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ZETES ANNUAL REPORT 2013

CREATING TOMORROW BY INVESTING TODAY

All the same and yet all very unique: getting the best out of people and goods into an outstanding ID


CONTENTS

03

HIGHLIGHTS

04

WHO IS ZETES?

06

MESSAGE FROM THE EXECUTIVE MANAGEMENT

08

REPORT FROM THE BOARD OF DIRECTORS

16

STRATEGY

20

ACTIVITIES

40

INNOVATION

44

SOCIAL RESPONSIBILITY

48

SHAREHOLDERS INFORMATION

Then look for the logo in the Annual Report. Open Layar and hold your mobile or tablet (still) over the page.

51

FINANCIAL INFORMATION AND CORPORATE GOVERNANCE

The digital content will appear and take you further into the world of Zetes.

Zetes is an international Group highly specialised in identification & mobility solutions. Connecting what matters is at the heart of our business: physical movements and digital flows, our customers and their critical data, but also consumers and corporations, citizens and governments. By using the most innovative technologies, we help our customers to improve speed, quality and accuracy in order to be on the leading edge of their industry. This has made us a pioneering leader on our market.

READ BETWEEN THE LINES OF OUR ANNUAL REPORT. Discover an extra layer of detail with Layar. At Zetes, we like to embrace technological innovations – on condition that they offer real added value. And we consider adding an extra digital layer to enrich the information in our Annual Report to be a real added value. Why? Because a video or interactive experience often says more than a thousand words. Thanks to your smartphone and the Layar technology, you can choose the digital content you want to add to this report.

How do you use Layar? Download the free app for Android, iPhone or tablet.

INTERACTIVE PRINT

No smartphone or tablet? You can also find all this content by clicking here: www.zetes.com/AR2013


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

ZETES GROUP - KEY FIGURES In € '000 OPERATING SITUATION Sales Gross Margin % Sales Operating Expenses Current Ebitda (1) % Sales Amortizations, depreciations and impairment losses Current Ebit (2) EBIT Net Result

2008 177 636 77 415 43.6% (62 204) 15 211 8.6% (6 055) 9 156 8 563 6 004

2009 167 471 76 457 45.7% (62 851) 13 606 8.1% (5 479) 8 127 7 425 5 135

2010 216 738 88 711 40.9% (69 614) 19 096 8.8% (7 272) 11 824 11 416 8 210

2011 220 562 95 477 43.3% (76 837) 18 640 8.5% (7 599) 11 041 10 055 6 244

2012 214 126 93 699 43.8% (79 583) 14 117 6.6% (7 472) 6 645 5 438 3 526

2013 211 472 91 446 43.2% (77 911) 13 535 6.4% (7 604) 5 931 5 111 3 397

CASH FLOW STATEMENT (KEY FIGURES) CASH AND CASH EQUIVALENTS, BEGINNING BALANCE

2008 14 722

2009 12 710

2010 18 140

2011 14 599

2012 14 306

2013 12 797

CASH FLOWS FROM OPERATIONS of which: Cash flows from the P&L Working capital

7 030 12 867 (5 837)

14 684 10 850 3 834

11 117 14 681 (3 564)

18 174 14 499 3 675

12 381 10 541 1 840

4 026 10 337 (6 311)

CASH FLOWS RELATING TO INVESTING ACTIVITIES of which: Fixed Assets Subsidiaries, net of cash acquired Developments

(4 481) (3 776) 65 (1 138)

(7 241) (4 323) (2 098) (1 176)

(10 010) (6 715) (1 278) (2 147)

(13 424) (4 701) (6 550) (2 473)

(7 662) (5 361) (740) (1 834)

(10 696) (7 986) (343) (2 756)

CASH FLOWS RELATING TO FINANCING ACTIVITIES of which: Proceeds from cash flows from financing Repayments relating to cash flows from financing Bank overdrafts increase (decrease) Dividends paid Own shares

(4 308) 571 (2 260) 204 (1 940) (300)

(2 088) 2 558 (1 388) (403) (1 940) (467)

(4 870) 113 (2 837) (49) (1 911) 466

(5 065) 4 614 (2 018) (966) (5 336) (1 267)

(6 199) 0 (2 080) 588 (2 895) (1 685)

4 672 3 947 (2 108) 6 185 (2 875) (250)

CASH AND CASH EQUIVALENTS, CLOSING BALANCE

12 710

18 140

14 599

14 306

12 797

10 585

FINANCIAL POSITION (KEY FIGURES) ASSETS of which: Tangible assets Intangible assets Goodwill Deferred tax assets Inventories Current trade and other receivables Current prepayments Cash and cash equivalents TOTAL ASSETS

2008

2009

2010

2011

2012

2013

7 574 3 788 32 464 1 930 12 097 52 089 4 325 12 710 127 464

8 893 3 874 33 108 1 867 11 102 46 370 6 017 18 140 130 376

12 548 4 690 34 970 2 749 15 155 65 593 7 161 14 599 158 346

13 020 5 636 40 125 3 028 15 351 62 345 8 696 14 306 163 523

13 625 5 433 39 878 3 204 15 631 57 724 9 900 12 797 158 964

15 873 6 659 39 924 4 385 14 302 57 986 10 588 10 585 163 187

EQUITY AND LIABILITIES of which: Total equity Non current interests bearing borrowings Deferred tax liabilities Current interests bearing borrowings Current trade and other payables TOTAL EQUITY AND LIABILITIES

67 376 2 854 1 014 2 805 51 880 127 464

70 341 3 049 1 435 2 408 51 097 130 376

77 930 963 1 686 4 021 70 328 158 346

78 385 2 548 1 994 4 345 71 316 163 523

77 501 798 1 854 4 921 68 168 158 964

77 072 2 921 2 550 10 983 65 858 163 187

2008 769

2009 803

2010 902

2011 1 097

2012 1 070

2013 1 118

TOTAL HEADCOUNT Headcount on December 31st

(1) Current EBITDA = current EBIT before amortizations, depreciations and impairment losses (2) Current EBIT = EBIT excluding restructuration costs and other non current elements (badwill/SOP/Other)


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

SALES : € 211.5 MILLION in € million 200

80 170.7

150

145.5

171.5

155.3

148.3

250

171.2

61.4

60

131.6

200 49.9 42.6

100

40

50

0

31.6

29.3

2008

2009

2010

2011

2012

2013

0

2007

2008

214.1

211.5

2010

2011

2012

2013

14.1

13.5

2012

2013

167.5

100

20

2007

177.6

220.6

150

40.3

35.8

177.1

216.7

50

2007

2008

2009

Goods ID

2010

2011

2012

0

2013

2009

People ID

Group

CURRENT EBITDA : € 13.5 MILLION in € million 20 16

13.6

14.3 11.4

12

9.9

20

16

16

12

9.9

10.8

8 4

4

2007

2008

2009

2010

2011

2012

2013

0

2007

7.7

2009

2010

2011

2012

2013

Operating expenses Current EBITDA

2008

2009

2010

2011

148 315

131 646

155 290

170 703

63 269

57 885

63 047

68 518

2012

0

2007

2008

2009

2010

2011

Group Including corporate costs

EVOLUTION IN PEOPLE ID

2013

%

2008

2009

2010

2011

2012

2013

%

171 518 171 187

-0.2%

29 321

35 808

61 448

49 859

42 608

40 285

-5.5%

68 334

-1.4%

14 147

18 556

25 663

26 959

24 377

23 112

-5.2%

(48 922) (48 019) (51 652) (58 636) (61 884) (59 226)

-4.3%

(10 368) (12 120) (14 885) (14 904) (14 490) (15 433)

6.5%

69 323

14 346

9 866

11 395

9 882

7 439

9 108

% Sales

9.7%

7.5%

7.3%

5.8%

4.3%

5.3%

EBITDA

13 819

9 325

11 002

9 258

6 285

8 415

Current EBIT

10 028

6 170

7 054

5 225

2 296

597

622

697

889

Headcount

13.6

People ID

EVOLUTION IN GOODS ID

Gross Margin

15.2

4

Goods ID

Turnover

15.4

18.6

8

3.8

2008

19.1

12

9.9

6.4 4.9

0

12.1

9.1 7.4

8

20

22.4%

3 778

6 436

10 779

12 055

9 887

7 679

12.9%

18.0%

17.5%

24.2%

23.2%

19.1%

-22.3%

33.9%

3 778

6 365

10 764

11 693

9 879

7 552

-23.6%

3 201

39.4%

2 095

4 688

7 865

9 131

7 641

6 159

-19.4%

862

874

1.4%

159

169

194

196

196

233

18.9%

292.2%

ANNUAL INVESTMENTS : Fixed assets

1 776

1 062

4 642

3 147

4 095

3 243

-20.8%

1 902

3 250

2 073

1 299

1 185

4 649

Subsidiaries

0

2 098

1 278

6 550

740

343

-53.6%

(65)

0

0

0

0

0

1 138

1 176

2 147

2 107

1 834

2 584

40.9%

0

0

0

366

0

172

Developments


HIGHLIGHTS

Belgium

Gambia

Production of driving licences, which started at the beginning of 2013, is in full swing. Belgian passport issuance is now another Zetes project, with personalization beginning in spring 2014.

Zetes has also been mandated to personalize the Gambian biometric passport. Our integration of iris data directly into the passport is a world first.

Goods ID

Senegal

2013 was a pivotal year for the Goods ID division. The solutions portfolio was redefined to obtain a standardized offering, with market-specific solutions proposed to all Group customers. These solutions, directed at a collaborative supply chain, enable Zetes to differentiate itself from the competition and ensure growth for years to come.

66 enrolment stations developed and produced by Zetes were delivered to Senegal as part of the biometric passport project, and went into production during the summer months.

Investments 2013 was a year of investment, with substantial human and financial resources allocated to development in support of the company's future vision.

3


Connecting the physical and digital worlds to increase supply chain and identity document security


FOUNDED IN 1984 30 YEARS' EXPERIENCE CONDENSED INTO OUR SOLUTIONS N°1 EMEA PROVIDER OF SUPPLY CHAIN SOLUTIONS € 3 MILLION OF INVESTMENT IN INNOVATION 16,000,000 IDENTITY DOCUMENTS PRODUCED DIRECT PRESENCE IN 16 COUNTRIES 40% RECURRING REVENUE 100,000 WAREHOUSE OPERATORS WORKING WITH ZETES VOICE SOLUTION € 3.2 MILLION DISTRIBUTED TO SHAREHOLDERS 1,118 EMPLOYEES IN EMEA BIOMETRIC ENROLMENT OF 70,000,000 PEOPLE


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

"OF COURSE WE BELIEVE IN THE FUTURE, WE’RE BUSY BUILDING IT"

Customers, employees and shareholders all play their part in Zetes' innovation process. Our investments reflect a vision of the future. To remain among the best, we don’t improvise our future, we build it.

What’s more important to any State than its citizens? And more precious for a company than its products or production equipment? They cannot risk losing sight of what is most dear to them. For the past 30 years, Zetes has placed its entire expertise at the disposal of customers, enabling them to trace goods and identify people, by linking the physical and virtual worlds. Innovation is born of the exchange of knowledge Customers have a multitude of different needs: data integrity and protection, increased quality and productivity, improved flow management. On top of this, they need systems that are easy to use, requiring a high level of complexity and sophistication from the outset. Over the years, our teams have developed unrivalled reserves of experience. They know our customers' processes. They understand the challenges they face. They have also mastered proven technologies and are keen to investigate emerging ones. It is through this mixture of expertise that Zetes’ solutions are constantly born. They respond to evolving needs and ever increasing demands, whether regulatory or otherwise. During the past year, Zetes has increased its development efforts in both Goods and People ID in order to provide increasingly specific responses to the needs of the markets it serves. Developing solutions today that our customers will need tomorrow In Goods ID, the requirement for by-unit identification is spreading. For the past few years, an increasing number of economic sectors like the pharmaceuticals industry and the luxury sector, and more recently agro-food, have had recourse to introduce

6



Ladies and Gentlemen, dear Shareholders,

"It is its customers who are carrying Zetes forward by pushing our teams to excel and find an outstanding response to their challenges."

serialization, which exponentially increases the quantity of data to be recorded in the databases of supply chain stakeholders. Zetes provides a targeted response for each stakeholder. Recently it has developed the concept of a collaborative supply chain and provided tools for sustaining it. The resulting data repository enables data on goods produced, stored or transported to be gathered and for access to supply chain stakeholders concerned to be provided in a totally secure setting. This is not simply a case of replicating existing systems, but developing an integrated solution that the sector can use to solve tomorrow’s challenges and which will create even greater value for the financial stakeholders concerned. The enthusiasm shown by those customers who have already opted to work with Zetes on this initiative clearly demonstrates that this innovation is both necessary and promising for the future of our company. Leadership in one's sector is achieved only at the price of targeted innovation and permanent investment, which Zetes works on continuously. Biometrics and mobile data serving citizen identification In People ID, migratory flows are a driver of prosperity in the world by intensifying exchanges of skills and levelling out age pyramids. But these are possible only under the sovereign control of States, who need to be able to identify their own citizens and control visitors. The rapid increase in


MESSAGE FROM THE EXECUTIVE MANAGEMENT

computer processing power has made it possible to harness biometrics and mobile informatics, which are unbeatable means of precisely controlling individuals. At the request of several states, Zetes has recently developed and implemented biometric and biographical data recording systems, which permit integrated population databases to be constituted. From these systems, issuing of travel documents like passports and visas, enabling citizens to travel worry-free and for States to identify them with 100% certainty, can follow. Such innovative solutions are not the fruit of chance and Zetes has been able to capitalize, when investing in people identification, on its expertise in mobile informatics and ID processes. In so doing Zetes has accumulated references and solidified its reputation, making it a credible candidate supplier for any new identity document market. Our customers are the drivers of progress Clearly, it is our customers that carry Zetes forward and push our teams to excel in finding adequate answers to their challenges. They are the drivers of our progress, as are all our employees, with their desire to provide impeccable service and ambition to create ever-greater value. We wish to express our gratitude to all our customers for the trust they have placed in us, either as the managers of large companies or the leaders of the many states that constitute our references. We also wish to honour the efforts of all our teams, which collaborate beyond job and country boundaries to share their knowledge and enable Zetes Group to develop the most advanced solutions.

attributed to shareholders, to whom Zetes returned an amount of â‚Ź 3.2 million in the course of the past year. This serves as proof of our gratitude and also our confidence in the company's continued ability to generate strong profits and significant cash flow in the future, which are supported by today's investment.

Finally, these combined development and innovation efforts would not be impossible without large-scale investment, which at this level, is only possible for the strongest Jean-François Jacques and financially well resourced companies. The strength of our balance sheet can be Chairman of the Board

Alain Wirtz Chief Executive Officer

Pierre Lambert Chief Financial Officer

7


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

"INNOVATION IS OUR PASSPORT TO THE FUTURE."

Ladies and Gentlemen, dear Shareholders, The Board of Directors is please to present you with its report for the 2013 financial year. The present report covers both the unconsolidated (parent company) and consolidated financial statements. The Board attests that, to its knowledge, the unconsolidated and consolidated annual financial statements give a true and fair view of the net assets, financial situation and results of Zetes Industries SA and, in the case of the consolidated accounts, of the companies included in the consolidation. It also attests that the management report on the consolidated financial statements includes a true and fair description of the development, operational performance and position of the company, including the companies included in consolidation, and a description of the principal risks and uncertainties with which they are confronted. The consolidated financial statements are drawn up in euros (EUR), in accordance with the IFRS standards adopted by the European Union Commentary on the development of the company's business and its current situation Given the limited operational activity of the parent company Zetes Industries SA, it is the consolidated financial statements, discussed below, that give an accurate situational view of the Zetes Group (Zetes Industries SA and its subsidiaries). The consolidated financial statements are presented before dividend payment, which will be agreed at the Ordinary General Meeting of 28th May 2014. After the volatile order-taking and lower profitability of 2012, the Goods ID division significantly improved its performance in 2013, particularly in the second half. This improvement is largely due to good cost control. At the same time, the division

8

continued work on implementing its strategy based on developing its six key solutions. Sales revenue in the People ID division declined slightly compared with 2012, owing to lower activity in short-term projects, which affected second half performance. The conclusion and preparation in 2013 of several long-term contracts reinforces the company's confidence in the positive development of People ID for years to come. Balance sheet and cash flow The significant investments in Goods ID (development of solutions, equipment leased to customers) and in People ID (eVisa infrastructure in Senegal and Cote d'Ivoire, production site and backup for the Belgian driving licence, production infrastructure for the Belgian passport and other projects) have significantly impacted the Group's balance sheet. Besides the increase in fixed assets (up by a net € 7 million compared with December 2012), the company has also devoted a significant portion of its resources to preparing to undertake People ID contracts. This preparation work also explains the evolution of the deferred charges account (relating to signed contracts) and of the account relating to construction contracts, together up more than € 1.9 million on 2012. By spreading the cost of a project over its lifespan, these two accounts ensure consistent profitability over time. These efforts have obviously impacted the Group's indebtedness, moving from a positive cash position of € 7.5 million at the end of 2012, to a net debt position of € 3.0 million at the end of 2013. This increase is structural in nature, insofar as the increase in funding is tied to specific investments. At the same time, available cash has decreased slightly to €  10.6  million (against € 12.8 million in 2012).

Total assets increased by € 4.2 million from € 159.0 million to € 163.2 million. The net working capital requirement has also increased to € 15.9 million against € 12.7  million at the end of 2012, mainly due to the impact of construction contracts. Inventory is slightly lower at € 14.3 million, which is a good performance given the stability of the Group's sales. 

"The solvency ratio remains very high at 47.23%."

With equity of € 77.1 million on total assets of € 163.2 million, the solvency ratio remains very high at 47.23% (48.8% in 2012 and 47.9% in 2011), despite the Company's decision, given management's confidence in the prospects of the Group, to distribute a dividend of € 2.9 million in 2013. Zetes attaches great importance to having a strong balance sheet structure as this allows it to bid for and, where appropriate, absorb very large deals. The cash flow from operations is € 4.0  million, consisting of € 10.3 million generated in the income statement offset by the € -6.3 million used to increase working capital (a 'cash' variation). This significant increase is linked in particular to: • The increase in construction contracts and prepaid charges for People ID projects (€ 1.9 million) • Equipment leased out (€ 2.1 million of LT receivables, included in working capital) • A non-structural reduction in supplier payables (€ 2.3 million).


REPORT FROM THE BOARD OF DIRECTORS

Investments by Goods ID reached € 5.8 million, again up from previous years (€ 4.1 million in 2012). These investments break down into equipment for internal use (€ 2.4 million), assets related to operating leases (€ 0.6 million) and financial acquisitions (€ 0.3 million), plus capitalized development costs of € 2.6 million (against 1.8 million in 2012), linked to the Group's 6 flagship solutions. The investments in People ID are of course related to preparation work on the various longterm contracts. They are up significantly at € 4.8  million, against € 1.2 million in 2012. In total, investments total a historical high of € 10.7 million. They have been partfunded by bank borrowing, with the balance coming from internally generated funds. In 2013, the Group acquired € 0.2 million of its own shares. At 31st December 2013 it held 234,322 treasury shares (4.35%). Income statement Group sales revenue amounted to more than € 211 million, virtually unchanged compared with 2012 (-1.2%). The share of recurring revenues remains very high at over 40% of consolidated revenue. Recurring revenues consist of income from long-term contracts ("Build and Operate") in People ID and from maintenance and consumables in Goods ID. The contribution made by the two divisions to the 2013 results differs considerably. Goods ID significantly improved its performance. Although sales and gross margin were very similar to 2012, current EBITDA increased by 22.4% thanks to 

"Group sales revenue amounted to more than € 211 million, virtually unchanged compared with 2012."

Board of Directors From top to bottom and from left to right: Floris Vansina, Jean-François Jacques, Paul Jacques, Jean-Marie Laurent Josi, Hiram Claus, Pierre Lambert, José-Charles Zurstrassen, Michel Allé, Alain Wirtz, Olivier Gernay

good cost control (-4.3%). In People ID, the second half of the year was marked by lower "Build and Transfer" income, resulting in a 5.5% contraction in sales and a 22.3% reduction in EBITDA. This was, however, a temporary phenomenon and in 2013, the division also signed major long-term contracts. These are at the development stage and will support good income growth in 2014. Recurring EBITDA amounted to € 13.5 million in 2013, down slightly by 1.5% from 2012. Non-recurring charges amounted to a net € 0.8 million. These relate mainly to the restructuring programme in Goods ID, to align the division with its more softwareoriented strategy. Depreciation on non-current assets of €  5.0 million is very similar to that of 2011 and 2012. Write-downs on inventory (€ 0.6  million) and receivables (€ 0.2  million) are in line with last year's figures. Amortization of R&D amounts to € 1.7 million.

EBIT reached € 5.9 million in 2013, 71% of which was generated in the second half. The net financial result is composed of bank charges (€ 274,000), cross-border payments and various guarantees such as bid or performance bonds, along with bank charges linked to investment finance, the foreign exchange result (€ - 273,000) and lastly, interest expenses (€ 229,000). The total tax charge of € 0.94 million represents an effective tax rate of 21.6%. Group net profit is € 3.4 million, down 3.6% on 2012. Segment reporting Goods ID division 2013 ended much better than it started. Order-taking began slowly, but the situation improved from summer time onwards, with contracts awarded for a number of large projects. The increased turnover is clearly reflected in current EBITDA, which nearly doubled between the first and second halves (from € 3.1 million to € 6.0 million). A major source of orders continues to be the retail sector, because it is constantly

9


MCL Mobility Platform receives a warm welcome

First references: Non-food Retail and Transport

looking to increase productivity levels through better supply chain traceability. Zetes' solutions (ZetesMedea and ZetesChronos) provide an answer to the problem and deliver a rapid return on investment. Competition between manufacturers is maintaining the strong pressure felt on margins from mobile terminals and other equipment. The sale of services (life cycle management) and software (in the form of services and increasingly, licences) allows Zetes to offset this pressure and maintain its margins. Good cost control linked to productivity gains enabled Zetes to improve its performance, even in the absence of income growth. In this way the EBITDA/sales ratio increased by 1% from 4.3% in 2012, to 5.3% in 2013. At the same time, the Division continued to invest in its six key solutions, which capitalize on its core fields of expertise. The first commercial successes validate Zetes’ choice of strategy. The MCL Mobility Platform is proving popular with customers, to whom it offers much more effective management of mobile devices. The first references are now installed in the non-food retail and transport sectors. The six key marketing solutions have already served to offset the constant pressure on hardware prices and margins in the 2013 financial results and Zetes expects to demonstrate this to full effect in the 2014

10



"Order-taking began slowly, but the situation improved from summer time onwards, with contracts awarded for a number of large projects."

results. Indeed, advance indicators, such as sales cycle tracking, show a clear increase in customer enquiry levels for these solutions. Besides their impact on business in the countries concerned, changes in exchange rates, particularly between the South African rand and the euro, were unfavorable to the Goods ID division. At constant exchange rates, revenue would have increased by 1.9% and gross margin by 0.6%. People ID division Sales revenues amounted to € 40.3 million, down 5.5% on 2012. 2013 was marked by impressive order taking for long-term contracts (i.e. Belgian passport, biometric visa in Senegal, Gambian passport). But with the exception of Senegal, where the system is in place and has been generating revenue since July 2013, other contracts have tied up large amounts of resources for development and

preparation and will only begin generating revenue during the course of 2014. Similarly, the 2013 sales figure lacks a major "Build and Transfer" project with a high hardware component. These are generally contracts linked to the preparation of election cycles, for which electoral lists are prepared based on a biometric enrolment of the population. Both the conclusion and execution phases of the contract take place rapidly. Only two "Build and Transfer" projects were completed in 2013, one for Togo and the other for Guinea-Conakry. Both consisted primarily of services, with limited income but high margins. Overall in 2013, 80% of revenue came from "Build and Operate" contracts, giving a gross margin of 57.4%, reflecting the division's value-added strategy. These long-term contracts are often concluded between governments that entrust Zetes with creating a population database and issuing the related identity documents or travel documents. Zetes looks after electronic ID card systems in Belgium, Israel and Portugal, as well as driving licences in Belgium. For a number of years now, Zetes has also managed the comprehensive biographical and biometric registration of Côte d’Ivoire citizens and the issuance (personalization) of their electronic passports.


REPORT FROM THE BOARD OF DIRECTORS

In 2013, the Gambian government awarded Zetes the concession for a similar passport system in Gambia ("Build and Operate" model). Then in August 2013, the Belgian Government tasked Zetes with issuing passports for Belgian citizens. The past months have been spent preparing for these contracts. Document issuance under both contracts will begin in the second quarter of 2014. 

"2013 was marked by impressive order taking for long-term contracts."

The breakdown of sales by half year clearly reflects the lack of "Build and Transfer" income in the second half. In addition, from July 2013, the division has internalized the secure distribution of identity documents to the Belgian municipalities. Until then, distribution was undertaken by an independent transportation company, the costs of which were reflected in purchases. This has had the effect of increasing gross margin in the second half, with a corresponding increase in operating expenses. With current EBITDA down 22.3% compared with 2012 at € 7.7 million, the current EBITDA to sales ratio remained at a high at 19.1% (23.2% in 2012). This sales

400,000

ratio is explained by the very high services component in the "Build and Transfer" contract sales and the capital-intensive nature of the "Build and Operate" contracts. The difference between EBITDA and EBIT (amounting € 6.0 million) is primarily due to the depreciation on these investments. Goodwill In the first half, Zetes completed a new asset deal, acquiring a team of 10 specialists in e-commerce logistics processes, along with the intellectual property and customer base of the company L4 Epsilon in France (€ 0.2 million). This acquisition generated a small additional goodwill of € 45,725. In this way goodwill is virtually unchanged from 2012, at € 39.9 million. The goodwill validation test (review of the recoverable amount) did not reveal a need to record impairment losses.

Belgian passports a year



"The organizational structure introduced in 2012 makes it possible to better utilize the highly professional knowledge and skills available across the Group."

Zetes also purchased 15% of the shares of Zetes Industries Israel for € 0.2 million. This did not generate additional goodwill. Human resource management and environmental actions

Border control

In 2013, the Group's workforce grew by 4.5%. In addition to the French acquisition within Goods ID (see above), the People ID Division has handled the distribution

11


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

of identity documents to the Belgian municipalities using internal resources. With Zetes also increasing its presence in West Africa, the People ID division has grown by 37 employees. In total, the Group's workforce expanded from 1,070 employees at the end of 2012, to 1,118 at the end of 2013. As with intellectual property, human resources constitute a key asset of the Group. The organizational structure introduced in 2012 makes it possible to better utilize the highly professional knowledge and skills available across the Group, particularly in the field areas of the six key solutions. The company and its employees are aware of their civic responsibility in environmental matters and strive daily to

implement responsible practices in this area, including limiting travel, energy saving, waste management and the like. Principal risks and uncertainties The Board of Directors presents its assessment of the risks facing the Company in the 'Financial information and corporate governance' section of the annual report. These risks relate to pending litigation, human resources, the environment, exceptional events, acquisitions, new products, technologies and fraud. The same notes also describe the Group’s exposure to prices, credit, liquidity and cash availability, foreign exchange and interest rate risks. To cover these risks, the Company has recourse to traditional financial instruments. It avoids overly complex instruments, which could have questionable transparency. The instruments currently used are also described in the 'Financial information and corporate governance' part of the annual report. Events after the closing date To date, there has been no specific postclosing event that influences the annual accounts submitted to the General Assembly. Prospects for 2014 and description of events that could significantly influence the company's developments.

ZetesAtlas - BMS - France

12

Goods ID Division has started 2014 with a stronger first quarter than in the previous two years. Macroeconomic indicators are improving and customers seem more willing to invest. All sectors are involved, even though the retail sector continues to drive investment. The Group's strategy is in place across all countries and Zetes is looking to harvest the first fruits, as planned, this year. Market interest in the various solutions remains substantial and Zetes will continue to invest in new features and functionality, to ensure its solutions remain as attractive as possible.

Zetes can also rely on its recurring business (25 to 30% of income depending on the subsidiaries’ degree of maturity). Until now, this has been based on maintenance and repair, as well as the sale of consumables (labels, ribbons, etc) and in some countries, it has also been reinforced by the rental income from solutions (managed services). In People ID, visibility remains very good on all long-term contracts ("Build and Operate"). The Gambian and Belgian passports are scheduled to go into production in the second quarter of 2014. All the other contracts are expected to contribute positively to the division’s performance. Zetes started 2014 with a contract to deliver biometric kits ("Build and Transfer") for the Republic of Uganda. Other smaller projects are also running. Together, they will contribute to the achievement of budget targets for 2014. In summary, the good performance of Goods ID, combined with short and longterm contracts in People ID, should produce significantly better results in 2014 than in 2013. Research and development Development expenses in 2013 were € 2.8 million compared with € 1.8 million in 2012. These relate mainly to software development. The effort of converting the six key products into standardized products - and improving their functionality - will continue in 2013. This should lead to development costs of the same order as in 2013. Branches The group’s activity is organized via local companies which are direct or indirect subsidiaries of Zetes Industries SA. Zetes Industries SA does, however, have a dormant branch in Ireland.


REPORT FROM THE BOARD OF DIRECTORS

€ 2.8 million

Corporate Governance Statement

of development costs

The Corporate Governance Statement is included in the 'Corporate Governance' section of the 2013 Annual Report. This Declaration includes, among other things, a description of the composition and modus operandi of the Board of Directors, the main features of the internal control and risk management systems, the composition and modus operandi of the Executive Committee, the composition and modus operandi of the Committees within the Board of Directors, the remuneration policy and most recent remuneration report of Zetes Industries SA with its social capital policy, the measures taken by Zetes Industries SA to comply with Belgian rules on market abuse, the Group Code of Conduct and dividend policy. Conflicts of interest between directors and the company

ZetesMedea - CERP Rouen - France

No decision has come to the knowledge of the Board of Directors which has given rise to the application of articles 523 or 524 of the Companies Code.

the 'Financial information and corporate governance' section of the annual report.

Related party transactions

Article 74 of the law of 1 April 2007

Related party transactions during the period under review consist essentially of the remuneration of the Executive Committee (3 persons) in an amount of € 966,900 (compared with € 875,981 in 2012). Transactions with companies linked to directors have been undertaken according to arm’s length principles. Details of related party transactions are included in

The information relating to article 74 of the law of 1 April 2007 on public takeover bids is given in the Corporate Governance Declaration section (Shareholding Structure sub-section) of the annual report.



"Goods ID Division has started 2014 with a stronger first quarter than in the previous two years."

Issue of subscription rights In 2013, the Company did not issue any subscription rights. The powers of the Board of Directors to issue or repurchase shares are set out in Articles 6 and 7 of the company by-laws. Purchase of own shares In 2013, Zetes Industries SA acquired 18,553 of its own shares at an average price of € 15.61. At 31st December 2013 it held 234,322 own shares, representing 4.35% of the capital for a par value of €

2.2 million. These shares are retained for employee incentive schemes or business transactions involving exchanges of shares. Audit Committee At 31st December 2013, the Audit Committee consisted of four non-executive directors, two of whom have independent status: • Gema SPRL, represented by Mr Michel Allé (Chairman of the Audit Committee, independent, non-executive director) • Mr Paul Jacques (independent, nonexecutive director) • Mr Hiram Claus (non-independent, non-executive director) • Floris Vansina BVBA, represented by Mr Floris Vansina (non-independent, non-executive Director).

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ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

The independence of Mr. Paul Jacques (who is unrelated to Jean-François Jacques) and Mr Michel Allé is guaranteed by the fact that none of them (or anyone with whom they are related) holds more than 10% of the voting rights of Zetes Industries SA. Their competence derives from their education and professional experience in the financial sector.

Statutory auditor’s report The consolidated financial statements of the company have been audited by RSM Réviseurs d’Entreprises Bedrijfsrevisoren, represented by Mr. Laurent Van der Linden and Mr. Thierry Dupont. The statutory auditor has informed us that he will express an unqualified opinion.

Proposed appropriation of the results of the Group parent company, Zetes Industries SA The statutory (unconsolidated) income statement of Zetes Industries SA shows sales of € 5.7 million (€ 5.7 million in 2012) and a net profit of € 1.5 million (€ 1.1 million in 2012). With equity of € 60.9 million (before allocation of dividends), the company presents a very high solvency ratio of 92.8%. An abbreviated version of Zetes Industries SA’s statutory accounts is provided in the Annual Report (Financial

1,118

employees

ZetesChronos - An Post - Ireland

14

ZetesChronos - Jerónimo Martins - Portugal


REPORT FROM THE BOARD OF DIRECTORS

Information section). The Board of Directors will be proposing that the company pays an ordinary dividend of € 0.55 gross per share (giving a payout ratio of 83.8% of the consolidated net profit), payable after the Annual General Meeting. Given the 234,322 treasury shares held on 31/12/2013, for which an unavailable reserve of € 3.6 million has been established, the Board proposes to allocate the results of Zetes Industries SA, as detailed in the statutory annual accounts of the Company, as follows:

Discharge of directors and auditors It is proposed to grant discharge to the directors and the statutory auditor. Brussels, 31 March 2014 For the Board of Directors.

Alain Wirtz SA Represented by Mr Alain Wirtz Chief Executive Officer

Pierre Lambert Chief Financial Officer

In € Profit for appropriation

1 534 994

Profit for the year available for appropriation

1 465 753

Profit brought forward Withdrawal from equity

69 241 1 400 000

From capital and share premium account From reserves

1 400 000

Appropriation Transfer to legal reserve Gross dividend Profit to be carried forward

73 288 2 835 466 26 240

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All the colours of the world unite in the eye in a unique way. _ INTRODUCING BIOMETRICS TO SOCIETY

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ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING IN TODAY ZETES ANNUAL REPORT CONNECTING WHAT MATTERS


STRATEGY Creating value for our customers is what drives Zetes' strategy. We achieve this by answering complex problems to provide our customers with enhanced productivity, quality and data integrity. A detailed understanding of the business process challenges facing our customers, combined with correct use of technology, lie at the heart of Zetes' value proposition. Standing out from one’s competitors and maintaining a market leading position require major investments, which must be identified with a clear-sighted approach and implemented in accordance with our long-term vision.

Goods ID: a coherent approach In Goods ID, optimizing the supply chain is a central customer concern. At every level, companies face the challenge of maintaining the fluidity of transactions and optimizing their use of resources. In response to these requirements, Zetes has segmented its business offering into six solutions that resolve the need for goods traceability. To achieve this, Zetes combines software and hardware to create solutions that facilitate the collection and transmission of information from ‘shop floor’ areas to company data processing systems. Given the frequent similarity of problems that occur from one company to the next, Zetes is concentrating its development efforts on solutions that address the fundamental needs that exist at every step in the supply chain, from production, warehousing, transportation and logistics, to direct sales in retail outlets.


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

Zetes is also investing in developing integration tools, which enable clients to simplify the project management of solutions implementation, in particular by removing difficulties linked to system incompatability. The company believes this new approach will enable it to achieve two key business goals. Firstly, by strengthening relationships with existing customers and secondly, by convincing new companies, in particular multinationals looking for standardization, consistency and cost rationalization, of its strong capabilities.

The division's focus responds to a changing market and enables Zetes to maintain its lead role as ‘the supply chain traceability experts’.

People ID: a good mix of two contract models In People ID, Zetes sees a particularly profitable future in "Build and Operate' contracts, which it will secure to balance the flow of income into the Group. Traditionally, Zetes has brought together key devices and processes, on a turnkey

basis, to enable governments to capture and safeguard its citizens’ biographic and biometric data and produce the required identity and travel documents. Here, remuneration is generally a function of the number of documents issued and although these contracts rarely generate substantial income in the first year, they provide a regular flow of income to the division in the medium and long term."Build and Transfer" projects, on the other hand, are implemented over shorter periods and respond to an urgent customer request. In this case, Zetes again supplies a complete infrastructure, but transfers

Enterprise applications ERP/WMS/TMS

Goods

Wired & wireless networks

Front end communication Complementary application logic

National register AFIS system

People

Physical Identification & data capture Linking the physical and digital worlds

18

Digital (Secure) data communication

Host system integration


STRATEGY

it onto the customer and assists with implementation. The level of contribution made for this type of contract is higher, but less regular than a "Build and Operate" contract. Our Group objective therefore is to have a good mix of the two contract types in order to generate a sustainable flow of revenues from People ID. Compared with larger competitors in the authentication sector, Zetes relies on its excellent reputation, built as a result of a growing number of successfully executed projects, to increase market share.

A backbone for the two divisions At the Group level, Zetes' strategy is based on three strategic pillars, each of which are reinforced with five levers that give extra traction to the Group's positioning.

Strategic pillars Strong specialization Zetes remains focused on traceability within the supply chain. To this issue, Zetes brings extensive knowledge of computer systems and builds bridges between the physical and digital worlds. Its command of this area makes the company a partner of choice for customers seeking the best solution to a specific need. Zetes also specializes in systems for issuing and managing identity and travel documents that are subject to national and international legislation (states, European Union, etc.) and private regulations (ICAO standards in the air travel sector). Complementary activities Although they address different markets, goods identification and people ID are highly complementary activities. This

complementarity expresses itself as shared identification and data security technologies and in the mobility of solutions. It enables Zetes to utilise existing knowledge held in different divisions to create synergies that enable it to propose innovative solutions to both commercial and governmental organisations.



"Attentive to the needs of business and working closely with customers, Zetes is well placed to become a preferred technology partner."

Europe and Africa Zetes still sees many opportunities in Europe related to regulatory constraints, a growing need for traceability and the constant search for productivity gains. Rich in raw materials and with fast growing and migratory populations, Africa is also a market with a high demand for auto-ID solutions in the future. The two continents therefore remain priority areas for Zetes and will allow it to sustain its growth levels.

Strategy levers Group solutions Solutions developed by the company itself are an essential component of Zetes’ strategy. These allow a targeted approach by market and provide greater flexibility during implementation. Innovation and synergies The synergy between Zetes’ various divisions and teams within the group allow the company to remain at the forefront of developments in the sector. Exchanges can take place both across market sectors, between technologies and internationally.

departments or with different solution types. Maximizing competences Customer contact and service quality are essential elements of the Group's success. In this way our employees can accumulate valuable experience, which is then transfered into the solution sets and becomes a catalyst for further team innovation. Stability Diversification into different markets reduces dependence on any one sector. Government contracts are for example less sensitive to economic cycles than business investment. Similarly, certain sectors in the supply chain may slow down while others experience growth or are subject to strict traceability regulations. The same applies to geographic diversification. Recurring revenues also contribute to the stability of the Group: Zetes enjoys a guaranteed revenue base through its long-term contracts and extensive range of services.

Relationships of trust Attentive to the needs of business and working closely with customers, Zetes is well placed to become a preferred technology partner. This confidence can multiply the number projects available from a single organization, within different

19


Being fast is great. But it’s nothing without being clever. _ZETESCHRONOS : FULL VISIBILITY ON DELIVERY PROCESSES

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ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING IN TODAY ZETES ANNUAL REPORT CONNECTING WHAT MATTERS


VIDEO 'Zetes' activities. Goods ID and People ID '

ACTIVITIES From bar codes to today's supply chain and government solutions, Zetes' success has always lain in its ability to innovate and evolve. Via its public and private customers, ordinary citizens and consumers are the ultimate beneficiaries of our progress. Zetes' activities began in 1984 with the introduction of barcodes, a technology that has enabled many companies to increase their productivity and efficiency. Since then, the company has maintained a constant lookout for the most effective technological solutions to the challenges facing its customers. It has frequently pioneered the implementation of these technologies, investing heavily in research and development over the years. In parallel with this, Zetes has made major efforts to understand its customers' needs and processes, so as to be able to advise on the most appropriate optimization technologies. Zetes' many investments over the decades have given it a unique positioning in both the supply chain and people authentication markets. Not only has it developed unique knowledge and know-how in each individual sector, it has also created convergences by constantly building bridges between the different aspects of its activities. Our customers' investment decisions generally originate from a concern to provide a better service to consumers and citizens. They are the ultimate beneficiaries of Zetes’ solutions.


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

GOODS ID

In 2013, Zetes adapted its Goods ID offering to accelerate growth and meet the expectations of customers facing a fastchanging environment dominated by the need for traceability and visibility.

3 decades of investment in supply chain automation Based on its long experience of supply chains and to meet current business needs, Zetes introduced a suite of solutions in 2013 that target the problems specific to each stakeholder in the chain. These improve performance, make them more competitive in terms of productivity and also help them comply with recent legislation on traceability and counterfeiting. This suite of solutions for a collaborative supply chain has its roots in the history of the company and the technological investments made during 30 years in business. • 1984: Formation of Zetes Belgium, pioneering the use of barcodes in retail. • 1991: Introduction of Europe's first proof of delivery solution in Spain. • 2000: First investment in print & apply for identifying goods in production. • 2000: Investment in voice, to improve warehouse picking performance. • 2009: Investments in vision technology (or ImageID), to improve and speed up shipping processes.

22



"Zetes' collaborative supply chain has its roots in the history of the company and the technology investments it has made during its 30 years of existence."

Symbiosis between the collaborative supply chain and advancements in traceability, improving services to consumers. In a symbiotic way, each technology has spawned new applications. This accumulation of expert knowledge of customers' operating sectors, a thorough understanding of their processes and of automatic data capture technology, has enabled Zetes to develop the current offering of its Goods ID division. Today the division approaches its markets with standard software solutions based on the above technologies. In this way, each link in the supply chain finds an answer to its particular needs. The creation of a centralized database also makes it possible to interconnect all players in the chain. A need to exchange data on the movement of goods is particularly acute in sectors such as pharmaceuticals, luxury goods and food, which are confronted with counterfeiting, consumer health concerns and other issues.


100,000 warehouse operators

INNOVATION

work with Zetes, voice recognition solutions

ZetesMedea – Morrisons – UK

A suite of standardized solutions In addition to its own technology R&D, Zetes has made numerous acquisitions to expand its geographical coverage, generally targeting companies whose employees possess detailed market knowledge. These new subsidiaries have adopted the Group's technology solutions, while usually retaining their own solutions in order to capitalize on the expertise of employees and their investments in research and development. In this way the Zetes collaborative supply chain encapsulates the experience of different experts in different territories. The current standardization meets a need for simplification, cost rationalization and globalization. Companies with subsidiaries in several countries are increasingly looking for a pragmatic and rational approach to supply chain management. Standardized solutions enable a consistent approach, implemented by local expert teams. Management of applications in the cloud In recent years, the concept of the cloud has appeared on the corporate scene and is becoming increasingly popular, given the ease of management applications that the system offers and reduced investment outlays required. This model is, however, difficult to replicate in a

supply chain environment. Unlike an office environment, there is no guarantee that all operators are working with mobile devices and have internet connectivity. A tool adapted to the needs of these players but offering the same benefits was required and this is exactly what the MCL Mobility Platform does. This is marketed with several Zetes' solutions, enabling customers to reduce their IT infrastructures and simplify applications management. The main benefits the MCL Mobility Platform offers are: • The ability to manage applications in several locations without local IT departments.

• Readiness for future technological developments (both in terminals and operating systems) as the platform allows customers to adapt to new situations without a need for major investment in software development. 

"The MCL Mobility Platform enables customers to reduce their IT infrastructures and simplify mobile applications management."

• Downloading of new applications from a centralized location. • Automatic updating of terminals and applications. • Scalability, with easy deployment in new locations and easy addition of new users during peak periods. Computing capacity responds elastically to customer needs, without the need to invest in additional infrastructure to handle production peaks. • No additional costs for IT infrastructure and administration.

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ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

ZETESATLAS - PRODUCT IDENTIFICATION AND TRACEABILITY ON PACKAGING LINES

ZetesAtlas is a packaging execution system (PES), which manages, secures and enhances the product identification process at the packaging stage.

24

VIDEO ‘Datamatrix identification at Bristol-Myers Squibb’

Counterfeiting and Consumer Safety

Total control of the packaging line

Traceability is definitely the key concern for many production companies. It is necessary in order to combat counterfeiting and to ensure that a quality product is delivered to the end consumer. Recent scandals, mainly in the food sector, as well as consumers' increasing concerns about the environmental impact of the products they buy, have bred a growing number of regulations and companies need to find a way to comply. Where problems persist, it is imperative to organize the quick and efficient return of goods in question. The opportunities for ZetesAtlas are many, since a significant number of companies are still looking for a solution to comply with this reality, which is barely a decade old.

The ZetesAtlas solution interfaces with a company's ERP system to manage the tools that mark the products leaving production lines. This approach, which greatly reduces manual intervention, can considerably reduce the number of errors. With a single operator, ZetesAtlas can configure all the printers, labelling robots and control cameras which permit the identification of individual products and their aggregation: which products are in which box, which boxes are on which palette, etc. Aggregation of data from one level of packaging to another is critical for efficient traceability. ZetesAtlas is also able to support serialization, i.e. the identification of products by unit rather than by batch.

Moreover, 90% of companies in the production sector are not yet aware of the benefits of an integrated packaging line identification solution.

Combined with ZetesOlympus, which links the company's partners (customers and suppliers), ZetesAtlas provides optimum visibility of product movements.

Potentially interested in this type of solution are the pharmaceutical, luxury goods and food sectors. Other sectors have also expressed interest.


ACTIVITIES

ZETESMEDEA - PROCESS OPTIMIZATION IN THE WAREHOUSE

A highly competitive industry Subject to strong economic pressures, a company’s main objective is to secure high levels of productivity while minimizing costs. Achieving this requires high levels of automation to speed up processes and minimize the number of errors. Accurate, rapid deliveries are a decisive factor in the choice of supplier. The spread of e-commerce also presents growth opportunities for ZetesMedea. The organization of a dedicated e-commerce warehouse is very different from that of a traditional goods distribution warehouse. Serving a larger number of customers with smaller quantities of products, it has its own specific needs. In July 2013, Zetes acquired the French company L4 Epsilon, specializing in the e-commerce sector. Currently, the L4 Epsilon proposition is being integrated into ZetesMedea.

ZetesMedea is a logistics execution system that improves the efficiency of warehouse processes. It helps reduce costs, permits error-free execution of operations and provides real-time visibility of warehouse events by integrating advanced technologies like voice and ImageID.

This solution is of primary interest to the retail and food sectors, both in traditional business and e-commerce.

VIDEO ‘Voice picking at Système U’

Visibility from reception through to shipping Zetes pioneered the introduction of voice recognition in warehouse processing. Since then it has successfully advanced the technology and extended it to other areas such as order picking. Within ZetesMedea, voice is the solution that still presents the greatest level of opportunity. Based on the MCL Voice system, the ZetesMedea Voice solution is a powerful system with operators no longer requiring training, or having to record their voice profiles, but able to start working immediately. Moreover, unlike other voice technologies, MCL Voice offers a choice of different hardware suppliers and allows voice to be combined with other data capture technologies. Zetes has also developed a dock door control module, based on ImageID technology, which enables trucks to be loaded faster, while reducing errors. The ability to manage all warehouse processes is an important competitive advantage for Zetes, allowing the user to track a product from the point at which it enters the warehouse to when it leaves.

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ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

ZETESCHRONOS - OVERALL VISIBILITY OF THE DELIVERY PROCESS

ZetesChronos is an advanced mobile Proof of Delivery (POD) solution. Designed to control the full range of collection and delivery processes, it offers real-time visibility of the movement of goods and related employee activities, from loading of goods to delivery, ensuring traceability at every stage of the delivery process.

26

VIDEO ‘Innovative POD solution at Rangel’

Increasingly demanding customers

Next generation ePOD

Like the warehousing sector, the transportation sector is having to adapt to a changing marketplace and especially to e-commerce, which is resulting in larger numbers of smaller deliveries. This calls for an adaptation to working methods and, by extension, to the solutions that automate these processes. An increasing number of customers are also demanding same-day delivery. This requires a very high degree of flexibility which, together with rising fuel prices and fierce competition, makes process optimization a central concern for transportation and logistics companies.

The majority of parcel and courier delivery companies have already made the transition from paper processes to automatic data capture solutions, but the ePOD solutions they use tend to focus on digitizing collection and delivery processes and therefore on improving the performance of individual drivers. Zetes proposes a next-generation solution that improves both the performance of company employees as well as the image of the business itself. This is made possible by integrating tools that link the back office and business intelligence.

Proof of delivery solutions are of particular interest to postal services, parcel and courier delivery services, the retail sector and logistics service providers.

Many opportunities also remain in the retail sector, where the use of paper remains widespread for proof of delivery. The real differentiator for Zetes is, however, the MCL Mobility Platform, which can manage all the terminals and applications in the cloud.


ACTIVITIES

ZETESARES - DIRECT STORE DELIVERY FOR IMPROVING SALES

ZetesAres is a complete Direct Store Delivery solution designed to increase sales through better customer management. Embracing orders, sales, delivery, asset management and maintenance, it transforms salespersons into highly efficient and reliable advisers, selling the right product at the right place and at the right time.

Selling more and better

Ergonomics and ease of use

Marketing is one of the main factors that leads companies to opt for direct instore sales solutions, with a professional presentation of products to enhance their brand image. In addition, they are keen to provide a better service to customers in order to be more competitive and increase sales.

ZetesAres operates on tablets, allowing easy access to information about products and a pleasant and ergonomic design. With all applications combined on a single device, a salesperson can close a sale faster and quickly calculate the amount of stock still available in the van.

In the cosmetics sector, a direct in-store sales solution helps combat grey markets by gaining better control of distribution channels. It is also of interest to niche food businesses, which face strong competition and a need to differentiate themselves.

Like ZetesChronos, ZetesAres uses the MCL Mobility Platform, but its appeal lies in its comprehensive functionality. In addition, being part of the "collaborative supply chain" portfolio means it can be connected to other links in the supply chain including ZetesAtlas, for effectively combating counterfeiting.

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ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

ZETESATHENA - SMART IN-STORE MANAGEMENT

Shop

ZetesAthena is a complete solution for the creation, storage and deployment of in-store management applications in the cloud. From reception to stock-taking, from repricing to replenishment, from access to product information to click & collect, data management is centralized and simple, with no requirement for heavy investment.

28

Difficulties faced by multinationals in managing applications

Reduced investment and ease of management

Here too, new buying habits are strongly influencing companies' technology decisions. Increasingly, well-informed customers are using a growing number of channels to check the price and availability of products and then make purchases. This implies first, that store chains need to offer multiple distribution channels and, secondly, that they require full inventory visibility, both at the branch consulted and others (to redirect the customer if necessary), product information, etc. Addressing the loss of potential sales due to ‘out of stocks’ is a primary challenge.

Solutions to improve store processes are widespread and generally offer very similar functionality. Zetes has an important differentiator with the MCL Mobility Platform. This is advantageous for retailers with a large number of stores to manage, particularly in the clothing and luxury goods sectors, as well as airport shops and concessions. Using the platform minimizes their IT investments at each point of sale.

The multiplication of distribution channels calls for very accurate inventory management as well as shipping and returns. Many stores go out of business daily because they lack processes adapted to this new reality. Here too, fierce competition and the economic environment are pushing companies to find ways to reduce their investment.

ZetesAthena customers have an advantage in terms of time spent by their employees dealing directly with customers rather than on administrative and technical tasks. The solution also allows a more fluid exchange of information between different branches of the same chain, including stock availability data. In combination with ZetesMedea and ZetesChronos, ZetesAthena offers a perfect solution to manage processes affected by the multiplication of distribution channels.


ACTIVITIES

ZETESOLYMPUS - END TO END TRACEABILITY FROM PRODUCTION TO CONSUMER

Shop

ZetesOlympus is the central component of the Zetes Collaborative Supply Chain. It acts as a unified database and can interface with information sources, both internal and external to the company, to know at any time, what has taken place, when, where, and involving whom.

Protecting brand image

Total visibility

Opportunities for ZetesOlympus are strongly linked to those of ZetesAtlas, insofar as the main purpose of ZetesOlympus is to ensure better product traceability by sharing data between the various links of the supply chain. All partners have access to information, with the production company acting as the initiator and biggest beneficiary. Whether the issue is one of product quality or counterfeiting, it is the brand’s image that is in danger. Branded goods manufacturers are keen for this type of database, to be able to track goods from the time of manufacture until sale to the consumer.

In the supply chain field, Zetes is the only company to offer a range of solutions that simultaneously improve the processes of each individual link and pass up product information instantly to a central database. The visibility obtained on the movement of products throughout the supply chain is particularly useful for the pharmaceutical, luxury goods and food sectors, which face more pressing issues of counterfeiting or traceability regulations.

ZetesOlympus can also be used to track containers. Each year, companies lose large sums of money due to the loss of pallets, carts, plastic containers, etc. ZetesOlympus can locate these assets within the company itself, or with a customer or supplier, saving the customer money and also reducing its environmental impact.

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ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

Zetes’ Collaborative

N° 20202020 Lot 202 2020/20/02

Product Identification Serialisation

N° 20202020 Lot 202 2020/20/02

N° 20202020 Lot 202 2020/20/02

N° 20202020 Lot 202 2020/20/02

N° 20202020 Lot 202 2020/20/02

N° 20202020 Lot 202 2020/20/02

N° 20202020 Lot 202 2020/20/02

Data Aggregation

Box Labelling

Pallet Control

Pallet Labelling

N°217 Mr Johan Schmitz

1 N°217 Mr Johan Schmitz

Proof of Delivery

Store

Proof of Delivery

30

Put Away


VIDEO ‘The collaborative supply chain’

e Supply Chain Solutions Product X Quantity Y

Go to location XY, pick 1

Put Away Replenishment

Inventory

XY, 1 OK

Order Picking

Kitting

Dock Door Control

Shop express

12x

Shop �pres�

Direct Store Delivery

Location X Quantity Y

Location X Quantity Y

N°217 Mr John Smith

go to AB, put 6

COLLECT

AB, 6 OK

N°217 Mr John Smith

Replenishment

Price & Promotion Management

Inventory

Sales Escorting

Click & Collect

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ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

A solid partner

Geographical proximity

Companies are looking for partners with the technical and human resources to support them in projects that are of crucial importance for their organizations. In a market that remains highly fragmented, Zetes has:

Zetes' Goods ID activity requires geographic proximity to customers: knowledge of local cultures and the ability to respond quickly. The Group is therefore seeking to expand its presence, through acquisitions or by organic growth and be present where companies are developing their activities. As the European leader in automatic identification, it intends to further strengthen its position in the coming years. The unique network developed in this way also enables it to respond to the needs of multinationals seeking solutions and equipment uniformity.

• The critical size required for deploying large-scale projects; • A solid financial base, enabling it to make significant investments, particularly in infrastructure; • A network of offices across 15 EMEA countries, for supporting our customers' international projects.

Direct Presence

32

Countries Served



"Zetes' geographical coverage enables the Group to be close to customers, to correctly define their needs and intervene rapidly on the ground."


ACTIVITIES

Growth opportunities

Safety legislation and brand protection are leading companies to

invest in traceability

Europe Europe is Zetes' historical continent, on which the company has developed a large network of subsidiaries. This geographical coverage enables the Group to be close to customers, correctly define their needs and intervene rapidly on the ground. Despite the uncertain macroeconomic situation in Europe, there are still growth opportunities for Zetes as follows: • Geographically: There are still many opportunities for Zetes to be present and strengthen its leadership position. • In terms of business needs: Identification and traceability needs are changing, particularly in terms of security, legislation, brand protection and multiplication of sales channels. These changes reflect a growing desire to protect and satisfy consumers, who are increasingly discerning about the origin and quality of the products they buy. • Technologically: with its size and financial solidity, Zetes can dedicate international teams to develop solutions in line with market needs and thus stay a step ahead of the competition. Africa In South Africa, Zetes has five sites in four cities: two in Johannesburg, and one each in Cape Town, Durban and Port Elizabeth. The African continent offers great development potential with an acute need for traceability and supply chain solutions. The most promising sectors there involve capitalising on the continent's many

ZetesAtlas – Brystol-Myers Squibb – France

natural resources, and manufacturing, which is booming. In addition, South Africa is an ideal access point to the entire subSaharan region. Two continents, one supplier Zetes' presence in both Europe and Africa offers a big advantage to companies that operate on both continents. The Group is able to offer the same level of service everywhere. As supply chains go global, multinational companies are starting to look for so-called "glocal" solutions: a global approach but with local services and support.



"As supply chains go global, multinational companies are starting to look for so-called 'glocal' solutions."

In the highly fragmented automatic identification market, Zetes is the only company able to provide this level of service. Our approach has won Zetes several major contracts and this trend is expected to continue in the years to come.

33


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY VIDEO ‘E-voting solution’

PEOPLE ID

In 2013 Zetes signed several long-term contracts (Belgian passport, biometric visa in Senegal, Gambian passport, and others). These will begin to generate revenue during the course of 2014.

10 years at the top of the security market For the past decade, Zetes has been one of the most influential players in the identity and travel documents sector. With its contracts for social identity cards, biometric passports and visas, driving licences and electronic identity cards, Zetes' portfolio of customer references has expanded on both European and African continents. New initiatives such as the "Your eID, making life simpler" campaign by the Belgian authorities, serve to highlight the many applications of electronic identity. Zetes is very much at the forefront here, with, in particular, the launch of the Zetes eaZySign platform. This enables the legally binding electronic signature of documents and their subsequent storage in a secure environment. The potential market for applications such as these is huge, with many countries still having to move into the electronic age or adopt high-accuracy biometric authentication.



"Many countries still have to move into the electronic age or adopt high-accuracy biometric authentication."

Zetes has developed a full product range spanning live citizen enrolment to the issuance of identity documents. In recent years it has also added a fixed biometric enrolment station and an e-gate for automated border control. It has also updated its mobile enrolment kit, as used in electoral census operations. The main advantages of its new model are ergonomics (or ease of use) and a high degree of autonomy.

Innovation and references as growth factors Zetes has chalked up a number of innovative achievements, including: • First large-scale deployment of the electronic ID card in Belgium in 2005; • World première with the biometric enrolment of over 25 million Congolese voters in 2006; • Ivorian biometric passport, a ‘nec plus ultra’ document incorporating live biographical and biometric recording, in 2008; • Gambian passport with simultaneous integration of biometric information (iris) and fingerprints in 2013.

Secur-eVote

34


States need visibility of populations residing in or passing through their territories

Enrolment site - Banjul - Gambia

The electronic voting solution is also being improved constantly. Faster, more efficient and more reliable than paper voting processes, electronic voting helps ensure voting confidentiality, offers immediate and reliable counting with guaranteed integrity and control tools, and reduces paper-related errors by eliminating manual reading and counting. All solutions offered to customers, whether software, hardware or a combination of the two, require great robustness and guarantees of security. Zetes has therefore sought certification of the highest standards, such as ISO27001, for IT security. The successful project completions in Belgium have allowed Zetes to expand elsewhere in EMEA. The reasons for focusing on this region are many. Investment in business development is sizable, plus sales cycles are long and require sustained effort. The choice of Africa as a target market is easily justified: many states there want to strengthen their national registries. The identification and localization of populations are critical tools for policy development. African leaders have clearly understood the value of biometrics to ensure accurate citizen authentication.



"Most calls for tenders for identity and travel documents require certifications and extensive references." Apart from the countries already mentioned, Zetes has also deployed its solutions in Togo, Burundi, Gabon, Cape Verde, Benin,

Chad, Israel, Sierra Leone and Portugal. The company's good reputation is closely tied to the success of these projects. This accumulation of customer references is essential and guarantees the growth of Zetes’ People ID business. Most invitations to tenders (RFT) for identity and travel documents require certifications and extensive references. Zetes is therefore well positioned to continue its growth.

Personalizing the Belgian passport From 2014, the Zetes Group will be responsible for the personalization and distribution of electronic passports for Belgian citizens. The Group will rely on processes that have already been widely tested in similar projects and on a secure computing infrastructure. Nearly 400,000 passports will be personalized each year. Zetes will also take in hand the distribution of passports to authorities. By integrating this last link, Zetes reinforces the watertight nature of the entire process and further reduces the risk of theft or fraud. Particular emphasis is also placed on the quality of the photo in the new passport. In 80% of cases, this is the parameter on which counterfeiters operate. This photo is therefore reproduced in multiple places in the document.

35


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY VIDEO ‘Election preparations in the DRC’



"The comprehensiveness of Zetes' offering enables a country's authorities to entrust a single supplier with the implementation of what for it are highly complex projects"

Control of the entire production chain Over the years and using the most innovative technologies, Zetes has developed a portfolio of solutions covering the entire value chain leading to the production and control of secure identity and travel documents. These include: • Concurrent biometric and biographic enrolment • Secure data transfer • Centralization and creation of population databases or registers

• Data reading and identity control (administration, border control, elections, etc.). The reason for the Group's success lies partly in the comprehensiveness of its offer, enabling a country's authorities to entrust a single supplier with the implementation of what it regards to be highly complex projects. Citizen identification: a challenge for each state

• Document production

People identification solutions are intended for states and governments, for whom a good view of the populations residing on or passing through their territories is essential, including and in particular for:

• Document personalization

• organizing democratic elections

• Information control and elimination of duplicates

• Secure transportation of documents

• controlling migration flows

Personalization of the Gambian passport and delivery of e-gate station In October 2013, Zetes won the contract for the personalization of Gambian passports. This 15-year contract is an excellent showcase of Zetes’ full range of skills, which include responsibility for: • Establishing a secure site, benefiting from the expertise of its Belgian site, achieving ISO 27001 certification • The enrolment of passport applicants, using fixed stations, developed and produced by Zetes • Creation of a centralized database combining two types of biographic and biometric data (iris and fingerprint) • Secure data management • AFIS deduplication • Personalization of the passport • Secure delivery of the document • Automated border control through an e-gate developed and produced by Zetes.

36


ACTIVITIES VIDEO ‘Using the eID on smartphone and tablet’

4,250 mobile kits

• administrative management • human resource management (e.g. civil servants, police, military personnel).

delivered in Uganda in 2014

The main challenge facing states in this area is to combat identity theft and counterfeiting. Where authentication projects emanate from governments, citizens also benefit from a secure identity, enabling them to prove that they are who they say they are and thus to exercise their rights, to access government services and to cross borders. Priority to data security of citizens People identification touches on the concepts of privacy and confidentiality. It is therefore imperative to provide maximum assurances of security both in the management of data and in the documents themselves. This translates into several measures:

Mobile enrolment kit

• "Live enrolment": based on fixed and/ or mobile kits, Zetes' solutions ensure unity of time and place when collecting biographic and biometric information.

• Holding ISO 27001 certification for the secure management of sensitive information.

• Data encryption for both transferring information and restricting access to certain data contained in a document to its owner only.

Zetes continues to invest constantly in this area, to assure authorities and citizens of the highest levels of data protection. Very good visibility for long-term People ID contracts

• The use of advanced materials and techniques in document production to ensure their non-counterfeitability. 

"The Senegalese, Gambian and Belgian contracts won in 2013 will contribute to the division's results from 2014 onwards."

The business model within People ID is based on "Build & Operate" (BO) and "Build & Transfer" (BT) contracts. BO contracts involve projects for producing secure documents (e.g. Belgian and Israeli identity cards, Ivorian biometric passports). These are concessions granted by states for periods extending over several years. Such contracts require significant frontend investment, but the recurring revenue they generate over time offers considerable

visibility and predictability to the Division. The Senegalese, Gambian and Belgian contracts won in 2013 will therefore contribute to the division's results in 2014. BT type projects, most of them currently in Africa, are more limited in time frame. These are biometric enrolment projects used for elections, censuses of officials, etc. In this case, Zetes takes responsibility for developing an infrastructure that is transmitted on a turnkey basis to the client. Thereafter, Zetes offers additional support services relating to project management, technical assistance or training. In March 2014, Zetes signed a contract to deliver 4250 mobile registration kits to Uganda.

37


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

Enrolment

AFIS

At this initial stage, the biographical and/or biometrical data of each person to be identified are recorded with the aid of fixed or mobile identification stations.

Thanks to a high-performance information checking system (AFIS or Automated Fingerprint Identification System), Zetes searches for duplicate entries. If the system finds that identical biographical and/ or biometrical details exist more than once, an alarm is raised and the identities of the people involved are verified.

Centralisation

Database / national register

Once personal data has been recorded, it is centralised in a single, structured database. The data is transferred in an encrypted manner via satellite communication, the Internet, or digital media.

38

VIDEO ‘Overview of People ID activities’

Once all the data has been verified, a reliable database is available that, if necessary, can be used to prepare a population register. A register of this sort is still currently lacking in many countries.


PASSEPORT

ACTIVITIES

Document delivery

Control

When handing over the document, a civil servant re-checks the citizen's biometric data. If the document contains encrypted data, the citizen will have previously received a PIN code which, for increased security, may be changed at the time of delivery.

The information gathered is verified against the existing database. The implementation of biometry and AFIS allow the detection of fraudulent individuals attempting to present themselves under a false identity.

B

Production / personalisation The verified data can also be used to produce and/or personalise secured documents. These documents include electronic ID cards, biometric electronic passports, visas, driving licences, voter cards and social security cards.

Online applications The electronic identity card allows remote identification on the Internet, giving access to a number of applications and secure portals. These can be private or public, such as electronic signing of documents or tax returns in Belgium.

39


It's good to know someone's keeping watch. Wherever you go. _ZETESOLYMPUS : REDEFINING TRACKING & TRACING

ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING IN TODAY


INNOVATION In Goods ID, re-modelling our product offering around the "collaborative supply chain" has unleashed a new innovation thrust, with enhanced cooperation between subsidiaries and greater integration of their expertise. Safety and ergonomics remain priorities in the development of People ID solutions. Innovation is the very essence of a company like Zetes and essential for survival. But a new idea does not remain new for long. Zetes therefore needs to invest continually in order to maintain its competitive advantage and innovation positions us as a leader. The Group has been a pioneer in many ways: introducing barcodes in supermarkets, bringing voice recognition technology to warehouses and electronic identity cards to national States. In line with the ever changing needs of businesses and governments, Zetes focuses on driving innovation and implementing the best possible mobility and identification technologies for its customers. • To encourage innovation, Zetes actively promotes exchange and collaboration at multiple levels: • Between experts from the same division • Between the Group's international subsidiaries • Between Goods ID and People ID • Between a company and its customers.


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

This approach has led to the "productization" of solutions in Goods ID, the development of specific tools, such as the MCL Mobility Platform and new products and solutions in People ID.

• data needs to be made secure

The collaborative supply chain

• within a single installed base, they use rugged mobile computers, specially designed for a supply chain environment and mobile devices such as smartphones in parallel.

In 2013, Zetes introduced its collaborative supply chain solutions. Adapted to the specific processes of each market, they call on the diverse technologies in which Zetes has developed extensive expertise over the years. Using its knowledge, Zetes creates synergies, both in terms of technologies and the level of expertise in different countries. This pooling enables Zetes to market solutions that are consistent at a Group level, flexible, and full of essential functionality. The collaborative supply chain responds to customer concerns about sharing data between different players in the supply chain while delegating to a trusted third party. As a trusted partner, Zetes holds the responsibility for providing secure and segmented access to this data.

The MCL Mobility Platform.

Platform by the Zetes Group brings a number of advantages for both customers and Zetes’ own subsidiaries. The latter can increase its focus on the functional aspects of solutions while at the same time being able to guarantee their compatibility with different operating systems. For customers, access to the MCL Mobility Platform allows them to centrally manage their installed bases and to obtain practical information on terminal usage.

• they face difficulties in managing fleets of terminals and mobile applications • they want to be able to produce reports and analyses

This approach has already met with great success, especially in the case of ZetesChronos and ZetesAthena solutions. It was a decisive factor behind Zetes successfully winning several contracts in 2013.

Managing a mobile infrastructure becomes a truly complex issue for these companies. To address this problem, the MCL Technologies division has designed and developed an integrated mobility platform. Unlike other mobility software, the MCL Mobility Platform goes well beyond the parameterization and management of mobile terminals. It focuses on mobile applications and all operational aspects of mobility. Messy and time-consuming tasks like deploying a project on multiple sites, adding new users and updating applications, are all greatly simplified. Standardizing

on

the

MCL

Moving towards a "Software as a Service" (SaaS) model With the MCL Mobility Platform architected as a cloud application, Zetes is able to market its solutions using a subscription model (Software as a Service or SaaS).

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INNOVATION

By limiting customers' investment in their IT infrastructure, the Cloud approach offers a significant cost advantage. In addition, centralizing management also provides major time savings in the implementation of solutions.

and maintenance, which is operated for a monthly fee covering hardware and software. This is an attractive model for many companies.

The Zetes Academy and knowledge sharing

Moreover, the usual financial benefits of SaaS are also present in solutions based on the MCL Mobility Platform. These include a reduction in capex and total cost of ownership (TCO), scalability, ease of use, including maintenance, automatic updates, centralized and protected data and greater resilience. 

"Zetes has introduced, in parallel with its SaaS offering, a Hardware as a Service (HaaS) offering, which is an attractive model for companies."

The MCL Mobility Platform also allows Zetes to innovate by offering “Back-End as a Service” (BaaS) services. Managing the flow of data between mobile terminals and a company's management systems involves combining many resources. BaaS greatly simplifies this aspect since the mobile terminals/central systems interface is standardized via the platform. Finally, the versatility of the MCL Mobility Platform makes it possible to offer hybrid solutions for customers as required. This means they can benefit from Cloud and MCL Mobility Platform services, while continuing to manage the data flow on their own site. In terms of hardware, Zetes has introduced in parallel with SaaS, a Hardware as a Service (HaaS) offering. In this way it is the entire solution, including mobile terminals

Each solution is supported by a BSG or Business Solution Group, consisting of ten or so Zetes experts from different countries. This strategy makes it possible to combine expertise distributed across different territories and ensure a coordinated approach to each vertical market. To ensure consistency and optimal communication between teams, Zetes has established an Academy, resulting in common solutions and shared within the Group.

When developing hardware for its solutions, the People ID division calls on the design and production capabilities of Goods ID. This collaboration has resulted in solutions including SecureVote, the fixed biometric enrolment station and now e-gate. An identical collaboration also operates at the software level. In order to track the issuanc of the Belgian driving licences and Belgian passports, People ID is using the ZetesChronos proof of delivery solution developed by Goods ID.

Passports and automated border control. Towards a strengthening of security The People ID division continues to work on improving both hardware and software solutions. For the Gambian passport project, Zetes achieved a world first by incorporating biometric iris information directly into the passport. As part of this same project, Zetes will be installing its first automatic border identity control e-gate station, which operates by comparing a traveller’s biometric information with that contained in his passport. The e-gate strengthens Zetes’ People ID division's offering. Automated border control solutions are expanding worldwide. The potential market is huge and Zetes has a high-end solution, which is able to meet a States’ most stringent requirements.

43


Everyone protects what is most precious to them. _OPTIMISING ID SECURITY

12

ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING IN TODAY ZETES ANNUAL REPORT CONNECTING WHAT MATTERS


SOCIAL RESPONSIBILITY The Group continues to invest in staff training and improving the security of its solutions to guarantee customers the best possible quality. Special attention is also given to the environment and Zetes has recently been awarded a number of ISO certifications, including ISO 14001. For Zetes, maximising our employees' well-being and personal development is an essential motivating force. Our priorities mirror the major concerns of civil society to protect consumers and citizens, which by extension, includes Zetes' corporate and governmental customers. The Group also places great importance on its environmental responsibilities.

Employment Zetes' main driving force, its employees Zetes owes its success primarily to its employees. Being largely a services company, its main assets are the strong relationships that it fosters with customers and the creative solutions it develops to solve their problems. To achieve this, an in-depth understanding of the markets in which these customers operate is essential, together with mastery of the various automatic identification technologies and an excellent understanding of local cultures.


Advanced protection of citizens' data

Gambian biometric passport

Capitalizing on know-how

Respect for the individual

These factors make the knowledge and know-how of the company’s personnel a crucial asset, which Zetes makes every effort to retain and strengthen. Consequently, when integrating new employees and their know-how following an acquisition, Zetes takes care to avoid losing the skills brought on board.

Zetes is vigilant to ensure that its personnel are not subjected to discrimination of any kind, whether racial, physical, political, religious, or sexual. The company respects all employment legislation within the European Union and in the countries outside the EU where it operates. Zetes offers its personnel a genberous level of social benefits, which often exceeds statutory requirements. It also seeks to contribute to the development of less fortunate regions, such as Africa, by recruiting and training local workers and entrusting them with technical and managerial responsibilities. Currently, Zetes has a direct presence in CĂ´te d'Ivoire, Senegal, Gambia and South Africa.

Sharing knowledge between colleagues, both old and new, can enhance individual skills and strengthens the Group as a whole. Evolution through exchange Faced with a fast-changing world and, in particular, continual technological advancement and customers seeking productivity gains against a backdrop of an increasingly complex regulatory environment, it is imperative for our employees to be constantly updating their skills. In response to this, Zetes has introduced an organisational structure to facilitate sharing knowledge and capitalizing on existing experience. For several years, internal training and the recruitment of highly qualified personnel have enabled Zetes to significantly strengthen skill levels and customer service effectiveness.

46

in a sporting event as part of a team of 250 runners, in support of a voluntary association.

Committing to the "Nos Enfants Cardiques" voluntary association In 2013, for the seventh consecutive year, Zetes joined forces with "Nos Enfants Cardiaques" for the annual Brussels 20km road race. This voluntary association, composed of parents of children with heart defects and members of the healthcare team at Cliniques Universitaires Saint-Luc in Brussels, seeks to improve the wellbeing of children with heart defects and their families. This collaboration is an opportunity for the Group's employees to participate

Better identification + traceability = Better protection Protection of citizens People identification is vital to the exercise of democratic rights, such as electoral participation and the protection of personal data. More specifically, Zetes’ solutions provide an answer to the following needs:


SOCIAL RESPONSIBILITY

• Preparing a democratic electoral process

Producing reliable voter lists is a real challenge for countries without a national population register. With its biometric enrolment solution, Zetes offers an answer to the requirement of one citizen = one vote.

• Combating identity theft Incorporating biometric data into identity documents guarantees that the document holder is indeed the person he or she claims to be. Comparing a citizen's fingerprints with an existing database can prevent a person from assuming two different identities or from trying to steal someone else's identity. • Combating fraud As well as personal data, it is also necessary to protect the document itself. The identity documents Zetes produces incorporate proven security features that are impossible to counterfeit. Zetes is currently involved in eiD projects in Belgium (national identity cards, foreign resident’ s cards, kids-ID), Portugal and Israel. It also personalizes passports for Belgium, Côte d'Ivoire and the Gambia. Sensitive data protection The processing of citizen-related data calls for a very advanced level of protection and hence for secure data management systems. In this way, Zetes became one of the first businesses in its sector to be awarded the ISO 27001 certification for the production of eID and eTravel documents (passports, visas, etc). This is the only internationally recognised standard that defines security prerequisites for the implementation of an Information Security Management System (ISMS).

This competence was initially developed for sensitive projects such as those in the People ID arena, which involve ensuring the security of citizen data for national governments. It is, however, also an increasingly valuable asset in Goods ID, where companies believe that a data breach can seriously compromise their activities. Consumer protection In recent years, consumers and, more specifically, consumer health, have become primary supply chain concerns. Sectors such as the food and pharmaceutical industries need to comply with increasingly strict national and supranational regulations. The portfolio of solutions developed by Zetes meets these societal issues by introducing new elements such as use of the cloud. ZetesOlympus, for example, makes it possible to collect all data related to a product and offer secure access to this database to various supply chain stakeholders. This greatly facilitates the traceability of defective products or the identification of counterfeit goods. Environmental protection The streamlining of processes inevitably involves the dematerialization of information and automation of information flows. Zetes makes heavy use of mobile communications. Whether by optimizing supply chains or using electronic signatures, this remote exchange of information contributes to reducing physical movement. At a company level, process automation reduces errors, with a knock-on reduction to losses during production and the logistical headache of processing returned goods. All companies are looking for ways to efficiently manage their mobile assets (vehicles, pallets, tools, etc.) Identifying and locating these assets in real-time can optimize their use and thus reduce the overall numbers required.



"Zetes has obtained ISO 14001 certification for its identity cards and travel documents production site. This allows it to control the impact of industrial activity on the environment." Despite its relatively small ecological footprint, Zetes has begun introducing an environmental management system to respect the environment. It has obtained ISO 14001 certification for its identity cards and travel documents production site. This allows it to control the impact of industrial activities on the environment. As part of this initiative, a volunteer GreenTeam has been put together to develop environmental initiatives and strive to achieve the following objectives:

• Raising awareness and continuous improvement of environmental performance;

• Sustainable management of raw materials;

• Responsible use of energy;

• Ecological management of the building and surrounding areas.

All processes have been reassessed for their environmental impact and improvements have already been implemented.

47


Nothing is more ‘all right’ than picking the right one on the right moment. _ZETESMEDEA : GIVING CONTROL OVER WAREHOUSE OPERATIONS

ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING IN TODAY


SHAREHOLDERS INFORMATION Clear communication on the Group's achievements and goals ought to enable investors to gain an accurate picture of its financial health and its prospects. Therefore, Zetes works continuously to improve its communication tools. The company pays particular care to the preparation of its annual and interim results. Management takes care to remain accessible, especially to answer questions that might arise in investors' minds. The website is updated at regular intervals, with emphasis on ease of navigation to enable investors to locate as quickly and easily as possible the information they need. The Group also seeks to reward investors for the confidence they place in it, and distributes them a significant part of the earnings achieved, in the form of dividends or of treasury share purchases.


ZETES ANNUAL REPORT 2013 | CREATING TOMORROW BY INVESTING TODAY

"THE BEST WAY TO PREDICT THE FUTURE IS TO CREATE IT. THAT IS WHAT WE DO"

Benoît Heins - Investor Relations

Contacts

Financial information

Calendar

ZETES INDUSTRIES SA

The company’s annual report will be sent to registered shareholders, and to others upon request. This report, as well as any other public information, can be obtained from the Company’s headquarters and via the website www.zetes.com.

Annual General Meeting : last Wednesday of May - May 28 at 10:00 am

Individuals who would like to be on our distribution list for press releases may inform us of their interest by sending an email to investor@zetes.com or by registering on our website.

Publication of full year results: third week of March 2015

Da Vinci Science Park Rue de Strasbourg 3 B-1130 Bruxelles RPM : 0425.609.373. Tel. +32 (0)2 728 37 11 Fax +32 (0)2 728 37 51

Investor relations and communications Investor Relations : Benoît Heins Media Relations : Sandra Franchitti Tel. +32 (0)2 728 37 11 Fax +32 (0)2 728 37 51 E-mail : investor@zetes.com Euronext Brussels : ZTS

50

Financial services are provided in Belgium by KBC Bank. KBC Bank : Avenue du Port 2 – 1080 Brussels

Publication of half year results: last week of August – August 29, 2014 Dividend payment: June 5 2014

Dividend A dividend of € 0.55 per share (coupon n°10) will be proposed at the AGM of May 28 2014. The "ex-date" (on which a shareholder is no longer entitled to coupon, which is retained by the vendor) is 2 June 2014. The payment date is 5 June 2014. The dividend is payable at KBC Bank, the company's principal paying agent.


CONSOLIDATED DATA PER SHARE (IN €)

2008

2009

2010

2011

2012

2013

Capital and reserves

12.51

13.17

14.64

14.70

14.77

14.95

Cash flow

2.39

2.03

2.76

2.72

2.01

2.00

Current EBITDA

2.82

2.55

3.59

3.50

2.69

2.62

Current net profit (Group share)

1.20

1.06

1.63

1.31

0.86

0.78

Net profit (Group share)

1.11

0.96

1.57

1.18

0.70

0.66

Net profit (excluding discontinued operations)

1.11

0.96

1.57

1.18

0.70

0.66

Number of shares at December 31

5 389 714

5 389 714

5 389 714

5 389 714

5 389 714

5 389 714

Average number of shares

5 386 299

5 342 394

5 324 566

5 331 111

5 247 116

5 156 750

Average number of shares for calculating diluted earnings

5 386 299

5 342 394

5 324 566

5 331 111

5 247 116

5 156 750

Diluted current net profit (Group share)

1.20

1.06

1.63

1.31

0.86

0.78

Diluted net profit (Group share)

1.11

0.96

1.57

1.18

0.70

0.66

Diluted net profit (excluding discontinued operations)

1.11

0.96

1.57

1.18

0.70

0.66

Gross dividend / Capital repayment

0.36

0.36

1.00

0.55

0.55

0.55

Net dividend / Capital repayment

0.27

0.27

0.75

0.41

0.46

0.41

Highest price

21.6

17.7

17.7

18.8

16.4

18.0

Lowest price

10.9

12.0

14.5

15.3

12.6

14.3

Price at December 31

12.8

16.4

17.4

15.9

15.0

17.5

Price / earnings at December 31

11.5

17.0

11.1

13.4

21.4

26.6

Gross dividend yield

2.8%

2.2%

5.7%

3.5%

3.7%

3.2%

Net dividend yield

2.1%

1.7%

4.3%

2.6%

3.0%

2.4%

954

471

626

1 100

772

736

Annual volume ('000 of EURO)

15 685

7 280

10 292

18 935

11 613

12 014

Market capitalization at December 31 ('000 EUR)

68 988

88 122

93 781

85 481

80 954

94 051

Annual volume ('000 of shares)

ISIN Codes Zetes Industries shares : BE0003827442


Publication Zetes Corporate Marketing & Communication Executive Editor Pierre Lambert, CFO Da Vinci Science Park Rue de Strasbourg 3 B-1130 Brussels Design www.chocoweb.be Layout and production www.visible.be This report was written in French. The Dutch and English versions are provided for the convenience of the reader. Only the French version is legally binding.

www.zetes.com/AR2013


CREATING TOMORROW BY INVESTING TODAY

Financial Information and Corporate Governance


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

CONTENTS

03

CONSOLIDATED INCOME STATEMENT

04

CONSOLIDATED FINANCIAL POSITION

05

CONSOLIDATED CASH FLOW STATEMENT

06

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

07

SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

12

NOTES TO THE CONSOLIDATED ACCOUNTS

17

SEGMENT INFORMATION

34

MANAGEMENT OF RISKS AND UNCERTAINTIES

36

AUDITOR’S REPORT

37

STATUTORY ACCOUNTS

41

CORPORATE GOVERNANCE


The consolidated financial statements for the year ended December 31, 2013 as presented in this annual report were prepared under the responsibility of the Board of Directors and authorized for issue on April 1, 2014 subject to approval of the statutory non-consolidated accounts by the shareholders at the Ordinary General Meeting to be held on May 28, 2014.

Consolidated income statement NOTES In '000 € Sales Cogs Gross Margin Employee expenses Other operating expenses Current EBITDA (1) Non current costs EBITDA Provisions, depreciation, amortisation, impairment losses EBIT Result from the disposal of fixed assets Financial result Result before taxes Income tax PROFIT OF THE PERIOD

2

4 6 / 7 / 9 / 10

4 5

Non-controlling interests Net profit of the Group Current EBIT (1) Net current result (1) (3)

2011

2012

2013

220 562 (125 085) 95 477

214 126 (120 427) 93 699

211 472 (120 026) 91 446

(53 062) (23 774) 18 640 (987) 17 653 (7 599) 10 055

(55 252) (24 331) 14 117 (1 207) 12 910 (7 472) 5 438

(54 250) (23 661) 13 535 (820) 12 715 (7 604) 5 111

(1) (1 213) 8 841 (2 597) 6 244

61 (543) 4 956 (1 431) 3 526

(3) (776) 4 333 (935) 3 397

(65) 6 308

(152) 3 677

12 3 385

11 041 7 005

6 645 4 512

5 931 4 028

6 308 (10)

3 677 106

3 385 (480)

Total comprehensive income In '000 € Net profit of the Group Currency translation differences (recyclable component) Net revaluation of hedging instruments (recyclable component) Other comprehensive income, net of related tax effects Total comprehensive income of the Group

4

(13)

(22)

(7) 6 302

94 3 771

(502) 2 883

5 331 111 1.18 1.31 5 331 111 1.18

5 247 116 0.70 0.86 5 247 116 0.70

5 156 750 0.66 0.78 5 156 750 0.66

Earnings per share (€ per share) Number of shares outstanding (2) Net result (3) Net current result (1) (3) Number of shares fully diluted (2) Net diluted result (3)

12

12

(1) "Current" excludes restructuring expenses and non current income/costs/badwill (2) Weighted average number of outstanding shares (3) Attributable to equity holders of the parent company

3


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

Consolidated financial position (before appropriation) NOTES

2011

2012

2013

Tangible assets

6

13 020

13 625

15 873

Intangible assets

7

5 636

5 433

6 659

Goodwill Deferred tax assets Financial assets and other non current assets Non current assets Inventories Current trade and other receivables Current tax assets Current prepayments Cash and cash equivalents Current assets Total assets

7 5 8

40 125 3 028 808 62 616 15 351 62 345 209 8 696 14 306 100 907 163 523

39 878 3 204 556 62 697 15 631 57 724 216 9 900 12 797 96 268 158 964

39 924 4 385 2 705 69 545 14 302 57 986 181 10 588 10 585 93 642 163 187

76 461 1 039 77 501 1 012 771 241

76 109 963 77 072 2 921 800 192

In '000 €

ASSETS

9 10

13

EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Non-controlling interests Total equity Non current borrowings Non current provisions Non current obligations

12 13 14 14

77 270 1 115 78 385 3 615 696 192

Deferred tax liabilities

5

1 994

1 854

2 550

6 497 4 345 387 31 71 316 1 609 953 78 641 163 523

3 878 4 921 114 33 68 185 2 617 1 715 77 586 158 964

6 464 10 983 24 65 905 1 288 1 450 79 651 163 187

Non current liabilities Current interests bearing borrowings Current provisions Current obligations Current trade and other payables Current tax liabilities Other current liabilities Current liabilities Total equity and liabilities

4

13 14 14 15


Consolidated cash flow statement

In '000 € CASH AND CASH EQUIVALENTS, BEGINNING BALANCE (I) Cash flows from the P&L Result before tax Depreciation on fixed assets Depreciation on development costs Write-downs on inventories & receivables Write-downs on financial assets Provisions Net Financial charges Income tax paid Other increases (decreases) incl. badwill Working capital Decrease (increase) in assets (1) Increase (decrease) in liabilities CASH FLOWS FROM THE OPERATIONS (II) Acquisitions Fixed assets Subsidiaries (net of cash acquired) Development expenses Disposals Fixed assets Interests received (+) CASH FLOWS RELATING TO INVESTING ACTIVITIES (III) Increase (decrease) of cash flows from financing Capital Proceeds from finance lease/bank loans Other loans Repayments of finance lease liabilities/bank loans Bank overdrafts increase (decrease) Cash restricted or pledged Financial charges Dividends Paid Own shares NET CASH FLOWS RELATING TO FIN. ACTIVITIES (IV) NET INCREASE IN CASH AND CASH EQUIVALENTS (V) = (II) + (III) + (IV) Exchange rates impact (VI) CASH AND CASH EQUIVALENTS, CLOSING BALANCE (VII) = (I) + (V) + (VI)

2011

2012

2013

14 599 14 499 8 841 4 944 1 498 790 65 409 184 (2 418) 186 3 675 6 545 (2 870) 18 174 (13 724) (4 701) (6 550) (2 473) 186 186 114 (13 424) 1 835 276 3 544 1 070 (2 018) (966) (71) (298) (5 336) (1 267) (5 065) (316) 23 14 306

14 306 10 541 4 956 5 033 1 686 538 26 (19) 153 (1 694) (138) 1 840 3 235 (1 395) 12 381 (7 934) (5 361) (740) (1 834) 201 201 71 (7 662) (1 395) 105 (2 080) 588 (8) (224) (2 895) (1 685) (6 199) (1 481) (28) 12 797

12 797 10 337 4 333 4 927 1 748 824 44 (200) 232 (1 504) (68) (6 311) (2 796) (3 514) 4 026 (11 086) (7 986) (343) (2 756) 366 366 24 (10 696) 8 053 2 3 947 (2 108) 6 185 28 (256) (2 875) (250) 4 672 (1 998) (214) 10 585

(1) Included the change in LT trade receivables

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ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

Consolidated statement of changes in equity Issued capital

Reserves

Own shares

Currency translation reserves (2)

Non controlling interests

Total equity

58 311

19 794

(300)

(276)

(4)

77 526

405

77 930

(10) (10)

4 4

6 308 (7) 6 302 0 0 (5 318) (1 267)

(65) (65) 276 547

6 244 (7) 6 237 276 547 (5 318) (1 267)

28

28

(28)

0

(0)

(20)

(20)

77 270

1 115

78 385

3 677 94 3 771 0 (2 895)

(152)

3 526 94 3 619 105 (2 895)

Hedging reserves

Total

(1)

In '000 € Balance at 31 December 2010 Net result of the period Result directly allocated to equity Total comprehensive income Capital increase Business Combination Dividends Acquisitions / sales of own shares Increase (decrease) through changes in ownership interests in subsidiaries that do not result in change of control Other variations

6 308

(4 000)

4 000

Balance at 31 December 2011

54 311

24 812

6 308

(5 318) (1 267)

Net result of the period Result directly allocated to equity Total comprehensive income Capital increase Dividends Acquisitions / sales of own shares Other variations Balance at 31 December 2012 Net result of the period Result directly allocated to equity Total comprehensive income Dividends Acquisitions / sales of own shares Increase (decrease) through changes in ownership interests in subsidiaries that do not result in change of control Other variations Balance at 31 December 2013

(1 568)

(286)

(0)

106 106

(13) (13)

3 677 3 677 (2 895) (1 685) 54 54 311

25 649

(1 685) (54)

(3 253)

(234)

(13)

3 385

3 385 (2 875)

(29)

(29)

76 461

1 039

77 501

3 385

12

3 397

(480)

(22)

(502)

(480)

(22)

2 883 (2 875)

(250)

(1 685)

0

(502) 12

(250)

2 895 (2 875) (250)

(110)

(110)

(82)

(192)

(4 416)

4 416

(0)

(7)

(7)

49 895

30 465

76 109

963

77 072

(3 502)

(714)

(35)

(1) Attributable to equity holders of the parent company (2) The decrease of the translation reserves for an amount of 480 thousand € is mainly explained by the decline of the rand and the pound sterling against the euro.

6

(152) 105


Summary of principal accounting policies The principal accounting policies adopted when preparing these consolidated financial statements are set out below.

1. Declarations of conformity The consolidated financial statements at 31 December 2013 have been prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted in the European Union. The Zetes Group has not anticipated any standards or interpretations issued prior to the approval date of the financial statements, and which come into application later than 31 December 2013.

2. Summary of changes in accounting principles The new standards and interpretations listed below are mandatory for the first time for the annual financial periods beginning on or after the date mentioned next to the standard or interpretation.

a. Standards and interpretations applicable from 2013 IFRS 7 IFRS 13 Amendments to IAS 1 Amendments to IAS 19 Amendments to IAS 12 Amendments to IFRS 1 IFRIC 20

Financial Instruments: Disclosures - Amendment regarding the offsetting of assets and liabilities Fair value measurement Presentation of Financial Statements - Other comprehensive income Employee Benefits Income Taxes - Deferred Tax: Recovery of Underlying Assets Government Loans First-time Adoption of IFRS: Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters Stripping Costs Incurred during the operational phase of an open pit mine (1/1/2013)

b. Standards and interpretations already published by not yet in force as of 31 December 2013 IFRS 9 IFRS 10 IFRS 11 IFRS 12 Amendments to IAS 19 Amendments to IAS 27 Amendments to IAS 28 Amendments to IAS 32 Amendments to IFRS 10, IFRS 12 and IAS 27 Amendments to IAS 36 Amendments to IAS 39 IFRIC 21

Financial Instruments and subsequent amendments (effective date not yet communicated). Consolidated Financial Statements (1/1/2014). Partnerships (1/1/2014). Disclosure of shareholdings in other entities (1/1/2014). Employee Benefits: Employee Contributions (1/7/2014, but not yet endorsed in the EU). Separate Financial Statements (1/1/2014). Investments in associates and joint ventures (1/1/2014). Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities (1/1/2014). Consolidated Financial Statements and Disclosure of Interests in Other Entities: Investment Entities (1/1/2014) Recoverable amount Disclosures for Non-Financial Assets (1/1/2014, but not yet endorsed in the EU). Novation of Derivatives and Continuation of Hedge Accounting (1/1/2014, but not yet endorsed in the EU). Levies charged by Public Authorities (1/1/2014, but not yet endorsed the in EU).

The other aforementioned standards, interpretations and amendments will, to the knowledge of management, have no significant impact on the consolidated financial statements (limited impact on the disclosures to be made).

3. Preparation The financial statements are prepared on a historical cost basis, except for the measurement at fair value of available-for-sale investments and derivative financial instruments. The consolidated financial statements are presented in euro, which is the company’s functional currency. The preparation of these financial statements requires the use of estimates and assumptions in determining the value of assets and liabilities at the balance sheet date and income and expenses for the year. The Zetes Group revises its estimates at each closing date based on the best available information. The key estimates involve assessing: • assets and liabilities in business combinations • the recoverable amount of goodwill and the intangible assets (development costs) • the results of construction contracts • provisions, including for litigation • capitalized tax loss carry-forwards • where appropriate, the forecast evolution in results

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ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

4. Basis of consolidation

The main exchange rates used are:

a. Subsidiaries Subsidiaries are those entities controlled by the Company. Control exists when the Company has an interest of more than one half of the voting rights of an enterprise or otherwise has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences (or a date nearby) until the date that control ceases. The acquisition of subsidiaries (business combination) is recorded in accordance with IFRS 3 revised, with identifiable assets acquired and liabilities assumed recorded at the time of takeover of control at fair value. Business combinations made before 1 January 2010 were accounted for under IFRS 3 (as applicable prior to revision) and have not been restated. Intra-group balances and transactions, and unrealised gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

b. Joint ventures Joint ventures are those entities over whose activities Zetes has joint control together with a third party, established by contractual agreement. For reasons of consistency over time (cf. IFRS 11 – Partnerships – above), this entity, which is integrated into Metaform Ltd, is proportionately consolidated.

5. Foreign currency translation Transactions in foreign currencies are translated at an average rate that approximates the foreign exchange rate ruling at the time the transaction took place. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to euro at the foreign exchange rate prevailing at that date. All foreign exchange gains and losses arising on this translation and from the settlement of the transactions are recognised in the income statement. Nonmonetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated to euro at the foreign exchange rate prevailing at the date of the transaction. Upon consolidation, the assets and liabilities of subsidiaries stated in foreign currencies are translated to euro at foreign exchange rates prevailing at the reporting date. Goodwill and fair value adjustments related to the acquisition of foreign subsidiaries are translated at the historical rate at the date of acquisition and therefore no exchange differences arise. Income and expenses are translated to euro at the average rate for the period. Foreign exchange differences arising on translation are recognised directly in equity. When a foreign entity is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.

Closing

Closing

Average

Average

2013

2012

2013

2012

Pound sterling

0.8337

0.8161

0.8491

0.8108

Swiss franc

1.2276

1.2072

1.2309

1.2053

US dollar

1.3791

1.3194

1.3282

1.2856

14.5660

11.1727

12.7768

10.5362

1 Euro =

Rand

6. Revenue recognition The Company does not specifically break out the sales of goods from the provision of services. In various cases, solutions are sold at an overall sales price with no distinction made between income from the provision of services and that from the sale of goods. The level of gross margin is the assessment criterion used by the Company as reflecting the value added by the Group. Revenue is recognised to the extent that it is probable that the economic benefits will flow to Zetes and the revenue can be measured reliably. Additionally, the following criteria must be met:

a. Sale of products Revenue from the sale of hardware products is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Income from the sale of standard software is recognised at the time of physical delivery to the customer, to the extent that such sale is definitive. As a general rule, ownership of the software remains with the publisher, which grants only user rights to its customer.

b. Maintenance contracts Revenue from maintenance contracts is recognised on a straight-line basis over the term of the service contract.

c. Integration services Revenue from integration services, such as project management and installation of equipment, is recognised in the income statement according to the percentage of completion method. The degree of completion is measured by reference to the proportion of service costs incurred to date as a percentage of the estimated total service costs for each project.

d. Projects Each project is broken down into its elementary components: hardware, software and services. Income is then recognised according to the rules which apply to each component. Where the individual components of a project cannot be broken out (sale of a total project), a global state of progress is determined and income from the project is determined as a function of this.

e. Construction contracts A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose or use. In the Zetes People

8


Authentication business, a construction contract typically involves the design and development of a card production pilot as well as the card production roll-out accompanied by project management and other value-added personalisation services. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised using the percentage of completion method. The stage of completion is measured by reference to the number of cards produced in proportion of the total to be produced for each project. Contract cost includes all expenditure directly related to specific projects and an allocation of fixed and variable overheads incurred in connection with contract activities. The aggregate of the contract costs incurred that relate to contract activity already performed, plus/minus the profit/loss recognised on each contract, is compared against the progress billings to date. Where costs plus/minus profit/loss exceed progress billings, the net balance is shown under trade and other receivables. Where progress billings exceed costs plus/less profit/loss, the net balance is shown under trade and other payables. Advance billings that relate to work to be performed in the future, are not considered in the above calculation and are included in advances received. When it is appears probable that total contract costs will exceed total contract revenue, the expected loss is recognised in the income statement immediately. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable that those costs will be recovered.

f. Royalties, interest and dividends Revenue from royalties is recognised on an accrual basis in accordance with the substance of the relevant agreements. Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to Zetes. Income from dividends receivable is recognised when the right to receive payment is established.

7. Government grants A government grant is recognised when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Grants related to assets (such as for capital expenditure) are credited to deferred income and released to the income statement on a straight-line basis over the expected useful life of the relevant asset. Grants relating to income are recognised in the income statement over the period necessary to match them with the costs they are intended to compensate.

8. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Land is not depreciated while owned buildings are depreciated over 20 years on a straight-line basis. Buildings are revalued by an

outside valuer every three years, with recognition of any significant changes. Leasehold improvements are depreciated over the shorter of estimated useful life and lease term. Other items are depreciated on a straight-line basis over the estimated useful lives as follows: Buildings structural works

20 years

Building equipment and installations

Maximum 10 years

Plant installations, machinery and equipment

3 - 5 years , or by the actual number of items produced vs. the total number of items expected to be produced on the machine

Goods ID equipment for commercial use (demo stock)

2 – 4 years

Computer and office equipment 3 – 5 years Furniture

5 – 10 years

Vehicles

4 years

9. Intangible assets a. Research & development Zetes does not perform any fundamental research activities. Development expenditure is recognised as an intangible asset, only when (among other criteria) it can be demonstrated that the product resulting from the development is likely to generate economic benefits and when the expenditure incurred on the development can be measured reliably. Capitalised development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is charged on a straight-line basis over the estimated useful life of the related asset, which is expected to be 3 years.

b. Other intangible assets Expenditure to acquire computer software and other licenses are stated at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is charged on a straight-line basis over the estimated useful life, not exceeding 5 years.

c. Goodwill Goodwill arising on acquisition of subsidiaries and joint ventures represents the excess of the cost of the acquisition over Zetes’ share in the net fair value of the identifiable assets liabilities and contingent liabilities recognised. Goodwill is recognised as an asset and is initially measured at cost. Subsequently its carrying value may be reduced by accumulated impairment losses (application of an impairment test).

10. Current assets and liabilities a. Inventories Inventories are stated at the lower of cost and net realisable value. In respect of raw materials and consumables, cost is accounted for according to the weighted average price. The cost of goods purchased for re-sale is the individual purchase price of each individual item or the weighted average price. Work in progress and finished goods are

9


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY valued at manufacturing cost, which includes all direct production costs.

13.Income taxes

b. Inventory write-down

a. Current tax

The amount of write-down is estimated by an analysis of stock rotation (sales/product), with a distinction made between finished goods and repair parts/equipment.

Current tax is the estimated tax payable on the taxable income for the year, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any reversal of inventory write-downs owing to an increase in the net realisable value is accounted for as a reduction in the amount of inventory charged to the period in which the reversal takes place.

c. Trade receivables Trade receivables are recognised and carried at original invoice amount (nominal value). Allowances are recognised when collection of the full amount is no longer probable.

d. Trade payables Trade payables are stated at their nominal value.

11. Cash and cash equivalents Cash and cash equivalents are carried at nominal value in the balance sheet. They comprise cash at bank and in hand, as well as shortterm deposits with banks and commercial paper with a term of three months or less, that are readily convertible to cash and that are not subject to significant risks of changes in value.

12. Leases a. Financial leases Leases, in which Zetes obtains the right to use assets, are classified as finance leases if substantially all the risks and rewards incident to ownership of the leased item are transferred to Zetes. Finance leases are capitalised at the fair value of the leased item at the inception of the lease or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and the reduction of the lease debt as to achieve a constant rate of interest on the remaining balance of the debt. Finance charges are charged directly against the income statement.

Depreciation Assets held under financial leases are depreciated on a straightline basis over the useful life of the asset. If there is no reasonable certainty that Zetes will be the owner of an asset at the end of a lease, the asset is 100% depreciated over the shorter of the length of the lease or the useful life of the asset.

b. Operating leases Leases that do not meet the criteria of finance leases are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the lease term.

10

Income tax expense is recognised in the income statement.

b. Deferred tax Deferred tax is provided using the balance sheet method in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except where the deferred tax liability arises from goodwill amortisation. Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised (selected horizon: 5 years). In respect of tax losses acquired upon investments in subsidiaries and joint ventures, deferred tax assets are recognised only to the extent that it is probable that the taxable profit against which the tax loss can be utilised will be generated within five years after the acquisition. The carrying amount of deferred income tax assets is reviewed at each reporting 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 deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

14. Equity – capital increase The transaction costs linked to any capital increases are accounted for as a deduction from equity, net of any related income tax benefit.

15. Dividends payable Dividends declared after the balance sheet date are not recognised as a liability at the reporting date but are directly deducted from equity when paid.

16. Provisions A provision is recognised when (i) Zetes has a present obligation (legal or constructive) as a result of a past event, (ii) it is probable that an outflow of resources will be required to settle the obligation, and (iii) a reliable estimate of the amount can be made. Where Zetes expects an amount for which a provision has been charged to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. If the effect of the time value of money is material,


provisions are determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Commitments resulting from restructurings are recognised when announced to the persons concerned.

17. Pension benefit plans and other post-employment benefits Zetes operates various post employment benefit plans in accordance with the local conditions and practices of the countries in which it operates. Costs relating to defined contribution pension plans are recognised when due. There are currently no pension plans of the defined benefit type in place at Zetes. Certain subsidiaries provide a post-employment benefit that is not a pension plan. The benefits are unfunded and represent a legal obligation consisting of defined payments when employees leave the Company. The related provision is determined separately for each employee (present value of the estimated future cash outflows).

18. Derivative financial instruments Derivative financial instruments utilised by Zetes are principally forward exchange contracts and currency options for hedging purposes. Any changes in fair value are taken directly to equity. No derivative instrument is held or has been issued for trading purposes.

19. Borrowing costs Borrowing costs, including interest on borrowings and bank overdrafts, as well as ancillary costs incurred in connection with the arrangement of borrowings, are recognised as an expense in the period in which they are incurred.

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ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

Notes to the consolidated accounts NOTE 1. CONSOLIDATED COMPANIES SUBSIDIARY Accuscan International Ltd Blackbird Data Systems Ltd Burotica SA Id-All BV IND Systeme GmbH Logiscan SARL Metaform Ltd Powersys 2000 S.L. RASW Management Maarn BV RFIDEA SA Zetes Auto ID Systems AG Zetes BV Zetes C么te d'Ivoire Zetes Fastrace SA Zetes GmbH Zetes Holding GmbH Zetes Holding Ltd Zetes Industries (Isra毛l) Ltd Zetes International GmbH Zetes Ireland Ltd Zetes Ltd Zetes Multicom SA Zetes NetWave SA Information Systems and Telecommunications Zetes Pty Ltd Zetes SA Zetes SAS Zetes Senegal SARL ZETES Solutions CZ s.r.o. Zetes SRL Zetes Technologies BV Zetes Technologies SA Zts Lda Number of consolidated subsidiaries: 32 (1) % of shares acquired during the year

12

Country

Ownership %

Consolidation Method

UK Ireland Portugal The Netherlands Germany France Israel Spain The Netherlands Belgium Switzerland The Netherlands Ivory Coast Belgium Germany Germany UK Israel Germany Ireland UK Spain

100 100 100 100 100 100 100 100 100 100 100 100 100 75.9 100 100 100 85 100 100 100 100

Global Global Global Global Global Global Global Global Global Global Global Global Global Global Global Global Global Global Global Global Global Global

Greece

58.1

Global

South Africa Belgium France Senegal Czech Republic Italy The Netherlands Belgium Portugal

90 100 100 100 100 100 100 50 100

Global Global Global Global Global Global Global Global Global

Change (1)

Date of change

15

March 2013

100

May 2013


01-Zetes Industries SA Belgium December 2013

100%

02-Zetes SA Belgium

34% 41.9%

100%

100%

12-ID-All NL(*)

14-Zetes International Germany (*) 100%

85%

10%

100%

50%

58.12%

37-IND Systeme GmbH Germany

81.4% 100%

35-Zetes Switzerland

05-ZTS Portugal (*)

43-Zetes Netwave Greece

28-Powersys Spain (*) 18.6%

50%

45-Rfidea Belgium

100%

17-Zetes BV Netherlands

90%

46-Zetes SouthAfrica

100%

27-Zetes Italy

100%

47-Zetes Solutions CZ

100%

100%

40-Zetes Logiscan France (*)

10%

41-Zetes Côte d'Ivoire

100%

25-Zetes Multicom Spain

31-RASW Vocognition NL

100%

23-Zetes Holdings Ireland (*)

33-Zetes Technologies NL (*)

100%

21-Zetes Blackbird Ireland

03-Zetes Technologies SA (*)

90%

49.84%

100%

10%

100%

34-Zetes GmbH Germany 37-IND Systeme

100%

15-Burotica Portugal

04-Zetes France

90% 10%

36-Zetes Holdings Germany (*)

30-Zetes Israël 100%

100%

29-Metaform Ltd Israël

50%

100%

07-Zetes Fastrace Belgium

49-Zetes Gambia GM

90%

48-Zetes Sénégal SN

50.16%

100%

38-Zetes Accuscan UK (*)

22-Zetes Holdings UK (*)

100%

32-Zetes UK

(*) Limited or no operations

13


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

2013 Events Early in 2013, Zetes purchased 15% of the shares of Zetes Industries (Israel) Ltd. In May 2013, Zetes established a new subsidiary in Senegal (Zetes Senegal). The subsidiary Zetes Gambia Ltd (Gambia) is being formed at the end of 2013; its impact on the 2013 consolidated financial statements is not significant and it has therefore not been included. The company Anvos GmbH (Germany) merged with Zetes GmbH in Germany.

Joint ventures In 2009, Zetes created a joint venture with the company Pitkit Printing Enterprises. For time consistency reasons, this entity, integrated into Metaform Ltd, is proportionately consolidated. Joint venture financial position at 31.12 2013 In '000 € Non current assets Current assets Equity Non current liabilities Current liabilities

1 931 7 138 8 366 400 304

NOTE 2. EMPLOYMENT COSTS BOOKED In '000 € Wages and salaries Defined contribution pension plan Total

2011

2012

2013

(51 879) (1 183) (53 062)

(53 803) (1 448) (55 252)

(52 789) (1 461) (54 250)

1 012 1 097

1 073 1 070

1 096 1 118

987 1 074

1 047 1 042

1 071 1 095

TOTAL IN UNITS Average Number of Staff Total staff at the end of the year

TOTAL IN FTE (1) Average Number of Staff Total staff at the end of the year (1) FTE: Full Time Equivalent

14


NOTE 3. SEGMENT REPORTING INCOME STATEMENT

2011

2012

2013

170 703 49 859 220 562

171 518 42 608 214 126

171 187 40 285 211 472

68 518 40.1% 26 959 54.1% 95 477 43.3%

69 323 40.4% 24 377 57.2% 93 699 43.8%

68 334 39.9% 23 112 57.4% 91 446 43.2%

(58 636) (14 904) (3 298) (76 837)

(61 884) (14 490) (3 209) (79 583)

(59 226) (15 433) (3 252) (77 911)

Current EBITDA Goods ID In % of sales People ID In % of sales Corporate Total current EBITDA Total current EBITDA in % of sales

9 882 5.8% 12 055 24.2% (3 298) 18 640 8.5%

7 439 4.3% 9 887 23.2% (3 209) 14 117 6.6%

9 108 5.3% 7 679 19.1% (3 252) 13 535 6.4%

EBITDA Goods ID People ID Corporate Total EBITDA

9 258 11 693 (3 298) 17 653

6 285 9 879 (3 254) 12 910

8 415 7 552 (3 251) 12 715

Current EBIT Goods ID In % of sales People ID In % of sales Corporate Total current EBIT Total current EBIT in % of sales

5 225 3.1% 9 131 18.3% (3 315) 11 041 5.0%

2 296 1.3% 7 641 17.9% (3 292) 6 645 3.1%

3 201 1.9% 6 159 15.3% (3 429) 5 931 2.8%

EBIT Goods ID People ID Corporate Total EBIT

4 601 8 769 (3 315) 10 055

1 142 7 634 (3 337) 5 438

2 508 6 033 (3 429) 5 111

In '000 € Sales Goods ID People ID Corporate Total sales Gross margin Goods ID In % of sales People ID In % of sales Corporate Total gross margin Total gross margin in % of sales Operating expenses Goods ID People ID Corporate Total operating expenses

15


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

FINANCIAL POSITION

2011

2012

2013

In '000 € Goodwill Goods ID People ID Total goodwill

36 816 3 309 40 125

36 569 3 309 39 878

36 615 3 309 39 924

Fixed assets Goods ID People ID Corporate Total fixed assets

12 811 5 601 244 18 655

14 289 4 552 218 19 058

14 660 7 667 205 22 531

Inventories Goods ID People ID Total inventories

12 045 3 306 15 351

11 619 4 012 15 631

10 032 4 269 14 302

Current trade and other receivables Goods ID People ID Corporate Total current trade and other receivables

59 406 9 915 87 69 408

56 588 9 024 140 65 752

56 975 10 361 99 67 434

Total assets Goods ID People ID Corporate and other non allocated assets Total assets

121 078 22 130 20 315 163 523

119 065 20 896 19 003 158 964

118 282 25 605 19 299 163 187

61 084 8 762 952 70 798

60 432 7 989 729 69 150

58 294 6 171 769 65 234

61 084 8 762 93 677 163 523

60 432 7 989 90 543 158 964

58 294 6 171 98 722 163 187

5 254 1 665 255 7 174

5 929 1 185 80 7 195

5 827 4 821 95 10 743

Current trade and other payables Goods ID People ID Corporate Total current trade and other payables Total liabilities Goods ID People ID Corporate and other non allocated liabilities Total liabilities Capital expenditures Goods ID People ID Corporate Total Capital expenditures

16


Segment information

nearly doubled between the first and second half (€ 3.1 million vs. € 6.0 million).

Zetes Industries applies IFRS 8 'Operating Segments'. The group is organized into two activity clusters - Goods ID and People ID that operate in different ways and with a distinct management and organisational structure.

The retail sector remains an important customer because it is constantly seeking to increase productivity through better traceability along the supply chain. Zetes' solutions (ZetesMedea and ZetesChronos in particular) provide an answer to the problem and can deliver a rapid return on investment.

The Goods ID division is highly decentralized, with local operations working more autonomously and responding to its customers’ needs for proximity. The division has introduced an international structure, with physical locations across Europe, Israel and South Africa (15 countries). In contrast, the People ID division is highly centralized, though the concluding of a number of ‘build and operate’ contracts has led Zetes to set up secure document production units in various countries. Zetes also has business development teams operating on the African continent (South Africa, Cote d'Ivoire). Internal reporting is limited to the specific analysis of sales, gross margin, operating expenses, EBITDA and depreciation/amortization for each cluster. Zetes also has a 'corporate' structure, the expenses of which are monitored separately. Earnings results, investments, assets and liabilities for each segment include items directly attributable to a segment as well as items that can reasonably be allocated to it. Segment assets include fixed assets, goodwill, inventories, trade receivables, construction contracts, advance payments and taxes receivable. Segment liabilities include trade payables, advance payments received, and debts to employees and government bodies. Non-allocated (corporate).

sales/results

relate

to

central

administration

In this way the EBITDA/sales ratio increased by 1% from 4.3% in 2012 to 5.3% in 2013. At the same time, the Division continued to invest in its 6 key solutions, which correspond to its particular areas of expertise and initial commercial successes validate Zetes' strategic choices. The MCL mobility platform has been well received. It gives customers much improved management of their mobile terminals and the first references have now been installed in the retail non-food and transport sectors. Already, sales of the 6 key solutions have helped offset the effects of constant pressure on hardware prices and margins seen in the 2013 financial results. Zetes expects this effect to be more clearly visible in the 2014 results. Advance indicators, such as sales cycle tracking, clearly show an increased level of interest in these solutions from customers.

Internal growth and currency effects

1. GOODS ID Goods ID

Pressure of competition between manufacturers continues to compress margins on mobile terminals and other equipments. The sale of services (life cycle management) and software (in the form of services and, increasingly, licences) allows Zetes to offset this pressure and maintain its margins. Good cost control together with productivity gains enabled Zetes to improve its performance, even in the absence of revenue growth.

Besides its impact on the business in the countries concerned, changes in exchange rates, particularly between the South African Rand and the Euro, were unfavourable to the Goods ID division.

2010

2011

2012

2013

%

155 290

170 703

171 518

171 187

-0.2%

63 047

68 518

69 323

68 334

-1.4%

-51 652

-58 636

-61 884

-59 226

-4.3%

11 395

9 882

7 439

9 108

22.4%

% Sales

% Sales

7.30%

5.80%

4.34%

5.32%

EBITDA

11 002

9 258

6 285

8 415

33.9%

Current EBITDA

7 054

5 225

2 296

3 201

39.4%

In '000 € Sales Gross margin Operating expenses Current EBITDA

Current EBIT

Goods ID

2012

2013

%

171 518

174 699

1.9%

69 323

69 768

0.6%

40.4%

39.9%

(61 884)

(60 631)

-2.0%

7 439

9 137

22.8%

% Sales

4.3%

5.2%

EBITDA

6 285

8 421

Currency effect excluded

In '000 € Sales Gross margin Operating expenses

34.0%

In 2013, the Goods ID Division significantly improved its performance; while sales and gross margin were very similar to those of the previous year, current EBITDA increased by 22.4%, the result of good cost control (-4.3%).

Performance analysis on a constant scope basis (i.e. organic growth only) shows that, at constant exchange rates, sales would have increased by 1.9% and gross margin by 0.6%.

The year ended much better than it started: after a slowing of ordertaking at the start of the year, a more positive trend followed from summer onwards, with the conclusion of several major projects. The impact of this turnaround is clearly reflected in current EBITDA, which

The priority for the year was the development of the 6 key solutions, with external growth put on temporary hold. Only one (asset) deal was completed in 2013, which involved taking over a team of 10 specialists in e-commerce-related logistics along with the intellectual property

17


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY and customers of the company, L4 Epsilon, in France (€ 0.2 million). This acquisition has been fully integrated into Zetes France. The data provided below also reflects the fact that Zetes in the Czech Republic was only partially consolidated in 2012. Goods ID

Pro forma 2013

2012

2013

%

171 518

169 470

-1.2%

69 323

67 795

-2.2%

In '000 € Sales Gross margin % Sales

40.4%

40.0%

(61 884)

(58 920)

-4.8%

Current EBITDA

7 439

8 875

19.3%

% Sales

4.3%

5.2%

EBITDA

6 285

8 182

Operating expenses

30.2%

2. PEOPLE ID

In 2013, 80% of revenue came from ‘Build and Operate’ contracts, with a gross margin of 57.4%, reflecting the division's value-added strategy. In many cases, these long-term contracts are awarded by governments that entrust Zetes with responsibility for looking after their population databases and issuing related identity or travel documents. The scope of these projects varies, with electronic ID card systems in Belgium, Israel and Portugal, as well as the Belgian driver's licence. For several years now, Zetes has also managed, on behalf of Côte d'Ivoire, the comprehensive biographical and biometric registration of its citizens and the issue (personalization) of their electronic passports. In 2013, the Gambian government awarded Zetes the concession for a similar passport system in Gambia (‘Build and Operate’ model). And in August 2013, the Belgian government entrusted Zetes with issuing passports for Belgian citizens. The past months have been used to prepare these contracts. The issuance of documents will begin in the second quarter of 2014 for both contracts.

2013 was marked by a significant number of new long-term contracts, including the Belgian and Gambian passports and biometric visas in Senegal. With the exception of Senegal, where the system is in place and has been generating income since July 2013, the other contracts have initially absorbed substantial resources for development and preparation, with revenue to come during the course of 2014.

In addition, starting in July 2013, the division internalized the secure distribution of identity documents to Belgian municipalities. Until then, these were distributed by an outside carrier whose external costs were reflected in purchases. This decision resulted in an increase in gross margin in the second half (decreased purchases) and a corresponding increase in operating expenses.

In 2013, Zetes did not execute any major ‘Build and Transfer’ project with a high hardware component. Such contracts are usually associated with the preparation of electoral cycles, for which the electoral roll is prepared based on a biometric enrolment of the population. In this case, the contract and its execution follow in quick succession. Only two ‘Build and Transfer’ projects were completed in 2013, for Togo and Guinea Conakry. Both consisted primarily of services, generating a limited income but high margins.

With current EBITDA down 22.3% compared with 2012 at € 7.7 million, the current EBITDA to sales ratio remains high at 19.1%. This percentage can be explained by the very high 'services' component in the ‘Build and Transfer’ contract sales and the fact that ‘Build and Operate’ contracts are capital intensive. Invoicing therefore includes an amount to cover depreciation of the investments. Current EBIT amounts to € 6.2 million (-19.4%).

People ID

2010

2011

2012

2013

%

Sales

61 448

49 859

42 608

40 285

-5.5%

Gross margin

25 663

26 959

24 377

23 112

-5.2%

-14 885

-14 904

-14 490

-15 433

6.5% -22.3%

In '000 €

Operating expenses Current EBITDA

10 779

12 055

9 887

7 679

% Sales

17.50%

24.20%

23.20%

19.1%

EBITDA

10 764

11 693

9 879

7 552

-23.6%

7 865

9 131

7 641

6 159

-19.4%

Current EBIT

18

This trend is, however, temporary and elsewhere, 2013 has been marked by a large intake of long-term contracts. These are at the development stage and will support good revenue growth in 2014.

3. GROUP The cost of the Corporate Division amounted to € 3.3 million. The Zetes model is based on strong operational divisions and a light corporate structure. The main tasks of Zetes Corporate are strategy definition, financial control and external growth.


NOTE 4. NON-CURRENT COSTS AND INCOME / FINANCIAL RESULT NON CURRENT COSTS AND INCOME

2011

2012

2013

In '000 € Restructuring costs Badwill Other non current costs and income Total

(893) (94) (987)

(1 280) 81 (8) (1 207)

(693) (127) (820)

The restructuring costs relate to the adjusting of local structures and to putting in place the new organization (strategy of converting bespoke solutions into software products). The main other non-current costs are employee expenses without economic counterparty (k€ 222 ) and the costs linked to acquisitions and company formation (k€ 30 ). The other non-current income includes the earnouts adjustments (k€ 125).

FINANCIAL RESULT

2011

2012

2013

In '000 € Interest charges Other financial charges Interest income Other financial income Financial result excluding exchange differences

(298) (347) 114 24 (506)

(224) (324) 71 109 (367)

(256) (357) 27 83 (503)

Exchange losses / conversion differences Exchange gains / conversion differences Exchange differences

(1 021) 315 (706)

(564) 389 (175)

(742) 469 (273)

Total financial result

(1 213)

(543)

(776)

19


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

NOTE 5. TAXES INCOME TAX

2011

2012

2013

In '000 € Current income tax expenses Deferred tax expenses Income tax

2 418 180 2 597

1 694 (264) 1 431

1 504 (569) 935

3 005 8 841 33.99% (50) (412) 399 (313) (31) 2 597 29.38%

1 685 4 956 33.99% (121) (332) 560 (383) 23 1 431 28.86%

1 473 4 333 33.99% (193) (160) 179 (409) 45 935 21.59%

RECONCILIATION OF STATUTORY TAX TO EFFECTIVE TAX RATE Tax expenses using statutory rate Net profit before taxes Belgian statutory tax rate Tax effect of rates in other jurisdictions Tax effect of notional interest deduction Tax effect of non tax deductible expenses Tax effect of current and deferred tax adjustments Others Tax expenses using effective rate Effective tax rate

DEFERRED TAX ASSETS

2011

2012

2013

In '000 € Intangible assets Tangible assets Inventories Trade receivables Construction contracts Accrued charges Provisions Tax losses carried-forward Total deferred tax assets

81 86 39 60 (4) 38 115 2 614 3 028

(28) 157 32 34 27 43 2 939 3 204

(50) 126 127 28 19 42 4 093 4 385

DEFERRED TAX LIABILITIES

2011

2012

2013

Intangible assets Tangible assets Construction contracts Deferred charges Non-recoverable tax losses Total deferred tax liabilities

1 109 278 482 125 1 994

1 168 277 374 35 1 854

1 395 275 497 383 2 550

20


NOTE 6. TANGIBLE ASSETS In '000 € Balance at 31 December 2010 Gross carrying amount Accumulated depreciation Closing balance 2010 Changes in 2011 Additions Business combination Disposals / cancellations Conversion differences Reclassifications (to) from other items / other Depreciation charge Depreciation on business combination Depreciation on disposals / cancellations Depreciation other Balance at 31 December 2011 Gross carrying amount Accumulated depreciation Closing balance 2011 Changes in 2012 Additions Business combination Disposals / cancellations Conversion differences Reclassifications (to) from other items / other Depreciation charge Depreciation on business combination Depreciation on disposals / cancellations Depreciation other Balance at 31 December 2012 Gross carrying amount Accumulated depreciation Closing balance 2012

Buildings

Plants and Motor vehicles equipments

Fixtures and fittings

Leasehold improvements

Other

Assets leased to third parties

Total

-

42 477 (29 929) 12 548

3 607 (294) 3 313

27 119 (21 263) 5 856

2 947 (1 713) 1 234

2 532 (2 143) 388

4 486 (3 174) 1 312

1 786 (1 341) 445

29 -

1 688 1 240 (214) (155)

992 173 (775) (7)

130 212 (301) (6)

771 (317) (4)

407 343 (4) (29)

4 017 1 969 (1 611) (200)

-

(421)

(18)

58

0

-

(381)

(155)

(2 859)

(454)

(179)

(371)

(159)

(4 178)

-

(793)

(54)

(176)

-

(14)

(1 038)

-

210

603

293

317

1

1 424

-

537

21

(90)

2

(0)

470

3 637 (449) 3 188

29 257 (24 169) 5 089

3 313 (1 598) 1 715

2 623 (2 296) 327

4 937 (3 226) 1 710

2 504 (1 513) 990

-

46 271 (33 252) 13 020

11 -

1 688 206 (304) (13)

756 0 (567) (3)

220 17 (47) (4)

222 (85) 13

137 31 (16) (28)

1 751 -

4 786 254 (1 019) (34)

-

(732)

(25)

(91)

-

(167)

-

(1 016)

(155)

(2 295)

(578)

(139)

(320)

(266)

(252)

(4 006)

-

(167)

(0)

(14)

-

(31)

-

(212)

-

300

436

47

85

10

-

878

-

777

24

91

(3)

84

-

974

3 648 (604) 3 043

30 099 (25 550) 4 549

3 350 (1 590) 1 760

2 718 (2 311) 408

5 088 (3 465) 1 623

2 461 (1 717) 743

1 751 (252) 1 499

49 114 (35 489) 13 625

21


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

NOTE 6. TANGIBLE ASSETS (CONTINUED)

In '000 € Changes in 2013 Additions Business combination Disposals / cancellations Conversion differences Reclassifications (to) from other items / other Depreciation charge Depreciation on business combination Depreciation on disposals / cancellations Depreciation other Balance at 31 December 2013 Gross carrying amount Accumulated depreciation Closing balance 2013

Buildings

Plants and Motor vehicles equipments

Fixtures and fittings

Leasehold improvements

Other

Assets leased to third parties

Total

-

3 951 11 (243) (69)

989 (569) (14)

300 2 (24) (31)

702 4

291 (67) (117)

646 (221) (15)

6 878 12 (1 125) (242)

-

(6)

(37)

(2)

-

5

-

(39)

(156)

(1 689)

(672)

(152)

(349)

(296)

(622)

(3 935)

-

-

-

-

-

-

-

-

-

238

415

24

-

37

41

755

-

(149)

42

15

(5)

40

0

(57)

3 648 (760) 2 888

33 743 (27 150) 6 593

3 679 (1 765) 1 914

2 958 (2 419) 539

5 794 (3 819) 1 974

2 572 (1 937) 636

2 161 (832) 1 329

54 554 (38 681) 15 873

312

1

Balance at 31 December 2013 Net carrying amount of tangible assets under finance leases Tangible assets acquired in 2013 under finance leases Amount of tangible assets pledged as security for liabilities

313

308

308

312

1

313

NOTE 7. INTANGIBLE ASSETS In '000 € Balance at 31 December 2010 Gross carrying amount Accumulated depreciation Accumulated impairment losses Closing balance 2010 Changes in 2011 Additions Business combination Conversion differences Other Depreciation charge Depreciation on business combination Depreciation other

22

Goodwill

Development costs

Patents, trademarks and other rights

Computer software

Total

36 283 (1 314) 34 970

13 470 (10 602) 2 868

1 217 (743) 474

4 001 (2 653) 1 349

54 972 (13 998) (1 314) 39 660

2 473 44 5 (844) (1 543) (40) 842

42 140 (20) (389) (227) (132) 381

642 107 8 431 (493) (71) (408)

3 157 5 788 (48) (1 104) (2 264) (243) 815

5 498 (41) (302)


NOTE 7. INTANGIBLE ASSETS (CONTINUED) In '000 € Balance at 31 December 2011 Gross carrying amount Accumulated depreciation Accumulated impairment losses Closing balance 2011 Changes in 2012 Additions Business combination Conversion differences Cancellation Other Depreciation charge Depreciation on business combination Depreciation cancelled Depreciation other Balance at 31 December 2012 Gross carrying amount Accumulated depreciation Accumulated impairment losses Closing balance 2012 Changes in 2013 Additions Business combination Conversion differences Other Depreciation charge Depreciation other Balance at 31 December 2013 Gross carrying amount Accumulated depreciation Accumulated impairment losses Closing balance 2013 Net internally generated intangible assets

Goodwill

Development costs

Patents, trademarks and other rights

Computer software

Total

41 439 (1 314) 40 125

15 148 (11 344) 3 804

989 (722) 267

5 190 (3 625) 1 565

62 765 (15 691) (1 314) 45 761

1 834 4 (1 752) -

49 11 2 (229) -

526 206 7 (31) (735) (124)

2 409 617 13 (718) (678) (2 716) (124)

(1)

(2)

32

29

16 986 (13 096) 3 890

1 051 (954) 97

5 897 (4 451) 1 446

64 407 (18 501) (595) 45 311

2 756 (3) (1 779) 1

140 14 (76) (14)

968 132 (75) (4) (885) 52

3 864 177 (65) (4) (2 740) 39

40 519 (595) 39 924

19 738 (14 874) 4 864

1 205 (1 043) 161

6 918 (5 284) 1 633

68 380 (21 202) (595) 46 583

-

4 864

399 0 (718) (646)

718

40 473 (595) 39 878

46 (0)

4 864

Comments on Goodwill The goodwill increase of k€ 46 is related to the asset deal involving L4 Epsilon in France.

Earnouts The earnouts adjustments made in 2013 have been booked in the P&L (application of IFRS 3R).

23


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

Breakdown of the goodwill by segment The goodwill is allocated according to the segment where the acquisitions have been made: Goods ID or People ID. Zetes Group organizes its activity by businesses, each under the authority of a specific manager. It is at this level that strategy, resource allocation, solutions and priority markets are determined. It is also at this level that performance is analysed.

In '000 € By segment Goods ID People ID Total goodwill

For each entity, the Group identifies whether it is a "mono-activity" or not. A "mono-activity" is considered to be a separate CGU. Those that are not mono-activity are organised in such a way as to be able to break down analytically their activities, including the assets and liabilities attached thereto. Each analytical unit then constitutes a CGU. CGUs are then grouped into groups of CGUs that make up the Goods ID and People ID divisions. The goodwill is allocated to these groups of CGUs. Assets constituting a cash-generating unit are tested for impairment before undertaking an impairment test at the level of the group of CGUs to which the goodwill is allocated. The Group examines the value of the goodwill shown in the statement of financial position at each annual closing date, or more often whether indications of impairment exists. The external impairment index used is the market capitalization of the company. The recoverable amount of a cash-generating unit is determined on the basis of fair value, less costs of sales or, where insufficient in respect of goodwill, of value in use. The fair value is calculated based on valuations effective in the industry, namely a multiple of EBITDA adjusted for net cash position. The cost of sales is estimated at 5% of the value of the entity under review. The value in use is calculated based on projected cash flows derived from the annual budgets as adopted by the Board of Directors, as well as assumptions concerning the evolution of the business over a five-year period. Cash flows beyond the range of the projections are extrapolated using estimated average growth rates, as indicated below.

24

2011

2012

2013

VAR.

36 816 3 309 40 125

36 569 3 309 39 878

36 615 3 309 39 924

46 46

Estimated cash flows do not include incoming and outgoing cash flows from financing activities or related to income taxes. Past flows are compared to estimated projections. The assumptions used in the tests are the same for all CGUs. The weighted average cost of capital before taxes applied by the Group to all CGUs is compared with different sources and is updated periodically, but not whenever an impairment test is carried out. Between each update, the Group verifies that the key variables used in determining the WACC (applied in its activity segment) have not changed significantly.

Key assumptions used in calculating value in use

2013 Discount rate Growth rate (1) Illiquidity discount

10% 1% 15%

(1) After the five-year period

Sensitivity analysis The Group conducts a sensitivity analysis, with an emphasis on the key assumptions; these are the EBITDA multiplier used to determine the fair value and the growth forecasts used to determine the value in used (elaboration of different scenarios). The analysis done in 2013 shows that the carrying value of the Goods ID division exceeds its fair value, without exceeding its value in use. It also shows that the value in use of the division is significantly greater than its carrying value in the different scenarios.


NOTE 8. FINANCIAL ASSETS AND OTHER NON CURRENT ASSETS ASSETS In '000 € Other non current financial assets Non current cash restricted or pledged Long term trade receivables Total

2011

2012

2013

197 611

164 392

808

556

213 351 2 141 2 705

HEDGING INSTRUMENTS In ‘000 Forward contracts EUR / USD

Sale EUR

Purchase USD

Expiring from

Expiring to

Contract average rate

Closing rate 31/12

2 498

3 380

janv-14

déc-14

1.353

1.379

The Group has hedging instruments to hedge identified foreign exchange risks; on 31/12/2013, there are hedging contracts for an amount of 3.3 million USD against EUR to be purchased at an average rate of 1 353. The net result on hedging instruments is (35) thousand € and is mentioned in the Statement of Changes in equity.

NOTE 9. INVENTORIES ASSETS In '000 € Total gross carrying amounts Goods Production supplies Stock in transit Accumulated write-downs Goods Production supplies Total net

2011

2012

2013

20 824 17 866 2 722 237 (5 473) (5 262) (211) 15 351

20 382 15 129 3 921 1 332 (4 751) (4 499) (252) 15 631

19 186 15 273 3 644 269 (4 884) (4 772) (113) 14 302

(496)

(381)

(638)

INCOME STATEMENT In '000 € Write-downs on inventories of the year

25


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

NOTE 10. CURRENT TRADE AND OTHER RECEIVABLES ASSETS In '000 € Trade receivables Gross trade receivables Accumulated write-downs Other current receivables Construction contracts Other Total

2011

2012

2013

58 232 59 962 (1 730) 4 112 1 881 2 232 62 345

53 852 55 038 (1 187) 3 872 1 556 2 317 57 724

54 183 55 560 (1 376) 3 802 2 356 1 446 57 986

The credit risk is not significant at the Group level. The risk is spread on lots of different customers and markets. It is partly covered by a credit insurance company. If not, a credit risk analysis is performed allowing to reduce the risk of the counterparty. Construction contracts Cumulative amount of contract costs incurred and recognized profits less losses

INCOME STATEMENT In '000 € Revenue relating to the execution of construction contracts Write-downs on bad and doubtful customers

120 066

144 202

166 716

2011

2012

2013

25 710 (295)

24 137 (157)

22 513 (185)

2011

2012

2013

155 236

46 128

46 234

(1 025) (675) (350) (63) (33) (1 121)

(876) (738) (138) (74) (20) (969)

(967) (756) (211) (82) (20) (1 068)

NOTE 11. RELATED PARTIES

In '000 € Assets with related parties (1) Liabilities with related parties Transactions within related parties Total Management Committee remunerations Basic compensation Variable compensation Total non executive directors remunerations Total others (2) Total services received (1) Current accounts of executive directors (2) Lawyers services

All transactions with companies related to directors have been made at arm's length. The remuneration report is available in the "Corporate Governance" section of the annual report.

26


NOTE 12. EQUITY NOTE MOVEMENTS IN NUMBER OF SHARES

Ordinary shares

Number of shares on 31/12/2012 Number of shares issued in 2013 Number of shares on 31/12/2013

5 389 714 0 5 389 714

OWN SHARES

Number

Own shares, opening balance 2013 movements Own shares, closing balance

215 769 18 553 234 322

In '000 € 3 253 250 3 502

In 2013, the Board of Directors decided to buy own shares, in accordance with the authorization given by the Shareholders' General Meeting.

Other informations All issued shares are fully paid. The articles of association authorise the Board of Directors to increase the issued capital for an amount of maximum 51.7 million €. All shares are without par-value.

Dividend The Board of Directors will propose to the Ordinary General Assembly held on May 28, 2014 to pay a gross ordinary dividend of 0.55 € per share. This amount remains unchanged compared to the amount paid in 2013. The proposed dividend has not been recognised as a liability at the end of 2013.

EARNINGS PER SHARE CALCULATION

Continuing operations

Total

Net profit (basic) The net profit per share is calculated by dividing the net result of the Group by the weighted average number of ordinary shares outstanding during the year. Net profit of the Group (in '000 €) Weighted average number of ordinary shares outstanding Basic earnings per share (in €)

3 385 5 156 750 0.66

3 385 5 156 750 0.66

Net profit (diluted) For the calculation of the diluted earnings per share, the weighted average number of ordinary shares is adjusted to take into account the conversion of all dilutive equity instruments. At the end of 2013, the outstanding number of options is 184.669. The weighted average listing price is 16.18 € (2013) ; because it does not exceed the exercise prices, the options are not taken into account to compute the dilution effect. Net profit of the Group (in '000 €) Weighted average number of ordinary shares outstanding Adjustments for options Weighted average number of ordinary shares for diluted earnings per share Diluted earnings per share (in €)

3 385 5 156 750 0 5 156 750 0.66

3 385 5 156 750 0 5 156 750 0.66

27


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

OPTIONS

Exercise price Outstanding on 31/12/2012 Granted during the period Exercised during the period Cancelled during the period Outstanding on 31/12/2013 Of which vested Of which to be vested Expiring date

PLAN 2005

PLAN 2007

23.00 181 869

22.63 2 800

181 869 181 869

TOTAL 184 669 184 669 184 669 -

21/11/17

2 800 2 800 22/06/19

2011

2012

2013

166 506 673

156 215 370

239 221 460

4 672 5 903 10 574

4 662 5 433 10 095

4 627 5 457 10 084

3 499 673 2 721 6 893

2 042 370 3 307 5 719

3 975 460 9 469 13 904

1 067 1 067

214 214

-

4 345 3 615 7 960

4 921 1 012 5 933

10 983 2 921 13 904

There were no options granted in 2013.

NOTE 13. FINANCIAL BORROWINGS FINANCE LEASES, MINIMUM LEASE PAYMENT PAYABLE, PRESENT VALUE In '000 € < 1 year Between 2 and 5 years Total

NON CANCELLABLE FUTURE MINIMUM OPERATING LEASE PAYMENTS In '000 € < 1 year Between 2 and 5 years > 5 years Total

INTERESTS BEARING BORROWINGS In '000 € Bank borrowings Finance leases Bank overdrafts Total

NON-INTERESTS BEARING BORROWINGS Other non current borrowings Total

AGING PROFILE < 1 year Between 2 and 5 years > 5 years Total

28


FINANCIAL DEBTS BY CURRENCY

2011

2012

2013

EUR GBP CHF ZAR Total

6 698 14 14 168 6 893

4 705 202 791 20 5 719

13 495 400 9 13 904

In '000 € Total financial debts Cash available Net cash (-) / net financial debt (+)

6 893 (14 917) (8 024)

5 719 (13 189) (7 471)

13 904 (10 936) 2 968

Current financial debts Cash and cash equivalents Current net cash (-) / current net financial debt (+)

4 345 (14 306) (9 961)

4 921 (12 797) (7 877)

10 983 (10 585) 397

392 12 797 13 189

351 10 585 10 936

FAIR VALUE OF FINANCIAL DEBTS For floating rate financial debts, the fair value is equal to the face value.

NET CASH

The net cash is the difference between the total financial debts and the cash available. The current net cash is the difference between the current financial debts and the cash and cash equivalents.

CASH AVAILABLE In '000 € Current cash restricted or pledged Cash and cash equivalents Total cash available

611 14 306 14 917

29


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

NOTE 14. PROVISIONS & OBLIGATIONS PROVISIONS In '000 â&#x201A;Ź

Warranty provisions

Restructuring provisions

Legal proceeding provisions

Onerous contract provisions

Total

Balance at 31 December 2010

272

148

71

103

594

Non current provisions Current provisions

272 -

133 15

71 -

103 -

579 15

Business combination Additional provisions Amounts used Unused amounts reversed Other

7 104 (18) (2)

324 (14) (134)

256 (138) (26) 133

56 (58) -

7 739 (210) (45) (2)

Balance at 31 December 2011 Non current provisions Current provisions

363 363 -

324 324

296 233 63

100 100 -

1Â 083 696 387

Additional provisions Amounts used Unused amounts reversed Other

115 (12) 0

193 (324) (4)

10 (109) (125)

56 -

374 (324) (121) (128)

Balance at 31 December 2012 Non current provisions Current provisions

467 467 -

188 74 114

73 73 -

156 156 -

885 771 114

Additional provisions Amounts used Unused amounts reversed Other

20 (42) 4

0 (114) (39) (9)

(33) -

127 -

148 (147) (81) (5)

Balance at 31 December 2013 Non current provisions

449 449

27 27

40 40

284 284

800 800

The warranty provisions cover the company costs for the defective equipments not under the producer guarantee. The legal proceeding provisions mainly relate to disputes with former employees. The onerous contract provisions cover the not-normal costs related to agreements.

30


OBLIGATIONS In '000 â&#x201A;Ź Balance at 31 December 2010 Non current obligations Current obligations

Post employment benefit obligation 136 118 17

Additional provisions Amounts used Conversion differences Other

87 (38) (3) 40

Balance at 31 December 2011 Non current obligations Current obligations

222 192 31

Additional provisions Amounts used Conversion differences

90 (38) 0

Balance at 31 December 2012 Non current obligations Current obligations

274 241 33

Additional provisions Amounts used Conversion differences

18 (76) 1

Balance at 31 December 2013 Non current obligations Current obligations

217 192 24

CONTINGENT LIABILITIES On 31/12/2013, the Group has contingent liabilities with uncertainty on timing and/or amount, arising in the course of the business. The contingent liabilities relate to possible obligations in respect of certain warranties given to bankers, customers, suppliers and joint ventures. The possibility of an outflow of resources embodying economic benefits is remote.

DEFINED CONTRIBUTION PLANS Zetes operates various post employment benefit plans in accordance with the local conditions and practices of the countries in which it operates. Those plans are contracted with external insurance companies, which have to respect minimum legal returns. The contributions to these insurance schemes are funded by payments from employees and the relevant group's companies. The payments to defined contribution plans charged as an expense in 2013 amount to 1 465 thousand â&#x201A;Ź.

31


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

NOTE 15. CURRENT TRADE AND OTHER CURRENT PAYABLES 2011

2012

2013

33 128 23 541 14 646 5 712 6 808 2 127 71 316

31 524 23 006 13 638 5 495 6 508 1 636 17 68 185

28 957 22 758 14 144 5 535 6 696 1 913 47 65 905

2011 Acquisitions

2012 Acquisitions

2013 Acquisitions

Impact of acquisitions Non current assets Tangible assets Intangible assets Deferred tax assets Cash restricted or pledged Other non current assets Current assets Inventories Trade and other receivables Prepayments Cash and cash equivalents Other current assets Non-current liabilities Interests bearing borrowings Provisions Deferred tax liabilities Current liabilities Interests bearing borrowings Trade and other current payables Advances received Other liabilities

1 197 931 47 138 81 5 572 1 419 3 591 198 166 198 522 514 7 4 582 974 2 646 943 19

167 42 94 30 877 178 361 47 290 331 304 23 4

144 12 132 6 6 46 46 -

Net identifiable assets and liabilities

1 666

712

104

Goodwill on acquisitions and earnouts Goodwill on acquisitions Badwill on acquisitions Cash (acquired) / disposed Net cash outflow / (inflow) Minority interests

5 498 5 498 (166) 6 997 547

318 399 (81) (290) 740 -

46 46 150 -

In '000 € Trade payables Advances received Other current payables Payables to employees Payables to public administrations Other Current hedging instruments Total

NOTE 16. DISCLOSURES ON ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES In '000 €

32


2013 & POST CLOSING TRANSACTIONS Zetes acquired in 2013 the assets of the company L4 Epsilon which is fully integrated into Zetes France. The net assets & liabilities of this acquisition amount to 104 thousand €. Their book value before the business combination is the same. There are no post closing transactions in 2014.

NOTE 17. AUDITOR'S MISSIONS The auditor RSM Réviseurs d’Entreprises, represented by M. Laurent Van der Linden and M. Thierry Dupont, has been appointed by the 2011 Shareholders Meeting. It will expire at the 2014 Shareholders Meeting held to approve the 2013 accounts. The mission and powers of the auditor are those granted by the law. The Auditor may not be revoked by the Shareholders' Meeting other than for good reason.

2011

2012

2013

Auditor's fees Audit of the financial statements Other missions

79 1

84 2

84 -

Auditor's related parties' fees Audit of the financial statements Fiscal advices Other missions

12 4 19

4 12 -

6 -

In '000 €

33


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

Management of risks and uncertainties Introduction Risk taking is inherent in any business enterprise. There is no growth or value creation in a company without taking risks. If not properly managed and controlled, these risks may affect the Company's ability to achieve its objectives. By continuing to foresee and manage risks, risk management and internal control systems play a key role in conducting and monitoring various business activities. Risk is the possibility of an event occurring that will have consequences that may affect the company's employees, assets, environment, objectives or reputation. Risk management is the responsibility of all players in the company. It aims to be comprehensive and cover all activities, processes and assets of the company. Risk management is a dynamic system of the company, which it defines and implements under its responsibility. Risk management comprises a set of tools, behaviours, procedures and actions adapted to the characteristics of each company, that allows senior management to keep the risks to an acceptable level. Risk management helps to: a) Create and preserve the value, assets and reputation of the company a) Place the company's decision making and processes on a firmer basis and help it achieve its objectives

- conflicts with the selling shareholders in the context of business combinations - claims by Zetes against suppliers - third party claims for patent infringement The above list is not exhaustive. Where necessary, provisions are set up for such risks. Although these are estimated based on the company’s best understanding of the situation, court judgements could expose the company to unexpected costs.

Risks related to human resources Zetes seeks to be at the sharp edge of technology. Finding the human resources with which to remain there is a major challenge. Zetes’ good name and its commercial and operational successes significantly reduce this risk.

Environmental risks Zetes strictly respects all laws and regulations governing the protection of the environment. Even so, certain exceptional circumstances or accidents could potentially expose the company to litigation. The group is not involved in any environmental dispute at the present time.

Risks related to exceptional events

a) Mobilize company employees around a common vision of the principal risks and sensitize them to the risks inherent in their business.

By its very nature the company is open to such risks. A fire or flood could always affect a production site, and with it the company’s financial situation. Although Zetes insures against risks, there is no such thing as “zero” risk. More generally, there are natural and political risks that could destabilize the economic system, and hence Zetes’ activity.

Description of the risks

Risks attached to acquisitions

The Board of Directors presents below its assessment of the risks to which the company is exposed:

Zetes’ strategy involves acquiring other companies. Despite the care with which management goes about these acquisitions and, in particular, the due diligence audits that are made, specific risks always exist. The most serious are linked to the process of integrating newly acquired companies into the group, to their activities before joining Zetes, to their real growth potential (over-estimation) and to the value of the technological know-how acquired. In certain cases, these risks could engender a loss of goodwill value.

a) Promote coherence between a company's values and actions

By the nature of its commercial activities, the company is exposed to the uncertainties attached to the development of the economy and to the situation of its customers and its competitors. Each of the risks listed below can have a negative impact on the overall condition of the company and its results. For this reason any forward-looking statements must be analysed in the light of this presentation. Besides the risks mentioned here, there may be other risks the company is not aware of, or which are not reported as such, but which could also have an adverse effect on the company.

Litigation risks Zetes is, has already been, and could again be involved in legal action which is part of the normal course of business. Such legal action can relate to : - warranty / product quality / installation issues - conflicts with employees

34

Risks attached to new products Zetes specialises in identification. To maintain its competitive advantage, Zetes carries out specific development and places specialized software and hardware on the market. In 2013 the company invested € 2.8 million. A total of € 4.9 million of development expenses are capitalised on the balance sheet. The risks associated with these developments are: - over-ambitious sales objectives, insufficient profitability, owing to unsuitable functionalities, or the existence of less expensive competing products


- the placing on the market of products that are not yet stabilized, bringing a loss of credibility and/or additional, unanticipated expenses to resolve the problem - the use of external components of insufficient quality.

Technological risk For Zetes, technological risk is linked to the time at which a new technology is adopted. This risk is managed by a specific team, which acts as a technology watch units. This team concentrates expertise and knowledge as long as the technology is not yet ready for market. It also helps disseminate know-how and competencies once a decision to go to market has been taken by Group management.

Risk of fraud The risk of fraud is inherent in all human activity. The company is attentive to appoint people of trust to key positions. This trust is considered the cornerstone of the fight against fraud. The company seeks, where the size of the subsidiary permits, to establish a separation of duties. Thus, persons in charge of procurement will not be responsible for paying bills. Limits on signing authority are also set according to the activity level of the companies concerned. Finally, the group executive committee is careful to limit the representative powers of the executive committees of the subsidiaries to day-today operations. It is also careful to ensure an appropriate division of powers within their management structures. To this end, direct communication channels exist with the group executive committee, both for local financial managers, who report both to their Country Managers and CFO, and for country managers, who are responsible for their performance to both the Group CEO and the Group CFO.

Price risk This risk is covered by agreements with our main suppliers; price reviews are built into our contracts with them.

Foreign exchange risk The consolidated accounts are in euros. This means that the accounts of those group entities whose reference currency is not the euro need to be converted into euros on consolidation. To the extent that currencies fluctuate against one another this can negatively impact the accounts. The greatest risks are those of the fluctuation of the euro against the pound sterling, the Swiss franc, the rand and the shekel. At the operating level, and insofar as the charges of these entities are incurred in their own reference currencies, the currency risk lies essentially in their contribution to Group results. A risk also exists on loans/borrowings (repayment or revaluation). A potential risk also exists in the parity between the CFA and the euro. In terms of buying, procurement is essentially in euros. There does exist, however, a US dollar risk for certain specific equipment that is purchased in this currency. Significant sales / purchase contracts in foreign currencies are normally hedged specifically. Zetesâ&#x20AC;&#x2122; financial department has a preference for forward foreign exchange contracts and, to a lesser extent, currency options, for hedging foreign exchange risk. In People ID, some of Zetes' competitors use other currencies than the euro as their reference currency. Currency fluctuations may either strengthen Zetes' competitive advantage or weaken it against those competitors whose revenues (and costs) are collected (and incurred) in other monetary areas

Interest rate risk The interest rate risk is limited to the extent that the company has a slightly negative treasury position. A rise in either short or long term rates would not significantly affect results. On top of this, bank debt serves mainly to fund short term working capital needs of subsidiaries. The occasional longer term debts for financing acquisitions or investments have a short average term which does not call for specific interest rate coverage.

Credit risk This risk is covered by a credit insurance company (around 50% of sales). Otherwise, an internal analysis of the credit risk is carried out, which reduces the counterparty risk. The multiplicity of clients, both geographical and sectoral, and their general quality also significantly reduce the Group's credit risk.

Liquidity and treasury risk Zetesâ&#x20AC;&#x2122; liquidity and treasury risk is limited. In addition to a cash position of â&#x201A;Ź 10.6 million (December, 2013), the company retains a significant borrowing potential based on an agreement signed with its three main bankers to finance projects, additional working capital needs or, partially, acquisitions.

35


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

ZETES INDUSTRIES SA STATUTORY AUDITOR’S REPORT TO THE SHAREHOLDERS MEETING ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013 As required by law, we report to you on the statutory audit mandate which you have entrusted to us. This report includes our opinion on the consolidated balance sheet as at December 31, 2013, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, as well as the explanatory notes, together with our report on other legal and regulatory requirement.

Report on the consolidated financial statements – Unqualified opinion We have audited the consolidated financial statements for the year ended December 31, 2013, prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The consolidated statement of financial position shows total assets of 163 187 (thousand) EUR and the consolidated income statement shows a consolidated profit of 3 397 (thousand) EUR.

Responsibility of the board of directors for the preparation of the consolidated financial statements The board of directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Statutory auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the statutory auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the board of directors, as well as

36

evaluating the overall presentation of the consolidated financial statements. We have obtained from the company’s officials and the board of directors the explanations and information necessary for performing our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Unqualified opinion In our opinion, the consolidated financial statements give a true and fair view of the group’s net equity and financial position as of December 31, 2013, and of its results and its cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union.

Report on other legal and regulatory requirement The board of directors is responsible for the preparation and the content of the directors’ report on the consolidated financial statements. In the framework of our mandate, our responsibility is to verify, for all significant aspects, the compliance with some legal and regulatory requirements. On this basis, we provide the following additional comment which does not modify the scope of our audit opinion on the consolidated financial statements: • The directors’ report on the consolidated financial statements includes the information required by law, is, for all significant aspects, in agreement with the consolidated financial statements and is not in obvious contradiction with any information obtained in the context of our mandate.

Zaventem, 16 April 2014

RSM RÉVISEURS D'ENTREPRISES BEDRIJFSREVISOREN CVBA-SCRL REPRESENTED BY

LAURENT VAN DER LINDEN

THIERRY DUPONT


Statutory Accounts In accordance with article 105 of the Company Code, the current Annual Report offers an abbreviated version of the statutory annual accounts of Zetes Industries SA. Zetes Industries SA’s Annual Report and the annual accounts, together with the Auditor’s Report, will be deposited and will also be available at the Company’s registered office and on the Company Web site www.zetes.com. The Company Auditor has signed a statement of unqualified approval of the statutory annual accounts of Zetes Industries SA for the years ended 2013, 2012 and 2011.

1. BALANCE SHEET In '000 € ASSETS Fixed assets Formation expenses Intangible fixed assets Tangible fixed assets Financial fixed assets Current assets Amounts receivable after one year Stocks and contracts in progress Amounts receivable within one year Short term deposits and own shares Cash at bank and in hand Deferred charges and accrued income TOTAL ASSETS

2011

2012

2013

33 905 329 106 33 471 32 714 1 583 94 28 819 1 634 491 92 66 619

32 375 309 95 31 971 31 890 1 225 13 27 051 3 319 135 148 64 265

32 249 427 149 31 673 33 297 1 256 84 28 159 3 569 123 105 65 546

61 208 56 092 38 3 233 1 634 211 5 411 5 397

60 303 56 092 38 783 3 319 69 3 962 3 918

58 017 51 676 38 2 707 3 569 26 7 529 2 700 4 779

303

-

-

6 1 251 656 3 181 14 66 619

20 1 113 514 2 271 45 64 265

1 126 503 3 151 50 65 546

EQUITY AND LIABILITIES Capital and reserves Capital Share premium account Reserves Unavailable reserves for own shares Profit carried forward Provision for liabilities and charges Debts Amounts payable after one year Amounts payable within one year Current portion of amounts payable after more than one year falling due within one year Financial debts Trade debts Amounts payable regarding taxes, remuneration and social security Other debts Accrued charges and deferred income TOTAL EQUITY AND LIABILITIES

37


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

2. INCOME STATEMENT In '000 € Operating income Turnover Other operating income Operating charges Raw materials, consumables and goods for resale Services and other goods Remuneration, social security and pensions Depreciation and amounts written off Other operating charges Operating profit or (loss) Financial income Financial charges Profit on ordinary activities before taxation Extraordinary income Extraordinary charges Profit for the period before taxation Income taxes PROFIT OF THE YEAR

3. APPROPRIATION ACCOUNT In '000 € Profit to be appropriated Profit for the year available for appropriation Profit brought forward Drawdowns on capital Drawdowns on reserves Transfers to legal reserve Transfers to other reserves Result to be carried forward Dividends (1)

2011

2012

2013

6 957 6 543 414 (5 672) (159) (3 112) (2 284) (102) (15) 1 285 851 (135) 2 001

5 744 5 351 392 (5 093) (107) (2 942) (1 892) (136) (16) 651 517 (81) 1 087

5 731 5 369 362 (5 519) (79) (3 543) (1 708) (177) (12) 212 1 396 (92) 1 515

2 001 (14) 1 987

1 087 (33) 1 054

(47) 1 468 (3) 1 466

2011

2012

2013

2 197 1 987 211 4 000

1 264 1 054 211 817 53 69 1 959

1 535 1 466 69

99 2 993 211 2 895

1 400 73 (0) 26 2 835

(1) Amount determined on the basis of the treasury shares held at 31/12/2013; for 2011 and 2012, it is the amount of dividends adjusted to take into account the own shares held at the Ordinary General Meeting. In 2013, Zetes has also proceeded to a capital reimbursement of € 0.17 per share.

38


4. INVESTMENTS AND SOCIAL RIGHTS HELD IN OTHER COMPANIES Are to be mentioned hereafter, the companies in which the company holds a direct investment in the sense of the Royal Decree of October 8, 1976 as well as the other companies in which the company holds shares in case these shares represent at least 10% of the subscribed capital.

RIGHTS HELD BY Name

Address of the registered office

SA ZETES

Rue de Strasbourg 3 - 1130 Brussels Bâtiment Einstein – 17/19 rue Georges BesseSA ZETES France 92160 Antony SA ZETES TECHNOLOGIES Rue de Strasbourg 3 - 1130 Brussels ZTS Lda Alameda Antonio Sergio 7 - 2795023 Linda-A-Velha SA BUROTICA Alameda Antonio Sergio 7 - 2795023 Linda-A-Velha SA ZETES FASTRACE Rue de Strasbourg 3 - 1130 Brussels ZETES INTERNATIONAL GmbH Flughafenstraße 52 b, 22335 Hamburg ZETES SRL Lungobisagno Dalmazia 71/16 - 16141 Genova ZETES INDUSTRIES (Israel) 2 Hahagana Street - 47203 Ramat-Hasharon Ltd ZETES HOLDING GmbH Waldstrasse 23 - 63128 Dietzenbach RFIdea SA Rue des Chasseurs Ardennais, 5 - 4031 Angleur ZETES COTE IVOIRE Abidjan, 17BP 319 Abidjan 01

Country Belgium

Directly Nombre 170 827

France

% 100

27 470

100

1 249 2 10 millions 2 124 4 10

49.96 100 50 34.03 100 10

Israël

850

85

Germany Belgium Côte Ivoire

2 3 190

100 ns 10

Belgium Portugal Portugal Belgium Germany Italy

Indirectly %

0.04 50 41.9 90

100 90

5. STATEMENT OF CAPITAL In '000 €

CAPITAL 1. Issued capital At the end of the preceding period Changes during this period: At the end of the period 2. Structure of the capital Registered shares, bearer and dematerialized shares Registered Bearer and dematerialized

Number of shares

56 092 (4 416) 51 676 5 389 714 1 338 296 4 051 418

SHAREHOLDER STRUCTURE BASED ON NOTIFICATION IN DECEMBER 2013 SHAREHOLDERS Zephir Cobepa Axa Belgium Other nominative shareholders Public Own shares Total

Number of shares

%

1 277 495 1 329 655 199 453 8 641 2 340 148 234 322 5 389 714

23.70 24.67 3.70 0.16 43.42 4.35 100.00

39


ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

6. AUDITORS In '000 â&#x201A;Ź Auditor fees Fees relating to extraordinary services or specific missions rendered to Zetes Industries SA Fees relating to extraordinary services or specific missions rendered to Zetes Industries SA by parties related to the auditor Other certification missions Tax advices Other missions out of certification

40

41

1 1 -


Statement on Corporate Governance 1. The 2009 Belgian Code on Corporate Governance

Principle 5.2./17 Internal audit

This section is based on the rules and the principles which organize the corporate governance of Zetes Industries SA/NV (the Company). These are listed exhaustively in the Company's Corporate Governance Charter as approved by the Board of Directors of the Company and available, along with the Company’s coordinated articles of association, on the Zetes Industries SA/NV website (http://www.zetes.com/en/investor-relations/corporate-governance).

The company does not have an independent internal audit function. Taking into account the nature, size and complexity of the company, executive management has established rules and procedures and has divided up responsibilities between different people in order to ensure the proper functioning of its internal control and risk management system.

The Company’s Board of Directors intends to comply with the 2009 Belgian Code on Corporate Governance, but believes that certain deviations from its provisions are justified in view of the Company’s particular situation.

2. BOARD OF DIRECTORS

Principle 2.9. Secretary of the Company Given the size of the Company, the Board of Directors does not plan to appoint a Company secretary.

Principle 5.3. Appointments committee None of the principles relating to the Appointments committee are applicable.

Name and position

2.1. Composition, appointment and termination of the Board of Directors In accordance with article 15 of the articles of association, the Company is managed by a six members minimum Board of Directors consisting of legal or physical persons, who do not have to be shareholders. Pursuant to the articles of association, the Directors are appointed by the General Meeting of Shareholders for a term of maximum 6 years and are re-eligible. Their terms of office expire at the end of the Ordinary General Meeting following the last year of their term. As of 31 December 2013, the Board of Directors of Zetes Industries SA/NV consisted of 10 persons. The Ordinary General Meeting of 27 May 2015 will decide on the appointment of all directors for their next term.

Term until(**) Professional Address

Alain Wirtz SA Represented by Mr Alain Wirtz Chief Executive Officer (CEO) (Nominated by Zephir Corporation) (Executive Director)

2015

Rue de Strasbourg 3 1130 Brussels

Jean-François Jacques SPRL Represented by Mr Jean-François Jacques Chairman of the Board(*), (Nominated by Zephir Corporation) (Executive Director)

2015

Rue de Strasbourg 3 1130 Brussels

Pierre Lambert Chief Financial Officer (CFO) (Executive Director)

2015

Rue de Strasbourg 3 1130 Brussels

Jean-Marie Laurent Josi (Nominated by Cobepa) (Director)

2015

Rue de la Chancellerie 2 1000 Brussels

Hiram Claus (Nominated by Cobepa) (Director)

2015

Rue de la Chancellerie 2 1000 Brussels

Olivier Gernay (Nominated by Zephir Corporation) (Director)

2015

Avenue Brugmann 403 1180 Brussels

Floris Vansina BVBA Represented by Mr Floris Vansina (Director)

2015

Charles Woestelaan 147 1090 Jette

José-Charles Zurstrassen (Independent Director)

2015

Avenue Général Baron Empain 41 1150 Woluwe-Saint-Pierre

Paul Jacques (*) (Independent Director)

2015

Rue du Ham 20 1180 Brussels

GEMA SPRL Represented by Mr Michel Allé (Independent Director)

2015

Place Constantin Meunier 17 1190 Brussels

* Mr Paul Jacques and Mr Jean-François Jacques are unrelated. (**) The term of office of directors ends immediately after the Annual General Meeting of shareholders held in the year mentioned next to the director's name.

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ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY The statutory auditor of the Company is RSM Réviseursd’Entreprises - Bedrijfsrevisoren, having its registered office at Chaussée de Waterloo 1151, 1180 Uccle, represented by Mr Laurent Van der Linden and Mr Thierry Dupont. This firm has audited the Company’s consolidated accounts since 2000, while introducing a rotation of its representatives. Mr Laurent Van der Linden and Mr Thierry Dupont are responsible for auditing the Company's statutory (unconsolidated) and consolidated accounts. The three-year mandate of the statutory auditor will expire at the General Shareholders’ meeting that will be held on 28 May 2014.

2.2. Role of the Board of Directors The Board of Directors is the decision-making body of Zetes Industries SA/NV, (i) with the exception of matters reserved to the shareholders by law or on the basis of the articles of association, and (ii) with the exception of the management powers delegated to the Managing Directors. The Board of Director’s role is to pursue the long-term success of Zetes Industries SA/NV and the Zetes Group by providing entrepreneurial leadership and enabling risks to be assessed and managed. The Board of Directors decides on Zetes Industries SA/NV’s values and strategy, its risk appetite and key policies. The Board of Directors ensures that the necessary financial and human resources are in place for Zetes Industries SA/NV to meet its objectives.

2.3. Responsibilities of the Board of Directors The key responsibilities of the Board of Directors include: • Reviewing, evaluating and approving, on a regular basis, long range plans and strategy for Zetes Industries SA/NV and the Zetes Group; • Reviewing periodically objectives and policies;

Zetes

Industries

SA/NV’s

corporate

• Monitoring and evaluating the performance of Zetes Industries SA/ NV and the Zetes Group against strategic goals, plans and budgets; • Reviewing, evaluating and approving the overall corporate organisational structure; • Reviewing, evaluating and approving major resource allocations and capital investments (including acquisitions and divestments); • Reviewing the financial and operating results; • Reviewing, evaluating and approving budgets and forecasts; • Taking all necessary measures to ensure the correctness and the timely publication of financial reports and other significant financial and non-financial information; • Supervising the performance of the external auditor; • Appointing the Managing Directors; • Deciding on the Executive Committee structure; • Reviewing Executive Committee performance; • Maintaining continuing interaction and dialogue and a climate of respect, trust and candour with the Executive Committee; • Reviewing, evaluating and approving the remuneration policy as it relates to the Executive Committee of Zetes Industries SA/NV; • Monitoring and reviewing the effectiveness of the Board committees.

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2.4. Organisation of the Board of Directors 2.4.1. Board Meetings Regular Board meetings are held, at least approximately six times a year, with special meetings convened as necessary by the Chairman of the Board of Directors or two Directors. Board meetings may also be organised by means of video- or teleconference. Each meeting is chaired by the Chairman of the Board of Directors and, in his absence, by the CEO or by an executive Director. The Board of Directors can only validly deliberate and decide if at least half of its members are present or represented. Resolutions are taken by a simple majority of the votes cast. In 2013, the Board of Directors met 6 times. The attendance of individual directors was as follows: all members attended all meetings except for Mr José-Charles Zurstrassen (19 February 2013), ALAIN WIRTZ SA, represented by Mr Alain Wirtz (29 March 2013), JEAN-FRANCOIS JACQUES SPRL, represented by Mr Jean-François Jacques (28 August 2013) and Mr Olivier Gernay (29 Mars and 28 August 2013).

2.4.2. Agenda Items for Board Meetings The Chairman of the Board of Directors establishes the agenda for each Board meeting. At the beginning of the year the Chairman of the Board of Directors establishes a schedule of the main topics to be discussed during the year. A detailed agenda and, to the extent feasible, supporting documents and proposed resolutions are provided to the Directors five calendar days prior to each Board meeting. The agenda lists the topics to be discussed and specifies whether they are for information, for deliberation or for decisionmaking purposes. Directors review these materials in advance of the meeting. Each Director is free to suggest the inclusion of items on the agenda. Subject to any applicable notice requirements, Directors who have suggestions for topics to be included in the agenda are required to advise the Chairman of the Board of Directors well in advance of such meetings.

2.4.3. Assessment Under the leadership of its Chairman, the Board of Directors will conduct regular self-assessments to determine whether it and its committees are functioning effectively. The evaluation will have the following objectives: • Evaluating how well the Board operates; • Checking that important issues are adequately discussed and prepared; • Evaluating the content of each Director's contributions, his or her presence at Board and Committee meetings and the constructive nature of his or her involvement in discussions and decisions; • Checking the actual composition of the Board against the desired composition; with the non-executive Directors regularly evaluating their interaction with the Executive Committee. At regular intervals the way each director has exercised his or her duties, as well as his or her role and responsibilities, will be reviewed with a view to adapting the composition of the Board to reflect


intervening changes. Specific attention will be given to the evaluation of the Chairman of the Board of Directors and the Chairmen of the Committees. When a director's term of office comes up for renewal, that director's involvement and effectiveness will be evaluated using a transparent and pre-established procedure. The Chairman of the Board will receive comments from all Directors and will report to the Board of Directors. This report will include an assessment of the Board's performance. The evaluation will focus on the Board's contribution to the company Zetes Industries SA/NV, and specifically on those areas in which the Board considers that there is room for improvement. The Board will react to the results of performance analysis by recognizing its strengths and correcting weaknesses. When required, this will involve the appointment of new members, the non-reappointment of existing members or the taking of any action that seems appropriate for the effective functioning of the Board of Directors. The Board will ensure that measures are taken for the orderly reappointment of Board members. It will ensure that any new appointment and any renewal, of both executive and non-executive Directors, will maintain an appropriate balance of required skills within the Board of Directors.

3. Internal control and risk management as regards the preparation of financial information Internal control relevant to the preparation of financial reporting is a structural component of the company, defined and implemented under its responsibility, which seeks to ensure the reliability of financial information and the compliance of the financial statements with IFRS (International Financial Reporting Standards). The Board of Directors is responsible for defining the measures necessary to ensure the integrity and timely publication of the financial statements and of other significant financial information provided to shareholders. The executive committee is responsible for establishing and monitoring internal controls based on the reference framework approved by the Board of Directors as well as for preparing the financial statements and other significant financial information of the company. Internal control of financial information includes more specifically rules and procedures that: • relate to the detailed recording of transactions involving company assets; • provide reasonable assurance that transactions are recorded in such a way as to permit preparation of financial statements in conformity with IFRS; • provide reasonable assurance that the company's sales are made in accordance with the conditions imposed by the Executive Committee and Board of Directors of the company, and that the expenditures of the company are incurred with their authorization; • provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use, or transfer of assets that could have a material effect on the consolidated financial statements.

The Executive Committee is responsible for the exercise of internal control over financial reporting. This control includes the evaluation of significant risks, identifying malfunctioning, shortcomings and difficulties of implementation, and monitoring of measures taken to correct deficiencies identified. Given its limitations, internal control of financial information may be unable to prevent or detect false declarations. In addition, it is difficult to anticipate how effective such control will be in future periods: controls could potentially become inadequate because of changing conditions or because they fail to keep pace with evolving policies or procedures. The Executive Committee has evaluated the effectiveness of the internal control of financial reporting as of 31 December 2013. This evaluation focused on the design of the internal control of financial information and included tests of its operating efficiency. On this basis, the Executive Committee was of the opinion that, as of 31 December 2013, the Company had adequate internal control of financial information.

4. Managing Directors and Executive Committee The Board of Directors has appointed the managing directors of Zetes Industries SA/NV. The Board of Directors has granted authority to the managing directors to enable them to fulfil their responsibilities and duties. They will have sufficient room to propose and implement, within the legal framework, a corporate strategy that reflects the company's values, risk appetite and key policies. To this end, the Chief Executive Officer (CEO) (Alain Wirtz SA) and the Chairman of the Board (Jean-François Jacques SPRL) are both managing directors of Zetes Industries SA/nv. The managing directors work together with the Executive Committee, which consists of all the executive directors of Zetes Industries SA, i.e. currently the two managing directors and the CFO. The Executive Committee is therefore composed of three members: the two managing directors, Alain Wirtz SA and JeanFrançois Jacques SPRL, and the CFO of the company, Mr Pierre Lambert. The Executive Committee does not constitute a management committee (comité de direction) within the meaning of article 524bis of the Belgian Companies Code.

5. Committees of the Board of Directors 5.1 Role A substantial portion of the preparatory analysis and work of the Board of Directors is done by standing Board Committees. The decisionmaking, however, remains within the collegial responsibility of the Board of Directors, with the Committees only having an advisory function (but not excluding the possibility of ad hoc delegations). They assist the Board of Directors in specific areas, which they cover in appropriate detail and upon which they make recommendations to the Board of Directors. The Board of Directors will have at all times an Audit Committee and a Remuneration Committee. The Board of Directors may, from time to time, establish or maintain additional Committees as necessary or appropriate.

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ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

5.2 Composition and appointment Committee members shall be appointed by the Board of Directors. The Chairman of the Board of Directors shall ensure that the Board of Directors appoints Committee members and a Chairman for each of these Committees. Each Committee is composed of at least three members. Appointment shall not be for a term exceeding that of Board membership. In deciding on the specific composition of a Committee, consideration shall be given to the needs and qualifications required for the optimal functioning of that Committee. The designation of Committee members is based on (i) their specific competences and experience, in addition to the general competence requirements for Board members, and (ii) the requirement that each Committee, as a group, possesses the competences and experience needed to perform its tasks.

5.3 Audit Committee The Audit Committee assists the Board of Directors in its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the external auditor’s qualifications and independence, and (iv) the performance of the Company’ internal controls and risk management and its external auditors' accomplishment of their mission. The responsibilities of the Audit Committee are described in detail in the Corporate Governance Charter. The Audit Committee is composed exclusively of non-executive Directors. At least one of them is an independent director. At 31 December 2013, the members of the Audit Committee were: • Gema SPRL, represented by Mr Michel Allé (Chairman of the Audit Committee, independent director) • Mr Hiram Claus (non-executive director), • Floris Vansina BVBA, represented by Mr Floris Vansina (nonexecutive director)

• Jean-Marie Laurent-Josi (Chairman Committee, non-executive director)

of

the

Remuneration

• Paul Jacques (independent director) • José-Charles Zurstrassen (independent director)

6. Report on the remuneration of Directors and the Executive Committee ZETES INDUSTRIES SA/NV - Remuneration Report 2013 6.1 General Principles of the Remuneration Policy This section describes the general principles of Zetes Industries' remuneration policy. The aim of the remuneration policy within the Zetes Group is to reward individual and collective performance, to align the interests of the senior managers, directors and shareholders of Zetes Industries, while taking due account of the differences between the Group's operating companies. This policy has been applied consistently for many years. With respect for good corporate governance, compensation is consistent with the standards for the industry, and a bonus system, directed at the performance and the values of the Company, exists to motivate the Zetes Industries executive management and the managers of the Group to work towards the lasting growth of the value of the Company. The remuneration guidelines and the bonus systems of the Zetes Group seek to ensure the Executive Management of Zetes Industries and to Group executives of appropriate remuneration for their activities and their levels of responsibility, taking into account the economic situation and the success and the prospects of the Zetes Group.

• Mr Paul Jacques (independent director)

In this way the total remuneration package of executive directors of Zetes Industries as well as heads of the operational and functional units consists is made up as follows:

5.4 Remuneration Committee

1. fixed components independent of the results,

The role of the Remuneration Committee is to assist the Board of Directors in all matters relating to the remuneration of Board members (executive and non-executive) and of those Zetes Industries SA/NV employees that report directly to the Executive Committee, and in those matters regarding the governance of the group on which the Board of Directors or the Chairman of the Board of Directors wishes to receive the Committee’s advice.

2. bonuses dependent on both the results for one financial year and the respect of quality criteria directly related to an alignment between the long-term strategy of the Company and the interests of its shareholders

The responsibilities of the Remuneration Committee are described in detail in the Corporate Governance Charter.

6.2 With regard to the market conformity of remuneration

The Remuneration Committee should consist of no less than three Directors. All members should be non-executive Directors. The majority of Committee members should be Independent Directors. At 31 December 2013, the members of the Remuneration Committee were:

(*) a.o. "Executive remuneration in Belgium 2013", E&Y

44

These general principles already applied in 2012 and continued to do so in 2013.

In order to assess objectively the remuneration of the Executive Management, the Remuneration Committee has ad hoc studies(*) enabling it to position said remuneration. The surveys assess the amount and the structuring of compensation. This has allowed the Remuneration Committee to ensure that the remuneration of Executive Mangement is in line with that practised by publicly traded Belgian and European companies of similar structure, size and activity.


6.3. Remuneration of the executive directors

6.3.4 Summary of the total compensation paid in 2013

This section describes the remuneration programme for executive directors. It contains a description of the structure of their remuneration and also clarifies the relationship between performance and pay levels.

Remuneration of the CEO

The contractual arrangements and remuneration of members of the Executive Management are adopted and audited annually by the Remuneration Committee appointed by the Board. With respect to variable remuneration, the Remuneration Committee sets the objectives of the Executive Management and assesses how far these have been fulfilled.

6.3.2 Beneficiaries The Executive Management of the Company is composed of the following companies and persons:

represented by Mr Jean-François

85 500 € 390 500 €

Remuneration of the other members of the Executive Management 2013 Fixed remuneration

451 000 €

Variable remuneration

125 400 €

Total

576 400 €

6.3.5 Stock Options and shares

Chairman of the Board and Managing Director

For 2013 there was no remuneration in the form of Stock Options or shares either for the CEO or for the other members of Executive Management.

Jacques

Mr Pierre Lambert

Total

305 000 €

CEO and Managing Director

represented by Mr Alain Wirtz

Jean-François Jacques SPRL

Fixed remuneration Variable remuneration

6.3.1 Principles

Alain Wirtz SA

2013

Chief Financial Officer and Director

6.3.3 Remuneration structure In 2013, members of the Executive Management received remuneration consisting of a fixed salary and variable compensation dependent on both Zetes Group's consolidated financial results and the respect of qualitative targets including a concept of long-term growth in the enterprise value. The criteria taken into account in determining variable compensation are: - The achievement of the budget objectives of the reference year as adopted by the Board at the end of the previous year; - The reactivity and adaptability of Executive Management to economic changes during the reference year; - The ability to propose external growth operations and to integrate them successfully into the Group. Moreover, taking into consideration the constant readiness demonstrated by the Executive Management of Zetes Industries over the last twenty years to manage the business in a long-term perspective, the Compensation Committee intends to propose to the General Assembly that it waives, by specific approval, the prescriptions of Article 520ter of the Companies Act.

6.3.6 Pension plan No pension plan is established for the companies Alain Wirtz SA and Jean-Francois Jacques SPRL. Mr Pierre Lambert, in his capacity as Chief Financial Officer and director of Zetes Industries SA, works under the mandatory selfemployed regime. He enjoys an individual pension commitment, the amount of which is included in his remuneration.

6.3.7 Severance indemnities In the event of the revocation of their appointments, other than dismissal for serious offence, Alain Wirtz SA and Jean-François Jacques SPRL will each receive an indemnity equal to twelve months' compensation (annual base salary and variable pay); that of Mr Lambert, as a self-employed mandatary, will be equivalent to eighteen months. In the event that Alain Wirtz SA and/or Jean-François Jacques SPRL resign from their directorships, they undertake to provide, at the request of the Board, various support, consultancy and transfer of know-how activities on an exclusive basis for a period of twelve months on the same financial terms (annual base salary and variable pay). Mr Lambert’s undertaking is for nine months. There is no provision for any special severance payment in case of takeover ('golden parachutes').

6.3.8 Right of recovery of variable remuneration Other than as provided by law, there is no specific contractual provision concerning the recovery of the variable remuneration attributed on the basis of incorrect financial information.

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ZETES FINANCIAL INFORMATION | CREATING TOMORROW BY INVESTING TODAY

6.4. Remuneration of non-executive directors and members of Board committees The non-executive directors of the Company receive for their Services a) a fixed annual amount, decided by the General Meeting of Shareholders and set at € 6.000 and b) an amount of € 500 for each attendance at a Board of Directors meeting. The non-executive members of the Audit Committee receive an amount of € 1.250 for each meeting of the Audit Committee in which they participate.

The Company does not provide non-executive directors with any remuneration, benefits or other incentives, other than remuneration, for their services as directors of the company. Non-executive directors do not receive any variable remuneration linked to results or other performance criteria. They are not entitled to stock options, or to any extra-legal pension scheme. At 31 December 2013, the remuneration of non-executive directors broke down as follows:

Board of Directors Jean-Marie Laurent Josi (*)

Audit Committee

9 000 €

Total 9 000 €

Floris Vansina BVBA

9 000 €

5 000 €

14 000 €

Paul Jacques

9 000 €

5 000 €

14 000 €

José-Charles Zurstrassen

8 500 €

8 500 €

Olivier Gernay

8 000 €

8 000 €

Gema Sprl

9 000 €

5 000 €

14 000 €

Hiram Claus (*)

9 000 €

5 000 €

14 000 €

61 500 €

20 000 €

81 500 €

Total

(*) Messrs. Jean-Marie Laurent Josi and Hiram Claus surrender their directors' fees in favour of SA Cobepa.

7. Capital structure The capital of the Company is represented by 5.389.714 shares. At 31 December 2013, Zetes Industries SA/NV held 234.322 own shares, leaving 5.155.392 shares in circulation at the same date. In 2005, the Board of Directors issued 191.894 warrants for the benefit of its employees, directors or persons having management assignments at Zetes Industries SA/ NV subsidiaries. Each warrant was granted free of charge and entitled its holder to one share, exercisable at € 23 per share. Under the conditions of the share option plans, these warrants became exercisable from June 2009. At 31 December 2013, 181.869 warrants remained in circulation.

46

In 2007, the Board of Directors also issued 23.800 warrants for the benefit of its employees, directors or persons having management assignments at Zetes Industries SA/NV subsidiaries. Each warrant was granted free of charge and entitled its holder to one share, exercisable at € 22.63 per share. At 31 December 2013, 2.800 warrants remained in circulation.


7.1. Shareholding structure Based on the notifications received and published up till 31 December 2013, the shareholding structure is as follows: Without exercise of the warrants Shareholder Zephir (in concert with Cobepa) Cobepa (in concert with Zephir) Axa Belgium Other registered shareholders Public Own shares TOTAL

number of shares % 1 277 495 23.70% 1 329 655 24.67% 199 453 3.70% 8 641 0.16% 2 340 148 43.42% 234 322 4.35% 5 389 714 100%

After exercise of the warrants. Shareholder Zephir (in concert with Cobepa) Cobepa (in concert with Zephir) Axa Belgium Other registered shareholders Employees Public Own shares TOTAL

number of shares 1 277 495 1 329 655 199 453 8 641 184 669 2 340 148 234 322 5 574 383

% 22.92% 23.85% 3.58% 0.16% 3.31% 41.98% 4.20% 100%

Except for the above mentioned information, as at 31 December 2013 the Company has not received any other notification of any ownership of shares of more than 3% in compliance with the articles of association.

Under the terms of their agreement, Zephir Corporation and Cobepa have agreed (among other matters) the following: a) Minimum number of directors - each party will vote in favour of a minimum number of candidates for directorships proposed by the other in accordance with the following rule: one candidate for every complete 7% of all the issued and outstanding shares of the Company held by Zephir Corporation or Cobepa. b) Pre-emption right: the parties have a pre-emption right on the shares the other party wishes to transfer according to defined rules. However, 25% of the shareholdings owned by both parties immediately after the IPO are free of this pre-emption right.

7.3. Measures to prevent insider trading The Zetes Group’s code of conduct to prevent insider trading is included in the Corporate Governance Charter. This is published on the website (www.zetes.com/en/investor-relations/corporategovernance).

8. Policy for the appropriation of the results The intention of the Company is to pay out dividends for an amount of about one third of its net profit before goodwill impairment. Any proposal to pay dividends will also be based upon the Company’s financial situation, its capital requirements and other factors considered important by the Company. In accordance with this policy, the Board of Directors will propose to the General Shareholders’ Meeting on 28 May 2014 that it declare a gross ordinary dividend per share of € 0.55, equal to the previous year’s amount.

7.2. Notification Art. 74 of the Law of 1 April 2007 According to article 74 of the Law of 1 April 2007 on takeover bids, Zetes Industries SA/NV has received notifications from the following shareholders. These notifications include all legally required statements and mention in particular that, acting in concert with other people since 21 November 2005, these shareholders held more than 30% of the voting securities issued by the company: a) Zephir Corporation SA, a corporation organised under the laws of Belgium acting in concert with Copeba SA. b) Copeba SA, a corporation organised under the laws of Belgium acting in concert with Zephir Corporation SA.

47


Publication Zetes Corporate Marketing & Communication Executive Editor Pierre Lambert, CFO Da Vinci Science Park Rue de Strasbourg 3 B-1130 Brussels Design www.chocoweb.be Layout and production www.visible.be This report was written in French. The Dutch and English versions are provided for the convenience of the reader. Only the French version is legally binding.

www.zetes.com/AR2013

11425 zetes annual report 2013 en complet financier