacy computer systems for critical regulatory compliance. The acquisition aligns with HPE Software's focus on endtoend protection of the data itself, helping enterprises neutralise the impact of a breach and proactively combat new security threats.
• 21 July 2015: the sale of its iManage business, a provider of content management solutions for law firms, corporate legal departments and other professional services firms such as accounting and financial services. The business was in a niche segment of the market that was not strategic to HPE Software.
• 30 September 2015: the sale of its LiveVault business, a provider of Cloudbased data backup and recovery solutions for companies and organisations. LiveVault's backup offering is targeted at the Small and Medium Sized business market, which was not a core focus area for HPE Software.
• 3 February 2016: the acquisition of Trilead AG, a provider of backup solutions targeted exclusively on virtualised environments. This acquisition provided competitive virtualisation backup capabilities and complements and completes a virtualisation management suite that includes, amongst other things, backup, archiving, file analytics and resource tiring, enabling HPE Software to better capture the large and growing market opportunity for backup in virtualised environments.
• 8 March 2016: the sale of its TippingPoint business, a provider of nextgeneration intrusion prevention systems and related network security solutions. This business had limited synergy with the rest of HPE Software's security portfolio and could be best optimised by a buyer whose focus is on network security.

4. PRODUCT PORTFOLIOS

Big Data Platform Analytics

HPE Software's Big Data Platform Analytics product group provides a full suite of software designed to help organisations capture, store, explore, analyse, protect and share information and insights within and outside their organisations to improve business outcomes. HPE Software's Big Data suite includes Vertica, an analytics database technology for machine, structured and semistructured data, and IDOL, an analytics tool for unstructured information, including audio, video and text.

Vertica:

• is an advanced analytics SQL engine that enables organisations to make data driven decisions in near realtime;

• is purpose built to address the most demanding analytic and predictive machine learning workloads. It is also a data lake for structured and semistructured data offering speed, scale, and functionality;
• delivers speed and scale with the broadest options for deployment on premise on commodity hardware, on Hadoop, or multiCloud;
• is intentionally built with an open architecture to integrate with all leading BI and visualisation tools, ETL tools, and open source technologies; and
• is used by a wide variety of organisations, including heavily data driven organisations, because they need a platform that can handle the volume and dynamic workloads and meet ever growing demands.

IDOL:

• is an analytics tool for unstructured information, including audio, video and text;
• is a unified data analytics platform supporting 1,000 data formats encompassing text, video, image, and audio content;
• enables outofthebox access to 150 data repositories behind and beyond your customer's firewall;
• unlocks hidden insights by revealing trends, patterns, and relationships to help gain an indepth understanding of user profiles and actions to personalise knowledge delivery; and
• through Natural Language Question Answering, empowers organisations to tap into the full potential of big data by breaking down the barriers between machines and humans. It effectively unleashes the power of machine learning by enabling natural language based humancentric exchanges in delivering the contextually relevant information.

Application Testing and Delivery Management

HPE Software's Application Testing and Delivery Management ("ADM") product group provides software that enables organisations to deliver highperformance applications, accelerating the application delivery life cycle and automating testing processes to ensure the quality and scalability of desktop, web, mobile and Cloudbased applications. ADM products help customers bridge the Securing DevOps continuum with product suites for Enterprise DevOps, Mobility, Life Cycle Virtualisation, Performance Engineering, Functional Testing and Application Performance Management. These solutions help customers to continually deliver enhanced user experiences across technologies with quality, speed and confidence, helping accelerate the planning, testing, delivery and support of optimised applications by:

• providing an open, integrated DevOps toolchain at the core, and enabled by intelligent test automation software, supporting continuous testing across functional, performance and security to predictably achieve results;
• delivering a platform for a hybridCloud test lab supporting continuous functional and performance testing of software destined for all types of devices, web, mobile and IoT. This test lab leverages the scalability of the Cloud and provides intelligent analytics and lifecycle virtualisation to test against highly constrained environments; and
• extending the modern platform for application lifecycle management so that all data sources across development, testing and production operations can be used to provide realtime insights and predictive recommendations, enabling customers to manage the complexity of continuous delivery, new software architectures and dynamic device footprints through insights based on big data and machine learning, to transition from a reactandrespond to predictandoptimise posture.

Security and Information Governance

HPE Software's Security and Information Governance product group provides comprehensive solutions that span security and risk management, with a focus on protecting users, applications and data, while also enabling customers to manage risks and meet legal obligations. HPE's Security software is designed to disrupt fraud, hackers and cyber criminals by testing and scanning software for security vulnerabilities, improving network defences and security, implementing security controls, safeguarding data at rest, in motion and in use (regardless of where software and data reside) and providing security intelligence, analytics and information management to identify threats and manage risk. HPE Software's Information Governance software provides solutions for archiving, data protection, eDiscovery and enterprise content management. HPE Software's Security software as well as Information Governance offerings allow it to deliver unique offerings that address its customers evolving data needs.

The following graphic outlines the principal products included in HPE Software's Security and Information Governance software offering:

IT Operations Management

HPE Software's IT Operations Management product group provides the software required to automate routine IT tasks and to pinpoint IT problems as they occur, helping enterprises to reduce operational costs and improve the reliability of applications running in a traditional, Cloud or hybrid environment. The IT Operations Management product group consists of:

• Automation solutions: solutions which help automate IT tasks and intelligently drive efficiency across the virtualised data centre through the power of analytics and visualise and control hybrid infrastructure;
• Orchestration solutions: endtoend Cloud solutions that offer greater flexibility and simplified operations to increase speed of delivery in a heterogeneous, hybrid Cloud environment; and
• Transformation solutions: solutions to help transform IT from a technology resources cost centre to a value creating business partner with the ability to broker consumption of services to support rapidly changing business environments.

5. SALES, MARKETING AND DISTRIBUTION

HPE Software has over 30,000 customers worldwide, including 98 of the Fortune 100 companies. HPE Software's customers are organised by commercial and large enterprise groups, including business and public sector enterprises, and purchases of solutions and services may be fulfilled directly by HPE Software or indirectly through a variety of partners, including:

• resellers that sell HPE Software's products and services, frequently with their own valueadded products or services, to targeted customer groups;
• distribution partners that supply HPE Software's solutions to resellers;
• OEMs that integrate HPE Software's services with their own products and services, and sell the integrated solution;
• independent software vendors that provide their clients with specialised software products and often assist HPE Software in selling its products and services to clients purchasing their products;
• systems integrators that provide expertise in designing and implementing custom IT solutions and often partner with HPE Software to extend their expertise or influence the sale of HPE Software's products and services; and
• advisory firms that provide various levels of management and IT consulting, including systems integration work, and typically partner with HPE Software on client solutions that require HPE Software's products and services.

The mix of HPE Software's business conducted by direct sales or channel differs substantially by customer type and region. HPE Software believes that customer buying patterns and different regional market conditions require HPE Software to tailor sales and marketing efforts accordingly. HPE Software is focused on driving the depth and breadth of its coverage, in addition to identifying efficiencies and productivity gains, in both direct and indirect businesses.

6. INTERNATIONAL

HPE Software's products are available worldwide. HPE Software believes this geographic diversity allows HPE Software to meet demand on a worldwide basis for customers, draws on business and technical expertise from an international workforce, provides stability to operations, provides revenue streams that may offset geographic economic trends and offers HPE Software an opportunity to access new markets for its maturing products. HPE Software believes that its broad geographic presence gives HPE Software a solid base on which to build future growth.

Approximately 51 per cent. of HPE Software's overall net revenue in the financial year ended 31 October 2016 came from outside the United States.

7. RESEARCH AND DEVELOPMENT

HPE Software's research and development efforts are focused on designing and developing products, services and solutions that anticipate customers' changing needs and desires and emerging technological trends. These efforts are also focused on identifying the areas where HPE Software believes it can make a unique contribution and where partnering with other leading technology companies will leverage HPE Software's cost structure and maximise customers' experiences.

Research and development expense was US\$608 million in the financial year ended 31 October 2016, US\$681 million in the financial year ended 31 October 2015 and US\$683 million in the financial year ended 31 October 2014.

8. PATENTS

HPE Software's general policy is to seek patent protection for those inventions likely to be incorporated into products and services or where obtaining such proprietary rights will improve HPE Software's competitive position. HPE Software's worldwide patent portfolio includes approximately 2,000 granted patents and pending patent applications.

Patents generally have a term of up to 20 years from the date they are filed. As HPE Software's patent portfolio has been built over time, the remaining terms of the individual patents across the patent portfolio vary. HPE Software believes that its patents and patent applications are important for maintaining the competitive differentiation of its products and services, enhancing its freedom of action to sell products and services in markets in which HPE Software chooses to participate, and maximizing its return on research and development investments. No single patent is in itself essential to the business as a whole.

9. ENVIRONMENT

HPE Software's operations are subject to regulation under various US federal, state and local laws and foreign laws concerning the environment, including laws addressing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites. HPE Software could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, and thirdparty damage or personal injury claims, if HPE Software were to violate or become liable under environmental laws.

HPE Software is committed to maintaining compliance with all environmental laws applicable to its operations and services and to reducing the environmental impact of its business. HPE Software meets this commitment with a comprehensive environmental, health and safety policy and management of its operations and services.

Environmental costs and accruals are presently not material to HPE Software's operations, cash flows or financial position. Although there is no assurance that existing or future environmental laws will not have a material adverse effect on HPE Software's operations, cash flows or financial condition, HPE Software does not currently anticipate material capital expenditures for environmental control facilities.

10. EMPLOYEES

HPE Software had approximately 12,200 regular active employees as of 31 October 2016. Upon Completion, HPE Software's total headcount will also include certain staff transferring from the HPE Global Marketing Team and central corporate functions of HPE in the Separation. Including these employees, the total headcount for HPE Software would have comprised approximately 16,900 employees as of 31 October 2016.

11. PROPERTIES

As of 10 July 2017, HPE Software owned or leased approximately 2 million square feet of space worldwide, including areas occupied by staff in central functions supporting HPE Software.

12. PRINCIPAL EXECUTIVE OFFICES

HPE Software's principal executive offices are located at 3000 Hanover Street, Palo Alto, California, 94304, United States of America.

13. PRODUCT DEVELOPMENT, SERVICES AND MANUFACTURING

The locations of HPE Software's major and significant facilities are as follows:

Major Facilities

Americas Sunnyvale, CA, United States Austin, TX, United States

Asia Pacific Bangalore, India Shanghai, China

Europe, Middle East, Africa Yehud, Israel

Significant Facilities

Americas Heredía, Costa Rica Cambridge, MA, United States

Asia Pacific Bangalore, India Chennai, India

Europe, Middle East, Africa Prague, Czech Republic ClujNapoca, Romania Sofia, Bulgaria Boeblingen, Germany Bracknell, United Kingdom

14. SELECTED FINANCIAL INFORMATION

HPE Software has divested certain businesses during the two financial years ended 31 October 2015 and 31 October 2016, including Tipping Point, Live Vault and iManage. In addition, HPE transferred the Marketing Optimisation product group and HPPA Teleform to HP Inc., in the fourth quarter of HPE's financial year ended 31 October 2015 in connection with the separation of HPE from HP Inc. The below table sets out the impact of these divestitures and transfers. These numbers have not been adjusted for the acquisition of Voltage Security by HPE during the financial year ended 31 October 2015.

The financial information presented below differs from that contained in the "HPE Software financial results update" announcement, released by the Company on 3 April 2017. These differences arise as the below financial information is extracted from the HPE Software Historical Financial Information (as set out in Section B of Part VII (Historical Financial Information of HPE Software)) which was prepared in accordance with the Company's accounting policies under IFRS and the conventions set out in SIR 2000 for the preparation of carveout financial information, whereas the financial information presented in the 3 April 2017 announcement was derived from information prepared under HPE's accounting policies in US GAAP and utilising SEC carveout accounting rules.

One notable area of difference in relation to the years ended 31 October 2016 and 31 October 2015 is that the presentation of gains on disposals of businesses is presented below as an exceptional item which is excluded from HPE Software Underlying Adjusted EBITDA. This has a corresponding impact on the Underlying Adjusted EBITDA impacts of transfers and divestitures in the period relating to "Other divestitures".

	For the three
	months ended		For the financial year
	31 January	ended 31 October
	2017	2016	2015	2014
	\$m	\$m	\$m	\$m
Software revenue as reported in the HPE Software
Historical Financial Information	724	3,198	3,629	3,929
Revenue impact of transfers and divestitures in the track record period:
Marketing Optimisation product group transfer	–	–	(163)	(232)
Other divestitures*	–	(69)	(271)	(310)

	For the three
	months ended		For the financial year
	31 January		ended 31 October
	2017	2016	2015	2014
	\$m	\$m	\$m	\$m
HPE Software profit before tax as reported in the
HPE Software Historical Financial Information	1	137	246	361
Add back net finance (income) costs	(13)	72	44	3
Add back other expenses, net	–	–	–	2
Add back loss on available­for­sale securities
reclassified into earnings	–	–	3	2
Add back amortisation of intangible assets	35	161	254	281
Add back depreciation of property, plant and equipment	14	60	82	82
HPE Software EBITDA	37	430	629	731
Add back separation costs	74	106	91	–
Add back restructuring charges	33	110	34	45
Add back share­based compensation	16	91	62	62
Add back acquisition costs	1	3	5	10
Less gain on disposal of business	–	(82)	(7)	–
Less defined benefit plan settlement and
re­measurement benefit	(1)	–	–	–
HPE Software Underlying Adjusted EBITDA**	160	658	814	848
Underlying adjusted EBITDA impact of transfers and
divestitures in the track record period:
Marketing Optimisation product group transfer	–	–	(33)	(48)
Other divestitures*	–	(15)	(140)	(154)

Note that EBITDA and Underlying Adjusted EBITDA are alternative performance measures.

* Divestitures of Tipping Point, iManage, Live Vault and HPPA Teleform. Amounts shown for these divestitures are HPE Software's estimate of the amount of revenue and EBITDA generated by these divested businesses during the periods presented, adjusted for HPE Software's estimate of overhead and other costs that HPE Software retained following divestment of these businesses.

** The Company reports a metric referred to as "Facility EBITDA," which is defined on page 46 of this Prospectus. HPE Software's Underlying Adjusted EBITDA and Facility EBITDA as calculated result in the same figure.

PART VI

OPERATING AND FINANCIAL REVIEW OF HPE SOFTWARE

The following discussion of HPE Software's financial condition and results of operations should be read in conjunction with the Risk Factors, the combined historical financial information of HPE Software and the notes related thereto set out in Part VII (Historical Financial Information of HPE Software) and the information related to the business of HPE Software contained elsewhere in this Prospectus. Except as otherwise stated, the financial information included in this Part VI (Operating and Financial Review of HPE Software) has been extracted without material adjustment from the combined historical financial information set out in Part VII (Historical Financial Information of HPE Software). The combined historical financial information referred to in this Part VI (Operating and Financial Review of HPE Software) has been prepared in accordance with IFRS as adopted by the European Union and the conventions set out in SIR 2000 for the preparation of carveout financial statements as explained in Section B of Part VII (Historical Financial Information of HPE Software).

The following Operating and Financial Review compares the three months ended 31 January 2017 to the three months ended 31 January 2016, the financial year ended 31 October 2016 to the financial year ended 31 October 2015 and the financial year ended 31 October 2015 to the financial year ended 31 October 2014, unless otherwise noted. The Capital Resources discussion presents information as of 31 October 2016, unless otherwise noted.

Background

HPE Software provides big data platform analytics, security and information governance, application testing and delivery management, and IT operations management solutions for businesses and other enterprises of all sizes. HPE Software's offerings include licences, support, professional services and SaaS. HPE Software consists of one reportable segment, the development and sale of software solutions.

On 1 November 2015, HPE was spun off in a transaction in which HP Inc., formerly known as HewlettPackard Company, separated into two independent publicly traded companies (the "2015 Separation"). Accordingly, in this Part VI (Operating and Financial Review of HPE Software), the term "Parent" refers to the HewlettPackard Company for periods prior to 1 November 2015 and to HPE from 1 November 2015 onward.

Business Transferred to Parent

Prior to the 2015 Separation, HP Inc. conducted a strategic review of HPE Software and decided that the marketing optimization software product group, which had historically been managed by HPE Software and included in HPE Software's results of operations, no longer aligned with HPE Software's strategic charter, as it was outside HPE Software's gotomarket focus of selling to IT departments. However, HP Inc. determined that these software assets primarily aligned with a document management and solutions ecosystem that would complement its printing business. As a result of this strategic review process, the marketing optimization software product group was realigned to become a part of HP Inc. This realignment is reflected in the combined historical financial information of HPE Software as a transfer of the marketing optimization software product group from HPE Software to its Parent during the financial year ended 31 October 2015. This realignment did not qualify under the scope of IFRS 5 "Noncurrent Assets Held for Sale and Discontinued Operations" and therefore is incorporated within the combined historical financial information under continuing operations.

The following table presents the carrying value of the marketing optimization software product group's assets and liabilities at the date of transfer:

In millions USD

\$512
91
(37)
–––––––– \$566

(1) Goodwill was allocated on a relative fair value basis.

Revenues related to the marketing optimization software product group included in HPE Software's results of operations were as follows:

	Years ended 31 October ––––––––––––––––––––––
In millions USD	2015	2014
–––––––––––––––––– Revenues	–––––––– 163	–––––––– 232
	––––––––	––––––––

Business Combinations and Divestitures

Business Combinations

In February 2016, HPE Software acquired the entire share capital of Trilead GmbH, a data protection software company, for a purchase price of US\$12 million. In connection with this acquisition, HPE Software recorded US\$10 million of goodwill (which is not deductible for tax purposes), US\$4 million of amortisable intangible assets, and assumed US\$2 million of net liabilities.

In February 2015, HPE Software acquired the entire share capital of Voltage Security, a datacentric security software solutions company, for a purchase price of US\$160 million. In connection with this acquisition, HPE Software recorded US\$102 million of goodwill (which is not deductible for tax purposes), US\$48 million of amortisable intangible assets and assumed US\$10 million of net assets.

In March 2014, HPE Software acquired the entire share capital of Shunra Software, an application performance engineering company, for a purchase price of US\$20 million. In connection with this acquisition, HPE Software recorded US\$12 million of goodwill, US\$7 million of amortisable intangible assets and assumed US\$1 million of net assets.

HPE Software has used acquisition accounting for the acquisitions described above and the resulting goodwill has been capitalised. There were no contingent consideration payments included in any of the acquisitions described above.

Divestitures

In the financial year ended 31 October 2016, HPE Software completed the sale of its TippingPoint business to Trend Micro International for approximately US\$300 million. Cash proceeds from the sale of HPE Software's Tipping Point business included a US\$25 million deposit in the financial year ended 31 October 2015 and US\$254 million in the financial year ended 31 October 2016. The remaining amount of approximately US\$21 million was related to inventory and tooling assets retained by HPE Software in connection with a transition services agreement under which HPE Software produced products for the divested business until the termination of the transition services agreement in HPE Software's three months ended 30 April 2017. Upon termination of the transition services agreement, Trend Micro International became obligated to purchase any remaining TippingPoint related inventory and tooling. As of 30 April 2017, substantially all remaining TippingPoint related inventory and tooling had been shipped to Trend Micro International. An US\$82 million gain related to the divestiture of Tipping Point was included in the combined statement of comprehensive income in the financial year ended 31 October 2016.

In the financial year ended 31 October 2015, HPE Software completed the sales of its LiveVault and iManage businesses for combined proceeds of US\$149 million. The total gain of US\$7 million associated with these divestitures was included in the combined statement of comprehensive income. Net proceeds from the 2015 divestitures of LiveVault and iManage combined with the deposit for the 2016 sale of TippingPoint totaled US\$174 million.

Trends and Uncertainties

HPE Software is in the process of addressing many challenges facing its business. One set of challenges relates to dynamic market trends, such as the market shift to cloudrelated software. Another set of challenges relates to changes in the competitive landscape. HPE Software's major competitors are expanding their product and service offerings with integrated products and solutions, HPE Software's businessspecific competitors are exerting increased competitive pressure in targeted areas and are entering new markets, HPE Software's emerging competitors are introducing new technologies and business models, and HPE Software's alliance partners in some businesses are increasingly becoming competitors in others. A third set of challenges relates to business model changes and HPE Software's gotomarket execution.

The macroeconomic weakness HPE Software has experienced in some geographic regions has moderated but remains an overall challenge. HPE Software is facing challenges, including the market shift to SaaS and gotomarket execution challenges. The market shift to SaaS has caused HPE Software and other more mature enterprise software companies to face increased competition from smaller, less traditional competitors. Certain of these smaller, less traditional competitors are successfully growing their revenues while HPE Software and other more mature enterprise software companies are generally experiencing flat to declining licence revenues with a resulting impact on support and professional services revenues. To be successful in addressing these challenges, HPE Software must improve its gotomarket execution with multiple product delivery models, including SaaS, which better address customer needs and achieve broader integration across its overall product portfolio as it works to capitalise on important market opportunities in cloud, big data and security. The transition HPE Software is undergoing as it prepares for the Transaction, including the formation of a new legal entity structure, a global sales transformation to enable a digital and partner model in certain geographies, and a ramping up of the partnership with DXC Technology Company, is having an unfavourable impact on HPE Software's revenue growth.

For a further discussion of trends, uncertainties and other factors that could impact HPE Software's operating results, see the Risk Factors.

Significant Accounting Policies

A summary of HPE Software's significant accounting policies is included in Note 1, "Seattle's accounting policies," to the combined historical financial information contained in Part VII (Historical Financial Information of HPE Software).

Results of Operations

Overview – Three Months Ended 31 January 2017

The following provides an overview of HPE Software's key financial metrics for the three months ended 31 January 2017 as compared to the three months ended 31 January 2016:

	In millions USD
Revenue	––––––––––––– \$724
Year­over­year change percentage	(7.3)%
Operating loss	\$(12)
Operating loss as a percentage of revenue	(1.7)%
Year­over­year change in operating profit or loss as a % of revenue (percentage points)	(3.0)pts
Loss for the period	\$(28)

HPE Software's revenue decreased 7.3 per cent. for the three months ended 31 January 2017 as compared to the prioryear period. HPE Software incurred an operating loss of US\$12 million for the three months ended 31 January 2017 due primarily to lower revenues and increased exceptional items, largely driven by higher separation costs arising from the Transaction. See "Results of Operations – Three Months ended 31 January 2017 and 2016" below for a further discussion of HPE Software's financial performance for the three months ended 31 January 2017.

As of 31 January 2017, cash and cash equivalents were US\$109 million, representing a decrease of US\$21 million from the 31 October 2016 balance of US\$130 million. For the three months ended 31 January 2017, HPE Software generated US\$148 million of cash flows from operating activities and invested US\$5 million in property, plant and equipment.

Results of Operations – Three Months Ended 31 January 2017 and 2016

Results of operations in US dollars and as a percentage of revenue were as follows:

	Three months ended 31 January –––––––––––––––––––––––––––––––––––––––––––––––––––
	2017		2016 –––––––––––––––––––––––
	––––––––––––––––––––––		(unaudited)
	Dollars in	% of	Dollars in	% of
	millions	Revenue	millions	Revenue
Licence	\$173	23.9%	\$187	23.9%
Support	387	53.5%	426	54.6%
Professional services	89	12.3%	96	12.3%
Software­as­a­service	75 ––––––––	10.3% ––––––––	72 ––––––––	9.2% ––––––––
Revenue	724	100.0%	781	100.0%
Cost of sales	(232) ––––––––	(32.0)% ––––––––	(249) ––––––––	(31.9)% ––––––––
Gross profit	492	68.0%	532	68.1%
Selling and distribution costs	(232)	(32.0)%	(270)	(34.6)%
Research and development expenses	(129)	(17.9)%	(155)	(19.8)%
Administrative expenses	(143) ––––––––	(19.8)% ––––––––	(97) ––––––––	(12.4)% ––––––––
Operating (loss)/profit	(12)	(1.7)%	10	1.3%
Analyzed as:
Adjusted Operating Profit	146	20.2%	120	15.4%
Share­based compensation	(16)	(2.3)%	(22)	(2.8)%
Amortisation of intangible assets	(35)	(4.8)%	(43)	(5.5)%
Exceptional items	(107)	(14.8)%	(45)	(5.8)%
Operating (loss)/profit	(12)	(1.7)%	10	1.3%
Finance costs	(2)	(0.3)%	(1)	(0.1)%
Finance income	15 ––––––––	2.1% ––––––––	— ––––––––	0.0% ––––––––
Net finance income/(costs)	13	1.8%	(1)	(0.1)%
Profit before tax	1	0.1%	9	1.2%
Taxation	(29) ––––––––	(4.0)% ––––––––	24 ––––––––	3.0% ––––––––
(Loss)/profit for the period	\$(28)	(3.9)%	\$33	4.2%

–––––––– –––––––– –––––––– ––––––––

Revenue

Revenue and the change in revenue for the three months ended 31 January 2017 as compared to the three months ended 31 January 2016 were as follows:

		Three months ended 31 January –––––––––––––––––––––––
	2017 ––––––––	2016 ––––––––	Change ––––––––––––––––––––––
In millions USD ––––––––––––––––––		(unaudited)
Licence	\$173	\$187	\$(14)	(7.5)%
Support	387	426	(39)	(9.2)%
Professional services	89	96	(7)	(7.3)%
Software­as­a­service	75 ––––––––	72 ––––––––	3 ––––––––	4.2% ––––––––
Total revenue	\$724	\$781	\$(57)	(7.3)%
	––––––––	––––––––	––––––––	––––––––

For the three months ended 31 January 2017, HPE Software's total revenue decreased by US\$57 million or 7.3 per cent. as compared to the prioryear period. The decrease in HPE Software's total revenue was due primarily to the divestiture of the TippingPoint business in the second quarter of the financial year ended 31 October 2016, unfavourable foreign currency fluctuations and an ongoing decline in licence revenue as a result of the market shift to SaaS solutions. The impact of the divestiture of the TippingPoint business was a US\$39 million decrease in HPE Software's total revenue for the three months ended 31 January 2017 as compared to the prioryear period.

Licence revenue for the three months ended 31 January 2017 decreased by US\$14 million or 7.5 per cent. as compared to the prioryear period. The decrease in licence revenue was due primarily to the divestiture of the TippingPoint business during the second quarter of the financial year ended 31 October 2016, which resulted in a US\$12 million decrease in licence revenue for the three months ended 31 January 2017. The decline in licence revenue was also attributable to the market shift to SaaS solutions, which resulted in lower revenue, particularly from big data platform analytics licences, partially offset by revenue growth in security and information governance products.

Support revenue for the three months ended 31 January 2017 decreased by US\$39 million or 9.2 per cent. as compared to the prioryear period. The decrease in support revenue was due primarily to the divestiture of the TippingPoint business, ongoing declines in licence revenue and unfavourable currency fluctuations. The divestiture of the TippingPoint business resulted in a US\$27 million decrease in support revenue for the currentyear period as compared to the prioryear period.

Professional services revenue for the three months ended 31 January 2017 decreased by US\$7 million or 7.3 per cent. as compared to the prioryear period due primarily to lower revenue within the big data platform analytics product group. SaaS revenue for the three months ended 31 January 2017 increased by US\$3 million or 4.2 per cent. as compared to the prioryear period driven primarily by growth in IT operations management and security and information governance products, reflecting the overall market shift to SaaS solutions.

Gross Profit

HPE Software's gross profit decreased by 0.1 percentage points for the three months ended 31 January 2017 as compared to the prioryear period due primarily to an unfavourable revenue mix resulting from a decrease in highermargin support revenue.

Operating Expenses

Selling and Distribution Costs

Selling and distribution costs decreased 14.1 per cent. for the three months ended 31 January 2017 as compared to the prioryear period. As a percentage of revenue, selling and distribution costs decreased by 2.6 percentage points to 32.0 per cent. for the current period from 34.6 per cent. for the prioryear period. The decrease in selling and distribution costs in absolute dollars and as a percentage of revenue was due primarily to lower spending on marketing programs, lower headcount, the divestiture of the TippingPoint business and lower amortisation of intangible assets.

Research and Development ("R&D") Expenses

R&D expenses decreased 16.8 per cent. for the three months ended 31 January 2017 as compared to the prioryear period due primarily to reduced costs as a result of lower headcount and the divestiture of the TippingPoint business in the second quarter of the financial year ended 31 October 2016. As a percentage of revenue, R&D expense decreased by 1.9 percentage points to 17.9 per cent. for the current period from 19.8 per cent. for the prioryear period as the percentage decline in R&D expense was greater than the percentage decline in revenue.

Administrative Expenses

Administrative expense increased 47.4 per cent. for the three months ended 31 January 2017 as compared to the prioryear period. As a percentage of revenue, administrative expenses increased by 7.4 percentage points to 19.8 per cent. for the current period from 12.4 per cent. for the prioryear period. The increase in administrative expense in absolute dollars and as a percentage of revenue was due primarily to increased exceptional items, driven by higher separation costs arising from the planned Transaction.

Operating (Loss) Profit

Operating (loss) profit decreased by US\$22 million to a US\$12 million operating loss for the three months ended 31 January 2017 as compared to US\$10 million of operating profit in the prioryear period due to the above described activity. As a percentage of revenue, operating profit decreased by 3.0 percentage points to (1.7 per cent.) of revenue for the three months ended 31 January 2017 from 1.3 per cent. of revenue in the prioryear period.

Adjusted Operating Profit

Adjusted operating profit, which excludes sharebased compensation, amortisation of intangible assets, and exceptional items, increased 21.7 per cent. for the three months ended 31 January 2017 as compared to the prioryear period. As a percentage of revenue, adjusted operating profit increased by 4.8 percentage points to 20.2 per cent. of revenue for the three months ended 31 January 2017 from 15.4 per cent. of revenue in the prioryear period.

Sharebased Compensation

Sharebased compensation decreased for the three months ended 31 January 2017, as compared to the prioryear period due to a lower volume of award grants in the currentyear period. In connection with the 2015 Separation, onetime retention stock awards were granted to certain executives during the three months ended 31 January 2016.

Amortisation of Intangible Assets

Amortisation expense decreased for the three months ended 31 January 2017, as compared to the prioryear period due primarily to certain intangible assets associated with prior acquisitions reaching the end of their respective amortisation periods. In addition, the sale of the TippingPoint business in the second quarter of the financial year ended 31 October 2016 resulted in lower amortisation of intangible assets for the three months ended 31 January 2017 as compared to the prioryear period.

Exceptional Items

Exceptional items for the three months ended 31 January 2017 and 2016 consisted of acquisition costs, restructuring costs, separation costs and defined benefit plan settlement and remeasurement benefit.

Acquisition Costs

Acquisition costs were substantially unchanged for the three months ended 31 January 2017 as compared to the prioryear period.

Restructuring Costs

Restructuring costs decreased by US\$2 million to US\$33 million for the three months ended 31 January 2017 as compared to US\$35 million in the prioryear period due to lower costs in the current period from the restructuring plan announced in September 2015 (the "2015 Plan") and the multiyear restructuring plan announced in May 2012 (the "2012 Plan").

Separation Costs

Separation costs include allocated costs resulting from the 2015 Separation, and all such costs resulting from the Transaction.

Separation costs for the three months ended 31 January 2017 consisted primarily of thirdparty consulting, contractor fees and other incremental costs arising from the Transaction.

Separation costs for the three months ended 31 January 2016 consisted of allocated thirdparty consulting, contractor fees and other incremental costs arising from the 2015 Separation.

Defined Benefit Plan Settlement and Remeasurement Benefit

Defined benefit plan settlement and remeasurement benefit represents an adjustment to net periodic pension cost resulting from the remeasurement of certain Parent pension plans.

Net Finance Income (Costs)

Net finance income increased to US\$13 million for the three months ended 31 January 2017 as compared to US\$1 million of net finance costs in the prioryear period due to US\$15 million of interest income on tax provision in the current year period.

Taxation

HPE Software's effective tax rate was 2900.00 per cent. and (266.67 per cent.) for the three months ended 31 January 2017 and 2016, respectively. HPE Software's effective tax rate generally differs from the US federal statutory rate of 35 per cent. due to favourable tax rates associated with certain earnings from HPE Software's operations in lower tax rate jurisdictions throughout the world. HPE Software has not provided U.S. taxes for all nonU.S. earnings because HPE Software plans to reinvest some of those earnings indefinitely outside the U.S. Additionally, HPE Software's effective tax rate may vary from period to period as the result of specific transactions and the impact of uncertain tax positions.

For the three months ended 31 January 2017, HPE Software's effective tax rate included US\$47 million of taxation related to uncertain tax positions. As the pretax income for the three months ended 31 January 2017 was US\$1 million, the effective tax rate for that period is significantly impacted by these tax charges and jurisdictional rate differences.

For the three months ended 31 January 2016, HPE Software's effective tax rate included US\$7 million of income tax benefits related to uncertain tax position and US\$3 million of net benefit from other items.

For a reconciliation of HPE Software's effective tax rate to the US federal statutory rate of 35 per cent. and further explanation of HPE Software's provision for taxes, see Note 5, "Taxation," to the combined historical financial information contained in Part VII (Historical Financial Information of HPE Software).

Overview – Financial Year Ended 31 October 2016

The following provides an overview of HPE Software's key financial metrics for the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015:

	In millions USD ––––––––––––––
Revenue	\$3,198
Year­over­year change percentage	(11.9)%
Operating profit	\$209
Operating profit as a percentage of revenue	6.5%
Year­over­year change in operating profit as a % of revenue (percentage points)	(1.6)pts
Profit for the period	\$55

HPE Software's revenue decreased 11.9 per cent. In the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015. HPE Software's operating profit for the financial year ended 31 October 2016 declined by 1.6 percentage points as compared to the financial year ended 31 October 2015 due primarily to lower gross profit, increased sharebased compensation and increased exceptional items driven by higher restructuring costs. See "Results of Operations – Financial Years Ended 31 October 2016, 2015 and 2014" below for a further discussion of HPE Software's financial performance for the financial year ended 31 October 2016.

As of 31 October 2016, cash and cash equivalents were US\$130 million, representing a decrease of US\$20 million from the 31 October 2015 balance of US\$150 million. For the financial year ended 31 October 2016, HPE Software generated US\$481 million of cash flows from operating activities, received net proceeds of US\$249 million from business divestitures, invested US\$26 million in property, plant and equipment, net of proceeds from sales, and paid US\$12 million in connection with business acquisitions, net of cash acquired.

Results of Operations – Financial Years Ended 31 October 2016, 2015 and 2014

Results of operations in US dollars and as a percentage of revenue were as follows:

	For the financial years ended 31 October –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
	2016 ––––––––––––––––––––		2015 ––––––––––––––––––––		2014 ––––––––––––––––––––
	Dollars in millions	% of Revenue	Dollars in millions	% of Revenue	Dollars in millions	% of Revenue
Licence	\$885	27.6%	\$1,011	27.8%	\$1,163	29.6%
Support	1,623	50.8%	1,883	51.9%	1,980	50.4%
Professional services	396	12.4%	423	11.7%	461	11.7%
Software­as­a­service	294	9.2%	312	8.6%	325	8.3%
Revenue	–––––––– 3,198	–––––––– 100.0%	–––––––– 3,629	–––––––– 100%	–––––––– 3,929	–––––––– 100%
Cost of sales	(987) ––––––––	(30.9)% ––––––––	(1,118) ––––––––	(30.8)% ––––––––	(1,202) ––––––––	(30.6)% ––––––––
Gross profit	2,211	69.1%	2,511	69.2%	2,727	69.4%
Selling and distribution costs Research and development	(1,110)	(34.7)%	(1,205)	(33.2)%	(1,374)	(35.0)%
expenses	(608)	(19.0)%	(681)	(18.8)%	(683)	(17.3)%
Administrative expenses	(284) ––––––––	(8.9)% ––––––––	(332) ––––––––	(9.1)% ––––––––	(302) ––––––––	(7.7)% ––––––––
Operating profit	209	6.5%	293	8.1%	368	9.4%
Analyzed as:
Adjusted Operating Profit	598	18.7%	732	20.2%	766	19.5%
Share­based compensation	(91)	(2.9)%	(62)	(1.7)%	(62)	(1.6)%
Amortisation of intangible assets	(161)	(5.0)%	(254)	(7.0)%	(281)	(7.1)%
Exceptional items	(137)	(4.3)%	(123)	(3.4)%	(55)	(1.4)%
Operating profit	209	6.5%	293	8.1%	368	9.4%
Finance costs	(73)	(2.3)%	(45)	(1.2)%	(5)	(0.2)%
Finance income	1 ––––––––	0.1% ––––––––	1 ––––––––	0.0% ––––––––	2 ––––––––	0.0% ––––––––
Net finance costs	(72)	(2.2)%	(44)	(1.2)%	(3)	(0.2)%
Other expense, net	—	0.0%	—	0.0%	(2)	0.0%
Loss on available­for­sale
securities reclassified
into earnings	— ––––––––	0.0% ––––––––	(3) ––––––––	(0.1)% ––––––––	(2) ––––––––	0.0% ––––––––
Profit before tax	137	4.3%	246	6.8%	361	9.2%
Taxation	(82) ––––––––	(2.6)% ––––––––	108 ––––––––	3.0% ––––––––	(37) ––––––––	(1.0)% ––––––––
Profit for the period	\$55	1.7%	\$354	9.8%	\$324	8.2%

Revenue

Revenue and the change in revenue for the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015 and the financial year ended 31 October 2015 as compared to the financial year ended 31 October 2014 were as follows:

–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

		For the financial years ended
		31 October –––––––––––––––––––––––––––––––				Change compared to prior financial year –––––––––––––––––––––––––––––––––––––––––––
	2016 ––––––––	2015 ––––––––	2014 ––––––––	2016 ––––––––	2015 ––––––––	2016 ––––––––	2015 ––––––––
In millions USD ––––––––––––––––––
Licence	\$885	\$1,011	\$1,163	\$(126)	\$(152)	(12.5)%	(13.1)%
Support	1,623	1,883	1,980	(260)	(97)	(13.8)%	(4.9)%
Professional services	396	423	461	(27)	(38)	(6.4)%	(8.2)%
Software­as­a­service	294 ––––––––	312 ––––––––	325 ––––––––	(18) ––––––––	(13) ––––––––	(5.8)% ––––––––	(4.0)% ––––––––
Total revenue	\$3,198	\$3,629	\$3,929	\$(431)	\$(300)	(11.9)%	(7.6)%
	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––

Financial year ended 31 October 2016 compared to the financial year ended 31 October 2015

In the financial year ended 31 October 2016, HPE Software's total revenue decreased by US\$431 million or 11.9 per cent. as compared to the financial year ended 31 October 2015. The decrease in HPE Software's total revenue was due primarily to the impact of the transfer of the marketing optimization and HPPA Teleform product groups to Parent in the financial year ended 31 October 2015, as well as the divestiture of other businesses including the divestiture of the TippingPoint business in the financial year ended 31 October 2016 and the divestiture of the LiveVault and iManage businesses in the financial year ended 31 October 2015. The total impact of these transfers and divestitures was a US\$366 million decrease in HPE Software's total revenue for the financial year ended 31 October 2016. HPE Software's revenue for the financial year ended 31 October 2016 was also negatively impacted by the continued overall market shift to SaaS solutions and related gotomarket sales execution challenges. HPE Software also experienced unfavourable foreign currency fluctuations, led primarily by weakness in the Euro.

Licence revenue for the financial year ended 31 October 2016 decreased by US\$126 million or 12.5 per cent. as compared to the financial year ended 31 October 2015. The decrease in licence revenue was due primarily to the impact of the transfer of the marketing optimization product group to Parent and the divestiture of other businesses, which resulted in a decrease of US\$81 million in licence revenue in the financial year ended 31 October 2016 compared to the financial year ended 31 October 2015. Licence revenue for the financial year ended 31 October 2016 was also negatively impacted by the overall market shift to SaaS solutions and related sales execution challenges, which resulted in lower revenue, particularly from IT operations management products, as well as the impact of unfavourable foreign currency fluctuations.

Support revenue for the financial year ended 31 October 2016 decreased by US\$260 million or 13.8 per cent. as compared to the financial year ended 31 October 2015. The decrease in support revenue was due primarily to the impact of the transfer of the marketing optimization product group to Parent and the divestiture of other businesses, which resulted in a decrease of US\$212 million in support revenue in the financial year ended 31 October 2016 compared to the financial year ended 31 October 2015. Support revenue for the financial year ended 31 October 2016 was also negatively impacted by lower licence revenue levels in the financial years ended 31 October 2016 and 2015, which has a carry over impact on support revenue, as well as the impact of unfavourable currency fluctuations.

Professional services revenue decreased by US\$27 million or 6.4 per cent. in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015, due primarily to the transfer of the marketing optimization product group to Parent. SaaS revenue decreased by US\$18 million or 5.8 per cent. in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015, due primarily to the divestiture of businesses, partially offset by an increase in SaaS revenue from continuing products reflecting the overall market transition from licence to SaaS solutions.

Financial year ended 31 October 2015 compared to the financial year ended 31 October 2014

In the financial year ended 31 October 2015, HPE Software's total revenue decreased by US\$300 million or 7.6 per cent. as compared to the financial year ended 31 October 2014. The decrease in HPE Software's revenue was due primarily to unfavourable foreign currency fluctuations across all regions, led primarily by weakness in the Euro, and an overall shift in the market to SaaS solutions and related gotomarket sales execution challenges. In addition, revenue for the financial year ended 31 October 2015 was negatively impacted by the transfer of the marketing optimization product group to Parent as of the beginning of the fourth quarter of the financial year ended 31 October 2015 and the divestiture of the iManage and LiveVault businesses during the financial year ended 31 October 2015, which collectively resulted in a total decrease of US\$99 million in revenue for the financial year ended 31 October 2015 compared to the financial year ended 31 October 2014.

Licence revenue for the financial year ended 31 October 2015 decreased by US\$152 million or 13.1 per cent. as compared to the financial year ended 31 October 2014. The decrease in licence revenue was due primarily to unfavourable foreign currency fluctuations and to the market shift to SaaS solutions and related sales execution challenges, which resulted in lower licence revenue from IT operations management products. The transfer of the marketing optimization product group to Parent as of the beginning of the fourth quarter of the financial year ended 31 October 2015 and the divestiture of other businesses during 2015 resulted in a US\$25 million decrease in licence revenue for the financial year ended 31 October 2015 compared to the financial year ended 31 October 2014.

Previous declines in licence revenue resulted in lower support revenue in the financial year ended 31 October 2015, which decreased by US\$97 million or 4.9 per cent. as compared to the financial year ended 31 October 2014. Support revenue for the financial year ended 31 October 2015 was also negatively impacted by the transfer of the marketing optimization product group to Parent as of the beginning of the fourth quarter of the financial year ended 31 October 2015 and the divestiture of other businesses during the financial year ended 31 October 2015, which resulted in a total decrease of US\$55 million in support revenue for the financial year ended 31 October 2015 compared to the financial year ended 31 October 2014. Unfavourable currency fluctuations also contributed to the decline in support revenue for the financial year ended 31 October 2015. These reductions in support revenue for the financial year ended 31 October 2015 were partially offset by increased revenue from the support of security and information governance products in the financial year ended 31 October 2015 as compared to the financial year ended 31 October 2014.

Professional services revenue for the financial year ended 31 October 2015 decreased by US\$38 million or 8.2 per cent. as compared to the financial year ended 31 October 2014, due primarily to unfavourable currency impacts and a continued focus on highermargin engagements that resulted in lower revenue from professional services related to big data platform analytics solutions, partially offset by an increase in professional services revenue related to security and information governance products. SaaS revenue for the financial year ended 31 October 2015 decreased by US\$13 million or 4.0 per cent. as compared to the financial year ended 31 October 2014, due primarily to sales execution challenges.

Gross Profit

Financial year ended 31 October 2016 compared to the financial year ended 31 October 2015

HPE Software's gross profit decreased by 0.1 percentage points in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015 due primarily to the decline in support revenue in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015.

Financial year ended 31 October 2015 compared to the financial year ended 31 October 2014

HPE Software's gross profit decreased by 0.2 percentage points in the financial year ended 31 October 2015 as compared to the financial year ended 31 October 2014 due to a decline in licence revenue.

Operating Expenses

Selling and Distribution Costs

Selling and distribution costs decreased 7.9 per cent. in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015. As a percentage of revenue, selling and distribution costs increased by 1.5 percentage points to 34.7 per cent. of revenue in the financial year ended 31 October 2016 from 33.2 per cent. of revenue in the financial year ended 31 October 2015. The decrease in selling and distribution costs in absolute dollars in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015 was due primarily to the transfer of the marketing optimization product group to Parent, the divestiture of other businesses, lower commission expense, lower amortisation of intangible assets and the impact of favourable foreign currency fluctuations. The increase in selling and distribution costs as a percentage of revenue in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015 was due to lower revenue in the financial year ended 31 October 2016 compared to the financial year ended 31 October 2015.

Selling and distribution costs decreased by 12.3 per cent. in the financial year ended 31 October 2015 as compared to the financial year ended 31 October 2014. As a percentage of revenue, selling and distribution costs decreased by 1.8 percentage points to 33.2 per cent. in the financial year ended 31 October 2015 from 35.0 per cent. in the financial year ended 31 October 2014. The decrease in selling and distribution costs in absolute dollars and as a percentage of revenue was due primarily to favourable currency impacts and lower commission expense.

Research and Development Expenses

R&D expenses decreased 10.7 per cent. in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015 due primarily to reduced spending as a result of the transfer of the marketing optimization product group to Parent, the divestiture of other businesses, and the impact of favourable currency fluctuations. As a percentage of revenue, R&D expense increased to 19.0 per cent. in the financial year ended 31 October 2016 from 18.8 per cent. in the financial year ended 31 October 2015.

R&D expense for the financial year ended 31 October 2015 decreased 0.3 per cent. as compared to the financial year ended 31 October 2014, however, R&D expenses increased as a percentage of revenue in the financial year ended 31 October 2015 by 1.5 percentage points to 18.8 per cent. from 17.3 per cent. in the financial year ended 31 October 2014. The increase in R&D expense for the financial year ended 31 October 2015 as a percentage of revenue was due to lower revenue in the financial year ended 31 October 2015 compared to the financial year ended 31 October 2014.

Administrative Expenses

Administrative expenses decreased 14.5 per cent. in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015. As a percentage of revenue, administrative expenses decreased by 0.2 percentage points to 8.9 per cent. of revenue in the financial year ended 31 October 2016 from 9.1 per cent. of revenue in the financial year ended 31 October 2015. The decrease in administrative expenses in absolute dollars and as a percentage of revenue in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015 was due primarily to a onetime US\$82 million gain from the divestiture of the TippingPoint business, lower headcount, the transfer of the marketing optimization product group to Parent, the divestiture of other businesses, a reduction in litigation expenses, and the impact of favourable foreign currency fluctuations. These decreases were partially offset by increased exceptional items, mainly driven by higher restructuring costs.

Administrative expenses increased by 9.9 per cent. in the financial year ended 31 October 2015 as compared to the financial year ended 31 October 2014. As a percentage of revenue, administrative expenses increased by 1.4 percentage points to 9.1 per cent. in the financial year ended 31 October 2015 from 7.7 per cent. in the financial year ended 31 October 2014. The increase in administrative expenses in absolute dollars and as a percentage of revenue was due primarily to increased exceptional items, mainly driven by higher separation costs, and higher litigation expenses. These increases in administrative expenses were partially offset by favourable currency impacts, headcount reductions and a US\$7 million gain from the divestiture of the LiveVault and iManage businesses.

Operating Profit

Operating profit decreased 28.7 per cent. in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015 due to the above described activity. As a percentage of revenue, operating profit decreased by 1.6 percentage points to 6.5 per cent. of revenue in the financial year ended 31 October 2016 from 8.1 per cent. of revenue in the financial year ended 31 October 2015.

Operating profit decreased 20.4 per cent. in the financial year ended 31 October 2015 as compared to the financial year ended 31 October 2014 due to the above described activity. As a percentage of revenue, operating profit decreased by 1.3 percentage points to 8.1 per cent. of revenue in the financial year ended 31 October 2015 from 9.4 per cent. of revenue in the financial year ended 31 October 2014.

Adjusted Operating Profit

Adjusted operating profit, which excludes sharebased compensation, amortisation of intangible assets and exceptional items, decreased 18.3 per cent. in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015. As a percentage of revenue, adjusted operating profit decreased by 1.5 percentage points to 18.7 per cent. of revenue in the financial year ended 31 October 2016 from 20.2 per cent. of revenue in the financial year ended 31 October 2015.

Adjusted operating profit decreased 4.4 per cent. in the financial year ended 31 October 2015 as compared to the financial year ended 31 October 2014. As a percentage of revenue, adjusted operating profit increased by 0.7 percentage points to 20.2 per cent. of revenue in the financial year ended 31 October 2015 from 19.5 per cent. of revenue in the financial year ended 31 October 2014.

Sharebased Compensation

Sharebased compensation increased in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015 due to grants of onetime retention stock awards to certain executives following the 1 November 2015 separation of HPE from HP Inc. Sharebased compensation was substantially unchanged in the financial year ended 31 October 2015 as compared to the financial year ended 31 October 2014.

Amortisation of Intangible Assets

Amortisation expense decreased in each of the financial year ended 31 October 2016 and the financial year ended 31 October 2015 as compared to the prior financial year due primarily to certain intangible assets associated with prior acquisitions reaching the end of their respective amortisation periods. In addition, the sale of the TippingPoint business and the transfer of the marketing optimization product group to Parent resulted in lower amortisation of intangible assets in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015.

Exceptional Items

Exceptional items during the financial years ended 31 October 2016, 2015 and 2014 consisted of acquisition costs, restructuring costs, separation costs, and gain on disposal of businesses.

Acquisition Costs

Acquisition costs decreased in each of the financial years ended 31 October 2016 and 2015 as compared to the prior financial year due primarily to a reduction in the level of merger and acquisition activity.

Restructuring Costs

Restructuring costs increased in the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015 due primarily to higher charges from the 2015 Plan. Restructuring costs decreased in the financial year ended 31 October 2015 as compared to the financial year ended 31 October 2014 due primarily to lower charges from the 2012 Plan, partially offset by charges from the 2015 Plan.

Separation Costs

Separation costs for the financial year ended 31 October 2016 consisted of allocated thirdparty consulting, contractor fees and other incremental costs totaling US\$41 million, arising from the 2015 Separation, and all such costs, totaling US\$65 million, arising from the Transaction.

Separation costs for the financial year ended 31 October 2015 consisted of allocated thirdparty consulting, contractor fees and other incremental costs arising from the 2015 Separation.

Gain on Disposal of Businesses

A US\$82 million gain related to the divestiture of TippingPoint was recorded in the financial year ended 31 October 2016.

A US\$7 million gain related to the divestitures of LiveVault and iManage was recorded in the financial year ended 31 October 2015.

Net Finance Costs

Net finance costs increased in each of the financial years ended 31 October 2016 and 2015 as compared to the prior financial year due to yearoveryear increases in interest expense on tax provisions.

Taxation

HPE Software's effective tax rates were 59.85 per cent., (43.90 per cent.) and 10.25 per cent. in the financial years ended 31 October 2016, 2015 and 2014, respectively. HPE Software's effective tax rate generally differs from the US federal statutory rate of 35 per cent. due to favourable tax rates associated with certain earnings from HPE Software's operations in lower tax jurisdictions throughout the world. HPE Software has not provided U.S. taxes for all nonU.S. earnings because HPE Software plans to reinvest some of those earnings indefinitely outside the U.S. Additionally, HPE Software's effective tax rate may vary from year to year as the result of specific transactions and the impact of uncertain tax positions.

In the financial year ended 31 October 2016, HPE Software's effective tax rate included US\$69 million of taxation arising from the TippingPoint divestiture, US\$46 million of taxation in connection with uncertain tax positions and US\$29 million of taxation arising from movements in deferred tax not recognised.

In the financial year ended 31 October 2015, HPE Software's effective tax rate benefited from a US\$115 million deferred tax adjustment for unremitted earnings in connection with the separation of HPE from its former Parent. The overall tax benefit for the financial year ended 31 October 2015 was reduced by US\$39 million of taxation in connection with uncertain tax positions.

In the financial year ended 31 October 2014, HPE Software's effective tax rate included US\$23 million of taxation arising from movements in deferred tax not recognised, the effects of which were partially offset by US\$4 million of income tax benefits related to uncertain tax positions.

For a reconciliation of HPE Software's effective tax rate to the US federal statutory rate of 35 per cent. and further explanation of HPE Software's provision for taxes, see Note 5, "Taxation," to the combined historical financial information contained in Part VII (Historical Financial Information of HPE Software).

Liquidity and Capital Resources

Historical Liquidity

HPE Software has historically used cash generated from operations as its primary source of liquidity. HPE Software has historically participated in cash management and funding arrangements managed by Parent. Cash flows used in financing activities primarily reflect changes in Parent's investment in HPE Software. Parent's cash has not been assigned to HPE Software for any of the periods presented because those cash balances are not directly attributable to HPE Software.

Future Liquidity

On 21 June 2017, Seattle Borrower borrowed US\$2.6 billion in the form of the 7year term loan due 21 June 2024 under the Seattle Term Loan Facility. This loan under the Seattle Term Loan Facility bears interest at a rate per annum of LIBOR plus 2.75 per cent. (subject to a LIBOR floor of 0.00 per cent.). Proceeds from this loan will primarily be used to fund the US\$2.5 billion cash payment to HPE prior to Completion and to pay expenses associated with the borrowing.

Cash and Borrowings

HPE Software's cash and cash equivalents and borrowings (which consisted entirely of finance lease obligations) were as follows:

	As of
	31 January –––––––––		As of 31 October –––––––––––––––––––––––––––––––––––––
In millions USD ––––––––––––––––––	2017 –––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Cash and cash equivalents	\$109	\$130	\$150	\$197
Total finance lease obligations	\$38	\$36	\$33	\$21

Cash Flow

HPE Software's key cash flow metrics were as follows:

	Three months ended 31 January ––––––––––––––––––––		Financial years ended 31 October –––––––––––––––––––––––––––––––
In millions USD ––––––––––––––––––	2017 ––––––––	2016 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
		(unaudited)
Net cash generated from operating activities	\$148	\$191	\$481	\$536	\$1,014
Net cash (used in) generated from
investing activities	(8)	(6)	211	40	(16)
Net cash used in financing activities	(161)	(152)	(712)	(623)	(1,119)
Net (decrease) increase in cash and cash equivalents	–––––––– \$(21) ––––––––	–––––––– \$33 ––––––––	–––––––– \$(20) ––––––––	–––––––– \$(47) ––––––––	–––––––– \$(121) ––––––––

Operating Activities

Net cash generated from operating activities decreased by US\$43 million for the three months ended 31 January 2017 as compared to the three months ended 31 January 2016 due primarily to lower operating profit and higher payments for accounts payable and restructuring, partially offset by increased cash provided by accounts receivable. Net cash generated from operating activities decreased by US\$55 million for the financial year ended 31 October 2016 as compared to the financial year ended 31 October 2015 due primarily to lower operating profit. Net cash generated from operating activities decreased by US\$478 million for the financial year ended 31 October 2015 as compared to the financial year ended 31 October 2014 primarily due to lower operating profit, less cash provided by accounts receivable and more cash used by other assets and liabilities primarily due to decreases in deferred revenue and the employee compensation and benefits liability.

Investing Activities

Net cash used in investing activities was substantially unchanged for the three months ended 31 January 2017 as compared to the three months ended 31 January 2016. Net cash generated from investing activities was US\$211 million for the financial year ended 31 October 2016, consisting primarily of net cash proceeds from the divestiture of the TippingPoint business. Net cash generated from investing activities of US\$40 million in the financial year ended 31 October 2015 primarily consisted of US\$174 million of net proceeds from business divestitures, offset by US\$138 million of payments made in connection with business acquisitions, net of cash acquired. Net cash used in investing activities was US\$16 million in the financial year ended 31 October 2014 due primarily to payments made in connection with business acquisitions, net of cash acquired.

Financing Activities

Cash flows used in financing activities primarily represent net transfers to Parent. As cash and the financing of HPE Software's operations have historically been managed by Parent, the components of net transfers to Parent include cash transfers from HPE Software to Parent and payments by Parent to settle HPE Software's obligations. These transactions are considered to be effectively settled for cash at the time the transaction is recorded.

Contractual and Other Obligations

HPE Software's contractual and other obligations as of 31 October 2016, which have not changed materially as of 31 January 2017 except as discussed below, were as follows:

		Payments Due by Period –––––––––––––––––––––––––––––––––––––––––––
In millions USD ––––––––––––––––––	Total ––––––––	1 Year or Less ––––––––	1­3 Years ––––––––	3­5 Years ––––––––	More than 5 Years ––––––––
Operating lease obligations (net of sublease
rental income)	\$186	\$37	\$62	\$48	\$39
Purchase obligations(1)	8	2	3	2	1
Finance lease obligations (includes interest)	40 ––––––––	17 ––––––––	21 ––––––––	2 ––––––––	– ––––––––
Total(2)(3)	\$234	\$56	\$86	\$52	\$40

(1) Purchase obligations increased from US\$8 million at 31 October 2016 to US\$23 million at 31 January 2017 as a result of newly executed contracts. Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on HPE Software and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. These purchase obligations are related principally to software licence agreements and other items. Purchase obligations exclude agreements that are cancelable without penalty. Purchase obligations also exclude open purchase orders that are routine arrangements entered into in the ordinary course of business as they are difficult to quantify in a meaningful way. Even though open purchase orders are considered enforceable and legally binding, the terms generally allow HPE Software the option to cancel, reschedule, and adjust terms based on business needs prior to the delivery of goods or performance of services.

–––––––– –––––––– –––––––– –––––––– ––––––––

• (2) As of 31 October 2016, HPE Software expected future cash payments of approximately US\$99 million in connection with HPE Software's approved restructuring plans. As of 31 January 2017, HPE Software expects future cash payments of approximately US\$50 million in connection with HPE Software's approved restructuring plans which includes approximately US\$38 million expected to be paid in the financial year ended 31 October 2017 with the remaining cash payments of approximately US\$12 million to be made through the financial year ending 31 October 2021. Payments for restructuring have been excluded from the contractual obligations table, because they do not represent contractual cash outflows and there is uncertainty as to the timing of these payments. For more information on HPE Software's restructuring activities, see Note 18, ''Provisions,'' to the combined historical financial information contained in Part VII (Historical Financial Information of HPE Software).
• (3) As of 31 October 2016, HPE Software had approximately US\$455 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions. These liabilities and related interest and penalties include US\$1 million expected to be paid within one year. As of 31 January 2017, HPE Software had approximately US\$506 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions. These liabilities and related interest and penalties include US\$245 million expected to be paid within one year. For the remaining amount, HPE Software is unable to make a reasonable estimate as to when cash settlement with the tax authorities might occur due to the uncertainties related to these tax matters. Payments of these obligations would result from settlements with taxing authorities. For more information on HPE Software's uncertain tax positions, see Note 5, "Taxation," to the combined historical financial information contained in Part VII (Historical Financial Information of HPE Software).

OffBalance Sheet Arrangements

As part of HPE Software's ongoing business, HPE Software has not participated in transactions that generate material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating offbalance sheet arrangements or other contractually narrow or limited purposes.

Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, HPE Software is exposed to foreign currency exchange rate and interest rate risks that could impact HPE Software's financial position and results of operations. HPE Software's risk management strategy with respect to these market risks may include the use of derivative financial instruments. HPE Software uses derivative contracts only to manage existing underlying exposures. Accordingly, HPE Software does not use derivative contracts for speculative purposes. HPE Software's risks, risk management strategy and a sensitivity analysis estimating the effects of changes in fair value for each of these exposures is outlined below. HPE Software's exposure to market risk as of 31 January 2017 has not changed materially since 31 October 2016. Actual gains and losses in the future may differ materially from the sensitivity analyses based on changes in the timing and amount of foreign currency, exchange rate and interest rate movements and HPE Software's actual exposures and derivatives in place at the time of the change, as well as the effectiveness of the derivative to hedge the related exposure.

Foreign Currency Exchange Rate Risk

HPE Software is exposed to foreign currency exchange rate risk inherent in HPE Software's sales commitments, anticipated sales, anticipated purchases and assets and liabilities denominated in currencies other than the US dollar. HPE Software transacts business in approximately 70 currencies worldwide, of which the most significant foreign currencies to HPE Software's operations for the financial year ended 31 October 2016 were the Euro, the British pound, the Australian dollar and the Canadian dollar. For most currencies, HPE Software is a net receiver of the foreign currency and therefore benefits from a weaker US dollar and is adversely affected by a stronger US dollar relative to the foreign currency. Even where HPE Software is a net receiver of the foreign currency, a weaker US dollar may adversely affect certain expense figures, if taken alone.

HPE Software uses a combination of forward contracts and, from time to time, options designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in HPE Software's forecasted net revenue and, to a lesser extent, cost of sales, operating expenses and intercompany loans denominated in currencies other than the US dollar. In addition, when debt is denominated in a foreign currency, HPE Software may use swaps to exchange the foreign currency principal and interest obligations for US dollardenominated amounts to manage the exposure to changes in foreign currency exchange rates. HPE Software also uses other derivatives not designated as hedging instruments consisting primarily of forward contracts to hedge foreign currency balance sheet exposures. Alternatively, HPE Software may choose not to hedge the risk associated with HPE Software's foreign currency exposures, primarily if such exposure acts as a natural hedge for offsetting amounts denominated in the same currency or if the currency is too difficult or too expensive to hedge.

HPE Software has performed sensitivity analyses as of 31 October 2016 and 2015 using a modeling technique that measures the change in the fair values arising from a hypothetical 10 per cent. adverse movement in the levels of foreign currency exchange rates relative to the US dollar, with all other variables held constant. The analyses cover all of HPE Software's foreign currency derivative contracts offset by underlying exposures. The foreign currency exchange rates HPE Software used in performing the sensitivity analysis were based on market rates in effect at 31 October 2016 and 2015. The sensitivity analyses indicated that a hypothetical 10 per cent. adverse movement in foreign currency exchange rates would result in foreign currency exchange fair value losses of less than US\$1 million for each of the financial years ended 31 October 2016 and 2015.

Interest Rate Risk

HPE Software is also exposed to interest rate risk related to HPE Software's investment portfolio. HPE Software has performed sensitivity analyses as of 31 October 2016 and 2015 using a modelling technique that measures the change in the fair values arising from a hypothetical 10 per cent. adverse movement in the levels of interest rates across the entire yield curve, with all other variables held constant. The analyses cover HPE Software's investments. The analyses use actual or approximate maturities for the investments. The discount rates used were based on the market interest rates in effect at 31 October 2016 and 2015. The sensitivity analyses indicated that a hypothetical 10 per cent. adverse movement in interest rates would result in losses in the fair values of HPE Software's investments of less than US\$1 million for each of the financial years ended 31 October 2016 and 2015.

PART VII

HISTORICAL FINANCIAL INFORMATION OF HPE SOFTWARE

SECTION A: Accountant's Report on HPE Software Historical Financial Information

The Directors 28 July 2017 Micro Focus International plc The Lawn 2230 Old Bath Road Newbury Berkshire RG14 1QN

Dear Sirs

The software business segment of Hewlett Packard Enterprise Company ("Seattle")

We report on the financial information set out in Section B of Part VII below for the three financial years ended 31 October 2014, 31 October 2015, 31 October 2016 and the three months ended 31 January 2017 (the "Financial Information"). This Financial Information has been prepared for inclusion in the prospectus dated 28 July 2017 of Micro Focus International plc (the "Company") on the basis of the accounting policies set out in note I.A of the Financial Information. This report is required by Annex I of Commission Regulation (EC) 809/2004 and is given for the purpose of complying with that item and for no other purpose.

We have not audited or reviewed the financial information for the three months ended 31 January 2016 which has been included for comparative purposes only and accordingly do not express an opinion thereon.

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 the basis of preparation set out in note I.A to the Financial Information.

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 28 July 2017, a true and fair view of the state of affairs of Seattle as at the dates stated and of its profits, cash flows and changes in equity for the periods then ended in accordance with the basis of preparation set out in note I.A to the Financial Information.

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: HPE Software Historical Financial Information

The Software Segment of Hewlett Packard Enterprise Company Combined Historical Financial Information

The Software Segment of Hewlett Packard Enterprise Company Combined statement of comprehensive income for the years ended 31 October 2014, 2015 and 2016 and the three month periods ended 31 January 2016 and 2017

		Three months ended
		31 January			Years ended 31 October
		––––––––––––––––– 2017	2016	2016	––––––––––––––––––––––––––– 2015	2014
In millions USD	Note	–––––––	––––––– (unaudited)	–––––––	–––––––	–––––––
––––––––––––––––––– Revenue	1	724	781	3,198	3,629	3,929
Cost of sales comprising:
Cost of sales (excluding amortization of capitalized
development costs and acquired technology
intangibles)		(208)	(220)	(876)	(955)	(1,021)
Amortization of product development costs	7	–	(2)	(6)	(27)	(29)
Amortization of acquired technology intangibles	7	(24)	(27)	(105)	(136)	(152)
Cost of sales		(232)	(249)	(987)	(1,118)	(1,202)
Gross profit		––––––– 492	––––––– 532	––––––– 2,211	––––––– 2,511	––––––– 2,727
Selling and distribution costs		(232)	(270)	(1,110)	(1,205)	(1,374)
Research and development expenses comprising:
Expenditures incurred in the year		(129)	(155)	(608)	(683)	(683)
Capitalization of product development costs	7	–	–	–	2	–
Research and development expenses		(129)	(155)	(608)	(681)	(683)
Administrative expenses		(143)	(97)	(284)	(332)	(302)
Operating (loss)/profit		(12)	10	209	293	368
Analyzed as:
Adjusted Operating Profit		146	120	598	732	766
Share­based compensation	23	(16)	(22)	(91)	(62)	(62)
Amortization of intangible assets	7	(35)	(43)	(161)	(254)	(281)
Exceptional items	2	(107)	(45)	(137)	(123)	(55)
Operating (loss)/profit	3	(12)	10	209	293	368
Finance costs		(2)	(1)	(73)	(45)	(5)
Finance income		15	–	1	1	2
Net finance income/(costs)	4	––––––– 13	––––––– (1)	––––––– (72)	––––––– (44)	––––––– (3)
Other expense, net		–	–	–	–	(2)
Loss on available­for­sale securities reclassified into earnings		–	–	–	(3)	(2)
Profit before tax	2	––––––– 1	––––––– 9	––––––– 137	––––––– 246	––––––– 361
Taxation	5	(29)	24	(82)	108	(37)
(Loss)/profit for the period		––––––– (28)	––––––– 33	––––––– 55	––––––– 354	––––––– 324
Other comprehensive income (loss):
Items that will not be reclassified to profit or loss before taxation
Actuarial gain/(loss) on pension liabilities schemes	19	58	(17)	(67)	(15)	(12)
Items that may be subsequently reclassified to profit or
loss before taxation
Unrealized gain on available­for­sale securities		–	2	–	3	–
Unrealized gain/(loss) on cash flow hedges		1	1	1	5	(5)
Currency translation differences		–	(1)	5	(32)	(4)
Taxation		–	–	–	(2)	2
		–––––––	–––––––	–––––––	–––––––	–––––––
Other comprehensive income/(expense) for the period,
net of taxation		59	(15)	(61)	(41)	(19)
Total comprehensive income/(expense) for the period		––––––– 31	––––––– 18	––––––– (6)	––––––– 313	––––––– 305
		–––––––	–––––––	–––––––	–––––––	–––––––

The Software Segment of Hewlett Packard Enterprise Company Combined statement of financial position as at 31 October 2014, 2015 and 2016 and 31 January 2017

	31 January	31 October	31 October	31 October
Note	2017	2016	2015	2014 ––––––––
6	8,095	8,095	8,319	8,852
7	375	411	604	934
8	134	138	133	145
5	41	15	25	6
	93	72	65	70
21	999	1,047	817	425 ––––––––
	9,737	9,778	9,963	10,432 ––––––––
				150
	11	20	23	26
11	495	665	706	787
12	109	130	150	197 ––––––––
	691	892	996	1,160
	10,428	10,670	10,959	–––––––– 11,592
				––––––––
				556
				6
				52
15	193	346	384	298
16	822	767	864	953 ––––––––
	1,567	1,798	1,912	1,865 ––––––––
17	173	157	195	244
14	22	21	22	15
19	89	162	98	85
18	6	10	3	6
	18	23	21	19
21	4	4	6	11 ––––––––
	312	377	345	380 ––––––––
	1,879	2,175	2,257	2,245
	8,549	8,495	8,702	–––––––– 9,347
				––––––––
	8,580	8,526	8,738	9,351
				(4)
	––––––––	––––––––	––––––––	––––––––
	10 13 14 18	–––––––– –––––––– –––––––– 76 –––––––– –––––––– –––––––– 495 16 41 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––	–––––––– –––––––– –––––––– 77 –––––––– –––––––– –––––––– 608 15 62 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––	–––––––– –––––––– –––––––– 117 –––––––– –––––––– –––––––– 617 11 36 –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– Foreign currency translation deficit (31) (31) (36)

The Software Segment of Hewlett Packard Enterprise Company Combined statement of changes in equity for the years ended 31 October 2014, 2015 and 2016 and three month periods ended 31 January 2016 and 2017

		Foreign
	Parent	currency
	company	translation
In millions USD	investment	reserve/(deficit)	Total equity
–––––––––––––––––––	–––––––––	––––––––––––	––––––––––
Balance as at 1 November 2013	9,893	–	9,893
Profit for the period	324	–	324
Other comprehensive expense for the period	(15)	(4)	(19)
Total comprehensive income/(expense)	––––––––	––––––––	––––––––
Transactions with owners	309	(4)	305
Net transfers to parent	(851)	–	(851)
Balance as at 31 October 2014	––––––––	––––––––	––––––––
	9,351	(4)	9,347
Profit for the period	––––––––	––––––––	––––––––
	354	–	354
Other comprehensive expense for the period	(9)	(32)	(41)
	––––––––	––––––––	––––––––
Total comprehensive income/(expense) Transactions with owners	345	(32)	313
Net transfers to parent	(958)	–	(958)
Balance as at 31 October 2015	––––––––	––––––––	––––––––
	8,738	(36)	8,702
Profit for the period	––––––––	––––––––	––––––––
	55	–	55
Other comprehensive (expense)/income for the period	(66)	5	(61)
Total comprehensive (expense)/income	––––––––	––––––––	––––––––
Transactions with owners	(11)	5	(6)
Net transfers to parent	(201)	–	(201)
Balance as at 31 October 2016	––––––––	––––––––	––––––––
	8,526	(31)	8,495
Loss for the period	––––––––	––––––––	––––––––
	(28)	–	(28)
Other comprehensive income for the period	59	–	59
	––––––––	––––––––	––––––––
Total comprehensive income Transactions with owners	31	–	31
Net transfers from parent	23	–	23
Balance as at 31 January 2017	––––––––	––––––––	––––––––
	8,580	(31)	8,549
	––––––––	––––––––	––––––––
Balance as at 31 October 2015	8,738	(36)	8,702
	––––––––	––––––––	––––––––
Profit for the period (unaudited)	33	–	33
Other comprehensive expense for the period (unaudited)	(14)	(1)	(15)
	––––––––	––––––––	––––––––
Total comprehensive income/(expense) (unaudited) Transactions with owners	19	(1)	18
Net transfers to parent (unaudited)	(146)	–	(146)
	––––––––	––––––––	––––––––
Balance as at 31 January 2016 (unaudited)	8,611	(37)	8,574
	––––––––	––––––––	––––––––

The Software Segment of Hewlett Packard Enterprise Company Combined statement of cash flows for the years ended 31 October 2014, 2015 and 2016 and three month periods ended 31 January 2016 and 2017

		Three months ended 31 January –––––––––––––––––		––––––––––––––––––––––––––	Years ended 31 October
		2017 –––––––	2016 –––––––	2016 –––––––	2015 –––––––	2014 –––––––
In millions USD –––––––––––––––––––	Note		(unaudited)
Cash generated from operations Interest paid Tax (paid)/received	22	150 – (2)	191 – –	481 (3) 3	545 (3) (6)	993 (2) 23
Net cash generated from operating activities		––––––– 148	––––––– 191	––––––– 481	––––––– 536	––––––– 1,014
Cash flows from investing activities
Payments for intangible assets	7	(2)	(2)	(2)	–	(1)
Purchase of property, plant and equipment	8	(5)	(5)	(26)	(17)	–
Proceeds from sales of property	8	–	1	1	18	14
Proceeds from business divestitures	28	–	–	249	174	–
Payment for the acquisition of business	27	–	–	(12)	(138)	(20)
Short­term investments		(1) –––––––	– –––––––	1 –––––––	3 –––––––	(9) –––––––
Net cash (used in)/generated from investing activities Cash flows from financing activities		(8)	(6)	211	40	(16)
Repayment of borrowings	14	(3)	(3)	(12)	(8)	(4)
Net transfers to parent	26	(158) –––––––	(149) –––––––	(700) –––––––	(615) –––––––	(1,115) –––––––
Net cash used in financing activities		(161) –––––––	(152) –––––––	(712) –––––––	(623) –––––––	(1,119) –––––––
Net (decrease)/increase in cash and cash equivalents equivalents		(21)	33	(20)	(47)	(121)
Cash and cash equivalents at beginning of period		––––––– 130	––––––– 150	––––––– 150	––––––– 197	––––––– 318
Cash and cash equivalents at end of period	12	––––––– 109 –––––––	––––––– 183 –––––––	––––––– 130 –––––––	––––––– 150 –––––––	––––––– 197 –––––––

Noncash payments of \$5m were made in the three months ended 31 January 2017 (2016: \$2m) and \$16m in the year ended 31 October 2016 (2015: \$19m and 2014: \$20m) related to property, plant and equipment acquired through finance leases.

The Software Segment of Hewlett Packard Enterprise Company Summary of significant accounting policies for the years ended 31 October 2014, 2015 and 2016 and three month periods ended 31 January 2016 and 2017

General information

The Software segment ("Seattle") of Hewlett Packard Enterprise Company ("HPE") provides big data platform analytics, application testing and delivery management, security and information governance and IT operations management solutions for businesses and other enterprises of all sizes. Seattle's offerings include licenses, support, professional services and softwareasaservice. Seattle consists of one operating segment, the development and sale of software solutions. Seattle is domiciled in the United States. HPE's registered office is 3000 Hanover Street Palo Alto, California, 94304 USA.

On 1 November 2015, HPE was spun off in a transaction in which HP, Inc., formerly known as HewlettPackard Company, separated into two independent publicly traded companies. Prior to the spinoff, HPE was a wholly owned subsidiary of HewlettPackard Company and HPE's businesses were operated as part of HewlettPackard Company. Accordingly, the term "Parent" refers to HewlettPackard Company for periods prior to 1 November 2015 and to HPE from 1 November 2015 onward.

I Seattle's accounting policies

A Basis of preparation

This combined historical financial information of Seattle was derived from the combined and consolidated financial statements and accounting records of Parent as Seattle did not comprise a separate legal entity or group of entities during the periods presented. The combined historical financial information for the three years ended 31 October 2016 and three month periods ended 31 January 2016 and 2017 has been prepared specifically for the purposes of this prospectus and in accordance with the requirements of the Prospectus Directive (PD) Regulation, and in accordance with this basis of preparation. The accounting policies applied and disclosed below are consistent with those to be used by Micro Focus in its next published financial statements for the period ended 31 October 2018, and these policies have been applied consistently to all periods presented unless stated otherwise.

The combined historical financial information has been prepared on a going concern basis under the historical cost convention. The planned merger of Seattle (which, at the time of the merger, will hold Seattle, the Software segment of HPE) with a wholly owned subsidiary of Micro Focus (the "Transaction"), funding available to the Seattle business and the business's forecasts and projections have been considered, taking account of possible changes in trading performance, and including stress testing and scenario analysis. On this basis, the business will be able to operate at adequate levels of both liquidity and capital for the foreseeable future. Accordingly the going concern basis of preparation has been adopted.

This combined historical financial information does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006.

This basis of preparation describes how the combined historical financial information has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"), except as noted below.

IFRS does not provide for the preparation of combined historical financial information, or for the specific accounting treatment set out below. Accordingly, in preparing the combined historical financial information, certain accounting conventions commonly used for the preparation of combined historical financial information for inclusion in investment circulars as described in the Annexure to SIR 2000 (Investment Reporting Standards applicable to public reporting engagements on combined historical financial information) issued by the UK Auditing Practices Board have been applied. The application of these conventions results in the following material departure from IFRS; in all other respects, IFRS has been applied.

As explained above, the combined historical financial information is not prepared on a consolidated basis and therefore does not comply with the requirements of IFRS 10 "Consolidated Financial Statements". However, the combined historical financial information has been prepared on a combined basis applying the principles underlying the consolidations procedures of IFRS 10.

The following summarizes the accounting and other principles applied in preparing the combined historical financial information:

• Seattle's business did not comprise a separate legal entity or group of entities during the three years ended 31 October 2016 and three months ended 31 January 2017 (the "Track Record Period") and, therefore it is not meaningful to present share capital or an analysis of reserves. Parent company investment represents a combination of the overall receivables and payables with Parent, funding balances with Parent and equity investment by Parent in Seattle, which cannot be separately identified or allocated throughout the Track Record Period.
• The combined statement of comprehensive income of Seattle reflects allocations of general corporate expenses from Parent including, but not limited to, executive management, finance, legal, information technology, employee benefits administration, treasury, risk management, procurement and other shared services. These allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenue, expenses, headcount or other relevant measures. These allocations have been considered to be a reasonable reflection of the utilization of services by, or the benefits provided to, Seattle. These allocations may not, however, reflect the expenses Seattle would have incurred as a standalone company for the periods presented. Actual costs that may have been incurred if Seattle had been a standalone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.
• The combined statement of financial position of Seattle includes Parent's assets and liabilities that are specifically identifiable or otherwise attributable to Seattle, including subsidiaries and affiliates in which Parent has a controlling financial interest or is the primary beneficiary. Parent's cash has not been assigned to Seattle for any of the periods presented because those cash balances are not directly attributable to Seattle. Seattle reflects transfers of cash to and from Parent's cash management system as a component of Parent company investment on the combined statement of financial position.
• Parent's longterm debt has not been attributed to Seattle for any of the periods presented because Parent's borrowings are not the legal obligation of Seattle nor will they be transferred to Seattle pursuant to the Separation and Distribution Agreement.
• Parent maintains various benefit and sharebased compensation plans. Seattle's employees participate in those programs and a portion of the cost of those plans is included in Seattle's combined historical financial statements.
• Parent has established a number of defined benefit pension schemes. A number of Seattle employees were members of the defined benefit pension schemes during the conversion period. An allocation method has been used to determine Seattle's cost of these schemes, and its relative share of Parent's gross pension assets and liabilities.
• The combined historical financial information includes Seattle's net assets and results of operations as described above. All intercompany transactions and accounts within the combined businesses of Seattle have been eliminated.
• Intercompany transactions between Seattle and Parent, other than leases with Parent's wholly owned leasing subsidiary (as described in note 26), are considered to be effectively settled in the combined historical financial Information at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the combined statement

of cash flows within financing activities and on the combined statement of financial position within Parent company investment.

• Seattle's operations have historically been included in the tax returns filed by the respective Parent entities of which Seattle's businesses are a part. Income tax expense and other income tax related information contained in this combined historical financial information is presented on a separate return basis as if Seattle filed its own tax returns. The separate return method applies the accounting guidance for income taxes to the standalone financial statements as if Seattle were a separate taxpayer and a standalone enterprise for the periods presented. Current income tax liabilities related to entities that file jointly with Parent are assumed to be immediately settled with Parent and are relieved through the Parent company investment account and Net transfers to Parent in the combined statement of cash flows.
• Current tax receivable/payable and deferred tax assets and liabilities were determined based on the analysis of Seattle's current tax position and temporary differences at each periodend and assessment of how these relate directly or indirectly to the Seattle business.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying Seattle's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the combined historical financial information, are disclosed below in II, "Critical accounting estimates and assumptions."

Upon completion of the Transaction, the ordinary shares of Micro Focus will be listed on the Official List of the Financial Conduct Authority and traded on the London Stock Exchange and Micro Focus' American Depositary Shares will be listed and traded on the New York Stock Exchange. In connection with Micro Focus' regulatory filing process with the Securities and Exchange Commission in the United States, Micro Focus has reviewed the classification of amortization costs in its statement of comprehensive income. As a result of this review, Micro Focus has elected to classify amortization expenses for both capitalized development costs and acquired technology intangibles as part of Cost of Sales.

As the accounting policies applied by Seattle in the Historical Financial Information are required to be consistent with those to be adopted by Micro Focus in its 31 October 2018 annual financial statements, Seattle has reclassified the amortization of capitalized development costs and acquired technology intangibles into Cost of Sales.

The revised presentation is in accordance with IFRS and provides investors with a combined statement of comprehensive income presentation that is more comparable with Micro Focus' peers listed on both exchanges.

B Divestitures

Business transferred to Parent

Prior to HP Inc.'s spinoff of HPE, HP Inc. conducted a strategic review of Seattle and decided that the marketing optimization software product group, which has historically been managed by Seattle and included in Seattle's results of operations, no longer aligned with Seattle's strategic goals, as it was outside Seattle's gotomarket focus of selling to IT departments. However, HP, Inc. determined that these software assets primarily aligned with a document management and solutions ecosystem that would complement its printing business. As a result of this strategic review process, the marketing optimization software product group was realigned to become a part of HP Inc. This realignment is reflected in Seattle's combined historical financial statements as a transfer of the marketing optimization software product group from Seattle to Parent during the year ended 31 October 2015 (see note 26). The realignment did not qualify under the scope of IFRS 5 "Noncurrent Assets Held for Sale and Discontinued Operations" and therefore is incorporated within the combined historical financial information under continuing operations.

Revenues related to the marketing optimization software product group included in Seattle's results of operations were as follows:

	Years ended 31 October
In millions USD	––––––––––––––––––––––– 2015	2014
––––––––––––––––––– Revenues	–––––––– 163	–––––––– 232
	––––––––	––––––––

Disposals

In the year ended 31 October 2015, Seattle completed sales of its entire ownership of the LiveVault and iManage businesses for combined proceeds of \$149m. In the year ended 31 October 2016, Seattle completed the sale of its entire ownership of the TippingPoint business for approximately \$300m. These disposals are reflected in Seattle's combined historical financial information as divestments of the relevant businesses from Seattle (see note 28).

C Revenue recognition

Seattle recognizes revenues from sales of software licenses (including intellectual property and patent rights, licenses to endusers, software maintenance, subscription, technical support, training and professional services), upon firm evidence of an arrangement, delivery of the software and determination that collection of a fixed or determinable fee is reasonably assured. When the fees for software upgrades and enhancements, maintenance, consulting and training are bundled with the license fee, they are unbundled using Seattle's objective evidence of the fair value of the elements represented by Seattle's customary pricing for each element in separate transactions. If evidence of fair value exists for all undelivered elements and there is no such evidence of fair value established for delivered elements, revenue is first allocated to the elements where fair value has been established and the residual amount is allocated to the delivered elements. If evidence of fair value for any undelivered element of the arrangement does not exist, all revenue from the arrangement is deferred until such time that there is evidence of delivery.

If the arrangement includes acceptance criteria, revenue is not recognized until Seattle can objectively demonstrate that the acceptance criteria have been met, or the acceptance period lapses, whichever is earlier. Seattle recognizes license revenue derived from sales to resellers upon delivery to resellers, provided that all other revenue recognition criteria are met; otherwise revenue is deferred and recognized upon delivery of the product to the enduser. Where Seattle sells access to a license for a specified period of time and collection of a fixed or determinable fee is reasonably assured, license revenue is recognized upon delivery, unless future substantive upgrades or similar future performance obligations are committed to, in which case revenue is deferred and recognized ratably over the specified period. This is typically the case for subscriptions where access and performance obligations are performed over a defined term. Maintenance revenue is derived from providing technical support and software updates to customers. Maintenance revenue is recognized on a straightline basis over the term of the contract, which in most cases is one year. Revenue from consulting and training services is recognized on a percentage of completion basis as the services are performed. The stage of completion is measured on the basis of services performed to date as a percentage of the total services to be performed. Amounts collected prior to satisfying the above revenue recognition criteria are included in deferred income.

Seattle recognizes revenue for hosting or softwareasaservice arrangements as the service is delivered, generally on a straightline basis, over the contractual period of performance. In hosting arrangements, Seattle considers the rights provided to the customer (e.g., whether the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty, and the feasibility of the customer to operate or contract with another vendor to operate the software) in determining whether the arrangement includes the sale of a software license. In hosting arrangements where software licenses are sold, license revenue is generally recognized when all other revenue recognition criteria are satisfied.

For Services time and material contracts, Seattle recognizes revenue as services are rendered and recognizes costs as they are incurred. Seattle recognizes revenue from certain fixedprice contracts, such as consulting arrangements, as work progresses over the contract period on a proportional performance basis, as determined by the percentage of labor costs incurred to date compared to the total estimated labor costs of a contract. Seattle recognizes revenue on fixedprice contracts for design and build projects (to design, develop and construct software and systems) using the percentageofcompletion method. Seattle uses the costtocost method to measure progress toward completion as determined by the percentage of cost incurred to date compared to the total estimated costs of the project. Estimates of total project costs for fixedprice contracts are regularly revised during the life of a contract. Provisions for estimated losses on fixedpriced contracts are recognized in the period when such losses become known. If reasonable and reliable cost estimates for a project cannot be made, Seattle recognizes revenue to the extent of recoverable costs.

Rebates, price protection, promotions and other volumebased incentives paid to partners as part of a contracted program are netted against revenue at the later of the date of revenue recognition or when the sales incentive is offered. For certain incentive programs, Seattle estimates the number of customers expected to redeem the incentive based on historical experience and the specific terms and conditions of the incentive.

IFRS 15 "Revenue from contracts with customers" establishes 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. Application of the standard is mandatory for annual reporting periods starting from 1 January 2018 onward. Earlier application is permitted. Revenue is recognized based on a five step model and is based around performance obligations. The standard replaces IAS 18 "Revenue" and IAS 11 "Construction contracts" and related interpretations. Seattle is currently assessing the impact of IFRS 15, but it is too early to determine how significant the effect on actual results and financial position will be.

Cost of sales includes costs related to the consulting business, helpline support and royalties payable to third parties.

D Segment reporting

In accordance with IFRS 8 "Operating Segments", Seattle has derived the information for its operating segment using the information used by the Chief Operating Decision Maker ("CODM"). The operating segment is consistent with that used in internal management reporting and the measure used by Seattle's Executive Vice President and General Manager is the Adjusted Operating Profit for Seattle as a whole as set out in note 3 and Adjusted EBITDA and Underlying Adjusted EBITDA as set out in note 3. The operating segment's operating results are reviewed regularly by the CODM to make decisions about resources for the segment and assess its performance, and for which discrete financial information is available. Seattle has determined that it has one operating segment.

E Exceptional items

Exceptional items are those significant items which are separately disclosed by virtue of their size, nature or incidence to enable a full understanding of Seattle's financial performance. Examples of transactions which may be considered of an exceptional nature include major restructuring programs, cost of acquisitions and separation costs, which include allocated thirdparty consulting costs, contractor fees and other incremental costs arising from the 1 November 2015 separation of Parent, HPE, from HP Inc., formerly known as HewlettPackard Company.

F Restructuring

Seattle records charges associated with Parentapproved restructuring plans to reorganize Seattle's business, to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes and accelerate innovation. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations, and contract cancellation costs. Seattle records restructuring charges based on estimated employee terminations and site closure and consolidation plans. Seattle accrues for severance and other employee separation costs under these actions when it is probable that benefits will be paid and the amount is reasonably estimable. The rates used in determining severance accruals are based on existing plans, historical experiences and negotiated settlements.

G Employee benefit costs

a) Pension obligations

Parent operates various pension schemes that Seattle employees participate in. The majority of the pension schemes in which Seattle employees participate are defined benefit plans.

Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement. This is usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the combined 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 independent actuaries 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 highquality corporate bonds that have terms to maturity approximating to the terms of the related pension obligation. The pension benefits, obligations, and expenses reflected in the combined historical financial information have been determined based on an allocation of Parent's benefits, obligations and expenses for the respective periods. The allocation has been determined as a ratio of Seattle employees as compared to total pension scheme employees on a pension plan basis as at the 2016 measurement date.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

Service cost and interest cost are recognized immediately in employee benefit expense in the combined statement of comprehensive income. The service cost component includes current service cost, pastservice cost, and any gain/loss on settlement. The current service cost of the defined benefit plan reflects the increase in the defined benefit obligation resulting from employee service in the current year. The pastservice cost is the change in present value of the defined benefit obligation resulting from benefit changes or curtailments. 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.

b) Sharebased compensation

Parent maintains various sharebased compensation plans. Seattle's employees participate in those programs and a portion of the cost of those plans is included in Seattle's combined historical financial information. Sharebased compensation expense has been allocated to Seattle based on the awards and terms previously granted to Seattle's employees as well as an allocation of Parent's corporate and shared functional employee expenses. For shares granted, the fair value of the employee services received in exchange for the grant of the shares is recognized as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares granted. Nonmarket vesting conditions are included in assumptions about the number of shares that are expected to vest. Market vesting conditions are taken into account when determining the fair value of the shares at grant date. At each statement of financial position date, Seattle revises its estimates of the number of shares that are expected to vest. Seattle recognizes the impact of the revision of original estimates, if any, in the combined statement of comprehensive income, and a corresponding adjustment to equity over the remaining vesting period.

Sharebased compensation is allocated down from Parent, and therefore the pricing method applicable for Parent is the same as that utilized by Seattle. Parent utilizes the BlackScholesMerton option pricing model to estimate the fair value of share options subject to servicebased vesting conditions. Parent estimates the fair value of share options subject to performancecontingent vesting conditions using a combination of a Monte Carlo simulation model and a lattice model, as these awards contain market conditions.

H Foreign currency translation

a) Functional and presentation currency

The combined historical financial information is presented in US dollars, which is Micro Focus' presentational currency and all values are rounded to the nearest million, except when otherwise indicated.

Seattle predominantly uses the US dollar as its functional currency for all significant legal entities.

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial periodend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the combined statement of comprehensive income.

c) Seattle companies

The results and financial position of all Seattle entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• i) Assets and liabilities for each combined statement of financial position presented are translated at the closing rate at the date of that combined statement of financial position;
• ii) Income and expenses for each combined statement of comprehensive income item are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
• iii) All resulting exchange differences are recognized as a separate component of equity. On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

d) Exchange rates

The most important foreign currencies for Seattle are the UK Pound Sterling ("GBP") and the Euro ("EUR"). The exchange rates used are as follows:

	31 January 2017		31 January 2016	31 October 2016		31 October 2015		31 October 2014
	––––––––––––––––– Average –––––––	Closing –––––––	––––––– Average –––––––	––––––––––––––––– Average –––––––	Closing –––––––	––––––––––––––––– Average –––––––	Closing –––––––	––––––––––––––––– Average –––––––	Closing –––––––
EUR/USD GBP/USD	1.065 1.236	1.081 1.258	1.084 1.511	1.107 1.414	1.097 1.221	1.144 1.543	1.105 1.539	1.353 1.659	1.252 1.600

I Intangible assets

a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Seattle has one segment and one cash generatingunit ("CGU") to which Goodwill has been attributed for the purpose of impairment testing.

b) Computer software

Computer software licenses are capitalized on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortized using the straightline method over their estimated useful lives of three to five years.

c) Research and development

Research expenditure is recognized as an expense as incurred. Costs incurred on development projects relating to the developing of new computer software programs and significant enhancement of existing computer software programs are recognized as intangible assets when it is probable that the project will be a success, considering its commercial and technological feasibility, and costs can be measured reliably. Only direct costs are capitalized which are the software development employee costs and thirdparty contractor costs. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Development costs are amortized from the commencement of the commercial production of the product on a straightline basis over the period of its expected benefit, typically being three years.

d) Intangible assets – arising on business combinations

Intangible assets that are acquired by Seattle are stated at cost less accumulated amortization and impairment. Amortization is charged to the combined statement of comprehensive income on a straightline basis over the estimated useful life of each intangible asset. Intangible assets are amortized from the date they are available for use. The estimated useful lives will vary for each category of asset acquired as follows:

	Estimated useful lives (years)
Purchased software	–––––––––––––– Three
Development costs	Three
Customer contracts, customer lists and distribution agreements	Four
Developed and core technology and patents	Four
Trade name and trademarks	Three

J Property, plant and equipment

All property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditures that are directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Seattle and the cost of the item can be measured reliably. All other repairs and maintenance expenditures are charged to the combined statement of comprehensive income during the financial year in which they are incurred. Depreciation is calculated using the straightline method to write off the cost of each asset over its estimated useful life as follows:

	Estimated useful
	lives (years) ––––––––––––––
Buildings	Five to 40
Leasehold improvements	Lesser of useful life or
	life of lease
Equipment and other	Three to 15

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the combined statement of comprehensive income.

K Impairment of nonfinancial assets

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization and depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows being CGUs. Any nonfinancial assets other than goodwill which have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Assets that are subject to amortization and depreciation are also reviewed for any possible impairment at each reporting date.

L Inventories

Inventories are stated at the lower of cost and net realizable value. The cost of finished goods comprises software for resale and packaging materials. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Cost is computed using standard cost which approximates actual cost on a firstin, firstout basis. When work has been performed and the revenue is not yet recognized, the direct costs of thirdparty contractors and staff will be treated as work in progress where the probability of invoicing and evidence of collectability can be demonstrated.

M Trade receivables

Trade receivables are initially recognized at fair value and subsequently measured at amortized cost less provisions for impairment. A provision for impairment of trade receivables is established when there is objective evidence that Seattle will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is based on historical collection trends and the collection risk of specific customer accounts due to a change in their financial condition identified subsequent to the transaction. The amount of the provision is recognized in the combined statement of comprehensive income.

N Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other shortterm highly liquid investments with original maturities of three months or less, which are subject to insignificant risk of changes in value.

O Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Subsequent to initial recognition, interestbearing borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the combined statement of comprehensive income over the period of borrowing on an effective interest basis.

P Leases

Leases for which the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases. All other leases are classified as finance leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the combined statement of comprehensive income on a straightline basis over the period of the lease.

Seattle entered into leases with Parent for data center equipment that are classified as finance leases. See note 26 for further information about Seattle's finance leases with Parent.

Q Taxation

Current and deferred tax are recognized in the combined statement of comprehensive income, except when the tax relates to items charged or credited directly to equity, in which case the tax is also recorded directly in equity.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the combined historical financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by Seattle and it is probable that the temporary difference will not reverse in the foreseeable future.

Current tax is recognized based on the amounts expected to be paid or recovered under the tax rates and laws that have been enacted or substantively enacted at the statement of financial position date.

R Parent company investment

Net transfers to and from Parent are included within Parent company investment. The components of net transfers to Parent are included within the combined statement of changes in equity.

Parent company investment in the combined statement of financial position and statement of changes in equity represents Parent's historical investment in Seattle, the net effect of transactions with and allocations from Parent and Seattle's accumulated earnings. See note 26 for further information about transactions between Seattle and Parent.

S Financial instruments and hedge accounting

Financial assets and liabilities are recognized in Seattle's statement of financial position when Seattle becomes a party to the contractual provision of the instrument.

Financial assets are initially recognized at fair value plus transaction costs for all financial assets not at fair value through profit or loss. Seattle classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Seattle determines the classification of its financial assets at initial classification.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as noncurrent.

(b) Loans and receivables

Loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as noncurrent assets. Seattle's loans and receivables comprise cash and cash equivalents and trade receivables. Trade receivables are noninterest bearing and are stated at their fair value less the amount of any appropriate provision for irrecoverable amounts. Loans and receivables are subsequently carried at amortized cost using the effective interest method.

(c) Availableforsale financial assets

Availableforsale financial assets are nonderivatives that are either designated in this category or not classified in any of the other categories. They are included in noncurrent assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Available for sale financial assets are subsequently carried at fair value with changes in fair value recognized in other comprehensive income.

Assessments are completed at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For the loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the combined statement of comprehensive income. Seattle's principal financial liabilities are noninterest bearing trade payables and variablerate bank borrowings. Trade payables and bank borrowings are stated at their fair value.

(a) Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as noncurrent liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

(b) Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

For derivative instruments that are designated and qualify as cash flow hedges, changes in fair value are initially recorded for the effective portion of the derivative instrument in Accumulated other comprehensive loss as a separate component of equity in the combined statement of financial position and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction is recognized in earnings. The effective portion of cash flow hedges is reported in the same financial statement line item as changes in the fair value of the hedged item.

For derivative instruments not designated as hedging instruments, changes in fair value of the derivative instrument are recognized, as well as the offsetting change in the fair value of the hedged item, in finance cost in the combined statement of comprehensive income in the period of change.

For forward contracts designated as cash flow hedges, hedge effectiveness is measured by comparing the cumulative change in fair value of the hedge contract with the cumulative change in fair value of the hedged item, both of which are based on forward rates. Any ineffective portion of the hedge is recognized in the combined statement of comprehensive income in the same period in which ineffectiveness occurs. Amounts excluded from the assessment of effectiveness are recognized in the combined statement of comprehensive income in the period they arise.

T Provisions

Provisions for restructuring costs and legal claims are recognized when Seattle has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease and other contractual termination penalties and employee termination payments. Provisions are not recognized for future operating losses.

If there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pretax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as an interest expense.

U Adoption of new and revised IFRS

The accounting policies adopted in these combined historical financial statements reflect the most recent IFRS required adoptions as at the three months ended 31 January 2017 and as at the year ended 31 October 2016, with the exception of the following standards, amendments to or interpretations of published standards:

• (a) The following standards, interpretations and amendments to existing standards are not yet effective and have not been adopted early by Seattle:
• i) IFRS 15 "Revenue from contracts with customers" establishes 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. Application of the standard is mandatory for annual reporting periods starting from 1 January 2018 onward and has been endorsed by the EU. Earlier application is permitted. The standard replaces IAS 18 "Revenue" and IAS 11 "Construction contracts" and related interpretations.
• ii) IFRS 9 "Financial instruments" replaces the guidance in IAS 39 and applies to periods beginning on or after 1 January 2018, subject to EU endorsement. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model.

In the event that the Transaction completes as anticipated, the potential acquiror intends to align year ends to 31 October. As such, the aforementioned standards will be adopted in the year ending 31 October 2019.

• (b) The following standards, interpretations and amendments to existing standards are not yet effective, have not yet been endorsed by the EU and have not been adopted early by Seattle:
• i) IFRS 16 "Leases" addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on statement of financial position for lessees. The standard replaces IAS 17 "Leases," and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted subject to EU endorsement and the entity adopting IFRS 15 "Revenue from contracts with customers" at the same time.

• ii) Amendments to IAS 12 "Income taxes" on recognition of deferred tax assets for unrealized losses are effective on periods beginning on or after 1 January 2017, subject to EU endorsement. These amendments relate to the recognition of deferred tax assets for unrealized losses and clarify how to account for deferred tax assets related to debt instruments measured at fair value.

• iii) Amendments to IAS 7 "Disclosure initiative on the Statement of cash flows" are effective on periods beginning on or after 1 January 2017, subject to EU endorsement. This amendment introduces an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities and is part of the IASB's Disclosure Initiative, which continues to explore how financial statement disclosure can be improved.

• iv) Clarifications to IFRS 15 "Revenue from contracts with customers" (issued on 12 April 2016) are effective on periods beginning on or after 1 January 2018, subject to EU endorsement. These amendments address identifying performance obligations, principalversusagent considerations, and licensing. These amendments also provide some transition relief for modified contracts and completed contracts.
• v) Amendments to IFRS 2 "Sharebased Payment" are effective on periods beginning on or after 1 January 2018, subject to EU endorsement. This amendment eliminates diversity in practice on the effects of vesting conditions on the measurement of a cashsettled sharebased payment transaction, the classification of a sharebased payment transaction with net settlement features for withholding tax obligations, and the accounting where a modification to the terms and conditions of a sharebased payment transaction changes its classification from cashsettled to equitysettled.
• vi) IFRS Interpretations Committee ("IFRIC") Interpretation 22 "Foreign Currency Transactions and Advance Consideration" which clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency, which is effective 1 January 2018, subject to EU endorsement.

Apart from IFRS 9, IFRS 15, and IFRS 16, where it is too early to determine how significant the effect on reported results and financial position will be, it is anticipated that the future introduction of those standards, amendments and interpretations listed above will not have a material impact on the combined historical financial statements.

II Critical accounting estimates and assumptions

In preparing the combined historical financial statements, best estimates and judgments have been made of certain amounts included in the financial statements, giving due consideration to materiality. Estimates are regularly reviewed and updated as required. Actual results could differ from these estimates. Unless otherwise indicated, it is unlikely that materially different amounts would be reported related to the accounting estimates and assumptions described below. The following is considered to be a description of the most significant estimates, which require subjective and complex judgments, and matters that are inherently uncertain.

a) Impairment of goodwill

Tests are completed annually whether goodwill has suffered any impairment in accordance with IAS 36. The recoverable amount of Seattle's CGU has been determined based on the higher of an asset's fair value less costs to sell and fair value less cost of disposal ("FVLCD") calculations. These calculations require the use of estimates. Details of Seattle's impairment review and sensitivities to changes in assumptions are disclosed in note 6.

b) Income taxes

Seattle is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Seattle recognizes liabilities for anticipated settlement of tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Seattle carries appropriate provision, based on best estimates, until tax computations are agreed with the relevant taxation authorities.

c) Pension obligations

The cost of the defined benefit pension plan and other postemployment medical benefits and the present value of the pension obligation are determined using actuarial valuation. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in valuation and its longterm nature, the estimated cost of a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Further details about pension obligations are disclosed in note 19.

d) Revenue recognition

The key areas of judgment in respect of recognizing revenue are the timing of recognition and the fair value allocation between the elements of each arrangement including license, maintenance, service and hosting revenue, and the estimate of costs used when assessing the stage of completion for fixed price services contracts.

III Financial risk factors

Seattle's multinational operations expose it to a variety of financial risks that include the effects of changes in credit risk, foreign currency risk, and liquidity risk. Seattle maintains cash and cash equivalents, investments, derivatives and certain other financial instruments with various financial institutions. These financial institutions are located in many different geographic regions, and Seattle's policy is designed to limit exposure from any particular institution. As part of its risk management processes, Seattle performs periodic evaluations of the relative credit standing of these financial institutions. Seattle has not sustained material credit losses from instruments held at these financial institutions.

a) Credit risk

Financial instruments that potentially subject Seattle to significant concentrations of credit risk consist principally of cash and cash equivalents, investments, receivables from trade customers and derivatives. Seattle participates in cash management, funding arrangements and risk management programs managed by Parent. Seattle also maintains cash and cash equivalents, investments, derivatives and certain other financial instruments with various financial institutions. These financial institutions are located in many different geographic regions, and Seattle's policy is designed to limit exposure from any particular institution. As part of its risk management processes, periodic evaluations are performed of the relative credit standing of these financial institutions. Seattle has not sustained material credit losses from instruments held at these financial institutions. Derivative contracts are utilized to protect against the effects of foreign currency and interest rate exposures. Such contracts involve the risk of nonperformance by the counterparty, which could result in a material loss.

No single customer accounts for more than ten percent of gross accounts receivable. Credit risk with respect to accounts receivable is generally diversified due to the large number of entities comprising Seattle's customer base and their dispersion across many different industries and geographic regions. Ongoing credit evaluations are performed of the financial condition of its thirdparty distributors, resellers and other customers and may require collateral, such as letters of credit and bank guarantees, in certain circumstances.

b) Foreign currency risk

Seattle operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to UK Sterling and the Euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Foreign exchange risk arises when future commercial transactions, recognized assets and liabilities are denominated in a currency that is not the entity's functional currency.

As part of its risk management strategy, Seattle uses derivative instruments, primarily forward contracts, and total return swaps to hedge certain foreign currency and, to a lesser extent, equity exposures. The objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting the fair value of assets and liabilities. Seattle does not have any leveraged derivatives and does not use derivative contracts for speculative purposes. Derivative contracts may be designated as cash flow hedges. Additionally, for derivatives not designated as hedging instruments, those economic hedges may be categorized as other derivatives. Derivative instruments directly attributable to Seattle are recognized at fair value in the combined statement of financial position. The change in fair value of the derivative instruments is recognized in the combined statement of comprehensive income dependent upon the type of hedge as further discussed in note 20. Cash flows are classified from derivative programs with the activities that correspond to the underlying hedged items in the combined statement of cash flows. See note 20.

c) Liquidity risk

Parent treasury carries out cash flow forecasting for Seattle to ensure that it has sufficient cash to meet operational requirements. Surplus cash over and above what is required for working capital needs is transferred to Parent through Parent's cash management system as a distribution from Parent company investment. Trade payables arise in the normal course of business and are all current.

The Software Segment of Hewlett Packard Enterprise Company Notes to the combined historical financial information for the years ended 31 October 2014, 2015 and 2016 and three month periods ended 31 January 2016 and 2017

1. Segmental reporting

IFRS 8 "Operating Segments" requires the determination of the operating segment based on information which is provided internally to the CODM. The operating segment has been identified based on the internal reporting information and management structures within Seattle. A segmental analysis was prepared for the carveout business to reflect the segment which the carveout business has decided to adopt. From such information, it has been determined that there is one reporting segment.

Information regarding the results of the reportable segment is included below. Details of other material items can be found in the notes to the combined historical financial statements.

Revenue by product category is presented below:

	Three months ended
	31 January ––––––––––––––––––––––		Years ended 31 October –––––––––––––––––––––––––––––––––––––
	2017 ––––––––	2016 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
In millions USD –––––––––––––––––––		(unaudited)
Product category
License	173	187	885	1,011	1,163
Support	387	426	1,623	1,883	1,980
Professional services	89	96	396	423	461
Software­as­a­service	75 ––––––––	72 ––––––––	294 ––––––––	312 ––––––––	325 ––––––––
Total revenue	724 ––––––––	781 ––––––––	3,198 ––––––––	3,629 ––––––––	3,929 ––––––––

Supplementary information

Within Seattle's one reporting segment, Parent monitors revenues both by geographical region and by product portfolio and further disclosures in this regard are given below.

Seattle operates globally, with primary operations in North America; International, which consists of Europe, Middle East, Africa and Latin America; and the Asia Pacific regions.

Revenue by geographical region based on the location of Seattle's businesses is presented below:

	Three months ended 31 January		Years ended 31 October
	–––––––––––––––––––––– 2017	2016	2016	––––––––––––––––––––––––––––––––––––– 2015	2014
In millions USD –––––––––––––––––––	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Geographical region
North America	380	411	1,708	1,935	2,120
International	267	288	1,150	1,301	1,404
Asia Pacific	77 ––––––––	82 ––––––––	340 ––––––––	393 ––––––––	405 ––––––––
Total revenue	724 ––––––––	781 ––––––––	3,198 ––––––––	3,629 ––––––––	3,929 ––––––––

Property, plant and equipment by geographical region based on the location of Seattle's businesses is presented below:

		As at –––––––––––––––––––––––––––––––––––––––––––––––––––––
		31 January –––––––––		31 October ––––––––––––––––––––––––––––––––––––––
		2017 –––––––––	2016 –––––––––	2015 –––––––––	2014 –––––––––
In millions USD –––––––––––––––––––	Note
Geographical region
North America		94	92	99	113
International		18	22	24	24
Asia Pacific		22 –––––––––	24 –––––––––	10 –––––––––	8 –––––––––
Total property, plant and
equipment	8	134 –––––––––	138 –––––––––	133 –––––––––	145 –––––––––

Intangible assets by geographical region based on the location of Seattle's businesses is presented below:

		As at –––––––––––––––––––––––––––––––––––––––––––––––––––––
		31 January –––––––––		31 October ––––––––––––––––––––––––––––––––––––––
		2017	2016	2015	2014
In millions USD –––––––––––––––––––	Note	–––––––––	–––––––––	–––––––––	–––––––––
Geographical region
North America		372	408	599	925
International		3	3	5	7
Asia Pacific		– –––––––––	– –––––––––	– –––––––––	2 –––––––––
Total other intangible assets	7	375 –––––––––	411 –––––––––	604 –––––––––	934 –––––––––

2. Profit before tax

Profit before tax is stated after charging/(crediting) the following operating costs/(gains) classified by the nature of the costs/(gains):

		Three months ended 31 January ––––––––––––––––––––			Years ended 31 October –––––––––––––––––––––––––––––––
		2017 ––––––––	2016 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
In millions USD –––––––––––––––––––	Note		(unaudited)
Staff costs	23	383	430	1,753	1,848	2,099
Depreciation of property,
plant and equipment	8	14	15	60	82	82
Amortization of intangible assets	7	35	43	161	254	281
Operating lease rentals payable	24	6	7	34	52	42
Employee benefit expense	19	29	37	147	121	123
Charges (reversals) to provision
for receivables impairment	11	–	1	9	3	(6)

Exceptional items

	Three months ended 31 January –––––––––––––––––––––––		Years ended 31 October –––––––––––––––––––––––––––––––––––––
	2017 ––––––––	2016 ––––––––	2016 ––––––––	2015 ––––––––	2014
In millions USD –––––––––––––––––––		(unaudited)			––––––––
Reported within Operating profit
Acquisition costs	1	1	3	5	10
Restructuring costs	33	35	110	34	45
Separation costs	74	9	106	91	–
Gain on disposal of businesses	–	–	(82)	(7)	–
Defined benefit plan settlement
and remeasurement benefit	(1) ––––––––	– ––––––––	– ––––––––	– ––––––––	– ––––––––
Total	107	45	137	123	55
	––––––––	––––––––	––––––––	––––––––	––––––––

The acquisition costs are external costs incurred in evaluating and completing the acquisition of Voltage, Trilead, and Shunra during the Track Record Period. The costs mostly relate to due diligence work, legal work on the acquisition agreements and professional advisors on the transactions.

Charges are recorded associated with Parentapproved restructuring plans to reorganize Seattle's business, to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes and accelerate innovation. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations, and contract cancellation costs. Restructuring charges are recorded based on estimated employee terminations and site closure and consolidation plans. Severance and other employee separation costs under these actions are accrued when it is probable that benefits will be paid and the amount is reasonably estimable. The rates used in determining severance accruals are based on existing plans, historical experiences and negotiated settlements.

Separation costs consist of allocated thirdparty consulting, contractor fees and other incremental costs arising from the 1 November 2015 separation of Parent, HPE, from HP Inc., formerly known as HewlettPackard Company. Separation costs include direct transaction costs arising from the planned merger of Seattle with a wholly owned subsidiary of Micro Focus.

Gain on disposal of businesses relates to the divestiture of TippingPoint in the year ended 31 October 2016 and the divestitures of LiveVault and iManage in the year ended 31 October 2015.

3. Reconciliation of operating profit to EBITDA

	Three months ended 31 January		Years ended 31 October
	2017	2016	2016	2015	2014 ––––––––
Note
	(12)	10	209	293	368
7	35	43	161	254	281
8	14	15	60	82	82 ––––––––
	37	68	430	629	731
7	–	(3)	(6)	(27)	(29)
23	16	22	91	62	62
2	107	45	137	123	55 ––––––––
	160	132	652	787	819
7	–	3	6	27	29 ––––––––
	160	135	658	814	848 ––––––––
		–––––––– –––––––– –––––––– ––––––––	–––––––––––––––––––– –––––––– (unaudited) –––––––– –––––––– ––––––––	–––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––	––––––––––––––––––––––––––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

Earnings before interest, taxes, depreciation and amortization of purchased intangibles ("EBITDA") and EBITDA before exceptional items and sharebased compensation charge ("Adjusted EBITDA") and Adjusted EBITDA before net amortization/capitalization of internal development costs ("Underlying Adjusted EBITDA") are used as key performance measures of the business.

These alternative performance measures are consistent with those used by sellside equity analysts who write research on the industry in which Seattle operates and how institutional investors consider performance.

These measures are not defined in IFRS and thus may not be comparable to similarly titled measures by other companies.

4. Finance income and finance costs

		Three months ended 31 January	Years ended 31 October
		–––––––––––––––––––––––	–––––––––––––––––––––––––––––––––––––
	2017 ––––––––	2016 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
In millions USD –––––––––––––––––––		(unaudited)
Finance costs
Interest on finance lease
obligations	1	1	3	2	2
Interest on tax provisions	–	–	68	42	3
Other	1 ––––––––	– ––––––––	2 ––––––––	1 ––––––––	– ––––––––
Total	2 ––––––––	1 ––––––––	73 ––––––––	45 ––––––––	5 ––––––––
Finance income
Bank interest	–	–	1	1	2
Interest on tax provisions	15 ––––––––	– ––––––––	– ––––––––	– ––––––––	– ––––––––
Total	15	–	1	1	2
Net finance (income)/costs	–––––––– (13)	–––––––– 1	–––––––– 72	–––––––– 44	–––––––– 3
	––––––––	––––––––	––––––––	––––––––	––––––––

5. Taxation

	Three months ended 31 January –––––––––––––––––––––––			Years ended 31 October –––––––––––––––––––––––––––––––––––––
	2017	2016	2016	2015	2014
In millions USD –––––––––––––––––––	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Current tax
Current period	4	(12)	(308)	(277)	(289)
Adjustments to tax in respect
of previous periods	–	8	18	23	3
	–––––––– 4 ––––––––	–––––––– (4) ––––––––	–––––––– (290) ––––––––	–––––––– (254) ––––––––	–––––––– (286) ––––––––
Deferred tax
Origination and reversal of
temporary differences	(33)	28	208	362	249
Impact of change in tax rates	–	–	–	–	–
	–––––––– (33)	–––––––– 28	–––––––– 208	–––––––– 362	–––––––– 249
Total	–––––––– (29)	–––––––– 24	–––––––– (82)	–––––––– 108	–––––––– (37)
	––––––––	––––––––	––––––––	––––––––	––––––––

	Three months ended
	31 January –––––––––––––––––––––––		Years ended 31 October –––––––––––––––––––––––––––––––––––––
	2017 ––––––––	2016 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
In millions USD –––––––––––––––––––		(unaudited)
Profit before taxation	1	9	137	246	361
Tax at US corporation tax rate of
35.0% effects of:	–	(3)	(48)	(86)	(127)
State taxes	(1)	9	17	25	(24)
Tax rates other than the
US standard rate	18	14	108	88	167
Movement in deferred tax
not recognized	(3)	(4)	(29)	22	(23)
Deferred tax adjustment for
unremitted earnings	–	(2)	(7)	115	(33)
Uncertain tax positions	(47)	7	(46)	(39)	4
TippingPoint divestiture	–	–	(69)	–	–
Other	4 ––––––––	3 ––––––––	(8) ––––––––	(17) ––––––––	(1) ––––––––
Total (taxation)/benefit	(29)	24	(82)	108	(37)
Effective tax rate	–––––––– (2,900.00)%	–––––––– 266.67%	–––––––– (59.85)%	–––––––– 43.90%	–––––––– (10.25)%

The table below explains the difference between Seattle's US statutory rate to its effective rate in the combined statement of comprehensive income.

The movement in deferred tax assets and liabilities during the period is provided in note 21.

6. Goodwill

		–––––––––––––––––––––––––––––––––––––––––––––––––––– 31 October
2017	2016	2015	2014 ––––––––
8,095	8,319	8,852	8,840
–	10	102	12
–	(234)	(123)	–
–	–	(512)	– ––––––––
8,095	8,095	8,319	8,852 ––––––––
	31 January –––––––– –––––––– –––––––– ––––––––	–––––––– –––––––– ––––––––	––––––––––––––––––––––––––––––––––––– –––––––– –––––––– ––––––––

In connection with the separation of HPE from HewlettPackard Company, HewlettPackard Company retained the marketing optimization software product group, which has historically been managed by and included in Seattle. The adjustment reflects the impact of removing the related goodwill allocated on a relative fair value basis from Seattle and has been captured in the line 'Transfers to Parent' within the table above.

Goodwill acquired through business combinations has been allocated for impairment testing purposes to each individual CGU. Annual impairment tests are conducted on the carrying value of goodwill, based on the net present value on the recoverable amount of the CGU to which goodwill has been allocated. It has been determined that Seattle has one CGU.

An impairment test is a comparison of the carrying value of the assets of the CGU with their recoverable amount, and where the recoverable amount is less than the carrying value, an impairment results. The annual impairment testing is carried out at 1 August each year.

The recoverable amount of the CGU is determined based on the FVLCD calculations. The determination of whether or not goodwill has been impaired requires an estimate to be made of the FVLCD of the CGU.

The FVLCD calculation includes estimates about the future financial performance of the CGU. FVLCD is estimated using a weighing of fair values derived both from the income and market approach. Under the income approach, the fair value of the CGU is estimated based on the present value of the estimated future cash flows. The cash flow projections in the three financial years following the budget year reflect management's expectation of the medium and longterm operating performance of the CGU and growth prospects in the CGU's market that would be assessed by market participants. Under the market approach, fair value is estimated based on market multiples of revenue derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting units.

Key assumptions

The key assumptions in the FVLCD calculations are the discount rate applied, the longterm operating margin and the longterm growth rate of net operating cash flows and market multiples of revenue. These assumptions are based on the fair value assumptions that reflect market participant assumptions in pricing the entity. In determining the key assumptions, management has taken into consideration the current economic climate, the resulting impact on expected growth and discount rates, and the pressure this places on impairment calculations. Key assumptions were not used for the three months ended 31 January 2017 or the year ended 31 October 2016 as the fair value was based on the value of the Seattle Payment to be made by Seattle to HPE prior to the Distribution and the consideration payable by Micro Focus to HPE Shareholders in the Merger, as further described elsewhere herein. FVLCD for 2016 of \$8.8 billion was based on the value of CGU resulting from a competitive bid from a number of potential buyers of the CGU.

Discount rate applied

The discount rate applied to the CGU represents a posttax rate that reflects market assessment of the time value of money at the statement of financial position date and risks specific to the CGU. The discount rate applied to the CGU's operations was 11% as at 31 October 2015 (2014: 11%).

Longterm operating margin

The longterm operating margin for the CGU is primarily based upon past performance adjusted as appropriate where management believes that past operating margins are not indicative of future operating margins. Longterm operating margin was calculated excluding the impact of certain corporate cost allocations. The FVLCD calculations are based on five years' projections and then a terminal value calculation. The longterm operating margins applied to the CGU is 23% as at 31 October 2015 (2014: 23%). This excludes certain overhead costs that have been allocated in the combined historical financial information.

Longterm growth rates of net operating cash flows

The longterm growth rates of net operating cash flows are assumed to be no greater than the longterm growth rate in the gross domestic product of the countries in which the CGU operates and was 5% as at 31 October 2015 (2014: 5%).

Market multiples of revenue

The market approach valuation is calculated using revenue multiples for companies comparable to each of Seattle's business lines of 3.4 times its revenue as at 31 October 2015 (2014: 2.4).

Summary of results

During the years ended 31 October 2016, 2015, and 2014, and as at the date of transition, all goodwill was tested for impairment, with no impairment charges resulting.

As the FVLCD calculation for market participant assumptions is most sensitive to a change in the longterm operating margin, it would take a systematic change to the market for longterm operating margins to fall to the level where an impairment would be required. The income and market approach were weighted equally. A valuation solely based on the market approach or the income approach as at 31 October 2014 would not result in any impairment. A weight of up to 88% in the income approach would not result into impairment as at 31 October 2015.

A reduction of 14% as at 31 October 2015 (2014: 5%) in the absolute value of longterm operating margins of the CGU would be the limit of what could be considered to be reasonably possible on the basis that Seattle's cost base is flexible and could quickly respond to market changes. Seattle operates across a range of geographies and sectors and also offers customer cost saving solutions, which help to insulate it from more significant changes. If the longterm margins used in the FVLCD calculations for the CGU was 14% as at 31 October 2015 (2014: 5%) lower in absolute terms than management's estimates based on a reasonable discount factor change, Seattle would not have any impairment charge. If the operating margins remain in perpetuity at the current year levels then there would also not be any impairment charge.

The estimate for the longterm posttax discount rate is based on the weighted average cost of capital (WACC) using longterm market data and industry data to derive the appropriate inputs to the calculation. A 0.75% change as at 31 October 2015 (2014: 0.75%) in the absolute posttax discount rate is the maximum change that could be considered as reasonably possible. If the estimated posttax discount rates applied to the discounted cash flows of the CGU were 0.75% (2014: 0.75%) higher in absolute terms than the management's estimates, Seattle would not have any impairment charge.

The longterm growth rates could change and that a 1.5% change as at 31 October 2015 (2014: 1.5%) is reasonably possible.

Combinations of a reduction in the longterm operating margins of the CGU combined with a reasonably possible increase in the absolute discount rate and a reasonably possible decrease in the longterm growth rates and no impairment would occur in these scenarios.

7. Other intangible assets

Other intangible assets were composed of the following as at 31 January 2017:

	Purchased intangibles ––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	Purchased software ––––––––	Development costs ––––––––	Customer contracts, customer lists and distribution agreements ––––––––	Developed and core technology and patents ––––––––	Trade name and trademarks ––––––––	Total ––––––––
Cost
At 1 November 2016	15	97	1,221	3,153	127	4,613
Acquisitions	–	–	–	–	–	–
Additions	–	–	–	–	–	–
Disposals	(2) ––––––––	– ––––––––	– ––––––––	(4) ––––––––	– ––––––––	(6) ––––––––
At 31 January 2017	13 ––––––––	97 ––––––––	1,221 ––––––––	3,149 ––––––––	127 ––––––––	4,607 ––––––––
Accumulated amortization
At 1 November 2016	(14)	(97)	(1,098)	(2,872)	(121)	(4,202)
Charge for the period	–	–	(10)	(24)	(1)	(35)
Disposals	2 ––––––––	– ––––––––	– ––––––––	3 ––––––––	– ––––––––	5 ––––––––
At 31 January 2017	(12) ––––––––	(97) ––––––––	(1,108) ––––––––	(2,893) ––––––––	(122) ––––––––	(4,232) ––––––––
Net book amount at 31 January 2017	1	–	113	256	5	375
Net book amount at 31 October 2016	–––––––– 1 ––––––––	–––––––– – ––––––––	–––––––– 123 ––––––––	–––––––– 281 ––––––––	–––––––– 6 ––––––––	–––––––– 411 ––––––––

Other intangible assets were composed of the following as at 31 October 2016:

			Purchased intangibles
			Customer contracts, customer lists and	–––––––––––––––––––––––––––––––– Developed and core	Trade name
	Purchased	Development	distribution	technology	and
In millions USD –––––––––––––––––––	software ––––––––	costs ––––––––	agreements ––––––––	and patents ––––––––	trademarks ––––––––	Total ––––––––
Cost
At 1 November 2015	15	97	1,337	3,220	169	4,838
Acquisitions	–	–	1	3	–	4
Additions	2	–	–	–	–	2
Disposals	(2) ––––––––	– ––––––––	(117) ––––––––	(70) ––––––––	(42) ––––––––	(231) ––––––––
At 31 October 2016	15 ––––––––	97 ––––––––	1,221 ––––––––	3,153 ––––––––	127 ––––––––	4,613 ––––––––
Accumulated amortization
At 1 November 2015	(14)	(91)	(1,139)	(2,835)	(155)	(4,234)
Charge for the period	(2)	(6)	(41)	(105)	(7)	(161)
Disposals	2 ––––––––	– ––––––––	82 ––––––––	68 ––––––––	41 ––––––––	193 ––––––––
At 31 October 2016	(14)	(97)	(1,098)	(2,872)	(121)	(4,202)
Net book amount at 31 October 2016	–––––––– 1	–––––––– –	–––––––– 123	–––––––– 281	–––––––– 6	–––––––– 411
Net book amount at 31 October 2015	–––––––– 1	–––––––– 6	–––––––– 198	–––––––– 385	–––––––– 14	–––––––– 604

Other intangible assets were composed of the following as at 31 October 2015:

	Purchased intangibles ––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	Purchased software ––––––––	Development costs ––––––––	Customer contracts, customer lists and distribution agreements ––––––––	Developed and core technology and patents ––––––––	Trade name and trademarks ––––––––	Total ––––––––
Cost
At 1 November 2014	24	97	1,582	3,386	180	5,269
Acquisitions	–	–	27	19	2	48
Additions	–	2	–	–	–	2
Disposals	(9) ––––––––	(2) ––––––––	(272) ––––––––	(185) ––––––––	(13) ––––––––	(481) ––––––––
At 31 October 2015	15 ––––––––	97 ––––––––	1,337 ––––––––	3,220 ––––––––	169 ––––––––	4,838 ––––––––
Accumulated amortization
At 1 November 2014	(21)	(66)	(1,267)	(2,822)	(159)	(4,335)
Charge for the period	(2)	(27)	(80)	(136)	(9)	(254)
Disposals	9	2	208	123	13	355
At 31 October 2015	–––––––– (14)	–––––––– (91)	–––––––– (1,139)	–––––––– (2,835)	–––––––– (155)	–––––––– (4,234)
Net book amount at 31 October 2015	–––––––– 1	–––––––– 6	–––––––– 198	–––––––– 385	–––––––– 14	–––––––– 604
Net book amount at 31 October 2014	–––––––– 3 ––––––––	–––––––– 31 ––––––––	–––––––– 315 ––––––––	–––––––– 564 ––––––––	–––––––– 21 ––––––––	–––––––– 934 ––––––––

Other intangible assets were composed of the following as at 31 October 2014:

			Purchased intangibles
			Customer contracts,	––––––––––––––––––––––––––––––––
			customer	Developed
			lists and	and core	Trade name
	Purchased	Development	distribution	technology	and
In millions USD –––––––––––––––––––	software ––––––––	costs ––––––––	agreements ––––––––	and patents ––––––––	trademarks ––––––––	Total ––––––––
Cost
At 1 November 2013	25	97	1,599	3,553	190	5,464
Acquisitions	–	–	1	6	–	7
Additions	2	–	–	–	–	2
Disposals	(3) ––––––––	– ––––––––	(18) ––––––––	(173) ––––––––	(10) ––––––––	(204) ––––––––
At 31 October 2014	24	97	1,582	3,386	180	5,269
Accumulated amortization	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
At 1 November 2013	(20)	(37)	(1,199)	(2,843)	(159)	(4,258)
Charge for the period	(4)	(29)	(86)	(152)	(10)	(281)
Disposals	3 ––––––––	– ––––––––	18 ––––––––	173 ––––––––	10 ––––––––	204 ––––––––
At 31 October 2014	(21)	(66)	(1,267)	(2,822)	(159)	(4,335)
Net book amount at	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
31 October 2014	3	31	315	564	21	934
Net book amount at	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
1 November 2013	5 ––––––––	60 ––––––––	400 ––––––––	710 ––––––––	31 ––––––––	1,206 ––––––––

Intangible assets, with the exception of purchased software and internally generated development costs, relate to identifiable assets purchased as part of Seattle's business combinations. Intangible assets are amortized on a straightline basis over their expected useful economic life – see accounting policy I(d).

Amortization expense ("Charge for the period") in the above tables is included in the following costs in the combined statement of comprehensive income:

	Three months ended 31 January		Years ended 31 October –––––––––––––––––––––––––––––––––––––
	––––––––––––––––––––––– 2017 ––––––––	2016 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
In millions USD –––––––––––––––––––	(unaudited)
Cost of sales	24	29	111	163	181
Selling and distribution costs	11 ––––––––	14 ––––––––	50 ––––––––	91 ––––––––	100 ––––––––
Total	35 ––––––––	43 ––––––––	161 ––––––––	254 ––––––––	281 ––––––––

8. Property, plant and equipment

Property, plant and equipment were composed of the following as at 31 January 2017:

		Leasehold	Equipment
In millions USD –––––––––––––––––––	Buildings ––––––––	improvements ––––––––	and other ––––––––	Total ––––––––
Cost
At 1 November 2016	12	59	348	419
Additions	–	–	12	12
Disposals	(1) ––––––––	(3) ––––––––	(48) ––––––––	(52) ––––––––
At 31 January 2017	11 ––––––––	56 ––––––––	312 ––––––––	379 ––––––––
Accumulated depreciation
At 1 November 2016	(6)	(28)	(247)	(281)
Charge for the period	(1)	(1)	(12)	(14)
Disposals	1 ––––––––	1 ––––––––	48 ––––––––	50 ––––––––
At 31 January 2017	(6) ––––––––	(28) ––––––––	(211) ––––––––	(245) ––––––––
Net book amount at 31 January 2017	5	28	101	134
Net book amount at 31 October 2016	–––––––– 6 ––––––––	–––––––– 31 ––––––––	–––––––– 101 ––––––––	–––––––– 138 ––––––––

Property, plant and equipment were composed of the following as at 31 October 2016:

		Leasehold	Equipment
In millions USD –––––––––––––––––––	Buildings ––––––––	improvements ––––––––	and other ––––––––	Total ––––––––
Cost
At 1 November 2015	13	43	321	377
Additions	–	17	51	68
Disposals	(1)	(1)	(21)	(23)
Divestitures	– ––––––––	– ––––––––	(3) ––––––––	(3) ––––––––
At 31 October 2016	12 ––––––––	59 ––––––––	348 ––––––––	419 ––––––––
Accumulated depreciation
At 1 November 2015	(5)	(18)	(221)	(244)
Charge for the period	(2)	(11)	(47)	(60)
Disposals	1	1	21	23
Divestitures	– ––––––––	– ––––––––	– ––––––––	– ––––––––
At 31 October 2016	(6) ––––––––	(28) ––––––––	(247) ––––––––	(281) ––––––––
Net book amount at 31 October 2016	6	31	101	138
Net book amount at 31 October 2015	–––––––– 8 ––––––––	–––––––– 25 ––––––––	–––––––– 100 ––––––––	–––––––– 133 ––––––––

Property, plant and equipment were composed of the following as at 31 October 2015:

		Leasehold	Equipment
In millions USD –––––––––––––––––––	Buildings ––––––––	improvements ––––––––	and other ––––––––	Total ––––––––
Cost
At 1 November 2014	13	36	332	381
Additions	7	28	51	86
Disposals	(6)	(18)	(54)	(78)
Divestitures	(1) ––––––––	(3) ––––––––	(8) ––––––––	(12) ––––––––
At 31 October 2015	13 ––––––––	43 ––––––––	321 ––––––––	377 ––––––––
Accumulated depreciation
At 1 November 2014	(4)	(10)	(222)	(236)
Charge for the period	(3)	(20)	(59)	(82)
Disposals	1	10	54	65
Divestitures	1 ––––––––	2 ––––––––	6 ––––––––	9 ––––––––
At 31 October 2015	(5) ––––––––	(18) ––––––––	(221) ––––––––	(244) ––––––––
Net book amount at 31 October 2015	8	25	100	133
Net book amount at 31 October 2014	–––––––– 9 ––––––––	–––––––– 26 ––––––––	–––––––– 110 ––––––––	–––––––– 145 ––––––––

Property, plant and equipment were composed of the following as at 31 October 2014:

		Leasehold	Equipment
In millions USD –––––––––––––––––––	Buildings ––––––––	improvements ––––––––	and other ––––––––	Total ––––––––
Cost
At 1 November 2013	13	58	289	360
Additions	3	3	87	93
Disposals	(3) ––––––––	(25) ––––––––	(44) ––––––––	(72) ––––––––
At 31 October 2014	13 ––––––––	36 ––––––––	332 ––––––––	381 ––––––––
Accumulated depreciation
At 1 November 2013	(3)	(25)	(167)	(195)
Charge for the period	(1)	(10)	(71)	(82)
Disposals	– ––––––––	25 ––––––––	16 ––––––––	41 ––––––––
At 31 October 2014	(4) ––––––––	(10) ––––––––	(222) ––––––––	(236) ––––––––
Net book amount at 31 October 2014	9	26	110	145
Net book amount at 1 November 2013	–––––––– 10 ––––––––	–––––––– 33 ––––––––	–––––––– 122 ––––––––	–––––––– 165 ––––––––

Depreciation expense ("Charge for the period") in the above tables is included in the following costs in the combined statement of comprehensive income:

	Three months ended 31 January –––––––––––––––––––––––			Years ended 31 October
	2017	2016	2016	––––––––––––––––––––––––––––––––––––– 2015	2014
In millions USD –––––––––––––––––––	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Cost of sales	8	7	28	31	32
Selling and distribution costs Research and development	2	3	14	30	26
expense	4	4	17	16	20
Administrative expense	– ––––––––	1 ––––––––	1 ––––––––	5 ––––––––	4 ––––––––
Total	14 ––––––––	15 ––––––––	60 ––––––––	82 ––––––––	82 ––––––––

9. Principal subsidiaries

The combined historical financial information of Seattle represents the assets, liabilities, results and cash flows of the software business carved out from Parent. The combined historical financial information of Seattle includes the softwarespecific legal entities in the HPE group listed below, as well as assets, liabilities, results and cash flows pertaining to the software business/segment carvedout from other HPE legal entities.

Details of principal subsidiaries are provided below:

Subsidiary Country of incorporation Principal activities Entco LLC, Taiwan Branch Taiwan Branch Verity GB Limited United Kingdom Branch Voltage Security Limited United Kingdom Branch Longsand Ltd. United Kingdom Contract manufacturer Peregrine Systems do Brasil Limitada Brazil Distribution Autonomy Systems Ltd. United Kingdom Factory EntIT Software, LLC United States IP company Autonomy Australia Pty Limited Australia Sales & services Autonomy Systems Australia Pty Limited Australia Sales & services Entcorp Australia Pty Limited Australia Sales & services Autonomy Belgium BVBA Belgium Sales & services Autonomy Systems Canada Ltd. Canada Sales & services Autonomy Systems (Beijing) Co., Ltd. China Sales & services Autonomy Systems (Beijing) Limited Company China Sales & services ArcSight International, Inc. Bureau de Liaison (France) France Sales & services Autonomy Software Asia Private Limited India Sales & services Entco, LLC India Sales & services Interwoven Software Services India Private Limited India Sales & services Autonomy Italy S.r.l. Italy Sales & services Entcorp Italiana Srl Italy Sales & services Verity Italy S.r.l. Italy Sales & services Autonomy KK Japan Sales & services Entcorp Japan KK Japan Sales & services Verity Luxembourg SARL Luxembourg Sales & services Autonomy Netherlands BV Netherlands Sales & services Entcorp Nederlands BV Netherlands Sales & services Verity Benelux BV Netherlands Sales & services Autonomy Nordic AS Norway Sales & services Autonomy Systems Singapore Pte Ltd Singapore Sales & services Entco Software Pte Ltd Singapore Sales & services Autonomy Systems Software South Africa South Africa Sales & services Autonomy Digital Ltd. United Kingdom Sales & services Meridio Limited United Kingdom Sales & services ZANTAZ UK Ltd. United Kingdom Sales & services Entco MS, Inc United States Sales & services Entco, LLC United States Sales & services MicroLink LLC United States Sales & services Stratify, Inc. United States Sales & services Voltage Security International, Inc. United States Sales & services

10. Other current assets

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Value­added taxes receivable	21	22	53	39
Prepaid expenses	26	27	26	27
Income tax receivable	—	—	—	63
Other current assets	29 ––––––––	28 ––––––––	38 ––––––––	21 ––––––––
Total	76	77	117	150
	––––––––	––––––––	––––––––	––––––––

Other current assets consist of shortterm prepaid income taxes, deposits and deferred contract costs.

11. Trade and other receivables

As at
31 January		31 October
2017	2016	2015	2014 ––––––––
460	631	678	763
39	41	35	35
(4)	(7)	(7)	(11) ––––––––
495	665	706	787 ––––––––
	–––––––– –––––––– ––––––––	–––––––– –––––––– –––––––– ––––––––	–––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––– –––––––– –––––––– ––––––––

Concentrations of credit risk with respect to trade receivables are limited due to Seattle's customer base being large and diverse. In determining the recoverability of a trade receivable, historical collection trends and the collection risk of specific customer accounts due to a change in their financial condition identified subsequent to the transaction are considered. Due to this, management believes there is no further credit risk provision required in excess of the normal provision for doubtful receivables. As at 31 January 2017, 31 October 2016, 2015 and 2014, the carrying amount approximates the fair value of the instrument due to the shortterm nature of the instrument.

Provisions were established in an amount equal to the trade receivables that were partially or fully impaired.

Movements in Seattle's provision for impairment of trade receivables were as follows:

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January			31 October –––––––––––––––––––––––––––––––
	–––––––––––––––––––– 2017 ––––––––	2016 ––––––––	2016 ––––––––	2015	2014
In millions USD –––––––––––––––––––		(unaudited)		–––––––– ––––––––
At period beginning	7	7	7	11	24
Charges/(reversals) to provision for receivables impairment	—	1	9	3	(6)
Receivables written off as uncollectable, net of recoveries	(3)	(3)	(9)	(7)	(7)
At period end	–––––––– 4	–––––––– 5	–––––––– 7	–––––––– 7	–––––––– 11
	––––––––	––––––––	––––––––	––––––––	––––––––

The creation and release of the provision for impaired receivables have been included in selling and distribution costs in the combined statement of comprehensive income. Amounts charged in the allowance account are generally written off when there is no expectation of recovering additional cash. Seattle does not hold any collateral as security.

Seattle has thirdparty revolving shortterm financing arrangements intended to facilitate the working capital requirements of certain customers. The recourse obligations associated with these shortterm financing arrangements as at all periods presented were not material. The amount of trade receivables sold but not collected under these shortterm financing arrangements was \$1m as at 31 January 2017 and \$2m as at 31 October 2016 (2015: \$2m and 2014: \$6m).

12. Cash and cash equivalents

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Cash at bank and in hand	40	35	66	124
Time deposits	—	—	—	—
Money market funds	69 ––––––––	95 ––––––––	84 ––––––––	73 ––––––––
Cash and cash equivalents	109 ––––––––	130 ––––––––	150 ––––––––	197 ––––––––

The carrying amount approximates the fair value at each period end. Seattle's credit risk on cash and cash equivalents is limited as the counterparties are well established banks with high credit ratings.

13. Trade and other payables – current

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Trade payables	53	65	76	72
Accrued taxes – other	228	237	200	105
Accruals	214 ––––––––	306 ––––––––	341 ––––––––	379 ––––––––
Total	495	608	617	556
	––––––––	––––––––	––––––––	––––––––

The carrying amount approximates the fair value at each period end.

14. Borrowings

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Finance lease obligations	38 ––––––––	36	33	21 ––––––––
	38 ––––––––	–––––––– 36 ––––––––	–––––––– 33 ––––––––	21 ––––––––
Reported within
Current liabilities	16	15	11	6
Non­current liabilities	22 ––––––––	21 ––––––––	22 ––––––––	15 ––––––––
	38 ––––––––	36 ––––––––	33 ––––––––	21 ––––––––
Cash and cash equivalents	(109)	(130)	(150)	(197)
Less borrowings	38 ––––––––	36 ––––––––	33 ––––––––	21 ––––––––
Net debt	(71)	(94)	(117)	(176)
	––––––––	––––––––	––––––––	––––––––

15. Current tax liabilities

In millions USD –––––––––––––––––––		As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January ––––––––	31 October –––––––––––––––––––––––––––––––––––––
	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Corporation tax	(193) ––––––––	(346) ––––––––	(384) ––––––––	(298) ––––––––

16. Deferred income – current

		As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
In millions USD	2017	2016	2015	2014
–––––––––––––––––––	––––––––	––––––––	––––––––	––––––––
Deferred income	822	767	864	953
	––––––––	––––––––	––––––––	––––––––

Revenue not recognized in the combined statement of comprehensive income under Seattle's accounting policy for revenue recognition is classified as deferred income in the combined statement of financial position to be recognized in future periods. Deferred income also includes amounts invoiced in advance for customer support contracts.

17. Deferred income – noncurrent

In millions USD –––––––––––––––––––		As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Deferred income	173 ––––––––	157 ––––––––	195 ––––––––	244 ––––––––

Revenue not recognized in the combined statement of comprehensive income under Seattle's accounting policy for revenue recognition is classified as deferred income in the combined statement of financial position to be recognized in future periods in excess of one year.

18. Provisions

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Restructuring	37	55	6	15
Legal	2	1	2	14
Performance bonus	4	16	31	29
Other	4 ––––––––	— ––––––––	— ––––––––	— ––––––––
Total	47	72	39	58
Current	–––––––– 41	–––––––– 62	–––––––– 36	–––––––– 52
Non­current	6 ––––––––	10 ––––––––	3 ––––––––	6 ––––––––
Total	47	72	39	58
	––––––––	––––––––	––––––––	––––––––

	Performance
In millions USD	Restructuring	Legal	bonus	Other	Total
–––––––––––––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
At 1 November 2016	55	1	16	—	72
Additional provision in the period	33	1	6	4	44
Utilization of provision	(42)	—	(18)	—	(60)
Release of provision	(9)	—	—	—	(9)
	––––––––	––––––––	––––––––	––––––––	––––––––
At 31 January 2017	37	2	4	4	47
	––––––––	––––––––	––––––––	––––––––	––––––––
Current	31	2	4	4	41
Non­current	6	—	—	—	6
	––––––––	––––––––	––––––––	––––––––	––––––––
Total	37	2	4	4	47
	––––––––	––––––––	––––––––	––––––––	––––––––

			Performance
In millions USD –––––––––––––––––––	Restructuring ––––––––	Legal ––––––––	bonus ––––––––	Other ––––––––	Total ––––––––
At 1 November 2015	6	2	31	—	39
Additional provision in the period	110	1	19	—	130
Utilization of provision	(58)	—	(34)	—	(92)
Release of provision	(3) ––––––––	(2) ––––––––	— ––––––––	— ––––––––	(5) ––––––––
At 31 October 2016	55 ––––––––	1 ––––––––	16 ––––––––	— ––––––––	72 ––––––––
Current	45	1	16	—	62
Non­current	10 ––––––––	— ––––––––	— ––––––––	— ––––––––	10 ––––––––
Total	55	1	16	—	72

			Performance
In millions USD –––––––––––––––––––	Restructuring ––––––––	Legal ––––––––	bonus ––––––––	Other ––––––––	Total ––––––––
At 1 November 2014	15	14	29	—	58
Additional provision in the period	34	—	33	—	67
Utilization of provision	(43)	(8)	(31)	—	(82)
Release of provision	— ––––––––	(4) ––––––––	— ––––––––	— ––––––––	(4) ––––––––
At 31 October 2015	6 ––––––––	2 ––––––––	31 ––––––––	— ––––––––	39 ––––––––
Current	3	2	31	—	36
Non­current	3 ––––––––	— ––––––––	— ––––––––	— ––––––––	3 ––––––––
Total	6	2	31	—	39

–––––––– –––––––– –––––––– –––––––– ––––––––

–––––––– –––––––– –––––––– –––––––– ––––––––

	Performance
In millions USD	Restructuring	Legal	bonus	Other	Total
–––––––––––––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
At 1 November 2013	46	11	41	9	107
Additional provision in the period	45	3	37	—	85
Utilization of provision	(74)	—	(49)	(9)	(132)
Release of provision	(2)	—	—	—	(2)
	––––––––	––––––––	––––––––	––––––––	––––––––
At 31 October 2014	15	14	29	—	58
	––––––––	––––––––	––––––––	––––––––	––––––––
Current	9	14	29	—	52
Non­current	6	—	—	—	6
	––––––––	––––––––	––––––––	––––––––	––––––––
Total	15	14	29	—	58
	––––––––	––––––––	––––––––	––––––––	––––––––

Restructuring costs represent charges associated with Parentapproved restructuring plans to reorganize Seattle's business, to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes and accelerate innovation. Restructuring costs, which include termination benefits and facility closure costs, are recorded at estimated fair value. Termination benefits are composed of severance payments for terminated employees and facility closure costs represent costs to terminate leases in conjunction with the consolidation of facilities.

Restructuring charges of \$33m during the three months ended 31 January 2017 (2016: \$35m) and \$110m during the year ended 31 October 2016 (2015: \$34m and 2014: \$45m) have been recorded by Seattle based on restructuring activities impacting Seattle's employees and infrastructure as well as an allocation of restructuring charges related to Parent's corporate and shared functional employees and infrastructure. Allocated restructuring charges related to Parent's corporate and shared functional employees and infrastructure were \$2m during the three months ended 31 January 2017 (2016:\$1m) and \$10m during the year ended 31 October 2016 (2015: \$3m and 2014: \$12m).

On 14 September 2015, Parent's Board of Directors approved a restructuring plan (the "2015 Plan") which will be implemented through the year ending 31 October 2018. As part of the 2015 Plan, it is expected up to approximately 2,900 employees will exit Seattle by the end of 2018. The changes to the workforce will vary by country, based on local legal requirements and consultations with employee works councils and other employee representatives, as appropriate. It is estimated that Seattle will incur aggregate pretax charges through the year ending 31 October 2018 of approximately \$196m in connection with the 2015 Plan, of which approximately \$172m relates to workforce reductions and approximately \$24m primarily relates to real estate consolidation.

On 23 May 2012, Parent adopted a multiyear restructuring plan (the "2012 Plan") designed to simplify business processes, accelerate innovation and deliver better results for customers, employees and shareholders. As at 31 January 2017, Seattle had eliminated approximately 2,500 positions in connection with the 2012 Plan, with a portion of those employees exiting Seattle as part of voluntary enhanced early retirement ("EER") programs in the US and in certain other countries. Seattle recognized \$193m in total aggregate charges in connection with the 2012 Plan, all related to workforce reductions, including the EER programs. Of the total restructuring balance outstanding as at 31 January 2017, \$6m is included in the line item "longterm provisions" which represents the estimated costs for the remaining lease obligations. The remainder of the restructuring balance is included within the line item "provisions" in Seattle's combined statement of financial position.

Legal provisions include management's best estimate of the likely outflow of economic benefits associated with ongoing legal matters.

Performance bonus represents discretionary bonus programs to reward employees based on business results, job role, and individual performance.

19. Pension commitments

Parent operates multiple defined benefit plans in multiple countries. Seattle employees participate in 55 of these defined benefit plans in 23 countries under broadly similar regulatory frameworks. Seattle operates under the regulatory requirements in all relevant countries, with the significant amount of their plans under the regulatory frameworks of Germany, the Netherlands, Japan, the UK, the US, and Switzerland. Some of the plans are final salary pension plans, which provide benefits to members in the form of a guaranteed level of pension payable for life in the case of retirement, disability, or death. The level of benefit provided depends on the members' length of service and their salary in the final years leading up to retirement. Other plans include termination or retirement indemnity plans or other types of statutory plans that provide a onetime benefit at termination. Responsibility for governance of the plans, including investment decisions and contribution schedules, lies with Parent.

Parent has established a number of defined benefit pension schemes that Seattle employees participate in. A number of Seattle employees were members of the defined benefit pension schemes during the conversion period. The amounts shown below relate to Seattle's share of obligations arising from membership by its employees of the defined benefit schemes operated by Parent.

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January		31 October
In millions USD –––––––––––––––––––	–––––––– 2017 ––––––––	2016 ––––––––	––––––––––––––––––––––––––––––––––––– 2015 ––––––––	2014 ––––––––
Present value of defined benefit obligations	(686)	(798)	(713)	(853)
Fair value of plan assets	626 ––––––––	667 ––––––––	651 ––––––––	807 ––––––––
Net defined benefit obligation	(60)	(131)	(62)	(46)
Impact of minimum funding requirement/
asset ceiling	—	—	—	—
Other retirement benefit obligations1	(29) ––––––––	(31) ––––––––	(36) ––––––––	(39) ––––––––
Liability in the statement of financial position	(89)	(162)	(98)	(85)
	––––––––	––––––––	––––––––	––––––––

1 Related to net obligations for other employee benefit liabilities, retiree health and welfare liabilities, and accrued medical expenses liabilities.

An allocation method has been used to determine Seattle's share of HPE's gross pension assets and liabilities. Changes in the allocation percentage between the beginning and end of a financial year are recorded in "Exchange and other adjustments".

A summary of the movement in the net defined benefit liability is shown in the first table below. The subsequent tables provide a more detailed analysis of the movements in the present value of the obligations and the fair value of assets. In 2015, Parent offered certain terminated vested participants of the US Parent pension plans, a onetime voluntary window during which they could elect to receive their pension benefit as a lump sum payment. As a result, the Parent pension plan trust made lump sum payments to eligible participants who elected to receive their pension benefit under this lump sum program. The defined benefit plan settlement net credit of \$1m recorded in the combined statement of comprehensive income for the year ended 31 October 2015, primarily includes the net settlement and periodic benefit credit resulting from this lump sum program incurred by Parent, which was determined to be directly attributable to Seattle, as well as the impact of remeasurement of the related US defined benefit plans.

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January		31 October
In millions USD –––––––––––––––––––	–––––––– 2017 ––––––––	2016 ––––––––	––––––––––––––––––––––––––––––––––––– 2015 ––––––––	2014 ––––––––
Change in net defined benefit liability
Net benefit	(131)	(62)	(46)	(15)
Exchange and other adjustments1	—	(2)	(5)	—
Service cost excluding administrative
expenses	(3)	(14)	(12)	(13)
Interest on defined benefit obligations, net
of plan assets	—	(2)	(1)	—
Employer contributions	1	14	27	16
Acquisitions/(divestitures)/(transfers)	20	7	(33)	1
Actuarial gain/(loss)	50	(71)	1	(40)
Currency exchange rate gain	3	—	8	5
Administration expenses	— ––––––––	(1) ––––––––	(1) ––––––––	— ––––––––
Net defined benefit liability at end of period	(60) ––––––––	(131) ––––––––	(62) ––––––––	(46) ––––––––

As at
31 January		31 October
2017	2016	2015	2014 ––––––––
(798)	(713)	(853)	(761)
—	3	33	—
—	—	9	—
(3)	(14)	(12)	(13)
(3)	(18)	(24)	(30)
65	2	81	—
(1)	(3)	(3)	(3)
45	(123)	(26)	(115)
—	—	3	(35)
37	(133)	(21)	(79)
8	10	(8)	(1)
5	18	21	27
4	50	61	42 ––––––––
(686)	(798)	(713)	(853) ––––––––
	–––––––– –––––––– Due to changes in demographic assumptions –––––––– ––––––––	–––––––– –––––––– ––––––––	–––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––– –––––––– –––––––– ––––––––

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January		31 October
In millions USD –––––––––––––––––––	–––––––– 2017 ––––––––	2016 ––––––––	––––––––––––––––––––––––––––––––––––– 2015 ––––––––	2014 ––––––––
Change in plan assets
Fair value of plan assets at beginning of period	667	651	807	746
Exchange and other adjustments1	—	(5)	(38)	—
Settlements	—	—	(9)	—
Actuarial gain	5	52	27	75
Employer and participant contributions	2	17	30	19
Acquisitions/(divestitures)/transfers	(45)	5	(114)	1
Benefits paid	(5)	(18)	(21)	(27)
Administrative expenses	—	(1)	(1)	—
Return on plan assets (net of interest cost on
plan assets)	3	16	23	30
Currency exchange rate loss	(1) ––––––––	(50) ––––––––	(53) ––––––––	(37) ––––––––
Fair value of plan assets at end of period	626	667	651	807
	––––––––	––––––––	––––––––	––––––––

1 An allocation method has been used to determine Seattle's share of Parent's gross pension assets and liabilities. Changes in the allocation percentage between the beginning and end of the financial year is recorded in "Exchange and other adjustments".

The major categories of plan assets are as follows:

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January		31 October
In millions USD –––––––––––––––––––	–––––––– 2017 ––––––––	2016 ––––––––	––––––––––––––––––––––––––––––––––––– 2015 ––––––––	2014 ––––––––
Equity instruments	261	293	295	359
Debt instruments	214	234	223	312
Real estate	28	35	35	32
Cash and cash equivalents	15	4	2	4
Other	108 ––––––––	101 ––––––––	96 ––––––––	100 ––––––––
Total	626	667	651	807
	––––––––	––––––––	––––––––	––––––––

Main assumptions (rates per annum)

The main assumptions for the valuations of the plans under IAS 19R are set out below.

	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January –––––––– 2017 ––––––––
		2016 ––––––––	––––––––––––––––––––––––––––––––––––– 2015 ––––––––	2014 ––––––––
Weighted­average assumptions
Discount rate	2.11%	1.72%	2.66%	3.17%
Rate of salary increase	2.27%	2.25%	2.28%	1.84%
Post­retirement benefit discount rate	4.02%	3.66%	3.72%	3.52%

Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in the territory. These assumptions translate into an average life expectancy in years for a pensioner retiring at age 65:

	31 January	31 October –––––––––––––––––––––––
	–––––––– 2017 ––––––––	2016 ––––––––	2015 ––––––––
Retiring at age 65 at the end of the reporting period
Male	21	21	21
Female	24	24	24
Retiring 15 years after the end of the reporting period
Male	23	23	23
Female	25	25	25

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is as follows:

		Change in
	Change in assumption ––––––––––––	defined benefit obligation ––––––––––––
Discount rate for scheme liabilities	0.5%	(9.21)%
Price inflation	0.25%	3.86%
Salary growth rate	0.5%	0.49%
Life expectancy	One Year	3.87%

The above sensitivity analyses are 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 recognized within the combined statement of financial position.

Through its defined benefit pension plans, Seattle is exposed to a number of risks, the most significant of which are detailed below:

Asset Volatility: The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform, this will create a deficit. Many of the plans hold a significant proportion of government and corporate bonds that offer the best return over the long term, while minimizing shortterm risk and volatility.

Bond Yields: A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the pledged and unpledged bond holding.

Inflation: Some of the pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. There is a cap on the level of inflationary increase on one of the plans which protects the plan against extreme inflation. The majority of the plan assets are either unaffected by or loosely correlated with inflation, meaning an increase in inflation will also increase the deficit.

Life Expectancy: The majority of the plan obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plan liabilities.

In the case of the defined benefit plans, the investment positions are managed within an assetliability matching ("ALM") framework that has been developed to achieve long term investments that are in line with the obligations under the pension schemes. A change in future obligations would impact the timing and nature of future cash flows based on the matching framework. As noted in the plan assets outlined above, as at 31 January 2017 Seattle had assets valued at \$626m, and at 31 October 2016 at \$667m (2015: \$651m, and 2014: \$807m). Within this framework, the objective is to match assets to the pension obligations by investing in investments that match the benefit payments as they fall due and in the appropriate currency. The performance of the assets is actively monitored to ensure they are matching the expected cash flows arising from the pension obligations. The processes used to manage risk from previous periods have not been changed. The assets are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A significant portion of the assets consists of bonds, with additional investments in property and equity.

Parent sponsors a qualified retirement plan in which Seattle employees participate (the "401(k) plan"). The 401(k) plan is for all eligible US employees under the provisions of the Internal Revenue Code of 1986, as amended ("IRC"). Participants may defer a portion of their annual compensation on a pretax basis subject to tax limitations. The 401(k) plan allows Seattle the flexibility to adjust the match percentage. The quarterly employer matching contributions in the 401(k) plan were 100% of an employee's contributions, up to a maximum of 4% of eligible compensation. Effective 1 January 2017, the annual employer matching contributions in the updated 401(k) plan will be 50% of an employee's contributions, up to a maximum of 6% of eligible compensation.

Seattle has other retirement plans in certain foreign countries in which it employs personnel. Each plan is consistent with local laws and business practices. During the year ended 31 October 2016, Seattle made matching contributions on its 401(k) plan and other defined contribution retirement plans and expensed \$40m (2015: \$46m and 2014: \$48m). During the three months ended 31 January 2017, Seattle made matching contributions on its 401(k) plan and other defined contribution retirement plans and expensed \$9m (31 January 2016: \$11m).

Parent sponsored retiree health and welfare benefit plans of which the most significant plans were in the United States. The net liability relating to these plans amounted to \$4m as at 31 January 2017 and \$4m as at 31 October 2016 (2015: \$3m and 2014: \$7m).

20. Financial instruments

The table below sets out the contractual values of financial assets and liabilities.

			As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
		31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	Note	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Financial assets – loans and receivables
Current
Cash and cash equivalents	12	109	130	150	197
Trade and other receivables,
excluding unbilled receivables	11	456	624	671	752
At period ended		–––––––– 565	–––––––– 754	–––––––– 821	–––––––– 949
		–––––––– –––––––– –––––––– As at ––––––––––––––––––––––––––––––––––––––––––––––––––––			––––––––
		31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	Note	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Financial liabilities – at amortized cost
Non­current
Provisions	18	6	10	3	6
Borrowings	14	22	21	22	15
Current
Borrowings	14	16	15	11	6
Trade and other payables	13	495 ––––––––	608 ––––––––	617 ––––––––	556 ––––––––
At period ended		539 ––––––––	654 ––––––––	653 ––––––––	583 ––––––––

Due to the shortterm nature its financial instruments, which include cash, accounts receivable, accounts payable and other accrued liabilities, the carrying amount approximates fair value.

Financial risk management

Seattle participates in cash management, funding arrangements and risk management programs managed by Parent. Seattle also maintains cash and cash equivalents, investments, derivatives and certain other financial instruments with various financial institutions. These financial institutions are located in many different geographic regions, and Seattle's policy is designed to limit exposure from any particular institution. As part of the risk management processes, periodic evaluations of the relative credit standing of these financial institutions are performed. Seattle has not sustained material credit losses from instruments held at these financial institutions. Derivative contracts are utilized to protect against the effects of foreign currency and interest rate exposures. Such contracts involve the risk of nonperformance by the counterparty, which could result in a material loss.

Credit risk

As a result of its use of derivative instruments, Seattle is exposed to the risk that its counterparties will fail to meet their contractual obligations. To mitigate counterparty credit risk, Seattle has a policy of only entering into derivative contracts with carefully selected major financial institutions based on their credit ratings and other factors, and Seattle maintains dollar risk limits that correspond to each financial institution's credit rating and other factors. Seattle's established policies and procedures for mitigating credit risk include reviewing and establishing limits for credit exposure and periodically reassessing the creditworthiness of its counterparties. Seattle participates in Parent's master netting agreements, which further mitigates credit exposure to counterparties by permitting Seattle to net amounts due from Seattle to a counterparty against amounts due to Seattle from the same counterparty under certain conditions.

To further mitigate credit exposure to counterparties, Seattle participates in Parent's collateral security agreements, which allow Seattle to hold collateral from, or require Seattle to post collateral to, counterparties when aggregate derivative fair values exceed contractually established thresholds which are generally based on the credit ratings of Parent and its counterparties. If Parent's credit rating falls below a specified credit rating, the counterparty has the right to request full collateralization of the derivatives' net liability position. Conversely, if the counterparty's credit rating falls below a specified credit rating, Parent has the right to request full collateralization of the derivatives' net liability position. Collateral is generally posted within two business days.

Under Seattle's derivative contracts, the counterparty can terminate all outstanding trades following a covered change of control event affecting Seattle that results in the surviving entity being rated below a specified credit rating. This is not expected to be triggered as Parent maintains a high credit rating. This credit contingent provision did not affect Seattle's financial position or cash flows as at any of the periods presented.

The carrying amount of financial assets represents the maximum credit exposure. The following table presents Seattle's maximum exposure to credit as at the respective dates.

		As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
		31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	Note	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Trade and other receivables	11	495	665	706	787
Cash and cash equivalents	12	109 ––––––––	130 ––––––––	150 ––––––––	197 ––––––––
Total		604 ––––––––	795 ––––––––	856 ––––––––	984 ––––––––

Foreign exchange risk

Seattle's currency exposures comprise those that give rise to net currency gains and losses to be recognized in the combined statement of comprehensive income as well as gains and losses on consolidation, which are recognized reserves. Such exposures reflect the monetary assets and liabilities of Seattle that are not denominated in the operating or functional currency of the operating unit involved and Seattle's investment in net assets in currencies other than the US dollar.

As part of its risk management strategy, Seattle uses derivative instruments, primarily forward contracts, and total return swaps to hedge certain foreign currency. The objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting the fair value of assets and liabilities. Seattle does not have any leveraged derivatives and does not use derivative contracts for speculative purposes. Derivative contracts may be designated as cash flow hedges. Additionally, for derivatives not designated as hedging instruments, those economic hedges may be categorized as other derivatives. Derivative instruments directly attributable to Seattle are recognized at fair value in the combined statement of financial position. The change in fair value of the derivative instruments is recognized in the combined statement of comprehensive income dependent upon the type of hedge as further discussed below. Cash flows from Seattle's derivative programs are classified with the activities that correspond to the underlying hedged items in the combined statement of cash flows.

Seattle uses forward contracts designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in its forecasted net revenue and, to a lesser extent, cost of revenue, operating expenses and intercompany loans denominated in currencies other than the US dollar. Seattle's foreign currency cash flow hedges mature generally within twelve months; however, forward contracts associated with intercompany loans extend for the duration of the loan term, which typically range from two to five years.

Other derivatives not designated as hedging instruments consist primarily of forward contracts used to hedge foreign currencydenominated statement of financial position exposures.

Sensitivity analysis

Seattle's principal exposures in relation to market risks are the changes in the exchange rates between the US dollar and the Euro. The table below illustrates the sensitivities of Seattle's results to changes in these key variables as at the statement of financial position date. The analysis covers only financial assets and liabilities held at the statement of financial position date.

	Three months ended 31 January –––––––––––––––––––––––––––			Years ended 31 October –––––––––––––––––––––––––––––––––––––
	2017	2016	2016	2015	2014
	Combined	Combined	Combined	Combined	Combined
	statement of	statement of	statement of	statement of	statement of
	comprehensive	comprehensive	comprehensive	comprehensive	comprehensive
In millions USD –––––––––––––––––––	income ––––––––	income ––––––––	income ––––––––	income ––––––––	income ––––––––
Euro/USD exchange rate +/­ 5%	1	1	1	1	1
	––––––––	––––––––	––––––––	––––––––	––––––––

Capital risk management

During the Track Record Periods, capital management with respect to Seattle was performed as part of Parent's overall management of its own capital.

Primary capital in Seattle has been infused by Parent. Cash generated by operations is used as the primary source of liquidity. Internally generated cash flows will be generally sufficient to support Seattle's operating businesses, capital expenditures, restructuring activities, interest payments and income tax payments. Seattle expects to supplement this shortterm liquidity, if necessary, by borrowing through Parent under credit facilities made available by various domestic and foreign financial institutions. The relative proportion of debt to equity will be adjusted over the mediumterm depending on the cost of debt compared to equity and the level of uncertainty facing the industry and Seattle.

		As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
		31 January ––––––––		31 October –––––––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	Note	2017 ––––––––	2016 ––––––––	2015 ––––––––	2014 ––––––––
Total borrowings	14	38	36	33	21
Less cash and cash equivalents	12	(109) ––––––––	(130) ––––––––	(150) ––––––––	(197) ––––––––
Total net debt		(71)	(94)	(117)	(176)
Total equity		8,549 ––––––––	8,495 ––––––––	8,702 ––––––––	9,347 ––––––––
Debt/equity %		(0.83)%	(1.11)%	(1.34)%	(1.88)%

Fair value

Fair value is the estimated market value that one could obtain when selling an asset or be paid when transferring a liability. Authoritative guidance associated with fair value measurements provides a framework for measuring fair value and establishes a fair value hierarchy that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

–––––––– –––––––– –––––––– ––––––––

Valuation techniques are used based upon observable and unobservable inputs. Observable inputs are developed using market data such as publicly available information and reflect the assumptions market participants would use, while unobservable inputs are developed using the best information available about the assumptions market participants would use. Assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement:

Level 1 — The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the group is the current bid price. These instruments are included in Level 1.

Level 2 — The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entityspecific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Level 3 — If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. This is the case for unlisted equity securities.

The following table presents Seattle's assets and liabilities that are measured at fair value on a recurring basis:

	As at 31 January 2017 –––––––––––––––––––––––––––––––––––––––––––––––––––
In millions USD –––––––––––––––––––	Level 1 ––––––––	Level 2 ––––––––	Level 3 ––––––––	Total ––––––––
Assets
Cash equivalents and investments
Time deposits	—	11	—	11
Money market funds	69	—	—	69
Foreign bonds	—	30	—	30
Derivative Instruments
Foreign exchange contracts	— ––––––––	3 ––––––––	— ––––––––	3 ––––––––
Total assets	69	44	—	113
Liabilities	––––––––	––––––––	––––––––	––––––––
Derivative Instruments
Foreign exchange contracts	—	—	—	—
Total liabilities	–––––––– — ––––––––	–––––––– — ––––––––	–––––––– — ––––––––	–––––––– — ––––––––

							As at 31 October
			2016				––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 2015			2014
In millions USD –––––––––––––––		Level 1 Level 2	Level 3	Total	Level 1	Level 2	–––––––––––––––––––––––– –––––––––––––––––––––––– Level 3 –––––– –––––– –––––– ––––– –––––– –––––– –––––– –––––	Total	Level 1	Level 2 –––––– –––––– ––––––	–––––––––––––––––––––––– Level 3	Total –––––
Assets
Cash equivalents and investments
Time deposits	—	11	—	11	—	14	—	14	—	15	—	15
Money market funds	95	—	—	95	84	—	—	84	73	—	—	73
Foreign bonds	—	27	—	27	—	28	—	28	—	24	—	24
Derivative Instruments Foreign exchange
contracts	—	3	—	3	—	2	— –––––– –––––– –––––– ––––– –––––– –––––– –––––– –––––	2	—	— –––––– –––––– ––––––	—	— –––––
Total assets	95	41	—	136	84	44	—	128	73	39	—	112
Liabilities							–––––– –––––– –––––– ––––– –––––– –––––– –––––– –––––			–––––– –––––– ––––––		–––––
Derivative Instruments
Foreign exchange contracts	—	1	—	1	—	1	—	1	—	4	—	4
Total liabilities	—	1	—	1	—	1	–––––– –––––– –––––– ––––– –––––– –––––– –––––– ––––– — –––––– –––––– –––––– ––––– –––––– –––––– –––––– –––––	1	—	–––––– –––––– –––––– 4 –––––– –––––– ––––––	—	––––– 4 –––––

For the three months ended 31 January 2017, and each of the years ended 31 October 2016, 2015, and 2014, there were no material transfers among levels within the fair value hierarchy. As at 31 October 2016, 2015, and 2014, Seattle had no Level 3 financial instruments.

The fair value of Seattle's foreign exchange hedges were liabilities of \$0m as at 31 January 2017 and \$1m as at 31 October 2016 (2015: \$1m, and 2014: \$4m) and assets of \$3m as at 31 January 2017 and \$3m as at 31 October 2016 (2015: \$2m, and 2014: \$0m). The liability amounts are shown in the line item, "trade and other payables", and the asset amount is shown in the line item, "trade and other receivables" in Seattle's combined statement of financial position. The gain (loss) related to the hedges amounted to \$3m in the three months ended 31 January 2017 (2016: \$2m) and \$2m in the year ended 31 October 2016 (2015: \$8m and 2014: \$4m).

The fair value of Seattle's assets that have been designated to fund one of Seattle's defined benefit plans (note 19) are Level 2 financial instruments, as the fair value is determined based on quotes received from the financial institution that holds these assets.

Fair value of derivative instruments

All derivative instruments are recognized on a gross basis in the combined statement of financial position. Seattle participates in Parent's master netting arrangements and collateral security arrangements. Future derivative cash flows are expected to be recognized in accordance with their underlying instruments. Seattle does not offset the fair value of its derivative instruments against the fair value of cash collateral posted under Parent's collateral security agreements. As at 31 January 2017, 31 October 2016, 2015 and 2014, information related to the potential effect of Seattle's use of Parent's master netting agreements and collateral security agreements was as follows:

	As at 31 January 2017 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
	(i)	(ii)	(iii) = (i) ­ (ii)		(v)	(vi) =
	Gross amount	Gross	Net amount	(iv)	Financial	(iii) ­ (iv) ­ (v)
In millions USD ––––––––––––––		recognized amount offset	presented	Derivatives ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––	collateral	Net amount
Derivative assets	3	—	3	—	—	3
Derivative liabilities	— ––––––––	— ––––––––	— ––––––––	— ––––––––	— ––––––––	— ––––––––
Net	3	—	3	—	—	3
	––––––––	––––––––	–––––––– As at 31 October 2016	––––––––	––––––––	––––––––
	(i)	(ii)	(iii) = (i) ­ (ii)	––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––	(v)	(vi) =
	Gross amount	Gross	Net amount	(iv)	Financial	(iii) ­ (iv) ­ (v)
In millions USD ––––––––––––––		recognized amount offset	presented	Derivatives ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––	collateral	Net amount
Derivative assets	3	—	3	—	—	3
Derivative liabilities	1 ––––––––	— ––––––––	1 ––––––––	— ––––––––	— ––––––––	1 ––––––––
Net	2	—	2	—	—	2
	––––––––	––––––––	–––––––– As at 31 October 2015	––––––––	––––––––	––––––––
	(i)	(ii)	(iii) = (i) ­ (ii)	––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––	(v)	(vi) =
	Gross amount	Gross	Net amount	(iv)	Financial	(iii) ­ (iv) ­ (v)
In millions USD ––––––––––––––		recognized amount offset	presented	Derivatives ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––	collateral	Net amount
Derivative assets	2	—	2	1	—	1
Derivative liabilities	1 ––––––––	— ––––––––	1 ––––––––	1 ––––––––	— ––––––––	— ––––––––
Net	1	—	1	—	—	1
	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––

	As at 31 October 2014 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
	(i)	(ii)	(iii) = (i) ­ (ii)		(v)	(vi) =
	Gross amount	Gross	Net amount	(iv)	Financial	(iii) ­ (iv) ­ (v)
In millions USD ––––––––––––––		recognized amount offset ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––	presented	Derivatives	collateral	Net amount
Derivative assets	—	—	—	—	—	—
Derivative liabilities	4 ––––––––	— ––––––––	4 ––––––––	— ––––––––	— ––––––––	4 ––––––––
Net	(4) ––––––––	— ––––––––	(4) ––––––––	— ––––––––	— ––––––––	(4) ––––––––

21. Deferred tax

The analysis of deferred tax assets and deferred tax liabilities is as follows:

			As at
	31 January		–––––––––––––––––––––––––––––––––––––––––––––––––––– 31 October
In millions USD –––––––––––––––––––	–––––––– 2017 ––––––––	2016 ––––––––	––––––––––––––––––––––––––––––––––––– 2015 ––––––––	2014 ––––––––
Deferred tax assets	999	1,047	817	425
Deferred tax liabilities	(4) ––––––––	(4) ––––––––	(6) ––––––––	(11) ––––––––
Deferred tax assets	995	1,043	811 ––––––––	414 ––––––––
	––––––––	––––––––	As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January		31 October
In millions USD –––––––––––––––––––	–––––––– 2017 ––––––––	2016 ––––––––	––––––––––––––––––––––––––––––––––––– 2015 ––––––––	2014 ––––––––
Net deferred tax assets	999	1,047	817	425
Set­off provisions	124	113	227	488
Gross deferred tax assets	–––––––– 1,123	–––––––– 1,160	–––––––– 1,044	–––––––– 913
Net deferred tax liabilities	–––––––– (4)	–––––––– (4)	–––––––– (6)	–––––––– (11)
Set­off provisions	(124)	(113)	(227)	(488)
Gross deferred tax liabilities	–––––––– (128)	–––––––– (117)	–––––––– (233)	–––––––– (499)
	––––––––	–––––––– –––––––– –––––––– As at ––––––––––––––––––––––––––––––––––––––––––––––––––––
	31 January
In millions USD –––––––––––––––––––	–––––––– 2017 ––––––––	2016 ––––––––	––––––––––––––––––––––––––––––––––––– 2015 ––––––––	2014 ––––––––
Deferred tax asset, net
At period beginning	1,043	811	414	174
(Debited)/credited to combined statement of
comprehensive income	(33)	208	362	249
(Debited)/credited directly to Parent company investment	(15)	24	17	(9)
Acquisition	—	—	18	—
Foreign exchange adjustment	—	—	—	—
Effect of change in tax rates – charged to
combined statement of comprehensive income	—	—	—	—
At period end	–––––––– 995	–––––––– 1,043	–––––––– 811	–––––––– 414
	––––––––	––––––––	––––––––	––––––––

		Inter­		Employee	Other
	Tax losses	company	Deferred	and retiree	temporary
In millions USD –––––––––––––––	–––––––	& credits transactions –––––––	revenue –––––––	benefits –––––––	differences –––––––	Total –––––––
Deferred tax assets
At 1 November 2013	55	189	212	46	77	579
Acquisition	—	—	—	—	—	—
Credited/(debited) to combined statement of comprehensive
income	27	295	38	4	(40)	324
Credited/(debited) directly to
Parent company investment	—	—	—	14	(4)	10
Foreign exchange adjustment	—	—	—	—	—	—
Effect of change in tax rates –
charged to combined
statement of comprehensive
income	— –––––––	— –––––––	— –––––––	— –––––––	— –––––––	— –––––––
At 31 October 2014	82	484	250	64	33	913
Acquisition (Debited)/credited to combined	22	—	1	—	—	23
statement of comprehensive
income	(27)	234	(58)	(4)	(22)	123
Credited/(debited) directly to
Parent company investment	—	—	3	(14)	(4)	(15)
Foreign exchange adjustment	—	—	—	—	—	—
Effect of change in tax rates –
charged to combined statement
of comprehensive income	—	—	—	—	—	—
At 31 October 2015	––––––– 77	––––––– 718	––––––– 196	––––––– 46	––––––– 7	––––––– 1,044
Acquisition	—	—	—	—	—	—
(Debited)/credited to combined
statement of comprehensive
income	(3)	74	(28)	9	41	93
Credited directly to Parent
company investment	—	—	—	9	14	23
Foreign exchange adjustment	—	—	—	—	—	—
Effect of change in tax rates –
charged to combined statement
of comprehensive income	—	—	—	—	—	—
At 31 October 2016	––––––– 74	––––––– 792	––––––– 168	––––––– 64	––––––– 62	––––––– 1,160
Acquisition	—	—	—	—	—	—
(Debited)/credited to combined
statement of comprehensive
income	—	(34)	(2)	1	12	(23)
Debited directly to Parent company
investment	—	—	—	(13)	(1)	(14)
Foreign exchange adjustment	—	—	—	—	—	—
Effect of change in tax rates –
charged to combined statement of comprehensive income	—	—	—	—	—	—
	–––––––	–––––––	–––––––	–––––––	–––––––	–––––––
At 31 January 2017	74 –––––––	758 –––––––	166 –––––––	52 –––––––	73 –––––––	1,123 –––––––

Seattle periodically engages in intercompany advanced royalty payment and licensing arrangements that result in advance payments between subsidiaries in different tax jurisdictions. When the local tax treatment of these arrangements differs from IFRS treatment, deferred taxes are recognized. During the three months ended 31 January 2017, Seattle did not execute any intercompany advanced royalty payment arrangements. During the year ended 31 October 2016, Seattle executed intercompany advanced royalty payment arrangements resulting in advanced payments of \$500m (2015: \$800m and 2014: \$1,000m). Payments related to these transactions were received in the US from a foreign combined affiliate, with a deferral of intercompany revenues over the term of the arrangements, which range from approximately 5 years to 15 years. Intercompany royalty revenue and the amortization expense related to the licensing rights are eliminated in the combined historical financial information.

As at 31 October 2016, Seattle had operating losses and other temporary differences carried forward in respect of which no deferred tax assets were recognized amounting to \$78m as at 31 January and \$75m as at 31 October 2016 (2015: \$46m and 2014: \$68m). Seattle's other temporary differences have no expiry date restrictions. The expiry date of operating losses carried forward is dependent upon the tax law of the various territories in which the losses arose. A summary of Seattle's unrecognized deferred tax assets and expiry dates is set out in the following tables:

In millions USD –––––––––––––––––	At 31 January 2017 –––––––––––––––––	Expiry ––––––––
Losses
Europe	—
America	13
Other	— ––––––––
Total losses	13 ––––––––
Unrestricted operating losses	— ––––––––
Other temporary differences	65 ––––––––	No expiry
Total	78
In millions USD –––––––––––––––––	–––––––– At 31 October 2016 –––––––––––––––––	Expiry ––––––––
Losses
Europe	—
America	13
Other	— ––––––––
Total losses	13 ––––––––
Unrestricted operating losses	— ––––––––
Other temporary differences	62 ––––––––	No expiry
Total	75
	––––––––

In millions USD –––––––––––––––––	At 31 October 2015 –––––––––––––––––	Expiry ––––––––
Losses Europe America Other	— 4 — ––––––––
Total losses	4 ––––––––
Unrestricted operating losses	—
Other temporary differences	–––––––– 42	No expiry
Total	–––––––– 46 ––––––––
In millions USD –––––––––––––––––	At 31 October 2014 –––––––––––––––––	Expiry ––––––––
Losses
Europe	—
America Other	— —
Total losses	–––––––– —
Unrestricted operating losses	–––––––– —
Other temporary differences	–––––––– 68	No expiry
Total	–––––––– 68

	––––––––
In millions USD –––––––––––––––––	Unremitted earnings ––––––––	Intangible assets ––––––––	Employee and retiree benefits ––––––––	Other temporary differences ––––––––	Total ––––––––
Deferred tax liabilities
At 1 November 2013	(108)	(279)	(2)	(16)	(405)
Credited to combined statement of
comprehensive income	(34)	(9)	—	(32)	(75)
Acquisition of subsidiary	—	—	—	—	—
Credited directly to Parent company investment	—	—	(19)	—	(19)
Effect of change in tax rates – charged to combined statement of comprehensive income	—	—	—	—	—
At 31 October 2014	–––––––– (142)	–––––––– (288)	–––––––– (21)	–––––––– (48)	–––––––– (499)
Charged/(credited) to combined statement of comprehensive
income	115	187	—	(63)	239
Acquisition of subsidiary	—	(5)	—	—	(5)
(Credited)/charged directly to Parent company investment	—	(8)	15	25	32
Effect of change in tax rates – charged to combined statement of
comprehensive income	—	—	—	—	—
At 31 October 2015	–––––––– (27)	–––––––– (114)	–––––––– (6)	–––––––– (86)	–––––––– (233)

	Unremitted	Intangible	Employee and retiree	Other temporary
In millions USD –––––––––––––––––	earnings ––––––––	assets ––––––––	benefits ––––––––	differences ––––––––	Total ––––––––
(Credited)/charged to combined statement of comprehensive
income	(4)	35	1	83	115
Acquisition of subsidiary	—	—	—	—	—
Charged directly to Parent company investment	—	—	1	—	1
Effect of change in tax rates – charged to combined statement of
comprehensive income	— ––––––––	— ––––––––	— ––––––––	— ––––––––	— ––––––––
At 31 October 2016	(31)	(79)	(4)	(3)	(117)
Credited to combined statement of comprehensive income	—	—	—	(10)	(10)
Acquisition of subsidiary	—	—	—	—	—
Credited directly to Parent company investment	—	—	(1)	—	(1)
Effect of change in tax rates – charged to combined statement of
comprehensive income	— ––––––––	— ––––––––	— ––––––––	— ––––––––	— ––––––––
At 31 January 2017	(31)	(79)	(5)	(13)	(128)

No deferred tax liability was recognized in respect of unremitted earnings of overseas subsidiaries as Seattle is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. The gross undistributed earnings were \$4,956m as at 31 October 2016 (2015: \$4,772m and 2014: \$4,314m).

–––––––– –––––––– –––––––– –––––––– ––––––––

22. Cash generated from operations

			Three months
		ended 31 January			Years ended 31 October
		–––––––––––––––––––– 2017	2016	–––––––––––––––––––––––––––––––– 2016	2015	2014
In millions USD –––––––––––––––––	Note	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
(Loss)/profit after tax Adjustments for		(28)	33	55	354	324
Net interest and other		(13)	1	72	47	7
Taxation	5	29 ––––––––	(24) ––––––––	82 ––––––––	(108) ––––––––	37 ––––––––
Operating (loss)/profit		(12)	10	209	293	368
Depreciation and amortization		49	58	221	336	363
Share­based compensation	23	16	22	91	62	62
Provision for doubtful accounts	11	—	1	9	3	(6)
Restructuring costs		33	35	110	34	45
Other, net		—	5	(83)	(13)	(4)
Changes in working capital
Accounts receivable	11	170	10	41	81	155
Accounts payable	13	(113)	(2)	(9)	61	5
Restructuring costs		(40)	(17)	(51)	(41)	(65)
Other assets and liabilities		47 ––––––––	69 ––––––––	(57) ––––––––	(271) ––––––––	70 ––––––––
Cash generated from operations		150	191	481	545	993
Interest paid		–––––––– —	–––––––– —	–––––––– (3)	–––––––– (3)	–––––––– (2)
Tax (paid)/received		(2) ––––––––	— ––––––––	3 ––––––––	(6) ––––––––	23 ––––––––
Net cash generated from operations		148	191	481	536	1,014
		––––––––	––––––––	––––––––	––––––––	––––––––

23. Employees

			Three months
			ended 31 January	Years ended 31 October ––––––––––––––––––––––––––––––––
		–––––––––––––––––––– 2017	2016	2016	2015	2014
In millions USD –––––––––––––––––	Note	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Staff costs
Wages and salaries		327	365	1,490	1,596	1,828
Social security costs		27	28	116	131	148
Other pension costs	19	13	15	56	59	61
Cost of employee share schemes		16 ––––––––	22 ––––––––	91 ––––––––	62 ––––––––	62 ––––––––
Total		383	430	1,753	1,848	2,099
		––––––––	–––––––– Three months	––––––––	––––––––	––––––––
			ended 31 January		Years ended 31 October
		–––––––––––––––––––– 2017	2016	2016	–––––––––––––––––––––––––––––––– 2015	2014
In millions USD –––––––––––––––––	Note	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Pension costs comprise
Defined benefit schemes	19	4	4	16	13	13
Defined contribution schemes	19	9 ––––––––	11 ––––––––	40 ––––––––	46 ––––––––	48 ––––––––
Total		13	15	56	59	61

–––––––– –––––––– –––––––– –––––––– ––––––––

		Three months
		ended 31 January	Years ended 31 October ––––––––––––––––––––––––––––––––
	–––––––––––––––––––– 2017	2016	2016	2015	2014
	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Average number of people
employed by Seattle	12,165	13,183	13,214	12,909	13,700
	––––––––	–––––––– Three months	––––––––	––––––––	––––––––
		ended 31 January	Years ended 31 October ––––––––––––––––––––––––––––––––
	–––––––––––––––––––– 2017	2016	2016	2015	2014
In millions USD –––––––––––––––––	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Key management compensation
Salary	1	1	2	2	2
Share­based payments	1	2	9	3	3
Employee benefits	— ––––––––	— ––––––––	2 ––––––––	2 ––––––––	1 ––––––––
Total	2	3	13	7	6

The key management figures above include the executive management team.

Sharebased payments

Certain of Seattle's employees participate in equitysettled sharebased payment plans sponsored by Parent. Parent's sharebased payment plans include incentive compensation plans and an employee stock purchase plan ("ESPP"). All awards granted under the plans are based on shares of Parent common stock and, as such, are not reflected in Seattle's combined statement of changes in equity. Sharebased payment expense includes expense attributable to Seattle based on the awards and terms previously granted under the incentive compensation plan to Seattle's employees and an allocation of Parent's corporate and shared functional employee expenses. Accordingly, the amounts presented are not necessarily indicative of future awards and do not necessarily reflect the results that Seattle would have experienced as an independent company for the periods presented.

–––––––– –––––––– –––––––– –––––––– ––––––––

Parent's sharebased incentive payment plans include equity plans adopted in 2015, 2004 and 2000, as amended (collectively, the "Principal Equity Plans"), as well as various equity plans assumed through acquisitions under which sharebased awards were outstanding. Sharebased awards granted under the Principal Equity Plans include restricted share awards, share options, and performancebased awards. Employees who meet certain employment qualifications are eligible to receive sharebased awards.

Restricted share awards are nonvested share awards that may include grants of restricted shares or restricted share units. Restricted share awards and cashsettled awards are generally subject to forfeiture if employment terminates prior to the lapse of the restrictions. Such awards generally vest one to three years from the date of grant. During the vesting period, ownership of the restricted shares cannot be transferred. Restricted shares have the same dividend and voting rights as shares of Parent common stock and are considered to be issued and outstanding upon grant. The dividends paid on restricted shares are nonforfeitable. Restricted share units have forfeitable dividend equivalent rights equal to the dividend paid on shares of common stock. Restricted share units do not have the voting rights of shares of common stock, and the shares underlying restricted share units are not considered issued and outstanding upon grant. The fair value of the restricted share awards is the closing price of shares of Parent common stock on the grant date of the award. Seattle expenses the fair value of restricted share awards ratably over the period during which the restrictions lapse.

Share options granted under the Principal Equity Plans were generally nonqualified share options, but the Principal Equity Plans permitted certain options granted to qualify as incentive share options under the IRC. Share options generally vest over three to four years from the date of grant. The exercise price of a share option was equal to the closing price of Parent's shares on the option grant date. The maximum term for shares granted is eight years from the date of grant. The majority of share options issued by Parent contained only service vesting conditions. However, starting in the year ended 31 October 2011, Parent began granting performancecontingent share options that vest only on the satisfaction of both service and market conditions prior to the expiration of those awards.

Sharebased payments expense and the resulting tax benefits recognized by Seattle were as follows:

	ended 31 January	Three months	Years ended 31 October ––––––––––––––––––––––––––––––––
	–––––––––––––––––––– 2017	2016	2016	2015	2014
In millions USD –––––––––––––––––	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Cost of revenue	4	3	13	9	10
Research and development	4	6	24	16	17
Selling and distribution costs	4	8	43	26	25
Administrative expenses	4 ––––––––	5 ––––––––	11 ––––––––	11 ––––––––	10 ––––––––
Share­based compensation expense	16	22	91	62	62
Income tax benefit	(3) ––––––––	(3) ––––––––	(13) ––––––––	(13) ––––––––	(7) ––––––––
Share­based compensation, net of tax	13	19	78	49	55

In connection with Parent's 1 November 2015 separation from HewlettPackard Company, the Parent Board of Directors approved amendments to certain outstanding longterm incentive awards on 29 July 2015. The amendments provided for the accelerated vesting on 17 September 2015 of certain sharebased awards that were otherwise scheduled to vest between 18 September 2015 and 31 December 2015. Seattle's increased pretax sharebased compensation expense due to the acceleration was approximately \$6m in the year ended 31 October 2015.

–––––––– –––––––– –––––––– –––––––– ––––––––

Sharebased compensation expense includes an allocation of Parent's corporate and shared functional employees expenses of \$4m in the three months ended 31 January 2017 (2016: \$4m) and \$15m in the year ended 31 October 2016 (2015: \$15m and 2014: \$11m).

Cash received from option exercises and purchases under Parent's ESPP by Seattle employees was \$19m as at the year ended 31 October 2016 (2015: \$30m and 2014: \$44m). The benefit realized for the tax deduction from option exercises was \$3m during the year ended 31 October 2016 (2015: \$7m and 2014: \$11m).

A summary of restricted share award activity for Seattle employees is as follows:

		As at 31 January	As at 31 October ––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
	2017		2016		2015		2014
	Shares 000's ––––––––	––––––––––––––––––– Weighted average grant date fair value per share ––––––––	––––––––––––––––––– Shares 000's ––––––––	Weighted average grant date fair value per share ––––––––	––––––––––––––––––– Shares 000's ––––––––	Weighted average grant date fair value per share ––––––––	––––––––––––––––––– Shares 000's ––––––––	Weighted average grant date fair value per share ––––––––
Outstanding at beginning of period1	6,063	\$15	—	—	3,316	\$24	3,783	\$21
Converted from former
Parent's plan1	—	—	2,690	\$15	—	—	—	—
Granted and assumed
through acquisition	1,384	\$25	4,922	\$16	1,434	\$36	2,114	\$29
Exercised	(1,466)	\$15	(840)	\$15	(2,081)	\$26	(2,174)	\$23
Forfeited	(206)	\$17	(696)	\$15	(427)	\$29	(407)	\$23
Employee transition2	(841)	\$15	(13)	\$17	(808)	\$22	—	—
Outstanding at end of period	–––––––– 4,934 ––––––––	–––––––– \$18 ––––––––	–––––––– 6,063 ––––––––	–––––––– \$15 ––––––––	–––––––– 1,434 ––––––––	–––––––– \$32 ––––––––	–––––––– 3,316 ––––––––	–––––––– \$24 ––––––––

(1) In connection with HPE's 1 November 2015 separation from HewlettPackard Company, Seattle employees with outstanding former Parent restricted stock awards received HPE replacement restricted stock awards upon the separation.

(2) Employee transition amounts consist of restricted share award activity for employees transitioning between Seattle and Parent.

The total grant date fair value of restricted share awards vested for Seattle employees was \$2m, net of taxes in the three months ended 31 January 2017 and \$6m, net of taxes in the year ended 31 October 2016 (2015: \$51m and 2014: \$33m, net of taxes). As at 31 January 2017, total unrecognized pretax sharebased payment expense related to nonvested restricted share awards to Seattle employees was \$65m, which is expected to be recognized over the remaining weightedaverage vesting period of 1.3 years.

Parent utilizes the BlackScholesMerton option pricing model to estimate the fair value of share options subject to servicebased vesting conditions. Parent estimates the fair value of share options subject to performancecontingent vesting conditions using a combination of a Monte Carlo simulation model and a lattice model, as these awards contain market conditions. The weightedaverage fair value per share for options issued during the periods and the assumptions used to measure fair value were as follows:

	Three
	months ended
	31 January ––––––––––	Years ended 31 October –––––––––––––––––––––––––––––––––––––––
	2017 ––––––––––	2016 ––––––––––	2015 ––––––––––	2014 ––––––––––
Weighted­average fair value1	\$6	\$4	\$8	\$7
Expected volatility2	25.7%	31.1%	26.8%	33.1%
Risk­free interest rate3	2%	1.7%	1.7%	1.8%
Expected dividend yield4	1%	1.5%	1.8%	2.1%
Expected term in years5	6.1	5.4	5.9	5.7

(1) The weightedaverage fair value was based on share options granted during the period.

• (2) For awards granted in the three months ended 31 January 2017 and in the year ended 31 October 2016, expected volatility was estimated using average historical volatility of selected peer companies. For awards granted in the years ended 31 October 2015, expected volatility was estimated using the implied volatility derived from trades of options to acquire shares of Parent common stock. For awards granted in the year ended 31 October 2014, expected volatility for awards subject to servicebased vesting was estimated using the implied volatility derived from trades of options to acquire shares of Parent common stock, whereas for performancecontingent awards, expected volatility was estimated using the historical volatility of Parent's common stock.
• (3) The riskfree interest rate was estimated based on the yield on US Treasury zerocoupon issues.
• (4) The expected dividend yield represents a constant dividend yield applied for the duration of the expected term of the award.
• (5) For awards granted in the three months ended 31 January 2017 subject to servicebased vesting, the expected term was estimated using the simplified method. For awards granted in the year ended 31 October 2016 subject to servicebased vesting, the expected term was estimated using the simplified method taking the vesting term and the original contractual term divided by two, since it was HPE's first fiscal year as a separate standalone company. For awards subject to servicebased vesting granted in 2015 and 2014, the expected term was estimated using historical exercise and postvesting termination patterns. For performancecontingentawards, the expected term in all periods represents an output from the lattice model.

A summary of share option activity for Seattle employees is as follows:

	As at 31 January 2017 ––––––––––––––––––––––––––––––––––––––––
	Shares 000's –––––––––––	Weighted average exercise price –––––––––––	Average share price –––––––––––
Outstanding at beginning of period	4,561	\$15
Granted and assumed through acquisition	21	\$25
Exercised	(378)	\$14	\$23
Forfeited/Expired	(128)	\$15
Employee transition¹	(1,807)	\$17
Outstanding at end of period	2,269 ––––––––	\$14 ––––––––
Vested and expected to vest at end of period	2,217 ––––––––	\$14 ––––––––
Exercisable at end of period	1,310	\$12
	––––––––	––––––––

	2016 ––––––––––––––––––––––––––
				2015		––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 2014 ––––––––––––––––––––––––––
Shares 000's	Weighted average exercise price	Average share price	Shares 000's	–––––––––––––––––––––––––– Weighted average exercise price	Average share price	Shares 000's	Weighted average exercise price	Average share price –––––––
(1,407)	\$11	\$18	(1,148)	\$18	\$33	(2,164)	\$16	\$32
(371)	\$18		(955)	\$35		(2,436)	\$22
115	\$23		(427)	\$16		—	—
4,561	\$15		1,975	\$25		3,975	\$23
1,368	\$13		1,350	\$22		2,930	\$23
	––––––– — 3,828 2,396 ––––––– 4,378 –––––––	––––––– — \$15 \$14 ––––––– \$15 ––––––– ––––––– –––––––	–––––––	––––––– 3,975 — 530 ––––––– 1,903 ––––––– –––––––	––––––– \$23 — \$34 ––––––– \$25 ––––––– –––––––	–––––––	––––––– 7,932 — 643 ––––––– 3,837 ––––––– –––––––	––––––– \$20 — \$29 ––––––– \$23 ––––––– –––––––

(1) Employee transition amounts consist of option activity for employees transitioning between Seattle and Parent.

The aggregate intrinsic value in the table above represents the total pretax intrinsic value that Seattle employee option holders would have realized had all Seattle employee option holders exercised their options on the last trading day of the year ended 31 October 2016, 2015, and 2014. The aggregate intrinsic value is the difference between Parent's closing share price on the last trading day of the year and the exercise price, multiplied by the number of inthemoney options. The total intrinsic value of options exercised by Seattle employees was \$3m in the three months ended 31 January 2017 and was \$11m in the year ended 31 October 2016 (2015: \$18m and 2014: \$31m). The total intrinsic value of options outstanding as at 31 January 2017 was \$21m and was \$35m as at 31 October 2016 (2015: \$11m and 2014: \$55m). The total grant date fair value of options granted to Seattle employees which vested was \$1m, net of taxes in the three months ended 31 January 2017 and was \$5m, net of taxes in the year ended 31 October 2016 (2015: \$8m, net of taxes and 2014: \$9m, net of taxes).

As at 31 January 2017, total unrecognized pretax sharebased payment expense related to share options for Seattle employees was \$2M, which is expected to be recognized over the remaining weightedaverage vesting period of 1.7 years.

The following table summarizes the share options outstanding at the end of the year and their expiry dates and exercise prices:

		Share option (in thousands) –––––––––––––––––––––––––––––––––––––––––––––––––––––––
Grant date	Expiry date	Three months ended 31 January	Years ended 31 October
(Year ended) ––––––––––––––	(Year ended) ––––––––––	–––––––––––– 2017 ––––––––––––	2016 ––––––––––	––––––––––––––––––––––––––––––––––––––– 2015 ––––––––––	2014 ––––––––––
2005	2015	—	—	—	92
2006	2016	—	—	109	161
2007	2017	26	41	40	540
2008	2016	17	19	43	94
2009	2017	44	57	56	167
2010	2018	245	266	238	745
2011	2019	394	471	504	1,047
2012	2020	14	14	43	113
2013	2021	67	69	180	427
2014	2022	161	519	383	589
2015	2023	241	656	379	—
2016	2024	1,039	2,449	—	—
2017	2025	21 ––––––––	— ––––––––	— ––––––––	— ––––––––
Total		2,269	4,561	1,975	3,975
Weighted average remaining contractual life of options		––––––––	––––––––	––––––––	––––––––
outstanding at end of period		4.9 ––––––––	5.7 ––––––––	4.6 ––––––––	3.7 ––––––––

Parent sponsors the ESPP, pursuant to which eligible employees may contribute up to 10% of their eligible compensation, subject to certain income limits, to purchase shares of Parent's common stock. Pursuant to the terms of the ESPP, employees purchase shares under the ESPP at a price equal to 95% of Parent's closing share price on the purchase date. Sharebased payment expense was recorded in connection with those purchases of \$1m in the year ended 31 October 2016 (2015: \$1m and 2014: \$1m) as these plans are treated as compensatory plans under IFRS.

24. Operating lease commitments – minimum lease payments

Seattle has a number of lease agreements in respect of properties, vehicles, plant and equipment, for which the payments extend over a number of years:

	As at 31 January
In millions USD –––––––––––––––	–––––––––––––– 2017 ––––––––––––––
Future minimum lease payments under operating leases expiring:
No later than one year	37
Later than one year and no later than five years	110
Later than five years	39 ––––––––
Total	186

Seattle leases various offices under noncancellable operating lease agreements that are included in the table. The leases have various terms, escalation clauses and renewal rights. Some of the offices leased have been sublet to unrelated third parties and Seattle has not been released from its primary obligations under these leases. The above operating lease payments are presented at their gross amounts, before sublease rental income. The future minimum sublease payments expected to be received under noncancellable leases as at 31 October 2016 is

––––––––

\$3m. Lease payments recognized as an expense were \$6m in the three months ended 31 January 2017 and \$34m in the year ended 31 October 2016 (2015: \$52m and 2014: \$42m).

25. Contingent liabilities

Restructuring

On 14 September 2015, Parent's Board of Directors approved a restructuring plan (the "2015 Plan") which will be implemented through the year ending 31 October 2018. As part of the 2015 Plan, it is expected up to approximately 2,900 employees will exit Seattle by the end of 2018. The changes to the workforce will vary by country, based on local legal requirements and consultations with employee works councils and other employee representatives, as appropriate. It is estimated that Seattle will incur aggregate pretax charges through the year ending 31 October 2018 of approximately \$196m in connection with the 2015 Plan, of which approximately \$172m relates to workforce reductions and approximately \$24m primarily relates to real estate consolidation.

On 23 May 2012, Parent adopted a multiyear restructuring plan (the "2012 Plan") designed to simplify business processes, accelerate innovation and deliver better results for customers, employees and shareholders. As at 31 January 2017, Seattle had eliminated approximately 2,500 positions in connection with the 2012 Plan, with a portion of those employees exiting Seattle as part of voluntary EER programs in the US and in certain other countries. Seattle recognized \$193m in total aggregate charges in connection with the 2012 Plan, all related to workforce reductions, including the EER programs.

Legal proceedings

From time to time, Seattle is a defendant in claims or lawsuits involving matters which are routine to the nature of our business such as claims involving former employees, or claims for infringement of patents. The ultimate resolution of all such matters will not have a material adverse effect on its results of operations, cash flows, or financial position.

Seattle is involved in various lawsuits, claims, investigations and proceedings including those consisting of IP, commercial, employment, employee benefits and environmental matters, which arise in the ordinary course of business. The Separation and Distribution Agreement between Seattle and Parent includes provisions that allocate liability and financial responsibility for litigation involving the parties, as well as provide for cross indemnification of the parties against liabilities to one party arising out of liabilities allocated to the other party. In addition, as part of the Separation and Distribution Agreement, HPE and Seattle have agreed to cooperate with each other in managing litigation that relates to both parties' businesses. The Separation and Distribution Agreement also contains provisions that allocate liability and financial responsibility for such litigation relating to both parties' businesses. Seattle records a liability when it believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Significant judgment is required to determine both the probability of having incurred a liability and the estimated amount of the liability. Seattle reviews these matters at least quarterly and adjusts these liabilities to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other updated information and events pertaining to a particular matter. Litigation is inherently unpredictable. However, Seattle believes it has valid defenses with respect to legal matters pending against it. The potential amount of each of the below actions is not quantifiable.

Forsyth, et al. vs. HP Inc. and Hewlett Packard Enterprise Company: This purported class and collective action was filed on 18 August 2016 and an amended (and operative) complaint was filed on 19 December 2016 in the United States District Court for the Northern District of California, against HP Inc. and Hewlett Packard Enterprise Company alleging defendants violated the Federal Age Discrimination in Employment Act ("ADEA"), the California Fair Employment and Housing Act, California public policy and the California Business and Professions Code by terminating older workers and replacing them with younger workers. Plaintiffs seek to certify a nationwide collective action under the ADEA comprised of all individuals aged 40 and older at the time their employment was terminated by an HP entity pursuant to a work force reduction ("WFR") plan on or after 9 December 2014 for individuals terminated in deferral states and on or after 8 April 2015 in nondeferral states. Plaintiffs also seek to certify a Rule 23 class under California law comprised of all persons 40 years of age or older employed by defendants in the state of California and terminated pursuant to a WFR plan on or after 18 August 2012.

Delaney and Haragos v. HewlettPackard Company and HP Enterprise Services, LLC: This purported California class action was filed on 22 April 2016 and a second (and operative) amended complaint was filed on 2 September 2016 in California Superior Court (San Diego County) against HewlettPackard Company, HP Inc., and Hewlett Packard Enterprise Services, LLC, alleging defendants violated the California Fair Employment and Housing Act and the California Unfair Competition Code by disproportionately laying off employees who were 40 or older and replacing them with younger workers. Plaintiff Haragos seeks to represent a Federal Rule of Civil Procedure Rule 23 statelaw class comprised of all California employees who were terminated by defendants pursuant to a WFR plan between 22 April 2012 and the present. Plaintiff Delaney's claims were voluntarily dismissed effective 28 November 2016. On 27 January 2017, the court granted defendants' motion to compel plaintiff Haragos to arbitration. Pursuant to the terms of Mr. Haragos' WFR release, the parties engaged in mediation on 1 March 2017 and reached a confidential settlement of Haragos' individual claims. On 28 March 2017, the court dismissed Haragos' class claims without prejudice.

Wall v. HewlettPackard Enterprise Company and HP Inc.: This certified California class action and Private Attorney General Act action was filed against HewlettPackard Company on 17 January 2012 and the fifth (and operative) amended complaint was filed against HP Inc. and Hewlett Packard Enterprise Company on 28 June 2016. The complaint alleges that the defendants paid earned incentive compensation late and failed to timely pay final wages. On 9 August 2016, the court ordered the class certified without prejudice to a future motion to amend or modify the class certification order or to decertify. Trial is set to begin on 22 January 2018.

Realtime Data LLC: Realtime Data LLC ("Realtime") filed three patent infringement actions in the Eastern District of Texas against HPE. The first was filed on 8 May 2015 against HewlettPackard Company, HP Enterprise Services and Oracle ("Oracle matter") and accuses HP's Proliant servers running Oracle's Solaris, HPE's StoreOnce, and HPE's Vertica. Oracle has agreed to indemnify HPE for all claims against HPE related to Oracle's Solaris, including databases running Solaris with the ZFS file system on HP ProLiant servers. Following a 23 March 2017 mediation, Oracle and Realtime reached a settlement. It is unclear whether their agreement has been finalized. No stipulated judgment or joint motion to dismiss has been filed to date, although the parties notified the Court that an agreement has been reached in principle. The second lawsuit was filed on 8 May 2015 against HewlettPackard Company, HP Enterprise Services, and SAP America Inc., Sybase Inc. ("SAP matter") and accuses HP's Converged Systems running SAP Hana. SAP agreed to indemnify HPE and HP Enterprise Services ("HPES") for the SAP related products. On 16 June 2016, SAP reached a settlement agreement with Realtime, which led to the dismissal of all claims relating to HPE products indemnified by SAP. The third lawsuit was filed on 26 February 2016 (amended on 15 August 2016) against Hewlett Packard Enterprise Company, HP Enterprise Services, and Silver Peak Systems, Inc. ("Silver Peak"), and accuses HPE's StoreOnce, 3Par StoreServe, Connected MX, Connected Backup, and LiveVault. On 17 November 2016, the Magistrate Judge granted HPE and Realtime's joint motion to sever and consolidate the Oracle and Silver Peak matters. There are seven patents asserted in the remaining lawsuits. The patents generally relate to data compression techniques used to conserve storage space. HPE and the joint defense group have filed several inter partes review petitions with the Patent Trial and Appeal Board on all seven asserted patents. On 3 February 2017, the Magistrate Judge granted HPE's Motion to Stay Pending Inter Partes Review.

Indemnification

In the ordinary course of business, Seattle enters into contractual arrangements under which Seattle provides indemnification to certain vendors and customers against claims of intellectual property infringement made by third parties arising from the use by such vendors and customers of Seattle's software products and services and certain other matters. Some indemnifications may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.

26. Related party transactions

Transactions between Seattle and its subsidiaries have been eliminated. The remuneration of key management personnel of Seattle including executives is set out in note 23.

Prior to HP Inc.'s spinoff of HPE, HP Inc. conducted a strategic review of Seattle and decided that the marketing optimization software product group, a continuing business which has historically been managed by Seattle and included in Seattle's results of operations, no longer aligned with Seattle's strategic goals, as they were outside Seattle's gotomarket focus of selling to IT departments. However, HP Inc. determined that these software assets primarily aligned with a document management and solutions ecosystem that would complement its printing business. As a result of this strategic review process, the marketing optimization software product group was realigned to become a part of HP Inc.

The following table presents the transfer of Seattle's assets and liabilities at the date of transfer with an offsetting adjustment to Parent company investment.

In millions USD

––––––––
566
(37) ––––––––
91
512

1 Goodwill was allocated on a relative fair value basis.

Seattle enters into leasing arrangements with Parent's whollyowned leasing subsidiary, HPE Financial Services, which are cash settled on a recurring basis in accordance with the contractual terms of the leasing arrangements. These leasing arrangements are accounted for as finance leases or operating leases based on the contractual terms of the leasing arrangements. Finance lease obligations are classified as Borrowings on the combined statement of financial position and principal payments on these obligations are reflected on a separate line within financing activities in the combined statement of cash flows.

Future principal payments under these finance leases were as follows:

	As at 31 January –––––––––––––––––––––––		As at 31 October –––––––––––––––––––––––––––––––––––––
	2017	2016	2016	2015	2014
In millions USD –––––––––––––––	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Future minimum lease payments
under finance leases expiring
No later than one year	18	14	17	13	7
Later than one year and no
later than five years	24	21	23	24	17
Later than five years	— ––––––––	— ––––––––	— ––––––––	— ––––––––	— ––––––––
Total minimum lease
payments	42	35	40	37	24
Less: amount representing
interest	(4) ––––––––	(3) ––––––––	(4) ––––––––	(4) ––––––––	(3) ––––––––
Present value of minimum
lease payments	38	32	36	33	21
	––––––––	––––––––	––––––––	––––––––	––––––––

The net carrying amount of the leased asset was \$36m as at 31 January 2017 and was \$34m as at 31 October 2016 (2015: \$32m and 2014: \$21m).

Seattle sold software to other businesses of Parent in the amount of \$57m in the three months ended 31 January 2017 (2016: \$57m) and \$255m during the year ended 31 October 2016 (2015: \$255m and 2014: \$284m).

Seattle purchased equipment and services from other businesses of Parent in the amount of less than \$1m in the three months ended 31 January 2017 (2016: \$1m) and \$4m in the year ended 31 October 2016 (2015: \$3m and 2014: \$1m).

The combined statement of comprehensive income includes an allocation of general corporate expenses from Parent for certain management and support functions which are provided on a centralized basis within Parent. These management and support functions include, but are not limited to, executive management, finance, legal, information technology, employee benefits administration, treasury, risk management, procurement and other shared services. These allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenue, expenses, headcount or other relevant measures. These allocations were \$75m in the three months ended 31 January 2017 (2016: \$89m) and \$347m in the year ended 31 October 2016 (2015: \$378m and 2014: \$396m).

These allocations are considered to be a reasonable reflection of the utilization of services by, or the benefits provided to, Seattle. These allocations may not, however, reflect the expense Seattle would have incurred as a standalone company for the periods presented. Actual costs that may have been incurred if Seattle had been a standalone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.

Parent company investment on the combined statement of financial position and in the combined statement of changes in equity represents Parent's historical investment in Seattle, the net effect of transactions with and allocations to Parent and Seattle's accumulated earnings.

Net transfers to Parent are included within Parent company investment. The components of net transfers to Parent in the combined statement of changes in equity for all periods presented were as follows:

		Three months
	ended 31 January –––––––––––––––––––––––		Years ended 31 October –––––––––––––––––––––––––––––––––––––
	2017	2016	2016	2015	2014
In millions USD –––––––––––––––	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Intercompany revenues	(57)	(57)	(255)	(255)	(284)
Intercompany purchases	—	1	4	3	1
Cash pooling and general
financing activities	(112)	(219)	(417)	(822)	(1,206)
Corporate allocations	75	89	347	378	396
Income taxes	(47)	40	317	298	217
Net assets of marketing optimization software product
group transferred to Parent Cash transfers (to)/from Parent for business combinations	—	—	—	(566)	—
and divestitures	—	—	(237)	(36)	20
Others	164 ––––––––	— ––––––––	40 ––––––––	42 ––––––––	5 ––––––––
Total net transfers from/(to) Parent per combined statement
of changes in equity	23 ––––––––	(146) ––––––––	(201) ––––––––	(958) ––––––––	(851) ––––––––

A reconciliation of net transfers to Parent in the combined statement of changes in equity to the corresponding amount presented in the combined statement of cash flows for all periods presented were as follows:

		Three months
	ended 31 January –––––––––––––––––––––––			Years ended 31 October –––––––––––––––––––––––––––––––––––––
	2017	2016	2016	2015	2014
In millions USD –––––––––––––––	––––––––	–––––––– (unaudited)	––––––––	––––––––	––––––––
Net transfers from/(to) Parent
per combined statement of
changes in equity	23	(146)	(201)	(958)	(851)
Income taxes paid by Parent	(15)	(23)	(56)	(121)	(70)
Restructuring	(2)	(1)	(10)	(3)	(12)
Share­based compensation	(17)	(17)	(91)	(62)	(62)
Net assets of marketing optimization software product
group transferred to Parent	—	—	—	566	—
Transfer of deferred tax assets
(to)/from Parent	—	—	(10)	(9)	9
Other	(147) ––––––––	38 ––––––––	(332) ––––––––	(28) ––––––––	(129) ––––––––
Total net transfers to Parent per combined statement
of cash flows	(158)	(149)	(700)	(615)	(1,115)
	––––––––	––––––––	––––––––	––––––––	––––––––

27. Business combinations

In February 2016, Seattle acquired the entire share capital of Trilead GmbH, a data protection software company, for a purchase price of \$12m. In connection with this acquisition, Seattle recorded \$10m of goodwill (which is not deductible for tax purposes), \$4m of amortizable intangible assets and assumed \$2m of net liabilities.

In February 2015, Seattle acquired the entire share capital of Voltage Security, a datacentric security software solutions company, for a purchase price of \$160m. In connection with this acquisition, Seattle recorded \$102m of goodwill (which is not deductible for tax purposes), \$48m of amortizable intangible assets and assumed \$10m of net assets. As part of the transaction, Seattle acquired receivables with a fair value of \$4m. Acquisitionrelated costs amounted to \$3m and were expensed.

In March 2014, Seattle acquired the entire share capital of Shunra Software, an application performance engineering company, for a purchase price of \$20m. In connection with the acquisition, Seattle recorded \$12m of goodwill, \$7m of amortizable intangible assets and assumed \$1m of net assets.

Pro forma results of operations for these acquisitions, including revenue from the beginning of the fiscal year, during which the relevant acquisitions occurred, have not been presented because they are not material to Seattle's combined results of operations, either individually or in the aggregate.

All identifiable assets and liabilities were assigned a portion of the cost of acquisition based on their respective estimated fair values. The determination of fair value is a critical and complex calculation that involves significant assumptions and estimates. These assumptions and estimates were based on management's best judgments. No residual value has been assumed for any of the acquired intangible assets.

The value of the goodwill represents the value of the assembled workforce at the time of the acquisition with specific knowledge and technical skill. It also represents the prospective future economic benefits that are expected to accrue from enhancing the portfolio of products available to Seattle's existing customer base with those of the acquired business. Goodwill is not tax deductible.

Seattle has used acquisition accounting for the acquisitions described above, and the resulting goodwill of \$124m has been capitalized. There were no contingent consideration payments included in any of the acquisitions described above.

28. Divestitures

In the year ended 31 October 2016, Seattle completed the sale of its TippingPoint business for approximately \$300m. Cash proceeds from the sale of Seattle's TippingPoint business included a \$25m deposit in the year ended 31 October 2015 and \$254m in the year ended 31 October 2016. The remaining amount of approximately \$21m is related to inventory and tooling assets retained by Seattle in connection with a transition services agreement under which Seattle will produce products for the divested business through an initial 12 month term ending in Seattle's three months ending 30 April 2017. An \$82m gain related to the divestiture of TippingPoint was included in the combined statement of comprehensive income in the year ended 31 October 2016.

In the year ended 31 October 2015, Seattle completed sales of its LiveVault and iManage businesses for combined proceeds of \$149m. The total gain of \$7m associated with these divestitures was included in the combined statement of comprehensive income.

Net cash proceeds from the 2015 divestitures of LiveVault and iManage combined with the deposit for the 2016 sale of TippingPoint totaled \$174m.

29. Post balance sheet events

Events and transactions subsequent to the combined statement of financial position date have been evaluated through 28 July 2017, the date the combined statement of financial position was issued, for potential recognition or disclosure.

On 21 June 2017, Seattle borrowed \$2.6 billion in the form of a 7year term loan (''Term Loan'') due 21 June 2024 under its senior secured credit facility. The Term Loan bears interest at a rate per annum of LIBOR plus 2.75% (subject to a LIBOR floor of 0.00%). Proceeds from the Term Loan will primarily be used to fund a \$2.5 billion payment to HPE prior to the closing of the Transaction and to pay expenses associated with the borrowing.

SECTION C: Unaudited HPE Software Financial Information for the six months ended 30 April 2017

The Software Segment of Hewlett Packard Enterprise Company Condensed Combined Interim Historical Financial Information

The Software Segment of Hewlett Packard Enterprise Company Condensed combined statement of comprehensive income (unaudited)

			Six months
		–––––––––––––––––––––––	ended 30 April
		2017 ––––––––	2016 ––––––––
In millions USD –––––––––––––––	Note		(unaudited)
Revenue	5	1,409	1,554
Cost of sales comprising:
Cost of sales (excluding amortization of capitalized
development costs and acquired technology intangibles)		(387)	(440)
Amortization of product development costs	11	—	(6)
Amortization of acquired technology intangibles	11	(46)	(54)
Cost of Sales		(433)	(500)
Gross profit		–––––––– 976	–––––––– 1,054
Selling and distribution costs		(439)	(555)
Research and development expenses comprising:
Expenditures incurred in the year		(240)	(322)
Capitalization of product development costs	11	–	–
Research and development expenses		(240)	(322)
Administrative expenses		(343)	(81)
Operating (loss)/profit		(46)	96
Analyzed as:
Adjusted Operating Profit		322	214
Share­based compensation	8	(31)	(42)
Amortization of intangible assets	11	(70)	(86)
Exceptional items	6	(267)	10
Operating (loss)/profit		(46)	96
Finance costs		(2)	(3)
Finance income		12	—
Net finance income/(costs)		10	(3)
(Loss)/profit before tax		(36)	93
Taxation	9	(11) ––––––––	30 ––––––––
(Loss)/profit for the period		(47)	123
Other comprehensive income (loss):
Items that will not be reclassified to profit or loss before taxation
Actuarial gain/(loss) on pension liabilities schemes	19	68	(33)
Items that may be subsequently reclassified to profit or loss before taxation
Unrealized loss on available­for­sale securities		(1)	(1)
Unrealized loss on cash flow hedges		(1)	(3)
Currency translation differences		1	—
Taxation		—	—
Other comprehensive income/(expense) for the period,		––––––––	––––––––
net of taxation		67	(37)
		––––––––	––––––––
Total comprehensive income for the period		20 ––––––––	86 ––––––––

The Software Segment of Hewlett Packard Enterprise Company Condensed combined statement of financial position (unaudited)

		As at
		30 April	––––––––––––––––––––––– 31 October
		–––––––– 2017 ––––––––	–––––––– 2016 ––––––––
In millions USD ––––––––––––––––––	Note	(unaudited)
Non­current assets
Goodwill	10	8,095	8,095
Other intangible assets	11	339	411
Property, plant and equipment	12	147	138
Long­term income tax receivable		41	15
Other non­current assets		98	72
Deferred tax assets		964 ––––––––	1,047 ––––––––
		9,684	9,778
Current assets		––––––––	––––––––
Other current assets	13	96	77
Inventories		5	20
Trade and other receivables	14	508	665
Cash and cash equivalents		167	130
		–––––––– 776	–––––––– 892
Total assets		–––––––– 10,460	–––––––– 10,670
Current liabilities		––––––––	––––––––
Trade and other payables	15	499	608
Borrowings	16	16	15
Provisions	18	43	62
Current tax liabilities		153	346
Deferred income	17	750	767
		–––––––– 1,461	–––––––– 1,798
Non­current liabilities		––––––––	––––––––
Deferred income		164	157
Borrowings	16	23	21
Retirement benefit obligations	19	80	162
Long­term provisions	18	6	10
Other non­current liabilities		31	23
Deferred tax liabilities		5	4
		–––––––– 309	–––––––– 377
Total liabilities		–––––––– 1,770	–––––––– 2,175
Net assets		–––––––– 8,690	–––––––– 8,495
Capital and reserves		––––––––	––––––––
Parent company investment		8,720	8,526
Foreign currency translation deficit		(30)	(31)
Total equity		–––––––– 8,690	–––––––– 8,495

–––––––– ––––––––

The Software Segment of Hewlett Packard Enterprise Company Condensed combined statement of changes in equity (unaudited)

		Foreign
	Parent	currency
	company	translation	Total
In millions USD ––––––––––––––––––	investment ––––––––	reserve/(deficit) ––––––––	equity ––––––––
Balance as at 31 October 2015	8,738	(36)	8,702
Profit for the period	55	—	55
Other comprehensive (expense)/income
for the period	(66) ––––––––	5 ––––––––	(61) ––––––––
Total comprehensive (expense)/income	(11)	5	(6)
Transactions with owners
Net transfers to parent	(201) ––––––––	— ––––––––	(201) ––––––––
Balance as at 31 October 2016	8,526 ––––––––	(31) ––––––––	8,495 ––––––––
Loss for the period (unaudited)	(47)	—	(47)
Other comprehensive income for the period
(unaudited)	66 ––––––––	1 ––––––––	67 ––––––––
Total comprehensive income (unaudited)	19	1	20
Transactions with owners
Net transfers from parent (unaudited)	175 ––––––––	— ––––––––	175 ––––––––
Balance as at 30 April 2017 (unaudited)	8,720	(30)	8,690
	––––––––	––––––––	––––––––

The Software Segment of Hewlett Packard Enterprise Company Condensed combined statement of cash flows (unaudited)

		Six months ended 30 April
	Note	––––––––––––––––––––––– 2017	2016
In millions USD ––––––––––––––––––		–––––––– (unaudited)	––––––––
Cash generated from operations	20	178	233
Tax paid		(2) ––––––––	(2) ––––––––
Net cash generated from operating activities		176	231
Cash flows from investing activities
Payments for intangible assets	11	(2)	(2)
Purchase of property, plant and equipment	12	(14)	(14)
Proceeds from sales of property	12	—	1
Proceeds from business divestitures	24	—	249
Payment for the acquisition of business	23	—	(12)
Short­term investments		(1) ––––––––	— ––––––––
Net cash (used in)/generated from investing activities Cash flows from financing activities		(17)	222
Repayment of borrowings	16	(6)	(5)
Net transfers to parent		(116)	(428)
Net cash used in financing activities		–––––––– (122) ––––––––	–––––––– (433) ––––––––
Net increase in cash and cash equivalents		37	20
Cash and cash equivalents at beginning of period		130 ––––––––	150 ––––––––
Cash and cash equivalents at end of period		167 ––––––––	170 ––––––––

Noncash payments of \$10m were made in the six months ended 30 April 2017 (2016: \$7m) related to property, plant and equipment acquired through finance leases.

The Software Segment of Hewlett Packard Enterprise Company Notes to the condensed combined interim historical financial information (unaudited)

1. General information

The Software segment ("Seattle") of Hewlett Packard Enterprise Company ("HPE") provides big data platform analytics, application testing and delivery management, security and information governance and IT operations management solutions for businesses and other enterprises of all sizes. Seattle's offerings include licenses, support, professional services and softwareasaservice. Seattle consists of one operating segment, the development and sale of software solutions. Seattle is domiciled in the United States. HPE's registered office is 3000 Hanover Street Palo Alto, California, 94304 USA.

On 1 November 2015, HPE was spun off in a transaction in which HP Inc., formerly known as HewlettPackard Company, separated into two independent publicly traded companies. Prior to the spinoff, HPE was a wholly owned subsidiary of HewlettPackard Company and HPE's businesses were operated as part of HewlettPackard Company. Accordingly, the term "Parent" refers to HewlettPackard Company for periods prior to 1 November 2015 and to HPE from 1 November 2015 onward.

2. Basis of preparation

This condensed combined interim historical financial information of Seattle was derived from the combined and consolidated interim financial statements and accounting records of Parent as Seattle did not comprise a separate legal entity or group of entities during the periods presented. The condensed combined interim historical financial information for the six month periods ended 30 April 2016 and 2017 has been prepared specifically for the purposes of this prospectus and in accordance with the requirements of the Prospectus Directive (PD) Regulation, and in accordance with this basis of preparation, and with IAS 34, "Interim Financial Reporting" as adopted by the European Union. The condensed combined interim historical financial information should be read in conjunction with the combined historical financial information for the year ended 31 October 2016, which have been prepared in accordance with IFRS as adopted by the European Union ("IFRS") and the Standards for Investment Reporting (SIR 2000).

The condensed combined interim historical financial information has been prepared on a going concern basis under the historical cost convention. The planned merger of Seattle with a wholly owned subsidiary of Micro Focus (the "Transaction"), funding available to the Seattle business and the business's forecasts and projections have been considered, taking into account possible changes in trading performance, and including stress testing and scenario analysis. On this basis, the business will be able to operate at adequate levels of both liquidity and capital for the foreseeable future. Accordingly, the going concern basis of preparation has been adopted.

This condensed combined interim historical financial information does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006.

This basis of preparation describes how the combined historical financial information has been prepared in accordance with IFRS, except as noted below.

IFRS does not provide for the preparation of combined historical financial information, or for the specific accounting treatment set out below. Accordingly, in preparing the condensed combined interim historical financial information, certain accounting conventions commonly used for the preparation of combined historical financial information for inclusion in investment circulars as described in the Annexure to SIR 2000 (Investment Reporting Standards applicable to public reporting engagements on combined historical financial information) issued by the UK Auditing Practices Board have been applied. The application of these conventions results in the following material departure from IFRS; in all other respects, IFRS has been applied.

As explained above, the condensed combined interim historical financial information is not prepared on a consolidated basis and therefore does not comply with the requirements of IFRS 10 "Consolidated Financial Statements". However, the condensed combined interim historical financial information has been prepared on a combined basis applying the principles underlying the consolidations procedures of IFRS 10.

The following summarizes the accounting and other principles applied in preparing the condensed combined interim historical financial information:

• Seattle's business did not comprise a separate legal entity or group of entities during the three years ended 31 October 2016 and six months ended 30 April 2017 (the "Track Record Period") and, therefore it is not meaningful to present share capital or an analysis of reserves. Parent company investment represents a combination of the overall receivables and payables with Parent, funding balances with Parent and equity investment by Parent in Seattle, which cannot be separately identified or allocated throughout the Track Record Period.
• The condensed combined statement of comprehensive income of Seattle reflects allocations of general corporate expenses from Parent including, but not limited to, executive management, finance, legal, information technology, employee benefits administration, treasury, risk management, procurement and other shared services. These allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenue, expenses, headcount or other relevant measures. These allocations have been considered to be a reasonable reflection of the utilization of services by, or the benefits provided to, Seattle. These allocations may not, however, reflect the expenses Seattle would have incurred as a standalone company for the periods presented. Actual costs that may have been incurred if Seattle had been a standalone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.
• The condensed combined statement of financial position of Seattle includes Parent's assets and liabilities that are specifically identifiable or otherwise attributable to Seattle, including subsidiaries and affiliates in which Parent has a controlling financial interest or is the primary beneficiary. Parent's cash has not been assigned to Seattle for any of the periods presented because those cash balances are not directly attributable to Seattle. Seattle reflects transfers of cash to and from Parent's cash management system as a component of Parent company investment on the condensed combined statement of financial position.
• Parent's longterm debt has not been attributed to Seattle for any of the periods presented because Parent's borrowings are not the legal obligation of Seattle nor will they be transferred to Seattle pursuant to the Separation and Distribution Agreement.
• Parent maintains various benefit and sharebased compensation plans. Seattle's employees participate in those programs and a portion of the cost of those plans is included in Seattle's condensed combined historical financial statements.
• Parent has established a number of defined benefit pension schemes. A number of Seattle employees were members of the defined benefit pension schemes during the conversion period. An allocation method has been used to determine Seattle's cost of these schemes, and its relative share of Parent's gross pension assets and liabilities.
• The condensed combined interim historical financial information includes Seattle's net assets and results of operations as described above. All intercompany transactions and accounts within the combined businesses of Seattle have been eliminated.
• Intercompany transactions between Seattle and Parent, other than leases with Parent's wholly owned leasing subsidiary are considered to be effectively settled in the condensed combined interim historical financial Information at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the condensed combined statement of cash flows within financing activities and on the condensed combined statement of financial position within Parent company investment.
• Seattle's operations have historically been included in the tax returns filed by the respective Parent entities of which Seattle's businesses are a part. Income tax expense and other income tax related information contained in this condensed combined interim historical financial information is presented on a separate return basis as if Seattle filed its own tax returns. The separate return method applies the accounting guidance for income taxes to the standalone financial statements as if Seattle were a separate taxpayer and a standalone enterprise for the periods presented. Current income tax liabilities related to

entities that file jointly with Parent are assumed to be immediately settled with Parent and are relieved through the Parent company investment account and Net transfers to Parent in the condensed combined statement of cash flows.

• Current tax receivable/payable and deferred tax assets and liabilities were determined based on the analysis of Seattle's current tax position and temporary differences at each periodend and assessment of how these relate directly or indirectly to the Seattle business.

3. Accounting policies

The accounting policies adopted are consistent with those of the combined historical financial information for the year ended 31 October 2016, as described in those financial statements. The accounting policies applied are consistent with those used by Micro Focus in its interim financial statements for the six months ended 31 October 2016.

• (a) The following standards, interpretations and amendments to existing standards are not yet effective and have not been adopted early by Seattle:
• i) IFRS 15 "Revenue from contracts with customers" establishes 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. Application of the standard is mandatory for annual reporting periods starting from 1 January 2018 onward and has been endorsed by the EU. Earlier application is permitted. The standard replaces IAS 18 "Revenue" and IAS 11 "Construction contracts" and related interpretations.
• ii) IFRS 9 "Financial instruments" replaces the guidance in IAS 39 and applies to periods beginning on or after 1 January 2018, subject to EU endorsement. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model.

In the event that the Transaction completes as anticipated, the potential acquiror intends to align year ends to 31 October. As such, the aforementioned standards will be adopted in the year ending 31 October 2018.

• (b) The following standards, interpretations and amendments to existing standards are not yet effective, have not yet been endorsed by the EU and have not been adopted early by Seattle:
• i) IFRS 16 "Leases" addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on statement of financial position for lessees. The standard replaces IAS 17 "Leases," and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted subject to EU endorsement and the entity adopting IFRS 15 "Revenue from contracts with customers" at the same time.
• ii) Amendments to IAS 12 "Income taxes" on recognition of deferred tax assets for unrealized losses are effective on periods beginning on or after 1 January 2017, subject to EU endorsement. These amendments relate to the recognition of deferred tax assets for unrealized losses and clarify how to account for deferred tax assets related to debt instruments measured at fair value.
• iii) Amendments to IAS 7 "Disclosure initiative on the Statement of cash flows" are effective on periods beginning on or after 1 January 2017, subject to EU endorsement. This amendment introduces an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities and is part of the IASB's Disclosure Initiative, which continues to explore how financial statement disclosure can be improved.
• iv) Clarifications to IFRS 15 "Revenue from contracts with customers" (issued on 12 April 2016) are effective on periods beginning on or after 1 January 2018, subject to EU endorsement. These amendments address identifying performance obligations, principalversusagent considerations,

and licensing. These amendments also provide some transition relief for modified contracts and completed contracts.

• v) Amendments to IFRS 2 "Sharebased Payment" are effective on periods beginning on or after 1 January 2018, subject to EU endorsement. This amendment eliminates diversity in practice on the effects of vesting conditions on the measurement of a cashsettled share based payment transaction, the classification of a share based payment transaction with net settlement features for withholding tax obligations, and the accounting where a modification to the terms and conditions of a sharebased payment transaction changes its classification from cashsettled to equitysettled.
• vi) IFRS Interpretations Committee ("IFRIC") Interpretation 22 "Foreign Currency Transactions and Advance Consideration" which clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency, which is effective on periods beginning on or after 1 January 2018, subject to EU endorsement.
• vii) IFRS Interpretations Committee ("IFRIC") Interpretation 23 "Uncertainty over Income Tax Treatments" which clarifies application of recognition and measurement requirements in IAS 12 Income Taxes when there is uncertainty over income tax treatments, which is effective on periods beginning on or after 1 January 2019, subject to EU endorsement.

Apart from IFRS 9, IFRS 15, and IFRS 16, where it is too early to determine how significant the effect on reported results and financial position will be, it is anticipated that the future introduction of those standards, amendments and interpretations listed above will not have a material impact on the condensed combined historical financial statements.

4. Functional currency

The condensed combined interim historical financial information is presented in US dollars, which is Micro Focus' presentational currency and all values are rounded to the nearest million, except when otherwise indicated. Seattle predominantly uses the US dollar as its functional currency for all significant legal entities.

5. Segmental reporting

IFRS 8 "Operating Segments" requires the determination of the operating segment based on information which is provided internally to the Chief Operating Decision Maker ("CODM"). The operating segment has been identified based on the internal reporting information and management structures within Seattle. A segmental analysis was prepared for the carveout business to reflect the segment which the carveout business has decided to adopt. From such information, it has been determined that there is one reporting segment.

Information regarding the results of the reportable segment is included below. Details of other material items can be found in the notes to the condensed combined interim historical financial statements.

Revenue by product category is presented below:

	Six months ended 30 April
	––––––––––––––––––––––– 2017	2016
In millions USD ––––––––––––––––––	––––––––	–––––––– (unaudited)
Product category
License	314	384
Support	773	829
Professional services	174	198
Software­as­a­service	148 ––––––––	143 ––––––––
Total revenue	1,409 ––––––––	1,554 ––––––––

Supplementary information

Within Seattle's one reporting segment, Parent monitors revenues both by geographical region and by product portfolio and further disclosures in this regard are given below.

Seattle operates globally, with primary operations in North America; International, which consists of Europe, Middle East, Africa and Latin America; and the Asia Pacific regions.

Revenue by geographical region based on the location of Seattle's businesses is presented below:

	Six months
	ended 30 April
	––––––––––––––––––––––– 2017	2016
In millions USD ––––––––––––––––––	––––––––	–––––––– (unaudited)
Geographical region
North America	741	832
International	512	560
Asia Pacific	156	162
Total revenue	1,409	1,554
	–––––––– ––––––––	–––––––– ––––––––

Property, plant and equipment by geographical region based on the location of Seattle's businesses is presented below:

	As at
	30 April	31 October
	2017	–––––––– 2016
Note	(unaudited)	––––––––
	108	92
	17	22
	22	24 ––––––––
12	147	138 ––––––––
		––––––––––––––––––––––– –––––––– –––––––– –––––––– ––––––––

Intangible assets by geographical region based on the location of Seattle's businesses is presented below:

	As at
	30 April	31 October
	2017	–––––––– 2016
Note	(unaudited)	––––––––
	336	408
	3	3
	—	— ––––––––
11	339	411 ––––––––
		––––––––––––––––––––––– –––––––– –––––––– –––––––– ––––––––

6. Exceptional items

	Six months ended 30 April –––––––––––––––––––––––
	2017	2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Reported within Operating (loss)/profit
Acquisition costs	1	2
Restructuring costs	83	52
Separation costs	188	18
Gain on disposal of businesses	—	(82)
Defined benefit plan remeasurement benefit	(5) ––––––––	— ––––––––
Total	267	(10)

The acquisition costs are external costs incurred in evaluating and completing the acquisition of Trilead during the Track Record Period. The costs mostly relate to due diligence work, legal work on the acquisition agreements and professional advisors on the transactions.

–––––––– ––––––––

Charges are recorded associated with Parentapproved restructuring plans to reorganize Seattle's business, to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes and accelerate innovation. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations, and contract cancellation costs. Restructuring charges are recorded based on estimated employee terminations and site closure and consolidation plans. Severance and other employee separation costs under these actions are accrued when it is probable that benefits will be paid and the amount is reasonably estimable. The rates used in determining severance accruals are based on existing plans, historical experiences and negotiated settlements.

Separation costs in the six months ended 30 April 2017 include direct transaction costs arising from the planned merger of Seattle with a wholly owned subsidiary of Micro Focus and allocated third partyconsulting, contractor fees and other incremental costs arising from the 1 November 2015 separation of Parent, HPE, from HP Inc. in the six months ended 30 April 2016.

Gain on disposal of businesses relates to the divestiture of TippingPoint in the six months ended 30 April 2016.

7. Reconciliation of operating profit to EBITDA

		Six months ended 30 April
	Note	––––––––––––––––––––––– 2017	2016
In millions USD ––––––––––––––––––		–––––––– (unaudited)	––––––––
Operating (loss)/profit		(46)	96
Amortization of intangible assets	11	70	86
Depreciation of property, plant and equipment	12	30 ––––––––	30 ––––––––
EBITDA		54	212
Amortization of development costs	11	—	(6)
Share­based compensation charge	8	31	42
Exceptional items	6	267 ––––––––	(10) ––––––––
Adjusted EBITDA		352	238
Amortization of development costs	11	— ––––––––	6 ––––––––
Underlying Adjusted EBITDA		352	244
		––––––––	––––––––

Earnings before interest, taxes, depreciation and amortization of purchased intangibles ("EBITDA") and EBITDA before exceptional items and sharebased compensation charge ("Adjusted EBITDA") and Adjusted EBITDA before net amortization/capitalization of internal development costs ("Underlying Adjusted EBITDA") are used as key performance measures of the business.

These alternative performance measures are consistent with those used by sellside equity analysts who write research on the industry in which Seattle operates and how institutional investors consider performance.

These measures are not defined in IFRS and thus may not be comparable to similarly titled measures by other companies.

8. Sharebased compensation

The sharebased compensation charge for the six months ended 30 April 2017 was \$31m (2016: \$42m). The decrease in the current period is as a result of a decrease in awards granted and a decrease in the share price of Parent period over period.

9. Taxation

(Loss)/profit before tax was (\$36m) for the six months ended 30 April 2017 (2016: \$93m). Adjusted profit before tax was \$332m for the six months ended 30 April 2017 (2016: \$204m):

	Six months ended 30 April
	––––––––––––––––––––––– 2017	2016
In millions USD ––––––––––––––––––	–––––––– –––––––– (unaudited)
(Loss)/profit before tax	(36)	93
Amortization of intangible assets	70	86
Share­based compensation charge	31	42
Exceptional items	267 ––––––––	(10) ––––––––
Adjusted profit before tax	332 ––––––––	211 ––––––––

The tax charge for the period was \$11m for the six months ended 30 April 2017 and a benefit of \$30m for the six months ended 30 April 2016. The effective tax rate ("ETR") was 30.56% and 32.26% for the six months ended 30 April 2017 and 2016 respectively, as set out below:

	Six months ended 30 April
	––––––––––––––––––––––– 2017	2016 ––––––––
In millions USD ––––––––––––––––––	–––––––– (unaudited)
(Loss)/profit before tax	(36)	93
(Taxation)/benefit	(11) ––––––––	30 ––––––––
(Loss)/profit after tax	(47)	123
Effective tax rate	–––––––– 30.56%	–––––––– 32.26%

Seattle's effective tax rate may vary from year to year as the result of specific transactions and the impact of uncertain tax positions. The effective tax rate for the six months ended 30 April 2017 of 30.56% differs from the previous year of 32.26% primarily due to changes in taxation related to uncertain tax positions. Tax charges/(benefits) related to uncertain tax positions during the six months ended 30 April 2017 were \$48m, compared to (\$4m) during the six months ended 30 April 2016.

Seattle's cash taxes paid in the period were \$2m, compared to \$2m in the six months ended 30 April 2016.

10. Goodwill

		As at –––––––––––––––––––––––
		30 April	31 October
		–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	Note	–––––––– (unaudited)	––––––––
Cost and net book amount
At period beginning		8,095	8,319
Acquisitions	23	—	10
Divestitures	24	— ––––––––	(234) ––––––––
At period end		8,095 ––––––––	8,095 ––––––––

11. Other intangible assets

Other intangible assets were composed of the following as at 30 April 2017:

			Purchased intangibles
			Customer contracts, customer lists and	–––––––––––––––––––––––––––––––– Developed and core	Trade name
	Purchased	Development	distribution	technology	and
	software ––––––––	costs ––––––––	agreements ––––––––	and patents ––––––––	trademarks ––––––––	Total ––––––––
In millions USD ––––––––––––––––––				(unaudited)
Cost
At 1 November 2016	15	97	1,221	3,153	127	4,613
Acquisitions	—	—	—	—	—	—
Additions	—	—	—	—	—	—
Disposals	— ––––––––	— ––––––––	— ––––––––	(4) ––––––––	— ––––––––	(4) ––––––––
At 30 April 2017	15	97	1,221	3,149	127	4,609
Accumulated amortization	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
At 1 November 2016	(14)	(97)	(1,098)	(2,872)	(121)	(4,202)
Charge for the period	—	—	(21)	(46)	(3)	(70)
Disposals	— ––––––––	— ––––––––	— ––––––––	2 ––––––––	— ––––––––	2 ––––––––
At 30 April 2017	(14) ––––––––	(97) ––––––––	(1,119) ––––––––	(2,916) ––––––––	(124) ––––––––	(4,270) ––––––––
Net book amount at
30 April 2017	1	—	102	233	3	339
Net book amount at	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
31 October 2016	1 ––––––––	— ––––––––	123 ––––––––	281 ––––––––	6 ––––––––	411 ––––––––

Other intangible assets were composed of the following as at 31 October 2016:

			Purchased intangibles
	Purchased software ––––––––	Development costs ––––––––	Customer contracts, customer lists and distribution agreements ––––––––	–––––––––––––––––––––––––––––––– Developed and core technology and patents ––––––––	Trade name and trademarks ––––––––	Total ––––––––
In millions USD ––––––––––––––––––
Cost
At 1 November 2015	15	97	1,337	3,220	169	4,838
Acquisitions	—	—	1	3	—	4
Additions	2	—	—	—	—	2
Disposals	(2) ––––––––	— ––––––––	(117) ––––––––	(70) ––––––––	(42) ––––––––	(231) ––––––––
At 31 October 2016	15	97	1,221	3,153	127	4,613
Accumulated amortization	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
At 1 November 2015	(14)	(91)	(1,139)	(2,835)	(155)	(4,234)
Charge for the period	(2)	(6)	(41)	(105)	(7)	(161)
Disposals	2 ––––––––	— ––––––––	82 ––––––––	68 ––––––––	41 ––––––––	193 ––––––––
At 31 October 2016	(14) ––––––––	(97) ––––––––	(1,098) ––––––––	(2,872) ––––––––	(121) ––––––––	(4,202) ––––––––
Net book amount at 31 October 2016	1	—	123	281	6	411
Net book amount at	––––––––	––––––––	––––––––	––––––––	––––––––	––––––––
31 October 2015	1 ––––––––	6 ––––––––	198 ––––––––	385 ––––––––	14 ––––––––	604 ––––––––

Intangible assets, with the exception of purchased software and internally generated development costs, relate to identifiable assets purchased as part of Seattle's business combinations. Intangible assets are amortized on a straightline basis over their expected useful economic life.

Amortization expense ("Charge for the period") in the above tables is included in the following costs in the condensed combined statement of comprehensive income:

	Six months ended 30 April
	––––––––––––––––––––––– 2017	2016
In millions USD ––––––––––––––––––	––––––––	–––––––– (unaudited)
Cost of sales	46	60
Selling and distribution costs	24 ––––––––	26 ––––––––
Total	70 ––––––––	86 ––––––––

12. Property, plant and equipment

Property, plant and equipment were composed of the following as at 30 April 2017:

		Leasehold	Equipment and
	Buildings	improvements	other	Total
In millions USD ––––––––––––––––––	––––––––	––––––––	–––––––– (unaudited)	––––––––
Cost
At 1 November 2016	12	59	348	419
Additions	2	2	42	46
Disposals	(1) ––––––––	(4) ––––––––	(68) ––––––––	(73) ––––––––
At 30 April 2017	13 ––––––––	57 ––––––––	322 ––––––––	392 ––––––––
Accumulated depreciation
At 1 November 2016	(6)	(28)	(247)	(281)
Charge for the period	(1)	(5)	(24)	(30)
Disposals	1 ––––––––	3 ––––––––	62 ––––––––	66 ––––––––
At 30 April 2017	(6) ––––––––	(30) ––––––––	(209) ––––––––	(245) ––––––––
Net book amount at 30 April 2017	7	27	113	147
Net book amount at 31 October 2016	–––––––– 6 ––––––––	–––––––– 31 ––––––––	–––––––– 101 ––––––––	–––––––– 138 ––––––––

Property, plant and equipment were composed of the following as at 31 October 2016:

		Leasehold	Equipment and
	Buildings	improvements	other	Total
In millions USD ––––––––––––––––––	––––––––	––––––––	––––––––	––––––––
Cost
At 1 November 2015	13	43	321	377
Additions	—	17	51	68
Disposals	(1)	(1)	(21)	(23)
Divestitures	— ––––––––	— ––––––––	(3) ––––––––	(3) ––––––––
At 31 October 2016	12 ––––––––	59 ––––––––	348 ––––––––	419 ––––––––
Accumulated depreciation
At 1 November 2015	(5)	(18)	(221)	(244)
Charge for the period	(2)	(11)	(47)	(60)
Disposals	1	1	21	23
Divestitures	—	—	—	—
At 31 October 2016	–––––––– (6)	–––––––– (28)	–––––––– (247)	–––––––– (281)
Net book amount at 31 October 2016	–––––––– 6	–––––––– 31	–––––––– 101	–––––––– 138
Net book amount at 31 October 2015	–––––––– 8 ––––––––	–––––––– 25 ––––––––	–––––––– 100 ––––––––	–––––––– 133 ––––––––

13. Other current assets

		As at
	30 April	––––––––––––––––––––––– 31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Value­added taxes receivable	5	22
Prepaid expenses	36	27
Other current assets	55 ––––––––	28 ––––––––
Total	96	77
	––––––––	––––––––

Other current assets consist of shortterm prepaid income taxes, deposits and deferred contract costs.

14. Trade and other receivables

	As at –––––––––––––––––––––––
	30 April	31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Accounts receivable, billed	462	631
Unbilled receivables	50	41
Less: Provision for impairment of trade receivables	(4) ––––––––	(7) ––––––––
Trade receivables, net	508	665
	––––––––	––––––––

As at 30 April 2017 and 31 October 2016, the carrying amount approximates the fair value of the instrument due to the shortterm nature of the instrument.

15. Trade and other payables – current

		As at
	30 April	––––––––––––––––––––––– 31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Trade payables	75	65
Accrued taxes – other	204	237
Accruals	220 ––––––––	306 ––––––––
Total	499	608
	––––––––	––––––––

The carrying amount approximates the fair value at each period end. Accruals include accrued vacation, sales commissions, marketing expenses, contract labor, vendor related royalties, and other employee related costs.

16. Borrowings

	As at –––––––––––––––––––––––
	30 April	31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Finance lease obligations	39 ––––––––	36 ––––––––
	39 ––––––––	36 ––––––––
Reported within
Current liabilities	16	15
Non­current liabilities	23 ––––––––	21 ––––––––
	39 ––––––––	36 ––––––––
Cash and cash equivalents	(167)	(130)
Less borrowings	39 ––––––––	36 ––––––––
Net debt	(128)	(94)

17. Deferred income – current

		As at
	30 April	––––––––––––––––––––––– 31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Deferred income	750	767
	––––––––	––––––––

–––––––– ––––––––

Revenue not recognized in the condensed combined statement of comprehensive income under Seattle's accounting policy for revenue recognition is classified as deferred income in the condensed combined statement of financial position to be recognized in future periods. Deferred income also includes amounts invoiced in advance for customer support contracts.

18. Provisions

		As at –––––––––––––––––––––––
	30 April	31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Restructuring	48	55
Legal	1	1
Performance bonus	— ––––––––	16 ––––––––
Total	49 ––––––––	72 ––––––––
Current	43	62
Non­current	6 ––––––––	10 ––––––––
Total	49	72
	––––––––	––––––––

			Performance
	Restructuring	Legal	bonus	Other	Total
In millions USD ––––––––––––––––––	––––––––	––––––––	–––––––– (unaudited)	––––––––	––––––––
At 1 November 2016 Additional provision	55	1	16	—	72
in the period	83	—	10	4	97
Utilization of provision	(74)	—	(26)	(4)	(104)
Release of provision	(16) ––––––––	— ––––––––	— ––––––––	— ––––––––	(16) ––––––––
At 30 April 2017	48 ––––––––	1 ––––––––	— ––––––––	— ––––––––	49 ––––––––
Current	42	1	—	—	43
Non­current	6	—	—	—	6
Total	–––––––– 48	–––––––– 1	–––––––– —	–––––––– —	–––––––– 49
	––––––––	––––––––	––––––––	––––––––	––––––––

Restructuring costs represent charges associated with Parentapproved restructuring plans to reorganize Seattle's business, to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes and accelerate innovation. Restructuring costs, which include termination benefits and facility closure costs, are recorded at estimated fair value. Termination benefits are composed of severance payments for terminated employees and facility closure costs represent costs to terminate leases in conjunction with the consolidation of facilities.

Restructuring charges of \$83m during the six months ended 30 April 2017 (2016: \$52m) have been recorded by Seattle based on restructuring activities impacting Seattle's employees and infrastructure as well as an allocation of restructuring charges related to Parent's corporate and shared functional employees and infrastructure.

On 14 September 2015, Parent's Board of Directors approved a restructuring plan (the "2015 Plan") which will be implemented through the year ending 31 October 2018. As part of the 2015 Plan, it is expected up to approximately 2,900 employees will exit Seattle by the end of 2018. The changes to the workforce will vary by country, based on local legal requirements and consultations with employee works councils and other employee representatives, as appropriate. It is estimated that Seattle will incur aggregate pretax charges through the year ending 31 October 2018 of approximately \$196m in connection with the 2015 Plan, of which approximately \$172m relates to workforce reductions and approximately \$24m primarily relates to real estate consolidation.

On 23 May 2012, Parent adopted a multiyear restructuring plan (the "2012 Plan") designed to simplify business processes, accelerate innovation and deliver better results for customers, employees and shareholders. As at 30 April 2017, Seattle had eliminated approximately 2,500 positions in connection with the 2012 Plan, with a portion of those employees exiting Seattle as part of voluntary extended early retirement ("EER") programs in the US and in certain other countries. Seattle recognized \$193m in total aggregate charges in connection with the 2012 Plan, all related to workforce reductions, including the EER programs. Of the total restructuring balance outstanding as at 30 April 2017, \$6m is included in the line item "longterm provisions" which represents the estimated costs for the remaining lease obligations. The remainder of the restructuring balance is included within the line item "provisions" in Seattle's condensed combined statement of financial position.

Legal provisions include management's best estimate of the likely outflow of economic benefits associated with ongoing legal matters.

Performance bonus represents discretionary bonus programs to reward employees based on business results, job role, and individual performance.

19. Pension commitments

Parent operates multiple defined benefit plans in multiple countries. Seattle employees participate in 55 of these defined benefit plans in 23 countries under broadly similar regulatory frameworks. Seattle operates under the regulatory requirements in all relevant countries, with the significant amount of their plans under the regulatory frameworks of Germany, the Netherlands, Japan, the UK, the US, and Switzerland. Some of the plans are final salary pension plans, which provide benefits to members in the form of a guaranteed level of pension payable for life in the case of retirement, disability, or death. The level of benefit provided depends on the members' length of service and their salary in the final years leading up to retirement. Other plans include termination or retirement indemnity plans or other types of statutory plans that provide a onetime benefit at termination. Responsibility for governance of the plans, including investment decisions and contribution schedules, lies with Parent.

Parent has established a number of defined benefit pension schemes that Seattle employees participate in. A number of Seattle employees were members of the defined benefit pension schemes during the conversion period. The amounts shown below relate to Seattle's share of obligations arising from membership by its employees of the defined benefit schemes operated by Parent.

	As at –––––––––––––––––––––––
	30 April	31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Present value of defined benefit obligations	(693)	(798)
Fair value of plan assets	644 ––––––––	667 ––––––––
Net defined benefit obligation	(49)	(131)
Impact of minimum funding requirement/asset ceiling	—	—
Other retirement benefit obligations1	(31) ––––––––	(31) ––––––––
Liability in the statement of financial position	(80)	(162)
	––––––––	––––––––

1 Related to net obligations for other employee benefit liabilities, retiree health and welfare liabilities, and accrued medical expenses liabilities.

An allocation method has been used to determine Seattle's share of HPE's gross pension assets and liabilities. Changes in the allocation percentage between the beginning and end of a financial year are recorded in "Exchange and other adjustments".

A summary of the movement in the net defined benefit liability is shown in the first table below. The subsequent tables provide a more detailed analysis of the movements in the present value of the obligations and the fair value of assets.

	As at –––––––––––––––––––––––
	30 April	31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Change in net defined benefit liability
Net benefit	(131)	(62)
Exchange and other adjustments1	—	(2)
Service cost excluding administrative expenses	(5)	(14)
Interest on defined benefit obligations, net of plan assets	(1)	(2)
Employer contributions	11	14
Acquisitions/(divestitures)/transfers	20	7
Actuarial gain/(loss)	50	(71)
Currency exchange rate gain	7	—
Administration expenses	— ––––––––	(1) ––––––––
Net defined benefit liability at end of period	(49)	(131)
	––––––––	––––––––

	As at –––––––––––––––––––––––
	30 April	31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Change in present value of defined benefit obligation
Present value of defined benefit obligation at beginning of period	(798)	(713)
Exchange and other adjustments1	—	3
Settlements	—	—
Service cost	(5)	(14)
Interest cost on defined benefit obligation	(7)	(18)
Acquisitions/(divestitures)/transfers	65	2
Plan participant contributions	(1)	(3)
Actuarial gain/(loss)	45	(123)
Due to changes in demographic assumptions	—	—
Due to changes in financial assumptions	37	(133)
Due to experience	8	10
Benefits paid	12	18
Currency exchange rate (loss)/gain	(4) ––––––––	50 ––––––––
Present value of defined benefit obligation at end of period	(693)	(798)
	––––––––	–––––––– As at
	30 April	––––––––––––––––––––––– 31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Change in plan assets
Fair value of plan assets at beginning of period	667	651
Exchange and other adjustments1	—	(5)
Settlements	—	—
Actuarial gain	5	52
Employer and participant contributions	12	17
Acquisitions/(divestitures)/transfers	(45)	5
Benefits paid	(12)	(18)
Administrative expenses	—	(1)
Return on plan assets (net of interest cost on plan assets)	6	16
Currency exchange rate gain/(loss)	11 ––––––––	(50) ––––––––
Fair value of plan assets at end of period	644 ––––––––	667 ––––––––

1 An allocation method has been used to determine Seattle's share of Parent's gross pension assets and liabilities. Changes in the allocation percentage between the beginning and end of the financial year is recorded in "Exchange and other adjustments".

The major categories of plan assets are as follows:

	As at –––––––––––––––––––––––
	30 April	31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Equity instruments	267	293
Debt instruments	220	234
Real estate	29	35
Cash and cash equivalents	16	4
Other	112 ––––––––	101 ––––––––
Total	644 ––––––––	667 ––––––––

Main assumptions (rates per annum)

The main assumptions for the valuations of the plans under IAS 19R are set out below.

		As at –––––––––––––––––––––––
	30 April	31 October
	–––––––– 2017	–––––––– 2016
In millions USD ––––––––––––––––––	–––––––– (unaudited)	––––––––
Weighted­average assumptions
Discount rate	2.12%	1.72%
Rate of salary increase	2.27%	2.25%
Post­retirement benefit discount rate	4.02%	3.66%

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is as follows:

		Change in
	Change in assumption ––––––––––	defined benefit obligation ––––––––––
Discount rate for scheme liabilities	0.5%	(9.21)%
Price inflation	0.25%	3.86%
Salary growth rate	0.5%	0.49%
Life expectancy	One Year	3.87%

The above sensitivity analyses are 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 recognized within the condensed combined statement of financial position.

In the case of the defined benefit plans, the investment positions are managed within an assetliability matching ("ALM") framework that has been developed to achieve long term investments that are in line with the obligations under the pension schemes. A change in future obligations would impact the timing and nature of future cash flows based on the matching framework. As noted in the plan assets outlined above, as at 30 April 2017 Seattle had assets valued at \$644m, and as at 31 October 2016 at \$667m. Within this framework, the objective is to match assets to the pension obligations by investing in investments that match the benefit payments as they fall due and in the appropriate currency. The performance of the assets is actively monitored to ensure they are matching the expected cash flows arising from the pension obligations. The processes used to manage risk from previous periods have not been changed. The assets are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A significant portion of the assets consists of bonds, with additional investments in property and equity.

Parent sponsors a qualified retirement plan in which Seattle employees participate (the "401(k) plan"). The 401(k) plan is for all eligible US employees under the provisions of the Internal Revenue Code of 1986, as amended ("IRC"). Participants may defer a portion of their annual compensation on a pretax basis subject to tax limitations. The 401(k) plan allows Seattle the flexibility to adjust the match percentage. The quarterly employer matching contributions in the 401(k) plan were 100% of an employee's contributions, up to a maximum of 4% of eligible compensation. Effective 1 January 2017, the annual employer matching contributions in the updated 401(k) plan are 50% of an employee's contributions, up to a maximum of 6% of eligible compensation.

Seattle has other retirement plans in certain foreign countries in which it employs personnel. Each plan is consistent with local laws and business practices. During the six months ended 30 April 2017, Seattle made matching contributions on its 401(k) plan and other defined contribution retirement plans and expensed \$17m (2016: \$40m).

Parent sponsored retiree health and welfare benefit plans of which the most significant plans were in the United States. The net liability relating to these plans amounted to \$4m as at 30 April 2017 and \$4m as at 31 October 2016.

20. Cash generated from operations

		Six months ended 30 April –––––––––––––––––––––––
		2017	2016
In millions USD ––––––––––––––––––	Note	–––––––– (unaudited)	––––––––
(Loss)/profit after tax		(47)	123
Adjustments for
Net interest and other		(10)	3
Taxation	9	11 ––––––––	(30) ––––––––
Operating (loss)/profit		(46)	96
Depreciation and amortization		100	116
Share­based compensation	8	31	42
Provision for doubtful accounts		(1)	3
Restructuring costs		83	53
Other, net		(1)	(81)
Changes in working capital
Accounts receivable	14	157	20
Accounts payable	15	(109)	(5)
Restructuring costs	6	(69)	(27)
Other assets and liabilities		33 ––––––––	16 ––––––––
Cash generated from operations		178 ––––––––	233 ––––––––
Interest paid		—	—
Tax paid		(2) ––––––––	(2) ––––––––
Net cash generated from operations		176	231
		––––––––	––––––––

21. Contingent liabilities

Restructuring

On 14 September 2015, Parent's Board of Directors approved a restructuring plan (the "2015 Plan") which will be implemented through the year ending 31 October 2018. As part of the 2015 Plan, it is expected up to approximately 2,900 employees will exit Seattle by the end of 2018. The changes to the workforce will vary by country, based on local legal requirements and consultations with employee works councils and other employee representatives, as appropriate. It is estimated that Seattle will incur aggregate pretax charges through the year ending 31 October 2018 of approximately \$196m in connection with the 2015 Plan, of which approximately \$172m relates to workforce reductions and approximately \$24m primarily relates to real estate consolidation.

On 23 May 2012, Parent adopted a multiyear restructuring plan (the "2012 Plan") designed to simplify business processes, accelerate innovation and deliver better results for customers, employees and shareholders. As at 30 April 2017, Seattle had eliminated approximately 2,500 positions in connection with the 2012 Plan, with a portion of those employees exiting Seattle as part of voluntary extended early retirement ("EER") programs in the US and in certain other countries. Seattle recognized \$193m in total aggregate charges in connection with the 2012 Plan, all related to workforce reductions, including the EER programs.

Legal proceedings

From time to time, Seattle is a defendant in claims or lawsuits involving matters which are routine to the nature of our business such as claims involving former employees, or claims for infringement of patents. The ultimate resolution of all such matters will not have a material adverse effect on its results of operations, cash flows, or financial position.

Seattle is involved in various lawsuits, claims, investigations and proceedings including those consisting of IP, commercial, employment, employee benefits and environmental matters, which arise in the ordinary course of business. The Separation and Distribution Agreement between Seattle and Parent includes provisions that allocate liability and financial responsibility for litigation involving the parties, as well as provide for cross indemnification of the parties against liabilities to one party arising out of liabilities allocated to the other party. In addition, as part of the Separation and Distribution Agreement, HPE and Seattle have agreed to cooperate with each other in managing litigation that relates to both parties' businesses. The Separation and Distribution Agreement also contains provisions that allocate liability and financial responsibility for such litigation relating to both parties' businesses. Seattle records a liability when it believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Significant judgment is required to determine both the probability of having incurred a liability and the estimated amount of the liability. Seattle reviews these matters at least quarterly and adjusts these liabilities to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other updated information and events pertaining to a particular matter. Litigation is inherently unpredictable. However, Seattle believes it has valid defenses with respect to legal matters pending against it. The potential amount of each of the below actions is not quantifiable.

Forsyth, et al. vs. HP Inc. and Hewlett Packard Enterprise Company: This purported class and collective action was filed on 18 August 2016 and an amended (and operative) complaint was filed on 19 December 2016 in the United States District Court for the Northern District of California, against HP Inc. and Hewlett Packard Enterprise Company alleging defendants violated the Federal Age Discrimination in Employment Act ("ADEA"), the California Fair Employment and Housing Act, California public policy and the California Business and Professions Code by terminating older workers and replacing them with younger workers. Plaintiffs seek to certify a nationwide collective action under the ADEA comprised of all individuals aged 40 and older at the time their employment was terminated by an HP entity pursuant to a work force reduction ("WFR") plan on or after 9 December 2014 for individuals terminated in deferral states and on or after 8 April 2015 in nondeferral states. Plaintiffs also seek to certify a Rule 23 class under California law comprised of all persons 40 years of age or older employed by defendants in the state of California and terminated pursuant to a WFR plan on or after 18 August 2012.

Delaney and Haragos v. HewlettPackard Company and HP Enterprise Services, LLC: This purported California class action was filed on 22 April 2016 and a second (and operative) amended complaint was filed on 2 September 2016 in California Superior Court (San Diego County) against HewlettPackard Company, HP Inc., and Hewlett Packard Enterprise Services, LLC, alleging defendants violated the California Fair Employment and Housing Act and the California Unfair Competition Code by disproportionately laying off employees who were 40 or older and replacing them with younger workers. Plaintiff Haragos seeks to represent a Federal Rule of Civil Procedure Rule 23 statelaw class comprised of all California employees who were terminated by defendants pursuant to a WFR plan between 22 April 2012 and the present. Plaintiff Delaney's claims were voluntarily dismissed effective 28 November 2016. On 27 January 2017, the court granted defendants' motion to compel plaintiff Haragos to arbitration. Pursuant to the terms of Mr. Haragos' WFR release, the parties engaged in mediation on 1 March 2017 and reached a confidential settlement of Haragos' individual claims. On 28 March 2017, the court dismissed Haragos' class claims without prejudice.

Wall v. HewlettPackard Enterprise Company and HP Inc.: This certified California class action and Private Attorney General Act action was filed against HewlettPackard Company on 17 January 2012 and the fifth (and operative) amended complaint was filed against HP Inc. and Hewlett Packard Enterprise Company on 28 June 2016. The complaint alleges that the defendants paid earned incentive compensation late and failed to timely pay final wages. On 9 August 2016, the court ordered the class certified without prejudice to a future motion to amend or modify the class certification order or to decertify. Trial is set to begin on 22 January 2018.

Realtime Data LLC: Realtime Data LLC ("Realtime") filed three patent infringement actions in the Eastern District of Texas against HPE. The first was filed on 8 May 2015 against HewlettPackard Company, HP Enterprise Services and Oracle ("Oracle matter") and accuses HP's Proliant servers running Oracle's Solaris, HPE's StoreOnce, and HPE's Vertica. Oracle has agreed to indemnify HPE for all claims against HPE related to Oracle's Solaris, including databases running Solaris with the ZFS file system on HP ProLiant servers. Following a 23 March 2017 mediation, Oracle and Realtime reached a settlement. It is unclear whether their agreement has been finalized. No stipulated judgment or joint motion to dismiss has been filed to date, although the parties notified the Court that an agreement has been reached in principle. The second lawsuit was filed on 8 May 2015 against Hewlett-Packard Company, HP Enterprise Services, and SAP America Inc., Sybase Inc. ("SAP matter") and accuses HP's Converged Systems running SAP Hana. SAP agreed to indemnify HPE and HPES for the SAP related products. On 16 June 2016, SAP reached a settlement agreement with Realtime, which led to the dismissal of all claims relating to HPE products indemnified by SAP. The third lawsuit was filed on 26 February 2016 (amended on 15 August 2016) against Hewlett Packard Enterprise Company, HP Enterprise Services, and Silver Peak Systems, Inc. ("Silver Peak"), and accuses HPE's StoreOnce, 3Par StoreServe, Connected MX, Connected Backup, and LiveVault. On 17 November 2016, the Magistrate Judge granted HPE and Realtime's joint motion to sever and consolidate the Oracle and Silver Peak matters. There are seven patents asserted in the remaining lawsuits. The patents generally relate to data compression techniques used to conserve storage space. HPE and the joint defense group have filed several inter partes review petitions with the Patent Trial and Appeal Board on all seven asserted patents. On 3 February 2017, the Magistrate Judge granted HPE's Motion to Stay Pending Inter Partes Review.

Indemnification

In the ordinary course of business, Seattle enters into contractual arrangements under which Seattle provides indemnification to certain vendors and customers against claims of intellectual property infringement made by third parties arising from the use by such vendors and customers of Seattle's software products and services and certain other matters. Some indemnifications may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.

22. Related party transactions

Transactions between Seattle and its subsidiaries have been eliminated. The remuneration of key management personnel of Seattle including executives is set out below.

	Six months ended 30 April
	––––––––––––––––––––––– 2017	2016
In millions USD ––––––––––––––––––	–––––––– –––––––– (unaudited)
Key management compensation
Salary	1	1
Share­based payments	3	4
Employee benefits	— ––––––––	1 ––––––––
Total	4 ––––––––	6 ––––––––

23. Business combinations

In February 2016, Seattle acquired the entire share capital of Trilead GmbH, a data protection software company, for a purchase price of \$12m. In connection with this acquisition, Seattle recorded \$10m of goodwill (which is not deductible for tax purposes), \$4m of amortizable intangible assets and assumed \$2m of net liabilities.

Pro forma results of operations for this acquisition, including revenue from the beginning of the fiscal year during which the acquisition occurred, has not been presented because it is not material to Seattle's condensed combined results of operations.

All identifiable assets and liabilities were assigned a portion of the cost of acquisition based on their respective estimated fair values. The determination of fair value is a critical and complex calculation that involves significant assumptions and estimates. These assumptions and estimates were based on management's best judgments. No residual value has been assumed for any of the acquired intangible assets.

The value of the goodwill represents the value of the assembled workforce at the time of the acquisition with specific knowledge and technical skill. It also represents the prospective future economic benefits that are expected to accrue from enhancing the portfolio of products available to Seattle's existing customer base with those of the acquired business. Goodwill is not tax deductible.

Seattle has used acquisition accounting for the acquisitions described above, and the resulting goodwill of \$10m has been capitalized. There were no contingent consideration payments included in any of the acquisitions described above.

24. Divestitures

In the six months ended 30 April 2016, Seattle completed the sale of its TippingPoint business for approximately \$300m. TippingPoint is a provider of nextgeneration intrusion prevention systems and related network security solutions. Cash proceeds from the sale of Seattle's TippingPoint business included a \$25m deposit in the year ended 31 October 2015 and \$254m, offset by \$5m of transaction costs, received in the year ended 31 October 2016. The remaining amount of approximately \$21m is related to inventory and tooling assets retained by Seattle in connection with a transition services agreement under which Seattle will produce products for the divested business through an initial 12 month term ending in Seattle's three months ending 31 January 2017. An \$82m gain related to the divestiture of TippingPoint was included in the condensed combined statement of comprehensive income in the six months ended 30 April 2016.

25. Post balance sheet events

Events and transactions subsequent to the condensed combined statement of financial position date have been evaluated through 28 July 2017, the date the condensed combined statement of financial position was issued, for potential recognition or disclosure.

On 21 June 2017, Seattle borrowed \$2.6 billion in the form of a 7year term loan ("Term Loan") due 21 June 2024 under its senior secured credit facility. The Term Loan bears interest at a rate per annum of LIBOR plus 2.75% (subject to a LIBOR floor of 0.00%). Proceeds from the Term Loan will primarily be used to fund a \$2.5 billion payment to HPE prior to the closing of the Transaction and to pay expenses associated with the borrowing.

PART VIII

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

SECTION A: ACCOUNTANT'S REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The Directors Micro Focus International plc The Lawn 2230 Old Bath Road Berkshire RG14 1QN

J.P. Morgan Limited 25 Bank Street Canary Wharf London E14 5JP

28 July 2017

Dear Sirs

Micro Focus International plc (the "Company")

We report on the unaudited pro forma financial information (the "Pro Forma Financial Information") set out in section B of Part VIII of the Company's Prospectus dated 28 July 2017 (the "Prospectus") which has been prepared on the basis described in the notes to the Pro Forma Financial Information, for illustrative purposes only, to provide information about how the proposed merger with HPE Software might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the financial statements for the period ended 30 April 2017. This report is required by item 7 of Annex II to the PD Regulation and item 20.2 of Annex I to the PD Regulation and is given for the purpose of complying with that PD Regulation and for no other purpose.

Responsibilities

It is the responsibility of the directors of the Company to prepare the Pro Forma Financial Information in accordance with Annex II of the PD Regulation.

It is our responsibility to form an opinion, as required by item 7 of Annex II to the PD Regulation as to the proper compilation of the Pro Forma Financial Information and to report our 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

PricewaterhouseCoopers LLP, 1 Embankment Place, London, WC2N 6RH T: +44 (0) 2075 835 000, F: +44 (0) 2072 124 652, www.pwc.co.uk

PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Conduct Authority for designated investment business.

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.

Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules 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 the PD Regulation, consenting to its inclusion in the Prospectus.

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.

Our work has not been carried out in accordance with auditing standards or other standards and practices generally accepted in the United States of America 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:

• (a) the Pro Forma Financial Information has been properly compiled on the basis stated; and
• (b) such basis is consistent with the accounting policies of the Company.

Declaration

For the purposes of Prospectus Rule 5.5.3 R(2)(f), we are responsible for this report as part of the Prospectus and we 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 to the PD Regulation.

Yours faithfully

PricewaterhouseCoopers LLP Chartered Accountants

PricewaterhouseCoopers LLP, 1 Embankment Place, London, WC2N 6RH T: +44 (0) 2075 835 000, F: +44 (0) 2072 124 652, www.pwc.co.uk

PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Conduct Authority for designated investment business.

SECTION B: UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma income statement (the "Unaudited Pro Forma Income Statement") and the unaudited pro forma statement of net assets (the "Unaudited Pro Forma Statement of Net Assets") of the Enlarged Group set out in this Section B of Part VIII (Unaudited Pro Forma Financial Information) of this Prospectus have been prepared on the basis set out in the notes below to illustrate the effect of the Transaction and the associated financing on the Micro Focus Group's net assets as if the Transaction had taken place as at 30 April 2017, and on the Micro Focus Group's income statement for the financial year ended 30 April 2017 as if the Transaction had taken place on 1 May 2016.

The Unaudited Pro Forma Financial Information has been prepared in accordance with Annex II of the Prospectus Directive Regulations and in a manner consistent with the accounting policies adopted by the Micro Focus Group.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only and, by its nature, addresses a hypothetical situation and does not, therefore, represent the Enlarged Group's actual financial position or results.

The Unaudited Pro Forma Financial Information does not constitute financial statements within the meaning of Section 434 of the Companies Act. Shareholders should read this Prospectus in its entirety and not rely solely on the financial information contained in this Part VIII (Unaudited Pro Forma Financial Information). PwC's report on the Unaudited Pro Forma Financial Information is set out in Section A of this Part VIII of the Prospectus

The Unaudited Pro Forma Financial Information does not purport to represent what the Enlarged Group's financial position or results actually would have been if the Transaction had been completed on the dates indicated nor does it purport to represent the financial condition of the Company, HPE Software or the Enlarged Group at any future date.

1. UNAUDITED PRO FORMA INCOME STATEMENT

			Adjustments
		HPE	–––––––––––––––––––––––––––––––
	Micro Focus	Software
	for the	for the
	year ended	year ended
	30 April	31 October	Financing	Merger	Pro forma
	2017		2016 adjustments adjustments		Enlarged
(\$ millions)	(Note 1) ––––––––	––––––––	(Note 2) (Notes 3 & 5) ––––––––	(Note 4) ––––––––	Group ––––––––
Revenue	1,381	3,198	–	–	4,579
Cost of Sales	(237) ––––––––	(987) ––––––––	– ––––––––	– ––––––––	(1,224) ––––––––
Gross Profit	1,144 ––––––––	2,211 ––––––––	– ––––––––	– ––––––––	3,355 ––––––––
Selling and distribution costs	(467)	(1,110)	–	–	(1,577)
Research and development expenses	(180)	(608)	–	–	(788)
Administrative expenses	(203) ––––––––	(284) ––––––––	– ––––––––	(61) ––––––––	(548) ––––––––
Operating profit	294 ––––––––	209 ––––––––	– ––––––––	(61) ––––––––	442 ––––––––
Share of results of associates	(1)	–	–	–	(1)
Finance costs	(97)	(73)	(148)	–	(318)
Finance income	1	1	–	–	2
Net finance costs	(96) ––––––––	(72) ––––––––	(148) ––––––––	– ––––––––	(316) ––––––––
Profit before tax	197 ––––––––	137 ––––––––	(148) ––––––––	(61) ––––––––	125 ––––––––
Taxation	(39) ––––––––	(82) ––––––––	30 ––––––––	– ––––––––	(91) ––––––––
Profit for the period	158	55	(118)	(61)	34
	––––––––	––––––––	––––––––	––––––––	––––––––

1. The Micro Focus Group's financial information for the 12 months ended 30 April 2017 has been extracted, without material adjustment, from the Micro Focus International plc Annual Report and Accounts 2017.

2. HPE Software's financial information for the 12 months ended 31 October 2016 has been extracted, without material adjustment, from the financial information in Part VII (Historical Financial Information of HPE Software) of this Prospectus.

3. 1. Financing adjustments reflect an interest cost of \$109 million which would have been incurred on the expected drawdown on the Seattle Term Loan Facility, the Micro Focus Term Loan Facilities and the Revolving Credit Facility as described in Note 4 to the Unaudited Pro Forma Statement of Net Assets less the interest cost incurred on outstanding indebtedness under the Existing Facilities Agreement that has been refinanced in connection with the Merger. For purposes of the Unaudited Pro Forma Income Statement, the foregoing indebtedness is treated as if the full amount had been drawn as at 1 May 2016 and therefore represents a charge for a 12 month period. In addition the finance costs adjustment includes \$39 million of debt issuance costs over the term of the new financing.
4. 1. The Company and HPE Software expect, as of 30 April 2017 and 31 October 2016, respectively, to incur remaining transaction and related costs in connection with the Merger of \$15 million and \$46 million, respectively. An adjustment to administrative expenses in the Unaudited Pro Forma Income Statement of \$61 million has been included to represent the estimated total remaining transaction and related costs expected to be incurred in connection with the Merger.
5. 1. A tax credit will be available on the financerelated expenses described in Note 3 of the Unaudited Pro Forma Income Statement as these are assumed to be tax deductible for purposes of the Unaudited Pro Forma Income Statement. The tax impact of the adjustments was estimated based on the average UK corporate tax rate of the Micro Focus Group for the 12 months ended 30 April 2017 (which was 20 per cent.). No tax deduction has been assumed for the transaction and related costs described in Note 4 of the Unaudited Pro Forma Income Statement.
6. 1. The nature of the adjustments described in Notes 3 and 5 of the Unaudited Pro Forma Income Statement means that adjustments of a similar nature will have a continuing impact on the Enlarged Group following Completion.
7. 1. In preparing the Unaudited Pro Forma Income Statement, no account has been taken of the trading or transactions of the Micro Focus Group since 30 April 2017 and HPE Software since 31 October 2016.
8. 1. As described in Note 3 to the Unaudited Pro Forma Statement of Net Assets, on Completion a full fair value exercise will be completed which may result in separate intangible assets being identified. The Unaudited Pro Forma Income Statement does not reflect the impact of the amortisation of any additional intangible assets that may be recognised.

2. UNAUDITED PRO FORMA STATEMENT OF NET ASSETS

			Adjustments
		HPE	–––––––––––––––––––––––––––––––
	Micro Focus	Software
	as at	as at
	30 April	30 April	Merger	Financing	Pro forma
	2017		2017 adjustments	Adjustment	Enlarged
(\$ millions)	(Note 1)		(Note 2) (Notes 3 & 5)	(Note 4)	Group
ASSETS	––––––––	––––––––	––––––––	––––––––	––––––––
Non­current assets
Goodwill	2,829	8,095	308	–	11,232
Other intangible assets	1,089	339	–	–	1,428
Property, plant and equipment	41	147	44	–	232
Investments in associates	12	–	–	–	12
Long­term pension assets	22	–	–	–	22
Other non­current assets	3	139	–	–	142
Deferred tax assets	208	964	–	–	1,172
	–––––––– 4,204	–––––––– 9,684	–––––––– 352	–––––––– –	–––––––– 14,240
	––––––––	––––––––	––––––––	––––––––	––––––––
Current assets
Inventories	–	5	–	–	5
Trade and other receivables	289	604	–	–	893
Current tax receivables	2	–	–	–	2
Cash and cash equivalents	151	167	285	–	603
Assets classified as held for sale	– ––––––––	– ––––––––	– ––––––––	– ––––––––	– ––––––––
	442 ––––––––	776 ––––––––	285 ––––––––	– ––––––––	1,503 ––––––––
Total assets	4,646	10,460	637	–	15,743
LIABILITIES	––––––––	––––––––	––––––––	––––––––	––––––––
Current liabilities:
Trade and other payables	170	499	6	–	675
Borrowings	71	16	–	–	87
Provisions	20	43	–	–	63
Current tax liabilities	43	153	–	–	196
Deferred income	641	750	–	–	1,391
Total current liabilities	–––––––– 945	–––––––– 1,461	–––––––– 6	–––––––– –	–––––––– 2,412
Non­current liabilities:	––––––––	––––––––	––––––––	––––––––	––––––––
Deferred income	224	164	–	–	388
Borrowings	1,490	23	–	3,278	4,791
Retirement benefit obligations	31	80	–	–	111
Long­term provisions	12	6	–	–	18
Other non­current liabilities	4	31	–	–	35
Deferred tax liabilities	327	5	–	–	332
	–––––––– 2,088	–––––––– 309	–––––––– –	–––––––– 3,278	–––––––– 5,675
Total liabilities	–––––––– 3,033	–––––––– 1,770	–––––––– 6	–––––––– 3,278	–––––––– 8,087
	––––––––	––––––––	––––––––	––––––––	––––––––
Net assets	1,613 ––––––––	8,690 ––––––––	631 ––––––––	(3,278) ––––––––	7,656 ––––––––

1. The Micro Focus Group's financial information as at 30 April 2017 has been extracted, without material adjustment from the Micro Focus International plc Annual Report and Accounts 2017.

2. HPE Software's financial information as at 30 April 2017 has been extracted, without material adjustment, from Section C of Part VII (Historical Financial information of HPE Software) of this Prospectus.

3. 1. The adjustments arising from the Merger are set out below:
4. i. The Company will issue the Consideration Shares (the "Equity Consideration") after the Return of Value and Share Capital Consolidation have been completed. Additionally, prior to the Merger, Seattle will incur indebtedness pursuant to the Seattle Term Loan Facility and make a cash payment of US\$2.5 billion (subject to certain adjustments in limited circumstances set forth in the Separation and Distribution Agreement) to HPE.
   • a. Prior to Completion, the Company will issue one B Share for each Ordinary Share held by Existing Shareholders and redeem the B Shares for their nominal value. The total cost of the Return of Value to the Company will be \$500 million (inclusive of any currency hedging costs or proceeds). It is assumed for purposes of the Unaudited Pro Forma Financial Information that there will be 221.18 million Ordinary Shares outstanding (on a fully diluted basis) immediately prior to the Merger (assuming completion of the Return of Value and Share Capital Consolidation).
   • b. Equity Consideration The Equity Consideration is determined for purposes of the Unaudited Pro Forma Financial Information by multiplying the aggregate number of ADSs representing Consideration Shares expected to be issued to HPE Shareholders in the Merger by the closing price of an Ordinary Share of £22.47 as at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), translated to USD using the mid¬market exchange rate on that date of \$1.3022: £1 to arrive at a price of an Ordinary Share of \$29.26.
   • c. The Merger Agreement provides that HPE Shareholders will receive ADSs representing 50.1 per cent. of the fully diluted share capital of the Company immediately following the Merger and, therefore, for purposes of the Unaudited Pro Forma Financial Information, it is assumed that HPE Shareholders will receive 222.06 million ADSs representing the Ordinary Shares to be issued by the Company. Based on an assumed price of an Ordinary Share of \$29.26, this results in an aggregate Equity Consideration valued at \$6,498 million.

The Equity Consideration is estimated using the issued share capital of the Company as at 25 July 2017 (the latest practicable date prior to the publication of this Prospectus), with the number of Ordinary Shares being rounded to the nearest million. The actual Equity Consideration will vary depending on the actual number of Ordinary Shares outstanding (on a fully diluted basis) immediately prior to the Merger, the actual price of an Ordinary Share and applicable exchange rates at the date of Completion.

ii. The estimated goodwill arising from the Merger is \$308 million. This has been calculated as the excess of the total purchase price (including debt of the Seattle Group assumed by the Enlarged Group at Completion) of \$8,998 million over the book value of the net assets acquired.

\$ millions
8,998
8,690 ––––––––
308 ––––––––

The Merger will be accounted for using the acquisition method of accounting and with the Company as the accounting acquiror. The excess of the purchase price over the book value of the HPE Software net assets acquired has been reflected in intangible assets as goodwill. A full fair value exercise to allocate the purchase price will be completed following Completion, therefore no account has been taken in the Unaudited Pro Forma Financial Information of any fair value adjustments that may arise in connection with the Merger or for the value of any customerrelated or other intangibles to be recognised at the date of Completion.

• iii. As of 30 April 2017, the Company and HPE Software expected to incur remaining transaction and related costs in connection with the Merger of \$15 million and \$45 million, respectively. An adjustment to cash in the Unaudited Pro Forma Statement of Net Assets of \$60 million has been included to represent the estimated remaining transaction and related costs expected to be incurred in connection with the Merger.
• 1. Total new loans and borrowings of the Micro Focus Group and the Seattle Group in connection with the Merger, comprising the \$2,600 million Seattle Term Loan Facility and \$885 million new tranches of the Micro Focus Term Loan Facilities, amount to \$3,278 million (net of debt issuance costs of \$207 million).

HPE Software will use \$2,500 million of the \$2,600 million Seattle Term Loan Facility to make the \$2.5 billion payment in cash to HPE in connection with the Contribution and the Separation. The remaining amount is expected to be used to fund debt issuance costs and for general corporate purposes.

The Micro Focus Group has amended the Existing Facilities Agreement to refinance \$1.5 billion, and has drawn incremental borrowings against those facilities of \$885 million. The Micro Focus Group has entered into the Revolving Credit Facility of \$500 million, which it does not intend to draw down on.

• 1. At or prior to Completion, pursuant to the terms of the Separation and Distribution Agreement and the Merger Agreement, HPE will engage in the following transactions with Seattle:
• i. Transfer certain IT assets not presented in the historical financial statements of HPE Software included elsewhere in this Prospectus (see Part VII (Historical Financial Information of HPE Software)) in connection with the Separation of HPE Software from HPE. Accordingly, \$44 million of PP&E have been added to the Unaudited Pro Forma Statement of Net Assets.
• ii. Transfer certain liabilities that are associated with former employees of HPE Software to the Seattle Group. Accordingly, \$6 million of liabilities have been included in the Unaudited Pro Forma Statement of Net Assets.
• iii. Effect cash infusions, if and to the extent necessary, so that at Completion the Seattle Group will have on hand the minimum cash amounts specified in the Separation and Distribution Agreement. Accordingly, a cash adjustment of \$67 million has been included in the Unaudited Pro Forma Statement of Net Assets.

The estimated impact to cash is summarised as follows:

	\$ millions
Return of Value payment (Note 3.i.a)	(500)
Estimated transaction and financing costs (Note 3.iii)	(60)
Borrowings, net (Note 4)	3,278
Cash payment to HPE (Note 4)	(2,500)
Seattle cash adjustment (Note 5.iii)	67 ––––––––
	285 ––––––––

1. In preparing the Unaudited Pro Forma Statement of Net Assets, no account has been taken of the trading or transactions of the Micro Focus Group or HPE Software since 30 April 2017.

PART IX

CAPITALISATION AND INDEBTEDNESS

1. THE MICRO FOCUS GROUP

The tables below set out the Micro Focus Group's capitalisation and indebtedness. The capitalisation and indebtedness information set out below has been extracted without material adjustment from the Micro Focus Group's unaudited accounting records as at 30 April 2017.

	As at 30 April 2017 ––––––––––––––––
Indebtedness	(US\$ in millions)
Guaranteed	–
Secured Unguaranteed/unsecured	(71) –
Total Current debt	––––––––– (71)
Guaranteed	––––––––– –
Secured	(1,490)
Unguaranteed/unsecured	– –––––––––
Total Non­Current debt (excluding current portion of long­term debt)	(1,490) –––––––––
Total Indebtedness	(1,561)
	––––––––– As at 30 April 2017
Capitalisation/Shareholder's equity:	–––––––––––––––– (US\$ in millions)
(a) Share capital	40
(b) Legal Reserve	–
(c) Other Reserves	478 –––––––––
Total Capitalisation	518
Total Capitalisation and Indebtedness	––––––––– 1,043
	––––––––– As at 30 April 2017
Net cash (indebtedness):	–––––––––––––––– (US\$ in millions)
Cash and cash equivalents	151
Liquidity	––––––––– 151
Total current debt (See table above)	(71) –––––––––
Net current cash position	80
Total Non­Current debt (See table above)	(1,490) –––––––––
Net cash position	(1,410) –––––––––

2. HPE SOFTWARE

The tables below set out HPE Software's capitalisation, indebtedness and net cash position. The capitalisation, indebtedness and net cash information set out below has been extracted without material adjustment from HPE Software's unaudited financial information for the six months ended 30 April 2017 as set out in Part C of Section VII (Historical Financial Information of HPE Software).

	As at 30 April 2017 ––––––––––––––––
Indebtedness	(US\$ in millions)
Total Current debt
Guaranteed	–
Secured(1)	16
Unguaranteed/unsecured	– –––––––––
	16 –––––––––
Total Non­Current debt (excluding current portion of long­term debt)
Guaranteed	–
Secured(1) Unguaranteed/unsecured	23 –
	–––––––––
Total Non­Current debt (excluding current portion of long­term debt)	23 –––––––––
Total Indebtedness	39
(1) Secured debt entirely consists of finance lease obligations	–––––––––
	As at 30 April 2017
Capitalisation/Shareholder's equity:	–––––––––––––––– (US\$ in millions)
(a) Invested capital	8,720
(b) Legal Reserve	–
(c) Other Reserves	(30) –––––––––
Total Capitalisation	8,690 –––––––––
Total Capitalisation and Indebtedness	8,729
	––––––––– As at 30 April 2017
Net cash (indebtedness):	–––––––––––––––– (US\$ in millions)
Cash and cash equivalents	167
Liquidity	––––––––– 167
Total current debt (See table above)	(16)
Net current cash position	––––––––– 151
Total Non­Current debt (See table above)	(23)
Net cash position	––––––––– 128
	–––––––––

PART X

DIRECTORS, PROPOSED DIRECTORS, CORPORATE GOVERNANCE AND EMPLOYEES

1. INTRODUCTION

The Micro Focus Group is (and the Enlarged Group will be) controlled by the Board, which is responsible for the Company's system of corporate governance. The Board currently comprises nine Directors, five of whom are NonExecutive Directors. The NonExecutive Directors possess a wide range of skills and experience relevant to the development of the Micro Focus Group and the Enlarged Group, which complement those of the Executive Directors.

Following Completion, Kevin Loosemore and Mike Phillips will continue as Executive Chairman and Chief Financial Officer, respectively, of the Enlarged Group. As announced on 17 January 2017, Chris Hsu, who is currently Executive Vice President and General Manager of HPE Software as well as Chief Operating Officer at HPE, will become Chief Executive Officer of the Enlarged Group with effect from Completion and Stephen Murdoch (the current Chief Executive Officer of Micro Focus) will become the Chief Operating Officer with effect from Completion.

With effect from Completion, HPE will have the right to nominate (i) one new nonexecutive director who is a serving executive of HPE to the Board and (ii) onehalf of the Board's independent nonexecutive directors, in each case, subject to approval of the current Nomination Committee. As announced on 25 April 2017, the current Nomination Committee has selected and approved the appointments of John Schultz (as the HPE Nominated Director who is a serving executive of HPE and is not independent) with effect from Completion, and Silke Scheiber and Darren Roos as independent NonExecutive Directors with effect from 15 May 2017. In accordance with the Merger Agreement, a further independent HPE Nominated Director will be appointed following Completion.

Until the Company's second AGM following Completion, any HPE Nominated Director who ceases to be a director of the Company may be replaced by HPE, subject to approval of the Nomination Committee and (except in the case of the HPE Nominated Director who is a serving executive of HPE) such replacement being able to be classified as independent under the UK Corporate Governance Code.

As a result of the proposed appointments to the Board, immediately following Completion it is expected the Board will comprise 10 directors, five of whom will be independent. Once an additional independent HPE Nominated Director is appointed following Completion, this will increase the total number of directors to 11 and the number of independent NonExecutive Directors to six.

2. DIRECTORS AND THE PROPOSED DIRECTORS

2.1 Board of the Company (at the date of this Prospectus)

Name	Position
Kevin Loosemore	(Executive Chairman)
Mike Phillips	(Chief Financial Officer)
Stephen Murdoch	(Chief Executive Officer, Micro Focus, to Completion)
Nils Brauckmann	(Chief Executive Officer, SUSE)
Karen Slatford	(Senior Independent Non­executive Director)
Richard Atkins	(Independent Non­executive Director)
Amanda Brown	(Independent Non­executive Director)
Darren Roos	(Independent Non­executive Director)
Silke Scheiber	(Independent Non­executive Director)

2.2 Profiles of the Executive Directors

Kevin Loosemore (Executive Chairman) Age: 58

Kevin is the Company's Executive Chairman and a member of the Board. He was appointed nonexecutive Chairman of the Company in 2005 and Executive Chairman in April 2011.

Kevin was previously nonexecutive Chairman of Morse plc, a nonexecutive director of Nationwide Building Society and a nonexecutive director of the Big Food Group plc. His most recent executive roles were as Chief Operating Officer of Cable & Wireless plc, President of Motorola Europe, Middle East and Africa and before that, he was Chief Executive of IBM UK Limited.

He has a degree in politics and economics from Oxford University.

Mike Phillips (Chief Financial Officer) Age: 54

Mike is the Company's Chief Financial Officer and a member of the Board, positions he has held since joining the Company on 7 September 2010.

Mike was previously Chief Executive Officer at Morse plc, following his initial role as Group Finance Director. Mike left Morse plc in July 2010 following the turnaround and successful corporate sale to 2e2 in June 2010. From 1998 to 2007, Mike was Group Finance Director at Microgen plc and played a lead role in its transformation to an international software and services business with sustainable and profitable growth.

Earlier roles include seven years of corporate finance work at Smith & Williamson, as well as two years at PricewaterhouseCoopers where he led the UK technology team, reporting to the global Head of Corporate Finance for the Technology Sector. Mike began his career at Peat Marwick Mitchell & Co (now KPMG). Mike was a nonexecutive director of Parity Group plc from November 2011 to September 2013.

Stephen Murdoch (Chief Executive Officer, Micro Focus division, to become Chief Operating Officer from Completion) Age: 50

Stephen is currently Chief Executive Officer, Micro Focus and a member of the Board, positions he has held since 1 February 2016. Before his appointment as Chief Executive Officer, Micro Focus, Stephen served as General Manager of Products and Marketing Strategy from November 2012 to April 2014 and then as Chief Operating Officer from April 2014 to February 2016.

Stephen has a 25year track record of success in the IT industry, spanning hardware, software, and services. He has held senior executive positions in general management, sales, and strategy with IBM and Dell. Most recently, he was the General Manager of Europe, Middle East & Africa for Dell's Public Sector and Large Commercial Enterprise business unit until August 2012.

Nils Brauckmann (Chief Executive Officer, SUSE division) Age: 53

Nils is the Chief Executive Officer, SUSE and a member of the Board. Nils has led SUSE since May 2011 and was appointed to the Board on 1 February 2016.

Prior to this, Nils gained more than 20 years of management and leadership experience in the IT industry, serving in crossfunctional and international management positions in companies such as WRQ (acquired by the Attachmate Group in 2004), Novell, and Siemens Nixdorf, where he started his technology career.

2.3 Profiles of the NonExecutive Directors

Karen Slatford (Senior Independent Nonexecutive Director) Age: 60

Karen is Chair of Draper Esprit plc, an AIM listed venture capital firm, The Foundry, a leading special effects software company, and Citation Ltd, which provides HR and Health and Safety support to small and mediumsized enterprises. Karen is also nonexecutive director of Intelliflo Ltd and Accesso Technology Group plc. Karen began her career at ICL before spending 20 years at HewlettPackard Company, where in 2000 she became Vice President and General Manager Worldwide Sales & Marketing for the Business Customer Organization, responsible for sales of all HewlettPackard products, services and software to business customers globally. Karen holds a BA Honours degree in European Studies from Bath University and a Diploma in Marketing.

Richard Atkins (Independent Nonexecutive Director) Age: 65

Richard is Chairman of Acora, an IT Services outsourcing company; Entanet International, a wholesale voice and data communications company; and Miles 33, a publishing software company. He is also a nonexecutive director at Aon, the UK's largest insurance broker.

He has spent the majority of his career within the IT industry. Previously, he was a Director at Data Sciences where he led its leveraged buyout from Thorn EMI in 1991 and then managed its successful sale to IBM in 1996. His final role at IBM was as General Manager for IBM Global Services Northern Europe where he was also a member of the IBM worldwide Senior Leadership Team. Since leaving IBM in 2005 he has acted as a nonexecutive director for several companies including Compel, Message Labs, Global Crossing, Morse, and Easynet. Richard qualified as a Chartered Accountant with EY.

Amanda Brown (Independent Nonexecutive Director) Age: 48

Amanda is currently Group Human Resources Director at Hiscox Ltd., a FTSE 250 business and specialist insurer with offices in 14 countries.

Amanda has more than 20 years of international HR experience in a variety of industries, including consumer goods, leisure, hospitality, and financial services. Prior to Hiscox, Amanda held a number of leadership roles with Mars, PepsiCo, and Whitbread plc. She has expertise in HR, remuneration strategy, and managing organisations through periods of significant change.

Silke Scheiber (Independent NonExecutive Director) Age: 44

Silke was an investment professional at Kohlberg Kravis Roberts & Co. Partners LLP, London, UK, from July 1999 and became a member in 2012. She retired from KKR in 2015. Prior to KKR, Silke worked at Goldman, Sachs & Company oHG, Frankfurt, Germany, from 1996 to 1999. Silke, who is Austrian, graduated from the University of St. Gallen, Switzerland. Silke is a director of CNH Industrial N.V., Amsterdam, the Netherlands and Jungbunzlauer Holding AG, Basel, Switzerland.

Darren Roos (Independent Nonexecutive Director) Age: 42

Darren is a technology leader who has spent nearly 20 years building businesses worldwide. Darren, who is South African, spent nine years with Software AG and served on its board. Over the past three years with SAP, he has been responsible for the SAP Northern European business. Darren is currently the President of SAP's S/4HANA ERP Cloud business, where he guides SAP's customers on their journey to innovation through digital transformation.

2.4 Senior Management of the Micro Focus Group

Paul Rodgers (Group Business Operations and Integration Director) Age: 53

Paul became the Group Business Operations and Integration Director in February 2016 and was previously HR Director for the Company since April 2008. Prior to joining the Micro Focus Group, Paul was the Managing Director of a successful executive HR consultancy business for four years, with clients such as Dell, Unilever, Yahoo, and Sainsbury's. Paul has further large corporate experience, including having previously been the Group HR Director for Cable & Wireless and spending 17 years in IBM covering various senior roles, such as HR Director for UK & Ireland; Sales Operations Director for the European PC Division and Project Management Executive within the Global Services Division. He holds a BSc (Hons) in Computer Science from the University of Ulster and a Masters of Business Administration.

Jane Smithard (Group General Counsel and Company Secretary) Age: 63

Jane is Company Secretary of the Company and was named General Counsel of the Company in May 2006. Jane has worked with the Company for over 15 years providing a wide range of legal services. Jane qualified as a Barrister, having been called to the Bar of England and Wales in 1982. She also has a BA (Hons) in Law, a postgraduate diploma in European Law from Kings College of London and is a Fellow of the Chartered Institute of Arbitrators.

Martin Taylor (Group Chief Information Officer) Age: 63

Martin has over 35 years' experience in leading global companies through IT driven change in a wide variety of business sectors and geographies. He started his career with British Airways, then worked 10 years with Mars, followed by a series of Global CIO positions with Courtaulds plc, EMI Music, Cable & Wireless, LCH Clearnet, and G4S. He has also worked in senior advisory roles for the UK Government's Home Office, Tata Consulting Services and Barclaycard. He has a degree in English Literature from Cambridge University.

John Delk (Head of Product Development) Age: 56

John has been responsible for Product Development at the Company since February 2015. He joined the Company as part of the acquisition of the Attachmate Group where he was Vice President of Product Management and Marketing at NetIQ. Prior to that he spent seven years in various leadership positions at Novell in Product Management, Sales and Services. John has over 32 years of experience in the IT industry working for various companies, including roles as a Managing Partner at BearingPoint/KPMG Consulting and a Vice President at EDS. He holds a Masters Degree in Computer Science from Georgia Institute of Technology and a Bachelors Degree from Furman University with a double major in Mathematics and Computer Science.

Rob Ebrey (Head of Tax and Treasury) Age: 43

Rob has been responsible for the Tax and Treasury functions of the Company since June 2009 and was also responsible for the internal audit and risk function until December 2016. Rob joined the group in June 2006 as Group Financial Controller, having previously been Group Financial Controller of Fibernet Group plc for five years. Rob trained as a Chartered Accountant in the audit practice of Chantrey Vellacott DFK, before subsequently joining the audit practice of Arthur Andersen, focussing on the technology sector. He holds a BA (Honors) in Business Economics from Durham University.

Suzanne Chase (Director of Internal Audit and Risk) Age: 54

Suzanne is Director of Internal Audit and Risk. She is a solicitor with over 30 years expertise in M&A, governance, compliance, risk and assurance. Previous positions held have been Group General Counsel at Wickes plc, Group General Counsel and Company Secretary at The Big Food Group plc, General Counsel and Company Secretary at Morse plc, General Counsel and Company Secretary at Parity Group plc and Compliance Partner at King Sturge LLP (now part of JLL). She has a B.A. Hons degree in Combined Arts from University of Leicester, attended The College of Law, worked in private practice at D J Freeman and is a member of The Law Society of England and Wales.

2.5 Profiles of the Proposed Directors and HPE Software's Key Management

Chris Hsu (Chief Executive Officer of the Enlarged Group from Completion) Age: 47

Chris will be Chief Executive Officer of the Enlarged Group following Completion. Chris has served as Executive Vice President and Chief Operating Officer for HPE since November 2015 and General Manager, HPE Software since September 2016. Prior to that, he served as Senior Vice President, Organisational Performance and Hewlett Packard Enterprise Separation Leader at HewlettPackard Company from May 2014 to November 2015. Before joining HewlettPackard Company, Chris served as Managing Director at Kohlberg Kravis Roberts (KKR), an investment firm, from December 2013 to May 2014 and as Director of KKR Capstone, a consulting firm, from November 2008 to December 2013.

John Schultz (Nonindependent Nonexecutive Director from Completion) Age: 53

John Schultz has served as Executive President, General Counsel and Secretary of HPE since November 2015. Prior to that, John performed a similar role at HewlettPackard Company from April 2012 to November 2015. Previously, John served as Deputy General Counsel for Litigation, Investigations and Global Functions at HewlettPackard from September 2008 to April 2012. From March 2005 to September 2008, John was a partner in the litigation practice of Morgan, Lewis & Bockius LLP, a law firm where, among other clients, he supported HewlettPackard Company as external counsel on a variety of litigation and regulatory matters.

Sue Barsamian (Senior Vice President of Worldwide Sales and Field Operations) Age: 57

Sue Barsamian joined HPE in 2006 and is currently the Chief Sales and Marketing Officer at HPE Software and previously served as SVP & General Manager of Enterprise Security Products. Sue served as Vice President of Go to Market at Mercury which was acquired by HPE in 2006. Sue graduated with a Bachelor of Science degree with honours in electrical engineering from Kansas State University and completed her postgraduate studies at the Swiss Federal Institute of Technology.

3. CORPORATE GOVERNANCE

The Company supports the principles of corporate governance contained in the UK Corporate Governance Code and through its commitment to the highest standards of corporate governance, the Board endorses and supports the essential elements of the UK Corporate Governance Code. Apart from a limited exception as explained below, the Company complies with the UK Corporate Governance Code and, subject to such exception, the Directors intend to continue to comply with UK Corporate Governance Code following Completion.

3.1 Board of the Company

In accordance with the UK Corporate Governance Code, all Directors are subject to election by the Shareholders at the first AGM of the Company after their appointment, and, thereafter, are subject to election on an annual basis. The Board has agreed procedures for Directors to follow if they believe they require independent professional advice in the furtherance of their duties and these procedures allow the Directors to take such advice at the Company's expense. In addition, all the Directors have direct access to the advice and services of the Company Secretary. The Company Secretary is accountable to the Board through the Chairman on governance matters. It is the responsibility of the Company Secretary to ensure that the Board procedures are followed and all rules and regulations are complied with. Any new Director receives a comprehensive, formal and tailored induction into the Company's operations. The Directors can request that appropriate training is available as required. New Directors' inductions include briefings on the Company's business, strategy, constitution and decision making process, the roles and responsibilities of a director and the legislative framework for action by the Board. New Directors also meet with senior product and other managers.

As part of its leadership and control of the Company, the Board has agreed a list of items that are specifically reserved for its consideration. These include business strategy, financing arrangements, material acquisitions and divestments, approval of the annual budget, major capital expenditure projects, risk management, treasury policies and establishing and monitoring internal controls. At each meeting, the Board reviews progress of the Micro Focus Group (and following Completion, will review progress of the Enlarged Group) towards its objectives and monitors financial progress against budget.

The Board schedules meetings on a regular basis approximately every two months, with additional meetings when circumstances and business dictate. In the financial year ended 30 April 2017, there were 14 formally scheduled Board meetings.

All Directors receive an agenda and board papers in advance of meetings to help them make an effective contribution at the meetings. The Board makes use of appropriate technology as a means of updating and informing all its members. Board papers are circulated electronically to a tablet device, allowing Directors to access documentation more easily and securely. The Executive Directors ensure regular informal contact is maintained with NonExecutive Directors.

The Board undertakes a formal and rigorous process for the evaluation of its own performance and that of its committees and individual Directors (including the Executive Chairman), as required by the UK Corporate Governance Code.

3.2 Board Committees

In accordance with best practice, the Company has established audit, nomination and remuneration committees, with written terms of reference for each that deal with their respective authorities and duties. The full terms of reference of all the committees are available from the Company Secretary or can be viewed on the Company's website at http://investors.microfocus.com/corporategovernance.

3.3 Audit Committee

The Audit Committee is comprised entirely of independent NonExecutive Directors. Prior to Completion, it is chaired by Richard Atkins, who the Board considers has recent and relevant financial experience. The other members, prior to Completion, are Karen Slatford and Amanda Brown. Following Completion, the Audit Committee will be chaired by Richard Atkins and the other members shall be Amanda Brown, Silke Scheiber and the additional HPE Nominated Director, who will be an independent NonExecutive Director, to be appointed following Completion.

The Audit Committee is expected to meet not less than four times in each financial year and met eight times during the financial year to 30 April 2017.

The Audit Committee is responsible for, amongst other things:

• reviewing the annual accounts and interim reports prior to submission to the full Board for approval;
• overseeing the relationship with the Company's auditor, ensuring the independence and objectivity of the auditor (taking into account UK professional and regulatory requirements and the relationship with the audit firm as a whole) and considering audit fees and fees for other nonaudit work;
• reporting to the Board on its proceedings, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken;
• monitoring the integrity of the financial statements of the Company and ensuring that the interests of shareholders are properly protected in relation to financial reporting and internal control;
• reviewing the effectiveness of the Company's internal controls and risk management systems;
• reviewing the Company's procedures for preventing and detecting fraud, the Company's systems and controls for the prevention of bribery, the adequacy and effectiveness of the Company's anti money laundering systems and the Company's arrangements for its employees to raise concerns about possible wrongdoing in financial reporting or other matters; and
• monitoring and reviewing the need for, and the effectiveness of, the Company's internal audit function in the context of the Company's overall risk management system.

3.4 Nomination Committee

The Nomination Committee is comprised of entirely independent NonExecutive Directors. Prior to Completion, it is chaired by Karen Slatford and the other members are Richard Atkins and Amanda Brown. Following Completion, it is intended that the Nomination Committee will be chaired by Karen Slatford and the other members shall be Richard Atkins, Darren Roos and the additional HPE Nominated Director, who will be an independent NonExecutive Director, to be appointed following Completion.

The Nomination Committee is expected to meet not less than twice in each financial year and met 12 times during the financial year ended 30 April 2017.

The Nomination Committee is responsible for, amongst other things:

• reviewing the structure, size and composition (including the skills, knowledge and experience) required of the Board and making recommendations to the Board with regard to any changes;
• identifying and nominating, for the approval of the Board, candidates to fill Board vacancies as and when they arise;
• giving full consideration to succession planning for Directors and other senior executives;
• keeping under review the leadership needs of the Company, both executive and nonexecutive, with a view to ensuring the continued ability of the organisation to compete effectively in the market place; and
• reviewing annually the time required from NonExecutive Directors and evaluating whether they are spending enough time to fulfil their duties.

3.5 Remuneration Committee

The Remuneration Committee is comprised entirely of independent NonExecutive Directors. Prior to Completion, it is chaired by Amanda Brown and the other members are Richard Atkins and Karen Slatford. Following Completion, the Remuneration Committee will be chaired by Amanda Brown and the other members shall be Karen Slatford, Darren Roos and Silke Scheiber.

The Remuneration Committee is expected to meet not less than four times in each financial year and met eight times during the financial year ended 30 April 2017.

The Remuneration Committee is responsible for, amongst other things:

• determining and agreeing with the Board the framework or broad policy for the remuneration of the Company's chief executive officer, Chairman, the Executive Directors, the Company Secretary and other members of the executive management team;
• determining the total individual remuneration package of each Executive Director and other senior executives including bonuses, incentive payments and share options or other share awards;
• determining the policy for, and scope of, pension arrangements for each Executive Director and other senior executives;
• approving the design of, and determining targets for any performancerelated pay schemes operated by the Company, and approving the total annual payments made under such schemes;
• reviewing the design of all share incentive plans for approval by the Board and Shareholders;
• overseeing any major changes in employee benefit structures throughout the Micro Focus Group (and, following Completion, the Enlarged Group); and
• reviewing the ongoing appropriateness and relevance of the Remuneration Policy.

The Company's policy on the remuneration of Executive Directors and their direct reports is established by the Remuneration Committee and approved by the Board. The individual remuneration packages of each Executive Director is determined by the Remuneration Committee in accordance with the Remuneration Policy.

The remuneration of NonExecutive Directors is a matter for the Chairman and the Executive Directors.

No Director or employee participates in discussions relating to the setting of their own remuneration.

The objective of the Company's remuneration policies is that all employees, including Executive Directors, should receive appropriate remuneration for their performance, responsibility, skills and experience. Remuneration packages are designed to enable the Micro Focus Group (and, following Completion, the Enlarged Group) to attract and retain key employees by ensuring they are remunerated appropriately and competitively and that they are motivated to achieve the highest level of performance for the Company in line with the best interests of Shareholders.

It is intended that an appropriate and significant proportion of remuneration of the Executive Directors will continue to be performancerelated.

3.6 Compliance with the UK Corporate Governance Code

The Company complies with the provisions of the UK Corporate Governance Code, except that, at the date of this Prospectus, Kevin Loosemore exercises the role of Executive Chairman alongside Stephen Murdoch who is Chief Executive Officer of Micro Focus and Nils Brauckmann who is Chief Executive Officer of SUSE. Stephen Murdoch will become Chief Operating Officer with effect from Completion and Nils Brauckmann will continue as Chief Executive Officer of SUSE.

Kevin Loosemore (formerly NonExecutive Chairman) was appointed to the role of Executive Chairman on 14 April 2011. It was previously announced that Kevin would continue as Executive Chairman until at least April 2018 with responsibility for the delivery of strategy; the benefits to Shareholders of the Transaction; mergers and acquisitions activities and investor relations. Should the Merger complete and the appointment of Chris Hsu as the new Chief Executive Officer become effective, Kevin will remain as Executive Chairman until the delivery of the first full financial year results following Completion (anticipated to be January 2019) to ensure continuity and an orderly transition of all executive responsibilities.

The Nomination Committee and the Board consider that the combined role of an Executive Chairman is in the interests of Shareholders in order to utilise the proven leadership qualities and significant experience of Kevin Loosemore to ensure the ongoing commercial success of the Company. Furthermore, Kevin Loosemore has been with the Company since its flotation in 2005 and can therefore provide stability and continuity through his detailed understanding of the Micro Focus Group's operations and the markets in which it operates.

Following Kevin Loosemore's appointment as Executive Chairman, the terms of reference were agreed by the Board and can be viewed on http://investors.microfocus.com/corporategovernance.

Kevin Loosemore leads the Board and the Company in its relationships with all stakeholders and customers. Alongside the Chief Executive Officer, he is responsible for all aspects of executive management including business strategy and its successful achievement. He is also responsible for chairing Board and general meetings, facilitating the effective contribution of NonExecutive Directors, ensuring effective communication with Shareholders and upholding a high standard of integrity and probity.

Karen Slatford chairs the Nomination Committee and is therefore responsible for succession planning, governance issues, including the annual review of board effectiveness, and acting as an intermediary, if necessary, between NonExecutive Directors and the Executive Chairman and between the Company and Shareholders.

Following Completion, the Board will comprise 10 directors, five of whom will be independent. Once a further independent HPE Nominated Director is appointed following Completion, this will increase the total number of directors to 11 and the number of independent NonExecutive Directors to six.

4. INTERESTS OF THE DIRECTORS, PROPOSED DIRECTORS AND SENIOR MANAGEMENT

4.1 The interests in the share capital of the Company of the Directors, the Proposed Directors and Senior Management (all of which, unless otherwise stated, are beneficial or are interests of a person connected with a Director, a Proposed Director or a member of Senior Management) as at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus):

	Number of Ordinary Shares in
Director/Proposed	which the Director/Senior Manager	Percentage of existing
Director/Senior Manager	has a direct or indirect interest	issued share capital(8)
Kevin Loosemore(1)	750,418	0.327
Mike Phillips(2)	147,158	0.064
Stephen Murdoch	–	–
Nils Brauckmann	–	–
Karen Slatford	–	–
Richard Atkins(3)	6,867	0.002
Amanda Brown	5,000	0.002
Darren Roos	–	–
Silke Scheiber	–	–
Chris Hsu(4)	–	–
John Schultz (4)	–	–
Paul Rodgers(5)	148,255	0.065
Jane Smithard	4,187	0.002
Martin Taylor	1,734	0.001
John Delk	–	–
Rob Ebrey(6)	10,640	0.005
Suzanne Chase(7)	15,721	0.007
Sue Barsamian(4)	–	–

1 47,918 shares are held by Kevin Loosemore's wife, Joy Loosemore.

2 122,077 shares are held by Mike Phillips' wife, Josephine Phillips.

3 2,756 shares are held by Richard Atkins' wife, Julie Atkins.

• 4 Chris Hsu, John Schultz and Sue Barsamian will become Shareholders at Completion as a result of their current shareholding in HPE.
• 5 82,039 shares are held by Paul Rodgers' wife, Dawn Rodgers.
• 6 6,455 shares are held by Rob Ebrey's wife, Tiffany Ebrey.
• 7 9,652 shares are held by Suzanne Chase's husband, Graham Chase.

8 Based on 229,732,879 Ordinary Shares in issue as of 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus).

4.2 As at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), the interests (all of which are or will be beneficial unless otherwise stated) of the Directors and (so far as is known to them or could with reasonable diligence be ascertained by them) their connected persons (within the meaning of section 252 of the Companies Act) in the share capital of the Company, including interests arising pursuant to any transaction notified to the Company pursuant to DTR 3.1.2R or article 19 of the Market Abuse Regulation (as applicable), were as follows:

(a) Directors' shareholdings

		Percentage of Ordinary Shares beneficially
Name	Number of Ordinary Shares	held at present(4)
Kevin Loosemore(1)	750,418	0.327
Mike Phillips(2)	147,158	0.064
Stephen Murdoch	–	–
Nils Brauckmann	–	–
Karen Slatford	–	–
Richard Atkins(3)	6,867	0.002
Amanda Brown	5,000	0.002
Darren Roos	–	–
Silke Scheiber	–	–

1 47,918 shares are held by Kevin Loosemore's wife, Joy Loosemore.

2 122,077 shares are held by Mike Phillips' wife, Josephine Phillips.

3 2,756 shares are held by Richard Atkins' wife, Julie Atkins.

4 Based on 229,732,879 Ordinary Shares in issue as of 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus).

(b) Directors' share awards

Micro Focus International plc Incentive Plan 2005

	Number at	Exercise
Name	25 July 2017	price	Date for exercise
Kevin Loosemore	192,157	0.0p	27 June 2015 to 26 June 2022
Kevin Loosemore	142,132	0.0p	26 June 2016 to 25 June 2023
Kevin Loosemore(1)	115,192	0.0p	27 June 2017 to 26 June 2024
Kevin Loosemore(1)	111,275	0.0p	17 July 2018 to 16 July 2025
Kevin Loosemore(1)	69,156	0.0p	26 July 2019 to 25 July 2026
Mike Phillips	86,471	0.0p	27 June 2015 to 26 June 2022
Mike Phillips	63,959	0.0p	26 June 2016 to 25 June 2023
Mike Phillips(1)	61,710	0.0p	27 June 2017 to 26 June 2024
Mike Phillips(1)	52,299	0.0p	17 July 2018 to 16 July 2025
Mike Phillips(1)	37,262	0.0p	26 July 2019 to 25 July 2026
Stephen Murdoch	96,237	0.0p	27 December 2015 to 28 December 2022
Stephen Murdoch	39,884	0.0p	26 June 2016 to 25 June 2023
Stephen Murdoch(1)	56,421	0.0p	27 June 2017 to 26 June 2024
Stephen Murdoch(1)	44,510	0.0p	17 July 2018 to 16 July 2025
Stephen Murdoch(1)	26,024	0.0p	23 March 2019 to 22 March 2026
Stephen Murdoch(1)	39,640	0.0p	26 July 2019 to 25 July 2026
Nils Brauckmann(1)	27,159	0.0p	16 December 2017 to 15 December 2024
Nils Brauckmann(1)	17,722	0.0p	17 July 2018 to 16 July 2025
Nils Brauckmann(1)	26,024	0.0p	23 March 2019 to 22 March 2026
Nils Brauckmann(1)	33,476	0.0p	26 July 2019 to 25 July 2026

1 Performance condition requires that cumulative earnings per share growth over a three year vesting period is at least equal to RPI plus 3 per cent. per annum (at which point 25 per cent. of awards will vest) and for full vesting the cumulative earnings per share growth will be required to be RPI plus 9 per cent. per annum. Straightline vesting will apply between these points. Performance against these objectives is determined by the committee based on the Company's audited results.

Additional Share Grant

	Number at	Exercise
Name	25 July 2017	price	Date for exercise
Kevin Loosemore	947,140	0.0p	1 November 2017 to 31 October 2024
Mike Phillips	676,529	0.0p	1 November 2017 to 31 October 2024
Stephen Murdoch	405,917	0.0p	1 November 2017 to 31 October 2024
Nils Brauckmann	405,917	0.0p	1 November 2017 to 31 October 2024

• 4.3 At the AGM of the Company held on 22 September 2016, Shareholder approval was given to enable further awards of ASGs to be made in the future as a result of material acquisitions by the Company (by whatever means). Following Completion, the Remuneration Committee will determine what further awards of ASGs should be made in connection with the Transaction and the integration of HPE Software into the Enlarged Group.
• 4.4 Save as disclosed in this paragraph 4, none of the Directors nor any person connected with them, has any interest, whether beneficial or nonbeneficial, in the share capital of the Company or of any of its subsidiary or associated undertakings.
• 4.5 No Director, Proposed Director or member of Senior Management 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 Enlarged Group or any of its subsidiary undertakings and which were effected by the Enlarged 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.
• 4.6 There are no outstanding loans or guarantees granted or provided by any member of the Enlarged Group to or for the benefit of any of the Directors or Proposed Directors, save that indemnity provisions are in place for the benefit of Directors and Proposed Directors in relation to certain losses and liabilities which they may potentially incur to third parties in the course of their duties.

5. REMUNERATION OF THE DIRECTORS, PROPOSED DIRECTORS AND SENIOR MANAGEMENT

5.1 Directors' terms of employment, including notice periods

(a) Executive Directors' service contracts

The Executive Directors have service contracts with the Company on the following terms:

	Date of
Name	service contract	Expiry date
Kevin Loosemore(1)	14 April 2011	The agreement is terminable by either party on six months' notice
Mike Phillips	7 September 2010	The agreement is terminable by either party on six months' notice
Stephen Murdoch	16 April 2014	The agreement is terminable by either party on six months' notice
Nils Brauckmann	27 January 2016	The agreement is terminable by either party on six months' notice

1 Subject to the below, Kevin Loosemore's notice period decreases by one month for each complete month served after 31 October 2017 until it reaches zero on 1 May 2018.

If an executive director commits any crime or act of dishonesty or, other than Kevin Loosemore, commits any material breach of their service contract or any act of gross misconduct, the Company is entitled to summarily terminate the service contract without notice or payment in lieu of notice or other compensation. In the case of Kevin Loosemore, his employment may be terminated by the Company without notice if, in the opinion of the Board acting reasonably and after giving Kevin Loosemore reasonable opportunity to comment before such opinion is reached, it is determined that he has committed any serious breach of his service contract which is incapable of remedy or he is guilty of any gross misconduct, or gross incompetence, in the discharge of his duties of his employment. Any such contract terms cannot however, as a rule of law, affect the executive director's statutory rights such as rights in respect of unfair dismissal.

Should an Executive Director, other than Nils Brauckmann, be dismissed in different circumstances to the above, the Company may pay him, in lieu of notice, a sum equal to his basic pay over his notice period. In respect of Kevin Loosemore, such sum is equal to £735,000 in the event his appointment is terminated prior to 1 May 2018. Nils Brauckmann's service contract does not contain such a contract term.

Subject to Kevin Loosemore being granted an ASG over at least 947,140 Ordinary Shares within one week of Completion (or within one week of the Company being permitted to grant such ASGs), his existing notice provisions (including any right to a payment in lieu of notice of £735,000) as detailed above, will be replaced in their entirety with a six month notice period. If the Company and Kevin Loosemore are not able to mutually agree the terms of an ASG deed such that the ASG is issued within the required time frame, then Kevin Loosemore's notice period will not change and as at 1 May 2018 his notice period will be down to zero.

Each of the Executive Directors is subject to a confidentiality undertaking without limitation in time and, save for Kevin Loosemore, to noncompetition, nonsolicitation, nondealing and nonhiring restrictive covenants for a period of between six and 12 months after the termination of their respective employment arrangements. Kevin Loosemore is subject to six month nonhiring and noninterference with suppliers restrictive covenants.

Each of the Executive Directors has the benefit of a qualifying thirdparty indemnity from the Company (the terms of which are in accordance with the Companies Act) and appropriate directors' and officers' liability insurance.

The Executive Chairman receives a payment in lieu of pension of 20 per cent. of base salary whilst the other Executive Directors receive a contribution of up to 15 per cent.

(b) Proposed Director's (Chris Hsu) service contract

Chris Hsu has entered into a service agreement with Micro Focus (US) Inc. dated 16 January 2017, pursuant to which, with effect from Completion, Chris Hsu will become Chief Executive Officer of the Enlarged Group. The service agreement is terminable on six months' notice by either party and contains summary termination provisions similar to the Executive Directors. Chris Hsu is also subject to confidentiality undertakings without limitation in time and to nonsolicitation restrictive covenants for a period of 12 months after termination.

Chris Hsu's salary on commencement of employment will be US\$1,000,000 and he will be eligible for benefits consistent with other Executive Directors and a bonus of up to 150 per cent. of base salary. Chris will also be eligible to participate in the Company's LTIP (it being anticipated that Chris will be granted an award of two times his base salary on commencement of his employment) and it is anticipated that he will also be granted an ASG following Completion.

(c) NonExecutive Directors' letters of appointment

The NonExecutive Directors have letters of appointment with the Company on the following terms:

	Effective date of
Name	letter of appointment	Fees (per annum)
Karen Slatford	5 July 2010	£120,000
Richard Atkins	16 April 2014	£90,000
Amanda Brown	1 July 2016	£90,000
Darren Roos	15 May 2017	£70,000
Silke Scheiber	15 May 2017	£70,000

Each of the NonExecutive Directors is appointed by a letter of appointment for a fixed term of three years or less subject to earlier termination by either the NonExecutive Director or the Company on 90 days' notice. Each NonExecutive Director still serving at the end of his or her term will have his or her appointment reviewed by the Board and the reappointment of that NonExecutive Director may be agreed.

Each NonExecutive Director is entitled to reimbursement of reasonable expenses.

NonExecutive Directors do not participate in the Micro Focus Group's share incentives or otherwise receive performance related pay, and do not receive any pension contributions or benefits in kind.

The NonExecutive Directors are subject to confidentiality undertakings without limitation in time.

Each of the NonExecutive Directors has the benefit of a qualifying thirdparty indemnity from the Company (the terms of which are in accordance with the Companies Act) and appropriate directors' and officers' liability insurance.

Amanda Brown's fees are paid directly to her employer, Hiscox Limited.

(d) Proposed NonExecutive Director's (John Schultz) letter of appointment

The letter of appointment between John Schultz, the HPE Nominated Director who is a serving executive of HPE, and the Company is on substantially the same terms as the existing NonExecutive Directors, save that there shall be no fee payable to John Schultz.

(e) Emoluments

Details of the emoluments due to the then Directors including their salary and/or fees, bonus, pension and other benefits for the financial year ended 30 April 2017, as set out in the Company's 2017 Annual Report, are shown below:

Base salary	Benefits in		Annual		Total
(£'000)	(£'000)	(£'000)	(£'000)	(£'000)	(£'000)
750	32	150	506	2,788	4,226
470	19	71	317		2,370
500	18	75	338	1,365	2,296
423	12	63	285	619	1,402
103	–	–	–	–	103
62	–	–	–	–	62
78	–	–	–	–	78
77	–	–	–	–	77
68	–	–	–	–	68 ––––––
2,525	81	359	1,446	6,265	10,676 ––––––
	and fees –––––– ––––––	kind –––––– ––––––	Pension –––––– ––––––	bonus –––––– ––––––	LTIP 1,483 –––––– ––––––

For the financial year ended 30 April 2017, the aggregate total remuneration paid (including contingent or deferred compensation) and benefits in kind granted (under any description whatsoever) to the Senior Management by the Company was £17.4 million.

5.2 The current and past directorships and partnerships of the Directors, the Proposed Directors and the Senior Management

Set out below are the directorships (unless otherwise stated) and partnerships held by the Directors, Proposed Directors and members of Senior Management (other than, where applicable, directorships held in the Company), in the five years prior to the date of this Prospectus:

5.2.1 Directors

	Current Directorships	Former Directorships and
Director	and Partnerships	Partnerships within five years
Kevin Loosemore	Micro Focus Group Limited MA Finance Co.,	Farnham Castle
	LLC Miami Escrow Borrower LLC
Mike Phillips	Attachmate Corporation	Accurev, Inc.
	Authasas Advanced Authentication	Parity Group plc
	B.V.
	Authasas B.V.
	MA FinanceCo., LLC
	Miami Escrow Borrower LLC
	Micro Focus (IP) Holdings Limited
	Micro Focus (IP) Limited
	Micro Focus (US) Holdings
	Micro Focus (US) International
	Holdings, Inc.
	Micro Focus (US), Inc.
	Micro Focus CHC Limited
	Micro Focus Group Holdings
	Unlimited Company
	Micro Focus Group Limited
	Micro Focus Holdings Limited
	Micro Focus International Holdings
	Limited
	Micro Focus IP Development
	Limited
	Micro Focus IP Limited
	Micro Focus Ireland Limited
	Micro Focus Limited
	Micro Focus Limited Hong Kong Branch
	Micro Focus MHC Limited
	Micro Focus Midco Limited
	Micro Focus Software Inc.
	Novell Holdings, Inc.
	Novell International Holdings, Inc.
	Seattle Holdings, Inc.
	Seattle MergerSub, Inc.
	SUSE LLC
	The Attachmate Group, Inc.
Stephen Murdoch	Park Regis Birmingham LLP
	West Bar BPRA LLP
	Cobalt Data Centre 2 LLP
	Cumberland House BPRA Property
	Fund LLP
Nils Brauckmann	Micro Focus Software Inc.	None
	SUSE Linux GmbH
Karen Slatford	Accesso Technology Group PLC	Reviso Cloud Accounting Limited
	Alfa Financial Software Holdings plc	Volex PLC
	Citation Software Limited	Cambridge Broadband Networks
	Draper Esprit PLC	Limited
	ECI Debitoor Limited	Acunu Limited
	The Foundry Topco No.2 Limited	Featurespace Limited

Director	Current Directorships and Partnerships	Former Directorships and Partnerships within five years
Karen Slatford (Continued)	Intelliflo Limited Intelliflo Holdings 2013 Limited The Foundry Midco No 1 Limited The Foundry Midco No 2 Limited The Foundry Bidco Limited The Foundry Topco Limited The Foundry Intermediate Holdings Limited The Foundry Visionmongers Ltd. The Foundry Holdings Limited
Richard Atkins	Entanet Holdings Limited Miles 33 (Holdings) Limited Acora Holdings Limited Acora Limited AON UK Limited Quillot Associates Ltd	Sub10 Systems Limited Fitch 7City Learning Holdings Limited Fitch 7City Learning (IB) Limited EGHL Limited
Amanda Brown	Hiscox Underwriting Group Services Limited	None
Darren Roos	None	None
Silke Scheiber	Jungbunzlauer Holding AG CNH Industrial N.V.	WMF Group GmbH WMF AG Finedining Capital AG Van Gansewinkel Groep BV KION Group AG KION Material Handling GmbH Kohlberg Kravis Roberts & Co. Partners LLP Kohlberg Kravis Roberts & Co. (International) Partners LLP KKR Management LLC KKR Associates 2006 (Overseas), Limited Partnership KKR Associates Europe II, Limited Partnership KKR Associates Europe III, Limited Partnership KKR IFI GP L.P. KKR PEI Associates, L.P. KKR KFC Holdings Limited KKR PEI Holdings GP Limited KKR SP Limited Kohlberg Kravis Roberts & Co SAS
5.2.2 Proposed Directors Chris Hsu	None	None
John Schultz	Umpqua Holdings Corporation H3C Holding Limited	None

5.2.3 Senior Management

Member of	Current Directorships	Former Directorships and
Senior Mngement	and Partnerships	Partnerships within five years
Paul Rodgers	Borland Software India Private Limited	None
	Micro Focus India Private Limited
	Relativity Technologies Private
	Limited
	Micro Focus Ireland Limited
	Micro Focus Srl
	Novell Software (Beijing) Ltd
	Borland Software (Beijing) Co Ltd
Jane Smithard	24 Sutherland Street Ltd	Network Software Associates Inc
	Attachmate Group Australia Pty Ltd	Netzoft, Inc
	Attachmate Group Austria GmbH	Serena Software Canada Limited
	Attachmate Group Belgium BVBA	Serena Software Nordic AB
	Attachmate Group Denmark A/S	The Attachmate Group, Inc
	Attachmate Group France SARL
	Attachmate Group Germany GmbH
	Attachmate Group Italy S.r.l
	Attachmate Group Netherlands B.V Attachmate Group Schweiz AG
	Attachmate Group Singapore Pte. Ltd
	Attachmate Group South Africa (Pty)
	Ltd
	Attachmate Group Spain S.L
	Attachmate Group Sweden AB
	Attachmate India Private Ltd
	Attachmate Teknoloji Satis ve
	Pazarlama Lt Sti
	GWAVA EMEA GmbH
	Merant Holdings
	Micro Focus International Limited
	Micro Focus IP Ltd
	Micro Focus Software India Private Limited
	NetIQ K.K
	Novell Corporation (Malaysia) Sdn.
	Bhd.
	Novell India Pvt. Ltd
	Novell Japan, Ltd
	Novell Korea Co.,Ltd
	Novell New Zealand Limited
	Novell Portugal Informatica Lda
	NOVL Czech s.r.o
	Serena Holdings
	Serena Software Benelux BVBA
	Serena Software Europe Limited
	Serena Software Europe Limited –
	India Branch Serena Software Europe Limited –
	Italy Branch
	Serena Software Europe Limited –
	Korea Branch

Member of	Current Directorships	Former Directorships and
Senior Mngement	and Partnerships	Partnerships within five years
Jane Smithard	Serena Software GmbH
(Continued)	Serena Software GmbH – Swiss Branch
	Serena Software Japan KK
	Serena Software Pte. Ltd.
	Serena Software Pty Limited
	Serena Software SA
	Serena Software SAS
	SUSE Linux GMBH
	SUSE Linux s.r.o
Martin Taylor	None	None
John Delk	ResolvNow Corporation	None
Rob Ebrey	Authasas Advanced Authentication B.V.	Borland Srl
	Authasas B.V.
	MA FinanceCo., LLC
	Micro Focus (IP) Holdings Limited
	Micro Focus (US) International Holdings, Inc
	Micro Focus CHC Limited
	Micro Focus Finance Sarl
	Micro Focus MHC Limited
	Micro Focus Midco Limited
	Minerva Finance S.a.r.l
Suzanne Chase	8 Park Street Bath Flat Management Co. Limited	Parity Group PLC
Sue Barsamian	None	None

Except for the current directorships and partnerships set out above in paragraph 5.2 of this Part X (Directors, Proposed Directors, Corporate Governance and Employees), in respect of any Director, Proposed Director or member of Senior Management, there are no actual or potential conflicts of interests between any duties he or she has to the Company, either in respect of the Transaction or otherwise, and the private interests and/or other duties he or she may also have.

Save in respect of Darren Roos, Silke Scheiber, John Schultz and the HPE Nominated Director to be appointed following Completion pursuant to the Merger Agreement, none of the Directors, Proposed Directors or members of Senior Management were selected to be a Director, Proposed Director or member of Senior Management pursuant to any arrangement or understanding with any major shareholder, customer, supplier or other person having a business connection with the Enlarged Group.

At the date of this Prospectus, none of the Directors, Proposed Directors or members of the Senior Management has during at least the previous five years:

• any convictions in relation to fraudulent offences;
• been a member of the administrative, management, supervisory body or senior management of a company associated with any bankruptcies, receiverships or liquidations; or
• been subject to any official public incrimination or sanctions by any statutory or regulatory authorities (including designated professional bodies) or been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer.

There are no family relationships between any of the Directors, Proposed Directors or members of Senior Management.

6. EMPLOYEES

6.1 Employees of the Micro Focus Group

6.1.1 The total number of persons employed by the Micro Focus Group at the end of each of the three financial years ended 30 April 2015, 30 April 2016 and 30 April 2017 is set out below:

	Number of employees (FTE) ––––––––––––––––––––––––––––––––––––––––
	Year ended	Year ended	Year ended
	30 April 2017	30 April 2016	30 April 2015
Total number of employees	–––––––––––	–––––––––––	–––––––––––
(including Executive Directors)	4,839	4,213	4,239

• 6.1.2 As at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), the Micro Focus Group employed 4,871.73 persons (on an FTE basis) (including the Executive Directors).
• 6.1.3 A breakdown of the Micro Focus Group's employees by geographical location as at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus) is as follows:

	Number of employees (FTE)
Country	of the Micro Focus Group
Australia	59.00
Austria	52.00
Belgium	11.00
Brazil	55.00
Bulgaria	48.00
Canada	89.94
China	106.00
Czech Republic	108.00
Denmark	6.00
France	79.00
Germany	491.00
Hong Kong	14.00
India	746.00
Ireland	123.00
Ireland Ennis	11.00
Ireland Galway	24.00
Israel	31.42
Italy	66.00
Japan	61.00
Korea, Republic of	4.00
Malaysia	3.00
Netherlands	87.00
New Zealand	3.00
Norway	2.00
Portugal	10.00
Singapore	62.00
South Africa	29.00
South Korea	1.00
Spain	56.00
Sweden	24.88
Switzerland	14.00

	Number of employees (FTE)
Country	of the Micro Focus Group
Taiwan	13.00
Turkey	3.00
Ukraine	9.00
United Arab Emirates	4.00
United Kingdom	564.00
United States	1,801.50 ––––––––
Total	4,871.73
	––––––––

6.1.4 A breakdown of the Micro Focus Group's employees by activity (on an FTE basis), as at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), is as follows:

	Number of employees (FTE)
Activity	of the Micro Focus Group
Executive Management	7.00
Facilities	72.00
Finance & Administration	279.75
Global GTM	854.00
Human Resources	68.00
Information Technology	180.00
Legal Services	39.00
Marketing	129.00
Product Group	1,445.36
Sales Operations	677.00
Sales Org	27.00
SUSE	1,093.63 ––––––––
Total	4,871.73

––––––––

6.2 Employees of HPE Software

6.2.1 The total number of regular active persons employed within HPE Software as at the end of the three financial years ended 31 October 2014, 31 October 2015 and 31 October 2016 and the three months ended 31 January 2017 is set out below (in each case excluding staff from the central corporate functions of HPE):

	31 January	31 October	31 October	31 October
	2017	2016	2015	2014
Total number of employees	11,509	12,199	11,922	13,021

• 6.2.2 As at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), HPE Software employed 11,370 persons (on an FTE basis).
• 6.2.3 A breakdown of HPE Software employees by geographical location as at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus) is as follows:

	Number of employees of
Country	HPE Software
Australia	246
Austria	20
Belgium	44
Brazil	65
Bulgaria	226
Canada	151
China	698

	Number of employees of
Country	HPE Software
Costa Rica	383
Czech Republic	105
Denmark	20
Egypt	1
Finland	12
France	220
Germany	418
Greece	2
Hong Kong	25
India	1,975
Ireland	38
Israel	690
Italy	178
Japan	130
Korea, Republic of	43
Luxembourg	2
Malaysia	49
Mexico	190
Netherlands	101
New Zealand	12
Norway	10
Philippines	118
Poland	75
Portugal	7
Puerto Rico	19
Romania	397
Russian Federation	73
Saudi Arabia	13
Singapore	134
South Africa	15
Spain	200
Sweden	32
Switzerland	50
Taiwan	15
Tunisia	21
Turkey	28
United Arab Emirates	53
United Kingdom	661
United States	3,405 ––––––––
Total	11,370

––––––––

6.2.4 A breakdown of HPE Software employees by activity, as at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), is as follows:

	Number of employees of
Activity	HPE Software
Administration	118
Business Planning	167
Corporate Administration	11
Engineering	3,015
Engineering Services	111
Finance	514
Human Resources	176
Information Technology	92
Learning & Development	27
Legal	45
Marketing	398
Quality	8
Sales	2,035
Sales Operations	812
Services	3,735
Supply Chain & Operations	106 ––––––––
Total	11,370 ––––––––

7. PENSIONS

All employees of the Micro Focus Group, including Executive Directors, are invited to participate in a Micro Focus Group personal pension plan. Executive Directors will continue to receive a pension contribution or payment in lieu of pension. All major schemes are money purchase in nature and have no defined benefits. Defined benefit schemes are operated in Japan and France, but, given the number of members, are insignificant for the purposes of the Micro Focus Group. The Micro Focus Group has no obligation to the Micro Focus Group personal pension scheme beyond the payment of contributions

PART XI

ADDITIONAL INFORMATION

1. RESPONSIBILITY

The Company and each of the Directors and Proposed Directors, whose names appear in Part X (Directors, Proposed Directors, Corporate Governance and Employees) of this Prospectus, accept responsibility for the information contained in this Prospectus. To the best of the knowledge and belief of the Company, the Directors and the Proposed Directors (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 does not omit anything likely to affect the import of such information.

2. CORPORATE HISTORY

• 2.1 The Company was incorporated in England and Wales (where it is domiciled) on 21 May 2004 under the Companies Act 1985 as a private company limited by shares with registration number 5134647 and with the name Hackremco (No. 2158) Limited.
• 2.2 The Company was reregistered as a public company limited by shares and its company name was changed from Hackremco (No. 2158) Limited to Micro Focus International plc on 5 April 2005. The Company became the holding company for the Micro Focus Group on 17 May 2005 and, following Completion, will be the holding company of the Enlarged Group.
• 2.3 The liability of the members of the Company is limited.
• 2.4 The Company's registered office and principal place of business is at The Lawn, 2230 Old Bath Road, Newbury, Berkshire RG14 1QN (telephone number +44 (0)1635 565 200).
• 2.5 On 17 May 2005, the ordinary shares of the Company were admitted to listing on the Official List and to trading on the Main Market for listed securities immediately prior to which certain Golden Gate funds held ordinary shares equal to approximately 82 per cent. of the issued share capital of the Company. Immediately following the listing, such funds held ordinary shares equal to approximately 60.5 per cent. of the issued share capital of the Company and on 18 February 2009 finally divested their entire investment in the Company.
• 2.6 As at 25 July 2017 (being the latest practicable date prior to the date of this Prospectus), the issued share capital of the Company was £22,973,287.90 divided into 229,732,879 ordinary shares of 10 pence each (all of which were fully paid or credited as fully paid). As at 25 July 2017 (being the latest practicable date prior to the date of this Prospectus), no shares were held in treasury. The Consideration Shares and the New Ordinary Shares will be in registered form and capable of being held in uncertificated form.
• 2.7 As at the date of this Prospectus, although the number of Consideration Shares to be issued pursuant to the Merger Agreement at Completion shall equal 50.1 per cent. of the fully diluted share capital of the Company at Completion,6 as a result of the Share Capital Consolidation and any Ordinary Shares that may be issued prior to Completion, it is not possible to state the number of New Ordinary Shares that will be in issue immediately prior to Admission and therefore it is not possible to calculate the number of Consideration Shares to be issued pursuant to the Merger Agreement or the number of Ordinary Shares which will be the subject of Admission.

⁶ Excluding any Ordinary Shares to be issued pursuant to a de minimis number of replacement awards to be granted to HPE Software employees at Completion under their existing employee incentive arrangements.

2.8 The following is a summary of the changes in the issued ordinary share capital of the Company from 1 May 2014 to 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus):

Issue of ordinary shares
	Number of
	Ordinary
Date of Issue	Shares issued	Price (£)	Nature of issue
2 May 2014	1,500	1.8978	To settle exercise of share options
27 June 2014	25,855	2.4800	To settle exercise of share options
1 July 2014	2,500	4.016	To settle exercise of share options
7 July 2014	64,256	0.1354	To settle exercise of share options
22 July 2014	13,573	6.2317	To settle exercise of share options
25 July 2014	7,500	3.5800	To settle exercise of share options
22 August 2014	2,000	1.0400	To settle exercise of share options
1 September 2014	124,143	0.1000	To settle exercise of share options
1 September 2014	12,492	0.1000	To settle exercise of share options
2 September 2014	17,500	0.1000	To settle exercise of share options
3 September 2014	12,000	0.1000	To settle exercise of share options
5 September 2014	2,858	0.1000	To settle exercise of share options
5 September 2014	38,865	0.1000	To settle exercise of share options
6 September 2014	369	4.8160	To settle exercise of share options
8 September 2014	17,500	0.1000	To settle exercise of share options
11 September 2014	2,500	0.1000	To settle exercise of share options
12 September 2014	500	2.8135	To settle exercise of share options
27 October 2014			152,767,938 Ordinary Shares of 13 13/24 pence each consolidated
		into one share of £20,687,324.94
27 October 2014			one Ordinary Share of £20,687,324.94 divided into 141,845,030
			Ordinary Shares of 10p each and 15,606,772,650 Deferred D
		Shares of 1/24p each
20 November 2014	8,659,711	0.1000	To settle exercise of share options
24 November 2014	40,855	2.1840	To settle exercise of share options
24 November 2014	5,784	2.1840	To settle exercise of share options
24 November 2014	22,200	2.2628	To settle exercise of share options
24 November 2014	48,027	2.1348	To settle exercise of share options
5 December 2014	8,230	2.1840	To settle exercise of share options
8 December 2014	12,857	2.4100	To settle exercise of share options
23 April 2015	7,500	0.1000	To settle exercise of share options
29 April 2015	1,153	0.1136	To settle exercise of share options
19 June 2015	10,972	0.1136	To settle exercise of share options
1 July 2015	9,167	0.1136	To settle exercise of share options
13 July 2015	2,153	0.1136	To settle exercise of share options
30 October 2015	2,000	0.1136	To settle exercise of share options
3 December 2015	1,528	0.1250	To settle exercise of share options
21 December 2015	20,000	0.0284	To settle exercise of share options
24 December 2015	2,500	0.1136	To settle exercise of share options
24 December 2015	20,000	0.1000	To settle exercise of share options
30 December 2015	4,000	0.1136	To settle exercise of share options
31 December 2015	2,102	0.2036	To settle exercise of share options
8 January 2016	4,531	0.1296	To settle exercise of share options
21 January 2016	25,000	0	To settle exercise of share options
8 February 2016	810	6.1858	To settle exercise of share options
9 February 2016	5,126	2.9841	To settle exercise of share options
24 March 2016	500	14.5500	To settle exercise of share options
18 April 2016	2,622	0.1136	To settle exercise of share options

	Number of
	Ordinary
Date of Issue	Shares issued	Price (£)	Nature of issue
27 April 2016	6,569	0	To settle exercise of share options
28 April 2016	1,905	4.8160	To settle exercise of share options
5 May 2016	467	5.9840	To settle exercise of share options
26 May 2016	787	11.0205	To settle exercise of share options
31 May 2016	309,782	1.9187	To settle exercise of share options
1 June 2016	1,500	1.8978	To settle exercise of share options
8 June 2016	17,500	0	To settle exercise of share options
9 June 2016	2,500	0.1136	To settle exercise of share options
19 June 2016	1,000	0.1136	To settle exercise of share options
22 June 2016	4,053	1.0400	To settle exercise of share options
23 June 2016	3,500	0.8783	To settle exercise of share options
25 July 2016	115,303	0.2868	To settle exercise of share options
2 August 2016	30,734	0.1819	To settle exercise of share options
5 September 2016	26,895	0.9745	To settle exercise of share options
12 September 2016	2,500	0.1250	To settle exercise of share options
12 October 2016	29,720	3.3896	To settle exercise of share options
26 October 2016	27,918	1.9345	To settle exercise of share options
7 December 2016	13,949	3.8690	To settle exercise of share options
6 January 2017	61,588	0.7775	To settle exercise of share options
30 January 2017	30,967	1.9613	To settle exercise of share options
27 February 2017	22,242	0.5764	To settle exercise of share options
29 March 2017	53,778	1.3634	To settle exercise of share options
27 April 2017	208,964	5.5638	To settle exercise of share options
19 May 2017	6,650	2.2208	To settle exercise of share options
5 June 2017	1,000	0.1136	To settle exercise of share options

• 2.9 The number of Ordinary Shares subject to options as at 30 April 2017 (being the date of the most recent audited balance sheet of the Company) was 8,607,889. Save as disclosed in paragraph 5 of Part X (Directors, Proposed Directors, Corporate Governance and Employees) and paragraph 8 of this Part XI (Additional Information), no share or loan capital of the Company is under option or agreed conditionally or unconditionally to be put under option.
• 2.10 The Ordinary Shares have been and will be created under the Companies Act (or the Companies Act 1985, as applicable) and conform with the laws of England and Wales. The Ordinary Shares have been and will be duly authorised according to the requirements of the Company's constitution and have and will have all necessary statutory and other consents.
• 2.11 The Consideration Shares will be issued fully paid and will rank in full for all dividends or other distributions declared, made or paid after the date of issue of the Consideration Shares and otherwise pari passu in all respects to the Existing Ordinary Shares (which, if the Share Capital Consolidation is implemented, will become New Ordinary Shares following the Share Capital Consolidation). The Consideration Shares shall not rank for the Return of Value or for the dividends declared in respect of the financial year ended 30 April 2017 as these will take place prior to the issue of the Consideration Shares.
• 2.12 With effect from Admission, all of the Consideration Shares will be issued to the Depositary and be held in accordance with the terms of the ADS Facility.

2.13 Existing Shareholder authorities

At the AGM held at the Company's registered office at 3 p.m. on 22 September 2016, the Shareholders approved resolutions to:

• 2.13.1 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 an aggregate nominal amount of £7,637,743; and
• (b) up to a further aggregate nominal amount of £7,637,743 in connection with an offer by way of rights issue;
• 2.13.2 allot equity securities and sell treasury shares for cash on a nonpreemptive basis up to a nominal amount of £1,145,661;
• 2.13.3 allot equity securities and sell treasury shares for cash on a nonpreemptive basis up to a nominal amount of £1,145,661 for purposes of acquisitions or capital investments;
• 2.13.4 authorise the Company to make market purchases (within the meaning of section 693(4) of the Companies Act) of Ordinary Shares each subject to the following conditions:
• (a) the maximum aggregate number of Ordinary Shares authorised to be purchased is 34,346,931;
• (b) the minimum price which may be paid for each Ordinary Share is 10 pence; and
• (c) the maximum price which may be paid for each Ordinary Share shall not be more than the maximum price (exclusive of expenses) stipulated by the Listing Rules from time to time in force published by the Financial Conduct Authority; and
• 2.13.5 authorise the Company to call general meetings (other than AGMs) on a minimum of 14 clear days' notice.I.21.1.5
• At the General Meeting the Shareholders approved resolutions to:
• 2.13.6 approve the Merger and authorise the Directors to make such nonmaterial modifications, variations, revisions, waivers or amendments to the terms and conditions of the Merger and to do all things as are considered necessary or expedient in connection with the Merger, increase the borrowing limit contained in the Articles to US\$10,000 million and grant the Directors authority to allot Ordinary Shares up to a nominal amount of £25,000,000 as the Consideration Shares (such authority to expire on 7 March 2018);
• 2.13.7 amend the Articles as necessary in connection with the Return of Value and Share Capital Consolidation, and authorise the Directors to effect the Return of Value and, conditional upon Admission, the Share Capital Consolidation; and
• 2.13.8 conditional upon Admission, amend the Articles principally to reflect the Company having ADSs in issue at Completion.

3. ARTICLES OF ASSOCIATION

The following sets out a high level summary of certain provisions of the Articles:

3.1 Voting rights

Subject to any special terms as to voting upon which any Ordinary Shares may be issued, or may for the time being be held and any restriction on voting referred to below, every holder of Ordinary Shares who (being an individual) is present in person or (being a corporation) is present by a duly authorised representative and every proxy (regardless of the number of members for whom he is proxy) shall, subject to limited exceptions, have one vote on a show of hands. On a poll, every holder of Ordinary Shares present in person or by proxy shall have one vote for every Ordinary Share of which he is the holder.

The duly authorised representative of a corporate Shareholder may exercise the same powers on behalf of that corporation as it could exercise if it were an individual Shareholder.

A Shareholder is not entitled to vote unless all calls due from him have been paid.

A Shareholder is also not entitled to attend or vote at meetings of the Company in respect of any Ordinary Shares held by him in relation to which he or any other person appearing to be interested in such shares has been duly served with a notice under section 793 of the Companies Act and, has failed to comply with such notice within 14 days. Such disentitlement will apply only for so long as the notice from the Company has not been complied with.

3.2 General meetings

The Company must hold an AGM within the period of six months beginning with the day following the Company's accounting reference date in addition to any other general meetings held in the year. The Directors can call a general meeting at any time.

At least 21 clear days' written notice must be given for every AGM. For all other general meetings, not less than 14 days' written notice must be given. The notice for any general meeting must state: (i) whether the meeting is an AGM; (ii) the date, time and place of the meeting; (iii) the general nature of the business of the meeting; (iv) any intention to propose a resolution as a special resolution and (v) that a member is entitled to attend and vote and is entitled to appoint one or more proxies to attend, speak and vote instead of him and that a proxy need not also be a member. All members who are entitled to receive notice under the Articles must be given notice.

Before a general meeting starts, there must be a quorum, being two members present in person or by proxy.

Each Director can attend and speak at any general meeting.

3.3 Dividends and other distributions

Subject to the Companies Act, the Company may, by ordinary resolution, declare dividends to be paid to members of the Company according to their rights and interests in the profits of the Company available for distribution, but no dividend shall be declared in excess of the amount recommended by the Board.

Subject to the Companies Act, the Board may from time to time pay to the Shareholders such interim dividends as appear to the Board to be justified by the profits available for distribution and the position of the Company, on such dates and in respect of such periods as it thinks fit.

Except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide (no such shares presently being in issue), all dividends shall be apportioned and paid pro rata according to the amounts paid or credited as paid up (other than in advance of calls) on the shares during any portion or portions of the period in respect of which the dividend is paid. Any dividend unclaimed after a period of 6 years from the date of declaration shall be forfeited and shall revert to the Company.

The Board may, if authorised by an ordinary resolution, offer the holders of shares the right to elect to receive additional shares, credited as fully paid, instead of cash in respect of any dividend or any part of any dividend.

The Board may withhold dividends payable on shares representing not less than 0.25 per cent. by number of the issued shares of any class after there has been a failure to comply with any notice under section 793 of the Companies Act requiring the disclosure of information relating to interests in the shares concerned as referred to in paragraph 3.8 (Disclosure of interests in shares) of this Part XI (Additional Information) below.

3.4 Return of capital

On a voluntary windingup of the Company the liquidator may, with the sanction of a special resolution of the Company and subject to the Companies Act and the Insolvency Act 1986 (as amended), divide amongst the Shareholders of the Company in specie the whole or any part of the assets of the Company.

3.5 Transfer of shares

The Ordinary Shares are in registered form.

The Articles provide for Ordinary Shares to be held in CREST accounts, or through another system for holding shares in uncertificated form, such shares being referred to as "Participating Securities". Subject to such of the restrictions in the Articles as shall be applicable, any member may transfer all or any of his Ordinary Shares. In the case of Ordinary Shares represented by a certificate the transfer shall be made by an instrument of transfer in the usual form or in any other form which the Board may approve. A transfer of a Participating Security need not be in writing, but shall comply with such rules as the Board may make in relation to the transfer of such Ordinary Shares, a CREST transfer being acceptable under the current rules.

The instrument of transfer of a certificated share shall be executed by or on behalf of the transferor and (in the case of a partly paid share) by or on behalf of the transferee and the transferor is deemed to remain the holder of the share until the name of the transferee is entered in the register of members.

The Board may also refuse to register a transfer unless:

• 3.5.1 in the case of a certificated share, the instrument of transfer (duly stamped if required) is lodged at the registered office of the Company or at some other place as the Board may elect accompanied by the relevant share certificate and such other evidence of the right to transfer as the Board may reasonably require;
• 3.5.2 in the case of a certificated share, the instrument of transfer is in respect of only one class of share; and
• 3.5.3 in the case of a transfer to joint holders of a certificated share, the transfer is in favour of not more than four such transferees.

In the case of Participating Securities, the Board may refuse to register a transfer if the CREST Regulations allow it to do so, and must do so where such regulations so require.

The Board may also decline to register a transfer of shares if they represent not less than 0.25 per cent. by number of their class and there has been a failure to comply with a notice requiring disclosure of interests in the shares (as referred to in paragraph 3.8 (Disclosure of interests in shares) of this Part XI (Additional Information) below) unless the Shareholder has not, and proves that no other person has, failed to supply the required information. Such refusal may continue until the failure has been remedied, but the Board shall not decline to register:

3.5.4 a transfer in connection with a bona fide sale of the beneficial interest in any shares to any person who is unconnected with the shareholder and with any other person appearing to be interested in the shares;

• 3.5.5 a transfer pursuant to the acceptance of an offer made to all the Company's Shareholders or all the Shareholders of a particular class to acquire all or a proportion of the Ordinary Shares or the shares of a particular class; or
• 3.5.6 a transfer in consequence of a sale made through a recognised investment exchange or any stock exchange outside the United Kingdom on which the Ordinary Shares are normally traded.

3.6 Variation of rights

Subject to the Companies Act, all or any of the rights attached to any class of share may (unless otherwise provided by the terms of issue of shares of that class) be varied (whether or not the Company is being wound up) either with the written consent of the holders of not less than three quarters in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of such holders. The quorum at any such general meeting is two persons holding or representing by proxy at least onethird in nominal value of the issued shares of that class and at an adjourned meeting the quorum is one holder present in person or by proxy, whatever the amount of his/her shareholding. Any holder of shares of the class in question present in person or by proxy may demand a poll. Every holder of shares of the class shall be entitled, on a poll, to one vote for every share of the class held by him/her. Except as mentioned above, such rights shall not be varied.

The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the Articles or the conditions of issue of such shares, be deemed to be varied by the creation or issue of new shares ranking pari passu therewith or subsequent thereto.

3.7 Share capital and changes in capital

Subject to and in accordance with the provisions of the Companies Act, the Company may issue redeemable shares. Without prejudice to any special rights previously conferred on the holders of any existing shares, any share may be issued on terms that they are, at the option of the Company or a member, liable to be redeemed on such terms and in such manner as may be determined by the Board (such terms to be determined before the shares are allotted).

Subject to the provisions of the Articles and the Companies Act, the power of the Company to offer, allot and issue any new shares in the Company and any shares lawfully held by the Company or on its behalf (such as shares held in treasury) shall be exercised by the Board at such time and for such consideration and upon such terms and conditions as the Board shall determine.

The Company may by ordinary resolution alter its share capital in accordance with the Companies Act. The resolution may determine that, as between the holders of shares resulting from a subdivision, any of the shares may have any preference or advantage or be subject to any restriction as compared with the others.

3.8 Disclosure of interests in shares

Section 793 of the Companies Act provides a public company with the statutory means to ascertain the persons who are, or have within the last three years been, interested in its relevant share capital and the nature of such interests. When a Shareholder receives a statutory notice of this nature, he or she has 14 days to comply with it, failing which the Shareholder will not have any right to attend or vote at a Shareholders' meeting or to exercise any other right in relation to Shareholders' meetings. Where the shares represent at least 0.25 per cent. of their class the Company may decide to restrict the rights relating to the relevant shares and send out a further notice to the holder (known as a "direction notice") relating to the withholding of dividends and transfer restrictions.

Once the direction notice has been given, if the Directors are satisfied that all the information required by any statutory notice has been supplied, the Company shall, within not more than seven days, withdraw the direction notice.

The Articles do not restrict in any way the provisions of section 793 of the Companies Act.

3.9 Untraced shareholders

Subject to various notice requirements, the Company may sell any of a Shareholder's shares in the Company if, during a period of 6 years, at least three dividends on such shares have become payable and no dividend has been claimed during that period in respect of such shares and the Company has received no communication from such Shareholder.

3.10 Borrowing powers

The Board may exercise all the powers of the Company to borrow money and to mortgage or charge all or any of its undertaking, property and assets (present and future) and uncalled capital and subject to any relevant statutes, to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligations of the Company or any third party provided that the Board shall restrict the borrowings of the Company, and exercise all powers of control exercisable by the Company in relation to its subsidiaries, so as to secure (in relation to its subsidiaries so far as the Board is able) that the aggregate amount for the time being of all borrowings by the Micro Focus Group (excluding any money owed between members of the Micro Focus Group) shall not at any time without the previous sanction of an ordinary resolution of the Company exceed an amount equal to US\$2,500 million.

Following the General Meeting ,the Company's borrowing power was increased to \$10,000 million.

These borrowing powers may be varied by an alteration to the Articles which would require a special resolution of the Shareholders.

3.11 Powers of Directors

Subject to the Companies Act, and provided s/he has made the necessary disclosures, a Director may be a party to, or otherwise directly or indirectly interested in, any transaction or arrangement or proposed transaction or arrangement, with the Company or in which the Company is otherwise interested.

The Board has the power to authorise any matter which would or might otherwise constitute or give rise to a breach of the duty of a Director under section 175 of the Companies Act to avoid a situation in which s/he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with, the interests of the Company. Any such authorisation will only be effective if the matter is proposed in writing for consideration in accordance with the Board's normal procedures, any requirement about the quorum of the meeting is met without including the Director in question and any other interested Director and the matter was agreed to without such Directors voting (or would have been agreed to if the votes of such Directors had not been counted). The Board may impose terms or conditions in respect of its authorisation.

Save for certain circumstances, a Director shall not vote in respect of any matter in which s/he has, directly or indirectly, any material interest (otherwise than by virtue of his/her interests in shares or debentures or other securities of, or otherwise in or through, the Company) or a duty which conflicts or may conflict with the interests of the Company. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which s/he is debarred from voting.

A Director shall (in the absence of material interests other than those indicated below) be entitled to vote (and be counted in the quorum) in respect of any resolution concerning any inter alia of the following matters:

• 3.11.1 the giving of any guarantee, security or indemnity to him/her or any other person in respect of money lent to, or an obligation incurred by him/her or any other person at the request of or for the benefit of, the Company or any of its subsidiaries;

• 3.11.2 the giving of any guarantee, security or indemnity to a third party in respect of an obligation of the Company or any of its subsidiaries for which s/he himself has assumed any responsibility in whole or in part alone or jointly under a guarantee or indemnity or by the giving of security;

• 3.11.3 any proposal concerning his/her being a participant in the underwriting or subunderwriting of an offer of shares, debentures or other securities by the Company or any of its subsidiaries;

• 3.11.4 any proposal concerning any other company in which s/he is interested, directly or indirectly, and whether as an officer or shareholder or otherwise, provided that s/he is not the holder of or beneficially interested in 1 per cent. or more of any class of the equity share capital of such company (or of any corporate third party through which his/her interest is derived) or of the voting rights available to members of the relevant company (any such interest being deemed to be a material interest in all circumstances);
• 3.11.5 any arrangement for the benefit of employees of the Company or any of its subsidiaries which does not accord to any Director any privilege or advantage not generally accorded to the employees to which such arrangement relates; and
• 3.11.6 any proposal concerning any insurance which the Company is empowered to purchase and/or maintain for the benefit of any of the Directors or for persons who include Directors.

3.12 Redemption

The Ordinary Shares are not redeemable.

3.13 Electronic Communications

The Company may communicate electronically with its members in accordance with the provisions of the Electronic Communications Act 2000.

The above is a summary only of certain provisions of the Articles, the full provisions of which are available for inspection as described in paragraph 18 (Documents on display) of this Part XI (Additional Information). Certain amendments to other provisions of the Articles were approved at the General Meeting, conditional upon Admission. Please refer to Section E and F of Part VII (Return of Value) and Part X (Additional Amendments to Articles of Association) of the Circular, which are hereby incorporated by reference.

4. MICRO FOCUS ADS FACILITY

The Company will enter, in connection with the Transaction, into the ADS Facility with the Depositary which will govern the terms of the Company's ADS programme to be established on Completion. Each ADS will represent one Ordinary Share, unless another ratio is agreed by the Company and HPE. The ADSs will be issued through a Direct Registration System, unless a Shareholder specifically requests certificated ADRs. Pursuant to the Merger Agreement, the Company will issue the Consideration Shares to the Depositary and the Depositary will issue ADSs representing the Consideration Shares to HPE Shareholders. The Company has applied to list the ADSs on the NYSE.

The Depositary will, if requested by the Company in a timely manner, notify holders of ADSs of any notices of general meetings and pursuant to instruction from each ADS holder, exercise voting rights on their behalf accordingly.

The Depositary will distribute to each ADS holder cash dividends or other distributions declared or made by the Company in proportion to the number of Ordinary Shares represented by the ADSs held as of the record date set by the Depositary with respect to the ADSs (which will be as close as practicable to the record date for the Ordinary Shares), after deducting applicable fees and expenses.

ADS holders and beneficial owners will be responsible for any taxes or other governmental charges payable, or which become payable, on their ADSs or on the deposited securities represented by any of their ADSs. The Depositary may refuse to register or transfer ADSs or to allow an ADS holder to withdraw the deposited securities represented by such ADSs until it receives payment of such taxes or other charges.

5. MANDATORY TAKEOVER BIDS, "SQUEEZEOUT" AND "SELLOUT" RULES

The following sets out a high level overview only of the mandatory takeover bid, squeeze out and sell out rules that apply to Ordinary Shares.

5.1 Mandatory bid

The Takeover Code applies to the Company (although it does not apply to the Transaction). Broadly, under Rule 9 of the Takeover Code, if:

• 5.1.1 a person acquires an interest in shares in the Company which, when taken together with shares already held by him/her or persons acting in concert with him/her, carry 30 per cent. or more of the voting rights in the Company; or
• 5.1.2 a person who, together with persons acting in concert with him/her, is interested in not less than 30 per cent. and not more than 50 per cent. of the voting rights in the Company acquires additional interests in shares which increase the percentage of shares carrying voting rights in which that person is interested,

the acquiror and, depending on the circumstances, its concert parties, would be required (except with the consent of the Panel on Takeovers and Mergers) to make a cash offer for the outstanding shares in the Company at a price not less than the highest price paid for any interests in the Ordinary Shares by the acquiror or its concert parties during the previous 12 months.

5.2 Compulsory acquisition

Broadly, under sections 974 to 991 of the Companies Act, if an offeror acquires or contracts to acquire (pursuant to a takeover offer) not less than 90 per cent. of the shares (in value and by voting rights) to which such offer relates it may then compulsorily acquire the outstanding shares not assented to the offer. It would do so by sending a notice to outstanding holders of shares 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 the outstanding holders of shares. The consideration offered to the holders whose shares are compulsorily acquired under the Companies Act must, in general, be the same as the consideration that was available under the takeover offer.

In addition, pursuant to section 983 of the Companies Act, if an offeror acquires or agrees to acquire not less than 90 per cent. of the shares (in value and by voting rights) to which the offer relates, any holder of shares to which the offer relates who has not accepted the offer may require the offeror to acquire his/her shares on the same terms as the takeover offer.

The offeror would be required to give any holder of shares notice of his/her right to be bought out within one month of that right arising. Sellout rights cannot be exercised after the end of the period of three months from the last date on which the offer can be accepted or, if later, three months from the date on which the notice is served on the holder of shares notifying them of their sellout rights. If a holder of shares exercises his/her rights, the offeror is bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.

6. SUBSTANTIAL SHAREHOLDERS AND INTERESTS AND DEALINGS

So far as is known to the Company as at 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus), the following persons were interested, directly or indirectly, in three per cent. or more of the Company's issued share capital or voting rights:

		Percentage interest
	Number of Existing	of issued ordinary
	Ordinary Shares	share capital
FMR LLC	22,559,483	9.82%
Old Mutual plc	15,786,879	6.87%
Artemis Investment Management LLP	8,117,983	3.53%

So far as is known to the Company, the following persons shall be interested, directly or indirectly, in three per cent. or more of the Company's issued share capital or voting rights immediately following Completion:

FMR LLC Old Mutual plc Dodge & Cox

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 three per cent. 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. Save for the Transaction, 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 Ordinary Shares they hold compared to other Shareholders of such class.

7. SUBSIDIARIES

The Company is the parent company of the Micro Focus Group and, following Completion, will be the parent company of the Enlarged Group. The table below contains a list of the principal subsidiaries, joint ventures and associates of the Company following Completion (each of which is considered by the Directors to be likely to have a significant effect on the assessment of the assets, liabilities, the financial position and/or the profits and losses of the Enlarged Group):

		Proportion of	Proportion
	Country of	ownership	of voting
Name	Incorporation	interest	power held
Attachmate Corporation	USA	100%	100%
Attachmate Group Australia Pty Limited	Australia	100%	100%
Attachmate Group Austria GmbH	Austria	100%	100%
Attachmate Group Belgium N.V.	Belgium	100%	100%
Attachmate Group Denmark A/S	Denmark	100%	100%
Attachmate Group France SARL	France	100%	100%
Attachmate Group Germany GmbH	Germany	100%	100%
Attachmate Group Hong Kong Limited	Hong Kong	100%	100%
Attachmate Group Italy Srl	Italy	100%	100%
Attachmate Group Netherlands BV	Netherlands	100%	100%
Attachmate Group Schweiz AG	Switzerland	100%	100%
Attachmate Group Singapore Pte Ltd	Singapore	100%	100%
Attachmate Group South Africa Proprietary Limited	South Africa	100%	100%
Attachmate Group Spain S.L.	Spain	100%	100%
Attachmate Group Sweden AB	Sweden	100%	100%
Attachmate Hong Kong	Hong Kong	100%	100%
Attachmate India Private Ltd.	India	100%	100%
Attachmate Ireland Limited	Ireland	100%	100%
Attachmate Middle East LLC	Egypt	100%	100%
Attachmate Sales Argentina SRL	Argentina	100%	100%
Attachmate Sales UK Limited	UK	100%	100%
Attachmate Teknoloji Satis ve Pazarlama Limited Sti.	Turkey	100%	100%
Authasas Advanced Authentication B.V.	Netherlands	100%	100%
Authasas B.V.	Netherlands	100%	100%
Borland (H.K.) Limited	Hong Kong	100%	100%
Borland (Holding) UK Ltd	UK	100%	100%
Borland (UK) Limited	UK	100%	100%
Borland (Singapore) Pte Ltd	Singapore	100%	100%
Borland Australia Pty Ltd	Australia	100%	100%

		Proportion of	Proportion
	Country of	ownership	of voting
Name	Incorporation	interest	power held
Borland B.V.	Netherlands	100%	100%
Borland Canada	Canada	100%	100%
Borland Co. Limited	Japan	100%	100%
Borland Corporation	USA	100%	100%
Borland Entwicklung GmbH	Austria	100%	100%
Borland France Sarl	France	100%	100%
Borland GmbH	Germany	100%	100%
Borland Latin America Ltda	Brazil	100%	100%
Borland Software (India) Private Limited	India	100%	100%
Borland Magyarorszag KFT	Hungary	5%	5%
Borland Software Corporation	USA	100%	100%
Borland Technology Corporation	USA	100%	100%
Cambridge Technology Partners (Mexico) SA de CV	Mexico	100%	100%
Cambridge Technology Partners do Brasil sc Ltda	Brazil	100%	100%
Cambridge Technology Partners India Private Limited	India	100%	100%
CJDNLD LLC	USA	100%	100%
CTP Services SA de CV	Mexico	100%	100%
GWAVA EMEA GmbH	Germany	100%	100%
GWAVA Technologies Inc.	USA	100%	100%
GWAVA, Inc.	Canada	100%	100%
M A Finance Co LLC	USA	100%	100%
Merant Holdings	UK	100%	100%
Miami Escrow Borrower LLC	USA	100%	100%
Micro Focus (Canada) Limited/Espace Micro Focus (Canada) Ltd	Canada	100%	100%
Micro Focus (IP) Holdings Limited	UK	100%	100%
Micro Focus (IP) Ireland Limited	Ireland	100%	100%
Micro Focus (IP) Limited	UK	100%	100%
Micro Focus (US) Group Inc	USA	100%	100%
Micro Focus (US) Holdings	UK	100%	100%
Micro Focus (US) Inc	USA	100%	100%
Micro Focus (US) International Holdings Inc.	USA	100%	100%
Micro Focus AG	Switzerland	100%	100%
Micro Focus APM Solutions Limited	UK	100%	100%
Micro Focus APM Solutions Limited (EOOD)	Bulgaria	100%	100%
Micro Focus AS	Norway	100%	100%
Micro Focus AS, Filial I Finland (Branch)	Finland	100%	100%
Micro Focus AS, Norge, filial I Sverige (Branch)	Sweden	100%	100%
Micro Focus CHC Limited	UK	100%	100%
Micro Focus Denmark, filial af Micro Focus AS, Norge	Denmark	100%	100%
Micro Focus Finance Ireland Ltd	Ireland	100%	100%
Micro Focus Finance Sarl	Luxembourg	100%	100%
Micro Focus GmbH	Germany	100%	100%
Micro Focus Group Holdings Unlimited Company	Ireland	100%	100%
Micro Focus Group Limited	UK	100%	100%
Micro Focus Holdings Limited	UK	100%	100%
Micro Focus India Private Limited	India	100%	100%
Micro Focus International Holdings Ltd	Ireland	100%	100%
Micro Focus International Limited	Cayman Islands	100%	100%
Micro Focus IP Development Limited	UK	100%	100%
Micro Focus IP Limited	Cayman Islands	100%	100%
Micro Focus Ireland Limited	Ireland	100%	100%

		Proportion of	Proportion
	Country of	ownership	of voting
Name	Incorporation	interest	power held
Micro Focus Israel Limited	Israel	100%	100%
Micro Focus KK	Japan	74.7%	74.7%
Micro Focus Korea Limited	South Korea	100%	100%
Micro Focus Limited	UK	100%	100%
Micro Focus Limited Hong Kong (Branch)	Hong Kong	100%	100%
Micro Focus Limited Mexico (Branch)	Mexico	100%	100%
Micro Focus MHC Limited	UK	100%	100%
Micro Focus Midco Limited	UK	100%	100%
Micro Focus Middle East FZ­LLC	Dubai	100%	100%
Micro Focus NV	Netherlands	100%	100%
Micro Focus Progamação De Computadores Ltda	Brazil	100%	100%
Micro Focus Pte Limited	Singapore	100%	100%
Micro Focus Pty Limited	Australia	100%	100%
Micro Focus S.L. – Sucursal Em Portugal (Branch)	Portugal	100%	100%
Micro Focus SA/NV	Belgium	100%	100%
Micro Focus SAS	France	100%	100%
Micro Focus SLU	Spain	100%	100%
Micro Focus Software (Ireland) Limited	Ireland	100%	100%
Micro Focus Software (Canada) Inc.	Canada	100%	100%
Micro Focus Software Inc.	USA	100%	100%
Micro Focus Software Indian Private Limited	India	100%	100%
Micro Focus South Africa (PTY) Ltd	South Africa	100%	100%
Micro Focus Srl	Italy	100%	100%
Micro Focus UK Limited	UK	100%	100%
Minerva Finance Sarl	Luxembourg	100%	100%
N.Y. NetManagement (Yerushalayim) Ltd.	Israel	100%	100%
Net IQ Asia Ltd	Hong Kong	100%	100%
NetIQ Corporation	USA	100%	100%
NetIQ Europe Limited	Ireland	100%	100%
NetIQ Ireland Limited	Ireland	100%	100%
NetIQ KK	Japan	100%	100%
NetIQ Limited	UK	100%	100%
NetIQ Software International Limited	Cyprus	100%	100%
NetManage Canada Inc.	Canada	100%	100%
Novell (Taiwan) Co. Ltd	Taiwan	100%	100%
Novell Cayman Software Unlimited Company	Ireland	100%	100%
Novell Cayman Software International Unlimited Company	Ireland	100%	100%
Novell Corporation (Malaysia) Sdn Bhd	Malaysia	100%	100%
Novell do Brasil Software Ltd.	Brazil	100%	100%
Novell Holding Deutschland GmbH	Germany	100%	100%
Novell Holdings Inc	USA	100%	100%
Novell India Pvt Ltd	India	100%	100%
Novell International Holdings Inc	USA	100%	100%
Novell Ireland Real Estate Limited	Ireland	100%	100%
Novell Israel Software Limited	Israel	100%	100%
Novell Japan Ltd	Japan	68.3%	68.3%
Novell Korea Co. Limited	Korea	100%	100%
Novell New Zealand Limited	New Zealand	100%	100%
Novell Portugal Informatica Lda.	Portugal	100%	100%
Novell Software (Beijing) Limited	China China	100% 100%	100% 100%
Novell Software (Beijing) Ltd. Shanghai Branch

		Proportion of	Proportion
	Country of	ownership	of voting
Name	Incorporation	interest	power held
Novell Software (Beijing) Ltd. Shenzhen Branch	China	100%	100%
Novell Software International Limited	Ireland	100%	100%
Novell UK Software Limited	UK	100%	100%
Novell U.K. Limited	UK	100%	100%
NOVL Czech s.r.o	Czech Republic	100%	100%
Relativity Technologies Private Limited	India	100%	100%
Ryan McFarland Limited	UK	100%	100%
Seattle Holdings, Inc	USA	100%	100%
Seattle MergerSub, Inc	USA	100%	100%
Serena Holdings	UK	100%	100%
Serena Software Benelux BVBA	Belgium	100%	100%
Serena Software Do Brasil Ltda	Brazil	100%	100%
Serena Software Europe Limited	UK	100%	100%
Serena Software Europe Ltd (India Branch)	India	100%	100%
Serena Software Europe Ltd (Italy Branch)	Italy	100%	100%
Serena Software Europe Limited (Korea Branch)	Korea	100%	100%
Serena Software GmbH	Germany	100%	100%
Serena Software Inc.	USA	100%	100%
Serena Software GmbH	Switzerland	100%	100%
Serena Software Japan KK	Japan	100%	100%
Serena Software Nordic AB	Sweden	100%	100%
Serena Software Pte. Ltd.	Singapore	100%	100%
Serena Software Pty Limited	Australia	100%	100%
Serena Software SA	Spain	100%	100%
Serena Software SAS	France	100%	100%
Serena Software Ukraine LLC	Ukraine	100%	100%
Singapore Micro Focus Pte. Ltd.	Singapore	100%	100%
Spartacus Acquisition Corp.	USA	100%	100%
Spartacus Acquisition Holdings Corp.	USA	100%	100%
SUSE Linux GmbH	Germany	100%	100%
SUSE Linux Holdings Limited (SLH)	Ireland	100%	100%
SUSE Linux Ireland Ltd	Ireland	100%	100%
SUSE Linux s.r.o	Czech Republic	100%	100%
SUSE LLC	USA	100%	100%
The Attachmate Group Inc	USA	100%	100%
UK Micro Focus Limited Beijing Representative Office	China	100%	100%
XDB (UK) Limited	UK	100%	100%
HPE Software subsidiaries
ArcSight, LLC	United States	100%	100%
Autonomy Australia Pty Limited	Australia	100%	100%
Autonomy Belgium BVBA	Belgium	100%	100%
Autonomy Digital Limited	United Kingdom	100%	100%
Autonomy HoldCo BV	Netherlands	100%	100%
Autonomy Italy Srl	Italy	100%	100%
Autonomy Netherlands BV	Netherlands	100%	100%
Autonomy Software Asia Private Limited	India	100%	100%
Autonomy Systems (Beijing) Limited Company	China	100%	100%
Autonomy Systems (Canada) Ltd.	Canada	100%	100%
Autonomy Systems Australia Pty Limited	Australia	100%	100%
Autonomy Systems Limited	United Kingdom	100%	100%
Autonomy Systems Singapore Pte Ltd	Singapore	100%	100%

		Proportion of	Proportion
	Country of	ownership	of voting
Name	Incorporation	interest	power held
Autonomy Systems Software South Africa	South Africa	100%	100%
Entco Andromeda LLC	United States	100%	100%
Entco Australia Pty Ltd	Australia	100%	100%
Entco Belgium BVBA	Belgium	100%	100%
Entco Bellatrix Holdco	Cayman Islands	100%	100%
Entco Brasil Servicos de Tecnologia Ltda.	Brazil	100%	100%
Entco Brazil Holdings LLC	United States	100%	100%
Entco Bulgaria EOOD	Bulgaria	100%	100%
Entco Capital Co	Cayman Islands	100%	100%
Entco Caribe B.V.	Netherlands	100%	100%
Entco Caribe B.V. LLC (Branch)	Puerto Rico	100%	100%
Entco CentroAmerica CAC, Ltda.	Costa Rica	100%	100%
Entco Costa Rica Ltda.	Costa Rica	100%	100%
Entco Delaware LLC	United States	100%	100%
Entco Denmark ApS	Denmark	100%	100%
Entco Deutschland GmbH	Germany	100%	100%
Entco Draco BV	Netherlands	100%	100%
Entco Eastern Holding B.V.	Netherlands	100%	100%
Entco Eastern Holding II B.V.	Netherlands	100%	100%
Entco Enterprise B.V.	Netherlands	100%	100%
Entco Enterprise B.V., Amstelveen, Meyrin Branch	Switzerland	100%	100%
Entco Field Delivery Spain S.L.U.	Spain	100%	100%
Entco Foreign HoldCo Ltd.	United Kingdom	100%	100%
Entco France SAS	France	100%	100%
Entco Gatriam Holding B.V.	Netherlands	100%	100%
Entco Government Software LLC	United States	100%	100%
EntCo HoldCo BV	Netherlands	100%	100%
Entco HoldCo I B.V.	Netherlands	100%	100%
Entco HoldCo II B.V.	Netherlands	100%	100%
Entco HoldCo III B.V.	Netherlands	100%	100%
Entco HoldCo IV B.V.	Netherlands	100%	100%
Entco Holding Berlin B.V.	Netherlands	100%	100%
Entco Holding Finance B.V.	Netherlands	100%	100%
Entco Holding Hague B.V.	Netherlands	100%	100%
Entco Holding Hague II BV	Netherlands	100%	100%
Entco Holdings L.P.	Bermuda	100%	100%
Entco Holdings, Inc.	United States	100%	100%
Entco Interactive (Israel) Ltd	Israel	100%	100%
Entco International Sàrl	Switzerland	100%	100%
Entco International Sarl, Jebel Ali Free Zone Branch	United Arab Emireates	100%	100%
Entco International Sarl, Abu Dhabi Branch	United Arab Emirates	100%	100%
Entco International Trade, B.V.	Netherlands	100%	100%
Entco Investment Co	Cayman Islands	100%	100%
Entco IT Services Private Limited	India	100%	100%
Entco Italiana S.r.l.	Italy	100%	100%
Entco Japan, Ltd.	Japan	100%	100%
Entco Luxembourg S.a.r.l.	Luxembourg	100%	100%
Entco Marigalante Ltd.	Cayman Islands	100%	100%
Entco Mexico, S. de R.L. de C.V.	Mexico	100%	100%
Entco MS, Inc.	United States	100%	100%
Entco Nederland B.V.	Netherlands	100%	100%

		Proportion of	Proportion
	Country of	ownership	of voting
Name	Incorporation	interest	power held
Entco Polska sp. z o.o.	Poland	100%	100%
Entco Puerto Rico B.V.	Netherlands	100%	100%
Entco Puerto Rico B.V. LLC (Branch)	Puerto Rico	100%	100%
Entco Schweiz GmbH	Switzerland	100%	100%
Entco Singapore (Sales) Pte. Ltd.	Singapore	100%	100%
Entco Sinope Holding B.V.	Netherlands	100%	100%
Entco Situla Holding Ltd	United Kingdom	100%	100%
Entco Software Canada Co. Logiciels Entco Canada Cie	Canada	100%	100%
Entco Software India Pvt Ltd	India	100%	100%
Entco Software Malaysia Sdn. Bhd.	Malaysia	100%	100%
Entco Software México, S. de R.L. de C.V.	Mexico	100%	100%
Entco Software Pte. Ltd.	Singapore	100%	100%
Entco Software Romania SRL	Romania	100%	100%
Entco Software Services Middle East, FZ LLC	United Arab Emirates	100%	100%
EntCo Software Spain S.L.U.	Spain	100%	100%
Entco Sverige AB	Sweden	100%	100%
Entco Technologies, Inc.	United States	100%	100%
Entco Turkey Teknoloji Çözümleri Limited Şirketi	Turkey	100%	100%
Entco, LLC	United States	100%	100%
Entcorp Canada, Inc	Canada	100%	100%
Entcorp Czechia, s.r.o.	Czech Republic	100%	100%
Entcorp Marigalante UK Ltd.	United Kingdom	100%	100%
Entcorp Nederlands B.V.	Netherlands	100%	100%
Entcorp Philippines, Inc	Philippines	100%	100%
Entcorp Software Israel Ltd.	Israel	100%	100%
Entcorp Software México, S. de R.L. de C.V.	Mexico	100%	100%
Entcorp UK Ltd.	United Kingdom	100%	100%
Enterprise Corp Italiana S.r.l.	Italy	100%	100%
EntIT Software LLC	United States	100%	100%
Entsoft Galway Limited	Ireland	100%	100%
Ensoft Holding Ireland Unlimited Company	Ireland	100%	100%
Entsoft Ireland Limited	Ireland	100%	100%
Interwoven Australia Pty Limited	Australia	100%	100%
Entcorp Hong Kong Limited	Hong Kong	100%	100%
Interwoven Inc. – India Branch	India	100%	100%
Interwoven UK Ltd.	United Kingdom	100%	100%
Interwoven Inc., Taiwan Branch	Taiwan	100%	100%
Entcorp Japan KK	Japan	100%	100%
Limited Liability Company Entco	Russian Federation	100%	100%
Longsand Limited	United Kingdom	100%	100%
Mercury Interactive (Singapore) Pte. Ltd.	Singapore	100%	100%
Meridio Limited	United Kingdom	100%	100%
MicroLink LLC	United States	100%	100%
Peregrine Systems do Brazil Limitada	Brazil	100%	100%
Seattle Escrow Borrower LLC	United States	100%	100%
Seattle SpinCo, Inc.	United States	100%	100%
Shanghai Entco Software Technology Co., Ltd.	China	100%	100%
Shanghai Entco Software Technology Co., Ltd., Beijing Branch	China	100%	100%
Shanghai Entco Software Technology Co., Ltd., Chongqing Branch China		100%	100%
Shanghai Entco Software Technology Co., Ltd., Shenzhen Branch	China	100%	100%
Stratify, Inc.	United States	100%	100%

		Proportion of	Proportion
	Country of	ownership	of voting
Name	Incorporation	interest	power held
Trilead GmbH	Switzerland	100%	100%
Verity Benelux B.V.	Netherlands	100%	100%
Verity GB Limited	United Kingdom	100%	100%
Verity Italia S.r.l.	Italy	100%	100%
Verity Luxembourg S.à r.l.	Luxembourg	100%	100%
Verity Worldwide Ltd	British Virgin Islands	100%	100%
Vertica Systems LLC	United States	100%	100%
Voltage Security International, Inc.	United States	100%	100%
Voltage Security Limited	United Kingdom	100%	100%
Zantaz UK Limited	United Kingdom	100%	100%

The Company currently has no principal investments (in progress or planned for the future on which the Directors have made firm commitments or otherwise) other than the subsidiaries and subsidiary undertakings listed above.

8. MICRO FOCUS GROUP SHARE PLANS

The Micro Focus Group currently operates the following employee share plans:

• the LTIP;
• the ASG Programme;
• the Leadership Plan;
• the Sharesave Scheme;
• the Sharesave Plan 2010;
• the Ireland Sharesave Scheme;
• the ESPP; and
• the DSBP.

Prior to the Completion Date, Seattle SpinCo will adopt a plan for the purposes of assuming HPE awards.

The LTIP

In April 2005, prior to the Company's admission to the London Stock Exchange, the Company adopted the LTIP. The LTIP was amended by the Shareholders on 25 September 2014 to extend the LTIP until 27 April 2025. The LTIP provides a flexible framework to allow the Company to make awards of free Ordinary Shares, in the form of nilcost options, conditional awards or forfeitable shares, or to grant market value options over Ordinary Shares ("Awards"). Market value options may be designated as tax favoured options and granted pursuant to Schedule 4 to the Income Tax (Earning and Pensions) Act 2003 (options with particular income tax relief on exercise).

Awards may be granted to employees of the Micro Focus Group and certain associated companies and Directors. Currently, the Company's ongoing policy is to make annual awards of nilcost options to the Executive Directors and other members of the senior management team, and market value options or options with a nominal exercise price to other senior and key employees.

The LTIP can be summarised as follows:

(a) Eligibility

All employees (including Executive Directors) of the Micro Focus Group are eligible to participate in the LTIP. Unless the Remuneration Committee decides otherwise, Awards may not be granted to an employee who, on the Award date, has given or received notice of termination of employment.

(b) Awards

The Remuneration Committee must approve all Awards to be made under the LTIP.

The number of Ordinary Shares subject to an Award will be determined by reference to the number of Ordinary Shares already held or purchased by a participant, or the gross equivalent of an amount invested by or on behalf of a participant in Ordinary Shares.

Awards may generally only be made within 42 days following the announcement of the Company's results for any period or the date of the Company's AGM. The Remuneration Committee may, however, grant Awards at other times in exceptional circumstances.

Awards cannot be granted after 27 April 2025.

(c) Performance conditions and vesting

Awards are normally subject to performance conditions, determined by the Remuneration Committee for each Award. Performance conditions must be objective and must be specified at the date of the Award and may provide that an Award will lapse to the extent they are not satisfied.

However, Awards made on an allemployee basis may not be subject to performance conditions.

The Remuneration Committee determines, at the end of the relevant performance period, whether and to what extent any performance condition has been satisfied and how many Ordinary Shares vest for each Award.

If no performance conditions are set, the Awards will vest on the third anniversary of the Award date.

(d) Personal Limits

The maximum aggregate value of Awards in any financial year under the LTIP to an employee will not exceed two times annual base salary. For these purposes, the value of the Awards is deemed to be equal to the market value of free Ordinary Shares at the time of Award or in the case of market value options, 50 per cent. of the market value of Ordinary Shares under option at the time of Award. This limit may be exceeded only where the Remuneration Committee determines that there are exceptional circumstances.

(e) LTIP limits

In any 10year period, not more than 10 per cent. of the issued ordinary share capital of the Company may be issued or be issuable under any employee share plans operated by the Company (including, for the avoidance of doubt, the ASGs). These limits do not include rights to Ordinary Shares which have lapsed or been surrendered or those granted before the Company was listed on the Official List and admitted to trading on the London Stock Exchange.

(f) Treasury shares and share appreciation rights

Rights under the LTIP may be satisfied using treasury shares. If such treasury shares are used the Company will, so long as required under the Investment Association Principles of Remuneration, count them towards the dilution limits set out above. In addition, the Shareholders have approved a resolution allowing the Company to satisfy option Awards via the use of share appreciation rights. This is intended to allow the Company additional flexibility to manage dilution. Consistent with the Investment Association Principles of Remuneration, all the Ordinary Shares potentially subject to an outstanding Award will count towards the dilution limits until such time as a smaller number of Ordinary Shares are actually issued on exercise.

(g) Leaving employment

Generally an Award will lapse on the date a person holding an Award ceases to be an employee or member of the Micro Focus Group. Ordinary Shares may be acquired early if an employee leaves employment due to redundancy, ill health, injury or disability, death, retirement at normal retirement age or early retirement with the agreement of the Company, a sale of the employee's employing business or company or any other reason if the Remuneration Committee so decides. The number of Ordinary Shares will also be reduced pro rata to take account of the period between the start of the performance period and the date of leaving as a proportion of the whole performance period. The number of Ordinary Shares will also depend on the extent to which the performance conditions have been satisfied.

(h) Takeovers and restructurings

On a takeover, scheme of arrangement, merger or certain other corporate reorganisations, Awards will normally vest to the extent that any performance conditions are then satisfied and the number of Ordinary Shares acquired will be reduced pro rata to reflect the early vesting of the Awards.

(i) Adjustment of Awards on a variation of share capital

Awards may be adjusted following a rights issue or certain variations in share capital including capitalisations, subdivisions, consolidations or reductions of capital.

(j) Tax

The Company or any employing company of the Micro Focus Group may withhold such amount and make such arrangements as it considers necessary to meet any liability to taxation or social security contributions in respect of an Award, including the sale of Ordinary Shares on behalf of a participant.

A participant must, if required by the Company, enter into an election to transfer to it the liability to employer's national insurance contributions in respect of an Award.

(k) Amendments to the rules of the LTIP

Provisions relating to eligibility, individual and dilution limits, option price, rights attaching to Awards and Ordinary Shares, adjustment of Awards and other rights in the event of a variation in share capital and the amendment powers cannot be altered to the advantage of participants without the prior approval of the Shareholders in general meeting.

However, Shareholder approval is not required for minor changes intended to benefit the administration of the LTIP, or to comply with or take account of existing or proposed legislation or any changes in legislation, or to secure or maintain favourable tax exchange control or regulatory treatment for the Company, members of the Micro Focus Group or participants.

(l) Malus and Clawback

Awards granted to Executive Directors from July 2016 are subject to malus and clawback provisions which provide that, at any time before an Award vests, the number of Ordinary Shares that would otherwise vest shall be reduced (to nil if appropriate) ("Malus"), or within two years of the vesting of the Award, the vested Award shall be repaid in whole or in part ("Clawback"), or the vesting of an Award may be delayed if there is an ongoing investigation or other procedure being carried on to determine whether circumstances exist that may warrant Malus or Clawback.

Malus and/or Clawback may apply as a result of: (i) in the reasonable opinion of the Remuneration Committee, there is any material misstatement in the audited consolidated accounts of the Micro Focus Group or any member of the Micro Focus Group; (ii) any error in the calculation of the extent of vesting of any Award; (iii) the participant's actions or conduct having, in the reasonable opinion of the Remuneration Committee, amounted to fraud or gross misconduct; (iv) the participant's conduct during the applicable vesting period having, in the reasonable opinion of the Remuneration Committee, caused serious harm to the reputation of the Micro Focus Group and/or significant financial loss to any member of the Micro Focus Group; or (v) in the reasonable opinion of the Remuneration Committee, a material failure of risk management which caused serious harm to the reputation of the Micro Focus Group.

(m) General

Awards granted under the LTIP are not transferable (except with the consent of the Remuneration Committee).

Any Ordinary Shares issued in the LTIP will rank equally with Ordinary Shares of the same class in issue on that date of allotment, except in respect of rights arising by reference to a prior record date.

The laws of England and Wales govern the LTIP and all Awards.

ASG Programme

In October 2014, the ASG Programme was adopted by the Company in connection with the acquisition by the Micro Focus Group of the Attachmate Group and provided for the grant of share based awards in the form of nil cost options (an "ASG") to certain Executive Directors and senior managers of the Micro Focus Group. On 22 September 2016, Shareholders approved the implementation of the ASG Programme in respect of further grants thereunder.

The ASG Programme can be summarised as follows:

(a) Eligibility

All employees (including any officer or director) of any company within the Micro Focus Group are eligible to receive an ASG, however, participation is at the discretion of the Remuneration Committee. ASGs are only awarded in relation to a material acquisition (by whatever means) of an entity or business by the Micro Focus Group.

(b) Awards

ASGs are nil cost options over Ordinary Shares.

(c) Performance condition and vesting

ASGs become exercisable, subject to the satisfaction of the performance condition (see below) on the third anniversary of the date of grant or such earlier date as shall be determined by the Remuneration Committee (the "Vesting Date") and will remain exercisable until the tenth anniversary of the date of grant. If the ASGs are not exercised within the 30 days ending on the tenth anniversary of the date of grant because of any regulatory restrictions, the ASGs may be exercised within 14 days of such restrictions ceasing to apply.

The performance condition is that the percentage of Ordinary Shares subject to the ASG which may be acquired on exercise on or after the Vesting Date is as follows:

• (i) 0 per cent. if the Shareholder Return Percentage (as defined below) is 50 per cent. or less;
• (ii) 100 per cent. if the Shareholder Return Percentage is 100 per cent. or more; and
• (iii) a percentage determined on a straightline basis between (i) and (ii) above.

The "Shareholder Return Percentage" is calculated by deducting a "Reference Price" (fixed at, or following, the commencement of discussions relating to the relevant transaction) from the sum of the "Vesting Price" (calculated as the average closing share price over the period of 20 days ending on the day prior to the Vesting Date) plus the total of all dividends per share between the date of grant and the Vesting Date. This is divided by the Reference Price and the resulting figure multiplied by 100 to obtain the Shareholder Return Percentage.

Holders of ASGs are required, subject to holding employment or a directorship with any member of the Micro Focus Group on the Vesting Date, to hold the ASGs or the Ordinary Shares acquired on exercise for a minimum of 12 months following the Vesting Date.

The Company reserves the right to settle all or part of the ASGs in cash (calculated on the basis of the average closing Ordinary Share price for the 20 day period ending on the date of exercise). If the Ordinary Shares are not listed the cash amount shall be the greater of such value as the Remuneration Committee in its sole discretion shall determine acting fairly and reasonably or the average closing Ordinary Share price over the last 20 days on which Ordinary Shares were traded multiplied by the number of Ordinary Shares subject to the ASGs, whichever is the greater.

(d) Individual and dilution limits

The number of Ordinary Shares issued or issuable pursuant to ASGs granted pursuant to a single ASG programme may not exceed 2.5 per cent. of the issued Ordinary Share capital of the Company at the time of completion of the relevant acquisition. Within this limit, the number of Ordinary Shares that can be awarded to any individual under the relevant ASG programme may not exceed 0.5 per cent. of the issued Ordinary Share capital of the Company at the time of completion of the relevant acquisition. The ASG programme will also be contained within the overall limit on dilution which provides that in any 10 year period, not more than 10 per cent. of the issued ordinary share capital of the Company may be issued or be issuable under any employee share plans operated by the Company. These limits do not include rights to Ordinary Shares which have lapsed or been surrendered or those granted before the Company was listed on the Official List and admitted to trading on the London Stock Exchange.

(e) Leaving employment

The "leaver provisions" attaching to ASGs may be no more favourable for holders of ASGs (although may be less favourable at the discretion of the Remuneration Committee) than the terms set out in this section. If the employment of a holder of an ASG ceases before the Vesting Date:

• (i) as a result of the individual's voluntary resignation, the ASG will lapse. However, the Remuneration Committee may determine in its discretion that the ASG will become exercisable in part or in whole on the normal Vesting Date;
• (ii) as a result of the individual's material breach of contract, gross misconduct or gross incompetence, the ASG will lapse. However, the Remuneration Committee may determine in its discretion that the ASG will become exercisable in part or in whole on the normal Vesting Date;
• (iii) as a result of the individual being fairly dismissed within the meaning of Part XI of the Employment Rights Act 1996 for a reason other than one within (ii) above and other than that which would amount to a dismissal under clause 95(1)(c) of the Employment Rights Act 1996, the ASG will become exercisable on the normal Vesting Date for a period of six months. The percentage of Ordinary Shares subject to the ASG which may be acquired on exercise (subject also to the application of the performance condition) in these circumstances depends on the date on which the employment or directorship ceases (the "Termination Date"). The relevant percentage is 0 per cent. if the Termination Date is within six months of the date of grant, and 50 per cent., 70 per cent. or 90 per cent. if the Termination Date is on or before the first, second or third anniversary of the date of grant respectively; and
• (iv) in all other circumstances, the ASG will vest, subject to the performance condition referred to above, and become exercisable on the normal Vesting Date for a period of six months.

(f) Takeovers and restructurings

On a takeover, scheme of arrangement, or disposal of a business or assets contributing to 75 per cent. or more of the Company's turnover or on a change of control of the Company (in each case other than as a result of an internal reorganisation) prior to the Vesting Date, the ASGs will not automatically vest in full but instead the extent to which they vest will (i) be time apportioned (reflecting the time elapsed between the effective date of grant to the date of any change of control as a proportion of the normal vesting period of three years) and (ii) be subject to satisfaction of any performance conditions.

(g) Adjustment of awards on a variation of share capital

In the event of a capitalisation issue, rights issue or open offer, subdivision or consolidation of shares or reduction of capital or any other variation of capital/or demerger of all or part of the Company's business the ASGs will be adjusted to ensure that it delivers the value originally contemplated.

(h) Amendments to the ASGs

Provisions relating to:

• (i) the persons to whom, or for whom, securities, cash or other benefits are provided under the ASGs;
• (ii) limitations on the number or amount of the securities, cash or other benefits subject to the scheme;
• (iii) the maximum entitlement for any one participant; and
• (iv) the basis for determining a participant's entitlement to, and the terms of, securities, cash or other benefits to be provided and for the adjustment thereof (if any) if there is a capitalisation issue, rights issue or open offer, subdivision or consolidation of shares or reduction of capital or any other variation of capital, cannot be altered to the advantage of participants without the prior approval of Shareholders in general meeting (except for minor amendments to benefit the administration of the programme, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants in the programme or for any member of the Micro Focus Group).

(i) Tax

Exercise is conditional on the holder of the ASG providing relevant members of the Micro Focus Group with sufficient funds, or appropriate deductions being made by the Company (including through the sale of Ordinary Shares) to meet any withholding liability of any members of the Micro Focus Group.

(j) Malus and clawback

The Remuneration Committee will have discretion to include a malus and clawback clause to the effect that malus may be applied up to the Vesting Date and clawback may be applied during the 12 month period post the Vesting Date in the case of a material misstatement of the financial statements in respect of the performance period.

(k) General

ASGs are not transferable and are governed by the laws of England and Wales. Benefits provided under the ASGs are not pensionable.

The Leadership Plan

The Leadership Plan was adopted by the Board on 5 December 2007 and amended by the Remuneration Committee on 21 June 2011.

The terms of the Leadership Plan are identical to the terms of the LTIP, except for minor changes to benefit the administration of the plan and the changes summarised below:

(a) Eligibility

Directors are not eligible to participate in the Leadership Plan.

(b) Awards

Awards may be granted at any time, subject to any restrictions under applicable law and regulations. Awards may not be settled using newly issued or treasury shares.

Market value options over Ordinary Shares cannot be granted under the Leadership Plan. The Leadership Plan does not provide for the grant of tax advantaged options to UK taxpayers.

The Remuneration Committee may determine that no performance condition should attach to an award under the Leadership Plan.

(c) Limits

The Remuneration Committee may determine, from time to time, limits applicable to the Leadership Plan.

(d) Leaving Employment

Ordinary Shares may be acquired early due to retirement with the agreement of the Company.

(e) Amendments to the rules of the Leadership Plan

The Remuneration Committee may amend the Leadership Plan by resolution, provided that any amendment to the material disadvantage of participants (other than a minor change to a performance condition) must be approved by a majority of participants.

Sharesave Scheme

In July 2006, the Company adopted the Sharesave Scheme. The Sharesave Scheme is an allemployee tax favoured plan intended to meet the requirements of Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003. The Sharesave Scheme was amended by the Shareholders on 24 September 2015 to extend the Sharesave Scheme until 24 July 2026.

Under the Sharesave Scheme, UK employees of the Micro Focus Group are eligible to receive options to acquire Ordinary Shares at a discount of up to 20 per cent. of the market value of Ordinary Shares at the date of grant. Participants enter into a savings contract with a savings provider for a specified period determined at the outset by the Company. At the end of the savings period, the savings can be used to exercise the option and acquire Ordinary Shares or the cash can be refunded to the participant. If options are exercised, then provided the Sharesave Scheme remains approved by HM Revenue & Customs at that time, no income tax is chargeable on any gain made on exercise.

No performance conditions apply to the grant or exercise of options under the Sharesave Scheme.

The Sharesave Scheme can be summarised as follows:

(a) Eligibility

All employees of the Micro Focus Group who are subject to UK income tax are eligible to participate in the Sharesave Scheme provided they have met a qualifying period of service and do not have material interest in the Company. Directors who work at least 25 hours per week are also eligible to participate in the Sharesave Scheme.

(b) Limits

No option may be granted in any calendar year which would, at the time it is granted, cause the number of Ordinary Shares allocated on or after 17 May 2005 and in the prior ten years under the Sharesave Scheme or any other employee share plan adopted by the Company to exceed such number as represents ten per cent. of the issued ordinary share capital of the Company at that time.

(c) Exercise of options

Options are normally exercisable for a period of six months following the expiry of the relevant savings period. If options have not been exercised during that six month period, they lapse.

The exceptions to this rule are if an employee dies or ceases employment due to injury, disability, redundancy, retirement or transfer out of the Micro Focus Group or if there is a takeover or other corporate restructuring. In these circumstances, options become exercisable for a defined period following such event happening notwithstanding the savings period may not have expired.

(d) Amendments to the rules of the Sharesave Scheme

Certain amendments to the Sharesave Scheme to the advantage of an option holder require prior approval by ordinary resolution of the Shareholders in general meeting. Other minor amendments require Board approval.

(e) General

Benefits provided under the Sharesave Scheme are not pensionable. English law governs the Sharesave Scheme and all options granted under it.

International Sharesave Scheme

The International Sharesave Scheme was adopted by the Board on 5 August 2010 as a subplan to the Sharesave Scheme. The terms of the International Sharesave Scheme are identical to the terms of the Sharesave Scheme, except for minor changes to benefit the administration of the plan and changes relating to the lack of a requirement for approval from HM Revenue & Customs.

Ireland Sharesave Scheme

The Ireland Sharesave Scheme was adopted by the Board on 5 August 2010 as a subplan to the Sharesave Scheme. The terms of the Ireland Sharesave Scheme are identical to the terms of the Sharesave Scheme, except for minor changes to obtain favourable tax treatment for participants (including to provide for approval of the Ireland Sharesave Scheme by the Revenue Commissioners of Ireland).

ESPP

In July 2006, the Company adopted the ESPP for employees of the Micro Focus Group based in the US and Canada. The ESPP was amended by the Shareholders on 24 September 2015 to extend to ESPP until 24 July 2026. The ESPP operates in a broadly similar way to the Sharesave Scheme in that options are granted by the Company to acquire Ordinary Shares at a discount to the fair market value using savings accumulated over a defined period) but with some differences.

The ESPP is intended to constitute an "employee stock purchase plan" within the meaning of section 423(b) of the Code. This means that awards made under the ESPP qualify for favourable tax treatment in the United States.

(a) Eligibility

All employees (including any officer or director) of any Micro Focus Group company are eligible to participate in the ESPP, provided they have met a qualifying period of employment as determined by the ESPP committee.

(b) Dilution limits

No option may be granted in any calendar year which would, at the time it is granted, cause the number of Ordinary Shares allocated on or after 17 May 2005 and in the prior ten years under the ESPP or any other employee share plan adopted by the Company to exceed such number as represents ten per cent. of the issued ordinary share capital of the Company at that time.

In addition, unless increased with the approval of the Shareholders, the maximum number of Ordinary Shares that may be issued pursuant to the ESPP is 29,922,924 Ordinary Shares.

(c) Offer periods and exercise of options

Participants are granted an option to acquire a specified number of Ordinary Shares at a specified option price using proceeds saved through payroll deductions over a period of 24 months, or such other period determined by the ESPP committee. The period of the offer may not exceed 27 months unless the option price is determined by reference to the fair market value of an Ordinary Share at the date of exercise of the option, in which case the offer period may not exceed 60 months.

At the end of the payroll period, the amount authorised is deducted from the pay of each participant and held to the credit of the participant by the Company as part of its general funds and may, at the discretion of the Company, accrue interest.

At the end of the offer period, participants decide to either use the proceeds saved to exercise the option and acquire Ordinary Shares, or to elect to have the savings (and any applicable interest) refunded.

On a takeover or other corporate restructuring, options may be exercised within one month of notification of the event happening, following which the option shall lapse.

(d) Individual limits

Shareholders holding or deemed to hold five per cent. or more of Ordinary Shares (including Ordinary Shares held under options) are ineligible to participate in the ESPP.

No employee shall be granted an option under the ESPP if such grant would allow the employee to acquire in any calendar year, under the ESPP and any other employee share purchase plan, Ordinary Shares with an aggregate fair market value in excess of US\$25,000.

(e) Option price

The option price is determined by the ESPP committee but shall be not less than the lower of 85 per cent. of the fair market value of an Ordinary Share on the date of grant of the option and 85 per cent. of the fair market value of an Ordinary Share on the date of exercise of the option.

(f) Amendments to the rules of ESPP

Certain amendments to the ESPP to the advantage of an option holder require prior approval by ordinary resolution of the Shareholders in general meeting. Other minor amendments require Board approval.

(g) Governing law

English law governs the ESPP to the extent not preempted by US federal law (including the Code).

The DSBP

Effective from the financial year ended 30 April 2016 for all Executive Directors there is a mandatory conversion of onethird of any cash bonus earned into awards over Ordinary Shares subject to the terms of the DSBP. Kevin Loosemore is exempt as his annual bonus has been 150 per cent. since 2011, and its treatment was covered in his service contract which predates the Remuneration Policy. The terms of the DSBP can be summarised as follows:

(a) Eligibility

All employees (including Executive Directors) of the Micro Focus Group are eligible to participate in the DSBP. Awards may not be granted to an employee who, on the Award date, has given or received notice of termination of employment. Awards granted to Executive Directors will be granted in accordance with the published remuneration policy of the Company at the time of grant (as amended from time to time).

(b) Awards

An award under the DSBP can comprise an option to acquire Ordinary Shares, a conditional right to receive Ordinary Shares or an award of Ordinary Shares that must be given back if the award lapses.

Awards can be granted at any time.

(c) Vesting

Awards will normally vest in full after three years, subject to continued employment with the Company.

(d) Personal Limits

The maximum market value of Shares over which an award may be granted to any employee in respect of any financial year of the Company shall not exceed the total cash value of the bonus that has been deferred by the same employee in respect of the same financial year in order to become eligible to receive the awards under the DSBP.

(e) Source of shares

Awards under the DSBP will be satisfied by the transfer of existing Ordinary Shares (other than treasury shares) or ADSs that represent existing Ordinary Shares.

(f) Leaving employment

An award under the DSBP will lapse on the date a person holding an award ceases to be an employee of the Micro Focus Group. However, if the award holder ceases to be an employee of the Micro Focus Group by reason of redundancy, illhealth, injury or disability, death, retirement, a sale of the award holder's employing business or company or any other reason if the Remuneration Committee so decides, then (except where cessation occurs within 12 months of the award date, unless the Remuneration Committee determines otherwise) the award will not lapse but will vest on the date of cessation of employment and the number of Ordinary Shares in respect of which the award vests shall be reduced pro rata to reflect the early vesting of the award.

(g) Takeovers and restructurings

On a takeover, scheme of arrangement, demerger or certain other corporate reorganisations, awards under the DSBP will normally vest and, unless the Remuneration Committee determines otherwise, the number of Ordinary Shares in respect of which an award vests shall be reduced pro rata to reflect the early vesting of the award.

(h) Adjustment of awards on a variation of share capital

Awards may be adjusted following a rights issue or certain variations in share capital including capitalisations, subdivisions, consolidations or reductions of capital.

(i) Tax

The Company or any member of the Micro Focus Group may withhold such amount and make such arrangements as it considers necessary to meet any liability to taxation or social security contributions that arises in respect of an award, including the sale of Ordinary Shares on behalf of a participant.

A participant must, if required to do so, enter into an election to transfer the liability to employer's national insurance contributions in respect of an award.

(j) Amendments to the rules of the DSBP

The Remuneration Committee may amend the terms of the DSBP by resolution. However, no alteration can be made to the material disadvantage of participants in respect of existing awards unless a majority of relevant participants indicate that they approve the alteration.

(k) Malus and Clawback

Awards granted to Executive Directors are subject to Malus and Clawback on substantially the same terms as summarised in respect of the LTIP, save that the Remuneration Committee may operate 'Clawback' within one year of the vesting of an award only.

(l) General

The laws of England and Wales govern all awards under the DSBP.

Seattle SpinCo Plan

Seattle SpinCo expects to establish the Seattle SpinCo 2017 Share Incentive Plan (the "Seattle SpinCo Plan") under which converted awards in the form of share awards (the "Converted Awards") will be granted. Converted Awards are awards issued to satisfy the automatic adjustment and conversion of awards with respect to HPE Shares into awards with respect to the number of Ordinary Shares (or ADSs) contemplated by the Employee Matters Agreement in connection with the Transaction. The Seattle SpinCo Plan will be effective as of immediately prior to Completion. The Seattle SpinCo Plan is to be adopted by the Seattle SpinCo Board and is subject to the approval of the sole stockholder of Seattle SpinCo prior to its effective date. The Seattle SpinCo Plan will continue in effect for a term of ten years from the date of the approval of the sole stockholder of Seattle SpinCo.

(a) Eligibility

Awards may be made under the Seattle SpinCo Plan to employees. The Administrator (as defined below), in its discretion, will select the employees to whom grants may be made, the time or times at which grants are made, and the terms of the grants.

(b) Administration

The Seattle SpinCo Plan may be administered by the Seattle SpinCo Board, a committee appointed by the Seattle SpinCo Board or its delegate (as applicable, the "Administrator").

(c) Shares Available

The Seattle SpinCo Plan authorises the delivery of shares, which number shall be reduced to reflect such actual number of HPE Shares subject to the Converted Awards as of immediately prior to Completion. The shares subject to the Seattle SpinCo Plan will include Seattle SpinCo Shares and, with respect to Converted Awards assumed in connection with the Merger that are settled following Completion, Ordinary Shares (or ADSs). With respect to Converted Awards, following Completion, the Ordinary Shares (or ADSs) issued pursuant to the Seattle SpinCo Plan will be fully paid and, to the extent permitted by the laws of England and Wales, will be made available from Ordinary Shares (or ADSs) acquired by or gifted to Seattle SpinCo, newly allotted and issued Ordinary Shares (or ADSs), or Ordinary Shares (or ADSs) acquired by or issued or gifted to the trustee of an employee benefit trust established by the Company.

(d) Converted Awards

Converted Awards will be governed by the provisions of the original HPE award agreement applicable to such award, except as modified under the Seattle SpinCo Plan to conform to the requirements of the Companies Act 2006 and to permit issuance of Ordinary Shares (or ADSs) to employees in satisfaction of awards following Completion.

(e) Terms and Conditions of Share Grants

Each share grant agreement will contain provisions regarding (1) the number of Ordinary Shares (or ADSs) subject to the share grant or a formula for determining that number, (2) the purchase price of the Ordinary Shares (or ADSs), if any, and the means of payment for the Ordinary Shares (or ADSs), (3) the performance criteria, if any, and level of achievement versus these criteria that will determine the number of Ordinary Shares (or ADSs) granted, issued, transferred, retainable or vested, as applicable, (4) the terms and conditions on the grant, issuance, transfer, and forfeiture of the Ordinary Shares (or ADSs), as applicable, as may be determined by the Administrator, (5) restrictions on the transferability of the share grant, and (6) any further terms and conditions, in each case not inconsistent with the Seattle SpinCo Plan and applicable law, as may be determined by the Administrator.

(f) Termination of Employment

In the case of share grants, including share units, unless the Administrator determines otherwise, the restricted share or restricted share units will be forfeited upon the grantee's termination of employment for any reason.

(g) Vesting

The vesting of a share grant may be subject to performance criteria, continued service of the grantee, or both, as determined by the Administrator.

(h) Dividends

The Administrator may provide that dividends will accrue in respect of unvested share grants (including share units) and be paid in connection with the vesting of the grants. However, under no circumstances will accrued dividends be paid in connection with unvested share grants (including share units) that fail to vest.

(i) Nontransferability

Unless otherwise determined by the Administrator, grants made under the Seattle SpinCo Plan are not transferable other than by will or the laws of descent and distribution and may be exercised during the grantee's lifetime only by the grantee. The Administrator will have the sole discretion to permit the transfer of a grant.

(j) Adjustments Upon Changes in Capitalisation, Merger or Sale of Assets

Subject to any required action by holders of Seattle SpinCo Shares, or with respect to Converted Awards following the Merger, Shareholders or ADS holders, as applicable, (1) the number and kind of shares covered by each outstanding grant, (2) the price per share subject to each outstanding grant, and (3) the number of shares available pursuant to the Seattle SpinCo Plan (and the related grant limits) will be proportionately adjusted by the Administrator for any increase or decrease in the number or kind of issued shares resulting from a share split, reverse share split, extraordinary dividend, alteration of capital, capitalisation of profits, bonus issue, combination or reclassification of the shares, any other increase or decrease in the number of shares effected without receipt of consideration or any other variation of share capital affecting the shares.

In the event of a liquidation or dissolution of the Company, any unexercised options, share appreciation rights or share grants will terminate. The Administrator, in its discretion, may provide that each grantee shall be fully vested in any share grants.

In the event of a change in control, as defined in the Seattle SpinCo Plan, the Administrator in its discretion may provide for (a) the assumption, substitution or adjustment of each outstanding grant and (b) the acceleration of the vesting of Converted Awards.

(k) Amendment and Termination of the Seattle SpinCo Plan

The Administrator may amend, alter, suspend or terminate the Seattle SpinCo Plan, or any part thereof, at any time and for any reason, subject to the approval of the holders of Seattle SpinCo Shares, or with respect to Converted Awards following the Merger, Shareholders or ADS holders, as applicable, for any amendment to the Seattle SpinCo Plan to the extent required by applicable law or share exchange rules. In addition, without limiting the foregoing, unless approved by holders of Seattle SpinCo Shares, or with respect to Converted Awards following the Merger, Shareholders, or ADS holders, as applicable, no amendment shall be made that would: (1) materially increase the maximum number of shares for which grants may be made under the Seattle SpinCo Plan, other than an increase pursuant to a change in the Company's capitalisation; (2) reduce the minimum exercise price for options or share appreciation rights granted under the Seattle SpinCo Plan; (3) reduce the exercise price of outstanding options and share appreciation rights; or (4) materially expand the class of persons eligible to receive grants under the Seattle SpinCo Plan. No action by the Administrator or shareholders may alter or impair any grant previously made under the Seattle SpinCo Plan without the written consent of the grantee.

Effect of the Transaction on the Company's Share Plans

It is anticipated that there will not be any adjustments made as a result of the Transaction to the number of Ordinary Shares subject to Company options and awards granted prior to the Transaction.

9. LITIGATION

9.1 The Micro Focus Group

There are no governmental, legal or arbitration proceedings (including any 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 Micro Focus Group's financial position or profitability.

9.2 HPE Software

Save for the outstanding litigation set out below, there are no governmental, legal or arbitration proceedings (including any 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 HPE Software's financial position or profitability. As at 25 July 2017 (being the latest practicable date prior to the date of this Prospectus), the potential liability of each of the below actions is not quantifiable.

(a) Forsyth, et al. vs. HP Inc. and Hewlett Packard Enterprise Company

This purported class and collective action was filed on 18 August 2016 and an amended (and operative) complaint was filed on 19 December 2016 in the United States District Court for the Northern District of California, against HP Inc. and HPE alleging defendants violated the Federal Age Discrimination in Employment Act, the California Fair Employment and Housing Act, California public policy and the California Business and Professions Code by terminating older workers and replacing them with younger workers. Plaintiffs seek to certify a nationwide collective action under the Federal Age Discrimination in Employment Act comprised of all individuals aged 40 and older at the time their employment was terminated by HP Inc., Hewlett Packard Enterprise Company or any of their subsidiaries pursuant to a work force reduction plan on or after 9 December 2014 for individuals terminated in deferral states and on or after 8 April 2015 in nondeferral states. Plaintiffs also seek to certify a Federal Rule of Civil Procedure Rule 23 class under California law comprised of all persons 40 years of age or older employed by defendants in the state of California and terminated pursuant to a work force reduction plan on or after 18 August 2012. HPE Software believes it has valid defences with respect to this matter.

(b) Wall v. HewlettPackard Enterprise Company and HP Inc.

This certified California class action and Private Attorney General Act action was filed against HewlettPackard Company on 17 January 2012 and the fifth (and operative) amended complaint was filed against HP Inc. and HPE on 28 June 2016. The complaint alleges that the defendants paid earned incentive compensation late and failed to timely pay final wages. On 9 August 2016, the court ordered the class certified without prejudice to a future motion to amend or modify the class certification order or to decertify. Trial is set to begin on 22 January 2018. HPE Software believes it has valid defences with respect to this matter.

(c) Realtime Data LLC

Realtime filed three patent infringement actions in the Eastern District of Texas against HPE. The first was filed on 8 May 2015 against HewlettPackard Company, HP Enterprise Services and Oracle (the "Oracle matter") and accuses HP Proliant servers running Oracle's Solaris, HPE's StoreOnce, and HPE's Vertica. Oracle has agreed to indemnify HPE for all claims against HPE related to Oracle's Solaris, including databases running Solaris with the ZFS file system on HP ProLiant servers. Following a 23 March 2017 mediation, Oracle and Realtime reached a settlement, and on 15 May 2017, the court ordered all claims between Oracle and Realtime be dismissed with prejudice. It is unclear whether their agreement has been finalised. No stipulated judgment or joint motion to dismiss has been filed to date, although the parties notified the court that an agreement has been reached in principle. The second lawsuit was filed on 8 May 2015 against HewlettPackard Company, HP Enterprise Services, SAP America Inc. and Sybase Inc., and accuses HP's Converged Systems running SAP Hana. SAP America Inc. agreed to indemnify HPE and HP Enterprise Services for the SAPrelated products. On 16 June 2016, SAP America Inc. reached a settlement agreement with Realtime, which led to the dismissal of all claims relating to HPE products indemnified by SAP America Inc. The third lawsuit was filed on 26 February 2016 (amended on 15 August 2016) against HPE, HP Enterprise Services, and Silver Peak Systems, Inc. (the "Silver Peak matter"), and accuses HPE's StoreOnce, 3Par StoreServe, Connected MX, Connected Backup, and LiveVault. On 17 November 2016, the Magistrate Judge granted HPE and Realtime's joint motion to sever and consolidate the Oracle matter and the Silver Peak matter. There are seven patents asserted in the remaining lawsuits. The patents generally relate to data compression techniques used to conserve storage space. HPE and the joint defence group have filed several inter partes review petitions with the Patent Trial and Appeal Board on all seven asserted patents. On 3 February 2017, the Magistrate Judge granted HPE's Motion to Stay Pending Inter Partes Review. HPE Software believes it has valid defences with respect to these matters.

10. MATERIAL CONTRACTS

10.1 Micro Focus Group

The following contracts are material contracts (entered into outside the ordinary course of business) which: (i) have been entered into within the two years prior to the date of this Prospectus by members of the Micro Focus Group; or (ii) contain provisions under which any member of the Micro Focus Group has an obligation or entitlement which is or may be material to the Micro Focus Group as at the date of this Prospectus.

(a) Merger Agreement

A summary of the principal terms of the Merger Agreement is set out in Section A of Part VI (Principal Terms of the Transaction) of the Circular, which is hereby incorporated by reference in this Prospectus.

(b) Employee Matters Agreement

A summary of the principal terms of the Employee Matters Agreement is set out in Section B of Part VI (Principal Terms of the Transaction) of the Circular, which is hereby incorporated by reference in this Prospectus.

(c) Existing Facilities Agreement

A summary of the principal terms of the Existing Facilities Agreement is set out in paragraph 6.1(c) of Part VIII (Additional Information) of the Circular, which is hereby incorporated by reference in this Prospectus.

(d) New Facilities Agreements

A summary of the principal terms of the New Facilities Agreements is set out in Section C of Part VI (Principal Terms of the Transaction) of the Circular, which is hereby incorporated by reference in this Prospectus.

(e) Debt Commitment Letters

The Debt Commitment Letters consist of (i) the Micro Focus Commitment Letter whereby J.P. Morgan Chase Bank, N.A., HSBC Bank PLC, Bank of America, N.A., Barclays Bank PLC and The Royal Bank of Scotland PLC committed to provide the Micro Focus Term Loan Facilities and the Revolving Credit Facility and (ii) the Seattle Commitment Letter whereby J.P. Morgan Chase Bank, N.A., HSBC Bank PLC, Bank of America, N.A., Barclays Bank PLC and The Royal Bank of Scotland PLC committed to provide the Seattle Term Loan Facility.

(f) Serena Merger Agreement

On 22 March 2016, the Company entered into the Serena Merger Agreement to acquire the entire issued share capital of Spartacus Acquisition Holdings Corp., the holding company of Serena Software Inc. and its subsidiaries, for cash consideration of US\$540 million, subject to net working capital and net debt adjustments postcompletion.

The Serena Merger Agreement contains customary representations, warranties and a tax indemnity given by the shareholders of Spartacus Acquisition Holdings Corp. The shareholders' aggregate liability under the representations and warranties is capped at the general escrow fund (US\$27 million).

The Serena Merger Agreement is governed by and shall be construed in accordance with the laws of the State of Delaware.

Completion of the acquisition occurred on 2 May 2016.

(g) ADS Facility

A summary of the principal terms of the ADS Facility is set out in paragraph 4 of Part XI (Additional Information) of this Prospectus.

10.2 HPE Software

The following contracts are material contracts (entered into outside the ordinary course of business) which: (i) have been entered into within the two years prior to the date of this Prospectus by HPE Software; or (ii) contain provisions under which any member of the HPE Group has an obligation or entitlement which is or may be material to HPE Software as at the date of this Prospectus.

(a) Merger Agreement

A summary of the principal terms of the Merger Agreement is set out in Section A of Part VI (Principal Terms of the Transaction) of the Circular, which is hereby incorporated by reference in this Prospectus.

(b) Ancillary Agreements

Summaries of the principal terms of the Separation and Distribution Agreement, Transition Services Agreement, Tax Matters Agreement, Employee Matters Agreement, Real Estate Matters Agreement and Intellectual Property Matters Agreement are set out in Section B of Part VI (Principal Terms of the Transaction) of the Circular, which is hereby incorporated by reference in this Prospectus.

(c) New Seattle Facility Agreement

A summary of the principal terms of the New Seattle Facility Agreement is set out in Section C of Part VI (Principal Terms of the Transaction) of the Circular, which is hereby incorporated by reference in this Prospectus.

(d) Voltage Security, Inc. agreement and plan of merger

On 8 February 2015, HewlettPackard Company, Electro Acquisition Sub, Inc., Voltage Security, Inc., and Shareholder Representative Services LLC entered into an agreement and plan of merger pursuant to which HewlettPackard Company acquired the entire issued share capital of Voltage Security, Inc., a datacentric security software solutions company.

The agreement and plan of merger contains customary representations, warranties and a tax indemnity.

The agreement and plan of merger is governed by and shall be construed in accordance with the laws of New York (except to the extent the law of the State of Delaware is held to govern the merger).

Completion of the acquisition occurred on 20 February 2015.

(e) TippingPoint asset purchase agreement

On 20 October 2015, HewlettPackard Company and Trend Micro Inc. entered into an asset purchase agreement pursuant to which HewlettPackard Company sold its TippingPoint business, a provider of nextgeneration intrusion prevention systems and related network security solutions, to Trend Micro Inc. for cash consideration of \$300 million.

The asset purchase agreement contains customary representations, warranties and a tax indemnity.

The asset purchase agreement is governed by and shall be construed in accordance with the laws of the State of Delaware.

Completion of the acquisition occurred on 9 March 2016.

(f) LiveVault asset purchase agreement

On 31 August 2015, HewlettPackard Company and KeepItSafe Inc., entered into an asset purchase agreement pursuant to which HewlettPackard Company sold its LiveVault business, a provider of cloudbased data backup and recovery solutions for companies and organisations, to KeepItSafe Inc.

The asset purchase agreement contains customary representations, warranties and a tax indemnity.

The asset purchase agreement is governed by and shall be construed in accordance with the laws of the State of Delaware.

Completion of the acquisition occurred on 30 September 2015.

11. DETAILS OF ANY PROPERTY/FIXED ASSETS

There is no existing or planned tangible fixed asset which is individually material to the Micro Focus Group or HPE Software. The Directors are not aware of any environmental issues that may affect the Micro Focus Group's or HPE Software's (respectively) utilisation of tangible fixed assets.

12. RELATED PARTY TRANSACTIONS

Save for the related party transactions disclosed in note 36 (Related party transactions) in the Company's annual report and accounts for the financial year ended 30 April 2017, which are hereby incorporated by reference in this Prospectus, there are no related party transactions between the Company or members of the Micro Focus Group that were entered into during the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017 or during the period from and including 30 April 2017 to and including 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus).

Save for the related party transactions disclosed in note 26 (Related party transactions) in the audited accounts of HPE Software for the financial years ended 31 October 2014, 31 October 2015 and 31 October 2016 and for the three months ended 31 January 2017 and in note 22 (Related party transactions) in the unaudited interim accounts of HPE Software for the six months ended 30 April 2017, there are no related party transactions between HPE Software or members of HPE Software that were entered into during the financial years ended 31 October 2014, 31 October 2015 and 31 October 2016, or for the period from and including 31 October 2016 to and including 25 July 2017 (being the latest practicable date prior to the publication of this Prospectus).

13. WORKING CAPITAL

The Company is of the opinion that, taking into account the cash resources and bank facilities available to the Micro Focus Group, the working capital available is sufficient for its present requirements, that is, for at least the next 12 months from the date of this Prospectus.

14. NO SIGNIFICANT CHANGE

14.1 Micro Focus Group

There has been no significant change in the financial or trading position of the Micro Focus Group since 30 April 2017, being the date to which the last audited financial information of the Micro Focus Group was prepared.

14.2 HPE Software

There has been no significant change in the financial or trading position of HPE Software since 30 April 2017, being the date to which the last interim financial information of the HPE Software was prepared.

15. CONSENTS

• 15.1 Each of J.P. Morgan Cazenove and Numis has given and not withdrawn its written consent to the issue of this Prospectus with reference to their names being included in the form and context in which they appear.
• 15.2 PwC has given and has not withdrawn its written consent to the inclusion in this Prospectus of its accountant's report on (i) the historical financial information relating to the Attachmate Group in Section B of Part IV (Historical Financial Information of the Micro Focus Group) of this Prospectus and (ii) the pro forma financial information in Part VIII (Unaudited Pro Forma Financial Information) of this Prospectus in the form and context in which they are included, and has authorised the contents of this report for the purposes of Prospectus Rule 5.5.3R(2)(f).
• 15.3 EY has given, and has not withdrawn, its written consent to the inclusion of its report in Section A of Part VII (Historical Financial Information of HPE Software) of this Prospectus in the form and context in which it appears, and has authorised the contents of this report for the purposes of Prospectus Rule 5.5.3R(2)(f).

16. DILUTION

Upon Completion, the Consideration Shares will represent 50.1 per cent. of the fully diluted share capital of the Company.7 Accordingly, Existing Shareholders will experience a 49.9 per cent. dilution in their shareholdings as a result of the Transaction.

17. GENERAL

• 17.1 The expenses and costs of the Company incidental to the Transaction and Admission are estimated to amount to approximately US\$267 million (excluding VAT).
• 17.2 The (i) annual accounts of the Company for the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017 and (ii) historical financial information of the Attachmate Group for the 13 months ended 30 April 2015 contained in Part IV (Historical Financial Information of the Micro Focus Group) of this Prospectus have been audited by PwC, a member of the Institute of Chartered Accountants in England and Wales, of 1 Embankment Place, London WC2N 6RH. The financial information contained in this Prospectus does not amount to statutory accounts within the meaning of section 434(3) of the Companies Act. Full audited accounts have been delivered to the Registrar of Companies for the Company for the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017.

⁷ Excluding any Ordinary Shares to be issued pursuant to a de minimis number of replacement awards to be granted to HPE Software employees at Completion under their existing employee incentive arrangements.

• 17.3 The historical financial information of HPE Software for the three financial years ended 31 October 2014, 31 October 2015 and 31 October 2016 and the three months ended 31 January 2017 has been reported on by EY. EY is registered to perform audit work by the Institute of Chartered Accountants in England and Wales and its registered office is 1 More London Place, London SE1 2AF.
• 17.4 The Company's current accounting reference date is 30 April. Following Completion, the Company intends that, in order to align financial year ends between HPE Software and the Company, it will align its financial year end with HPE Software's financial year end of 31 October, with the Company's first accounting period to be audited after Completion being for the 18 months ending 31 October 2018. During this extended accounting period and in order to comply with the Listing Rules, the Company also intends to publish an unaudited interim report for the six months ended 31 October 2017 and a second unaudited interim report for the 12 months ending 30 April 2018.
• 17.5 The Company's registrar and paying agent for the payment of dividends is Equiniti Limited of Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA.

18. DOCUMENTS ON DISPLAY

Copies of the documents listed below may be inspected free of charge at the Company's website (www.microfocus.com) and will be made available for inspection during business hours on any weekday (Saturdays, Sundays and bank holidays excepted) at the offices of Travers Smith LLP, 10 Snow Hill, London EC1A 2AL up to and including Admission:

• 18.1 the Articles (as in force at the date of this Prospectus);
• 18.2 the Articles (as proposed to be adopted on Completion);
• 18.3 the audited annual report and accounts of the Micro Focus Group in respect of the financial years ended 30 April 2015, 30 April 2016 and 30 April 2017;
• 18.4 the report from PwC contained in Section B (The Attachmate Group) of Part IV (Historical Financial Information of the Micro Focus Group) of this Prospectus;
• 18.5 the report from EY contained in Part VII (Historical Financial Information of HPE Software) of this Prospectus;
• 18.6 the report on the unaudited pro forma financial information by PwC set out in Part VIII (Unaudited Pro Forma Financial Information);
• 18.7 the written consents referred to in paragraph 15 of this Part XI (Additional Information);
• 18.8 the Merger Agreement (including the Separation and Distribution Agreement, Tax Matters, Agreement, Transition Services Agreement, Employee Matters Agreement, Real Estate Matters Agreement and Intellectual Property Matters Agreement); and
• 18.9 this Prospectus.

PART XII

TAXATION

SECTION A: UK TAXATION

The following comments do not constitute tax advice and are intended only as a general guide. They are based on current UK tax law and what is understood to be HMRC's current published practice as at the date of this document (which are both subject to change at any time, possibly with retrospective effect). The UK Government announced on 20 July 2017, that Ways and Means resolutions relating to the Finance (No.2) Bill 2017 will be introduced in Parliament on 6 September 2017. Royal Assent of the Bill is anticipated to take place later in 2017. The rates and allowances for 2017/18 stated in the UK tax section below reflect the current law.

The following comments relate only to certain limited aspects of the UK tax consequences of holding or disposing of Ordinary Shares. This tax section does not cover the tax implications associated with the Merger, the issue of B Shares to Shareholders followed by their redemption, and the Share Capital Consolidation of the Existing Ordinary Shares, certain aspects of which are dealt with in the Circular and are incorporated by reference herein.

The comments below are intended to apply only to Shareholders: (i) who are resident (and, in the case of individuals, domiciled) in (and only in) the UK for UK tax purposes (unless the position of nonUK resident Shareholders is expressly referred to); (ii) to whom splityear treatment does not apply; (iii) who are and will be the absolute beneficial owners of their Ordinary Shares and any dividends paid in respect of them; (iv) who hold, and will hold, their Ordinary Shares as investments (otherwise than through an individual savings account or a pension arrangement) and not as securities to be realised in the course of a trade; (v) who hold less than 5 per cent. of the Ordinary Shares; and (vi) to whom the UK tax rules concerning carried interest do not apply in relation to their holding or disposal of Ordinary Shares.

The comments below may not apply to certain Shareholders, such as dealers in securities, broker dealers, insurance companies and collective investment schemes, pension schemes, Shareholders who are exempt from UK taxation, Shareholders who acquire or acquired their Ordinary Shares under the Micro Focus Group Share Plans and Shareholders who have (or are deemed to have) acquired their Ordinary Shares by virtue of an office or employment. Such Shareholders may be subject to special rules.

The material set out in the paragraph below does not constitute tax advice. Shareholders who are in any doubt as to their tax position or who are subject to tax in a jurisdiction other than the UK should consult an appropriate professional adviser.

1. DIRECT TAXATION OF DIVIDENDS

Liability to United Kingdom income tax or United Kingdom corporation tax on income in respect of dividends payable on the Ordinary Shares will depend upon the individual circumstances of the Shareholder. An overview of the UK tax rules applicable to dividends is set out below.

1.1 UK withholding tax

There is no United Kingdom withholding tax on dividends paid by the Company.

1.2 Individual Shareholders within the charge to UK income tax

When the Company pays a dividend to a Shareholder who is an individual resident (for tax purposes) and domiciled in the United Kingdom, the amount of income tax payable on the receipt, if any, will depend on the individual's own personal tax position. "Dividend income" for these purposes includes UK and non UK source dividends and certain other distributions in respect of shares.

No UK income tax should be payable by a UK resident Shareholder if the amount of dividend income received, when aggregated with the Shareholder's other dividend income in the year of assessment, does not exceed the nil rate amount. The nil rate amount is £5,000 for 2017/2018, and is expected (subject to the provisions of the Finance Bill due to be published in autumn 2017) to be £2,000 for 2018/2019. Dividend income in excess of the nil rate amount is taxed at the following rates for 2017/2018:

• 7.5 per cent. to the extent that it falls below the threshold for higher rate income tax;
• 32.5 per cent. to the extent it falls within the higher rate band; and
• 38.1 per cent. to the extent it falls within the additional rate band.

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 dividend income which is within the nil rate amount counts towards an individual's basic or higher rate limits and so will be taken into account in determining whether the threshold for higher rate or additional rate income tax is exceeded.

1.3 Corporate Shareholders within the charge to UK corporation tax

Shareholders within the charge to corporation tax that are "small companies" (for the purposes of UK taxation of dividends) will not generally expect to be subject to tax on dividends from the Company provided certain conditions are met (including an antiavoidance condition).

Other Shareholders within the charge to United Kingdom corporation tax (which are not a "small company" for the purposes of UK taxation of dividends) should not be subject to tax on dividends from the Company so long as the dividends fall within an exempt class and certain conditions are met. In general, (i) dividends paid on nonredeemable "ordinary shares" (that is, nonredeemable shares that do not carry any present or future preferential rights to dividends or to the Company's assets on its winding up); and (ii) dividends paid to a United Kingdom resident corporate Shareholder holding less than 10 per cent. of the issued share capital of the class in respect of which the dividend is paid should fall within an exempt class. However, it should be noted that the exemptions are not comprehensive and are subject to antiavoidance rules. Shareholders will need to ensure that they satisfy the requirements of any exempt class and that no antiavoidance rules apply before treating any dividend as exempt, and seek appropriate professional advice where necessary.

2. CHARGEABLE GAINS

2.1 Individuals

A disposal (or deemed disposal) of Ordinary Shares by a UK resident individual Shareholder may give rise to a chargeable gain (or allowable loss) for the purposes of UK capital gains tax, depending on the circumstances and subject to any available exemption or relief. No indexation allowance will be available to an individual holder of Ordinary Shares in respect of any disposal of Ordinary Shares. However, the capital gains tax annual exemption (which is £11,300 for individuals in the 2017/18 tax year) may be available to exempt any chargeable gain, to the extent that the exemption has not already been utilised.

With effect from 6 April 2016, capital gains tax on share disposals by a UK resident individual Shareholder will generally be charged at 10 per cent. to the extent that the total chargeable gains and, generally, total taxable income arising in a tax year, after all allowable deductions (including losses, the income tax personal allowance and the capital gains tax annual exempt amount), are less than the upper limit of the income tax basic rate band. To the extent that any chargeable gains (or part of any chargeable gains) arising in a tax year exceed the upper limit of the income tax basic rate band when aggregated with any such income (in the manner referred to above), capital gains tax will generally be charged at 20 per cent.

2.2 Companies

A disposal (or deemed disposal) of Ordinary Shares by a UK resident corporate Shareholder may give rise to a chargeable gain (or allowable loss) for the purposes of UK corporation tax, depending on the circumstances and subject to any available exemption or relief. Indexation allowance may reduce the amount of any chargeable gain for these purposes, but will not create or increase any allowable loss. The main rate of UK corporation tax is currently 19 per cent. with effect from 1 April 2017.

3. STAMP DUTY AND SDRT

The following statements are intended as a general guide to the current UK stamp duty and SDRT position, and apply regardless of whether or not a Shareholder is resident in the UK. It should be noted that certain categories of person, including market makers, brokers, dealers, and other specified market intermediaries, are entitled to exemption from stamp duty and SDRT in respect of purchases of securities in specified circumstances.

3.1 General rules

An agreement to sell Ordinary Shares will normally give rise to a liability on the purchaser to SDRT, at the rate of 0.5 per cent. of the amount or the value of the consideration paid. If an instrument of transfer of the Ordinary Shares is subsequently produced (for example, if the Ordinary Shares are held in certificated form) it will generally be subject to stamp duty at the rate of 0.5 per cent. of the amount or the value of the consideration paid (rounded up to the nearest £5). When such stamp duty is paid, the SDRT charge will generally be cancelled and any SDRT already paid will (subject to a claim) generally be refunded provided that the instrument is duly stamped within six years of the date on which the agreement was made or, in the case of a conditional agreement, the date on which the conditions were satisfied.

No stamp duty (as opposed to SDRT) will be payable on an instrument transferring Ordinary Shares if the amount or value of the consideration for that transfer is £1,000 or less and it is certified on the instrument that the transfer effected by that instrument does not form part of a larger transaction or series of transactions for which the aggregate consideration exceeds £1,000.

Transfers of Ordinary Shares effected on a paperless basis through CREST will generally be subject to SDRT (rather than stamp duty) at the rate of 0.5 per cent. of the amount of the consideration paid. CREST will normally collect the SDRT automatically and pay this on to HMRC.

Stamp duty and SDRT are generally satisfied by the purchaser.

3.2 Depositary arrangements and clearance services

Special rules apply where Ordinary 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 Finance Act 1986 or a person providing a clearance service within section 70 or section 96 of the Finance Act 1986, under which stamp duty or SDRT may be charged at a higher rate of 1.5 per cent. However, where a clearance service has made and maintained an election under section 97A Finance Act 1986, the 1.5 per cent. charge will not apply as transfers of Ordinary Shares into and within that clearance service would then be subject to stamp duty at the normal 0.5 per cent. rate.

Following the firsttier tax tribunal decision in HSBC Holdings plc and the Bank of New York Mellon Corporation v HMRC, HMRC has confirmed that it will no longer seek to impose stamp duty or SDRT at the rate of 1.5 per cent. on issues of UK shares to depositary receipt issuers and clearance systems, or on transfers of such shares to such issuers and systems where those transfers are integral to the raising of capital by a company. However, HMRC's view (which is currently being challenged in litigation) is that the tribunal's decision does not have any impact upon the transfer (on sale or otherwise than on sale) of shares or securities to depositary receipt systems or clearance services that are not an integral part of an issue of share capital and so the 1.5 per cent. SDRT or stamp duty charge will continue to apply to such transfers. Specific professional advice should be sought before incurring a 1.5 per cent. stamp duty or SDRT charge in any circumstances.

It is not anticipated that any of the steps associated with the issue of the Consideration Shares to the Depositary will give rise to any stamp duty or SDRT.

Transfers of ADSs should not attract a charge to stamp duty or SDRT in the UK provided there is no written instrument of transfer. Transfers of the Ordinary Shares by the Depositary or its nominee to a holder outside the Depositary facilities, or any subsequent transfers that occur entirely outside those facilities, will ordinarily be subject to the stamp duty and SDRT rules in subparagraph 3.1 above.

SECTION B: US TAXATION

This Section B of Part XII (Taxation) describes certain US federal income tax consequences to US Holders of (i) the Transaction and (ii) postTransaction ownership and disposition of Ordinary Shares and/or ADSs under current law. This Section is general in nature, is not an opinion and does not address all aspects of US federal income taxation that may be relevant to a US Holder. Shareholders should consult their own tax advisers as to the particular tax consequences to them of the Transaction and postTransaction ownership and disposition of Ordinary Shares and/or ADSs.

This Section is based on the federal income tax laws of the United States as of the date of this Prospectus, including the Code, existing and proposed Treasury Regulations promulgated thereunder, judicial authority, published administrative positions of the IRS, and other applicable authorities, all as of the date hereof. All of the foregoing authorities are subject to change, which change could apply retroactively and could significantly affect the tax consequences described below. The Company has not sought any ruling from the IRS with respect to the statements made and the conclusions reached in the following discussion and there can be no assurance that the IRS or a court will agree with its statements and conclusions. This Section does not address the socalled Medicare tax on net investment income, any US federal nonincome tax laws, including the federal estate or gift tax laws, or the laws of any state, local or nonUS taxing jurisdiction. In addition, this discussion does not address any withholding taxes or reporting obligations applicable to accounts maintained by a US Holder with nonUnited States financial institutions (through which a US Holder may hold Ordinary Shares and/or ADSs).

This Section applies only to US Holders who hold their Ordinary Shares and/or ADSs as capital assets for US federal income tax purposes (generally, property held for investment). This Section neither addresses the tax consequences to any particular US Holder nor describes all of the tax consequences that may be applicable to persons in special tax situations, such as: banks and certain other financial institutions; insurance companies; regulated investment companies; real estate investment trusts; brokers or dealers in stocks and securities, or currencies; persons who use or are required to use a marktomarket method of accounting; certain former citizens or residents of the United States subject to Section 877 of the Code; entities subject to the antiinversion rules of Section 7874 of the Code; taxexempt organisations and entities; persons subject to the alternative minimum tax provisions of the Code; persons whose functional currency is other than the US dollar; persons holding Ordinary Shares and/or ADSs as part of a straddle, hedging, conversion or other integrated transaction; persons holding Ordinary Shares and/or ADSs through a bank, financial institution or other entity, or a branch thereof, located, organised or resident outside the United States; persons that actually or constructively own 10 per cent. or more of the total combined voting power of all classes of the Company' voting stock; persons who acquired Ordinary Shares and/or ADSs pursuant to the exercise of an employee stock option or otherwise as compensation; or partnerships or other passthrough entities, or persons holding Ordinary Shares and/or ADSs through such entities.

If a partnership (including an entity or arrangement treated as a partnership for US federal income tax purposes) holds Ordinary Shares and/or ADSs, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A partnership or partner in a partnership holding Ordinary Shares and/or ADSs should consult its own tax advisers regarding the tax consequences of investing in and holding Ordinary Shares and/or ADSs.

This Section assumes that the Company will be treated as a nonUS corporation for US federal income tax purposes following the Merger.

The summary of certain US federal income tax consequences set out below is for general information only and is subject to the considerations set out above. It is not a substitute for careful tax planning and advice. Shareholders should consult their own tax advisers as to the particular tax consequences to them of the Transaction, the postTransaction ownership of Ordinary Shares and/or ADSs, the applicability and effect of state, local, nonUS and other tax laws (including the US federal and gift tax laws), the applicability of the Treaty or any other applicable tax treaty, and possible changes in tax law.

1. US FEDERAL INCOME TAX CONSIDERATIONS OF THE MERGER

The Merger is intended to qualify as a reorganisation within the meaning of Section 368(a) of the Code. However, even if the Merger so qualifies, pursuant to certain rules contained in Section 367(a) of the Code and the Treasury Regulations promulgated thereunder, US Holders will generally recognise gain, if any, but not loss, on the exchange of shares of Seattle SpinCo common stock for ADSs pursuant to the Merger, in an amount equal to the excess of the fair market value of the ADSs received by the US Holder pursuant to the Merger over such stockholder's adjusted basis in the shares of Seattle SpinCo common stock exchanged therefor. A US Holder's tax basis in its shares of Seattle SpinCo common stock immediately after the Distribution will be the portion of the tax basis of the shares of HPE common stock held by such US Holder immediately before the Distribution allocated to the shares of Seattle SpinCo common stock based on the relative fair market values of the shares of HPE common stock and the shares of Seattle SpinCo common stock on the date of the Distribution. Any gain recognised by a US Holder in the Merger should be capital gain, and should be longterm capital gain if the shares of HPE common stock in respect of which the shares of Seattle SpinCo common stock were received have been held by such stockholder for more than one year at Completion.

A US Holder that recognises gain pursuant to the Merger should have an adjusted tax basis in the ADSs it receives equal to the fair market value of the ADSs received in the Merger, and a US Holder that realises a loss with respect to its shares of Seattle SpinCo common stock exchanged in the Merger should have an adjusted tax basis in the ADSs received in the Merger equal to such stockholder's adjusted tax basis in its shares of Seattle SpinCo common stock surrendered in exchange therefor (determined as described above). A US Holder's holding period of ADSs received in the Merger should include the holding period of such stockholder's shares of Seattle SpinCo common stock surrendered in exchange therefor, which should in turn include the holding period of the shares of HPE common stock with respect to which such shares of Seattle SpinCo common stock were received in the Distribution.

Special considerations may exist for US Holders that have acquired different blocks of shares of HPE common stock at different times or at different prices, or otherwise have varying holding periods and bases with respect to different blocks of their shares of HPE common stock. Such US Holders should consult their own tax advisers regarding the allocation of their aggregate basis among, and their holding period of, shares of HPE common stock and shares of Seattle SpinCo common stock received in the Distribution and the amount and character of gain recognised pursuant to the Merger, as well as the basis and holding period of the ADSs received in the Merger. In determining the amount of gain recognised in the Merger, each share of Seattle SpinCo common stock transferred should be treated as the subject of a separate exchange. Thus, if a US Holder transfers some shares of Seattle SpinCo common stock on which gains are realised and other shares of Seattle SpinCo common stock on which losses are realised, such US Holders may not net the losses against the gains to determine the amount of gain recognised.

A US Holder that receives cash in lieu of fractional ADSs in the Merger should be treated as though it first received such fractional ADSs in the Merger, and then sold such fractional ADSs for the amount of cash received in lieu thereof. Such US Holder should recognise capital gain or loss on such sale measured by the difference between the cash received for such fractional ADSs and the stockholder's basis in the fractional ADSs, as determined above. Such capital gain or loss should generally be a longterm capital gain or loss if the US Holder's holding period in such fractional ADSs (determined as described above) exceeds one year on such disposition.

2. US FEDERAL INCOME TAX CONSIDERATIONS OF POSTTRANSACTION OWNERSHIP AND DISPOSITION OF ORDINARY SHARES AND ADSS

The following is a discussion of certain US federal income tax consequences to US Holders of postTransaction ownership and disposition of Ordinary Shares and/or ADSs. The discussion is based on the determination by the Company that it is not a PFIC for US federal income tax purposes.

2.1 Ownership of ADSs in General

For US federal income tax purposes, a US Holder of the ADSs generally will be treated as the owner of the Ordinary Shares represented by the ADSs.

The US Treasury Department has expressed concern that depositaries for American depositary receipts, or other intermediaries between the holders of shares of an issuer and the issuer, may be taking actions that are inconsistent with the claiming of US foreign tax credits by US Holders of those receipts or shares. Accordingly, the analysis regarding the availability of a US foreign tax credit for UK taxes and sourcing rules described below could be affected by future actions that may be taken by the US Treasury Department.

2.2 Dividends

Under the US federal income tax laws, and subject to the PFIC rules discussed below, for US Holders, the gross amount of any dividend the Company pays out of its current or accumulated earnings and profits (as determined for US federal income tax purposes) is subject to US federal income taxation. For certain noncorporate US Holders, including individuals, dividends that constitute "qualified dividend income" will be taxable to such US Holder at the preferential rates applicable to longterm capital gains, provided that the US Holder holds the Ordinary Shares and/or ADSs for more than 60 days during the 121 day period beginning 60 days before the exdividend date and meets other holding period requirements. Dividends the Company pays with respect to the Ordinary Shares and/or ADSs generally will be qualified dividend income.

The dividend is taxable to a US Holder when a US Holder receives the dividend, actually or constructively. The dividend will not be eligible for the dividendsreceived deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution that a US Holder must include in its income will be the US dollar value of the payments made, determined at the spot pound sterling/US dollar rate on the date the dividend distribution is includible in the US Holder's income, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date a US Holder includes the dividend payment in income to the date a US Holder converts the payment into US dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. Such foreign exchange gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a nontaxable return of capital to the extent of a US Holder's basis in the Ordinary Shares and/or ADSs and thereafter as capital gain. However, the Company does not expect to calculate earnings and profits in accordance with US federal income tax principles. Accordingly, a US Holder should expect to generally treat distributions made by the Company as dividends.

A US Holder must include any foreign tax withheld from the dividend payment in its gross income even though the US Holder does not in fact receive it. Subject to certain limitations, UK tax withheld, if any, in accordance with the Treaty and paid over to the United Kingdom will be deductible or creditable against a US Holder's US federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the preferential tax rates. To the extent a refund of the tax withheld is available to a US Holder under UK law or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against a US Holder's US federal income tax liability.

Dividends paid by the Company generally will be income from sources outside the United States and will, depending on a US Holder's circumstances, be either "passive" or "general" income for purposes of computing the foreign tax credit allowable to a US Holder. The rules governing the foreign tax credit are complex and involve the application of rules that depend upon a US Holder's particular circumstances. Accordingly, US Holders are urged to consult their own tax advisers regarding the availability of the foreign tax credit under their particular circumstances.

2.3 Capital Gains

Subject to the PFIC rules discussed below, if a US Holder sells or otherwise disposes of its Ordinary Shares and/or ADSs in a taxable disposition, a US Holder will recognise capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount that the US Holder realises and the US Holder's tax basis, determined in US dollars, in the US Holder's Ordinary Shares and/or ADSs. Capital gain of certain noncorporate US Holders, including individuals, is generally taxed at preferential rates where the property is held for more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

2.4 PFIC Rules

Special US federal income tax rules apply to US persons owning stock of a PFIC. A foreign corporation will be considered a PFIC for any taxable year in which (i) 75 per cent. or more of its gross income is passive income, or (ii) 50 per cent. or more of the value (determined on the basis of a quarterly average) of its assets are considered "passive assets" (generally, assets that generate passive income). With certain exceptions, a US Holder's Ordinary Shares and/or ADSs will be treated as stock in a PFIC if the Company were a PFIC at any time during the US Holder's holding period in its Ordinary Shares and/or ADSs.

The Company believes that Ordinary Shares and ADSs should not be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If the Company were to be treated as a PFIC, gain realised on the sale or other disposition of a US Holder's Ordinary Shares and/or ADSs would in general not be treated as capital gain. Instead, unless a US Holder elects to be taxed annually on a marktomarket basis with respect to a US Holder's Ordinary Shares and/or ADSs, a US Holder would be treated as if it had realised such gain and certain "excess distributions" ratably over its holding period for the Ordinary Shares and/or ADSs and would generally be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. In addition, dividends that a US Holder receives from the Company would not be eligible for the reduced tax rates applicable to qualified dividend income if the Company is treated as a PFIC with respect to a US Holder either in the taxable year of the distribution or the preceding taxable year, but instead would be taxable at rates applicable to ordinary income. In some cases, the adverse consequences resulting from the Company being treated as a PFIC can be mitigated if a US Holder is eligible for and timely makes a valid election to treat the Company as a "qualified electing fund". The Company does not, however, expect to collect and provide certain of the information required for US Holders to make this election.

2.5 Information with Respect to Foreign Financial Assets

Owners of "specified foreign financial assets" with an aggregate value in excess of US\$50,000 (and in some circumstances, a higher threshold) may be required to file an information report with respect to such assets with their tax returns. "Specified foreign financial assets" include financial accounts maintained by foreign financial institutions, as well as the following, but only if they are held for investment and not held in accounts maintained by financial institutions: (i) stocks and securities issued by nonUS persons, (ii) financial instruments and contracts that have nonUS issuers or counterparties, and (iii) interests in foreign entities. US Holders are urged to consult their own tax advisers regarding the application of this reporting requirement to their ownership of the Ordinary Shares and/or ADSs.

2.6 Backup Withholding and Information Reporting

Information reporting requirements generally will apply to dividend payments or other taxable distributions with respect to Ordinary Shares and/or ADSs made to a noncorporate US Holder within the United States, and the payment of proceeds to a noncorporate US Holder from the sale of Ordinary Shares and/or ADSs effected in the United States or through a United States office of a broker.

In addition, backup withholding may apply to such payments if a US Holder fails to comply with applicable certification requirements or is notified by the IRS that such US Holder has failed to report all interest and dividends required to be shown on a US Holder's US federal income tax returns.

Payment of the proceeds from the sale of Ordinary Shares and/or ADSs effected through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale effected through a foreign office of a broker could be subject to information reporting in the same manner as a sale within the United States (and in certain cases may be subject to backup withholding as well) if (i) the broker has certain connections to the United States, (ii) the proceeds or confirmation are sent to the United States or (iii) the sale has certain other specified connections with the United States.

A US Holder generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed a US Holder's federal income tax liability by timely filing a refund claim with the IRS.

PART XIII

DOCUMENTS INCORPORATED BY REFERENCE

Incorporation by reference into this Prospectus

This Prospectus should be read and construed in conjunction with certain documents which have been previously published and which shall be deemed to be incorporated in, and form part of, this Prospectus. The list below enumerates the information which is incorporated by reference into this Prospectus in compliance with Rule 2.4 of the Prospectus Rules. Where only certain parts of the documents listed below are incorporated by reference, the parts not incorporated are either not required or are covered elsewhere in this Prospectus.

To the extent that any document or information incorporated by reference or attached to this Prospectus itself incorporates any information by reference, either expressly or impliedly, such information will not form part of this Prospectus for the purposes of the Prospectus Rules, except where such information or documents are stated within this Prospectus as specifically being incorporated by reference or where this Prospectus is specifically defined as including such information.

Any statement contained in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Prospectus to the extent that a statement contained herein (or in a later document which is incorporated by reference herein) modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus.

The enumerated sections of the below documents are incorporated by reference into this Prospectus:

		Page numbers in
Document	Section	such documents
Financial statements of the	Consolidated statement of comprehensive income	84
Micro Focus Group for the year	Consolidated statement of financial position	85
ended 30 April 2015 and	Consolidated statement of changes in equity	86
independent audit report	Consolidated statement of cash flows	87
thereon	Notes to the consolidated financial statements	95 to 130
	Notes to the Company financial statements	135 to 141
	Independent auditors report	132 to 133
Financial statements of the	Consolidated statement of comprehensive income	99
Micro Focus Group for the year	Consolidated statement of financial position	100
ended 30 April 2016 and	Consolidated statement of changes in equity	101
independent audit report	Consolidated statement of cash flows	102
thereon	Notes to the consolidated financial statements	111 to 149
	Notes to the Company financial statements	156 to 162
	Independent auditors report	92 to 98
Financial statements of the	Consolidated statements of comprehensive income	116 to 117
Micro Focus Group for the year	Consolidated statement of financial position	118 to 119
ended 30 April 2017 and	Consolidated statement of changes in equity	120
independent audit report	Consolidated statement of cash flows	121 to 122
thereon	Notes to the consolidated financial statements	134 to 177
	Notes to the Company financial statements	185 to 191
	Independent auditors report	109 to 115
Circular	Part VI (Principal Terms of the Transaction)	120 to 132
	Part VII (Details of the Return of Value)	133 to 162
	Part VIII (Additional Information)	163 to 177
	Part X (Additional Amendments to Articles of Association)	179 to 181

GLOSSARY AND DEFINITIONS

Section A: Glossary

The following glossary terms apply throughout this Prospectus, unless the context requires otherwise:

ASQ	application testing/Automated Software Quality solutions. ASQ software is used to test applications and for quality assurance
BI	business information
Big Data	very large amounts of data, frequently held in databases on corporate servers or mainframes. This data is often found to be very useful for understanding customer buying patterns, corporate trends or similar
CD	COBOL Development, a product portfolio of Micro Focus that produces COBOL development related products for commercial sale
CDMS	COBOL Development & Mainframe Solutions
Cloud	the deployment of IT infrastructure on a model that separates applications and/or data from the devices that access these applications or data. The intermediary between the access device and the application and/or data is either a network (public or private), or the internet
COBOL	Common Business Oriented Language, a software development programming language
Containers	building blocks which allow users to spawn applications on any virtual or physical infrastructure, integrating all its dependencies such as code, runtime, system tools and system libraries
CORBA	Common Object Request Broker Architecture, a software middleware integration product that bridges the gap between different operating systems and languages
DevOps	Development and Operations
ETL	extract, transform, load
FTE	full­time equivalent
Hadoop	an open source, Java­based programming framework that supports the processing and storage of extremely large data sets in a distributed computing environment
Host Connectivity	methods, such as LAN­based access to mainframes, gateways that provide translation services and web technologies, provided to organisations that implement IBM mainframe and IBM AS/400 hosts in order to allow intranet, extranet and web users access data on those systems
HR	Human Resources
IaaS	Infrastructure as a Service, the provision of a complete computing service including hardware and software. The only on­premise IT required is a browser. This is full utility computing and typically billed on a monthly or quarterly basis

IAM	Identity and Access Management
IAS	Identity Access and Security
IoT	Internet of Things
IT	information technology
Linux	a version of Unix that is made available under the free and Open Source development and distribution model. Linux has also been distributed by two commercial companies (Red Hat and Attachmate's SUSE Linux product portfolio) on a paid for basis. These commercial companies provide a more robust commercial version of the software, with associated maintenance support services
Micro Focus	the Micro Focus product portfolio
Net IQ	NetIQ, a product portfolio whose products help organisations tackle information protection challenges cost effectively and manage the complexity of dynamic, highly distributed application environments
Novell	Novell, a product portfolio which develops, sells and installs enterprise­quality software that is positioned in the operating systems and infrastructure software layers of the IT industry, including Linux operating system software for a range of computers from desktops to servers. In addition, Novell also provides a portfolio of integrated IT management software for systems, identity and security management for both Linux and mixed platform environments
OEM	Original Equipment Manufacturer, a term that designates hardware systems manufacturers
OpenFusion	one of the brands in the CORBA marketplace acquired by the Micro Focus Group in November 2013
Open Source	the practice of making software source code freely available in the public domain to software engineers for modification or distribution
OpenStack	a Linux­based Cloud computing platform commonly deployed as an IaaS solution in a data centre
PaaS	Platform as a Service
Physical­to­Virtual	the migration of software from a physical server to a virtual server which would normally sit in the Cloud. A virtual server is one which cannot be separately identified because it is simultaneously running multiple workloads which can be shifted from server to server so as to maximise capacity utilisation
PL/I	a software development language used in older technology environments
SaaS	Software as a Service
SQL	Structured Query Language
SSH	Secure Shell
SSO	single sign­on

SUSE or SUSE Linux	a family of software products centred around SUSE Linux Enterprise Servers, an interoperable platform for core computing needs supported by a shared global support and services organisation
UNIX	a computer operating system, which acts as an intermediary between application programs and computer hardware. Unix was created by AT&T's Bell labs and was one of the first operating systems to be made available on many different brands of computer hardware
Virtual­to­Virtual	the process of migrating a computing environment from one virtual machine/server to another

Section B: Definitions

The following definitions apply throughout this Prospectus, unless the context requires otherwise:

Adjusted earnings per share	has the meaning given in "Non­IFRS Measures" on page 46 of this Prospectus
Adjusted EBITDA	has the meaning given in "Non­IFRS Measures" on page 46 of this Prospectus
Adjusted net income	has the meaning given in "Non­IFRS Measures" on page 46 of this Prospectus
Adjusted Operating Profit	has the meaning given in "Non­IFRS Measures" on page 46 of this Prospectus
Administrator	has the meaning given in paragraph 8 (Seattle SpinCo Plan) of Part XI (Additional Information) of this Prospectus
Admission	the admission of the New Ordinary Shares (or, if the Share Capital Consolidation is not implemented, the re­admission of the Existing Ordinary Shares) and the admission of the Consideration Shares to the premium listing segment of the Official List becoming effective in accordance with the Listing Rules and to trading on the Main Market for listed securities becoming effective in accordance with the Admission and Disclosure Standards
Admission and Disclosure Standards	the requirements contained in the publication "Admission and Disclosure Standards" dated April 2013 containing, among other things, the admission requirements to be observed by companies seeking admission to trading on the Main Market for listed securities
ADRs	the American Depositary Receipts, evidencing the ADSs
ADS Facility	the agreement between the Company and the Depositary relating to the ADSs
ADSs	the American Depositary Shares
AGM	the annual general meeting of the Company held on 22 September 2016
Amendment No. 3	the amendment agreement to the Existing Facilities Agreement dated 28 April 2017
Articles	the articles of association of the Company
ASG	the Additional Share Grant, which is the grant of share based awards in the form of nil cost options
ASG Programme	the Additional Share Grants Programme
Attachmate Group	The Attachmate Group, Inc. and its subsidiaries and subsidiary undertakings as at the date of its acquisition by the Company on 20 November 2014
Audit Committee	the audit committee of the Company established by the Board
Awards	awards of free Ordinary shares, in the form of nil­cost options, conditional awards or forfeitable shares, or to grant market value option over Ordinary Shares

B Share Scheme	the proposed transactions comprising the Share Capital Consolidation and the Return of Value by way of the issuance of the B Shares to be effected in accordance with Part VII (Details of the Return of Value) of the Circular
B Shares	the redeemable B shares in the capital of the Company carrying the rights and restrictions set out in Section F of Part VII (Details of the Return of Value) of the Circular
Board	the board of directors of the Company from time to time
Business Day	a day (excluding Saturdays, Sundays and public holidays in England and Wales) on which banks generally are open for business in London for the transaction of normal banking business
CAGR	compound annual growth rate
Circular	the circular to Shareholders and notice of general meeting published by the Company and dated 9 May 2017
Clawback	has the meaning given in paragraph 8 (The LTIP) of Part XI (Additional Information) of this Prospectus
Code	US Internal Revenue Code of 1986, as amended
Companies Act	the Companies Act 2006, as amended
Company	Micro Focus International plc
Company Secretary	the company secretary of the Company from time to time
Completion	completion of the Transaction
Completion Date	the date of Completion
Consideration Shares	the Ordinary Shares to be issued as consideration pursuant to the Merger Agreement
Contribution	the contribution by HPE of HPE Software to Seattle SpinCo pursuant to the terms of the Separation and Distribution Agreement
Converted Awards	has the meaning given in paragraph 8 (Seattle SpinCo Plan) of Part XI (Additional Information) of this Prospectus
CREST	the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the operator (as defined in the CREST Regulations)
CREST Regulations	the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from time to time
Debt Commitment Letters	the Micro Focus Commitment Letter and the Seattle Commitment Letter
Deferred Shares	the deferred shares of 10 pence each in the capital of the Company carrying the rights and restrictions summarised in Section F of Part VII (Details of the Return of Value) of the Circular
Depositary	Deutsche Bank Trust Company Americas, acting as (i) depositary for ADSs representing Consideration Shares and (ii) issuer of ADRs representing those ADSs

direction notice	has the meaning given in paragraph 2.8 of Part XI (Additional Information) of this Prospectus
Directors	the directors of the Company whose names are set out in paragraph 2.1 of Part X (Directors, Proposed Directors, Corporate Governance and Employees) of this Prospectus and "Director" means any one of them
Disclosure Guidance and Transparency Rules	the latest edition of the "Disclosure Guidance and Transparency Rules" made by the FCA
Distribution	the pro rata distribution of shares of Seattle SpinCo common stock by HPE to the holders of HPE common stock and HPE common­equivalent preferred stock pursuant to the terms of the Separation and Distribution Agreement
DSBP	Micro Focus International plc Deferred Share Bonus Plan
EBITDA	earnings before interest, taxes, depreciation and amortisation
Employee Matters Agreement	the Employee Matters Agreement dated 7 September 2016, as amended, entered into by HPE, Seattle SpinCo and the Company, a summary of the principal terms and conditions of which is set out in paragraph 7 of Section B of Part VI (Principal Terms of the Transaction) of the Circular
Enlarged Group	the Micro Focus Group, as at and from Completion, as enlarged by the Transaction
Enlarged Share Capital	the entire issued ordinary share capital of the Company following the Transaction
ESPP	Micro Focus Employee Stock Purchase Plan 2006
Euroclear	Euroclear UK & Ireland Limited, the operator of CREST
Executive Chairman	Kevin Loosemore
Executive Directors	the executive directors of the Company from time to time, which at the date of this Prospectus are the Directors whose names are set out in paragraph 2.2 of Part X (Directors, Proposed Directors, Corporate Governance and Employees) of this Prospectus
Existing Facility	the Existing Term Loan Facilities and the Existing RCF
Existing Ordinary Shares	the existing ordinary shares of 10 pence each in the capital of the Company
Existing RCF	the US\$375,000,000 revolving credit facility available pursuant to the Existing Facilities
Existing Shareholders	the holders of Ordinary Shares prior to Completion
Existing Term Loan Facilities	Facility B, B­2 and Facility C, collectively (it being understood that on 2 August 2016 the Company consummated a repricing transaction whereby the Facility B was converted into US\$1,515,200,000 Facility B­2 and, pursuant to Amendment No. 3, the Facility C was refinanced into additional Facility B­2, such that the aggregate amount of Existing Term Loan Facilities is US\$1,515,187,500 Facility B­2)
EY	Ernst & Young LLP

Facility B	the US\$1,275,000,000 tranche B term loan facility provided to the Micro Focus Borrower pursuant to the Existing Term Loan Facilities
Facility B­2	the US\$1,515,200,000 tranche B­2 term loan facility provided to the Micro Focus Borrower pursuant to the Existing Term Loan Facilities
Facility B­3	the US\$384,800,000 tranche B­3 term loan facility provided to the Micro Focus Borrower pursuant to an escrow credit agreement
Facility C	the US\$412,500,000 tranche C term loan facility provided to the Micro Focus Borrower pursuant to the Existing Term Loan Facilities
Facility EBITDA	has the meaning given in "Non­IFRS Measures" on page 46 of this Prospectus
FCA	the UK Financial Conduct Authority
FSMA	the Financial Services and Markets Act 2000, as amended
General Meeting	the general meeting of the Company held at 2 p.m. on 26 May 2017
HMRC	Her Majesty's Revenue & Customs
HP Inc.	HP Inc. (a Delaware corporation formerly known as Hewlett­Packard Company, which was the parent entity of HPE prior to the separation of HPE from HP Inc. on 1 November 2015)
HPE	Hewlett Packard Enterprise Company (a Delaware corporation)
HPE Group	HPE and its subsidiaries and subsidiary undertakings from time to time
HPE Nominated Director	a director nominated to the Board by HPE pursuant to the Merger Agreement
HPE Shareholder	a holder of common stock of HPE
HPE Shares	shares of HPE common stock, par value \$0.01 per share
HPE Software	the software business segment of HPE, which is to be transferred to (or retained by, as applicable) the members of the Seattle Group, in accordance with the terms and conditions of the Separation and Distribution Agreement, prior to Completion
HPE Tax Opinion	an opinion of counsel in form and substance reasonably acceptable to HPE, dated as of the date of Completion, regarding certain aspects of the US federal income tax treatment of the Distribution and certain related transactions and the Transaction
IFRS	International Financial reporting Standards as adopted by the European Union
Intellectual Property Matters Agreement	the Intellectual Property Matters Agreement among HPE, Hewlett Packard Enterprise Development LP and Seattle SpinCo, to be entered into by such parties on or prior to the Completion Date in the form attached as an exhibit to the Separation and Distribution Agreement, and a summary of the principal terms and conditions of which is set out in paragraph 6 of Section B of Part VI (Principal Terms of the Transaction) of the Circular

Ireland Sharesave Scheme	the Micro Focus Sharesave Plan Ireland 2013, adopted as a sub­plan of the Sharesave Scheme
IRS	US Internal Revenue Service
Leadership Plan	the Micro Focus International PLC Leadership Stock Incentive Plan 2007
Listing Rules	the Listing Rules of the FCA
London Stock Exchange	London Stock Exchange plc
LTIP	the Micro Focus Incentive Plan 2005
Main Market	the main market of the London Stock Exchange
Malus	has the meaning given in paragraph 8 (The LTIP) of Part XI (Additional Information) of this Prospectus
Market Abuse Regulation	the EU Market Abuse Regulation (596/2014)
Merger	the proposed merger of the Company with HPE Software which will be achieved through the acquisition by the Company of all the outstanding Class A common stock of Seattle SpinCo by way of the merger of Merger Sub with and into Seattle SpinCo on the terms and subject to the conditions set out in the Merger Agreement
Merger Agreement	the Agreement and Plan of Merger dated 7 September 2016 entered into between the Company, HPE, Merger Sub, Seattle Holdings and Seattle SpinCo, a summary of the principal terms and conditions of which is set out in Section A of Part VI (Principal Terms of the Transaction) of the Circular
Merger Sub	Seattle MergerSub Inc. (a Delaware corporation and an indirect wholly­owned subsidiary of the Company)
Micro Focus Borrower	MA FinanceCo, LLC (a wholly owned subsidiary of Seattle Holdings)
Micro Focus Commitment Letter	the commitment letter, dated 7 September 2016, entered into by JPMorgan Chase Bank, N.A., Micro Focus Group Limited, and the Micro Focus Borrower (as amended from time to time) and relating to the Micro Focus Term Loan Facilities and the Revolving Credit Facility
Micro Focus Group	the Company and its subsidiaries and subsidiary undertakings from time to time
Micro Focus Group Share Plans	the Micro Focus Group share plans set out in paragraph 8 of part XI (Additional information) of this Prospectus
Micro Focus Term Loan Facilities	the US\$2.4 billion term loan facilities to be provided to the Micro Focus Borrower pursuant to the New Micro Focus Facility Agreement, it being understood that (i) the borrower with respect to a US\$884.8 million tranche B facility (the "New Micro Focus Tranche B Facility") (which will consist of a combination of €470 million (equivalent to approximately US\$500 million) of Euro­denominated term loans and US\$384.8 million of US dollar­denominated term loans) will initially be a newly formed US subsidiary of the Micro Focus Borrower, to be merged with and into the Micro Focus Borrower prior to Completion, and (ii) a US\$1,515.2 million tranche B facility (the "Refinancing Tranche B Facility") will be provided through an amendment to the Facility B­2

New Facilities	the Micro Focus Term Loan Facilities, the Revolving Credit Facility and the Seattle Term Loan Facility
New Facilities Agreements	the New Micro Focus Facility Agreement and the New Seattle Facility Agreement
New Micro Focus Facility Agreement	the New York law governed credit agreement to become effective at or prior to Completion to document the Micro Focus Term Loan Facilities and the Revolving Credit Facility. The New Micro Focus Facility Agreement will be effected through an amendment to the Existing Facilities Agreement
New Ordinary Shares	the ordinary shares of the Company to be created as a result of the Share Capital Consolidation
New Seattle Facility Agreement	the New York law governed credit agreement to become effective at or prior to Completion to document the Seattle Term Loan Facility
NISPOM	National Industrial Security Program Operating Manual
Nomination Committee	the nomination committee of the Company established by the Board
Non­Executive Directors	the non­executive directors of the Company from time to time, which at the date of this Prospectus are those Directors whose names are set out in paragraph 2.3 of Part X (Directors, Proposed Directors, Corporate Governance and Employees) of this Prospectus
NYSE	the New York Stock Exchange
Official List	the official list of the UKLA
Ordinary Shares	the ordinary shares of 10 pence each in the capital of the Company, including, if the context requires, the Consideration Shares
Overseas Shareholders	Shareholders who are not resident in the United Kingdom or who are citizens, residents or nationals of a country other than the United Kingdom or who have a registered address which is not in the United Kingdom. For the avoidance of doubt, Shareholders who are not resident in the United Kingdom include Shareholders who are resident in the Channel Islands or the Isle of Man
Participating Securities	has the meaning given in paragraph 2.5 of Part XI (Additional Information) of this Prospectus
PCAOB	Public Company Accounting Oversight Board
Proposed Directors	Chris Hsu and John Schultz
Prospectus	this document
Prospectus Rules	the Prospectus Rules of the FCA made under section 73A of the FSMA
PFIC	passive foreign investment company
PwC	PricewaterhouseCoopers LLP
Real Estate Matters Agreement	the Real Estate Matters Agreement between HPE and Seattle SpinCo, to be entered into by such parties on or prior to the Completion Date in the form attached as an exhibit to the Separation and Distribution Agreement, and a summary of the principal terms and conditions of

	which is set out in paragraph 5 of Section B of Part VI (Principal Terms of the Transaction) of the Circular
Realtime	Realtime Data LLC
Record Time	6.00 p.m. on 31 August 2017 (or such other time and/or date as the Directors in their absolute discretion may determine)
Remuneration Committee	the remuneration committee of the Company established by the Board
Remuneration Policy	the remuneration policy of the Company adopted at the AGM in accordance with section 439A of the Companies Act
Return of Value	the return of value by way of the issuance of the B Shares to be effected in accordance with Part VII (Details of the Return of Value) of the Circular
Revolving Credit Facility	the new revolving credit facility of up to US\$500 million agreed to be provided to the Micro Focus Borrower pursuant to the New Micro Focus Facility Agreement
RIS	any of the services authorised by the FCA from time to time for the purpose of disseminating regulatory announcements
Risk Factors	those risk factors set out in pages 21 to 45 of this Prospectus
RPI	the Retail Prices Index
SDRT	Stamp Duty Reserve Tax
Seattle Borrower	Initially, Seattle Escrow Borrower LLC, a Delaware limited liability company and a wholly owned subsidiary of Seattle SpinCo, prior to the Effective Date (as defined in the New Seattle Facility Agreement), and thereafter, Seattle SpinCo
Seattle Commitment Letter	the commitment letter dated 7 September 2016 entered into by JPMorgan Chase Bank, N.A., Micro Focus Group Limited and the Micro Focus Borrower (as amended from time to time) and relating to the Seattle Term Loan Facility
Seattle Group	Seattle SpinCo and its subsidiaries and subsidiary undertakings from time to time
Seattle Holdings	Seattle Holdings Inc. (a Delaware corporation and a wholly­owned direct subsidiary of the Company)
Seattle SpinCo	Seattle SpinCo, Inc. (a Delaware corporation and, prior to the Distribution, a wholly­owned subsidiary of HPE)
Seattle SpinCo Board	the board of directors of Seattle SpinCo
Seattle SpinCo Plan	the Seattle SpinCo 2017 Share Incentive Plan, under which Converted Awards will be granted to certain employees
Seattle Term Loan Facility	the US\$2.6 billion term loan facility to be provided to the Seattle Borrower pursuant to the New Seattle Facility Agreement
SEC	the US Securities and Exchange Commission
Securities Act	the US Securities Act of 1933, as amended and the rules and regulations promulgated thereunder

Senior Management	those managers whose names are set out in paragraph 2.1 and, if the context requires, paragraph 2.2 of Part XI (Directors, Proposed Directors, Corporate Governance and Employees) of this Prospectus
Separation	the transfer of HPE Software from the HPE Group to the Seattle Group and the Distribution, in each case, in accordance with the terms and conditions of the Separation and Distribution Agreement
Separation and Distribution Agreement	the Separation and Distribution Agreement dated 7 September 2016 entered into between HPE and Seattle SpinCo, a summary of the principal terms and conditions of which is set out in paragraph 2 of Section B of Part VI (Principal Terms of the Transaction) of the Circular
Serena Group	Spartacus Acquisition Holdings Corp., the holding company of Serena Software Inc. and its subsidiaries
Serena Merger Agreement	the Merger Agreement dated 22 March 2016 relating to the acquisition of the Serena Group by the Company which completed on 2 May 2016
Share Capital Consolidation	the proposed consolidation, subdivision and redesignation of share capital, as more fully described in paragraph 3.2 of Section D of Part VII (Details of the Return of Value) of the Circular
Shareholder	a holder of Ordinary Shares and, where the context so requires, holders of B Shares and/or Deferred Shares
Shareholder Return Percentage	has the meaning given in paragraph 8 (ASG Programme) of Part XI (Additional Information) of this Prospectus
Sharesave Plan 2010	the Micro Focus International Sharesave Plan 2010, adopted as a sub­plan of the Sharesave Scheme
Sharesave Scheme	the Micro Focus Sharesave Plan 2006
SLAs	service level agreements
SIR 2000	Standards for Investment Reporting 2000
subsidiary	as defined in sections 1159 and Schedule 6 of the Companies Act
Takeover Code	the City Code on Takeovers and Mergers
Tax Matters Agreement	the Tax Matters Agreement among HPE, Seattle SpinCo and the Company, to be entered into by such parties on or prior to the Completion Date in the form attached as an Exhibit to the Separation and Distribution Agreement, and a summary of the principal terms and conditions of which is set out in paragraph 4 of Section B of Part VI (Principal Terms of the Transaction) of the Circular
Temporary Regulations	the temporary Treasury Regulations under Section 7874 of the Code
Termination Date	that date on which the employment or directorship ceases
Total Shareholder Returns	the value to a Shareholder over a period of time from the increase in the price of Ordinary Shares in that period as well as any cash received in the period from normal dividend payments

Treaty	the United Kingdom­United States Income Tax Convention (1975), as amended
Transition Services Agreement	the Transition Services Agreement between HPE and Seattle SpinCo, to be entered into on or prior to the Completion Date in the form attached as an Exhibit to the Separation and Distribution Agreement, and a summary of the principal terms and conditions of which is set out in paragraph 3 of Section B of Part VI (Principal Terms of the Transaction) of the Circular
UK Corporate Governance Code	the UK Corporate Governance Code published by the Financial Reporting Council, as amended from time to time
UK or United Kingdom	the United Kingdom of Great Britain and Northern Ireland
UKLA	the UK Listing Authority, the Financial Conduct Authority acting in its capacity as the competent authority for the purposes of Part VI of FSMA
Underlying Adjusted EBITDA	has the meaning given in "Non­IFRS Measures" on page 46 of this Prospectus
United States or US	The United States of America, its territories and possessions, any state of the United States and the District of Columbia
US Holder	a beneficial owner of Seattle SpinCo common stock or Ordinary Shares and/or ADSs, as applicable, that is, for US federal income tax purposes: (i) an individual citizen or resident of the United States; (ii) a corporation (or other entity treated as a corporation for US federal income tax purposes) created or organised under the laws of the United States, any State thereof or the District of Columbia; (iii) an estate the income of which is subject to US federal income tax without regard to its source; or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust, or, in the case of a trust that was treated as a domestic trust under the law in effect before 1997, the trust has elected to be treated as a domestic trust for US federal income tax purposes