IPS annual report 2012 FINAL - Airopack · DuPont Award Following the silver medal in the 2011...

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ANNUAL REPORT 2012

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KEY FIGURES

in 1’000 € in 1'000 €

2012 2011

Consolidated income statement

Net sales 159 15

EBITDA -4'090 -2'738

EBIT -5'605 -3'020

Net result -5'969 -3'327

Net result per share in € -0.62 -0.37

Consolidated cash flow -40 -472

Consolidated balance sheet

Cash and cash equivalents 138 176

Shareholders' equity 795 550

Balance sheet total 14'216 11'653

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TABLE OF CONTENTS

Profile of IPS Group 4

Report from the Board of Directors 5

Financial review 6

Corporate governance 7

Financial reporting 2012 15

Corporate calendar and addresses 52

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PROFILE OF IPS GROUP I.P.S. Innovative Packaging Solutions AG is a leading provider of mechanical and pressure-controlled primary packaging technologies and dispensing systems for manufacturers and suppliers of cosmetic, personal care, pharmaceutical and food products. Our inventions are industrialized and marketed through operational businesses of which IPS holds a strategic share. IPS excels in developing new primary packaging, building and managing partnerships to enable a fast rollout of our innovations through an excellent operational footprint and world-class customer service. Our innovations are always supported by strong worldwide IP protection. With R&D facilities in the Netherlands and Switzerland and a successful track record of over 35 years, IPS combines the power of R&D, technology, IP, commercialization and operational expertise together with a real passion for helping consumers in their constant need for simpler, better and more fun to use every-day consumer packaging. We connect innovation with the principles of sustainability; doing our utmost to reduce the carbon footprint of our products, in order to aid the protection and improvement of the environment, creating a better future for our children. The company has been listed on the SIX Swiss Exchange since 2010.

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REPORT FROM THE BOARD OF DIRECTORS

General In March 2012 IPS Group successfully accomplished a capital increase when 895,000 shares were issued from the authorised capital thereby generating € 4 million in new cash for the Company. The fact that the private placement was fully subscribed within only a few days confirms investor confidence in our company. DuPont Award Following the silver medal in the 2011 Edison Awards in New York, IPS Group has won the prestigious 2012 DuPont Packaging Award in the Innovation and Sustainability category. IPS's success in the DuPont awards represents a further milestone and a considerable degree of recognition for IPS Group. The innovative Airopack dispensers for which IPS was honoured are revolutionary and represent a paradigm shift in dispenser technology. First substantial sales Airopack In 2012 IPS Group’s joint venture company Airolux shipped nearly 400’000 pieces of Airopack, as part of the initial order of nearly 1 million pieces, to Supermax, a global leader and A-brand in personal care products. Actual sales lagged behind plan mainly due to quality issues with the customer formulation purchased from a third party subcontractor. This unexpected hurdle triggered Group Management’s decision to insource the complete filling process including the development of formulations for customers. With this step Airolux, as of January 2013, is able to offer a unique one-stop shopping concept to its customers creating yet another competitive advantage. Result development The consolidated 2012 income statement shows a net loss of € 6.0 million. The 2012 result reflects the operational cost of the production organisation set up to fulfil expected sales. Due to the unexpected delay in the start of various customer projects the absorption of the fixed organizational expenses could not be achieved. Short term priorities In the last quarter of 2012 new high speed assembly lines were installed at the Airolux production site in Bilten (CH) to further optimize the cost price with the improved 2

nd generation Airopack. As of January 2013,

Airolux has an installed capacity of up to 45 million pieces per annum. In 2013 Group management will fully focus on the fulfilment of existing customer orders and the closure of additional business. It is our goal to fully load the monthly capacity of the highly automated assembly and filling lines before the end of 2013. In the second quarter of 2013 the production of the Pressure Control Device (PCD), which is the engine of the Airopack system, will be relocated from the joint venture to a 100% IPS Group owned production facility in the Netherlands. This strategically important step will secure that IPS Group always has full control over the manufacturing of its core technology components.

Prospects In its 2013 budget IPS Group has identified a substantial number of customer projects which are expected to start in the year 2013. However, in the current phase of IPS Group’s development accurate forecasting of expected revenues from these customer projects remains difficult. Despite this uncertainty, the Board of Directors and the Group Management are confident that in the course of 2013 the operational business of the Group will achieve break-even on a month by month base. In order to secure the Group’s liquidity and fund the planned investments, the Board of Directors is preparing a capital increase which is planned for Spring 2013. The realization of this capital increase is key in providing the Group with the necessary funding to realize its business plan. Reinforced by the commitment of two major shareholders to provide the Group with bridge financing until the capital increase can be effectuated, the Board of Directors and Group Management are confident that the IPS Group will be able to obtain sufficient financing. On behalf of both the Board of Directors and the Group Management we would like to thank our shareholders for their loyalty and the trust they place in our Company. Our thanks also go to our employees for the extraordinary effort and commitment they have shown in 2012. Finally thanks are also extended to all customers and partners for their confidence in IPS Group and the good business relations our Group enjoys with them. Baar, March 2013 Alexander Vogel Quint Kelders Chairman of the CEO and Member of the Board of Directors Board of Directors

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FINANCIAL REVIEW Capital structure Issued capital On 23 March 2012, 895’000 bearer shares with a nominal value of CHF 5.00 each were issued from the authorised capital. The issue price was determined by the Board of Directors at CHF 8.50, based on the 60-day VWAP and in consideration of investor interest. Authorized capital On 24 May 2012, the General Assembly of Shareholders has approved the proposal of the Board of Directors to issue new authorized capital up to a maximum of 1.6 million bearer shares and a maximum aggregate amount of CHF 8 million at any time up to 24 May 2014. Conditional capital On 24 May 2012, the General Assembly of Shareholders has approved the proposal of the Board of Directors to create conditional capital up to CHF 4.5 million through the issuance of up to 900’000 fully paid bearer shares with a nominal value of CHF 5 each through the exercise of option rights which shall be granted to the employees and members of the Board of Directors of the Company or Group companies according to a stock option plan as adopted by the Board of Directors. Income statement The consolidated net loss amounted to € 6.0 million, on EBITDA level the loss amounted to € 4.1 million. The major positions of the income statement 2012 can be explained as follows: Operating income The first significant deliveries of Airopack by the joint venture company Airolux resulted in net sales of € 0.2 million on a consolidated level. Increased inventory of finished goods created another € 0.3 million of income. This relates to Airopack products ready to be delivered to fulfil orders placed by the customer. Raw material expense Raw material expense consists of plastic parts purchased from third parties and external cost of decorating and filling Airopack. Personnel expense Personnel expenses amount to € 2.0 million. Of this amount € 0.5 million relates to expenses for Group Management and the Board of Directors of I.P.S. Innovative Packaging Solutions AG. The remaining personnel expenses consist of cost of the research and development team in the Netherlands and the pro rata part of the personnel employed by the joint venture Airolux. Other operating expense Other operating expense amounts to € 2.2 million and includes € 0.3 million for charges for operations related to the joint-venture Airolux. These charges primarily relate to the premises that Airolux rents from Resilux Schweiz AG. A detailed breakdown of other operating expense can be found on page 28 of the Annual Report.

Depreciation / Amortization The 2012 consolidated statements include a full year of depreciation on machines. In 2011 depreciation on machines and moulds has started as per 1 December when production started. The amortization of capitalized development costs and patents has started as of 1 January 2012 in line with the start of substantial customer shipments. The amortization of the goodwill already started in 2010 directly following the reverse acquisition. Balance sheet The major assets of the IPS Group are machinery, moulds and intellectual property. As the future value of the Business would represent self-created goodwill, it is not recognized in the consolidated accounts which explains why the consolidated equity of the Group as at 31 December 2012 is € 0.8 million whereas the equity of the parent company, I.P.S. Innovative Packaging Solutions AG is € 49.1 million (CHF 59.2 million). As a result of the capital increase effectuated on 23 March 2012 the equity of the Group was increased by € 6.3 million. The capital increase generated € 4.0 million in new cash for the Group. The remainder of € 2.3 million was implemented by converting loans from the major shareholder into equity to further strengthen the Group’s balance sheet. Liquidity In 2012 the cash flow from operating activities amounted to negative € 3.8 million. On top of this, a net amount of € 0.9 million was invested in tangible fixed assets and another amount of € 1.5 million was used to fund the joint venture. The resulting negative cash flow of in total € 6.2 million was financed by additional loans of € 2.1 million and the € 4.0 million in new cash generated by the capital increase of March 2012. At 31 December 2012 the cash position of the Group amounted to € 0.1 million. In December 2012 two major shareholders have agreed to provide the necessary bridge financing, by means of short-term loans, to IPS Group to cover its cash needs until the capital increase planned for spring 2013. The parties have agreed to convert these loans into newly issued equity, at the time the capital increase is effectuated, at the same terms and conditions available to shareholders exercising their pre-emptive rights. The Board of Directors and Group Management are confident that the IPS Group will be able to obtain sufficient financing. Baar, March 2013 Frans van der Vorst CFO

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CORPORATE GOVERNANCE IPS Group is committed to modern corporate governance principles and aims to provide all stakeholders with the greatest transparency possible. The following information complies with the current corporate governance guidelines of the SIX Swiss Exchange.

Group structure Change in Group structure in 2012 On 2 July 2012 Airopack Competence Centre B.V. was incorporated as a 100% participation of Airolux AG. Group structure as at 31 December 2012 I.P.S. Innovative Packaging Solutions AG is the parent company of IPS Group and has its statutory seat in Baar, Switzerland. The shares of the Company are listed on the SIX Swiss Exchange (Ticker: IPS / Security number: 201382; ISIN: CH 0002013826). The market capitalization of I.P.S. Innovative Packaging Solutions AG, as of 31 December 2012 is CHF 98.8 million. I.P.S. Innovative Packaging Solutions AG is the only listed company of IPS Group. All investments in subsidiaries and associates are listed on page 40 of the Financial Report together with the information on location, share capital and the size of the equity interest. IPS Group currently is active in one business segment. Shareholders Significant shareholders Shareholders with reportable positions (>3%) as at 31 December 2012: Jan Kelders, Riederalp (Switzerland)* 64.0% Nicolas Mathys, Baar (Switzerland) 5.9% Balfidor Fondsleitung AG, Basel (Switzerland)* 3.1% * percentages as reported to SIX Swiss Exchange

Cross-shareholdings No cross-shareholdings exist with other companies. Capital structure Ordinary share capital The share capital of I.P.S. Innovative Packaging Solutions AG, the parent company of IPS Group, as per 31 December 2012 amounts to a total of 9’882’571 bearer shares (31.12.2011: 8’987’571). Each bearer share carries one vote at the Annual General Meeting. There are no shares affording preferential voting rights. There are no limits on transferability. Authorized capital On 24 May 2012, the General Assembly of Shareholders has approved the proposal of the Board of Directors to issue new authorized capital up to a maximum of 1.6 million shares and a maximum aggregate amount of CHF 8 million at any time up to 24 May 2014. The Board of Directors is authorized to limit or exclude subscription rights of shareholders and to allocate them to third parties if the new shares are to be used for the acquisition of companies, parts of companies, equity stakes or the financing of such transactions, to enable a participation of strategic partners or investors or for the fast and flexible raising of equity capital through a placement of shares that would be difficult to implement with subscription rights. Conditional capital On 24 May 2012, the General Assembly of Shareholders has approved the proposal of the Board of Directors to create conditional capital up to CHF 4.5 million through the issuance of up to 900’000 fully paid bearer shares with a par value of CHF 5 each through the exercise of option rights which shall be granted to the employees and members of the Board of Directors of the Company or Group companies according to a stock option plan as adopted by the Board of Directors.

Capital structure

Capital Number of

shares

par value per

share

Total in CHF

Ordinary share capital 9'882'571 5.00 49'412'855

Authorized capital (until 24 May 2014) 1'600'000 5.00 8'000'000

Conditional capital 900'000 5.00 4'500'000

Changes in share capital over the last three years Number of

shares

Par value per

share in CHF

Total

in CHF

As at 31 December 2009 1'887'390 5.00 9'436'950

Capital increase by contribution in kind 7'100'181 5.00 35'500'905

As at 31 December 2010 8'987'571 5.00 44'937'855

Changes in 2011 - - -

As at 31 December 2011 8'987'571 5.00 44'937'855

Capital increase 23 March 2012 895'000 5.00 4'475'000

As at 31 December 2012 9'882'571 5.00 49'412'855

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CORPORATE GOVERNANCE Ordinary Shares The issued bearer shares are fully paid in. Participation and dividend right certificates I.P.S. Innovative Packaging Solutions AG has issued neither participation certificates nor dividend right certificates. Convertible bonds As per 31 December 2012 there are no convertible bonds outstanding. Share option rights In 2011 an option program for the members of the Board of Directors and the Group Management was launched. Each option entitles the holder to buy one share in I.P.S. Innovative Packaging Solutions AG at a fixed exercise price. As per 31 December 2012 a total of 466’750 (31.12.2011: 318’419) share option rights were allocated (detailed information on page 48 of the Annual Report). Share options rights allocated in 2011 and 2012 are subject to a vesting period of two years, during which period the options cannot be exercised. Board of Directors The duties of the Board of Directors are defined in the Swiss Code of Obligations, the Articles of Association and the Organizational Regulations. The primary duties of the Board of Directors are: • Strategic direction and management of the IPS

Group, • Determining the organization, appointing and

dismissing members of Group Management and other key executives,

• Determining the accounting framework as well as the principals for planning, policy and controls,

• Preparing the Annual Report and the Annual Shareholders' Meeting and executing the passed resolutions and

• Determining principles of risk management and internal controls.

The Board of Directors delegates all management duties to the Group Management to the extent permitted by law and by the Articles of Association. The Organizational Regulations contain detailed rules for the delegation of competencies. The remit of the Board of Directors covers decisions on the acquisition and sale of shareholdings, strategic partnerships, and investments not included in the budget or exceeding a certain significance threshold. Changes to the Board of Directors At the Annual General Meeting of the Shareholders on 24 May 2012, Nicolas Mathys and John McKernan were elected to the Board of Directors for a period of two years. Election and term of office The members of the Board of Directors are elected by the General Meeting for a term of two years, on completion of which they can be re-elected. A member of the Board of Directors must resign at the Annual General Meeting at which the Annual Report for the financial year in which he reached the age of 65 is approved; however, in particular cases the Board may derogate from this rule by an unanimous decision.

Internal Organization The Board elects the Chairman from its members and appoints the Secretary. As at 31 December 2012 the Board is organized as follows: Dr. Alexander Vogel, Chairman, non executive Quint Kelders (CEO), Member, executive Daniel Gutenberg, Member, non executive Benno Zehnder, Member, non executive Nicolas Mathys, Member, non executive John McKernan, Member, non executive The Chairman convenes a meeting of the Board of Directors as often as the Group’s business requires, but at least four times a year. The meetings are chaired by the Chairman who also sets the agenda. Each member of the Board of Directors can request the convocation of a meeting and the inclusion of an item in the agenda. Minutes are taken of the discussions and resolutions at the meetings. The Board of Directors convenes for ordinary half-day meetings. From 1 January 2012 to 31 December 2012, the Board held eight meetings, including two times via telephone conference. The Board meetings usually lasted around 4 hours, telephone conferences around 1 hour. Committees Two committees were set up to support the Board of Directors: the Audit Committee and the Compensation Committee. The committees meet regularly and are required to prepare minutes of their meetings and recommendations for perusal at the meetings of the Board of Directors. The committees notify the full Board of Directors of important matters immediately. Audit Committee The Audit Committee’s primary task is to maintain a comprehensive and efficient auditing system for I.P.S. Innovative Packaging Solutions AG and the IPS Group. The committee also approves the focal points of the audits and reviews the audit results, accounting principles and financial control mechanisms. The Audit Committee‘s decisions are subject to approval by the full Board of Directors. The members of the Audit Committee are the Board members Benno Zehnder (Chairman) and Daniel Gutenberg. The CFO also attends all meetings as well as representatives of the external auditors as required. Two meetings were held in 2012, one of which was attended by the external auditor. Compensation Committee The Compensation Committee submits proposals to the full Board of Directors concerning the compensation (including employee participation schemes) of the members of the Board of Directors and Group Management. Details of the IPS Group’s remuneration policy can be found on page 47. The members of the Compensation Committee are the Board members Dr. Alexander Vogel (Chairman) and Benno Zehnder. Four meetings were held in 2012. Transactions with parties related to the Board of Directors Details of transactions with related parties can be found on page 37.

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CORPORATE GOVERNANCE Information and control instruments vis-à-vis Group Management The CEO and the CFO inform the Board of Directors about current business performance and key projects at each board meeting. On a monthly basis the CFO prepares a consolidated income statement and provides it with respective comments and key information on the liquidity status and major risk positions to the Board of Directors. All members of the Board of Directors may request to see any information relevant to the Company. Group risk analyses are conducted on a regular basis by the Audit Committee. The main risks are analyzed at least once a year at the Board of Directors level. Group Management Members of Group Management and their activities CEO and CFO are elected by the Board of Directors at the request of the Compensation Committee. The members of Group Management also have positions in the Boards of Directors of the IPS Group’s subsidiaries. Change in Group Management In 2012 the Group Management remained unchanged. Management Contracts As at 31 December 2012 and during the reportable period, there have been no management contracts between the Group and companies or persons entrusted with management tasks. Compensations, shareholdings and loans Content and method of determining compensation and share ownership programs The Compensation Committee makes recommendations regarding the definition of the compensation programs for the members of the Board of Directors and Group Management, which are then submitted to the full Board of Directors for decision according to its reasonable discretion. The Members of the Board of Directors and the members of Group Management receive a fixed cash compensation and share option rights. Members of the Board of Directors can opt to receive their total compensation in share option rights only. Compensation to serving members of the Board of Directors and Group Management For details on compensation and shareholdings of members of the Board of Directors and Group Management, please refer to note 8 of the Financial Statements of I.P.S. Innovative Packaging Solutions AG (page 47 of the Annual Report). Compensation to former members of the Board of Directors and Group Management No fees, salaries, credits, bonuses or non-cash benefits were paid to former members of the Board of Directors or Group Management in the year under review. Share allocations in the year under review No shares were allocated to members of the Board of Directors or members of Group Management and affiliated persons in the year under review.

Ownership of shares and options by members of the Board of Directors and Group Management As at 31 December 2012, the non-executive members of the Board of Directors and affiliated persons living in the same household held a total of 636’500 shares in the Company (detailed information on page 48 of the Annual Report). As at 31 December 2012, the members of Group Management and affiliated persons living in the same household held no shares in the Company. In 2011 an option program for the members of the Board of Directors and the Group Management was launched. Each option entitles the holder to buy one share in I.P.S. Innovative Packaging Solutions AG at a fixed exercise price. Options allocated under the plan in 2011 and 2012 expire four years after the issue date and are subject to a vesting period of two years, during which period the options cannot be exercised. Options expire without compensation in case the employment is terminated during the vesting period. As per 31 December 2012 a total of 466’750 share option rights in the Company were allocated to the members of the Board of Directors and the Group Management and affiliated persons living in the same household (detailed information on page 48 of the Annual Report). Additional fees and remuneration No additional fees or remuneration were paid out. Loans extended to directors and officers of the Company As at 31 December 2012, IPS Group had not granted loans to nor acted as guarantor for any members of the Board of Directors or to/for any members of Group Management or to/for any persons affiliated to said parties. Employee stock ownership and management incentive programmes IPS Group currently has no stock ownership programs for employees or management.

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CORPORATE GOVERNANCE Shareholders’ participation Voting-rights Each bearer share carries one vote at the Annual General Meeting. There are no shares affording preferential voting rights. There are no limits on transferability and the exercise of voting rights. Statutory quorums Provided there are no mandatory legal or statutory provisions to the contrary, the General Meeting of Shareholders takes its decisions and holds elections with an absolute majority of the valid votes cast. In a second ballot a relative majority is required. At least two-thirds of the votes represented, together with an absolute majority of the represented total share value are required for decisions on: 1. a change of the corporate purpose, 2. an increase of the voting power of existing voting

shares as well as the issue of new shares with more voting privileges than those of existing voting shares,

3. the introduction of more stringent transferability restrictions,

4. an approved or conditional capital increase, 5. a capital increase out of equity, subscribed in kind

or to acquire assets and giving special privileges, 6. the restriction or withdrawal of option exercise

rights, 7. the relocation of the Company domicile, 8. dissolving the Company without liquidation. As a general rule, an open ballot is used for decision making and elections. A secret ballot is held at the request of the Chairman, or if one or more shareholders representing a total of at least 10 percent of the voting shares request this. Convocation of the General Meeting of Shareholders The General Meeting of Shareholders is held annually, at the latest six months after the end of the fiscal year. It is convened by the Board of Directors. The invitation, together with the agenda and the motions, must be published at least twenty days before the meeting is to be held. Shareholders representing shares with a total par value of at least CHF 1 million may request an item for discussion to be placed on the agenda. If this right for agenda proposals is exercised, the proposals have to be announced in time, in order that the inclusion on the agenda is reasonable for the Board of Directors. The Board of Directors considers a period of 60 days before the respective meeting as reasonable. One or more shareholders who, together, represent at least 10 percent of the share capital may ask the Board of Directors to call a General Meeting and/or request an item for discussion to be put on the agenda.

Changes of control and defence measures Duty to make an offer The legal threshold of 33 1/3% of the voting rights, which obliges to make a takeover offer to the public stockholders is revoked in article 5bis (“opting out clause”) of the Company’s articles of association (as per the decision of the shareholders at the meeting on 7 May 2009). Clauses on changes of control There are no clauses on changes of control in favour of the members of the Board of Directors, Group Management or other employees. Auditing body Duration of the mandate and term of office of the lead auditor BDO AG, Zurich, have been the statutory auditors for I.P.S. Innovative Packaging Solutions AG since 2007. The statutory auditors are elected by the Annual General Meeting of Shareholders for a period of one year. The lead auditor is René Füglister, Swiss Certified Accountant. He has been responsible for this auditing mandate since 2011. Auditing fees In 2012, BDO AG as statutory auditors received audit fees for their services in the amount of CHF 85k (2011: CHF 110k). Additional fees In 2012, BDO AG received fees for preparing tax returns in the amount of CHF 11k (2011: CHF 7k). Supervisory and controlling instruments towards the statutory auditors The Board of Directors’ Audit Committee assesses the performance, invoicing and independence of the external auditors and provides the Board of Directors with corresponding recommendations. The auditors provide Group Management and the Audit Committee with regular reports that set out the results of their work and recommendations. The Audit Committee annually reviews the scope of the external audit, the audit plans and the relevant procedures, and discusses the audit reports with the external auditors. The external auditors attended one meeting of the Audit Committee in 2012.

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CORPORATE GOVERNANCE Information policy I.P.S. Innovative Packaging Solutions AG provides current and potential investors and the general public with extensive information about the Company, its strategy and business development. The Company also publishes all share price-relevant facts on its website in accordance with the requirements of the guidelines on ad-hoc public disclosure. The Company’s website also offers an electronic information tool that enables shareholders and other interested parties to be added to an electronic distribution list (http://www.ips-grp.com/en/investor-relations/investor-relations-contact/) The aim is to provide rapid, real-time and transparent information about important Company developments. The IPS Group publishes an income statement and balance sheet every six months. Shareholders are given information on the Group’s business performance at the General Meeting, via the half-year report and, if necessary, through additional channels. The Company’s official publication organ is the Swiss Commercial Gazette. Members of the Board of Directors The Board of Directors, which according to the Articles of Association comprises between three and several members, currently has six members. Quint Kelders is the only executive member. The other five members are non-executive members.

Dr. Alexander Vogel, Swiss Citizen, Born 1964 Chairman of the Board of Directors (non executive) Chairman of the Compensation Committee Member since 29 June 2010, elected until the 2014 Annual General Meeting Present position Since 2000: Partner of meyerlustenberger | lachenal Attorneys at Law with specialization in the areas: Corporate Law, Mergers & Acquisitions, Capital Markets and Finance, Head of the M&A/Corporate Department of the firm, Member of the Steering Committee of the firm. Previous positions Associate with Mayer, Brown & Platt, Chicago (1994) Associate with meyerlustenberger (1992-1999) Other activities Board member of various Swiss Companies, of which the following are the most essential: Meyer Burger Technology AG, Allreal Finanz AG, ROZAG Gruppe, STRABAG Swiss companies and Verenahof AG. Education and qualification Dr. iur., University of St. Gallen, admitted to the Swiss and New York Bar

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CORPORATE GOVERNANCE

Quint Kelders, Citizen of the Netherlands, Born 1974 Executive Member of the Board of Directors Member since 29 June 2010, elected until the 2014 Annual General Meeting Present position Chief Executive Officer (CEO) of I.P.S. Innovative Packaging Solutions AG President of the Board of Directors of Airolux AG, Bilten. Other activities Member of the Board of Directors of the following companies: Q-Invest B.V., ROQ Investments in Innovations B.V., Jan Kelders Beheer B.V. Previous positions Top Management functions with Meadwestvaco Corporation (MWV), Richmond, USA (2007-2010) CEO and major shareholder of Keltec Dispensing Systems, NL (1997-2007) Global Sales & Marketing Director of Heesen Yachts B.V., Oss, NL and Heesen Continental Yachts B.V., Fort Lauderdale, USA (2000-2006) Assistant to the Managing Directors of Ganahl AG, Volketswil, Switzerland (1997) Education and qualification Bachelor Business Administration, The University of Hull, Greenwich University (Hull/London UK) Business Degree, IVA University Driebergen (NL) Technical Degree, Technical College Waalwijk / Gilze (NL)

Daniel Gutenberg, Swiss Citizen, Born 1966 Member of the Board of Directors (non executive) Member of the Audit Committee Member since 12 May 2005, elected until the 2013 Annual General Meeting Present position General Partner of VI Partners AG, a Swiss venture capital company. Other activities Financier, coach and consultant of several start-up companies mainly in technical fields. In the context of those activities he has been elected in several Boards of Directors, of which the following are the most essential: carry n cash AG, Dealunited, SonicEmotion AG and YPO Young Presidents’ Organization. Furthermore he is President of the Schweizer Technion Gesellschaft. Previous positions 1991 – 2001 Founder, Managing Director and sole shareholder of Gutenberg Communication Systems AG Until 2001: Member of the Executive Board and Country Manager of Telindus Education and qualification Engineer in high frequency technology with a masters degree of CPLN Neuchâtel, Switzerland.

13

CORPORATE GOVERNANCE

Benno Zehnder, Swiss Citizen, Born 1955 Member of the Board of Directors (non executive) Chairman of the Audit Committee and member of the Compensation Committee Member since 29 June 2010, elected until the 2014 Annual General Meeting Present position Co-founder and partner of ZSP Consulting AG, Baar (Switzerland) with specialization in the following fields: Business and strategic consulting, consulting of start-up companies and family offices, real estate projects. Previous positions CFO Pelikan-Group, Zug and Project Manager Metro International AG, Baar (1991-1994) Controller and Project Manager Metro International AG, Baar (1988-1991) Other activities Board member of various Swiss Companies, of which the following are the most essential: Sensile Holding AG, Verenahof AG. Education and qualification Certified accountant/controller, Business apprenticeship, advanced education in Merger & Acquisitions

Nicolas Mathys, Swiss Citizen, Born 1968 Member of the Board of Directors (non executive) Member since 24 May 2012, elected until the 2014 Annual General Meeting Present position Partner of Zug Finance AG, Zug (Switzerland) Previous positions Partner of Zulauf Asset Management AG, (2001-2009) Portfolio Manager and Company Analyst of Zulauf Asset Management AG, (1998-2001) Project Engineer, F. Hoffmann – La Roche LTD., Basel (1993-1996) Other activities Board member of various Swiss and international companies. Education and qualification Master of Business Administration, SDA BOCCONI, Milan Master in Chemical Engineering, Swiss Federal Institute of Technology (ETH)

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John McKernan, US Citizen, Born 1959 Member of the Board of Directors (non executive) Member since 24 May 2012, elected until the 2014 Annual General Meeting Present position President and CEO of Peninsula Packaging, California, U.S.A. Previous positions President and CEO of York Label (2009-2011) President of MeadWestvaco Calmar (1996-2009) Vice President Sales & Marketing of Setco (1985-1996) Education and qualification Master of Plastics Engineering, University of Lowell, U.S.A.

Members of the Group Management Quint Kelders, Chief Executive Officer (CEO) since 12 August 2010 and member of the Board of Directors since 29 June 2010 (for further information consult page 12). Frans van der Vorst, Citizen of the Netherlands, Born 1967, Chief Financial Officer (CFO) since 1 February 2011. Prior to his appointment Frans van der Vorst worked as a corporate finance consultant at Witlox Van den Boomen in Waalre, the Netherlands. Before that he held leading positions, inter alia as Financial Director of MeadWestvaco Calmar Netherlands B.V., a global packaging company. Frans van der Vorst holds a master’s degree in Business Economics from Tilburg University (Netherlands). Corporate Calendar 11 April 2013 Annual General Meeting of

Shareholders 2013 27 September 2013 Half year report 2013 28 March 2014 Financial reporting 2013 Important Web-links www.ips-grp.com Website of the IPS Group http://www.ips-grp.com/en/investor-relations/financial-news/ Ad-hoc-Information http://www.ips-grp.com/en/investor-relations/investor-relations-contact/ Registration in the mailing-list [email protected] Contact address

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FINANCIAL REPORTING 2012

16

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TABLE OF CONTENTS

Information on IPS bearer shares 18

Consolidated income statement 19

Consolidated balance sheet 20

Consolidated cash flow statement 21

Consolidated statement of changes in equity 22

Notes to the consolidated financial statements 23

- Principles of consolidation 23

- Principles of valuation 25

- Financial risk management 27

Report of the statutory auditor 41

Income statement 42

Balance sheet 43

Notes to the financial statements 44

Proposed appropriation of available earnings 50

Report of the statutory auditor 51

Corporate calendar and addresses 52

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INFORMATION ON IPS BEARER SHARESTicker: IPS

Security ID: 201382

On August 12, 2010 the former COS Computer Systems AG Baden, which has been renamed to I.P.S. Innovative Packaging

Solutions AG increased its capital through contribution in kind by I.P.S. Holding B.V. Until that moment the operating activity

of the group was trading with Memory-modules.

2008 2009 2010 2011 2012

Number of issued shares 1'887'390 1'887'390 8'987'571 8'987'571 9'882'571

Par value per share in CHF 5.00 5.00 5.00 5.00 5.00

Dividend payments / repayments of par value in CHF 12.00 0.00 0.00 0.00 0.00

Net result of the Group per share in CHF -1.48 0.22 -0.37 -0.46 -0.74

Market prices (Closing prices Zürich)*

Highest price (CHF) 17.80 9.98 9.20 10.00 12.80

Lowest price (CHF) 6.75 6.00 6.01 7.53 7.85

Closing price as of 31 December (CHF) 7.50 7.52 8.10 9.17 10.00

* Prices for 2008 have been adjusted for the par value reduction of 16 April 2008.

Source: www.six-swiss-exchange.com

Investor Relations

Contact persons for the Financial Community are the CEO and the CFO.

19

CONSOLIDATED INCOME STATEMENT

in 1’000 € in 1’000 €

Notes 2012 2011

Net sales 1 159 15

Other operating income 449 180

Profit from disposal of tangible fixed assets - -

Change in inventory of finished and semi finished goods 285 10

Operating income 893 205

Raw material expense -834 -114

Personnel expense 2 -1'966 -1'119

Other operating expense 3 -2'183 -1'710

Operating expense -4'983 -2'943

Earnings before interest, taxes, depreciation and amortization (EBITDA) -4'090 -2'738

Depreciation of tangible fixed assets 9 -738 -94

Amortization of intangible assets 10 -777 -188

Earnings before interest and taxes (EBIT) -5'605 -3'020

Financial result 4 -364 -307

Earnings before taxes (EBT) -5'969 -3'327

Income taxes 5 - -

Net result -5'969 -3'327

Net result per share in € 6 -0.62 -0.37

20

in 1’000 € in 1’000 €

Assets Notes 31.12.2012 31.12.2011


Trade accounts receivable 63 50

Other receivables 7 489 397

Inventories 8 559 222

Prepayments and accrued income 130 141

Current assets 1'379 986

Other receivables 7 1'887 506

Tangible fixed assets 9 5'247 3'686

Intangible assets 10 5'703 6'475

Non current assets 12'837 10'667

Total assets 14'216 11'653

Liabilities and shareholders' equity

Financial liabilities

Bank overdrafts 13 422 433

Short term portion of financial liabilities 13 908 551

Trade accounts payable 11 1'213 914

Other current payables 12 54 18

Accrued liabilities and deferred income 331 205

Current liabilities 2'928 2'121

Financial liabilities* 13 10'410 8'901

Provisions 14 83 81

Non current liabilities 10'493 8'982

Liabilities 13'421 11'103

Share capital 37'251 33'536

Capital reserves -23'600 -26'201

Cumulative translation adjustments -548 -445

Accumulated losses -12'308 -6'340

Shareholders' equity 795 550

Total Liabilities and Shareholders' equity 14'216 11'653

* thereof subordinated 3'721 2'408

CONSOLIDATED BALANCE SHEET

21

CONSOLIDATED CASH FLOW STATEMENT

in 1’000 € in 1'000 €

Notes 2012 2011

-5'969 -3'327

1'515 282

Profit from disposal of tangible fixed assets 0 0

268 141

-4'186 -2'904

-12 -10

-92 1'526

-333 -153

44 -65

464 10

35 -10

118 105

124 -49

-3'838 -1'550

Investments -877 -1'094

Disposals 37 9

Change in long term receivables from joint venture 7 -1'474 0

-2'314 -1'085

Change in current financial liabilities third parties -14 302

Change in shareholder loan 976 803

Change in long-term financial liabilities 1'137 1'058

Capital paid in at capital increase 4'013 0

6'112 2'163

-40 -472

176 632

-40 -472

2 16

138 176

-80 -1

Received interest payments (included in Cash flow from operating activities) 19 3

Change in accrued liabilities and deferred income

Net result

Depreciation, impairments and amortization

Other positions with no impact on liquidity

Operating cash flow

Change in trade accounts receivable

Change in other receivables

Cash flow from operating activities

Tangible and intangible assets

Cash flow from investing activities

Cash flow from financing activities

Change in inventories

Change in prepayments and accrued income

Change in trade accounts payable

Change in other current payables

Paid income tax and received tax refunds (net)

Total Cash flow

Cash and cash equivalents as at 1 January

Total Cash flow

Impact of currency translation

Cash and cash equivalents as at 31 December

Paid interest (included in Cash flow from operating activities)

22

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Number of

shares in 1'000 € in 1'000 € in 1'000 € in 1'000 € in 1'000 € in 1'000 € in 1'000 €

Shareholders' equity at 31 Dec. 2010 8'987'571 33'536 7'195 -33'396 -26'201 -374 -3'013 3'948

Net result of the period - - - - - - -3'327 -3'327

Exchange differences - - - - - -71 - -71

Shareholders' equity at 31 Dec. 2011 8'987'571 33'536 7'195 -33'396 -26'201 -445 -6'340 550

Capital increase 23 March 2012 895'000 3'715 2'601 - 2'601 - - 6'316

Net result of the period - - - - - - -5'969 -5'969

Exchange differences - - - - - -102 - -102

Shareholders' equity at 31 Dec. 2012 9'882'571 37'251 9'796 -33'396 -23'600 -547 -12'309 795

The share capital of I.P.S. Innovative Packaging Solutions AG is held in Swiss Franc (CHF) and converted to Euro at historical

rates. All shares issued as of 31 December 2012 are entitled to dividends and voting rights in relation to their par value at the

meeting of shareholders.

Share capital Capital reserves IPS Group Accumu-

lated

exchange

differen-

ces

Accu-

mulated

lossesOther

Capital

reserves

Total

Capital

reserves

Capital

reserves

parent

company

(premium)

Total

Equity

Authorized and conditional capital

in 1'000 € in 1'000 €

31.12.2012 31.12.2011

Authorized capital: bearer shares at CHF 5 par value 6'627 6'502

Conditional capital: bearer shares at CHF 5 par value 3'728 1'829

10'355 8'331

Authorized capital

Conditional capital

On 24 May 2012, the General Assembly of Shareholders has approved the proposal of the Board of Directors to create conditional

capital up to a maximum CHF 4.5 million through the issuance of up to 900'000 shares. The conditional capital can be used to

increase the share capital by virtue of the exercise of option rights granted under an incentive share program for employees. The

subscription rights of existing shareholders are excluded.

On 24 May 2012, the General Assembly of Shareholders has approved the proposal of the Board of Directors to issue new

authorized capital up to a maximum of 1.6 million bearer shares and a maximum aggregate amount of CHF 8.0 million at any time up

to 24 May 2014.

23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Principles of consolidation Accounting principles The consolidated financial statements are based on the annual accounts of I.P.S. Innovative Packaging Solutions AG and its Group companies for the year ending 31 December 2012, prepared on an uniform basis. The Group prepares its accounts in compliance with the existing guidelines of Swiss GAAP ARR (Swiss Accounting and Reporting Recommendations) using the historical cost principle. The consolidated financial statements are based on economic values and present a true and fair view of the Company’s assets, financial position and results of operations and are in accordance with Swiss law. The annual financial statements are prepared under the assumption of going concern. The preparation of financial statements requires management to make estimates and other judgments that affect the reported amounts of assets and liabilities as well as the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual outcomes could differ from those estimates. Consolidated companies The consolidated financial statements include the annual accounts of I.P.S. Innovative Packaging Solutions AG as well as the Group companies in which I.P.S. Innovative Packaging Solutions AG directly or indirectly holds 50% or more of the voting rights or has a controlling influence by contractual agreement (control principle). Investments of 50% where the Group does not hold sole management control (joint ventures) are consolidated using the quotal-method and investments between 20% and 49% (associated companies) are accounted for using the equity method. Minority holdings of less than 20% are carried in the balance sheet at acquisition cost less any adjustments for impairment required by generally accepted accounting principles. The consolidated companies are listed in the Notes to the Consolidated Financial Statements (see Note 22). Changes to the Group of consolidated companies Changes in 2012 On 2 July 2012, Airopack Competence Centre B.V., Vlijmen (the Netherlands) was incorporated as a 100% participation of Airolux AG, Bilten (Switzerland). Airopack Competence Centre B.V. is proportionally consolidated at 50%. Changes in 2011 No changes occurred in 2011.

Consolidation method Capital has been consolidated using the purchase method. Assets and liabilities as well as expenses and income of the fully consolidated companies are included in their entirety; those of classical joint ventures with voting share of exactly 50% are included at 50%. Minority holdings in consolidated shareholders’ equity and Group profit are shown separately. Companies and businesses acquired during the course of the year are re-valued on their acquisition date on the basis of uniform Group principles and consolidated from that date onwards. Any goodwill or negative goodwill remaining after this revaluation (the difference between the purchase price and the total shareholders’ equity reported) is recognized under assets or liabilities and written off through the income statement over its useful life of which is usually five years. A provision in the amount of negative goodwill is written back over a maximum of five years. Companies sold during the year are excluded from the consolidated financial statements from the date of sale. Transactions with related parties Parties (individuals or legal entities) are considered to be related if one party has the ability to directly or indirectly exercise significant influence on the other party (organisation) in making financial or operating decisions. Organisations that are controlled directly or indirectly by the same related parties are also considered to be related. In addition, members of the Board of Directors and the Group Management or close members of their families are also considered related parties. As at 31 December 2012, the major shareholder of I.P.S. Innovative Packaging Solutions AG has reported to SIX Swiss Exchange ownership of 63.98% of the voting rights and therefore exercises control over the Group.

24


Principles of consolidation Translation of foreign currencies The Euro is the Group’s reporting currency. Financial statements of consolidated companies in other currencies are translated as follows: current assets, fixed assets and liabilities at year-end rates (rate on balance sheet date); shareholders’ equity at historical rates. The income statement and cash flow statement are translated at the average rate for the year. Any resulting exchange differences are recognized in shareholders’ equity with no effect on the income statement. The foreign currency items contained in the individual financial statements of the consolidated companies are translated as follows: foreign currency transactions at the rate on the date of the transaction (current rate); foreign currency balances are translated at year-end using the year-end rate (rate on the balance sheet date). The resulting exchange differences are recognized in the income statement. The foreign exchange rates shown below were used in compiling the consolidated financial statements.

Currency exchange rates in €

Balance sheet Income statement /

Cash flow statement

31.12.2012 31.12.2011 2012 2011

0.8284 0.8128 0.8297 0.8105CHF

Currency

Income statement The consolidated income statement of IPS Group has been prepared pursuant to the period-based costing method. Cash flow statement Cash and cash equivalents are the basis for the cash flow statement. Cash flow from operating activities is calculated using the indirect method. Segment reporting The IPS Group currently operates in one business segment. Therefore, segment reporting is only performed according to geographic regions.

25


Principles of valuation Income statement Net sales and revenue recognition The IPS Group records invoiced amounts for the sale of goods and services, net of sales taxes, discounts, rebates and return of goods, as net sales. Intercompany sales are eliminated on consolidation. Revenue from the sale of goods is recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer, which is usually on delivery to third parties. Revenue from services is generally recognized in the period the services are provided. Research and development Research costs are expensed as incurred. Development costs are capitalized only if the identifiable asset is commercially and technically feasible, can be completed, its costs can be measured reliably and will generate probable future economic benefits. Such capitalized intangibles are recognized at cost less accumulated amortization and impairment adjustments. Amortization starts when the capitalized asset is taken into use. These assets are amortized over their estimated useful life applying the straight line method. Impairment The value of non-current assets is assessed on the balance sheet date for signs of impairment. If there is evidence of any lasting reduction in value, the realizable value is calculated (impairment test). If the book value exceeds the realizable value, the difference is recognized in the income statement. Balance sheet - Assets Cash and cash equivalents Cash and cash equivalents include cash, balances in postal giro and bank accounts, and term deposits with a residual term of less than three months. They are valued at their par value. Trade accounts receivable / Other receivables These items include short-term receivables with a residual term of up to one year. These receivables are valued at their par values. Any value adjustments required are made when appropriate. Inventories Goods manufactured by the Group itself, merchandise and other stocks of goods such as raw materials, packaging materials, etc., are valued at the lower of cost or market price. Discounts are treated as reductions in purchase value. Tangible assets Tangible assets are valued at purchase cost less any depreciation required by generally accepted accounting principles. Company produced additions to plant and equipment are only capitalized if they are clearly identifiable and the costs reliably determinable, and they bring a measurable benefit to the Company over the course of several years.

Depreciation is charged on a straight line basis over the economic life of the fixed asset. The useful lives of assets have been determined as follows: - Machinery and assembly lines 7 - 10 years - Moulds 3 - 5 years - Other tangible assets 2 – 5 years Intangible assets This item includes patents, capitalized development costs and goodwill from the reverse acquisition. Intangible assets are capitalized if they are clearly identifiable and the costs reliably determinable and they bring a measurable benefit to the Company over the course of several years. Intangible assets are valued at purchase cost less amortization. Amortization is charged on a straight line basis over the expected useful life. Goodwill is amortized over a period of five years. Patents and capitalized development cost are amortized over a period of ten years. Deferred taxes The accrual of deferred income taxes is based on a balance-sheet oriented approach and essentially takes all future income tax effects into account. The deferred income tax to be accrued annually is calculated on the basis of the future tax rate valid on the balance sheet date for the tax subject in question. Deferred tax credit for loss carry-forwards is only established to the extent to which it is likely that future earnings with which loss carry-forwards can be offset will be available. As at the balance sheet date, no such deferred tax credit was capitalized. Balance sheet - Liabilities Payables Payables include current and noncurrent liabilities, as well as accruals and deferrals at par values. Provisions A provision is a potential future obligation arising from an event which occurs before the balance sheet date. A provision is recorded when it is judged probable that a liability has been incurred and the amount can be reliably estimated. Provisions are adjusted periodically as assessments change or additional information becomes available.

26


Principles of valuation Pension benefit obligations Employees and former employees receive various employee benefits and old age pensions which are provided in accordance with the laws of the countries in question. I.P.S. Innovative Packaging Solutions AG is a member of a collective occupational pension foundation. Both I.P.S. Research and Development B.V. and Airopack Competence Centre B.V. provide a defined contribution pension plan to all its employees. Airolux AG provides a fully insured occupational pension plan to its employees. All pension plans mentioned above are financed by both employer and employee contributions. With regard to the application of Swiss GAAP ARR 16 “Employee benefit obligations” we refer readers to Note 15 in the notes to the consolidated financial statements. Contingent liabilities A contingent liability is recognized when there is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events or when there is a present obligation that cannot be recognized as a liability because it is not probable that an outflow of resources will be required, alternatively because the amount of the obligation cannot be measured with sufficient reliability.

27


Financial risk management IPS Group applies a central risk assessment system which covers both strategic and operational risks. The Board of Directors of I.P.S. Innovative Packaging Solutions AG conducts a review, at least once a year, of whether the risk governance and reduction measures in place are adequate for the Company’s needs. Ongoing monitoring of the risks is the responsibility of the Group management. Accounting and financial reporting risks are monitored and reduced through a suitable internal control system. The Group’s activities expose it to a variety of financial risks: market risks, credit risks and liquidity risks. The Group’s financial risk management program focuses on reducing financial risks with the potential to adversely affect its financial performance. Financial risk management is carried out by the CFO of the Group in close cooperation with the Group companies.

28


in 1'000 € in 1'000 €

Notes 2012 2011

1 Breakdown of net sales

Net sales by country

Europe 35 1

Middle East and Africa 123 14

North America 1 -

Asia/Pacific - -

Latin America/Rest of the world - -

159 15

2 Personnel expense

Salaries -1'574 -788

Social security expense -282 -135

Other personnel expense -110 -196

-1'966 -1'119

3 Other operating expense

Research and development cost -197 -212

Charges for operation of the production facility -280 -364

Office rental and maintenance -322 -244

Marketing and public relations -522 -375

Audit, legal and consulting -374 -285

Other operating cost -488 * -230

-2'183 -1'710

* including € 62'000 incidental cost relating to capital increase of March 2012

4 Financial result

Interest income 44 32

Other financial income 0 0

Financial income 44 32

Interest expense third parties -229 -170

Interest expense related parties 16 -143 -169

Other financial expense -10 -17

Financial expense -382 -356

Financial result (net) -338 -324

Exchange (loss) / gain -26 18

Total Financial result -364 -306

29


in 1'000 € in 1'000 €

2012 2011

5 Income taxes

Current income taxes - -

Change in deferred taxes - -

0 0

in 1'000 € in 1'000 €

31.12.2012 31.12.2011

Expiry of unused tax loss carryforwards

tax loss

carryforwards

theoretical tax

assets

(not capitalized)

tax loss

carryforwards

theoretical tax

assets

(not capitalized)

within five years 49'664 4'333 63'692 5'338

over five years 9'431 1'267 6'882 874

59'095 5'600 70'574 6'212

2012 2011

6 Result per share

Weighted average number of issued shares 9'682'052 8'987'571

Weighted average position in treasury shares 0 0

Weighted average number of shares used for calculation 9'682'052 8'987'571

Net result in 1'000 € -5'969 -3'327

Net result in € per share -0.62 -0.37

For the periods under review there have been no deferred tax assets or liabilities.

Deferred tax assets from tax loss carryforwards not yet used are recognized when it is likely that the tax advantage will be used in

the foreseeable future. The existing corporate and financing structure severely limits or makes impossible the use of existing tax

loss carryforwards in the future. This fact and taking into consideration possible tax-relevant developments in earnings of individual

subsidiaries have led to the conclusion that utilization of tax loss carryforwards in the foreseeable future cannot be expected with a

sufficient degree of probability and that thus the conditions for capitalizing any deferred tax assets are not met. The gross values of

unused tax loss carryforwards which have not been capitalized expire as follows:

30


7 Other receivables

in 1'000 € in 1'000 €

Notes 2012 2011

Receivable from German Tax authorities* 527 620

Value added tax receivables 229 238

Other receivables from third parties 146 45

Other receivables from joint venture 1'474 0

2'376 903

489 397

1'887 506

2'376 903

* Receivables from German Tax authorities

Net present value of receivables at 1 January 620 709

Receipt of annual installment -118 -118

Interest accrual 25 29

Net present value of receivables at 31 December 527 620

8 Inventories

Raw materials and consumables 259 207

Semi-finished goods 193 3

Finished goods 107 12

559 222

Current (< 1 year)

Longterm (> 1 year)

These receivables represent corporate tax receivables from the German Tax authorities which have been assigned to I.P.S.

Innovative Packaging Solutions AG by former COS Group companies. The receivables are paid out by the German Tax authorities

in 10 annual installments from 2008 to 2017. The amount shown is the net present value of the remaining installments, discounted

at a discount rate of 4.2%.

31


9 Tangible fixed assets

in 1’000 €

Notes Machinery and Moulds Other tangible Total

assembly lines assets

Purchase value at 1.1.2011 2'133 480 159 2'772

Change in group of consolidated companies - - - 0

Additions 320 614 96 1'030

Disposals - - -14 -14

Exchange differences 29 1 1 31

Purchase value at 31.12.2011 2'482 1'095 242 3'819


Additions 1'218 635 449 2'302

Disposals - -37 0 -37

Exchange differences 26 8 1 35

Purchase value at 31.12.2012 3'726 1'701 692 6'119

Accumulated depreciation at 1.1.2011 0 0 -44 -44


Ordinary depreciation -54 - -40 -94

Disposals - - 5 5

Exchange differences - - - 0

Accumulated depreciation at 31.12.2011 -54 0 -79 -133


Ordinary depreciation -339 -311 -88 -738

Disposals - - 0 0

Exchange differences - - -1 -1

Accumulated depreciation at 31.12.2012 -393 -311 -168 -872

Net book value at 1 January 2011 2'133 480 115 2'728

Net book value at 31 December 2011 2'428 1'095 163 3'686

Net book value at 31 December 2012 3'333 1'390 524 5'247

31.12.2012 31.12.2011

Fire insurance values 7'545 7'401

Assets pledged to secure a financial liability 13 1'319 850

Assets included in financial lease 13 1'417 629

Virtually all tangible fixed assets are used for the assembling and filling of Airopack. The recoverability of these values depends on

future sales. As the Group Management believes in the realization of the business plan the valuation is based on the going

concern principle. Should the business plan not be realized as expected, a significant value adjustment would be required. These

conditions indicate the existence of a material uncertainty that may cause significant doubt about the valuation.

32


10 Intangible assets

in 1’000 €

Development Patents Goodwill Total

cost


Change in group of consolidated companies - - - -

Additions 63 - - 63

Disposals - - - 0

Exchange differences 6 - - 6



Additions - - - 0

Disposals - - - 0

Exchange differences 5 - - 5


Accumulated amortization at 1.1.2011 0 0 -78 -78


Ordinary amortization - - -188 -188

Disposals - - - 0


Accumulated amortization at 31.12.2011 0 0 -266 -266


Ordinary amortization -506 -83 -188 -777

Disposals - - - 0


Accumulated amortization at 31.12.2012 -506 -83 -454 -1'043

Net book value at 1 January 2011 5'011 721 862 6'594

Net book value at 31 December 2011 5'080 721 674 6'475

Net book value at 31 December 2012 4'579 638 486 5'703

Development costs and patents represent capitalized expenses for patents and external and internal development costs relating to

the Airopack-technology. The recoverability of these values depends on future sales. As the Group Management believes in the

realization of the business plan the valuation is based on the going concern principle. Should the business plan not be realized as

expected, a significant value adjustment would be required. These conditions indicate the existence of a material uncertainty that

may cause significant doubt about the valuation. The development cost and patents are amortized over a period of ten years.

The goodwill represents the premium on I.P.S. Innovative Packaging Solutions AG in the reverse acquisition which mainly consists of

the value for the listing on the SIX Swiss Exchange. The goodwill is amortized over a period of five years.

The intangible assets are checked at the balance sheet date for signs of impairment losses. Group management conducts the

impairment test by means of a Discounted Cash Flow calculation, using a WACC of 9.1%, on the most recently updated version of

its business plan. However, given the fact that IPS Group is currently still in the start-up phase several assumptions underlying the

business plan can not yet be validated by actual achieved results. In case Group Management's assumptions on timing of expected

revenue's and/or expected EBIT-Margins would prove to be incorrect, a significant value adjustment would be required.

33


in 1’000 € in 1’000 €

Notes 31.12.2012 31.12.2011

11 Trade accounts payable

To third parties 1'213 739

To related parties 16 0 175

1'213 914

12 Other current payables

To third parties 54 18

To related parties 16 0 0

54 18

13 Financial liabilites

Current financial liabilities

Bank loans * 422 433

Non-current financial liabilities

Current Non-current Total Average

interest rateResidual term Residual terms

up to one year 1 to 5 years

2012

Loan from third parties ** 514 5'291 5'805 2.9%

Loan from shareholders - 4'052 4'052 3.8%

Financial lease obligations 394 1'067 1'461 2.8%

908 10'410 11'318 3.2%

2011

Loan from third parties ** 416 3'438 3'854 3.4%

Loan from major shareholder - 4'965 4'965 4.0%

Financial lease obligations 135 498 633 2.9%

551 8'901 9'452 3.7%

*

**

Thereof subordinated € 3.7 million (31.12.2011: € 2.4 million) to all other current and future liabilities.

To secure another loan of € 1.2 million (31.12.2011: € 0.9 million) within this position, machinery with a carrying amount of € 1.3

million (31.12.2011: € 0.9 million) has been pledged (see Note 9).

Thereof € 422k (31.12.2011: € 411k) secured with a personal bank guarantee from the major shareholder (see Note 16)

34


14 Provisions

in 1’000 €

Other provisions

As at 1 January 2011 79

Created 0

Released (income statement) 0

Utilized 0

Exchange differences 2

As at 31 December 2011 81

Created 0

Released (income statement) 0

Utilized 0

Exchange differences 2

As at 31 December 2012 83

31.12.2012 31.12.2011

Term of provisions

Current provisions (< 1 year) 0 0

Long-term provisions (> 1 year) 83 81

83 81

Other provisions include provisions for pending legal matters and other matters where outflows of funds are likely. In all events,

the likelihood of such events occuring has been assessed as being well above 50%. In the periods under review there existed no

provisions for pension liabilities and no restructuring provisions. Tax provisions are included in the balance sheet position "tax

liability".

35


15 Pension Benefit Obligations

in 1'000 €

Economic benefit / economic obligation

31.12.2012 31.12.2012 31.12.2011

Pension schemes without excess/insufficient cover - - -

Pension schemes with insufficient cover -2 - -

Total -2 0 0

Economic benefit / economic obligation

and pension expenses

2012 2012 2012 2011

Pension schemes without excess/insufficient cover 0 44 44 15

Pension schemes with insufficient cover 0 8 8 8

0 52 52 23

Excess /

insufficient

cover as per

Swiss GAAP

ARR 26

Economic benefit / obligation

for the Group

Change vs.

prior year /

taken to the

income

statement in

the FY

Contributions

limited to the

period

Pension expenses (included in

personnel expenses)

36


16 Transactions with shareholders and related parties

Transactions and balances between IPS Group and related parties can be summarized as follows:

Transactions with shareholders and with parties controlled by shareholders

• Jan Kelders, Riederalp (Switzerland)

in 1'000 € in 1’000 €

2012 2011

Expense

Interest expense (not paid out but accrued to the shareholders loan) -143 -169

Rental expense (office premises of I.P.S. Research and Development B.V.) -78 -78

Shareholder loans

Balance as at 1 January 4'965 3'894

Conversion to capital (capital increase March 2012) -2'303 -

Settlement trade accounts payable 175 -

Settlement current receivable - -871

Additional loan 563 1'672

Annual interest (2012: 3.75 %; 2011: 4.00%) 143 169

Exchange differences (loan is denominated in CHF) 94 101

Balance as at 31 December 3'637 4'965

Off Balance Sheet positions:

Rental liabilities (office premises of I.P.S. Research and Development B.V.)

- due within one year 78 78

- due between one and five years 100 181

Total 178 259

422 411

• Nicolas Mathys, Baar (Switzerland)

in 1'000 € in 1’000 €

2012 2011

Expense

Interest expense (not paid out but accrued to the shareholders loan) -1 -

Shareholder loans

Balance as at 1 January 0 -

Additional loan 414 -

Annual interest (2012: 3.75 %) 1 -

Exchange differences (loan is denominated in CHF) - -

Balance as at 31 December 415 0

Major Shareholder of I.P.S. Innovative Packaging Solutions AG and father of the CEO of I.P.S. Innovative Packaging

Solutions AG.

Personal guarantee by Jan Kelders for a bank overdraft facility of an IPS Group

company

As at 31 December 2012 Nicolas Mathys holds 5.9% of the shares issued by I.P.S. Innovative Packaging Solutions AG

37


Balance sheet position with parties controlled by the major shareholder

in 1'000 € in 1’000 €

2012 2011

Trade accounts payable 0 175

Transactions with members of the Board of Directors and Group Management

Remuneration of the members of the Board of Directors and Group Management

Remuneration in cash 471 411

Social security contributions 21 26

Benefits in kind 17 10

509 447

Transactions with other related parties

• meyerlustenberger | lachenal Rechtsanwälte, Baar (Switzerland)

Board member Dr. Alexander Vogel is a partner of meyerlustenberger | lachenal Rechtsanwälte

Legal and notary costs 55 38

• ZSP Consulting AG, Baar (Switzerland)

Board member Benno Zehnder is a partner of ZSP Consulting AG

Office rent Baar 74 26

Options

In 2011 an option program for the members of the Board of Directors and the Group Management was launched. Each option

entitles the holder to buy one bearer share in I.P.S. Innovative Packaging Solutions AG at a fixed exercise price. Options

allocated under the plan expire four years after the issue date and are subject to a vesting period of two years, during which

period the options cannot be exercised. Options expire without compensation in case the employment is terminated during the

vesting period. As per 31 December 2012 a total of 466'750 (31.12.2011: 318'419) share option rights in the Company were

allocated to the members of the Board of Directors and the Group Management and affiliated persons living in the same

household held. For further details we refer to page 48 of the Annual Report.

As at 31 December 2011 a balance sheet position existed with a single party controlled by the major shareholder. In 2012 this

position has been settled with the major shareholder (see Note 16 shareholder loans).

38


Off-balance sheet leasing / rental liabilities

Operating leases and rent commitments

As at 31 December, future operating lease payments not recorded in the balance sheet amounted to:

in 1'000 € in 1’000 €

31.12.2012 31.12.2011

one year 316 176

one to five years 1'239 333

more than five years 0 0

1'555 * 509

* thereof related party: € 178k (31.12.2011: € 259k), see Note 16

18 Derivative financial instruments

Contingent assets and liabilities

Earn-Out agreements

Pledge of future licence and dividend payments

- 50.00% of the licence income from the Airopack Business (without limitation in time)

- 33.33% of dividend payments from Airolux AG (without limitation in time)

- 33.33% of capital gains, should IPS Group sell it's participation in Airolux AG (without limitation in time)

Residual liabilities from the "old COS business"

Legal disputes

IPS Group is involved in legal disputes in connection with ordinary operating activities. Although the outcome of these disputes

cannot be predicted with certainty at present, IPS Group assumes that it will not have a major negative impact on business

activity or the financial situation of the Group. Expected outgoing payments are provided for accordingly.

In 2004, IPS Group acquired the rights to the basis technology (Pressure Control Device) of Airopack from a third party. The

parties determined the purchase price according to the following earn-out model:

To safeguard the counterparty rights in the mentioned agreement, the transfer of the rights to the acquired base technology is

subject to certain restrictions. Furthermore, the future licence and dividend payments from Airolux AG to IPS Group are pledged

to the seller of that base technology.

In the sales transactions of the old COS companies in 2010, I.P.S. Innovative Packaging Solutions AG guaranteed nothing but

the transfer of the unrestricted ownership in the respective companies. However, there might be a residual risk due to the

possibility of a company that was sold becoming insolvent in the future. In such a case, an insolvency administrator could

challenge payments made from the insolvent company to IPS Group before the insolvency. If payments were made according to

an existing obligation, if the paying company had not been insolvent at the time of payment and if the payment was made at least

twelve months before insolvency the entrusted german lawyers consider this risk to be remote. The last payments from sold

companies to IPS group companies occured at the end of 2009 and the beginning of 2010 with a total amount of EUR 2.7

million. Up until the date the 2012 annual accounts were approved, none of the companies sold in 2010 filed insolvency.

17

Due within

Currency forward contracts are used to hedge currency exposures. As at 31 December 2012, CHF/EUR forward contracts with a

contract volume of € 2.0 million (31.12.2011: € 2.0 million) were outstanding. As at 31 December 2012, the replacement value

amounted to € 0k (31.12.2011: € 16k) and has been booked to accrued income. All forward contracts were realized during

January 2013, with the last one being realized on 16 January 2013.

There have been no other derivative financial instruments.

19

In case of positive future results of the sold Memory business as well as in case of a positive outcome of a VAT-lawsuit of the

former group company COS Distribution GmbH, (Austria) IPS Group participates in accordance with existing earn-out

agreements. At the date of the financial statements, the Group had no other major contingent assets.

As at 31 December 2012 IPS Group has accrued a liability of € 6k (31.12.2011: € 0k) from the aforementioned earn-out model.

This amount is included in the balance sheet position "Accrued liabilities and deferred income".

39


20 Going Concern

21

- On 11 January 2013 the Group received bridge financing of € 0.5 million from its shareholder Jan Kelders.

The consolidated 2012 income statement shows a net loss of € 6.0 million. The 2012 result reflects the operational cost of the

production organisation set up to fulfil expected sales. Due to the unexpected delay in the start of various customer projects,

absorption of the fixed organizational expenses could not be achieved. In the current phase of IPS Group’s development

accurate forecasting of expected revenues from customer projects remains difficult. However, the Board of Directors and the

Group Management are confident that in the course of 2013 the operational business of the Group will achieve break-even on a

month by month base. As at 31 December 2012 the available cash amounted to € 0.1 million. In January and February 2013 the

Group received bridge financing from two of its major shareholders for a total amount of € 0.9 million. In order to secure the

Group’s liquidity and fund the planned investments, the Board of Directors is preparing a capital increase which is planned for

Spring 2013. The realization of this capital increase is key in providing the Group with the necessary funds to realize its business

plan. Reinforced by the commitment of two major shareholders, to provide the Group with bridge financing until the capital

increase can be effectuated, the Board of Directors and Group management are confident that the IPS Group will be able to

obtain sufficient financing and believes the Group is able to meet its targets over the next 12 months, even though unexpected

further delays in the start of customer projects cannot be ruled out. Nevertheless, the aforementioned conditions indicate the

existence of a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern.

Subsequent events

From the accounting reference date until the consolidated financial statements were approved by the Board of Directors on 4

March 2013, the following major events occured:

- On 4 February 2013 the Group received bridge financing of € 0.4 million from its shareholder Nicolas Mathys.

40


22

Company name Statutory seat Function Currency Capital Capital

share*

Capital

share*

31.12.2012 31.12.2011

I.P.S. Innovative Packaging Solutions AG Baar (CH) Holding CHF 49'412'855 100% 100%

I.P.S. Research and Development B.V. Hertogenbosch (NL) Research & EUR 5'900'000 100% 100%

Development

Airolux AG Bilten (CH) Production & CHF 100'000 50% 50%

Trade

Airopack Competence Centre B.V. Vlijmen (NL) Support EUR 18'000 50% n/a

I.P.S. Holding B.V. Vlijmen (NL) Holding EUR 5'900'000 100% 100%

I.P.S. B.V. Vlijmen (NL) Holding EUR 5'900'000 100% 100%

Intelligent Packaging Systems Group SA Baar (CH) Inactive CHF 100'000 100% 100%

IPS Patent AG Baar (CH) Inactive CHF 100'000 100% 100%

I.P.S. IP AG Baar (CH) Inactive CHF 100'000 100% 100%

I.P.S. Remarketing Holding AG Baar (CH) Inactive CHF 120'000 100% 100%

Consolidated Companies

* share in capital, voting power and quote of consolidation is identical

41

REPORT OF THE STATUTORY AUDITOR Report of the statutory auditor on the consolidated financial statements to the general meeting of I.P.S. Innovative Packaging Solutions AG, Baar As statutory auditor, we have audited the accompanying consolidated financial statements (pages 15 to 40) of I.P.S. Innovative Packaging Solutions AG, which comprise the balance sheet, income statement, cash flow statement, statement of changes in equity and notes for the year ended 31 December 2012.

Board of Directors’ Responsibility

The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Swiss GAAP FER and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements for the year ended 31 December 2012 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with Swiss GAAP FER and comply with Swiss law.

Without qualifying our opinion, we draw your attention to Note 20 in the consolidated financial statements which indicates that IPS Group incurred a net loss of € 6.0 million during the year ended 31 December 2012 and, as at that date, the available cash amounts to € 0.1 million. In January and February 2013 the Group received bridge financing from two of its major shareholders for a total amount of € 0.9 million (Note 21). However, if the capital increase which is being prepared by the Board of directors cannot be realized or the budgeted revenues cannot be generated the Group's ability to continue as a going concern could be compromised. The consolidated financial statements do not include any adjustment that might result from the outcome from this material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern.

Without qualifying our opinion, we draw your attention to the fact (Note 9 and 10) that the valuation of tangible and intangible assets is depending on the Group's ability to meet the budgeted revenues and cash flows over the next 12 months. If the expected cash flows cannot be generated, the value of the tangible and intangible fixed assets might be impaired and would impact the financial situation of the Group. The consolidated financial statements do not include any adjustment that might result from the outcome from this material uncertainty. Report on Other Legal Requirements

We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

Zurich, 4 March 2013

BDO Ltd

Andreas Wyss René Füglister

Auditor in charge Licensed Audit Expert Licensed Audit Expert

42

INCOME STATEMENT

in 1’000 CHF in 1’000 CHF

Notes 2012 2011

Income

Income from participations and treasury shares 1 48 43

Interest and other financial income 221 97

Income from charging management services to group companies - -

269 140

Expense

Expenses relating to participations 2 -45 -55

Personnel expense -884 -676

Administration expense -750 -489

Interest and other financial expense -351 -248

Taxes -2 -3

-2'032 -1'471

Net result -1'763 -1'331

43


Assets Notes 31.12.2012 31.12.2011


Other current receivables

from third parties 189 169

from major shareholder - -

from group companies 4'312 2'153

Current assets 4'587 2'501

Tangible fixed assets 396 155

Other long term receivables from third parties 498 622

Other long term receivables from joint venture 2'313 -

Loans to group companies 1'331 1'283

Participations 57'000 57'000

Non current assets 61'538 59'060

Total assets 66'125 61'561

Liabilities and Shareholders' equity

Payables to group companies 1'722 1'669

Other short term liablities 128 194

Accrued expenses and deferred income 117 167

Current liabilities 1'967 2'030

Loan from shareholders 4'891 6'109

Provisions 4 100 100

Non-current liabilities 4'991 6'209

Liabilities 6'958 8'239

Share capital 5 49'413 44'938

Legal reserves

Capital contribution reserve 12'775 9'642

General reserve 343 343

Accumulated losses 6 -3'364 -1'601

Shareholders' equity 59'167 53'322

Total Liabilities and Shareholders' equity 66'125 61'561

BALANCE SHEET

44

NOTES TO THE FINANCIAL STATEMENTS


2012 2011

Income from participations

Valuation adjustment of receivables and loans 48 43

Valuation adjustment of participations - -

48 43

2 Expenses relating to participations

Valuation adjustment of receivables and loans -45 -55

Valuation adjustment of participations - -

-45 -55

Participations in 1’000 CHF

Valuation in 1’000 CHF

1.1.2012 adjustments Disposals Additions 31.12.2012

Purchase value 57'220 - - - 57'220

Valuation adjustment -220 - - - -220

Book value 57'000 0 0 0 57'000

Valuation

1.1.2011 adjustments Disposals Additions 31.12.2011

Purchase value 58'752 - -1'532 - 57'220

Valuation adjustment -465 - 245 - -220

Book value 58'287 0 -1'287 0 57'000

1

3

On 12 August 2010, the Company acquired 100% of the shares of I.P.S. Holding B.V. at a purchase price of CHF 57.0 million.

As at the date of the acquisition this valuation was based on the business plan of IPS Group and has been confirmed by a

valuation report from Ernst & Young.

The valuation of the participations is checked at the balance sheet date for signs of impairment losses. Group management

conducts the impairment test by means of a Discounted Cash Flow calculation on the most recently updated version of its

business plan. However, given the fact that IPS Group is currently still in the start-up phase several assumptions underlying the

business plan can not yet be validated by actual achieved results. In case Group Management's assumptions on timing of

expected revenue's and/or expected EBIT-Margins would prove to be incorrect, a significant value adjustment would be

required.

The recoverability of these values depends on future sales. As the Group Management believes in the realization of the

business plan, the valuation is based on the going concern principle. Should the business plan not be realized as expected, a

significant value adjustment would be required. These conditions indicate the existence of a material uncertainty that may cause

significant doubt about the valuation.

45


3

Company name Statutory seat Function Currency Capital Capital

share*

Capital

share*

31.12.2012 31.12.2011

I.P.S. Research and Development B.V. Hertogenbosch (NL) Research & EUR 5'900'000 100% 100%

Development

Airolux AG Bilten (CH) Production & CHF 100'000 50% 50%

Trade

Airopack Competence Centre B.V. Vlijmen (NL) Support EUR 18'000 50% n/a

I.P.S. Holding B.V. Vlijmen (NL) Holding EUR 5'900'000 100% 100%

I.P.S. B.V. Vlijmen (NL) Holding EUR 5'900'000 100% 100%

Intelligent Packaging Systems Group SA Baar (CH) Inactive CHF 100'000 100% 100%

IPS Patent AG Baar (CH) Inactive CHF 100'000 100% 100%

I.P.S. IP AG Baar (CH) Inactive CHF 100'000 100% 100%

I.P.S. Remarketing Holding AG Baar (CH) Inactive CHF 120'000 100% 100%

Participations (continued)

* share in capital and voting power is identical

46



31.12.2012 31.12.2011

4

- -

100 100

100 100

5 Share capital

49'413 44'938

Authorized capital* (1'600'000 shares at CHF 5 par value; 31.12.2011: 1'600'000 shares) 8'000 8'000

Conditional capital** (900'000 shares at CHF 5 par value; 31.12.2011: 450'000 shares) 4'500 2'250

*

**

Major Shareholders 31.12.2012 31.12.2011

Jan Kelders, Riederalp (Switzerland) * 63.98% 63.98%

Nicolas Mathys, Baar (Switzerland) 5.87% 5.28%

Balfidor Fondsleitung AG, Basel (Switzerland) * 3.13% n/a

* Percentages as reported to SIX Swiss Exchange

6

44'938 44'938

General reserves 343 343

Reserves for treasury shares - -

Capital contribution reserve 9'642 9'642

-1'601 -270

53'322 54'653

4'475 -

3'133 -

-1'763 -1'331

59'167 53'322

49'413 44'938

343 343

thereof Capital contribution reserve 12'775 9'642

- -

-3'364 -1'601

7 Contingent liabilities

p.m. p.m.

Shareholders capital at 31 December

On 24 May 2012, the General Assembly of Shareholders has approved the proposal of the Board of Directors to create

conditional capital up ta a maximum of CHF 4.5 million through the issuance of up to 900'000 fully paid bearer shares. The

conditional capital can be used to increase the share capital by virtue of the exercise of option rights granted under an incentive

share programs for employees. The subscription rights of existing shareholders are excluded.

Changes in share capital

Share capital at 1 January

Legal reserves at 1 January

Provisions

Taxes

Litigation risks

9'882'571 bearer shares (31.12.2011: 8'987'571 bearer shares) at CHF 5 par value

On 24 May 2012, the General Assembly of Shareholders has approved the proposal of the Board of Directors to issue new

authorized capital up to a maximum of 1.6 million bearer shares and a maximum aggregate amount of CHF 8 million at any

time up to 24 May 2014.

Sight accounts with banks might be used according to their General Terms of Business

to secure outstanding loan facilities.

thereof Share capital

thereof General reserves

thereof Reserves for treasury shares

thereof Accumulated losses

Retained earnings at 1 January

Total shareholders capital at 1 January

Capital increase at par value

Capital increase agio

Annual result

47


8 Compensation to Members of the Board of Directors and Group Management

in 1'000 CHF

Compensation 2012 Period Fixed cash

compen-

sation

Social

security

contri-

butions

Benefits

in kind

3 Total

compen-

sation

Board of Directors

Alexander Vogel, Chairman of the Board full year 20 2 - 22

Quint Kelders, Member full year total compensation shown under Group Management

Daniel Gutenberg, Member full year 20 2 - 22

Nicolas Mathys, Member 05-12.121

- - - 0

John McKernan, Member 05-12.121

11 - - 11

Benno Zehnder, Member full year 20 - - 20

Total Board of Directors 71 4 0 75

Group Management

Quint Kelders, CEO full year 279 11 143

304

Frans van der Vorst, CFO full year 218 11 63

235

Total Board of Directors and Group Management 568 26 20 614

in 1'000 CHF

Compensation 2011 Period Fixed cash

compen-

sation

Social

security

contri-

butions

Benefits

in kind

3 Total

compen-

sation

Board of Directors

Alexander Vogel, Chairman of the Board full year 20 2 - 22

Quint Kelders, Member full year total compensation shown under Group Management

Daniel Gutenberg, Member full year 20 2 - 22

Benno Zehnder, Member full year 20 - - 20

Total Board of Directors 60 4 0 64

Group Management

Quint Kelders, CEO full year 180 10 123

202

Roger Nötzli, CFO until 1 February 2011 01-03.112

71 10 - 81

Frans van der Vorst, CFO as per 1 February 2011 02-12.112

196 8 - 204

Total Board of Directors and Group Management 507 32 12 551

1

2

3

Basic compensation is paid exclusively in cash. There is currently a share option rights program in place. No severance payments

were made during 2012 and 2011. No compensation was paid to former members of the Board of Directors or Group

Management.

Roger Nötzli, CFO till 31 January 2011, has left the Company on 31 March 2011. Frans van der Vorst is the new CFO of the

Company since 1 February 2011.

Benefits in kind relates to private use of company car calculated at 9.6% of the purchase price of the car.

Nicolas Mathys and John McKernan have been elected to the Board of Directors by the Shareholders in the General Assembly of

24 May 2012.

48


8 Compensation to Members of the Board of Directors and Group Management (continued)

Other compensations paid to actual and former Board members and to parties affilieted to them


2012 2011

• meyerlustenberger | lachenal Rechtsanwälte, Baar (Switzerland)

Board member Dr. Alexander Vogel is a partner of meyerlustenberger | lachenal Rechtsanwälte

Legal and notary costs 66 47

• ZSP Consulting AG, Baar (Switzerland)

Board member Benno Zehnder is a partner of ZSP Consulting AG

Office rent Baar 89 32

Options

Loans granted to members of the Board of Directors and Group Management

Shares held by the members of the Board of Directors and by the Group Management

31.12.2012 31.12.2011

Name Bearer shares *

Options

allocated * Bearer shares *

Options

allocated *

Board of Directors

Alexander Vogel, Chairman 0 66'665 0 40'000

Quint Kelders, Member see Group Management see Group Management

Daniel Gutenberg, Member 56'500 50'000 56'500 30'000

Nicolas Mathys, Member 580'000 26'666 474'524 -

John McKernan, Member 0 20'000 - -

Benno Zehnder, Member 0 50'000 0 30'000

Group Management

Quint Kelders, CEO and Member of the Board 0 165'950 0 165'950

Frans van der Vorst, CFO 0 87'469 0 52'469

Total Board of Directors and Group Management 636'500 466'750 531'024 318'419

* Options allocated in 2011 and 2012 are subject to a vesting period of 2 years, during which period the options cannot

be exercised. These figures include shares and options held by related parties of these persons but not those of

the major shareholder.

In 2011 an option program for the members of the Board of Directors and the Group Management was launched. Each option

entitles the holder to buy one bearer share in I.P.S. Innovative Packaging Solutions AG at a fixed exercise price. Options allocated

under the plan in 2011 and 2012 expire four years after the issue date and are subject to a vesting period of two years, during

which period the options cannot be exercised. Options expire without compensation in case the employment is terminated during

the vesting period. As per 31 December 2012 a total of 466’750 (31.12.2011: 318'419) share option rights in the Company were

allocated to the members of the Board of Directors and the Group Management and affiliated persons living in the same

household.

During the entire period under review no loans were granted to members of the Board of Directors and Group Management or to

any persons affiliated to said parties.

49


9 Risk management

Organization of the risk management

As part of its duty to manage the Company, the Board of Directors has issued guidelines on risk management and assigned

the Group management to perform a risk assessment at least once a year. The Company has established a risk-

management system which allows the early detection and analysis of risks as well as the adoption of necessary counter

measures.

Principles of risk management

The Board of Directors and the Group management have determined the general principles of risk management. This

includes setting guidelines for the systematic recording and evaluation of the risks as well as their prioritization and the

assessment of the influences on the Company and the initiation of measures to avoid or minimize risks.

Risk analysis

The systematically recorded, analyzed and prioritized risks have been been summarized in a probabilistic risk matrix. As at

31 December 2012, the liquidity risk is deemed to be the major risk which could, in principle, threaten the existence of the

Company. However considering the bridge financing and the scheduled capital increase the Board of Directors does not

have any doubt regarding the going concern of the Company for the forseeable future. Nevertheless, the aforementioned

conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to

continue as a going concern.

Risk reporting

Within the Company, regular reporting on existing risks as well as on risk management has been established. Through this

reporting, the Board of Directors is informed about major risk exposures. The risk management as such has been reviewed

in the meeting of the Board of Directors held on 4 March 2013. In this meeting all essential risks were discussed and where

necessary measures were agreed upon.

10 Going Concern

In 2012 I.P.S. Innovative Packaging Solutions AG incurred a net loss of CHF 1.8 million. In the current phase of IPS

Group’s development accurate forecasting of expected revenues from customer projects remains difficult. However, the

Board of Directors and the Group Management are confident that in the course of 2013 the operational business of the

Group will achieve break-even on a month by month base. As at 31 December 2012 the available cash amounted to CHF

0.1 million. In January and February 2013 the Company received bridge financing from two of its major shareholders for a

total amount of CHF 1.1 million. In order to secure the Group’s liquidity and fund the necessary investments, the Board of

Directors is preparing a capital increase which is planned for Spring 2013. The realization of this capital increase is key in

providing the Group with the necessary funds to realize its business plan. Reinforced by the commitment of two major

shareholders, to provide the Group with bridge financing until the capital increase can be effectuated, the Board of Directors

and Group management are confident that the IPS Group will be able to obtain sufficient financing and believes the Group is

able to meet its targets over the next 12 months, even though unexpected further delays in the start of customer projects

cannot be ruled out. Nevertheless, the aforementioned conditions indicate the existence of a material uncertainty that may

cast significant doubt about the Group's ability to continue as a going concern.

11 Subsequent events

From the accounting reference date until the consolidated financial statements were approved by the Board of Directors on 4

March 2013, the following major events occured:

- On 11 January 2013 the Group received bridge financing of CHF 0.6 million from its shareholder Jan Kelders.

- On 4 February 2013 the Group received bridge financing of CHF 0.5 million from its shareholder Nicolas Mathys.

50

PROPOSED APPROPRIATION OF AVAILABLE EARNINGS


Retained earnings / (Accumulated losses) 31.12.2012 31.12.2011

Retained earnings as at 1 January -1'601 -270

Net result -1'763 -1'331

(Accumulated losses) / Retained earnings as at 31 December -3'364 -1'601

The Board of Directors proposes to carry forward the accumulated deficit of CHF 3'364 k to the new account.

51

REPORT OF THE STATUTORY AUDITOR Report of the statutory auditor to the general meeting of I.P.S. Innovative Packaging Solutions AG, Baar

As statutory auditor, we have audited the

accompanying financial statements (pages 42 to 50) of

I.P.S. Innovative Packaging Solutions AG, which

comprise the balance sheet, income statement and

notes for the year ended 31 December 2012.

Board of Directors’ Responsibility

The Board of Directors is responsible for the

preparation of the financial statements in accordance

with the requirements of Swiss law and the company’s

articles of incorporation. This responsibility includes

designing, implementing and maintaining an internal

control system relevant to the preparation of financial

statements that are free from material misstatement,

whether due to fraud or error. The Board of Directors is

further responsible for selecting and applying

appropriate accounting policies and making accounting

estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these

financial statements based on our audit. We conducted

our audit in accordance with Swiss law and Swiss

Auditing Standards. Those standards require that we

plan and perform the audit to obtain reasonable

assurance whether the financial statements are free

from material misstatement.

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 judgment, including the assessment of

the risks of material misstatement of the financial

statements, whether due to fraud or error. In making

those risk assessments, the auditor considers the

internal control system relevant to the entity’s

preparation of the financial statements in order to

design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the entity’s internal

control system. An audit also includes evaluating the

appropriateness of the accounting policies used and the

reasonableness of the accounting estimates made, as

well as evaluating the overall presentation of the

financial statements. We believe that the audit evidence

we have obtained is sufficient and appropriate to

provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements for the year

ended 31 December 2012 comply with Swiss law and

the company’s articles of incorporation.

Without qualifying our opinion, we draw your attention

to Note 10 in the financial statements which indicates

that I.P.S. Innovative Packaging Solutions AG incurred

a net loss of CHF 1.8 million during the year ended 31

December 2012 and, as at that date, the Company's

available cash amounts to CHF 0.1 million.

In January and February 2013 the Company received

bridge financing from two of its major shareholders for a

total amount of CHF 1.1 million (Note 11).

However, if the capital increase which is being

prepared by the Board of Directors cannot be realized,

the Companies's ability to continue as a going concern

could be compromised. The financial statements do not

include any adjustment that might result from the

outcome from this material uncertainty that may cast

significant doubt about the Company's ability to

continue as a going concern.

Without qualifying our opinion, we draw your attention

to the fact (Note 3) that the valuation of the

participations is depending on the subsidiaries ability to

continue as a going concern which includes meeting the

budgeted revenues and cash flows over the next 12

months. If the expected cash flows cannot be

generated, the value of the participations might be

impaired and would impact the financial situation of the

company. The financial statements do not include any

adjustment that might result from the outcome from this

material uncertainty.

Report on Other Legal Requirements

We confirm that we meet the legal requirements on

licensing according to the Auditor Oversight Act (AOA)

and independence (article 728 CO and article 11 AOA)

and that there are no circumstances incompatible with

our independence.

In accordance with article 728a paragraph 1 item 3 CO

and Swiss Auditing Standard 890, we confirm that an

internal control system exists, which has been designed

for the preparation of financial statements according to

the instructions of the Board of Directors.

We recommend that the financial statements submitted

to you be approved.

Zurich, 4 March 2013

BDO Ltd

Andreas Wyss René Füglister

Auditor in charge

Licensed Audit Expert Licensed Audit Expert

52

CORPORATE CALENDAR AND ADDRESSES Corporate Calendar 11 April 2013 General meeting of shareholders 2013

27 September 2013 Half year report 2013

28 March 2014 Financial Reporting 2013 IPS bearer shares Exchange SIX Swiss Exchange Domestic Standard

Ticker IPS

ISIN Code CH0002013826 Important Web-links www.ips-grp.com

Website of the IPS Group http://www.ips-grp.com/en/investor-relations/financial-news/

Ad-hoc-Information http://www.ips-grp.com/en/investor-relations/investor-relations-contact/

Registration in the mailing list [email protected]

Contact address Investor Relations CEO Quint Kelders

CFO Frans van der Vorst I.P.S. Innovative Packaging Solutions AG Zugerstrasse 76b CH-6340 Baar (ZG) Tel. +41 (0) 41 766 35 00 Fax +41 (0) 41 766 35 09

Disclaimer This report contains future related statements which offer no guarantee with regard to future performance. These statements are made on the basis of management’s views and assumptions regarding future events and business performance at the time the statements are made. They are subject to risks and uncertainties including, but not limited to, future global economic conditions, exchange rates, legal provisions, market conditions, activities by competitors and other factors outside the company’s control. The electronic-version of this report is exposed to manipulation risks from the internet and therefore only the printed version handed in to the SIX Swiss Exchange is legally binding.

Date post:	19-Jul-2020
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