Reply Annual Report 2017

Transcript

1 reply annual financial report 2017 REPLY ANNUAL FINANCIAL REPORT 2017

2 reply ANNUAL FINANCIAL REPORT 2017 1 1

3 Annual Financial Report 2017 2

4 2 3

5 contents Annual Financial Report 2017 4

6 6 Board of Directors and Controlling Bodies 10 The Group ’s financial highlights L 12 etter to Shareholders 14 REPL Y LIVING NETWORK 48 REPOR T ON OPERATIONS 50 Main risks and uncertainties to which R eply S.P.A and the Group are exposed 54 R eview of the Group’s economic and financial position 60 Significant operations in 2017 61 eply on the stock market R 67 arent Company Reply S.p.A. The P 71 Corporate Governance Disclosure of non-financial information 72 Other information 73 76 Events subsequent to 31 December 2017 76 Outlook on operations 77 Motion for the approval of the financial statement and allocation of the result for the financial year 80 CONSOLID ATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2017 tatement 82 Consolidated income S tatement of comprehensive income 83 Consolidated S Contents 84 tatement of financial position Consolidated S 85 Consolidated S tatement of changes in equity 86 Consolidated S tatement of cash flows Notes to the financial S tatements 87 Annex ed tables 152 ttestation of the Consolidated Financial Statements A 159 eport of the Statutory Auditors to the Shareholders’ meeting 160 R 162 uditors' Report Independent A 168 FINANCIAL S TATEMENTS AS AT 31 DECEMBER 2017 tatement Income S 170 tatement of comprehensive income 171 S S 172 tatement of financial position 173 S tatement of changes in equity tatement of cash flows S 174 175 Notes to the Financial S tatements 232 Annex ed tables 239 R eport on the Statutory Auditors to the Shareholders’ meeting uditors' Report 250 Independent A 5 4

7 BOARD OF DIRECTORS AND CONTROLLING BODIES Annual Financial Report 2017 6

8 Chairman and Chief Executive Officer Mario Rizzante Chief Executive Officer Tatiana Rizzante Executive Directors Daniele Angelucci Claudio Bombonato Oscar Pepino Filippo Rizzante (1) (2) (3) Fausto Forti (1) (2) Maria Letizia Jaccheri (1) (2) Enrico Macii Board of Statutory Auditors President Cristiano Antonelli Statutory Auditors Paolo Claretta Assandri Ada Alessandra Garzino Demo Auditing firm Board of Directors and Controlling Bodies EY S.p.A. Amministratori non investiti di deleghe operative. (1) (2) Amministratori indipendenti ai sensi del Codice di Autodisciplina elaborato dal Comitato per la Corporate Governance (3) Lead independent Director This report has been translated into English from the original Italian version, in case of doubt the Italian version shall prevail. 7 6

9 Annual Financial Report 2017 8

10 8 9

11 THE GROUP’S FINANCIAL HIGHLIGHTS ECONOMIC FIGURES (THSD 2016 % 2015 % EUROS) 2017 % 780,739 100.0 100.0 884,434 100.0 705,601 Revenue 13.9 106,417 13.6 98,736 Gross operating income 123,244 14.0 113,873 12.9 99,594 12.8 90,558 12.8 Operating income 110,310 12.5 97,405 12.5 88,930 Income before taxes 12.6 Group net income 8.8 67,544 8.7 56,748 8.0 77,871 FINANCIAL FIGURES (THSD 2017 2016 2015 EUROS) 401,404 337,017 295,425 Group shareholders' equity 668 Non controlling interest 520 653 assets 871,154 770,575 700,745 Total Net working capital 167,870 160,404 162,566 Net invested capital 267,893 345,041 308,779 73,202 44,334 flow Cash 79,497 57,030 28,758 28,186 Net financial position Annual Financial Report 2017 (*) 2016 2015 2017 DATA PER SHARE (EUROS) 37,411,428 37,411,428 Number of shares 37,411,428 2.66 2.42 Operating income per share 3.04 2.08 1.81 1.52 Net income per share 1.96 Cash flow per share 1.19 2.12 10.73 9.00 7.90 Shareholders' equity per share INFORMATION 2017 2016 2015 OTHER 6,456 6,015 5,245 Number of employees (*) For 2016 and 2015 the number of shares were redetermined following the Stock split resoled by the Extraordinary Meeting held on 13 September 2017, through the allotment of four (4) new ordinary shares per each ordinary shares owned. 10

12 10 11

13 LETTER TO SHAREHOLDERS offering a complete portfolio of products and DEAR SHAREHOLDERS, services aligned to the evolving needs of companies that increasingly focused on the digitisation of all services and physical goods. 2017 was the year during which the digital revolution firmly asserted itself. Today, thanks to the investments made in previous years, Reply is one of the leaders in this evolution, Widespread network access; the diffusion of mobile both in terms of its portfolio of partnerships and technology and “smart” devices; the resulting Annual Financial Report 2017 availability of huge amounts of information; the because of our customer ecosystem. In recent months, few companies operating in our industry sharing economy; the digitisation of production have received as much recognition from the market processes, including 3D-printing; and cloud-based solutions drove the rapid and continuous redefinition as Reply. of productive and distributive maps. This was all In fact, our expertise consolidated in the “core” made possible by overcoming entry barriers and the emergence of new collaborative and innovative processes of leading industrial and media sectors ecosystems. allows us to transform technology into relevant and innovative solutions for our customers. At the same time, we support them in the constant search for This is an evolution that can no longer be stopped, competitiveness that today’s markets demand. leading to the inevitable crisis of those sectors that are unable to evolve and adapt, find new We enjoy leading partner status with all of the and different competitive approaches or open themselves up to new business or service models. major global technology vendors. We also have investment projects under way in research Reply worked effectively in this new environment and development, with a focus on emerging during 2017. We quickly positioned ourselves technologies, including virtual reality, blockchain amongst the leading players in this transformation, and artificial intelligence - areas in which we 12

14 and services portfolio increasingly better aligned are already active with specific expertise and a dedicated portfolio of products and services. to the demands of a new world. A world, in which innovation linked to technology shifts from an enabler to a strategic lever for corporate success. The implications of what can be referred to as the industrial revolution of the 21st century appear, however, to be extremely profound, even and Our commitment is and continues to be stronger than ever, ensuring that we can capitalise on this especially in our sector. Letter to Shareholders moment of strong distruption, translating it into new Digital innovation will, in fact, increasingly stem from value for Reply’s shareholders, its employees and its customers. the fusion between business and technology, which does not readily fit traditional models: smart cities; connected vehicles and products; digital currencies Chairman of the Board and e-health are just a few examples of these new Mario Rizzante hybrid scenarios. Agility and speed will be our key assets in this environment, whilst the ability to be competitive will be closely linked with the capacity to experiment and innovate quickly, learning rapidly from our company’s experience, and then just as swiftly bringing new products and services to the market. Now more than ever, it is imperative that we continue to move forward. Our competitive advantage, reflected in the results recorded in 2017, combined with our financial strength, make Reply’s products 13 12

15 REPLY LIVING NETWORK

16

17 Reply is a group that specialises in consulting, system integration and digital services with a focus on the conception, design and development of solutions based on the new communication channels and digital media. Relazione finanziaria annuale 2017 Composed of a network of companies, Reply REPLY IS CHARACTERISED BY: partners with key industrial groups in defining • a culture focused on technological innovation; business models. This is made possible by the new that can anticipate market a flexible structure • technological and communication paradigms such developments and interpret new technological drivers; as artificial intelligence, big data, cloud computing, method of proven success and • a delivery digital communication and the internet of things. scalability; of companies specialised in specific network a • areas of expertise; • teams composed of specialists from leading universities; management • a highly experienced team; • in research and investment continuous development; relationships with customers. • and long-term 16

18 THE ORGANISATIONAL MODEL With over 6.400 employees (as of 31 December, 2017), Reply operates through a network of companies that specialise in processes, applications and technologies and are centres of excellence in their respective fields of expertise. • Processes – at Reply, the understanding and use of technology involves introducing a new enabling approach for processes, based on an in-depth knowledge of both the market and the specific industrial contexts of implementation. • Applications – Reply designs and implements application solutions aimed at satisfying companies’ core business requirements. • – Reply optimises the use of Technology innovative technologies, implementing solutions Reply Living network capable of ensuring maximum efficiency and operational flexibility for customers. REPLY’S SERVICES INCLUDE: – focusing on strategy, • Consulting communication, design, process and technology. • System Integration – making the most of the potential offered by technology, combining business consulting with innovative technological solutions and high level value-add. – innovative services based on • Digital Services new communication channels and digital trends. 17 16

19 MARKET FOCUS For every market segment in which the company operates, Reply combines specific sector expertise with wide experience in the provision of services and a wealth of advanced technological capabilities. In 2017, the breakdown of the Group’s sales in its various vertical sectors was as follows: Telco & Media 26.3% Manufacturing & Retail 33.2% Energy & Utility 7.0 % Healthcare & Government 7.1 % Financial Services 26.4% mediation layers used in the automotive world to TELCO & MEDIA enable 3G-4G communication between the Service In a world that is evolving towards an increase in Annual Financial Report 2017 Operations Centre and Network Operations Centre digital contacts, the types of relationship with the end (NOC-SOC) and cars equipped with a “black box”. customer are drastically changing. The digitalisation of services and the virtualisation of interactions present Reply also collaborates with leading European new challenges in terms of supply, business models operators in the renewal of Operations Support and operational processes, often leading to scenarios systems / Business Support Systems (OSS/BSS) to of cross-industry competition. To counteract this, Reply support increasingly more customer-focused service works with major telecom and media operators to models and an omnichannel configuration of the define and implement digital transformation strategies portfolio offering. and apply these to the main core processes. Finally, Reply is involved in the creation and Reply delivers integrated strategic and technological implementation of services and applications consulting services to support the design, definition designed for latest generation mobile devices. These and management of the new-generation networks, include on-demand or linear audio/video content, based on SDN (Software Defining Network) models, integration with connected products, customer capable of integrating and managing virtual networks support services and omnichannel customer (Network Virtualisation) through network engineering engagement solutions. services and network operations. The solutions developed by Reply are also applied to the network 18

20 services. Reply offers consulting services, as well as FINANCIAL SERVICES a wide range of models and architectural solutions Reply is increasingly active in supporting the digital based on different standards, technologies and transformation of Europe’s financial institutions. usage profiles, aimed at the banking/insurance Reply is working with some of the major players in market and at emerging players in the payments the sector on many key issues, such as the design industry. Where relevant, Reply takes advantage of complete multi-channel digital experiences of the new opportunities offered by the PSD2 and customer engagement strategies. This legislation (revised Payment Service Directive). work includes everything from digital branding to the implementation of application strategies; IoT solutions represent another theme of great the development of a new generation of portals interest to Reply, in particular applied to the auto, and multi-channel touchpoints to the complete home and health insurance sectors in which the redefinition of the underlying technological company is active with cutting-edge projects for a architecture; and the analysis of new customer number of key players. journeys, relying on evolved marketing initiatives with a data-driven focus. MANUFACTURING & RETAIL Reply Living network Reply partners with companies in this sector to In the wealth management area, Reply maintains support them through the transformation and a strong market presence and has developed a management of information systems, from strategic wide range of specific skills and solutions aimed, design to the understanding and redefinition of key for example, at emerging consulting models and processes, and the implementation of solutions that remote advice solutions and platforms. In the area integrate core applications in the manufacturing of Governance Risk Control (GRC), Reply operates and distribution sectors. The areas of focus and with a dedicated consulting division, comprising development of skills are on the support of supplier a European network that is distributed across 13 relationship management processes; the design countries with over 200 business consultants and is and implementation of control systems and planning highly specialised in risk evaluation and risk control. based on the new generation of Cloud ERP solutions; In this field, Reply is working with several leading the planning and control of production units through financial institutions on a broad range of activities Manufacturing Execution Systems (MES); and the connected with the implementation of European distribution and handling of products across complex Banking Union standards and on the development of logistics networks through Supply Chain Execution related models and solutions. (SCE) processes. Another area in which Reply boasts a strong Native Cloud platforms and applications, together presence and a high level of specialisation is the with a focus on the enabling aspects of digital mobile payments realm and related m-commerce 19 18

21 transformation, represent the main technological Moreover, the company’s consolidated expertise component of Reply’s portfolio offering. in the introduction of new technologies (IoT, big data, cloud, mobile, etc.) is vertically applied, with Industry 4.0 and Logistics 4.0 are increasingly dedicated and highly focused teams, to operating important elements for the strategic development of models for the various areas of the energy and utility companies in the sector. In particular, the introduction value chain, and in particular in the definition and of greater levels of flexibility on the shop floor development of new smart metering, electric mobility, is a new competitive challenge for processing monitoring and optimisation of systems, smart grid companies. In 2017, Reply significantly increased its and asset and work management models. Finally, product offer in this area. The porting reengineering Reply also assists its customers in the adoption of on the Cloud platform of proprietary SCE and MES new energy management models aimed at boosting solutions was completed. Using IoT, cloud computing energy efficiency, a field in which it provides a and big data models, communication to the latest complete portfolio offering, aimed at both energy generation of sensors on production lines and within sales companies and final consumers. products was further boosted, creating a backbone for the next generation of applications in the logistics and manufacturing sector. Annual Financial Report 2017 ENERGY & UTILITIES In 2017, the energy and utilities sector confirmed the growth of innovative technologies on an industrial scale, across the entire value chain. Driven by market and regulatory pressures, operators are firmly investing in the digitisation, programming optimisation and operation of installations for the generation, transport and distribution of electricity. Reply is one of the key partners delivering extensive transformation for companies operating in the sector. It combines knowledge of the market and of its unique processes, with a distinctive capability to design, implement and manage applications and technological solutions, supporting the “core business”; trading and risk management; pricing and forecasting; smart metering; billing; and CRM areas. 20

22 HEALTHCARE & GOVERNMENT Telemedicine or digital healthcare, a realm that is expected to move therapies and patient monitoring increasingly out of the hospital environment, represents an important area of specialisation for Reply. The key areas that can potentially impact the organisational model are telemonitoring at the patient’s home; and electronic prescriptions and healthcare for the management of patients suffering from chronic diseases. Reply has developed a specific platform for these areas, designed to facilitate an integrated network of communications between patients and community operators at various levels: hospitals, nursing homes, healthcare centres, community centres and more. Reply Living network Lastly, Reply is working with various government agencies in the United Kingdom, including the Ministry of Defence (MOD), for which it has helped define and implement a new approach in the use of IT architecture. Designed to support decision- making processes, this new architecture is capable of integrating flows of heterogeneous information to improve data management and, at the same time, ensure the complete visibility of available resources. 21 20

23 TECHNOLOGICAL INNOVATION Technological innovation forms the basis for Reply’s development. The company has always pursued the objective of providing its customers with the tools necessary to increase flexibility and efficiency. Reply is involved in a continuous process of research, selection and marketing of innovative solutions for sustaining the creation of value within organisations. intelligence projects is the availability of data ARTIFICIAL INTELLIGENCE because without a wide availability of data, both Artificial intelligence, one of the founding dreams historical and updated in real time, AI is not able to of information technology itself, is a discipline produce results. With this in mind, Reply works not that has existed for a long time. For years a mere only with the machine learning and neural networks fantasy due to the unavailability of systems and technologies, but also with the management and data, this technology is now becoming a reality treatment of big data through advanced analytics which is capable of bringing about concrete benefits techniques. in different contexts. Over the next few years, revolutions are expected in all fields, especially in the BLOCKCHAIN industrial sector, but also in areas related to society Blockchain technology represents a new and to the private life of individuals. opportunity to profoundly redesign the concepts of trust, property and trade. This is a further leap Today artificial intelligence is ready to be used within for web-based systems, which follows the joint companies. The machine learning solution is, in fact, Annual Financial Report 2017 statement of social networks and mobile devices. already adoptable and can automate processes by The disruptive potential of blockchain protocols improving their quality. Reply applies the results of lie in the opportunities they create for cutting out research on artificial intelligence to real-life scenarios the middleman in virtually any guarantor-regulated in different sectors, implementing projects that trading process or Trusted Third-Party (TTP). The high integrate the latest machine learning technologies potential of and the wide range of applications from into company systems, from deep learning to this technology have been recognised at a cross- cognitive computing, from recommendation systems industry level. to predictive engines, from data robotics to chatbots. Reply collaborates in these areas with the world’s Reply’s Competence Centre, focused on the leading AI technology players. blockchain technology, is engaged in different countries (Benelux, France, Germany, Italy, the UK) Specifically, Reply’s solutions within the artificial and across various vertical industries (Banking, intelligence realm is based on three key elements: Insurance, Telco & Media, Energy, Retail, Healthcare, human-computer interaction (with the study of natural Real Estate, etc.), and works to accelerate language conversation and recognition systems), the customer adoption of the most pervasive processes (Intelligent Process Automation) and blockchain technologies, such as Bitcoin, Ethereum, decisions (Data prediction and Data prescription). Hyperledger and Multichain. Moreover, the The essential factor for implementing artificial 22

24 company’s proven expertise in system integration most appropriate technological solutions and is reflected in the blockchain world, and in its ability applications; to interface with Blockchain-as-a-Service services • an end-to-end provider service which, supported offered by major IT vendors, meaning that Reply’s by the partnership with major vendors worldwide blockchain solutions fall within the “enterprise-ready” including Amazon Web Services, Google, software product category. Microsoft, Oracle, SAP and Salesforce, allows customers to benefit from the most effective CLOUD COMPUTING solutions for their needs, both in terms of the Cloud computing has established itself as one of model and the technology chosen; and the most important areas of transformation that SaaS services and solutions, based on Reply’s • companies have had to face. The offer of virtual proprietary application platforms. environments and services by leading vendors CUSTOMER ENGAGEMENT worldwide has in fact modified, if not revolutionised the concept of IT as it had been traditionally The rapid evolution of data analytics tools was triggered by the major innovations of technology interpreted, transforming it from being a simple companies and is characterised by the use of data- commodity to one of the basic elements on which to Reply Living network driven analysis methodologies, the benefits of which configure the digital transformation of an enterprise. are the result of a large availability of data and At the same time, the ever increasing maturity of increasing computational capacity for their analysis. the cloud in its various forms (IaaS, PaaS or SaaS) Specifically, the data-driven approach is defining is leading service providers and system integrators a new model for the design and management of marketing initiatives aimed at the customer. Indeed, to define specific offer portfolios aimed at highly strategic issues, such as the coexistence of cloud once the needs of the individual customer have been with traditional on-premise applications and the interpreted, based on data and analysis provided by CRM (Customer Relationship Management) platforms, challenge of data management security. it becomes possible to define one-to-one marketing In order to fulfil the requirements for strategic, campaigns, launched in real time to meet specific needs. technological and change management transformation necessary for the implementation of the most effective cloud models based on specific With the aim of exploiting this competitive advantage and establishing a consultative and strategic situations, Reply has defined a portfolio of services platform, Reply has created a competence centre structured along the following lines: consulting support (from the business process • focused on the customer robotics approach. Thanks to operational management), capable of helping to the experience gained through initiatives carried clients to understand, select and develop the out in various sectors (e.g. automotive, financial 23 22

25 services, utilities, retail, etc.), Reply has defined a data modelling and data process re-engineering, framework for the development and implementation Reply has made it easier for its customers to of processes related to direct interactions with approach the issue of big data, favouring the activation of a real and solid pathway of cultural customers, integrating machine learning, artificial intelligence and cognitive systems models, all aimed change and introducing a new approach to data at the recognition and anticipation of needs across management. various digital channels. In particular, Reply has partnered with companies The customer robotics approach facilitates the to support them in the application of big data conception, design and implementation of services technologies, by creating architectures based on the new “data lake” concept; and in the development aimed at providing data-driven customer service tools, such as recommendation systems for and application of advanced analytics models, bringing together business experts and data products and conversational systems capable of scientists to define core business processes with a understanding and interacting independently, using data-driven focus. natural language. Finally, Reply is constantly investing in developing Reply has also initiated the development of a specific Annual Financial Report 2017 offering in the machine learning field, designed its expertise in leading CRM and e-commerce platforms and solutions, thanks to a solid ecosystem to address the growing demand by companies to of partnerships with world leaders in the industry, automate lower impact digitised processes, such as invoice reconciliation. At the same time, Reply works including Microsoft, Oracle, SAP and Salesforce. with companies to increase their ability to build value-added services based on innovative process DATA & ANALYTICS automation models through deep learning, image Big data technologies have moved on from being recognition and prescriptive analytics. a strictly technological field, to become one of the key levers in the digital transformation of companies. To better support its customers in the introduction Indeed, significant data projects have been of advanced, data-use techniques, Reply has launched to define programmes aimed at improving also developed a training programme aimed at business performance (e.g. risk management in establishing a new generation of data scientists financial institutions), innovating service models (e.g. capable of capitalising on the latest machine learning passenger car policies in the insurance sector) or and data analysis techniques. to understanding and serving customers better (e.g. loyalty programmes in the retail sector). By combining technological skills in data analysis, 24

26 DIGITAL EXPERIENCE DESIGN CONSULTING Real Time Marketing, artificial intelligence and In an increasingly digital and more connected world, analysis of the customer journey are the three the concept of customer experience has become transformation technologies that will have the most a key differentiating factor, both in B2C and in impact on the relationships that brands have with B2B environments. Reply helps its customers to their customers and prospects. In fact, the use of create innovative and distinctive product-service these technologies enables brands to improve their experiences. This process begins with the analysis marketing results through continuous enhancement of people’s needs, strategic business objectives and in customer experience, customer loyalty and an technological enablers, it then transforms them into increase in their customer base. integrated customer journeys and prototypes that make the results immediately tangible and verifiable. Finally they are developed in an iterative and agile Taking full advantage of these emerging capabilities also means building a vision of the individual way, until they are launched on the market. customer that is increasingly more data-driven. At the same time, a customer-centric approach The growing interest in cross-device identification requires a change in the organisation, which must be tools and Account-Based Marketing (ABM) solutions aligned not so much to its internal functions – and Reply Living network underlines the increasing interest among marketers to the underlying IT systems – but to the customer journey. Reply supports organisations in managing towards technologies and models that are capable change to make them more customer-centric; of offering targeted and coherent interactions among receptive to market inputs and feedback; and agile in owned, earned and paid media. releasing new products and services, by mobilising cross-functional teams that operate in full autonomy In response, Reply has developed an extended and specialised set of skills. These range from digital and towards specific objectives. Reply continued to invest in the acquisition of skills storytelling to a multi-platform strategic vision; and expertise in this field in 2017, further expanding contextual interaction to omnichannel loyalty; and data recognition components used to capture large the two design studios in Milan and Munich that offer support to customers across Europe. quantities of information and subsequent data analysis expertise required to transform the data into powerful and effective market insights. To extend this scenario further, it is necessary to ensure coherent communication between the various media involved, through a unified consulting, conceptual and productive supply chain that also incorporates a multimedia asset management 25 24

27 strategy. In addition to the creation and management on analytical skills and paid, owned and earned media activation designed to enable and optimise of every aspect of the interactive digital brand image, Reply’s areas of expertise include creativity a company positioning integrated with its own and technology as applied to important fields, such ecosystem over the relevant relationship channels. These channels include social media networks; as mobile telephony, e-commerce, gaming and the search engines; comparison websites; shopping internet of things. These are areas that commercial marketplaces and social shopping networks; brands need to master, both now and especially in the future, as already demonstrated by major global affiliation networks; email; applications; and lead communication markets. generation channels. In recent years, Reply has developed specific DIGITAL PAYMENTS expertise and solutions to support companies in The widespread adoption of mobile devices among the development of immersive experience projects consumers and the creation of new payment through the application of augmented reality and channels that see the mobile component as a virtual reality. These technologies are expected to supporting factor, make the payment sector one of have an increasingly strong impact on the marketing the areas with the highest growth rate. strategies of highly innovative brands. Annual Financial Report 2017 Reply has defined a dedicated offer, based on Another important field in which Reply supports its consultancy services and technological platforms, corporate customers is communication via digital social to assist banks, financial institutions, telecos, utilities media networks. Today, this is a mainstream activity and retailers in creating and supplying innovative that has expanded significantly over the last few years remote and proximity digital payment services. and is the acknowledged global arena for brand-user relationships. Reply has therefore added to its portfolio One of Reply’s key technological assets in this area an offering aimed at supporting companies in strategic is HI Credits™, a platform which enables personalised activities that are needed to position a brand correctly, and contextualised payment services by capitalising including within social media channels. This includes on the available smartphone technologies. HI monitoring and assessment activities; the design and Credits™ can handle all major payment card circuits, architecture of relational KPIs; promotional activities token-based digital payment solutions (Apple Pay, such as couponing and social gaming; content Samsung Pay and Google Pay) and money transfers marketing; CRM; and social caring. based on current accounts in person-to-person (P2P) and person to business (P2B) modes. Social networks are increasingly more connected to the digital marketing activities that Reply The expansion of new payment tools requires the integrates into a universal relationship model, based acceptance network to adapt in order to manage 26

28 new types of digital payments. Reply has developed a range of services that make it possible to manage The growing use of social media to compare prices new digital payment tools including Alipay, Jiify and and products has further enriched and modified WeChat, both on the traditional POS network and on purchasing processes. The buying journey is a smartphone or tablet. increasingly based on an exchange of information and multi-channel interactions in which the Another innovation relating to the acceptance transaction is begun and completed between chats, network is the introduction, by leading hardware social media, online stores and physical shops. vendors, of POS solutions running on Android, which make it possible to develop new services directly This evolution of the traditional purchasing scenario on the POS device and to distribute them using a has led Reply to define an omnichannel strategy business model based on proprietary app stores. centered on customer needs. This allows companies Reply has developed significant expertise in the to provide the final consumer with a completely planning, design and implementation of payment unified and integrated experience, through online, apps for Android POS devices. mobile and physical channels, where the client feels monitored and supported during the process (e.g. Reply Living network E-COMMERCE voice assistants, recommendation engine). Reply Mobile consumers are increasingly demanding a provides end-to-end management of the entire completely integrated experience from companies, corporate sales cycle chain, for all business models as personalised and as unified as possible through (B2B, B2C, B2B2C). various physical and digital channels. In a similar purchasing scenario, the success of this lies in Reply’s offering ranges from the management of the ability to invest in services that promote and products and catalogues to promotions and pricing enrich relations and interaction between sellers and optimisation; warehouse and logistics management customers, by constantly innovating and extending to integrated call centre systems; and customer sales models with new multi-channel strategies engagement both in physical stores, using proximity capable of offering consumers different touchpoints commerce techniques, and on online channels, by for purchasing products and delivering a unique exploiting the potential of social media. Last but not experience that is integrated and agile. One example least, Reply is able to build a digital experience that is the increasingly widespread success of purchasing is not only rich and fluid for the end customer, but is processes based on the “click and collect” models, also able to create an emotional relationship with the which are extremely useful in order to avoid brand. additional delivery costs or unexpected events such as delays. Purchases are made online and the product is collected free of charge at the shop. 27 26

29 ENTERPRISE ARCHITECTURE & AGILE INDUSTRY 4.0 The fourth industrial revolution is the combined The recent paradigm shifts in areas such as cloud computing, the mobile world, IoT and big data, effect of connectivity, data processing power, latest generation mechanical automation, machine learning along with more mature models of agile and and artificial intelligence. Industry 4.0 models are DevOps delivery, have rendered the IT landscape unrecognisable compared to a few years ago. quickly redefining production sites around the world, transforming them into systems closely In 2018, with the increasingly widespread emergence interconnected with the supply chain, logistics, of 3D printing, virtual reality, artificial intelligence, sales, the products themselves and the support and machine learning and big data, all organisations will maintenance chain. need to understand that those who do not know how Plants become open ecosystems that need to to seize the opportunity to innovate, will be penalised by the market. be able to adapt autonomously to new tasks, to carry out maintenance activities and to predict the best input and output flows through constant In order to excel in the digital economy, characterised by the convergence between the communication with supply chains, while attaining levels of efficiency and control that minimise costs physical and the digital worlds, organisations must Annual Financial Report 2017 and maximise results. remove the boundaries between IT and business. This will allow enterprises to be agile in exploiting For this new global world of interconnected the new developments available to them, although they must proceed with caution to avoid damaging production, Reply has developed a suite of existing systems and processes. integrated solutions capable of ensuring its customers are flexible, connected and efficient. This new technological approach requires agile In particular, Reply’s mission is to accompany its customers along the entire transformation journey: delivery models in which small, highly qualified, from the planning and development of solutions multi-disciplinary teams implement a process of end- that open up the production sites and interconnect to-end change in a very short timeframe, working directly with the managers of the various business them to the entire digital world, to the design and areas involved. Reply supports its customers in implementation of solutions capable of rendering the realm of enterprise architecture through a vast products “smart”, connected and digital. catalogue of architectural frameworks, methods and models, consolidated in many projects completed for The digitisation of companies is a transformation large industrial, media and service groups. expected to take place in the medium term, made possible and concrete by the use of all the vertical and horizontal pillars offered by Industry 4.0 28

30 (Robotics, Digital Twin, Cloud and Fog Computing, MOBILE augmented reality, big data, artificial intelligence and In the mobile sector, Reply supports companies in machine learning, etc.). defining interaction scenarios with their users based on omnichannel applications and architectures THE INTERNET OF THINGS capable of meeting the needs that the new market The drive to converge the telco, media and scenario is imposing. These are the appeal of consumer electronics sectors is making it necessary and high usability of services; high performance to treat objects that currently lack connectivity as of services; the creation of architectures that are “networked devices”. One of the main developments capable of integrating new channels and types currently underway consists of the gradual of devices with flexibility to provide services and interconnection not only of computers and devices, content suitable for each platform. but also of a multiplicity of material objects, giving rise to networks that are increasingly pervasive and With the exponential growth of mobile video, where integrated with people’s daily lives. the quality and stability of the service is essential to ensuring its success, Reply is involved in major Reply has designed and developed HI ReplyTM, European projects for the provision of OTT-TV Reply Living network a platform of services, devices and middleware, services, working with design, development, on which to base specific vertical applications validation and monitoring teams. covering advanced logistics, environmental security, contactless payment and product traceability. In 2017, In addition, Reply has established its own application Reply continued to follow the trend of verticalisation factory dedicated to mobile applications for both the started in previous years, consolidating its position business and consumer worlds. The factory includes in the smart home, healthcare, insurance and a user experience laboratory, together with teams of automotive sectors. developers specialised in various platforms, which bases its activity on a data-driven approach using Following the incentives promoted at local level tools and methods that focus on users and on their (Industry 4.0 in Germany and Calenda Plan in Italy), needs and behaviours. which have led to a push in the application of the IoT in industry, Reply has designed a proprietary Manufacturing Operation Management solution. Finally, within the IoT ecosystem, Reply has developed specific vertical solutions for the energy sector. 29 28

31 AUGMENTED REALITY, VIRTUAL RISK MANAGEMENT, PRIVACY & SECURITY REALITY Reply’s Risk & Regulatory Management Consultancy The success of virtual reality continued during the course of 2017, both in the pure entertainment market division operates at a European level, providing services for risk, finance, treasury and compliance with the release of various high-quality products initiatives within the financial services sector. In (including Reply’s Theseus-VR), and in the professional field. The different visors launched on the market in these areas, Reply has developed a consolidated recent months (Google Daydream, ACER, ASUS, HP, experience in change and remediation programmes Lenovo, etc.) which go alongside the most popular driven by regulatory developments, and has developed programmes aimed at the strategic and products currently available (OCULUS and HTC Vive), together with the general reduction in prices, are operational improvement and optimisation of the proof of a continuously expanding market. same. Over recent years, IT-related risks have increased Augmented reality, which in 2017 had as its reference dramatically in terms of both their impact and their product Microsoft’s Hololens headset, also saw an important mobile development with the release of frequency, leading to serious security violations and causing hundreds of millions of client data records the respective development platforms of two leading Annual Financial Report 2017 players (Google and Apple). The areas in which this to be compromised worldwide. The parameters that should be considered and monitored are technology saw the greatest amount of development are the professional sectors as relating to companies’ often interconnected and are therefore difficult to catalogue in an orderly manner or to tackle production processes (training, maintenance support, quality control) and sales support (e-commerce). individually. By combining experience in the 3D sector, from In order to deal with this increasingly complex environment, Reply has defined an integrated, the gaming world, mobile skills and wearable devices, Reply has been able to develop an offering coherent and comprehensive range of services to support its customers in defining the best possible specifically orientated towards the development of solutions designed to increase user involvement. security governance and security technology strategies. This offer portfolio includes the development of augmented reality applications (aimed at visualising a In particular, Reply provides support across all the implementation phases of an integrated information virtual product in a real environment) and immersive reality applications designed specifically to provide security plan, from strategic planning and the users with an unforgettable experience, transporting definition of enterprise security architectures, to them into a navigable virtual environment. the implementation of specific IT countermeasures. 31 30

32 Social media represents a valuable system of data Lastly, thanks to its cyber security command centre, Reply assists large organisations with advanced that makes it possible to better understand users and to generate actionable insight. For example, computer security incident response services. data on user expectations supports those marketing SOCIAL MEDIA initiatives focused on anticipating emerging In recent years, social media has profoundly changed trends; analytics data supports communication the way in which individuals of all age groups teams in defining communication clusters; communicate and interact, in both their private and advertisement interaction data makes it possible professional lives. to optimise campaigns to decrease the dispersion of communication and to improve the conversion The Internet has correspondingly transformed itself performance. from a purely informative tool, to an immense space for dialogue and conversation, and for the research, purchase and evaluation of product/service brands. New opportunities can be capitalised on by brands Reply Living network that are able to analyse and take advantage of the interactions generated on social media, be they customers, prospects, employees, partners or suppliers. The strategic assets in this realm are the ability to observe relevant phenomena, the process of defining the most effective social media marketing activities to meet a brand’s business needs, data- driven content curation and social analytics activities. Reply offers an innovative approach for maximising the value of brands’ digital identity on social networks, with a view to integration with other relational touch points, from search engines – nowadays closely interconnected with social media – to television, for second screen interaction analysis. 31 30

33 VIDEO & GAMING GENERATION The video game market continues to see a strong performance, expanding to all age groups and remaining equally divided between female and male audiences. Mistakenly considered to be a niche phenomenon by some, video gaming is actually a mass phenomenon and one of the main consumer areas in the leisure and entertainment sector. Video games are also a language of communication, a culture that permeates the whole of society. Companies must continually improve the dialogue with its customers by seeking new forms of "customer engagement", among which games play an important role. Reply has developed a portfolio offering capable of Annual Financial Report 2017 meeting all of a brand’s needs, from the use of virtual reality and augmented reality to the production of educational games (edutainment) or games designed to promote a product or a message (advergames). Reply is constantly investing in this area in order to offer, through the use of the latest technologies, increasingly innovative and engaging game experiences. During the course of 2017, Reply was able to further assert the company’s ability to create quality products, with a focus on the international market. In particular, the release of Theseus-VR, made available on all leading VR videogame marketplaces (VR Playstation, OCULUS Store, Steam VR), achieving good visibility and recognition from critics. 32

34 Reply Living network 32 33

35 REPLY SERVICES & PLATFORMS

36

37 THE REPLY SERVICES Today, networks consist of distributed “information systems” that provide real-time access to an ever- increasing quantity of complex data, information and content. This use of the Internet is creating new competitive models based on service approaches that depend on three fundamental components: the software platforms involved, an understanding of and expertise in the relevant processes, and service management. Reply supports its clients in this innovation process with services and platforms that are designed to fully exploit the new potentials offered by networks and communication technologies. BUSINESS PROCESS OUTSOURCING CFO SERVICES Reply provides specialist services in three fields of The role of the CFO is changing dramatically due to the increasing need to use complex reporting expertise: and simulation tools that can provide timely and • Finance & Administration - the management of transnational accounting processes, the adequate information on the success of a business writing of consolidated financial statements, the and its ability to create value. As part of its business performance management portfolio, Reply has management of tax obligations, the digitisation of identified specific services that are capable of accounting documents and electronic storage. Human resources supporting the development of CFOs, who are - training, ECM (enterprise • increasingly called upon to confront issues that were content management), career profiles, company Annual Financial Report 2017 knowledge and dashboards for directional once the responsibility of CEOs: • analysis. definition of the business control model; - the management and control of Pharmaceutical • • strategic planning and budgeting; • creation of the consolidated statement; and pharmaceutical expenses. • IPO support. APPLICATION MANAGEMENT Reply has defined an application management model characterised by: • a modular approach that allows the customer to purchase either individual service components (for example, only application maintenance or only operational support) or structured groups of services; and • a flexible supply model, aimed at integrating Reply’s services in the best possible way with the customer’s business processes, while taking into account the specific needs involved. 36

38 THE REPLY PLATFORMS very centre of processes and applications in order BRICK REPLY™ to facilitate a content management approach that Brick Reply is Reply’s Industry 4.0-ready is based on integrated multi-channel strategies. manufacturing operations platform, focused on the Thanks to the organisation of workflows, a high IoT (Internet of Things) and based on a fully open level of interoperability with other business systems services architecture capable of interfacing with and the advanced multi-channel asset distribution machinery and coordinating production processes services, Discovery Reply™ supports integrated within a factory. Brick Reply's objective is the production models and the utilisation and storage digitisation of business processes in manufacturing, of content. The platform is designed to support the from planning to the execution and monitoring purchase, processing, cataloguing, access, research of activities. The platform’s flexibility, ease of and distribution of digital assets on various delivery implementation, focus on Industry 4.0, plus the channels, both traditional (analogue and digital TV) multiple modes of use and application (As-a-Service, and IP-based (webTV, over-the-top TV, mobile TV, Infrastructure as a Service, On-Premise) means that connected TV and digital signage). it is a comprehensive and extremely adaptable solution for integration and use in different industrial HI REPLY™ sectors. Reply Living network HI Reply™, the Reply solution focused on the Internet of Things, is a platform of services, devices and CLICK REPLY™ middleware on which specific vertical applications Click Reply™ is the Reply supply chain execution are based, such as infomobility, advanced logistics, suite, intended for the management and optimisation environmental security, contactless payment and of processes in the production or logistics and product traceability. HI Reply™ enables simple and distribution sectors. Click Reply™ is one of the leaders standard communication between web-connected in the automotive, retail fashion, grocery and contract objects. The platform consists of a combination logistics (3PL) sectors and is used by more than 400 of hardware, firmware and software components companies and over 20,000 users worldwide. The distributed on the actual objects, which vary from suite has obtained important recognition, including simple sensors and actuators to more sophisticated a place in the Gartner Group’s WMS (warehouse systems, such as smartphones and mini-computers. management system) Magic Quadrant. Enhanced by the platform, objects become “smart”, acquiring the ability to interact with one another via standard internet technologies and gaining a set DISCOVERY REPLY™ of basic functions necessary for them to behave Discovery Reply™, Reply’s digital asset management “seamlessly” (auto-configuration, location, discovery and content delivery platform, manages the full life and ontology of services exposed). cycle of digital assets (video, audio, images and documents). It places multimedia content at the 37 36

39 the need for communication, collaboration and SIDEUP REPLY™ education through social media and tools that SideUp Reply™ is the Reply platform providing place the focus on the employees. It is suitable services for warehouse management and supply for corporate and public contexts. TamTamy™ chain integration and collaboration. The solution is provides its customers with a platform designed to entirely cloud-based and integrates with both ERP facilitate interaction between companies, brands systems and supply chain planning and e-commerce and people. The product offers a variety of social systems. SideUp Reply™ is aimed at companies that media-focused functionalities, which can easily be need to improve the efficiency and visibility of their extended and integrated at an enterprise level, while supply chain in a short time. SideUp Reply™ can be also addressing the needs of the consumer, making used directly via the Internet, with a pay-per-use it possible to create digital workplace communities, model. The suite has obtained important recognition, communication portals and promote intranet including a place in the Gartner Group’s WMS participation. With a customisable front-end that is (warehouse management system) Magic Quadrant. flexible and responsive that enables immediate and intuitive access, the platform is also accessible in a STARBYTES™ mobile environment. TamTamy™ is available both as a Starbytes™, the crowdsourcing platform developed cloud-based and as an on-premise service. by Reply and based on cloud architecture, targets Annual Financial Report 2017 companies that intend to activate an open enterprise TICURO REPLY™ model, enabling them to develop projects, services Ticuro Reply™ is Reply’s healthcare solution focused or products through access to the capabilities and on telemedicine, telemonitoring and the analysis of skills of a digital community, with a direct channel and behavioural habits. Based on the internet of things, without intermediaries. Within traditional mechanisms of Ticuro Reply™ is able to connect to more than 50 engagement, Starbytes™ introduces new dynamics that types of devices, from medical devices to wearable stimulate interactivity, including the use of gamification, and environmental sensors, helping people, patients, as well as facilitating a comprehensive management of caregivers and health professionals during the the standards that regulate partnership contracts with treatment process. Certified as a CE medical device, freelancers. Starbytes™ is a new model in the workplace Ticuro Reply supports individuals, based on their where supply and demand meet in a flexible way health conditions, in prevention, treatment and through contests and tenders and in which, thanks to postoperative care. The data collected and managed a sophisticated and transparent feedback system, the by Ticuro Reply facilitates processes and solutions best merit-based professionalism emerges. focused on continuous remote assistance, allowing doctors to establish an interactive relationship with TAMTAMY™ patients and provide them with a personalised TamTamy™ is Reply’s Digital Workplace and Enterprise treatment plan. Social Network solution, designed to respond to 38

40 PARTNERSHIP - RESEARCH AND DEVELOPMENT Reply considers research and continuous innovation to be fundamental assets for the support of its customers as they adopt new technologies. In order to offer the most appropriate solutions for different business requirements, Reply has established important partnerships with major global vendors. In particular, Reply has achieved top level certifications in leading enterprise technologies, including: of guaranteeing coverage across the entire suite MICROSOFT of Oracle products. Reply is the leading partner in In 2017 Reply continued to develop its partnership the three key areas of Oracle’s Cloud Computing with Microsoft, achieving Gold Partner status in all offering: Infrastructure as a Service (IaaS), Platform as the countries in which it operates. Specifically, Reply a Service (PaaS) and Software as a Service (SaaS). is engaged in the main areas covered by microsoft’s four key solution areas: Modern Workplace, Business Moreover, in 2017, Reply was one of the first partners Applications, Applications and Infrastructure, Data to successfully bring application solutions to the and Artificial Intelligence. market within the customer experience, modern 2017 also saw significant growth in the adoption of marketing, enterprise resource planning, human cloud solutions by customers. Furthermore, Reply capital management and budgeting realms, fully Reply Living network is a member of the Partner Advisory Council for based on cloud technology. In recent months Reply Microsoft’s Azure and Data Platform and in 2017 it has further strengthened its leadership in Oracle’s participated in the exclusive Distinguished Engineer cloud technology - Reply was among the first Council held in Redmond, WA (USA). Microsoft partners to join the “Managed Service Providers” awards received by the company include: ‘Enterprise programme thanks to its expertise, tools and HiPo Partners – Emerging Azure Partner of the Year processes designed to create, deploy and manage 2016’ and ‘Cloud Transformation Partner – Azure Oracle and non-Oracle workloads on the Oracle 2017’. Cloud Platform. ORACLE Lastly, in the e-commerce sector, Reply has Reply is an Oracle Platinum Cloud Select partner, developed various projects, based on the Xstore and in 2017 was awarded, for the third consecutive and Oracle Commerce suites, aimed at defining a year, ‘Cloud Partner of the Year’ in Italy and Germany. customer-centric strategy, customised and unified Reply pursues a process of constant innovation across the various channels. and training, aimed at ensuring qualified support for companies. With 49 corporate specialisations and more than 500 resources certified on Oracle products, Reply boasts one of the leading European Competence Centres to date, capable 39 38

41 AMAZON WEB SERVICES SAP Thanks to its extensive international experience Reply is now among the main partners of Amazon in the implementation of software solutions based Web Services (AWS) Partner Network, the division that supplies public cloud infrastructure. In particular, on the SAP product suite, Reply is able to support Reply has completed numerous projects on companies with the optimisation of their activities and processes, taking an agile and integrated approach infrastructures and services made available by AWS and supplied to companies, in both the B2B to the design and development of business and B2C sectors, complete end-to-end support, information systems for the digital age. from the implementation and integration of custom In this scenario, Reply relies on the Design Thinking applications and platforms to maintenance and management services based on consumption cost methodology to combine technology with a models. Reply supports its customers through the more human-oriented aspect. This flexible and digital transformation processes, relying on the collaborative approach helps companies to see most appropriate cloud model for the requirements their business from a different point of view, tackling “weak spots”, exploring unchartered territory and of each individual company, while adopting a governance strategy that is secure, flexible and innovating. In particular, in terms of the business efficient. components and the specific changes required Annual Financial Report 2017 by the digital transformation process undertaken In 2017, Amazon Web Services confirmed Reply, for by companies, Reply’s expertise covers both the traditional enterprise processes, and the latest SAP the fifth consecutive year, as Premier Consulting Partner, the highest level of certification and technologies in the field of IoT, machine learning, big data and analytics, including SAP Leonardo, SAP only awarded to a select group of AWS partners worldwide. Cloud Platform and SAP Hybris, for the development of end-to-end e-commerce and customer APPLE engagement solutions. Reply is one of the first European partners to be part of Apple’s Mobility Partner Program, a global initiative The technology and design domain is significant, aimed at leaders in the development of mobile extending from SAP cloud architecture to the solutions for the business and enterprise worlds. SAP Fiori and SAP S/4 HANA suites. In 2017 Reply In particular, Reply was selected by Apple with the won the “SAP Quality Award Gold” for the fourth specific objective to extend the business mobile consecutive year, obtaining quality and performance solutions available on the IoS platform. recognition from SAP for the innovative SAP solutions implemented. Finally, Reply is a “SAP Hybris Platinum Thanks to this partnership, Reply has gained Partner” and became a SAP S/4 HANA Cloud access to specialised training programmes for its Lighthouse Partner. 40

42 development team, with the opportunity to test SALESFORCE applications on devices not yet available on the With over 150 certifications to its name, Reply is market. Reply can count on Apple’s direct support now one of the most prominent Salesforce.com for the design of the most innovative solutions, as speclialists in Europe, counting among its customers well as for the exclusive verification and certification leading industrial and media groups. In particular, service of the solutions developed, ensuring Reply’s expertise in cloud, based on SaaS and PaaS customer satisfaction. with specific process and market know-how, focusing specifically on the digital marketing, digital CRM and GOOGLE integration areas, makes it a leading specialist in Reply has achieved the prestigious Google Cloud Salesforce.com technologies Managed Service Provider (MSP) certification level, joining a group of highly specialised Google Cloud partners. MSP is the certification with which Google recognises its most specialised worldwide partners – they support customers across the end-to-end cloud Reply Living network journey, knowing how to respond to business needs during the different stages of the process, from the initial involvement to the migration and execution in the Cloud, all the way to the planning and optimisation of the system. As a Google Cloud MSP, Reply offers a high level of service to customers who are looking for complete and proactive support, with exclusive services covering not only the migration of a system to the Cloud, but all aspects of the process including the subsequent development and management ensuring full security. In addition to the MSP certification, Google renewed Reply’s 2018 Premier Partner certification for G Suite and Cloud Platform, which recognises the company’s excellence demonstrated in the offering and technological support on the Google Cloud product suite. 41 40

43 DEVELOPMENT AND EVOLUTION OF PROPRIETARY PLATFORMS Reply constantly dedicates resources to research and development activities, concentrating them in two areas: the development and evolution of proprietary platforms; and the definition of a continuous scouting, selection and learning process of new technologies. This approach is to bring innovative solutions onto the market, capable of sustaining the creation of value in companies. greater customisation of the user experience and BRICK REPLY™ to encourage interaction with the field, through easier access to the hardware components of In 2017, Brick Reply™’s development focused on the mobile devices. The first version of the Click Reply implementation of specific planning optimisation LEA Edition warehouse management system was algorithms for various industrial sectors, with the aim released in March 2017. The current WMS version of increasing flexibility and the ability to respond is being further enriched and expanded during the to customer requirements. At the same time, first half of 2018 with functional extensions and the efforts were under way to expand the integration introduction of new process configuration tools. capabilities of the platform, relying on different The migration programme on the LEA platform will gateway technologies and edge computing continue in 2018, with the complete revisitation of the solutions to speed up data exchange, both during Annual Financial Report 2017 Click Yard management module. the plant operation phases, and in the increasingly complex monitoring of machine parameters. DISCOVERY REPLY™ Further developments of the planning module and During the course of 2017, the platform was extended of the maintenance management component are by further enhancing the integration with traditional envisaged for 2018, in order to provide customers digital channels such as digital signage, web and with a tool capable of optimising production connected TV, thanks to an increasingly cloud-based sequences, taking into account all the key planning approach. Within the area of enterprise content factors. management and cataloguing systems, a new feature was developed to facilitate the automatic CLICK REPLY™ documentation of images and video. To boost the Click Reply™’s 2017 roadmap focused on the in-store digital signage systems funcitonality, the release of version 4.10 that included a revised platform was integrated with several key monitor and mobile solution, applicable to any product in the display solutions available on the market, allowing suite. The new technological features are designed authorised users and user profiles to insert, modify to ensure the full support of Android devices, and approve content and listings to be distributed offering a greater robustness, more communication on a digital display network, both in a corporate security and an optimised use of resources. The environment and in-store. new usability features are designed to facilitate a 42

44 access to the hardware components of mobile HI REPLY™ devices. In 2017, the platform development focused on vertical applications for the industry sector, particularly with STARBYTES™ regard to the industry 4.0 paradigm. Within this The 2017 StarbytesTM development plans anticipate framework, the Hi Reply™ platform is positioned as the launch of international initiatives aimed at a middleware component which, equipped with highlighting crowd talent and tailoring the offer not proprietary modules, facilitates and accelerates only towards SMEs, but also to medium and large the introduction of new models for integrated plant enterprises. This will be achieved through the launch management. One of the main themes was that of a “premium” service that aims to help businesses of the so-called Edge Computing method, namely effectively locate digital professionals, in what has the part of intelligence positioned closer to the become an increasingly fragmented industry with machine. This ability to take field data and intervene poor availability of quality resources. with minimal latency, facilitating the optimisation of resources, is a major theme for the digital TAMTAMY™ transformation of the factory. In 2017 Reply continued the development of the Reply Living network platform, releasing TamTamyTM X, the new and SIDEUP REPLY™ latest version of the product that embraces the In 2017 the migration towards the Lea Reply™ platform concepts related to the “digital workplace”, placing continued, with the integration of the Appointment the employee at the centre of the proposed formats. Schedule and Transportation Portal modules. TamTamyTM X includes new modules dedicated Moreover, the first version of the SideUp Reply to short training initiatives (Microlearning), idea LEA Edition warehouse management system was generation (Jam Session), the emergence of talent released in March 2017. The current WMS version through people challenges (Challenges) and is being further enriched and expanded during the the support of day-by-day work through a virtual first half of 2018 with functional extensions and the assistant (TTGuru). Further investments are planned introduction of new process configuration tools. during the course of 2018, with the aim of continuing 2017 also saw the release of the new version of a to pursue work focused on the “digital workplace”, mobile solution geared toward warehouse activities. expanding and consolidating the above modules The new technological features are designed with onboarding support and proactive suggestions, to ensure the full support of Android devices, all based on innovative and emerging technologies. offering a greater robustness, more communication security and an optimised use of resources. The new usability features are designed to facilitate a greater customisation of the user experience and to encourage interaction with the field, through easier 43 42

45 TICURO REPLY™ In 2017, Ticuro Reply™ continued to develop the digital healthcare components it offers. In particular, the Patient Management and Telerehabilitation modules were released. The Patient Management application facilitates the management of continuity of care processes between the medical institution and the patient, integrating innovative Televisit, Teleconsultation and Healthcare Telecooperation features. The Telerehabilitation module allows rehabilitation sessions to be carried out directly from home, interacting in real time with the physiotherapist and greatly increasing the patient’s involvement in the daily process of improvement and recovery. Relazione finanziaria annuale 2017 44

46 THE VALUE OF PEOPLE Reply is based on the excellence of the people who make up its diverse team, professionals from the best universities and polytechnics in the sector. The men and women within the Group bring the Reply “brand” to life for customers and partners, embodying the company’s image. Reply invests continuously in human resources, All Group managers focus daily on upholding the establishing special relationships and partnerships principles on which Reply has always depended and with a number of universities with the aim of which have sustained the company during its growth. attracting highly skilled individuals to join its team. THE REPLY TEAM • Sharing the customer’s objectives; Recruitment is focused primarily on young graduates. In particular, the areas of interest are: professionalism and speed of implementation; • and computer science, computer engineering, electronic • engineering, telecommunications engineering, culture and flexibility. managerial engineering, economics and business. Excellence : the underlying culture, study, attention The relationship between Reply and universities to quality, seriousness, the creation of value from is also developed through regular collaboration in results. the form of industrial placements, dissertations and participation in lectures and seminars. : collaboration, the transfer of ideas and Teamwork The values that characterise Reply’s employees are knowledge, the sharing of objectives and results, respect for personal characteristics. enthusiasm, excellence, a methodical approach, team spirit, initiative and an ability to understand the business context and to communicate clearly : the sharing of objectives, customer Client the solutions proposed. The continuous desire to satisfaction, conscientiousness, professionalism, a sense of responsibility, integrity. imagine, experiment and study new solutions allows innovation to occur more rapidly and efficiently. Innovation : imagination, experimentation, courage, study, the search for improvement. Anyone who decides to become a part of the “Reply world” will find the opportunity to best express their potential in an organisational model based on : method, experience in the management of Speed projects, collaboration, commitment in achieving culture, ethics, trust, honesty and transparency. results and customer objectives. These are indispensable values for continuous improvement and for an ever-increasing attention to quality in one’s work. 44

47 ANNUAL FINANCIAL REPORT 2017

48

49 REPORT ON OPERATIONS

50

51 MAIN RISKS AND UNCERTAINTIES TO WHICH REPLY S.P.A AND THE GROUP ARE EXPOSED The Reply Group adopts specific procedures in managing risk factors that can have an influence on company results. Such procedures are a result of an enterprise management that has always aimed at maximizing value for its stakeholders putting into place all necessary measures to prevent risks related to the Group activities. Reply S.p.A., as Parent Company, is exposed to the same risks and uncertainties as those to which the Group is exposed, and which are listed below. The risk factors described in the paragraphs below must be jointly read with the other information disclosed in the Annual Report. EXTERNAL RISKS Annual Financial Report 2017 RISKS ASSOCIATED WITH GENERAL ECONOMIC CONDITIONS The informatics consultancy market is strictly related to the economic trend of industrialized countries where the demand for highly innovative products is greater. An unfavorable economic trend at a national and/or international level or high inflation could alter or reduce the growth of demand and consequently could have negative effects on the Group’s activities and on the Group’s economic, financial and earnings position. RISKS ASSOCIATED WITH EVOLUTION IN ICT SERVICES The ICT service segment in which the Group operates is characterized by rapid and significant technological changes and by constant evolution of the composition of the professionalism and skills to be combined in the realization of such services, with the need to continuously develop and update new products and services. Therefore, future development of Group activities will also depend on the capability of anticipating the technological evolutions and contents of the Group’s services even through significant investments in research and development activities. 50

52 RISKS ASSOCIATED WITH COMPETITION The ICT market is highly competitive. Competitors could expand their market share squeezing out and consequently reduce the Group’s market share. Moreover the intensification of the level of competition is also linked with possible entry of new entities endowed with human resources and financial and technological capacities in the Group’s reference sectors, offering largely competitive prices which could condition the Group’s activities and the possibility of consolidating or amplifying its own competitive position in the reference sectors, with consequent repercussions on business and on the Group’s economic, earnings and financial situation. RISKS ASSOCIATED WITH INCREASING CLIENT NEEDS The Group’s solutions are subject to rapid technological changes that, together with the increasing needs of customers and their need to improve informatics, which results in a request of increasingly complex development activities, sometimes requires excessive efforts that are not proportional to the economic aspects. This in some cases could result in negative effects on the Group’s activities and on the Group’s economic, financial and earnings position. Report on Operations RISKS ASSOCIATED WITH SEGMENT REGULATIONS The activities carried out by the Group are not subject to any particular segment regulation. INTERNAL RISKS RISKS ASSOCIATED WITH KEY MANAGEMENT The Group’s success is largely dependent on some key figures that have made a decisive contribution to its development, such as the Chairman and the Executive Directors of the Parent Company Reply S.p.A.. Reply also has a leadership team (Senior Partner, Partner) with many years of experience in the sector with a decisive role in the management of the Group’s business. The loss of any of these key figures without an adequate replacement or the inability to attract and retain new, qualified personnel could therefore have an adverse effect upon the Group’s business prospects, earnings and financial position. Management deems that in any case the Company has a sufficient operational and managerial structure capable of guaranteeing continuity in the running of the business. 51 50

53 RISKS ASSOCIATED WITH RELATIONSHIP WITH CLIENT The Group offers consulting services mainly to medium and large size companies operating in different market segments (Telco, Manufacturing, Finance, etc.). A significant part of the Group’s revenues, although in a decreasing fashion in the past years, is concentrated on a relatively limited number of clients. If such clients were lost this could have an adverse effect on the Group’s activities and on the Group’s economic, financial and earnings position. RISKS ASSOCIATED WITH INTERNATIONALIZATION The Group, with an internationalization strategy, could be exposed to typical risks deriving from the execution of its activities on an international level, such as changes in the political, macro- economic, fiscal and/or normative field, along with fluctuations in exchange rates. These could negatively influence the Group’s growth expectations abroad. RISKS ASSOCIATED WITH CONTRACTUAL OBLIGATIONS The Group develops solutions with a high technological content of significant value; the underlying related contracts can provide for the application of penalties in relation to timeliness Annual Financial Report 2017 and the qualitative standards agreed upon. The application of such penalties could have adverse effects on the Group’s economic, financial and earnings position. The Group has undersigned adequate precautionary insurance contracts against any risk that could arise under professional responsibility for an annual maximum amount deemed to be adequate in respect of the actual risk. Should the insurance coverage not be adequate and the Group is called to compensate damages greater than the amount covered, the Group’s economic, financial and earnings position could be deeply jeopardized. FINANCIAL RISKS CREDIT RISK For business purposes, specific policies are adopted to assure its clients’ solvency. With regards to financial counterparty risk, the Group does not present significant risk in credit- worthiness or solvency. 52

54 LIQUIDITY RISK The group is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time. The cash flows, funding requirements and liquidity of the Group’s companies are monitored or centrally managed under the control of the Group Treasury, with the objective of guaranteeing effective and efficient management of capital resources (maintaining an adequate level of liquid assets and funds obtainable via an appropriate committed credit line amount). The difficult economic and financial context of the markets requires specific attention as regards the management of liquidity risk and in such a way that particular attention is given to shares tending to generate financial resources with operational management and to maintaining an adequate level of liquid assets. The Group therefore plans to meet its requirements to settle financial liabilities as they fall due and to cover expected capital expenditures by using cash flows from operations and available liquidity, renewing or refinancing bank loans. EXCHANGE RATE AND INTEREST RATE RISK The Group entered into most of its financial instruments in Euros, which is its functional and Report on Operations presentation currency. Although it operates in an international environment, it has a limited exposure to fluctuations in the exchange rates. The exposure to interest rate risk arises from the need to fund operating activities and M&A investments, as well as the necessity to deploy available liquidity. Changes in market interest rates may have the effect of either increasing or decreasing the Group’s net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions. The interest rate risk to which the Group is exposed derives from bank loans; to mitigate such risks, the Group, when necessary, has used derivative financial instruments designated as “cash flow hedges”. The use of such instruments is disciplined by written procedures in line with the Group’s risk management strategies that do not contemplate derivative financial instruments for trading purposes. 53 52

55 REVIEW OF THE GROUP’S ECONOMIC AND FINANCIAL POSITION FOREWORD The financial statements commented on and illustrated in the following pages have been prepared on the basis of the Consolidated financial statements as at 31 December 2017 to which reference should be made, prepared in compliance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and adopted by the European Union, as well as with the provisions implementing Article 9 of Legislative Decree No. 38/2005. TREND OF THE PERIOD The Reply Group closed 2017 with a consolidated turnover of 884.4 million Euros, an increase of 13.3% compared to 780.7 million Euros in 2016. The EBITDA was 123.2 million Euros (106.4 million Euros in 2016), while the EBIT was at 113.9 million Euros (99.6 million Euros in 2016). Annual Financial Report 2017 The Group net profit was at 77.9 million Euros, an increase of 15.3% compared to 67.5 million Euros recorded in 2016. As at 31 December 2017, the Group’s net financial position was positive, at 57.0 million Euros (28.8 million Euros at the end of 2016). As at September 30, 2017, the net financial position was positive, at 66.0 million Euros. In 2017, Reply established itself as one of the key players in digital transformation by providing a complete service aligned with companies’ new needs and by being increasingly committed to the digitalization of each service or physical asset. The investments made in the main areas on which companies base their future development, such as Artificial Intelligence, Virtual and Augmented Reality and 3D combined with the ability to provide customers with the best skills to deal with components of basic innovation, such as Cloud Computing, the Internet of Things and Big Data, are able to ensure a distinctive positioning of Reply on the market. 54

56 RECLASSIFIED CONSOLIDATED INCOME STATEMENT Reply’s performance is shown in the following reclassified consolidated statement of income and is compared to corresponding figures of the previous year: (THOUSAND EUROS) 2017 % 2016 % 884,434 100.0 780,739 100.0 Revenues (15,269) (1.7) (16,969) (2.2) Purchases (431,555) (48.6) (48.8) (379,713) Personnel Services and other costs (35.3) (277,071) (35.5) (312,253) Other operating (costs)/income (2,113) (0.2) (569) (0.1) Operating costs (761,190) (86.1) (674,322) (86.4) 13.6 Gross operating income (EBITDA) 123,244 13.9 106,417 (11,669) (1.5) Amortization, depreciation and write-downs (12,353) (1.4) 0.3 4,846 0.6 2,982 Other non recurring (expenses)/income 12.9 113,873 12.8 99,594 Operating income (EBIT) (Loss)/gain on investments (585) (0.1) (668) (0.1) Report on Operations Financial income/(expenses) (2,978) (0.3) (1,520) (0.2) 110,310 Income before taxes 12.5 12.5 97,405 (3.6) (29,698) (3.8) (31,765) Income taxes 8.9 78,545 8.7 67,707 Net income Non controlling interests (674) (0.1) (163) - 8.7 Group net income 77,871 8.8 67,544 55 54

57 (*) REVENUES BY REGION 2017 2016 0.2% 0.3% 13.7% 12.3% 17.9% 16.5% 68.2% 70,9% (*) Region 1: Region 1 ITA, USA, BRA, POL, ROU Region 2 Region 2: DEU, CHE, CHN, HR Region 3 Region 3: IoT Incubator GBR, LUX, BEL, NLD, FRA, BLR REVENUES BY BUSINESS LINES 2017 2016 10.7% 9.9% 40.6% 36.3% 49.5% 53.0% Annual Financial Report 2017 Technologies Applications Processes TREND IN KEY ECONOMIC INDICATORS (THOUSAND EUROS) 140,000 120,000 100,000 80,000 60,000 40,000 EBITDA 20,000 EBIT EBT 0 2017 2016 2015 56

58 ANALYSIS OF THE FINANCIAL STRUCTURE The Group’s financial structure is set forth below as at 31 December 2017, compared to 31 December 2016: (THOUSAND EUROS) 31/12/2017 % 31/12/2016 % CHANGE 496,459 442,655 53,804 Current operating assets (328,589) (282,251) (46,338) Current operating liabilities 167,870 160,404 Working capital, net (A) 7,466 Non current assets 232,441 31,016 263,457 Non current liabilities (86,286) (84,067) (2,219) Fixed capital (B) 177,171 148,374 28,797 36,263 Invested capital, net (A+B) 345,041 100.0 308,779 100.0 Shareholders' equity (C) 64,535 402,072 116.5 337,537 109.3 NET FINANCIAL POSITION (A+B-C) (16.5) (28,758) (9.3) (28,272) (57,030) Report on Operations Net invested capital on 31 December 2017, amounting to 345,041 thousand Euros, was funded by Shareholders’ equity for 402,072 thousand Euros and by available overall funds of 57,030 thousand Euros. The following table provides a breakdown of net working capital: 31/12/2017 31/12/2016 CHANGE (THOUSAND EUROS) Work in progress 58,651 35,000 93,651 Trade receivables 357,082 339,194 17,888 Other current assets 45,726 44,810 916 Current operating assets (A) 442,655 53,804 496,459 Trade payables 100,150 92,735 7,414 Other current liabilities 228,439 189,515 38,924 Current operating liabilities (B) 328,589 282,251 46,338 Working capital, net (A-B) 167,870 160,404 7,466 19.0% 20.5% % return on investments 57 56

59 NET FINANCIAL POSITION AND CASH FLOWS STATEMENT (THOUSAND EUROS) CHANGE 31/12/2017 31/12/2016 76,511 86,398 9,887 Cash and cash equivalents, net 2,925 (883) Current financial assets 2,042 (18,893) 2,528 (16,365) Due to banks (942) (738) (204) Due to other providers of finance 71,133 59,805 11,328 Short-term financial position - 4 Non current financial assets (4) Due to banks (13,381) (29,985) 16,604 Due to other providers of finance (721) (1,066) 345 M/L term financial position (14,102) (31,047) 16,944 Total net financial position 57,030 28,758 28,272 Change in the item cash and cash equivalents is summarized in the table below: Annual Financial Report 2017 (THOUSAND EUROS) 31/12/2017 Cash flows from operating activities (A) 73,302 Cash flows from investment activities (B) (32,812) Cash flows from financial activities (C) (30,504) Change in cash and cash equivalents (D) = (A+B+C) 9,887 Cash and cash equivalents at beginning of period (*) 76,511 (*) 86,398 Cash and cash equivalents at year end Total change in cash and cash equivalents (D) 9,887 (*) Liquid assets and cash equivalents net are net of current account overdrafts The complete consolidated cash flow statement and the details of cash and other cash equivalents net are set forth below in the financial statements. 58

60 ALTERNATIVE PERFORMANCE INDICATORS In addition to conventional financial indicators required by IFRS, presented herein are some alternative performance measures, in order to allow a better understanding of the trend of economic and financial management. These indicators, that are also presented in the periodical Interim management reports must not, however, be considered as replacements to the conventional indicators required by IFRS. Set forth below are the alternative performance indicators used by the Group with relevant definition and basis of calculation: • EBIT : corresponds to the “Operating margin” • EBITDA : Earnings before interest, taxes, depreciation and amortization and is calculated by adding to the Operating margin the following captions: › Amortization and depreciation › Write-downs › Other unusual costs/(income) Report on Operations • EBT : corresponds to the Income before taxes • Net financial positio n: represents the financial structure indicator and is calculated by adding the following balance sheet captions: › Cash and cash equivalents › Financial assets (short-term) › Financial liabilities (long-term) › Financial liabilities (short-term) 59 58

61 SIGNIFICANT OPERATIONS IN 2017 ACQUISITION OF COMSYSTO GMBH At the end of December 2016, an agreement was signed for the acquisition of the 100% share capital of comSysto GmbH, a company incorporated under German law based in Munich for an initial cash consideration of 6 million Euros. The agreement became effective in January 2017. The company is specialized in Agile solutions on Open Source technology. Annual Financial Report 2017 60

62 REPLY ON THE STOCK MARKET The world is radically transforming under the disruptive spur of Internet of Things, Virtual Reality, Artificial Intelligence and the Cloud paradigm. Digital innovation will more and more arise from a blend of business and technology that cannot be framed into traditional models. Reply’s goal - in an increasingly global and multinational marketplace - is to be a benchmark in technology and consulting for companies that are considering innovation and new business models as strategic means to compete on the market. Reply’s strength is its ability to interpret innovation by making it functional to businesses’ requirements. For years we will be in a phase where innovation and growth lead the way: for our clients accelerating digitalization is the key to successfully growing businesses, strengthening relationships with customers and optimizing the business processes. Reply has for years and continues to significantly invest in specific solutions and expertise, to help businesses deal with the most substantial transformation. Reply is fully committed to creating sustainable value and to continuing the successful, long-term development of the company and is convinced that the shareholders can derive substantial value from the opportunities ahead and the competitive advantage of Reply. Report on Operations REPLY SHARE PERFORMANCE 2017 has been a fantastic year for the equity markets showing record highs in equity combined with a lot of resiliency. Economic growth is robust and above the long-term average, not just in some parts of the world, but globally. Inflation remains low and interest rates are low for the foreseeable future. European markets were widely supported by a decrease in political uncertainty, with centrist politicians winning in both the Netherlands and France, which saw international institutional enthusiasm rise across the continent. Macroeconomic data was very positive on the continent, with unemployment at 8.8% in the Eurozone, its lowest since 2009. Meanwhile the Eurozone Economic sentiment indicator was at its highest since October 2000. The positive economic framework and the excellent positioning of Reply clearly affected its share price during 2017. From March onwards the Reply share entered a steady upward trend, outperforming every relevant index and the share price development of peers. Following the implementation of a share split and a private placement of 7.7% of the Reply shares by Iceberg, the main shareholder of Reply, the share price saw a gradual correction. From November onwards, the share reentered the continuous upward development bringing the market capitalization to 1.7 billion Euros at the end of the year. Reply outperformed the Italian MIB index by 43 percentage points; compared to the STAR and the Italian Mid Cap index the performance was 22 percentage points and 25 percentage points respectively better. 61 60

63 180% 180 % 170% % 170 163 160% 160 % 150% 150 % 140% 140 % 131 130% % 130 120% 120 % 114 110% % 110 100% 100% Feb Apr Ja n Dec Nov Oct p Se Aug l Ju n Ju May Mar Feb Ja n ce: FactSet Price Sour s FTSE Repl Italia Star y S.p.A. MIB FTSE Annual Financial Report 2017 Taking December 6, 2000, the date of the Reply IPO as a reference, the Italian main index MIB performed unsatisfactorily. It lost more than 50% of its starting value and never recovered substantially from the lows reached during the financial crisis. In the same period Reply 1.400% 1.400% increased its IPO value by more than 1,100%. In 2017 Reply further increased the value creation adding 411 percentage points to the outperformance versus the MIB. 1200 1.200% 1.200% 1.000% 1.000% 800% 800% 600% 600% 400% 400% 200% 200% 48 0% 0% 2002 2001 2014 2017 2016 2015 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Sour ce: FactSet Prices Repl y S.p.A. FTSE MIB 62

64 180% 180% 170% 170% 163 160% 160% 150% 150% 140% 140% 131 130% 130% 120% 120% 114 110% 110% 100% 100% Feb May Ju n Dec Ja n Feb Mar Apr Ja n Ju Nov Oct p Se Aug l ce: FactSet Prices Sour y S.p.A. FTSE MIB FTSE Italia Star Repl 1.400% 1.400% 1200 1.200% 1.200% 1.000% 1.000% 800% 800% 600% 600% 400% 400% 200% 200% 48 0% 0% 2014 2016 2015 2013 2012 2011 2010 2009 2017 2007 2006 2005 2004 2003 2002 2001 2008 MIB FTSE y S.p.A. Repl ce: FactSet Prices Sour Report on Operations CAPITAL MARKET POSITION Financial year 2017 was also characterized by the measures Reply took to improve the liquidity of the share following the repeated requests of existing and potential shareholders, more specifically: 1. Share Split On Oct. 16, 2017 a share split in the ratio of 1:4 became effective, reducing the nominal value of a Reply share from 0.52 Euro to 0.13 Euro while leaving the share capital of the company unchanged. The Company's constant growth has brought the shares to record an extremely positive trend over time achieving a significant rise in market value compared to the initial listing price leading to the Share split proposal. 2. Double Voting Rights An extraordinary Shareholders' Meeting in September 2017 also approved the introduction of double voting rights in accordance with the current legislative and regulatory framework. Specifically, the new By-laws provide for the assignment – subject to the verification of the appropriate pre-requirements by the administrative body - of two votes for each ordinary 63 62

65 share held by the same shareholder for an ongoing period of at least 24 months from the date of entry in a specific list created by Reply. The goal of this instrument - leaving behind the traditional ‘one share, one vote’ principle - is to stimulate medium to long-term equity investments and to reward ‘loyal shareholders’. Lastly, Iceberg, the main shareholder of Reply, sold 7.7% of the shares to the market in a private placement. This operation increased the free float of Reply to 52.8%. The development of the trading volume in the Reply share clearly shows the benefit of the aforementioned operations. The number of traded shares increased by 58% and the trading volume – also reflecting the very positive development of the share price – more than doubled to Euro 591 million. Capital market valuations of the Reply share now clearly reflect the constant positive business development. Reply at the end of 2017 was traded at a premium of circa 40% (enterprise value/revenue, enterprise value/EBITDA) compared to a peer group of well-known IT service providers and advertising agencies. DIVIDEND Annual Financial Report 2017 Performance-based compensation is an essential pillar of the partnership-oriented business model of Reply. Each year this principle is balanced with the need of internal financing as a means to fund the investments of Reply (in new startup companies and new technologies). In 2017 Reply achieved earnings per share of Euro 2.08, an increase of 14% compared to 2016. For the financial year 2017 the corporate bodies of Reply propose to the shareholders’ meeting to approve the payment of a dividend of EUR 0.35 (dividend 2016: Euro 0.2875). Referred to the share price of Reply at the end of 2017 this corresponds to a dividend yield of 0.8%. Due to a reduced share price in conjunction with the operational progress of 2017 this yield is higher than the 2016 value by 1.0%. 64

66 The following table gives an overview of the main parameters of the Reply share and the substantial developments during the last 5 years. 2017 2015 2014 2013 2016 Share price Euro 46.17 29.50 31.48 15.23 14.23 Year-end Euro 53.50 34.08 32.30 16.98 14.48 High for the year 25.03 Euro 28.93 5.23 14.61 11.93 Low for the year Trading Number of shares traded (year) 14.894,2 9.419,3 11.448,2 14.344,0 14.819,8 # thousand Number of shares traded (day) # thousand 57.1 36.1 43.9 55.2 58.8 Trading volume (year) Euro million 590.6 282.6 279.5 212.7 123.9 0.492 Trading volume (day) Euro million 2.289 1.095 1.083 0.844 Capital structure Number of shares # thousand 9.352,9 9.352,9 9.352,9 9.307,9 37.411,4 Share capital 4.864 4.864 4.863 4.863 4.840 Euro million Free Float % 52.8 42.0 42.0 43.1 42.1 Report on Operations Market capitalization 1.727,3 1.103,6 1.177,5 569,6 529,6 Euro million Allocation of net income Earnings per share Euro 2.08 1.81 1.52 1.28 0.93 1) Euro 0.350 0.2875 0.2500 0.2125 0.1750 Dividend Euro million 13.092 10.755 9.353 7.950 6.515 Dividend payment 2) % 0.8% 1.0% 0.8% 1.4% 1.2% Dividend yield For comparison purposes all figures related to the nominal value of the Reply share have been rebased in order to reflect the share split conducted in 2017 1) Amount proposed for shareholder approval for 2017 2) Related to year-end closing price THE SHAREHOLDERS BASE Following the private placement of Iceberg, the free float of the share amounted to 53%; 50% of the Reply shares are owned by the founders of Reply, Institutional shareholders owned 41% at the end of 2017, while retail shareholders owned 9% of the shares. In the institutional shareholders’ base American investors continued to make up the largest regional group (33% of institutional holdings). French investors now rank number 2, owning around 21%. 65 64

67 ANALYSTS The analyst coverage of Reply increased substantially in 2017. Currently 5 Italian analysts are commenting the Reply share rating the share price to “outperform” or “neutral”. All Reply analysts on average have set a target price of Euro 51. DIALOG WITH THE CAPITAL MARKETS An active and open communication policy ensuring prompt and continuous flow of information is a major component of the Reply IR strategy. Reply has maintained high level of activities with the capital markets throughout 2017. During 17 conferences and 6 roadshows Reply actively explained its equity story. Following the introduction of the tax-incentivized share savings plan PIR in Italy Reply saw a substantial increase of interest from Italian investors. Special emphasis was laid on the Spanish market where Reply attended 2 conferences in Madrid and Barcelona. Brussel was another new location that Reply addressed via a roadshow with the help of a French broker. The number of brokers who were involved in the IR activities of Reply was slightly increased in 2017. Annual Financial Report 2017 66

68 THE PARENT COMPANY .A. REPLY S.p INTRODUCTION The tables presented and disclosed below were prepared on the basis of the financial statements as at 31 December 2017 to which reference should be made, prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and endorsed by the European Union, as well as with the regulations implementing Article 9 of Legislative Decree No. 38/2005. RECLASSIFIED INCOME STATEMENT The Parent Company Reply S.p.A. mainly carries out the operational co-ordination and the technical and quality management services for the Group companies as well as the administration, finance and marketing activities. As at 31 December 2017 the Parent Company had 88 employees (87 employees in 2016). Reply S.p.A. also carries out commercial fronting activities (pass-through revenues) for some major customers, whereas delivery is carried out by the operational companies. The economic results Report on Operations achieved by the Company are therefore not representative of the Group’s overall economic trend and the performances of the markets in which it operates. Such activity is instead reflected in the item Revenue from fronting operations of the Income Statement set forth below. The Parent Company’s income statement is summarized as follows: 2016 (THOUSAND EUROS) 2017 CHANGE 63,996 7,732 Revenues from operating activities 56,264 319,688 324,995 5,307 Pass-through revenues (355,085) (6,534) Purchases, services and other expenses (361,620) (20,177) 355 (19,822) Personnel and related expenses (3,000) 1,781 (4,781) Other unusual and operating (expenses)/income (973) Amortization, depreciation and write-downs (732) (242) 1,739 3,576 1,837 Operating income (2,900) 5,872 Financial income/(expenses) 2,972 20,189 87,951 108,140 Gain on equity investments (12,230) (2,189) (10,041) Loss on equity investments 102,459 85,620 16,839 Income before taxes Income taxes (391) 425 (816) 102,068 17,263 84,804 NET INCOME 67 66

69 Revenues from operating activities mainly refer to charges for: royalties on the Reply trademark for 25,401 thousand Euros (21,692 thousand Euros in the • financial year 2016); • shared service activities carried out for its subsidiaries for 27,866 thousand Euros (24,492 thousand Euros in the financial year 2016); • management services for 7,972 thousand Euros (7,498 thousand Euros in the financial year 2016). Operating income 2017 marked a positive result of 3,576 thousand Euros after having deducted amortization expenses of 973 thousand Euros (of which 673 thousand Euros referred to intangible assets and 337 thousand Euros to tangible assets). Financial income amounted to 2,972 thousand Euros and included interest income for 6,951 thousand Euros and interest expenses for 572 thousand Euros mainly relating to financing for the M&A operations. Such result also includes net negative exchange rate differences amounting to 1,226 thousand Euros. Income from equity investments which amounted to 108,140 thousand Euros refers to dividends received from subsidiary companies in 2017. Losses on equity investments refer to write-downs and losses reported in the year by some subsidiary companies that were considered to be unrecoverable. Net income for the year ended 2017, amounted to 102,068 thousand Euros after income taxes of 391 thousand Euros Annual Financial Report 2017 FINANCIAL STRUCTURE Reply S.p.A.’s financial structure as at 31 December 2017, compared to that as at 31 December 2016, is provided below: (THOUSAND EUROS) 31/12/2017 31/12/2016 CHANGE 478 723 (245) Tangible assets 2,183 Intangible assets (22) 2,206 Equity investments 143,260 149,356 (6,096) Other fixed assets 4,714 1,596 3,118 (13,501) (10,743) Non financial liabilities - L/T (2,758) Fixed capital 137,134 144,660 (7,526) Net working capital 22,191 2,797 19,394 INVESTED CAPITAL 147,457 11,868 159,325 Shareholders' equity 292,110 200,742 91,369 Net financial position (132,785) (53,285) (79,501) 11,868 TOTAL SOURCES 159,325 147,457 68

70 The net invested capital on 31 December 2017, amounting to 159,325 thousand Euros, was funded by Shareholders’ equity in the amount of 292,110 thousand Euros from Shareholders’ equity and available overall funds of 132,785 thousand Euros. Changes in balance sheet items are fully analyzed and detailed in the explanatory notes to the financial statements. NET FINANCIAL POSITION The Parent Company’s net financial position as at 31 December 2017, compared to 31 December 2016, is detailed as follows: 31/12/2016 31/12/2017 CHANGE (THOUSAND EUROS) Cash and cash equivalents, net 42,075 35,361 6,714 Financial loans to subsidiaries 82,843 62,430 20,413 (738) Loans to third party - 738 (16,250) (18,778) Due to banks 2,528 Report on Operations (43,139) (64,428) 21,289 Due to subsidiaries Net financial position short term 65,530 15,324 50,205 Long term financial assets 80,327 67,299 13,028 Due to banks (29,339) 16,267 (13,071) Net financial position long term 67,256 37,960 29,295 Total net financial position 132,785 53,285 79,501 Change in the net financial position is analyzed and illustrated in the explanatory notes to the financial position. 69 68

71 RECONCILIATION OF EQUITY AND PROFIT FOR THE YEAR OF THE PARENT COMPANY In accordance with Consob Communication no. DEM/6064293 dated 28 July 2006, Shareholders’ equity and the Parent Company’s result are reconciled below with the related consolidated amounts. 31/12/2017 31/12/2016 (THOUSAND EUROS) NET INCOME NET EQUITY NET INCOME NET EQUITY 292,110 102,068 200,742 17,264 Reply S.p.A.’s separate financial statements 178,972 84,537 211,675 77,365 Results of the subsidiary companies Carrying value of investments in consolidated companies (66,344) - (68,576) - Elimination of dividends from subsidiary companies (109,064) (23,354) - Adjustments to accounting principles and elimination of unrealized intercompany gains and losses, net of related tax effect (1,999) 1,005 (5,784) (3,567) Non controlling interests (668) (674) (520) (163) 67,544 Net Group consolidated financial statement 402,072 77,871 337,537 Annual Financial Report 2017 70

72 CORPORATE GOVERNANCE The Corporate Governance system adopted by Reply adheres to the Corporate Governance Code for Italian Listed Companies issued by Borsa Italiana S.p.A. in March 2006, which was updated in July 2015, with the additions and amendments related to the specific characteristics of the Group. In compliance with regulatory obligations the annually drafted “Report on Corporate Governance and Ownership Structures” contains a general description of the corporate governance system adopted by the Group, reporting information on ownership structures and compliance with the Code of Conduct, including the main governance practices applied and the characteristics of the risk management and internal control system also with respect to the financial reporting process. The aforementioned Report is available on the Corporate Governance section of the website www.reply.com - Investors – Corporate Governance. The Corporate Governance Code is available on the website of Borsa Italiana S.p.A. www. borsaitaliana.it. Report on Operations The Board of Directors, on an annual basis and at the proposal of the Remuneration Committee, establishes a Remuneration Policy which incorporates the recommendations of the Corporate Governance Code and regulations issued by Consob. In accordance with law, the Remuneration Policy forms the first part of the Report on Remuneration and will be submitted to the review of the Shareholders’ Meeting called to approve the 2017 financial statements. 71 70

73 DISCLOSURE OF NON- FINANCIAL INFORMATION The company, in accordance with the provisions of article 5 (3) (b) of Legislative Decree No 254/2016, has prepared the consolidated disclosure of a non-financial nature which constitutes a separate report. The consolidated declaration of non-financial data 2017, drafted in accordance with the "GRI Standards" reporting standard, is available on the Group website www.reply.com. Annual Financial Report 2017 72

74 OTHER INFORMATION RESEARCH AND DEVELOPMENT ACTIVITIES Reply offers high technology services and solutions in a market where innovation is of primary importance. Reply considers research and continuous innovation a fundamental asset in supporting clients with the adoption of new technology. Reply dedicates resources to Research and Development activities in order to project and define highly innovative products and services as well as possible applications of evolving technologies. In this context, Reply has developed of its own platforms: • Brick Reply™ • Click Reply™ • Discovery Reply™ • Hi Reply™ • Sideup Reply™ Starbytes™ • • TamTamy™ Report on Operations • Ticuro Reply™ Reply has important partnerships with major global vendors so as to offer the most suitable solutions to different company needs. Specifically, Reply boasts the highest level of certification amongst the technology leaders in the Enterprise sector, among which: • Microsoft Oracle • SAP/Hybris • • Amazon Apple • • Google • Salesforce 73 72

75 HUMAN RESOURCES Human resources constitute a primary asset for Reply which bases its strategy on the quality of products and services and places continuous attention on the growth of personnel and in- depth examination of professional necessities with consequent definitions of needs and training courses. The Reply Group is comprised of professionals originating from the best universities and polytechnics. The Group intends to continue investing in human resources by bonding special relations and collaboration with major universities with the scope of attracting highly qualified personnel. The people who work at Reply are characterized by enthusiasm, expertise, methodology, team spirit, initiative, the capability of understanding the context they work in and of clearly communicating the solutions proposed. The capability of imagining, experimenting and studying new solutions enables more rapid and efficient innovation. The group intends to maintain these distinctive features by increasing investments in training and collaboration with universities. Annual Financial Report 2017 At the end of 2017 the Group had 6,456 employees compared to 6,015 in 2016. GENERAL DATA PROTECTION REGULATION (GDPR) In view of the application commencing May 2018 of the new European regulation on the protection of personal data (EU 679/16), a specific compliance program is under way, including the appointment of a Group Data Protection Officer (DPO) and Region officer. TRANSACTIONS WITH RELATED PARTIES AND GROUP COMPANIES During the period, there were no transactions with related parties, including intergroup transactions, which qualified as unusual or atypical. Any related party transactions formed part of the normal business activities of companies in the Group. Such transactions are concluded at standard market terms for the nature of goods and/or services offered. The company in the notes to the financial statements and consolidated financial statements 74

76 provides the information required pursuant to Art. 154-ter of the TUF [Consolidated Financial Act] as indicated by Consob Reg. no. 17221 of 12 March 2010, indicating that there were no significant transactions concluded during the period. Information on transactions with related parties as per Consob communication of 28 July 2006 is disclosed at the Note to the Consolidated financial statements and Notes to the financial statements. TREASURY SHARES At the balance sheet date, the Parent Company holds 4,028 treasury shares amounting to 24,502 Euros, nominal value equal to 524 Euros; at the balance sheet item net equity, the company has posted an unavailable reserve for the same amount. At the balance sheet date the Company does not hold shares of other holding companies. Report on Operations FINANCIAL INSTRUMENTS In relation to the use of financial instruments, the company has adopted a policy for risk management through the use of financial derivatives, with the scope of reducing the exposure to interest rate risks on financial loans. Such financial instruments are considered as hedging instruments as they can be traced to the object being hedged (in terms of amount and expiry date). In the notes to the financial statements more detail is provided to the above operations. 75 74

77 EVENTS SUBSEQUENT TO 31 DECEMBER 2017 No significant events have occurred since year ended December 31, 2017. OUTLOOK ON OPERATIONS Financial year 2017 has marked the year of the definitive affirmation of the digital revolution. Massive access to the network, the diffusion of mobile technologies and "intelligent" equipment, the consequent availability of a huge amount of information, the economy of sharing, the dematerialization of processes, three-dimensional printing and solutions in the cloud, are at the basis of a rapid and continuous redefinition of production and distribution maps, made possible by the decline of entry barriers and the emergence of new collaborative ecosystems and innovation. Annual Financial Report 2017 In this new context Reply, through the exploitment of the investments made in previous years, has managed to position itself among the main players of this transformation with a complete offer aligned to the new needs of the companies, increasingly engaged in digitizing any service or physical good. Today Reply is among the leaders, both in terms of partnership portfolio and as a network of customers and this allows the group to look with reasonable optimism and serenity to the future months. 76

78 MOTION FOR THE APPROVAL OF THE FINANCIAL STATEMENT AND ALLOCATION OF THE RESULT FOR THE FINANCIAL YEAR The financial statements at year ended 2017 of Reply S.p.A. prepared in accordance with International Financial Reporting Standards (IFRS), recorded a net income amounting to 102,067,710 Euros and net shareholders’ equity amounting to 292,110,492 Euros thus formed: (EUROS) 31/12/2017 4,863,486 Share Capital Share premium reserve 23,302,692 Legal reserve 972,697 24,502 Reserve for treasury shares on hand 160,879,405 Other reserves 190,042,782 Total share capital and reserves Report on Operations Net income 102,067,710 Total 292,110,492 The Board of Directors in submitting to the Shareholders the approval of the financial statements (Separate Statements) as at 31 December 2017 showing a net result of 102,067,710 Euros, proposes that the shareholders resolve: to approve the financial statement (Separate Statements) of Reply S.p.A. which records net • profit for the financial year of 102,067,710 Euros; • to approve the motion to allocate the net result of 102,067,710 as follows: a unit dividend to shareholders amounting to 0,35 Euros for each ordinary share with › a right, therefore excluding treasury shares, with payment date fixed on 9 May 2018, coupon cutoff date 7 May 2018 and record date, determined in accordance with Article 83-terdecies of Legislative Decree no. 58/1998 set on 8 May 2018; › approving the proposal of attribution to Directors entrusted with operative positions as regards a shareholding in the profits of the Parent Company in accordance with Article 22 of the articles of association, to be established for an overall amount of 2,950,000.00 Euros, corresponding to approximately 2.3% of the consolidated gross operative margin 2017, (before allocation of the shareholding in profits for Directors invested with operative 77 76

79 positions) calculated at 126,194 thousand Euros, which will be paid taking into account the related reserve funds in the financial statement in compliance with that foreseen in the main IAS/FRS international accounts, ratifying as the related allocation in the statement requires. › › › Turin, 13 March 2018 For the Board of Directors The Chairman Mario Rizzante Annual Financial Report 2017 78

80 Report on Operations 78 79

81 CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2017

82

83 CONSOLIDATED INCOME STATEMENT (*) 2017 (THOUSAND EUROS) 2016 NOTE Revenues 5 884,434 780,739 Other income 19,579 17,672 6 (15,269) (16,969) Purchases 7 (431,555) (379,713) Personnel 8 (296,650) (329,924) Services and other costs 9 (12,353) (11,669) Amortization, depreciation and write-downs 10 869 4,277 Other operating and non recurring (costs)/income Operating income 113,873 99,594 (Loss)/gain on investments 11 (668) (585) 12 (2,978) Financial income/(expenses) (1,520) Income before taxes 110,310 97,405 Income taxes 13 (31,765) (29,698) Net income 78,545 67,707 Non controlling interest (674) (163) Group net result 77,871 67,544 Annual Financial Report 2017 Earnings per share and diluted 14 2.08 1.81 (*) Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Consolidated statement of income are reported in the Annexed tables herein and fully described in Note 35. 82

84 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME NOTE 2017 2016 (THOUSAND EUROS) 78,545 67,707 Profit of the period (A) Other comprehensive income that will not be reclassified subsequently to profit or loss: Actuarial gains/(losses) from employee benefit plans 79 (1,597) Total Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax (B1): 25 79 (1,597) Other comprehensive income that may be reclassified subsequently to profit or loss: Gains/(losses) on cash flow hedges (62) 28 Gains/(losses) on exchange differences on translating foreign operations (2,155) (10,562) Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2): (2,127) (10,624) 25 Total other comprehensive income, net of tax (B) = (B1) + (B2): (2,049) (12,221) Total comprehensive income (A)+(B) 76,496 55,846 Total comprehensive income attributable to: Owners of the parent 75,822 55,323 674 163 Non-controlling interests Consolidated Financial Statements as at 31 December 2017 83 82

85 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (*) 31/12/2017 NOTE 31/12/2016 (THOUSAND EUROS) 17,686 Tangible assets 21,552 15 16 166,132 157,429 Goodwill 15,525 17,016 Other intangible assets 17 29,201 Equity investments 18 14,110 6,385 9,739 19 Other financial assets 20 24,661 16,466 Deferred tax assets 263,457 232,445 Non current assets 21 93,651 58,651 Inventories 22 357,082 Trade receivables 339,194 45,726 44,810 23 Other receivables and current assets 19 2,042 2,925 Financial assets 24 109,195 Cash and cash equivalents 92,550 Current assets 607,697 538,130 TOTAL ASSETS 770,575 871,154 Share Capital 4,863 4,863 Other reserves 318,670 264,610 Net result of the period 77,871 67,544 Annual Financial Report 2017 Group shareholders' equity 25 337,017 401,404 25 668 Non controlling interest 520 402,072 337,537 NET EQUITY 26 22,275 24,558 Due to minority shareholders and Earn-out 27 Financial liabilities 31,051 14,102 Employee benefits 31,838 30,401 28 29 Deferred tax liabilities 18,563 18,539 Provisions 30 13,635 10,545 Non current liabilities 100,388 115,118 Financial liabilities 27 35,670 40,105 31 92,735 Trade payables 100,150 32 Other current liabilities 189,144 228,165 Provisions 30 274 371 Current liabilities 368,693 317,921 TOTAL LIABILITIES 469,082 433,038 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 871,154 770,575 (*) Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Statement of Financial Position are reported in the annexed Tables and further described in Note 35. 84

86 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CASH FLOW RESERVE FOR NON- SHARE TREASURY CAPITAL EARNING HEDGE TRANSLATION ACTUARIAL CONTROLLING RESERVE CAPITAL RESERVES RESERVES RESERVE SHARES GAINS/(LOSSES) INTERESTS TOTAL (THOUSAND EUROS) On 1 January 2016 4,863 (25) 72,836 218,194 - 1,546 (1,990) 653 296,078 Dividends distributed - - (9,353) - - - (816) (10,169) - 55,486 - - - 67,544 (62) (10,562) (1,597) 163 Total profit (loss) (3,858) Other changes - - - (4,378) - - - 520 (3,586) 520 On 31 December 2016 4,863 (25) 72,836 272,007 (62) (9,016) 337,537 CASH FLOW RESERVE FOR NON- SHARE TREASURY CAPITAL EARNING HEDGE TRANSLATION ACTUARIAL CONTROLLING RESERVE (THOUSAND EUROS) SHARES RESERVES RESERVES CAPITAL RESERVE GAINS/(LOSSES) INTERESTS TOTAL (62) On 1 January 2017 4,863 (25) 72,836 272,007 337,537 (9,016) (3,586) 520 Dividends distributed - - (10,729) - - - (821) (11,550) - Total profit (loss) - - - 77,871 28 (2,155) 79 674 76,496 Other changes - - - (707) - - - 296 (411) 668 402,072 On 31 December 2017 4,863 (25) 72,836 338,442 (34) (11,171) (3,508) Consolidated Financial Statements as at 31 December 2017 85 84

87 CONSOLIDATED STATEMENT OF CASH FLOWS 2017 (THOUSAND EUROS) 2016 Group net income 77,871 67,544 Income taxes 31,765 29,698 12,353 Amortization and depreciation 11,669 Other non-monetary expenses/(income) (5,862) (3,464) Change in inventories (35,000) (974) Change in trade receivables (17,888) (28,882) Change in trade payables 7,414 13,508 Change in other assets and liabilities 24,816 22,376 (21,826) (31,502) Income tax paid Interest paid (755) (612) Interest collected 171 278 Net cash flows from operating activities (A) 73,202 79,497 Payments for tangible and intangible assets (14,729) (19,344) Payments for financial assets (2,165) (4,253) Payments for the acquisition of subsidiaries net of cash acquired (15,918) (44,311) Net cash flows from investment activities (B) (32,812) (67,909) Dividends paid (10,169) (11,550) Annual Financial Report 2017 - In payments from loans 16,115 Repayment of loans (19,245) (11,374) 291 242 Other changes Net cash flows from financing activities (C) (5,186) (30,504) Net cash flows (D) = (A+B+C) 9,887 6,402 Cash and cash equivalents at the beginning of period 76,511 70,109 Cash and cash equivalents at period end 86,398 76,511 Total change in cash and cash equivalents (D) 9,887 6,402 DETAIL OF CASH AND CASH EQUIVALENTS (THOUSAND EUROS) 2016 2017 Cash and cash equivalents at beginning of period: 76.511 70,109 Cash and cash equivalents 92.550 105,137 Bank overdrafts (16.039) (35,028) Cash and cash equivalents at period end: 86.398 76,511 Cash and cash equivalents 109.195 92,550 (16,039) Bank overdrafts (22.798) 86

88 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 GENERAL INFORMATION General information Accounting principles and basis of consolidation NOTE 2 Risk management NOTE 3 NOTE 4 Consolidation INCOME STATEMENT Revenue NOTE 5 Purchases NOTE 6 NOTE 7 Personnel NOTE 8 Services and other costs NOTE 9 Amortization, depreciation and write-downs NOTE 10 Other operating and non recurring income/(expenses) NOTE 11 (Loss)/gain on investments NOTE 12 Financial income/(expenses) Income taxes NOTE 13 NOTE 14 Earnings per share STATEMENT OF FINANCIAL POSITION ASSETS NOTE 15 Tangible assets Goodwill NOTE 16 NOTE 17 Other intangible assets NOTE 18 Equity Investments NOTE 19 Financial assets Deferred tax assets NOTE 20 Work-in-progress NOTE 21 Trade receivables NOTE 22 NOTE 23 Other receivables and current assets NOTE 24 Cash and cash equivalents Consolidated Financial Statements as at 31 December 2017 STATEMENT OF FINANCIAL POSITION - LIABILITIES AND EQUITY NOTE 25 Shareholders’ equity NOTE 26 Payables to minority shareholders and Earn-out NOTE 27 Financial liabilities NOTE 28 Employee benefits Deferred tax liabilities NOTE 29 NOTE 30 Provisions NOTE 31 Trade payables NOTE 32 Other current liabilities NOTE 33 Segment Reporting OTHER INFORMATION NOTE 34 Additional disclosures to financial instruments and risk management policies NOTE 35 Transactions with related parties Emoluments to Directors, Statutory Auditors NOTE 36 and Directors with Key responsibilities NOTE 37 Guarantees, commitments and contingent liabilities NOTE 38 Events subsequent to 31 December 2017 NOTE 39 Approval of the Consolidated financial statements and authorization to publish 87 86

89 NOTE 1 - GENERAL INFORMATION Reply [MTA, STAR: REY] specializes in the implementation of solutions based on new communication channels and digital media. Reply, consisting of a network of specialist companies, supports important European industries belonging to the Telco & Media, Manufacturing & Retail, Bank & Insurances and Public Administration segments, in defining and developing new business models utilizing Big Data, Cloud Computing, CRM, Mobile, Social Media and Internet of Things paradigms. Reply offers consultancy, system integration and application management and business process outsourcing (www.reply.com). NOTE 2 - ACCOUNTING PRINCIPLES AND BASIS OF CONSOLIDATION COMPLIANCE WITH INTERNATIONAL ACCOUNTING PRINCIPLES The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and endorsed by the European Union. The designation “IFRS” also includes all valid Annual Financial Report 2017 International Accounting Standards (“IAS”), as well as all interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), formerly the Standing Interpretations Committee (“SIC”). Following the coming into force of European Regulation No. 1606 of July 2002, starting from 1 January, 2005, the Reply Group adopted International Financial Reporting Standards (IFRS). The consolidated financial statements have been prepared in accordance with Consob regulations regarding the format of financial statements, in application of Art. 9 of Legislative Decree 38/2005 and other CONSOB regulations and instructions concerning financial statements. GENERAL PRINCIPLES The consolidated financial statement is prepared on the basis of the historic cost principle, modified as requested for the appraisal of some financial instruments for which the fair value criterion is adopted in accordance with IAS 39. The consolidated financial statements have been prepared on the going concern assumption. In this respect, despite operating in a difficult economic and financial environment, the Group’s 88

90 assessment is that no material uncertainties (as defined in paragraph 25 of IAS 1) exist with regards its ability to continue as a going concern. These consolidated financial statements are expressed in thousands of Euros and are compared to the consolidated financial statements of the previous year prepared in accordance with the same principles. Further indication related to the format of the financial statements respect to IAS 1 is disclosed here within as well as information related to significant accounting principles and evaluation criteria used in the preparation of the following consolidated report. FINANCIAL STATEMENTS The consolidated financial statements include statement of income, statement of comprehensive income, statement of financial position, statement of changes in shareholders’ equity, statement of cash flows and the explanatory notes. The income statement format adopted by the Group classifies costs according to their nature, which is deemed to properly represent the Group’s business. The Statement of financial position is prepared according to the distinction between current and non- current assets and liabilities. The statement of cash flows is presented using the indirect method. Consolidated Financial Statements as at 31 December 2017 The most significant items are disclosed in a specific note in which details related to the composition and changes compared to the previous year are provided. It should be noted that in order to comply with the indications contained in Consob Resolution no. 15519 of 27 July 2006 “as to the format of the financial statements”, additional statements: income statement and statement of financial position have been added showing the amounts of related party transactions. BASIS OF CONSOLIDATION SUBSIDIARIES The financial statements of subsidiaries are included in the consolidated financial statements as at 31 December of each year. Control exists when the Group has the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. 89 88

91 Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting principles used into line with those used by other members of the Group. All significant intercompany transactions and balances between group companies are eliminated on consolidation. Non controlling interest is stated separately with respect to the Group’s net equity. Such Non controlling interest is determined according to the percentage of the shares held of the fair values of the identifiable assets and liabilities of the company at the date of acquisition and post-acquisition adjustments. According to IAS 27, overall loss (including the profit/(loss) for the year) is attributed to the owners of the Parent and minority interest also when net equity attributable to minority interests has a negative balance. Difference arising from translation of equity at historical exchange rates and year end exchange rates are recorded at an appropriate reserve of the consolidated shareholders’ equity. BUSINESS COMBINATIONS Acquisition of subsidiary companies is recognized according to the purchase method of accounting. The acquisition cost is determined by the sum of the fair value, at the trading date, of all the assets transferred, liabilities settled and the financial instruments issued by the group Annual Financial Report 2017 in exchange of control of the acquired company. In addition, any cost directly attributable to the acquisition. The identifiable assets, liabilities and contingent liabilities of the company acquired that respect the conditions to be recognized according with IFRS 3 are stated at their fair value at the date of acquisition with the exception of those non current assets (or groups in discontinued operations) that are held for sale in accordance with IFRS 5, which are recognized and measured at fair value less selling costs. The positive difference between the acquisition costs and Group interest of the reported assets and liabilities is recorded as goodwill and classified as an intangible asset having an indefinite life. Minority interest in the company acquired is initially measured to the extent of their shares in the fair value of the assets, liabilities and contingent liabilities recognized. The accounting of the put and call options on the minority shareholdings of the subsidiary company are recorded according to IAS 32, taking into account therefore, depending on the case, the existence and the determinability of the consideration to the minority shareholders if the option was exercised. 90

92 INVESTMENTS IN ASSOCIATE COMPANIES An associate is a company over which the Group is in a position to exercise significant influence, but not control, through the participation in the financial and operating policy decisions of the investee. The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method of accounting, with the exception of investments held for future disposal. Where a group company transacts with an associate of the Group, unrealized profits and losses are eliminated to the extent of the Group’s interest in the relevant associate, except to the extent that unrealized losses provide evidence of an impairment of the asset transferred. With regard to investments in associated companies held, either directly or indirectly through venture capital or similar entities, in order to realize capital gains, these are carried at fair value. This treatment is permitted by IAS 28 "Investments in Associates", which requires that these investments are excluded from its scope and are designated, from the time of initial recognition, at fair value through profit or loss and accounted for in accordance with IAS 39 "Financial instruments: recognition and Measurement" and any change therein is recognized in profit and loss. TRANSACTIONS ELIMINATED ON CONSOLIDATION All significant intercompany balances and transactions and any unrealized gains and losses Consolidated Financial Statements as at 31 December 2017 arising from intercompany transactions are eliminated in preparing the consolidated financial statements. Unrealized gains and losses arising from transactions with associates and jointly controlled entities are eliminated to the extent of the company’s interest in those entities. FOREIGN CURRENCY TRANSACTIONS Transactions in foreign currencies are recorded at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rate prevailing at that date. Exchange differences arising on the settlement of monetary items or on reporting monetary items at rates different from those at which they were initially recorded during the period or in previous financial statements, are recognized in the income statement. CONSOLIDATION OF FOREIGN ENTITIES All assets and liabilities of foreign consolidated companies with a functional currency other than the Euro are translated using the exchange rates in effect at the balance sheet date. 91 90

93 Income and expenses are translated at the average exchange rate for the period. Translation differences resulting from the application of this method are classified as equity until the disposal of the investment. Average rates of exchange are used to translate the cash flows of foreign subsidiaries in preparing the consolidated statement of cash flows. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are recorded in the relevant functional currency of the foreign entity and are translated using the period end exchange rate. In the context of IFRS First-time Adoption, the cumulative translation difference arising from the consolidation of foreign operations was set at nil, as permitted by IFRS 1; gains or losses on subsequent disposal of any foreign operation only include accumulated translation differences arising after 1 January 2004. The following table summarizes the exchange rates used in translating the 2017 and 2016 financial statements of the foreign companies included in consolidation: AVERAGE ON 31 AVERAGE ON 31 2017 DECEMBER 2017 2016 DECEMBER 2016 GBP 0.87615 0.88723 0.818896 0.85618 3.6041 Brazilian Real 3.861627 3.9729 3.4305 Annual Financial Report 2017 Rumanian Leu 4.6585 4.490754 4.539 4.5687 2.1837 2.3659 2.20087 2.17226 Belarusian Ruble US Dollar 1.1293 1.1993 1.106598 1.0541 Chinese Yuan 7.6264 7.8044 7.349579 7.39643 Polish Zloty 4.2563 4.177 4.363635 4.4103 - Kuna 7.4644 7.44 - 92

94 TANGIBLE ASSETS Tangible fixed assets are stated at cost, net of accumulated depreciation and impairment losses. Goods made up of components, of significant value, that have different useful lives are considered separately when determining depreciation. Depreciation is charged so as to write off the cost or valuation of assets, over their estimated useful lives, using the straight-line method, on the following bases: 3% Buildings 30% Equipment Plants 40% Hardware 40% Furniture and fittings 24% The recoverable value of such assets is determined through the principles set out in IAS 36 and outlined in the paragraph “Impairment” herein. Ordinary maintenance costs are fully expensed as incurred. Incremental maintenance costs are allocated to the asset to which they refer and depreciated over their residual useful lives. Improvement expenditures on rented property are allocated to the related assets and depreciated over the shorter between the duration of the rent contract or the residual useful Consolidated Financial Statements as at 31 December 2017 lives of the relevant assets. Assets held under finance leases, which provide the Group with substantially all the risks and rewards of ownership, are recognized as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the financial statement as a debt. The assets are amortized over their estimated useful life or over the duration of the lease contract if lower. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in income. 93 92

95 GOODWILL Goodwill is an intangible asset with an indefinite life, deriving from business combinations recognized using the purchase method, and is recorded to reflect the positive difference between purchase cost and the Group’s interest at the time of acquisition, after having recognized all assets, liabilities and identifiable contingent liabilities attributable to both the Group and third parties at their fair value. Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Impairment losses are recognized immediately as expenses that cannot be recovered in the future. On disposal of a subsidiary or associate, the attributable amount of unamortized goodwill is included in the determination of the profit or loss on disposal. OTHER INTANGIBLE ASSETS Intangible fixed assets are those lacking an identifiable physical aspect, are controlled by the company and are capable of generating future economic benefits. Annual Financial Report 2017 Other purchased and internally-generated intangible assets are recognized as assets in accordance with IAS 38 – Intangible Assets, where it is probable that the use of the asset will generate future economic benefits and where the costs of the asset can be determined reliably. Such assets are measured at purchase or manufacturing cost and amortized on a straight-line basis over their estimated useful lives, if these assets have finite useful lives. Other intangible assets acquired as part of an acquisition of a business are capitalized separately from goodwill if their fair value can be measured reliably. In case of intangible fixed assets purchased for which availability for use and relevant payments are deferred beyond normal terms, the purchase value and the relevant liabilities are discounted by recording the implicit financial charges in their original price. Expenditure on research activities is recognized as an expense in the period in which it is incurred. Development costs can be capitalized on condition that they can be measured reliably and that evidence is provided that the asset will generate future economic benefits. An internally-generated intangible asset arising from the Group’s e-business development (such as informatics solutions) is recognized only if all of the following conditions are met: an asset is created that can be identified (such as software and new processes); • 94

96 • it is probable that the asset created will generate future economic benefits; • the development cost of the asset can be measured reliably. These assets are amortized when launched or when available for use. Until then, and on condition that the above terms are respected, such assets are recognized as construction in progress. Amortization is determined on a straight line basis over the relevant useful lives. When an internally-generated intangible asset cannot be recorded at balance sheet, development costs are recognized in the statement of income in the period in which they are incurred. INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES Intangible assets with indefinite useful lives consist principally of acquired trademarks which have no legal, contractual, competitive, economic, or other factors that limit their useful lives. Intangible assets with indefinite useful lives are not amortized; in accordance with IAS 36 criteria, are tested for impairment annually or more frequently whenever there is an indication that the asset may be impaired. Any impairment losses are not subject to subsequent reversals. IMPAIRMENT At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is Consolidated Financial Statements as at 31 December 2017 estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually or more frequently, whenever there is an indication that the asset may be impaired. The recoverable amount of an asset is the higher of fair value, less disposal costs and its value in use. In assessing its value in use, the pre-tax estimated future cash flows are discounted at their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Its value in use is determined net of tax in that this method produces values largely equivalent to those obtained by discounting cash flows net of tax at a pre-tax discount rate derived, through an iteration, from the result of the post-tax assessment. The assessment is carried out for the individual asset or for the smallest identifiable group of cash generating assets deriving from ongoing use, the so-called Cash generating unit. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than 95 94

97 its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognized as an expense immediately. Where the value of the Cash generating unit, inclusive of goodwill, is higher than the recoverable value, the difference is subject to impairment and attributable firstly to goodwill; any exceeding difference is attributed on a pro-quota basis to the assets of the Cash generating unit. Where an impairment loss subsequently reverses, the carrying amount of the asset, (or cash-generating unit), with the exception of goodwill, is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount that would have been determined had no impairment loss been recognized for the asset. A reversal of an impairment loss is recognized as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. INVESTMENTS IN OTHER COMPANIES Investments in equity investments mainly held through an Investment Entity as defined by IFRS 10, are designated at fair value and accounted for in accordance with IAS 39 “Financial Annual Financial Report 2017 Instruments: Recognition and Measurement”. The fair value is determined using the International Private Equity and Venture Capital valuation guideline (IPEV) and any change therein is recognized in profit (loss) in the period in which they occurred. In the event of write-down for impairment, the cost is recognized in the income statement; the original value is restored in subsequent years if the assumptions for the write-down no longer exist. Investments in other companies that are available-for-sale financial assets are measured at fair value, when this can be reliably determined. Gains or Losses arising from change in fair value are recognized in Other comprehensive income/(losses) until the assets are sold or are impaired, at that time, the cumulative Other comprehensive income/(losses) are recognized in the Income Statement. Investments in other companies for which fair value is not available are stated at cost less any impairment losses. Dividends received are included in Other income/(expenses) from investments. The risk resulting from possible losses beyond equity is entered in a specific provision for risks to the extent to which the Parent Company is committed to fulfil its legal or implicit obligations towards the associated company or to cover its losses. 96

98 CURRENT AND NON CURRENT FINANCIAL ASSETS Financial assets are recognized in the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. Investments are recognized and written-off the balance sheet on a trade-date basis and are initially measured at cost, including transaction costs. At subsequent reporting dates, financial assets that the Group has the expressed intention and ability to hold to maturity (held-to-maturity securities) are measured and amortized at cost according to the prevailing market interest rate method, less any impairment loss recognized to reflect irrecoverable amounts. Investments other than held-to maturity securities are classified as either held-for-trading or available-for-sale, and are measured at subsequent reporting dates at fair value. Where financial assets are held for trading purposes, gains and losses arising from changes in fair value are included in the net profit or loss for the period; for available-for-sale investments, gains and losses arising from changes in fair value are recognized directly in equity, until the security is disposed of or is determined to be impaired; at which time the cumulative gain or loss previously recognized in equity is included in the net profit or loss for the period. This item is stated in the current financial assets. TRANSFER OF FINANCIAL ASSETS The Group removes financial assets from its balance sheet when, and only when, the Consolidated Financial Statements as at 31 December 2017 contractual rights to the cash flows from the assets expire or the Group transfers the financial asset. In the case of transfer of the financial asset: if the entity substantially transfers all the risks and rewards of ownership of the financial • asset, the Group removes the asset from the balance sheet and recognizes separately as assets or liabilities any rights and obligations created or retained with the transfer; • if the Group substantially retains all the risks and rewards of ownership of financial assets, it continues to recognize the financial asset; • if the Group neither transfers nor substantially retains all the risks and rewards of ownership of the financial asset, it determines whether or not it has retained control of the financial asset. In this case: › if the Group has not retained control, it removes the asset from its balance sheet and separately recognizes as assets or liabilities any rights and obligations created or retained in the transfer; if the Group has retained control, it continues to recognize the financial asset to the extent › of its residual involvement in the financial asset. 97 96

99 At the time of removal of financial assets from the balance sheet, the difference between the carrying value of assets and the fees received or receivable for the transfer of the assets is recognized in the income statement. WORK IN PROGRESS Work in progress mainly comprise construction contracts; when the result of a specific order can be reliably estimated, proceeds and costs referable to the related order are indicated as proceeds and costs respectively in relation to the state of progress of activities on the date of closure of the financial statement, based on the relationship between costs sustained for activities taking place up to the date of the financial statement and total costs estimated from the order, except for that which is not considered as representative of the state of progress of the order. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized to the extent of contract costs that it is probable will be recoverable. Contract costs are recognized as expenses in the period in which they are incurred. Annual Financial Report 2017 When it is probable that the total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately. Any advance payments are subtracted from the value of work in progress within the limits of the contract revenues accrued; the exceeding amounts are accounted as liabilities. Product inventories are stated at the lower of cost and net realizable value. Cost comprises direct material and, where applicable, direct labor costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Trade payables and receivables and other current assets and liabilities Trade payables and receivables and other current assets and liabilities are measured at nominal value and eventually written down to reflect their recoverable amount. Write-downs are determined to the extent of the difference of the carrying value of the receivables and the present value of the estimated future cash flows. Receivables and payables denominated in non EMU currencies are stated at the exchange rate at period end provided by the European Central Bank. 98

100 CASH The item cash and cash equivalents includes cash, banks, reimbursable deposits on demand and other short term financial investments readily convertible in cash and are not subject to significant risks in terms of change in value. TREASURY SHARES Treasury shares are presented as a deduction from equity. The original cost of treasury shares and proceeds of any subsequent sale are presented as movements in equity. FINANCIAL LIABILITIES AND EQUITY INVESTMENTS Financial liabilities and equity instruments issued by the Group are presented according to their substance arising from their contractual obligations and in accordance with the definitions of financial liabilities and equity instruments. The latter are defined as those contractual obligations that give the right to benefit in the residual interests of the Group’s assets after having deducted its liabilities. The accounting standards adopted for specific financial liabilities or equity instruments are outlined below: • Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of Consolidated Financial Statements as at 31 December 2017 direct issue costs and subsequently stated at its amortized cost, using the prevailing market interest rate method. • Equity instruments Equity instruments issued by the Group are stated at the proceeds received, net of direct issuance costs. • Non current financial liabilities. Liabilities are stated according to the amortization cost. 99 98

101 DERIVATIVE FINANCIAL INSTRUMENTS AND OTHER HEDGING TRANSACTIONS In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when at the inception of the hedge there is formal designation and sufficient documentation that the hedge is highly effective and that its effectiveness can be reliably measured. The hedge must be highly effective throughout the different financial reporting periods for which it was designated. All derivative financial instruments are measured in accordance with IAS 39 at fair value. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows relating to the Group’s contractual commitments and forecast transactions are recognized directly in Shareholders’ equity, while any ineffective portion is recognized immediately in the Income Statement. If the hedged company commitment or forecasted transaction results in the recognition of an asset or liability, then, at the time the asset or liability is recognized, associated gains or losses on the derivative that had previously been recognized in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognized in the income statement in the same period in which the hedge Annual Financial Report 2017 commitment or forecasted transaction affects net profit or loss, for example, when the future sale actually occurs. For effective hedging against a change in fair value, the hedged item is adjusted by the changes in fair value attributable to the risk hedged with a balancing entry in the Income Statement. Gains and losses arising from the measurement of the derivative are also recognized at the income statement. Changes in the fair value of derivative financial instruments that no longer qualify as hedge accounting are recognized in the Income Statement of the period in which they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognized in equity is retained in equity until the forecasted transaction is no longer expected to occur; the net cumulative gain or loss recognized in equity is transferred to the net profit or loss for the period. Implicit derivatives included in other financial instruments or in other contractual obligations are treated as separate derivatives, when their risks and characteristics are not strictly related to the underlying contractual obligation and the latter are not stated at fair value with recognition of gains and losses in the Income Statement. 100

102 EMPLOYEE BENEFITS The scheme underlying the employee severance indemnity of the Italian Group companies (the TFR) was classified as a defined benefit plan up until 31 December 2006. The legislation regarding this scheme was amended by Law No. 296 of 27 December 2006 (the “2007 Finance Law”) and subsequent decrees and regulations issued in the first part of 2007. In view of these changes, and with specific reference to those regarding companies with at least 50 employees, this scheme only continues to be classified as a defined benefit plan in the Consolidated financial statements for those benefits accruing up to 31 December 2006 (and not yet settled by the balance sheet date), while after that date the scheme is classified as a defined contribution plan. For Italian companies with less than 50 employees, severance pay (“TFR”) remains a “post- employment benefit”, of the “defined benefit plan” type, whose already matured amount must be planned to estimate the amount to settle at the time of annulment of working relations and subsequently updated, using the “Projected unit credit method”. Such actuarial methodology is based on an assumption of demographic and financial nature in order to carry out a reasonable estimate of the amount of benefits that each employee had already matured based on his employment performances. Through actuarial valuation, current service costs are recognized as “personnel expenses” in the Income Statement and represent the amount of rights matured by employees at the reporting date, and the interest cost is recognized as “Financial gains or losses” and represents Consolidated Financial Statements as at 31 December 2017 the figurative expenditure the Company would bear by securing a market loan for an amount corresponding to the Employee Termination Indemnities (“TFR”). Actuarial income and losses that reflect the effects resulting from changes in the actuarial assumptions used are directly recognized in Shareholders’ equity without being ever included in the consolidated income statement. PENSION PLANS According to local conditions and practices, some employees of the Group benefit from pension plans of defined benefits and/or a defined contribution. In the presence of defined contribution plans, the annual cost is recorded at the income statement when the service cost is executed. The Group's obligation to fund defined benefit pension plans and the annual cost recognized in the Income Statement is determined on an actuarial basis using the “ongoing single premiums” method. The portion of net cumulative actuarial gains and losses which exceeds the greater 101 100

103 of 10% of the present value of the defined benefit obligation and 10% of the fair value of plan assets at the end of the previous year is amortized over the average remaining service lives of the employees. The post-employment benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses, arising from the application of the corridor method and past service costs to be recognized in future years, reduced by the fair value of plan assets. SHARE-BASED PAYMENT PLANS The Group has applied the standard set out by IFRS 2 “Share-based payment”. Share-based payments are measured at fair value at granting date. Such amount is recognized in the Income Statement, with a balancing entry in Shareholders’ equity, on a straight-line basis over the “vesting period”. The fair value of the option, measured at the granting date, is measured through actuarial calculations, taking into account the terms and conditions of the options granted. Following the exercise of the options assigned in previous years, the Group has no more stock option plans. For cash-settled share-based payment transactions, the Group measures the goods and Annual Financial Report 2017 services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the Group is required to remeasure the fair value of the liability at each reporting date and at the date of settlement, with the changes in value recognized in profit or loss for the period. PROVISIONS AND RESERVES FOR RISKS Provisions for risks and liabilities are costs and liabilities having an established nature and the existence of which is certain or probable that at the reporting date the amount cannot be determined or the occurrence of which is uncertain. Such provisions are recognized when a commitment actually exists arising from past events of legal or contractual nature or arising from statements or company conduct that determine valid expectations from the persons involved (implicit obligations). Provisions are recognized when the Group has a present commitment arising from a past event and it is probable that it will be required to fulfil the commitment. Provisions are accrued at the best estimate of the expenditure required to settle the liability at the balance sheet date, and are discounted when the effect is significant. 102

104 REVENUE RECOGNITION Revenue is recognized if it is probable that the economic benefits associated with the transaction will flow to the Group and the revenue can be measured reliably. Revenue from sales and services is recognized when the transfer of all the risks and benefits arising from the passage of title takes place or upon execution of a service. Revenues from sales of products are recognized when the risks and rewards of ownership of goods are transferred to the customer. Revenues are recorded net of discounts, allowances, settlement discounts and rebates and charged against profit for the period in which the corresponding sales are recognized. GOVERNMENT GRANTS Government grants are recognized in the financial statements when there is reasonable assurance that the company concerned will comply with the conditions for receiving such grants and that the grants themselves will be received. Government grants are recognized as income over the periods necessary to match them with the related costs which they are intended to compensate. TAXATION Income tax represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit defers from the Consolidated Financial Statements as at 31 December 2017 profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Current income tax is entered for each individual company based on an estimate of taxable income in compliance with existing legislation and tax rates or as substantially approved at the period closing date in each country, considering applicable exemptions and tax credit. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. 103 102

105 Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and associates and interests arising in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply to the period when the liability is settled or the asset realized. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. In the event of changes to the accounting value of deferred tax assets and liabilities deriving from a change in the applicable tax rates and relevant legislation, the resulting deferred tax amount is entered in income statement, unless it refers to debited or credited amounts Annual Financial Report 2017 previously recognized to Shareholders’ equity. DIVIDENDS Dividends are entered in the accounting period in which distribution is approved. Earnings per share Basic earnings per share is calculated with reference to the profit for the period of the Group and the weighted average number of shares outstanding during the year. Treasury shares are excluded from this calculation. Diluted earnings per share is determined by adjusting the basic earnings per share to take account of the theoretical conversion of all potential shares, being all financial instruments that are potentially convertible into ordinary shares, with diluting effect. USE OF ESTIMATIONS The preparation of the financial statements and relative notes under IFRS requires that management makes estimates and assumptions that have effect on the measurement of assets and liabilities and on disclosures related to contingent assets and liabilities at the reporting date. The actual results could differ from such estimates. Estimates are used to accrue 104

106 provisions for risks on receivables, to measure development costs, to measure goodwill and payables for Earn-out, to measure contract work in progress, employee benefits, income taxes and other provisions. The estimations and assumptions are reviewed periodically and the effects of any changes are recognized immediately in income. CHANGES IN ACCOUNTING PRINCIPLES The accounting principles newly adopted by the Group and their outcomes are described in the subsequent paragraph “Accounting principles, amendments and interpretations applied since 1 January 2017. There have been no further changes other than those described in the aforementioned paragraph. CHANGES IN ACCOUNTING ESTIMATES AND RECLASSIFICATIONS At the reporting date, there are no significant estimates regarding the unforeseeable outcome of future events and other causes of uncertainty that might result in significant adjustments being made to the value of assets and liabilities in the coming year. Consolidated Financial Statements as at 31 December 2017 105 104

107 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ADOPTED BY THE GROUP FROM 1 JANUARY 2017 The Group applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after 1 January 2017. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. The nature and the impact of each amendment is described below: Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The Group has provided the information in Note 27. Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealized Losses The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary Annual Financial Report 2017 difference related to unrealized losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. The Group applied amendments retrospectively. However, their application has no effect on the Group’s financial position and performance as the Group has no deductible temporary differences or assets that are in the scope of the amendments. 106

108 STANDARDS ISSUED BUT NOT YET EFFECTIVE The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective. IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments, which replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. The Group plans to adopt the new standard on the required effective date and will not restate comparative information. During 2017, the Group has performed a detailed impact assessment of all three aspects of IFRS 9. This assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Group in 2018 when the Group will adopt IFRS 9. Overall, the Group expects no significant impact on its statement of financial position and equity. Consolidated Financial Statements as at 31 December 2017 a) Classification and measurement The Group does not expect a significant impact on its balance sheet or equity on applying the classification and measurement requirements of IFRS 9. It expects to continue measuring at fair value all financial assets currently held at fair value. Loans as well as trade receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. The Group analyzed the contractual cash flow characteristics of those instruments and concluded that they meet the criteria for amortized cost measurement under IFRS 9. Therefore, reclassification for these instruments is not required. b) Impairment IFRS 9 requires the Group to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Group will apply the simplified approach and record lifetime expected losses on all trade receivables. According to the performed assessment, the Group does not expect a significant impact on its loss allowance. 107 106

109 c) Hedge accounting The Group determined that all existing hedge relationships that are currently designated in effective hedging relationships will continue to qualify for hedge accounting under IFRS 9. The Group has chosen not to retrospectively apply IFRS 9 on transition to the hedges where the Group excluded the forward points from the hedge designation under IAS 39. As IFRS 9 does not change the general principles of how an entity accounts for effective hedges, applying the hedging requirements of IFRS 9 will not have a significant impact on Group’s financial statements. IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014, and amended in April 2016, and will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Early adoption is permitted. The standard requires a company to recognize revenue upon transfer of control of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for transferring goods or services to a customer, using a five-step process. Annual Financial Report 2017 The new standard also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The Group plans to adopt the new standard on the required effective date using the full retrospective method. During 2016, the Group performed a preliminary assessment of IFRS 15, which was continued with a more detailed analysis completed in 2017. On the basis of this assessment, the Group’s revenues will continue to be recognized in a manner consistent with accounting guidance in prior years. It is not foreseen an impact on equity and to the Group’s Net profit. Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognized in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture. The IASB has deferred the effective date 108

110 of these amendments indefinitely, but an entity that early adopts the amendments must apply them prospectively. IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2 The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after 1 January 2018, with early application permitted. The Group does not expect impact from the applying of those amendments. IFRS 16 Leases IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Consolidated Financial Statements as at 31 December 2017 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right- of-use asset. 109 108

111 Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs. In 2018, the Group will continue to assess the potential effect of IFRS 16 on its consolidated financial statements. NOTE 3 - RISK MANAGEMENT CREDIT RISK Annual Financial Report 2017 For business purposes, specific policies are adopted to assure its clients’ solvency. With regards to financial counterparty risk, the Group does not present significant risk in credit- worthiness or solvency. LIQUIDITY RISK The group is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time. The cash flows, funding requirements and liquidity of the Group companies are monitored and centrally managed under the control of the Group Treasury. The aim is to guarantee the efficiency and effectiveness of the management of current and perspective capital resources (maintaining an adequate level of reserves of liquidity and availability of funds via a suitable amount of committed credit lines). The difficult economic situation of the markets and of financial markets necessitates special attention being given to the management of the liquidity risk, and in that sense particular emphasis is being placed on measures taken to generate financial resources through operations and maintaining an adequate level of liquid assets. The Group therefore plans to meet its requirements to settle financial liabilities as they fall due and to cover expected 110

112 capital expenditures by using cash flows from operations and available liquidity, renewing or refinancing bank loans. EXCHANGE RATE AND INTEREST RATE RISK The Group entered into most of its financial instruments in Euros, which is its functional and presentation currency. Although it operates in an international environment, it has a limited exposure to fluctuations in the exchange rates. The exposure to interest rate risk arises from the need to fund operating activities and M&A investments, as well as the necessity to deploy available liquidity. Changes in market interest rates may have the effect of either increasing or decreasing the Group’s net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions. The interest rate risk to which the Group is exposed derives from bank loans; to mitigate such risks, the Group, when necessary, has used derivative financial instruments designated as “cash flow hedges”. The use of such instruments is disciplined by written procedures in line with the Group’s risk management strategies that do not contemplate derivative financial instruments for trading purposes. Consolidated Financial Statements as at 31 December 2017 111 110

113 NOTE 4 - CONSOLIDATION Companies included in consolidation are consolidated on a line-by-line basis. Change in consolidation compared to 31 December 2016 is related to comSysto GmbH, a company incorporated under German law, acquired by Reply AG who holds 100% of the share capital. The company is specialized in Agile solutions in Open Source technologies. Change in the consolidation does not significantly affect the Group’s revenues and profits before tax on 31 December 2017 (approximately 1.1% and 1.4% respectively on revenues and profits before tax). NOTE 5 - REVENUE Revenues from sales and services, including changes in work in progress on orders, amounted to 884,434 thousand Euros (780,739 thousand Euros in 2016). Annual Financial Report 2017 This item includes consulting services, fixed price projects, assistance and maintenance services and other minor revenues. The following table shows the percentage breakdown of revenues by geographic area. Moreover, the breakdown reflects the business management of the Group by Top Management and the allocation approximates the localization of services provided: (*) COUNTRY 2017 2016 Region 1 70.9% 68.2% Region 2 17.9% 16.5% Region 3 13.7% 12.3% IoT Incubator 0.2% 0.3% Total 100.0% 100.0% (*) Region 1: ITA, USA, BRA, POL, ROU Region 2: DEU, CHE, CHN, HR Region 3: GBR, LUX, BEL, NLD, FRA, BLR Disclosure required by IFRS 8 (“Operating segment”) is provided in Note 33 herein. 112

114 NOTE 6 - PURCHASES Detail is as follows: (THOUSAND EUROS) 2017 2016 CHANGE Software licenses for resale 8,982 9,389 (407) Hardware for resale 933 2,068 (1,135) Other 5,512 (158) 5,353 Total 15,269 16,969 (1,701) Purchases of Software licenses and Hardware licenses for resale are recognized net of any change in inventory. The item Other includes the purchase of fuel for 2,496 thousand Euros and the purchase of consumption material for 1,360 thousand Euros. NOTE 7 - PERSONNEL Detail is as follows: Consolidated Financial Statements as at 31 December 2017 (THOUSAND EUROS) 2016 2017 CHANGE Payroll employees 405,656 47,789 357,867 25,899 21,847 Executive Directors 4,052 Total 431,555 379,713 51,842 The increase in the cost of employees, amounting to 51,842 thousand Euros, is attributable to the total registered increase in the Group’s business and in the increase in employees. Detail of personnel by category is provided below: (NUMBER) 2016 CHANGE 2017 Directors 234 326 (92) Managers 726 836 (110) Staff 5,496 4,853 643 6,456 6,015 441 Total 113 112

115 On 31 December 2017 the Group had 6,456, employees compared with 6,015 at the end of 2016. Change in consolidation brought an increase of 74 employees. The average number of employees in 2017 was 6,291 marking an increase with respect to 5,663 in the previous year. Payroll employees comprise mainly electronic engineers and economic, computer science, and business graduates from the best Universities. NOTE 8 - SERVICES AND OTHER COSTS Services and other costs comprised the following: 2017 2016 CHANGE (THOUSAND EUROS) Commercial and technical consulting 178,885 22,067 200,952 Travelling and professional training expenses 30,922 29,569 1,353 Other services costs 54,365 52,315 2,050 Office expenses 24,979 18,910 6,068 Annual Financial Report 2017 Lease and rentals 8,143 227 8,370 Other 10,336 8,827 1,508 Total 329,924 296,650 33,274 The change in Services and other costs, amounting to 33,274 Euros, is attributable to an overall increase in the Group’s business. The item Other services mainly include marketing services, administrative and legal services, telephone and canteen. Office expenses include services rendered by third parties for 486 thousand Euros and related parties for 769 thousand Euros, in connection to service contracts for the use of premises, domiciliation and provision of secretarial services, and rent charged by third parties for 15,735 thousand Euros. This item also includes utility expense for 4,841 thousand Euros. 114

116 NOTE 9 - AMORTIZATION, DEPRECIATION AND WRITE DOWNS Depreciation of tangible assets, calculated on the basis of economic-technical rates determined in relation to the residual useful lives of the assets, resulted in an overall charge as at 31 December 2017 of 6,878 thousand Euros. Details of depreciation are provided in the notes to tangible assets. Amortization of intangible assets for the year ended 2017 amounted to an overall loss of 5,475 thousand Euros. Details of depreciation are provided in the notes to tangible assets. NOTE 10 - OTHER OPERATING AND NON RECURRING INCOME/ (EXPENSES) Other operating and non recurring income amounted to 869 thousand Euros (4,277 thousand Euros in 2016) and refer to: other operating costs amounting to 2,113 thousand Euros in relation to provision for • contractual and commercial risks and lawsuits; • other non recurring income amounting to 2,982 thousand Euros in relation to the fair value adjustment of the liability referred to the deferred consideration for the acquisition of Consolidated Financial Statements as at 31 December 2017 shareholdings in subsidiary companies (Business combination). NOTE 11 - (LOSS)/GAIN ON INVESTMENTS This item amounting to negative 585 thousand Euros is related to: • the fair value of investments resulting in a gain of 2,749 thousand Euros; • impairment of investments in the amount of 3,333 thousand Euros. 115 114

117 NOTE 12 - FINANCIAL INCOME/(EXPENSES) Detail is as follows: 2017 2016 CHANGE (THOUSAND EUROS) 401 342 59 Financial income (816) (1,017) Interest expenses 201 Other (2,563) (846) (1,718) Total (2,978) (1,520) (1,458) Financial gains mainly include interest on bank accounts amounting to 171 thousand Euros. Interest expenses mainly include expenses related to loans for M&A operations. The item Other includes: • the Exchange rate differences from the translation of balance sheet items not stated in Euros in a net loss of 1,749 thousand Euros; Annual Financial Report 2017 • the write off of other financial assets amounting to 1,226 thousand Euros: • the net changes in fair value of Convertible Loans including capitalized interest amounting to 2,454 thousand Euros; • the changes in fair value of financial liabilities pursuant to IAS 39 in a net loss of 1,818 thousand Euros. 116

118 NOTE 13 - INCOME TAXES Income taxes for the financial year ended 2017 amounted to 31,765 thousand Euros and is detailed as follows: 2017 CHANGE (THOUSAND EUROS) 2016 31,114 IRES and other taxes 35,668 4,554 5,376 4,734 643 IRAP (Italy) 41,045 35,848 5,197 Current taxes 794 5,387 Deferred tax expenses (4,593) (9,841) (1,557) Deferred tax income (8,283) Deferred taxes (9,046) (6,150) (2,896) Previous year taxes (233) - (233) Total income taxes 31,765 29,698 2,067 The tax burden on the result before taxes was equivalent to 28.8% (30.5% in the financial year of 2016). The reconciliation between the tax charges recorded in the consolidated financial statements and the theoretical tax charge, calculated on the basis of the theoretical tax rate in effect in Italy, is the following: PROFIT/(LOSS) BEFORE TAXES FROM CONTINUING OPERATIONS 110,310 Consolidated Financial Statements as at 31 December 2017 Theoretical income taxes 24.0% 26,474 Effect of fiscal permanent differences (1,559) Effect of difference between foreign tax rates and the theoretical Italian tax rate 817 Other differences 657 Current and deferred income tax recognized in the financial statement excluding IRAP 26,389 23.9% IRAP current and deferred 5,376 4.9% Current and deferred income recognized in the financial statements 31,765 28.8% In order to render the reconciliation between income taxes recognized in the financial statements and theoretical income taxes more meaningful, IRAP tax is not taken into consideration since it has a taxable basis that is different from the result before tax of continuing operations. Theoretical income taxes are therefore calculated by applying only the tax rate in effect in Italy (“IRES”), equal to 24.0%, on the result before tax of continuing operations. 117 116

119 NOTE 14 - EARNINGS PER SHARE The basic and diluted earnings per share as at 31 December 2017 was calculated on the basis of the Group’s net result amounting to 77,871 thousand Euros (67,544 thousand Euros as at 31 December 2016) divided by the weighted average number of shares, net of treasury shares, as at 31 December 2017 which amounted to 37,407,400 (37,407,400 as at 31 December 2016). It is to be noted that the average number of shares for 2016 was redetermined following the Stock split resolved by the Extraordinary Shareholders’ Meeting on September 13 2017 through the allotment of 4 shares per each ordinary share owned. (EUROS) 2017 2016 Group net result 77,871,000 67,544,000 Average no. shares 37,407,400 37,407,400 Earnings per share 2.08 1.81 NOTE 15 - TANGIBLE ASSETS Annual Financial Report 2017 Tangible assets as at 31 December 2017 amounted to 21,552 thousand Euros and are detailed as follows: 31/12/2017 31/12/2016 CHANGE (THOUSAND EUROS) Buildings 2,067 1,764 304 Plant and machinery 3,419 3,132 288 Hardware 4,877 3,920 956 Other 11,189 8,870 2,319 Total 21,552 17,686 3,867 118

120 Change in tangible assets during 2017 is summarized below: PLANT AND MACHINERY OTHER TOTAL BUILDINGS HARDWARE (THOUSAND EUROS) 9,305 29,279 20,874 Historical Cost 4,023 63,481 (2,259) (6,173) (25,359) (12,004) (45,795) Accumulated depreciation 1,764 3,132 3,920 8,870 17,686 31/12/2016 Historical Cost 446 1,648 3,713 5,064 10,871 Increases - (118) (1,341) (808) (2,268) Disposals - (171) 65 156 Other changes 50 Accumulated depreciation (143) (1,395) Depreciation (2,447) (6,878) (2,893) Utilized - 88 1,256 659 2,003 Other changes - - 65 23 88 Historical Cost 10,900 31,807 24,958 72,134 4,469 Accumulated depreciation (2,402) (7,480) (26,931) (13,769) (50,581) 31/12/2017 2,067 3,419 4,877 11,189 21,552 Consolidated Financial Statements as at 31 December 2017 During the financial year the Group carried out total investments 10,871 thousand Euros (7,048 thousand Euros at 31 December 2016). The item Buildings mainly includes the net value of a building owned by the group amounting to 1,916 thousand Euros, located in Gutersloh, Germany. Increase in the item Plant and machinery mainly refers to investments in specific equipment in the mobile field and the realization of systems and installations for the offices in which the Group operates. Change in the item Hardware is due to investments made by the Group in hardware equipment (computers and servers). Furthermore this item includes financial leases for 389 thousand Euros (556 at 31 December 2016). 119 118

121 The item Other as at 31 December 2017 mainly includes improvements to third party assets and office furniture. The increase of 5,064 Euros mainly refers to improvements made to the offices where the Group’s companies operate. Such item also includes a financial leasing for furniture for a net value amounting to 1,399 thousand Euros (894 thousand Euros at 31 December 2016). Other changes mainly refer to change in consolidation and to translation differences. As at 31 December 2017 tangible assets were depreciated by 70.1% of their value, compared to 72.1% at the end of 2016. NOTE 16 - GOODWILL This item includes goodwill arising from consolidation of subsidiaries and the value of business branches purchased against payment made by some Group companies. Goodwill in 2017 developed as follows: Annual Financial Report 2017 (THOUSAND EUROS) Beginning balance 157,429 Increases 10,202 Impairment - Total 167,631 Exchange rate differences (1,499) Ending balance 166,132 Increase in Goodwill compared to 31 December 2016 owes to the acquisition of comSysto GmbH, a company incorporated under German law acquired by the subsidiary Reply AG. 120

122 The following table summarizes the calculation of goodwill and the aggregate book value of the companies as at the acquisition date. (*) FAIR VALUE (THOUSAND EUROS) Tangible and intangible assets 113 2,351 Trade receivables and other current assets 2,680 Cash and cash equivalents Trade payables and other current liabilities (1,087) Net assets acquired 4,057 Transaction value 14,259 Goodwill 10,202 (*) book value is equal to fair value At 31 December 2017 no impairment indicators emerged. Goodwill was allocated to the cash generating units (“CGU”), identified in the Region in which the Group operates. Moreover, the breakdown reflects the business management of the Group by Top Management and is summarized as follows: TRANSLATION (THOUSAND EUROS) AT 31/12/2016 AT 31/12/2017 INCREASES DIFFERENCES Region 1 - - 48,252 48,252 Consolidated Financial Statements as at 31 December 2017 53,782 10,202 - 63,984 Region 2 Region 3 55,394 - (1,499) 53,895 Total 157,429 10,202 (1,499) 166,132 Reply has adopted a structured and periodic planning and budgeting system aimed at defining objectives and business strategies in order to draft the annual budget. The impairment model adopted by the Reply Group is based on future cash flows calculated using the Discounted cash flow analysis. In applying this model, Management uses different assumptions, which are applied to the single CGU over two years of extrapolation subsequent to the annual budget, in order to estimate: Increase in revenues, • 121 120

123 • Increase in operating costs, Investments, • • Change in net capital. The recoverable value of the CGU, to which the single goodwill is referred, is determined as the highest between the fair value less any selling costs (net selling price) and the present value of the estimated future cash flows expected from the continuous use of the good (value in use). If the recoverable value is higher than the carrying amount of the CGU there is no impairment of the asset; in the contrary case, the model indicates a difference between the carrying amount and the recoverable value as the effect of impairment. The following assumptions were used in calculating the recoverable value of the Cash Generating Units: ASSUMPTION REGION 1 REGION 2 REGION 3 Terminal value growth rates: 1% 1% 1% Discount rate, net of taxes: 7.83% 5.93% 6.64% Discount rate, before taxes: 10,30% 8.43% 8.19% Multiple of EBIT 11.7 11.7 11.7 Annual Financial Report 2017 As to all CGUs subject to the impairment tests at 31 December 2017 no indications emerged that such businesses may have been subject to impairment. The positive difference between the value in use thus estimated on the accounting value of the net invested capital on 31 December 2017 of the CGU is equal to 380.8% for Region 1,227.5% for Region 2 and 102.5% for Region 3. Reply has also developed a sensitivity analysis of the estimated recoverable value. The Group considers that the growth rate of revenues and the discount rate are key indicators in estimating the fair value and has therefore determined that: • a decrease of up to 30% of the revenue growth; • an increase of 100 basis points in the discount rate. This analysis would not lead to an excess of the carrying value of the CGU compared to its recoverable value, which tends to be significantly higher. 122

124 Finally, it is appropriate to note that the estimates and budget data to which the above mentioned parameters have been applied are those determined by management on the basis of past performance and expectations of developments in the markets in which the Group operates. Moreover, estimating the recoverable amount of the Cash-Generating Units requires discretion and the use of estimates by Management. The Group cannot guarantee that there will be no goodwill impairment in future periods. Circumstances and events which could potentially cause further impairment losses are constantly monitored by Reply management. NOTE 17 - OTHER INTANGIBLE ASSETS Net intangible assets as at 2017 amounted to 15,525 thousand Euros (17,016 thousand Euros on 31 December 2016) and are detailed as follows: ACCUMULATED NET BOOK VALUE HISTORICAL COST 31/12/2017 AMORTIZATION (THOUSAND EUROS) Development costs (21,366) 6,032 27,398 Software 23,763 (20,521) 3,242 Trademark 537 - 537 Other intangible assets 7,344 (1,628) 5,716 59,041 Total (43,515) 15,525 Consolidated Financial Statements as at 31 December 2017 Change in intangible assets during 2017 is summarized in the table below: NET BOOK VALUE OTHER NET BOOK VALUE (THOUSAND EUROS) INCREASES AMORTIZATION CHANGES 31/12/2017 31/12/2016 Development costs 6,007 2,723 (2,699) - 6,032 Software 1,555 (2,053) (72) 3,242 3,812 Trademark 537 - - - 537 Other intangible assets 6,659 - (723) (220) 5,716 15,525 (5,475) (292) Total 17,016 4,278 123 122

125 Development costs refer to software products and are accounted for in accordance with provisions of IAS 38. The item Software mainly refers to software licenses purchased and used internally by the Group companies. This item includes 279 thousand Euros related to software development for internal use. The item Trademark mainly refers to the value of the “Reply” trademark granted on 9 June 2000 to the Parent Company Reply S.p.A. (at the time Reply Europe Sàrl), in connection with the share capital increase that was resolved and subscribed to by the Parent Company. Such amount is not subject to systematic amortization. The item Other intangible assets is related to the consolidation difference (Purchase price allocation) following several Business combinations in 2016. NOTE 18 - EQUITY INVESTMENTS Annual Financial Report 2017 The item Equity investments amounts to 29,201 thousand Euros and includes for 15 thousand Euros several subsidiary companies that were not consolidated as they were not operational at the closing date and for 29,186 to investments in start-up companies in the IoT field made by the Investment company Breed Investments Ltd. Note that the investments in equity investments mainly held through an Investment Entity as defined by IFRS 10, are designated at fair value and accounted for in accordance with IAS 39 “Financial Instruments: Recognition and Measurement”. The fair value is determined using the International Private Equity and Venture Capital valuation guideline (IPEV) and any change therein is recognized in profit (loss) in the period in which they occurred. NEW CONVERTIBLE NET FAIR VALUE (THOUSAND INCREASES FOLLOW-ON VALUE LOANS EXCHANGE AT VALUE AT EUROS) 31/12/2016 2017 INVESTMENTS ADJUSTMENTS IMPAIRMENT CONVERSION DIFFERENCES 31/12/2017 (448) 29,186 Investments 14,104 3,969 3,837 2,749 (3,333) 8,309 124

126 NEW INCREASES 2017 The increases of the period are related to: • Canard Drones (564 thousand Euros) Canard Drones has built a visual inspection solution for airport systems based on Unmanned Aerial Vehicles (UAVs). • We Predict (2.132 thousand Euros) We Predict has created Indico, a predictive analytics solution designed to identify engineering warranty problems in the automotive and heavy machinery markets, and extending into their supply chains and large OEM insurers. Indico is a highly visual system with detailed reporting dashboards that make it simple, systematic and interactive to identify and prioritize warranty issues. FoodMarble (569 thousand Euros) • FoodMarble has developed a connected device called AIRE to help people manage digestive symptoms. Working as a personal breath analyzer, AIRE helps users identify the foods that are most compatible with their unique digestive system. The technology for doing this is used in leading digestive health clinics and gastroenterology departments worldwide and FoodMarble has adapted the technology, making it smaller, portable and more affordable for personal, everyday use. • AppyParking (704 thousand Euros) AppyParking’s next generation intelligent mobility and connected car platform bridges the Consolidated Financial Statements as at 31 December 2017 gap between high definition kerbside mapping, internet of things and frictionless payments. AppyParking's smart city platform enables the public and private sector to manage and control a digital infrastructure layer over existing road networks. FOLLOW-ON INVESTMENTS The increase is related to follow-on investments existing at December 31, 2016. NET FAIR VALUE ADJUSTMENTS The net fair value adjustment amounting to 2,749 thousand Euros reflects the market values of the last rounds that took place in 2017 on investments already in portfolio. IMPAIRMENT This item amounting to 3,333 thousand Euros is related to impairment of investments deemed unrecoverable. 125 124

127 CONVERTIBLE LOANS CONVERSION The increase is related to the conversion of Convertible Loans in shares of several equity investments and also includes fair value adjustments for positive 3,091 thousand Euros. All fair value assessments shall be part of the hierarchy level 3. NOTE 19 - FINANCIAL ASSETS Current and non-current financial assets amounted to a total of 8,427 thousand Euros with compared to 12,664 thousand Euros as at 31 December 2016. Detail is as follows: 31/12/2016 CHANGE 31/12/2017 (THOUSAND EUROS) 3,242 3,190 53 Receivables from insurance companies 1,275 1,039 236 Guarantee deposits Other financial assets 15 759 (744) Annual Financial Report 2017 1,853 5,489 (3,636) Convertible loans Short term securities 2,042 (145) 2,187 Total 8,427 12,664 (4,237) The item Receivables from insurance companies mainly refers to the insurance premiums paid against pension plans of some German companies and to directors’ severance indemnities. Convertible loans relate to the option to convert into shares of the following start-up company in the field of IoT, detail is as follows: NET FAIR (THOUSAND VALUE AT CAPITALIZED VALUE EQUITY EXCHANGE VALUE AT EUROS) 31/12/2016 INCREASES INTERESTS ADJUSTMENTS IMPAIRMENT CONVERSION DIFFERENCES 31/12/2017 1,853 Convertible loans 5,489 2,494 219 3,091 (856) (8,309) (276) 126

128 INCREASES This amount is referred to new investments in convertible loans in 2017. NET FAIR VALUE ADJUSTMENTS The net fair value adjustments reflect the market value of the loans converted into equity at the time of conversion. IMPAIRMENT Impairment is related to write-downs of convertible loans that were deemed unrecoverable. EQUITY CONVERSION The decrease is related to the conversion of the loans into equity investments inclusive of fair value adjustments. Short term securities mainly refer to Time Deposit investments. Note that the items Receivables from insurance companies, Convertible loans, Guarantee deposits and Other financial assets are not shown within the Net financial position. Consolidated Financial Statements as at 31 December 2017 127 126

129 NOTE 20 - DEFERRED TAX ASSETS Deferred tax assets, amounting to 24,661 thousand Euros as at 31 December 2017 (16,466 thousand Euros as at 31 December 2016), include the fiscal charge corresponding to the temporary differences originating among the anti-tax result and taxable income relating to entries with deferred deductibility. Detail of Deferred tax assets is provided at the table below: (THOUSAND EUROS) 31/12/2016 UTILIZATION 31/12/2017 ACCRUALS Prepaid tax on costs that will become 7,604 1,425 (2,674) 6,355 deductible in future years Prepaid tax on greater provisions for doubtful accounts 3,409 (998) 7,508 5,097 1,684 272 (242) 1,714 Deferred fiscal deductibility of amortization Consolidation adjustments and other items 2,080 8,909 (1,905) 9,085 Total 16,466 14,015 (5,819) 24,661 Annual Financial Report 2017 The decision to recognize deferred tax assets is taken by assessing critically whether the conditions exist for the future recoverability of such assets on the basis of expected future results. There are no deferred tax assets on losses carried forward. NOTE 21 - WORK IN PROGRESS Work in progress, amounting to 93,651 thousand Euros, is detailed as follows: (THOUSAND EUROS) 31/12/2017 31/12/2016 CHANGE Contract work in progress 279,489 169,802 109,687 Advance payments from customers (185,838) (111,151) (74,687) Total 93,651 58,651 35,000 Any advance payments made by the customers are deducted from the value of the inventories, within the limits of the accrued consideration; the exceeding amounts are accounted as liabilities. 128

130 NOTE 22 - TRADE RECEIVABLES Trade receivables as at 31 December 2017 amounted to 357,082 thousand Euros with a net increase of 17,888 thousand Euros. (THOUSAND EUROS) 31/12/2017 31/12/2016 CHANGE 271,043 265,976 5,067 Domestic clients 89,519 75,076 14,443 Foreign trade receivables Credit notes to be issued (9) (489) (498) Total 360,064 341,042 19,022 Allowance for doubtful accounts (1,848) (1,133) (2,982) Total trade receivables 357,082 339,194 17,888 Trade receivables are shown net of allowances for doubtful accounts amounting to 2,982 thousand Euros on 31 December 2017 (1,848 thousand Euros at 31 December 2016). The Allowance for doubtful accounts developed in 2017 as follows: 31/12/2017 (THOUSAND EUROS) 31/12/2016 ACCRUALS UTILIZATION REVERSAL Allowance for doubtful accounts (54) 2,982 1,848 1,914 (727) Consolidated Financial Statements as at 31 December 2017 Over-due trade receivables and the corresponding allowance for doubtful accounts, compared to 2016, are summarized in the tables below: AGING AT 31/12/2017 TRADE 91 - 180 181 - 360 OVER 360 TOTAL 0 - 90 (THOUSAND EUROS) RECEIVABLES CURRENT DAYS DAYS DAYS DAYS OVERDUE Trade receivables 319,343 34,490 3,797 1,787 647 40,721 360,064 (2,982) (2,982) - (700) (399) (1,287) (596) Allowance for doubtful accounts 50 37,739 Total trade receivables 357,082 319,343 33,790 3,399 500 129 128

131 AGING AT 31/12/2016 0 - 90 91 - 180 181 - 360 OVER 360 TOTAL TRADE CURRENT DAYS DAYS DAYS DAYS OVERDUE (THOUSAND EUROS) RECEIVABLES 341,042 310,338 27,283 1,773 341 1,306 30,704 Trade receivables Allowance for doubtful accounts (25) (307) (128) (183) (1,205) (1,824) (1,848) Total trade receivables 339,194 310,313 26,976 1,645 158 101 28,881 The carrying amount of Trade receivables is in line with its fair value. Trade receivables are all collectible within one year. NOTE 23 - OTHER RECEIVABLES AND CURRENT ASSETS Detail is as follows: (THOUSAND EUROS) 31/12/2017 31/12/2016 CHANGE Tax receivables 24,227 14,543 9,684 Annual Financial Report 2017 Advances to employees 349 219 131 11,762 9,254 Accrued income and prepaid expenses 2,508 Other receivables 9,388 20,882 (11,494) Total 45,726 44,810 916 • The item Tax receivables mainly includes: • credits to the Treasury for VAT (13,592 thousand Euros); • income tax prepayments net of the allocated liability (6,572 thousand Euros); • receivables for withholding tax (209 thousand Euros). The item Other receivables mainly includes the contributions receivable in relation to research projects for 6,653 thousand Euros (12,762 thousand Euros at 31 December 2016). 130

132 NOTE 24 - CASH AND CASH EQUIVALENTS The balance of 109,195 thousand Euros, with an increase of 16,646 thousand Euros compared with 31 December 2016, represents cash and cash equivalents as at the end of the year. Changes in cash and cash equivalents are fully detailed in the Consolidated statement of cash flow. NOTE 25 - SHAREHOLDERS’ EQUITY SHARE CAPITAL On 31 December 2017 the company capital of Reply S.p.A, wholly undersigned and paid up, was amounting to 4,863,486 Euros and is composed of n. 37,411,428 ordinary shares with nominal value of 0.13 Euros each. The Extraordinary Shareholders’ Meeting held on 13 September 2017 resolved to split the 9,352,857 outstanding ordinary shares, with a nominal value of € 0.52 each, into 37,411,428 newly issued ordinary shares, with a nominal value of € 0.13 each, having the same characteristics as outstanding ordinary shares, assigned in the ratio of four new shares in replacement of each existing ordinary share. Consolidated Financial Statements as at 31 December 2017 TREASURY SHARES The value of the Treasury shares, amounting to 25 thousand Euros, refers to the shares of Reply S.p.A. held by the parent company, that at 31 December 2017 were equal to n. 4,028. CAPITAL RESERVES On 31 December 2017 Capital reserves, amounting to 72,836 thousand Euros, were mainly comprised as follows: • Share premium reserve amounting to 23,303 thousand Euros; • Treasury share reserve amounting to 25 thousand Euros, relating to the shares of Reply S.p.A held by the Parent Company; • Reserve for the purchase of treasury shares amounting to 49,976 thousand Euros, formed via initial withdrawal from the share premium reserve. By means of a resolution of the Shareholders’ Meeting of 21 April 2017 Reply S.p.A. re-authorized it, in accordance with and for the purposes of Article 2357 of the Italian Civil Code, the purchase of a maximum of 50 131 130

133 million Euros of ordinary shares, corresponding to 20% of the share capital, in a lump sum solution or in several solutions within 18 months of the resolution. EARNING RESERVES Earnings reserves amounted to 338,442 thousand Euros and were comprised as follows: Reply S.p.A.’s Legal reserve amounted to 973 thousand Euros; • • Retained earnings amounted to 259,599 thousand Euros (retained earnings amounted to 203,490 thousand Euros on 31 December 2016 ); • Profits/losses attributable to shareholders of the Parent Company amounted to 77,871 thousand Euros (67,544 thousand Euros as on 31 December 2016). OTHER COMPREHENSIVE INCOME Other comprehensive income can be analyzed as follows: (THOUSANDS EUROS) 31/12/2017 31/12/2016 Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax: Actuarial gains/(losses) from employee benefit plan 79 (1,597) Annual Financial Report 2017 Total Other comprehensive income that will not be 79 (1,597) classified subsequently to profit or loss, net of tax (B1): Other comprehensive income that may be reclassified subsequently to profit or loss: Gains/(losses) on cash flow hedges 28 (62) Gains/(losses) from the translation of assets in foreign currencies (2,155) (10,562) Total Other comprehensive income that may be classified subsequently to profit or loss, net of tax (B2): (2,127) (10,624) Total other comprehensive income, net of tax (B) = (B1) + (B2): (2,049) (12,221) SHARE BASED PAYMENT PLANS There are no stock option plans resolved by the General Shareholders’ meetings. 132

134 NOTE 26 - PAYABLES TO MINORITY SHAREHOLDERS AND EARN-OUT Payables to minority shareholders and Earn-out owed on 31 December 2017 amount to 22,275 thousand Euros inclusive of negative exchange differences amounting to 336 thousand Euros and are detailed as follows: FAIR VALUE EXCHANGE 31/12/2016 INCREASES ADJUSTMENTS PAYMENTS DIFFERENCES 31/12/2017 (THOUSAND EUROS) (3,760) 13,736 - 292 (150) Payable to minority shareholders 10,118 Payables for earn-out 4,180 (2,385) (273) (186) 12,157 10,822 Total payables to minority shareholders and Earn-out 24,558 4,180 (2,093) (4,033) (336) 22,275 The increase in payables for earn-out amounting to 4,180 is related to comSysto GmbH, a company incorporated under German law and based in Munich, acquired by Reply AG that holds 100% of the share capital. The item Fair value adjustments in 2017 amounted to 2,093 thousand Euros with a balancing entry in Profit and loss, reflects the best estimate in relation to the deferred consideration originally posted at the time of acquisition. Total payments made amounted to 4,033 thousand Euros and refer to the consideration paid in Consolidated Financial Statements as at 31 December 2017 relation to the original contracts signed at the time of acquisition. NOTE 27 - FINANCIAL LIABILITIES Detail is as follows: 31/12/2016 31/12/2017 CURRENT NON CURRENT TOTAL CURRENT (THOUSAND EUROS) TOTAL NON CURRENT Bank overdrafts 22,798 - 22,798 16,039 - 16,039 Bank loans 16,365 13,381 29,746 18,893 29,985 48,877 Total due to banks 13,381 52,544 34,932 29,985 64,916 39,163 1,803 942 721 1,663 737 1,066 Other financial borrowings 66,720 31,051 Total financial liabilities 40,105 14,102 54,207 35,669 133 132

135 The following illustrates the distribution of financial liabilities by due date: 31/12/2017 31/12/2016 FROM 1 TO DUE IN 12 FROM 1 TO OVER 5 OVER 5 DUE IN 12 (THOUSAND EUROS) YEARS TOTAL MONTHS 5 YEARS YEARS TOTAL MONTHS 5 YEARS 22,798 - - 22,798 16,039 - - 16,039 Bank overdrafts 16,267 - 29,476 18,767 29,697 - 48,464 M&A loans 13,209 Mortgage loans 172 - 288 115 288 - 403 115 Other financial borrowings 942 722 - 1,663 737 1,066 - 1,803 Other - - (17) 11 - - 11 (17) Total 40,105 14,102 - 54,207 35,669 31,051 - 66,720 M&A financing refers to credit lines to be used for acquisition operations carried directly by Reply S.p.A. or via companies controlled directly or indirectly by the same. Summarized below are the existing contracts entered into for such a purpose: • On 25 November 2013 Reply S.p.A entered into a line of credit with Unicredit S.p.A for a total amount amounting to 25,000,000 Euros to be used by 31 December 2015. The loan Annual Financial Report 2017 is reimbursed on a half-year basis deferred to commence on 30 June 2016 and will expire on 31 December 2018. Such credit line was used for 6,053 thousand Euros at 31 December 2017. • On 31 March 2015 Reply S.p.A. entered into a line of credit with Intesa Sanpaolo S.p.A. for a total amount of 30,000,000 Euros detailed as follows: › Tranche A, amounting to 10,000,000 Euros, entirely used for the reimbursement of the credit line dated 13 November 2013. The loan is reimbursed on a half-year basis deferred to commence on 30 September 2015. Such credit line was used for 5,000 thousand Euros at 31 December 2017. Tranche B, amounting to 20,000,000 Euros, to be used by 30 September 2016.The loan is › reimbursed on a half-year basis deferred to commence on 31 March 2017. Such credit line was used for 14,286 thousand Euros at 31 December 2017. • On 8 April 2015 Reply S.p.A. entered into a line of credit with Unicredit S.p.A. for a total amount of 10,000,000 Euros entirely used for the reimbursement of the credit line dated 19 September 2012. The loan is reimbursed on a half-year basis deferred to commence on 31 October 2016. Such credit line was used for 2,500 thousand Euros at 31 December 2017. 134

136 • On 30 September 2015 Reply S.p.A. entered into a line of credit with Unicredit S.p.A. for a total amount of 25,000,000 Euros to be used by 30 September 2018. On 17 February 2017 a reduction of the credit line to 1,500,000 was agreed and completely utilized, the loan will be reimbursed on a half year basis deferred to commence on 31 May 2019 and will expire on 30 November 2021. Such credit line was used for 1,500 thousand Euros at 31 December 2017. • On 28 July 2016 Reply S.p.A. entered into a line of credit with Intesa San Paolo S.p.A. for a total amount of 49,000 thousand Euros to be used by 30 June 2018. The loan will be reimbursed on a half basis deferred to commence on 30 September 2018 and will expire on 30 September 2021. As at December 31, 2017 this line had not been used. On 21 September 2016 Reply S.p.A. entered onto an Interest Rate Swap contract with Intesa • San Paolo S.p.A. with effect from 31 March 2017 and will expire on 31 March 2020. • On 17 February 2017 Reply S.p.A. entered into a line of credit with Unicredit S.p.A. for a total amount of 50,000,000 Euros to be used by 28 February 2018. As at December 31, 2017 this line had not been used. As contractually defined, such ratios are as follows: • Net financial indebtedness/Equity Net financial indebtedness/EBITDA • At the balance sheet date, Reply fulfilled the Covenants under the various contracts. Consolidated Financial Statements as at 31 December 2017 The item Mortgages refers to financing granted to Tool Reply GmbH, for the acquisition of the building where the German company has its registered office. Reimbursement takes place via six monthly instalments (at 4.28%) with expiry on 30 September 2019. Other financial borrowings are related to financial leases determined according to IAS 17. The item Others mainly refers to the evaluation of derivative hedging instruments. The underlying IRS amounted to 19,286 thousand Euros. The carrying amount of Financial liabilities is deemed to be in line with its fair value. 135 134

137 NET FINANCIAL POSITION In compliance with Consob regulation issued on 28 July 2006 and in accordance with CESR’s Recommendations for the consistent implementation of the European’s regulation on Prospectuses issued on 10 February 2005, the Net financial position of the Reply Group at 31 December 2017. 31/12/2016 CHANGE (THOUSAND EUROS) 31/12/2017 92,550 16,646 109,195 Cash and cash equivalents 2,042 2,925 (883) Current financial assets - (4) Non current financial assets 4 111,238 95,479 Total financial assets 15,758 Current financial liabilities (40,105) (35,670) (4,435) Non current financial liabilities (14,102) (31,051) 16,949 Total financial liabilities (54,207) (66,721) 12,514 Total net financial position 57,030 28,758 28,272 For further details with regards to the above table see Note 24 as well as Note 27. Annual Financial Report 2017 Change in financial liabilities during 2017 is summarized below: (THOUSAND EUROS) Total financial liabilities 2016 66,720 Bank overdrafts (16,039) Fair value IRS (11) Non current financial liabilities 2016 50,671 Cash flows (19,245) Total non current financial liabilities 2017 31,426 Bank overdrafts 22,798 Fair value IRS (17) Total financial liabilities 2017 54,207 136

138 NOTE 28 - EMPLOYEE BENEFITS 31/12/2016 CHANGE 31/12/2017 (THOUSAND EUROS) Employee severance indemnities 23,748 22,094 1,654 6,461 6,771 (310) Employee pension funds 1,613 1,520 93 Directors severance indemnities 16 16 - Other Total 31,838 30,401 1,437 EMPLOYEE SEVERANCE INDEMNITIES The Employee severance indemnity represents the obligation to employees under Italian law (amended by Law 296/06) that has accrued up to 31 December 2006 and that will be settled when the employee leaves the company. In certain circumstances, a portion of the accrued liability may be given to an employee during his working life as an advance. This is an unfunded defined benefit plan, under which the benefits are almost fully accrued, with the sole exception of future revaluations. The procedure for the determination of the Company’s obligation with respect to employees was carried out by an independent actuary according to the following stages: • Projection of the Employee severance indemnity already accrued at the assessment date Consolidated Financial Statements as at 31 December 2017 and of the portions that will be accrued until when the work relationship is terminated or when the accrued amounts are partially paid as an advance on the Employee severance indemnities; • Discounting, at the valuation date, of the expected cash flows that the company will pay in the future to its own employees; • Re-proportioning of the discounted performances based on the seniority accrued at the valuation date with respect to the expected seniority at the time the company must fulfil its obligations. In order to allow for the changes introduced by Law 296/06, the re-proportioning was only carried out for employees of companies with fewer than 50 employees that do not pay Employee severance indemnities into supplementary pension schemes. Reassessment of Employee severance indemnities in accordance with IAS 19 was carried out “ad personam” and on the existing employees, that is analytical calculations were made on each employee in force in the company at the assessment date without considering future work force. 137 136

139 The actuarial valuation model is based on the so called technical bases which represent the demographic, economic and financial assumptions underlying the parameters included in the calculation. The assumptions adopted can be summarized as follows: DEMOGRAPHIC ASSUMPTIONS Mortality RG 48 survival tables of the Italian population INPS tables divided by age and gender Inability Retirement age Fulfilment of the minimum requisites provided by the General Mandatory Insurance Annual frequency of advances and employee turnover were assumed Advances on Employee severance indemnities from historical data of the company: frequency of advances in 2017: 2.50% frequency of turnover in 2017: 10% ECONOMIC AND FINANCIAL ASSUMPTIONS Annual discount rate Average annual rate of 1.5% Annual Financial Report 2017 Calculated with reference to the valuation date of primary shares on the stock market in which Annual growth rate of the Employee severance indemnities the company belongs and with reference to the market yield of Federal bonds. An annual constant rate equal to 1.31% was used for the year 2017. The employee severance indemnities (TFR) are revalued on an annual basis equal to 75% Annual increase in salaries of the inflation rate plus a spread of one and a half percentage point. The annual increase of salaries used was calculated in function of the employee qualifications Annual inflation rate and the Company’s market segment, net of inflation, from 1.0% to 1.50% In accordance with IAS 19, Employment severance indemnities at 31 December 2017 are summarized in the table below: (THOUSAND EUROS) Balance at 31/12/2016 22,094 Cost relating to current (service cost) work 4,135 Actuarial gain/loss 78 Interest cost 317 Indemnities paid during the year (2,875) 23,748 Balance at 31/12/2017 138

140 EMPLOYEE PENSION FUNDS The Pension fund item relates to liability as regards the defined benefit pensions of some German companies and is detailed as follows: (THOUSAND EUROS) 31/12/2017 31/12/2016 Present value of liability 7,394 7,641 Fair value of plan assets (933) (870) 6,771 Net liability 6,461 The amounts recognized for defined benefit plans is summarized as follows: (THOUSAND EUROS) Present value at beginning of the year 7,641 Service cost 53 113 Interest cost Actuarial gains/(losses) (236) Indemnities paid during the year (177) Present value at year end 7,394 DIRECTORS SEVERANCE INDEMNITIES Consolidated Financial Statements as at 31 December 2017 This amount is related to Directors severance indemnities paid during the year. Change amounting to 93 thousand Euros refers to the resolution made by the Shareholders Meeting of several subsidiary companies to pay an additional indemnity to some Members of the Board in 2017 and to a partial payment of the indemnity. 139 138

141 NOTE 29 - DEFERRED TAX LIABILITIES Deferred tax liabilities at 31 December 2017 amounted to 18,539 thousand Euros and are referred mainly to the fiscal effects arising from temporary differences deriving from statutory income and taxable income related to deferred deductibility. (THOUSAND EUROS) 31/12/2017 31/12/2016 1,880 1,797 Deductible items off the books Other 16,659 16,766 Total 18,539 18,563 The item Other mainly includes the measurement of contract work in progress, employee benefits, capitalization of development costs and reversal of amortization of intangible assets. Deferred tax liabilities have not been recognized on retained earnings of the subsidiary companies as the Group is able to control the timing of distribution of said earnings and in the near future does not seem likely. Annual Financial Report 2017 NOTE 30 - PROVISIONS Provisions amounted to 13,909 thousand Euros (of which 13,635 thousand Euros are non- current). Change in 2017 is summarized in the table below: BALANCE AT CHANGE IN BALANCE AT (THOUSAND EUROS) 31/12/2016 ACCRUALS UTILIZATION REVERSALS 31/12/2017 CONSOLIDATION Fidelity fund - 25 (93) - 255 323 Provision for risks 10,593 184 4,103 (1,138) (88) 13,655 Total 10,916 184 4,128 (1,230) (88) 13,909 Employee fidelity provisions refer mainly to provisions made for the employees of some German companies in relation to anniversary bonuses. The liability is determined through actuarial calculations applying a 5.5% rate. 140

142 The Provision for risks represents the best estimate for contingent liabilities. The accrual of the year is referred to the update of this estimate and to new legal ongoing controversies, lawsuits with former employees and other liabilities in Italy and abroad. NOTE 31 - TRADE PAYABLES Trade payables at 31 December 2017 amounted to 100,150 thousand Euros and are detailed as follows: (THOUSAND EUROS) 31/12/2017 31/12/2016 CHANGE 84,368 80,369 3,999 Domestic suppliers 16,855 13,383 3,472 Foreign suppliers Advances to suppliers (1,073) (1,017) (57) Total 100,150 92,735 7,414 NOTE 32 - OTHER CURRENT LIABILITIES Other current liabilities at 31 December 2017 amounted to 228,165 thousand Euros with an Consolidated Financial Statements as at 31 December 2017 increase of 39,020 thousand Euros with respect to the previous financial year. Detail is as follows: (THOUSAND EUROS) 31/12/2017 31/12/2016 CHANGE Income tax payable 7,448 8,114 (666) 9,627 VAT payable 9,630 (3) Withholding tax and other 6,879 187 6,691 23,954 (482) Total due to tax authorities 24,436 25,006 National social insurance payable 2,079 22,927 Other 1,956 1,758 198 Total due to social securities 26,962 24,685 2,277 Employee accruals 52,965 10,789 63,754 Other payables 105,629 78,564 27,065 Accrued expenses and deferred income 7,865 8,495 (630) Total other payables 177,248 140,023 37,225 189,144 39,020 Other current liabilities 228,165 141 140

143 Due to tax authorities amounting to 23,954 thousand Euros, mainly refers to payables due to tax authorities for withholding tax on employees and professionals’ compensation. Due to social security authorities amounting to 26,962 thousand Euros, is related to both Company and employees’ contribution payables. Other payables at 31 December 2017 amounted to 177,248 thousand Euros and mainly include: • amounts due to employees that at the balance sheet date had not yet been paid; • liabilities related to share based payment transactions to be settled in cash to some Group companies. Following agreements signed in 2014 with some Directors of subsidiary companies, the liability at year end amounted to 1,364 thousand Euros while the cost in Profit and loss amounted to 551 thousand Euros. Such options can be exercised in financial year 2018 upon achievement of some economic-financial parameters. • remuneration of directors recognized as participation in the profits of the subsidiary companies. • advances received from customers exceeding the value of the work in progress amounting to 76,199 thousand Euros. Accrued Expenses and Deferred Income mainly relate to advance invoicing in relation to T&M Annual Financial Report 2017 consultancy activities to be delivered in the subsequent financial year. 142

144 NOTE 33 - SEGMENT REPORTING Segment reporting has been prepared in accordance with IFRS 8, determined as the area in which the services are executed. IOT TOTAL (THOUSAND % REGION 2 % REGION 3 % INCUBATOR % INTERSEGMENT 2017 % EUROS) REGION 1 618,305 100 162,064 100 124,720 100 1,692 100 (22,348) 884,434 100 Revenues 22,348 (523,849) (88.9) (110,908) (88.9) (4,642) (274.3) (144,138) (761,190) (86.1) (84.7) Operating costs Gross operating 94,456 15.3 17,925 11.1 13,812 11.1 (2,950) (174.3) - 123,244 13.9 income Amortization, depreciation and (1.5) (8,979) (1.5) (1,920) (1.2) (1,428) (1.1) (26) write-downs (12,353) (1.4) Other non-recurring - - 2 (216) (0.2) - 3,198 2,982 0.3 (costs)/income - Operating income 13.8 19,204 11.8 12,168 9.8 (2,975) (175.8) 113,873 12.9 85,476 Gain/(loss) on investments - - - - - - (585) (34.5) (585) (0.1) (2,900) Financial income/(loss) (2,246) (1.4) (685) (0.5) 1 (171.4) (2,978) (0.3) 2,853 12.5 88,329 14.3 16,958 10.5 11,483 9.2 (6,460) (381.8) 110,310 Income before taxes (3.6) Income taxes (23,666) (3.8) (4,719) (2.9) (3,052) (2.3) (329) (19.4) (31,765) 7.6 78,545 Net income 64,664 10.5 12,239 8.9 8,431 6.8 (6,789) (401.2) Consolidated Financial Statements as at 31 December 2017 IOT TOTAL (THOUSAND % REGION 1 % REGION 3 % INCUBATOR REGION 2 INTERSEGMENT 2016 % EUROS) % 564,678 100 131,592 100 98,273 100 2,667 100 Revenues 780,739 100 (16,472) Operating costs (84.6) (120,215) (91.4) (89,715) (91.3) (3,090) (115.9) 16,472 (674,322) (86.4) (477,774) Gross operating 86,905 15.4 11,377 8.6 8,558 8.7 income - 106,417 13.6 (423) (15.90) Amortization, depreciation and write-downs (8,618) (1.5) (1,595) (1.2) (1,431) (1.5) (24) (0.9) (11,669) (1.5) Other non-recurring - 1,251 1 2,612 3 983 - 4,846 0.6 (costs)/income - Operating income 14.1 10,764 8.2 9,739 9.9 (447) (16.8) 99,594 12.8 79,538 Gain/(loss) on investments - - - - - - (668) (25.1) (668) (0.1) (2,051) Financial income/(loss) (2,036) (1.5) 782 1 - (76.9) (1,520) (0.2) 1,785 Income before taxes 81,322 14.4 8,729 6.6 10,522 10.7 (3,167) (118.8) 97,405 12.5 (1.9) Income taxes (4.5) (3,250) (2.5) (1,851) (25,151) 553 21 (29,698) (3.8) 67,707 8.7 Net income 56,171 9.9 5,479 4.2 8,671 8.8 (2,614) (98.00) 143 142

145 (THOUSAND IOT TOTAL IOT TOTAL INCUBATOR REGION 3 2017 REGION 1 REGION 2 REGION 3 INTERSEG. INTERSEG. 2016 REGION 2 EUROS) INCUBATOR REGION 1 Current operating 37,405 59,377 (26,216) 496,459 380,286 44,726 312 730 (20.492) 442,655 56,568 assets 406,418 Current operating (41,968) (8,096) (260,999) 26,216 (328,589) (242,703) (29,082) (27,094) (3,864) 20.492 (282,251) liabilities (43,742) Net working 137,583 15,635 (7,784) - 167,870 capital (A) 15,644 10,312 (3,135) - 160,404 14,600 145,419 88,832 78,867 64,593 31,165 - 263,457 83,889 63,326 65,168 20,059 - 232,441 Non current assets Non-financial (27,033) liabilities long term - - (86,286) (49,388) (8,358) (7,646) - - (84,067) (26,587) (51,341) 37,490 52,280 56,236 31,165 - 177,171 34,501 36,293 57,522 20,059 - 148,374 Fixed capital (B) Net invested 308,779 capital (A+B) 66,881 71,870 23,381 - 345,041 172,084 51,937 67,834 16,924 - 182,910 Breakdown of employees by Region is as follows: 31/12/2017 31/12/2016 CHANGE REGION Region 1 4,769 4,507 262 Region 2 1,090 951 139 Annual Financial Report 2017 Region 3 549 36 585 IoT Incubator 12 8 4 Total 6,456 6,015 441 NOTE 34 - ADDITIONAL DISCLOSURES TO FINANCIAL INSTRUMENTS AND RISK MANAGEMENT POLICIES TYPES OF FINANCIAL RISKS AND CORRESPONDING HEDGING ACTIVITIES The Group has determined the guide lines in managing financial risks. In order to maximize costs and the resources Reply S.p.A. has centralized all of the groups risk management. Reply S.p.A. has the task of gathering all information concerning possible risk situations and define the corresponding hedge. As described in the section “Risk management”, the Group constantly monitors the financial risks to which it is exposed, in order to detect those risks in advance and take the necessary action to mitigate them. 144

146 The following section provides qualitative and quantitative disclosures on the effect that these risks may have upon the company. The quantitative data reported in the following do not have any value of a prospective nature, in particular the sensitivity analysis on market risks, is unable to reflect the complexity of the market and its related reaction which may result from every change which may occur. CREDIT RISK The maximum credit risk to which the Group is theoretically exposed at 31 December 2017 is represented by the carrying amounts stated for financial assets in the balance sheet. Balances which are objectively uncollectible either in part or for the whole amount are written down on a specific basis if they are individually significant. The amount of the write-down takes into account an estimate of the recoverable cash flows and the date of receipt, the costs of recovery and the fair value of any guarantees received. General provisions are made for receivables which are not written down on a specific basis, determined on the basis of historical experience. Refer to the note on trade receivables for a quantitate analysis. LIQUIDITY RISK Consolidated Financial Statements as at 31 December 2017 The Group is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time. The two main factors that determine the Group's liquidity situation are on one side the funds generated by or used in operating and investing activities and on the other the debt lending period and its renewal features or the liquidity of the funds employed and market terms and conditions. As described in the Risk management section, the Group has adopted a series of policies and procedures whose purpose is to optimize the management of funds and to reduce the liquidity risk, as follows: • centralizing the management of receipts and payments, where it may be economical in the context of the local civil, currency and fiscal regulations of the countries in which the company is present; • maintaining an adequate level of available liquidity; • monitoring future liquidity on the basis of business planning. 145 144

147 Management believes that the funds and credit lines currently available, in addition to those funds that will be generated from operating and funding activities, will enable the Group to satisfy its requirements resulting from its investing activities and its working capital needs and to fulfil its obligations to repay its debts at their natural due date. CURRENCY RISK The Group has a limited exposure to exchange rate risk, therefore the company does not deem necessary hedging exchange rates. INTEREST RATE RISK Reply S.p.A. makes use of external funds obtained in the form of financing and invest in monetary and financial market instruments. Changes in market interest rates can affect the cost of the various forms of financing, including the sale of receivables, or the return on investments, and the employment of funds, causing an impact on the level of net financial expenses incurred by the company. To mitigate such risks, the Group, when necessary, has used derivative financial instruments designated as “cash flow hedges”. Annual Financial Report 2017 SENSITIVITY ANALYSIS In assessing the potential impact of changes in interest rates, the company separates fixed rate financial instruments (for which the impact is assessed in terms of fair value) from floating rate financial instruments (for which the impact is assessed in terms of cash flows). Floating rate financial instruments include principally cash and cash equivalents and part of debt. A hypothetical, unfavorable and instantaneous change of 50 basis points in short-term interest rates at 31 December 2017 applied to floating rate financial assets and liabilities, operations for the sale of receivables and derivatives financial instruments, would have caused increased net expenses before taxes, on an annual basis, of approximately 259 thousand Euros. This analysis is based on the assumption that there is a general and instantaneous change of 50 basis points in interest rates across homogeneous categories. A homogeneous category is defined on the basis of the currency in which the financial assets and liabilities are denominated. 146

148 FAIR VALUE ASSESSMENT HIERARCHY LEVELS The IFRS 13 establishes a fair value hierarchy which classifies the input of evaluation techniques on three levels adopted for the measurement of fair value. Fair value hierarchy attributes maximum priority to prices quoted (not rectified) in active markets for identical assets and liabilities (Level 1 data) and the non-observable minimum input priority (Level 3 data). In some cases, the data used to assess the fair value of assets or liabilities could be classified on three different levels of the fair value hierarchy. In such cases, the evaluation of fair value is wholly classified on the same level of the hierarchy in which input on the lowest level is classified, taking account its importance for the assessment. The levels used in the hierarchy are: • Level 1 inputs are prices quoted (not rectified) in markets active for identical assets and liabilities which the entity can access on the date of assessment; • Level 2 inputs are variable and different from the prices quoted included in Level 1 observable directly or indirectly for assets or liabilities; Level 3 inputs are variable and not observable for assets or liabilities. • The following table presents the assets and liabilities which were assessed at fair value on 31 December 2017, according to the fair value hierarchical assessment level: (THOUSAND EUROS) NOTE LEVEL 1 LEVEL 2 LEVEL 3 Investments 18 - - 29,201 Consolidated Financial Statements as at 31 December 2017 - Convertible loans 19 - 1,853 Financial securities 19 - - 2,042 2,042 Total financial assets 31,054 - Derivative financial liabilities (IRS) 34 Liabilities to minority shareholders and earn out 26 - - 22,275 Other financial liabilities - - 1,364 32 Total financial liabilities - 34 23,639 The valuation of investments in start-up within the Internet of Things (IoT) business, through the acquisition of equity investments and through the issuance of convertible loans, is based on data not directly observable on active stock markets, and therefore falls under the fair value hierarchical Level 3. 147 146

149 The item Financial securities is related to securities listed on the active stock markets and therefore falls under the fair value hierarchical level 1. The fair value of Liabilities to minority shareholders and earn out was determined by Group management on the basis of the sales purchase agreements for the acquisition of the company’s shares and on economic parameters based on budgets and plans of the purchased company. As the parameters are not observable on stock markets (directly or indirectly) these liabilities fall under the hierarchy profile in level 3. Cash settled share-based payments of companies belonging to the Group included within the caption Other financial liabilities, are valued on the basis of profitability parameters. Since these parameters are not observable market parameters (directly or indirectly) such debts fall under the hierarchy of Level 3. As at 31 December 2017, there have not been any transfers within the hierarchy levels. NOTE 35 - TRANSACTIONS WITH RELATED PARTIES Annual Financial Report 2017 In accordance with IAS 24 Related parties are Group companies and persons that are able to exercise control, joint control or have significant influence on the Group and on its subsidiaries. Transactions carried out by the group companies with related parties that as of the reporting date are considered ordinary business and are carried out at normal market conditions. The main economic and financial transactions with related parties is summarized below. (THOUSAND EUROS) 31/12/2017 31/12/2016 FINANCIAL TRANSACTIONS NATURE OF TRANSACTION Trade receivables 28 Receivables from professional services - Trade payables and other 3 2 Payables for professional services and official rentals offices Other payables 4,072 2,965 Payables for emoluments to Directors and Managers with strategic responsibilities and Board of Statutory Auditors 148

150 2016 NATURE OF TRANSACTION 2017 ECONOMIC TRANSACTIONS Revenues from professional services - - Receivables from professional services 1,164 769 Service contracts relating to office rental, Services from Parent company and related parties and office administration Personnel 7,819 6,850 Emoluments to Directors and Key Management with strategic responsibilities 122 122 Services and other costs Emoluments to Statutory Auditors REPLY GROUP MAIN ECONOMIC AND FINANCIAL TRANSACTIONS In accordance with IAS 24, emoluments to Directors, Statutory Auditors and Key Management are also included in transactions with related parties. In accordance with Consob Resolution no. 15519 of 27 July 2006 and Consob communication no. DEM/6064293 of 28 July 2006 the financial statements present the Consolidated Income statement and Balance Sheet showing transactions with related parties separately, together with the percentage incidence with respect to each account caption. Pursuant to Art. 150, paragraph 1 of the Italian Legislative Decree n. 58 of 24 February 1998, no transactions have been carried out by the members of the Board of Directors that might be in potential conflict of interests with the Company. Consolidated Financial Statements as at 31 December 2017 NOTE 36 - EMOLUMENTS TO DIRECTORS, STATUTORY AUDITORS AND KEY MANAGEMENT The fees of the Directors and statutory Auditors of Reply S.p.A. for carrying out their respective function, including those in other subsidiary companies, are as follows: (THOUSAND EUROS) 2017 2016 Executive Directors 5,877 5,224 Statutory auditors 122 122 5,999 5,346 Total Emoluments to Key management amounted to approximately 1,942 thousand Euros (1,626 thousand Euros at 31 December 2016). 149 148

151 NOTE 37 - GUARANTEES, COMMITMENTS AND CONTINGENT LIABILITIES GUARANTEES Guarantees and commitments where existing, have been disclosed at the item to which they refer. COMMITMENTS It is reported that: • The Domination Agreement contract undersigned in 2010 between Reply Deutschland AG, dominated company, and Reply S.p.A, dominating company, ceased to exist from the date of legal efficacy of the merger for incorporation of Reply Deutschland AG in Reply S.p.A and with this, the obligations taken on by Reply. It is reported that the judgment of the qualified German Court is still pending for deciding on the suitability of the strike value of the acquisition option of shares on request of the minority shareholders of Reply Deutschland AG at a pre-determined price (8.19 euros). Currently it is not possible to foresee the outcome of the said judgment but Management believes that any future economic-financial effects on the Group are not significant. Annual Financial Report 2017 • with regards the merger operation for the incorporation of Reply Deutschland AG in Reply S.p.A. the assessment procedures foreseen in the measures of Article 122 of Umwandlungsgesetz find application – German law on extraordinary operations – with reference to the exchange ratio and the corresponding amount in cash. Within three months from the registration of the merger in the Turin Companies Register, each minority shareholder was able to present a petition for the purpose of commencing, in compliance with German law, before a Judge qualified in Germany – who shall have exclusive jurisdiction – the assessment inherent in the Share Swap ratio and the corresponding amount in cash. All shareholders of Reply Deutschland will have the right to benefit from a possible increase in the exchange ratio determined by the Judge or on the basis of an agreement between the parties, and that is to say independently of their participation in the evaluation procedure. On the contrary, from the possible increase of the corresponding amount in cash determined by the Judge or on the basis of an agreement between the parties only the shareholders who verbally annotated their disagreement in the general meeting in respect of conditions of the law can benefit. 150

152 In the case where evaluation procedures include a modification of the exchange ratio, every single difference shall be regulated in cash. At present, some minority shareholders have commenced the aforementioned procedures. With specific reference to the request to obtain the corresponding amount in cash, the time limit for exerting such an authority shall expire starting from the shortest time limit between the day following it expiring from the two months subsequent to the final ruling of the qualified court or the publication of a binding agreement between the parties. During the said period, the former Reply Deutschland shareholders can freely decide on whether to obtain the corresponding amount in cash or whether to remain shareholders of Reply. CONTINGENT LIABILITIES As an international company, the Group is exposed to numerous legal risks, particularly in the area of product liability, environmental risks and tax matters. The outcome of any current or future proceedings cannot be predicted with certainty. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully covered, by insurers’ compensation payments and could affect the Group financial position and results. Instead, when it is probable that an overflow of resources embodying economic benefits will be required to settle obligations and this amount can be reliably estimated, the Group recognizes specific provision for this purpose. Consolidated Financial Statements as at 31 December 2017 NOTE 38 - EVENTS SUBSEQUENT TO 31 DECEMBER 2017 No significant events have occurred since year ended December 31, 2017. NOTE 39 - APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS AND AUTHORIZATION TO PUBLISH The Consolidated financial statements at 31 December 2017 were approved by the Board of Directors on March 13, 2018 which authorized the publication within the terms of law. 151 150

153 ANNEXED TABLES CONSOLIDATED INCOME STATEMENT PREPARED PURSUANT TO CONSOB RESOLUTION NO. 15519 OF 27 JULY 2006 OF WHICH OF WHICH RELATED RELATED (THOUSAND EUROS) % 2016 PARTIES % 2017 PARTIES 884,434 - - 780,739 - - Revenues 17,672 - - 19,579 - - Other income (15,269) - - - Purchases - (16,969) (431,555) 1.8% (379,713) (6,850) 1.8% Personnel (7,819) (329,924) (769) Services and other costs (296,650) (1,286) 0.4% 0.2% Amortization, depreciation and write downs (12,353) - - (11,669) - - Other operating and non recurring (cost)/income 869 - - 4,277 - - Operating income 113,873 - 99,594 - - - (Loss)/gain on investments - - (668) - - (585) Financial income/(expenses) (2,978) - - (1,520) - - Income before taxes 110,310 - - 97,405 - - Annual Financial Report 2017 Income taxes (31,765) - (29,698) - - - Net income - - 67,707 - - 78,545 Non controlling interest (674) - - (163) - - Group net result 77,871 - - 67,544 - - 152

154 CONSOLIDATED STATEMENT OF FINANCIAL POSITION PREPARED PURSUANT TO CONSOB RESOLUTION NO. 15519 OF 27 JULY 2006 OF WHICH OF WHICH RELATED RELATED PARTIES (THOUSAND EUROS) 31/12/2016 PARTIES % 31/12/2017 % 21,552 - - 17,686 - - Tangible assets 166,132 - - 157,429 - - Goodwill 15,525 - 17,016 - - - Other intangible assets 29,201 - - 14,110 - - Equity investments 6,385 - - 9,739 - - Other financial assets 24,661 16,466 - - Deferred tax assets - - Non current assets 263,457 - 232,445 - - - 93,651 58,651 - Work in progress - - - Trade receivables - - 339,194 28 0.0% 357,082 Other current assets 45,726 - - 44,810 - - Financial assets - - 2,925 - - 2,042 Cash and cash equivalents 109,195 - - 92,550 - - Current assets 607,697 - - 538,130 - - - TOTAL ASSETS 871,154 - - 770,575 - - - Share capital 4,863 - - 4,863 Other reserves 318,670 - 264,610 - - - 77,871 - 67,544 - - Group net income - 401,404 - - Group Shareholder’s equity - - 337,017 Non controlling interest 668 - - 520 - - Consolidated Financial Statements as at 31 December 2017 SHAREHOLDER’S EQUITY 402,072 - 337,537 - - - Payables to minority shareholders and Earn-out - - 24,558 - - 22,275 14,102 - - Financial liabilities - - 31,051 Employee benefits 31,838 - - 30,401 - - Deferred tax liabilities 18,539 - - 18,563 - - Provisions 13,635 - 10,545 - - - 100,388 - 115,118 - - Non current liabilities - 40,105 - - Financial liabilities - - 35,670 Trade payables 100,150 3 0,0% 92,735 2 0.0% Other current liabilities 228,165 4.072 1,8% 189,144 2,965 1.6% Provisions - - 371 - - 274 Current liabilities 368,693 - - 317,921 - - Total liabilities 469,082 - - 433,038 - - TOTAL SHAREHOLDER’S - - EQUITY AND LIABILITES 871,154 - - 770,575 153 152

155 REPLY LIST OF INVESTMENTS AT 31 DECEMBER 2017 GROUP INTEREST HEADQUARTERS COMPANY NAME Parent company Reply S.p.A. Turin – Corso Francia, 110 - Italy Companies consolidates on a line-by-line basis (**) Minden, Germany 51.00% 4brands Reply GmbH & CO. KG. Air Reply S.r.l. (*) Turin, Italy 85.00% Turin, Italy 100.00% Arlanis Reply S.r.l. Arlanis Reply AG Potsdam, Germany 100.00% Turin, Italy Aktive Reply S.r.l. 100.00% Atlas Reply S.r.l. Turin, Italy 100.00% (***) 100.00% London, United Kingdom Avantage Reply Ltd. Avantage Reply (Belgium) Sprl Brussels, Belgium 100.00% Avantage Reply (Luxembourg) Sarl Itzig, Luxembourg 100.00% Annual Financial Report 2017 Amsterdam, Netherland 100.00% Avantage Reply (Netherlands) BV (***) 100.00% London, United Kingdom Avvio Reply Ltd Blue Reply S.r.l. 100.00% Turin, Italy Guetersloh, Germany Blue Reply GmbH 100.00% Bridge Reply S.r.l. Turin, Italy 60.00% Turin, Italy 100.00% Business Reply S.r.l. Breed Reply Ltd 100.00% London, United Kingdom Breed Reply Investment Ltd London, United Kingdom 80.00% Cluster Reply S.r.l. Turin, Italy 100.00% (**) 100.00% Munich, Germany Cluster Reply GmbH & CO. KG (*) San Paolo, Brazil 76.00% Cluster Reply Informatica LTDA. Cluster Reply Roma S.r.l. Turin, Italy 100.00% (*) 100.00% Munich, Germany ComSysto Reply GmbH Concept Reply GmbH Munich, Germany 100.00% Consorzio Reply Energy Turin, Italy 100.00% Consorzio Reply Public Sector Turin, Italy 100.00% 100.00% Data Reply S.r.l. Turin, Italy 154

156 (*) Data Reply GmbH 70.00% Munich, Germany Turin, Italy Discovery Reply S.r.l. 100.00% e*finance consulting Reply S.r.l. Turin, Italy 100.00% Turin, Italy 100.00% Ekip Reply S.r.l. Turin, Italy 100.00% EOS Reply S.r.l. First Development Hub, LLC Minsk, Belarus 100.00% Forge Reply S.r.l. Turin, Italy 100.00% (***) 80.00% London, United Kingdom France Reply Ltd Turin, Italy 100.00% Go Reply S.r.l. Healthy Reply GmbH Düsseldorf, Germany 100.00% Hermes Reply S.r.l. Turin, Italy 100.00% Hermes Reply Polska zo.o Katowice, Poland 100.00% Industrie Reply GmbH (formerly Logistics Reply GmbH) Munich, Germany 100.00% InEssence Reply GmbH Düsseldorf, Germany 100.00% IrisCube Reply S.p.A. Turin, Italy 100.00% 100.00% Leadvise Reply GmbH Darmstadt, Germany Lem Reply S.r.l. Turin, Italy 100.00% Like Reply S.r.l. 100.00% Turin, Italy Live Reply GmbH Düsseldorf, Germany 100.00% Logistics Reply S.r.l. Turin, Italy 100.00% Consolidated Financial Statements as at 31 December 2017 (***) London, United Kingdom 100.00% Lynx Recruiting Ltd Macros Reply GmbH Munich, Germany 100.00% Guetersloh, Germany 100.00% Open Reply GmbH Open Reply S.r.l. Turin, Italy 100.00% Pay Reply S.r.l Turin, Italy 100.00% Portaltech Reply Ltd. London, United Kingdom 100.00% Turin, Italy 100.00% Portaltech Reply S.r.l. Portaltech Reply GmbH 100.00% Guetersloh, Germany Power Reply S.r.l. Turin, Italy 100.00% (**) Munich, Germany 100.00% Power Reply GmbH & CO. KG Profondo Reply GmbH Guetersloh, Germany 100.00% Protocube Reply S.r.l. Turin, Italy 55.00% Reply Consulting S.r.l. Turin, Italy 100.00% Guetersloh, Germany 100.00% Reply AG 155 154

157 Reply do Brasil Sistemas de Informatica Ltda Belo Horizonte, Brazil 100.00% Michigan, USA Reply Inc. 100.00% Reply Ltd. London, United Kingdom 100.00% Reply Belgium SA Mont Saint Guibert, Netherland 100.00% Turin, Italy Reply Digital Experience S.r.l. (formerly Bitmama S.r.l.) 100.00% Reply France Sarl Paris, France 100.00% Reply Luxembourg Sarl Sandweiler, Luxembourg 100.00% Reply NL Ltd. (***) London, United Kingdom 100.00% Reply Services S.r.l. Turin, Italy 100.00% Reply Verwaltung GmbH 100.00% Guetersloh, Germany Ringmaster S.r.l. Turin, Italy 50.00% Risk Reply Ltd (***) London, United Kingdom 80.00% Riverland Reply GmbH Munich, Germany 100.00% Santer Reply S.p.A. Milan, Italy 100.00% Security Reply S.r.l. Turin, Italy 100.00% Sense Reply S.r.l. Turin, Italy 90.00% London, United Kingdom Solidsoft Reply Ltd. 100.00% Annual Financial Report 2017 Spark Reply S.r.l. 85.00% Turin, Italy Germany Spark Reply GmbH 100.00% Square Reply S.r.l. Turin, Italy 100.00% Turin, Italy 95.00% Storm Reply S.r.l. (*) Storm Reply GmbH 100.00% Guetersloh, Germany Syskoplan Reply S.r.l. Turin, Italy 100.00% Reply GmbH (formerly Syskoplan Reply GmbH) Zurich, Switzerland 100.00% Syskoplan Reply GmbH & CO. KG (**) Guetersloh, Germany 100.00% Sytel Reply Roma S.r.l. Turin, Italy 100.00% Turin, Italy 100.00% Sytel Reply S.r.l. Target Reply S.r.l. 100.00% Turin, Italy TamTamy Reply S.r.l. Turin, Italy 100.00% Technology Reply S.r.l. Turin, Italy 100.00% Technology Reply Roma S.r.l. Turin, Italy 100.00% Technology Reply S.r.l. Bucharest, Romania 100.00% TD China (TD Marketing Consultants, Beijing Co. Ltd) China 100.00% 100.00% Tool Reply GmbH Guetersloh, Germany 156

158 Triplesense Reply GmbH 100.00% Frankfurt, Germany 98.00% Twice Reply S.r.l. Turin, Italy Munich, Germany 100.00% Twice Reply GmbH TD Reply GmbH (formerly Trommsdorf+drüner, innovation+marketing consultants GmbH) Berlin, Germany 100.00% (***) London, United Kingdom 100.00% WM360 Reply Ltd Whitehall Reply S.r.l. Turin, Italy 100.00% (*) Turin, Italy 89.20% Xister Reply S.r.l. Xuccess Reply GmbH 100.00% Munich, Germany Companies carried at fair value England Amiko Digital Health Limited 22.70% England 5.90% Appy Parking England 3.60% Callsign Spain 10.90% Canard Drones Cocoon Alarm Limited England 23.60% Connecterra Holdings Ltd Belgium 19.50% enModus Ltd 19.20% England Food Marble England 13.60% Inova Design Solutions Ltd England 33.70% Iotic Labs Limited England 17.10% Consolidated Financial Statements as at 31 December 2017 Kokoon Technology Ltd England 38.20% England RazorSecure Ltd 21.10% England 14.30% Senseye Ltd Sentryo SAS 13.30% France We Predict Ltd England 16.60% Wearable Technologies Ltd England 14.80% Zeetta Networks Limited 29.30% England Companies carried at cost Sprint Reply S.r.l. Turin, Italy 100.00% (*) For these companies an option exists for the acquisition of their minority shares; the exercise of such option in future reporting periods is subject to the achievement of profitability parameters. The accounting reflects Management's best estimate as at the closing date of the 2017 Annual Financial Report. (**) These companies are exempt from filing statutory financial statements in Germany under the German law § 264b HGB. (***) As permitted under English law, these subsidiary companies have claimed audit exemption under Companies Act 2006. 157 156

159 INFORMATION IN ACCORDANCE WITH ARTICLE 149-DUODECIES ISSUED BY CONSOB The following table, prepared in accordance with Art. 149-duodeciesof Consob’s Regulations for Issuers reports the amount of fees charged in 2017 for the audit and audit related services provided by the Independent Auditors and by entities that are part of the Independent Auditors’ network. (THOUSAND EUROS) SERVICE PROVIDER GROUP ENTITY FEE 2017 EY S.p.A. Parent company - Reply S.p.A. 59 Audit Subsidiaries 213 EY S.p.A. Subsidiaries 195 Ernst & Young GmbH Ernst & Young LLP Subsidiaries 119 Ernst & Young Auditores Independentes S.S. 29 Subsidiaries Total 615 (1) 1 Audit related services EY S.p.A. Parent company - Reply S.p.A. (2 ) 55 EY S.p.A. Parent company - Reply S.p.A. (1) Annual Financial Report 2017 21 EY S.p.A. Subsidiaries Total 77 Other services EY S.p.A. Parent company - Reply S.p.A.(3) 9 Total 9 Total 701 (1) Signed tax forms (Modello Unico, IRAP and Form 770) (2) DNF (3) GAAP Analysis 158

160 ATTESTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS in accordance with article 154-bis of Legislative Decree 58/98 The undersigned, Mario Rizzante, in his capacity as Chairman and Chief Executive Officer, and Giuseppe Veneziano, Director responsible for drawing up Reply S.p.A.’s financial statements, hereby attest, pursuant to the provisions of Article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of 24 February 1998: • suitability with respect to the Company’s structure and • the effective application of the administration and accounting procedures applied in the preparation of the Consolidated financial statements for the year ended 2017. The assessment of the adequacy of administrative and accounting procedures used for the preparation of the statutory financial statements at 31 December 2017 was carried out on the basis of regulations and methodologies defined by Reply prevalently coherent with the Internal Control – Integrated Framework model issued by the Committee of Sponsoring Organizations of the Treadway Commission, an internationally-accepted reference framework. The undersigned also certify that: 3.1 the Consolidated Financial Statement Consolidated Financial Statements as at 31 December 2017 have been prepared in accordance with International Financial Reporting Standards, • as endorsed by the European Union pursuant to Regulation (EC) No. 1606/2002 of the European Parliament and Council, dated 19 July 2002 as well as the measures issued to implement Article 9 of Legislative Decree no. 38/2005; • correspond to the amounts shown in the Company’s accounts, books and records; and • provide a fair and correct representation of the financial conditions, results of operations and cash flows of the Company and its consolidated subsidiaries. 3.2 the report on operations includes a reliable operating and financial review of the Company and of the Group as well as a description of the main risks and uncertainties to which they are exposed. Turin, 13 March 2018 Chairman Director responsible and Chief Executive Officer of drawing up the accounting documents Giuseppe Veneziano Mario Rizzante 159 158

161 OF THE S TATU TORY PORT RE AUDITORS TO THE SH AR EHOLDER S’ M EETING elated to th e fi nan cial consolidated financial r statements as at 31 D ecember 2017 Dear Shareholders, The Board of Directors is submitting to you the Consolidated Financial Statements as at 31 December 2017 prepared in conformity with the International Financial Reporting Standards (“IFRS”), issued by the International Accounting Standards Board (“IASB”), which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Changes in Shareholders’ Equity, Consolidated Cash Flow Statement, and the Notes to the Financial Statements. The Consolidated Financial Statements as at 31 December 2017 present a consolidated Shareholders’ equity amounting to 401,404 thousand Euros, including a consolidated profit of 77,871 thousand Euros. The Report on Operations adequately illustrates the financial, economic and earnings position, nancial year the trend, at a consolidated level, of Reply S.p.A. and its subsidiaries during the fi and after its end, as well as the sub-division of the volumes of assets of the principal business Annual Financial Report 2017 lines and the consolidated results. The consolidation area is determined in such context, which included as at 31 December 2017 in addition to the Parent Company, 100 companies and 2 consortiums, all of which consolidated on a line-by-line basis. The controls made by the Independent Auditor EY S.p.A. concluded that the amounts reported 2017 are supported by the Parent in the Consolidated Financial Statements as at 31 December Company’s accounting records, in the fi nancial statements for the reporting period of the subsidiaries, and in the information that they have formally communicated. Such financial statements submitted by the subsidiaries to the Parent Company, for purposes of the preparation of the Consolidated Financial Statements, prepared by the respective competent corporate bodies, have been reviewed by the bodies and/or persons in charge of the audit of the individual companies, according to their respective legal systems, and by the Independent Auditor in the context of the procedures followed for the audit of the Consolidated Financial Statements. The Board of Statutory Auditors did not audit the financial statements of such companies. EY S.p.A., the company entrusted with the audit of Reply’s Consolidated Financial Statements, has issued its report on today’s date, in which it confirms that, in its opinion: the Consolidated Financial Statements of the Reply Group as at 31 December 2017 conform to • 160

162 the International Financial Reporting Standards (IFRS) endorsed by the European Union, as well as to the measures issued to implement Article 9 of Legislative Decree 38/2005 and, therefore, they were prepared with clarity and represent a true and fair view of the financial and economic position, the economic result and the cash flows of the Reply Group as at such date, the Report on Operations and some of the information pursuant to Article 123-bis, paragraph • 4 of Legislative Decree 58/1998 presented in the Report on Corporate Governance and Ownership Structure are consistent with the Consolidated Financial Statements and are prepared in accordance to the law. With regard to the key aspects of the audit, EY S.p.A. has identified the valuation of the goodwill and the valuation of payables to minority shareholders and corporate transactions. On the basis of the audits and controls carried out, we certify that: • The consolidation area has been determined in correct manner; • The consolidation procedures adopted conform to legal requirements and have been properly applied; The review of the report on Operations demonstrated that it is consistent with the • consolidated Financial statements; • All the information used for the consolidation refers to the entire administrative period represented by the financial year 2017; • The measurement criteria are homogeneous with those used for the previous reporting period; • Changes in the consolidation compared to 31 December 2016 consist of the inclusion of the following companies: › Spark Reply S.r.l.; › Technology Reply Roma S.r.l.; › comSysto GmbH Whereas the following companies were incorporated under WM360 Ltd.: Consolidated Financial Statements as at 31 December 2017 › WM360 Consultancy Services Ltd; › WM360 Crashpad Ltd; WM Reply Ltd; › WM360 Resocurcing Ltd; › › Triplesense Reply S.r.l. was incorporated under Reply Digital Experience S.r.l. › Xister USA Corporation (liquidated in 2017). Finally, we remind you that our three-year term of office has expired and in thanking you for the trust you have placed in us, we invite you to take the necessary measures. Turin, 29 March 2018 THE STATUTORY AUDITORS (Prof. Cristiano Antonelli) (Dott.ssa Ada Alessandra Garzino Demo) (Dott. Paolo Claretta Assandri) 161 160

163 INDEPENDENT AUDITORS' REPORT Annual Financial Report 2017 162

164 Consolidated Financial Statements as at 31 December 2017 162 163

165 Annual Financial Report 2017 164

166 Consolidated Financial Statements as at 31 December 2017 164 165

167 Annual Financial Report 2017 166

168 Consolidated Financial Statements as at 31 December 2017 166 167

169 FINANCIAL STATEMENTS AS AT 31 DECEMBER 2017

170

171 INCOME STATEMENT (*) NOTE 2017 2016 (EUROS) 378,788,753 367,952,177 Revenue 5 Other income 6 7,999,405 10,201,787 Purchases 7 (19,198,916) (16,293,477) 8 Personnel (19,821,559) (20,176,553) Services and other costs (342,420,618) (338,791,654) 9 10 Amortization, depreciation and write-downs (731,885) (973,395) Other operating and non recurring income/(expenses) 11 (2,999,737) 1,780,821 Operating income 3,576,315 1,738,834 Gain/(loss) on equity investments 12 18,000,006 95,910,635 13 2,971,575 Financial income/(expenses) (2,900,297) Income before taxes 102,458,525 16,838,543 Income taxes 14 (390,815) 424,935 Net income 102,067,710 17,263,478 Net and diluted income per share 15 2.73 0.46 (*) Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Income Statement are reported in the annexed Tables and further described in Note 34. Annual Financial Report 2017 170

172 STATEMENT OF COMPREHENSIVE INCOME (EUROS) NOTE 2017 2016 Profit of the period (A) 102,067,710 17,263,478 Other comprehensive income that will not be reclassified subsequently to profit or loss Actuarial gains/(losses) from employee benefit plans 26 2,503 (14,351) Total Other comprehensive income that will not be reclassified 2,503 subsequently to profit or loss, net of tax (B1): (14,351) Other comprehensive income that may be reclassified s ubsequently to profit or loss: (62,261) Gains/(losses) on cash flow hedges 26 28,013 Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2): 28,013 (62,261) Total other comprehensive income, net of tax (B) = (B1) + (B2): 30,516 (76,612) 17,186,867 102,098,226 Total comprehensive income (A)+(B) Financial Statement as at 31 December 2017 171 170

173 STATEMENT OF FINANCIAL POSITION (*) 31/12/2017 31/12/2016 (EUROS) NOTE 16 477,824 722,796 Tangible assets Goodwill 17 86,765 86,765 2,096,599 2,118,907 Other intangible assets 18 143,259,963 19 Equity investments 149,356,195 80,407,079 67,399,932 20 Other financial assets 21 4,634,202 3,017,480 Deferred tax assets 230,962,432 222,702,075 Non current assets 22 304,557,549 Trade receivables 372,933,805 23 21,330,897 20,042,881 Other receivables and current assets 24 63,168,559 Financial assets 82,843,389 25 63,610,241 50,108,291 Cash and cash equivalents 437,877,280 Current assets 540,718,332 771,680,764 TOTAL ASSETS 660,579,355 Share Capital 4,863,486 4,863,486 Other reserves 185,179,297 178,614,766 Net income 102,067,710 17,263,478 SHAREHOLDERS' EQUITY 26 292,110,492 200,741,730 Due to minority shareholders 27 2,364,114 2,364,114 Financial liabilities 28 13,071,428 29,338,628 Annual Financial Report 2017 Employee benefits 29 436,717 474,932 30 1,121,147 Deferred tax liabilities 1,214,430 33 9,448,000 6,821,300 Provisions Non current liabilities 26,572,905 40,081,906 Financial liabilities 28 80,924,097 97,952,769 Trade payables 31 349,998,450 296,231,941 Other current liabilities 32 24,371,010 16,288,820 33 Provisions 5,786,000 1,200,000 Current liabilities 452,997,366 419,755,719 TOTAL LIABILITIES 479,570,271 459,837,625 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 771,680,764 660,579,355 (*) Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Statement of Financial Position are reported in the annexed Tables and further described in Note 34. 172

174 STATEMENT OF CHANGES IN EQUITY CASH FLOW RESERVE FOR SHARE TREASURY CAPITAL EARNING HEDGE ACTUARIAL (EUROS) CAPITAL SHARES RESERVES RESERVES RESERVE GAINS/(LOSSES) TOTAL Balance at 1 January 2016 (24,502) 79,183,600 108,878,593 - 5,536 192,906,714 4,863,486 Dividends distributed - - - (9,351,850) - - (9,351,850) Total profit - - - 17,263,478 (62,261) (14,351) 17,186,867 Balance at (62,261) (8,815) 31 December 2016 4,863,486 (24,502) 79,183,600 116,790,222 200,741,730 CASH FLOW RESERVE FOR SHARE TREASURY CAPITAL EARNING HEDGE ACTUARIAL (EUROS) CAPITAL SHARES RESERVES RESERVES RESERVE GAINS/(LOSSES) TOTAL Balance at 1 January 2017 79,183,600 4,863,486 (24,502) 116,790,222 (62,261) (8,815) 200,741,730 Dividends distributed - - (10,729,463) - - (10,729,463) - Total profit - - - 102,067,710 28,013 2,503 102,098,226 Balance at 292,110,492 (6,312) 31 December 2017 4,863,486 (24,502) 79,183,600 208,128,469 (34,248) Financial Statement as at 31 December 2017 173 172

175 STATEMENT OF CASH FLOWS (EUROS) 2017 2016 102,067,710 17,263,478 Result (424,935) Income taxes 390,815 973,395 Amortization and depreciation 731,885 Other non-monetary expenses/(income) 6,119,235 (3,958,627) Change in trade receivables (44,701,320) (68,376,256) Change in trade payables 53,766,509 43,889,462 Change in other assets and liabilities (3,890,654) 20,729,321 Income tax paid 424,935 (1,756,577) Interest paid (567,826) (712,037) Net cash flows from operating activities (A) 90,907,864 31,060,651 (706,115) (1,310,015) Payments for tangible and intangible assets Payments for financial assets (15,925,279) (12,268,806) Payments for the acquisition of subsidiaries net of cash acquired (20,500) (13,906,512) Net cash flows from investment activities (B) (12,995,420) (31,141,806) Dividends paid (10,729,463) (9,351,850) Financing received - 15,500,000 Payment of instalments (18,767,200) (10,641,506) Net cash flows from financing activities (C) (4,493,356) (29,496,663) Net cash flows (D) = (A+B+C) (4,574,511) 48,415,781 Cash and cash equivalents at the beginning of period 33,363,577 37,938,088 Annual Financial Report 2017 81,779,357 Cash and cash equivalents at period end 33,363,577 Total change in cash and cash equivalents (D) 48,415,780 (4,574,511) 2016 DETAIL OF CASH AND CASH EQUIVALENTS 2017 2016 (EUROS) Cash and cash equivalents at beginning of period: 33,363,577 37,938,088 Cash and cash equivalents 50,108,291 55,745,286 Other - 743,560 Transaction accounts - surplus 62,430,218 57,778,523 (64,428,008) (41,140,870) Transaction accounts - overdraft Bank overdrafts (35,188,412) (14,746,924) Cash and cash equivalents at the end of the year: 81,779,357 33,363,577 Cash and cash equivalents 63,610,242 50,108,291 Other - (19,164) Transaction accounts - surplus 82,843,389 62,449,382 Transaction accounts - overdraft (43,139,346) (64,428,008) (14,746,924) Bank overdrafts (21,534,927) 174

176 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 General information General information NOTE 2 Accounting principles Financial risk management NOTE 3 NOTE 4 Other NOTE 5 Revenues Income statement NOTE 6 Other revenues NOTE 7 Purchases NOTE 8 Personnel NOTE 9 Services and other costs NOTE 10 Amortization, depreciation and write-downs NOTE 11 Other operating and non recurring income/(expenses) NOTE 12 Result of equity investments NOTE 13 Financial income/(expenses) Income taxes NOTE 14 NOTE 15 Earnings per share Financial positionAssets NOTE 16 Tangible assets Goodwill NOTE 17 NOTE 18 Other intangible assets NOTE 19 Equity Investments NOTE 20 Non current financial assets Deferred tax assets NOTE 21 NOTE 22 Trade receivables Other receivables and current assets NOTE 23 NOTE 24 Current financial assets Financial Statement as at 31 December 2017 NOTE 25 Cash and cash equivalents Financial position- Liabilities and shareholders’ equity NOTE 26 Shareholders’ equity NOTE 27 Payables to minority shareholders NOTE 28 Financial liabilities NOTE 29 Employee benefits NOTE 30 Deferred tax liabilities Trade payables NOTE 31 NOTE 32 Other current liabilities NOTE 33 Provisions Other information Transactions with related parties NOTE 34 NOTE 35 Additional disclosures to financial instruments and risk management policies NOTE 36 Significant non-recurring transactions NOTE 37 Transactions resulting from unusual and/or abnormal operations Guarantees, commitments and contingent liabilities NOTE 38 Other information NOTE 39 Emoluments to Directors, Statutory Auditors and Directors with Key responsibilities NOTE 40 Events subsequent to 31 December 2017 NOTE 41 Approval of the financial statements and authorization for publication 175 174

177 NOTE 1 - GENERAL INFORMATION Reply [MTA, STAR: REY] is specialized in the implementation of solutions based on new communication and digital media. Reply, consisting of a network of specialized companies, assists important European industries belonging to Telco & Media, Manufacturing & Retail, Bank & Insurances and Public Administration sectors, in defining and developing new business models utilizing Big Data, Cloud Computing, CRM, Mobile, Social Media and Internet of Things paradigms. Reply’s services include: consulting, system integration, application management and Business Process Outsourcing. (www.reply.com) The company mainly carries out the operational coordination and technical management of the group and also the administration, financial assistance and some purchase and marketing activities. Reply also manages business relations for some of its main clients. NOTE 2 - ACCOUNTING PRINCIPLES AND BASIS OF CONSOLIDATION Annual Financial Report 2017 COMPLIANCE WITH INTERNATIONAL ACCOUNTING PRINCIPLES The 2017 Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and endorsed by the European Union, and with the provisions implementing Article 9 of Legislative Decree No. 38/2005. The designation “IFRS” also includes all valid International Accounting Standards (“IAS”), as well as all interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), formerly the Standing Interpretations Committee (“SIC”). In compliance with European Regulation No. 1606 of 19 July 2002, beginning in 2005, the Reply Group adopted the International Financial Reporting Standards (“IFRS”) for the preparation of its Consolidated Financial Statements. On the basis of national legislation implementing the aforementioned Regulation, those accounting standards were also used to prepare the separate Financial Statements of the Parent Company, Reply S.p.A., for the first time for the year ended 31 December 2006. It is hereby specified that the accounting standards applied conform to those adopted for the preparation of the initial Statement of Assets and Liabilities as at 1 January 2005 according to the IFRS, as well as for the 2005 Income Statement and the Statement of Assets and Liabilities 176

178 as at 31 December 2005, as re-presented according to the IFRS and published in the special section of these Financial Statements. GENERAL PRINCIPLES The Financial Statements were prepared under the historical cost convention, modified as required for the measurement of certain financial instruments. The criterion of fair value was adopted as defined by IAS 39. The Financial Statements have been prepared on the going concern assumption. In this respect, despite operating in a difficult economic and financial environment, the Company’s assessment is that no material uncertainties (as defined in paragraph 25 of IAS 1) exist relative to its ability to continue as a going concern. These Financial Statements are expressed in Euros and are compared to the Financial Statements of the previous year prepared in accordance with the same principles. These Financial Statements have been drawn up under the general principles of continuity, accrual based accounting, coherent presentation, relevancy and aggregation, prohibition of compensation and comparability of information. The fiscal year consists of a twelve (12) month period and closes on the 31 December each year. Financial Statement as at 31 December 2017 FINANCIAL STATEMENTS The Financial Statements include statement of income, statement of comprehensive income, statement of financial position, statement of changes in shareholders’ equity, statement of cash flows and the explanatory notes. The income statement format adopted by the company classifies costs according to their nature, which is deemed to properly represent the company’s business. The Statement of financial position is prepared according to the distinction between current and non-current assets and liabilities. The statement of cash flows is presented using the indirect method. The most significant items are disclosed in a specific note in which details related to the composition and changes compared to the previous year are provided. It is further noted that, to comply with the indications provided by Consob Resolution No. 15519 of 27 July 2006 “Provisions as to the format of Financial Statements”, in addition to mandatory tables, specific supplementary Income Statement and Balance Sheet formats have been added that report significant amounts of positions or transactions with related parties indicated separately from their respective items of reference. 177 176

179 TANGIBLE ASSETS Tangible fixed assets are stated at cost, net of accumulated depreciation and impairment losses. Goods made up of components, of significant value, that have different useful lives are considered separately when determining depreciation. In compliance with IAS 36 – Impairment of assets, the carrying value is immediately remeasured to the recoverable value, if lower. Depreciation is charged so as to write off the cost or valuation of assets, over their estimated useful lives, using the straight-line method, on the following bases: Equipment 30% Plant and machinery 40% Hardware 40% Furniture and fittings 24% Ordinary maintenance costs are fully expensed as incurred. Incremental maintenance costs are allocated to the asset to which they refer and depreciated over their residual useful lives. Improvement expenditures on rented property are allocated to the related assets and Annual Financial Report 2017 depreciated over the shorter between the duration of the rent contract or the residual useful lives of the relevant assets. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in income. GOODWILL Goodwill is an intangible asset with an indefinite life, deriving from business combinations recognized using the purchase method, and is recorded to reflect the positive difference between purchase cost and the Company’s interest at the time of acquisition of the fair value of the assets, liabilities and identifiable contingent liabilities attributable to the subsidiary. Goodwill is not amortized, but is tested for impairment annually or more frequently if specific events or changes in circumstances indicate that it might be impaired. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Impairment losses are recognized immediately as expenses that cannot be recovered in the future. Goodwill deriving from acquisitions made prior to the transition date to IFRS are maintained at amounts recognized under Italian GAAP at the time of application of such standards and are subject to impairment tests at such date. 178

180 OTHER INTANGIBLE ASSETS Intangible fixed assets are those lacking an identifiable physical aspect, are controlled by the company and are capable of generating future economic benefits. Other purchased and internally-generated intangible assets are recognized as assets in accordance with IAS 38 – Intangible Assets, where it is probable that the use of the asset will generate future economic benefits and where the costs of the asset can be determined reliably. Such assets are measured at purchase or manufacturing cost and amortized on a straight-line basis over their estimated useful lives, if these assets have finite useful lives. Other intangible assets acquired as part of an acquisition of a business are capitalized separately from goodwill if their fair value can be measured reliably. In case of intangible fixed assets purchased for which availability for use and relevant payments are deferred beyond normal terms, the purchase value and the relevant liabilities are discounted by recording the implicit financial charges in their original price. Expenditure on research activities is recognized as an expense in the period in which it is incurred. Development costs can be capitalized on condition that they can be measured reliably and that evidence is provided that the asset will generate future economic benefits. An internally-generated intangible asset arising from the company’s e-business development Financial Statement as at 31 December 2017 (such as informatics solutions) is recognized only if all of the following conditions are met: • An asset is created that can be identified (such as software and new processes); • It is probable that the asset created will generate future economic benefits; • The development cost of the asset can be measured reliably. These assets are amortized when launched or when available for use. Until then, and on condition that the above terms are respected, such assets are recognized as construction in progress. Amortization is determined on a straight line basis over the relevant useful lives. When an internally-generated intangible asset cannot be recorded at balance sheet, development costs are recognized to the statement of income in the period in which they are incurred. 179 178

181 INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIFE Intangible assets with indefinite useful lives consist principally of acquired trademarks which have no legal, contractual, competitive, economic, or other factors that limit their useful lives. Intangible assets with indefinite useful lives are not amortized, as provided by IAS 36, but are tested for impairment annually or more frequently whenever there is an indication that the asset may be impaired. Any impairment losses are not subject to subsequent reversals. IMPAIRMENT At each balance sheet date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually or more frequently, whenever there is an indication that the asset may be impaired. Annual Financial Report 2017 The recoverable amount of an asset is the higher of fair value less disposal costs and its value in use. In assessing its value in use, the pre-tax estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Its value in use is determined net of tax in that this method produces values largely equivalent to those obtained by discounting cash flows net of tax at a pre-tax discount rate derived, through an iteration, from the result of the post-tax assessment. The assessment is carried out for the individual asset or for the smallest identifiable group of cash generating assets deriving from ongoing use, (the so-called Cash generating unit). With reference to goodwill, Management assesses return on investment with reference to the smallest cash generating unit including goodwill. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognized as an expense immediately. When the recognition value of the Cash generating unit, inclusive of goodwill, is higher than the recoverable value, the difference is subject to impairment and attributable firstly to goodwill; any exceeding difference is attributed on a pro-quota basis to the assets of the Cash generating unit. 180

182 Where an impairment loss subsequently reverses, the carrying amount of the asset, (or cash-generating unit), with the exception of goodwill, is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount that would have been determined had no impairment loss been recognized for the asset. A reversal of an impairment loss is recognized as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. EQUITY INVESTMENTS Investments in subsidiaries and associated companies are valued using the cost method. As implementation of such method, they are subject to an impairment test if there is any objective evidence that these investments have been impaired, due to one or more events that occurred after the initial measurement if such events have had an impact on future cash flows, thus inhibiting the distribution of dividends. Such evidence exists when the subsidiary’s and associate’s operating margins are repetitively and significantly negative. If such is the case, impairment is recognized as the difference between the carrying value and the recoverable value, normally determined on the basis of fair value less disposal costs, normally determined through the application of the market multiples to prospective EBIT or to the value in use. At each reporting period, the Company assesses whether there is objective evidence that a Financial Statement as at 31 December 2017 write-down due to impairment of an equity investment recognized in previous periods may be reduced or derecognized. Such evidence exists when the subsidiary’s and associate’s operating margins are repetitively and significantly positive. In this case, the recoverable value is re-measured and eventually the investment is restated at initial cost. Equity investments in other companies, comprising non current financial assets not held for trading, are measured at fair value, if it can be determined. Any subsequent gains and losses resulting from changes in fair value are recognized directly in Shareholders’ equity until the investment is sold or impaired; the total recognized in equity up to that date are recognized in the Income Statement for the period. Minor investments in other companies for which fair value is not available are measured at cost, and adjusted for any impairment losses. 181 180

183 Dividends are recognized as financial income from investments when the right to collect them is established, which generally coincides with the shareholders’ resolution. If such dividends arise from the distribution of reserves prior to the acquisition, these dividends reduce the initial acquisition cost. CURRENT AND NON CURRENT FINANCIAL ASSETS Financial assets are recognized on the Company’s balance sheet when the Company becomes a party to the contractual provisions of the instrument. Investments are recognized and written-off the balance sheet on a trade-date basis and are initially measured at cost, including transaction costs. At subsequent reporting dates, financial assets that the Company has the expressed intention and ability to hold to maturity (held-to-maturity securities) are measured at amortized cost according to the effective interest rate method, less any impairment loss recognized to reflect irrecoverable amounts, and are classified among non current financial assets. Investments other than held-to maturity securities are classified as either held-for-trading or available-for-sale, and are measured at subsequent reporting dates at fair value. Where Annual Financial Report 2017 financial assets are held for trading purposes, gains and losses arising from changes in fair value are included in the net profit or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognized directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognized in equity is included in the net profit or loss for the period. This item is stated in the current financial assets. TRANSFER OF FINANCIAL ASSETS The Company derecognizes financial assets from its Financial Statements when, and only when, the contractual rights to the cash flows deriving from the assets expire or the Company transfers the financial asset. In the case of transfer of the financial asset: • If the entity substantially transfers all of the risks and benefits of ownership associated with the financial asset, the Company derecognizes the financial asset from the Financial Statements and recognizes separately as assets or liabilities any rights or obligations originated or maintained through the transfer; • If the Company maintains substantially all of the risks and benefits of ownership associated with the financial assets, it continues to recognize it; If the Company does not transfer or maintain substantially all of the risks and benefits of • 182

184 ownership associated with the financial asset, it determines whether or not it has maintained control of the financial asset. In this case: › If the Company has not maintained control, it derecognizes the financial asset from its Financial Statements and recognizes separately as assets or liabilities any rights or obligations originated or maintained through the transfer; › If the Company has maintained control, it continues to recognize the financial asset to the extent of its residual involvement with such financial asset. At the time of removal of financial assets from the balance sheet, the difference between the carrying value of assets and the fees received or receivable for the transfer of the asset is recognized in the income statement. TRADE PAYABLES AND RECEIVABLES AND OTHER CURRENT ASSETS AND LIABILITIES Trade payables and receivables and other current assets and liabilities are measured at nominal value and eventually written down to reflect their recoverable amount. Write-downs are determined to the extent of the difference of the carrying value of the receivables and the present value of the estimated future cash flows. Receivables and payables denominated in non EMU currencies are stated at the exchange rate at period end provided by the European Central Bank. Cash and cash equivalents Financial Statement as at 31 December 2017 The item cash and cash equivalents includes cash, banks and reimbursable deposits on demand and other short term financial investments readily convertible in cash and are not subject to significant risks in terms of change in value. TREASURY SHARES Treasury shares are presented as a deduction from equity. All gains and losses from the sale of treasury shares are recorded in a special Shareholders’ equity reserve. 183 182

185 FINANCIAL LIABILITIES AND EQUITY INVESTMENTS Financial liabilities and equity instruments issued by the Company are presented according to their substance arising from their contractual obligations and in accordance with the definitions of financial liabilities and equity instruments. The latter are defined as those contractual obligations that give the right to benefit in the residual interests of the Company’s assets after having deducted its liabilities. The accounting standards adopted for specific financial liabilities or equity instruments are outlined below: • Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs and subsequently stated at its amortized cost, using the prevailing market interest rate method. • Equity instruments Equity instruments issued by the Company are stated at the proceeds received, net of direct issuance costs. • Non current financial liabilities Annual Financial Report 2017 Liabilities are stated according to the amortization cost. DERIVATIVE FINANCIAL INSTRUMENTS AND OTHER HEDGING TRANSACTIONS The Company’s activities are primarily subject to financial risks associated with fluctuations in interest rates. Such interest rate risks arise from bank borrowings. In order to hedge such risks, the Company’s policy consists of converting fluctuating rate liabilities in constant rate liabilities and treating them as cash flow hedges. The use of such instruments is disciplined by written procedures in line with the Company risk strategies that do not contemplate derivative financial instruments for trading purposes. In accordance with IAS 39, derivative financial instruments qualify for hedge accounting only when at the inception of the hedge there is formal designation and sufficient documentation that the hedge is highly effective and that its effectiveness can be reliably measured. The hedge must be highly effective throughout the different financial reporting periods for which it was designated. All derivative financial instruments are measured in accordance with IAS 39 at fair value. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows relating to Company commitments and forecasted transactions 184

186 are recognized directly in Shareholder’s equity, while the ineffective portion is immediately recorded in the Income Statement. If the hedged company commitment or forecasted transaction results in the recognition of an asset or liability, then, at the time the asset or liability is recognized, associated gains or losses on the derivative that had previously been recognized in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognized in the income statement in the same period in which the hedge commitment or forecasted transaction affects net profit or loss, for example, when the future sale actually occurs. For effective hedging against a change in fair value, the hedged item is adjusted by the changes in fair value attributable to the risk hedged with a balancing entry in the Income Statement. Gains and losses arising from the measurement of the derivative are also recognized at the income statement. Changes in the fair value of derivative financial instruments that no longer qualify as hedge accounting are recognized in the Income Statement of the period in which they arise. Financial Statement as at 31 December 2017 Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognized in equity is retained in equity until the forecasted transaction is no longer expected to occur; the net cumulative gain or loss recognized in equity is transferred to the net profit or loss for the period. Embedded derivatives included in other financial instruments or in other contractual obligations are treated as separate derivatives, when their risks and characteristics are not closely related to those of the financial instrument that houses them and the latter are not measured at fair value with recognition of the relative gains and losses in the Income Statement. 185 184

187 EMPLOYEE BENEFITS The scheme underlying the employee severance indemnity of the Italian Group companies (the TFR) was classified as a defined benefit plan up until 31 December 2006. The legislation regarding this scheme was amended by Law No. 296 of 27 December 2006 (the “2007 Finance Law”) and subsequent decrees and regulations issued in the first part of 2007. In view of these changes, and with specific reference to those regarding companies with at least 50 employees, this scheme only continues to be classified as a defined benefit plan in the Financial Statements for those benefits accruing up to 31 December 2006 (and not yet settled by the balance sheet date), while after that date the scheme is classified as a defined contribution plan. Employee termination indemnities (“TFR”) are classified as a “post-employment benefit”, falling under the category of a “defined benefit plan”; the amount already accrued must be projected in order to estimate the payable amount at the time of employee termination and subsequently be discounted through the “projected unit credit method”, an actuarial method based on demographic and finance data that allows the reasonable estimate of the extent of benefits that each employee has matured in relation to the time worked. Through actuarial measurement, Annual Financial Report 2017 interest cost is recognized as financial gains or losses and represents the figurative expenditure that the Company would bear by securing a market loan for an amount corresponding to the Employee Termination Indemnities (“TFR”). Actuarial income and losses that reflect the effects resulting from changes in the actuarial assumptions used are directly recognized in Shareholders’ equity. SHARE-BASED PAYMENT PLANS The Company has applied the standard set out by IFRS 2 “Share-based payment”. Share-based payments are measured at fair value at granting date. Such amount is recognized in the Income Statement, with a balancing entry in Shareholders’ equity, on a straight-line basis and over the (vesting period). The fair value of the option, measured at the granting date, is assessed through actuarial calculations, taking into account the terms and conditions of the options granted. The stock options resolved in the previous financial years have been exercised and therefore the Company does not have existing stock option plans. 186

188 PROVISIONS AND RESERVES FOR RISKS Provisions for risks and liabilities are costs and liabilities having an established nature and the existence of which is certain or probable that at the reporting date the amount cannot be determined or the occurrence of which is uncertain. Such provisions are recognized when a commitment actually exists arising from past events of legal or contractual nature or arising from statements or company conduct that determine valid expectations from the persons involved (implicit obligations). Provisions are recognized when the Company has a present commitment arising from a past event and it is probable that it will be required to fulfil the commitment. Provisions are accrued at the best estimate of the expenditure required to settle the liability at the balance sheet date, and are discounted when the effect is significant. REVENUE RECOGNITION Revenue is recognized if it is probable that the economic benefits associated with the transaction will flow to the Company and the revenue can be measured reliably. Revenue from sales and services is recognized when the transfer of all the risks and benefits arising from the passage of title takes place or upon execution of a service. Revenues from services include the activities the Company carries out directly with respect to Financial Statement as at 31 December 2017 some of its major clients in relation to their businesses. These activities are also carried out in exchange for services provided by other Group companies, and the costs for such services are recognized as Services and other costs. Revenues from sales of products are recognized when the risks and rewards of ownership of goods are transferred to the customer. Revenues are recorded net of discounts, allowances, settlement discounts and rebates and charged against profit for the period in which the corresponding sales are recognized. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable that represents the discounted interest rate of the future estimated proceeds estimated over the expected life of the financial asset in order to bring them to the accounting value of the same asset. Dividends from investments is recognized when the shareholders’ rights to receive payment has been established. 187 186

189 FINANCIAL INCOME AND EXPENSES Financial income and expenses are recognized and measured in the income statement on an accrual basis. TAXATION Income tax represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit defers from the profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Current income tax is entered for each individual company based on an estimate of taxable income in compliance with existing legislation and tax rates or as substantially approved at the period closing date in each country, considering applicable exemptions and tax credit. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the Financial Statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet Annual Financial Report 2017 liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and associates and interests arising in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply to the period when the liability is settled or the asset realized. Deferred tax is charged or credited in the income 188

190 statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. In the event of changes to the accounting value of deferred tax assets and liabilities deriving from a change in the applicable tax rates and relevant legislation, the resulting deferred tax amount is entered in income statement, unless it refers to debited or credited amounts previously recognized to Shareholders’ equity. EARNINGS PER SHARE Basic earnings per share is calculated with reference to the profit for the period of the Company and the weighted average number of shares outstanding during the year. Treasury shares are excluded from this calculation. Diluted earnings per share is determined by adjusting the basic earnings per share to take account of the theoretical conversion of all potential shares, being all financial instruments that are potentially convertible into ordinary shares, with diluting effect. Financial Statement as at 31 December 2017 USE OF ESTIMATIONS The preparation of the Financial Statements and relative notes under IFRS requires that management makes estimates and assumptions that have effect on the measurement of assets and liabilities and on disclosures related to contingent assets and liabilities at the reporting date. The actual results could differ from such estimates. Estimates are used to accrue provisions for risks on receivables, to measure development costs, to measure contract work in progress, employee benefits, income taxes and other provisions. The estimations and assumptions are reviewed periodically and the effects of any changes are recognized immediately in income. CHANGES IN ESTIMATIONS AND RECLASSIFICATIONS There were no changes of estimates or reclassifications during the 2017 reporting period. 189 188

191 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ADOPTED BY THE COMPANY FROM 1 JANUARY 2017 Reply S.p.A. applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after 1 January 2017. Reply S.p.A. has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. The nature and the impact of each amendment is described below: Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). Reply S.p.A. has provided the information in Note 28. Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealized Losses The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference related to unrealized losses. Furthermore, the amendments provide guidance on Annual Financial Report 2017 how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. The Company applied amendments retrospectively. However, their application has no effect on the Company’s financial position and performance as the Company has no deductible temporary differences or assets that are in the scope of the amendments. STANDARDS ISSUED BUT NOT YET EFFECTIVE The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments, which replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for 190

192 hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. The Company plans to adopt the new standard on the required effective date and will not restate comparative information. During 2017, the Company has performed a detailed impact assessment of all three aspects of IFRS 9. This assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Company in 2018 when the Company will adopt IFRS 9. Overall, the Company expects no significant impact on its statement of financial position and equity. a) Classification and measurement The Company does not expect a significant impact on its balance sheet or equity on applying the classification and measurement requirements of IFRS 9. It expects to continue measuring at fair value all financial assets currently held at fair value. Loans as well as trade receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. The Company analyzed the contractual cash flow characteristics of those instruments and concluded that they meet the criteria for amortized cost measurement under IFRS 9. Financial Statement as at 31 December 2017 Therefore, reclassification for these instruments is not required. b) Impairment IFRS 9 requires the Company to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Company will apply the simplified approach and record lifetime expected losses on all trade receivables. According to the performed assessment, the Company does not expect a significant impact on its loss allowance. c) Hedge accounting The Company determined that all existing hedge relationships that are currently designated in effective hedging relationships will continue to qualify for hedge accounting under IFRS 9. The Company has chosen not to retrospectively apply IFRS 9 on transition to the hedges where the Company excluded the forward points from the hedge designation under IAS 39. As IFRS 9 does not change the general principles of how an entity accounts for effective hedges, applying the hedging requirements of IFRS 9 will not have a significant impact on Company’s financial statements. 191 190

193 IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014, and amended in April 2016, and will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Early adoption is permitted. The standard requires a company to recognize revenue upon transfer of control of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for transferring goods or services to a customer, using a five-step process. The new standard also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The Company plans to adopt the new standard on the required effective date using the full retrospective method. During 2016, the Company performed a preliminary assessment of IFRS 15, which was continued with a more detailed analysis completed in 2017. On the basis of this assessment, the Company’s revenues will continue to be recognized in a manner consistent with accounting guidance in prior years. It is not foreseen an impact on equity and to the Company’s Net profit. Annual Financial Report 2017 Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognized in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognized only to the extent of unrelated investors’ interests in the associate or joint venture. The IASB has deferred the effective date of these amendments indefinitely, but an entity that early adopts the amendments must apply them prospectively. IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2 The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and 192

194 conditions of a share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after 1 January 2018, with early application permitted. The Company does not expect impact from the applying of those amendments. IFRS 16 Leases IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a Financial Statement as at 31 December 2017 lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right- of-use asset. Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is 193 192

195 permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs. In 2018, the Company will continue to assess the potential effect of IFRS 16 on its consolidated financial statements. NOTE 3 - RISK MANAGEMENT Reply S.p.A. operates at a world-wide level and for this reason its activities are exposed to various types of financial risks: market risk (broken down in exchange risk, interest rate risk on financial flows and on “fair value”, price risk), credit risk and liquidity risk. To minimize risks Reply utilizes derivative financial instruments. At a central level it manages the hedging of principle operations. Reply S.p.A. does not detain derivate financial instruments for negotiating purposes. Annual Financial Report 2017 CREDIT RISK For business purposes, specific policies are adopted in order to guarantee that clients honor payments. With regards to financial counterparty risk, the company does not present significant risk in credit-worthiness or solvency. For newly acquired clients, the Company accurately verifies their capability in terms of facing financial commitments. Transactions of a financial nature are undersigned only with primary financial institutions. LIQUIDITY RISK The Company is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time. The cash flows, funding requirements and liquidity of Group companies are monitored and managed on a centralized basis through the Group Treasury. The aim of this centralized system is to optimize the efficiency and effectiveness of the management of the Group’s current and future capital resources (maintaining an adequate level of cash and cash equivalents and the availability of reserves of liquidity that are readily convertible to cash and committed credit). The difficulties both in the markets and in the financial markets require special attention to the management of liquidity risk, and in that sense particular emphasis is being placed on measures 194

196 taken to generate financial resources through operations and on maintaining an adequate level of available liquidity. The Company therefore plans to meet its requirements to settle financial liabilities as they fall due and to cover expected capital expenditures by using cash flows from operations and available liquidity, renewing or refinancing bank loans. RISKS ASSOCIATED WITH FLUCTUATIONS IN CURRENCY AND INTEREST RATES As the company operates mainly in a “Euros area” the exposure to currency risks is limited. The exposure to interest rate risk arises from the need to fund operating activities and the necessity to deploy surplus. Changes in market interest rates may have the effect of either increasing or decreasing the company’s net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions. The exposure to interest rate risk arises from the need to fund operating activities and M&A investments, as well as the necessity to deploy available liquidity. Changes in market interest rates may have the effect of either increasing or decreasing the Company’s net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions. The interest rate risk to which the Company is exposed derives from bank loans; to mitigate such risks, Reply S.p.A., when useful, uses derivative financial instruments designated as “cash flow hedges”. The use of such instruments is disciplined by written procedures in line with the Company’s risk management strategies that do not contemplate derivative financial instruments Financial Statement as at 31 December 2017 for trading purposes. 195 194

197 NOTE 4 - OTHER INFORMATION EXCEPTION ALLOWED UNDER PARAGRAPH 4 OF ARTICLE 2423 OF THE ITALIAN CIVIL CODE No exceptions allowed under Article 2423, paragraph 4, of the Italian Civil Code were used in drawing up the annexed Financial Statements. FISCAL CONSOLIDATION The Company has decided to enter into the National Fiscal Consolidation pursuant to articles 117/129 of the TUIR. Reply S.p.A., Parent Company, acts as the consolidating company and determines just one taxable income for the Group companies that adhere to the Fiscal Consolidation, and will benefit from the possibility of compensating taxable income having fiscal losses in just one tax return. Each company adhering to the Fiscal Consolidation transfers to Reply S.p.A. its entire taxable income, recognizing a liability with respect to the Company corresponding to the payable IRES; The companies that transfer fiscal losses can register a receivable with Reply, corresponding Annual Financial Report 2017 to IRES on the part of the loss off-set at a Group level and remunerated according to the terms established in the consolidation agreement stipulated among the Group companies. NOTE 5 - REVENUE Revenues amounted to 378,788,753 Euros and are detailed as follows: (EUROS) 2017 2016 CHANGE Revenues from services 319,687,582 5,307,368 324,994,951 Royalties on "Reply" trademark 25,400,909 21,691,597 3,709,312 Intercompany services 19,722,944 18,478,081 1,244,862 Other intercompany revenues 8,669,950 8,094,917 575,034 367,952,177 10,836,576 Total 378,788,753 196

198 Reply manages business relationships on behalf of some of its major clients. Such activities were recorded in the item Revenues from services to third parties which increased by 5,307,368 Euros. Revenues from Royalties on the “Reply” trademark refer to charges to subsidiaries, corresponding to 3% of the subsidiaries’ turnover with respect to third parties. Revenues from Intercompany services and Other intercompany charges refer to activities that Reply S.p.A. carries out for the subsidiaries, and more specifically: • operational, co-ordination, technical and quality management; • administration, personnel and marketing activities; • strategic management services. NOTE 6- OTHER INCOME Other income that as at 31 December 2017 amounted to 10,201,787 Euros (7,999,405 Euros at 31 December 2016) mainly refer to expenses incurred by Reply S.p.A. and recharged to the Group companies, and include expenses for social events, recharged telephone expenses and training courses. Financial Statement as at 31 December 2017 NOTE 7 - PURCHASES Detail is as follows: (EUROS) 2016 CHANGE 2017 Software licenses for resale 16,589,844 10,502,020 6,087,825 Hardware for resale 2,227,370 5,249,071 (3,021,701) Other 381,702 542,387 (160,685) Total 19,198,916 16,293,477 2,905,439 The items software and hardware licenses for resale refer to the costs incurred for software licenses for resale to third parties carried out for the Group companies. The item Other mainly includes the purchase of supplies, e-commerce material, stationary and printed materials (143,542 Euros) and fuel (213,718 Euros). 197 196

199 NOTE 8 - PERSONNEL EXPENSES Personnel costs amounted to 19,821,559 Euros, with a decrease of 354,994 Euros and are detailed in the following table: (EUROS) 2017 2016 CHANGE 14,977,542 15,982,802 (1,005,260) Payroll employees 4,844,017 4,193,751 650,267 Directors Total 19,821,559 20,176,553 (354,994) Detail of personnel by category is provided below: 31/12/2017 31/12/2016 CHANGE (NUMBER) Directors 60 58 2 Managers 10 8 2 Staff 18 21 (3) 1 Total 88 87 Annual Financial Report 2017 The average number of employees in 2017 was 87 (in 2016 89). 198

200 NOTE 9 - SERVICES AND OTHER COSTS Service and other costs comprised the following: 2016 CHANGE 2017 (EUROS) 2,813,911 (628,229) Commercial and technical consulting 2,185,682 2,059,581 (260,166) 1,799,415 Travelling and training expenses 315,109,360 302,717,479 12,391,881 Professional services from group companies 3,942,874 679,554 3,263,321 Marketing expenses 1,328,557 1,459,381 (130,824) Administrative and legal services Statutory auditors and Independent auditors fees 152,424 95,933 248,356 Leases and rentals 1,302,133 1,316,967 (14,834) Office expenses 3,179,460 (811,601) 2,367,859 Other services from group companies 2,586,691 11,699,912 (9,113,221) Expenses incurred on behalf of group companies 8,098,789 5,986,389 2,112,400 Other 3,450,901 4,142,829 (691,928) Total 342,420,618 338,791,654 3,628,965 Professional Services from Group companies, which changed during the year by 12,391,881 Financial Statement as at 31 December 2017 Euros, relate to revenues from services to third parties. Reply S.p.A. carries out commercial fronting activities for some of its major clients, whereas delivery is carried out by the operational companies. Office expenses include services rendered by related parties in connection with service contracts for the use of premises, legal domicile and secretarial services, as well as utility costs. NOTE 10 - AMORTIZATION, DEPRECIATION AND WRITE-DOWNS Depreciation of tangible assets was calculated on the basis of technical-economic rates determined in relation to the residual useful lives of the assets, and which amounted in 2017 to an overall cost of 336,687 Euros. Details of depreciation are provided at the notes to tangible assets. 199 198

201 Amortization of intangible assets amounted in 2017 to an overall cost of 636,708 Euros. Details of depreciation are provided at the notes to intangible assets. NOTE 11 - OTHER UNUSUAL OPERATING INCOME/(EXPENSES) Other unusual operating expenses amounted to 2,999,737 Euros and refer to the accrual of risk and expense provisions (3,000,000 Euros). NOTE 12 - GAIN/(LOSSES) ON EQUITY INVESTMENTS Detail is a follows: (EUROS) 2017 2016 CHANGE Dividends 108,140,467 20,189,006 87,951,461 Loss on equity investments (12,229,832) (2,189,000) (10,040,832) Total 95,910,635 18,000,006 77,910,629 Annual Financial Report 2017 Dividends include proceeds from dividends received by Reply S.p.A. from subsidiary companies during the year. 200

202 Detail is as follows: (EUROS) 31/12/2017 2,970,000 Aktive Reply S.r.l. 775,000 Arlanis Reply S.r.l. Atlas Reply S.r.l. 830,000 Blue Reply S.r.l. 10,730,000 Bridge Reply S.r.l. 144,000 Business Reply S.r.l. 2,815,000 Cluster Reply Roma S.r.l. 935,000 Cluster Reply S.r.l. 12,395,000 Data Reply S.r.l. 245,000 Discovery Reply S.r.l. 1,035,000 E*finance Consulting S.r.l. 3,405,000 Ekip Reply S.r.l. 55,000 Eos Reply S.r.l. 621,467 490,000 Go Reply S.r.l. Hermes Reply S.r.l. 3,085,000 5,505,000 IrisCube Reply S.p.A. Logistics Reply S.r.l. 1,970,000 Financial Statement as at 31 December 2017 Open Reply S.r.l. 8,605,000 Pay Reply S.r.l. 2,065,000 Power Reply S.r.l. 5,935,000 Reply Consulting S.r.l. 2,435,000 Ringmaster S.r.l. 725,000 Security Reply S.r.l. 4,205,000 Square Reply S.r.l. 440,000 Syskoplan Reply S.r.l. 465,000 Sytel Reply Roma S.r.l. 8,655,000 Sytel Reply S.r.l 11,460,000 Tamtamy Reply S.r.l. 295,000 Target Reply S.r.l. 4,060,000 Technology Reply S.r.l. 8,085,000 2,705,000 Whitehall Reply S.r.l. Total 108,140,467 201 200

203 Losses on equity investments refer to write-downs and the year-end losses of several subsidiary companies that were prudentially deemed as non-recoverable with respect to the value of the investment. For further details see Note 19 herein. NOTE 13 - FINANCIAL INCOME/(EXPENSES) Detail is as follows: 2017 2016 CHANGE (EUROS) 6,942,047 4,562,480 2,379,567 Interest income from subsidiaries Interest income on bank accounts 9,207 10,349 (1,142) Interest expenses (567,826) (738,646) 170,820 Other (3,411,853) (6,734,480) 3,322,627 Total 2,971,575 (2,900,297) 5,871,872 Annual Financial Report 2017 Interest income from subsidiaries refers to the interest yielding cash pooling accounts of the Group companies included in the centralized pooling system. Interest expenses refer to the interest expenses on the use of credit facilities with Intesa Sanpaolo and Unicredit. The item Other mainly includes a loss on exchange rate differences amounting to 2,518 thousand Euros and a gain on exchange rate differences amounting to 336 thousand Euros arising from the translation of balance sheet items not recorded in Euros. 202

204 NOTE 14 - INCOME TAXES The details are provided below: 2017 2016 CHANGE (EUROS) 2,146,714 1,136,839 1,009,875 IRES 166,000 205,000 (39,000) IRAP - (398,461) (398,461) Corporate tax - previous years Current taxes 1,341,839 572,414 1,914,253 Deferred tax liabilities 93,283 15,899 77,384 Deferred tax assets (1,616,722) (1,782,673) 165,952 243,336 Deferred taxes (1,523,438) (1,766,774) Total income taxes 815,750 390,815 (424,935) IRES THEORETICAL RATE The following table provides the reconciliation between the IRES theoretical rate and the fiscal theoretical rate: Financial Statement as at 31 December 2017 AMOUNT TAXATION (EUROS) Result before taxes 102,458,525 Theoretical tax rate 24.0% 24,590,046 Temporary differences, net (93,502,515) Taxable income 8,956,010 2,149,442 Total IRES 2,154,000 Benefit arising from the National Fiscal Consolidation 7,286 Total current IRES 2,146,714 Temporary differences, net refer to: • Deductible differences amounting to 115,111 thousand Euros arising mainly from the non- taxable share of the dividends received in the financial year (102,733 thousand Euros) due to the subsidized taxation (Patent Box) on the Reply trademark; Non-deductible differences amounting to 22,609 thousand Euros owing mainly to write- • 203 202

205 down/losses of equity investments (13,456 thousand Euros), Directors’ fees to be paid (3,000 thousand Euros), the accrual to of risk and expense provisions (3,000 thousand Euros) and the exchange rate losses related to foreign currency interest-free loans (2,481 thousand Euros). CALCULATION OF TAXABLE IRAP (EUROS) AMOUNT TAXATION Difference between value and cost of production 3,576,315 303,719 IRAP net Taxable IRAP 3,880,034 Total IRAP 166,000 Temporary differences, net mainly refer to: • Non-deductible differences amounting to 9,130 thousand Euros mainly due to emoluments to Directors (4,784 thousand Euros) and to accruals and write offs not relevant for the purpose of the calculation of taxable IRAP (3,022 thousand Euros); Annual Financial Report 2017 • Deductible differences amounting to 8,826 thousand Euros mainly due to the subsidized taxation (Patent Box) on the Reply trademark (8,584 thousand Euros). NOTE 15 - EARNINGS PER SHARE Basic earnings and diluted earnings per share as at 31 December 2017 was calculated with reference to the net profit which amounted to 102,067,710 Euros (17,263,478 Euros at 31 December 2016) divided by the weighted average number of shares outstanding as at 31 December 2017, net of treasury shares, which amounted to 37,407,400 (37,407,400 at 31 December 2016). It is to be noted that the average number of shares for 2016 was redetermined following the Stock split resolved by the Extraordinary Shareholders’ Meeting on September 13, 2017 through the allotment of 4 shares per each ordinary share owned. 204

206 (EUROS) 2017 2016 Net profit of the year 102,067,710 17,263,478 Weighted number of shares 37,407,400 37,407,400 Basic earnings per share 2.73 0.46 NOTE 16 - TANGIBLE ASSETS Tangible assets as at 31 December 2017 amounted to 477,824 Euros are detailed as follows: (EUROS) 31/12/2017 31/12/2016 CHANGE 230,242 369,202 (138,960) Plant and machinery Hardware 83,500 119,055 (35,555) Other tangible assets 164,083 234,540 (70,457) Total 722,796 (244,972) 477,824 The item Other mainly includes furniture and costs for improvements to leased assets. Financial Statement as at 31 December 2017 205 204

207 Change in Tangible assets during 2017 is summarized below: (EUROS) OTHER TOTAL PLANT AND MACHINERY HARDWARE 1,626,820 1,689,902 1,707,663 Historical cost 5,024,385 Accumulated depreciation (1,338,462) (1,507,765) (1,455,362) (4,301,589) 369,202 119,055 234,540 722,796 31/12/2016 Historical cost 6,496 54,158 40,494 101,148 Increases Disposals - (43,607) (43,607) - Accumulated depreciation Depreciation (89,713) (101,518) (336,687) (145,456) Disposals - - 34,174 34,174 Historical cost 1,714,159 1,680,978 1,686,789 5,081,926 Accumulated depreciation (1,483,918) (1,597,378) (1,522,706) (4,604,102) 31/12/2017 230,242 83,500 164,083 477,824 Annual Financial Report 2017 During the year under review the Company made investments amounting to 101,148 Euros, which mainly refer to hardware, automobiles and mobile phones. NOTE 17 - GOODWILL Goodwill as at 31 December 2017 amounted to 86,765 Euros and refers to the value of business branches (consulting activities related to Information Technology and management support acquired in July 2000. Goodwill recognized is deemed adequately supported in terms of expected financial results and related cash flows. 206

208 NOTE 18 - OTHER INTANGIBLE ASSETS Intangible assets as at 31 December 2017 amounted to 2,096,599 Euros (2,118,907 Euros at 31 December 2016) and are detailed as follows: HISTORICAL ACCUMULATED NET BOOK VALUE AT COST DEPRECIATION 31/12/2017 (EUROS) Software 7,079,799 (5,519,263) 1,560,535 Trademark 536,064 - 536,064 Total 7,615,863 (5,519,263) 2,096,599 Change in intangible assets in 2017 is summarized in the table below: NET BOOK NET BOOK VALUE AT VALUE AT INCREASES DEPRECIATION 31/12/2017 31/12/2016 (EUROS) Software 1,582,843 614,400 (636,708) 1,560,535 Trademark 536,064 - - 536,064 Total 2,118,907 614,400 (636,708) 2,096,599 Financial Statement as at 31 December 2017 The item Software is related mainly to software licenses purchased and used internally by the company. The increase is related to software licenses purchased and used internally by the company. The item Trademark expresses the value of the “Reply” trademark granted to the Parent Company Reply S.p.A. (before Reply Europe Sàrl) on 9 June, 2000, in connection to the Company’s share capital increase that was resolved and undersigned by the Parent Company Alister Holding SA. Such amount is not subject to systematic amortization, and the expected future cash flows are deemed adequate. 207 206

209 NOTE 19 - EQUITY INVESTMENTS The item Equity investments at 31 December 2017 amounted to 143,259,963 Euros, with a decrease of 6,096,232 Euros compared to 31 December 2016. BALANCE AT WRITE BALANCE AT ACQUISITIONS AND DISPOSAL INTEREST OTHER 31/12/2017 SUBSCRIPTIONS (EUROS) 31/12/2016 DOWNS 558,500 85.00% 558,500 Air Reply S.r.l. Aktive Reply S.r.l. 100.00% 512,696 512,696 588,000 588,000 100.00% Arlanis Reply S.r.l. (454,000) 356,575 12,575 100.00% Atlas Reply S.r.l. 110,000 9,483,484 (2,161,000) 7,322,484 100.00% Avantage Ltd 527,892 527,892 100.00% Blue Reply S.r.l. Breed Reply Ltd. 12,477 100.00% 12,477 103 103 80.00% Breed Reply Investment Ltd. 6,000 6,000 60.00% Bridge Reply S.r.l. 268,602 Business Reply S.r.l. 268,602 100.00% Cluster Reply S.r.l. 2,540,848 100.00% 2,540,848 296,184 296,184 100.00% Cluster Reply Roma S.r.l. Annual Financial Report 2017 32,500 32,500 35.91% Consorzio Reply Public Sector 1,000 Consorzio Reply Energy 25.00% 1,000 Data Reply S.r.l. 317,662 317,662 100.00% Discovery Reply S.r.l. 1,311,669 1,311,669 100.00% 3,076,385 3,076,385 100.00% e*finance Consulting Reply S.r.l. 30,000 30,000 100.00% Ekip Reply S.r.l. 155,369 155,369 80.71% Eos Reply S.r.l. Forge Reply S.r.l. 12,000 722,000 (722,000) 12,000 100.00% 1,920,000 Go Reply S.r.l. 1,920,000 100.00% Hermes Reply Polska zoo 10,217 100.00% 10,217 Hermes Reply S.r.l. 199,500 199,500 100.00% IrisCube Reply S.p.A. 6,724,952 6,724,952 100.00% 400,012 18,400 (18,400) Lem Reply S.r.l. 400,012 100.00% Like Reply S.r.l. 132,317 100.00% 132,317 Logistics Reply S.r.l. 1,049,167 1,049,167 100.00% Open Reply S.r.l. 1,417,750 100.00% 1,417,750 Pay Reply S.r.l. 10,000 10,000 100.00% Portaltech Reply S.r.l. 104,500 1,500 106,000 100.00% 100.00% Power Reply S.r.l. 2,500,850 2,500,850 208

210 BALANCE AT WRITE BALANCE AT ACQUISITIONS AND SUBSCRIPTIONS (EUROS) OTHER 31/12/2017 INTEREST DISPOSAL 31/12/2016 DOWNS 370,000 100.00% 287,000 Protocube Reply S.r.l. 287,000 (370,000) 3,518,434 100.00% 3,518,434 Reply Consulting S.r.l. 57,835,781 57,835,781 Reply AG 100.00% Reply Digital Experience S.r.l. 31,000 (31,000) 10,000 4,227,019 100.00% (ex Bitmama S.r.l.) 4,217,019 Reply do Brasil Sistemas 206,816 de Informatica Ltda 206,816 98.50% 40,596 40,596 100.00% Inc. Reply Ltd. 11,657,767 11,657,767 100.00% Reply 104,132 (8,920) 95,212 100.00% Reply Services S.r.l. S.r.l. 5,000 5,000 50.00% Ringmaster 11,386,966 11,386,966 100.00% Santer Reply S.p.A. - 9,000 6,700 15,700 90.00% Sense Reply S.r.l. 3,887,432 (3,887,432) Sensoria Inc. - - 403,500 269,000 Spark Reply S.r.l. 672,500 85.00% Security Reply S.r.l. 392,866 100.00% 392,866 Sprint Reply S.r.l. - 10,000 10,000 100.00% Square Reply S.r.l. 100,000 100.00% 100,000 Storm Reply S.r.l. 986,000 986,000 95.00% Syskoplan Reply S.r.l. 949,571 949,571 100.00% Financial Statement as at 31 December 2017 Sytel Reply S.r.l. 4,991,829 4,991,829 100.00% 894,931 894,931 100.00% Sytel Reply Roma S.r.l. 254,551 8,920 263,471 100.00% Tamtamy Reply S.r.l. Target Reply S.r.l. 600,338 600,338 100.00% Technology Reply Roma 10,000 100.00% 10,000 Technology Reply S.r.l. 216,658 216,658 100.00% Technology Reply S.r.l. (Romania) 9,919 9,919 100.00% Triplesense Reply S.r.l. (10,000) - - 10,000 Twice Reply S.r.l. 521,203 521,203 98.00% Whitehall Reply S.r.l. 160,212 100.00% 160,212 (*) 11,150,465 89.20% 11,150,465 Xister Reply S.r.l. Total 149,356,195 20,500 1,527,100 (7,643,832) - 143,259,963 (*) For this company an option exists for the acquisition of their minority shares; the exercise of such option in future reporting periods is subject to the achievement of profitability parameters. The accounting of such options reflect management’s best estimate at the closing date. 209 208

211 ACQUISITIONS AND SUBSCRIPTIONS Sense Reply S.r.l. In the month of July 2017 Sense Reply S.r.l. was constituted, a company in which Reply S.p.A. holds 90% of the share capital. Sprint Reply S.r.l. In the month of December 2017 Sprint Reply S.r.l. was constituted, a company in which Reply S.p.A. holds 100% of the share capital. FINANCIAL LOAN REMISSION The amounts are referred to the waiver of financial loan receivables from some subsidiaries in order to increase their equity position. WRITE-DOWNS The amounts recorded reflect losses on some equity investments that are deemed not to be recoverable. Annual Financial Report 2017 ****************** The list of equity investments in accordance with Consob communication no. 6064293 of 28 July 2006 is included in the attachments. The negative differences arising between the carrying value of the investments and the corresponding portion of their shareholders’ equity are not related to permanent impairment of value, as the carrying value is supported by positive economic and financial forecasts that guarantee the recoverable amount of the investment. 210

212 NOTE 20 - NON CURRENT FINANCIAL ASSETS Detail is as follows: 2017 2016 CHANGE (EUROS) Guarantee deposits 80,125 100,850 (20,725) 80,326,954 67,299,082 13,027,872 Loans to subsidiaries Total 67,399,932 13,007,147 80,407,079 Guarantee deposits are mainly related to deposits on lease contracts. Financial receivables from subsidiaries are referred to loans granted to the following companies: COMPANY AMOUNT Breed Reply Investments Ltd 27,334,806 Breed Reply Ltd 2,986,824 Cluster do Brasil (ex Mind Services Informàtica LTDA) 1,215,000 Concept Reply GmbH 900,000 Financial Statement as at 31 December 2017 Hermes Reply Polska Sp Zoo 523,644 InEssence Reply Gmbh 2,250,000 Reply AG 5,000,000 Reply do Brazil Sist. De Inf Ltda 1,561,740 Reply France Sarl 150,000 Reply Inc. 1,283,820 Reply Ltd 36,171,120 Sense Reply 300,000 Technology Reply S.r.l. Romania 650,000 Total 80,326,954 211 210

213 NOTE 21 - DEFERRED TAX ASSETS This item amounted to 4,634,202 Euros at 31 December 2017 (3,017,480 Euros at 31 December 2016), and included the fiscal charge corresponding to the temporary differences on statutory income and taxable income related to deferred deductible items. TEMPORARY DEDUCTIBLE DIFFERENCES TAXABLE AMOUNT TAX 12,511,082 3,017,480 Total deferred tax assets at 31/12/2016 8,578,694 2,289,767 Accrued Utilization (2,791,354) (673,045) 18,298,423 4,634,202 Total deferred tax assets at 31/12/2017 Of which: - directors fees and employee bonuses accrued but not yet paid 6,448,000 1,676,220 - unrealized foreign exchange losses 8,440,074 2,025,618 - taxable amounts greater than book value 3,410,349 932,364 Total 18,298,423 4,634,202 Annual Financial Report 2017 The decision to recognize deferred tax assets is taken by assessing critically whether the conditions exist for the future recoverability of such assets on the basis of expected future results. There are no deferred tax assets on losses carried forward. 212

214 NOTE 22 - TRADE RECEIVABLES Trade receivables at 31 December 2017 amounted to 372,933,805 Euros and are all collectible within 12 months. Detail is as follows: (EUROS) 31/12/2017 31/12/2016 CHANGE 182,690,437 197,571,158 14,880,721 Third party trade receivables Credit notes to be issued (65,529) - (65,529) Allowance for doubtful accounts (264,883) (266,951) 2,069 14,817,261 Third party trade receivables 197,240,746 182,423,485 Receivables from subsidiaries 53,558,715 122,133,909 175,692,624 155 280 435 Receivables from Parent Company 122,134,064 Trade receivables from subsidiaries and Parent Company 175,693,058 53,558,995 Total trade receivables 372,933,805 304,557,549 68,376,256 Reply manages business relationships on behalf of some of its major clients. This activity is Financial Statement as at 31 December 2017 reflected in the item Third Party Receivables which increased by 14,817,261 Euros. Receivables from subsidiaries are related to services that the Parent Company Reply S.p.A. carries out in favor of the subsidiary companies at normal market conditions. Trade receivables are all due within 12 months and do not include significant overdue balances. In 2017 the provision for doubtful accounts was increased by 22,121 Euros following a specific risk analysis of all the trade receivables, following a utilization of the year amounting to 24,190 Euros. The carrying amount of Trade receivables in line with its fair value. 213 212

215 NOTE 23 - OTHER RECEIVABLES AND CURRENT ASSETS Detail is as follows: 31/12/2017 31/12/2016 CHANGE (EUROS) Tax receivables 10,566,546 3,360,938 7,205,608 5,650,457 12,851,076 (7,200,619) Other receivables from subsidiaries Other receivables 172,850 89,997 262,848 Accrued income and prepaid expenses 4,851,046 3,658,017 1,193,030 Total 21,330,897 20,042,881 1,288,016 The item Tax receivables includes VAT receivables net (6,727,607 Euros) and IRAP and IRES tax prepayments (3,758,729 Euros). Other receivables from subsidiary companies mainly refer to IRES receivables which are calculated on taxable income, and transferred by the Italian subsidiaries under national fiscal consolidation. Annual Financial Report 2017 Accrued income and prepaid expenses refer to prepaid expenses arising from the execution of services, lease contracts, insurance contracts and other utility expenses, which are accounted for on an accrual basis. The carrying value of Other receivables and current assets is deemed to be in line with its fair value. NOTE 24 - CURRENT FINANCIAL ASSETS This item amounted to 82,843,389 Euros (63,168,559 Euros at 31 December 2016) and refers to the total of interest yielding cash pooling accounts of subsidiaries included in the centralized pooling system of the Parent Company Reply S.p.A.; the interest yield on these accounts is in line with current market conditions. 214

216 NOTE 25 - CASH AND CASH EQUIVALENTS This item amounted to 63,610,241 Euros, with an increase of 13,501,951 Euros compared to 31 December 2016 and is referred to cash at banks and on hand at year-end. NOTE 26 - SHAREHOLDERS’ EQUITY Share capital As at 31 December 2017 the fully subscribed paid-in share capital of Reply S.p.A., amounted to 4,863,486 Euros and is made up of no. 37,411,428 ordinary shares having a nominal value of euro 0.13 each. The Extraordinary Shareholders’ Meeting held on 13 September 2017 resolved to split the 9,352,857 outstanding ordinary shares, with a nominal value of € 0.52 each, into 37,411,428 newly issued ordinary shares, with a nominal value of € 0.13 each, having the same characteristics as outstanding ordinary shares, assigned in the ratio of four new shares in replacement of each existing ordinary share. Treasury shares Financial Statement as at 31 December 2017 The value of the Treasury shares, amounting to 24,502 Euros, refers to the shares of Reply S.p.A. that at 31 December 2017 were equal to no. 4.028. Capital reserves At 31 December 2017 amounted to 79.183.600 Euros, and included the following: • Share premium reserve amounting to 23,302,692 Euros. • Treasury share reserve amounting to 24,502 Euros, relating to the shares of Reply S.p.A which at 31 December 2017 were equal to no. 4.028. • Reserve for the purchase of treasury shares amounting to 49,975,498 Euros. • Reserves arising from the merger operation of Reply Deutschland AG. in Reply S.p.A, and include: › Share swap surplus reserve amounting to 3,445,485 Euros › Surplus annulment reserve amounting to 2,902,479 Euros. 215 214

217 Earnings Reserve Earning reserves amounted to 208,128,469 Euros and were comprised as follows: The Legal reserve amounting to 972,697 Euros (972,697 Euros at 31 December 2016); • • Extraordinary reserve amounting to 102,265,360 Euros (95,731,345 Euros at 31 December 2016); • Retained earnings amounting to 2,822,701 Euros (2,822,701 Euros at 31 December 2016); • Net result totaling 102,067,710 Euros (17,263,478 Euros at 31 December 2016). Other comprehensive income Other comprehensive income can be analyzed as follows: (THOUSAND EUROS) 31/12/2017 31/12/2016 Other comprehensive income that will not be reclassified subsequently to profit or loss: Actuarial gains/(losses) from employee benefit plans 2,503 (14,351) Total Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax (B1): 2,503 (14,351) Other comprehensive income that may be reclassified subsequently to profit or loss: Gains/(losses) on cash flow hedges 28,013 (62,261) Annual Financial Report 2017 Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2): 28,013 (62,261) Total Other comprehensive income, net of tax (B) = (B1) + (B2) 30,516 (76,612) NOTE 27 - PAYABLES TO MINORITY SHAREHOLDERS AND EARN-OUT Payables to Minority shareholders and for Earn-out at 31 December 2017 amounted to 2,364,114 Euros and have not undergone any changes compared to 31 December 2016. 216

218 NOTE 28 - FINANCIAL LIABILITIES Detail is as follows: 31/12/2016 31/12/2017 NON NON CURRENT CURRENT TOTAL CURRENT (EUROS) TOTAL CURRENT Bank overdrafts 21,534,927 - 21,534,927 14,746,924 14,746,924 Bank loans 16,267,199 13,071,428 29,338,628 18,767,199 29,338,628 48,105,827 Transaction accounts - 43,139,346 64,428,008 - 64,428,008 43,139,346 Other (17,376) - (17,376) 10,637 - 10,637 Total financial liabilities 80,924,097 13,071,428 93,995,525 97,952,769 29,338,628 127,291,397 The future out payments of the financial liabilities are detailed as follows: 31/12/2016 31/12/2017 FROM 1 DUE IN 12 FROM 1 DUE IN 12 MONTHS MONTHS TO 5 YEARS TOTAL TOTAL TO 5 YEARS (EUROS) Bank overdrafts 21,534,927 - 21,534,927 14,746,924 - 14,746,924 48,105,827 Bank loans 16,267,199 13,071,428 29,338,628 18,767,199 29,338,628 Financial Statement as at 31 December 2017 Transaction accounts 43,139,346 43,139,346 64,428,008 - 64,428,008 - (17,376) - (17,376) 10,637 - 10,637 Other Total financial liabilities 80,924,097 13,071,428 93,995,525 97,952,769 29,338,628 127,291,397 M&A loans refers to credit lines to be used for acquisition operations carried directly by Reply S.p.A. or via companies controlled directly or indirectly by the same. Following and summarized by main features the ongoing contracts entered into for such a purpose: Summarized below are the existing contracts entered into for such a purpose: • On 25 November 2013 Reply S.p.A entered into a line of credit with Unicredit S.p.A for a total amount amounting to 25,000,000 Euros to be used by 31 December 2015. The loan is reimbursed on a half-year basis deferred to commence on 30 June 2016 and will expire on 31 December 2018. Such credit line was used for 6,053 thousand Euros at 31 December 2017. 217 216

219 • On 31 March 2015 Reply S.p.A. entered into a line of credit with Intesa Sanpaolo S.p.A. for a total amount of 30,000,000 Euros detailed as follows: › Tranche A, amounting to 10,000,000 Euros, entirely used for the reimbursement of the credit line dated 13 November 2013. The loan is reimbursed on a half-year basis deferred to commence on 30 September 2015. Such credit line was used for 5,000 thousand Euros at 31 December 2017. › Tranche B, amounting to 20,000,000 Euros, to be used by 30 September 2016.The loan is reimbursed on a half-year basis deferred to commence on 31 March 2017. Such credit line was used for 14,286 thousand Euros at 31 December 2017. • On 8 April 2015 Reply S.p.A. entered into a line of credit with Unicredit S.p.A. for a total amount of 10,000,000 Euros entirely used for the reimbursement of the credit line dated 19 September 2012. • The loan is reimbursed on a half-year basis deferred to commence on 31 October 2016. Such credit line was used for 2,500 thousand Euros at 31 December 2017. • On 30 September 2015 Reply S.p.A. entered into a line of credit with Unicredit S.p.A. for a total amount of 25,000,000 Euros to be used by 30 September 2018. On 17 February 2017 a reduction of the credit line to 1,500,000 was agreed and completely utilized, the loan will be Annual Financial Report 2017 reimbursed on a half year basis deferred to commence on 31 May 2019 and will expire on 30 November 2021. Such credit line was used for 1,500 thousand Euros at 31 December 2017. • On 28 July 2016 Reply S.p.A. entered into a line of credit with Intesa San Paolo S.p.A. for a total amount of 49,000 thousand Euros to be used by 30 June 2018. The loan will be reimbursed on a half basis deferred to commence on 30 September 2018 and will expire on 30 September 2021. As at December 31, 2017 this line had not been used. • On 21 September 2016 Reply S.p.A. entered onto an Interest Rate Swap contract with Intesa San Paolo S.p.A. with effect from 31 March 2017 and will expire on 31 March 2020. • On 17 February 2017 Reply S.p.A. entered into a line of credit with Unicredit S.p.A. for a total amount of 50,000,000 Euros to be used by 28 February 2020. As at December 31, 2017 this line had not been used. As contractually defined, such ratios are as follows: • Net financial indebtedness/Equity • Net financial indebtedness/EBITDA At the balance sheet date, Reply fulfilled the Covenants under the various contracts. 218

220 The item Other refers to the valuation of derivative hedging instruments. The underlying IRS amounted to 19,286 thousand Euros. The carrying amount of Financial liabilities is deemed to be in line with its fair value. Net financial position In compliance with Consob regulation issued on 28 July 2006 and in accordance with CESR’s “Recommendations for the consistent implementation of the European’s regulation on Prospectuses" issued on 10 February 2005 the Net financial position at 31 December 2017 was as follows: (EUROS) 31/12/2017 31/12/2016 CHANGE 50,108,291 63,610,242 13,501,951 Cash and cash equivalents Transaction accounts, asset 62,430,218 20,413,171 82,843,389 Total current financial assets 146,453,630 112,538,509 33,915,121 Loans to third parties - 738,341 (738,341) 13,027,872 Loans to subsidiaries 80,326,954 67,299,082 68,037,423 12,289,530 Total non current financial assets 80,326,954 Financial Statement as at 31 December 2017 226,780,584 180,575,933 46,204,652 Total financial assets Due to banks (37,784,750) (33,524,760) (4,259,990) Transaction accounts, liability (43,139,346) (64,428,008) 21,288,662 Current financial liabilities (80,924,097) (97,952,769) 17,028,672 Due to banks 16,267,200 (13,071,428) (29,338,628) (29,338,628) 16,267,200 (13,071,428) Non current financial liabilities (127,291,397) (93,995,525) 33,295,872 Total financial liabilities Total net financial position 132,785,059 53,284,536 79,500,523 54,729,704 of which related parties 120,030,996 65,301,292 For further details with regards to the above table see Notes 20, 24 and 25 as well as Note 28. 219 218

221 Change in Financial liabilities during 2017 is summarized below: (EUROS) 127,291,397 TOTAL FINANCIAL LIABILITIES 2016 Bank overdrafts (14,746,924) Transaction accounts, liability (64,428,008) (10,637) Fair value IRS Non current financial liabilities 2016 48,105,828 (18,767,200) Cash flows NON CURRENT FINANCIAL LIABILITIES 2017 29,338,628 Bank overdrafts 21,534,927 Transaction accounts, liability 43,139,346 Fair value IRS (17,376) TOTAL FINANCIAL LIABILITIES 2017 93,995,525 NOTE 29 - EMPLOYEE BENEFITS Annual Financial Report 2017 The Employee severance indemnity represents the obligation to employees under Italian law (amended by Law no. 296/06) accrued by employees up to 31 December 2006 which will be paid when the employee leaves the company. In certain circumstances, a portion of the accrued liability may be given to an employee during his working life as an advance. This is an unfunded defined benefit plan, under which the benefits are almost fully accrued, with the sole exception of future revaluations. The procedure for the determination of the Company’s obligation with respect to employees was carried out by an independent actuary according to the following stages: • Projection of the Employee severance indemnity already accrued at the assessment date and of the portions that will be accrued until when the work relationship is terminated or when the accrued amounts are partially paid as an advance on the Employee severance indemnities; • Discounting, at the valuation date, of the expected cash flows that the company will pay in the future to its own employees; • Re-proportioning of the discounted performances based on the seniority accrued at the valuation date with respect to the expected seniority at the time the company must fulfil its obligations. 220

222 Reassessment of Employee severance indemnities in accordance with IAS 19 was carried out “ad personam” and on the existing employees, that is analytical calculations were made on each employee in force in the company at the assessment date without considering future work force. The actuarial valuation model is based on the so called technical bases which represent the demographic, economic and financial assumptions underlying the parameters included in the calculation. The assumptions adopted can be summarized as follows: DEMOGRAPHIC ASSUMPTIONS Mortality RG 48 survival tables of the Italian population Inability INPS tables divided by age and gender Retirement age Fulfilment of the minimum requisites provided by the General Mandatory Insurance Advances on Employee Annual frequency of advances and employee turnover were assumed severance indemnities from historical data of the company: frequency of advances in 2017: 2.50% frequency of turnover in 2017: 10% ECONOMIC AND FINANCIAL ASSUMPTIONS Constant average annual rate equal to 1.50% Annual discount rate Financial Statement as at 31 December 2017 Annual growth rate of the Calculated with reference to the valuation date of primary shares on the stock market in which the company belongs and with reference to the market yield of Federal bonds. Employee severance indemnities The annual discount used for 2017 was 1.31% Annual increase in salaries The employee severance indemnities (TFR) are revalued on an annual basis equal to 75% of the inflation rate plus a spread of one and a half percentage point. The annual increase of salaries used was calculated in function of the employee qualifications Annual inflation rate and the Company’s market segment, net of inflation, from 1.0% to 1.50% In accordance with IAS 19, Employment severance indemnities at 31 December 2017 is summarized in the table below: 31/12/2016 436,717 Actuarial gains/(losses) (2,503) Interest cost 6,407 (10,399) Indemnities paid Transfers 44,709 31/12/2017 474,932 221 220

223 NOTE 30 - DEFERRED TAX LIABILITIES Deferred tax liabilities at 31 December 2017 amounted to 1,214,430 Euros and are referred mainly to the fiscal effects arising from temporary differences between the statutory income and taxable income. TAX TEMPORARY TAXABLE DIFFERENCES TAXABLE 1,121,147 4,570,231 Balance at 31/12/2016 388,681 93,283 Accruals Utilization - - Total at 31/12/2017 1,214,430 4,958,912 - deduction allowance for doubtful accounts 718,805 172,513 - different goodwill/trademark measurements 622,828 173,769 - gains on unrecognized differences and other minor differences 3,617,279 868,148 Total at 31/12/2017 4,958,912 1,214,430 Annual Financial Report 2017 NOTE 31 - TRADE PAYABLES Trade payables at 31 December 2017 amounted to 349,998,450 Euros with an increase of 53,766,509 Euros. Detail is as follows: (EUROS) 31/12/2017 31/12/2016 CHANGE Due to suppliers 18,032,095 14,481,539 3,550,556 Due to subsidiaries 196,329,834 185,959,406 10,370,427 Advance payments from customers - asset 135,636,520 95,790,995 39,845,526 Total 349,998,450 296,231,941 53,766,509 Due to suppliers mainly refers to services from domestic suppliers. Due to subsidiary companies recorded a change of 10,370,427 Euros, and refers to professional services in connection to third party agreements with Reply S.p.A. Reply S.p.A. carries out commercial fronting activities for some of its major clients, whereas delivery is carried out by the operational companies. 222

224 Advance payments from customers include advances received from customers for contracts subcontracted to subsidiary companies, which at the balance sheet date were not yet completed. The carrying amount of trade payables is deemed to be in line with its fair value. NOTE 32 - OTHER CURRENT LIABILITIES Detail is as follows: 31/12/2017 31/12/2016 CHANGE (EUROS) - 5,572,864 (5,572,864) Income tax payable 680,461 1,275,175 Withholding tax and other (594,714) Total payable to tax authorities 6,848,039 (6,167,578) 680,461 INPS (National Italian insurance payable) 928,410 848,457 79,953 Other 292,441 306,550 (14,108) 65,845 Total social security payable 1,220,852 1,155,006 Employee accruals 281,400 1,592,652 1,874,052 Payable to subsidiary companies 8,973,992 (1,599,759) 7,374,233 Financial Statement as at 31 December 2017 3,393,086 Miscellaneous payables 430,849 2,962,237 Accrued expenses and deferred income 1,746,136 2,839,083 (1,092,947) Total other payables 14,387,507 16,367,965 (1,980,458) Total other current liabilities 24,371,010 (8,082,190) 16,288,820 Due to tax authorities mainly refers to payables due for withholding tax on employees and free lancers’ compensation. Due to social security authorities is related to both Company and employees’ contribution payables. Employee accruals mainly include payables to employees for remunerations due but not yet paid at year-end. Due to subsidiary companies represents the liability on tax losses recorded by subsidiaries under national tax consolidation for 2017 and for the tax credits that subsidiaries transferred to Reply S.p.A as part of the tax consolidation. The carrying amount of the item Other current liabilities is deemed to be in line with its fair value. 223 222

225 NOTE 33 - PROVISIONS The item Provisions amounting to 15,234,000 Euros is summarized as follows: 31/12/2016 ACCRUALS UTILIZED 31/12/2017 (EUROS) 6,821,300 3,000,000 (373,300) 9,448,000 Provision for risks Provision for losses on equity investments 4,586,000 - 5,786,000 1,200,000 Total 8,021,300 7,586,000 (373,300) 15,234,000 The item Provision for risks reflects the best estimate of contingent liabilities deriving from ongoing legal litigations, at 31 December 2017 an accrual of 3,000,000 euros was made. The item Provision for losses on equity investments has been adjusted because of the impairment test related to the value of the equity investments. NOTE 34 - TRANSACTIONS WITH RELATED PARTIES Annual Financial Report 2017 With reference to CONSOB communications no. DAC/RM 97001574 of 20 February 1997 and no. DAC/RM 98015375 of 27 February 1998 concerning relations with related parties, the economic and financial effects on Reply S.p.A.’s year ended 2017 Financial Statements related to such transactions are summarized below. Transactions carried out by Reply S.p.A. with related parties are considered ordinary business and are carried out at normal market conditions. Financial and business transactions among the Parent Company Reply S.p.A. and its subsidiaries and associate companies are carried out at normal market conditions. 224

226 REPLY S.P.A. MAIN ECONOMIC AND FINANCIAL TRANSACTIONS WITH WITH WITH SUBSIDIARY WITH SUBSIDIARY RELATED AND ASSOCIATE RELATED AND ASSOCIATE PARTIES COMPANIES PARTIES NATURE OF TRANSACTION COMPANIES (THOUSAND EUROS) FINANCIAL TRANSACTIONS 31/12/2017 31/12/2016 80,327 - 67,299 - Financial loans Financial receivables - - 80 Guarantee deposits 80 Guarantee deposits 39,704 - (1,998) - Transaction accounts held Transaction accounts, net by the Parent company Trade receivables and other 181,348 - 135,683 - Royalties, administration services, marketing, quality management services and office rental Trade payables and other - 195,851 - Services carried out in relation 203,720 to contracts signed by the Parent company and subsequently committed to subsidiary companies Compensation paid to Directors Other payables - 2,950 - 2,300 and Key Management ECONOMIC TRANSACTIONS 2017 2016 25,401 21,692 Licensing of the "Reply" trademark Revenues from Royalties - consisting in a 3% fee on third party revenues Financial Statement as at 31 December 2017 33,150 13 28,288 8 Administrations services, marketing, Revenues from services quality management and office rental 7,071 - 6,794 Revenues from management Strategic management services - services Costs for professional services 337,191 - 331,065 - Services carried out in relation to contracts signed by the Parent company and subsequently committed to subsidiary companies Other services 420 1,370 420 Services related to office rental 1,497 and office of the secretary Personnel 5,877 - 5,224 Emoluments to Directors - and Key Management Interest income, net 6,942 - 4,563 - Interest on financial loans: 3 month Euribor + spread of 3 percentage points 225 224

227 In accordance with Consob Resolution no. 15519 of 27 July 2006 and Consob communication no. DEM/6064293 of 28 July 2006, in the annexed tables herein, the Statement of income and the Statement of financial position reporting transactions with related parties separately, together with the percentage incidence with respect to each account caption has been provided. Pursuant to art. 150, paragraph 1 of the Italian Legislative Decree n. 58 of 24 February 1998, no transactions have been carried out by the members of the Board of Directors that might be in potential conflict of interests with the Company. NOTA 35 - ADDITIONAL DISCLOSURE TO FINANCIAL INSTRUMENTS AND RISK MANAGEMENT POLICIES TYPES OF FINANCIAL RISKS AND CORRESPONDING HEDGING ACTIVITIES Reply S.p.A. has determined the guide lines in managing financial risks. In order to maximize costs and the resources Reply S.p.A. has centralized all of the groups risk management. Reply Annual Financial Report 2017 S.p.A. has the task of gathering all information concerning possible risk situations and define the corresponding hedge. As described in the section “Risk management”, Reply S.p.A. constantly monitors the financial risks to which it is exposed, in order to detect those risks in advance and take the necessary action to mitigate them. The following section provides qualitative and quantitative disclosures on the effect that these risks may have upon the company. The quantitative data reported in the following do not have any value of a prospective nature, in particular the sensitivity analysis on market risks, is unable to reflect the complexity of the market and its related reaction which may result from every change which may occur. CREDIT RISK The maximum credit risk to which the company is theoretically exposed at 31 December 2017 is represented by the carrying amounts stated for financial assets in the balance sheet. Balances which are objectively uncollectible either in part or for the whole amount are written down on a specific basis if they are individually significant. The amount of the write-down takes into account an estimate of the recoverable cash flows and the date of receipt, the costs 226

228 of recovery and the fair value of any guarantees received. General provisions are made for receivables which are not written down on a specific basis, determined on the basis of historical experience. Refer to the note on trade receivables for a quantitate analysis. LIQUIDITY RISK Reply S.p.A. is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time. The two main factors that determine the company’s liquidity situation are on one side the funds generated by or used in operating and investing activities and on the other the debt lending period and its renewal features or the liquidity of the funds employed and market terms and conditions. As described in the Risk management section, Reply S.p.A has adopted a series of policies and procedures whose purpose is to optimize the management of funds and to reduce the liquidity risk, as follows: Centralizing the management of receipts and payments, where it may be economical in • the context of the local civil, currency and fiscal regulations of the countries in which the company is present; • Maintaining an adequate level of available liquidity; Financial Statement as at 31 December 2017 • Monitoring future liquidity on the basis of business planning. Management believes that the funds and credit lines currently available, in addition to those funds that will be generated from operating and funding activities, will enable the Group to satisfy its requirements resulting from its investing activities and its working capital needs and to fulfil its obligations to repay its debts at their natural due date. CURRENCY RISK Reply S.p.A. has a limited exposure to exchange rate risk; therefore, the company does not deem necessary hedging exchange rates. INTEREST RATE RISK Reply S.p.A. makes use of external funds obtained in the form of financing and invest in monetary and financial market instruments. Changes in market interest rates can affect the cost of the various forms of financing, including the sale of receivables, or the return on investments, and the employment of funds, causing an impact on the level of net financial expenses incurred by the company. 227 226

229 In order to manage these risks, the Reply S.p.A uses interest rate derivative financial instruments, mainly interest rate swaps, with the object of mitigating, under economically acceptable conditions, the potential variability of interest rates on the net result. SENSITIVITY ANALYSIS In assessing the potential impact of changes in interest rates, the company separates fixed rate financial instruments (for which the impact is assessed in terms of fair value) from floating rate financial instruments (for which the impact is assessed in terms of cash flows). Floating rate financial instruments include principally cash and cash equivalents and part of debt. A hypothetical, unfavorable and instantaneous change of 50 basis points in short-term interest rates at 31 December 2017 applied to floating rate financial assets and liabilities, operations for the sale of receivables and derivatives financial instruments, would have caused increased net expenses before taxes, on an annual basis, of approximately 643 thousand Euros. This analysis is based on the assumption that there is a general and instantaneous change of 50 basis points in interest rates across homogeneous categories. A homogeneous Annual Financial Report 2017 category is defined on the basis of the currency in which the financial assets and liabilities are denominated. FAIR VALUE HIERARCHY LEVELS Evaluation techniques on three levels adopted for the measurement of fair value. Fair value hierarchy attributes maximum priority to prices quoted (not rectified) in active markets for identical assets and liabilities (Level 1 data) and the non-observable minimum input priority (Level 3 data). In some cases, the data used to assess the fair value of assets or liabilities could be classified on three different levels of the fair value hierarchy. In such cases, the evaluation of fair value is wholly classified on the same level of the hierarchy in which input on the lowest level is classified, taking account its importance for the assessment. The levels used in the hierarchy are: • Level 1 inputs are prices quoted (not rectified) in markets active for identical assets and liabilities which the entity can access on the date of assessment; • Level 2 inputs are variable and different from the prices quoted included in Level 1 observable directly or indirectly for assets or liabilities; Level 3 inputs are variable and not observable for assets or liabilities. • 228

230 The following table presents the assets and liabilities which were assessed at fair value on 31 December 2017, according to the fair value hierarchical assessment level. NOTE LEVEL 1 LEVEL 2 LEVEL 3 (THOUSANDS EUROS) - - - Financial securities Other assets - - - Total Assets - - - 34 Derivative financial liabilities (IRS) 28 - Liabilities to minority shareholders and earn out 2,364 - 27 - Total Liabilities - 34 2,364 The fair value of Liabilities to minority shareholders and earn out was determined by Group management on the basis of the sales purchase agreements for the acquisition of the company’s shares and on economic parameters based on budgets and plans of the purchased company. As the parameters are not observable on stock markets (directly or indirectly) these liabilities fall under the hierarchy profile in level 3. As at 31 December 2017, there have not been any transfers within the hierarchy levels. Financial Statement as at 31 December 2017 NOTE 36 - SIGNIFICANT NON-RECURRING TRANSACTIONS Pursuant to Consob communication no. 6064293 of 28 July 2006, there were no significant non-recurring transaction during 2017. NOTE 37 - TRANSACTIONS RESULTING FROM UNUSUAL AND/OR ABNORMAL OPERATIONS Pursuant to Consob communication no. 6064293 of 28 July 2006, in 2017 Reply S.p.A. has not taken part in any unusual and/or abnormal operations as defined in that Communication, under which unusual and abnormal transactions are those which because of their significance or importance, the nature of the parties involved, the object of the transaction, the means of determining the transfer price or of the timing of the event (close of the year end) may give rise to doubts regarding the accuracy/completeness of the information in the Financial Statements, conflicts of interest, the safeguarding of the entity’s assets or the protection of minority interests. 229 228

231 NOTE 38 - GUARANTEES, COMMITMENTS AND CONTINGENT LIABILITIES GUARANTEES Guarantees and commitments where existing, have been disclosed at the item to which they refer. COMMITMENTS It is reported that: • The Domination Agreement contract undersigned in 2010 between Reply Deutschland AG, dominated company, and Reply S.p.A, dominating company, ceased to exist from the date of legal efficacy of the merger for incorporation of Reply Deutschland AG in Reply S.p.A and with this, the obligations taken on by Reply. It is reported that the judgment of the qualified German Court is still pending for deciding on the suitability of the strike value of the acquisition option of shares on request of the minority shareholders of Reply Deutschland AG at a pre-determined price (8.19 euro). Currently it is not possible to foresee the outcome of the said judgment but Management believes that any future economic-financial effects on the Company are not significant. • with regards the merger operation for the incorporation of Reply Deutschland AG in Annual Financial Report 2017 Reply S.p.A. the assessment procedures foreseen in the measures of Article 122j of Umwandlungsgesetz find application – German law on extraordinary operations – with reference to the exchange ratio and the corresponding amount in cash. Within three months from the registration of the merger in the Turin Companies Register, each minority shareholder was able to present a petition for the purpose of commencing, in compliance with German law, before a Judge qualified in Germany – who shall have exclusive jurisdiction – the assessment inherent in the Share Swap ratio and the corresponding amount in cash. All shareholders of Reply Deutschland will have the right to benefit from a possible increase in the exchange ratio determined by the Judge or on the basis of an agreement between the parties, and that is to say independently of their participation in the evaluation procedure. On the contrary, from the possible increase of the corresponding amount in cash determined by the Judge or on the basis of an agreement between the parties only the shareholders who verbally annotated their disagreement in the general meeting in respect of conditions of the law can benefit. In the case where evaluation procedures include a modification of the exchange ratio, every single difference shall be regulated in cash. At present, some minority shareholders have commenced the aforementioned procedures. With specific reference to the request to obtain the corresponding amount in cash, the time limit 230

232 for exerting such an authority shall expire starting from the shortest time limit between the day following it expiring from the two months subsequent to the final ruling of the qualified court or the publication of a binding agreement between the parties. During the said period, the former Reply Deutschland shareholders can freely decide on whether to obtain the corresponding amount in cash or whether to remain shareholders of Reply. CONTINGENT LIABILITIES As an international company, Reply is exposed to numerous legal risks, particularly in the area of product liability, environmental risks and tax matters. The outcome of any current or future proceedings cannot be predicted with certainty. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully covered, by insurers’ compensation payments and could affect the Company financial position and results. Instead, when it is probable that an overflow of resources embodying economic benefits will be required to settle obligations and this amount can be reliably estimated, the Company recognizes specific provision for this purpose. NOTE 39 - EMOLUMENTS TO DIRECTORS, STATUTORY AUDITORS AND KEY MANAGEMENT Financial Statement as at 31 December 2017 The fees of the Directors and Statutory Auditors of Reply S.p.A. for carrying out their respective functions, including those in other consolidated companies, are fully explained in the Annual Report on Remuneration annexed herein. NOTE 40 - EVENTS SUBSEQUENT TO 31 DECEMBER 2017 No significant events have occurred subsequent to 31 December 2017. NOTE 41 - APPROVAL OF THE FINANCIAL STATEMENTS AND AUTHORIZATION TO PUBLISH The financial statements for the year-ended 31 December 2017 were approved by the Board of Directors on March 13, 2018 which approved their publication. 231 230

233 ANNEXED TABLES REPLY S.P.A. STATEMENT OF INCOME PURSUANT TO CONSOB RESOLUTION NO. 15519 OF 27 JULY 2006 OF WHICH OF WHICH WITH RELATED WITH RELATED (EUROS) % 2016 PARTIES % 2017 PARTIES 378,788,753 58,321,419 15.4% 367,952,177 51,395,823 14.0% Revenue 10,201,787 8,084,930 79.3% 7,999,405 6,091,535 76.1% Other income (19,198,916) 98.0% (16,293,478) (15,694,310) 96.3% Purchases (18,817,214) (19,821,559) (5,877,000) 29.6% (20,176,553) Personnel 25.9% (5,224,000) Services and other costs (342,420,618) (327,701,502) 95.7% (338,791,654) (322,573,699) 95.2% Amortization and depreciation (973,395) - - (731,885) - - Other operating and non recurring income/(expenses) - - 1,780,821 - - (2,999,737) Operating income (EBIT) - - 1,738,834 - - 3,576,315 Gain/(loss) on equity investments 95,910,635 - - 18,000,006 - - Financial income/(loss) 2,971,575 6,942,047 233.6% (2,900,297) 4,562,480 (157.3%) Annual Financial Report 2017 Income before taxes 102,458,525 - 16,838,543 - - - taxes (390,815) - - 424,935 - - Income Net income 102,067,710 - - 17,263,478 - - Earnings per share and diluted 2.73 - - 0.46 - - 232

234 REPLY S.P.A. STATEMENT OF FINANCIAL POSITION PURSUANT TO CONSOB RESOLUTION NO. 15519 OF 27 JULY 2006 OF WHICH OF WHICH WITH RELATED WITH RELATED PARTIES (EUROS) 31/12/2016 PARTIES % 31/12/2017 % assets 477,824 - - 722,796 - - Tangible 86,765 - - 86,765 - - Goodwill 2,096,599 - 2,118,907 - - - Other intangible assets investments 143,259,963 - - 149,356,195 - - Equity 80,407,079 80,326,954 99.9% 67,399,932 Other financial assets 99.9% 67,299,082 Deferred tax assets 4,634,202 - - 3,017,480 - - Non-current assets - - 222,702,075 - - 230,962,432 372,933,805 Trade receivables 47.1% 304,557,549 122,134,064 40.1% 175,692,870 Other receivables and current assets 21,330,897 5,655,321 26.5% 20,042,881 13,548,794 67.6% Financial assets 82,843,389 100.0% 63,168,559 62,430,218 98.8% 82,843,389 Cash and cash equivalents 63,610,242 - - 50,108,291 - - Current assets 540,718,332 - - 438,877,280 - - 771,680,764 TOTAL ASSETS - - 660,579,355 - - 4,863,486 - - Share Capital 4,863,486 - - Financial Statement as at 31 December 2017 Other 185,179,297 - - 178,614,766 - - reserves 102,067,710 - 17,263,478 - - Net income - 292,110,492 - - 200,741,730 - - SHAREHOLDERS’ EQUITY 2,364,114 - - 2,364,114 - - Due to minority shareholders liabilities Financial - - 29,338,628 - - 13,071,428 benefits - - Employee 436,717 - - 474,932 Deferred tax liabilities - - 1,121,147 - - 1,214,430 Provisions 9,448,000 - - 6,821,300 - - Non-current liabilities - - 40,081,906 - - 26,572,905 80,924,097 64,428,008 53.3% 97,952,769 Financial liabilities 65.8% 43,139,346 Trade payables 196,329,645 56.1% 296,231,941 185,959,406 62.8% 349,998,450 Other current liabilities 16,288,820 7,324,233 45.0% 24,371,010 9,537,061 39.1% Provisions - - 1,200,000 - - 5,786,000 Current liabilities 452,997,366 - - 419,755,719 - - TOTAL LIABILITIES 479,570,271 - - 459,837,625 - - TOTAL LIABILITIES AND - - SHAREHOLDERS' EQUITY 771,680,764 - - 660,579,355 233 232

235 REPLY S.P.A. EQUITY INVESTMENTS IN SUBSIDIARIES WITH ADDITIONAL INFORMATION REQUIRED BY CONSOB (COMMUNICATION NO. 6064293 OF 28 JULY 2006) TOTAL CARRYING SHARE SHAREHOLDERS’ NET VALUE AT REGISTERED CURRENCY CAPITAL EQUITY RESULT INTEREST 31/12/2017 COMPANY OFFICE € Air Reply S.r.l. 85,365 70,763 85.00% 558,500 Turin 10,000 € 100.00% 588,754 510,345 Turin 588,000 Arlanis Reply S.r.l. 10,000 Turin 10,000 1,865,856 1,774,293 100.00% 512,696 Aktive Reply S.r.l. € Turin € 10,000 12,902 (137,667) 100.00% 12,575 Atlas Reply S.r.l. London GBP 5,086 3,074,295 114,408 100.00% 7,322,484 Avantage Reply Ltd. Turin € 7,871,152 7,812,289 100.00% 527,892 Blue Reply S.r.l. 10,000 London 10,000 (4,573,348) (2,692,457) 100.00% 12,477 Breed Reply Ltd GBP London GBP 100 (778,201) 1,431,062 80.00% 103 Breed Investments Ltd Bridge Reply S.r.l. Turin 10,000 283,109 254,329 60.00% 6,000 € Turin 2,596,531 78,000 2,739,453 Business Reply S.r.l. 100.00% 268,602 € Cluster Reply S.r.l. € 139,116 9,505,065 9,273,923 100.00% 2,540,848 Turin Annual Financial Report 2017 Turin € 10,000 1,075,149 1,040,805 100.00% 296,184 Cluster Roma Reply S.r.l. Consorzio Reply Public Sector Turin € 92,500 24,320 - 35.91% 32,500 Consorzio Reply Energy Turin 4,000 4,000 - 25.00% 1,000 € Turin € 1,500,647 1,468,199 100.00% 317,662 Data Reply S.r.l. 10,000 Turin 10,000 1,511,036 1,412,430 100.00% 1,311,669 Discovery Reply S.r.l. € Turin € 34,000 3,286,518 3,145,705 100.00% 3,076,385 e*finance Consulting Reply S.r.l. Ekip Reply S.r.l. Turin 10,400 106,246 69,163 100.00% 30,000 € Turin 568,539 14,000 683,156 Eos Reply S.r.l. 80.71% 155,369 € Forge Reply S.r.l. € 10,000 11,192 (724,469) 100.00% 12,000 Turin Go Reply S.r.l. Turin € 50,000 1,646,172 158,878 100.00% 1,920,000 Hermes Reply Polska zo.o Katowice 40,000 7,480,921 1,857,542 100.00% 10,217 ZLT Turin 1,173,037 10,000 1,230,823 Hermes Reply S.r.l. 100.00% 199,500 € IrisCube Reply S.p.A. € 651,735 6,482,707 5,605,928 100.00% 6,724,952 Turin Lem Reply S.r.l. Turin € 47,370 48,910 (24,045) 100.00% 400,012 Like Reply S.r.l. € 10,000 196,469 184,251 100.00% 132,317 Turin Logistics Reply S.r.l. Turin € 78,000 2,449,836 2,276,807 100.00% 1,049,167 Open Reply S.r.l. Turin € 10,000 2,486,272 2,455,890 100.00% 1,417,750 10,000 Pay Reply S.r.l. Turin € 10,000 2,489,312 2,458,053 100.00% 234

236 TOTAL CARRYING SHAREHOLDERS’ NET REGISTERED VALUE AT SHARE CURRENCY CAPITAL EQUITY RESULT INTEREST 31/12/2017 COMPANY OFFICE Turin € 10,000 875,293 861,915 100.00% 106,000 Portaltech Reply S.r.l. Turin 10,000 1,404,112 1,293,987 100.00% 2,500,850 € Power Reply S.r.l. Turin € 10,200 11,968 (375,472) 55.00% 287,000 Protocube Reply S.r.l. Turin € 10,000 1,112,793 1,068,089 100.00% 3,518,434 Reply Consulting S.r.l. Reply AG Guetersloh € 100,200 51,129,165 (7,440,793) 100.00% 57,835,780 Reply Services S.r.l. Turin 10,000 55,586 (29,991) 100.00% 95,212 € Michigan (57,099) 50,000 (1,265,092) Reply Inc. 100.00% 40,596 $ Reply Ltd. GBP 54,175 6,602,841 (2,052,082) 100.00% 11,657,766 London Reply Digital Experience S.r.l. (ex Bitmama S.r.l.) Turin € 29,407 35,498 (53,548) 100.00% 4,227,019 Reply do Brasil Sistemas 206,817 Belo Horizonte R$ 650,000 8,048,461 2,679,518 98.50% de Informatica Ltda Ringmaster S.r.l. Turin € 10,000 1,191,793 1,100,815 50.00% 5,000 11,386,966 Santer Reply S.p.A. Milan € 2,209,500 10,098,813 (2,322,417) 100.00% 4,648,649 4,493,747 Security Reply S.r.l. Turin € 50,000 392,866 100.00% Sense Reply S.r.l. Turin 10,085 (6,615) 90.00% 15,700 € 10,000 Turin 10,000 177,104 152,159 100.00% 100,000 Square Reply S.r.l. € Turin € 10,000 11,087 (272,278) 85.00% 672,500 Spark Reply S.r.l. Turin € 10,000 - Sprint Reply S.r.l. 100.00% - - Financial Statement as at 31 December 2017 Turin 10,000 4,771,699 1,996,095 95.00% 986,000 € Storm Reply S.r.l. Turin € 32,942 1,078,713 967,595 100.00% 949,571 Syskoplan Reply S.r.l. Turin € 115,046 7,093,839 6,868,731 100.0 % 4,991,829 Sytel Reply S.r.l. 10,000 Turin € 100.0 % 2,281,319 2,218,160 Sytel Reply Roma S.r.l. 894,931 TamTamy Reply S.r.l. Turin 10,000 515,579 490,938 100.0 % 263,471 € Turin 1,751,733 10,000 1,826,944 Target Reply S.r.l. 100.0 % 600,338 € Technology Roma S.r.l. € 10,000 786,461 464,889 100.00% 10,000 Turin Technology Reply S.r.l. Turin € 79,743 6,470,342 6,178,363 100.00% 216,658 Technology Reply S.r.l. (Romania) RON 44,000 (1,860,505) (1,153,636) 100.0% 9,919 Rumenia Twice Reply S.r.l. Turin € 10,000 3,808,328 150,585 98.00% 521,202 Whitehall Reply S.r.l. Turin € 21,224 666,478 539,708 100.00% 160,211 11,150,465 Xister Reply S.r.l. Rome € 10,000 3,115,902 979,944 89.20% 235 234

237 Details of shareholders’ equity stated according to origin, possibility of utilization, possibility of distribution, availability and the utilization in the previous three fiscal years SUMMARY OF THE AMOUNTS USED IN THE PRIOR THREE FISCAL YEARS POSSIBILITY OF FOR COVERAGE UTILIZATION AVAILABLE OF LOSSES OTHER NATURE/DESCRIPTION AMOUNT 4,863,486 Capital Capital reserve 24,502 Reserve for treasury shares 23,302,692 A,B,C 23,302,692 Share premium 29,990,873 29,990,873 Reserve for treasury shares A,B,C reserves Income Legal reserve B 972,697 Extraordinary reserve 102,265,360 A,B,C 102,265,360 Surplus merger reserve 6,347,964 A,B,C 6,347,964 Retained earnings 674,740 A,B,C 674,740 Reserve for purchases of treasury shares 19,984,625 A,B,C 19,984,625 Annual Financial Report 2017 Total 182,566,253 - Not available amount 182,566,253 Residual available amount Reserves from transition to IAS/IFRS FTA reserve 303,393 Retained earnings 2,147,961 Reserve for cash flow hedge (34,248) IAS reserve (24,502) Reserve for treasury shares (6,312) Accounting expenses according to IAS 32 (770,448) 1,615,844 Legend A: for share capital increase B: for coverage of losses C: distribution to shareholders 236

238 DISCLOSURES PURSUANT TO ARTICLE 149-DUODECIES BY CONSOB The following table, prepared in accordance with Art. 149-duodecies of the Regolamento Emittenti issued by Consob, reports the amount of fees charged in 2017 for the audit and audit related services provided by the Audit Firm and by entities that are part of the Audit Firm network. There were no services provided by entities belonging to its network. SERVICE PROVIDER 2017 FEES (EUROS) Audit EY S.p.A. 59,236 (1) 1,086 EY S.p.A. Audit related services (2) 55,000 EY S.p.A. (3) 9,450 Other EY S.p.A. Total 124,722 (1) Attestation of tax forms (tax return, IRAP and Form 770) (2) DNF attestation (3) GAAP Analysis Financial Statement as at 31 December 2017 237 236

239 ATTESTATION OF THE FINANCIAL STATEMENTS in accordance with article 154-bis of Legislative Decree 58/98 The undersigned, Mario Rizzante, in his capacity as Chairman and Chief Executive Officer, and Giuseppe Veneziano, Director responsible for drawing up Reply S.p.A.’s financial statements, hereby attest, pursuant to the provisions of Article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of 24 February 1998: • suitability with respect to the Company’s structure and the effective application • of the administration and accounting procedures applied in the preparation of the financial statements for the year ended 2017. The assessment of the adequacy of administrative and accounting procedures used for the preparation of the statutory financial statements at 31 December 2017 was carried out on the basis of regulations and methodologies defined by Reply prevalently coherent with the Internal Control – Integrated Framework model issued by the Committee of Sponsoring Organizations of the Treadway Commission, an internationally-accepted reference framework. The undersigned also certify that: Annual Financial Report 2017 3.1 the Financial Statements • have been prepared in accordance with International Financial Reporting Standards, as endorsed by the European Union pursuant to Regulation (EC) No. 1606/2002 of the European Parliament and Council, dated 19 July 2002 as well as the measures issued to implement Article 9 of Legislative Decree no. 38/2005; • correspond to the amounts shown in the Company’s accounts, books and records; and • provide a fair and correct representation of the financial conditions, results of operations and cash flows of the Company. 3.2 the report on operations includes a reliable operating and financial review of the Company and of the Group as well as a description of the main risks and uncertainties to which they are exposed. Turin, 13 March 2018 Chairman Director in charge and Chief Executive Officer of signing the financial statements Giuseppe Veneziano Mario Rizzante 238

240 REPORT ON THE STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING pursuant to article 153 of the legislative decree 58/1998 on the financial statements as at 31 December 2017 Dear Shareholders, pursuant to Article 153 of Legislative Decree No. 58/1998, as well as in compliance with outstanding laws and regulations, the Board of Statutory Auditors is reporting to the Shareholders’ meeting on the supervisory activity performed, and any omissions or censurable acts that emerged and can make proposals with respect to the approval of the Financial Statements. During the course of the financial year ended 31 December 2017, we complied with the duties set forth in Article 149 of Legislative Decree No. 58/1998 and in article 19 of Legislative decree 39/2010 and we are providing the following information with reference to the recommendations contained in the Consob communications issued up to the present day concerning the Financial Statement as at 31 December 2017 Regulations for Issuers: 1. THE MOST SIGNIFICANT OPERATIONS FROM AN ECONOMIC, FINANCIAL AND EARNINGS STANDPOINT. We obtained timely and adequate information from the Directors with respect to the most significant operations from an economic, financial and earnings standpoint carried out by the Company and/or by its subsidiaries in 2017 or subsequent to the end of the financial year, among which we note: • The completion of the company reorganization project concerning the merger of the company Triplesense Reply S.r.l. in favor of Bitmama S.r.l. both wholly owned by Reply S.p.A.; • The acquisition of the 100% share capital of comSysto GmbH by Reply AG for a consideration of 6 million Euros; • Reply S.p.A. undersigned a credit line with Unicredit S.p.A. in the amount of 50,000,000 Euros to be utilized by 28 February 2020; • Reply S.p.A. reduced to 1,500,000 Euros the loan/credit line originally signed in 2015 with Unicredit S.p.A. for a total of 25,000,000 Euros; 239 238

241 • Completion of the demerger of the company Technology Reply S.r.l. by way of transfer of business in favor of the newly established Technology Reply Roma S.r.l.; • Transfer of the InEssence Branch from InEssence Reply GmbH in favor of Syskoplan Reply S.r.l. having its business location in Milan; • Completion of the partial spin-off of the company Reply Services S.r.l. in favor or TamTamy Reply S.r.l.; • In the month of February 2018 Reply Services S.r.l. acquired a building in Turin, the former Caserma De Sonnaz. 2. ANY UNUSUAL AND/OR ATYPICAL TRANSACTIONS, INCLUDING INTRA-GROUP OR WITH RELATED PARTIES. On the basis of meetings held with the Directors and with representatives of the Independent Auditing firm, it did not appear that any atypical or unusual transactions occurred during the financial year, nor following the year ended. With reference to intra-group transactions, we give notice that: • Reply S.p.A. obtained professional services from Group companies related to revenues connected to contracts undersigned with major clients; Annual Financial Report 2017 • Reply S.p.A. gave bank guarantees to subsidiaries; • Reply S.p.A. granted the following subsidiaries loans without restrictions on use, aimed at supporting their activity: Air Reply S.r.l., Spark Reply S.r.l. and Sense Reply S.r.l. – non-interest bearing loan; › › Breed Investments Ltd, Breed Reply Ltd, Reply Ltd., Concept Reply GmbH, Hermes Reply Polska Sp Zoo, InEssence Reply Gmbh, Cluster do Brazil Ltda (formerly Mind Services Informatica Ltda), Portaltech Reply GmbH, Reply do Brazil Sistemas de Informatica Ltda, Reply Inc., Reply Ltd, Technology Reply S.r.l. (Romania), Reply AG and Reply France Sarl– interest bearing loans; • Reply S.p.A. provided subsidiaries with management, administrative, commercial and marketing services, the lease of premises, as well as services to manage the corporate internet network, electronic mail and web; • Reply S.p.A. centrally managed the Group’s treasury by means of correspondence bank accounts held by the individual subsidiaries; • Reply S.p.A. granted Group companies the use of the “REPLY” trademark that it owns; • Reply S.p.A. acquired “office services” (general services and the availability of office space) from Reply Services S.r.l. and from Santer Reply S.p.A.. Transactions with related parties in 2017, which took place in accordance with market 240

242 conditions, are related to Emoluments to Directors and Key Management and to “office services, in particular to the office situated in Corso Francia, 110 Turin, provided by Iceberg S.r.l. (formerly Alika S.r.l.), Reply S.p.A.’s direct parent company (until 31/01/2018). At the report date these transactions are ongoing with the exception of the “office services” that are currently being supplied by Alika S.r.l., the newly established company to which Iceberg S.r.l. conferred the business branch including the equity investment in Reply S.p.A. equal to approximately 45.10% of the share capital with effective date February 1, 2018. For these operations the Procedure for Related party transactions was not applied as these transactions are exempt as defined by art. 4.1 and 4.4. of the Procedure. 3. INFORMATION PROVIDED IN THE REPORT ON THE OPERATION ON ATYPICAL AND/OR UNUSUAL TRANSACTIONS, INCLUDING INTRA- GROUP TRANSACTIONS AND THOSE WITH RELATED PARTIES. The information provided by the Directors in the Report on Operations accompanying the Financial Statements as at 31 December 2017 and in the Notes to the Consolidated Financial Statements of the Reply Group and to the Financial Statements as at 31 December 2017 regarding the most significant transactions from an economic, financial and earnings standpoint, as well as transactions with subsidiaries, associated companies and related parties, are adequate. Financial Statement as at 31 December 2017 The Report does not reveal that any atypical and/or unusual transactions occurred during the year or after it ended. 4. COMMENTS AND PROPOSALS ON THE NOTES AND REQUESTS FOR INFORMATION CONTAINED IN THE REPORT OF THE INDEPENDENT AUDITOR. The Directive 2014/56/EU amended Directive 2006/43/EC concerning the statutory audit; the directive was implemented in Italy with Legislative Decree 135/2016 which amended Legislative Decree 39/2010. The regulation (EU) 537/2014 of 16 April 2014, art. 10, defines the specific requirements of the audit report for public interest entities. Pursuant to art. 19 of Legislative Decree 39/2010, during 2017 and up to the date of this Report, the Board of Statutory Auditors carried out a continuous monitoring process of the activities carried out by the auditing firm through a series of meetings during which among other things, has examined: the purpose of the audit, materiality and significant risks and the audit plan. The Board of Statutory Auditors analyzed the methodological framework adopted by the auditor and acquired the necessary information going forward, receiving updates on the progress of 241 240

243 the audit engagement and on the main aspects brought to the auditor's attention. The Board of Statutory Auditors examined the following reports prepared by the independent auditor EY S.p.A : • the reports on the audit of the financial statements and the audit of the consolidated financial statements issued on March 29, 2018 pursuant to art. 14 of Legislative Decree 39/2010 and of art. 10 of the Regulation (EU) n. 537/2014; • the additional report issued on March 29, 2018, pursuant to Article 11 of the aforementioned Regulation, to the Board of Statutory Auditors in capacity of the Internal Control and Auditing Committee; • the annual confirmation of independence, issued March 29, 2018, pursuant to art. 6 par. 2) let. a) of the Regulations and pursuant to paragraph 17 of ISA Italia 260. The aforementioned annual audit reports of the consolidated financial statements show that the individual financial statements and the consolidated financial statements of the Group provide a true and fair view of the balance sheet and financial situation of Reply S.p.A. and of the Reply Group at December 31, 2017, of the economic result and cash flows for the year ended on that date, in compliance with the International Financial Reporting Standards adopted Annual Financial Report 2017 by the European Union, as well as with the provisions issued in implementation of article 9 of Legislative Decree 38/2005. Furthermore, in the opinion of the auditor, the management report and some specific information disclosed in the report on corporate governance and ownership structure indicated in art. 123-bis, paragraph 4, of Legislative Decree 58/1998, is consistent with the financial statements of Reply S.p.A. and with the consolidated financial statements of the Reply Group at December 31, 2017 and are prepared in accordance with the law. With reference to the possible identification of significant errors in the management report (Article 14, paragraph 2, letter e) of Legislative Decree 39/2010), the auditor declared that nothing had emerged. Commencing financial year 2017, the audit reports on the financial statements and the consolidated financial statements describe, according to professional judgement, the most significant audit aspects of the individual and consolidated financial statements for the year under exam. More specifically, EY S.p.A. has identified the following key aspects: the valuation of investments, with regard to the financial statements and • 242

244 • the valuation of the goodwill and the valuation of payables to minority shareholders and corporate transactions, with regard to the consolidated financial statements. Regarding the aforementioned key aspects, for which the auditor's reports illustrate the related audit procedures adopted, the auditor does not express a separate opinion, since the auditors themselves were involved in the audit and in the assessment of the financial statements as a whole. The aforementioned key aspects were the subject of detailed analysis and updating during the periodic meetings that the Board of Statutory Auditors had with the auditors. 5. COMPLAINTS PURSUANT TO ARTICLE 2408 OF THE ITALIAN CIVIL CODE. No complaints have been acknowledged pursuant to Article 2408 of the Italian Civil Code in 2017 and at present. 6. FILED COMPLAINTS/LAWSUITS. The Company’s Directors did not advise us of any complaints filed against the Company in the financial year, nor subsequent to the date it ended. 7. THE GRANTING OF ANY FURTHER APPOINTMENTS TO THE Financial Statement as at 31 December 2017 INDEPENDENT AUDITOR AND RELATIVE COSTS. During 2017, in addition to the engagement of auditing the Financial Statements as at 31 December 2017, EY S.p.A. received the following engagements: • The signing of Reply S.p.A.’s various tax forms (Modelli Unico, IRAP, 770) The consideration for such engagement was 1 thousand Euros; • The signing of various tax forms of Reply S.p.A.’s Italian subsidiaries (Modelli Unico, IRAP, 770) The consideration for such engagement was 21 thousand Euros. • GAAP analysis of the 2017 Disclosure of non-financial information, on Reply S.p.A.'s non- financial reporting 2016 and its subsidiaries. The fee for this engagement was agreed at 9 thousand Euros. Limited review of the 2017 Consolidated Disclosure of non-financial information in • accordance to Leg. Decree 254/2016. The fee for this engagement was agreed at 55 thousand Euros. 243 242

245 8. ANY APPOINTMENTS OF PARTIES CONNECTED TO THE INDEPENDENT AUDITOR BY ONGOING RELATIONSHIPS, AND THE RELATIVE COSTS. In 2017 EY GmbH was assigned to perform a Due Diligence on a target acquisition company incorporated under German law. The consideration for such engagement was 87 thousand Euros. During 2018 EY LLP was assigned to perform a Due Diligence on a target acquisition company incorporated under American law. The fee for this engagement was agreed in a range of 185 to 235 thousand dollars. 9. INDICATION OF WHETHER OPINIONS WERE ISSUED IN ACCORDANCE WITH LAW DURING THE FINANCIAL YEAR. During the financial year the opinions requested by the Board of Statutory Auditors were issued as provided by law. 10. INDICATION OF THE FREQUENCY AND NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS, EXECUTIVE COMMITTEE AND BOARD Annual Financial Report 2017 OF STATUTORY AUDITORS. During the financial year, the Board of Directors met 4 times, and the Board of Statutory Auditors 8 times. The Internal Control and Risk Management Committee 4 times, whereas the Remuneration Committee met once, and the Committee for Related Party Transactions did not meet. The Board of Statutory Auditors attended the meetings of the Board of Directors, and through its Chairman, those of the Internal Control and Risk Management Committee and the Remuneration Committee. 11. INSTRUCTIONS GIVEN BY THE COMPANY TO SUBSIDIARIES PURSUANT TO ARTICLE 114(2) OF LEGISLATIVE DECREE 58/1998. The instructions given by Reply S.p.A. to subsidiaries, pursuant to the second paragraph of Article 114 of Legislative Decree 58/1998 appear to be adequate; similarly, the subsidiaries provided the Parent Company with the necessary information for its timely knowledge of the business situation. We advise you that in order to guarantee the timely communication of the information requested, Mr. Daniele Angelucci, Executive Director and Finance and Control Manager of Reply S.p.A., also acts as advisor within all of the administrative bodies of the Italian subsidiaries, 244

246 with the exclusion of the company Ringmaster S.r.l., as well as Director in numerous foreign subsidiaries and is also a member of the Supervisory Board of Reply AG. We further advise you that: • the Chairman of Reply S.p.A.’s Board of Directors, Mr. Mario Rizzante, is the Director of the English subsidiaries Reply Ltd., Portaltech Reply Ltd., Avantage Reply Ltd, Breed Reply Ltd, Breed Reply Investments Ltd. and is also a member of the Supervisory Board of Reply AG. • Tatiana Rizzante, Chief Executive Officer is Director of the English subsidiaries Avantage Reply Ltd and Reply Ltd and Director in the American subsidiary Reply Inc. and is also the Managing Director of the German subsidiaries, InEssence Reply GmbH and Reply AG. • Filippo Rizzante, Executive Director holds office as Vice President of Ringmaster S.r.l. among other offices as Director in several English companies. 12. SIGNIFICANT ISSUES THAT EMERGED DURING THE MEETINGS HELD WITH THE INDEPENDENT AUDITOR PURSUANT TO ARTICLE 150(3) OF LEGISLATIVE DECREE 58/1998. During the meetings held with representatives of the Independent Auditors, no deeds or facts deemed to be reprehensible or relevant emerged or are worthy of mention pursuant to art. 155, paragraph 2, of Legislative Decree 58/1998. Financial Statement as at 31 December 2017 13. THE COMPANY’S COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE OF THE LISTED COMPANIES’ CORPORATE GOVERNANCE COMMITTEE. Commencing from 2000, the Company adheres to the Corporate Governance Code promoted by Borsa Italiana S.p.A., and revised in July 2015. On 13 March 2018 the Board of Directors approved the annual Report on Corporate Governance and Ownership Structure prepared pursuant to Article 123 bis of Legislative Decree 58/1998. 14. FINAL CONSIDERATIONS ON THE SUPERVISORY ACTIVITY CARRIED OUT, AS WELL AS WITH RESPECT TO ANY OMISSIONS, CENSURABLE EVENTS OR IRREGULARITIES DISCOVERED DURING SUCH ACTIVITY. The Board’s supervisory activity was carried out through: • Activities aimed at controlling compliance with laws and the by-laws; • Participation at the meetings of the Company’s governing bodies; • Acquiring information during periodic meetings with the Independent Auditor concerning 245 244

247 both the activity it performed as well as any risks related to its independence; • Acquiring information during meetings with members of the Board of Statutory Auditors of the subsidiaries to exchange information on the Group’s activities and coordinate control and supervisory activities; • Gathering additional information during meetings with the Chairman of the Company, the Director responsible for drawing up the Company’s Financial Statements, the Person in charge of internal control and the Supervisory Body; • Participation at the meetings of the Internal Control and Risk Management Committee and the Remuneration Committee; • The analysis of any new provisions of law or Consob communications of interest to the Company. The Board confirmed that the organizational requirements were met to comply with the relevant Company by-laws, laws and regulations, in the constant evolution and search for improvement. In particular, we advise the Shareholders that: • We have monitored the conformity of the Procedure for Transactions with Related Parties, approved by Reply S.p.A.’s Board of Directors on 11 November 2010 and subsequently approved on 4 May 2015, according to the standards indicated in the Regulations Annual Financial Report 2017 approved by Consob by means of Resolution No. 17221 of 12 March 2010 and subsequent modifications, as well as compliance with it; • We controlled the correct application of the criteria adopted by the Board of Directors in evaluating the existence of the conditions of independence of the “independent Directors”; • we monitored the financial reporting process and its integrity; we have verified the effectiveness of the company's internal control, quality and risk • management systems, with regard to financial reporting; • we monitored the statutory audit of the financial statements and of the consolidated financial statements; • We monitored, when requested, compatibility with legal restrictions on services other than the audit of the annual and consolidated accounting records provided by the Independent Auditor to Reply S.p.A. and to its subsidiaries; • we monitored compliance with the provisions of art. 17, paragraph 4, of Legislative Decree 39/2010 and in this regard, we inform you that the new key manager for the review of the financial statements of Reply S.p.A. is Mr. Alessandro Davi; • we verified and monitored the independence of the independent auditing firm EY S.p.A. pursuant to articles 10, 10-bis, 10-ter, 10-quater and 17 of Legislative Decree 39/2010 and article 8 of Regulation (EU) 537/2014; 246

248 • We controlled compliance with the limit on the accumulation of appointments pursuant to Article 144-terdecies of the Consob Issuers’ Regulation No. 11971 as well as whether the members of the Board of Statutory Auditors possess the same pre-requisites of independence required for Directors; • We did not receive any reports of the Supervisory Body’s violation of the Organizational and Management Model pursuant to Legislative Decree 231/01; • We verified compliance with the laws on “Market abuse” and “Protection of savings” in matters of corporate disclosures of information and “Internal Dealings” based on the information provided by the Company. In this respect, the Internal Dealing Procedure was updated in accordance to Consob resolution no.19925 dated March 22, 2017 and was approved by the Board of Directors on November 14, 2017; • we verified the fulfillment of the obligations related to the regulations pursuant to Legislative Decree 254/2016 of the national implementation of the Directive 2014/95 / EU, on the basis of which the Consolidated Disclosure of Non-Financial information was approved by the Board of Directors on March 13, 2018. In this regard, we acknowledge that EY S.p.A., specifically appointed, issued on March 29, 2018 its opinion pursuant to art. 3, c. 10 of Legislative Decree 254/2016, regarding the compliance of the information provided in the Consolidated Disclosure of a Non-Financial information with respect to the requirements set forth in Legislative Decree 254/2016. Financial Statement as at 31 December 2017 On the basis of the principles mentioned and the information acquired during the audits and participation at meetings with the persons responsible for administration and the internal control, we reached the following conclusions: 1) ADMINISTRATION The Board of Statutory Auditors, having participated at the meetings of the Board of Directors, on the basis of the information obtained at such time, acknowledges that it has verified, with the exclusion of control of the merits of the opportunity and economic convenience of the choices made by such body, that the transactions performed and being carried out by the Company are based on principles of proper administration, conform to law and the By-laws, do not conflict with the resolutions of the Shareholders’ meetings or compromise the integrity of the Company’s assets. 2) ORGANISATIONAL STRUCTURE Within the scope of the responsibilities bestowed on us by the rules set forth in Legislative Decree 58/1998 and in compliance with the Governance Rules of the Board of Statutory Auditors, we met periodically with the Directors of the Independent Auditor and the 247 246

249 organizational department, to gather the necessary information. This allowed the Board of Statutory Auditors to thoroughly supervise the Company’s organizational structure also with reference to the procedures, processes and structures that preside over the production, reporting, measurement and representation of results and information of a non-financial nature and to arrive at a judgment of overall adequacy with respect to its size. 3) INTERNAL CONTROL SYSTEM Within the Board of Directors there is a Committee for Internal Control and Risk Management, a Remuneration and Nominating Committee, and a Committee for Transactions with Related Parties, whose activities are carried out according to a program in line with the needs of the Company. The participation of the Director in charge of the Internal Control, as well as our participation at the meetings of the Internal Control and Risk Management Committee, allowed us to coordinate our functions as the Internal Control and Audit Committee, assumed pursuant to Article 19 of Legislative Decree 39/2010, with the activities of the Internal Control and Risk Management Committee, and, in particular, to carry out the supervisory activities provided by Article 19 of Legislative Decree No. 39/2010. Annual Financial Report 2017 On the basis of our analysis and the audits conducted, the overall system appears to be substantially fair and reliable. We have received from EY S.p.A. the report pursuant to art. 10 of Regulation (EU) 537/2014 which states that no significant issues emerged during the audit, nor significant gaps in the Internal Control System in relation to the financial reporting process. On the basis of our analysis and the audits conducted, the overall system appears to be substantially fair and reliable. 4) ADMINISTRATIVE- ACCOUNTING SYSTEM Our assessment of the administrative-accounting procedures is positive, and they also appear to be imposed on the companies belonging to the Group. We therefore deem that the administrative-accounting system is suitable to represent and monitor management, the presentation of the data for the reporting period, the identification, prevention and management of financial and operational risks, and any fraud that could damage the Company. The Chairman and the Director in charge of drawing up the Company’s Financial Statements have issued, pursuant to Article 81-ter of Consob Regulation No. 11971/1999 and subsequent modifications and supplements, the attestation required by Article 154-bis (5) of TUF (Legislative Decree 58/1998). 248

250 15. ANY PROPOSALS TO MAKE TO THE SHAREHOLDERS’ MEETING PURSUANT TO ARTICLE 153 OF LEGISLATIVE DECREE 58/1998. In relation both to the provision of the second paragraph of Article 153 of Legislative Decree 58/1998 and the general supervisory obligation pursuant to Article 149(1) of such Decree, as well as the agenda of the Shareholders’ meeting which includes discussion of the Financial Statements for the reporting period, the Board of Statutory Auditors states that it has supervised compliance with the procedural rules and law with respect to their preparation. We note that the Financial Statements as at 31 December 2017 were prepared in compliance with European Regulation No. 1606/2002 of 19 July 2002, in compliance with International Financial Reporting Standards (IAS/IFRS). On the basis of the controls made directly and the information exchanged with the Independent Auditor, and also in view of the latter’s report pursuant to Article 14 of Legislative Decree 39/2010 which expresses a judgment without reservations, the Board of Statutory Auditors has no comments or proposals with respect to the Financial Statements or Report on Operations and the proposals set forth therein, which it consequently considers, to the extent of its specific expertise, should meet your approval. Similarly, with specific reference to the provision of the second paragraph of Article 153 of Legislative Decree 58/1998, the Board does not have any proposals to make with respect to the other matters within its scope of expertise. Financial Statement as at 31 December 2017 With reference to the point on the agenda concerning the purchase and disposal of treasury shares, recalling disclosures made by the Directors, the Board states that the resolution proposed is in accordance with articles 2357, 2357-ter of the Italian Civil Code, in accordance with Article 132 of Legislative Decree 58/1998, as well as those of Art. 144-bis of Consob’s Issuers Regulation no. 11971 of 14 May 1999. Finally, we remind you that our three-year term of office has expired and in thanking you for the trust you have placed in us, we invite you to take the necessary measures. Turin, 29 March, 2018 The Statutory Auditors (Prof. Cristiano Antonelli) (Dott.ssa Ada Alessandra Garzino Demo) (Dott. Paolo Claretta Assandri) 249 248

251 INDEPENDENT AUDITORS' REPORT Annual Financial Report 2017 250

252 Financial Statement as at 31 December 2017 250 251

253 Annual Financial Report 2017 252

254 Financial Statement as at 31 December 2017 252 253

255 Annual Financial Report 2017 254

256 Financial Statement as at 31 December 2017 254 255

257 CORPORATE INFORMATION HEADQUARTERS Reply S.p.A. Corso Francia, 110 10143 TURIN – ITALY Tel. +39-011-7711594 Fax +39-011-7495416 www.reply.com CORPORATE DATA Share capital: Euro 4,863,485.64 i.v. Fiscal Code and R.I. of Turin no. 97579210010 VAT no. 08013390011 REA of Turin 938289 Annual Financial Report 2017 MARKETING AND COMMUNICATION E-mail: [email protected] Tel. +39-011-7711594 Fax +39-011-7495416 INVESTOR RELATIONS E-mail: [email protected] Tel. +39-02-535761 Fax +39-02-53576444 256

258 reply annual financial report 2017 www.reply.com

Related documents