Vision DOCDATA N.V. Vision

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1 Vision 2020 DOCDATA N.V. Vision

2 A record year for DOCDATA N.V. thanks to our loyal clients and employees. DOCDATA N.V. Vision

3 Foreword by CEO 2013 has been a record year for our company, one in which we worked incredibly hard on all fronts. Not only did our client base expand further during the year, we continued to drive the business forward and are nowevolving into a large international organization. As a result, unfortunately I no longer personally know all employees and clients. We are a diverse company with two highly differentiated business units. This makes us unique. On the one hand we are involved with thousands upon thousands of consumer orders that are ordered online daily through our clients, and on the other hand we supply a relatively limited number of high-quality production systems to clients located all over the world, from Asia to South America. Each of our companies has its own specific dynamics, but ultimately it is the people who work here who make it possible every day. People on whom we can build and on whom we can rely day in day out: people who assume mutual responsibility at every level in our organization. Revenue development When I observe the effort and commitment of the employees in our companies and our clients convey their deep satisfaction with our services and machines, I am extremely proud. There is an unparalleled drive to quickly resolve deficiencies and to continually improve our processes. That drive is vital, because a standstill equals regression, certainly in the markets in which we are active. In 2014, our e-commerce company celebrates its 15th anniversary. We can be justifiably proud of that, considering how young the e-commerce market is. Our company IAI Industrial Systems has been operating for 22 years and during this period has carved out a top position in a worldwide market of personalization systems. Our clients have proven to be extremely loyal, which has been largely prompted by the superior quality that we continually deliver. The year 2014 will also bring challenges. We are already aware of some and others will undoubtedly show up on our path. Passion, commitment and striving towards the finest quality are the ingredients that enable our company to continue improving and excelling. During the coming years we will be investing a great deal of time in implementing our new Vision 2020: Smart Growth. Our success, but also the success of our clients, will depend on the degree to which we can mutually develop smart solutions in order to stay ahead of the competition. To achieve this, it is crucial that we utilise all our combined knowledge at all levels in the chain. We generated a combined record turnover of 167 million and a net profit of 8.7 million for We invested more than 8 million in our companies and many new employees were hired. I am proud of what we have achieved together. This would never have been accomplished without the enormous efforts of our employees and the authentic partnerships with our clients and suppliers. Thank you all! % 20% 10% 0% -10% Michiel Alting von Geusau Chief Executive Officer of DOCDATA N.V % Media replication E commerce IAI Revenue growth DOCDATA N.V. Vision

4 Vision 2020 Smart Growth DOCDATA N.V. Vision

5 Docdata Smart in e-commerce operations IAI Smart with laser technology DOCDATA N.V. Vision

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7 We are Docdata We are a leading international e-commerce service company with a focus on offering e-commerce solutions to clients who sell their products or services online. We are active in the Netherlands, Belgium, Germany, the United Kingdom, Poland, Switzerland, Italy, Spain and France. In the US pure players have 43% of the online market and the top 500 webshops more than 95%. We provide services that are key to being successful in e-commerce. Our principal activities are B2C fulfilment, returns logistics, online payments, international carrier management and related services that provide added value. Our clients include General resellers such as bol.com and Zalando, omnichannel players such as Bijenkorf and V&D, brands such as Brax and Livera, deal resellers such as Ibood and 1DayFly and specialized resellers such as Wine in Black and Gekruid. The online proposition is crucial for all these players. We play a major role in their success by supplying smart solutions across the entire chain. We are seen as a flexible partner with both integrated and modular e-commerce solutions. We are pioneering and are unparalleled in our responsiveness. We aim to be seen as a knowledge leader in the European e-commerce market. We are successful because we have employees who excel at what they do, are hands-on and have a nononsense attitude. They are supported by specialised IT systems and intelligent processes that guarantee quality, scalability and flexibility. This enables our clients to be successful online. Docdata achieved a turnover of 149 million euros and employed an average of 2000 employees, split between permanent and temporary personnel. DOCDATA N.V. Vision

8 European e-commerce solutions are our area of expertise The European e-commerce market The total European e-commerce market is estimated to be worth 312 billion in products and services. Growth in 2013 was similar to that of The strong growth figures for Central, Southern and Eastern Europe are striking in comparison to Western and Northern Europe. They seem to be making up the gap at a fast pace. Europe has around 250 million online shoppers. They spend an average of 1,243 a year. The business models in e-commerce In the e-commerce market we have identified five different business models. We offer specific solutions for each model that contribute to the success of the proposition for the business model concerned. General Reseller A General Reseller provides a full range of products in multiple product categories. Products are sold directly by the Reseller or via partners using the marketplace of the Reseller. An excellent search function is a prerequisite to operating successfully as a General Reseller. Some have a clear focus on hard-line products. In addition to product range, price and service are crucial to be successful. General Resellers are national and international pure players that make use of their highly user-friendly website, purchasing power, scalability and fast time to market. This top segment only has space for a limited number of players owing to the high investment required for providing a wide product range. The greatest example in this segment is, of course, Amazon and bol.com in the Benelux. Other examples are ASOS and Zalando. Omnichannel reseller Omnichannel resellers offer their products and services via both offline and online sales chennels. It is vital that consumers have a similar experience of service provision across all channels (One View of Customer) and that a single stock display exists (One View of Stock). Strong interaction between offline and online creates a seamless customer experience. Nevertheless, an Omnichannel reseller must take high operational and IT costs into account. Only a few players are capable of covering these costs. This segment offers space primarily for local players. The product range will always be smaller than that of the General reseller and requires greater focus on soft-line products. Examples include V&D and Bijenkorf. A percentage of omnichannel players use a fully integrated model in which private label products, sourced by the Omnichannel Reseller are sold. This is particularly widespread in the fashion market. Examples include brands such as Esprit and C&A. Brands Brands bind consumers by creating emotional ties and brand perception. Brands will always want to offer their products through multichannel selling. This involves making their products available through various online and offline channels. The largest percentage of turnover will therefore be generated through third parties. Their own online channel usually has a limited scope. However, a clear trend does exist for centralizing stock in Europe and also supplying B2C shipments from the same inventory. Examples include Brax and Puma. Deals reseller Deals resellers attract customers primarily on the basis of special offers. The proposition for these models is based on price and impulse. Growth will result mainly as a result of internationalization, which is not an easy task since a large number of similar models are already active. Examples of Deals resellers include Groupon and Bood. Specialized reseller In addition to models described above, there will always be space in the e-commerce market for smart, passionate entrepreneurs who distinguish themselves from the major players by offering a unique proposition. This is made possible due to specialized knowledge or expertise regarding a product, service or a unique combination of the two. The biggest challenge for Specialist resellers is not to enter the competition with the other models but to remain focussed on their own niche or multiple niches. Internationalization is possible but challenging, due to the need for acquiring a unique position in each local market, which requires a great deal of local knowledge. This makes it vital to analyse whether the main unique selling point is knowledge of the product or knowledge of local customs, combined with the target group of customers. Good examples of successful specialized resellers include Nespresso, Wine in Black and Gekruid. DOCDATA N.V. Vision

9 Product categories As noted above, we see a major market difference between hard-line and soft-line products. Hard-line products: Easily comparable, uniform product information is available. Pricing often makes the difference. Examples include media and electronics products. Specific products may be available via many sales channels. Low returns percentages. Market is dominated by Amazon. Soft-line products: More difficult to compare. Emotional ties due to style and taste. Examples include clothing and shoes. Products have a very short life cycle and are season driven. Value of product declines quickly and is often seen as a consumable. High returns percentages. A focus on one of these product categories is increasingly part of a webshop category. A focus on soft-line products enables the webshop to distinguish itself from the competition. A focus on hard-line products often results in fierce competition on price and availability. The fight will ultimately be won by the General resellers with deep pockets and buying power. Soft-line products Difficult to compare Require a strong emotional involvement (style, taste, etc) Examples are fashion and furniture Specific article is available in a few channels but many channels offer soft-line products Short lifecycle/ seasonality/ fashion driven Perceived as consumables/ value of the product diminishes rapidly E-commerce solutions Services that are necessary in order to become successful e-commerce companies: Online marketing. Webshop management. Online payments. B2C fulfilment. Carrier management & transport. Customer service. Returns logistics & refunds. Value added services. Software development and integration. Depending on the business model, there will be a preference for managing certain services internally rather than externally (outsourcing). The exact structure of costs depends on the proposition that the webshop offers. The average order value and type of Hard-line products 25% 20% 15% Easy to compare/ Product information is readily available Price is the main differentiator, based on specifications Examples are media and electronics Specific article is available in many different channels but Amazon will be the main product obviously impacts the relative costs. Understanding the structure of costs is crucial if smart solutions are to be offered that result in lower costs across the entire chain. For example, fast processing of returns may not only lead to lower customer service costs but also to a higher percentage of returning visitors and reducded costs related to selling obsolete stocks. Cost built-up ecommerce operations 2% 2.5% 3% 1% 0.5% Other Webshop management Online marketing & advertisement Customer service Online payments 10% 6% Carrier management & Transport 5% 1% Reverse logistics 5% B2C Fulfilment 0% DOCDATA N.V. Vision

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11 We aim to be the number one partner in e-commerce solutions Vision 2015: Growth through Quality We aim to distinguish ourselves by supplying the finest quality. By focusing on quality, combined with an authentic partnership concept, we aim to continue to grow together with our existing and new customers. In 2014 we will continue to invest in the quality of our service provision so that we surpass the agreed Service Level Agreements (SLAs) with our customers and continue to amaze the end consumer. The online shopper is becoming increasingly more demanding whereby a superior service is requiredto ensure that the consumer will remain a loyal customer at the webshops of our clients. We are aware that we play a crucial role in this, which is why we are continually investing in the provision of our services. To safeguard our quality we have invested in our IT systems and warehouse hardware over the past few years. We will continue to do this in 2014 to ensure that we provide a high standard of services and a sound basis for building on our 2020 strategy. Vision 2020: Smart Growth In the long term we believe in optimizing the e-commerce chain. During the coming years, the focus of our customers will primarily be on making the business model more profitable and less on exponential growth. In addition, the IT landscape will become increasingly more complex for e-commerce companies and analysis capabilities will have to increase to be able to use the enormous data streams for improving the entire chain. The market has ter-med this big data. In dialogue with our customers, we will be developing business-model-specific solutions. We will be making a start in 2014 by allocating dedicated teams to facilitate each business model. Within each team we will encourage knowledge sharing between suppliers, partners and customers with the ultimate aim of developing unique solutions to ensure that our customers will be successful online, now and in the future. Our customers success is also our success and together we can achieve Smart Growth. To impress online shoppers. every day! Growth trough quality Smarth growth Smart ecommerce solutions Smart connections Continuous improvement & business intelligence Gear to growth Flywheel to growth e-fulfilment e-payments e-commerce International fulfilment Reverse logistics Reporting & analysis B2C logistics Webshop design & management DOCDATA N.V. Vision

12 820 million persons 529 million internet users 250 million E-shoppers 2 million e-commerce jobs estimated online businesses Western Europe bn., 15.8% growth North Europe 28.7 bn., 15.1% growth 3.5 billion parcels Total turnover e-commerce 312 Billion + 19% (estimated 5% of total retail) Central Europe 76.3 bn., 20.5% growth South Europe 32.4 bn., 25.2% growth East Europe 13.4 bn., 32.6% growth DOCDATA N.V. Vision

13 Smart solutions, operational excellence and a winning team are vital to us Smart solutions E-commerce is becoming increasingly more complex. Increasing omnichannel activities, expanding product ranges and internationalization call for intelligent communication and integration between systems and smart solutions. Each business model has its own specific challenges for which solutions must be found. It is vital that the right data is supplied to the right people at the right time to ensure that they are able to make better decisions. By implementing our new Business Intelligence platform we have taken an important step forwards on which we can continue to build our strategy. Using IT and Business Intelligence, we can create substantial business value for our customers. Business Intelligence and IT have become our competitive advantage. Operational excellence Our customers know what to expect from us thanks to the establishment of clear SLAs and they are confident that we fulfil them every day. This guarantee gives our customers peace of mind, which enables them to focus on their core business. Delivering quality is crucial for our customers given the fact that the consumer sees this as part of the entire customer journey. We excel in reliability at every scale so that our customers service propositions remain always the same high level: even during significant peak pressure. We continue to keep a critical eye on our processes and are persistent in our continued optimization of these processes. This enables us to maintain high quality levels for fair conditions. In addition, we strive towards an organization in which a right-first-time culture prevails. Quality has become a part of our daily operations. Winning team In collaboration with our clients (partners), we aim to be a winning team. Our clients expect us to adopt a proactive attitude and see us as a knowledge leader in the field of e-commerce. We support our customers in understanding the entire e-commerce chain. The complexities and internationalization of e-commerce make it vital to be part of a winning team. Our experience in e-commerce gives us a clear idea of the challenges specific to each business model. In addition, we are capable of working very closely together with diverse partners. As a result, each party is able to focus on their expertise. The collaboration with partners enables us to switch quickly and innovate. This results in the best possible solution for our customers and ultimately the end consumer. DOCDATA N.V. Vision

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15 We want our customers to be successful In 2013, we took the first steps in developing specific solutions for each business model and we will be pursuing this route with our customers in We are seeking customers for each business model to develop this approach further. Free delivery has led to lower order value and less articles per order. General reseller IIn 2013, we collaborated with bol. com, broadening our knowledge and expertise in product categories. We are now capable of processing new product categories, such as drugstore products, animal supplies and home, garden and kitchen products, with the same quality and speed as other product categories. Scalability at an hourly level has become an increasingly important theme, given the fact that consumers are placing orders later and later while still expecting the same next-day delivery service. We will be developing smart solutions in collaboration with bol.com in order to guarantee the service scope during intense peak periods. We have expanded our international returns network together with Zalando. We process returns in seven different countries for Zalando, sometimes in collaboration with partners, but always using our own IT systems. This proposition is unique in Europe and is also partially used for other customers. We will continue to expand this network during the coming years. We will also be addressing the following projects for this business in collaboration with our customers: Smart fulfilment and returns solutions for a complex and comprehensive product range. Scalable and flexible solutions for extreme peak moments. Cross-border returns solutions including local fulfilment from returns. Same-day delivery solutions. Open logistics models, whereby General Resellers are given the opportunity to use their logistics channel for partner resellers. Hybrid operational solutions. Omnichannel reseller For the Omnichannel reseller 2013 was characterized by service improvement and a more seamless integration between the online and offline channel. Services for Bijenkorf and V&D were developed to ensure that the consumer experiences online added value to the offline channel and vice versa. Maintaining the same service scope during peak moments was also an important focus. Sales periods and other peak moments comprise an increasingly greater percentage of annual sales. For these periods we supply scalability at a day level. We will also be addressing the following projects for this business in collaboration with our customers: Scalable and flexible solutions for peak moments. Omnichannel solutions including integrated B2C and B2B logistics. Click & collect solutions including transport. Value added services for returns and special packaging. One-view-of-stock solutions for higher availability of products. Point-of-sale payment solutions for one view of customer. Brands Brand perception is crucial for brands. They strive to achieve unique and consistent market perception in every channel and country. For brands we offer the option for a fully integrated online solution, such as those of Livera and HP. We take care of the entire process from purchasing to sales. We supply a fully integrated corporate clothing solution for Deutsche Bahn that allows employees to place orders using an online tool. We have even extended this to include purchasing the corporate clothing and holding it in stock. In addition we offer brands with Docdata Connect the option to sell their products through other online channels (usually General resellers) alongside a proprietary online environment. The channels we offer with Docdata Connect are online marketplaces such as Zalando, bol.com, ebay and Amazon. DOCDATA N.V. Vision

16 Top General reseller (40%) High Mid Long tail Brands (10%) Deals reseller (5%) Specialized reseller (20%) Omnichannel reseller (25%) Price, service or emotion Price Emotion Service Emotion Service Price Service Emotion Price Assortment Price Service We will also be starting up the following projects for this business in collaboration with our customers: Customized and high-value logistics solutions for perfect and consistent brand perception. Cross-border fulfilment and returns solutions for international brands and fashion brands. Additional online channels via Docdata Connect. International carrier management for outgoing streams and local returns solutions. Integrated B2B / B2C solution Simple international solutions for collect online payments and reconciliation. Deals reseller During the past few years we have developed solutions for Deals resellers that facilitate processing of large amounts of a limited number of products in a short time frame, thereby keeping costs as low as possible. We will also be addressing the following projects for this business in collaboration with our customers: Fulfilment and returns solutions at the lowest costs through, among others, dynamic capacity planning. Value added services Developing chain solutions by having certain supplier activities carried out by third parties. Specialized reseller By collaborating closely with successful specialized resellers we are able to offer solutions that are aligned with the unique proposition of these players. For example, in 2013 we implemented various logistics solutions that optimize wine bottle processing in our warehouse. In addition, the solutions that we have developed for the other business models can also be applied on a smaller scale in this business model. Only a number of specialized resellers will be successful in the long run. We have developed an assesment tool that identifies key success factors, which we will discuss with our clients to ensure that they continue to focus on their unique offering. We will also be starting up the following specific projects for this business in collaboration with our customers: Specific fulfilment and returns solutions Specific value added services Combined payments and fulfilment solutions Providing step-by-step internationalization Business Intelligence and financial analyses DOCDATA N.V. Vision

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18 IAI Smart with laser technology DOCDATA N.V. Vision

19 We are IAI: our strength lies in laser technology We are a high-tech engineering company specializing in developing, building, delivering and maintaining advanced production systems. These production systems can process various products and materials quickly and precisely. Our core competence is the use of laser technology in automated production systems. In addition to knowledge of laser technology and optics, we also have knowledge of other processing technologies, such as inkjet printing and RFID (Radio Frequency Identification). We also have competencies in machine design, operating software and product handling. These competences enable us to integrate diverse technologies into automated production systems. We have a great deal of in-house knowledge about the interaction between processes in the production system and the materials for processing. This knowledge forms the basis for our advanced machinery designs. We aim to use this unique combination of knowledge and experience in areas where we can offer our customers attractive systems. This attractiveness can usually be found in the processing of products or materials whereby unique characteristics can be applied in combination with a product handling system that transports products through the system quickly, precisely and without any loss of quality. In 2013 the IAI group achieved a turnover of 18 million euros and employed an average of 75 full-time employees. IAI Industrial Systems has its head office in Veldhoven and a subsidiary, FEHA, in Halle, Germany. High quality production systems Intimate customer relationship The best service during the complete life cycle of our systems Innovation in laser applications DOCDATA N.V. Vision

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21 We develop applications and build systems... Based on our core competencies, we continually develop new markets. Our core competencies include: The development and application of process technology in production systems. - This involves processes such as laser engraving, laser perforation and printing on a range of materials. - Materials such as paper, polycar bonate, composites and metals are processed. The engineering of production systems focused on advanced and highly precise product handling. FEHA carried out the following additional activities: The design and production of unique CO2 lasers. Everything connected with lasers and the associated optics is in our genes. From this position we start new developments because we have built up a deep insight into the interaction between process and materials. This enables us to develop new applications and enter new markets. We also possess a great deal of in-house knowledge of mechatronics and the development of operating systems. We are able to apply this knowledge extremely effectively to our advanced production systems. We are not limited to laser applications alone. In the document security market we provide complete production systems worldwide that make it possible to personalize all types of passports, ID cards and other security documents. We offer our customers a complete solution for any security document. To achieve this we developed additional processes such as UV-printing and chip programming, as well as the security controls with vision systems. We also apply these technologies for the introduction of new security features and they form a vital input for our Technology Roadmap. We also develop the process and material knowledge that is necessary for our continued activities as a market innovator. Expertise in laser and optical technology Veldhoven Netherlands Engineering and manufacturing of industrial systems Document Security market New products in other niche markets Halle Germany Unique laser design Internal use Established system suppliers in mature markets DOCDATA N.V. Vision

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23 ...where our customer takes centre stage Currently, the majority of our turnover is achieved in the document security market. This market is changing, however: the market is becoming mature and is gradually becoming a buyer s market. This means that prices are under pressure and customers are becoming more demanding. The customer takes centre stage for us; we aim to forge strong ties with our customers and build intimacy. We are therefore focusing increasingly on the specific requirements and demands of the customer. We present ourselves as a technology supplier through our three pillars: High-quality production systems with a long life cycle; Leader in innovation, in tandem with our customers; Unburdening our customers; offering the best service during the whole life cycle of our product systems. We enter into dialogue with our customers at different organizational levels regarding the various pillars that underpin collaboration and partnerships. Collaboration is the basis of a more intimate customer relationship that has a long-term character. As a result we are more mutually dependent and need each other. General Management of our customers is used to make agreements on business models and options. Account Management is used to make agreement s on IAI s Product Roadmap. Development Managers is used to make agreements on IAI s Technology Roadmap and agreements are made with Operations and Maintenance Managers on IAI s Service Portfolio regarding our maintenance performance and improvement programmes. We offer our partners the opportunity to convert their requirements for all these activities into mutual programmes. We play a clear role here in the value chain: We are an independent production systems supplier and do not sit in the chair of the system integrator. During the previous year we defined a growth strategy and adjusted our ambition level upwards. The objective is to increase our market share in the document security market on the one hand, and to develop new markets based on our key competencies on the other. A prominent example of this is applications based on innovations that are used on existing FEHA CO2 lasers. This innovation will be positioned separately on the market as a laser source, but this technology will also be used in production systems developed by IAI. In order to achieve these ambitions, the following measures were implemented in 2013: All activities are coordinated integrally from a newly formed management team. The customer takes centre stage and a market approach has been developed based on the proposition: Building intimate customer relations by delivering: - High-value production systems; - Innovation in applications and processes; - The best service during the entire life cycle of our systems. The organization has been set up in order to achieve the objectives defined. Process improvements have been put into motion in order to be able to facilitate the intended growth. A start has been made with: Being present locally in regions with people for Sales and Service activities. Entering into partnerships with knowledge institutes and universities to speed up innovation. Making maximum use of the possibilities of the Brainport region by means of outsourcing. IAI s strategic goals for the following years are: Achieving growth in the market for document security. Building up a position in other laser-related markets where IAI systems can offer unique solutions. Continually deepening the competencies base. Entering into collaborative ties with customers and technology partners. Participating in other companies, where such participation supports achieving the above goals. DOCDATA N.V. Vision

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25 We analyse the market and stay ahead Market development High-quality security documents We distinguish between the following sections within the market for highquality security documents: Passports, both with a paper and a polycarbonate holder page. Cards, including ID cards, driving licences and health cards. Paper documents, including birth certificates, tax certificates, residence permits and title deeds. Bank notes. Passports The passport market is currently the most important market for IAI. We occupy a prominent worldwide position that generates the largest percentage of our turnover. Important market developments in this segment include: The maturing of the market and its transformation into more and more of a buyer s market. The market is becoming a replacement market as infrastructure is frequently present. The paper holder page is increasingly being replaced by polycarbonate. Asia and South America will occupy an increasingly more important position in the market in the next few years. Innovation drives the introduction of new security markets. A limited number of independent system suppliers are active in this market. Good security against potential passport fraud continues to be a high priority as a result of the increased threat of terrorism over the previous decade. This is also the driving force behind the continual renewal of safety features. In addition, we are observing a trend towards replacing the paper holder page with polycarbonate. This creates the possibility of the introduction of a new range of security features, which are highly suited to the laser applications supplied by IAI. This opens opportunities up to IAI for further growth in this market segment. It drives the Technology Roadmap for the entire security documents market segment. Market maturation is showing that in addition to the above-mentioned aspects, the price of a solution is playing an increasingly important role. In some tender procedures the price of production systems is even the decisive factor. Since the infrastructure for the introduction of new passports is already present in many countries, the production systems themselves are playing an increasingly more prominent role in the tender procedures. This has resulted in a decrease in the added value of the system integrator in a traditional sense and is changing their role in the market. There is less room for the old business model in which the system integrator was the contract partner and the production systems supplier fulfilled the role of subcontractor only. In the old business model, the system integrator calculated a margin on the production systems delivered. In many cases, the current market no longer permits a margin over margin. A major competitor has decided to assume the role of system integrator in addition to the role of system supplier. IAI does not have this ambition and is remaining with its core competencies. Market studies predict that the demand for high-quality personalisation equipment for security documents will come largely from outside Europe, mainly from Asia and South America, in the coming years. These studies foresee a levelling off in the growth of the market for security documents in the coming years, followed by the stabilisation of the market. Cards As national identity cards facilitate the monitoring of residency and in many cases also make it possible to travel, the authorities are paying attention to their improvement. In a number of countries, driving licences also serve as an identity document and improved security is therefore deemed necessary. We see a clear trend towards synthetic, credit card-sized documents for driving licences and identity cards. It is therefore expected that the high-quality card market will show further growth in the coming years. The card market can be subdivided into three categories: Government cards (identity cards, driving licences, residence permits). The growth in these markets will decrease. Healthcare passes; in other countries these cards are used for identifying right holders and as authentication for viewing patient records. Bank cards (payment passes and credit cards). We envisage a trend towards bundling multiple functionalities on a single card resulting in a higher security level. The highest market segment for identity cards issued by governments comprises 5% of the volume but represents 10% of the value and aligns well with the passport market in terms of production requirements, customer contacts and available technology. Although IAI has a small market share in this segment, it aims to achieve significant growth. DOCDATA N.V. Vision

26 Other security documents The tendency towards better security is also evident in documents such as birth certificates, diplomas and title deeds. These documents are usually still issued as paper documents. In addition to electronic security by means of central registers, physical security for these types of document is also receiving attention. There are also many documents such as cheques, vouchers and certificates of authenticity that cannot be checked by or on behalf of the general public in central registers and need additional recognisable security. IAI has two individual production systems in its portfolio for this market segment. These systems have been supplied to South Africa, India, Romania and Poland. In view of the availability of solutions on the one hand and the market opportunities on the other, IAI has decided to start focusing more on this market. Bank notes The banknote industry is a stable market where central banks pay a lot of attention to security against forgery. Besides the economic risk, such fraud has a long-term impact because incriminated denominations often keep circulating. This can lead to a loss of faith in the chartal money. Security features should be easy to remember and recognise and the public must be able to check them without the need for special tools. CO2 lasers Our subsidiary FEHA designs and sells lasers with specific bundle qualities in a variety of markets. They are sold directly to system builders as a laser source, as well as being used in our MicroPerf production systems for bank notes. IAI operates as a system integrator here. The total laser market shows a modest annual growth and the associated share of CO2 lasers remains almost constant at approximately 50% of the total laser market. The CO2 lasers are still the workhorses among the lasers. In the event of suitability for an application, a CO2 laser will always be chosen instead of a more expensive high-tech solution due to the excellent price/performance ratio of CO2 lasers. Totale Market omzet size 2011: 1,96 miljard USD Totale omzet 2012: Totale Market omzet size 2012: 2,06 miljard USD 2,06 miljard USD 4% 4% 4% 23% 24% 24% 50% 48% 48% 23% 24% 24% CO 2 Solid State CO2 Solid State CO 2 Solid State Fiber Diode & Excimer Fiber Diode & Excimer Fiber Diode & Excimer DOCDATA N.V. Vision

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28 How we serve these markets High-quality security documents The high-quality security documents market is a worldwide niche market. There are different kinds of players, each of whom we approach in a specific manner. We have indicated a number of focal projects, on which we will be concentrating during the coming years. These are projects with a relatively high chance of success, or projects with an important regional function. A plan has been drawn up for each focus country, in which we approach the end customer in order to create a pull for IAI technology towards our system integrator customers. The system integrators will therefore remain vital to us. By operating more and more as a partner we aim to become a preferred supplier of personalization systems and thus create a push towards end customers for IAI technology. We also work the market through technology partners. We collaborate to develop new personalization technologies and security features and we A. test and improve processes. This is aimed at strengthening our position in this market. In the ever-maturing security documents market the pressure on prices and margins is constantly increasing. In order to mitigate this effectively, we develop new business models with our customers. These models consist of: Supplying directly ourselves if the end customer only requires systems. Entering into partnership with other parties and offering joint supplies. Operating as a subcontractor for a system integrator. Where partnership is concerned, depending on the local situation a partnership form and mutual earnings model can be opted for. For IAI, the market for the protection of high-quality security documents is currently by far the most important one. To address the above-mentioned market developments, IAI has increased its sales activities in regions outside Europe; mainly in Asia and South America (mostly through contracts with agents). As from 2014 we will be expanding further by means of our own local Sales and Service people. We are making increasing use of the opportunities that Brainport, the high-tech region in Eindhoven, is offering for outsourcing certain competencies. Flexibility plays an essential role here in a market that is strongly project driven. In order to strengthen our innovative character and be capable of positioning a broad palette of new technologies on the market we will continue to enter into a growing number of worldwide partnerships with knowledge institutes and technology partners. We will continue to invest in new products and technologies. Our aim is to continue supplying the best systems in the market and to offer our customers every opportunity to introduce proprietary applications to the market that distinguish them from their competitors. We also offer our customers service activities across the entire IAI B. SYSTEM INTEGRATORS push pull END CUSTOMERS IAI FOCUS PROJECTS C. TECHNOLOGY PARTNERS END CUSTOMERS OTHER PROJECTS DOCDATA N.V. Vision

29 life cycle of the machines we deliver. We therefore unburden our customers and offer them the opportunity for introducing improvements and upgrades. We have put together a comprehensive service portfolio to accomplish this. Product Roadmap We have designed unique production systems for personalising passports and ID cards. These products can be personalised by our machines for both central and decentralised applications. This means that a blank passport can be provided with all the holder s personal information in our BookMaster One system, and that it is completely ready for issue when it leaves the production system. Our CardMaster One system does the same for ID cards. Often these systems are equipped with a module for applying ImagePerf of ImagePerf/TLI. Security features patented by IAI are already being used in many countries, including the Netherlands, Belgium, Switzerland, Ireland, the UK, Sweden, China, Russia, Ukraine, Canada, Portugal, Estonia, Costa Rica, Poland, Morocco, South Africa, Bulgaria, Algeria, India, Uzbekistan and Romania. Data Analysis Data Collection Customised Administrator Advice Service & Maintenance Implementation & Evaluation D. Management & Optimization C. Training Operator Installation A. Production Start-up B. Support Parts & Consumables Start-up Assistance Maintenance Training Warranty Helpdesk Support Corrective Unlimited Limited shelf life shelf life Preventive Web Phone In 2014 we will be developing a highvolume system specifically for identity cards (up to 1000 cards an hour) that with our high-quality technology will achieve a price/performance ratio that will perfectly match the middle segment of the market in terms of capacity; a market that we currently do not serve. We will also offer the security features that have been developed in the passport market. This new generation of Cardmasters should generate a stronger position for us in the cards market and substantially increase our market share of only 0.5%. We see opportunities here for identity cards, driving licences, residence permits and vehicle registration certificates. The specific entry strategy here is: Entering the ID cards market with security features from the passport market. Investing in our Product Roadmap by supplying new systems. For documents such as diplomas, birth certificates, excise certificates, vehicle registration certificates and many other documents that differ by country and are therefore hardly standardised, we have developed the SheetMaster Flex and WebMaster Flex. These systems can process such products printed in Sheets or in Web. Such treatments often involve making fine perforations in the shape of national symbols and/or unique document numbers. The product portfolio will be receiving special attention during the coming years. To achieve this, a Sales Manager has been taken on to sell existing systems as well as identify market potential and customer requirements. For bank notes we have developed a system that can apply the MicroPerf security feature that is currently being used in Swiss, Russian and Romanian bank notes. In January 2014 we received an order to develop and supply a MicroPerf system for China. This order is a preliminary towards potential repeat deliveries in the future. DOCDATA N.V. Vision

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31 Technology Roadmap In order to continue to retain our leading market position we need to be aware of and prepared for the requirements that security documents will be subject to in the coming five years. This gives is the opportunity to innovate in a timely manner in collaboration with our partners. In 2013 we took on a new Development Director to give new developments the attention that it deserves. One of his first tasks was to draw up a Technology Roadmap, which includes the personalization technologies and security features that we expect to develop and improve during the coming years. CO2 lasers Currently, our company FEHA manufactures CO2 lasers with a high bundle quality. These lasers serve niche markets. On the basis of new innovations, protected by patents, new features that are unique in the market are being added to existing lasers. The expectation is that this innovation, called Q-Switch, will substantially increase our sales volume in the coming years. This offers new opportunities in the Automotive and PCB markets among others. We will be positioning these renewed CO2 lasers in the market as laser sources. The new CO2 lasers are also creating new applications in existing markets, however. In these cases can can choose to use the new laser sources for developing system solutions and placing them on the market. System solutions for PCB markets among others Another promising application is the customized cutting of PCBs, Printed Circuit Boards, which are used in consumer products such as televisions and in telecommunications products such as mobile phones. Our system solution based on our renewed laser source can hereby replace the existing PCB sawing process. Among others, this will create the advantage of no longer having to clean the PCBs after separation. In order to achieve the market potential we have initiated a process to professionalize the organization in Halle: The existing lasers will be completely upgraded; The workforce will be increased; A new, high-tech location will be introduced during the first quarter of 2014; The ability to respond and flexibility will also be increased as a result of collaborating with third parties; Solar In preceding years, IAI supplied several bespoke production systems, which make use of special laser treatments. These systems are unique and partly carry out patented soldering and engraving treatments that are necessary as part of the production process of the customers. The Solar market has had another bad year. Many companies, including customers of IAI, got into difficulties due to the cheap supply of panels from China. For the time being, we are adopting a hesitant attitude; we are maintaining the contacts we have built up with existing and potential customers, but are also simultaneously keeping our efforts, costs and investments in this market to a minimum. Other markets Thanks to our unique combination of core competencies, built up in the security documents market, we are able to undertake special projects in markets other than those mentioned above. New projects are defined through our own initiatives and research or through our partner network. If, after careful research, it appears that such a project is attractive and feasible for all parties involved, the project will be further developed. DOCDATA N.V. Vision

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