AXWAY_REGISTRATION_DOCUMENT_2017

AXWAY GROUP AND ITS BUSINESS ACTIVITIES

CORPORATE RESPONSIBILITY

CORPORATE GOVERNANCE

CONSOLIDATED FINANCIAL STATEMENTS

2017 ANNUAL FINANCIAL STATEMENTS

CAPITAL AND AXWAY SOFTWARE STOCK

INFORMATIONS ADMINISTRATIVES ETbJURIDIQUES

COMBINED GENERAL MEETING OFb6bJUNEb2018

Notes to the financial statements

In order to increase Axway’s financial flexibility while also guaranteeing its capacity to finance an external-growth strategy, Axway Software has a multicurrency revolving credit facility (RCF) contracted with six banks in JulyǾ2014. This credit facility is for €125Ǿmillion, is revolving and matures in JulyǾ2019 with a 1+1 type renewal option. In JulyǾ2016, the banking pool granted another one-year extension for the revolving credit facility. The RCF, which now matures in JulyǾ2021, retains a central role in the Axway Group’s strategy for financing future acquisitions. The interest rate is Euribor applicable to the relevant drawdown period, plus a spread adjusted every six months in line with the change in the ratio of Net financial debt to EBITDA. The net debt figure used does not include employee profit-sharing liabilities. These lines are subject to a utilization and non-utilization commission. Three financial ratios must be met under covenants entered into with partner banking establishments (see NoteǾ14.3). ● “Net debt/EBITDA” ratio of below 3.0 from the signing date until 30ǾJune 2018 and below 2.5 from 31ǾDecember 2018 and 2.0 from 31ǾDecember 2020. This ratio was 0.47 at 31ǾDecember 2017; ● the ratio of “EBITDA to financial expenses” remaining above 5.0 throughout the term of the loan. This ratio was 40.19 at 31ǾDecember 2017; ● “Net debt/shareholders’ equity” ratio below 1.0 throughout the term of the loan. This ratio was 0.06 at 31ǾDecember 2017. At the beginning of JanuaryǾ2016, Axway had drawn down €20Ǿmillion of its €125Ǿmillion revolving credit facility (RCF) to finance the acquisition of Appcelerator. This drawn-down amount was fully repaid in AprilǾ2017. Alongside this, in order to finance the acquisition of Syncplicity, Axway drew down a further $45Ǿmillion in FebruaryǾ2017, which was repaid and replaced by a €36Ǿmillion drawdown in NovemberǾ2017. Following these transactions, the available balance under the RCF stands at €89Ǿmillion. The €5Ǿmillion loan from Banque Populaire, contracted in AprilǾ2016, is being repaid in line with its repayment schedule. This loan is repayable in installments over five years, and is not subject to any financial covenant. Similarly, the loans contracted from BPI France, for €5Ǿmillion in MarchǾ2015 for a term of 5Ǿyears, for €5Ǿmillion in JulyǾ2016 for a term of 7Ǿyears and for €3Ǿmillion in SeptemberǾ2016 for a term of 5Ǿyears, are not subject to any financial covenant and are being repaid in accordance with their respective repayment schedules.

Thus, bank borrowings changed as follows:

● two drawdowns from the RCF, of $45Ǿ million, then of €36Ǿmillion; ● two repayments to the RCF, of €20Ǿmillion and $45Ǿmillion; ● the scheduled quarterly €0.4Ǿthousand repayment installments on the BPI loans ofǾ2015 and 2016; ● the scheduled €0.25Ǿ thousand quarterly repayment installments for the AprilǾ2016 BP loan. At end 2017, Axway also sold €9Ǿmillion of its CIR research tax credits to Crédit Agricole, and the receivable was deconsolidated. Derivatives are initially recognized at fair value on the date of signing the contract. They are later revalued at their fair value. The accounting treatment of the associated profit or loss depends on whether the derivative has been designated as a hedging instrument and, if so, on the nature of the hedged item. The Group designates a number of derivatives such as: ● hedges of the fair value of assets or liabilities recognized in the balance sheet or of firm forward commitments (fair value hedge);Ǿor ● hedges of a specific risk associated with an asset or liability recognized or a future, highly probable transaction (cash flow hedge);Ǿor ● hedges of a net investment in a foreign operation (net investment hedge). The fair value of a hedging derivative instrument is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12Ǿmonths, and as a current asset or liability when the remaining maturity of the hedged item is less than 12Ǿmonths. Changes in the fair value of derivative instruments that qualify for hedge accounting impact the shareholders’ equity. Derivatives held for trading purposes are classified as current assets or liabilities if settled within a year of the closing, otherwise they are classified under non-current assets or liabilities. The Group also classifies derivatives as speculative instruments, which cannot qualify as designated and effective hedging instruments within the meaning of IASǾ39. The changes in their fair value are recorded in the income statement as Other financial income and expenses. 10.5 Financial instruments recorded inbthebbalance sheet

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AXWAY - 2017 REGISTRATION DOCUMENT