AXWAY_REGISTRATION_DOCUMENT_2017

AXWAY GROUP AND ITS BUSINESS ACTIVITIES Notes to the financial statements

CORPORATE RESPONSIBILITY

CORPORATE GOVERNANCE

CONSOLIDATED FINANCIAL STATEMENTS

2017 ANNUAL FINANCIAL STATEMENTS

CAPITAL AND AXWAY SOFTWARE STOCK

INFORMATIONS ADMINISTRATIVES ETbJURIDIQUES

COMBINED GENERAL MEETING OFb6bJUNEb2018

In view of the global nature of products andmarkets, a breakdown by country of the contribution to the Axway Group’s results would not be meaningful. Cash inflows related to business in different countries are thus not considered to be separate from the cash inflows generated by the activities of other countries, and Axway as a whole is considered as the smallest grouping of assets that generates broadly independent cash inflows. Since Axway operates as a software developer on a global market, the Group is treated as a single cash-generating unit for the purposes of impairment testing. b. Methods for measuring value-in-use In accordance with IASǾ36, where the carrying amount of a cash- generating unit to which goodwill has been allocated is tested for impairment and exceeds its fair value less costs to sell (or where it is not possible to determine the fair value less costs to sell), the carrying amount of the CGU is compared to its value-in-use. The value-in-use is determined using the present value of future cash flows method: ● cash flows for a planned five-year period, with cash flows for the first year of the plan based on the budget; ● cash flows beyond the five-year plan period are calculated by applying an infinite growth rate to reflect forecast long- term real economic growth, adjusted for forecast long-term inflation. Cash flow projections for the explicit period are determined by taking into account:

● supplemented by the market’s risk premium multiplied by a sensitivity coefficient (b) specific to the entity. c. Measurement of impairment losses Impairment losses are recognized to the extent of any excess of a CGU’s carrying amount over its recoverable amount. Impairment losses are first allocated against goodwill and are charged to the income statement as part of Other operating income and expenses . Impairment losses on goodwill cannot be reversed. d. Test carried out The aim of the annual impairment testing is to assess whether goodwill is impaired. This is the case when the carrying amount of the cash-generating unit (CGU) to which the goodwill tested is allocated is lower than its recoverable amount. The recoverable amount of a cash-generating unit is the higher of its value-in- use, calculated according to the discounted cash flow method, or its fair value less costs to sell. As Axway represents a single CGU, the impairment test for goodwill consists of comparing the overall carrying amount of the Group to its recoverable amount. Impairment testing carried out at the end ofǾ2014, 2015, 2016 and 2017 did not lead to the recognition of an impairment loss. For fiscal yearǾ2017, the value-in-use calculated according to the discounted cash flow method amounted to €606.5Ǿmillion, with a discount rate of 9.6% and an infinite growth rate of 2.2%, both resulting from the average of analysts. The projected cash flows are based on a five-year plan which is based on a business plan approved by the management. Beyond this period, cash flows are extrapolated depending on cash flows growing sustainably at 2.2%.

● general economic growth;

● the impact of technological advances in the industry. The cash flows are discounted using a discount rate equal to:

● the ten-year risk-free money market rate;

Discount rate

Value (in thousands of euros)

9.20%

9.60%

10.00% 552,032 573,788 597,886

1.80% 2.20% 2.60%

615,332 643,033 674,079

582,053 606,533 633,979

Growth rate in perpetuity

Kepler Nov-17 10.2%

SocGen Bryan Garnier

idMidCaps LCM MidCaps

Average Nov-17

Nov-17

Nov-17 11.9%

Nov-17

Nov-17

Discount rate

9.5% 2.0%

9.0% 2.0%

7.4% 2.0%

9.6% 2.2%

Growth rate in perpetuity

2.5%

2.5%

The fair value less costs to sell the Axway cash-generating unit was determined from its market capitalization. The costs to sell are estimated at 2% of Axway’s fair value. Thus, at the closing rate on 29ǾDecember 2017, the fair value of the Axway CGU, i.e.

its market capitalization, was €483.4Ǿmillion, and the fair value less costs to sell was €473.9Ǿmillion. The recoverable amount of Axway’s CGU thus amounted to €606.5Ǿmillion and corresponds to its value-in-use.

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AXWAY - 2017 REGISTRATION DOCUMENT

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