AXWAY_REGISTRATION_DOCUMENT_2017

CORPORATE RESPONSIBILITY AXWAY GROUP AND ITS BUSINESS ACTIVITIES Notes to the annual financial statements 2017

CORPORATE GOVERNANCE

CONSOLIDATED FINANCIAL STATEMENTS

2017 ANNUAL FINANCIAL STATEMENTS

CAPITAL AND AXWAY SOFTWARE STOCK

INFORMATIONS ADMINISTRATIVES ETbJURIDIQUES

COMBINED GENERAL MEETING OFb6bJUNEb2018

5.3 Notes to the annual financial statements 2017

1 Significant events, accounting policies and valuation rules 1.1 Significant events

● consistency of accounting methods from one year to the next (despite the change introduced by ANC regulation No.Ǿ2015- 05 of 2ǾJuly 2015, which did not have any material impact on the financial statements for the fiscal year); ● in accordance with general guidelines for the preparation and presentation of annual financial statements. Research & Development All research expenses are charged to the income statement in the year they are incurred. Project development costs may be capitalized if all of the following can be demonstrated: ● the technical feasibility of completing the intangible asset so that it will be available for use or sale; ● the intention to complete the intangible asset and use or sell it; ● independence of fiscal years; ● the manner in which the intangible asset will generate probable future economic benefits; ● the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; ● the ability to reliably measure the expenditure attributable to the intangible asset during its development. No software package development expenses have been recognized under intangible assets, as all of the conditions described above have not been met. Following the transfer of all Systar’s assets and liabilities, the Research & Development expenses which were capitalized by Systar were taken over by Axway Software and further amortized according to their initial amortization schedule. Software acquired Software acquired corresponds mainly to the contribution made by Sopra Group inǾ2001 and to the acquisition of the intellectual property relating to the software of Cyclone and Tumbleweed from Axway Inc. inǾ2010 and 2011 and the LiveDashboard software from Access UK inǾ2012, and the transfer of all of Systar’s assets inǾ2015. ● the ability to use or sell the intangible asset;

Acquisition of Syncplicity Our subsidiary Axway Inc. acquired 100% of Syncplicity for the sum of €76.6Ǿmillion. This transaction impacted Axway Software since it helped finance the purchase by drawing down on its credit line with the banks for $45Ǿmillion. This amount was transferred to Axway Inc. and recorded in its current account. NoteǾthat the $45Ǿmillion credit line was converted in November to a €36Ǿmillion drawdown. Tax audit TheMontreuil court issued a judgment in favor of Axway Software regarding the write-off of receivables, allowing provisions of €713Ǿthousand to be reversed. Provisions for foreign exchange risk Sharp fluctuations in the US dollar between the year-end 2016 ($1 to €1.0541) and year-end 2017 ($1 to €1.1993) led to a significant foreign exchange loss in our current accounts with Axway Inc. and Axway Ireland. We therefore recorded a foreign exchange loss of €8.7Ǿmillion. Liquidation of Systar UK Ltd and Axway Software SDN BHD Systar Uk Ltd and Axway Software SDN BHD were liquidated during the 2017 fiscal year. These transactions resulted in a loss of €8.8Ǿthousand for one entity and a profit of €3Ǿthousand for the other in the Axway Software parent company financial statements. 1.2 Accounting policies and valuation rules The annual financial statements were drawn up pursuant to French legal and regulatory provisions. They are defined by the new general accounting plan amended by ANC Regulation 2016- 07 of the Autorité des normes comptables (French Accounting Standards Authority) and approved by decree on 26ǾDecember 2016. These principles were applied on a prudent basis and in accordance with the following underlying assumptions:

● going concern basis;

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AXWAY - 2017 REGISTRATION DOCUMENT

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