9885.ZETES Finance - annual report 2012 - EN+cover-Low - Chiffres

Connecting what mattersAnnual report 2012

Connecting what m

atters | Zetes Annual report 2012

(1) Current EBITDA : Current EBIT before depreciation, amortization and impairment losses(2) Current EBIT : EBIT out restructuring expenses and other non current items (Badwill/vesting costs of options/Other)(3) cf Annual report (Financial Information)(4) Group share(5) Inventories + current trade and other receivables + prepayments - current trade and other payables(6) Cash and cash equivalents - Current interest bearing borowings(7) Proposed appropriation to the Ordinary General Assembly (0,38) and to the Extraordinary General Assembly of April 22nd, 2013 (0,17)

In € ‘000

OPERATING SITUATION 2007 2008 2009 2010 2011 2012

Sales 177 102 177 636 167 471 216 738 220 562 214 126

Gross Margin 73 961 77 415 76 457 88 711 95 477 93 699

% Sales 41.8% 43.6% 45.7% 40.9% 43.3% 43.8%

Current Ebitda (1) 15 392 15 211 13 606 19 096 18 640 14 117

% Sales 8.7% 8.6% 8.1% 8.8% 8.5% 6.6%

Current Ebit (2) 9 386 9 156 8 127 11 824 11 041 6 645

EBIT 8 756 8 563 7 425 11 416 10 055 5 438

Net Result 6 402 6 004 5 135 8 210 6 244 3 526

Net current result 6 765 6 468 5 673 8 694 7 005 4 512

Depreciation. amortisation. Impairment losses (6 005) (6 055) (5 479) (7 272) (7 599) (7 472)

Cash fl ow P&L (3) 13 737 12 867 10 850 14 681 14 499 10 541

Capital expenditure 7 187 3 710 6 421 7 994 11 252 6 100

Development expenditure 1 118 1 138 1 176 2 147 2 473 1 834

Weighted average number of ordinary shares in issue 5 389 714 5 386 299 5 342 394 5 324 566 5 331 111 5 247 116

Result per share in € (4) 1.16 1.11 0.96 1.57 1.18 0.70

Net current result per share in € 1.26 1.20 1.06 1.63 1.31 0.86

Gross Dividend / Capital repayment per share in € (7) 0.36 0.36 0.36 1.00 0.55 0.55

FINANCIAL SITUATION 2007 2008 2009 2010 2011 2012

Equity part of the Group 64 143 67 208 70 188 77 526 77 270 76 461

Solvency ratio (Equity/Total assets) 49.3% 52.9% 53.7% 49.2% 47.9% 48.8%

Working capital (5) 12 202 16 631 11 966 16 427 13 676 12 685

Short term net cash position (6) 11 298 9 905 15 732 10 577 9 961 7 877

EMPLOYMENT 2007 2008 2009 2010 2011 2012

Total at the end of the year 722 769 803 902 1 097 1 070

ZETES GROUP - KEY FIGURES

2007 2008 2009 2010 2011 2012 % 2007 2008 2009 2010 2011 2012 %

Sales 145 526 148 315 131 646 155 290 170 703 171 518 0.5% 31 575 29 321 35 808 61 448 49 859 42 608 -14.5%

Gross margin 58 701 63 269 57 885 63 047 68 518 69 323 1.2% 15 260 14 147 18 556 25 663 26 959 24 377 -9.6%

Operating expenses

(45 074) (48 922) (48 019) (51 652) (58 636) (61 884) 5.5% (10 383) (10 368) (12 120) (14 885) (14 904) (14 490) -2.8%

Current EBITDA 13 626 14 346 9 866 11 395 9 882 7 439 -24.7% 4 877 3 778 6 436 10 779 12 055 9 887 -18.0%

% Sales 9.4% 9.7% 7.5% 7.3% 5.8% 4.3% 15.4% 12.9% 18.0% 17.5% 24.2% 23.2%

EBITDA 13 083 13 819 9 325 11 002 9 258 6 285 -32.1% 4 877 3 778 6 365 10 764 11 693 9 879 -15.5%

Current EBIT 9 357 10 028 6 170 7 054 5 225 2 296 -56.1% 3 198 2 095 4 688 7 865 9 131 7 641 -16.3%

Employment 592 597 622 697 889 862 -3.0% 118 159 169 194 196 196 0.0%

SALES: € 214,1 MILLION

EVOLUTION IN GOODS ID EVOLUTION IN PEOPLE ID

0

50

100

150

200

2012201120102009200820072006

111.2

145.5 148.3131.6

155.3170.7 171.5

Goods ID

0

4

8

12

16

20

2012201120102009200820072006

10.3

13.614.3

9.911.4

9.9

7.4

Goods ID People ID

0

20

40

60

80

2012201120102009200820072006

26.331.6 29.3

35.8

61.4

49.942.6

People ID

0

4

8

12

16

20

2012201120102009200820072006

3.74.9

3.8

6.4

10.812.1

9.9

0

50

100

150

200

250

2012201120102009200820072006

137.5

177.1167.5

216.7 220.6 214.1

177.6

GroupIncluding corporate costs

11.7

15.4 15.213.6

19.1 18.6

14.1

0

4

8

12

16

20

2012201120102009200820072006

in € million

in € million

Group

CURRENT EBITDA: € 14,1 MILLION

Zetes is an international Group highly specialised in identifi cation & mobility solutions. Connecting what matters is at the heart of our business: physical movements and digital fl ows, 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 usa pioneering leader on our market.

Contents

03 HIGHLIGHTS

04 WHO IS ZETES?

06 MESSAGE FROM THEEXECUTIVE MANAGEMENT

08 REPORT FROM THEBOARD OF DIRECTORS

16 STRATEGY

20 ACTIVITIES

40 INNOVATION

44 SOCIAL RESPONSIBILITY

48 SHAREHOLDERS INFORMATION

FINANCIAL INFORMATIONAND CORPORATE GOVERNANCE

03

Highlights

InnovationInvestment to standardise the

Goods ID offering based on the

accumulated experience of the

Group's subsidiaries.

Acquisitionof Czech company InCAPTIO and the

assets of Nitica (France). 24 employees

join the Group.

Anti-Coun-terfeitingIncreasing interest in the

pharmaceutical and luxury industries

in serialisation, which can provide

their goods with unique identifiers.

People IDProjects successfully carried out

in Sierra Leone, Chad and Togo.

Africa continues to present great

development potential.

CloudThe retail sector is beginning to

grasp the benefits of the 'cloud' for

centrally managing their store-level

processes.

800,000Belgian driving licences will be

produced and delivered every

year from 2013. Good ID's "proof

of delivery" solution is used in

logistics.

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

04 Zetes AnnuAl RepoRt ConneCting what matters

Founded in

1984

100,000 warehouse operators working with Zetes voice solution

30 years'experience condensed into our solutions

more than 1,000 employees in EMEA

Biometric enrolment of

70 million people

40%+

recurring revenue

N°1 EMEA provider of supply chain solutions

€ 4.6 million distributed to shareholders

€ 4 million of investment in innovation

Direct presence in

16 countries

40 million identity documents produced

05Who Is Zetes?

simplifying processes The meat crisis of early 2013 confirms just how international economic activity has become. In this context it is legitimate to want to know where food or materials originate. Much is at stake, in terms of public health, ecological impact or respecting social values.

In Goods ID, Zetes has positioned itself from the outset as a specialist in identification and traceability. Over the years, the systems it has introduced have enabled each economic player to collect and store its own product data. The major trends of today in this field are, first, the identification of goods at individual unit level, second, the pooling and sharing of such data. At Zetes, serving these two areas requires us to permanently mobilise significant resources, especially for innovation.

"Serialisation" means allocating to each unit produced a unique number with which to trace and monitor its integration into a finished product or its final destination. The solutions Zetes proposes, which combine the accumulated expertise of the entire Group, start with labelling and continue with the tracking of each item right along the logistic chain up to the delivery of the final product to the end consumer.

Size is Zetes' trump card in this market. This enables it to acquire a Europe-wide understanding of the needs of each industry and accumulate expertise in all types of standard operations and in the exceptions that customers face. Innovation is the appropriate use of

technology to meet customers’ complex and changing needs.

In 2012, the sovereign debt crisis and uncertainty as to the future of the euro made investment decision-making slow and irregular. This made project implementation more complex, resulting in reduced first half earnings. The renewed optimism and regained confidence in the second half produced a return to more normal results.

In addition, 2012 gave the opportunity to focus the entire Goods ID Division on the Group's flagship solutions, those that bring the most value to our customers. Other, more flexible models of marketing our solutions were also introduced, in

particular through Managed Services contracts incorporating hardware, software and services.

Accumulation of references in People IDPeople identification needs continue to grow and the People ID division can look back on a year rich in achievements and in new orders.

Two electoral projects were undertaken, including one in Sierra Leone for the United Nations. The project in Togo, which is still ongoing, covers biometric census-taking and the issuing of voting cards and voter lists.

The Belgian Government, for its part, has awarded the new European driving licence project to Zetes, and finally, very recently, the Luxembourg Government has tasked Zetes with issuing the country's new ID cards.

Innovation is the appropriate use of technology to meet clients' complex and changing needs.

Creating value for our customers through innovation

The need for identification and traceability has been constantly growing in recent years. In what is now a global world, identification of goods, authentication of persons and flow control are increasingly important.


Globalisation entails significant migration flows and we are seeing growing requests by countries for biometric solutions for visa granting and control. Thus Senegal has decided to entrust Zetes with implementing a biometric visa solution.

Each time it bids, Zetes is able to point to its many international references. In the People ID business, having references is today crucial to gaining the trust of new states.

A pivot year2012 was a year of global uncertainty and for Zetes it ends with sales figures down from the previous year to € 214 million. But looking beyond the numbers, the past year has accelerated the implementation of a strategy to create value for customers through flagship solutions in Goods ID. Elsewhere, the winning of new long-term contracts confirms the ideal positioning of People ID. These advances are the work of all Zetes employees who have, by their intelligence and experience, made possible these developments. 2013 will be a continuation of 2012 and we know we can count on them to give satisfaction to our customers. Multinational companies and national governments, everyone has shown confidence in us. Their needs are the driving force behind our innovation. Their requirements drive our motivation.

And for our shareholders, these developments are the guarantee of the company's

sustainability and prosperity in the medium to long term. In the short term, Zetes wants to thank them for their confidence in 2012 by redistributing a significant part of the company's cash flow in the form of dividends and repurchase of own shares.

2012 provided an opportunity to focus the entire Goods ID Division on the Group's flagship solutions, those that bring the most value to our customers.

Jean-François Jacques

Chairman of the Board

Alain Wirtz

Chief Executive Officer

Pierre Lambert

Chief Financial Officer

07MessAge froM the exeCutIve MAnAgeMent

Ladies and Gentlemen, dear Shareholders,

The Board of Directors is please to present you with its report for the 2012 financial year. The present report covers both the unconsolidated (parent company) and consolidated (group) financial statements. The Board attests that, to its knowledge, the unconsolidated and the 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, 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, operating performance and position of the company, including the companies included in the consolidation, and a description of the principal risks and uncertainties with which they are confronted.

The financial statements are in euros and apply the IFRS standards adopted by the European Union.

Commentary on the development of the company's business and its current situationGiven the limited operating activity of the parent company Zetes Industries SA, it is the consolidated financial statements, which are discussed below, that provide an accurate view of the situation of the Zetes Group (Zetes Industries SA and its subsidiaries). The consolidated financial statements are presented before the appropriation of the dividend, which will be decided by the Ordinary General Meeting of 29 May 2013.

After a good year in 2011, the Company was confronted at the beginning of 2012 by an uncertain economic environment. For the Goods ID Division this situation expressed itself in highly volatile order-taking and low profitability throughout the first half. In the second half, the division found its way back to the performance levels of 2011. The People ID division, for its part, could rely on the revenue streams from its long-term contracts and ended the year with a good performance, in line with management's expectations.

Balance sheet and cash flowThe slight decrease in activity (-2.9% at Group level) favourably impacted the net need for working capital, which reduced from € 13.7 million to € 12.7 million.

With equity of € 77.5 million against total assets of € 159.0 million, the solvency ratio remains at a very high 48.8% (47.9% in 2011). This ratio is even more remarkable when one bears in mind that the company proceeded in 2012 to distribute a dividend of € 2.9 million and to buy back shares (eliminated in consolidated equity) in an amount of € 1.7 million. 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.

This good financial stewardship allows it to present, after investments of over € 7.9 million, a net cash position of € +7.5 million, almost unchanged from 2011.

The cash flow from operations is € 12.4 million, which breaks down into € 10.5 million generated in the income statement and € 1.8 million linked to the reduction in

Committing to efficient management of the Group

In 2012, the Goods ID Division has decided to concentrate its expertise on six key solutions that will be its workhorse for years to come. The new Belgian driving licence is added to the list of long-term contracts of the People ID Division. It will begin contributing to recurring revenue in the second half of 2013.


working capital needs. The cash tax expense (€ 1.7 million) explains most of the difference between EBITDA and operating cash flow. The reduced working capital need reflects the stable sales situation and good inventory and accounts receivable management.

Investments by Goods ID amount to € 4.1 million, higher than in previous years. These break down into assets for internal use (€ 2.3 million) and assets supporting managed services (operating lease contracts with customers: € 1.8 million). € 1.8 million of development costs were also capitalised (against € 2.1 million in 2011). Investments by People ID amount to € 1.2 million and relate essentially to improving production and personalisation equipment in Belgium.

These investments were made out of the company's own resources. The Group continues to generate substantial cash flows, which serve to develop and expand the company, service the dividend and repurchase shares.

Income statementGroup sales fell slightly in 2012 to € 214.1 million, which is 2.9% lower than in 2011. Sales by the Goods ID Division grew very slightly despite the difficult start to the year. In People ID, in the absence of any major "Build and Transfer" project with a strong hardware component, sales revenue fell by 14.5%.

Recurring revenues consist of revenues from long-term contracts ("Build and Operate") in People ID and revenues from maintenance

and consumables in Goods ID. Together, they amount to approximately € 87 million, or over 40% of consolidated revenue.

The Group's gross margin is growing in relative terms in the two divisions, highlighting the value-added strategy. In 2012 it stood at € 93.7 million, or 43.8% of sales (vs. 43.3% in 2011)

Operating expenses are up by 3.6%. However, from one half to another, this item is down 1.0%, reflecting the cost control efforts implemented during the year.

Current EBITDA amounted in 2012 to € 14.1 million. Nearly two-thirds of this was

generated in the second half, which was much stronger than the first half.

Zetes incurred non-recurring costs of € 1.2 million. These relate to restructuring in Goods ID to align the costs of certain entities with their revenue and gross margin potential, and to the strategy of converting solutions into software products (cf. ‘Evolution of the business model’ on p10).

Depreciation on non-current assets of € 5.0 million is very similar to the previous year. Valuation adjustments on inventory (€ 0.4 million) and receivables (€ 0.2 million) are down slightly on 2011.

Current EBIT reached € 6.6 million in 2012, 71% of which was generated in the second half.

Board of DirectorsFrom 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

Recurring revenue amount to over 40% of consolidated revenue.

09rePort froM the BoArD of DIreCtors

€ 214 million Group sales

Jerónimo Martins - Portugal

The net financial result is made up of bank charges (€ 0.2 million for cross-border payments and various guarantees such as bid or performance bonds), the foreign exchange result (€ 0.175 million ) and finally interest expense (€ 0.15 million).

The tax rate was 28.9%, close to the normative rate for the company, giving a total tax charge of € 1.4 million. Net profit was € 3.5 million, with a net current profit of € 4.5 million.

segment reporting

goods ID activity

The volatile order-taking in the first half made it difficult to plan and generate a steady income stream. This significantly impacted the results of the first half. On the other hand the more stable second half enabled Zetes to return to value added levels (gross margin) equivalent to those of the second half of 2011, with growing EBITDA. From one half to another, EBITDA multiplied by a factor of 2.3 (€ 2.2 million in H1 and € 5.2 million in H2).

On an annual basis, the performance is strongly influenced by the first half. In the second half of 2012 the division returned to profitability ratios comparable to those of 2011 (current EBITDA/Sales of 5.8%).

Furthermore, in order to better withstand the

more volatile order-taking, which considerably complicates project planning and execution, Zetes evolved its business model by focusing on its best solutions. The Division carefully analysed the economic sectors and areas of activity where mobility and automatic identification solutions are the most critical and can therefore potentially generate greater added value for customers. Crossing these data with Zetes' areas of expertise, 6 flagship solutions were then identified.

These solutions are being converted into products by the Group in order to capitalise on the experience gained with software applications that meet the needs of customers in a particular industry. The expected productivity gains for Zetes are substantial because all development work is now focused on a single product that is continuously enriched for each key solution. Zetes' objective is for the model to be beneficial both to clients and to the Goods ID Division.

In this way, Zetes clearly defines its area of expertise in 6 solutions that meet the needs of the supply chain from the production unit to logistics and transport and from there to the store.

This strategy enables Zetes to better serve certain economic sectors that it targets with sophisticated products, while retaining the flexibility to develop specific projects as and when customers request this.

Using a common Group-created development platform makes it possible to support the

mobile terminals of several manufacturers and most communication protocols.

Customers have clearly expressed their interest in these flagship products because access to

Zetes' expertise is faster and more efficient via products than via human beings. Some solutions, such as those hosted in the cloud, lend themselves very well to a lease rather than a sales model. In this case Zetes provides an integrated solution (hardware, software, services) against payment per month per terminal for a fixed period of 3 to 4 years. This model is very similar to that applied in "Build and Operate" contracts in People ID, and increases the predictability of income. In some cases, the leased assets are shown in the balance sheet (see p9). But in most cases, based on agreements with the financial institutions, the physical assets will be leased to the client by the latter.

Zetes clearly defines its area of expertise in 6 solutions that meet the needs of the supply chain.


Finally, the impact of currency fluctuations is very limited in the Division, while the analysis of performance on a constant scope basis (organic growth) shows an improvement of the results of the division (current EBITDA of € 7.7 million vs. € 7.4 million), which is explained by the poor performance of Zetes South Africa in 2012.

People ID activity

The People ID Division was able to rely on "Build and Operate" contracts to generate three-quarters of its revenues of € 42.6 million. These are down 14.5% compared to 2011, owing to the absence in 2012 of major "Build and Transfer" projects with their heavy hardware component. While the gross margin is down 9.6% in absolute terms to € 24.4 million, gross margin as a percentage of sales rose to 57.2% (vs. 54.1% in 2011), pointing to the added value delivered in all projects and the importance of services in the income of the Division.

All the "Build and Operate" contracts contributed to the result: eID and the SIS card in Belgium, eID in Portugal and in Israel, biometric passports and visas in the Côte d'Ivoire.

"Build and Transfer" projects were undertaken in the context of electoral cycles, in Sierra Leone for the United Nations and in Togo. Other smaller projects were carried out for the banking and insurance sectors as well as for civil servant identification in Chad.

In terms of business development, the Belgian government awarded Zetes the contract for the new driving licence at the end of 2012. Zetes will produce approximately 800,000 licences a year for a minimum of five years ("Build and Operate" model).

Operating expenses are 2.8% lower, with non-critical functions for major projects always outsourced. The smaller number of large "Build

and Transfer" projects kept operating costs down.

The Division continues to post excellent profitability ratios thanks to its strategy of value added (gross margin) and its permanent cost control.

With current EBITDA down 18% compared with 2011 to € 9.9 million, the current EBITDA to sales ratio remained at a high at 23.2% (24.2% in 2011), a percentage that is explained by the very high 'services' component in the "Build and Transfer" contract sales and the capital intensive nature of "Build and Operate" contracts, which are priced to cover the depreciation of the related investments. EBIT amounts to € 7.6 million.

goodwillAt the end of the first half, Zetes acquired InCaptio, based in Prague, Czech Republic, which specialises in Goods ID. Zetes also acquired the assets of Nitica, a Goods ID company operating out of south-west France. On this occasion, it took over a team of 9 people.

These acquisitions generated additional goodwill of € 0.4 million, offset by a € 0.6 million downward revision of earnouts. In total, goodwill reduced by € 0.2 million compared to 2011.

Impairment testing to validate the recoverable value of goodwill did not reveal any differences requiring the recording of impairment losses on goodwill.

human resource management and environmental activities In 2012, the Group's employee count declined slightly, from 1,097 at end-2011 to 1,070 at end-2012, with the limited increase in employees from the acquisitions offset by the restructuring mentioned above.

Just like intellectual property, human resources constitute a key asset of the Group. As indicated

€ 12.4 million Cash flow from

operations

eID project - Belgium


above, Zetes changed its organisation in 2012. The competence centres now operate out of the various Group entities that concentrate the knowledge and skills of the different businesses. The competence centre teams bring together developers scattered across the Group under the responsibility of specialists in each key solution.

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 limitations on travel, energy saving, waste sorting and the like.

Principal risks and uncertaintiesThe Board of Directors presents its assessment of the risks of 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 pricing, 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 instruments whose complexity

could compromise their transparency. The instruments currently used are also described under 'Financial information and corporate governance'.

events after the closing dateTo date, there has been no specific post-closing event that influences the annual accounts submitted to the General Meeting.

Per share:€ 0,38 dividend

+ € 0,17 repayment

Coca-Cola - BelgiumProduction-level identification


Prospects for 2013 and description of events that could significantly influence the company's developmentThe Goods ID Division began 2013 with good prospects, with order-taking stronger and, especially, more regular than at the start of 2012. The six key solutions are already proving a commercial success, with the first references signed in the retail sector, as well with production companies and courier services.

Crisis and uncertainty remain a part of daily reality and can impact the pace of clients' decisions. However, investments become priority where there are new regulatory requirements (serialisation and traceability), where they improve quality of service (proof of delivery), or where they permit significant productivity gains (warehouse or retail store organisation). The 6 key solutions adopted all meet at least one of these arguments.

In addition, Zetes continues to rely on its recurring business (25 to 30% of income depending on the degree of maturity of subsidiaries). This has taken the form until now of maintenance and repair services and the sale of consumables (labels, ribbons, etc.). In the future, it will be gradually increased by rental income (managed services), which will further increase the robustness of the Division's revenue stream.

In People ID, visibility remains very good on all long-term contracts ("Build and Operate"). The introduction of the new Belgian driving licence will gradually generate additional income, especially from the second half once all municipalities are equipped to issue the new document.

At the start of 2013, Zetes continues its voter enrolment mission in Togo. Other smaller projects are also under way.

In terms of business development, the priority remains to conclude new "Build and Operate" contracts. While these rarely generate considerable income in the first year, it is they that ensure the prosperity of the Division in the medium and long term. Zetes is currently taking part in several bids, both in Europe and Africa, and continues its business development work on both continents.

The People ID Division is experiencing a very busy first half with the launch of the new contracts such as the Belgian driving licence. However, their earnings contribution is expected mainly from the second

half onwards.

In summary, the good recovery of Goods ID combined with a similar result to last year in People ID should lead to better results in H1 2013 than the same period in 2012.

research and developmentDevelopment expenses in 2012 were € 1.8 million compared with € 2.5 million in 2011. These relate mainly to software development. The effort to convert Group solutions into standardised products is expected to continue in 2013 and to increase costs.

Branches The Group’s activity is organised via local companies which are direct or indirect subsidiaries of Zetes Industries SA. Zetes Industries SA does, however, have a dormant branch in Ireland.

statement on Corporate governanceThe Statement on Corporate Governance is included in the 'Corporate Governance' section of the 2012 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 and the Board committees, remuneration policy and the most recent remuneration report of Zetes Industries SA, its policy in terms of social capital, measures taken to comply with Belgian rules on market abuse, the Group Code of Conduct and, lastly, dividend policy.

Conflicts of interest between directors and the companyThe Board of Directors has not been required to make any decision giving rise to the application of articles 523 or 524 of the Companies Code.

very good visibility on long-term

People ID contracts

Border control

The Goods ID Division began 2013 with good prospects.


related party transactionsRelated party transactions during the period under review consist essentially of the remuneration of the Executive Committee (3 persons) in an amount of € 875,981 (compared with € 1,025,021 in 2011). Transactions with companies linked to directors have been undertaken on an arm’s length basis. Details on related party transactions are included in the 'Financial information and corporate governance' section of the annual report.

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

Issue of subscription rightsNo subscription rights were issued in 2012. The powers of the Board of Directors to issue or repurchase shares are set out in Articles 6 and 7 of the bylaws of the company.

Purchase of own sharesIn 2012, Zetes Industries SA acquired 118,112 own shares at an average price of € 14.27. At

31 December 2012 it held 215,769 own shares, representing 4.00% of the capital for a par value of € 2.2 million. These shares are held a. o. for employee incentive schemes or business combinations by means of exchanges of shares.

Audit CommitteeAt 31 December 2012, the Audit Committee consisted of four non-executive directors, two of whom having independent status:

• Gema SPRL, represented by Mr. Michel Allé (Chairman of the Audit Committee, non-executive - independent director)

• Mr. Paul Jacques (non-executive - independent director)

• Mr. Hiram Claus (non-executive - non-independent director)

• Floris Vansina BVBA, represented by Mr. Floris Vansina (non-executive - independent director)

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 their professional experience in the financial sector.

Voice pickerGruppo Iper - Italy

"Build and Operate" contracts ensure the prosperity of the People ID Division in the medium and long term.


statutory auditor’s reportThe consolidated financial statements of the company have been audited by RSM Réviseurs d’Entreprises - Bedrijfsrevisoren, represented by Mr. Laurent Van der Linden. The auditor has announced his intention of giving an unqualified opinion.

Proposed appropriation of the results of the group parent company, Zetes Industries sAThe statutory (unconsolidated) income statement of Zetes Industries SA shows sales of € 7 million and a net profit of € 1.1 million (€ 2.0 million in 2011). With equity of € 62.3 million (before appropriation), the company presents a very high solvency ratio of 96.9%. The Board of Directors will be proposing that the company pay an ordinary dividend of € 0.38 gross per share (giving a payout ratio of 53.5% of the consolidated net profit), payable after the Annual General Meeting. An Extraordinary General Meeting has also been convened to decide on a capital repayment of € 0.17 per share, which should allow a total payment of € 0.55 per share, equivalent to the dividend for the previous year. Given the 215,769 treasury shares held on 31.12.2012, for which an unavailable reserve of € 3.3 million has been established, the Board proposes to allocate the results of Zetes Industries SA, as detailed in the statutory annual financial statements of the Company, as follows:

In €Profit for appropriation 1,264,198Profit for the year available for appropriation 1,053,598Profit brought forward 210,600

Withdrawal from equity 816,772From capital and share premium accountFrom reserves 816,772

AppropriationAppropriation to legal reserve 52,680Appropriation to other reserves 0.00 Gross dividend 1,966,099 Profit to be carried forward 62,191

Discharge of directors and auditorsIt is proposed to grant discharge to the directors and the statutory auditor.

Brussels, 29 March 2013

For the Board of Directors.

ImageID Technology – Campofrío, Spain

Alain Wirtz Chief Executive Officer

Pierre Lambert Chief Financial Officer


Maintaining relationships of trust


Lodging a visa application at the Côte d'Ivoire

embassy - Brussels, Belgium

Monday - 13:45 - Border control at

Abidjan airport, Côte d'Ivoire

Monday - 08:10 - Boarding the plane -

Brussels, Belgium

Visa received -

Brussels, Belgium

Monday - Reunion with loved ones -

Abidjan, Côte d’Ivoire

Zetes is uniquely positioned in its market, thanks to its extensive knowledge of its customers' businesses and the challenges they face, its broad international presence and its financial stability. Today, it is important for both large enterprises and governments to have a strong partner capable of accompanying them in large-scale projects.

Zetes builds bridges between the physical world and the digital world. Its solutions are directed at, on the one hand, the various players in the supply chain and, on the other, public bodies. The former are driven by a search for optimised product traceability. This involves precise identification as well as increased visibility of movements inside the supply chain. Governments, meanwhile, want to identify with certainty their citizens or those wishing to enter their territories.

In both cases, this means giving an identity and being able to verify this identity at any time. For this Zetes uses identification technologies (barcodes, datamatrix, RFID, voice, vision, smart cards, biometrics, etc.) and data capture technologies (hardware components) that it integrates into standardised solutions. These solutions incorporate the cumulative expertise of 30 years' presence in the field of identification, enabling the Group to offer user-friendly solutions to extremely complex problems.

17strAtegy

Zetes' strategy is based on three pillars, which are the backbone of the company and enable it to stand out truly from the competition. These pillars are reinforced with five levers that give extra traction to the Group's positioning.

Each division pursues a specific strategy, which is detailed in the "Activities" section. These varying strategies are determined by the very nature of the activities of each division, the type of customers, but also the structure of the market and of the competition. In Goods ID, Zetes is the only major market player capable of covering the entire EMEA region, while its competitors are mainly local. In People ID, the

market is much more globalised. In addition, many contracts, such as election enrolments, are one-off assignments, and do not require a permanent presence in the countries in which they are carried out.

the strategic pillars

strong specialisationZetes is always looking for new solutions and new markets, but remains focused on automatic identification (auto-ID). To this Zetes brings its extensive knowledge of computer systems, building bridges between the physical

and digital worlds. This specialisation is a major asset in an environment with a pressing need for identification and traceability solutions, with many new regulations being adopted to combat fraud and counterfeiting. Its command of this area makes Zetes a partner of choice for finding the optimal solution to a specific need.

Complementary activities

Whether to identify goods or people, customers want to ensure data integrity to protect citizens against identity theft and to assure consumers of the quality of the products they buy.

Front end communication

Complementary application logic

Wired & wireless networks

Physical DigitalIdentification &

data capture(Secure) data communication Host system

integration

Enterprise applications ERP/WMS/TMS

National register AFIS system

People

Goods


The complementarity of the goods and people fields is manifested in a sharing of identification technologies, in the mobility of solutions and in data security, and leads to synergies that open the way to proposing totally new solutions.

europe and AfricaZetes still sees many opportunities in Europe linked to regulatory constraints, growing traceability needs 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. The two continents therefore remain priority areas for Zetes and will allow it to continue its growth.

strategy levers

group solutions Proprietary solutions are an essential component of the Zetes strategy. These permit a targeted approach by market and greater implementational flexibility. With 30 years of experience, Zetes is able to integrate its accumulated expertise into standardised solutions to meet the needs of players in each sector. Zetes takes a global approach, offering solutions that optimise the full range of processes in a particular environment.

Innovation and synergiesThe synergy between the group's various divisions and teams keeps Zetes at the forefront of its business. This exchange is cross-sectoral, cross- technology and international.

relationships of trust Through being attentive to the needs of businesses and working closely with its customers, Zetes becomes a preferred technology partner. This confidence can multiply the number projects for one and the same organisation, from different departments and with different types of solutions.

enhancing of competences Customer contact and service quality are essential elements of the Group's success. Our employees accumulate in this way valuable experience which is translated into solutions. This experience is the catalyst for innovation in the teams.

stabilityConquering new 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: long-term contracts and an extensive range of services provide Zetes with a guaranteed revenue base.

Data integrity for national governments

and companies

Morrissons – UK

Long-term contracts and an extensive range of services provide Zetes with a guaranteed revenue base.

19strAtegy

Guaranteeing identity and enhancing traceability


In Goods ID, our customers' concerns are consumer protection and satisfaction. In People ID, governments are looking to be able to identify unequivocally their citizens or officials. For this reason, Zetes solutions occupy a critical place in corporate and government strategies.

Even if aimed at different targets, there is a major convergence between the Group's two activities. Zetes' vision is one of close integration between goods and people identification. This is already the case for proof of delivery, with the need to identify the recipient at the time of delivery.

This reality is reflected increasingly in the organisation of the company, where extensive collaboration between the two divisions is extending the offerings of both Goods ID and People ID. The latest evidence is the contribution of the specialist entity which produces industrial equipment for product identification in the development of the hardware for a reliable voting solution. People ID also integrated the Zetes proof of delivery solution in its bid for the contract for the Belgian driving licence.

Meat traced and packaged -

Valladolid, Spain

Quality dinner served right on

time - Madrid, Spain

Bulls raised at Cuenca

- Spain

Burgers delivered to the supermarket

right on time - Madrid, Spain

21ACtIvItIes

A growing need for traceabilityVarious events during the past 15 years, like the mad cow disease, swine fever, dioxin chickens, or more recently, e-coli and horse meat crises, have highlighted the importance of traceability for consumer protection.

The internet explosion has increased the need to determine the sources of the products we buy and consume. The World Health Organisation (WHO) reported in 2010 that in 50% of cases, medicines purchased from illegal sites are counterfeit, presenting a major risk to those consuming them.

Other markets are also affected by counterfeiting, like luxury goods and cosmetics. Counterfeit products not identified as such can impact brand image by not meeting the quality standards that the brand guarantees.

Moreover, certain pharmaceutical or luxury products end up on parallel markets, outside the regular sales channels. This impacts the income of the target brand.

Whatever the specific motivations of any one market, producers need to be able to determine at any time what has happened, where, when, how and by whom, whether for an individual product or group of products. This requires total data transparency. Supply chain-related data needs to be integrated, managed and properly connected to the same supply chain, as well as available 24/7.

Faced with these growing problems, states and supranational organisations have begun to legislate. The EU has adopted a traceability directive in the pharmaceutical sector, which member states are required to implement no later than 1 January 2015. Similar legislation is on the way for the cosmetics and food industries.

Implementation of such legislation often presents a major challenge to companies in the sectors concerned. The necessary solutions are complex and it is important to minimise the impact of implementing them on their competitiveness.

the internet explosion: the challenges of e-commerceMulti-channel and omni-channel retailing enable a buyer to order from anywhere and have the products delivered

to different locations at his or her choice. This trend, been driven by the ubiquity of the web and smartphones, has made the retailing process much more complex.

This includes organising returns and reintegrating a portion of sales in the supply chain, a trend that could grow with increasing impulse consumption.

Businesses need to adapt to this new reality and reorganise their processes around it. A particular need here is for efficient inventory and returns management.

Continuous investment in innovation positions Zetes in lead position in the "collaborative supply chain". By linking all links in the chain, while at the same time addressing each sector’s specific problems, Zetes responds to the many challenges of protecting consumers.

Goods ID

Producers need to be able to determine at any time what has been done with their products, where, when, how and by whom.


Challenges of today and yesterdayAlthough faced with new challenges, companies linked into to the supply chain also continue to face organisational and competition concerns. Zetes' Goods ID solutions meet their need to bring the right products to the right places within the set deadlines and in a cost-effective manner.

In addition, by optimising their processes, companies are seeking in particular:

• Error reduction

• Increased productivity

• Better traceability

• Reduced losses

• Improved customer service

• Reduced operating costs

unmatched expertise Zetes has built a solid reputation in the industry, based on an organisation, the success factors of which are:

• Perfect mastery of automatic identification equipment and technologies

• Expertise in systems integration and implementation

• Highly specialised and motivated teams

• Reinforced vertical market specialisation

• Proven solutions

A solution for every marketZetes offers its customers a suite of solutions targeted at the needs of each link in the supply chain.

• ZetesAtlas, for the manufacturing sector

• ZetesMedea, for optimising warehouse processes

• ZetesChronos, for the transport sector

• ZetesAres, for Direct Store Delivery

• ZetesAthena, for rationalising in-store processes

• Zetesolympus a repository for facilitating the collaborative supply chain

This portfolio has been developed based on Zetes' many years’ experience of serving

the various supply chain players, each with its distinct needs. If this approach was commonplace in the past, it is no longer enough simply to offer technologies, most of which have now reached a sufficient level of

maturity. Zetes' added values lies rather in its understanding of the specific processes of each business and being able to respond appropriately. Only then can one select the technology best able to meet customer needs.

Optimising the organisation of returns is a trend that could grow with increasing impulse consumption.

The fight against counterfeiting

requires robust identification solutions

Bristol-Myers Squibb - France

23ACtIvItIes

secure product identification and optimised traceability right along the packaging lineZetesAtlas is the basis of the Zetes collaborative supply chain, since traceability begins with the raw materials and the way they are incorporated into finished products.

This solution allows products to be identified using various technologies and data aggregation at the software level. Aggregation means obtaining a clear view as to which products are in which boxes and which boxes on which palettes.

ZetesAtlas is addressed primarily at the pharmaceutical, luxury goods, cosmetics and food processing industries, which are the main areas where traceability is required for protecting either consumer health or brand image. The chemicals and explosives markets, where traceability meets obvious security needs, are also potential targets.

total control over the packaging process

The ZetesAtlas packaging execution system makes it possible to manage, secure and improve identification in an optimal fashion. A

precondition for this is excellent communication of events occurring on the manufacturing line to the data management system and vice versa. ZetesAtlas provides the missing link between the two. The solution acts as the single intermediary between the information system and packaging line (including all peripherals such as printers, cameras, etc.).

This feature is quite unique to the Zetes solution, which is one of the few to be able to offer full control over the entire packaging line, with most companies focusing primarily on just a part of the process. This presents a significant competitive advantage, as companies can use a single partner for all their needs (labelling, serialisation, communication with ERP, etc..), thereby reducing the risks and costs associated with the proliferation of suppliers.

Many years' experience of the production sector

The Group has been undertaking projects for manufacturing companies for many years, thanks to its print & apply machines, which are one of the components of ZetesAtlas. Its expertise in this field is based on its acquisition of several companies. Zetes has sites producing this industrial machinery in Spain and Belgium.

One of these lipsticks has contaminated ingredients. Which one?

ZetesAtlas allows to efficiently manage, secure, and optimise identification at manufacturing level.


efficient logistic execution in warehousesMany warehouse processes are extremely expensive for companies. To improve the productivity, accuracy and efficiency of logistics providers, ZetesMedea rationalises their operations, from reception of incoming goods to order preparation and inventory management through to shipping to the final customer.

Various technologies exist to optimise these processes. ZetesMedea is able to support whatever one the customer chooses, and produce optimal data communication with the management system.

In this way companies gain real-time visibility into the movement of goods, a significant reduction in picking and shipping errors, and a resulting reduction of wrong delivery penalties.

Zetes has conquered the logistics market in particular thanks to its voice solution. It remains a leader in this field through its continuous investment in innovation. With MCL Voice, developed by its subsidiary MCL, it is now possible to interface voice with a wide range of devices to reduce operator training times. Elsewhere, its ImageID solution serves to speed up the shipment verification process. It is in this constant search for innovation and providing additional benefits to its customers that the added value of Zetes lies.

total visibility of the delivery processZetesChronos is a proof of delivery solution that ensures that the correct package has been loaded and that the same package is delivered to the right person right on time. This solution brings together all Zetes' experience in this field, accumulated over several decades and in several countries. New features allow increased process digitisation, from parcel scanning to recipient authentication, mobile payment or uploading A4 documents. It is also possible to optimise the planning of delivery tours, to introduce a more flexible organisation of the reception of packages for shipment, etc.

This solution is therefore addressed primarily to transport companies which deliver large volumes of goods for businesses, as well as small parcel delivery companies like DHL, TNT and Chronopost.

Accurate, timely deliveries are synonymous with savings in fines, resources and error handling time.

One of these pallets will be sent to the wrong customer. Which one?

One of these packages will be lost in transit. Which one?

25ACtIvItIes

traceability across the supply chainZetesOlympus is a data repository positioned above all the other solutions. Based on the use of the cloud, it ensures better communication between all players in the supply chain and,

therefore, greater visibility of product movements within it. Access to particular data about a product can be granted or denied to one or the other partner. Having complete information on the

movement or handling of products available in one place also provides additional security

in the fight against counterfeiting and grey markets.

In addition, the use of cloud avoids ad infinitem duplication of data due to local storage. Given the increasing use of serialisation and thus unique numbering by product unit and not by batch, as is still often the case today, we are seeing an explosion of data to be recorded, with a far from negligible impact on infrastructure costs. ZetesOlympus makes it possible to better manage this problem.

One of these products will sell more. Which one?

selling moreCertain producers sell their products directly on the ground, in the stores. This method permits greater flexibility and better customer service, but is much more complex than a proof of delivery system. Quantities that will be sold are not known at the beginning of the day, it is important to be able to take orders in situ, have all product information on hand, adjust stock on hand for the day after each sale, etc. Direct Store Delivery therefore require a dedicated application, that is both extremely strong and flexible. It is this that Zetes proposes with its ZetesAres solution.

This sales method is used particularly in the cosmetics and beverages sectors. A dedicated Direct Store Delivery (DSD) solution is an effective tool for placing orders in real time and reducing the time spent on administrative tasks.

One of these meat packs contains antibiotics. Which one?

ZetesOlympus ensures better communication between all the actors within the supply chain.


easy cloud-based in-store management applicationsIn-store applications for managing stock shortages, prices, inventory, etc. are commonplace. However, for retailers with many branches, the use of these applications results in a significant infrastructure deployment cost, given the need for a separate infrastructure in each store. Using the cloud opens new opportunities, by managing all operations in different locations in a centralised manner. This application is made possible by the MCL Mobility Platform, designed and developed by MCL, a subsidiary of Zetes. This platform is the central element and added value generator of the ZetesAthena solution.

Equipped with a portable terminal, employees can directly download updated information on products. In addition, the IT department is able to initiate application updates in remote mode. There is no more need to encode all article references at each change of collection or when updating a local database with new products, a process that can involve encoding the same data hundreds of times at different locations. Employees can focus on the heart of their business, which is selling, and provide better customer service. Tasks are performed faster, administration is reduced and information is available in real time.

By opting for this type of solution, retail chains avoid the 'hidden' costs of traditional in-store solutions: servers, databases, OS licences, infrastructure and database maintenance, disaster recovery plan, etc..

ZetesAthena is directed primarily at large retail chains in the apparel, luxury goods, shoes and

electronics sectors as well as airport shops (wine, beer, etc.).

One branch still has the missing shirts in stock. Which one?

By opting for ZetesAthena, retail chains avoid the 'hidden' costs of traditional in-store solutions.

27ACtIvItIes

1 Shop �press

€

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XY, 1 OKGo to

location XY, pick 1

N°217Mr Johan Schmitz

N°217Mr John Smith

COLLECTAB, 6 OKgo to AB,

put 6

Shop express

12 x

€ N°217Mr John Smith


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Produit XQuantité Y

Location XQuantity Y


Zetes’ Collaborative Supply Chain Solutions

Product IdentificationSerialisation

Data Aggregation

BoxLabelling

PalletControl

PalletLabelling

Put AwayReplenishment Order Picking Kitting Dock Door ControlInventory

Proof of Delivery Direct Store Delivery

Store

Proof of Delivery Put Away Replenishment Price & PromotionManagement Inventory Click & CollectSales

Escorting


1 Shop �press

€

€

€

€

€ € €

€ € €

€ € €

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XY, 1 OKGo to

location XY, pick 1


N°217Mr John Smith

COLLECTAB, 6 OKgo to AB,

put 6

Shop express

12 x

€ N°217Mr John Smith


N° 20202020Lot 2022020/20/02

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Produit XQuantité Y



Zetes’ Collaborative Supply Chain Solutions

Product IdentificationSerialisation

Data Aggregation

BoxLabelling

PalletControl

PalletLabelling

Put AwayReplenishment Order Picking Kitting Dock Door ControlInventory

Proof of Delivery Direct Store Delivery

Store

Proof of Delivery Put Away Replenishment Price & PromotionManagement Inventory Click & CollectSales

Escorting

29ACtIvItIes

solving complex problems with simple solutionsStringent traceability requirements have made business processes very complex. At the same time, responses need to be easy to implement and use.

For example, serialisation provides answers to some of the "new" problems, in particular counterfeiting. Individual unit level identification makes it now possible to trace each goods item very precisely from production to sale to the final customer. Implementing this method presents, however, several challenges:

• The need to implement serialisation solutions upstream of the supply chain, at the production level. It is crucial for businesses that implementation have only minimal impact on productivity. It is also important to be able to identify which products are in what boxes and on which pallets.

• The multiplication by a factor of thousands of the number of references to be introduced at each step of the chain.

The proliferation of sales channels leads, in turn to:

• An increased need to manage inventory.

• The ability to track a product delivered to the customer through one channel and returned through another. An efficient delivery and product return service is a definite competitive advantage for companies selling through the internet.

The solutions that Zetes has developed meet these challenges:

• Condensing into a single product all of Zetes' expertise in product identification solutions in a production environment, ZetesAtlas allows simple implementation based on proven machines and software, that easily and efficiently take care of the data.

• The cloud allows data on a particular product to be entered into a centralised database and then shared with the other actors in the chain.

• The pooling of nearly 30 years’ experience in transport and logistics and extensive experience in retail enable Zetes to offer solutions that solve most of the challenges faced by both sectors, confronted with exploding online sales.

expenditure rationalisation and simplification of managementThe economic situation in Europe is strongly influencing companies' investment decisions. Zetes needs to take this reality into account if it wants to maintain its leading position. For this reason its thinking is organised around several themes:

• How to rationalise our customers' spending?

• How to simplify project management at the infrastructure level?

• How to use Zetes' potential to address this problem and to make it a key player?

8.6% of goods are out of stock at

any one time in Europe


Several solutions enable Zetes to meet this dual challenge:

• use of the cloud. Instead of storing the same data several times over on multiple IT structures, data is today managed centrally. The different supply chain players or branches of the same store chain can have direct access to data without tedious and time-consuming re-encoding, enabling them to concentrate on value-adding tasks.

• enhanced visibility of their terminals networks for businesses operating through multiple branches, and rationalising the purchase of these same terminals. This is made possible by the Zetes TotalCare platform, which can visualise the terminals in use at the various branches, and their status. An operator can now see which devices are out of service, under repair or require an application update. Zetes TotalCare has the double advantage of a global approach with a local support for different teams in the same company. It also enables companies to better manage their budgets.

• Adapted payment models. With the 'Software as a Service', 'Infrastructure as a Service' and 'Platform as a Service' models, companies pay a price per month or per year per user. In return, Zetes looks after maintenance, software updating, etc. For the hardware, lease contracts exist. In this context, Zetes takes full responsibility for managing the network of terminals, with maintenance, repairs and spare parts. All of these payment options are condensed in the Zetes TotalFinance offering.

A solid partnerCompanies are looking for partners with the technical and human resources to support them in projects that are of crucial importance for their organisations. In a highly fragmented market, Zetes is ideally positioned to meet their needs, having:

• The critical size required for the deployment of large-scale projects

• A solid financial foundation enabling it to make significant investments, particularly in infrastructure

• A network of offices across 16 EMEA countries, for accompanying our customers' International projects.

geographical proximityZetes' Goods ID activity requires geographic proximity with its clients: knowledge of local culture, rapid response, etc. The Group is therefore seeking to epand its presence, including through acquisitions, in order better to serve businesses. 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 makes it possible to respond to the needs of multinationals, seeking uniformity of solutions and equipment. enhanced visibility

on terminals parks

Jerónimo Martins - Portugal

31ACtIvItIes

growth opportunities

In europe

Europe is Zetes' historical continent, on which the company has developed an extensive network of subsidiaries. This geographical coverage puts the Group close to customers, able to correctly define their needs and intervene rapidly on the ground.

Despite the uncertainties of the macroeconomic situation in Europe, there are still growth opportunities for Zetes.

• geographically: There are still many opportunities to expand the network of subsidiaries and thus strengthen Zetes' leading position, particularly in Eastern Europe.

• in terms of business needs: Identification and traceability need change, particularly in terms of security, legislation, brand protection and multiplication of sales channels. These changes are marked by a growing desire to protect and satisfy consumers, who are increasingly particular 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 keep a step ahead of the competition.

Retail chains remain, via warehouse processes, the most important sector across Europe. Warehouse productivity gains, efficiency and reduced error rates are driving activity in this sector.

"Proof of delivery" solutions are proving highly popular in the "transport and logistics" segment, combining identification and mobility competences and going at times as far as mobile payment.

100,000 operatorswork with Zetes'

voice solution

Voice pickingMorrissons – UK


The pharmaceutical and luxury goods sectors are continuing to invest in unit-based marking and traceability solutions.

Recently, in-store sales have also begun to offer attractive growth opportunities. With newly-developed cloud-based solutions, store chains are now able to manage processes in their various outlets in a much simpler way. This is a real differentiator for Zetes, which has the critical mass to invest in IT infrastructure and manage itself the data relating to its customers' businesses.

In Africa

In South Africa, Zetes has 5 offices in 4 cities: two in Johannesburg, one in Cape Town, one in Durban and one in Port Elizabeth.

The African continent offers great development potential with an acute need for traceability and supply chain solutions. The most promising sectors there are the exploitation of the continent's many natural resources, and its booming manufacturing industries’.

In addition, South Africa is an ideal access point to the entire sub-Saharan region.

Throughout 2012, this subsidiary, deriving from the acquisition of ProScan in 2011, introduced the structures and adaptations needed to align it with the other subsidiaries. For this it has been able to count on the support of the Group's European offices, accustomed to work collaboratively based on the exchange of knowledge, expertise and experience.

two continents, one supplier Zetes' presence in both Europe and Africa is a big advantage for companies active 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.

On the highly fragmented automatic identification market, Zetes is the only company able to provide

this level of service. This approach has earned it several major contracts and this trend is expected to continue in the years to come.

Zetes is also forming a strategic alliance with the auto-ID industry leaders of the Asian and American markets.

ACtIvItIes

An Post - Ireland

On the highly fragmented automatic identification market, Zetes is the only company able to provide a local service combined with global solutions.

33

Citizen identification: a challenge for each statePeople 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:

• organising democratic elections

• controlling of migration flows

• administrative management

• human resource management (civil servants, police, military, etc.).

The main challenge facing States in this area is to combat identity theft and counterfeiting. Zetes' solutions provide effective responses to this major concern, covering the entire chain of production and control of high security identity and travel documents:

• Biometric enrolment

• Secure data transfer

• Centralisation

• Creation of population databases or registers

• Information control and eliminating duplicates

• Documents production

• Documents personalisation

• Secure transportation of documents

• Data reading and identity control (administration, border control, elections, etc.).

With its secure sites, Zetes is able to undertake the production and personalisation of:

• Electronic identity cards

• Biometric electronic passports

• Driving licences

• Biometric visas

• Voter cards

• Healthcare cards

good growth prospects

A solid reputation Zetes' People ID solutions are proving highly successful, owing in particular to the company's good reputation in this field, based on the success of the projects it has undertaken in recent years. This accumulation of references is essential and guarantees the growth of its People ID business.

Zetes has developed and implemented solutions for countries including Belgium, the Democratic Republic of Congo, Togo, Burundi, Gabon, Cape Verde, Benin, Côte d'Ivoire, Israel, Luxembourg and Portugal. In 2012, Zetes teams worked more particularly on projects in

Togo, Sierra Leone and Chad.

Another reason for the Group's success is the comprehensiveness of its offer, enabling a country's authorities to entrust a single supplier with the implementation of highly complex projects.

People ID

The evolution of the People ID Division is characterised by a diversification of the product offering. The solutions Zetes proposes are encountering growing interest and the strategy of detaching experts to the African continent is bearing fruit. Additionally, Zetes has begun to expand its geographic sphere of influence.

Zetes' People ID solutions are proving highly successful, owing in particular to the company's good reputation in this field.


Potential of electronic votingInterest in electronic voting is increasing around the world. This form is indeed often faster, more efficient and more reliable than the paper voting process. More specifically it permits:

• Enhanced voting confidentiality and secrecy

• Immediate and reliable counting with guarantees of integrity and control tools

• Reduction of paper support-related errors by eliminating manual reading and counting

However, the effectiveness of the system depends to a large extent on the supplier. Zetes has developed its own electronic voting system in response to growing demand from the market and given the complementarity of such a solution with its existing portfolio. The company has extensive experience in biometric voter identification and the constitution of electoral lists for election projects. This makes it particularly sensitive to issues of privacy and security surrounding such projects.

stability and quality

A mixed modelThe business model of the People ID activity is established on the basis of "Build & Operate" (BO) and "Build & Transfer" (BT) contracts.

BO contracts involve projects to produce secure documents (e.g. Belgian and Israeli identity cards, Ivorian biometric passports, etc.). These are concessions granted by States for periods extending over several years. Such contracts require significant front-end investment, but the recurring revenue they generate over the life of the contract offers considerable visibility and predictability to the Division.

BT type projects, most of them currently in Africa, are more limited in time frame. These are biometric enrolment projects in the context of elections, civil servant censuses, etc..

Local reputation As a Belgian-based company, Zetes won its spurs by implementing its home country’s eID project. With this success behind it, it took part in other innovative government-initiated projects, thereby winning the trust of government agencies in other countries. Zetes helped develop the kids-ID, and cards for foreigners and for Belgians residing abroad. It has also provided biometric enrolment equipment to Belgian consular posts for

40 million identity documents produced

Border control

Candidate A: 4892

Candidate B: 1234

Candidate C: 5367

Electronic voting process

35ACtIvItIes

producing visas and personalises health insurance cards for its own country's citizens.

The driving licence project that was awarded to the Group at the end of 2012 illustrates this essential component of its strategy.

expansion in eMeAThe successful project completions in Belgium have allowed Zetes to expand elsewhere in EMEA. Reasons for focusing on this area are many. This area requires sizeable investment in business development. Additionally, sales cycles are long and require sustained efforts. The choice of Africa is easily justified: many states there have no national registry. Population identification needs are therefore numerous. Leaders in these countries

are also very open to innovative solutions that facilitate citizen acceptance.

Early in 2012, Zetes decided to detach specialists from the Division to Africa, working out of its offices in Côte d'Ivoire and South Africa (Goods ID). The goal is to build teams gradually, as a function of projects that arise,

and be able in this way to cover sub-Saharan Africa with greater proximity. This approach is promising and the number of potential projects is increasing. Elsewhere, the Secur-

eVote solution is arousing considerable interest, including projects outside Europe and sub-Saharan Africa, which are Zetes' traditional zones of influence.

Innovation: a growth factorThe Division's portfolio of solutions and services continues to expand, both in order better to meet the expectations of the company's clients, and to be able to cover the full range of identification and authentication processes. Thus Zetes has added iris recognition as an additional technology for biometric identification. The development of an automatic e-gate for border controls is also under way. A comparison of the biometric information captured during the border crossing and that encrypted in a passport or visa, can serve to grant or deny travellers access to a particular country. The Division has also included in its offering the proof of delivery solution of the Goods ID Division, allowing it to track the delivery of driving licences to the municipal administrations of the Belgian State.

Congratulations from unDP in sierra Leone2012 saw Zetes take part in the electoral project in Sierra Leone. At the request of UNDP, Zetes produced and delivered the voter lists along with 2.7 million voter cards. Zetes' AFIS skills and its experience in card production/personalisation and in logistics enabled it to carry out this project in record time. Executing it was a real challenge in terms of timing and earned the People ID teams the congratulations of the UNDP for the quality of their work.

Zetes developped an eVoting system due to a growing market demand.

© Barbara-Anne Krijgsman


focus on security Person 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:

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

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

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

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

Zetes continues to invest constantly in this area, to ensure that authorities and citizens enjoy maximum protection of their data.

the Belgian driving licenceThe Federal Public Service (FPS) Mobility and Transport of the Belgian State has entrusted Zetes with the production, personalisation and distribution of the new driving licence. Around 800,000 documents will be produced, personalised and distributed each year, starting in February 2013, during this 5-year contract.

This project is a good example of complementarity between the two divisions of the Group, as the proof of delivery solution developed by the Goods ID specialists for transport and logistics enterprises is used here to ensure rapid and optimal communication with the authorities. Data on the delivery of licence in a particular municipality are transmitted within 15 minutes of arrival. In combination with a secure web application for checking at any time the status of production, volumes issued, etc., FPS Mobility and Transport has constant, excellent visibility on the status of orders.

37ACtIvItIes

Database / national registerOnce 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.

AfIsThanks 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.

CentralisationOnce the personal data have been recorded, they are centralised in a single, structured database. These data are transferred in an encrypted manner via satellite communication, the Internet, or digital media.

enrolmentAt 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.

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

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

ControlThe 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.

online applicationsThe 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.

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39ACtIvItIes

Stimulate creativity by sharing


In Goods ID, 2012 marked a turning point in terms of innovation. Zetes began packaging its solutions by creating 6 key products which meet to the critical supply-chain needs of various sectors. In People ID, the Group continued to work on improving its solutions by integrating the latest technologies to enhance security and ergonomics.

Innovation is at the very basis of the creation of a company like Zetes. It is essential to its proper functioning, and indeed its very survival. A new idea does not stay new long. Zetes needs to invest constantly in order to maintain its competitive advantage. Innovation places Zetes in a leader position. The Group has been a pioneer in many areas: introducing barcodes at supermarket level, voice recognition in warehouses or electronic identity cards at national government level.

Tomorrow, as today, Zetes will focus on innovation and on implementing best technologies for goods and people identification. This active and responsible approach is in line with the needs of businesses and governments. The investments also reflect Zetes' vision of increasing integration between the two divisions.

Delivered to the store and authenticity

controlled - Berlin, Germany

Sold: in a few seconds -

Berlin, Germany

Stock check: just one article available

- Berlin, Germany

Luxury handbag, made in Italy

41InnovAtIon

To encourage innovation, Zetes believes firmly and exchange and collaboration, which is promoted at various levels:

• Between experts within the same division

• Between the Group's international subsidiaries

• Between Goods ID and People ID

• Between the company and its customers

6 key solutionsIn 2012, Zetes started to package solutions that meet the specific needs of different markets: manufacturing, storage, transportation and logistics, Direct Store Delivery and retail. These solutions are based on Zetes' many years’ experience in the supply chain sector. Adapted to the specific processes of each market, they avail of the diverse technologies in which Zetes has developed considerable expertise over the years:

• barcode

• vocal

• imaging solutions

• RFID

• biometrics

• datamatrix

• smart cards

• label printing/application

• etc.

Backed by this knowledge, Zetes has set itself the task of combining the different technologies and creating synergies to bring new benefits to its customers.

New trends, such as cloud, are also part of the Zetes offering, and in particular for the ZetesAthena and ZetesOlympus solutions.

Unit identification (serialisation) is gradually replacing batch identification, increasing exponentially the amount of data needing to be stored, accessed and enriched. The cloud offers new opportunities by linking all players in a supply chain to a shared, centralised and secured database. All product information (components, production and best before dates,

movements, etc..) are found there, allowing better life cycle visibility and reducing the costs of investment in IT infrastructure.

For Zetes, this offers a significant competitive advantage because it is the only company to both

• own a portfolio of solutions covering the entire supply chain,

• possess the necessary critical mass to support major projects requiring consistency in terms of solutions, materials and implementation.

For international projects, it can rely on its network of subsidiaries in the EMEA zone.

the Academy Zetes and knowledge sharingEach solution is supported by an international team of experts. These BSGs (Business Solution Groups) each consist of ten or so experts from different countries. This strategy makes it possible to bring together the expertise distributed across different territories and to ensure a coordinated approach to each vertical market, while respecting the specificities of each region.

To ensure consistency and optimal communication between teams, Zetes has established an Academy. The aim is to enable the managers of different departments or the teams responsible for different solutions to meet at regular intervals and keep abreast of the latest technological and sales and marketing developments. It also allows teams

As traceability is becoming a major concern for society and corporations, the cloud offers new opportunities.

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to discuss best practices and work together to develop and promote solutions. The conclusions and results of this work are then passed on to the other Group employees. Zetes hopes in this way to continue to centralise the knowledge of its specialists and continue to evolve its solutions in line with market developments.

This Academy project complements the 'Update Week' that the Group organises every year, when technicians, developers and the sales, marketing and management teams of the various Group subsidiaries meet and discuss the latest technological developments, along with the specificities of the various vertical markets. The Academy is a unique opportunity to share best practices across borders. Contacts are maintained throughout the year, allowing employees to benefit from experience acquired elsewhere and optimising the resources applied to various projects.

In addition, the General Managers of all countries meet twice a year. These meetings are an opportunity to report on activities and present the most interesting projects at the international level.

new solutions in perspective for People IDThe People ID Division used 2012 to work on improving existing solutions, both hardware and software. New technologies like iris recognition, were integrated. Development of an e-gate is also under way. This will allow automatic indentity control at national borders by comparing the traveller's biometric information with that contained in the passport or the central database. The e-gate will strengthen the division's offering. National governments have already expressed interest in this solution.

For developing the hardware of its solutions, the People ID Division avails of the design and

production capabilities of Goods ID. It is this collaboration that is enabling solutions such as Secur-eVote, the fixed biometric enrolment station, and now e-gate to emerge.

Similar collaboration also takes place at the software level. Indeed, for tracking the issuance of the driving licences that Zetes is now producing for the Belgian State, People ID proposed the ZetesChronos proof of delivery solution developed by Goods ID. This complementarity

between the two divisions provides a clear competitive advantage to the company.

All these examples point to the key role of innovation in the Group's strategy and the Group will continue to invest in it in the future.

The complementarity between Goods ID and People ID provides a clear competitive advantage to the company.

E-voting solution

43InnovAtIon

Enhancing our employees' skills


Zetes' social responsibility is focused primarily on its employees and on the secure nature of the solutions it places on the market. The latter contribute to the better protection of consumers and citizens. At employee level, Zetes introduces structures and tools for knowledge sharing and skills development.

For Zetes, social responsibility is therefore hard-wired into the very structure of the Group and is at the heart of its activities. Attention to employee' well-being and personal development is essential to motivation. This is particularly important to the extent that our employees provide the contact with the customer and need to be the driving force of innovation.

At the same time, the protection of consumers and citizens are major concerns of civil society and therefore, by extension, of Zetes' customers, both corporate and government. Combating counterfeiting, quality of goods consumed, authentication of persons and, by extension, border controls, are all challenges which Zetes is meeting by developing and improving its solutions.

Drug delivered to the distribution centre and

authenticity control - Durban, South Africa

Drug produced -

Agen, France

Injected at the hospital - Durban,

South Africa

Delivered the same day to the pharmacy

- Durban, South Africa

45soCIAL resPonsIBILIty

is imperative for employees to be constantly updating their skills. Zetes has therefore introduced structures for sharing knowledge and capitalising on existing experience.

This sharing takes concrete form in the annual 'Update Week and Sales Conference' and in the recently created Zetes Academy, mentioned in the section on Innovation. These initiatives are essential, not only for innovation, but also for the personal growth of employees, who can use them to deepen and diversify their knowledge.

For several years, internal training and the recruitment of highly qualified personnel have enabled Zetes to significantly strengthen skill levels and customer service effectiveness.

respect for the indivual

Zetes is vigilant to ensure that its personnel are not subjected to discrimination of any kind, racial, physical, political, religious, or sexual. The company respects all employment legislation within the European Union and in countries outside the EU where it operates. Zetes offers its personnel a proper level of social benefits, often over and above statutory requirements. It also seeks to contribute to the development of less favoured regions, such as Africa, by recruiting and training local workers and entrusting them with technical and managerial responsibilities. Currently, the two Zetes divisions employ around 200 people in Africa.

Committing to the "nos enfants Cardiques" charity

For the past several years, Zetes has joined forces with the "Nos Enfants Cardiaques" association for the annual Brussels 20 km road race. This charitable organisation, composed of parents of children with heart defects and members of the healthcare team at the Cliniques Universitaires Saint-Luc in Brussels, seeks to improve the well-being of children with heart defects and their families.

This collaboration is an opportunity for the Group's employees participate in a sporting event, as part of a team of 250 runners, to support this charity.

employment

Zetes' main driving force, its employees

Zetes owes its success primarily to its employees. Being largely a services company, its main asset is the strong relationships that it creates with its customers. For this, an in-depth understanding of the markets in which these customers operate is essential, as are mastery of the various automatic identification technologies and an excellent understanding of local cultures.

Capitalizing on know-how

All this makes the knowledge and know-how of the company’s personnel a crucial asset which Zetes makes every effort to retain. Consequently, when integrating the new employees and their know-how in acquisition situations, Zetes takes care to avoid losing the skills brought on board.

Sharing between colleagues, old and new, can enhance individual skills and strengthens the Group as a whole. In this sense, the contribution of the acquired companies is often extremely beneficial, in terms both of technology know-how gained and of more detailed knowledge of markets (both vertical and geographical).

evolution through exchange

Faced with a fast-changing world, and, in particular, constantly changing technologies and a clientèle seeking productivity gains, whilst subject to increasingly complex regulations, it

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Update week 2012 - Lisbon


Better identification and traceability = better protectionZetes solutions are employed by public institutions and businesses to improve their management and, in the private sector, to gain competitive advantage. At the same time they provide answers to problems of counterfeiting or identity fraud.

Protection of citizens

People identification is vital to ensuring democratic rights, such as electoral participation and the protection of personal data. More specifically, Zetes’ solutions provide an answer to needs relating to:

• Preparing a democratic electoral process

Producing reliable voter lists is a real challenge for countries with no national population register. With its biometric enrolment solution, Zetes offers an answer to the requirement of one citizen = one vote. It is on the success of the voter enrolment operation that the electoral process

depends. In 2012, Zetes helped prepare the elections in Sierra Leone for the United Nations.

• Combating identity theft

Incorporating biometric data in identity documents guarantees that the document holder is the person he or she claims to be. By comparing a citizen's fingerprints with an existing database, it is possible to 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 security features that are provenly impossible to reproduce. Zetes is currently involved in eID projects in Belgium (national identity cards, foreign residents cards, kids-ID), Portugal and Israel.

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 area, which involve ensuring the security of citizens' data for national governments. It is, however, an increasingly valuable asset in Goods ID too, where companies are tending to outsource the management of their IT infrastructure in order to focus on their core business.

Consumer protection

In recent years, consumers and, more specifically, consumer health, have become a central concern of the supply chain. Sectors such as the food and pharmaceutical industries need to comply with increasingly strict national and supranational regulations. Unit identification makes it possible, for example, to combat counterfeit medicines. Better labelling makes it easier to determine the origin of food products. The portfolio of solutions that Zetes has developed meets these societal issues by introducing new elements such as the use of the cloud. ZetesOlympus, for example, makes it possible to collect all data related to a product and give secure access to this database to the various players in the supply chain. Traceability of defective products or the identification of counterfeit goods is greatly facilitated.

environmental protection

The streamlining of processes inevitably involves the dematerialisation of information and the automation of information flows. To achieve this, Zetes makes particular use of mobile communications. Whether by optimising supply chains or the use of electronic signatures, this remote exchange of information contributes to reducing physical movement. At company level, process automation results in diminished errors, with a knock-on reduction in losses during production or further along the supply chain. All companies are looking to efficiently manage their mobile assets (vehicles, pallets, tools, etc.). Identifying and locating these in real-time makes it possible to optimise the quantities in use and hence reduce consumption and production.

CERP - Belgium

47soCIAL resPonsIBILIty

Keeping investors well informed: a priority


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 (€ 2.9 million in 2012) or of treasury share purchases (€ 1.7 million in 2012).

Tuesday, 11: 20 - Package arrives at the distribution centre -

Dublin Ireland

Tuesday, 10:15 - Package delivered at

collection centre - Dublin, Ireland

Wednesday, 09:30 - Package delivered in perfect

condition, just in time for his birthday -

Lisbon, Portugal

Tuesday, 16: 46 - Package embarked on plane to

Lisbon - Portugal

49shArehoLDers InforMAtIon

financial informationThe 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.

Individuals who would like to be on our distribution list for press releases may inform us of their interest by sending an email to [email protected] or by registering on our website.

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

CalendarAnnual General Meeting: last Wednesday of May – May 29, 2013 at 10:00 am

Publication of half year results: last week of August – August 30, 2013

Publication of full year results: third week of March 2014

DividendA dividend of € 0.38 gross per share (coupon No. 8) will be proposed at the AGM of 29 May 2013.

The "ex-date" (on which the buyer of the share is no longer entitled to coupon no.8, which is retained by the vendor), is 25 June 2013. The payment date is 28 June 2013. The dividend is payable at KBC Bank, the company's principal paying agent.

An Extraordinary General Meeting has also been convened to decide on a capital repayment of € 0.17 per share (coupon no. 9). This, with the dividend, should allow a total payment of € 0.55 per share, equivalent to the dividend for 2011.

Contacts ZETES INDUSTRIES SA

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

Investor relations and communications Investor Relations: Benoît HeinsPress Relations: Sarah DheedeneTél. +32 (0)2 728 37 11Fax +32 (0)2 728 37 51E-mail : [email protected] Brussels : ZTS

Sarah Dheedene and Benoît Heins


ISIN codes

Zetes Industries share: BE0003827442Zetes Industries strip : BE0005600714

CONSOLIDATED DATA PER SHARE (€) 2007 2008 2009 2010 2011 2012

Capital and reserves 11.89 12.51 13.17 14.64 14.70 14.77

Cash fl ow 2.55 2.39 2.03 2.76 2.72 2.01

Current EBITDA 2.86 2.82 2.55 3.59 3.50 2.69

Current net profi t (Group share) 1.26 1.20 1.06 1.63 1.31 0.86

Net profi t (Group share) 1.16 1.11 0.96 1.57 1.18 0.70

Net profi t (excluding discontinued operations) 1.16 1.11 0.96 1.57 1.18 0.70

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 5 389 714 5 386 299 5 342 394 5 324 566 5 331 111 5 247 116

Average number of shares for calculating diluted earnings 5 595 990 5 386 299 5 342 394 5 324 566 5 331 111 5 247 116

Diluted current net profi t (Group share) 1.21 1.20 1.06 1.63 1.31 0.86

Diluted net profi t (Group share) 1.12 1.11 0.96 1.57 1.18 0.70

Diluted net profi t (excluding discontinued operations) 1.12 1.11 0.96 1.57 1.18 0.70

Gross dividend / Capital repayment 0.360 0.360 0.360 1.000 0.550 0.550

Net dividend / Capital repayment 0.270 0.270 0.270 0.750 0.413 0.455

Highest price 25.0 21.6 17.7 17.7 18.8 16.4

Lowest price 20.2 10.9 12.0 14.5 15.3 12.6

Price at December 31 20.8 12.8 16.4 17.4 15.9 15.0

Price / earnings at December 31 17.9 11.5 17.0 11.1 13.4 21.4

Gross dividend yield 1.7% 2.8% 2.2% 5.7% 3.5% 3.7%

Net dividend yield 1.3% 2.1% 1.7% 4.3% 2.6% 3.0%

Annual volume ('000 of shares) 1 006 954 471 626 1 100 772

Annual volume ('000 of EURO) 23 511 15 685 7 280 10 292 18 935 11 613

Market capitalization at December 31 ('000 EUR) 112 106 68 988 88 122 93 781 85 481 80 954

Connecting what m

atters | Zetes Annual report 2012

This report was written in French. The Dutch and English versions are providedfor the convenience of the reader. Only the French version is legally binding.

Designwww.chocoweb.be

Layout and productionwww.visible.be

PublicationZetes Corporate Marketing & Communication

Executive EditorPierre Lambert, CFODa Vinci Science ParkRue de Strasbourg 3B-1130 Brussels

www.zetes.com/AR2012

Financial Information and Corporate Governance

2 ZETES Financial inFormaTion

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

16 SEGMENT INfORMATION

33 MANAGEMENT Of RISKS AND UNCERTAINTIES

35 AUDITOR’S REpORT

36 STATUTORY ACCOUNTS

40 CORpORATE GOVERNANCE

3ConneCting what matters

The consolidated financial statements for the year ended December 31, 2012 as presented in this annual report were prepared under the responsibility of the Board of Directors and authorised for issue on March 29, 2013 subject to approval of the statutory non-consolidated accounts by the shareholders at the Ordinary General Meeting to be held on May 29, 2013.

Consolidated income statementNOTES 2010 2011 2012

In ‘000 €Sales 216 738 220 562 214 126Cogs (128 028) (125 085) (120 427)Gross Margin 88 711 95 477 93 699

Employee expenses 2 (47 470) (53 062) (55 252)Other operating expenses (22 145) (23 774) (24 331)Current EBITDA (1) 19 096 18 640 14 117Non current costs 4 (408) (987) (1 207)EBITDA 18 688 17 653 12 910Provisions, depreciation, amortisation, impairment losses 6 / 7 / 9 / 10 (7 272) (7 599) (7 472)EBIT 11 416 10 055 5 438

Result from the disposal of fixed assets 20 (1) 61Financial result 4 (581) (1 213) (543)Result before taxes 10 855 8 841 4 956Income tax 5 (2 645) (2 597) (1 431)pROfIT Of THE pERIOD 8 210 6 244 3 526

Non controlling interests (164) (65) (152)Net profit of the Group 8 374 6 308 3 677

Current EBIT (1) 11 824 11 041 6 645Net current result (1) (3) 8 694 7 005 4 512

Total comprehensive incomeIn ‘000 €Net profit of the Group 8 374 6 308 3 677Currency translation differences 359 (10) 106Net revaluation of hedging instruments 48 4 (13)Other comprehensive income, net of related tax effects(*) 407 (7) 94Total comprehensive income of the Group(**) 8 781 6 302 3 771

(*) “Other comprehensive income” (**) “Total comprehensive income”

Earnings per share (€ per share)Number of shares outstanding (2) 12 5 324 566 5 331 111 5 247 116

Net result (3) 1,57 1,18 0,70Net current result (1) (3) 1,63 1,31 0,86

Number of shares fully diluted (2) 12 5 324 566 5 331 111 5 247 116Net diluted result (3) 1,57 1,18 0,70

(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


Consolidated financial position (before appropriation)

NOTES 2010 2011 2012

In ‘000 €

ASSETSTangible assets 6 12 548 13 020 13 625Intangible assets 7 4 690 5 636 5 433Goodwill 7 34 970 40 125 39 878Deferred tax assets 5 2 749 3 028 3 204Financial assets and other non current assets 8 632 808 556Non current assets 55 588 62 616 62 697Inventories 9 15 155 15 351 15 631Current trade and other receivables 10 65 593 62 345 57 724Current tax assets 249 209 216Current prepayments 7 161 8 696 9 900Cash and cash equivalents 13 14 599 14 306 12 797Current assets 102 757 100 907 96 268Total assets 158 346 163 523 158 964

EQUITY AND LIABILITIESEquity attributable to equity holders of the parent 77 526 77 270 76 461Non controlling interests 405 1 115 1 039Total equity 12 77 930 78 385 77 501Non current borrowings 13 963 3 615 1 012Non current provisions 14 579 696 771Non current obligations 14 118 192 241Deferred tax liabilities 5 1 686 1 994 1 854Non current liabilities 3 346 6 497 3 878Current interests bearing borrowings 13 4 021 4 345 4 921Current provisions 14 15 387 114Current obligations 14 17 31 33Current trade and other payables 15 70 333 71 316 68 185Current tax liabilities 1 403 1 609 2 617Other current liabilities 1 280 953 1 715Current liabilities 77 070 78 641 77 586Total equity and liabilities 158 346 163 523 158 964


Consolidated cash flow statement

2010 2011 2012

In ‘000 €CASH AND CASH EQUIVALENTS, BEGINNING BALANCE (I) 18 140 14 599 14 306Cash flows from the p&L 14 681 14 499 10 541

Result before tax 10 855 8 841 4 956Depreciation on fixed assets 4 633 4 944 5 033Depreciation on development costs 1 472 1 498 1 686Write-downs on stock & receivables 1 123 790 538Write-downs on financial assets - 65 26Provisions 48 409 (19)Net Financial charges 517 184 153Income tax paid (3 483) (2 418) (1 694)Other increases (decreases) incl. badwill (483) 186 (138)

Working capital (3 564) 3 675 1 840Decrease (increase) in assets (22 102) 6 545 3 235Increase (decrease) in liabilities 18 538 (2 870) (1 395)

CASH fLOWS fROM THE OpERATIONS (II) 11 117 18 174 12 381Acquisitions (10 141) (13 724) (7 934)

Fixed assets (6 715) (4 701) (5 361)Subsidiaries (net of cash acquired) (1 278) (6 550) (740)Developments (2 147) (2 473) (1 834)

Disposals 93 186 201Fixed assets 93 186 201

Interests received (+) 38 114 71CASH fLOWS RELATING TO INVESTING ACTIVITIES (III) (10 010) (13 424) (7 662)proceeds from cash flows from financing 113 4 890 105

Capital - 276 105Proceeds from finance lease/bank loans 113 3 544 -Other loans - 1 070 -

Repayments relating to cash flows from financing (2 984) (3 055) (1 500)Repayment of finance lease liabilities and bank loans (2 837) (2 018) (2 080)Bank overdrafts increase (decrease) (49) (966) 588Cash restricted or pledged (98) (71) (8)

financial charges (555) (298) (224)Dividends paid (1 911) (5 336) (2 895)Own shares 466 (1 267) (1 685)NET CASH fLOWS RELATING TO fIN. ACTIVITIES (IV) (4 870) (5 065) (6 199)NET INCREASE IN CASH AND CASH EQUIVALENTS (V) = (II) + (III) + (IV) (3 763) (316) (1 481)Effect of exchange rates (VI) 222 23 (28)CASH AND CASH EQUIVALENTS, CLOSING BALANCE (VII) = (I) + (V) + (VI) 14 599 14 306 12 797


Consolidated statement of changes in equity

Issued capital Reserves Own shares

Currency translation reserves (2)

Hedging reserves Total (1)

Non controlling

interests Total equityIn ‘000 €

Balance at 31 December 2009 58 311 13 330 (767) (634) (52) 70 188 153 70 341

Net result of the period 8 374 8 374 (164) 8 210Result directly allocated to equity 359 48 407 407Total comprehensive income 8 374 359 48 8 781 (164) 8 617Business Combination 0 404 404Share-based payment 1 1 1Dividends (1 911) (1 911) (1 911)Acquisitions / sales of own shares 466 466 466Other variations 0 0 12 12

Balance at 31 December 2010 58 311 19 794 (300) (276) (4) 77 526 405 77 930

Net result of the period 6 308 6 308 (65) 6 244Result directly allocated to equity (10) 4 (7) (7)Total comprehensive income 6 308 (10) 4 6 302 (65) 6 237Capital increase 0 276 276Business Combination 0 547 547Share-based payment 0 0Dividends (5 318) (5 318) (5 318)Acquisitions / sales of own shares (1 267) (1 267) (1 267)

Increase (decrease) through changes in ownership interests in subsidiaries that do not result in change of control

28 28 (28) 0

Other variations (4 000) 4 000 (0) (20) (20)

Balance at 31 December 2011 54 311 24 812 (1 568) (286) (0) 77 270 1 115 78 385

Net result of the period 3 677 3 677 (152) 3 526Result directly allocated to equity 106 (13) 94 94

Total comprehensive income 3 677 106 (13) 3 771 (152) 3 619Capital increase 0 105 105Dividends (2 895) (2 895) (2 895)Acquisitions / sales of own shares (1 685) (1 685) (1 685)Other variations 54 (54) 0 (29) (29)

Balance at 31 December 2012 54 311 25 649 (3 253) (234) (13) 76 461 1 039 77 501(1) Attributable to equity holders of the parent company(2) The increase of the translation reserves for an amount of 106 thousand € is mainly explained by the pound sterling's increase against the euro, and secondarily, by the decline of the rand against the euro.


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 2012 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 2012.

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 2012

Amendments to IAS 12 Income Taxes - Deferred Tax: Recovery of the carrying amount of an asset (1/1/2012) 1/1/2012Amendments to IfRS 7 Financial Instruments – Disclosures – Amendment regarding derecognition (1/7/2011) 1/7/2011

The above-mentioned amendments do not impact the information to be disclosed by the Zetes Group.

b. Standards and Interpretations issued but not yet in force at 31 December 2012

IfRS 9 Financial instruments and related amendments 1/1/2015IfRS 10 Consolidated Financial Statements 1/1/2014IfRS 11 Partnerships 1/1/2014IfRS 12 Disclosure of shareholdings in other entities 1/1/2014IfRS 13 Fair value measurement 1/1/2013IfRS 7 Financial Instruments: Disclosures - Amendment regarding the offsetting of assets and liabilities 1/1/2013Amendements à IAS 1 Presentation of Financial Statements - Other comprehensive income 1/7/2012Amendements à IAS 19 Employee Benefits 1/1/2013Amendements à IAS 27 Separate Financial Statements 1/1/2014Amendements à IAS 28 Investments in associates and joint ventures 1/1/2014Amendements à IAS 32 Financial Instruments: Presentation - Offsetting financial assets and financial liabilities 1/1/2014Amendements à IfRS 1 Government Loans 1/1/2013Amendements aux IfRS 10, 11 et 12

Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance

1/1/2014

Amendements aux IfRS 10 et 12 et à IAS 27

Consolidated Financial Statements, Disclosure of Interests in Other Entities: Investment Entities 1/1/2014

IfRIC 20 Stripping Costs Incurred during the operational phase of an open pit mine 1/1/2013

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

- capitalised tax loss carry-forwards

- where appropriate, the forecast evolution in results


4. Basis of consolidation

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.

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. Non-monetary 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.

The main exchange rates used are:

Closing Closing Average Average2012 2011 2012 2011

1 Euro =Pounds sterling 0,8161 0,8353 0,8108 0,8675Swiss Franc 1,2072 1,2156 1,2053 1,2318U.S. dollar 1,3194 1,2939 1,2856 1,3917Rand 11,1727 10,4830 10,5362 10,4497

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 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

2 – 4 ans

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 valued at manufacturing cost, which includes all direct production costs.

b. Inventory write-down

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.

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 short-term 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 straight-line 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.

13. Income taxes

Income tax expense is recognised in the income statement.

a. Current tax

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.

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.


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 realised 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.


Notes to the consolidated accounts

NOTE 1. CONSOLIDATED COMpANIES

SUBSIDIArY Country Ownership %Method of

consolida-tion

Change (1) Date of change

Accuscan International Ltd Angleterre 100 GlobaleAnvos GmvH Allemagne 100 GlobaleBlackbird Data Systems Ltd Irlande 100 GlobaleBurotica SA Portugal 100 GlobaleId-All BV Pays-Bas 100 GlobaleIND Systeme GmbH Allemagne 100 GlobaleLogiscan SARL France 100 GlobaleMetaform Ltd Israël 100 GlobalePowersys 2000 S.L. Espagne 100 GlobaleRASW Management Maarn BV Pays-Bas 100 GlobaleRFIDEA SA Belgique 100 GlobaleZetes Auto ID Systems AG Suisse 100 GlobaleZetes BV Pays-Bas 100 GlobaleZetes Côte d'Ivoire Côte d'Ivoire 100 GlobaleZetes Fastrace SA Belgique 75,9 GlobaleZetes GmbH Allemagne 100 GlobaleZetes Holding GmbH Allemagne 100 GlobaleZetes Holding Ltd Angleterre 100 GlobaleZetes Industries (Israël) Ltd Israël 70 GlobaleZetes International GmbH Allemagne 100 GlobaleZetes Ireland Ltd Irlande 100 GlobaleZetes Ltd Angleterre 100 GlobaleZetes Pty Ltd Afrique du Sud 90 GlobaleZetes Multicom SA Espagne 100 GlobaleZetes NetWave SA Information Systems and Telecommunications

Grèce 58,1 Globale

Zetes SA Belgique 100 GlobaleZetes SAS France 100 GlobaleZETES Solutions CZ s.r.o. République tchèque 100 Globale 100% June 2012Zetes SRL Italie 100 GlobaleZetes Technologies BV Pays-Bas 100 GlobaleZetes Technologies SA Belgique 50 GlobaleZts Lda Portugal 100 GlobaleNumber of subsidiaries consolidated: 32

(1) % of shares acquired during the year


2012 Events Ine June 2012, Zetes acquired the company InCaptio (now known as Zetes Solutions CZ s.r.o.) in Czech Republic.

The companies Buco Card Services BV and Zetes Pass BV were placed in liquidation.

Joint venturesIn 2009, Zetes has created a joint venture with the company Pitkit Printing Enterprises. This entity, integrated in Metaform Ltd, is proportionately consolidated.

Joint venture financial position at 31.12.2012In ‘000 €Non current assets 1 979Current assets 6 584Equity 7 932Non current liabilities 371Current liabilities 260

NOTE 2. EMpLOYMENT

CoSTS BookED 2010 2011 2012In ‘000 €Wages and salaries (46 439) (51 879) (53 803)Defined contribution pension plan (1 031) (1 183) (1 448)Total (47 470) (53 062) (55 252)

ToTAL IN UNITSAverage Number of Staff 868 1 012 1 073Total staff at the end of the year 902 1 097 1 070

ToTAL IN FTE (1)

Average Number of Staff 842 987 1 047Total staff at the end of the year 880 1 074 1 042

(1) FTE: Full Time Equivalent


NOTE 3. SEGMENT REpORTING

INComE STATEmENT 2010 2011 2012In ‘000 €SalesGoods ID 155 290 170 703 171 518People ID 61 448 49 859 42 608Corporate - (0) (0)Total sales 216 738 220 562 214 126

Gross marginGoods ID 63 047 68 518 69 323In % of sales 40,6% 40,1% 40,4%People ID 25 663 26 959 24 377In % of sales 41,8% 54,1% 57,2%Corporate - - -Total gross margin 88 711 95 477 93 699Total gross margin in % of sales 40,9% 43,3% 43,8%

Operating expensesGoods ID (51 652) (58 636) (61 884)People ID (14 885) (14 904) (14 490)Corporate (3 077) (3 298) (3 209)Total operating expenses (69 614) (76 837) (79 583)

Current EBITDAGoods ID 11 395 9 882 7 439In % of sales 7,3% 5,8% 4,3%People ID 10 779 12 055 9 887In % of sales 17,5% 24,2% 23,2%Corporate (3 077) (3 298) (3 209)Total current EBITDA 19 096 18 640 14 117Total current EBITDA in % of sales 8,8% 8,5% 6,6%

EBITDAGoods ID 11 002 9 258 6 285People ID 10 764 11 693 9 879Corporate (3 078) (3 298) (3 254)Total EBITDA 18 688 17 653 12 910

Current EBITGoods ID 7 054 5 225 2 296In % of sales 4,5% 3,1% 1,3%People ID 7 865 9 131 7 641In % of sales 12,8% 18,3% 17,9%Corporate (3 095) (3 315) (3 292)Total current EBIT 11 824 11 041 6 645Total current EBIT in % of sales 5,5% 5,0% 3,1%

EBITGoods ID 6 661 4 601 1 142People ID 7 850 8 769 7 634Corporate (3 096) (3 315) (3 337)Total EBIT 11 416 10 055 5 438


FINANCIAL poSITIoN 2010 2011 2012In ‘000 €GoodwillGoods ID 31 661 36 816 36 569People ID 3 309 3 309 3 309Total goodwill 34 970 40 125 39 878

fixed assetsGoods ID 10 422 12 811 14 289People ID 6 809 5 601 4 552Corporate 7 244 218Total fixed assets 17 238 18 655 19 058

InventoriesGoods ID 8 482 12 045 11 619People ID 6 672 3 306 4 012Total inventories 15 155 15 351 15 631

Current trade and other receivablesGoods ID 58 906 59 406 56 588People ID 13 157 9 915 9 024Corporate 73 87 140Total current trade and other receivables 72 136 69 408 65 752

Total assetsGoods ID 109 472 121 078 119 065People ID 29 947 22 130 20 896Corporate and other non allocated assets 18 927 20 315 19 003Total assets 158 346 163 523 158 964

Current trade and other payablesGoods ID 55 730 61 084 60 432People ID 13 873 8 762 7 989Corporate 740 952 729Total current trade and other payables 70 344 70 798 69 150

Total liabilitiesGoods ID 55 730 61 084 60 432People ID 13 873 8 762 7 989Corporate and other non allocated liabilities 88 742 93 677 90 543Total liabilities 158 346 163 523 158 964

Capital expendituresGoods ID 6 789 5 254 5 929People ID 2 073 1 665 1 185Corporate - 255 80Total Capital expenditures 8 863 7 174 7 195


Segment informationZetes Industries applies IFRS 8 'Operating Segments'. It is organised into two activity clusters - Goods ID and People ID - that operate in different modes and with separate management control systems. The organisation of the "Goods ID" division was modified in 2012. Today it is organised into businesses, under the authority of managers whose specific responsibilities extend across all the entities of the division. The organisation by region has been abandoned.

In People ID, as previously announced, Zetes has established business development teams on the African continent (South Africa, Cote d'Ivoire). The division remains, however, highly centralised.

Internal reporting is limited for each cluster to the specific analysis of sales, gross margin, operating expenses, EBITDA and depreciation. Zetes has also a 'corporate' structure, the expenses of which are tracked separately.

The 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 sales/results relate to the central administration (corporate).

1. GOODS ID

Goods ID 2009 2010 2011 2012 %

In ‘000 €

Sales 131,646 155,290 170,703 171,518 0.5%

Gross margin 57,885 63,047 68,518 69,323 1.2%

Operating expenses

-48,019 -51,652 -58,636 -61,884 5.5%

Current EBITDA 9,866 11,395 9,882 7,439 -24.7%

Current EBITDA as % of Sales

7.50% 7.30% 5.80% 4.34%

EBITDA 9,325 11,002 9,258 6,285 -32.1%

Current EBIT 6,170 7,054 5,225 2,296 -56.1%

Sales by the Goods ID Division rose very slightly in 2012, despite the division being confronted, at the beginning of 2012, by an uncertain economic environment, expressed by highly volatile order-taking and low profitability throughout the first half. In the second half, the division was able to return to performance levels equivalent to those of 2011. From one half to another, EBITDA multiplied by a factor of 2.3 (€ 2.2 million in H1 and € 5.2 million in H2).

On an annual basis, the performance is strongly influenced by the first half. With current EBITDA of € 7.4 million, performance is down 24.7% compared with 2011.

In order better to withstand the greater volatility of order-taking, and reduce the related difficulties of project planning and execution, Zetes has evolved its business model by focusing on its best solutions. The Division carefully analysed the economic sectors and areas of activity where mobility and automatic identification solutions are the most critical and, therefore, can potentially generate greater added value for customers. By crossing these data with Zetes' areas of expertise, 6 flagship solutions were identified.

These solutions are being converted by the Group into products in order to capitalise on the experience gained in the application softwares that meet the needs of customers in the same industry. The expected productivity gains for Zetes are substantial because all developments are focused on one product continuously enriched for each key solution. Zetes' objective is for the model to be beneficial both to clients and to the Goods ID division.

In this way, Zetes clearly defines its area of expertise in 6 solutions that meet the needs of the supply chain from the production unit through logistics and transport right up to the store.

This strategy enables Zetes to better serve certain economic sectors, targeting them with sophisticated products, while retaining the flexibility to develop specific projects at the request of its customers.

The use of a common development platform created by the Group makes it possible to support the mobile terminals of several manufacturers and most communication protocols.

Customers have clearly expressed their interest in these flagship products because access to Zetes' expertise is faster and more efficient via products than via human beings. Certain solutions, such as those hosted in the Cloud, lend themselves very well to a lease rather than a sales model. In this case Zetes provides an integrated solution (hardware, software, services) against payment per month per terminal for a fixed term of 3 to 4 years. This model is very similar to that applied for "Build and Operate" contracts in People ID, and increases the predictability of income. In some cases, the leased assets are shown in the balance sheet (see below). But, in the long run, in most cases, based on agreements with the financial institutions, the physical assets will be leased to the client by the latter.


Internal growth and currency effects

The impact of currency fluctuations is very limited in the division (positive impact of € 55,000 at the EBITDA).

Goods IDCurrency effect excluded

2011 2012 %

In ‘000 €

Sales 170,703 169,889 -0.5%

Gross margin 68,518 68,714 0.3%

Gross Margin a % of Sales 40.1% 40.4%

Operating expenses (58,636) (61,335) 4.6%

Current EBITDA 9,882 7,378 -25.3%

Current EBITDA as % of Sales 5.8% 4.3%

EBITDA 9,258 6,230 -32.7%

Performance analysis on a constant scope basis (organic growth) shows an improvement of the results of the division (current EBITDA of € 7.7 million vs. € 7.4 million), which is explained by the poor performance of Zetes South Africa in 2012.

Goods IDPro forma 2011 and 2012 (*)

2011 2012 %

In ‘000 €

Sales 160,645 153,796 -4.3%

Gross margin 64,299 62,327 -3.1%

Gross Margin a % of Sales 40.0% 40.5%

Operating expenses (54,930) (54,663) -0.5%

Current EBITDA 9,369 7,664 -18.2%

Current EBITDA as % of Sales 5.8% 5.0%

EBITDA 8,744 6,586 -24.7%

(*): Rfidea and Zetes South Africa excluded in 2011 and 2012. Zetes Czech Republic excluded in 2012.

2. pEOpLE ID

The People ID division was able to rely on "Build and Operate" contracts to generate three-quarters of its revenues, which amounted in 2012 to € 42.6 million. These are down 14.5% compared to 2011, owing to the absence in 2012 of major "Build and Transfer" projects with their heavy hardware component. While the gross margin is down 9.6% in absolute terms to € 24.4 million, gross margin as a percentage of sales rose to 57.2% (vs. 54.1% in 2011), highlighting the added value delivered in all projects and the importance of services in the income of the Division.

people ID 2009 2010 2011 2012 %

In ‘000 €

Sales 35,808 61,448 49,859 42,608 -14.5%

Gross margin 18,556 25,663 26,959 24,377 -9.6%

Operating expenses

-12,120 -14,885 -14,904 -14,490 -2.8%

Current EBITDA 6,436 10,779 12,055 9,887 -18.0%

Current EBITDA as % of Sales

18.00% 17.50% 24.20% 23.20%

EBITDA 6,365 10,764 11,693 9,879 -15.5%

Current EBIT 4,688 7,865 9,131 7,641 -16.3%

All "Build and Operate" contracts contributed to the result: eID and SIS card in Belgium, eID in Portugal and in Israel, biometric passports and visas in the Côte d'Ivoire.

"Build and Transfer" projects were undertaken in the context of electoral cycles, in Sierra Leone for the United Nations and in Togo. Other smaller projects were carried out for the banking and insurance sectors as well as for civil servant identification in Chad.

In terms of business development, the Belgian government awarded Zetes the contract for the new driving licence at the end of the year. Zetes will produce approximately 800,000 licences a year for a minimum of five years ("Build and Operate" model).

Operating expenses are down by 2.8%. It should be noted here that non-critical functions for major projects are outsourced. As there were fewer large "Build and Transfer" projects, operating costs were kept down.

The Division continues to post excellent profitability ratios thanks to its strategy of value added (gross margin) and its permanent cost control.

With current EBITDA down 18% compared with 2011 at € 9.9 million, the current EBITDA to sales ratio remained at a high at 23.2% (24.2% in 2011), a percentage explained by the very high 'services' component in the "Build and Transfer" contract sales and that the fact that "Build and Operate" contracts are capital intensive and that invoicing therefore includes an amount to cover depreciation of the investments. EBIT amounts to € 7.6 million.

3. GROUp

The cost of the Corporate Division amounted to € 3.2 million. The Zetes model is based on strong operational divisions and only a light corporate structure. The main tasks of Corporate are strategy definition, financial control, marketing and external growth.


NOTE 4. NON CURRENT COSTS / fINANCIAL RESULT

NoN CUrrENT CoSTS 2010 2011 2012In ‘000 €Employee offering / stock (option) plan (1) - -Restructuring costs (359) (893) (1 280)Badwill - - 81Other non current costs (47) (94) (8)Total (408) (987) (1 207)

The restructuring costs aim to adjust the local structures and to put in place the new organisation (strategy of converting bespoke solutions into software products).

FINANCIAL rESULT 2010 2011 2012In ‘000 €

Interest charges (555) (298) (224)Other financial charges (384) (347) (324)Interest revenues 38 114 71Other financial revenues 89 24 109

financial result excluding exchange differences (812) (506) (367)

Exchange losses / conversion differences (751) (1 021) (564)Exchange gains / conversion differences 982 315 389

Exchange differences 231 (706) (175)

Total financial result (581) (1 213) (543)


NOTE 5. TAxES

INComE TAx 2010 2011 2012In ‘000 €Current income tax expenses 3 483 2 418 1 694Deferred tax expenses (839) 180 (264)Income tax 2 645 2 597 1 431

rECoNCILIATIoN oF STATUTorY TAx To EFFECTIvE TAx rATETax expenses using statutory rate 3 690 3 005 1 685

Net profit before taxes 10 855 8 841 4 956 Belgian statutory tax rate 33,99% 33,99% 33,99%

Tax effect of rates in other jurisdictions (267) (50) (121)Tax effect of notional interest deduction (435) (412) (332)Tax effect of non tax deductible expenses 443 399 560Tax effect of current and deferred tax adjustments (773) (313) (383)Others (14) (31) 23Tax expenses using effective rate 2 645 2 597 1 431

Effective tax rate 24,36% 29,38% 28,86%

DEFErrED TAx ASSETS 2010 2011 2012In ‘000 €Intangible assets 92 81 (28)Tangible assets 45 86 157Inventories 82 39 32Trade receivables 115 60 34Construction contracts - (4) -Accruals 72 38 27Provisions 23 115 43Tax losses carried-forward 2 320 2 614 2 939Total deferred tax assets 2 749 3 028 3 204

DEFErrED TAx LIABILITIES 2010 2011 2012Intangible assets 829 1 109 1 168Tangible assets 280 278 277Inventories - - -Construction contracts 452 482 374Accruals - - 35Non-recoverable tax losses 125 125 -Total deferred tax liabilities 1 686 1 994 1 854


NOTE 6. TANGIBLE ASSETS

In ‘000 € Buildingsplants and

equipmentsMotor vehi-

clesfixtures and

fittings

Leasehold improve-

mentsOther

Assets leased to

third partiesTotal

Balance at 31 December 2009Cost 445 24 273 2 684 2 455 4 574 1 763 36 193Accumulated depreciation (209) (18 629) (1 739) (2 009) (3 212) (1 503) (27 300)Opening balance 2010 237 5 644 945 446 1 362 259 8 893

Changes in 2010Additions 1 883 2 557 803 98 311 309 5 961Business combination 1 300 487 26 190 - 3 2 006Disposals / cancellations - (475) (505) (245) (467) (334) (2 025)Conversion differences - 278 4 34 68 10 394Reclassifications (to) from other items / other

(21) - (65) - - 35 (51)

Depreciation charge (107) (2 688) (432) (203) (422) (113) (3 964)Depreciation on business combination

- (334) (20) (149) - - (503)

Depreciation on disposals / cancellations

- 474 448 245 467 318 1 952

Depreciation other 21 (87) 30 (28) (7) (43) (115)

Balance at 31 December 2010Cost 3 607 27 119 2 947 2 532 4 486 1 786 42 477Accumulated depreciation (294) (21 263) (1 713) (2 143) (3 174) (1 341) (29 929)Closing balance 2010 3 313 5 856 1 234 388 1 312 445 12 548

Changes in 2011Additions 29 1 688 992 130 771 407 4 017Business combination - 1 240 173 212 - 343 1 969Disposals / cancellations - (214) (775) (301) (317) (4) (1 611)Conversion differences - (155) (7) (6) (4) (29) (200)Reclassifications (to) from other items / other - (421) (18) 58 0 - (381)

Depreciation charge (155) (2 859) (454) (179) (371) (159) (4 178)Depreciation on business combination - (793) (54) (176) - (14) (1 038)

Depreciation on disposals / cancellations - 210 603 293 317 1 1 424

Depreciation other - 537 21 (90) 2 (0) 470

Balance at 31 December 2011Cost 3 637 29 257 3 313 2 623 4 937 2 504 - 46 271Accumulated depreciation (449) (24 169) (1 598) (2 296) (3 226) (1 513) - (33 252)Closing balance 2011 3 188 5 089 1 715 327 1 710 990 - 13 020


NOTE 6. TANGIBLE ASSETS (CONTINUED)

In ‘000 € Buildingsplants and

equipmentsMotor vehi-

clesfixtures and

fittings

Leasehold improve-

mentsOther

Assets leased to

third partiesTotal

Changes in 2012Additions 11 1 688 756 220 222 137 1 751 4 786Business combination - 206 0 17 - 31 - 254Disposals / cancellations - (304) (567) (47) (85) (16) - (1 019)Conversion differences - (13) (3) (4) 13 (28) - (34)Reclassifications (to) from other items / other

- (732) (25) (91) - (167) - (1 016)

Depreciation charge (155) (2 295) (578) (139) (320) (266) (252) (4 006)Depreciation on business combination

- (167) (0) (14) - (31) - (212)

Depreciation on disposals / cancellations

- 300 436 47 85 10 - 878

Depreciation other - 777 24 91 (3) 84 - 974

Balance at 31 December 2012Cost 3 648 30 099 3 350 2 718 5 088 2 461 1 751 49 114Accumulated depreciation (604) (25 550) (1 590) (2 311) (3 465) (1 717) (252) (35 489)Closing balance 2012 3 043 4 549 1 760 408 1 623 743 1 499 13 625

Balance at 31 December 2012Net carrying amount of tangible assets under finance leases 68 103 2 172

Tangible assets acquired in 2012 under finance leases - 4 4

Amount of tangible assets pledged as security for liabilities

68 103 2 172

NOTE 7. INTANGIBLE ASSETS

In ‘000 € Goodwill Development costs

patents, trade-marks and other

rightsComputer

software Total

Balance at 31 December 2009Cost 34 421 11 323 1 096 3 365 50 206Accumulated depreciation - (9 121) (519) (2 269) (11 910)Accumulated impairment losses (1 314) - - - (1 314)Closing balance 2009 33 108 2 202 576 1 096 36 982

Changes in 2010Additions 2 147 58 697 2 902Business combination 1 679 1 679Conversion differences 183 (0) 64 4 251Other (65) (65)Depreciation charge (1 481) (217) (443) (2 141)Depreciation other (0) (7) 60 53


In ‘000 € Goodwill Development costs

patents, trade-marks and other

rightsComputer

software Total

Balance at 31 December 2010Cost 36 283 13 470 1 217 4 001 54 972Accumulated depreciation - (10 602) (743) (2 653) (13 998)Accumulated impairment losses (1 314) - - - (1 314)Closing balance 2010 34 970 2 868 474 1 349 39 660

Changes in 2011Additions 2 473 42 642 3 157Business combination 5 498 44 140 107 5 788Conversion differences (41) 5 (20) 8 (48)Other (302) (844) (389) 431 (1 104)Depreciation charge (1 543) (227) (493) (2 264)Depreciation on business combination (40) (132) (71) (243)Depreciation other 842 381 (408) 815

Balance at 31 December 2011Cost 41 439 15 148 989 5 190 62 765Accumulated depreciation - (11 344) (722) (3 625) (15 691)Accumulated impairment losses (1 314) - - - (1 314)Closing balance 2011 40 125 3 804 267 1 565 45 761

Changes in 2012Additions 1 834 49 526 2 409Business combination 399 - 11 206 617Conversion differences 0 4 2 7 13Cancellation (718) - - (718)Other (646) - - (31) (678)Depreciation charge (1 752) (229) (735) (2 716)Depreciation on business combination - - (124) (124)Depreciation cancelled 718Depreciation other (1) (2) 32 29

Balance at 31 December 2012Cost 40 473 16 986 1 051 5 897 64 407Accumulated depreciation - (13 096) (954) (4 451) (18 501)Accumulated impairment losses (595) - - - (595)Closing balance 2012 39 878 3 890 97 1 446 45 311

Net internally generated intangible assets 3 890 3 890

Comments on Goodwill

The goodwill increase of 399 thousand € is related to the acquisition of InCaptio in Czech Republic.

The cancellation of the fully depreciated goodwill of 718 thousand € is related to the liquidation of Buco Card Services BV.

Earnouts

Negative adjustments for 646 thousand € relating to the earnouts reevaluation have been booked in 2012 and are linked to the acquisitions prior to 2010 (application of IFRS 3).

NOTE 7. INTANGIBLE ASSETS (CONTINUED)


Breakdown of the goodwill by segment and by CGU

The aggregation of assets for the cash-generating units was revised in 2012. The "Goods ID" activity has, since the second half of the year, been organised by businesses, each under the authority of specific managers. 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.

Until 2011, goodwill was monitored by region (North, Central and South), with each region composed of different entities working closely together.

The reorganisation into "businesses" has had the effect of eliminating the concept of "regions", implying a change in the way assets are grouped. Zetes has identified the smallest groups of assets that generate cash inflows that are largely independent.

The goodwill impairment test is now performed at the level of the Goods ID and People ID divisions, in line with the way in which Zetes manages its activities.

2010 2011 2012 VAR.In ‘000 €By segmentGoods ID 31 661 36 816 36 569 (247)People ID 3 309 3 309 3 309 -Total goodwill 34 970 40 125 39 878 (247)

By CGUGoods ID - North (pro forma) 6 665 10 489 10 256 (233)Goods ID - South (pro forma) 9 463 9 985 9 953 (32)Goods ID - Central (pro forma) 13 799 14 920 15 319 399Goods ID - Competence centres (pro forma) 1 734 1 423 1 041 (382)Total Goods ID 31 661 36 816 36 569 (247)Total people ID 3 309 3 309 3 309 -Total Zetes Group 34 970 40 125 39 878 (247)

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 monoactivity are organised in such a way as to be able analytically to break down 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.

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 whenever indications of impairment exists.

The external impairment index used is the market capitalisation of the company. The recoverable amount of a cash-generating unit is determined on the basis of fair value, less costs of sale 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 then 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 business over a five-year period Cash flows beyond the range of the projections are extrapolated using estimated average growth rates, as indicated below. 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:

2012Discount rate 10%Growth rate (1) 1%Illiquidity discount 15%

(1) After the five-year period

Sensitivity analysisThe group conducts a sensitivity study, with an emphasis on the key assumptions. These are the EBITDA multiplier used to determine the fair value and growth forecasts.

The Company believes that its financing structure, without net debt, does not justify testing the impact of a change in financing costs (WACC).

The sensitivity analysis shows that a reasonably possible change in a key assumption (change in the EBITDA multiple - 20% reduction) leads to the carrying value of the Goods ID division exceeding its fair value, but without exceeding its value in use. The impact on the value in use of a 50% fall in the 5 year growth forecast (sales and operating expenses) under the constraint of a stable margin/sales ratio shows that the value in use of the division is very significantly greater than its carrying value.

NOTE 9. INVENTORIES

ASSETS 2010 2011 2012In ‘000 €Gross carrying amounts 20 406 20 824 20 382Goods 14 562 17 866 15 129Production supplies 5 572 2 722 3 921Stock in transit 271 237 1 332Accumulated write-downs (5 251) (5 473) (4 751)Goods (5 051) (5 262) (4 499)Production supplies (200) (211) (252)Total net 15 155 15 351 15 631

INComE STATEmENTIn ‘000 €Write-downs on stock of the year (715) (496) (381)

NOTE 8. fINANCIAL ASSETS AND OTHER NON CURRENT ASSETS

ASSETS 2010 2011 2012In ‘000 €Other non current financial assets 170 197 164Non current cash restricted or pledged 462 611 392Total 632 808 556

HEDgINg INSTrUmENTS

In ‘000 Sale EUR purchase USDExpiring

fromExpiring

toContract

average rateClosing rate

31/12Contrats de change à terme EUR / USD

1 406 1 832 jan-13 feb-13 1,303 1,319

The Group has hedging instruments to hedge identified foreign exchange risks; on 31/12/2012, there are hedging contracts for an amount of 1.8 million USD against EUR to be purchased at an average rate of 1.303. The net result on hedging instruments is (13) thousand € and is mentioned in the Statement of Changes in equity.


NOTE 10. CURRENT TRADE AND OTHER RECEIVABLES

ASSETS 2010 2011 2012In ‘000 €Trade receivables 62 079 58 232 53 852

Gross trade receivables 63 728 59 962 55 038Accumulated write-downs (1 648) (1 730) (1 187)

Other current receivables 3 514 4 112 3 872Construction contracts 2 545 1 881 1 556Other 969 2 232 2 317

Total 65 593 62 345 57 724

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 an insurance credit company. If not, a credit risk analysis is performed allowing to reduce the risk of the counterparty.

Construction contractsCumulative amount of contract costs incurred and recognised profits less losses 94 356 120 066 144 202

INComE STATEmENT 2010 2011 2012In ‘000 €Sales relating to the execution of construction contracts 22 187 25 710 24 137Write-downs on bad and doubtful customers (408) (295) (157)

Change in accounting estimates - construction contracts

The percentage of completion method is applied on a cumulative basis for every exercise, depending on the best estimate of the costs and revenue of the existing contracts. In 2012, the revenues estimate has been increased for three outstantding contracts.

NOTE 11. RELATED pARTIES

2010 2011 2012In ‘000 €Assets with related parties (1) 192 155 46

Liabilities with related parties 14 236 128

Transactions within related partiesTotal Management Committee remunerations (902) (1 025) (876)

Basic compensation (632) (675) (738) Variable compensation (270) (350) (138)

Total non executive directors remunerations (52) (63) (74)Total others (2) (20) (33) (20)

Total services received (974) (1 121) (969)(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.


NOTE 12. EQUITY NOTE

movEmENTS IN NUmBEr oF SHArES Ordinary sharesNumber of shares on 31/12/2011 5 389 714Number of shares issued in 2012 0Number of shares on 31/12/2012 5 389 714

owN SHArES Number In ‘000 €Own shares, opening balance 97 657 1 5682012 movements 118 112 1 685Own shares, closing balance 215 769 3 253

In 2012, the Board of Directors decided to buy own shares, in accordance with the authorisation 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 56.1 million €. All shares are without par value.

Dividend

The Board of Directors will propose to the Ordinary General Assembly held on May 29, 2013 to pay a gross ordinary dividend of 0.38 € per share. The proposed dividend has not been recognised as a liability at the end of 2012. An extraordinary General Assembly was also convened on April 22, 2013 to decide on a capital reduction in the form of a repayment to shareholders of 0.17 € per share. The goal is to give a stable total payout compared with 2011.

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 €) 3 677 3 677Weighted average number of ordinary shares outstanding 5 247 116 5 247 116Basic earnings per share (in €) 0,70 0,70

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 2012, the outstanding number of options is 184,669. The weighted average listing price is 14.44 € (2012) ; 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 €) 3 677 3 677Weighted average number of ordinary shares outstanding 5 247 116 5 247 116Adjustments for options 0 0Weighted average number of ordinary shares for diluted earnings per share 5 247 116 5 247 116Diluted earnings per share (in €) 0,70 0,70


OpTIONS

pLAN 2005 pLAN 2007 TOTALExercise price 23,00 22,63Outstanding on 31/12/2011 181 869 2 800 184 669Granted during the period -Exercised during the period - -Cancelled during the period - -Outstanding on 31/12/2012 181 869 2 800 184 669 Of which vested 181 869 2 800 184 669 Of which to be vested - -Expiring date 31/12/17 31/12/19

There were no options granted in 2012.

NOTE 13. fINANCIAL BORROWINGS

FINANCE LEASES, mINImUm LEASE pAYmENT pAYABLE, prESENT vALUE 2010 2011 2012< 1 yearBetween 2 and 5 years 224 166 156Total 454 506 215Total 678 673 370

NoN CANCELLABLE FUTUrE mINImUm opErATINg LEASE pAYmENTSIn ‘000 €< 1 year 4 225 4 672 4 662Between 2 and 5 years 4 633 5 903 5 433> 5 years 55 - -Total 8 913 10 574 10 095

INTErESTS BEArINg BorrowINgSIn ‘000 €Bank borrowings 1 490 3 499 2 042Finance leases 678 673 370Bank overdrafts 2 815 2 721 3 307Total interests bearing borrowings 4 984 6 893 5 719

NoN-INTErESTS BEArINg BorrowINgSOther non current borrowings - 1 067 214Total - 1 067 214

AgINg proFILE< 1 year 4 021 4 345 4 921Between 2 and 5 years 963 3 615 1 012> 5 years - - -Total 4 984 7 960 5 933


FINANCIAL DEBTS BY CUrrENCY 2010 2011 2012EUR 4 873 6 698 4 705GBP 34 14 202CHF 78 14 791ZAR - 168 20Total 4 984 6 893 5 719

fAIR VALUE Of fINANCIAL DEBTS

For floating rate financial debts, the fair value is equal to the face value.

NET FINANCIAL DEBT (+) / CASH (-)In ‘000 €Total financial debts 4 984 6 893 5 719Cash available (15 061) (14 917) (13 189)Net cash (10 076) (8 024) (7 471)

Current financial debts 4 021 4 345 4 921Cash and cash equivalents (14 599) (14 306) (12 797)Current net cash (10 577) (9 961) (7 877)

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 AvAILABLEIn ‘000 €Current cash restricted or pledged 462 611 392Cash and cash equivalents 14 599 14 306 12 797Total cash available 15 061 14 917 13 189


NOTE 14. pROVISIONS & OBLIGATIONS

pROVISIONS

In ‘000 €Warranty

provisionsRestructuring

provisionsLegal proceed-

ing provisionsOnerous con-

tract provisionsTotal

Balance at 31 December 2009 260 159 10 100 530Non current provisions 260 159 10 100 530

Additional provisions 60 14 61 77 213Amounts used - (26) - - (26)Unused amounts reversed (50) - - (75) (125)Other 2 1 - - 2

Balance at 31 December 2010 272 148 71 103 594Non current provisions 272 133 71 103 579Current provisions - 15 - - 15

Business combination 7 - - - 7Additional provisions 104 324 256 56 739Amounts used - (14) (138) (58) (210)Unused amounts reversed (18) - (26) - (45)Other (2) (134) 133 - (2)

Balance at 31 December 2011 363 324 296 100 1 083Non current provisions 363 - 233 100 696Current provisions - 324 63 - 387

Additional provisions 115 193 10 56 374Amounts used - (324) - - (324)Unused amounts reversed (12) - (109) - (121)Other 0 (4) (125) - (128)

Balance at 31 December 2012 467 188 73 156 885Non current provisions 467 74 73 156 771Current provisions - 114 - - 114

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.


OBLIGATIONS In ‘000 € post employment benefit obligationBalance at 31 December 2009 142Non current obligations 125Current obligations 17

Additional provisions 15Amounts used (29)Conversion differences 8

Balance at 31 December 2010 136Non current obligations 118Current obligations 17

Additional provisions 87Amounts used (38)Conversion differences (3)Other 40


Additional provisions 90Amounts used (38)Conversion differences 0


CONTINGENT LIABILITIES

On December 2012, 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 2012 amount to 1 448 thousand €.


NOTE 15. CURRENT TRADE AND OTHER CURRENT pAYABLES

In ‘000 € 2010 2011 2012Trade payables 33 977 33 128 31 524Advances received 22 834 23 541 23 006Other current payables 13 517 14 646 13 638

Payables to employees 5 424 5 712 5 495Payables to public administrations 6 705 6 808 6 508Other 1 388 2 127 1 636

Current hedging instruments 5 - 17Total 70 333 71 316 68 185

NOTE 16. DISCLOSURES ON ACQUISITIONS AND DISpOSALS Of SUBSIDIARIES

In ‘000 €2010

Acquisitions2011

Acquisitions2012

AcquisitionsImpact of the acquisitionsNon current assets 2 034 1 197 167

Tangible assets 1 503 931 42Intangible assets 0 47 94Deferred tax assets 377 138 30Cash restricted or pledged 150 - -Other non current assets 4 81 -

Current assets 2 167 5 572 877Inventories 362 1 419 178Trade and other receivables 1 719 3 591 361Prepayments 14 198 47Cash and cash equivalents 71 166 290Other current assets - 198 -

Non-current liabilities 995 522 -Interests bearing borrowings 409 514 -Provisions - 7 -Deferred tax liabilities 587 - -

Current liabilities 3 131 4 582 331Interests bearing borrowings 1 925 974 -Trade and other current payables 1 076 2 646 304Advances received 52 943 23Other liabilities 79 19 4

Net identifiable assets and liabilities 74 1 666 712

Goodwill on acquisitions and earnout 1 679 5 498 318Goodwill on acquisitions 1 679 5 498 399Badwill on acquisitions - - (81)

Cash (acquired) / disposed (71) (166) (290)Net cash outflow / (inflow) 1 682 6 997 740Minority interests 404 547 -


2012 & pOST CLOSING TRANSACTIONS

Zetes acquired in 2012 the company InCaptio (Czech Republic) and the assets of the company Nitica (France).

The net assets & liabilities of these acquisitions amount to 712 thousand €. Their book value before the business combination is 851 thousand €.

The acquisition bookings done in 2012 is based on a provisional estimate of the fair values.

Except for the acquisition of Nitica, completely integrated into Zetes France (asset deal), the impact of acquisitions on

the 2012 income statement is described in the segment reporting.

There are no post closing transaction in 2013.

NOTE 17. AUDITOR'S MISSIONS

The auditor RSM Réviseurs d’Entreprises, represented by M. Laurent Van der Linden, 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 reasons.

In ‘000 € 2012Auditor's fees

Audit of the financial statements 84Other missions 2

Auditor's related parties' feesAudit of the financial statements 4Fiscal advices 12Other missions


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

b) Place the company's decision making and processes on a firmer basis and help it achieve its objectives

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

d) Mobilise company employees around a common vision of the principal risks and sensitise them to the risks inherent in their business.

Description of the risks

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

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

- 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

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 destabilise the economic system, and hence Zetes’ activity.

Risks attached to acquisitions

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.


Risks attached to new products

Zetes specialises in identification. To maintain its competitive advantage, Zetes carries out specific development and places specialised software and hardware on the market. In 2012 the company invested € 1.8 million. A total of € 3.9 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 stabilised, 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-to-day 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.

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

Zetes’ liquidity and treasury risk is limited. In addition to a cash position of € 12.8 million (December, 2012), 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.

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. Zetes’ 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 net positive 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.


zetes industries

STATUTORY AUDITOR’S REPORT TO THE SHAREHOLDERS MEETING ON THE CONSOLIDATED FINANCIAL STATE-MENTS FOR THE YEAR ENDED DECEMBER 31, 2012

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, 2012, 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, 2012, prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The consolidated statement of financial position shows total assets of 158.964 (thousand) EUR and the consolidated income statement shows a consolidated profit of 3.526 (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 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, 2012, 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, 15 April 2013

THE STATUTORY AUDITOR,SCCRL RSM RÉVISEURS D’ENTREPRISESREPRESENTED BYLAURENT VAN DER LINDEN, PARTNER


Statutory accountsIn 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 2012, 2011 and 2010.

1. BALANCE SHEET 2010 2011 2012In ‘000 €ASSETSfixed assets 33 653 33 905 32 375Formation expenses - - -Intangible fixed assets 176 329 309Tangible fixed assets 35 106 95Financial fixed assets 33 443 33 471 31 971Current assets 37 059 32 714 31 890Amounts receivable after one year 1 931 1 583 1 225Stocks and contracts in progress 129 94 13Amounts receivable within one year 33 983 28 819 27 051Short term deposits and own shares 367 1 634 3 319Cash at bank and in hand 552 491 135Deferred charges and accrued income 97 92 148TOTAL ASSETS 70 713 66 619 64 265

EQUITY AND LIABILITIESCapital and reserves 62 116 61 208 60 296Capital 60 092 56 092 56 092Share premium account 38 38 38Reserves 1 408 3 233 845Unavailable reserves for own shares 367 1 634 3 319Profit carried forward 211 211 -provision for liabilities and charges 12 - -Debts 8 584 5 411 3 969Amounts payable after one year 233 - -Amounts payable within one year 8 328 5 397 3 925

Current portion of amounts payable after more than one year falling due within one year

506 303 -

Financial debts 119 6 20Trade debts 881 1 251 1 113Amounts payable regarding taxes, remuneration and social security 673 656 514Other debts 6 149 3 181 2 278

Accrued charges and deferred income 23 14 45TOTAL EQUITY AND LIABILITIES 70 713 66 619 64 265


2. INComE STATEmENT 2010 2011 2012In ‘000 € Operating income 7 536 6 957 5 744Turnover 6 619 6 543 5 351Other operating income 917 414 392Operating charges (6 327) (5 672) (5 093)Raw materials, consumables and goods for resale (599) (159) (107)Services and other goods (2 689) (3 112) (2 942)Remuneration, social security and pensions (2 229) (2 284) (1 892)Depreciation and amounts written off (775) (102) (136)Other operating charges (35) (15) (16)Operating profit or (loss) 1 210 1 285 651Financial income 1 051 851 517Financial charges (208) (135) (81)profit on ordinary activities before taxation 2 053 2 001 1 087Extraordinary incomeExtraordinary charges - - -profit for the period before taxation 2 053 2 001 1 087Income taxes - (14) (33)pROfIT Of THE YEAR 2 053 1 987 1 054

3. ApproprIATIoN ACCoUNT 2010 2011 2012In ‘000 € profit to be appropriated 2 792 2 197 1 264Profit for the year available for appropriation 2 053 1 987 1 054Profit brought forward 739 211 211Drawdowns on capital 4 000 -Drawdowns on reserves 2 857 817Transfers to legal reserve 103 99 53Transfers to other reserves - 2 993 62Result to be carried forward 211 211 -Dividends (1) 5 336 2 895 1 966

(1) Amount determined on the basis of the treasury shares held at 31/12/2012 ; for 2010 and 2011, it is the amount of dividends adjusted to take into account the own shares held at the Ordinary General Meeting.


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 BYName Address of the registered office Country Directly Indirectly

Number % %SA ZETES Rue de Strasbourg 3 - 1130 Evere Belgium 170 827 100

SA ZETES FranceBâtiment Einstein – 17/19 rue Georges Besse- 92160 Antony

France 27 470 100

SA ZETES TECHNOLOGIES Rue de Strasbourg 3 - 1130 Evere Belgium 1 249 49,96 0,04ZTS Lda Alameda Antonio Sergio 7 - 2795023 Linda-A-Velha Portugal 2 100SA BUROTICA Alameda Antonio Sergio 7 - 2795023 Linda-A-Velha Portugal 10 million 50 50SA ZETES FASTRACE Rue de Strasbourg 3 - 1130 Evere Belgium 2 124 34,03 41,9ZETES INTERNATIONAL GmbH Flughafenstraße 52 b, 22335 Hamburg Germany 4 100ZETES SRL Lungobisagno Dalmazia 71/16 - 16141 Genova Italy 10 10 90ZETES INDUSTRIES (Israel) Ltd

1 Hanagar st., Neve Ne'eman B, P.O. Box 7214, Hod Hasharon 45241

Israël 10 70

ZETES HOLDING GmbH Waldstrasse 23 - 63128 Dietzenbach Germany 2 100RFIdea SA Rue des Chasseurs Ardennais, 5 - 4031 Angleur Belgique 3 ns 100ZETES COTE IVOIRE Abidjan, 17BP 319 Abidjan 01 Côte Ivoire 190 10 90

5. STATEMENT Of CApITAL

CApITAL In ‘000€ Number of shares1. Issued capitalAt the end of the preceding period 56 092Changes during this period: -At the end of the period 56 0922. Structure of the capitalRegistered shares, bearer and dematerialised shares 5 389 714Registered 1 338 296Bearer and dematerialised 4 051 418

SHAREHOLDER STRUCTURE BASED ON NOTIfICATION IN DECEMBER 2012

SHArEHoLDErS Number of shares %Zephir 1 277 495 23,70Cobepa 1 329 655 24,67Axa Belgium 199 453 3,70Other nominative shareholders 8 641 0,16Public 2 358 701 43,76Own shares 215 769 4,00Total 5 389 714 100,00


6. AUDITORS

In ‘000€Auditor fees 41Fees 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

0


Statement on Corporate Governance

1. The 2009 Belgian Code on Corporate Governance

This section is based on the rules and the principles which organise 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’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.

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.

Principle 5.2. /17 Internal audit

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.

2. BOARD Of DIRECTORS:

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 2012, 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.

Name and position Term until** professional AddressAlain Wirtz SA, Represented by Mr Alain WirtzChief Executive Officer (CEO)(Nominated by Zephir Corporation)(Executive Director)

2015 Rue de Strasbourg 3 1130 Haren

Jean-françois Jacques SpRLRepresented by Mr Jean-françois Jacques(*)

Chairman of the Board,(Nominated by Zephir Corporation)(Executive Director)

2015 Rue de Strasbourg 31130 Brussels

pierre LambertChief 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

Alexandre Schmitz (resigning)(Nominated by Cobepa)(Director)

31/12/2012 Rue de la Chancellerie 2 1000 Brussels

Hiram Claus (replacing Mr A. Schmitz)(Nominated by Cobepa)(Director)

2015 (***) Rue de la Chancellerie 2 1000 Brussels

Olivier Gernay(Nominated by Zephir Corporation)(Director)

2015 Avenue Brugmann 403 1180 Bruxelles

floris Vansina BVBARepresented by Mr floris Vansina(Director)

2015 Charles Woestelaan 1471090 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 171190 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.(***) To be ratified by the next General Meeting


The Board of Directors noted on 19 December 2012 Mr Alexandre Schmitz’s decision to resign his directorship as from the end of 2012. The Board has co-opted Mr Hiram Claus to replace Mr Schmitz. The Board will propose to the next General Meeting that it ratify the co-opting of Mr Hiram Claus. The Board wishes the thank Mr Alexandre Schmitz most warmly for his commitment towards Zetes over the past 10 years and for his investment in the role of Chairman of the Audit Committee.

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. This firm has audited the Company’s consolidated accounts since 2000. Mr Laurent Van der Linden is 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 in 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 Zetes Industries SA/NV’s corporate objectives and policies;

• 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.

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 2012, the Board of Directors met 7 times. The attendance of individual directors was as follows: all members attended all meetings except for Mr Alexandre Schmitz (10 February 2012), GEMA SPRL, represented by Mr Michel Allé (30 March and 29 August 2012), Mr José-Charles Zurstrassen (21 June and 29 August 2012) and Mr Olivier Gernay (29 August 2012).

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 decision-making 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 authorisation;

• provide reasonable assurance regarding the prevention or timely detection of any unauthorised 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 at 31 December 2012. 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 2012, 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 Jean-François Jacques SA, and the CFO of the company, Mr Pierre Lambert. The Executive Committee does not constitute an 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 decision-making, 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.

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 2012, 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), replacing Mr Alexandre Schmitz, resigning

• Floris Vansina BVBA, represented by Mr Floris Vansina (non-executive director)

• Mr Paul Jacques (independent director)

5.4 Remuneration Committee

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.

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


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 2012, the members of the Remuneration Committee were:

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

• 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 2012

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.

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:

1. fixed components independent of the results,

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

These general principles apply for 2012 and 2013.

6.2. With regard to the market conformity of remuneration

In order to assess objectively the remuneration of the Executive Management, the Remuneration Committee has ordered an "Executive Directors' Remuneration Survey" from PriceWaterhouseCoopers to enable it to position the remuneration packages.

The survey assesses 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.

This report is dated November 2010 and still considered as up-to-date.

6.3. Remuneration of the executive directors:

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.

6.3.1 Principles

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:

Alain Wirtz SA represented by Mr Alain Wirtz

CEO and Managing Director

Jean-François Jacques SPRL represented by Mr Jean-François

Jacques

Chairman of the Board and Managing Director

Pierre Lambert Chief Financial Officer and Director

6.3.3 Remuneration structure

In 2012, 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.

6.3.4 Summary of the total compensation paid in 2012

Remuneration of the CEO

2011 2012

Fixed remuneration € 293,657 € 290,000

Variable remuneration € 150,000 € 50,000

Total € 443,657 € 340,000

Remuneration of the other members of the Executive Management

2011 2012

Fixed remuneration € 381,364 € 448, 196

Variable remuneration € 200,000 € 87,784

Total € 581364 € 535,981

6.3.5 Stock Options and shares

For 2012 there was no remuneration in the form of Stock Options or shares either for the CEO or for the other members of Executive Management.

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, has since 1 July 2012 worked under the mandatory self-employed regime since 1 July 2012. This makes it possible to align his regime with that of the other members of the Executive Committee. 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.

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 2012, the remuneration of non-executive directors broke down as follows:

Board of Directors Audit Committee Total

Jean-Marie Laurent Josi (*) € 9,500 € 9,500

Alexandre Schmitz (*) € 9,000 € 2,500 € 11,500

Floris Vansina BVBA € 9,500 € 2,500 € 12,000

Paul Jacques € 9,500 € 2,500 € 12,000

José-Charles Zurstrassen € 8,500 € 8,500

Olivier Gernay € 9,000 € 9,000

Gema Sprl € 8,500 € 2,500 € 11,000

Hiram Claus

Total € 63,500 € 10,000 € 73,500

(*) Messrs. Jean-Marie Laurent Josi and Alexandre Schmitz 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 2012, Zetes Industries SA/NV held 215,749 own shares, leaving 5,173,945 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 2012, 181,869 warrants remained in circulation.

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 2012, 2,800 warrants remained in circulation.

7.1. Shareholding structure

Based on the notifications received and published up till 31 December 2012, the shareholding structure is as follows:

Without exercise of the warrants

Shareholder number of shares %Zephir (in concert with Cobepa) 1,277,495 23.70%Cobepa (in concert with Zephir) 1,329,655 24.67%Axa Belgium 199,453 3.70%Other registered shareholders 8,641 0.16%Public 2,358,701 43.76%Own shares 215,769 4.00%TOTAL 5,389,714 100%

After exercise of the warrants

Shareholder number of shares %Zephir (in concert with Cobepa) 1,277,495 22.92%Cobepa (in concert with Zephir) 1,329,655 23.85%Axa Belgium 199,453 3.58%Other registered shareholders 8,641 0.16%Employees 184,669 3.31%Public 2,358,701 42.31%Own shares 215,769 3.87%TOTAL 5,574,383 100%

Except for the above mentioned information, as at 31 December 2012 the Company has not received any other notification of any ownership of shares of more than 3% in compliance with the articles of association.


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.

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/corporate-governance).

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 29 May 2013 that it declare a gross ordinary dividend per share of € 0.38. An Extraordinary General Meeting has also been convened to decide on a capital reimbursement of € 0.17 per share. This, together with the dividend, gives a total payment to shareholders of € 0.55 per share, equal to the previous year’s dividend.

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.

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