Supplement to the Prospectus dated 5 February 2013 … · 13,000 Stock Options were also tendered during the Initial Acceptance Period, they could not ... transferred shall be deposited

1 | 7

Supplement to the Prospectus dated 5 February 2013

relating to the voluntary and conditional public takeover bid in cash

possibly followed by a squeeze-out

by

Canon Europa N.V.

for all Shares which are not held by the Bidder (including the Treasury Shares), Warrants and Stock

Options

issued by

Image Recognition Integrated Systems Group SA

Financial adviser to the Bidder

2 | 7

Supplement to the Prospectus dated 5 February 2013 relating to the voluntary and conditional

public takeover bid in cash

possibly followed by a squeeze-out

by

Canon Europa N.V., a limited liability company (naamloze vennootschap) incorporated under

the laws of the Netherlands, having its registered office at Bovenkerkerweg 59, 1185 XB

Amstelveen, the Netherlands, filed with the Commercial Register (Kamer van Koophandel) of

Amsterdam under number 33166721

for all Shares which are not held by the Bidder (including the Treasury Shares), Warrants and

Stock Options issued by

Image Recognition Integrated Systems Group (abbreviated I.R.I.S.), a limited liability

company (société anonyme / naamloze vennootschap) organised under Belgian law, having

its registered office at rue du Bosquet 10, Parc Scientifique de Louvain-la-Neuve, 1435 Mont-

Saint-Guibert, Belgium, filed with the Register of Legal Enterprises (Registre des Personnes

Morales / Rechtspersonenregister) of Nivelles under number 0448.040.624

______________________

This is a supplement (the Supplement) to the prospectus dated 5 February 2013 relating to

the voluntary and conditional public takeover bid in cash possibly followed by a squeeze-out

by Canon Europa N.V. for all Shares which are not held by the Bidder (including the Treasury

Shares), Warrants and Stock Options issued by Image Recognition Integrated Systems

Group SA, as approved by the FSMA (the Prospectus).

The English version of the Prospectus and of this Supplement is a translation of the French

version that was approved by the FSMA on 5 February 2013 and 30 April 2013, respectively.

In case of differences between the French and English versions, the French version will

prevail.

In this Supplement, the terms starting with a capital letter have the meaning that is attributed

to them in the Prospectus.

This Supplement must be read together with the Prospectus. For any information not

contained in this Supplement, reference is made to the Prospectus. Further information on

the availability of the Prospectus can be found in chapter 3.5 below (“Availability of the

Prospectus, Acceptance Forms and the Supplement”).

3 | 7

1. VOLUNTARY REOPENING WITHIN THE FRAMEWORK OF THE BID, SQUEEZE-OUT AND DELISTING

1.1 Voluntary reopening of the Bid

At the closing of the Initial Acceptance Period of the Bid on 20 March 2013, 1,383,447 Shares

were tendered to the Bid. As a result, the Bidder held, at that time, 1,698,237 Shares or

91.05% of the Securities with voting rights in the Target. Although 15,000 Warrants and

13,000 Stock Options were also tendered during the Initial Acceptance Period, they could not

be transferred to the Bidder as these Securities are non-transferrable according to the

relevant Warrant and Stock Option plans.

Following the acquisition by the Bidder of at least 90% of the Shares, and in accordance with

section 35, 1° of the Royal Decree on Takeover Bids, the Bid was automatically reopened on

27 March 2013. At the closing of the mandatory reopening of the Bid on 17 April 2013, an

additional 56,299 Shares were tendered to the Bid.

As a result of both Acceptance Periods, the Bidder acquired 1,439,746 Shares or 92.87% of

the Shares subject to the Bid, and currently holds 1,754,536 Shares or 94.07% of the Shares.

In view of the above, the Bidder has decided, with the FSMA’s approval since the period of

ten weeks starting from the opening of the Initial Acceptance Period as set forth in section 30

of the Royal Decree on Takeover Bids has been reached, to reopen the Bid, under the same

conditions as set forth in the Prospectus, from 7 May 2013 to 30 May 2013 (at 4pm (Brussels

time) at the latest). The results of the reopening will be published on 4 June 2013 and the

Settlement Date will be on 5 June 2013.

1.2 Squeeze-out and compelled purchase

If, at the closing of the voluntary reopening of the Bid on 30 May 2013, the Bidder, any

persons affiliated to it and any persons acting in concert with it, hold at least 95% of the

Shares, and provided that the Bidder acquired at least 90% of the Shares subject to the Bid

(which condition has already been met), the Bidder intends to launch a squeeze-out in

accordance with sections 42 and 43 of the Royal Decree on Takeover Bids and section 513 of

the Companies’ Code, for all Securities with voting rights or giving access to voting rights

which are not yet in its possession following the closing of the voluntary reopening of the Bid.

The reopening within the framework of the squeeze-out shall be at the same terms as those

of the Bid.

The squeeze-out proceedings must be initiated by the Bidder within three months calculated

from the closing of the voluntary reopening of the Bid as set forth under chapter 1.1 above

(“Voluntary reopening of the Bid”), for an additional Acceptance Period of at least 15 Business

Days. The Bid Price relating to the Securities brought to the squeeze-out or transferred within

4 | 7

the context thereof must be paid, at the latest, by the 10th Business Day following the

announcement of the results of such squeeze-out.

If a squeeze-out is effectively carried out, Securities with voting rights or giving access to

voting rights not offered upon expiry of the additional Acceptance Period of the reopened Bid

shall be deemed transferred to the Bidder by operation of law. The funds corresponding to

the Bid Price for the Securities with voting rights or giving access to voting rights thus

transferred shall be deposited with the Deposit and Consignation Office (Caisse des Dépôts

et Consignations / Deposito- en Consignatiekas) in favour of the former holders of the

relevant Securities with voting rights or giving access to voting rights. When a squeeze-out

process is launched, the Shares are automatically delisted from the NYSE/Euronext Brussels

following the closing of the squeeze-out.

Similarly, pursuant to section 44 of the Royal Decree on Takeover Bids, if the Bidder, any

persons affiliated to it and any persons acting in concert with it, hold, following the closing of

the voluntary reopening of the Bid on 30 May 2013, at least 95% of the Shares, and provided

that the Bidder acquired at least 90% of the Shares subject to the Bid (which condition has

already been met) and that the Bidder does not launch a subsequent squeeze-out pursuant to

sections 42 and 43 of the Royal Decree on Takeover Bids, any holders of Securities with

voting rights or giving access to voting rights may compel the Bidder to buy, under the

conditions of the Bid, the Securities with voting rights or giving access to voting rights they

own. Any request to this effect must be sent to the Bidder’s headquarters by registered letter

with acknowledgement of receipt within three months of the end of the relevant Acceptance

Period.

1.3 Application for delisting

Even if the conditions for a squeeze-out would not be satisfied, the Bidder reserves the right

to apply for a delisting of the Shares pursuant to section 7, §4 of the Law of 2 August 2002.

Such delisting will only become effective if it is approved by NYSE Euronext Brussels and if,

after analysis, the FSMA does not oppose to it.

If the Bidder files a request for delisting from NYSE Euronext Brussels within three months

following the closing of the voluntary reopening of the Bid as set forth under chapter 1.1

above (“Voluntary reopening of the Bid”), and if, at that moment, the squeeze-out set forth

under chapter 1.2 above (“Squeeze-out and compelled purchase”) has not been launched,

the Bidder must reopen the Bid within 10 Business Days following such request, for a period

of at least 5 Business Days and maximum 15 Business Days, in accordance with section 35,

2° of the Royal Decree on Takeover Bids.

Should the Shares be delisted, the remaining Security Holders not having tendered their

Securities in the Bid reopened in the framework of the delisting, would hold illiquid financial

instruments.

5 | 7

2. FINANCIAL INFORMATION ON THE TARGET – FY2012 RESULTS

The press release issued by the Target on 21 March 2013 on the financial year 2012 results

of the Target is attached as annex 4.1. The annual financial statements of the Target are

expected to be approved on the occasion of the annual shareholders’ meeting of the Target to

be held on 21 May 2013.

The annual report 2012 of the Target, as established by the Board and published on 30 April

2013, is attached as annex 4.2.

The entire Target’s financial information is available in English and in French on the website

of the Target on http://www.iriscorporate.com/c2-47-17/I-R-I-S---Investors.aspx

3. RELEVANT INFORMATION WITHIN THE CONTEXT OF THE BID

3.1 Receiving and Paying Agent

ING Belgium SA/NV, a limited liability company (société anonyme / naamloze vennootschap)

organised under Belgian law, having its registered office at avenue Marnixlaan 24, 1000

Bruxelles, Belgium, filed with the Register of Legal Enterprises (Registre des Personnes

Morales / Rechtspersonenregister) of Brussels under number 0403.200.393, licensed as a

credit institution by the National Bank of Belgium, boulevard du Berlaimont-laan 14, 1000

Brussels, will provide the services of Receiving and Paying Agent for the purposes of the Bid.

3.2 Acceptance Forms and costs

Acceptance of the Bid may be done free of charge through the Receiving and Paying Agent

by submitting the Acceptance Form, duly completed and signed. Any expenses possibly

charged by other financial intermediaries will be for the account of the Security Holders

tendering their Securities, and will not be paid by the Bidder.

3.3 Approval of the Prospectus and of this Supplement by the FSMA

In accordance with section 19 of the Law on Takeover Bids, the French version of this

Prospectus has been approved by the FSMA on 5 February 2013.

The French version of this Supplement has been approved by the FSMA on 30 April 2013.

With the exception of the FSMA, no other authority in Belgium or in any other jurisdiction has

approved this Supplement.

These approvals by the FSMA do not imply any appraisal or assessment of the

appropriateness or the quality of the Bid, nor of the position of the Bidder or the Target.

6 | 7

3.4 Persons responsible for the Prospectus and this Supplement

The Bidder, represented by its board of directors, is responsible for the entire Prospectus and

this Supplement as well as the translations provided, except the Memorandum in Reply

(which includes the response from the Target’s works council).

It is specified, however, that the financial information of the Target was provided by the Target.

3.5 Availability of the Prospectus, Acceptance Forms and the Supplement

The Prospectus (including the Acceptance Form) and this Supplement are available in

English on the website of ING Belgium SA/NV on

http://www.ing.be/en/retail/investments/shares-and-

bonds/Pages/shares.aspx?WT.xmenusource=LEFTNAVIGATION_Actions. Only the French

versions of the Prospectus and the Supplement have been approved by the FSMA.

The Prospectus and this Supplement are also available in French on the website of ING

Belgium SA/NV on www.ing.be/fr/retail/investments/shares-and-

bonds/Pages/shares.aspx?WT.xmenusource=LEFTNAVIGATION_Actions.

They are also available in English and in French on the website of the Target on

http://www.iriscorporate.com/c2-151-17/Prospectus.aspx.

Further, the summary of the Prospectus is also available in Dutch on the website of ING

Belgium SA/NV on: https://www.ing.be/nl/retail/investments/shares-and-

bonds/Pages/shares.aspx?WT.xmenusource=LANGUAGE_NL.

The Prospectus and this Supplement can also be sent without charge upon request by

telephone from ING Belgium SA/NV at +32 2 464 60 02 (French) or at +32 2 464 60 04

(English).

3.6 Governing law and jurisdiction

The Bid is governed by Belgian law, in particular by the Law on Takeover Bids and the Royal

Decree on Takeover Bids.

Any litigation relating to the Bid, to the Prospectus or to this Supplement shall be subject to

the exclusive competence of the relevant courts of Brussels.

7 | 7

4. ANNEXES

4.1 Press release issued by the Target on 21 March 2013 on the financial year 2012 results of the Target

4.2 Annual report 2012 of the Target

Annex 4.1: Press release issued by the Target on 21 March 2013 on the financial year 2012 results of the Target

IMAGE RECOGNITION INTEGRATED SYSTEMS GROUP S.A. (Abbreviated as I.R.I.S. Group) Regulated information

FY2012 results Louvain-la-Neuve, March 21, 2013 I.R.I.S. Group SA, a technology company (listed on EURONEXT Brussels: IRI), specializing in Intelligent Document Recognition (IDR), Enterprise Content Management (ECM) and Optimized IT Infrastructure (ICT) releases its annual results for 2012. • Stable results Denis Hermesse, CFO, comments the annual results: “The FY2012 gross margin (the most appropriate business performance indicator) is € 61.6 million, stable compared to 2011 (61.2 million). Some growth initiatives have been successful for example (i) our partner business with Value Added Resellers (VAR) and Business Process Outsourcers (BPO) (up 12% Year on Year); (ii) our business with Canon (up 15% Year on Year) and (iii) a positive development of the sales of corporate solutions in the USA. These successes have offset some negative trends in other markets such as the hardware sales that impacted the consolidated revenue. The consolidated EBITDA for FY2012 is € 7.6 million and the EBIT € 4.8 million (impacted by unbudgeted and one-off legal costs of € 0.4 million including the costs related to the Canon tender offer). After financial results and taxes, the net result for the Group is € 3.6 million, compared to 3.7 million in 2011. The average monthly net cash position (being the cash available less the short term financial debts) was € 12.5 million in 2012 compared to 9.8 million in 2011. ” • Investment in technology

Dr. Pierre De Muelenaere, President & CEO comments: “The technological world is changing fast. Our goal is to offer a strong portfolio of innovative solutions and complementary services that also cover mobile platforms and cloud solutions, in a lot of different areas (OCR, Invoices, Mailroom, Business Process Optimization, Managed Operations, etc.). These solutions generate significant business benefits for our partners and clients, including in vertical markets where we have developed some unique expertise (for example in the healthcare or legal business). I.R.I.S.' objective remains to increase significantly its international footprint in the coming years. This requires continuous investment to support our growth opportunities. We have therefore budgeted sustained investments in operating expenses for 2013 and plan on some moderate EBIT increase as the economic background remains very unstable.” During 2012, I.R.I.S. maintained significant investment in its core assets: technologies and Intellectual Property (Document Capture technologies for the consumer and professional markets, the Document Management solutions, the Datacenter Monitoring solution and the Cloud Solutions). Those assets have been accumulated over the last 25 years and they give the company a good competitive advantage.

• Successful IRISLink 2013 and products launch In February 2013, I.R.I.S. held its annual event the IRISLink 2013 and hosted more than 900 attendants in the city of Louvain-La-Neuve. At that occasion, I.R.I.S. unveiled a record number of new products and new solutions (Each year, I.R.I.S. invest approximately 10% of its Gross margin in R&D). These new solutions will contribute to the business development of I.R.I.S. in 2013. IRISLink 2013 videos, pictures and other useful information on the event are available on www.iriscorporate.com/irislink2013.

Auditor’s report The company auditors confirm that they have completed the key elements of their audit of the consolidated accounts and that this audit has not yielded any material corrections that are required to be made to the financial information included in this press release. IFRS accounting standards All the figures have been established in accordance with IFRS. These figures are a summary of the detailed financial results as presented in the annual report to be released at mid of April 2013.

Financial calendar and financial information Annual General Meeting: 21 May 2013 at 9 a.m. Annual report: last week of April 2013 About I.R.I.S. - www.iriscorporate.com

I.R.I.S.’ mission is to increase our customers’ productivity and knowledge through helping them better manage their documents, data and information. I.R.I.S. Products & Technologies develops technologies and products for Intelligent Document Recognition and markets its portfolio on a worldwide basis through strong partnerships. I.R.I.S. Professional Solutions enables companies and administrations to find in one company the innovative expertise and hi-tech solutions to efficiently manage documents, information flows and IT infrastructure. I.R.I.S. has more than 500 employees based in Louvain-la-Neuve, Vilvoorde and Brasschaat (Belgium), Orly (France), Windhof (Luxemburg), Amstelveen and Meerssen (The Netherlands), Aachen (Germany), Delray Beach (USA), Hong-Kong (China) and Oslo (Norway). Contact: Denis Hermesse, CFO -Tel: +32 (0) 10 487 460 -E-mail: [email protected] IMAGE RECOGNITION INTEGRATED SYSTEMS GROUP S.A. Rue du Bosquet 10 – Parc Scientifique de Louvain-la-Neuve – B 1435 Mont Saint-Guibert Forward Looking Statements This press release contains forward-looking statements with respect to the business, financial condition, and results of operations of I.R.I.S. and its affiliates. These statements are based on the current expectations or beliefs of I.R.I.S.'s management and are subject to a number of risks and uncertainties that could cause actual results or performance of the Company to differ materially from those contemplated in such forward looking statements. These risks and uncertainties relate to changes in technology and market requirements, the company’s concentration on one industry, decline in demand for the company’s products and solutions, inability to timely develop and introduce new technologies, products and applications, and loss of market share and pressure on pricing resulting from competition which could cause the actual results or performance of the company to differ materially from those contemplated in such forward-looking statements. I.R.I.S. undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

http://www.iriscorporate.com/irislink2013

http://www.iriscorporate.com/

mailto:[email protected]

IFRS CONSOLIDATED KEY FIGURES (in EUR)

INCOME STATEMENT 31-12-2012 31-12-2011 31-12-2010Income from ordinary activities 99.986.088 121.292.320 119.488.557WIP, Self-constuct capital assets and Other operating income 3.816.342 4.950.158 3.155.780Operating income 103.802.430 126.242.478 122.644.337Gross margin 61.619.620 61.225.970 59.519.669Cash flow from operations (EBITDA) 7.602.226 7.178.393 7.239.224Income from operations (EBIT) 4.830.632 5.081.588 5.302.458Net financial income -11.468 -171.560 -188.313Profit before tax 4.819.164 4.910.028 5.114.145Taxes -1.190.435 -1.166.331 -1.035.115Profit for the period 3.628.729 3.743.697 4.079.030Group share in the Result 3.628.729 3.743.697 4.079.030

CONSOLIDATED BALANCE SHEET 31-12-2012 31-12-2011 31-12-2010

Share capital 38.774.902 38.774.902 38.774.902Shareholders’ equity 65.099.754 63.487.122 60.771.415Cash and cash equivalent 20.861.001 14.815.520 11.013.064Net cash position* 19.384.182 13.219.871 9.342.269

Non-current borrowings 1.239.730 2.637.229 4.281.051Balance sheet total 112.287.098 114.747.731 127.943.435

Basic earnings per share 31-12-2012 31-12-2011 31-12-2010

Weighted average number of outstanding shares during the period 1.824.747 1.843.661 1.841.064Cash flow from operations (EBITDA)/share 4,17 3,89 3,93Income from operations (EBIT)/share 2,65 2,76 2,88Profit for the period/share 1,99 2,03 2,22Capital/share 21,25 21,03 21,06Shareholders’ equity/share 35,68 34,44 33,01

Diluted earnings per share 31-12-2012 31-12-2011 31-12-2010

Weighted average number of outstanding shares during the period 1.824.747 1.843.661 1.841.064Weighted average number of outstanding dilutive warrants during the year 71.492 4.164 6.585Number of shares after dilution 1.896.239 1.847.825 1.847.648Cash flow from operations (EBITDA)/share 4,01 3,88 3,92Income from operations (EBIT)/share 2,55 2,75 2,87Profit for the period/share 1,91 2,03 2,21* Net cash position = cash and cash equivalents less short-term borrowings

Consolidated income statement (€) 31-12-2012 31-12-2011 31-12-2010

Operating revenues 103.802.430 126.242.478 122.644.337Revenue from ordinary operating activities 99.986.088 121.292.320 119.488.557Fixed assets - own constrution 1.817.771 3.140.921 776.785Other operating income 1.998.571 1.809.237 2.378.995Operating charges (98.971.798) (121.160.890) (117.341.879)Goods for resale, raw materials and consumables (38.366.468) (60.066.350) (59.968.888) Purchase (37.920.325) (60.275.814) (58.771.001) Inventory variations (446.143) 209.464 (1.197.887)Services and other goods (22.363.407) (21.306.200) (18.478.411)Personnel costs (35.217.378) (37.073.682) (36.200.660)Depreciation and amortization (2.771.594) (2.096.805) (1.936.766)Allowance for doubtful accounts and inventory write off 389.306 (442.688) (419.912)

Provisions (147.489) 275.817 121.978Other operating charges (494.768) (450.982) (459.220)Operating result 4.830.632 5.081.588 5.302.458Financial income 397.852 684.004 625.784Income from financial fixed assets 30.352 18.456 9.180Income from current assets 76.925 37.771 56.799Other financial income 290.575 627.777 559.805Financial charges (409.320) (855.564) (814.097)Interests on financial debts (127.498) (190.380) (255.893)Other financial charges (281.822) (665.184) (558.204)Net financial income (expense) (11.468) (171.560) (188.313)Result of operating activities after net finance costs 4.819.164 4.910.028 5.114.145Taxes (1.190.435) (1.166.331) (1.035.115)Deferred Taxes 105.687 1.038.210 566.384Deferred tax income 554.564 1.333.906 757.843Deferred Tax expense (448.877) (295.696) (191.459)Corporate income tax (1.296.122) (2.204.541) (1.601.499)Taxes (1.297.331) (2.253.189) (1.639.773)Tax adjustment 1.209 48.648 38.274Profit for the period 3.628.729 3.743.697 4.079.030Share of after-tax profit or loss of associates and joint ventures accounted for using the equity method

- - -

Consolidated profit 3.628.729 3.743.697 4.079.030Minority interest - - - Share of the group 3.628.729 3.743.697 4.079.030

Basic earning per share in EUR 31-12-2012 31-12-2011 31-12-2010Weighted average number of outstanding shares 1.824.747 1.843.661 1.841.064Operating result (EBIT) per share 2,65 € 2,76 € 2,88 € Net profit for the period/share 1,99 € 2,03 € 2,22 €

Diluted earning per share in EUR 31-12-2012 31-12-2011 31-12-2010Weighted average number of outstanding shares 1.824.747 1.843.661 1.841.064Weighted average number of outstanding dilutive warrants 71.492 4.164 6.585Number of shares after dilution 1.896.239 1.847.825 1.847.648Operating result (EBIT) per share 2,55 € 2,75 € 2,87 € Net profit for the period/share 1,91 € 2,03 € 2,21 €

Comprehensive income 31-12-2012 31-12-2011 31-12-2010Net profit for the period/share 3.628.729 3.743.697 4.079.030Foreign exchange gains & losses (61.324) 49.852 34.834Comprehensive income 3.567.405 3.793.549 4.113.864Share of the group 3.567.405 3.793.549 4.113.864

1 | 1

Annex 4.2: Annual report 2012 of the Target

1

Annual report 2012 – part 2 - English 6/05/13

© 2012 I.R.I.S. – all rights reserved for all countries page 1 / 99

2



IFRS CONSOLIDATED KEY FIGURES (in EUR)

INCOME STATEMENT 31/12/2012 31/12/2011 31/12/2010

Income from ordinary activities 99,986,088 121,292,320 119,488,557

WIP, Self-constuct capital assets and Other operating income 3,816,342 4,950,158 3,155,780

Operating income 103,802,430 126,242,478 122,644,337

Gross margin 61,619,620 61,225,970 59,519,669

Cash flow from operations (EBITDA) 7,602,226 7,178,393 7,239,224

Income from operations (EBIT) 4,830,632 5,081,588 5,302,458

Net financial income -11,468 -171,560 -188,313

Profit before tax 4,819,164 4,910,028 5,114,145

Taxes -1,190,435 -1,166,331 -1,035,115

Profit for the period 3,628,729 3,743,697 4,079,030

Group share in the Result 3,628,729 3,743,697 4,079,030

CONSOLIDATED BALANCE SHEET 31/12/2012 31/12/2011 31/12/2010

Share capital 38,774,902 38,774,902 38,774,902

Shareholders’ equity 65,099,754 63,487,122 60,771,415

Cash and cash equivalent 20,861,001 14,815,520 11,013,064

Net cash position* 19,384,182 13,219,871 9,342,269

Non-current borrowings 1,239,730 2,637,229 4,281,051

Balance sheet total 112,287,098 114,747,731 127,943,435

Basic earnings per share 31/12/2012 31/12/2011 31/12/2010

Weighted average number of outstanding shares during the

period 1,824,747 1,843,661 1,841,064

Cash flow from operations (EBITDA)/share 4.17 3.89 3.93

Income from operations (EBIT)/share 2.65 2.76 2.88

Profit for the period/share 1.99 2.03 2.22

Capital/share 21.25 21.03 21.06

Shareholders’ equity/share 35.68 34.44 33.01

Diluted earnings per share 31/12/2012 31/12/2011 31/12/2010

Weighted average number of outstanding shares during the

period 1,824,747 1,843,661 1,841,064

Weighted average number of outstanding dilutive warrants

during the year 71,492 4,164 6,585

Number of shares after dilution 1,896,239 1,847,825 1,847,648

Cash flow from operations (EBITDA)/share 4.01 3.88 3.92

Income from operations (EBIT)/share 2.55 2.75 2.87


* Net cash position = cash and cash equivalents less short-term borrowings

3



Table of Contents

OUR ACTIVITIES ........................................................................................................................................................................................................................................ 4

I.R.I.S. PRODUCTS & TECHNOLOGIES ...................................................................................................................................................................................................................................... 4 I.R.I.S. PROFESSIONAL SOLUTIONS ........................................................................................................................................................................................................................................... 4

MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FINANCIAL YEAR TO 31/12/2012 ................................................................................................... 5

BUSINESS ACTIVITIES IN 2012 ..................................................................................................................................................................................................................................................... 5 RESEARCH AND DEVELOPMENT ................................................................................................................................................................................................................................................ 7 HEADCOUNT ................................................................................................................................................................................................................................................................................ 9 IMPORTANT EVENTS IN 2012 ...................................................................................................................................................................................................................................................... 9 STATUTORY FINANCIAL STATEMENTS AT 31/12/2012 ........................................................................................................................................................................................................... 9 CONSOLIDATED FINANCIAL STATEMENTS AT 31/12/2012 .................................................................................................................................................................................................. 10 SIGNIFICANT EVENTS AFTER THE END OF THE FINANCIAL YEAR ....................................................................................................................................................................................... 11 OUTLOOK FOR 2013 AND DESCRIPTION OF EVENTS LIKELY TO HAVE A SIGNIFICANT INFLUENCE ON THE DEVELOPMENT OF THE COMPANY ................................................... 12 PURCHASE OF OWN SHARES ...................................................................................................................................................................................................................................................... 13 ELEMENTS LIKELY TO HAVE AN IMPACT IN THE EVENT OF A TAKEOVER BID .................................................................................................................................................................. 14 AUTHORIZED USE OF SHARE CAPITAL ..................................................................................................................................................................................................................................... 15 FOREIGN BRANCHES .................................................................................................................................................................................................................................................................. 15 PROPOSED DIVIDEND PAYMENT.............................................................................................................................................................................................................................................. 15 CORPORATE GOVERNANCE DECLARATION ............................................................................................................................................................................................................................ 16 ANALYSIS AND MANAGEMENT OF RISKS AND UNCERTAINTIES ........................................................................................................................................................................................... 17 DESCRIPTION OF THE PRINCIPAL CHARACTERISTICS OF THE COMPANY'S INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS WITHIN THE PROCESSES USED TO PREPARE

FINANCIAL INFORMATION ........................................................................................................................................................................................................................................................ 19 SHAREHOLDER STRUCTURE TABLE AS PRODUCED FROM THE TRANSPARENCY DECLARATIONS SENT TO THE COMPANY .......................................................................................... 20 COMPOSITION AND PROCEDURES OF THE EXECUTIVE BODIES AND THEIR COMMITTEES; CHARACTERISTICS OF THE PROCESS FOR THE APPRAISAL OF THE BOARD OF

DIRECTORS, ITS COMMITTEES AND ITS INDIVIDUAL DIRECTORS. ....................................................................................................................................................................................... 22 CONFLICTS OF INTEREST BETWEEN THE DIRECTORS AND THE COMPANY ........................................................................................................................................................................ 23 INDEPENDENCE AND COMPETENCE OF THE MEMBERS OF THE AUDIT COMMITTEE ...................................................................................................................................................... 23 REMUNERATION REPORT ......................................................................................................................................................................................................................................................... 23 REMUNERATION OF THE AUDITOR ......................................................................................................................................................................................................................................... 25 DISCHARGE GRANTED TO THE DIRECTORS AND TO THE STATUTORY AUDITOR .............................................................................................................................................................. 25

GOVERNANCE ......................................................................................................................................................................................................................................... 26

STOCK EXCHANGE LISTING ................................................................................................................................................................................................................ 30

UNITED NATIONS GLOBAL COMPACT ............................................................................................................................................................................................. 30

I.R.I.S. GROUP - CONSOLIDATED FINANCIAL STATEMENTS 2012 .............................................................................................................................................31

IFRS INCOME STATEMENT ....................................................................................................................................................................................................................................................... 31 CONSOLIDATED BALANCE SHEET ........................................................................................................................................................................................................................................... 32 CASH FLOW STATEMENT ........................................................................................................................................................................................................................................................... 34 CHANGES IN SHAREHOLDERS’ EQUITY ................................................................................................................................................................................................................................... 35

COMMENTS AND NOTES TO THE FINANCIAL STATEMENTS .................................................................................................................................................. 36

INFORMATION ABOUT THE COMPANY .................................................................................................................................................................................................................................... 36 DECLARATION OF COMPLIANCE .............................................................................................................................................................................................................................................. 36 USE OF ESTIMATES ..................................................................................................................................................................................................................................................................... 37 ACCOUNTING PRINCIPLES AND VALUATION RULES .............................................................................................................................................................................................................. 38

Basis for preparing the consolidated accounts ............................................................................................................................................................................................................................... 38 Accounting choices made ............................................................................................................................................................................................................................................................ 38 Consolidation method application criteria ................................................................................................................................................................................................................................... 39 Valuation rules ........................................................................................................................................................................................................................................................................ 39 Revenue recognition ................................................................................................................................................................................................................................................................... 42

SEGMENT REPORTING ............................................................................................................................................................................................................................................................... 46 Business segment reporting ......................................................................................................................................................................................................................................................... 46 Geographic zone reporting.......................................................................................................................................................................................................................................................... 51 Information concerning the principal customers ............................................................................................................................................................................................................................ 52

NOTES TO FINANCIAL STATEMENTS ........................................................................................................................................................................................................................................ 52 OFF-BALANCE SHEET COMMITMENTS ..................................................................................................................................................................................................................................... 87 STRUCTURE OF THE GROUP AND INFORMATION ABOUT RELATED PARTIES ..................................................................................................................................................................... 89

Organisation at 31 December – Relations between Group companies .......................................................................................................................................................................................... 89 Jointly controlled activities – Temporary partnerships (joint venture)............................................................................................................................................................................................. 90 Transactions with other related parties ....................................................................................................................................................................................................................................... 91 Remuneration of the main managers of the Group....................................................................................................................................................................................................................... 91

POST-BALANCE SHEET EVENTS ................................................................................................................................................................................................................................................ 93 Unconditional public takeover bid by Canon .............................................................................................................................................................................................................................. 93 Obligatory reopening and squeeze-out ......................................................................................................................................................................................................................................... 93

REPORT BY THE AUDITOR TO THE GENERAL MEETING OF SHAREHOLDERS OF IMAGE RECOGNITION INTEGRATED SYSTEMS GROUP SA ON THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 ......................................................................................................................................................... 94

UNQUALIFIED OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS ................................................................................................................ 94

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS ........................................................................................................................................ 95

LIÈGE, 16 APRIL 2013 ................................................................................................................................................................................................................................ 95

NON-CONSOLIDATED FINANCIAL STATEMENTS OF I.R.I.S. GROUP SA ................................................................................................................................ 96

GLOSSARY .................................................................................................................................................................................................................................................. 98

CONTACTS ................................................................................................................................................................................................................................................ 99

FINANCIAL CALENDAR AND FINANCIAL INFORMATION ......................................................................................................................................................... 99

RESPONSIBLE PUBLISHERS................................................................................................................................................................................................................. 99

4



Our activities Increase the productivity and knowledge of our clients by helping them better manage their documents, data and

information.

I.R.I.S. Products & Technologies

I.R.I.S. Products & Technologies develops Intelligent Document Recognition technologies and software packages and

markets its portfolio of products around the world through strong partnerships.

Thanks to continuous investment in R&D, for over twenty years I.R.I.S. has been developing highly innovative software

packages, for both personal and business users, all of which are based on proven proprietary technologies:

High-speed scanning

• Automatic document indexing

• Optical Character Recognition (OCR) for printed characters, and Intelligent Character Recognition (ICR) for

handwritten characters

• Intelligent Document Recognition (IDR)

• Recognition of forms and free-forms

• Automatic invoice recognition

• Automatic document classification

• Intelligent High-Quality Compression (iHQC™) of colour images

• Generation of all types of document (PDF, PDF/A-1b, Word, Excel, XPS, .DOCX, ODT, XML, etc.)

• Mobile scanning devices: pen scanners, business card scanners, portable scanners, etc.

I.R.I.S. Products & Technologies markets software solutions throughout the world by means of OEM licence

agreements, via value-added resellers (VARs), IT distribution and via Internet sales channels.

I.R.I.S. Professional Solutions

I.R.I.S. Professional Solutions enables companies and public authorities to find innovative expertise and high-tech

solutions for the efficient management of documents, information flows and IT infrastructures, through a single

company.

I.R.I.S. provides professional solutions for managing electronic documents, their content and their life cycle, for the

public sector (European institutions, ministries, regional and local authorities), financial sector (banks and insurance

companies), tertiary sector, associations (especially international professional associations) and industry. These solutions

include hardware (scanners and servers), specialized software and services (technical architecture, functional analysis,

development, installation, training, support and maintenance).

I.R.I.S. is a preferred partner in all of its domestic markets (France, Belgium, Luxembourg, the Netherlands, Norway

and Denmark) and in major international invitations to tender, thanks to the experience of its consultants, developers,

archivists, project leaders and system engineers.

I.R.I.S. is also the leading provider of services, hardware and software to deploy and optimise complex IT infrastructures within the Belgian, Luxembourg and French markets. Customers aim to implement an infrastructure consisting of a mainframe and open systems and applications that has been optimized to meet their requirements.

5



Management discussion and analysis for the financia l year to 31/12/2012 Report on the statutory and consolidated financial statements Ladies and Gentlemen, Dear Shareholders,

The Board of Directors of I.R.I.S. Group is pleased to issue its management report for the financial year ended 31 December 2012.

The Board of Directors declares that to the best of its knowledge, the consolidated financial statements for the year ended 31 December 2012 give a true and fair view of the Group’s financial position, results and cash flows (and those of all companies within the consolidation scope) for the year then ended, in accordance with International Financial Reporting Standards, as adopted in the European Union, and the laws and regulations applicable in Belgium. The present management discussion and analysis offers a faithful account of the financial year and the information it contains is true in all its key aspects, and there are no omissions likely to alter its significance.

Business activities in 2012

All the figures have been established in accordance with IFRS. The comparative figures for 2010 and 2011 are available in our annual report and on our website: http://www.iriscorporate.com. I.R.I.S. Group SA is a technology company specializing in intelligent document recognition (IDR), enterprise content management (ECM) and optimized IT infrastructures (ICT).

The mission of I.R.I.S. is to provide solutions that increase the business efficiency of our clients through better management of their electronic documents, data and information.

I.R.I.S. Products & Technologies develops Intelligent Document Recognition technologies and products and markets its portfolio of products around the world through strong partnerships. I.R.I.S. Professional Solutions enables companies and public authorities to find innovative expertise and high-tech solutions for the efficient management of documents, information flows and IT infrastructures, through a single company. Gross margin (which is the most relevant indicator for the measurement of I.R.I.S. activity) was €61.6 million for 2012. It remained stable when compared to the 2011 figure of €61.2 million. Some of our growth initiatives proved successful, for example:

(i) our partnerships with value added resellers (VAR) and business process outsourcers (BPO) (up by +12% over the year)

(ii) our business with Canon (up by +15% over the year) (iii) and positive growth in sales of enterprise solutions in the USA.

These successes have compensated for some negative trends in other markets such as hardware sales, which have affected the consolidated sales figure. The consolidated cash-flow from operations (EBITDA) for 2012 was €7.6 million and EBIT was €4.8 million (impacted by unbudgeted, non-recurring legal costs of €0.4 million including costs associated with the Canon takeover bid). The Group net result after financial income and financial expenses is €3.6 million, compared with €3.7 million in 2011. The average net cash position after deducting short-term debts is €12.5 million in 2012 compared with 9.8 million in 2011.

6



The world is experiencing enormous technological change. The objective of I.R.I.S. is to offer a robust portfolio of innovative solutions and associated services covering both mobile platforms and cloud solutions in a range of different fields (OCR, invoicing, mail, business process optimization, IT facilities management, etc.). These solutions provide significant benefits to our partners and clients, including those who operate in the vertical markets in which we have developed unique expertise such as the health sector and solutions for legal firms. The objective of I.R.I.S. is to significantly increase its global presence in future. This requires continual investment to support our opportunities for growth. We have, therefore, included continued investment within the operating expenses budget for 2013 and are planning a moderately increased EBIT given that the economic climate remains very uncertain. In 2012, I.R.I.S. continued to make major investment in its main assets: technologies and intellectual property (document capture technologies for both the personal and business markets, document management solutions, data centre monitoring solutions and Cloud solutions). These assets have accumulated over the last 25 years and place the company in a good competitive position. I.R.I.S. management is therefore confident about the company's future. 2012 financial year figures for sales and gross margin

In the 2012 financial year, income from ordinary activities was €99,986,088 compared with €121,292,320 in 2011. Operating income totalled €103,802,430 in 2012 compared with €126,242,478 in 2011. The fall is due to poorer hardware sales with a low profit margin. Gross margin (which is the most relevant indicator for the measurement of I.R.I.S. activity) was stable (up +0.64%) when compared to 2011 (€61.6 million for 2012 and €61.2 million in 2011).

This results in a gross margin percentage of 61.6% in 2012 compared with 50.5% in 2011 and 49.8% in 2010.

The portion of the gross margin generated by the sale of software packages (Products & Technologies division) was 27.9%, compared with 72.1% generated by the Professional Solutions division.

7



Changes in turnover and the Gross Margin €'000 Turnover from external customers 2008 2009 2010 2011 2012 Variation Products & Technologies 16,531 18,325 16,940 20,380 21,660 6.28%

Professional Solutions 92,794 84,569 102,549 100,912 78,326 -22.38%

I.R.I.S. 109,326 102,894 119,489 121,292 99,986 -17.57% €'000 Gross margin 2008 2009 2010 2011 2012 Variation Products & Technologies 14,315 15,236 13,766 16,589 17,217 3.78%

Professional Solutions 44,069 44,108 45,753 44,637 44,403 -0.52%

I.R.I.S. 58,384 59,344 59,520 61,226 61,620 0.64% The gross margin fell slightly for professional solutions: €44,402,833 in 2012 compared with €44,636,735 in 2011 (down -0.52%). In 2012, the gross margin - which is extremely dependent on the mix between software, hardware and services - was 56.7%.

The gross margin for packaged products and technologies totalled €17,216,787 at the end of 2012, compared with €16,589,235 at the end of 2011 (up by +3.78%). The gross margin rate was 79.5% in 2012.

The consolidated cash-flow from operations (EBITDA) for 2012 was up by +5.90% at €7,602,226 compared with €7,178,393 in 2011 and EBIT was €4,830,632 at year-end 2012 (impacted by unbudgeted, non-recurring legal costs of €0.4 million including costs associated with the Canon takeover bid), compared with €5,081,588 at year-end 2011. After deducting amortization and depreciation of €2,771,594, net financial expenses of €11,468 and tax of €1,190,435, the net profit was €3,628,729 compared to €3,743,697 the previous year. Cash position: I.R.I.S. continues to have a strong financial position. Shareholders' equity was up at €65,099,754 (€63,487,122 in 2011). The average net cash position after deducting short-term debts is €12.5 million in 2012 compared with €9.8 million in 2011. I.R.I.S. has undrawn credit lines of €8,000,000, with irrevocable lines totalling €6,500,000.

I.R.I.S. Group has long-term loans totalling €2,100,000. These loans were taken out in early 2009 for an initial total amount of €7,000,000 for a period of 5 years at a fixed interest rate and without new guarantees, in order to finance certain investments (including the acquisition of Corismo), and to increase the cash reserves available by taking advantage of a period of low interest rates. The other long-term borrowings consist of existing investment loans taken out to finance the purchase of the Louvain-la-Neuve and Vilvoorde buildings or finance office alterations or various equipment.

The group invested €3,388,670 in tangible and intangible assets in 2012, (€4,475,243 in 2011 and €2,046,131 in 2010), in particular for developing products and technologies, the acquisition of a business and a team of twenty consultants with a view to expansion of business with the European Union Institutions. These investments enable I.R.I.S. to pursue its growth.

Research and development

I.R.I.S. is first and foremost a technological group. A considerable proportion of its resources is dedicated to strengthening its technological assets, and proprietary software is a cornerstone of its business.

8



I.R.I.S. only capitalises R&D expenses related to the development of new products. Sums invested in developing upgrades are recognised as expenses for the financial year. In the last few years I.R.I.S. S.A. has greatly increased its presence in the mobile document capture applications segment. In 2009, I.R.I.S. commenced a 3-year development programme to extend its offer to mobile platforms such as Smartphones and tablet PCs. In 2010, I.R.I.S. also launched a project to design and develop a new electronic document management solution for business, based on breakthrough technologies. This solution is primarily targeted at the small to medium-sized business market and departmental requirements of major accounts. This project is based on the technologies developed by I.R.I.S. and its experience in integrating solutions currently offered by the major software publishers. It is aimed at innovative areas that have not yet been addressed, with an eye on the market's future development and meeting the needs of businesses. In 2011, with a view to significantly increasing its penetration of Asian markets, I.R.I.S. launched a project to develop the necessary technologies to provide a decisive competitive advantage in these markets in which their written languages are quite different to those used in Western markets. In 2011 I.R.I.S. developed some new applications to improve the performance, management, monitoring and reporting features of its data centre monitoring solutions and Cloud computing solutions. I.R.I.S continued these development activities in 2012. In addition, the R&D activities carried out concerned the development and enhancement of numerous products with a lifetime of less than one year, and recognised as expenses during the financial year (development of annual product upgrades). In 2012, I.R.I.S. continued to make massive investment in its main assets which are technologies and intellectual property. Thanks to the assets built up by I.R.I.S. over the last 25 years, the company is in a strong competitive position.

Our overall R&D effort has been maintained and is represented by staff costs of €6,268,853 in 2012, €6,424,764 in 2011, and €6,003,495 in 2010. The company, therefore, devotes 10.2% of its gross margin to payroll costs for staff engaged solely in R&D, and most of this is charged to profit and loss in the same financial year. These costs only consist of personnel costs and do not include costs for the infrastructure, equipment and vehicles or sub-contracting costs. In 2012, technology development programmes resulted in capitalization of €1,817,771 (€3,140,921 in 2011 and €776,785 in 2010). These research and development activities make it possible to expand the range of packaged products and strengthen international distribution.

It should be pointed out that it is the operating subsidiaries that invest directly in research and development, and not the parent company I.R.I.S. Group SA, which only has the role of a financial holding company.

9



Headcount At the end of 2012, I.R.I.S. Group had 487 employees (75.4% male and 24.6% female) compared with 496 in 2011 and 533 in 2010. The average workforce was 474.19 full-time equivalents in 2012, compared to 498.99 full-time equivalents in 2011 and 514.77 full-time equivalents in 2010.

The average age was 38.83 at the end of 2012, compared with 38.57 at the end of 2011.

Important events in 2012 Acquisition of a business in Belgium In January 2012 I.R.I.S. acquired a business and a team of twenty consultants. This business expansion enables I.R.I.S. to increase the size of its teams and its role within European Union institutions. Statutory financial statements at 31/12/2012

The statutory financial statements only reflect the financial position of the parent company as a holding company and do not give an accurate view of the group’s activity. Consequently, the present report also concerns the consolidated financial statements (see next point).

The statutory financial statements are prepared in accordance with Belgian accounting standards.

0

100

200

300

400

500

600

2004 2005 2006 2007 2008 2009 2010 2011 2012

240.03272.77

312.73

369.14

472.37 494.14 514.77498.96

474.19

Average workforce as full-time equivalents

10



A net profit of €502,869.54 was recorded for the 2012 financial year. This result can be broken down as follows:

Sales 2,430,065.42 2,119,060.57

+ Self-constructed capital assets 0.00 0.00

+ Other operating income 148,069.79 199,435.52

- Goods and other services -1,370,250.08 -1,128,717.03

- Salaries -1,065,952.88 -1,074,998.51

- Depreciation -34,882.30 -35,910.82

- Provisions for liabilities and charges -200,000.00 0.00

- Other operating expenses 0 0

= Income from operations -92,950.05 78,869.73 + Income from financial assets 63,230.83 68,385.24

+ Interest income from cash and deposits 623,867.22 669,185.96

+ Other financial income 60,407.01 48,075.48

- Financial expenses -150,487.60 -211,219.90

= Current income before tax 504,067.41 653,296.51 = Net income before tax 504,067.41 653,296.51

- Corporate income tax -1,200.62 -3,791.28

+ Tax adjustments 2.75 0

= Profit for the year to be attributed 502,869.54 649,505.23

The statutory accounts and balance sheets are detailed in the appendices to this annual report.

The profit to be attributed is €502,869.54

The proposed appropriation of the result is as follows:

- Profit for the year to be attributed €502,869.54

- Appropriation to the legal reserve: €25,143.48

- Allocation to unrestricted reserves: €477,726.06

Consolidated financial statements at 31/12/2012

Operations activity is carried out by the group's subsidiaries and not by the parent company, I.R.I.S. Group SA, which only has the role of a financial holding company. It is, therefore, essential to consult the Group's consolidated financial statements if you wish to form a true opinion of how the Group has progressed.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).

11



The consolidated net profit was €3,628,729.

This result can be broken down as follows:

Change 2012/2011

Income from ordinary activities 99,986,088 (-17.57%)

- Cost of sales -38,366,468

= Gross Margin 61,619,620 (+ 0.64%)

+ Self-constructed capital assets 1,817,771

+ Other operating income 1,998,571

- Goods and other services -22,363,407

- Salaries and social security charges -35,217,378

- Reduction in the value of trade receivables +389,306

- Provisions for liabilities and chargess -147,489

- Other operating expenses -494,768

= Cash flow from operations (EBITDA) 7,602,226 (+5.90%)

- Depreciation of fixed assets -2,771,594

= Income from operations (EBIT) 4,830,632 (-4.94%)

+ Financial income 397,852

- Financial expenses -409,320

= Result from ordinary activities 4,819,164

- Tax -1,190,435

= Consolidated income (Group share) 3,628,729 (-3.07%)

The detailed consolidated financial statements are presented in the appendices to this annual report.

Significant events after the end of the financial year

Post-balance sheet events to be reported are:

Unconditional public takeover bid by Canon

On 26 March 2013, the public takeover bid by Canon relating to all shares, warrants and options on shares of I.R.I.S. Group SA became unconditional. On 26 March 2013, Canon, a world leader in imaging solutions, announced via its subsidiary, Canon Europa N.V., announced that at the close of the initial acceptance period of its public takeover bid of I.R.I.S. Group SA on 20 March 2013, it held 91.05% of the entire shareholding of the I.R.I.S. Group. All the conditions precedent of the public takeover bid have been satisfied and the offer is, therefore, now unconditional.

12



This represents an important stage in the close relationship between Canon and the I.R.I.S. Group as Canon will focus on accelerating the growth of its solutions and professional services.

Canon already had a close strategic alliance with the I.R.I.S. Group which had developed over a number of years and was strengthened in July 2009 when Canon acquired a 17% stake in the company. When I.R.I.S. Group joins the Canon group this will give both companies the opportunity to work together more closely while developing a range of technology solutions to match our clients' business requirements even more accurately.

Obligatory reopening and squeeze-out

Shareholders who have not yet tendered their shares in response to the bid will have the opportunity to do so during the obligatory bid reopening period which commences on 27 March 2013 and ends on 17 April 2013. Shareholders can tender their shares to the bid in the same way and under the same conditions that were offered during the initial acceptance period, as described in the bid prospectus. The offer price per share is 44.50 euros and the price for warrants and options is as stated in the prospectus. At the end of the obligatory bid reopening period, if Canon holds at least 95% of the shares, Canon intends to launch a squeeze-out process. All of the bid details are contained in the bid prospectus and the memorandum in reply prepared by the I.R.I.S. Group SA Board of Directors and which are both published on the I.R.I.S. Group website (www.iriscorporate.com) and the ING Belgium website (www.ing.be).

The prospectus and memorandum in reply documents were both approved by the FSMA on 5 February 2013, and are also available on the FSMA website: http://www.fsma.be/fr/Supervision/fm/oa/ooa/ProspectusOPA.aspx

Outlook for 2013 and description of events likely to have a significant influence on the development of the company Initiatives for growth and investments 2012 was a year which contained a number of positive elements. To recap on these:

- Some initiatives for growth have proved successful, for example our partnerships with value-added resellers (VARs) and business process outsourcers (BPOs);

- the development of the activity with Canon (growth of 15% compared with 2011);

- Plans that were implemented in 2011 for certain activities have borne fruit in 2012 and resulted in major cost-savings.

These successes have compensated for some negative trends in other markets

In a world which is experiencing enormous technological change, the objective of I.R.I.S. is to offer a robust portfolio of innovative solutions and associated services covering both mobile platforms and cloud solutions in a range of different fields (OCR, invoicing, mail, business process optimization, IT facilities management, etc.). These solutions provide significant benefits to our partners and clients, including those who operate in the vertical markets in which we have developed unique expertise such as the health sector and solutions for legal firms. The objective of I.R.I.S. is also to significantly increase its global presence in future. The continued investments that are needed to support our opportunities for growth have, therefore, been included in our operating expenses budget for 2013. Consequently, we are planning for a moderately increased EBIT given that the economic climate remains very uncertain. Success at meetings held at IRISLink 2013 and successful launch of new products In February 2013, I.R.I.S. held its annual event IRISLink 2013 and welcomed over 900 attendees at Louvain-La-Neuve. At this event, I.R.I.S. launched several new products and new solutions. These new solutions will contribute to the growth of I.R.I.S. business in 2013.

13



Unconditional public takeover bid by Canon (see Post-balance sheet events)

Canon's Public Takeover Bid, which has now become unconditional, represents an important stage in the close relationship between Canon and the I.R.I.S. Group as Canon will focus on accelerating the growth of its solutions and professional services.

Canon already had a close strategic partnership with the I.R.I.S. Group which had developed over a number of years and was strengthened in July 2009 when Canon acquired a 17% stake in the company. When I.R.I.S. Group joins the Canon group this will give both companies the opportunity to work together more closely while developing a range of technology solutions to match our clients' business requirements even more accurately.

I.R.I.S. management considers that the company is operating in a buoyant growth market, and this view is confirmed by a number of external sources and analysis reports. Management is, therefore, convinced that the company will be able to seize a share of this market and achieve significant growth in its turnover and profitability. The group is therefore maintaining its strategic initiatives and in particular is continuing with its R&D investment policy and its efforts to innovate, to enable the group to continually improve and enhance the range and quality of the products and services provided, and to enter new markets. Management considers that joining the Canon group should also generate new opportunities. I.R.I.S. management is therefore confident about the company's future income prospects and growth.

Purchase of own shares Own shares buy-back programme On 21 March 2012 the Board of Directors approved a programme for the buyback of its own shares. The programme has the following characteristics:

• The objective of the plan is to reduce the number of shares in circulation and consequently improve

remuneration to shareholders and secondarily to have some shares available for the stock option plans

• The programme has been approved for the period from 23 March 2012 to 8 October 2014 and a maximum of

150,000 shares of I.R.I.S. Group SA, or a maximum amount of €4,500,000.

• Shares purchased during a session must not exceed 25% of the average daily transaction volume for the share

on the Euronext Brussels exchange over the 20 sessions prior to the date of each purchase.

• Regulatory framework: the programme will be implemented in compliance with Articles 205 to 208 of the Royal

Decree of 30 January 2001 implementing the Company Code, and the Royal Decree of 5 March 2006

concerning market abuses and Commission Regulation EC 2273/2003 of 22 December 2003 (as regards

exemptions for share buy-back programmes).

14



Purchases and sales of own shares during this financial year. During the 2012 financial year, I.R.I.S. Group SA did not sell any of its own shares, but purchased 25,535 shares under the buyback of own shares programme for an amount of €761,125. At 31 December 2012, the company held 30,615 own shares with an initial value of €837,107. It should be noted that the subsidiary I.R.I.S. Solutions & Experts bought 2,267 shares in I.R.I.S. Group for a total of €58,924, sold 2,696 shares for €62,500, in connection with business combinations, and held 18,677 shares in I.R.I.S. Group at 31 December 2012, worth a total of €279,677. Own shares are valued at their acquisition cost. These own shares were all tendered during the initial opening period of the Canon public takeover bid (in 2013). Elements likely to have an impact in the event of a takeover bid In accordance with article 34 of the Royal Decree of 14 November 2007, the elements likely to have an impact in the event of a takeover bid are presented below:

• Regarding the power of the administrative body: The Extraordinary General Meeting of 6 July 2009 renewed the authorization granted to the Board of Directors to make one or more capital increases to the company's subscribed share capital up to an amount of €38,000,000. This authorization was granted for a period of five years commencing on 8 October 2009 and terminating on 8 October 2014. This authorization covers capital increases in cash or in kind, subject to legal restrictions, by capitalization of reserves, with or without an issue premium, with or without the issue of new shares, with or without voting rights, by a public or private issue and by issuing convertible bonds, equity notes, subscription rights (which may or not be attached to other securities) or other securities that may ultimately entitle the holder to shares in the company. In connection with this authorization, the Board of Directors, proceeded, under a deed drawn up on 14 October 2011 to issue 35,000 warrants in favour of staff of the company or its subsidiaries and carried out a share capital increase in an amount of €1,268,050 subject to the condition precedent on the exercise of the warrants and declaration by the Board of Directors of the resulting capital increase. At 31 December 2012, the unused authorized capital amounted to €36,731,950.

The Board is expressly authorized to carry out capital increases for three years following the General Meeting of 15 December 2011 (or from 9 January 2012 if the meeting is deferred), on one or more occasions, from the date of the notification made by the Belgian Financial Services and Markets Authority (FSMA) stating that a takeover bid for the company has been referred to it, by a cash contribution, with limitation or withdrawal of the right of pre-emption of shareholders in favour of one or more specific people, who may or may not be members of staff of the company or its subsidiaries, or by contribution in kind in accordance with the applicable legal provisions. In this case, the Board of Directors may also create securities which may or may not represent the share capital, giving voting rights, as well as securities giving the right to apply for or acquire such securities, provided that the shareholders are not given a pre-emptive right to the aforementioned securities or rights in proportion to the amount of the capital that their shares represent.

• In relation to restrictions on the exercise of voting rights:

article 24 of the articles of association states that no shareholder can exercise voting rights at a general meeting that exceed ten (10) per cent of the total number of voting rights conferred on all of the securities issued by the company, whether or not they represent the capital; the articles of association also specify the method of calculating this percentage.

A Proposal was put to the Extraordinary General Meeting held on 29 November 2012 to remove article 24, paragraph 2 from the articles of association of the Company, subject to the Voluntary and Conditional Public Takeover Bid In Cash (the Bid) of Canon Europa N.V. (the Bidder) on all shares, warrants and stock options issued by the Company becoming unconditional in accordance with the terms and conditions of the Bid as described in the prospectus relating to the Bid (available in French and English on the Company's website at www.iriscorporate.com (home>investors)) (the Prospectus).

15



The Extraordinary General Meeting of 29 November 2012 made the following resolution:

Provided that the Offer becomes an unconditional offer under the Offer terms and conditions as described in Chapter 6.2 ("Offer Conditions") of the Prospectus, Article 24, Paragraph 2 of the articles of association, which currently reads as follows:

“However, no shareholder can exercise voting rights at a general meeting that exceed ten (10) per cent of the total number of voting rights conferred on all of the securities issued by the company, whether or not they represent the capital. When calculating this ten (10) per cent threshold, the securities held by shareholders acting as a group or as representatives for other shareholders or the securities held by shareholders who are linked together by any kind of agreement relating to the exercise of voting rights must be added together. Likewise, shareholders who are considered to be "companies related to a company", "persons related to a person", "related companies" or "companies with which there is a shareholding relationship" within the meaning of articles 11 to 14 of the Belgian Companies Code may not jointly participate in voting at the General Meeting for more than ten (10) per cent of the number of voting rights conferred on all of the securities issued by the company, whether or not they represent the capital. Holders of bonds, warrants or certificates issued with the consent of the company may attend the general meetings but with a consultative vote only.”

is deleted.

• Regarding important agreements to which the issuer is party, and that enter into effect or are amended or terminated in the event of a change of control of the issuer following a takeover bid: the company has issued several stock option plans that may be exercised early in the event of a change of control.

• In relation to the rules that apply to the appointment and replacement of members of the administrative body and changes to the issuer's articles of association: article 7 paragraph 4 of the articles of association states that except in the cases specified in article 545 of the Companies Code, no person may exercise at a general meeting a number of votes exceeding the number pertaining to the shares for which possession has been declared, in accordance with the provisions of the aforesaid article 7, at least forty-five days before the general meeting.

Authorized use of share capital The Extraordinary General Meeting of 6 July 2009 renewed the authorization granted to the Board of Directors to make one or more capital increases to the company's subscribed share capital up to an amount of €38,000,000. This authorization was granted for a period of five years commencing on 8 October 2009 and terminating on 8 October 2014. This authorization covers capital increases in cash or in kind, subject to legal restrictions, by capitalization of reserves, with or without an issue premium, with or without the issue of new shares, with or without voting rights, by a public or private issue and by issuing convertible bonds, equity notes, subscription rights (which may or not be attached to other securities) or other securities that may ultimately entitle the holder to shares in the company. In connection with this authorization, the Board of Directors, proceeded, under a deed drawn up on 14 October 2011 to issue 35,000 warrants in favour of staff of the company or its subsidiaries and carried out a share capital increase in an amount of €1,268,050 subject to the condition precedent on the exercise of the warrants and declaration by the Board of Directors of the resulting capital increase. At 31 December 2012, the unused authorized capital amounted to €36,731,950.

Foreign branches

The Group’s business abroad is handled by legally separate subsidiaries; the company does not have any foreign branches.

Proposed dividend payment

It is proposed that no dividend will be allocated for the financial year 2012.

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Corporate governance declaration

This corporate governance declaration complies with the provisions of the 2009 Belgian Corporate Governance Code ("2009 Code") and the Law of 6 April 2010 which amends the Belgian Companies Code. The Board of Directors declares that, to the best of its knowledge, the company's corporate governance complies with the principles and guidelines of the 2009 Code, with the exception of the matters stated below. The Corporate Governance Charter describes the main aspects of the group's corporate governance. The provisions of the I.R.I.S. Corporate Governance Charter aim to implement a high level of transparency for corporate governance matters. This transparency is achieved by the publication of information in two separate documents: the I.R.I.S. Corporate Governance Charter available on the company's website (http://www.iriscorporate.com/c2-33-17/I-R-I-S----Corporate-governance.aspx), and the section on corporate governance in the annual report. The 2009 Code with which the company is compliant is available at: http://www.corporategovernancecommittee.be/library/documents/final%20code/CorporateGovFRCode2009.pdf. The Corporate Governance Charter describes the main aspects of the I.R.I.S. Group's corporate governance. It will be updated frequently as the company modifies its corporate governance structure to match its changing needs. The Charter was adopted by the Board of Directors on 17 March 2006, was modified by the Board of Directors on 28 January 2008 and was again modified by the Board of Directors on 1 April 2011. In its charter, I.R.I.S. departs from the 2011 Code in respect of the following points:

• The Belgian Corporate Governance Code recommends a clear separation of duties between the running of the Board of Directors and the running of the operational activities of the company, recommending in particular that:

o the same person should not be both Chairman of the Board of Directors and Chief Executive Officer (CEO)

o the allocation of responsibilities between the Chairman of the Board of Directors and the CEO should be clearly defined, put in writing and approved by the Board of Directors

o the Chairman should establish close relations with the CEO, offering him support and advice, while

respecting the executive role of the CEO.

Given the desire of the company, in view of its current size and the personality of its founder, to maintain a very close link between the running of the Board of Directors and the running of the business, the founder of the company can be both the Chairman of the Board of Directors and the CEO.

• The 2009 Code recognizes that the board of directors should appoint its chairman on the basis of his/her knowledge, skills, experience and arbitration abilities. If the Board of Directors wishes to appoint the previous CEO as its Chairman, it should carefully consider both the positive and negative aspects of this decision and the Board should publish the reasons why this appointment is in the best interests of the company in the Corporate Governance Declaration. In the case of I.R.I.S. this recommendation has not been followed, given the desire of the company, in view of its current size and the personality of its founder, to maintain a very close link between the running of the Board of Directors and the running of the business, the founder of the company can be both the Chairman of the Board of Directors and the CEO.

• The Belgian Corporate Governance Code recommends implementation of an independent internal audit function with the appropriate resources and skills depending on the company's size and complexity. If the company does not have an internal audit function, the company must review whether it needs this function at least annually. In view of the size of the company and its level of complexity, the CFO is responsible for internal control functions.

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• The 2009 Code recommends that the Appointments and Remuneration Committee should meet at least twice a year. Given the company's wish to limit the number of directors with a view to efficacy, there is therefore expected to be a low number of appointments and changes to remuneration and the Appointments and Remuneration Committee meets at least once each year.

• The 2009 Code recommends that the Audit Committee should meet at least four times a year. In view of the fact that the company publishes half-yearly accounts and not quarterly accounts, the Audit Committee meets at least twice a year.

• The 2009 Code states that non-executive directors should make a regular appraisal, preferably at least once per year, of their interaction with the executive management; for this purpose they should meet at least once per year without the attendance of the CEO and other executive directors. In order to align this process with the regular appraisal of the Board of Directors this appraisal will take place at least once every three years.

• The 2009 Code recommends that, in principle, shares can not be granted definitively and options can not be exercised less than three years after they were granted. In view of the company's size and the potential consequences of a takeover of the company on its management structure, option plans may contain a clause to cover the possible immediate exercise of these options in the event that a public offer is made for the company.

Analysis and management of risks and uncertainties Like any company operating in a competitive market, I.R.I.S. is faced with general market risks. In particular:

- slow economic growth in our home markets: I.R.I.S. achieves most of its turnover in Europe and the USA. - Increased competition: as the market matures, the sector is gradually concentrating around a few dominant

players, including I.R.I.S., and competition is getting tougher at the international level. - Advances in technology: the development of products and services is a constant concern, in order to

remain at the forefront of developments and meet the expectations of the most demanding customers. Regarding intellectual property rights, I.R.I.S.’s presence and growth in the US market makes it a possible target for attacks by companies that specialize in registering very general and often invalid patents. These companies usually aim to obtain an out-of-court settlement so that the business under attack is spared exposure to much higher defence costs. However, I.R.I.S.’s policy is not to systematically register patents for the technological advances that we have achieved, to avoid making public all of our development secrets, since it is extremely complicated and costly to demonstrate infringement of intellectual property rights for software. The number of patents registered has been increasing however over the last three years. Contractual commitments, such as selling projects on a fixed-price basis may possibly lead to overspend resulting in a financial loss for the Group. With regard to finances, the company has not used any financial instruments to cover the risks inherent in its business. Foreign exchange risk I.R.I.S. Group’s activities in the United States and its business dealings (sales or supplies) with countries in Asia and elsewhere give rise to a US dollar exchange risk.

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Some conversion differences result from purely accounting operations (conversion of foreign subsidiaries, elimination of intercompany balances and reciprocal currency transactions) and are not related to gains or losses made. There is very little room for manoeuvre for this type of translation adjustment. For this reason, I.R.I.S. Group pays intra-group currency balances on a regular basis, so as to minimise translation adjustments. For transactions performed (purchase/sale and payment transactions in dollars), we try to reduce the exchange risk as much as possible:

• by balancing our volumes of purchases and sales in dollars

• by adopting a dollar hedging balance sheet approach (borrowing or investing in dollars against respective investments or borrowing in euros) when necessary

• by regularly monitoring variations in the dollar and financial forecasts, with the aim of assuming our positions in dollars at the most favourable rate

• through hedging transactions, if necessary. Regarding foreign exchange risk, the risk linked to the growing exposure to the US dollar cannot be totally covered. Interest rate risk The Group’s investment loans are either at a variable rate with the option of converting to a fixed rate, or at favourable fixed rates. The best margin and fixed cost conditions have been negotiated for credit facilities. Given the level of indebtedness, this risk is small. Credit risk With regard to credit risk, the Group may be exposed to credit risk linked to:

- operating activities: sales to the general public are made via our website and paid for in advance by credit card, while sales to authorised resellers are made under a prepayment arrangement or with payment terms agreed in view of our past relations; credit limits are established in order to reduce risks. However, it should be noted that some resellers have a return guarantee for I.R.I.S. products. As for sales to businesses and government bodies, the diversity, size and quality of our customers (banking, insurance, retail, industry, government and public sector, international organisations) diversifies the risk of loss, even though the terms of payment are sometimes quite long. Most of our customers are well-known major accounts, for which the credit risk is low. I.R.I.S. has always given particular attention to credit risk and counterparty risk. The group has introduced procedures for monitoring and managing credit risk, and payment and recovery procedures suited to the specific characteristics of each counterparty (private companies, public companies, international organizations, private individuals). As a result of the economic crisis we stepped up our ongoing efforts to manage this risk and monitor trade receivables.

- Investment activities: I.R.I.S. has no intention of taking risks when making cash investments. All investments are made in products guaranteeing 100% of the capital and yielding a guaranteed minimum rate of interest. The group also has a policy of diversifying its investments with different financial partners. The liquidity crisis in the banking sector and the risk of default by certain banks that arose in the final quarter of 2008 confirmed validity of the group’s highly prudent policy. At the end of 2012 all of the group’s investments were safe and highly liquid short-term investments. The group is also stepping up its policy of centralized cash management. Liquidity risk The company has surplus net cash and plans to maintain a level of cash and irrevocable credit facilities to enable it to continue operating with no income for a few months. The group therefore has credit facilities that are well-suited to its size and requirements, and to the payments that it will have to make. It is for this purpose that the group contracted

19



new fixed rate investment loans to finance or refinance its investments and acquisitions and to maintain a high level of cash reserves. The financing policy is also based on the principles of centralization within the parent company and diversification of financing with different financial partners. Risk of I.R.I.S. Group SA’s financial interests For regulatory purposes, the Board of Directors has reviewed the difference in value between the value of its financial assets and the equity shares underlying these financial investments. Taking into account the future growth outlook, the Board of Directors has not identified any sources of permanent loss on these financial investments. Description of the principal characteristics of the company's internal control and risk management systems within the processes used to prepare financial information The principal characteristics of the company's internal control and risk management systems within the processes used to prepare financial information are defined in line with the Company's objectives, its method of operation, its size and the ethical rules and integrity standards it imposes on itself. In particular, the Board of Directors has defined the various internal regulations governing the Board of Directors and the different committees. These regulations have been changed several times. They are available on the company's website and form part of a suitable control environment. The company intends to pursue its objective of geographical growth, expansion of its technology portfolio, while improving its profitability and retaining a very healthy underlying financial position which, certainly requires a cautious approach to ensure the company's long-term survival. The risk management process is therefore centralized for many aspects. By way of example, the company has centralized its method of dealing with the legal and regulatory obligations regarding financial information and the potential impact of changes to accounting principles, the other risk management programmes such as insurance cover, management of cash deposits in accordance with a risk limitation policy which was approved by the Board of Directors, financial liabilities, the company's R&D policy, management of any major legal disputes, management of tax affairs, capital operations relating to the consolidating company and for all of its subsidiaries, the General Terms and Conditions of Sale, disposal of any of the company's major assets. Regular control activities are performed in many ways, including: formal and informal contact between the executive management and the operations directors; ad-hoc internal audit work carried out by financial management to ensure that procedures and standards are being applied and that risks are controlled; analyses performed by the executive management; analyses performed by functional managers and operations managers; centralized processing of the financial data for financial reporting; centralized handling of reprocessing for consolidation; inspections carried out by the central finance unit; centralization of some risk management tasks as described above and separation of duties such as sales administration work. These control activities are supplemented by the work of the external auditor. As far as operations are concerned, each body is involved at different levels in the decision-making process and in the execution of the decisions taken and each role is also defined as accurately as possible for the purpose of optimizing the way in which the company operates. Information is provided to the management body by means of a wide range of systems and control processes implemented across management. For example, the company continues to implement a range of common management and governance tools. This programme commenced several years ago and includes: • A centralized Customer Relationship Management (CRM) package • A single accounting ERP system • A common project management system • Centralized financial reporting These systems provide the company with a unified approach for the analysis of management information. They are implemented in the most important business units and rolled out gradually to the whole group. They provide the capability for the company to obtain regular, consistent data which is communicated to the executive body. With regard to these objectives and these specific details but also to their method of operation, the internal control systems give rise to the identification and evaluation of risks by the Board of Directors, members of the Audit Committee and also by management. These are monitored regularly and when necessary this results in remedial action. Risks are assessed by the

20



executive management and are submitted to the Audit Committee and the Board of Directors where they are discussed. The external auditor supplements the internal control work performed by management. As far as governance is concerned, the concepts of risk management and internal control are an integral part of the corporate culture, especially in respect of the procedures implemented for delegation of powers, key indicator tracking, review of variances between budgets and actuals, the implementation of management systems in the group's various business units, etc. Shareholder structure table as produced from the transparency declarations sent to the company Denominator: 1,865,072 securities Notifications received between 1 September 2008 and 10 April 2013:

Notification

date

Holders of voting rights Number of voting rights

attached to securities

Number of similar

financial instruments

17/10/2008 Albert Frère 0

17/10/2008 Cie Nationale à Portefeuille 112,395

27/10/2008 Pierre De Muelenaere 119,113 8,500

27/10/2008 Baillie Gifford & co 27,896

27/10/2008 Baillie Gifford Overseas Limited 57,114

31/10/2008 Sofinim NV 112,395

31/10/2008 Ackermans & Van Haaren NV 1,895

31/10/2008 Stichting Administratiekantoor ‘Het

Torentje’

0

31/10/2008 Raynive SA 81,446

31/10/2008 Dumondal sc 0

02/07/2009 FIN.CO 62,398

02/07/2009 WALUFIN SA 0


17/07/2009 Cie Nationale à Portefeuille 0

22/07/2009 Canon Europa NV* 314,790

22/07/2009 Canon Inc.* -

22/07/2009 Pierre de Muelenaere* 47,645 8,500

22/07/2009 Etienne Van de Kerckhove* 6,360 8,500

23/07/2009 Sofinim NV -


23/07/2009 Stichting Administratiekantoor ‘Het

Torentje’

-

07/12/2011 Baillie Gifford & co 0


10/10/2012 Oddo Asset Management 58,582

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28/03/2013 Oddo Asset Management 1,334 0

28/03/2013 FIN.CO 0 0

03/04/2013 Canon Europa NV* 1,698,237 -

03/04/2013 Canon Inc.* - -

03/04/2013 I.R.I.S. GROUP.* - -

03/04/2013 Pierre de Muelenaere* 0 8,500

03/04/2013 Etienne Van de Kerckhove* 0 8,500

*Acting jointly

Summary of the voting rights

Total share capital (€) 38,774,902

Total number of securities conferring voting rights 1,865,072

Total number of voting rights (= denominator) 1,865,072

Total number of bonds convertible into securities conferring voting rights 0

Total number of share subscription rights (warrants) with attached voting rights that have

not yet been issued

45,000

Total number of voting rights that would result from these conversion or subscription

rights being exercised

45,000

Total number of shares without voting rights 0

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Composition and procedures of the executive bodies and their committees; Characteristics of the process for the appraisal of the Board of Directors, its committees and its individual directors. Composition of the Board of Directors The composition of the Board of Directors ensures that decisions are taken in the company's best interests. This composition is based on a mix of genres, an overall diversity and complementary skills, experience and knowledge. The Board of Directors is of a small enough size to enable decisions to be taken efficiently. It is sufficiently large for its members to contribute experience and knowledge from different domains and for changes in its composition to be managed without problems. No individual director or grouping of directors can dominate the Board of Directors' decision making. No individual board member can have excessive decision-making powers. At least half of the Board's members are non-executive directors. At least three directors are independent using the criteria contained in the I.R.I.S. Corporate Governance Charter. At 31/12/2012, the Board's composition was as follows: Pierre De Muelenaere, Chairman & CEO Etienne Van de Kerckhove, CEO Michel Claus, independent director within the meaning of the Group's Corporate Governance Charter Gérard Constant, independent director within the meaning of the Group's Corporate Governance Charter Pierre Sonveaux, independent director within the meaning of the Group's Corporate Governance Charter Jean-Louis Grégoire Thierry Marchandise Procedures of the Board of Directors The Chairman draws up the meeting agenda after discussing it with the CEO and he/she ensures that the procedures relating to the meeting preparation, its discussions, decision making and implementation of those decisions are applied correctly. The meeting agenda lists the topics to be dealt with and specifies if these are listed for information only, for discussion or for a decision to be made. The President must ensure that the directors receive the specific information in good time before the meetings, and as necessary in the intervals between meetings. With reference to the Board of Directors, all directors receive the same information. The Chairman must ensure that all directors can contribute to the Board's discussion with full knowledge of the facts and that the Board has sufficient time to discuss and consider topics before decisions are taken. The directors have access to independent professional advice at the company's expense, subject to compliance with the procedure established for this purpose by the Board of Directors. The Board of Directors meets often enough to perform its duties effectively. If necessary, the company can organize meetings of the Board or its committees using video, telephone or web-based communications media. The number of meetings held by the Board and its committees and the attendance figures for directors are published in the corporate governance section of the annual report. The Board of Directors appoints a General Secretary who has the responsibility to advise the Board on governance matters. Appraisal of the Board of Directors Under the Chairman's guidance, at least every three years the Board of Directors assesses its size, its composition, its own procedures and those of its committees and also its interaction with the executive management. The Board of Directors was re-modelled in July 2009, so it will next be reviewed 3 years after that date, or earlier as circumstances dictate.

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Specialist committees of the Board of Directors The Board of Directors establishes: An Audit Committee The Audit Committee has three members who are non-executive directors. At least one member is independent within the meaning of the Belgian Companies Code and has competence in accounting and audit matters. An Appointments and Remuneration Committee The Appointments and Remuneration Committee is composed solely of non-executive directors. The majority of its members are independent. At least every three years these committees re-examine their internal procedures, assess their own efficacy and advise the Board of Directors of any modifications found to be necessary. The Executive Management The Board of Directors assigns executive management responsibility to the CEOs, with all necessary powers to allow them to perform their duties and obligations. The CEOs must have sufficient room for manoeuvre, to propose and establish the company's strategy, whilst taking into account the company's values, the level of risk that the company is willing to take on and its key policies. The CEOs can set up committees within the company to help them prepare strategic decisions and report back to them on the performance and control of operations: - The Strategy Committee assists the CEOs to prepare their strategic decisions for the group, based on all necessary operational and financial information. The Strategy Committee has no decision-making powers. - Within each division, committees discuss important operational matters for the division in question, report on the execution and control of its operations and assist the CEOs to prepare their decisions on that particular division. Conflicts of interest between the directors and the company

The Board of Directors of I.R.I.S. Group is not aware of any decisions calling for the application of articles 523 or 524 of the Companies Code. Independence and competence of the members of the Audit Committee In accordance with article 96 9° of the Belgian Companies Code, we confirm that all of the members of the Audit Committee are independent as defined in the Belgian Corporate Governance Code and have accounting and audit skills acquired during their training and their experience within international audit companies, of financial and/or general management in international groups. Remuneration Report Remuneration of board members and executive managers Since certain directors and executive managers have the status of self-employed workers while others have the status of salaried employees, and to avoid all misunderstandings, the remuneration represents the total cost for the company, and therefore includes not only the basic remuneration, the variable remuneration (all bonuses for the financial year in question) and all other components of the remuneration such as pension costs, insurance cover and the monetary value of other benefits in kind, but also the amount of the fees received, the employers' contributions for salaried employees, and the full costs of vehicles. The total value of remuneration and other benefits granted directly or indirectly by the company or any other group entity and chargeable to the 2012 financial year was as follows:

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- Remuneration and benefits in 2012 (total cost for the company) of the CEOs:

Amount (€) 2012 fixed remuneration

Variable remuneration

Company vehicles Other Total

Pierre de Muelenaere 253,133 20,000 15,000 288,133 Etienne Van de Kerckhove 131,033 131,033

Total 404,166 0 15,000 0 419,166

- Options and warrants held by and/or granted to executive directors No warrants or options were assigned during the 2012 financial year. At 31 December 2012, the number of warrants or options held was: Number of options and warrants Options Total Non-executive Directors 0 0

Pierre De Muelenaere 8,500 8,500 Etienne Van de Kerckhove 8,500 8,500

Total 17,000 17,000 The exercise price of the options and warrants is €42.18. The CEOs receive no other remuneration in relation to long-term performance.

- Severance pay

In the event of dismissal of a CEO, 12 months' notice must be given, and severance pay will be allocated equal to 12 months' remuneration. This notice period is justified due to the age, length of service and responsibilities of the executive directors.

- Variable remuneration principle - Rémuneration linked to short-term and long-term performance Variable remuneration was introduced in 2006 for executive directors. The policy regarding the variable remuneration is aimed at allocating a capped remuneration, calculated according to net profitability targets for the Group. The remuneration is only allocated if the net profit is higher than a given threshold in relation to the gross margin. The variable remuneration amount could represent 100% of the CEOs fixed remuneration amount in circumstances of a maximum increase in profitability. No variable remuneration was due or paid in 2010, 2011 or 2012 under this plan. In 2012, a variable remuneration amount of €20,000 was granted to Mr Pierre De Muelenaere by the remuneration committee of 7/11/2012. The CEOs receive no other remuneration in relation to long-term performance. In the case of the grant of a variable remuneration, the company reserves the right to recover the variable remuneration if it was allocated on the basis of incorrect financial information.

- Pensions The CEOs receive no benefits that are related to pension plans.

- CEO shareholdings At 31/12/2012, the CEOs held the following numbers of shares: Pierre de Muelenaere 49,145

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Etienne Van de Kerckhove 0 At 3/04/2013, the CEOs declared that they no longer hold any shares in the I.R.I.S. Group. Remuneration of non-executive directors

- The non-executive directors who have the capacity of independent directors as defined by Law and the Belgian Corporate Governance Code, Michel Claus, Gérard Constant and Pierre Sonveaux, each received a remuneration amount of €15,000 in 2012 for their participation in boards and committees, representing a total cost of €45,000 for the company.

- They receive no other remuneration or other short-term or long-term benefit.

- The other non-executive directors do not receive any remuneration or short-term or long-term benefits.

- The non-executive directors do not receive any performance-related benefits such as bonuses or long-term profit-sharing schemes or benefits in kind or pension plan related benefits.

Remuneration of the Auditor

The fees paid for the task of certifying the statutory and consolidated financial statements for the 2012 financial year totalled €151,230.

The statutory auditor did not carry out any special audit missions in 2012.

Miscellaneous The Board of Directors has not established any policies for transactions and other contractual dealings between the company (including affiliated companies) and executive directors and managers, other than those provided for in legislation governing conflicts of interest. The Board has not needed to apply any specific measures to ensure compliance with Directive 2003/6/EC on insider dealing and market manipulation (market abuse). Discharge granted to the directors and to the statutory auditor

We suggest that discharge be granted to the directors and the statutory auditor for their duties performed during financial year 2012.

Prepared in Louvain-la-Neuve on 16 April 2013 and circulated to the following for signing,

Pierre De Muelenaere Etienne Van de Kerckhove Michel Claus Gérard Constant Jean-Louis Grégoire Thierry Marchandise Pierre Sonveaux

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Governance

BOARD OF DIRECTORS

Executive directors Term of office expiry Attendance

Pierre De Muelenaere Chairman of the Board and Chief Executive Officer (CEO)19 May 2015 9/9 Director of Belgacom SA Director of BSB SA Director of Parc Pairi Daiza SA Director of Guberna ASBL Etienne Van de Kerckhove Chief Executive Officer (CEO) 19 May 2015 5/9 Director of Evadix SA Director of Scabal S.A. Director of Belgian Presidents’ Organization ASBL Executive partner of Es Sence S.P.R.L.

Non-executive directors Term of office expiry Attendance

Michel Claus Director (since 9 February 2010) 19 May 2015 8/9 Director of Crown Avenue SA Director of Tower Bel SA Director of Mc Adam Europe SA Director of Elhena SA (Luxembourg) Director of Mondial Immo SA Gérard Constant Director 19 May 2015 9/9 Director of Ronveaux SA Director of Jucema SA Director of Mazymmo SA Director of the Domaine Constant-Duquesnoy

Chief Executive Officer of Vinicole de la Côte d’Or et du Rhône

Director of L’Atelier ASBL Jean-Louis Grégoire Director 19 May 2015 8/9 Director General of G20 YES Non-executive Chairman of Cabasse SA Vice-president of Canon Research France (CAF) Thierry Marchandise Director 19 May 2015 8/9 Director of Partenaire Bureautique SA Pierre Sonveaux Director 19 May 2015 7/9 Chairman of Sonaca SA Chairman of Wan ASBL Chief Executive Officer of Wespavia SA Director of Pégard Productics SA Chairman of Skywin ASBL

Independent Board Members as defined in the Belgian Corporate Governance Code

Michel Claus

Gérard Constant

Pierre Sonveaux

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The Board of Directors met nine times in 2012. It mainly discussed and dealt with the following matters:

• Year-end closing at 31 December 2011, approval of the annual press release, the management discussion and analysis and the annual report, proposed distribution of a dividend and notice to attend the General Meeting

• Adoption of the 2012 budget

• Reviewing the quarterly and half-year accounts, approval of the half-year press release and assessing the company’s cash position

• Monitoring of the work of the Audit Committee

• Establishment of an MTP 2012-2014

• Launch of an own shares buy-back programme

• Canon takeover – evaluation –approval – drafting of the memorandum in reply

• Changes to amortisation rules

• Convening of an extraordinary general meeting to delete article 24§2 of the company's articles of association provided that the Canon conditional takeover bid becomes unconditional under the terms and conditions of the prospectus

BOARD OF DIRECTORS' COMMITTEES

Audit Committee Attendance

Pierre Sonveaux, Chairman 1/2

Michel Claus 2/2

Gérard Constant 2/2

The Audit Committee:

- assists the Board of Directors with its responsibilities relating to the integrity of the company's

financial information, particularly by monitoring the process used to prepare the financial information,

monitoring the effectiveness of the company's internal control and risk management, monitoring the

legal inspection of the annual financial statements and consolidated accounts, reviewing and

monitoring the independence of the statutory auditor;

- advises the Board of Directors on the following matters proposed by the CEOs:

o rules for the valuation of items in the balance sheet and income statement o the company's annual budgets o the quarterly and half-yearly accounts o the annual accounts submitted for approval by the shareholders o quarterly, half-yearly and annual press releases about the financial statements

- controls the quality of systems and issues recommendations to the Board of Directors on internal control matters and the company's risk management;

- controls the definition, correct performance and fair remuneration of the external inspection mission entrusted to the statutory external auditors and advises the Board of Directors;

- takes advice from any third party as the Committee may deem this to be useful or necessary; - provides advice to the Board of Directors on:

o potential conflicts of interest between directors and members of management, and the company o financial relationships or interests that exist between directors, shareholders and the company.

Due to the constant attention given by the Board of Directors itself to the drawing up and preparation of the

financial statements, the Audit Committee only met twice in 2012 and mainly dealt with the following matters:

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- Detailed analysis of the accounts as at 31 December 2011 and the statutory auditor's report - Monitoring of the process for preparation of the financial information - Monitoring of internal audit and its activities - Monitoring of the legal inspection of annual financial statements and consolidated accounts, which also

includes monitoring the questions and recommendations issued by the statutory auditor - Detailed analysis of the financial statements as at 30 June 2012 and review of the auditor’s interim report

Appointments and Remuneration Committee Attendance

Gérard Constant, Chairman 1/1

Michel Claus 1/1

Thierry Marchandise 1/1

The Appointments and Remuneration Committee:

- organizes the process for appointing new directors and re-electing existing directors - organizes the process for the appraisal of the Board of Directors - advises the Board of Directors on the following matters proposed by the CEOs:

o remuneration, direct and indirect benefits, and any future contracts of members of the Strategy Committee

o the company's organization chart, the transparency of hierarchical structures and decision-making processes

- takes advice from any third party as the Committee may deem this to be useful or necessary.

The Remuneration Committee met once in 2012. It worked on the following issues:

- Validation of the management variable remuneration

STATUTORY AUDITOR

ERNST & YOUNG REVISEURS D’ENTREPRISES S.C.C.R.L. Expiry of term of office Represented by Marie-Laure Moreau 20 May 2014

GROUP'S EXECUTIVE MANAGEMENT

Pierre De Muelenaere Chief Executive Officer (CEO)

Etienne Van de Kerckhove Chief Executive Officer (CEO)

STRATEGY COMMITTEE

The Strategy Committee assists the CEOs to prepare their strategic decisions for the group, based on all necessary operational and financial information. The Strategy Committee has no decision-making powers. Pierre De Muelenaere Chief Executive Officer (CEO)

Denis Hermesse Chief Financial Officer (CFO)

Gamal Khaldi General Manager I.R.I.S. ICT

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DIVISION COMMITTEES

Within each division, committees discuss important operational matters for the division in question, report on the execution and control of its operations and assist the CEOs to prepare their decisions on that particular division.

P&T Committee ECM Committee ICT Committee NL-NO Committee

Pierre De Muelenaere Pierre De Muelenaere Pierre De Muelenaere Pierre De Muelenaere

Denis Hermesse Denis Hermesse Denis Hermesse Denis Hermesse

Gamal Khaldi Gamal Khaldi Gamal Khaldi Gamal Khaldi

Bernard de Fabribeckers Brigitte Niset Guy De Winne Pieter Offers

Frank Tiedt Hans Cromphout Marc Van Volsom Jeroen Den Exter

Guenter Hensges Philippe Ribeiro Frank Huyge Dunja Koenders

Olivier Dupont Patrick Velonis Xavier Watrin

Ralf Schroeder Americo Da Costa

Yves Halleux Hugues Delmotte

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Stock exchange listing Stock exchange listing

The I.R.I.S. share is listed on NYSE Euronext Brussels in the small caps segment.

In 2012 the price rose from €25.95 to €42.50. The market capitalization totalled €43,398,618 at 31 December 2012.

The average daily trading volume was 2,082 shares, i.e. a velocity of 29.4%.

I.R.I.S. signed a liquidity provider agreement with Banque Degroof.

United Nations Global Compact After I.R.I.S. Group and its subsidiary, I.R.I.S. Solutions & Experts, registered with the United Nations Global Marketplace (UNGM) in April 2010, the I.R.I.S. International Organization Business Unit wished to sign up to the Principles of the Global Compact, considering that this would be an excellent opportunity to pursue development of the customer portfolio, while at the same time supporting the actions of the United Nations. In effect, this charter encourages its worldwide members to align their operations and strategies with United Nations projects of a social, humanitarian, economic, scientific and legal nature. I.R.I.S. Group is registered under number 13847. On behalf of all our employees, I.R.I.S. is now proud of achieving and respecting the principles contained in the United Nations Global Compact with regard to:

• Human Rights,

• Labour,

• Environment,

• Anti-Corruption. Further information can be obtained from the website: www.unglobalcompact.org Welcome to the UNGM - United Nations Global Marketplace

31



I.R.I.S. GROUP - Consolidated financial statements 2012 IFRS income statement

IFRS Consolidated income statement € - Year ending: 31/12/2012 31/12/2011 31/12/2010

OPERATING INCOME 103,802,430 126,242,478 122,644,337 Income from ordinary activities (note 1) 99,986,088 121,292,320 119,488,557

Self-constructed capital assets (note 2) 1,817,771 3,140,921 776,785

Other operating income (note 2) 1,998,571 1,809,237 2,378,995

Operating expenses -98,971,798 -121,160,890 -117,341,879 Cost of sales (note 3) -38,366,468 -60,066,350 -59,968,888

Services and other goods (note 4) -22,363,407 -21,306,200 -18,478,411

Salaries, social security and pensions (note 5) -35,217,378 -37,073,682 -36,200,660

Amortization and depreciation of fixed assets (note 6) -2,771,594 -2,096,805 -1,936,766

Depreciation of stocks and trade receivables (notes 7, 17, 18) 389,306 -442,688 -419,912

Provisions for liabilities and charges (notes 7, 25) -147,489 275,817 121,978

Other operating expenses (note 8) -494,768 -450,982 -459,220

INCOME FROM OPERATIONS (EBIT) 4,830,632 5,081,588 5,302,458

Financial income (note 9) 397,852 684,004 625,784 Income from financial assets 30,352 18,456 9,180

Income from current assets 76,925 37,771 56,799

Other financial income 290,575 627,777 559,805

Financial expenses (note 9) -409,320 -855,564 -814,097 Interest on debts -127,498 -190,380 -255,893

Other financial expenses -281,822 -665,184 -558,204

NET FINANCIAL INCOME -11,468 -171,560 -188,313

PROFIT FROM ORDINARY ACTIVITIES after net financial income 4,819,164 4,910,028 5,114,145 TAXES (note 10) -1,190,435 -1,166,331 -1,035,115 Deferred taxes 105,687 1,038,210 566,384

Taxes payable -1,297,331 -2,253,189 -1,639,773

Tax adjustments 1,209 48,648 38,274

PROFIT FOR THE PERIOD 3,628,729 3,743,697 4,079,030

CONSOLIDATED RESULT 3,628,729 3,743,697 4,079,030 Minority interests 0 0 0

Group’ share 3,628,729 3,743,697 4,079,030

Basic earnings per share (€) (note 11) 31/12/2012 31/12/2011 31/12/2010

Weighted average number of outstanding shares during the period 1,824,747 1,843,661 1,841,064

Operating result (EBIT)/share 2.65 2.76 2.88


Diluted earnings per share (€) (note 11) 31/12/2012 31/12/2011 31/12/2010

Weighted average number of outstanding shares during the period 1,824,747 1,843,661 1,841,064

Weighted average number of outstanding dilutive warrants during the year 71,492 4,164 6,585

Number of shares after dilution 1,896,238 1,847,825 1,847,648

Operating result (EBIT)/share 2.55 2.75 2.87


Income statement (€) 31/12/2012 31/12/2011 31/12/2010

Profit for the period 3,628,729 3,743,697 4,079,030

Translation gains and losses -61,324 49,852 34,834

Total comprehensive income 3,567,405 3,793,549 4,113,864

Group’ share 3,567,405 3,793,549 4,113,864

32



Consolidated Balance Sheet

IFRS CONSOLIDATED ASSETS (€) 31/12/2012 31/12/2011 31/12/2010

NON-CURRENT ASSETS 51,031,544 50,186,442 46,881,118

Intangible assets (note 14) 12,981,562 12,112,796 9,493,139

Goodwill (note 13) 28,546,437 28,546,437 28,546,437

Tangible assets (note 15) 7,035,202 7,286,892 7,527,856

Land and buildings 5,381,403 5,708,213 5,979,776

Plant, machinery and equipment 986,575 952,336 870,338

Furniture and vehicles 492,619 500,587 361,016

Financial leasing and similar fees 21,424 77,774 148,637

Other tangible assets 117,223 47,982 150,612

Fixed assets under construction and down payments 35,958 0 17,477

Other non-current assets 361,849 379,171 518,477

Deferred tax assets (notes 10 and 16) 2,106,494 1,861,146 795,209

CURRENT ASSETS 61,255,554 64,561,289 81,062,317

Inventory (note 17) 2,812,860 2,725,173 2,636,234

Supplies 1,429,229 1,337,276 1,085,251

Finished products 1,060,530 1,056,540 1,430,463

Goods 323,101 331,357 120,520

Amounts payable by clients for work in progress (note 18) 1,134,832 1,183,197 1,483,490

Trade receivables and other debtors (note 19) 34,510,567 43,562,565 63,456,049

Trade receivables 32,245,746 39,828,178 59,670,690

Non-trade receivables 2,264,821 3,734,387 3,785,359

Cash and cash equivalents (note 20) 20,861,001 14,815,520 11,013,064

Short-term investments 3,493,667 126,311 2,777,080

Cash & cash equivalents 17,367,334 14,689,209 8,235,984

Other current assets (note 19) 1,936,294 2,274,834 2,473,480

TOTAL ASSETS 112,287,098 114,747,731 127,943,435

33



IFRS CONSOLIDATED SHAREHOLDERS’ EQUITY AND

LIABILITIES (€) 31/12/2012 31/12/2011 31/12/2010

SHAREHOLDERS’ EQUITY 65,099,754 63,487,122 60,771,415

Share capital (note 21) 38,774,902 38,774,902 38,774,902

Subscribed capital 38,774,902 38,774,902 38,774,902

Issue premiums 6,610 6,610 6,610

Consolidated reserves (notes 22 and 23) 26,379,614 24,705,658 22,039,803

Profits and losses brought forward 26,829,939 24,508,017 21,827,352

Shareholders’ equity – share-based payments 666,459 556,876 486,691

Shareholders’ equity – own shares -1,116,784 -359,235 -274,240

Conversion differences (note 24) -61,372 -48 -49.900

NON-CURRENT LIABILITIES 4,284,613 5,405,403 7,298,867

Provisions for liabilities and charges (note 25) 688,944 541,455 817,272

Other liabilities and charges (note 25) 688,944 541,455 817,272

Deferred taxes (note 10) 2,355,939 2,226,719 2,200,544

Non-current liabilities 1,239,730 2,637,229 4,281,051

Pensions and similar obligations (note 26) 469,590 391,023 418,033

Long-term liabilities (note 27) 770,140 2,246,206 3,863,018

Financial leasing and similar liabilities 0 22,325 55,451

Credit institutions 770,140 2,223,881 3,807,567

Other liabilities 0 0 0

CURRENT LIABILITIES 42,902,731 45,855,206 59,873,153

Long-term debts falling due during the year (note 27) 1,473,384 1,595,523 1,670,727

Financial debts (note 27) 3,435 126 68

Credit institutions 3,435 126 68

Trade payables and other payables (note 29) 34,704,684 38,016,693 51,905,542

Trade payables 21,168,831 26,024,371 37,726,993

Amounts owed to customers for work in progress 315,289 1,380,933 1,169,288

Taxes, salaries and social security liabilities 8,715,793 9,184,933 9,120,672

Corporate income tax 1,046,666 2,262,401 1,177,552

Other taxes 2,000,365 1,204,813 2,582,928

Salaries and social security charges 5,668,762 5,717,719 5,360,192

Other liabilities 4,504,771 1,426,456 3,888,589

Other current liabilities (note 29) 6,721,228 6,242,864 6,296,816

TOTAL LIABILITIES & EQUITY 112,287,098 114,747,731 127,943,435

34



Cash flow statement

IFRS CONSOLIDATED CASH FLOW STATEMENT (€) 31/12/2012 31/12/2011 31/12/2010

Earnings before tax 4,819,164 4,910,028 5,114,145

Depreciation of tangible and intangible assets (note 6) 2,771,594 2,096,805 1,936,766

Depreciation of stocks and trade receivables (allowances/write-backs) (notes 7, 17, 18) -389,306 442,688 419,912

Provisions for liabilities and charges (notes 7, 25) 147,489 -275,817 -121,978

Income from current assets (note 9) -107,277 -56,227 -65,979

Debt interest (note 9) 127,498 190,380 255,893

Shareholders’ equity – own shares (note 23) 109,583 70,185 54,486

Cash flow from current transactions 7,478,745 7,378,042 7,593,245

Other non-current assets 17,322 139,306 2

Inventory and amounts payable by clients for work in progress (notes 17 and 18) 505,164 68,244 -662,772

Current receivables (note 19) 8,896,818 19,593,906 -23,749,625

Other current assets (note 19) 338,540 198,646 -632,137

Conversion differences (note 24) -77,978 86,414 101,424

Pensions and similar obligations (note 26) 78,567 -27,010 37,321

Trade payables (note 29) -4,855,540 -11,702,622 15,207,425

Amounts owed to customers (note 29) -1,065,644 211,645 -377,768

Taxes, salaries and social security liabilities (note 29) 314,145 -776,919 690,884

Other debts (note 29) 3,127,212 -1,984,986 1,426,972

Other current liabilities (note 29) 478,364 -53,952 2,115,068

Income tax paid (note 29) -2,079,407 -1,363,361 -930,687

Changes in working capital 5,677,563 4,389,312 -6,773,893

CASH FLOW FROM OPERATIONS 13,156,308 11,767,354 819,352

Share capital – increase 0 0 368,850

Shareholders’ equity – own shares (note 22) -820,049 -147,495 256,932

Dividends (note 12) -1,291,948 -1,019,405 -832,885

Miscellaneous -11,697 -1,747 415

Changes in shareholders’ equity excluding income -2,123,693 -1,168,647 -206,688

Financial debts (note 27) -1,476,066 -1,616,812 -1,664,858

Interest received (note 9) 107,277 56,227 65,979

Interest paid (note 9) -127,498 -190,380 -255,893

Change in loan capital -1,496,287 -1,750,965 -1,854,772

CASH FLOW FROM FINANCING ACTIVITIES -3,619,980 -2,919,612 -2,061,460

Acquisition of subsidiaries, after deducting cash acquired (note 29) 0 -458,333 -1,856,725

Acquisitions during the financial year 0 -458,333 -1,856,725

Investments in intangible and tangible assets (notes 14 and 15) -3,388,670 -4,475,243 -2,046,131

Operating investments -3,388,670 -4,475,243 -2,046,131

CASH FLOW FROM INVESTING ACTIVITIES -3,388,670 -4,933,576 -3,902,856

CHANGES IN RESOURCES AND USES OF FUNDS 6,147,658 3,914,165 -5,144,964

Cash and cash equivalents at start of year (note 20) 13,219,871 9,342,269 14,559,153

Cash and cash equivalents at year end (note 20) 19,384,182 13,219,871 9,342,269

Translation adjustments 16,653 -36,563 -71,919

CHANGES IN CASH POSITION -6,147,658 -3,914,165 5,144,965

Information concerning the acquisition of subsidiaries, cash and cash equivalents and credit facilities is provided in Note 13 Goodwill, Note 20 Cash and cash equivalents and Note 27 Borrowings, respectively.

35



Changes in shareholders’ equity

Changes in consolidated shareholders' equity (€)

Capital Issue

premiums Own

shares Share-based

payments

Profits and

losses brought forward

Translation adjustments

Shareholders’ equity

01/01/2011 38,774,902 6,610 -274,240 486,691 21,827,352 -49,900 60,771,415

Profit for the period 3,743,697 49,852 3,793,549

Purchase/sale of own shares -84,995 -84,995

Translation adjustments on foreign currency transactions

59 59

Capital increase 0

Dividend -1,063,091 -1,063,091

Stock option plan 70,185 70,185

31/12/2011 38,774,902 6,610 -359,235 556,876 24,508,017 -48 63,487,122

Changes in consolidated shareholders' equity (€)

Capital Issue

premiums Own

shares Share-based

payments

Profits and

losses brought forward

Translation adjustments

Shareholders’ equity

01/01/2012 38,774,902 6,610 -359,235 556,876 24,508,017 -48 63,487,122

Profit for the period 3,628,729 -61,324 3,567,405

Purchase/sale of own shares -757,549 -757,549

Translation adjustments on foreign currency transactions

-1,257 -1,257

Capital increase 0

Dividend -1,305,550 -1,305,550

Stock option plan 109,583 109.583

31/12/2012 38,774,902 6,610 -1,116,784 666,459 26,829,939 -61,372 65,099,754

Consolidated shareholders’ equity increased by €1,612,632 between 1 January 2012 and 31 December 2012. This increase is due to:

• the profit for the period: €3,567,405

• the reduction in reserves for dividend distribution: €-1,305,550

• a reduction in shareholders' equity following purchases and sales of own shares: €-757,549

• the valuation of share-based payments: €109,583

• other: €-1,257 In the same period of the previous year, consolidated shareholders' equity increased by €2,715,707 between 1 January 2011 and 31 December 2011 due to:

• the profit for the period: €3,793,549

• the reduction in reserves for dividend distribution: €-1,063,091

• a reduction in shareholders' equity following purchases and sales of own shares: €-84,995

• the valuation of share-based payments: €70,185

• other: €59

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Comments and notes to the financial statements Information about the Company

Image Recognition Integrated Systems Group S.A. (abbreviated as I.R.I.S. Group) is a public limited company (société anonyme) incorporated in Belgium. Its registered office is located at Parc Scientifique de Louvain-La-Neuve, Rue du Bosquet 10, B-1435 Mont-Saint-Guibert. Its company registration number is BE 0448.040.624. It is listed on the NYSE Euronext Brussels stock market. The Board of Directors declares that to the best of its knowledge the consolidated financial statements for the year to 31 December 2012, drawn up in accordance with International Financial Reporting Standards (IFRS) give a true and fair view of the assets, financial situation and results of the I.R.I.S. group and the companies included in the consolidation scope. The financial report gives a true account of the significant events and main transactions with related parties and their impact on the financial statements, of all of the information that must be included in them, and a description of the main risks and uncertainties. The Board of Directors of I.R.I.S. Group at 16 April 2013 is composed of Pierre De Muelenaere, Chairman of the Board of Directors and CEO, Etienne Van de Kerckhove, CEO, Pierre Sonveaux, Director, Gérard Constant, Director, Jean-Louis Grégoire, Director, Thierry Marchandise, Director and Michel Claus, Director.

The mission of I.R.I.S. is to increase the productivity and knowledge of its customers by helping them to manage their documents, data and information more effectively.

I.R.I.S. Products & Technologies develops technologies and products in the field of Intelligent Document Recognition and markets its portfolio of products on a global scale through solid partnerships.

I.R.I.S. Professional Solutions enables companies and public authorities to find innovative expertise and high-tech solutions for the efficient management of documents, information flows and IT infrastructures, through a single company.

I.R.I.S. has more than 480 employees at its sites in Louvain-la-Neuve, Vilvoorde and Antwerp (Belgium), Orly (France), Windhof (Luxembourg), Amstelveen and Maastricht (Netherlands), Aachen (Germany), Delray Beach (Florida, USA), Hong Kong (China) Oslo (Norway) and Copenhagen (Denmark).

The consolidated financial statements for the year ending on 31 December 2012 include Image Recognition Integrated Systems Group S.A. and all of its subsidiaries (jointly referred to as I.R.I.S. Group, I.R.I.S. or the group). Comparative data is given for the periods from 1 January 2011 to 31 December 2011 and from 1 January 2010 to 31 December 2010.

The consolidated financial statements have been closed and their publication was decided by the meeting of the Board of Directors held on 16 April 2013. They will be approved by the shareholders at the Annual General Meeting to be held on 21 May 2013. Declaration of compliance

The consolidated accounts of I.R.I.S. Group at 31 December 2012 have been prepared in accordance with the International Financial Reporting Standards (IFRS) adopted for application in the European Union at that date.

The application of new IFRS standards, amendments and interpretations of the IFRIC that became compulsory for the I.R.I.S. Group on 1 January 2012 did not have any impact on the Group's financial statements.

Specifically, Amendments to IAS 12 - Income Taxes – Deferred tax - Recovery of underlying assets and Amendment to IFRS 7 - Disclosures - Transfers of Financial Assets did not have any impact on the I.R.I.S. group's financial statements at 31 December 2012.

I.R.I.S. does not apply in advance any standard or interpretation that was not compulsory at 31 December 2012.

Specifically, this means that the following standards, amendments and interpretations are not applied: IFRS 13 - Fair Value Measurement, Revised IAS 19 - Employee Benefits, Amendments to IFRS 7 - Financial Instruments Disclosures - Offsetting Financial Assets and Financial Liabilities, IFRIC 20 - Stripping Costs in the Production Phase of a Surface

37



Mine, IFRS 10 - Consolidated Financial Statements, IFRS 11 – Joint Arrangements, IFRS 12 - Disclosure of Interests in Other Entities, Amendment to IAS 28 - Investments in Associates and Joint Ventures, Amendments to IAS 32 - Financial Instruments: Presentation - Offsetting of Financial Assets and Financial Liabilities.

The possible impact on the financial statements of application of these new standards and interpretations will be analysed in 2013. Use of estimates Preparation of the financial statements requires the use of estimates and assumptions to determine the value of assets and liabilities, assessment of positive and negative events at the year-end date, and the income and expenses for the financial year. I.R.I.S. Group revises its estimates on the basis of information that is updated regularly. It is possible for the future results from the operations concerned to differ from these estimates, as this is an inherent factor in any evaluation process. At the present date, to the best of the knowledge of the I.R.I.S. Group there is no element that suggests that the estimates and assumptions used are not appropriate or justified and that no change or known information is such as to significantly modify the amounts recognised or set aside as provisions. The significant estimates made by the I.R.I.S. Group in preparing the financial statements mainly concern:

- assessment of the fair value of assets acquired and liabilities assumed in connection with a business combination:

The main assumptions and estimates used to determine the fair value of assets acquired and liabilities assumed principally include the future outlook of the market, which is needed to evaluate future cash flows and the revaluation rates to apply. The values used reflect the best estimates of the management.

- evaluation of the recoverable value of goodwill, tangible and intangible fixed assets when carrying out impairment tests:

Assumptions and estimates are made to determine the recoverable value of goodwill and tangible and intangible fixed assets. They principally concern the future outlook of the market, which enables future cash flows to be evaluated and determination of the revaluation rate to apply. Any change to these assumptions could have a significant effect on the recoverable value amount.

- evaluation of provisions, especially provisions for legal disputes, retirement pension commitments and similar:

The parameters that have a significant influence on the amount of provisions are the actual level of costs and the future development of any legal disputes. These parameters are established on the basis of the information and estimates that the company considers to be the most appropriate at the financial year-end dates. To the best knowledge of the I.R.I.S. Group there is no known element or change of such a kind that would affect the provision amounts significantly. Valuation of retirement pension commitments is based on actuarial calculations. Management considers that the assumptions used in valuing the commitments are appropriate and justified. Any change to the assumptions could, however, have significant impact.

- valuation of tax deficits carried forward as assets: Deferred tax assets are recognised as tax losses for carry forward, if I.R.I.S. Group considers it likely that the group will have taxable profits against which these tax losses can be used. The forecasts of taxable profits have been produced from income projections as prepared for the purpose of medium term business plans.

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- forecast changes to income:

This annual report contains evaluations made by management in respect of the business, the financial health of the company, the future earnings of I.R.I.S. Group and its subsidiaries. These evaluations are based on management's expectations and its understanding of the market. They are subject to the risks and uncertainties that are expressed in this annual report in the "management analysis and discussion" section. The financial performance of the company could possibly differ substantially, depending on changes in technology, market conditions, the company's concentration on one market segment, falling demand for the products and services offered, the inability to launch new products, loss of market share, pressure from competitors, etc. These market conditions could have a significantly unfavourable impact on the forecast results that are contained in this report.

Accounting principles and valuation rules

Basis for preparing the consolidated accounts

The consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS).

The same accounting principles and methods were applied in the 2012, 2011 and 2010 financial years, apart from the application by the group of new standards and interpretations that became compulsory on 1 January 2012. These principles and methods are described below.

Accounting choices made

The IFRSs offer choices regarding the accounting treatment or presentation of certain situations.

Presentation of the income statement

“IAS 1 – Presentation of Financial Statements” requires an analysis of expenses to be presented, using a classification based either on the nature of the expenses or their function within the entity. I.R.I.S. Group has decided to present expenses according to their nature, as this method provides the most relevant and reliable information.

Valuation of tangible and intangible assets

I.R.I.S. Group has chosen to value tangible and intangible assets using the cost model. After being recognised as assets, tangible and intangible assets are entered at their cost, minus accumulated amortization and accumulated impairment losses. The alternative method using the revaluation model set out in IAS 16 – Property, Plant and Equipment and IAS 38 – Intangible Assets, which offers the possibility of revaluing one or more categories of assets at sufficiently regular intervals, was not selected.

Government grants

In accordance with the choice offered by IAS 20 – Accounting of Government Grants and Disclosure of Government Assistance, government grants linked to tangible and intangible assets are presented in the balance sheet as deferred income.

Recognition of borrowing costs

Borrowing costs were recognised as expenses for the period in which they were incurred up to 31/12/2008. From 01/01/2009, with application of the Revised IAS 23, borrowing costs that are directly attributable to the acquisition,

39



construction or production of a qualifying asset are included in the cost of the asset. The other borrowing costs are recognised as charges.

Interests in joint ventures – Consolidation IAS 31 - Interests in Joint Ventures gives a choice of methods of consolidation of jointly controlled entities. I.R.I.S. Group has chosen to consolidate jointly controlled entities using the proportional consolidation method. I.R.I.S. Group does not have interests in joint ventures but only takes part in jointly controlled activities.

Consolidation method application criteria

Proportional integration is applied to subsidiaries owned and managed jointly by a limited number of shareholders.

Subsidiaries over which the consolidating company exercises de jure or de facto control are fully consolidated.

The financial data regarding subsidiaries is included in the consolidated financial statements from the date of acquisition of control. The “purchase method” is used to recognise the acquisition of a subsidiary provided that the acquisition meets the definition of a business combination. The acquisition cost is determined at the fair value of the assets acquired, the shares issued, the liabilities assumed and any liabilities at the acquisition date, and includes direct costs associated with the acquisition. Intra-Group balances and transactions and all income and expenses from intra-Group transactions are written off when the financial statements are prepared.

Associated companies over which one or more of the companies included in the consolidation perimeter exercises a significant influence, are accounted for using the equity method.

Valuation rules Goodwill – Consolidation differences

Goodwill as defined in the old and new IFRS 3 standard cannot be amortized. It is subject to an annual impairment test, which may be performed more often if there are indications of a loss in value or if circumstances require it.

Conversion of financial statements of foreign companies

Financial statements expressed in foreign currencies are converted according to the closing rate method. All balance sheet items, with the exception of shareholders’ equity, are converted at the exchange rate prevailing on the balance sheet date. Income statement items are converted at the average exchange rate for the financial year. The difference resulting from the application of these exchange rates is recorded in shareholders’ equity under the heading “conversion differences”.

Deferred taxes

Deferred taxation, caused either by the restatement of local accounts in order to make them uniform with the Group’s accounting and consolidation principles or by tax deferrals, give rise to deferred tax items which are calculated according to IAS 12 – Income Taxes.

Own shares

According to IAS 32 – Financial Instruments: Disclosure and Presentation, an entity’s equity instruments are not recognised as financial assets, irrespective of the reason for their repurchase. An entity that buys back its equity instruments must deduct them from its shareholders’ equity.

Dividends In accordance with IAS 10 – Events After the Balance Sheet Date, the distribution of dividends is recognised after approval by the General Meeting of Shareholders. The dividends are then deducted from the shareholders’ equity.

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Employee benefits and stock option plans

The cost of past or future services rendered under a stock option plan is calculated at the fair value of the option on the grant date.

Group employees, including the management as well as certain suppliers, are paid by means of share-based payment transactions, under which they receive equity instruments in return for the services provided ("equity-settled transactions").

The cost of these transactions is valued at the fair value of the instruments on the allotment date by an internal or external expert who uses an appropriate valuation model (Black & Scholes). For further information see Note 23.

This cost was offset against an equivalent increase in the shareholders' equity, for the period during which the terms of service and performance were fulfilled. This period ends at the date the beneficiaries receive an unconditional entitlement to the instruments, i.e. the start date of the exercise period.

Restatements and eliminations

The application of homogeneous accounting rules and valuation methods within the Group makes it possible to present the accounts of the consolidated companies on an identical economic basis, and requires a restatement of the statutory accounts, in accordance with the accounting principles set out below.

Thus, within the consolidation perimeter, economic depreciation, write-downs and provisions that are not economically justified are corrected, provided that the required information regarding these items can be obtained in time and without disproportionate expense, and insofar as these restatements have a significant impact on the shareholders’ equity and the Group’s results.

After aggregation of the balance sheets and income statements, restated where appropriate, the separate balances, as well as losses and profits on inter-Group transactions, are eliminated.

Special rules

Fixed assets are capitalized at their acquisition value when they are acquired from third parties. Other fixed assets are capitalized at their production cost.

Intangible assets – Internally generated intangible assets

Under IFRS, development costs must be capitalised if the following criteria are met:

• Proven technical feasibility of completing the intangible asset so that it may be sold or used;

• Intention of completing the intangible asset in order to sell or use it;

• Saleability or usability of the intangible asset;

• Reasonable likelihood that the intangible asset will generate future revenue;

• Availability of the technical resources and financial means required to complete, sell or use the intangible asset;

• Ability to reliably measure the expenses attributable to the intangible asset during its development phase.

I.R.I.S. only capitalizes expenses for the development of new products. Sums invested in developing upgrades are recognised as expenses for the financial year.

Licences are amortized using the following rates and methods: 33% to 100% on a straight-line basis.

Intellectual property rights, patents and know-how acquired from third parties are amortized using the following rates and methods: 20% to 100% on a straight-line basis. Intangible assets with an essential customer and technology component are amortized over their useful life at a minimum of 5% on a straight-line basis.

Tangible assets

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In accordance with IAS 16 – Property, Plant and Equipment, tangible assets are initially recognized at their acquisition cost. As the Group has elected to use the cost model, tangible assets are recognised at their cost less accumulated depreciation and accumulated impairment losses.

The cost of a tangible asset must be recorded as an asset if, and only if:

• It is likely that the company will receive the future economic advantages associated with the asset, and

• The cost of the asset to the company can be calculated in a reliable manner.

The depreciable amount is the cost of the asset minus its residual value.

The residual value is “the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life”.

Depreciation is the systematic allocation of the depreciable value of the asset over its useful life, in other words the amount of time the company expects to use the asset.

Tangible assets are depreciated from the first year, depending on the country, pro rata to the amount of time the asset has been owned, measured from the date of first use. They are depreciated on a straight-line basis at the following rates:

• Buildings: 3% to 5%

• Computer equipment(hardware and software): 20% to 33%

• Office equipment: 10% to 20%

• Office furniture: 10% to 20%

• Improvements to buildings: 5% to 20%

• New vehicles: 20% to 25%

• Second-hand vehicles: 33%

For buildings, I.R.I.S. uses a useful life of 33 years and considers that at the end of this useful life the internal alterations, internal partitions, floor covering, etc., will be destroyed and the shell including the foundations, floors, walls, roofs, frames, boiler, etc. (which represent the bulk of the cost of our buildings), will have a residual value equal to 50% of the current value of the buildings. Adopting a prudent approach, the residual value of the buildings is set at 30% of the acquisition cost (current value).

Inventory

Stocks of goods and supplies acquired from third parties are valued at their acquisition cost using absorption costing, on a First In First Out (FIFO) basis.

Inventory writedown is recognised case by case, as decided by the Board of Directors.

Inventory is valued either at cost or at the net realisable value, whichever is lower. Accounts receivable

Receivables are valued individually. They are written down case by case, based on the information available to the Board of Directors. Financial liabilities

Financial liabilities are initially recognised at their fair value. Financial liabilities that are not at their fair value through the income statement are increased by the transaction costs directly attributable to their acquisition or issue.

After initial recognition, all financial liabilities are valued at their amortized cost, using the effective interest rate method, except for: (a) Financial liabilities at fair value through the income statement; (b) Financial liabilities that arise when a financial asset transfer does not meet the conditions for derecognition or when it has been recognised using the continuing involvement approach.

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A financial liability is derecognised from the balance sheet when, and only when, it is extinguished, that is, when the obligation specified in the contract is wiped out, cancelled or expired.

Trade payables

Trade debts are valued individually.

Orders in progress

This income is recorded in accordance with the percentage of completion method, by measuring the services rendered against the services estimated. For orders in progress, the company records the value of work carried out but not yet invoiced at the balance sheet date. According to IAS 11 – Construction Contracts, an entity must present:

• The gross amount owed by customers for contracted work, as an asset;

• The gross amount owed to customers for contracted work, as a liability.

The total amount owed by customers for contracted work is the net amount:

• of the costs incurred plus the profits recognised;

• minus the sum of the losses recognised and any interim invoices

of all contracts in progress for which the costs incurred plus the profits recognised (minus the losses recognised) exceed the interim invoices.

The gross amount owed to customers for contracted work is the net amount

• of the costs incurred plus the profits recognised;

• minus the sum of the losses recognised and any interim invoices

for all contracts in progress for which the value of the interim invoices is greater than the costs incurred plus the profits recognised (minus the losses recognised).

Down payments received on orders are therefore deducted from the assets when the amount of such advance payments is less than the costs incurred plus the profits recognised (or minus the losses). The amounts owed by customers are capitalized under ‘Amounts payable by customers for work in progress’.

In the opposite case, the amount of the costs incurred plus the profits recognised (minus the losses) is deducted from the amount recorded in the liability account (debts). The amount owed to customers for work in progress is presented as a liability under ‘Amounts owed to customers for work in progress’.

Assets and liabilities expressed in foreign currencies

As a rule, non-current assets and inventory items acquired in foreign currencies are converted to the functional currency at the exchange rate prevailing on the acquisition date. Current monetary items in the balance sheet are converted at the exchange rate prevailing at the balance sheet date. The resulting foreign exchange gains or losses are entered in the income statement (with the exception of capitalizable advance payments made to consolidated subsidiaries; if necessary they are recognised directly in the shareholders' equity as translation adjustments).

Revenue recognition General cases

Hardware

Hardware refers to a series of components assembled to form a coherent whole that enables the user to perform a technical operation.

Income from hardware is entered in the books at the time it is physically delivered to the customer, at the contract sales price.

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Software

Standard software is a computer application forming a coherent logical whole, which is developed to meet needs that may be common to several customers, with the exception of bespoke solutions designed to meet individual needs. Software is characterised by its name, version, technical documentation and user manual. It is the subject of a medium or long-term development plan (roadmap).

The software company usually retains ownership of standard software, merely granting the customer the right to use it.

Income from software is generated by a licence (right of use) for an unlimited period or, more rarely, for a limited period. It is recognised on physical delivery to the customer (downloaded from the website, or delivered by post or carrier), at the contract sales price.

If the licence is temporary, the income is entered pro rata to the period of use (pro rata temporis basis), from the moment it is physically delivered to the customer (downloaded from the website, or delivered by post or carrier), at the contract sales price.

One-off services

Development is work that may include analysis and writing of lines of computer code by analysts or programmers, but does not extend to custom settings or configurations. Development may result in the creation of bespoke software, which is characterised by its name, version, technical documentation and user manual. As a rule, ownership of software development is transferred to the customer.

Parameterization is the adaptation of standard (or default) software parameters to the specific needs of a user.

Configuration is the adaptation of software parameters to a customer’s specific IT environment: the architecture, network, servers, operating systems, etc.

Installation is the work required to commission a computer application in the specific environment of the user and includes checking the correct functioning of the application.

Training involves explaining and demonstrating a computer application to users.

Services are recorded on job sheets dated and signed by the customer, or – if the services are not carried out on the customer’s premises – on time sheets approved by the project managers.

This income is recognised at the time the services are supplied:

• if the service is sold under a cost-plus contract: as the services are provided, at the contract sales price

• if the service is sold for a fixed price: as a percentage corresponding to the progress of the work. Recurring services

Support involves providing after-sales assistance to users of a computer application, either by telephone (hotline) or by on-site intervention. Maintenance involves after-sales servicing of a computer application. Hardware maintenance may involve the repair of defective parts, cleaning or the periodic checking of correct functioning. Software maintenance may involve the repair of lines of code (debugging), the installation of more recent versions (upgrading) or the periodic checking of correct functioning.

Services are recorded on job sheets dated and signed by the customer, or – if the services are not carried out on the customer’s premises – on time sheets approved by the project managers.

The income from a support and/or maintenance contract corresponds to the periodic subscription paid by the customer, exclusive of tax.

This income is recognised at the time the services are supplied:

• if the service is sold under a cost-plus contract: as the services are provided, at the contract sales price

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• if the service is sold for a fixed price: pro rata to the subscription period (pro rata temporis basis), at the contract sales price.

Projects

A project is an integrated whole which may include software and hardware, and which must comply with technical specifications agreed between I.R.I.S. and the customer. A project usually comprises development, parameterization, installation, configuration, training, support and maintenance phases. It may require work over a period of several months.

Each project is broken down into its basic components: hardware, software and services.

The income is recognised according to the rules applicable to each component.

At each year-end, the progress is assessed, the costs incurred and the future expenditure required to complete the project are compared with the initial budget (days worked, work remaining to be done) and the progress is valued.

In the event of a budget overspend, the difference is covered in full.

Special cases

Design of architecture based on software and hardware delivered by third parties

I.R.I.S. provides expertise in designing IT architectures, the remuneration for which is the margin on software and hardware provided directly by third parties, without I.R.I.S. being involved or responsible for the delivery or correct functioning of the goods in question.

The income is recognized as follows:

• if delivery takes place within fifteen days after the close of the period under review: the margin made on the sale of the equipment or maintenance is recognised upon confirmation by the supplier of acceptance of the purchase order (signed by the customer) and the delivery schedule;

• if delivery takes place before the date on which the accounts are approved by the Board of Directors, and if the design of the entire architecture has been completed by the balance sheet date: a reasonable valuation of the costs incurred is recognized, pro rata to the pre-sale services, upon presentation of the definitive architecture to the customer;

• otherswise: the margin on the sale of the equipment or maintenance is recognised upon physical delivery to the customer.

Public procurement contracts

Public procurement contracts usually involve the signing of an acceptance report upon completion of the various stages of a project.

The income is entered upon acceptance by the customer of a contract phase, at the contract sales price. If acceptance has not been received: as a percentage corresponding to the progress of the work. Sales with right of return

When clients are entitled to return the products purchased in the event of dissatisfaction (consumer protection legislation for distance selling or marketing products in retail networks), I.R.I.S. undertakes to refund dissatisfied customers, subject to certain conditions and the deduction of certain expenses.


• if reliable estimates of future returns are available, based on experience and other relevant factors: upon delivery, at the contract sales price, with an appropriate right of return provision;

• if statistics are not available: upon expiry of the authorised return period, at the contract sales price.

Statistics are substantiated by a statement of deliveries and returns over a reference period of sufficient length, for the same or comparable customers.

Consignment sales

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For consignment sales, the sale is dependent on the purchaser reselling the goods in question to its own customers. Where such a clause is applied to a given reseller, generation of the corresponding revenue is therefore linked to sales of the product by the reseller. As a result, the reseller must provide regular inventory lists and the income can only be recognised by I.R.I.S. as the reseller's stock decreases.


• if inventory lists are available: as the reseller's stock decreases, at the contract sales price;

• if inventory lists are not available: upon expiry of the authorised return period, at the contract sales price.

The reseller’s inventory list is supplied as a letter, specifying the quantity and type of stock.

Sales where delivery is postponed at the request of the customer

In the event of a sale where everything is ready for delivery, but the customer requests that delivery be postponed, the corresponding income is recognised once the client has expressly given its postponed delivery instructions, without cancellation of the firm order, if the products to be delivered are available, identified and ready for delivery, at the contract sales price. Postponement is substantiated by the letter sent by the client, containing its instructions. The deliverability of the product can be substantiated by progress reports, internal test or validation reports or any other relevant information.

Sales subject to installation, validation or inspection

Sales subject to installation, validation or inspection offer a guarantee to the customer that the goods delivered are fault-free and function correctly. Acceptance by the customer takes the form of an acceptance report stating the compliance of the product and its correct functioning.

The income is recognised upon acceptance of the installation, validation or inspection, at the contract sales price.

Installation, validation or inspection is substantiated by a receiving slip, dated and signed by the customer.

Sales including an after-sales warranty

When I.R.I.S. offers a warranty against defective products, no provision is made for the warranty, given the very low level of returns of defective products.

When I.R.I.S. offers guarantees within the framework of a project, no provision is made for this commitment given the very low number of requests for intervention under such guarantees.

For certain software sales agreements that include an after-sales service for a period of more than six months, the income is recognised:

• for the software component: upon delivery, at the contract sales price minus the value of the warranty;

• for the warranty component: pro rata to the period covered, for the part of the contract sales price pertaining to the warranty. Valuation of complex projects

Each project is divided up into tasks according to the basic components of the offer: hardware, software, licence, parameterization, configuration, installation, training, support, maintenance, development.

The income is recognised according to the rules applicable to each component.

At each year-end, the progress is assessed, the costs incurred and the future expenditure required to complete the project are compared with the initial budget (days worked, work remaining to be done) and the progress is valued.

In the event of a budget overspend, the difference is covered in full.

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Segment reporting

Business segment reporting

Risks and rates of return are primarily determined by the differences between the products and services offered. The business units are structured, organised and managed independently, depending on the products and services offered, with each segment supplying different products and services and targeting different markets. The internal financial reporting system reports to the Board of Directors, based on analyses of performance and profitability by operations segment.

Description of the business segments

Products & Technologies:

I.R.I.S. Products & Technologies develops Intelligent Document Recognition technologies and software packages and markets its portfolio of products around the world through strong partnerships. Thanks to increasing investment in R&D, for over twenty years I.R.I.S. has been developing highly innovative software packages, for both personal and business users, all of which are based on proven proprietary technologies: high-speed scanning, automatic document indexing, Optical Character Recognition (OCR) for printed text and Intelligent Character Recognition (ICR) for handwritten text, Intelligent Document Recognition (IDR), automatic form recognition (forms, free-forms), automatic invoice recognition, automatic document classification, hyper compression of colour images (iHQC™), generation of all document formats (pdf, pdf/a, xps, .docx, odt, xml etc.), mobile scanning peripherals: pen scanners, business card scanners, mobile scanners, etc.

I.R.I.S. Products & Technologies markets software solutions throughout the world by means of OEM licence agreements, via value-added resellers (VARs), IT distribution and Internet sales channels.

In this segment, I.R.I.S. develops software products sold under the I.R.I.S. brand: ReadirisTM Pro, ReadirisTM Corporate, ReadirisTM Home, IRIS DocumentTM server, IRIS PowerscanTM, IRISCaptureTM Pro, IRISCaptureTM Pro for Invoices and Cardiris. I.R.I.S. also develops products with a hardware component, such as IRISPenTM (pen scanner), IRISCardTM (business card reader), IRIScan AnywhereTM and IRIScanTM (portable A4 colour scanner) and IRISNotes. Finally, I.R.I.S. develops software products sold under customer brands.

This segment is based on a business model characterised by:

• indirect sales: I.R.I.S.’s customers are scanner manufacturers, computer hardware distributors and value-added resellers (VARs)

• international sales: this is a global niche market

• marketing that focuses on the products and their technical features

• a short sales cycle (under three months)

• stiff competition which is concentrated among a handful of international players

• a unit selling price that is usually less than €10,000

• a high gross margin which must cover ongoing short-cycle R&D investments, among other expenses. Professional Solutions

I.R.I.S. Professional Solutions enables companies and public authorities to find innovative expertise and high-tech solutions for the efficient management of documents, information flows and IT infrastructures, through a single company.

I.R.I.S. provides professional solutions for managing electronic documents, their content and their life cycle, for the public sector (European institutions, ministries, regional and local authorities), financial sector (banks and insurance companies), tertiary sector, associations (especially international professional associations) and industry. These solutions

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include hardware (scanners and servers), specialized software and services (technical architecture, functional analysis, development, installation, training, support and maintenance).

The software packages include products produced by I.R.I.S. Products & Technologies and applications developed by I.R.I.S. Professional Solutions, as well as products produced by third parties. The hardware used includes scanners, servers, storage entities and accessories purchased (directly or indirectly) from international manufacturers.

I.R.I.S. is a preferred partner in all of its domestic markets (France, Belgium, Luxembourg and the Netherlands) and in major international invitations to tender, thanks to the experience of its consultants, developers, archivists, project leaders and system engineers.

I.R.I.S. is also the leading provider of services, hardware and software to deploy and optimise complex IT infrastructures within the Belgian, Luxembourg and French markets. Customers aim to implement an infrastructure consisting of a mainframe and open systems and applications that has been optimized to meet their current and future requirements. I.R.I.S. has made its presence felt in this very specialized segment through the quality of the systems architecture it recommends and is aiming to extend its global reach.

This segment is based on a business model characterised by:

• direct sales: I.R.I.S.’s customers are companies (private sector) and authorities (public sector) that use the solutions for their own purposes

• local sales: the proximity, responsiveness and availability of technicians are essential factors for the success of the Group’s projects

• marketing that focuses on listening to customers’ needs and providing solutions that meet them

• a long sales cycle (over three months)

• stiff competition from IT service companies

• a unit sales price that is usually more than €10,000 (and can reach several million euros)

• a lower gross margin, due to the components purchased from third parties.

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Year ending 31/12/2012 (€) Professional

Solutions Products &

Technologies Unallocated TOTAL

Turnover from external customers 78,326,456 21,659,632 0 99,986,088

Inter-segment turnover 282,115 1,356,638 1,638,753

Inter-segment eliminations -282,115 -1,356,638 -1,638,753

Gross margin by segment 44,402,833 17,216,787 0 61,619,620

Other operating income 1,299,846 2,516,432 64 3,816,342

Income by segment 79,626,301 24,176,064 64 103,802,430

Segment expenses -76,478,508 -18,948,111 -3,545,179 -98,971,798

Operating income by sector 3,147,794 5,227,953 -3,545,115 4,830,632

Amortisation expense -1,430,234 -947,008 -394,352 -2,771,594

Other non-cash expenses -37,301 347,455 0 310,154

Financial result -11,468 -11,468

Income from associated companies

Earnings before tax 4,819,164

Tax -1,296,122 -1,296,122

Deductions and deferred taxes 105,687 105,687

NET PROFIT 3,628,729

Segment assets 71,309,681 21,092,297 92,401,978

Unallocated assets 19,885,120 19,885,120

Total segment assets 71,309,681 21,092,297 19,885,120 112,287,098

Segment liabilities 32,216,943 6,165,873 38,382,816

Unallocated liabilities 73,904,282 73,904,282

Total segment liabilities 32,216,943 6,165,873 73,904,282 112,287,098

Intangible assets 1,170,778 1,292,868 669 2,464,315

Tangible assets 792,573 125,603 6,179 924,355

Acquisition of segment assets 1,963,351 1,418,471 6,848 3,388,670

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Year ending 31/12/2011 (€) Professional

Solutions Products &

Technologies Unallocated TOTAL

Turnover from external customers 99,993,953 21,298,367 121,292,320

Inter-segment turnover 26,171 944,333 970,503

Inter-segment eliminations -26,171 -944,333 -970,503

Gross margin by segment 44,636,735 16,589,235 0 61,225,970

Other operating income 3,202,240 1,747,918 0 4,950,158

Income by segment 103,196,193 23,046,285 0 126,242,478

Segment expenses -101,821,812 -16,843,717 -2,495,361 -121,160,890

Operating income by sector 1,374,381 6,202,567 -2,495,361 5,081,588

Amortisation expense -1,269,078 -451,788 -375,940 -2,096,805

Other non-cash expenses -269,185 -196,261 0 -465,445

Financial result -171,560 -171,560

Income from associated companies

Earnings before tax 4,910,028

Tax -2,204,541 -2,204,541

Deductions and deferred taxes 1,038,210 1,038,210

NET PROFIT 3,743,697

Segment assets 79,849,178 19,652,001 99,501,179

Unallocated assets 15,246,552 15,246,552

Total segment assets 79,849,178 19,652,001 15,246,552 114,747,731

Segment liabilities 35,136,717 5,897,527 41,034,244

Unallocated liabilities 73,713,487 73,713,487

Total segment liabilities 35,136,717 5,897,527 73,713,487 114,747,731

Intangible assets 2,213,243 1,310,952 1,419 3,525,614

Tangible assets 702,510 229,917 17,202 949,629

Acquisition of segment assets 2,915,753 1,540,868 18,621 4,475,243

The unallocated items represent Group assets, liabilities, income and expenses which cannot be attributed to the different business segments, as well as non-segment assets, liabilities, income and expenses.

Since the Group's financial policy and income tax are managed at Group level, the financial income and tax expense are not allocated to the operational segments.

Deferred taxes, goodwill and derivative financial instruments are not included in the segment assets insofar as they are managed at Group level.

Deferred taxes, taxes payable and borrowings etc. are not included in the segment liabilities insofar as they are managed at Group level.

The transfer price of transactions between business segments is established on an arm’s length basis, in a similar manner to transactions with third parties. Transfer prices are in line with those practised for transactions with our approved resellers.

Changes in turnover and the gross margin

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In 2012, total operating income fell by -17.78%, compared with 2011. This is explained by poorer hardware sales with a low profit margin. Gross margin (which is the most relevant indicator for the measurement of I.R.I.S. activity) was stable (up +0.64%) when compared to 2011 (€61.6 million for 2012 and €61.2 million in 2011). The breakdown of operating income by activity sector is as follows: Professional Solutions was down by 22.84%, while Products & Technologies achieved 4.90% growth.

Professional Solutions achieved turnover of €78,326,456 from external customers in 2012 compared with €99,993,953 in 2011 (down by -21.67%). Despite the large drop in sales, gross margin remained stable at -0.52%, with the figures being €44,402,833 in 2012 compared to €44,636,735 in 2011. The gross margin percentage was up, representing 56.69% of sales in 2012 (44.64% in 2011), with hardware sales forming a lower proportion in the composition of the sales figure.

Products & Technologies achieved sales of €21,659,632 in 2012, showing a small amount of growth (+1.70%) when compared to the 2011 figure of €21,298,367. Gross margin was €17,216,787 in 2012 representing growth of 3.78% compared to €16,589,235 in 2011. Gross margin was 79.49% of turnover in 2012, compared with 77.89% in 2011.

2012 was marked by continuing difficult market conditions, with some orders still being postponed and lower activity levels in some of the Professional Solutions sector business units. The action plans implemented in some business units have borne fruit. Some of our growth initiatives proved successful, for example: (i) our partnerships with value added resellers (VAR) and business process outsourcers (BPO) (up by +12% over the year); (ii) our business with Canon (up by +15% over the year) and (iii) positive growth in sales of enterprise solutions in the USA. These successes have compensated for some negative trends in other markets such as hardware sales, which have affected the consolidated sales figure. By year-end we had achieved cash flow from operations (EBITDA) which was up by +5,90% at a figure of €7,602,226 in 2012 compared with €7,137,490 at year-end 2011; income from operations was down by -4.94% and net profit was down by -3.07% over the whole year. Income from some activities and the company's actions to improve the organization within some business units, cost structure reduction and relaunch of marketing activities should all contribute to the increased profitability of I.R.I.S. in the future. I.R.I.S. still has the opportunity to improve its access to global markets (EMEA, North and South America and Asia) and forecasts a growing demand for its technologies and solutions in several important market segments.

Income from operations

The group's operating income for 2012 fell by -4.94%, compared with 2011, for the reasons explained above. The profitability from operations can be considered as reasonable in view of the generally difficult economic environment and the elements of non-recurrent expense, especially non-recurrent legal costs in connection with the Canon takeover bid.

The operating income by segment in 2012 was as follows:

- €3,147,794 for Professional Solutions - €5,227,953 for Products & Technologies

A number of positive elements were scattered throughout the year:

- the partnership with Canon continues to develop well, as confirmed by the deployment of a large number of solutions for small and medium-sized companies throughout Europe.

- actions undertaken to change the operations structure of some entities resulted in major cost-savings from 2012 onwards

- sizeable contracts were signed with distributors, OEM partners, value added resellers (VAR), business process outsourcers (BPO) and a number of different companies in all activity sectors.

I.R.I.S. management considers that the company is operating in a buoyant growth market, and this view is confirmed by a number of external sources and analysis reports. Management is, therefore, convinced that the company will be able to seize a share of this market and achieve significant growth in its turnover and profitability, thanks to appropriate investment in marketing, sales activity and R&D. The group is therefore maintaining its strategic initiatives and in particular is continuing with its R&D investment policy and its efforts to innovate, to enable the group to continually improve and enhance the range and quality of the products and services provided, and to enter new markets. I.R.I.S. products enable our clients to achieve productivity improvement and directly contribute to their efficiency. I.R.I.S. management is therefore confident about the company's future income prospects and growth.

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Geographic zone reporting

The geographic zones are determined depending on the location of Group assets.

Segment income from external customers is presented by geographic zone, according to the geographic location of the customers. The geographic zones are grouped together as follows: Belgium; other countries of Europe, the Middle East and Africa (EMEA); North America and Asia; Oceania; other countries.

Segment assets and (tangible and intangible) asset acquisition costs are presented by geographic zone according to the geographic location of the assets. Segment assets are established in the zones where the group's entities are geographically located, i.e. Belgium, the other countries of Europe, the Middle-East and Africa, North America and Asia.

Year ending 31/12/2012 (€) Belgium EMEA

(excluding Belgium)

North America

Asia Unallocated TOTAL

External turnover 44,881,799 46,610,965 5,479,217 3,014,106 0 99,986,087

Segment assets 58,861,056 31,468,627 1,946,617 125,678 0 92,401,978

Unallocated assets 0 0 19,885,120 19,885,120

Total segment assets 58,861,056 31,468,627 1,946,617 125,678 19,885,120 112,287,098

Intangible assets 2,134,941 328,705 0 0 669 2,464,315

Tangible assets 518,699 398,076 1,234 167 6,179 924,355

Acquisition of segment assets 2,653,640 726,781 1,234 167 6,848 3,388,670

Year ending 31/12/2011 (€) Belgium EMEA

(excluding Belgium)

North America

Asia Unallocated TOTAL

External turnover 51,927,407 60,992,318 5,729,906 2,642,689 0 121,292,320

Segment assets 61,682,404 35,647,344 2,048,166 123,265 0 99,501,179

Unallocated assets 0 0 15,246,552 15,246,552

Total segment assets 61,682,404 35,647,344 2,048,166 123,265 15,246,552 114,747,731

Intangible assets 2,173,581 1,350,614 0 0 1,419 3,525,614

Tangible assets 678,844 250,114 0 3,469 17,202 949,629

Acquisition of segment assets 2,852,425 1,600,727 0 3,469 18,621 4,475,243

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Information concerning the principal customers The income from ordinary activities is spread over a large number of customers present in varied business segments. Income from ordinary activities arising from transactions with a single external customer does not exceed the threshold of 10% of I.R.I.S.'s total income from ordinary activities. For the years from 2010 to 2012 the breakdown of income from ordinary activities by business segment for external customers is shown in the table below:

Customer business segment 31/12/2012 31/12/2011 31/12/2010

Industry and services 31% 34% 28%

Public sector 18% 11% 16%

Banking and insurance 18% 27% 24%

Distribution channels 15% 12% 10%

International organisations 13% 11% 17%

End users 4% 4% 3%

Miscellaneous 1% 1% 2%

Notes to financial statements

1 - Income from ordinary activities

Income from ordinary activities fell by -17.57% between 2011 and 2012 to €99,986,088 compared with €121,292,320 in 2011 and €119,488,557 in 2010. This was due to:

• lower sales of hardware, which form a high proportion of sales but have a lower profit margin

• internal growth within many of I.R.I.S. Group's business activities

• conclusion of excellent contracts in both software publishing and solution integration

• ever increasing interest in I.R.I.S. solutions The split of income from ordinary activities between products and services is as follows:

Type of solution offered 2012 Split 2011 Split

Sales of products and hardware (Software, Hardware) 43.93% 51.17%

Sales of services and maintenance agreements 56.07% 48.83% 2 – Self-constructed capital assets and other operating income

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Self-constructed capital assets 1,817,771 3,140,921 776,785

Other operating income 1,998,571 1,809,237 2,378,995

In the last few years I.R.I.S. S.A. has greatly increased its presence in the mobile document capture applications segment. In 2009, I.R.I.S. commenced a 3-year development programme to extend its offer to mobile platforms such as Smartphones and tablet PCs. In 2010, I.R.I.S. also launched a project to design and develop a new electronic document management solution for business, based on breakthrough technologies. This solution is primarily targeted at the small to medium-sized business market and departmental requirements of major accounts. This project is based on the technologies developed by I.R.I.S. and its experience in integrating solutions currently offered by the major software publishers. It is aimed at innovative areas that have not yet been addressed, with an eye on the market's future development and meeting the needs of businesses.

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In 2011, with a view to significantly increasing its penetration of Asian markets, I.R.I.S. launched a project to develop the necessary technologies to provide a decisive competitive advantage in these markets in which their written languages are quite different to those used in Western markets. In 2011 I.R.I.S. developed some new applications to improve the performance, management, monitoring and reporting features of its hosting and "Managed operations" solutions. I.R.I.S. continued to develop these programmes in 2012. For 2012, investment in these projects totalled €1,817,771 compared with €3,080,400 in 2011. Other operating income mainly comprises the contribution of employees for the private use of company property (vehicles and benefits in kind), insurance payouts for claims, R&D tax credits in France, income from job creation grants and revenue from subletting.

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Insurance 64,781 105,477 120,121

Employee contribution to benefits in kind 762,642 733,451 741,449

Tax credit 389,281 386,000 465,900

Grants 358,195 112,802 191,551

Recovery of expenses 320,357 301,271 557,419

Rental income 0 0 0

Miscellaneous 102,985 154,237 257,155

Sale of fixed assets 330 15,999 45,400

Total 1,998,571 1,809,237 2,378,995

The various government subsidies and assistance received and recognised in income for the year are presented below:

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010 Job creation and training grants 101,842 96,754 184,301

Export subsidies 12,000 9,509 440

Investment subsidies 6,741 6,539 6,810

Research grants 626,893 386,000 465,900

Total 747,476 498,802 657,451

Grants that were capitalized in 2012 related to job creation and training aid (€101,842), export aid (€12,000), hardware purchase aid (€6,741) a research related grant of €389,281 for technology developments achieved in 2012 and a grant amount of €237,612 for research that was capitalized gradually based on amortization of the assets produced from such grants. Some technology development projects were carried out under grants relating to research and development of new products and these will be capitalized in the periods during which the costs relating to these investments and for which the grants were intended are recognized as expenses. This amortization is, therefore, carried out from the date at which these assets start to be used. Liabilities relating to these grants are recorded in the accounts at the time when they become more than reasonably probable. The amounts relating to these assets are presented in the balance sheet as deferred income for the part relating to the expenses that have not yet been taken into income. At 31/12/2012, an amount of €1,910,198 was, therefore, shown in deferred income in respect of grants already received or due to be received. The grants that have been awarded are not subject to any other conditions other than the condition that the allowable expenses are incurred within the context of those technology development projects for which the grants are intended.

3. Purchases

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Costs of supplies, purchases of raw materials, finished products, goods and change in inventory incurred during the financial years were €38,366,468 in 2012 €60,066,350 in 2011 and €59,968,888 in 2010. The variation in purchases is in line with the change in turnover and the fall between 2011 and 2012 is due to lower sales of third party hardware. 4. Goods and other services

Goods and other services amounted to €22,363,407 in 2012 compared with €21,306,200 in 2011 and €18,478,411 in 2010. The increased level of these charges between 2011 and 2012 is primarily explained by an increase to the number of consultancy contracts and sub-contracted contracts for some new projects in 2012, especially in connection with the expansion of some of the company's European Commission activities. The increase was offset by some cost-savings achieved in other activities.

Goods and other services include the rental expenses for real estate, vehicles, equipment and other rental charges totalling €3,561,888 in 2012, €3,435,256 in 2011 and €3,335,027 in 2010. There was no income from subletting in 2011 or 2010, compared to income of €22,815 received in 2009.

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Other rental 78,632 50,466 59,956

Equipment rental 248,169 228,464 352,867

Vehicle rental 2,172,890 2,142,162 2,000,565

Real estate rental 1,062,197 1,014,164 921,640

Total 3,561,888 3,435,256 3,335,028

Goods and other services also include other external purchases (electricity, water, telephone, consultancy and subcontracting fees, marketing and advertising expenses) necessary for the Group to function properly and to develop.

5. Payroll expense At the end of 2012, I.R.I.S. Group had 487 employees (75.4% male and 24.6% female), compared with 496 in 2011 (76.6% male and 23.4% female) and 533 in 2010 (77.9% male and 22.1% female). Their average age was 38.83 at the end of 2012, compared with 38.57 at the end of 2011 and 38 at the end of 2010.

The average workforce was 474.19 full-time equivalents in 2012 (-4.96%), 498.99 full-time equivalents in 2011 and 514.77 full-time equivalents in 2010. The average workforce in 2010, 2011 and 2012 in full-time equivalents was distributed as follows between the Group’s various entities:

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Full-time equivalents 2012 2011 2010

Company Management

personnel Employees Total

Management personnel

Employees Total Management

personnel Employees Total

I.R.I.S. Solutions & Experts 3.01 42.22 45.23 4.64 53.28 57.92 3.50 65.11 68.60

I.R.I.S. France 3.01 54.26 57.27 6.35 58.23 64.58 6.59 66.68 73.27

I.R.I.S. S.A. 4.61 63.44 68.05 4.60 56.45 61.05 4.27 55.41 59.69

I.R.I.S. Financial Services 1.90 40.58 42.48 4.79 52.34 57.13 6.00 52.86 58.86 I.R.I.S. Solutions & Experts Europe 0.00 43.88 43.88 0.00 44.49 44.49 0.92 61.67 62.59

I.R.I.S. ICT 1.00 61.01 62.01 1.00 65.18 66.18 1.00 59.37 60.37

I.R.I.S. AG 3.01 34.66 37.67 3.00 30.78 33.78 3.95 27.71 31.66

I.R.I.S. Netherlands 3.01 30.52 33.53 1.90 28.90 30.80 1.60 22.43 24.03

I.R.I.S. Luxembourg 0.87 29.62 30.49 2.87 32.03 34.90 3.20 27.72 30.92

I.R.I.S. GROUP 3.01 12.41 15.42 3.00 13.00 16.00 3.00 12.00 15.00

I.R.I.S. INC 1.00 8.26 9.26 1.00 9.13 10.13 1.00 9.18 10.18

I.R.I.S. Hong Kong Ltd 1.00 5.27 6.27 1.00 5.42 6.42 1.00 3.64 4.64

Ondit 0.00 12.07 12.07 0.00 0.00 0.00 0.00 0.00 0.00

I.R.I.S. Nordic 0.00 10.56 10.56 0.25 14.36 14.61 1.00 13.54 14.54

I.R.I.S. Denmark 0.00 0.00 0.00 1.00 0.00 1.00 0.42 0.00 0.42

Total 25.43 448.76 474.19 35.40 463.59 498.99 37.45 477.32 514.77

Payroll expense - € - Year ending: 31/12/2012 31/12/2011 31/12/2010

Gross remuneration 27,809,820 28,426,202 28,431,782

Social security contributions 6,117,793 7,180,643 7,172,750

Provisions for pensions 78,567 -27,010 37,321

Group insurance 572,315 544,282 541,016

Share-based payments 109,583 70,185 54,486

Others (training, recruitment, provisions for leave etc.) 529,300 879,380 -36,695

Total 35,217,378 37,073,682 36,200,660 The workforce has reduced between 2011 and 2012, mainly as a result of some teams being reorganized (changes to some management structures for the most part). This reorganization generated major cost-savings in 2012. Nevertheless, some other teams were strengthened to match the expected growth in their activity.

Pension plans were put in place in a number of the group’s entities. These are defined contribution plans and the companies’ only obligation is to pay the monthly premiums. Some of the plans include a minimum return obligation on the premiums paid. This return is almost fully guaranteed by insurance companies. The balance only represents an insignificant amount and does not currently require an additional provision to be made.

The Group has retirement benefit commitments in France. Valuation of these commitments at the end of 2012 resulted in recognition of charges totalling €78,567. These pension plans are described in Note 26 Retirement benefit and pension commitments.

The expenses recognised for group insurance plans totalled €572,315 in 2012, €544,282 in 2011 and €541,016 in 2010.

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Other personnel expenses break down as follows:

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Legal insurance 72,534 104,221 146,612

Other personnel costs -239,975 -40,870 -323,169

Training costs 131,580 164,850 254,947

Provisions and reversals of provisions for salaries 465,308 578,455 -211,178

Recruitment costs 99,853 72,724 96,093

Total 529,300 879,380 -36,695

6. Amortization and depreciation of fixed assets

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Amortization of intangible assets 1,619,985 905,957 815,940

Depreciation of tangible assets 1,151,609 1,190,848 1,120,826

Total 2,771,594 2,096,805 1,936,766

More details are provided in Note 14 – Intangible assets and Note 15 – Tangible assets.

7. Inventory write-down, depreciation of trade receivables and provisions

The table shown below shows the amounts recognised in income in 2010, 2011 and 2012. Further information about depreciation and the provisions made is given in Note 17 – Inventory, Note 18 – Work in progress, Note 19 – Trade receivables and other debtors, and Note 25 – Provisions.

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Depreciation for doubtful accounts and orders in progress -155,180 -299,579 -101,608

Depreciation for obsolete or defective stock 544,486 -143,109 -318,304

Provisions for liabilities and charges -147,489 275,817 121,978

Depreciation on work in progress 0 0 0

Provisions for order fulfilment 96,904 -108,801 98,823

Provisions for litigation -244,393 384,618 23,155

Provisions for other liabilities and charges 0 0 0

During the 2012 financial year I.R.I.S. booked losses on doubtful accounts for a total of €455,270 to cover the risk of non-payment by customers. On the other hand, ongoing debt recovery efforts have managed to reduce the outstanding trade receivables as far as possible, and also to recover receivables that had previously been assumed lost, resulting in reversals of losses on doubtful accounts and orders in progress for a total of €300,090. Therefore the net effect is €-155,180.

Depreciation for obsolete stocks was recognized for a total of €227,937 in 2012, in respect of obsolete stock, defective products and old product versions. In previous years, inventory write-down was recognized to cover the risk of loss of suppliers and defective items being irreplaceable and the risks connected with specific technical problems of some components such as lenses, batteries, etc. As the uncertainties about some suppliers have now disappeared and the technical problems experienced in 2011 were resolved in 2012, reversals of inventory write-down were recognized in this financial year for a total figure of €772,423. The net positive effect on provisions for inventory write-down is, consequently, €544,486.

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Provisions had been made in previous years for losses on orders in progress, to cover overspend on some projects. In 2012 a total of €133,362 of these provisions were used as the projects advanced. An additional provision for a total of €36,458 was recognised at 31/12/2012, to cover anticipated overspend on projects.

A few employee-related disputes were settled in 2012 by settlements requiring use of provisions made in previous years and these amounted to €124,093. New provisions in an amount of €368,486 have been made to cover or modify the estimated risk incurred in some new disputes that have emerged following the reorganisation plan that was implemented in 2011 and 2012. In total, use and reversals of provisions led to increased expenses and provisions of €244,393 for labour-related disputes.

8. Other operating expenses

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Fines, penalty charges 5,299 23,947 709

Real estate tax 74,313 71,922 35,948

Sundry operating taxes 269,526 264,591 294,247

Others 145,630 90,522 128,316

Total 494,768 450,982 459,220 Other operating expenses mainly comprise: - sundry operating taxes (professional tax, local tax, tax on motor vehicles etc.) for a total of €269,526 in 2012, €264,591 in 2011 and €294,247 in 2010. - real estate tax totalling €74,313 in 2012, €71,922 in 2011 and €35,948 in 2010. - sundry operating expenses of €145,630 in 2012, €90,522 in 2011 and €128,316 in 2010. 9. Financial income and financial expenses

Financial income (€) 31/12/2012 31/12/2011 31/12/2010 Foreign exchange gains 274,493 588,578 531,677

Interest received 107,277 56,227 65,979 Others 16,082 39,199 28,128

Total 397,852 684,004 625,784

Financial expenses (€) 31/12/2012 31/12/2011 31/12/2010 Foreign exchange losses -181,789 -439,058 -373,941 Interest paid -127,498 -190,380 -255,893

Bank charges and other borrowing costs -87,190 -115,137 -143,373 Others -12,843 -110,990 -40,890

Total -409,320 -855,564 -814,097

Net financial income (€) 31/12/2012 31/12/2011 31/12/2010 Foreign exchange gains (losses) 92,704 149,520 157,736 Interest received 107,277 56,227 65,979

Interest paid -127,498 -190,380 -255,893 Bank charges and other borrowing costs -87,190 -115,137 -143,373

Others 3,239 -71,791 -12,762 Total -11,468 -171,560 -188,313

10. Corporate income tax

The statutory tax rate in Belgium of 33.99% applied to the consolidated earnings before tax of €4,819,164 results in a tax expense of €1,638,034. The difference compared with the actual consolidated income tax of €1,190,435 resulting in an effective tax rate of 24.70% in 2012 (compared with tax of €1,166,331 resulting in an effective tax rate of 23.75% in 2011 and tax of €1,035,115 resulting in an effective tax rate of 20.24% in 2010) is the result of:

• The impact of disallowed expenses

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• Tax increases and adjustments

• Consolidation entries with no impact on tax

• Taxation, at different rates, of entities in countries other than Belgium (France, United States, Luxembourg, the Netherlands, Germany, Hong Kong, Norway and Denmark)

• The beneficial effects of application of the law on tax deduction for venture capital (notional interest) and the impact of tax exemption for patent income in Belgium and France.

• The negative effects of new taxation measures applicable in 2012: new taxation on some benefits in kind, some unused tax deductions (notional interest) in a financial year unavailable for carrying forward, etc.

•

(€) – Financial year ending: 31/12/2012 31/12/2011 31/12/2010

Corporate income tax for the year -1,279,336 -1,924,394 -1,639,773 Adjustment of corporate income tax from previous financial years -16,786 -280,147 38,274

Corporate income tax -1,296,122 -2,204,541 -1,601,499

Transfers to deferred tax assets 409,768 1,185,950 623,448

Use of deferred tax assets -163,729 -61,226 -120,318

Transfers to deferred tax liabilities -285,149 -234,469 -71,141

Use of deferred tax liabilities 144,797 147,956 134,395

Deferred taxes 105,687 1,038,211 566,384

Tax -1,190,435 -1,166,331 -1,035,115

Consolidated earnings before tax 4,819,164 4,910,034 5,114,145

Theoretical tax at the rate of 33.99% 1,638,034 1,668,921 1,738,298

Retirement benefits -26,186 9,002 -9,926

Impact of disallowed expenses and definitively taxed income 147,628 204,686 279,977

Impact of deduction for venture capital -308,787 -505,018 -438,365

Impact of the exemption of patent income -411,102 -373,170 -300,013

Tax shelter impact 0 0 -44,724

Additional tax charged 10,287 23,250 12,880

Adjustment of taxes 16,786 280,146 -38,274

Impact of taxation at different rates 123,776 -141,486 -164,738

Corporate income tax 1,190,435 1,166,331 1,035,115 Effective income tax rate 24.70% 23.75% 20.24%

A tax credit of €389,281 was entered in “Other operating income” in 2012, compared with €386,000 in 2011 and €465,900 in 2010. These amounts do not reduce the tax base but do reduce the tax liability (government receivables can be offset against the tax liability).

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Deferred tax assets and liabilities are calculated using the tax rates adopted on the date of recognition.

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Opening deferred tax assets: 1,861,146 795,209 263,394

Deferred tax assets recognised:

Recognition of deferred tax assets: 0 0 0

- based on amortization of intangible assets: 0 0 0

- Tax losses recoverable within 5 years 396,709 1,187,736 619,369

- Provisions for pensions 26,186 0 9,926

Use of deferred taxes

- amortisation of intangible assets: -4,345 -52,226 -100,108

- Recovery of earlier tax losses -159,384 0 -20,210

- Business combination (recoverable losses) 0 0 0

- Provisions for pensions 0 -9,001 0

- Offset of assets and liabilities from the same tax entity -13,818 -60,572 22,838

Deferred tax assets at year-end: 2,106,494 1,861,146 795,209

Additional deferred tax assets were recognized for an amount of €396,709 in 2012 to take account of tax losses that are recoverable within five years. These losses were due to one-off events. Usage or reversals of deferred tax assets were recognized for an amount of €159,384 corresponding to recovered losses or amounts that are no longer deemed to be recoverable within five years.

Some deferred tax assets were also recognised in respect of different accounting and tax values in the treatment of tangible assets (business assets that were tax-deductible but eliminated on consolidation). A total of €100,108 was used in 2010, €52,226 in 2011 and €4,345 in 2012 following fiscal depreciation for these financial years.

Finally, recognition of retirement benefits and pension plans resulted in recognition of a deferred tax liability of €9,926 in 2010, use of €9,001 in 2011 as a result of a reduction in the retirement benefit debt recorded in 2011 and an amount of €26,186 was recognized in 2012.

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Deferred tax liabilities at start of year: 2,226,718 2,200,544 2,240,441

Deferred tax liabilities recognised:

- based on amortization of intangible assets: 262,736 209,603 40,618

- based on depreciation of tangible assets: 25,099 25,099 31,042

Use of deferred taxes

- based on amortization of intangible assets: -142,615 -142,615 -132,975

- based on depreciation of tangible assets: -2,181 -5,340 -1,420

- Offset of assets and liabilities from the same tax entity -13,818 -60,572 22,838

Deferred tax liabilities at year-end: 2,355,939 2,226,719 2,200,544

Deferred tax liabilities totalling €2,355,939 were recognised at year-end 2012. These result from the valuation of the building, customers and technologies carried out during allocation of the acquisition cost of I.R.I.S. ICT, I.R.I.S. Nederland and I.R.I.S. AG, and differences between IFRS and Belgian accounting and tax treatment of certain capital assets, leading to different rates of accounting and fiscal depreciation. Additional deferred tax liabilities were booked in amounts of €262,736, €209,603 and €40,618 in the years 2012, 2011 and 2010 respectively.

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Deferred tax liabilities used in respect of amortization of intangible assets amounted to €142,615 in 2012 and 2011 and a figure of €132,975 in 2010.

An amount of €13,818 was offset between deferred tax assets and liabilities present within the same tax entity.

11. Earnings per share

All of the shares of I.R.I.S. Group are ordinary shares. The basic earnings per share figure is calculated by dividing the profit attributable to the holders of ordinary shares by the weighted average number of outstanding shares during the period.

The diluted earnings per share figure is obtained by dividing the profit attributable to the holders of ordinary shares by the weighted average number of ordinary shares, adjusted depending on the weighted average number of potential dilutive ordinary shares and, in this case, by the weighted average number of outstanding dilutive warrants (in the money) during the period.

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Income for calculation of the basic earnings per share 3,628,729 3,743,697 4,079,030

Effect of potential dilutive ordinary shares 0 0 0

Income for calculation of the diluted earnings per share 3,628,729 3,743,697 4,079,030

Weighted average number of shares for calculation of the basic earnings per share 1,824,747 1,843,661 1,841,064

1999 stock option plan 0 0 0

2005 stock option plan 0 0 585

2009 stock option plan 3,500 4,164 6,000

2011 "unconditional" stock option plan 17,746 0 0

2011 "conditional" stock option plan 20,000 0 0

2015 stock option plan 30,246 0 0

Effect of potential dilutive ordinary shares 71,492 4,164 6,585

Weighted average number of shares adjusted for calculation of the diluted earnings per share

1,896,239 1,847,825 1,847,648

Basic earnings per share 1.99 2.03 2.22

Diluted earnings per share 1.91 2.03 2.21

12. Dividends

Dividends paid during the year Based on the 2009 accounts, the 2010 General Meeting decided to distribute a total dividend of €869,534. This dividend was released for payment on 31 May 2010. Based on the 2010 accounts, the 2011 General Meeting decided to distribute a total dividend of €1,063,091. This dividend was released for payment on 31 May 2011. Based on the 2011 accounts, the 2012 General Meeting decided to distribute a total dividend of €1,305,550. This dividend was released for payment on 31 May 2012.

A total of €1,291,948 was paid in respect of dividends for the various years during 2012. A balance of €399,013 was recognised in the accounts at 31 December 2012 in respect of dividends to be paid for all past financial years.

Dividend distribution proposal

Given the results of the 2012 financial year, the company's outlook and subsequent events, the Board of Directors has submitted a proposal to the General Meeting of 21 May 2013 that no dividend shall be distributed for the last financial year.

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13. Goodwill

Overview (€) – Year ending: 31/12/2012 31/12/2011 31/12/2010

Opening goodwill 28,546,437 28,546,437 28,497,103

Acquisition 0 0 49,334

Allocation of acquisition price 0 0 0

Impairment 0 0 0

Goodwill at year-end 28,546,437 28,546,437 28,546,437

The amount of goodwill increased by €49,334 in 2010, due to recognition of an additional price of €49,334 for the acquisition of I.R.I.S. Nederland which was recorded on payment of the last additional price and maximum achievement of targets. No other movements occurred subsequently. Allocation of goodwill to the various cash-generating units (CGU)

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010 Professional Solutions – ECM FBLI 6,882,687 6,882,687 6,882,687 Professional Solutions - ECM NL/NO/DK 3,566,510 3,566,510 3,566,510

Professional Solutions – ICT IT Infrastructure 11,808,944 11,808,944 11,808,944 Products & Technologies 6,288,295 6,288,295 6,288,295 Total 28,546,436 28,546,436 28,546,436

The cash-generating units or CGUs to which the goodwill could be allocated were determined as the smallest entities that could be identified that for the most part independently generate cash flows, taking into consideration:

- the activities, product and services they offer, - their organization, business model, management, operational control - the specific activity sectors of their customers - their markets and marketing approach, distribution channels - their location.

During 2011, the teams, organizations, management structures, management and control and business model of the ECM BE, ECM Lux and ECM France business units have undergone extensive remodelling and have been greatly simplified.

The ECM activity in Belgium, Luxembourg and France was using team and management structures that were not optimal. The teams at ECM Belgium, ECM France, ECM Luxembourg and ECM International Organization have been reorganized as a whole and grouped together into a single entity. The structure of the new entity should eliminate duplications of activity and address the international marketplace in a unified manner, which is already the case for other activities such as P&T, ICT, ECM Legal. The sales and technical teams have been combined under a single management team with a single business model and a portfolio of common solutions.

The ECM activity (Belgium, France, Luxembourg, IO) now operates as a single autonomous unit, which no longer has locally managed separate teams. The business model and business plans have been unified. The previous CGUs that were locally controlled have, therefore, been merged into a single CGU: ECM FBLI. The goodwill for these entities has also been combined.

The ECM NL and Nordic entities offer "vertical" solutions for specific activity sectors, i.e. legal services and consultancy firms. These entities have been combined into joint teams under the same management and offer their solutions to the international marketplace independently.

Products & Technologies develops Intelligent Document Recognition technologies and software packages and markets its portfolio of products around the world. This specific activity is managed and controlled by a single management structure, sales management and technical management, offering solutions worldwide.

The ICT Infrastructure activity provides services and supplies hardware and software to implement and optimize complex IT infrastructures internationally.

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Impairment tests

The book value of cash-generating units must be compared at their recoverable value. The book values to be compared include the recognised intangible assets (customers, technology, business assets, other intangible assets) after deducting deferred taxes, tangible assets (hardware, facilities etc.), stocks and orders in progress, and goodwill.

Depreciation tests are mainly based on determining the going concern value based on two models.

Under the first model, the going concern value is calculated by discounting future cash flows generated by the assets over their useful life and by the disposal of assets at the end of this period.

The going concern value is calculated based on a discounted cash flow for which I.R.I.S. uses the following values:

- 2013 financial budgets and the medium term 5-year plans for 2014-2017, that have been most recently approved by management

- extrapolation at a stable conservative growth rate (0 to 2%)

- application of the discount rate (WACC), based on parameters (risk-fee rate, risk premium, size premium, beta) observed in the market and used by external sources in order to analyse and value similar companies.

Budgets are constructed by taking into account known facts, order books, the structure of overheads on the basis of existing data and include opportunities and sales projections that have been identified as well as the required costs to achieve these objectives (additional staff hiring, sub-contracting and required hardware, etc.) Medium term plans include growth projections, sales opportunities and the costs to achieve these based on past experience, observed data and expected changes to the solution offerings, the entities concerned and the market in management's view. Beyond five years, the growth rate used is 0% in order to test the business plans in a prudent manner. To value the discounted cash flow, the discount rate (WACC) used was 11.79%, being the rate recently used to value I.R.I.S. in the prospectus for the takeover bid that is in progress, plus the addition of a size premium which values entities that are smaller than the entire I.R.I.S. Group. The parameters used to construct this discount rate are as follows: This rate is based on the hypothesis of financing entirely from shareholders' equity, which results in a more conservative rate than a rate that considers financing partly from borrowing which could be utilised for organisations of a smaller size. In order to test the models more stringently we also included a size premium when performing the test, which produced a rate of 11.79% which is extremely cautious.

The available cash flows and the terminal value were updated at the end of December 2012 by applying a discount rate of 11.79%. The assumptions that were used to determine this discount rate are also in line with the rates used by the financial analysts who track the Company.

These assumptions are based on:

� the Weighted Average Cost of Capital ("WACC") which is equivalent to the "cost of equity" given that the

Company is in a net positive cash flow position (100% equity);

� a beta of 1.2, which is in line with those used for sampling many comparable stock exchange listed companies

(previously, a beta of 0.82 was used);

� a risk-free rate of 2.72%;

� a market risk premium of 5.5%;

� a size premium of 2.47%.

The CGUs are located in geographical regions with similar profiles. They have similar risk profiles (similar size, identical sectors, country risk, exchange risk, liquidity risk, etc.) and activity profiles that are also very similar. In fact, the risk/investment/entity (CGU) profiles are also very close to the risk profile of I.R.I.S. itself, as a company.

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The WACC calculation made using comparable factors, sensitivity analyses for some shareholders' equity risk parameters (size risk, Beta systematic risk) gives convergent results and have led us to use a single common discount rate for valuation of the various CGUs, at a discount rate that is considered reasonable, fairly cautious and appropriate for the valuation of all the CGUs.

The estimates of future cash flows include net cash flows that will be received on sale of the asset at the end of its useful life. With a similarly cautious approach, management estimates the residual value at the end of the useful life, as at least equal to 130% of the gross margin.

Under the second model, the going concern value is calculated by discounting future cash flows generated by the assets over their useful life, and the residual value is calculated using a perpetual growth rate (Gordon-Shapiro constant growth model).

For each cash-generating unit, the value calculated is compared with the value of the goodwill and of the cash-generating unit to see whether or not impairment has occurred.

I.R.I.S. used the same parameters and values as were used under the first method in order to conduct the impairment tests. The only difference was in the calculation of the residual value, which is calculated using a perpetual growth rate (Gordon-Shapiro formula). The perpetual growth rates that were generally used ranged between 0% and 2%. I.R.I.S. uses a perpetual growth rate of 0% in order to adopt a cautious approach in the impairment testing.

The tests conducted at the end of 2012 did not result in the identification of any impairment.

Internally, I.R.I.S. validates the results obtained by the going concern approach by the use of a further test, that is not specifically required by IAS 36: even if the going concern value is higher than the book value for all CGUs, I.R.I.S. also determines the fair value. The values are compared to recent transactions using gross margin or EBIT multiples. The values obtained are analysed according to common practice within the market. The additional test revealed no indication of impairment at 31/12/2012. Sensitivity analysis In this turbulent economic period, and in view of some specific situations, it is advisable to test business plans and the main parameters used in them. The main parameters used in the assumptions made when developing business plans are the level of turnover and gross margins, the structure and changes to overheads and the investment amounts needed to execute these plans. The budget has been established very accurately with regard to costs under the same perimeter and includes changes to these costs in 2013, based on the events that occurred at 31/12/2012. The level of sales incorporates any known elements at that date and any opportunities that have been recognised or can be reasonably estimated. Changes to costs depend on these opportunities. Beyond 2013, changes to these parameters have been constructed on the basis of market change as generally estimated by external sources (specialist reports, observations, market analyses) and specifically on the basis of past observation, changes to our products and customer relationships, the strategy established by management and, naturally, on the basis of growth estimates based on our view of the market and our position in it. In order to test the cash-generating units, I.R.I.S. has modified the parameters used to produce the medium-term plans and, specifically, has halved the growth rates presented in them. As the discount rate is also an important parameter, I.R.I.S. has used a discount rate constructed by considering a debt-free financing structure and resulting in a very cautious discount rate. If financing partly from borrowing were to be used, the discount rate would be less cautious. The test, therefore, includes the strictest assumption as regards the discount rate. The values in use of the CGUs were therefore tested by modifying important parameters, i.e. the assumptions in the business plans, while using the most prudent discount rate. The sensitivity analyses that were carried out on the impairment tests did not result in any impairment to be recorded in the books.

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Specific situation of the ECM FBLI business activity As explained in the notes to the 2010 and 2011 financial statements, the Professional Solutions-ECM activity in France experienced a very difficult year in 2010. In 2011, all ECM activity in Belgium, France and Luxembourg was analysed and remodelled, as previously described in this report. Teams have been restructured and the organization structure and its management have been modified and combined into a single operations entity that is now controlled and managed by a single management team. Local managers have been removed and replaced by a single management structure and the sales and technical teams have been combined to eliminate duplication, benefit from synergies and create a common offer to address the market in a unified manner. A common business model, common objectives and common business plans have been established. Management remains convinced that this is a growth market, and our conviction is confirmed by the many opinions from external analysts, for the French market in particular. The action plans that were implemented produced substantial cost savings in 2012 and the ECM FBLI entity achieved operating income in line with our expectations. In principle, conditions are therefore favourable for renewed marketing energy and optimum management of the resources and solutions that are offered in connection with I.R.I.S. products. The situation should continue to develop positively in the future and management expects the company to achieve a satisfactory level of profitability in the coming years, in line with corporate strategy and enabling the company to take advantage of a global growth market. The discounted cash flow that incorporates this data and this renewed growth and profitability experienced in 2012 onwards does not show any indication of impairment. Management, naturally enough, hopes that this CGU will continue to attain its objectives, or will perform much better. As is the case when drawing up forecasts of the change in earnings, medium term business plans contain evaluations about the business itself, the financial health of cash generating units and their future results. These evaluations are based on the expectations of management. They are subject to the risks and uncertainties that are expressed in this annual report. The financial performance of the cash-generating units could possibly differ substantially, depending on changes in technology, market conditions, falling demand for the products and services offer, the inability to launch new products, loss of market share, pressure from competitors, etc. These market conditions could have a significantly unfavourable impact on the business plans and could considerably affect the value of goodwill. Conclusion Several models are used to determine the going concern value of the cash generating units and the fair value less costs of sale, as described below. On the basis of the assumptions used, these models show no indication of impairment at the end of 2012 and show the recoverable values of the various CGUs to be higher than their book values. The assumptions used to construct the models have been tested in a sensitivity analysis. Moreover, I.R.I.S. uses several methods even though IAS 36 only requires the highest value to be used for the comparison against book value. Within the entire set of tests and analyses, no impairment, that would need to be recorded in the accounts was identified at 31/12/2012.

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14. Intangible assets

I.R.I.S. Group has elected to follow the principle of valuing intangible assets according to the cost model. After being recognised as assets, intangible assets are entered at their cost, minus accumulated amortization and accumulated impairment losses.

I.R.I.S. Group - (€) Concessions, patents, licences, etc. Downpayments

Acquisition cost

At 01/01/2011: 14,669,862 14,800

Changes during the financial year:

- Additions to consolidation scope 0 0

- Acquisitions 3,522,196 0

- Sales and disposals -5,152 0

- Transferred from one heading to another 14,800 -14,800

- Translation adjustments 4,087 0

- Other changes 0 0

At 31/12/2011: 18,205,793 0

Depreciation

At 01/01/2011: 5,191,523 0



- Recognised 905,957 0

- Reversed as surplus 0 0

- Cancelled following sale -5,152 0

- Transferred from one heading to another 0

- Translation adjustments 669 0

- Other changes 0 0

At 31/12/2011: 6,092,997 0

Net book value at the end of the financial year 12,112,796 0

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I.R.I.S. Group - (€) Concessions, patents, licences, etc. Downpayments

Acquisition cost

At 01/01/2012: 18,205,793 0



- Acquisitions 2,437,005 0

- Sales and disposals -527,401 0

- Transferred from one heading to another 41,264 0


- Other changes 0 0

At 31/12/2012: 20,186,248 0

Depreciation

At 01/01/2012: 6,092,997 0



- Recognised 1,619,985 0

- Reversed as surplus 0 0

- Cancelled following sale -527,396 0

- Transferred from one heading to another 16,828


- Other changes 0 0

At 31/12/2012: 7,204,686 0

Net book value at the end of the financial year 12,981,562 0

Acquisitions of intangible assets amounted to €2,464,315 in 2012 of which €1,817,771 concerned internal technological developments to enable I.R.I.S. to enhance the quality and range of its products and services. In January 2012 I.R.I.S. acquired a business and a team of twenty consultants at a cost of €390,000. This business expansion enables I.R.I.S. to increase the size of its teams and its role within European Union institutions. The remainder concerns the acquisition or replacement of software. Investments in intangible assets totalled €3,525,614 in 2011 and €1,566,467 in 2010.

(€) Year ending: 2012 2011 2010

Acquisitions of intangible assets, software 2,464,315 3,525,614 1,566,467 Development costs

I.R.I.S. only capitalises R&D expenses related to the development of new products. Sums invested in developing upgrades are recognised as expenses for the financial year. In 2010 the development of new products concerned internal management tools, the development of I.R.I.S. technologies and applications for mobile platforms and development of a new electronic document management solution for business, based on breakthrough technologies. In 2010 the self-constructed capital assets totalled €776,785. In 2011 the development of new products concerned continuing with previous developments (technologies for mobile platforms, development of a document management software product) and some management applications in addition to two new development programmes; one of these concerning technologies for the recognition and processing of Asian language documents; the other concerning software for "Managed Operations". In 2011, developments resulted in self-constructed capital assets totalling €3,140,921. In 2012, new product development continued on the same lines as previous developments (technology for mobile platforms, development of document management applications, development of technologies for the recognition and processing of Asian language documents) and on a new programme to develop applications in the "Managed Operations" and "Business Intelligence and Performance Monitoring" fields. In 2012, developments resulted in self-constructed capital assets totalling €1,817,771.

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This was described in Note 2.

In addition, the R&D activities carried out concerned the development and enhancement of numerous products with a lifetime of less than one year, and recognised as expenses during the financial year (development of annual product upgrades).

Therefore, the level of R&D work carried out to improve product versions or project solutions remains intense and generated costs which were recognised as staff costs totalling €6,268,853 in 2012, €6,424,764 in 2011, and €6,003,495 in 2010. If we include the full costs (various goods and services, infrastructure, freelance staff, etc.), the amounts would come to €7,353,547 in 2012, €7,722,884 in 2011 and €7,657,892 in 2010.

Development costs recognised as expenses during the financial year:

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Product development 2,978,256 3,325,665 2,770,058

Project development 3,290,597 3,099,099 3,233,437

Total development costs 6,268,853 6,424,764 6,003,495

15. Tangible assets

I.R.I.S. Group has elected to follow the principle of valuing tangible assets according to the cost model. After being recognised as assets, tangible assets are booked at their cost, minus accumulated depreciation and accumulated impairment losses.

I.R.I.S. Group - (€) Land and buildings

Plant, machinery and

equipment

Furniture and

vehicles

Leasing and similar

rights

Other tangible assets In progress

Acquisition cost

At 01/01/2011: 8,857,978 5,722,705 1,686,188 415,720 370,423 17,477


- Additions to consolidation scope 0 0 0 0 0 0

- Acquisitions 86,340 588,800 356,600 1,126 0 0

- Sales 0 -34,645 -159,092 -14,794 0 0

- Transferred from one heading to another 4,600 4,753 196,894 0 -188,771 -17,477

- Translation adjustments 0 716 2,435 0 0 0

- Other changes 0 0 0 0 -1 0

At 31/12/2011: 8,948,918 6,282,329 2,083,025 402,052 181,651 0

Depreciation

At 01/01/2011: 2,878,202 4,852,367 1,325,172 267,083 219,811 0



- Recognised 362,503 498,164 232,625 71,989 25,567 0

- Reversed 0 0 0 0 0 0

- Cancelled following sale 0 -29,363 -81,168 -14,794 0 0

- Transferred from one heading to another 0 8,333 103,376 0 -111,709 0

- Translation adjustments 0 492 2,433 0 0 0

- Other changes 0 0 0 0 0 0

At 31/12/2011: 3,240,705 5,329,993 1,582,438 324,278 133,669 0

Net book value at the end of the financial year 5,708,213 952,336 500,587 77,774 47,982 0

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I.R.I.S. Group - (€) Land and buildings

Plant, machinery and

equipment Furniture

and vehicles

Leasing and

similar rights

Other tangible assets In progress

Acquisition cost

At 01/01/2012: 8,948,918 6,282,329 2,083,025 402,052 181,651 0



- Acquisitions 27,582 534,326 227,604 0 104,213 35,958

- Sales 0 -10,079 -134,225 -79,415 0 0

- Transferred from one heading to another 0 -29,679 -11,585 0 0 0

- Translation adjustments 0 1,144 -1,996 0 0 0

- Other changes 0 0 0 0 0 0

At 31/12/2012: 8,976,500 6,778,041 2,162,823 322,637 285,864 35,958

Depreciation

At 01/01/2012: 3,240,705 5,329,993 1,582,438 324,278 133,669 0



- Recognised 354,392 494,744 215,415 52,086 34,972 0

- Reversed 0 0 0 0 0 0

- Cancelled following sale 0 -10,079 -132,098 -75,151 0 0

- Transferred from one heading to another 0 -23,255 6,427 0 0 0

- Translation adjustments 0 63 -1,978 0 0 0

- Other changes 0 0 0 0 0

At 31/12/2012: 3,595,097 5,791,466 1,670,204 301,213 168,641 0

Net book value at the end of the financial year 5,381,403 986,575 492,619 21,424 117,223 35,958

The main acquisitions of tangible assets in 2010 were:

2010 Tangible assets Amount (€)

Fitting out of buildings 63,485

Office furniture & equipment 187,015

Equipment and facilities 229,165











16. Other non-current assets and deferred tax assets

Other non-current assets amounted to €361,849 at 31/12/2012, €379,171 at 31/12/2011, and €518,477 at 31/12/2010, and comprise:

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- deposits paid to the Caisse de Dépôt et Consignation in connection with sales agreements, or in connection with rental or other guarantees (e.g. electricity): €361,849 in 2012 compared with €379,171 in 2011 and €341,477 at year-end 2010.

- amounts invested in the tax shelter, totalling €177,000 at the end of 2010.

A detailed analysis of the deferred tax assets is given in Note 10. Corporate income tax.

17. Inventory

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Inventory 2,812,860 2,725,173 2,636,234

Supplies 1,429,229 1,337,276 1,085,251

Finished products 1,060,530 1,056,540 1,430,463

Goods 323,101 331,357 120,520

Inventory write-down (provisions + reversals -) was recognised for obsolete equipment or returned and defective products for net amounts of €-544,486 in 2012, €143,109 in 2011 and €318,304 in 2010.

18. Work in progress

A number of projects had been commenced but not completed on 31 December, and have been recognised in line with IAS 11 – Construction Contracts.

Work in progress is valued according to the percentage of completion method, by measuring the services rendered against the services budgeted. For orders in progress, the company records the value of work carried out but not yet invoiced at the balance sheet date.

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Amount of income recognised 2,738,396 3,383,081 2,568,616 Amount of expenses recognised -2,429,624 -2,786,371 -1,455,797

Expected losses recognised immediately as expenses -36,060 -68,801 0

Profit recognised less loss recognised 272,712 527,910 1,112,819

Cost of contracts incurred during the year -2,429,624 -2,786,371 -1,455,797

Cost of contracts related to future activity 0 0 0

Income from contracts in progress 2,738,396 3,383,081 2,568,616

Interim invoices 1,633,126 2,222,667 1,129,559

Amounts payable by customers 1,134,832 1,183,196 1,483,490

Amounts owed to customers -29,562 -22,783 -44,433 Deductions from interim invoices 0 0 0

Down payments received on contracts in progress 0 0 0

19. Trade receivables and other debtors

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Trade receivables and other debtors 34,510,567 43,562,565 63,456,049

Trade receivables 32,245,746 39,828,178 59,670,690

Non-trade receivables 2,264,821 3,734,387 3,785,359

Other current assets 1,936,294 2,274,834 2,473,480

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Trade receivables represented about 118 days' turnover at the end of 2012 compared with 120 days' turnover at the end of 2011 and 182 days' turnover at the end of 2010. This change is explained by more constant level of business during 2011 and 2012, compared to very buoyant business at the end of 2010 resulting in the delivery and invoicing of some major contracts, especially for sales of complex IT hardware during December 2010. The quality of recovery of trade receivables remains very good in 2012 and the structure of the payment schedule in terms of age of the account remains very sound. We continue to have a high level of business at the end of the year, which explains the large amount of trade receivables at the balance sheet date.

The non-trade receivables mainly comprise subsidies due to the company and VAT and government receivables.

The other current assets mainly consist of maintenance services invoiced in advance and expenses to be carried forward (insurance, rental, subscriptions), invoiced at the end of December and relating to the next financial year.

20. Cash and cash equivalents

Components of the cash and cash equivalents account

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Short-term bank investments 3,493,667 126,311 2,777,080

Cash available in bank accounts 17,367,334 14,689,209 8,235,984

Cash and cash equivalents 20,861,001 14,815,520 11,013,064

The short-term bank investments comprise:

- investments with the following characteristics:

• guaranteed capital investments

• the best fixed interest rate according to the duration of the investment • no interest rate risk for investments

- highly liquid investments that can be withdrawn at any time. Depending on the type of investment, they yield:

• an interest rate similar to the Euribor 1 month rate according to the investment tranche.

• an interest rate similar to the Eonia rate for certain demand deposit accounts

Cash flows are presented in the cash flow statement.

Net cash

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Short-term bank investments 3,493,667 126,311 2,777,080

Cash available in bank accounts 17,367,334 14,689,209 8,235,984

Short-term financial debts -1,473,384 -1,595,523 -1,670,727

Bank overdrafts -3,435 -126 -68

Cash and cash equivalents 19,384,182 13,219,871 9,342,269

In 2009, I.R.I.S. took out loans to refinance certain investments and increase its cash reserve, taking advantage of a period of low rates and favourable conditions. These loans totalled €7,000,000 over a period of five years. In 2012, the short term financial debts comprised the amounts due during the year on these new loans for a total of €1,400,000, and the remainder comprised the amounts due during the year on the loans contracted to finance the buildings or equipment. This will be discussed in Note 27: Borrowings.

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21. Capital

I.R.I.S. endeavours to continuously optimize its capital structure and to achieve a balance between net financial indebtedness and total shareholders' equity as shown in the consolidated balance sheet. The main aim of the group in terms of management of its capital structure is to maximize its value for shareholders, to reduce the cost of capital and to maintain a good rating, while ensuring the required financial flexibility in order to take advantage of value-creating external growth opportunities. However, priority is currently given to financing through shareholders' equity. The group manages its capital structure and makes adjustments in view of changes in the economic situation. In this connection, it can adjust dividend payments to shareholders, repay part of the capital, buy back its own shares, issue new shares and launch share-based payment plans.

The management objectives, policies and procedures have remained the same for several financial years. I.R.I.S. is not subject to any external constraints regarding shareholders' equity, except for legal constraints.

Number of shares

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Number of shares issued 1,865,072 1,865,072 1,865,072

Number of partly paid-up shares 0 0 0

Number of fully paid-up shares issued 1,865,072 1,865,072 1,865,072

All of the shares of I.R.I.S. Group are ordinary shares with no par value, bearing dividend rights (if issued before the end of the financial year for which the dividend is proposed) and one vote at the General Meeting. All issued shares were fully paid-up and consisted of 1,534,378 dematerialised or bearer shares and 330,694 registered shares at 31/12/2012, compared with 1,534,353 dematerialised or bearer shares and 330,719 registered shares at both 31/12/2011 and 31/12/2010. The fully paid-up shares and other securities of the company are registered, in bearer form or dematerialised, within the limits provided for by law.

Holders may request the conversion of their securities into registered or dematerialised securities at any time and at their own expense.

Dematerialised securities are entered in the name of their owner or holder, on an account held with an approved bookkeeper or a clearing house.

The company's bearer securities that were already issued and registered on the securities account at 1 January 2008, exist in dematerialised form from that date. The other bearer securities will also be automatically converted into dematerialised securities when they are registered on the securities account from 1 January 2008 onwards. The bearer securities issued by the company that are not registered on the securities account, were automatically converted into dematerialised securities at 31/12/2008.

From 31/12/2008 the rights attached to possession of securities are suspended until they are converted into registered or dematerialised securities.

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Comparison of the number of outstanding shares at the start and end of the year:

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Number of outstanding shares at start of year 1,865,072 1,865,072 1,850,072

Capital increase – warrants exercised 0 0 15,000

Capital increase - private subscription 0 0 0

Capital increase – business combinations 0 0 0

Number of outstanding shares at year-end: 1,865,072 1,865,072 1,865,072

Subscribed capital – fully paid-up at start of year 38,774,902 38,774,902 38,406,052

Capital increase – warrants exercised 0 0 368,850

Capital increase - private subscription 0 0 0

Capital increase – business combinations 0 0 0

Subscribed capital – fully paid-up at year-end 38,774,902 38,774,902 38,774,902

Capital increase

No capital increases were carried out in 2012.

At the end of 2012, the capital of the company amounted to €38,774,902. Authorized capital

The Extraordinary General Meeting of 6 July 2009 renewed the authorization granted to the Board of Directors to make one or more capital increases to the company's subscribed share capital up to an amount of €38,000,000. This authorization was granted for a period of five years commencing on 8 October 2009 and terminating on 8 October 2014. This authorization covers capital increases in cash or in kind, subject to legal restrictions, by capitalization of reserves, with or without an issue premium, with or without the issue of new shares, with or without voting rights, by a public or private issue and by issuing convertible bonds, equity notes, subscription rights (which may or not be attached to other securities) or other securities that may ultimately entitle the holder to shares in the company. In connection with this authorization, the Board of Directors, proceeded, under a deed drawn up on 14 October 2011 to issue 35,000 warrants in favour of staff of the company or its subsidiaries and carried out a share capital increase in an amount of €1,268,050 subject to the condition precedent on the exercise of the warrants and declaration by the Board of Directors of the resulting capital increase. At 31 December 2012, the unused authorized capital amounted to €36,731,950. The Board is expressly authorized to carry out capital increases for three years following the General Meeting of 15 December 2011 (or from 9 January 2012 if the meeting is deferred), on one or more occasions, from the date of the notification made by the Belgian Financial Services and Markets Authority (FSMA) stating that a takeover bid for the company has been referred to it, by a cash contribution, with limitation or withdrawal of the right of pre-emption of shareholders in favour of one or more specific people, who may or may not be members of staff of the company or its subsidiaries, or by contribution in kind in accordance with the applicable legal provisions. In this case, the Board of Directors may also create securities which may or may not represent the share capital, giving voting rights, as well as securities giving the right to apply for or acquire such securities, provided that the shareholders are not given a pre-emptive right to the aforementioned securities or rights in proportion to the amount of the capital that their shares represent.

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Shareholder structure

Transparency threshold

Ref.: Article 7 of the articles of association - Declaration of shareholding

§ 1. Any physical person or legal entity that acquires securities representing or not representing the capital of the company, and conferring voting rights, must declare to the company and to the Banking and Finance Commission the number of securities held, once the voting rights pertaining to these securities amounts to three per cent (3%) or more of the total number of voting rights in existence at the time of the acquisition in question.

The same declaration must be made in the event of a further acquisition of the securities specified in paragraph 1, if, as a result of this acquisition, the number of voting rights pertaining to the securities held amounts to five per cent (5%) of the total number of voting rights in existence at the time of the acquisition, and thereafter on each acquisition of a further five per cent (10%, 15% etc.) of the total number of voting rights in existence at the time of the acquisition.

The same declaration must be made in the event of a transfer of securities, if the transfer results in the number of voting rights held falling below one of the thresholds specified in paragraphs 1 or 2.

§ 2. If a physical person or legal entity acquires or surrenders direct or indirect de jure or de facto control of a company that holds at least three per cent (3%) of the voting rights of the company, it must declare this to the company and to the Banking and Finance Commission.

§ 3. The declarations specified in paragraphs 1 and 2 above must be sent to the Financial Markets and Services Authority and by registered letter to the company, within two working days of the acquisition or transfer concerned, without prejudice to the special scheme provided for by the law for securities acquired by succession.

§ 4. Except in the cases specified in article 545 of the Companies Code, no person may exercise at a general meeting a number of votes exceeding the number pertaining to the shares for which possession has been declared, in accordance with the preceding paragraphs, at least forty-five days before the general meeting.

§ 5. The declarations concerned by the present article are governed by the applicable provisions of the Companies Code, without prejudice to the provisions included in the previous paragraphs. Transparency thresholds:

3% Threshold for first notification of shareholding 5% Threshold for statutory declaration 10% Threshold for statutory declaration 15% Threshold for statutory declaration 20% Threshold for statutory declaration Etc.

Notification of shareholding Shareholding in I.R.I.S. Group SA Notification by a parent enterprise or a person controlling the company Denominator: 1,865,072 securities

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Notifications received between 1 September 2008 and 10 April 2013:

Notification

date

Holders of voting rights Number of voting rights attached to

securities

Number of similar financial

instruments


17/10/2008 Cie Nationale à Portefeuille 112,395

27/10/2008 Pierre De Muelenaere 119,113 8,500

27/10/2008 Baillie Gifford & co 27,896


31/10/2008 Sofinim NV 112,395


31/10/2008 Stichting Administratiekantoor ‘Het Torentje’ 0

31/10/2008 Raynive SA 81,446

31/10/2008 Dumondal sc 0

02/07/2009 FIN.CO 62,398

02/07/2009 WALUFIN SA 0


17/07/2009 Cie Nationale à Portefeuille 0

22/07/2009 Canon Europa NV* 314,790

22/07/2009 Canon Inc.* -

22/07/2009 Pierre de Muelenaere* 47,645 8,500

22/07/2009 Etienne Van de Kerckhove* 6,360 8,500

23/07/2009 Sofinim NV -


23/07/2009 Stichting Administratiekantoor ‘Het Torentje’ -

07/12/2011 Baillie Gifford & co 0


10/10/2012 Oddo Asset Management 58,582

28/03/2013 Oddo Asset Management 1,334 0

28/03/2013 FIN.CO 0 0

03/04/2013 Canon Europa NV* 1,698,237 -

03/04/2013 Canon Inc.* - -

03/04/2013 I.R.I.S. GROUP.* - -

03/04/2013 Pierre de Muelenaere* 0 8,500

03/04/2013 Etienne Van de Kerckhove* 0 8,500

*Acting jointly

On 26/03/2013, Canon, via its subsidiary Canon Europa N.V., announced that at the close of the initial acceptance period for it takeover bid for I.R.I.S. Group SA on 20 March 2013, 1,698,237 shares in I.R.I.S Group, were held by Canon, which represents 91.05% of all shares in I.R.I.S. Group.

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Summary of the voting rights

Total share capital (€) 38,774,902

Total number of securities conferring voting rights 1,865,072

Total number of voting rights (= denominator) 1,865,072

Total number of bonds convertible into securities conferring voting rights 0

Total number of share subscription rights (warrants) with attached voting rights that have not yet been

issued

45,000

Total number of voting rights that would result from these conversion or subscription rights being

exercised

45,000

Total number of shares without voting rights 0

22. Reserves

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Consolidated reserves 26,379,614 24,705,658 22,039,803

Profits and losses brought forward 26,829,939 24,508,017 21,827,352

Shareholders’ equity – share-based payments 666,459 556,876 486,691

Shareholders’ equity – own shares -1,116,784 -359,235 -274,240

The consolidated reserves are made up of the profits and losses brought forward, reserves established to cover the value of services supplied from the past which are recognised within the framework of share-based payments and the amount of own shares held.

The statement of changes in shareholders’ equity provides full information about the different items of shareholders’ equity and comparisons of the figures at the start and end of the year.

Purchase of own shares

Number of shares – Year ending: 31/12/2012 31/12/2011 31/12/2010

Own shares held at start of year 24,186 21,807 41,264

Own shares purchased during the year 27,802 6,975 4,003

Own shares sold during the year -2,696 -4,596 -23,460

Own shares cancelled during the year 0

Own shares held at year-end 49,292 24,186 21,807

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Own shares held at start of year 359,235 274,240 1,143,606

Own shares purchased during the year 820,049 210,270 132,346

Own shares sold during the year -62,500 -125,275 -1,001,712

Own shares cancelled during the year 0

Own shares held at year-end 1,116,784 359,235 274,240

On 21 March 2012 the Board of Directors approved a programme for the buyback of its own shares. The programme has the following characteristics:

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• The objective of the plan is to reduce the number of shares in circulation and consequently improve

remuneration to shareholders and secondarily to have some shares available for the stock option plans

• The programme has been approved for the period from 23 March 2012 to 8 October 2014 and a maximum of

150,000 shares of I.R.I.S. Group SA, or a maximum amount of €4,500,000.

• Shares purchased during a session must not exceed 25% of the average daily transaction volume for the share

on the Euronext Brussels exchange over the 20 sessions prior to the date of each purchase.

• Regulatory framework: the programme will be implemented in compliance with Articles 205 to 208 of the Royal

Decree of 30 January 2001 implementing the Company Code, and the Royal Decree of 5 March 2006

concerning market abuses and Commission Regulation EC 2273/2003 of 22 December 2003 (as regards

exemptions for share buy-back programmes).

During the 2010 financial year I.R.I.S. Group SA did not buy or sell any of its own shares. During the 2011 financial year I.R.I.S. Group SA did not buy any of its own shares but sold 2,500 in connection with the stock option plan allocated in 2005. These shares were sold for a total sale price of €62,775. During the 2012 financial year, I.R.I.S. Group SA did not sell any of its own shares, but purchased 25,535 shares under the buyback of own shares programme for an amount of €761,125. At 31 December 2012, the company held 30,615 own shares with an initial value of €837,107.

It should be noted that the subsidiary I.R.I.S. Solutions & Experts bought 2,267 shares in I.R.I.S. Group for a total of €58,924, sold 2,696 shares for €62,500, in connection with business combinations, and held 18,677 shares in I.R.I.S. Group at 31 December 2012, worth a total of €279,677.

Own shares are valued at their acquisition cost.

23. Share-based payments

2005 stock option plan

In February 2002, I.R.I.S. Group issued stock options to its employees, directors and regular subcontractors (2005 Stock Option Plan). 25% of the options could be exercised 13 months after the offer, 50% 25 months after the offer, 75% 37 months after the offer and 100% 49 months after the offer, with unexercised options being carried forward.

The exercise of these plans is conditional on the holder still being under contract to I.R.I.S. The annual periods for exercise of the plans is 1 to 15 April, 1 to 31 July and 1 to 15 November.

I.R.I.S. Group applies the transitional provisions provided for under IFRS 2 – Share-based payments; this standard is only applicable to equity instruments (shares, stock options, etc.) allocated on or after 7 November 2002 and not vested at 1 January 2005, and therefore was not applied to this stock option plan. At 31/12/2009 15,250 options or warrants were issued at an exercise price of €24.59/share. In 2010, 15,000 options were exercised at this price for an amount of €368,850. 15,000 new shares were created at the time of the resulting capital increase. 250 options were surrendered as they were not exercised under the terms of this plan.

2009 stock option plan

A stock option plan was adopted in April 2005, with 12,500 options (and the same number of shares in the event of the options being exercised). The cost of past or future services rendered is recognised at the fair value of the equity instruments acquired. Valuation is based on the Black & Scholes model. The variables used are:

- Risk-free rate: five-year Belgian government bonds (OLOs) - Volatility: 30%

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- Fair market value: share price as at 31/05/2005 increased by a certain amount to take account of the dividends distributed during the life of the option

- Time delay: number of days of life of the option: 31/05/2005 to 31/12/2009 - Exercise price corresponding to the average price of the share during the last 30 days preceding allocation

of the plan.

Based on previous stock option plans, the percentage of options that will not be exercised (either due to loss of rights or employees leaving the company) was estimated and applied. Some options are subject to a minimum of three years of employment, and the cost of future services is distributed over the employment period conditioning the granting of options. On 17 April 2009 the Board of Directors approved the extension of the exercise period for a further five years, within the limits provided for by the law. The final date for the exercise of the options is 31/12/2014. No movements took place in 2010. In 2011, 2,500 options were exercised at an exercise price of €25.11/share for an amount of €62,775. 3,500 options remain exercisable at 31/12/2011. The exercise price for these options is €25.11. No movements took place in 2012. 2011 stock option plan The Board of Directors has decided to issue 30,500 stock options, mainly to executive directors and regular contractors of I.R.I.S. group companies, each of which entitles its holder to buy an existing share in the company, if the option is exercised. As a result, under the issue conditions of the stock option plan, the 30,500 options will entitle their beneficiaries to buy, when exercising these options, a maximum of 30,500 ordinary shares in the company’s capital. Each share acquired following exercise of an option will give entitlement to dividends paid for the financial year during which the option was exercised. The Board of Directors decided to issue 21,500 warrants each giving entitlement, in the event of exercise, to subscribe for one share in the company. As a result, under the issue conditions of the stock option plan, the 21,500 warrants will entitle the beneficiaries of these warrants to subscribe, by exercising them, to a maximum of 21,500 ordinary shares in the company’s capital. Each share acquired following exercise of a warrant will give entitlement to dividends made available for payment in respect of the financial year during which the warrant was exercised. The company will do what is necessary to have the shares acquired following exercise of warrants registered for listing. Warrants are issued within the framework of authorised capital, with withdrawal of the right of pre-emption of current shareholders so as to benefit mainly employees, executive board members and regular subcontractors. Consequently, at 31 December 2008 30,500 options and 19.500 warrants were issued under this plan. The exercise price is €42.18/share.

As a result of departures during the financial years, 1,000 warrants were surrendered in 2009 (500 unconditional warrants, and 500 conditional warrants) and 1,000 unconditional warrants in 2010. In 2010, 833 conditional warrants and 2,000 conditional options were surrendered as some of the conditions were not met. In 2011, as a result of departures in this financial year and failure to reach some targets, 5,000 options were surrendered (1,000 unconditional options and 4,000 conditional options) and 1,833 warrants were surrendered (1,500 unconditional warrants and 333 conditional warrants). In 2012, as a result of departures in this financial year, 834 warrants were surrendered (500 unconditional warrants and 334 conditional warrants). Consequently, at 31 December 2012 23,500 options and 14,000 warrants were issued under this plan. The exercise price is €42.18/share.

These options and warrants will be exercisable:

- for a third of the total number allotted to the Beneficiary, from 1 March 2010,

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- for an additional third, from 1 March 2011

- for the final third from 1 March 2012

- at the latest at 31 December 2012

and on condition that, at the time of exercise, the holder has been linked to the Company or one of its subsidiaries by an

employment contract, a term of office or another form of service contract without interruption since the allocation of

the warrants or options.

The cost of past or future services rendered is recognised at the fair value of the equity instruments in question.

Valuation is based on the Black & Scholes model. The variables used are:

- Risk-free rate: LIBOR or zero-coupon rate for the residual period - Volatility: 30.86% - Fair market value: price of the share at 22/02/2007 - Time delay: number of days of life of the option: 22/02/2007 to 31/12/2012 - Annual yield (dividend): 1% - Exercise price corresponding to the average price of the share during the last 30 days preceding allocation

of the plan.

Based on previous stock option plans, the percentage of options that will not be exercised (either due to loss of rights or employees leaving the company) was estimated and applied.

A proportion of the warrants and options are "conditional", i.e. their exercise is dependent on achieving performance and profitability targets. A percentage of 75% is applied when calculating the fair value, to take into account the likelihood of achieving the targets set.

In addition, these options and warrants are subject to a minimum period of employment during the exercise period, and the cost of future services is therefore spread over the employment period conditioning the granting of options or warrants. On 17 April 2009 the Board of Directors approved the extension of the exercise period for a further five years, within the limits provided for by the law. The warrants may be exercised before 31 December 2017, from 1 to 15 April, 1 to 31 July and 1 to 15 November. All warrants not yet exercised may be exercised from the 20th day up to the 5th day preceding 31 December 2017.

In every case, warrants not exercised on 31 December 2017 will expire and can therefore no longer be exercised after that date.

The plan was revalued on 17/04/2009 using the variables at that date:

- Risk-free rate: LIBOR or zero-coupon rate for the residual period - Volatility: 30.86% - Fair market value: price of the share at 17/04/2009 - Time delay: number of days of life of the option: 17/04/2009 to 31/12/2017 - Annual yield (dividend): 1% - Exercise price corresponding to the average price of the share during the last 30 days preceding allocation

of the plan.

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2015 stock option plan The Board of Directors decided to issue 35,000 warrants each giving entitlement, in the event of exercise, to subscribe for one share in the company. As a result, under the issue conditions of the stock option plan, the 35,000 warrants will entitle the beneficiaries of these warrants to subscribe, by exercising them, to a maximum of 35,000 ordinary shares in the company’s capital. Each share acquired following exercise of a warrant will give entitlement to dividends made available for payment in respect of the financial year during which the warrant was exercised. The company will do what is necessary to have the shares acquired following exercise of warrants registered for listing. Warrants are issued within the framework of authorised capital, with withdrawal of the right of pre-emption of current shareholders so as to benefit mainly employees, executive board members and regular subcontractors. The offer was accepted for a volume of 31,000 warrants. Consequently, at 31 December 2011 31,000 warrants were issued under this plan. The exercise price is €36.23/share. As a result of departures during the 2012 financial year, 1,000 warrants were surrendered, with the result that at 31 December 2012 30,000 warrants were issued under this plan. The exercise price is €36.23/share.

Exercise of these options and warrants can be carried out in July each year and during the first 15 days of November each year from July 2015 to 15 November 2020. Exercise is on condition that, at the time of exercise, the holder has been linked to the Company or one of its subsidiaries by an employment contract, or another service contract continuously since the allocation of the warrants or options.

The cost of past or future services rendered is recognised at the fair value of the equity instruments in question.

Valuation is based on the Black & Scholes model. The variables used are:

- Risk-free rate: LIBOR or zero-coupon rate for the residual period

- Volatility: 30.86% - Fair market value: price of the share at 18/09/2011 - Time delay: number of days of life of the option: 18/09/2011 to 15/11/2020 - Annual yield (dividend): 1% - Exercise price corresponding to the average price of the share during the last 30 days preceding allocation

of the plan.

Based on previous stock option plans, the percentage of options that will not be exercised (either due to loss of rights or employees leaving the company) was estimated and applied.

In addition, these options and warrants are subject to a minimum period of employment during the exercise period, and the cost of future services is therefore spread over the employment period conditioning the granting of options or warrants.

A cost of €109,583 was recognised as expenditure in 2012 for the various plans (compared with €70,185 in 2011 and €54,486 in 2010) and a corresponding amount was booked as its contra entry in shareholders' equity, under “Share-based payments”.

These plans were not subject to any cancellations or modifications during the financial year.

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Year 2010 2005 plan 2009 plan 2011 plan Total Weighted

average exercise price

Exercise price 24.59 25.11 42.18

Final exercise period 31/12/2009 31/12/2009 31/12/2017

Number of outstanding warrants at start of year 15,250 6,000 49,000 70,250 36.91 Number of warrants granted during the year 0 0 0 0 Number of warrants surrendered during the year -250 0 -3,833 -4,083 41.10

Exercised during the year -15,000 0 0 -15,000 24.59

Expired during the year

0

Outstanding at year-end 0 6,000 45,167 51,167 40.18

Exercisable at year-end 0 6,000 6,000 25.11



Exercise price 25.11 42.18 36.23

Final exercise period 31/12/2014 31/12/2017 15/11/2020 Number of outstanding warrants at start of year 6,000 45,167 0 51,167 40.18

Number of warrants granted during the year 0 0 31,000 31,000 36.23 Number of warrants surrendered during the year 0 -6,833 -6,833 42.18

Exercised during the year -2,500 0 -2,500 25.11

Expired during the year 0

Outstanding at year-end 3,500 38,334 31,000 72,834 38.83

Exercisable at year-end 3,500 38,334 41,834 40.75



Exercise price 25.11 42.18 36.23 Final exercise period 31/12/2014 31/12/2017 15/11/2020 Number of outstanding warrants at start of year 3,500 38,334 31,000 72,834 38.83

Number of warrants granted during the year 0 0 0 0 - Number of warrants surrendered during the year 0 -834 -1,000 -1,834 38.94 Exercised during the year 0 0 0 0 - Expired during the year 0 Outstanding at year-end 3,500 37,500 30,000 71,000 38.82 Exercisable at year-end 3,500 37,500 41,000 40.72

For the options exercised in 2011, the weighted average share price was €37.20, compared with €41.82 in 2010.

The exercise prices of the options outstanding at 31/12/2012 are €25.11 or €42.18 or €36.23 and the weighted average remaining life was 6.08 years at the end of 2012 compared with 7.08 years at the end of 2011 and 6.65 years at the end of 2010.

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24. Translation adjustments

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Opening translation adjustment -48 -49,900 -84,734

Historical values – Effect of the difference in closing rate for capital and profits carried forward -48,073 15,791 43,412

Effect on the profit for the year of the difference between the closing rate and the average exchange rate for the year -13,251 34,061 -8,578

Translation adjustment at year-end -61,372 -48 -49,900

The exchange rate differences recognised as liabilities in the balance sheet were the result of the conversion of the accounts of the US, UK, Norwegian, Danish and Asian subsidiaries at the balance sheet date. The changes were produced by the difference in the closing rates for capital and profits carried forward from previous financial years and the translation adjustment, between the closing rate and the average exchange rate for the year, of the profit for the year.

25. Provisions

Provisions for employee

or tax disputes Provisions for other litigation

Provisions for order fulfilment Total

Amounts at 01/01/2011 39,211 753,500 24,561 817,272

Additions to scope of consolidation

Provisions created and increased 405,091 108,801 513,892

Use -36,209 -36,209

Reversals -753,500 -753,500

Amounts at 31/12/2011 408,093 133,362 541,455

Provisions for employee

or tax disputes Provisions for other litigation

Provisions for order fulfilment Total

Amounts at 01/01/2012 408,093 133,362 541,455

Additions to scope of consolidation

Provisions created and increased 368,486 36,458 404,944

Use -124,093 -133,362 -257,455

Reversals

Amounts at 31/12/2012 652,486 36,458 688,944

Various provisions were or had been made to deal with a number of disputes:

- provisions for employee-related disputes which include various provisions for severance pay claimed by former employees. Several employee-related disputes were settled in 2012. An amount of €124,093 of provisions was used. Additional provisions for a total of €368,486 have been booked to cover the risks relating to new legal disputes that arose in 2012 or prior years for the whole group.

Provisions for disputes have been entered based on the best estimates made by the I.R.I.S. Group executive management.

The court decisions made are, however, essentially difficult to foresee.

- provisions for order fulfilment concerning contracts in progress for which the expected outcome is a loss, with this loss being covered in full. A provision of €24,561 was booked at 31/12/2010. Further provisions of €108,801 were booked in 2011. These provisions were entirely used (€133,362) on completion of the projects in question. An additional provisions amount of €36,458 was booked in 2012 to cover end-of-project losses recorded for two ongoing projects at 31/12/2012.

- a provision of €750,000 intended to cover a payout in a dispute in which I.R.I.S. was an indirect party and which concerns intellectual property rights between a customer of I.R.I.S. SA and a US company. Under a partnership agreement, I.R.I.S. may have been required to bear part of the costs. In order to defend itself, I.R.I.S. had also instituted legal proceedings on its own behalf against the US company. The provision amount set aside corresponds to the best

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estimate of the risk made by I.R.I.S. management. The amounts of legal fees paid in connection with the proceedings were expensed when they were incurred. In 2011, an agreement was reached between the parties and each party withdrew their legal action. The provision was therefore fully reversed. Another dispute for an amount of €3,500, which had been fully provisioned was also settled in 2011 and resulted in the reversal of the €3,500 provision amount. No provisions for other disputes were booked in 2012.

26. Retirement benefits

The French subsidiary of I.R.I.S. Group is required to pay benefits called retirement benefits” or “end-of-career benefits” to each of its employees upon their retirement. The amount of these benefits is stipulated in the Engineering and Design Firm collective agreement applicable to the company, and the minimum legal benefit depends on the amount of the employee’s last salary and his/her length of service with the company.

The benefit is not payable to employees leaving the company before retirement. For end-of-career benefits, the company has two areas of liability:

• liability for past services, depending on the length of service on the valuation date,

• liability for future services, that is, the entitlements that employees may acquire between the valuation date and the retirement date.

Estimation of these liabilities therefore takes into account the likelihood that an employee will still be with the company when he/she retires. This is weighted by a financial discount rate.

No financing is arranged for this retirement benefit liability and it is not covered by assets.

The cost of services rendered during the year and, where applicable, any past services, is recognised as an expense under “Payroll expense”. The accounting rules applied are the provisions of the international accounting standard “IAS 19 – Employee Benefits”. The Revised IAS 19 – Employee Benefits is not applied in advance.

The present value of the liabilities and the cost of services rendered in the course of the year are valued by applying the projected unit credit method, actuarial assumptions and financial assumptions.

The actuarial assumptions include demographic assumptions (mortality, staff turnover). The financial assumptions concern the discount rate, future salary levels and employee benefits.

The model takes into account the various parameters specific to each employee, such as age, socio-professional category, retirement age, length of service upon retirement, gross annual salary and company-specific factors, such as the collective agreement applicable to its activity, salary growth estimates and anticipated staff turnover.

The assumptions used are:

• economic parameters � a constant annual increase in salaries of 2% � net annual discount and revaluation rate of funds of 3.00% (including inflation)

• social parameters � retirement at the age of 65 � average staff turnover rate � rate of Social security charges of 49% � end of service initiated by the employee

• technical parameters � TV88/90 mortality table � projected unit credit method � pricing based on smoothed rate of contributions (one-off payments combined with

contributions averaged over time) � contributions paid annually in advance, as employees are planned at the start of the year.

The discount rate used in 2011 was 4%, but a different discount rate of 3% was used in 2012. The change to this assumption resulted in an increase of €56,773 to the actuarial liability, compared to what it would have been if the same rate that was used in 2011 had been taken. This resulted in an additional charge being booked in 2012. There has been no other change to the assumptions used.

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Summary of commitments

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010 31/12/2009 31/12/2008

Retirement benefits to be paid 2,780,135 2,894,563 3,371,222 3,608,553 3,750,078

Probable value of benefits to be paid 2,105,545 2,172,912 2,477,806 2,608,875 2,944,886

Probable current value of benefits to be paid 1,188,448 1,016,395 1,047,829 1,030,041 940,843

Actuarial liability 469,590 391,023 418,033 380,712 340,741

Normal expense for the financial year 42,045 36,767 38,147 37,321 34,135

Interest cost 11,731 16,721 17,132 15,333 16,089

Expense recognised for the cost of past services 66,836 -43,731 -17,958 -12,683 -133,650

Amounts entered as liabilities

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010 31/12/2009 31/12/2008

Pensions and similar obligations 469,590 391,023 418,033 380,712 340,741

Changes during the financial year in the liabilities recognised

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010 31/12/2009 31/12/2008

At start of year 391,023 418,033 380,712 340,741 424,167

Expenses recognised 78,567 -27,010 37,321 39,971 -83,426

At year-end 469,590 391,023 418,033 380,712 340,741

27. Borrowings Borrowings’ costs not directly attributable to the purchase, construction or production of a qualifying asset are recognised as expenses for the period in which they are incurred.

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Long-term borrowings 770,140 2,246,206 3,863,018

Financial leasing debts 0 22,325 55,451

Credit institutions 770,140 2,223,881 3,807,567

Long-term borrowings falling due during the year

1,473,384 1,595,523 1,670,727

Financial debts 3,435 126 68

Breakdown of financial liabilities by payment date

(€)

Amounts payable within

the year Amounts payable

in 1 to 5 years Amounts payable in

more than 5 y Total

borrowed

Long-term loans – investment loan 1,628,343 3,764,885 0 5,393,228 Total short-term borrowings 42,384 98,133 0 140,517 Credit facilities 68 0 0 68 Total borrowings at 31/12/2010 1,670,795 3,863,018 0 5,533,813

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(€)




more than 5 y Total

borrowed

Long-term loans – investment loan 1,541,004 2,246,206 0 3,787,210 Total short-term borrowings 54,519 0 0 54,519 Credit facilities 126 0 0 126 Total borrowings at 31/12/2011 1,595,649 2,246,206 0 3,841,855

(€)




more than 5 y Total

borrowed

Long-term loans – investment loan 1,453,741 770,140 0 2,223,881 Total short-term borrowings 19,643 0 0 19,643 Credit facilities 3,435 0 0 3,435 Total borrowings at 31/12/2012 1,476,819 770,140 0 2,246,959

Breakdown of borrowings

Breakdown of borrowings Type of rate Rate Date for payment

Due at end 2012

Due at end 2011

Due at end 2010

Real estate investment loan

Variable rate convertible into

fixed rate Euribor +

margin 2015 123,881 264,885 493,228

Investment loans and acquisitions Fixed rate 4.2% annual 2014 2,100,000 3,500,000 4,900,000

Finance leasing of rolling stock Fixed rate Miscellaneous 2013 19,643 76,844 140,517

Total long-term borrowings

2,243,524 3,841,729 5,533,745

€6.5m committed credit facilities

Irrevocable credit line,

variable rate

Euribor + margin, fixed annual cost

31/07/2014 to

30/09/2014

In 2009, I.R.I.S. Group contracted new investment loans totalling €7,000,000 for a period of 5 years at a fixed interest rate and without new guarantees, in order to refinance certain acquisitions or certain investments carried out by the group, and to increase the cash reserves available by taking advantage of a period of low interest rates. At the end of 2012, the outstanding amount of these investment loans is €2,100,000. The estimated amount of interest and commission to be paid on the loans and committed lines of credit over the 5 years is €110,995.

The other long-term borrowings consist of investment loans intended to finance the purchase of the Vilvoorde building or finance office alterations or various equipment.

At the end of 2012 I.R.I.S. had undrawn committed credit facilities (irrevocable except in exceptional circumstances) totalling €6,500,000. I.R.I.S. also has a revocable credit facility of €1,500,000. These lines expire between July 2014 and September 2014.

There was no difference between the fair values of the financial assets and liabilities (cash and cash equivalents, trade receivables, trade debts, borrowings) and their balance sheet value in 2012, 2011 or 2010.

28. Market risks and management of financial risks

Like any company operating in a competitive market, I.R.I.S. is faced with general market risks. In particular:

- slow economic growth in our home markets: I.R.I.S. achieves most of its turnover in Europe and the USA. - Increased competition: as the market matures, the sector is gradually concentrating around a few dominant

players, including I.R.I.S., and competition is getting tougher at the international level.

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- Advances in technology: the development of products and services is a constant concern, in order to

remain at the forefront of developments and meet the expectations of the most demanding customers.

Regarding intellectual property rights, I.R.I.S.’s presence and growth in the US market makes it a possible target for attacks by companies that specialize in registering very general and often invalid patents. These companies usually aim to obtain an out-of-court settlement so that the business under attack is spared exposure to much higher defence costs. However, I.R.I.S.’s policy is not to systematically register patents for the technological advances that we have achieved, to avoid making public all of our development secrets, since it is extremely complicated and costly to demonstrate infringement of intellectual property rights for software. The number of patents registered has been increasing however over the last three years.

With regard to finances, the company has not used any financial instruments to cover the risks inherent in its business. Foreign exchange risk

I.R.I.S. Group’s activities in the United States and its business dealings (sales or supplies) with countries in Asia and elsewhere give rise to a US dollar exchange risk.

Some conversion differences result from purely accounting operations (conversion of foreign subsidiaries, elimination of intercompany balances and reciprocal currency transactions) and are not related to gains or losses made. There is very little room for manoeuvre for this type of translation adjustment. For this reason, I.R.I.S. Group pays intra-group currency balances on a regular basis, so as to minimise translation adjustments.

For transactions performed (purchase/sale and payment transactions in dollars), we try to reduce the exchange risk as much as possible:

• by balancing our volumes of purchases and sales in dollars

• by adopting a dollar hedging balance sheet approach (borrowing or investing in dollars against respective investments or borrowing in euros) when necessary

• by regularly monitoring variations in the dollar and financial forecasts, with the aim of assuming our positions in dollars at the most favourable rate

• through hedging transactions, if necessary.

Regarding foreign exchange risk, the risk linked to the growing exposure to the US dollar cannot be totally covered.

Interest rate risk

Regarding interest rate risk: given the level of indebtedness, this risk is small. The Group’s investment loans are either at a variable rate with the option of converting to a fixed rate, or at favourable fixed rates. The best margin and fixed cost conditions have been negotiated for credit facilities.

Credit risk

With regard to credit risk, the Group may be exposed to credit risk linked to:

- operating activities:

sales to the general public are made via our website and paid for in advance by credit card, while sales to authorised resellers are made under a prepayment arrangement or with payment terms agreed in view of our past relations; credit limits are established in order to reduce risks. However, it should be noted that some resellers have a return guarantee for I.R.I.S. products. As for sales to businesses and government bodies, the diversity, size and quality of our customers (banking, insurance, retail, industry, government and public sector, international organisations) diversifies the risk of loss, even though the terms of payment are sometimes quite long. Most of our customers are well-known major accounts, for which the credit risk is low.

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I.R.I.S. has always given particular attention to credit risk and counterparty risk. The group has introduced procedures for monitoring and managing credit risk, and payment and recovery procedures suited to the specific characteristics of each counterparty (private companies, public companies, international organizations, private individuals). As a result of the economic crisis we stepped up our ongoing efforts to manage this risk and monitor trade receivables.

- Investment activities:

I.R.I.S. has no intention of taking risks when making cash investments. All investments are made in products guaranteeing 100% of the capital and yielding a guaranteed minimum rate of interest. The group also has a policy of diversifying its investments with different financial partners. The liquidity crisis in the banking sector and the risk of default by certain banks that arose in the final quarter of 2008 confirmed validity of the group’s highly prudent policy. At the end of 2012 all of the group’s investments were safe and highly liquid short-term investments. The group is also stepping up its policy of centralized cash management. Liquidity risk The company has surplus net cash and plans to maintain a level of cash and irrevocable credit facilities to enable it to continue operating with no income for a few months. The group therefore has credit facilities that are well-suited to its size and requirements, and to the payments that it will have to make. It is for this purpose that the group contracted new fixed rate investment loans to finance or refinance its investments and acquisitions and to maintain a high level of cash reserves. The financing policy is also based on the principles of centralization within the parent company and diversification of financing with different financial partners.

Analysis of trade receivables according to age.

The tables shown below classify the amounts of current trade receivables at 31/12/2012, 31/12/2011 and 31/12/2010 according to their age:

2012 Consolidated Accounts Due for over 90 days

Due for 60 to 90 days


Due for less than 30 days Not yet due Total

Trade receivables at 31/12/2012 1,831,372 341,596 1,389,756 7,296,464 21,386,559 32,245,746

Breakdown 5.68% 1.06% 4.31% 22.63% 66.32% 100.00%

2011 Consolidated Accounts Due for over

90 days Due for 60 to 90

days Due for 30 to 60

days Due for less

than 30 days Not yet due Total

Trade receivables at 31/12/2011 2,150,495 1,289,114 1,856,393 6,872,105 27,660,071 39,828,178

Breakdown 5.40% 3.24% 4.66% 17.25% 69.45% 100.00%

2010 Consolidated Accounts Due for over 90 days



Due for less than 30 days Not yet due Total

Trade receivables at 31/12/2010 2,251,564 1,697,190 833,400 19,131,553 35,756,983 59,670,690

Breakdown 3.77% 2.84% 1.40% 32.06% 59.92% 100.00%

The amount of current trade receivables at 31/12/2012 had reduced when compared to 2011, due to the lower hardware sales at year-end 2012 compared with 2011. Likewise, the amount of current trade receivables at 31/12/2011 showed a sharp fall when compared with 2010. It should be noted that December 2010 was a record month for the issuance of invoices. However, in terms of the age and structure of the payment schedule, the position is very healthy at the end of 2012. Most of the current trade receivables at the closing date were not due at the closing date (66.32% at the end of 2012, 69.45% in 2011 and 59.92% in 2010). These are mainly invoices to be drawn up (services and deliveries carried out at the end of the year and to be invoiced at the start of the next year) or invoices from the end of December for which the due dates are in January of the next year.

For the remainder, 22.63% of the receivables fell due during the 30 days prior to 31/12/2012, (17.25% in 2011 and 32.06% in 2010), 4.31% were due for 30 to 60 days (4.66% in 2011 and 1.40% in 2010), 1.06% were due for 60 to 90 days (3.24% in 2011 and 2.84% in 2010) and 5.68% were due for over 90 days (5.40% in 2011 and 3.77% in 2010) (mainly from public institutions where payment takes longer but the financial risk is lower).

An analysis of the age of the receivables shows the quality of our customers, the receivables of the whole of the I.R.I.S. group, and the effectiveness of the recovery procedures. The quality of our trade receivables balance also reflects the

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satisfaction of our customers, and therefore the quality of the work provided, and the achievements of the I.R.I.S. teams.

29. Trade payables and other liabilities

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Trade payables and other liabilities 34,704,684 38,016,693 51,905,542

Trade payables 21,168,831 26,024,371 37,726,993

Amounts owed to customers for work in progress

315,289 1,380,933 1,169,288

Taxes, salaries and social security liabilities 8,715,793 9,184,933 9,120,672

Corporate income tax 1,046,666 2,262,401 1,177,552

Other taxes 2,000,365 1,204,813 2,582,928

Salaries and social security charges 5,668,762 5,717,719 5,360,192

Other liabilities 4,504,771 1,426,456 3,888,589

Other current liabilities 6,721,228 6,242,864 6,296,816

Trade payables represented about 127 days' turnover at the end of 2012 compared with 117 days' turnover at the end of 2011 and 175 days' turnover at the end of 2010. This amount was less than the comparable 2011 figure and the 2010 figure in which the amount of purchases at the end of the year was related to business activity in December.

The amounts owed to customers were discussed in the section on work in progress. Taxes, salaries and social security liabilities comprises provisions for estimated income tax and taxes which are not yet payable or have not yet been recorded, VAT and social security contributions payable in the first quarter of the next financial year and the provision for annual leave. Other debts include an amount of €3.5 million collected on behalf of social organisations in a file relating to the social telephone rate and which is due be repaid at the start of 2013. With regard to the remainder of the debts, these consist mainly of amounts owing on royalties contracts and the balances of dividends to be paid.

Other current liabilities mainly comprise deferred maintenance income invoiced in advance, expenses funded at the balance sheet date and subsidies received or due to be received.

In accordance with the choice offered by IAS 20 – Accounting of Government Grants and Disclosure of Government Assistance, government grants linked to investments in tangible and intangible assets are presented in the balance sheet as deferred income and are included in the other current liabilities. Revenue is recognized in income over the lifetime of the assets, at the same rate as the amortisation expenses. The grants included on the balance sheet totalled €1,910,198 at 31/12/2012, €1,170,280 at 31/12/2011 and €650,650 at 31/12/2010. Off-balance sheet commitments

Rental

The annual rental expenses paid in 2010, 2011 and 2012 were:

(€) Year ending: 31/12/2012 31/12/2011 31/12/2010

Other rental 78,632 50,466 59,956

Equipment rental 248,169 228,464 352,867

Vehicle rental 2,172,890 2,142,162 2,000,565

Real estate rental 1,062,197 1,014,164 921,639

Total 3,561,888 3,435,255 3,335,028 In 2011, the increased property rentals and vehicle rentals are partly compensated for by the reduced value of equipment rentals. The rental amounts in 2012 are comparable with the 2011 amounts. Given the nature of the rental expenses, it

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may reasonably be supposed that, excluding changes in the consolidation perimeter, the annual amounts will remain more or less the same in 2013 and for the next four years. In the longer term, the only remaining binding obligation will be the rental of the French head office, which represents a total of €657,897 payable in more than five years.

Disputes

Disputes were described in the section on provisions;

Guarantees

In connection with some contracts with customers, I.R.I.S. Group has issued bank guarantee letters totalling €2,528,879. In addition, I.R.I.S. Group, I.R.I.S. SA, I.R.I.S. Solutions and Experts SA and I.R.I.S. ICT stand as joint and several guarantors for investment loans contracted to acquire various buildings and whose outstanding amounts are included as liabilities in the balance sheet for a total amount of €123,881 at 31/12/2012, €264,885 at 31/12/2011 and €493,228 at 31/12/2010, and for the undrawn credit facilities available to them at 31/12/2012. With regard to these credit facilities, I.R.I.S. has undertaken not to furnish security to any third party without the agreement of the banks concerned and to maintain a solvency ratio of less than 1 and a liquidity ratio of less than 0.7 (ratio defined in this connection as the ratio of financial debt over total receivables).

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Structure of the Group and information about related parties

Organisation at 31 December – Relations between Gro up companies

Image Recognition Integrated Systems Group S.A. (abbreviated as I.R.I.S. GROUP) Parc Scientifique de Louvain-la-Neuve, Rue du Bosquet 10, B-1435 Mont St Guibert, Belgium, company registration No. BE-448.040.624

holds directly or indirectly (through its subsidiaries) 100% of the following companies:

• Image Recognition Integrated Systems Group S.A. (abbreviated as I.R.I.S. SA) Parc Scientifique de Louvain-la-Neuve, Rue du Bosquet 10, B-1435 Mont St Guibert, Belgium, company registration No. BE-0430.824.708

• I.R.I.S. Solutions & Experts S.A. Parc Scientifique de Louvain-la-Neuve, Rue du Bosquet 10, B-1435 Mont St Guibert, Belgium, company registration No. BE-0882.094.937

• I.R.I.S. Solutions & Experts Europe S.A. Parc Scientifique de Louvain-la-Neuve, Rue du Bosquet 10, B-1435 Mont St Guibert, Belgium, company registration No. BE-0457.859.992

• I.R.I.S. France S.A. 64-68 Avenue de la Victoire, 94 310 ORLY, France, VAT Id no. FR-46.392.588.273

• Image Recognition Integrated Systems Inc. (abbreviated as I.R.I.S.Inc.) Delray Office Plaza, 4731 West Atlantic Avenue, Suite B1 & B2, Delray Beach, Florida 33445, USA

• I.R.IS. Financial Services S.A. (abbreviated as I.R.I.S. PSF) Route des 3 Cantons 11, 8399 Windhof, Grand-Duchy of Luxembourg, VAT number LU 155.333.28

• Image Recognition Integrated Systems Group S.A. (abbreviated as I.R.I.S. Luxembourg) Route des 3 Cantons 11, 8399 Windhof, Grand-Duchy of Luxembourg, VAT number LU 19.619.943

• I.R.I.S. ICT N.V. Mechelsesteenweg 542, 1800 Vilvoorde, Belgium, company registration number BE0449.223.727.

• I.R.I.S. Nederland B.V. Kruistraat 16231 LG Meerssen, The Netherlands, Registry of Commerce and Companies of Zuid-Limburg n° 14067802, VAT number NL 809344348B01

• I.R.I.S. AG HeussstraBe 23, 52078 Aachen, Germany, Aachen company registration no. HRB 8275

• Image Recognition Integrated Systems (I.R.I.S.) HK Ltd Room 813, 8/F, Hollywood Plaza, 610 Nathan Road, Kowloon Hong Kong, Hong Kong Companies Register No. 1204748

• I.R.I.S. Nordic AS Lysaker Torg 12, PO Box 190, 1325 Lysaker, Norway, Organisasjonsnummer 992 930 934

• I.R.I.S. ONDIT N.V. Sint Jobsesteenweg 102, 2930 Brasschaat, Belgium, Company Reg. No. BE 0897.474.187

• I.R.I.S. Denmark Aps Frederiksborggade 15, 6., 1360 Copenhagen, CVR-nr. 33 04 24 85.

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Organization chart at 31/12/2012:

All the financial statements of these companies are included in the consolidated financial statements of Image Recognition Integrated Systems Group S.A., the parent company and consolidating entity. All Group companies have, or are free to establish, relations with the other entities: - client-supplier relations for exchanging services (borrowing or lending resources for the implementation of projects), or supplying group products in connection with the sale or distribution of I.R.I.S. products by other subsidiaries in the Group - lender-borrower relations when one company is in need of cash and another company has a cash surplus, with the aim of optimising the cash position of the Group as a whole. I.R.I.S. Group holds 100% of all of its subsidiaries, which are related parties. All subsidiaries are fully consolidated using the global integration method when the Group's consolidated financial statements are prepared. All inter-company transactions and balances that exist between group companies, who are related parties, are therefore eliminated in the consolidation and in the Group's consolidated financial statements.

Jointly controlled activities – Temporary partnersh ips (joint venture) Our company is required to take part in consortiums or temporary partnerships as part of major framework agreements, particularly with European institutions. This obviously involves the need to closely monitor both the operational and financial life and management of these partnerships, as there is a principle of solidarity between partners in the event of litigation or a loss. It should be noted that I.R.I.S. usually works with larger companies that have a long experience of this type of partnership and are much stronger financially than I.R.I.S.

Denmark Norway

99,95% 100% 100% 100%

0,05%

99,997%

0,003% 0,03%

100% 100% 100,00%100%

99,97%

100%

99,97% 0,03%

99,93% 0,07%

98,998%

0,002%

USA Hong KongGermany BelgiumThe Netherlands Luxemburg France

I.R.I.S. GROUPS.A.

I.R.I.S. S.A.

I.R.I.S. Solutions & Experts S.A.

I.R.I.S. Solutions

& Experts Europe

S.A.

IRISFinancial Services

S.A.

I.R.I.S. (Luxembourg)

S.A.

I.R.I.S. ICT N.V.

I.R.I.S. France S.A.

I.R.I.S. INC

I.R.I.S.AG

I.R.I.S. Nederland

B.V.

I.R.I.S. HKLTD

I.R.I.S.Nordic

AS

ONDITN.V.

I.R.I.S.Denmark

ApS

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In these temporary partnerships or consortiums, each of the partners performs a given share of the work involved, for specific services or tasks, in projects carried out for end customers. The role of each of the partners is established in line with the work or services to be performed by each one, and the profiles of the personnel supplied, and is expressed as a percentage of the total work to be provided. Temporary partnerships do not have the status of a separate legal entity and no assets or liabilities are pooled. Each partner uses its own resources (primarily its employees), bears its own expenses and invoices the partnership for its services. Temporary partnerships operate at neither a profit nor a loss. The partnership's income and expenses are the income and expenses of all the partners, and the services invoiced by each of the partners are passed on to the end customer. In the event of an overspend for a project resulting in a loss by the temporary partnership, each of the partners bears a share of the loss, pro rata to its share in the partnership. The activities performed within temporary partnerships are “jointly controlled operations” and, in accordance with “IAS 31 – Interests in Joint Ventures”, I.R.I.S. recognises any assets and liabilities generated, any expenses incurred and its proportional share of the income in its financial statements. I.R.I.S.’s participation in temporary partnerships is faithfully reflected in its accounts. As payments are subject to final payment by the customer, the customer receivables booked by I.R.I.S. correspond to I.R.I.S.’s share. of the customer receivables of the temporary partnerships and the income recognised by I.R.I.S. represents its share of the income from products provided to end customers. Our company is a member of a consortium for some contracts with international organizations, and in particular with the following companies: Unisys, Sogeti, Intrasoft, Reggiani, TCS, ebrc, CTG: license2EU, ONE4EU2, Know-Sys, One4Research, Excite, ePubli. At 31 December 2012 and to date, to the best of our knowledge, based on the information available and brought to the knowledge of each of the partners, there are currently no legal disputes in progress involving any of the temporary partnerships and no possible or potential risk (which has not been reflected in the financial statements) to I.R.I.S. as a member of these partnerships.

Transactions with other related parties

Since 1 July 2004, I.R.I.S. France SA has been leasing a building in Orly. The owner company of this building is controlled by directors of the I.R.I.S. Group. Transactions are carried out under normal market conditions, which is the constant policy of I.R.I.S. Group.

Rental expenses for these premises totalled €187,504 for the French head office in 2012, €218,386 in 2011 and €214,103 in 2010.

A rental deposit of €48,000 was issued in connection with the lease of the French subsidiary.

Remuneration of the main managers of the Group

Remuneration and short-term benefits

The current main executives of the Group received €464,166 in 2012. These same main executives received €515,410 in 2011 and €568,610 in 2010 in remuneration and short-term benefits. The remuneration and short-term benefits allocated to the directors and managers of the consolidating company in 2012 totalled €419,166 compared with €470,410 in 2011 and €525,110 in 2010. The non-executive directors who have the capacity of independent directors as defined by Law and the Belgian Corporate Governance Code each received a remuneration amount of €15,000 in 2012 for their participation in boards and committees, representing a total cost of €45,000 (exactly the same as in 2011) for the company. They receive no other remuneration or other short-term or long-term benefit.

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The other non-executive directors do not receive any remuneration or short-term or long-term benefits. Remuneration linked to short-term and long-term performance No variable remuneration was due or paid in 2010 or 2011. In 2012, a variable remuneration amount of €20,000 was granted to the C.E.O. by the remuneration committee of 7/11/2012. This remuneration is included in the amounts shown above. The non-executive directors do not receive any performance-related benefits such as bonuses or long-term profit-sharing schemes or benefits in kind or pension plan related benefits. The CEOs receive no other remuneration in relation to long-term performance. In the case of the grant of a variable remuneration, the company reserves the right to recover the variable remuneration if it was allocated on the basis of incorrect financial information. Pensions The CEOs receive no benefits that are related to pension plans. Share-based payments

31/12/2012 31/12/2011 31/12/2010

Number of options held at 1 January 17,000 17,000 17,000

Number of options exercised during the year 0 0 0

Number of options allocated during the year 0 0 0

Number of options held at 31 December 17,000 17,000 17,000 The exercise price of the options and warrants is €42.18. Share-based payments

In 2007, 17,000 options (6,000 unconditional options and 11,000 options conditional on achieving certain financial results) were allotted to the principal managers. No share-based payments were made to the main managers of the Group in 2010, 2011 or 2012. At the close of 2012, the main managers hold 17,000 options. Severance pay In the event of dismissal of a CEO, 12 months' notice must be given, and severance pay will be allocated equal to 12 months' remuneration. This notice period is justified due to the age, length of service and responsibilities of the executive directors. Shareholdings of the CEOs: At 31/12/2012, the CEOs declared their shareholdings to be as follows: Pierre de Muelenaere 49,645 Etienne Van de Kerckhove 0

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At 3/04/2013, the CEOs declared that they no longer hold any shares in the I.R.I.S. Group.

Post-balance sheet events Post-balance sheet events to be reported are:

Unconditional public takeover bid by Canon On 26 March 2013, the public takeover bid by Canon relating to all shares, warrants and stock options of I.R.I.S. Group SA became unconditional. On 26 March 2013, Canon, a world leader in imaging solutions, announced via its subsidiary, Canon Europa N.V., that at the close of the initial acceptance period of its public takeover bid of I.R.I.S. Group SA on 20 March 2013, 91.05% of the entire shareholding of the I.R.I.S. Group was held by Canon. All the conditions precedent of the public takeover bid have been satisfied and the offer is, therefore, now unconditional. This represents an important stage in the close relationship between Canon and the I.R.I.S. Group as Canon will focus on accelerating the growth of its solutions and professional services.

Canon already had a close strategic partnership with the I.R.I.S. Group which had developed over a number of years and was strengthened in July 2009 when Canon acquired a 17% stake in the company. When I.R.I.S. Group joins the Canon group this will give both companies the opportunity to work together more closely while developing a range of technology solutions to match our clients' business requirements even more accurately.

Obligatory reopening and squeeze-out Shareholders who have not yet tendered their share(s) in response to the bid will have the opportunity to do so during the obligatory bid reopening period which commences on 27 March 2013 and ends on 17 April 2013. Shareholders can tender their share(s) to the bid in the same way and under the same conditions that were offered during the initial acceptance period, as described in the bid prospectus. The offer price per share is 44.50 euros and the price for warrants and options is as stated in the prospectus. At the end of the obligatory bid reopening period, if Canon holds at least 95% of the shares, Canon intends to launch a squeeze-out process. All of the bid details are contained in the bid prospectus and the memorandum in reply prepared by the I.R.I.S. Group SA Board of Directors and which are both published on the I.R.I.S. Group website (www.iriscorporate.com) and the ING Belgium website (www.ing.be).

The prospectus and memorandum in reply documents were both approved by the FSMA on 5 February 2013, and are also available on the FSMA website: http://www.fsma.be/fr/Supervision/fm/oa/ooa/ProspectusOPA.aspx

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Report by the auditor to the General Meeting of Sha reholders of Image Recognition Integrated Systems Group SA on the fina ncial year ended 31 December 2012 In accordance with legal requirements, we report to you on the performance of our mandate of statutory auditor. This report contains our opinion on the consolidated financial statements (the financial situation of the consolidated group at 31 December 2012, the consolidated income statement (consolidated overall net result, changes in the consolidated group's equity and the cash flow of the consolidated group) for the financial year ended 31 December 2012 and the notes as well as the required additional declaration. Unqualified opinion on the consolidated financial statements We have audited the consolidated financial statements for the year ended 31 December 2011, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted in the European Union, and with the legal and statutory requirements applicable in Belgium. The consolidated balance sheet shows total assets of €112,287,098 and the consolidated income statement shows a profit for the year, Group's share, of €3,628,729. Responsibility of the management body for the preparation of the consolidated financial statements The management body is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with international financial information standards. This responsibility includes implementing the internal control measures that it deems necessary for the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error. Responsibility of the statutory auditor Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the international audit standards (ISA). These standards require that we comply with rules governing professional ethics and plan and perform the audit to obtain reasonable assurance that the consolidated financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risk that the consolidated financial statements contain material misstatements, whether due to fraud or error. In making those risk assessments, the auditor takes into account the internal control procedures implemented by the entity for the preparation and fair presentation of the consolidated financial statements, in order to define audit procedures that are appropriate in the circumstances, but not in order to give an opinion on the effectiveness of the entity's internal control. An audit also involves an evaluation of the appropriateness of the accounting policies used, the reasonableness of significant accounting estimates made by the management body and the presentation of the consolidated financial statements, taken as a whole. We have obtained from the management body and the entity's employees the explanations and information required for our audit. We believe that the evidence we have obtained is appropriate and sufficient to form a reasonable basis for our opinion. Unqualified opinion In our opinion, the consolidated financial statements for the year ended 31 December 2012 give a true and fair view of the Group’s assets and financial position as at 31 December 2012, and of its results and cash flows for the year ended on that date, in accordance with IFRS as adopted by the European Union.

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Report on other legal and regulatory requirements The preparation and content of the management discussion and analysis of the consolidated financial statements are the responsibility of the management body. Included within our mission is the responsibility to verify that certain legal and regulatory requirements have been complied with in all material aspects. On this basis, we make the following additional statement which does not modify our audit opinion on the consolidated financial statements. � The management discussion and analysis of the consolidated financial statements deals with the information

required by law and is consistent with the consolidated financial statements. It does not present any obvious inconsistencies with the information that we obtained during the performance of our mandate.

Liège, 16 April 2013

Ernst & Young Réviseurs d’Entreprises SCCRL Statutory Auditor represented by

Marie-Laure Moreau Partner

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Non-consolidated financial statements of I.R.I.S. G roup SA

Pursuant to Article 105 of the Belgian Companies Code, the financial statements shown below are a short version of the annual financial statements, which can be obtained in full at the company’s head office and will be filed with the National Bank of Belgium. This abridged version does not contain all the notes or the report of the auditor which certified the annual financial statements without reservation.

BALANCE SHEET (€)

31/12/2012 31/12/2011 31/12/2010

F I X E D A S S E T S 20/28 22,495,654.84 22,523,688.42 22,551,484.60

II. Intangible assets 21 20,393.67 41,115.93 48,266.07

III. Tangible assets 22/27 13,205.69 20,518.01 30,664.05

B. Plant, machinery and equipment 23 13,028.38 20,008.25 15,864.05

C. Furniture and vehicles 24 177.31 509.76 0.00

F. Fixed assets under construction and down payments 27 0.00 0.00 14,800

IV. Financial assets 28 22,462,055.48 22,462,054.48 22,472,554.48

A. Affiliated companies 280/1 22,462,055.48 22,462,054.48 22,462,054.48

C. Other long-term investments 284/8 0.00 0.00 10,500.00

C U R R E N T A S S E T S 29/58 32,431,089.28 34,003,868.84 35,638,739.83

VII. Short-term receivables 40/41 30,067,275.83 33,354,119.48 33,961,301.12

A. Trade receivables 40 515,216.86 103,827.00 17,639.00

B. Non-trade receivables 41 29,552,058.97 33,250,292.48 33,943,662.12

VIII. Short-term investments 50/53 881,520.99 120,395.79 1,170,833.64

A. Own shares 50 881,520.99 120,395.79 170,833.64

B. Other investments 51/53 0.00 0.00 1,000,000.00

IX. Cash & cash equivalents 54/58 1,431.094.85 429,591.01 375,695.53

X. Prepayments and accrued income 490/1 51,197.61 99,762.56 130,909.54

T O T A L A S S E T S 20/58 54,926,744.12 56,527,557.26 58,190,224.43

S H A R E H O L D E R S E Q U I T Y 10-15 50,881,415.01 50,378,545.47 51,034,590.64

I. Share capital 10 38,774,902.12 38,774,902.12 38,774,902.12

A. Subscribed capital 100 38,774,902.12 38,774,902.12 38,774,902.12

II. Issue premiums 11 6,610.33 6,610.33 6,610.33

IV. Reserves 13 12,099,902.56 11,597,033.02 12,253,078.19

A. Legal reserve 130 1,075,323.99 1,050,180.51 1,017,705.25

B. Non-distributable reserves 131 881,520.99 120,395.79 170,833.64

1. For own shares 1310 881,520.99 120,395.79 170,833.64

2. Others 1311 0.00 0.00 217,500.00

D. Free reserves 133 10,143,057.58 10,426,456.72 10,847,039.30

PROVISIONS AND DEFERRED TAX 16 200,000.00 0.00 0.00

IV. Other liabilities and charges 163/5 200,000.00 0.00 0.00

D E B T S 17/49 3,845,329.11 6,149,011.79 7,155,633.79

VIII. Long-term borrowings 17 700,000.00 2,100,000.00 3,500,000.00

Financial debts 170/4 700,000.00 2,100,000.00 3,500,000.00

IX. Short-term debts 42/48 3,129,765.43 4,024,801.53 3,623,305.35

A. Long-term borrowings falling due during the year 42 1,400,000.00 1,400,000.00 1,400,000.00

C. Trade payables 44 538,573.85 135,805.37 228,067.12

E. Taxes, salaries and social security liabilities 45 207,140.81 209,012.61 122,855.77

1. Tax 450/3 37,911.19 75,160.48 10,982.17

2. Salaries and social security charges 454/9 169,229.62 133,852.13 111,873.60

F. Other liabilities 47/48 984,050.77 2,279,983.55 1,872,382.46

X. Prepayments and accrued income 492/3 15,563.68 24,210.26 32,328.44

T O T A L L I A B I L I T I E S 10-49 54,926,744.12 56,527,557.26 58,190,224.43

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Income statement(€) 31/12/2012 31/12/2011 31/12/2010

I. Sales and services 70/74 2,578,135.21 2,318,496.09 2,103,913.09

A. Turnover 70 2,430,065.42 2,119,060.57 1,972,303.26

B. Self-constructed capital assets 72 0.00 0.00 12,616.70

D. Other operating income 74 148,069.79 199,435.52 118,993.13

II. Cost of sales and services 60/64 -2,671,085.26 -2,239,626.36 -2,075,750.79

B. Goods and other services 61 1,370,250.08 1,128,717.03 967,060.00

C. Salaries, social security and pensions 62 1,065,952.88 1,074,998.51 1,044,810.82

D. Amortisation and depreciation of tangible and intangible fixed assets 630 34,882.30 35,910.82 63,739.33

F. Provisions for liabilities and charges 635/7 200,000.00 0.00 0.00

G. Other operating expenses 640/8 0 0 140.64

III. Operating income 70/64 -92,950.05 78,869.73 28,162.30

Operating loss 64/70 0 0 0

IV. Financial income 75 747,505.06 785,646.68 3,877,658.24

A. Income from financial assets 750 63,230.83 68,385.24 3,807,108.91

B. Income from current assets 751 623,867.22 669,185.96 6,505.21

C. Other financial income 752/9 60,407.01 48,075.48 64,044.12

V. Financial expenses 65 -150,487.60 -211,219.90 -285,706.05

A. Interest on debts 650 125,797.24 188,330.31 251,718.69

C. Other financial expenses 652/9 24,690.36 22,889.59 33,987.36

VI. Profit before tax and extraordinary items 70/65 504,067.41 653,296.51 3,620,114.49

IX. Pre-tax profit or loss for the financial year 70/66 504,067.41 653,296.51 3,620,114.49

X. Corporate income tax 67/77 -1,197.87 -3,791.28 -971

A. Tax 670/3 -1,200.62 -3,791.28 -971

B. Tax adjustments and reversal of tax provisions 77 2.75 0 0

XI. Profit for the year 70/67 502,869.54 649,505.23 3,619,143.49

A. Profit available for appropriation 70/69 502,869.54 649,505.23 3,619,143.49

1. Profit for the year to be appropriated 70/68 502,869.54 649,505.23 3,619,143.49

2. Profit carried forward from the previous year 790 0 0 0

B. Equity distributions 791/2 761,125.2 906,020.43 0

2. on reserves 792 761,125.2 906,020.43 0

C. Allocations to shareholders’ equity 691/2 -1,263,994.74 -249,975.26 -2,556,052.45

2. to the legal reserve 6920 25,143.48 32,475.26 180,957.17

3. to other reserves 6921 1,238,851.26 217,500.00 2,375,095.28

D. Profit carried forward 793/693 0 0 0

F. Profit available for distribution 694/6 0.00 -1,305,550.40 -1,063,091.04

1. Return on capital 694 0.00 1,305,550.40 1,063,091.04

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Glossary

This glossary defines a number of performance indicators. EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) Operating cash flow means the operating result plus amortization and depreciation of tangible and intangible assets. EBIT (Earnings Before Interest and Taxes) Operational or operating result corresponding to the results of activities pursued before financial income and expenses and taxes. Gross margin Difference between turnover on the one hand and the cost of goods sold (including services and licences purchased) on the other hand. Backlog or Order book The amount of orders, expressed as a gross margin (and not as turnover), corresponding to firm and definitive orders that have not yet been recognised in income but are planned to be recognised in income (according to the estimate of completion of the work/project) for the current financial year. Market capitalization Value of a company calculated on the basis of its share price obtained by multiplying the share price by the number of shares in existence. Net cash Cash and cash equivalents less financial debts falling due within the year. Weighted average number of ordinary shares (basic calculation) Number of ordinary shares in circulation at the start of the period, after deducting the own shares, adjusted by the number of ordinary shares redeemed or issued during the year, multiplied by a time-based weighting factor. Weighted average number of ordinary shares (diluted calculation) Weighted average number of ordinary shares increased by potential shares, corresponding to the shares potentially issued in connection with in-the-money warrants at the balance sheet date. WPR strip Presented at the same time as the corresponding share coupon, a WPR strip entitles the holder to the reduced withholding tax rate of 15% instead of the standard rate of 25%. Some of the financial data and statistics included in this annual report have been rounded off. Consequently, certain totals may differ from the sum of the amounts shown.

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Contacts Image Recognition Integrated Systems Group S.A. (abbreviated as I.R.I.S. Group SA) Rue du Bosquet 10 - Parc Scientifique de Louvain-la-Neuve – B-1435 Mont Saint Guibert - Belgium Tel +32 (10) 45.13.64 – Fax +32 (10) 45.74.73 www.iriscorporate.com VAT No. BE-0.448.040.624 Investor Relations & Financial Communications

Denis Hermesse, CFO Rue du Bosquet 10 - Parc Scientifique de Louvain-la-Neuve – B-1435 Mont Saint Guibert - Belgium Tel +32 (10) 487.460 – Fax +32 (10) 487.468 – E-mail: [email protected]

Financial calendar and financial information

Annual General Meeting 3rd Tuesday in May – 21 May 2013 at 9 am

Publication of half-year results 22 August 2013 at 17:45

Press release about the 2013 annual results 3rd week in March 2014

Consult our financial information by clicking on the "investors" section on our website www.iriscorporate.com. This section provides access to all press releases, financial reports and other useful information. You may also register to receive a regular copy of the I.R.I.S. investors' newsletter.

Responsible publishers

Pierre De Muelenaere & Etienne Van de Kerckhove Rue du Bosquet 10 - Parc Scientifique de Louvain-la-Neuve – B-1435 Mont Saint Guibert - Belgium

Rapport annuel

Ce rapport annuel est également disponible en français. The French version prevails.

Documents

Supplement to the Prospectus dated 5 February 2013 … · 13,000 Stock Options were also tendered during the Initial Acceptance Period, they could not ... transferred shall be deposited