s g sa annual report 2002 - bib.kuleuven.be · daewoo teletech co., ltd. integrates i.r.i.s. ocr...

annual report 2002IMAGE RECOGNITION INTEGRATED SYSTEMS GROUP SARue du Bosquet 10

Parc Scientifique de Louvain-la-Neuve

B-1435 Mont Saint Guibert

T +32/10/45.13.64 - F +32/10/45.34.43

www.irislink.com

key figures table of contents

general presentation

6 An inspiring profession and a sustainable vision for a changing world

7 I.R.I.S. products and services to feed your needs

14 Board and executive management

15 Corporate governance

activity report18 Management report

27 Group structure

28 Composition of the capital

29 Headcount

consolidated accounts of I.R.I.S. group32 Consolidated accounts

36 Appendices to the consolidated accounts

44 Control of the consolidated accounts

statutory accounts of I.R.I.S. group S.A48 Statutory accounts

contacts

54 Coordinates

54 Financial agenda

54 Investor relations and financial communication

2002 2001 2000 EUR EUR EUR

Sales (1) 41,646,974 35,340,034 27,620,317

Cash flow from operations (EBITDA) 3,073,198 3,000,810 2,740,788

Income from operations (EBIT) 2,047,759 2,091,553 2,137,097

Net current income before goodwill 772,049 1,549,210 1,555,989

Net income (share of group) -1,950,760 485,107 1,091,819(2)

Net cash flow 1,251,413 2,228,176 2,401,524

Capital 24,971,186 24,197,125 20,630,653

Capitaux propres 24,422,029 25,531,121 21,529,795

(1) Includes the on-going orders (2) Includes the capital gain on the sale of Asice, a subsidiary of SEPSI-IRIS France, for an amount of EUR 425,489

2002 2001 2000 EUR EUR EUR

Number of outstanding shares (on Dec. 31) 1,480,791 1,453,350 1,338,651

Cash flow from operations (EBITDA) 2.08 2.06 2.05

Income from operations (EBIT) 1.38 1.44 1.60

Net current income before goodwill 0.52 1.07 1.16

Net income (share of group) -1.32 0.34 0.82(1)

Net cash flow 0.85 1.53 1.79

Capital 16.86 16.65 15.41

Net equity 16.49 17.57 16.08

(1) See footnote above

(!) I.R.I.S. issues ”out of the money” options. 2002 2001 2000 This table therefore only has theoretical value, EUR EUR EUR

Number of outstanding shares (on Dec. 31) 1,480,791 1,453,350 1,338,651

Number of outstanding warrants (on Dec. 31) 134,457 28,766 36,362

Number of outstanding shares after dilution 1,615,248 1,482,116 1,375,013

Cash flow from operations (EBITDA) 1.90 2.02 1.99

Income from operations (EBIT) 1.27 1.41 1.55

Net current income before goodwill 0.48 1.05 1.13

Net income (share of group) -1.20 0.33 0.79(!1

Net cash flow 0.77 1.50 1.75

Capital 15.46 16.33 15.00

Net equity 15.12 17.23 15.66(1) See footnote above

CONSOLIDATED KEY FIGURES FISCAL YEAR (ENDS DECEMBER 31)

KEY FIGURES PER SHARE FISCAL YEAR (ENDS DECEMBER 31)

KEY FIGURES PER SHARE (FULLY DILUTED)(!) FISCAL YEAR (ENDS DECEMBER 31)

general presentation

An inspiring profession and a sustainable vision for a changing world

I.R.I.S. products and services to feed your needs

Board and executive management

Corporate governance

annual report 20026 /

Ladies and gentlemen,

I.R.I.S. was 15 years old in 2002.

15 years is very little in the overall scheme of things. Yet it is an age in a world moving at a frantic pace, in which technologies

develop at exponential speed.

Fifteen years ago, I.R.I.S. was a pioneer in Optical Character Recognition (OCR). Around the world, many small teams were

working, more or less efficiently, to develop solutions. After a number of years of consolidation in this sector, only a handful of

companies remain – and I.R.I.S. is No.1 in Europe and No.2 worldwide.

In fifteen years, we have built a strategy which aims to expand progressively to cover every requirement for digitising paper

documents, and then in recognising, managing, archiving, sharing and storing digital documents. The result of the technical

solutions produced by I.R.I.S. is the efficient management of documents, their contents, and consequently of knowledge itself

within organisations.

I.R.I.S. has become a key player in “Document to Knowledge”, and has acquired a truly international standing. Millions of

people worldwide now use our products, and hundreds of companies have used our solutions to improve their productivity.

This is a source of considerable satisfaction for the managers and technicians of I.R.I.S. and for all workers within the group.

Today, we operate in a particularly difficult global environment: uncertainties are enormous and both medium- and long-term

visibility is highly tentative.

I.R.I.S. has adapted, yet maintained the same course. I.R.I.S. remains – of course – a technology-based company which

continues to improve each of its technologies to ensure that they are the best. I.R.I.S. continues to listen to its customers

and to supply them with solutions which improve their productivity. In this way, we will win the satisfaction of countless

more clients.

At the same time, we understand that our shareholders are increasingly preoccupied with the prudent stewardship of the

company. They expect more from us than just a “growth at all costs” model; we must also manage the company intelligently.

We have therefore worked to maintain a solidly-structured balance sheet and a reasonable cost structure. In this way, I.R.I.S.

will be ideally placed when our customers, after several years of reducing costs, relaunch their investment programmes.

Ours is a fascinating profession. We have an enduring vision. The I.R.I.S. management and teams are motivated, and have

faith in the future.

Let the world change: I.R.I.S. is ready to seize new opportunities!

Pierre De Muelenaere Etienne Van de Kerckhove

Chairman of the Board of Directors Associate Administrator

Associate Administrator

I.R.I.S. products and professional software solutions to feed your needs

OUR PRODUCTS FOR INDIVIDUALS AND

ENTERPRISES

The “Office Products & Technologies” division of I.R.I.S.

develops and sells worldwide a full range (for Windows and

MacOS) of fast, easy-to-use OCR products which convert

your paper-based information into editable data.

These products are aimed at individual and professional

users, and are distributed:

- by the major scanner manufacturers under OEM (Original

Equipment Manufacturer) contracts;

- by I.T. distributors and resellers;

- or directly by I.R.I.S. from its e-shopping site

(shop.irislink.com).

READIRIS PRO

> Convert and edit your paper documents and PDFs

Readiris Pro is an easy-to-use text recognition program

which converts scanned paper documents, PDF documents

and image and fax files into editable text

which you can use in your favourite

applications.

You create a new document and

modify the content with ease using the

new “Floating Text” mode. The text flows from one

column or page to the next, while the images, tables and

graphics remain in place for a perfect reproduction of the

page layout.

Readiris Pro is available for Windows and MacOS, and rec-

ognises up to 104 languages.

I.R.I.S. is a leader in the “Document to Knowledge” market, and provides extremely high-quality solutions for converting

paper documents into electronic formats for archiving, storing, managing and sharing digital information.

7

Over the past years, I.R.I.S. has maintained an important R&D effort,

improving constantly the quality of its Optical Character Recogni-

tion products and achieving a leading position on the OCR market.

Today, its high-level technology is recognized and chosen by some

of the biggest scanner manufacturers in the world. They integrate

I.R.I.S.’ OCR into their devices to offer their consumers a fast, easy-

to-use and accurate OCR software for the conversion of their daily

paper documents into digital information.

Selected examples of co-operations

Hewlett-Packard integrates, for several years, I.R.I.S.’ OCR techno-

logy or I.R.I.S.’ OCR software, Readiris Pro, into its LaserJet, Office-

Jet and ScanJet product lines. It offers I.R.I.S. a worldwide visibility,

increasing its OCR market penetration.

Kodak bundles IRISPdf, I.R.I.S.’ professional solution to generate

PDFs, with Kodak Capture Software, Kodak’s high-speed scanning

solution.

Sharp integrates Readiris Pro into some multifunctional peripherals

Panasonic bundles Readiris Pro with some flatbed scanners and

multifunctional peripherals.

Canon Belgium proposes Readiris Pro Corporate Edition, I.R.I.S.’

professional OCR solution for the creation of editable documents

and PDF archives, with its professional scanners and “intelligent

multifunctional peripherals”.

Daewoo Teletech Co., Ltd. integrates I.R.I.S. OCR software into its

new multifunctional peripheral.

Mustek bundles Cardiris, I.R.I.S.’ business card organizer, with its

business card scanner.

Plustek released a ”personal Smart Scanner” bundled with Cardiris.

And more …

WORLDWIDE LEADING SCANNER MANUFACTURERS

CHOOSE I.R.I.S.’ TECHNOLOGY

An inspiring profession and a sustainable vision for a changing world

IRISPEN II

> Capture data instantly and precisely in any application

IRISPen II is a reader pen which allows you to scan pieces

of text, barcodes and hand-written numbers, line by line,

into any Windows or Mac application. The result is editable

text which appears at the cursor point in your current active

application.

You save time and avoid lengthy, painstaking inputting.

Simply slide the IRISPen over your chosen text!

I.R.I.S. BUSINESS CARD READER II

> Scan your business cards and manage your contacts

This practical tool makes it possible to scan, archive, index,

recognise and export business cards to a contact database.

The user simply inserts visiting cards into the scanner, and

the Cardiris software recognises the data and indexes and

archives it to a PDA or contact management application

(such as Outlook).

CARDIRIS

> Convert your business cards into

an electronic address book

After scanning, the business cards’ images are retained and

just one mouse click is needed to transfer the information to

a database or contact management application running on

a PC, under MacOS or on a PDA (Personal Digital Assistant),

such as Outlook or Outlook Express. Cardiris can save the

business card image in colour or in greyscale.

The internal sorting and search tools make it

possible to find a contact, an address or an

e-mail instantly.

IBR

> An original, high-throughput tool for banking

or similar applications

IBR (I.R.I.S. Banking Reader) makes decentralised data

processing a possibility in your workplace. Various differ-

ent types of data can be read: special banking sector fonts

such as “MICR” (Magnetic Ink Character

Recognition) OCR-A, OCR-B, E-13B and CMC-

7, as well as all traditional barcodes (including

PDF 417), hand-written figures and printed or

manually keyed omnifont information.

I.R.I.S. DEVELOPERS’ TOOLKITS

> Add the power of intelligent recognition

to your application

I.R.I.S. is successfully developing a wide range of toolboxes,

based on its unique fifteen years of experience in the optical

character recognition (OCR) field.

We offer toolkits for reading printed information, numeric

and alphabetic handwriting (ICR – Intelligent Character

Recognition), barcodes (also PDF 417), forms and special-

ised OCR-A, OCR-B, E-13B and CMC-7 (MICR) bank fonts.

OUR PROFESSIONAL SOFTWARE SOLUTIONS

The Professional Systems division of I.R.I.S. provides to

the professional world a range of IT services and solutions

covering a wide range of fields going from the demateri-

alization of documents to the management of knowledge

(KM), including Automatic Document Reading, Electronic

Document Management, information sharing, workflow,

and data storage and archiving.

Our approach is a global approach: I.R.I.S. defines the IT

solutions, architecture and infrastructures that best fit your

needs and provides all the IT equipment and software pack-

ages necessary for the implementation of your projects. On

top of standard solutions, we develop fully customized solu-

tions and integrate them into your global system. Our teams

take in charge the implementation as well as the follow up of

your projects: installation of the hardware and software solu-

tions, users’ training, technical support, maintenance etc.

HIGH-SPEED SCANNING

High-performance scanners and scanning

software solutions provide high-speed scan-

ning facilities (large volumes of documents) as

well as numerous image processing features:

creation of batches of documents, bar code

reading, indexing, image rotation, image crop-

ping, image deskew etc.

In the framework of our solutions and projects, we pro-

vide you with the necessary advice for choosing the scan-

ners and software solutions that best respond to your

specific needs.

The high-speed scanning software solution Kodak Capture

Software® features a range of batch output formats for

compatibility Formiris Pro, I.R.I.S. DocCenter and I.R.I.S.

DocShare. IRISPdf is an add-on software package that

complements the high-speed scanning software Kodak

Capture Software®. It executes text recognition in up to 104

languages and produces editable, fully searchable PDF and

RTF documents.

Our teams of experts and developers design, develop, and

integrate into your global solution tailor-made scanning and

In 2002, I.R.I.S. installed the new depart-

mental SPF Finance SCANFIN digitisation

centre. I.R.I.S. will provide operational

support for five years.

The aim of the SCANFIN departmental digi-

tisation centre is to provide automation of

the input and processing of information

relating to three VAT documents. These are

the monthly and quarterly VAT declarations

in handwritten or typewritten paper form, the

annual intra community statement and the

annual listing of customers liable to tax. This

corresponds to about 4 million documents to

be processed per year.

SCANFIN allows the current manual encoding

of these different documents to be replaced

by automatic input using a scanning proce-

dure. The aim is to reduce the total encoding

workload for SPF Finances personnel by

transferring this responsibility of the local offi-

ces to a departmental scanning centre.

The infrastructure organisation that has been

implemented provides acceptance and auto-

matic input of the types of documents cited

above by character recognition scanning.

This is then followed by processing by the

SPF Finances information systems. Finally the

documents are archived on electronic media

and made available for consultation and any

follow up through the SPF Finances Intranet.

The project also includes the replacement of

paper archiving of land registry change files

by digital archiving and image handling.

I.R.I.S. have taken responsibility for the de-

finition and implementation of a hardware

and software architecture based on three

input sites (Namur, Ghent and Brussels) and

one archiving site (Brussels). The software

solution is based on technologies developed

by I.R.I.S. for Automatic Document Reading

(ADR), Optical Character Recognition (OCR),

Archiving and Consultation.

Each data input site is equipped with a high

performance KODAK scanner (black and

white and/or colour according to require-

ments to be taken into account), scanning,

correction and validation stations equipped

with ADR and OCR software, and a local

storage server allowing autonomous storage

of document images and associated indexes

for about ten days. The stations and server are

network connected.

The archiving site is equipped with a server

supporting the I.R.I.S. DocCenter (Search-

irisWeb) software running under ORACLE, an

on line storage unit (IBM Shark) with a capa-

city of several Terabytes, two magneto optical

disk libraries and a magnetic tape library (for

backups). The archiving site is also equipped

with centralised backup and storage space

management tools (Tivoli).

The proposed architecture allows easy secure

administration of all the sub systems installed

on the input sites. The input sites are linked

to the archiving site by high-speed lines provi-

ding regular transfer of batches of images and

associated indexes. The archiving site also

supports consultation accesses, from all the

VAT and land registry offices within Belgian

territory, to all the stored images.

I.R.I.S. are also responsible for the provision

of maintenance, support and SPF Finances

personnel training.

I.R.I.S. INSTALL THE SCANFIN DIGITISATION CENTRE FOR THE FEDERAL FINANCE SERVICE

(BELGIAN FINANCE MINISTRY)

annual report 20028 /9

I.R.I.S. products and professional software solutions to feed your needs I.R.I.S. products and professional software solutions to feed your needs

recognition IT applications that are meant to perfectly meet

the specific needs of your activity field. Beyond standard

scanning and pre-processing features, these solutions offer

specific features for: file conversion, the scanning of non-

standard paper formats, hyper compression using the OCR

technology, the automatic segmentation of the information

using advanced techniques (syntax-based localization of

data, specialized sorting agents, semantic analysis etc.).

AUTOMATIC FORM READING

I.R.I.S. proposes Automatic Document Reading (ADR) solu-

tions that can be used for census operations,

voting operations, studies of all types, exam

sheets, etc. The purpose of such solutions are

to recognize, process and make available in

electronic format all types of data traditionally

provided on paper documents: questionnaires, paper

slips, forms, invoices, coupons, cheques, etc.

Our flagship product in ADR is Formiris Pro. Our high-

performance Optical Character Recognition engines can

read machine-printed data, hand-printed data, signs in

check boxes, bar codes and graphical zones. The applica-

tion offers advanced features for the identification of docu-

ments, whether it be traditional forms or less standardized

documents. It may also be used as a completely automated

highly effective sorting machine.

Our Service Bureau provides services for all projects to be

carried out in the fields of scanning and ADR. It provides

a team of experts and technicians as well as all the neces-

sary hardware and software equipments necessary for the

operations.

AUTOMATIC READING OF CHECKS

IT solutions are available for the sorting, reading and

processing of a wide range of payment documents: checks,

(international checks, travellers checks, eurocheques),

credit transfer slips, TIPs, vouchers, coupons, bills of

exchange, and other documents.

With I.R.I.S. ScanChecks, you can:

- digitalize and sort high volumes of checks using highly

effective sorters and scanners,

- capture the data available on the checks thanks to compu-

ter-assisted encoding facilities,

- check the data conformity when compared with other

scanned documents.

- follow-up the perfect check payment procedures.

IBR (I.R.I.S. Banking Reader) is a pen scanner based

on our advanced OCR technology and allows you

to perfectly read data on checks, bonds, coupons,

credit transfers, and standing orders.

A specific toolkit is also available for the reading of bank-

ing data (magnetic ink, E-13B, CMC-7, OCR-A, OCR-B):

DRS 8.0 Pro.

ELECTRONIC DOCUMENT MANAGEMENT (EDM)

We provide standard and customized Electronic

Document Management (EDM) solutions that enable

you to:

- build up a document repository where each document

is carefully indexed, archived and made available for

all users,

- centralize and share documents within a company or

organization or beyond, i.e. among its members and exter-

nal partners (intranet/extranet),

- search and retrieve documents of all formats in an instant

(via the Internet), using advanced technologies.

I.R.I.S. DocCenter and I.R.I.S. Archea are EDM solutions

developed by our teams of experts who have an experience

of 15 years in this high-technology field. We provide cus-

tomized standard solutions as well as tailor-made solutions.

Our experts analyze, develop, adapt, and integrate the solu-

tions that best fit your particular needs or projects.

High-performance indexing and “full text” search engines

such as RetrievalWare® can be integrated into your exis-

ting systems.

WORKFLOW

Our experts in workflow provide services for

the design, development, and integration of

workflow applications using standard workflow

tools. Their experience and competences in all

related IT fields make it easy for them to establish feasibility

studies and rapidly analyze the technical and technological

impacts of the systems to be implemented.

Workflow systems make it possible to increase the response

time of the enterprise processes, to reduce error risks, to

reduce the amount of paper documents and accelerate doc-

ument processing, to improve work coordination within the

company and consequently increase its productivity, end to

ensure a perfect distribution of workload and a perfect fol-

low-up. The most visible benefits of a workflow implemen-

tation are the reduction of response time and a productivity

increase (up to 50% for administrative tasks).

The administrative workflow deals with form distribution

within the company or organization, i.e. mostly internal doc-

uments. The administrative workflow is generally based on

an electronic messaging infrastructure (purchase request

forms, vacation forms, expense reports etc.).

The production workflow deals with the management of

company basic processes. These processes correspond to

processes that do not generally change much in the long

term and for which transactions are repetitive. The produc-

tion workflow deals with the management of a production

activity, i.e. from its reception and follow-up to its final reali-

zation (production of insurance contracts, management of

customer complaints etc.).

The cooperative or collaborative workflow deals with the

management of more changeable procedures, which are

linked to a limited group of people within the company. The

documents concerned are more complex documents and

involve different people.

In this case, the system productivity is less important than its

flexibility (scientific reports, technical documentation etc.).

Workflow systems will be particularly profitable whenever

used in conjunction with imaging and Electronic Document

Management technologies. With just a few clicks of the


In 2002, I.R.I.S. France was able to confirm

its leadership on the market of family allo-

wance agencies by setting up the 37th site

with form reading, electronic document

management and storage.

Nowadays, the family allowance funds (“Cais-

ses d’Allocations Familiales” or “CAFs”) each

month pay family benefits to more than 10

million people. Their activity originates with

the family policy of the French government is

and is controlled by the Ministry of Social Af-

fairs. These government agencies receive an

ever increasing volume of correspondence.

To meet the demand and continue to offer

good-quality services to the beneficiaries, the

family allowance funds turned to form reading

and document management technologies.

The custom solution I.R.I.S. France has de-

veloped for these agencies comprehends a

scanning module, the automatic identification

of unstructured documents, automated do-

cument recognition, the document indexing

and archiving. The forms to be processed are

pay slips, receipts for the payment of rent and

school certificates. The archiving solution of

I.R.I.S. France is the first one to be accepted

as a “legally binding archiving solution” by the

pilot site. Two types of media are used for the

storage of the documents: magnetic media

allow fast access, optical storage ensures

the safety of the data. The “dematerialized”

electronic documents are accepted as legally

binding documents, the paper documents can

be destroyed once they’re scanned in.

The automated processing of a person’s file is

carried out in five steps:

– A family’s records are collected. Any com-

posing element (pay slip, receipt for the

payment of rent, forms etc.) is scanned.

– The solution automatically identifies the kind

of document thanks to specialized I.R.I.S.

technology designed to identify “unstruc-

tured” documents. The image then gets

processed.

– The various documents are sent to the ser-

vices in charge of their follow-up. From this

moment on, a family’s file is available to the

public for consultation in electronic format

so that beneficiaries can check the status of

their file.

– The last step is the legal archiving. I.R.I.S.

France is the first company whose solution

is accepted as a “legally binding” archiving

solution by the pilot site.

IN FRANCE, 37 FAMILY ALLOWANCE AGENCIES (“CAFS”) HAVE SELECTED THE FORM READING,

ELECTRONIC DOCUMENT MANAGEMENT AND STORAGE SOLUTIONS OF I.R.I.S. TO INCREASE

THE QUALITY OF THEIR SERVICES


mouse, the company’s employees can access all the docu-

ments available in electronic format as well as all the infor-

mation necessary to carry out their tasks.

Some workflow systems are specifically dedicated to the

automated processing of invoices. They can be combined

with I.R.I.S.’s advanced OCR solutions to form a global solu-

tion able to dramatically reduce the administrative workload

of the companies’ accounting departments.

E-COMMUNICATIONS PLATFORM

Our department eCommunication provides a solution spe-

cifically designed for the sharing of information and know-

ledge: the I.R.I.S. DocShare portal.

I.R.I.S. DocShare is a Web-based document and knowledge

management solution. Via its tailor-made portal the users

can publish, transmit and easily share information within

their company or organization or within a well-defined

group of people.

I.R.I.S. DocShare is specifically dedicated to large accounts.

We have also developed an Internet communication plat-

form for the use of international associations and profes-

sional federations.

ELECTRONIC PRESS REVIEWS

I.R.I.S. ScanNews is an advanced IT solution for the auto-

mated creation and publishing of electronic press reviews.

With just of few clicks of the mouse, your press articles are

scanned, cut, reassembled, and distributed either in paper

format or in electronic format via your intranet/

extranet site. With I.R.I.S. ScanNews,

you can also import in your press

reviews all types of articles in elec-

tronic format (PDF, HTML).

You can create your press reviews

not only from newspapers, maga-

zines, but also from electronic documents in PDF or HTML

format. An easy-to-use cutting screen is available. The

scanned articles are automatically cut into colored blocks.

In the blink of an eye, you can directly distinguish the arti-

cles’ titles, subtitles, photographs, and graphics. Your press

reviews are directly available for further distribution over

your intranet/extranet site.

The scanned or imported articles are indexed according

to your filing system, and are used for building up a press

review database. You can then easily retrieve articles

by performing searches on their content and/or on their

metadata.

STORAGE AND ARCHIVING

Our Storage & Systems department distributes all hardware

and software equipments for the implementation of archiv-

ing, storage and consolidation systems.

Our team of experts is made of Project Managers, sys-

tem engineers, SAN specialists, and specialists in secu-

rity issues. They provide their expertise for the design and

architecture of the systems that will best fit your needs:

management of the high availability issue, disaster recovery,

data backup, life cycle management, tuning, data security,

and encryption. Our technicians and experts also provide

the necessary services linked to the systems’ implementa-

tion and follow up.

I.R.I.S. is “IBM Premier Business Partner” and consequently

offers all services linked to IBM environments. However,

our know-how extends to the integration:

- in the HP, SUN, HP-UX, SUN Solaris environments,

- of magnetic disks, magnetic tapes, optical disks, SAN, etc.

- of the Oracle, Informix, Sybase, and DB2 databases.

KNOWLEDGE MANAGEMENT

Because of the tremendous increase in information resour-

ces, of the complexity of all new IT

systems, and of the need to accelerate

processes and productivity, companies

and organizations nowadays have to

constantly redefine their information and knowledge manage-

ment strategy.

Our consultants in Knowledge Management (KM) offer

to carefully analyze your specific needs in Knowledge

Management (KM) and clearly determine the technological

means, practices and methods that will enable your com-

pany to appropriately manage and develop its intellectual

capital. Their approach follows a proven methodology and

takes into account the global strategy of the company, as

well as its type of activities, its existing IT structure, its

competences, and its particular organizational structure.

This methodology is based on an experience of more than

10 years in the field.

The KM program defines the strategic plan to be launched

to update the management of knowledge within the com-

pany. This strategic plan considers all organizational, infor-

mational and IT aspects.


Fideuram Bank (Luxembourg), a subsidiary of Banca Fideuram S.p.A.,

is known in financial circles in Luxembourg for its extensive range of

wealth management services for private clients as well as its services

for collective investment organisations. It was because of its princi-

ples of confidentiality and efficiency that it chose I.R.I.S. Luxembourg

– a local partner and expert in Document Management – to set up a

global electronic storage system for a subsidiary in Switzerland.

The first stage of this project was to scan, index, file and store secu-

rely all customer documents, including account opening forms, con-

tracts, powers of attorney and correspondence. Every user has been

given access rights to certain functions (lookup, indexing etc.).

An encryption system using long-term storage media (optical disks)

has also been put in place to ensure confidentiality of data, especially

when being sent to the storage firm and stored there.

The processing and storage of quarterly statements (cash state-

ments, statements of securities, evaluation reports, ”outstanding”

transactions, graphic portfolio distribution) completes the first stage

of this project, with advanced storage and printing functions – ”Hold-

Mail” and ”Print Manager”.

One of the special features of the system put in place by I.R.I.S.

Luxembourg is the multi-site archive support produced for the Luga-

no and Zurich offices of the subsidiary, Fideuram Bank (Switzerland).

In addition, this software solution can be used in several languages,

such as French and Italian.

The solution implemented enables thousands of pages to be pro-

cessed every month. The dematerialised documents can be in black

and white or colour and of varying formats (A3, A4, 3-fold, etc.).

I.R.I.S. LUXEMBOURG IMPLEMENTS AND INSTALLS AN

ARCHIVING AND DOCUMENT MANAGEMENT SOLUTION

AT FIDEURAM BANK (SWITZERLAND)


annual report 200214 /

Board and executive management Corporate governance

BOARD OF DIRECTORS

EXECUTIVE MEMBERS End of mandate

Pierre De Muelenaere President and Chief Executive Officer 17 May 2005

Director of E-Capital SA

Director of Parc Paradisio SA

Etienne Van de Kerckhove Chief Executive Officer 17 May 2005

Director of Stratefi SA

Serge Dahan Director 17 May 2005

President of Aproged

INDEPENDENT MEMBERS End of mandate

Pierre Rion Honorary Chairman 17 May 2005

Director of Fondation Roi Baudoin


Eric Domb Director 17 May 2005

President of Parc Paradisio SA

President of “Association du Management”

Director of “Parc d’Aventures Scientifiques” (Pass)

Alain Marsily Director Until December 31, 2002

Director of Hemeris SA

Pierre Sonveaux Director Since March 20, 2003 > May 17, 2005

President of Sonaca SA

Director of FN-Herstal SA


Director of Pégard SA

EXECUTIVE COMMITEE

Pierre De Muelenaere President Since March 20, 2003

Serge Dahan President Until March 20, 2003

Etienne Van de Kerckhove Secretary General

Colette Darconnat

AUDITORS

ERNST & YOUNG AUDITORS End of mandate

Represented by Eric Golenvaux 17 May 2005

CORPORATE GOVERNANCE

INDEPENDENT DIRECTORS

The Board of Directors is composed of three directors employed by the company and three non-executive directors.

The Board Members Eric Domb, Alain Marsily and Pierre Sonveaux are independent from the management and the key

shareholders, and they are therefore independent in the sens of the guidelines of the Banking and Finance Commission

(BFC), prepared by the Belgian Committee for Corporate Governance.

AUDIT COMMITTEE

President Etienne Van de Kerckhove

Members Eric Domb Until March 20, 2003

Alain Marsily Until December 31, 2002

Pierre Sonveaux Since March 20, 2003

The audit committee’s statutory mission is to assist the Board of Directors in maintaining the company’s financial integrity

by supervising the financial reporting, executing internal and external audits, performing internal verifications and handling

the financial relation between the company and its shareholders.

The members of the audit committee have the largest possible investigative authority in executing their supervising mission.

In essence, they have the same investigative authority as the one assigned by law to the company’s auditors.

The audit committee held two meetings in 2002 to discuss the following topics: an in-depth discussion with the company’s

auditor about the internal and external auditing, a review of the project management procedures, the establishment of a

Management Information System (“MIS”) and the adoption of international accounting standard (IAS/IFRS).

COMPENSATION COMMITTEE

President Pierre De Muelenaere

Members Alain Marsily Until December 31, 2002

Eric Domb Since March 20, 2003

Pierre Rion Since March 20, 2003

The compensation committee’s statutory mission is to assist the Board of Directors in determining the remuneration and

fees of the company’s directors (chairman, CEOs, general managers and employees that report directly to them).

REMUNERATION OF THE BOARD OF DIRECTORS AND COMMISSIONERS

In 2002, the non-executive administrators of the I.R.I.S. Group received a total remuneration of EUR 31,002 in the form of

attendance fees and fixed remuneration.

The executive administrators received a total remuneration of EUR 468,290 in 2002.

As of 31st December 2002, the administrators of the Group and its subsidiaries held a combined total of:

- 2,065 warrants under the 1999 stock option plan (S.O.P.)

- 52,000 warrants under the Horizon 2005 S.O.P.

During 2002, the remuneration for the fixed mandate of the commissioners of I.R.I.S. Group and its subsidiaries was

EUR 51,200.

15

activity report

Management report

Group structure

Composition of the capital

Headcount

GROWTH OF BUSINESS IN 2002

I.R.I.S. achieved strong growth in a

depressed economic climate

I.R.I.S. achieved a turnover of 41.6 million EUR. Sales

growth in 2002 reached 18%, a remarkable performance.

I.R.I.S. made no acquisitions in 2002, except for the 40%

share of I.R.I.S. B2B Technologies which remained in the

hands of the founders of this subsidiary. This had no effect

on the composition of consolidation.

However, I.R.I.S. did buy the AMOS Monétique (France)

and AMOS Inc (USA) companies in October 2001. Based on

a consistent composition (that is, excluding the contribution

of these companies in 2001 and 2002), the I.R.I.S. group’s

internal (organic) growth reached 15%.

In 2001, the AMOS companies achieved a total turnover

of 4.5 million EUR, EUR 981,115 of which was from the

fourth quarter consolidated into the I.R.I.S. accounts for

2001. AMOS therefore experienced an unexpected fall of

33% in annual turnover in 2002.

The economic climate has been a very difficult one, and

particularly in the IT (Information Technologies) sector. The

sustained growth of I.R.I.S. is a testimony to the interest

of large administrations, the business world and individual

users in the technologies developed by I.R.I.S.

In 2002, I.R.I.S. made significant progress in a number of

markets. With the notable exception of AMOS, each I.R.I.S.

business area made a positive contribution to the group’s

growth and profitability in 2002.

Progress in the United States was particularly good

(+ 75%), with I.R.I.S. recording 11.2% of its sales here.

I.R.I.S. maintained its overall gross margins

It is important to stress that I.R.I.S. succeeded in maintain-

ing its gross margin at 58%, the same level as previous

years. This too is a reason for satisfaction, at a time when

competitive pressure was particularly strong in the wake of

an overall reduction in IT investment.

PROFESSIONAL SYSTEMS

This division provides professional solutions for:

- Document Capture: scanning, recognition and automated

reading of paper documents, as well as electronic data

input for electronic document management applications.

- Document Management: electronic management, sharing

and storage of digital documents.

Teams active in the fields of automated document read-

ing (ADR) and electronic document management (EDM)

installed numerous systems, most notably at the Belgian

Ministry of Finance (automated recognition and reading of

VAT declaration forms), in the French government préfec-

tures (automated reading of vehicle-related documents),

the Luxembourg Chamber of Deputies (integrated docu-

ment portal), the Office of the President of the European

Commission (incoming mail management), at UNICE (infor-

mation sharing), etc.

The introduction of Formiris Pro 4.0 and IRISPdf has

strengthened the position of I.R.I.S. in the sectors of auto-

mated form recognition, production OCR and conversion

to PDF format.

DocShare has experienced remarkable success as an eCom-

munication tool among many large national, European and

international professional associations.

The growth of ScanNews was checked by the problem of

copyright, but companies now seem to have adapted to this

new concept.

It should be noted that there was a sudden fall in busi-

ness in October and November 2002, followed by a rise

in December. As a result, a few projects were carried over

into 2003.

OFFICE PRODUCTS & TECHNOLOGIES

This division produces and sells the Group’s office products

for optical character recognition (OCR), high-speed scan-

ning, penscanners and business card reading systems.

I.R.I.S. strongly increased sales of its Readiris Pro, IRISPen

II and I.R.I.S. Business Card Reader products in 2002. This

Ladies and gentlemen,

It is the privilege of the Board of Directors of the I.R.I.S. Group to give an account of its management for the year ending

31st December 2002.

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TURNOVER (000 EUR)

The sales figure of 2002 includes the on-going orders (for a total sum of 234,000 EUR).

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GROSS MARGIN

EUR AMOS MONETIQUE AMOS INC TOTAL

Turnover 2002

2,253,425 744,979 2,998,404

Professional Systems 2002 2001 2000

Turnover (in EUR) 35,511,805 30,123,697 22,307,229

Gross Margin (in EUR) 19,518,351 16,165,504 11,772,273

Gross Margin (%) 54.96 53.66 52.77

Office Products 2002 2001 2000& Technologies

Turnover (in EUR) 6,135,169 5,216,337 5,313,088

Gross Margin (in EUR) 4,657,440 4,321,441 4,637,178

Gross Margin (%) 75.91 82.84 87.28

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GROSS MARGIN BY BUSINESS


Management report

can be explained by sales growth in the distribution chan-

nels and a sharp rise in Internet sales. These two trends are

particularly strong in the United States, but have also been

prominent in Europe and Asia.

I.R.I.S. also continued to provide its character recognition

and document processing technology under OEM licence

contracts to major clients such as Hewlett-Packard, Kodak,

Panasonic, Fujitsu, Teco, etc.

Good performance of these packaged products and the

licence agreements gave I.R.I.S. record growth in its

U.S. sales.

2002 saw another rise in turnover for products with a

hardware component (IRISPen and Business Card Reader),

which accounts for the slight reduction in the division’s

gross margin.

I.R.I.S. posted a record operating cash flow

The operating cash flow (EBITDA) reached a record level of

EUR 3,073,198 (+ 2.4%). Despite a rise in R&D investment

(which did not require extra funds and was covered by the

expenses of the fiscal year) and reorganisation costs in the

interests of improved integration in a stricter budgetary

environment, the EBITDA margin was 7.4%.

After deducting operating amortisations, operating profit

(EBIT) stood at much the same level as in 2001 (-2.1%) at

EUR 2,047,759.

The weaker performance of EBITDA can be explained

mainly by the following factors:

- In a depressed market, I.R.I.S. was obliged to acquire

more new clients to ensure its growth. However, the cost

of acquiring new “key accounts” is high, in terms of both

sales and pre-sales (staff required for trialling and produc-

ing offers which are often complex).

- We were expecting slightly higher sales in 2002, and we

were surprised by the temporary drop in orders in October

and November.

- We had not predicted the AMOS slowdown, which had a

negative rather than positive effect on the group’s oper-

ating result. Furthermore, reorganisation costs for the

business unit AMOS were incurred for over EUR 150,000

(spent on severance payments, cancelled contracts and

the move of an office); this cost is covered by the opera-

tional expenses.

Despite these events, I.R.I.S. ended 2002 with figures

very close to the targets set at the beginning of the year.

Furthermore, we start 2003 with an orderbook and recurring

revenue (project maintenance) at record levels for I.R.I.S.

The financial result was hit hard by the fall in the dollar

In 2002, I.R.I.S.’s business on the other side of the Atlantic

grew strongly (+75%). The brutal decline of the dollar dur-

ing the first months of 2002 resulted in extremely significant

exchange rate losses and negative conversion discrepan-

cies by the end of June. Despite hopes to the contrary,

these losses did not abate in the last six months of the year,

with the dollar continuing to sink still further against the

euro. In total, the fall of the dollar generated a loss of EUR

342,562 (compared to a gain of EUR 108,282 in 2001).

In addition, increased turnover produced a significant rise

in working capital requirement, resulting in an increased

dependency on bank credit lines. Interest charges, bank

charges (international payments, etc.) and long-term credit

line reservation fees thus increased overall: EUR 478,790

(as opposed to EUR 181,901 in 2001).

Furthermore, the fall in investments and in the rate of inter-

est earned resulted in a drop in financial revenue: EUR

46,343 (against EUR 112,947 in 2001).

Lastly, amortisation of goodwill acquisition stands at EUR

858,237 (compared to EUR 701,706 in 2001).

It should be remembered that I.R.I.S. has credit lines with

the Fortis, CBC, Artesia and BBL banks. These credit lines

operate through fixed-term advances or in the form of cash

credit to a total value of EUR 12,000,000. The larger part of

these lines (EUR 8,750,000) cannot be rescinded for a period

of between 4 and 5 years starting from June 2001, in return

for payment of a fixed annual reservation commission.

Exceptional factors have led to a net loss

The exceptional results include some highly significant

components in 2002.

The Board of Directors, meeting on 20th March 2003, exam-

ined group holdings as a whole with the aim of evaluating

them and presenting an accurate image of its holdings. The

Board observed that the mediocre performance of AMOS in

2002 led the management to make a long-term downward

reassessment of AMOS’ business plan. Despite positive

projections for AMOS’ profits in 2003, the Board decided to

perform an extraordinary amortisation operation on a EUR

1,300,000 share of the consolidation differential (goodwill)

for the AMOS Monétique holding. This in no way compro-

mises either operating profitability or cash flow within the

group, either in 2002 or in the years to come.

No other reduction in value is justified either for AMOS

Monétique or for our other acquisitions, which all contrib-

uted to operating profits in 2002.

In the United States, I.R.I.S. has been sued, along with

other software publishers and IT manufacturers, by an indi-

vidual claiming that all of these companies have infringed

an invention patent dating back to 1983. Although no

infringement has been proven, I.R.I.S. has had to disburse

substantial fees in defending itself in the USA. The case is

currently approaching final settlement. In order to present

a faithful image of I.R.I.S.’s position, the Board of Directors

decided to record all charges relating to this lawsuit (a total

of EUR 587,487) under the 2002 period.

With regard to exceptional revenue, the main picture is that

of a surplus (EUR 60,905) arising from the sale of assets

acquired in 2001.

Result for the period

The scale of the exceptional losses, non-recurring in nature,

led to a net consolidated loss of EUR 1,950,760.

It should be noted that most of the non-recurring charges

(extraordinary amortisation on the AMOS holding and

conversion losses on the dollar) are not tax-deductible;

the same is true of the annual amortisation of the con-

solidation goodwill. Furthermore, the company has its

head office in Belgium and does not benefit from any fiscal

consolidation.De plus, le groupe a son siège en Belgique et

ne bénéficie d’aucune consolidation fiscale. For this reason,

I.R.I.S. remains liable for tax during the 2002 period, to a

value of EUR 533,140.

We do not propose to distribute any dividends for the

2002 period.

Net result from operations excluding goodwill

The result from operations (excluding goodwill) still shows

a benefit of EUR 772,049 despite the impact of the loss on

the dollar and despite the fact that all reorganisation costs

(particularly in the Amos business unit) were covered by the

operational expenses.

I.R.I.S. retains a very solid balance sheet structure

The key ratios at 31st December 2002 show high solvency

and liquidity:

- ratio between capital and reserves/balance sheet total:

57.53%

- current assets/debts under one year old: 1.57.

I.R.I.S.’s debts exceeding one year are zero.

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OPERATING CASH FLOW (000 EUR)

EUR AMOS MONETIQUE AMOS INC TOTAL

2002 operating result

-229,458 96,514 -132,944


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NET RESULT FROM OPERATIONS (000 EUR)

Management report Management report

Net cash reserves (available securities + financial invest-

ments – financial debts), which is traditionally at its lowest

point at the end of the year, was slightly negative as of 31st

December 2002 at EUR (120,234).

Given its capital and reserves of EUR 24,422,029 and a prof-

itable outlook for the future, I.R.I.S. is thus easily capable of

financing its growth itself.

STATUTORY ACCOUNTS ON DECEMBER 31, 2002

The statutory accounts only reflect the financial position of

the parent company as a holding company. They do not

give an accurate view of the group’s activity. This explains

why the current report also discusses the consolidated

accounts (refer to the next section).

The fiscal year 2002 shows a net loss of EUR 1,049,505. The

balance sheet total is EUR 26,688,153.

This result can be analysed as follows:

Proposal of appropriation of the result to be attributed

The Board of Directors proposes to carry the loss forward.

Application of accounting rules in situation of continuity

The loss of the fiscal year 2002 in the statutory accounts

creates a loss carried forward in the statutory accounts of

the company I.R.I.S. Group.

Nevertheless, the Board of Directors has applied consist-

ent accounting rules to close the accounts, based on the

continuity of the business, because the loss carried forward

is mainly caused by the amortisation of the participations in

AMOS and by the absence of dividends from the subsidiar-

ies that use their profit to finance their further development.

The very strong financial health and the global profit in the

consolidated accounts eliminate any doubt that I.R.I.S.

Group, disposing of a net equity of more than EUR 24 mil-

lions would be in a situation to discontinue the business.

Still, the Board intends to oblige the subsidiary companies

to distribute dividends so as to re-establish the net equity

at a substantially higher level than the current capital of

I.R.I.S. Group.

CONSOLIDATED ACCOUNTS ON

DECEMBER 31, 2001

Given the absence of any operational activity within the

holding company I.R.I.S. Group, we refer to the consoli-

dated annual accounts to get a real view of the evolution of

the group and, thus, of the parent company.

The group’s share in the consolidated loss is EUR

(1,950,760,-). This result can be analysed as follows:

KEY EVENTS OF 2002

Capital

Over the course of 2002, staff exercised warrants (stock

options) allocated in April 1999, thus increasing capital by

EUR 22,341.34 in return for the issue of 1,406 I.R.I.S. shares

with VVPR strips. These shares were issued at a fixed price

of EUR 15.89 per share.

On 5th March 2002, the founders of I.R.I.S. B2B Technologies

subscribed to a capital increase of EUR 400,000, with the

issue of 17,928 shares with VVPR strips. These shares were

issued at the contractual price of EUR 22.31 per share. Their

subscription was reserved as part of the sale of their IRIS

B2B Technologies shares in January 2002. The shares were

issued under the terms of authorised capital (see below: use

of authorised capital).

On 21st May 2002, a former shareholder of Paperless sub-

scribed to a capital increase of EUR 351,719.56, with the

issue of 8,107 shares with VVPR strips. These shares were

issued at the contractual price of EUR 43.38 per share. His

subscription was reserved as part of the sale of his shares.

The shares were issued under the terms of authorised capi-

tal (see below: use of authorised capital).

R&D activity

More than ever, I.R.I.S. is determined to strengthen its tech-

nology base. I.R.I.S.’s goal is to sell products and solutions

based mainly on proprietary technologies.

Management fees from subsidiaries 484,813

- General and administrative expenses -459,022

- Depreciation on fixed assets -5,047

- Other operating expenses -282

= Income from operations 20,462

+ Interest income from subsidiaries 637,757

+ Interest income from cash and deposits 7,253

+ Other financial income 5,795

- Interests and bank costs -197,430

= Current income before income tax 473,837

- Amortisation of participation in Amos -1,300,000

- Other extraordinary charges -8,397

= Net result before income tax -834,560

- Income tax -214,945

= Net benefit (loss) to be attributed -1,049,505

The statutory accounts and balance sheets are detailed in the appen-dices of this annual report..

Sales Office Products and Technologies

6,135,169

+ Sales Professional Systems 35,511,805

= Consolidated sales 41,646,974 (+17.9%) 100.0%

- Cost of goods sold -17,471,183

= Gross margin 24,175,791 (+18.0%) 58.0%

+ Other income from operations

422,392

- General and administrative expenses

-9,131,866

- Personnel expenses -11,825,404

- Allowance for doubtful accounts

-105,382

- Provision for general risks 0

- Other operating expenses -462,333

= Cash flow from operations

(EBITDA)

3,073,198 7.4%

- Depreciation on fixed assets -1,025,439

= Income from operations (EBIT)

2,047,759 4.9%

+ Financial income 183,151

- Financial expenses excl. acquisition goodwill

-1,012,002

= Current income before acquisition goodwill

1,218,908

- Depreciation on acquisition goodwill

-858,237

= Current income before income tax

360,671

+ Extraordinary income 165,140

- Extraordinary costs -2,029,712

= Net income before income tax

-1,503,901

+ Deferred taxes 86,281

- Income tax -533,140

= Consolidated income -1,950,760

- Minority interests 0

= Net income (group share) -1,950,760


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R&D (000 EUR)

Le comptes consolidés détaillés sont annexés.


I.R.I.S. Group SA itself has not invested in research and

development. However, its subsidiaries have spent EUR

3,523,838 on R&D (+19%).

It should be emphasised that these investments were not

recorded as a balance sheet asset, but absorbed directly

during the year.

The R&D efforts of teams from I.R.I.S. and Euriged (Sepsi-

I.R.I.S. France) in the field of ADR (automated document

reading) and ADC (automatic document capture) have been

centred on developing a new, unique product constituting a

major advance for I.R.I.S. in these markets: Formiris Pro 4.0.

In addition, new products were launched – such as IRISpdf,

which combines document scanning with a function to

export these documents in PDF and text format (following

OCR) to databases to facilitate searches and the use of the

information contained in the documents.

Each of the group’s products has enjoyed continuous

R&D work for the continuous improvement of its features,

usability and performance: Readiris Pro 8.0 (OCR), I.R.I.S.

DocCenter (EDM), I.R.I.S. DocShare (EDM), IRISPen II (pen-

scanner), IBCR (business card reader), etc.

It should be emphasised that these investments were not

recorded as a balance sheet asset, but absorbed directly

during the year.

Acquisitions

In January 2002, I.R.I.S. bought a 40% share in I.R.I.S. B2B

Technologies, which at the time still belonged to the found-

ers of this subsidiary. This operation had no impact on the

composition of consolidation.

QUALITY SYSTEM

Following in the footsteps of the Belgian subsidiaries, I.R.I.S.

Luxembourg has now obtained the ISO 9001 certification.

This fulfils I.R.I.S.’s need for continuous improvement in the

quality of the products, applications and solutions it deliv-

ers to clients. Certification also opens the doors to public

mass markets.

The I.R.I.S. quality system (QS) is monitored continuously,

implying not only particular attention from the management

but also a considerable amount of training and modifica-

tions to the procedures.

ACQUISITION OF OWN SHARES

I.R.I.S. Group SA acquired and resold 725 own shares in

2002, leaving it with no own shares by 31st December

2002. The acquisition price of these own shares was EUR

10,316.77, and the selling price was EUR 11,312.06.

This purchase and sale was caused by the mission given

to a stock exchange company to avoid too large changes

in the stock price at those moments when the difference

between the asked selling price and offered purchase price

of stock exceeded 5%.

USE OF AUTHORISED CAPITAL

On three occasions in 2002, the Board used the power with

which it is invested to conduct a capital increase for the

company, with removal of preferential rights for the group’s

shareholders:

- EUR 2,981,537.50: capital increase with a condition

precedent of the exercise of 121,250 warrants, under the

Stock Option Plan Horizon 2005 issue. The exercise price

of each warrant was EUR 24.59 per share (one share

per warrant).

- EUR 400,000: capital increase with issue of 17,928 shares

with VVPR strips, restricted to former shareholders of

I.R.I.S. B2B Technologies. The issue price was EUR 22.31

per share.

- EUR 351,719.56: capital increase with issue of 8,107

shares with VVPR strips, restricted to former shareholders

of Paperless. The issue price was EUR 43.38 per share.

Each share or warrant issue was covered in a special report

by the Board of Directors, an auditor’s report, an exemption

from publishing a prospectus by the Commission bancaire

et financière (Banking and Financial Commission), and a

listing admission by Euronext.

As of 31st December 2002, the authorised capital remain-

ing at the disposal of the Board of Directors up to 6th

September 2006 stood at EUR 18,386,005.94.

CONFLICTS OF INTEREST BETWEEN THE

ADMINISTRATORS AND THE COMPANY

The Board of Directors of I.R.I.S. Group was not aware of

any decision potentially falling within the scope of Articles

523 or 524 of the Code des Sociétés (Companies’ Code).

SPECIAL REMUNERATION OF AUDITORS

The auditors conducted several special tasks related to

special reports for authorised capital share issues, special

reports when exercising warrants through the staff, special

reports when increasing capital through contributions in

kind and preparation for compliance with the IAS-IFRS

standards, etc., earning a total of EUR 71.676 in 2002.

SUBSIDIARIES ABROAD

The group’s activity abroad is handled by legally sepa-

rate subsidiaries; the group does not have any branches

shares abroad.

CHANGE IN STOCK MARKET RATES IN 2002

I.R.I.S. shares are listed on Euronext, and form part of the

“Next Economy” quality sector, which buys shares from

growth companies in the technological sphere.

The stock market environment in 2002 was an extremely

difficult one, depending on the share market. This change,

coming after what had already been two years of heavy

decline, is underpinned by a correction of the P/E (price/

earning) ratios and a downward revision of the anticipated

profits for the various business sectors, particularly techno-

logical. All of this took place in an environment of political,

economic and social uncertainty.

This phenomenon also affected I.R.I.S., whose share price

fell from EUR 22.67 to EUR 13.78. The market valuation of

31st December 2002 was EUR 20.4 million (- 38,7% over

one year).

Average daily volume was 1,199 shares/day in 2002 (-16.7%

compared to 2001), giving a rotation of 21.4% of capital

during the 2002 period. This represents good share liquidity,

and points to a sustained interest in I.R.I.S. shares.

SIGNIFICANT EVENTS SINCE 1/1/2003

No significant events occurred after January 1, 2003.

OUTLOOK FOR 2003 AND DESCRIPTION OF

EVENTS WHICH MAY HAVE A KEY INFLUENCE

ON THE COMPANY’S FUTURE STRATEGY

I.R.I.S.’s strategic plan is to become the European leader

in the “Document to Knowledge” market. The pillars of this

plan are:

- the constant improvement of the products and technolo-

gies developed within the Group;

- the continuation of the geographical extension of the

“Professional Systems” division’s business;

- a sharp improvement in the Group’s profitability.

Despite the difficult and highly uncertain economic envi-

ronment, the management of I.R.I.S. is optimistic for 2003:

- I.R.I.S.’s order books are progressing strongly in comparison

to 2002, and the same is true of the start-of-year invoicing;

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CHANGE IN STOCK MARKET RATES IN 2002



- in 2003, I.R.I.S. will reap the benefits of several cost inte-

gration and optimisation measures implemented in 2002.

Given the general economic situation, the management of

I.R.I.S. naturally remains circumspect with regard to the

current period. However, we are counting on growing sales

and improved profitability.

2003 started well:

- in France, I.R.I.S. is continuing to deploy a number of

licences with Préfectures, CAFs and URSSAFs;

- in Belgium, the implementation of a second phase of

the Photothèque de la Police Fédérale (Federal Police

Photo Library) has started; final acceptance is expected

in late summer.

- the creation of a Cadastre numérique (Digital Cadastre)

for the Belgian Ministry of Finance will also be completed

before the end of the year;

- business with European institutions is growing rapidly,

just as with the major professional associations;

- in Luxembourg, new contracts have been signed with

major banks and administrations, such as the Centre de

Surveillance des Services Financiers (Financial Services

Monitoring Centre) and the Entreprise des Postes et Télé-

communications (Post and Telecommunications Company);

these contracts relate to solutions for electronic document

management, groupware, document archiving and storage;

- sales of products over the Internet (e-shopping) continue

to grow at the start of the year, as do sales through tradi-

tional distribution channels.

APPROPRIATION OF THE RESULT

The statutory (non-consolidated) result of the fiscal year to

be appropriated on December 31, 2002 is a loss of EUR

1,383,770.27 We propose to carry this loss forward.

DISCHARGE FOR THE ADMINISTRATORS AND

THE AUDITOR

It is proposed that discharge be granted to the administra-

tors and the Auditor.

The Board thanks Mr. Alain Marsily, who resigned his

administrator’s post effective as of 31st December 2002,

for his contribution to the work of the Board over a period

of nearly four years.

NOMINATION OF AN ADMINISTRATOR

The Board co-opted Mr. Pierre Sonveaux to the position

of administrator on 20th March 2003. His mandate, which

will be remunerated to the value of 3,000 EUR per year in

addition to attendance fees. The Board requests that the

Meeting confirm this nomination that will expire on 17th

May 2005.

Mr. Sonveaux is the Chairman of Sonaca (aeronautics), vice-

president of FN-Herstal (armaments) and an administrator

of several other companies such as Parc Paradisio (leisure)

and Pégard (metal construction). The Board of Directors

believes that Mr. Sonveaux’ experience and independence

will be of benefit to the quality of the Board’s work.

Drawn up in Louvain-la-Neuve on 15th April 2003, and

signed by circulation.

Pierre De Muelenaere Etienne Van de Kerckhove

Serge Dahan Pierre Rion

Eric Domb Pierre Sonveaux

ORGANISATION CHART AS OF DECEMBER 31, 2002

I.R.I.S. GROUP SA

I.R.I.S. Services SA (Belgium)

I.R.I.S. SA (Belgium)

I.R.I.S. Clinical SA (Belgium)

I.R.I.S. France SA (France)

SEPSI-IRIS France SA (France)

I.R.I.S. Inc (USA)

Amos Inc (USA)

I.R.I.S. Luxembourg SA (Luxemburg)

100%

100% 100%

100% 100%

100%

100% 75% 25%

Group structure


Management report

DATE OPERATION CAPITAL (EUR) SHARES

08/14/1992 Incorporation 30,987.00 1,250

12/14/1996 Capital increase through the incorporation of reserves without the creation of new shares

Replacement of 1,250 existing shares by 625,000 new shares (division by 500)

Capital increase in cashPrivate placement with an issue premium

Capital increase through the incorporation of issue premiums without the creation of new shares

+ 216,907.00247,894.00

-

+ 45,906.00293,799.00

+ 1,503,429.001,797,228.00

-

625,000

+ 115,740740,740

-

12/04/1997 Capital increase in cashUSD 1 million contribution from Parexel with issue premium

+ 880,022.002,677,250.00

+ 55,755796,495

05/17/1999 Capital increase in cashInitial public offering (IPO) and listing on stock exchange

+ 17,352,547.0020,029,797.00

+ 510,3691,306,864

11/17/1999 Capital increase in cashExercising of warrants from stock option programme

+ 148,396.0020,178,193.00

+ 9,3391,316,203


+ 62,162.0020,240,355.00

+ 3,9121,320,115


+ 9,566.0020,249,921.00

+ 6021,320,717

11/10/2000 Capital increase in cashContribution from former shareholders of SEPSI

+ 160,846.0020,410,767.00

+ 4,0961,324,813


+ 219,885.0020,630,652.00

+13,8381,338,651

03/31/2001 Capital increase in cashContribution from former shareholders of IT-Vision

+ 2,571,329.0023,201,982.00

+ 64,8301,403,481


+ 8,342.0023,210,324.00

+ 5251,404,006

08/02/2001 Capital increase through the incorporation of reserves without the creation of new shares

+ 39,676.0023,250,000.00


+ 9,581.4523,259,581.65

+ 6031,404,609

10/12/2001 Capital increase in cashContribution from old shareholders of Amos

+ 880,737.0024,140,318.65

+ 45,1661,449,775


+ 56,806.6624,197,125.31

+ 3,5751,453,350

03/05/2002 Capital increase in cashContribution from old shareholders of I.R.I.S. B2B Technologies

+ 400,000.0024,597,125.31

+ 17,9281,471,278


+ 22,341.3424,619,466.65

+ 1,4061,472,684

05/21/2002 Capital increase in cashContribution from old shareholders of Paperless

+ 351,719.5624,971,186.21

+ 8,1071,480,791

SHAREHOLDER NUMBER OF SHARES

PERCENTAGE OF CAPITAL

DATE OF DECLARATION

Pierre De Muelenaere

125,785 shares

8.49% 29 December 1999

Pierre Rion 70,000 shares

4.73% 26 December 2001

EMPLOYEE PARTICIPATION IN THE CAPITAL

Stock option programme 1999

On April 14, 1999, I.R.I.S. Group created 71,265 nominative

warrants, that were freely allotted to directors, employees

and some regular sub-contractors of the company and its

subsidiaries. Every warrant entitles the owner to subscribe

to a new share at an exercise price of EUR 15.89 per share.

The owners can exercise their warrants three times a year;

the stock option programme runs progressively from July

1999 to April 2003.

As of December 31, 2002, 22,207 warrants of this pro-

gramme remained to be exercised.

This programme ends on April 15, 2003.

Stock option plan 2005

On March 5, 2002 I.R.I.S. Group created 121,250 nomina-

tive warrants, that were freely allotted to directors, employ-

ees and some regular sub-contractors of the company and

its subsidiaries. Every warrant entitles the owner to sub-

scribe to a new share at an exercise price of EUR 24,59 per

share. The owners can exercise their warrants three times a

year; the stock option programme runs progressively from

April 2003 to December 2006.

As of December 31, 2002, 112,250 warrants of this pro-

gramme remained to be exercised.

Declaration of Transparency

Based on the declarations received to date:

HEADCOUNT

Evolution of the headcount

The number of employees came from 220 to 216 at the end

of the fiscal year. 71.76% of the staff are male and 28.24% are

female. The average age went up from 32.9 to 35.42 years.

Composition of the capital

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184220 216

HEADCOUNT AT END OF FISCAL YEAR

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FUNCTION


Headcount

consolidated accounts of I.R.I.S. Group

Consolidated accounts

Appendices to the consolidated accounts

Control of the consolidated accounts


CONSOLIDATED ASSETS (EUR) 2002 2001 2000

FIXED ASSETS 15,837,817 17,131,721 13,213,818

I. Formation costs 0 10,967 35,289

II. Intangible fixed assets 1,332,520 1,380,732 448,300

III. Consolidation differences (positive) 13,296,218 14,297,523 11,165,895

IV. Tangible fixed assets 848,853 1,205,959 1,412,649

A. Land and buildings 0 133,069 650,027

B. Plant, machinery and equipment 404,066 418,093 349,206

C. Furniture and vehicles 233,019 276,906 230,690

D. Leasing and similar rights 2,673 7,108 13,306

E. Other tangible fixed assets 209,095 246,647 169,422

F. Fixed assets in progress and down payments 0 124,136 0

V. Financial fixed assets 360,226 236,540 151,684

B. Other enterprises 360,226 236,540 151,684

2. Amounts receivable 360,226 236,540 151,684

CURRENT ASSETS 26,614,978 26,012,609 23,387,638

VII. Inventories and orders in progress 884,099 757,393 829,689

A. Inventories 650,097 757,393 829,689

1. Raw materials and supplies 328,275 495,410 377,016

3. Finished products 26,540 0 779

4. Goods for resale 295,282 261,983 451,893

B. On-going orders 234,002

VIII. Amounts receivable within one year 22,548,594 18,855,158 16,301,419

A. Trade receivables 21,704,095 17,659,001 15,471,314

B. Other amounts receivable 844,499 1,196,157 829,962

IX. Current investments 98,422 715,794 1,416,211

B. Other investments 98,422 715,794 1,416,211

X. Cash 2,345,286 4,613,285 3,935,417

XI. Deferred charges and accrued income 738,577 1,070,979 904,902

TOTAL 42,452,795 43,144,330 36,601,455

CONSOLIDATED LIABILITIES AND EQUITY (EUR) 2002 2001 2000

STOCKHOLDERS’ EQUITY 24,422,029 25,531,121 21,529,795

I. Capital 24,971,186 24,197,125 20,630,653

A. Issued capital 24,971,186 24,197,125 20,630,653

II. Issue premium 6,610 6,610 6,610

IV. Consolidated reserves -655,570 1,295,192 849,762

V. Consolidation differences (negative) 28,667 28,667 28,667

VI. Conversion differences 71,136 -605 9,159

VII. Subsidies in capital 0 4,132 4,944

MINORITY INTERESTS 0 181,200 163,259

VIII. Minority interests 181,200 163,259

PROVISIONS AND DEFERRED TAXES 111,820 237,287 264,113

IX. A. Provisions for liabilities and charges 111,820 151,006 45,091

2. Tax provisions 0 0

4. Other provisions 111,820 151,006 45,091

B. Deferred taxes 0 86,281 219,022

LIABILITIES 17,918,946 17,194,722 14,644,289

X. Amounts payable after one year 0 950,844 480,078

A. Financial debts 0 950,844 480,078

3. Leasing and similar debts 0 0 4,336

4. Credit institutions 0 950,844 475,742

XI. Amounts payable within one year 16,959,138 15,150,781 13,612,754

A. Current portion of debts over one year 319,683 40,566 82,633

B. Financial debts 2,563,942 2,785,520 974,742

1. Credit institutions 2,563,942 2,785,520 974,742

C. Trade debts 9,174,574 7,393,881 7,498,281

1. Suppliers 9,174,574 7,393,881 7,498,281

D. Down payments received on orders 248,571 24,967 46,309

E. Taxes, salaries and social debts 3,580,052 4,080,963 2,132,686

1. Taxes 2,042,179 2,639,156 1,198,263

2. Salaries and social costs 1,537,873 1,441,807 934,423

F. Other debts 1,072,316 824,884 2,878,102

XII. Deferred income and accrued charges 959,808 1,093,097 551,457

TOTAL 42,452,795 43,144,330 36,601,455

Consolidated accounts


CONSOLIDATED INCOME STATEMENT (EUR) 2002 2001 2000

I. Operational revenues 42,069,366 35,930,090 27,835,481

A. Sales 41,412,972 35,340,034 27,620,317

B. Differences between finished products 234,002 0 0 and on-going orders

C. Activated production 0 0

D. Other operating income 422,392 590,056 215,164

II. Operational expenses -40,021,607 -33,838,537 -25,698,385

A. Cost of goods sold -17,471,183 -14,853,089 -11,210,866

1. Purchases -17,446,796 -14,780,793 -11,563,266

2. Inventory variations -24,387 -72,296 352,400

B. Administrative and general expenses -9,131,866 -8,138,421 -5,579,536

C. Personnel expenses -11,825,404 -9,768,639 -7,736,912

D. Depreciation on fixed assets -1,025,439 -909,257 -603,691

E. Allowance for doubtful accounts -105,382 -18,936 -63,929

F. Provisions for liabilities and charges 0 5,272 -5,468

G. Other operating expenses -462,333 -155,467 -497,982

H. Restructuring expenses 0 0 0

III. Income from operations 2,047,759 2,091,553 2,137,097

IV. Financial income 183,151 733,723 697,842

A. Income from financial fixed assets 13,909 0 425

B. Income from current assets 32,434 112,947 277,134

C. Other financial income 136,808 620,776 420,283

V. Financial expenses -1,870,239 -1,396,101 -1,077,906

A. Interests on financial debt -360,279 -181,901 -135,258

B. Depreciation on positive consolidation differences -858,237 -701,706 -655,037

D. Other financial expenses -651,723 -512,494 -287,611

VI. Current income before income tax 360,671 1,429,175 1,757,033

VII. Extraordinary income 165,140 80,791 542,218

B. Red. of depreciation on consolidation differences 0 0 47,676

D. Red. of allowance for doubtful accounts. 86,885 0 6,269

E. Benefits on sale of fixed assets 60,905 70,420 461,792

F. Other extraordinary income 17,350 10,371 26,481

VIII. Extraordinary expenses -2,029,712 -428,847 -356,692

A. Extraordinary amortisation and depreciation -166 0

B. Exceptional amortisation on positive -1,300,000 0 0 consolidation differences

D. Provisions for extraordinary risks and charges 0 -118,276 -35,524

E. Losses on sale of fixed assets -252 -8,138 -36,778

F. Other extraordinary expenses -729,460 -302,267 -284,391

IX. Net income before taxes -1,503,901 1,081,119 1,942,558

X. A. Application of deferred taxes 86,281 129,422 1,660

B. Transfer to deferred taxes 0 0 -215,703

XI. Income tax -533,140 -711,093 -642,038

A. Taxes -535,608 -1,010,656 -647,018

B. Tax regularizations 2,468 299,563 4,981

XII. Net income -1,950,760 499,448 1,086,477

XIV. Consolidated income -1,950,760 499,448 1,086,477

A. Minority interests share 0 14,341 -5,342

B. Group share -1,950,760 485,107 1,091,819

Transfer to consolidated reserves -1,950,760 485,107 1,091,819

CONSOLIDATED CASH FLOW STATEMENT (EUR) 2002 2001 2000

Net income (group share) -1,950,760 485,106 1,091,819

Share of income from the acquisitions 0 0 0 during the fiscal year

Depreciation on fixed assets and formation costs 1,025,439 909,257 603,691

Allowance on doubtful accounts 105,382 19,102 63,929

Provision for liabilities and charges -86,885 113,004 34,723

Provision for deferred taxes -86,281 -129,422 214,043

Depreciation on positive consolidation differences 2,158,237 697,490 607,361

Cash flow from current operations 1,165,132 2,094,537 2,615,567

Receivables and advance payments -123,686 -84,856 -57,590

Inventory -126,706 72,296 -352,400

Receivables within one year -3,798,818 -2,572,675 -9,155,028

Deferred charges and accrued income (assets) 332,402 -166,077 -789,120

Minority interests -181,200 17,941 163,259

Conversion differences 71,741 -9,764 431

Trade debts 1,780,693 -104,400 4,614,398

Down payments on orders in progress 223,604 -21,342 46,309

Taxes, salaries and social debts -500,911 1,948,277 1,179,066

Other liabilities 247,432 -2,053,218 905,613

Deferred charges and accrued income (liabilities) -133,291 541,640 463,735

Changes in working capital -2,208,740 -2,432,178 -2,981,327

Cash flow from operations -1,043,608 -337,641 -365,760

Capital 774,061 3,526,796 452,459

Subsidies -4,132 -812 4,944

Provision for liabilities and charges 47,699 -7,089 -7,700

Provision for deferred taxes 0 -3,319 4,979

Changes in stockholders’ equity excl. income 817,628 3,515,576 454,682

Financial liabilities -671,727 428,699 403,947

Changes in financial liabilities -671,727 428,699 403,947

Cash flow from financial activities 145,901 3,944,275 858,629

Consolidation differences (positive) -1,156,932 -3,829,118 -8,571,036

Acquisitions during the fiscal year -1,156,932 -3,829,118 -8,571,036

Investments in fixed assets and formation costs -609,154 -1,610,842 -2,150,265

Investments in operations -609,154 -1,610,842 -2,150,265

Cash flow from investment activities -1,766,086 -5,439,960 -10,721,302

Changes in sources and uses of funds -2,663,793 -1,833,326 -10,228,432

Cash and equivalent at start of fiscal year 2,543,559 4,376,885 14,853,211

Correction on 1/1/1999 (reimbursed loan) 0 -247,894

Cash and equivalent at end of fiscal year -120,234 2,543,559 4,376,885

Changes in cash 2,663,793 1,833,326 10,228,432

Consolidated accounts Consolidated accounts

I. LIST OF FULLY CONSOLIDATED ENTITIES

I.R.I.S. Group operates in this consolidation as the parent com-

pany and consolidating enterprise.

The consolidated entities are:

> Image Recognition Integrated Systems Group S.A. (abbreviated I.R.I.S.Group)Parc Scientifique of Louvain-la-Neuve

Rue du Bosquet 10

B-1435 Mont St Guibert, Belgium

VAT BE-448.040.624

> Image Recognition Integrated Systems Services S.A. (abbreviated I.R.I.S. Services)Parc Scientifique of Louvain-la-Neuve

Rue du Bosquet 10


VAT BE-469.947.083

(% de participation: 2000: 100%; 2001: 100%; 2002: 100%)

> Image Recognition Integrated Systems S.A. (abbreviated I.R.I.S.)Parc Scientifique of Louvain-la-Neuve

Rue du Bosquet 10


VAT BE-430.824.708

(% de participation: 2000: 100%; 2001: 100%; 2002: 100%)

Division ”eCommunications”Rue de Stalle 65

B-1180 Bruxelles, Belgium

> I.R.I.S. Clinical S.A.Parc Scientifique of Louvain-la-Neuve

Rue du Bosquet 10


VAT BE-457.859.992

(share: 2000: 100%; 2001: 100%; 2002: 100%)

> Image Recognition Integrated Systems France S.A. (abbreviated I.R.I.S.France)Rue du Saule Trapu 19

Parc du Moulin de Massy

F-91300 Massy, France

(share: 2000: 100%; 2001: 100%; 2002: 100%)

> SEPSI-IRIS France S.A.Rue du Saule Trapu 19

Parc du Moulin de Massy

F-91300 Massy, France

(share: 2000: 100%; 2001: 100%; 2002: 100%)

> Image Recognition Integrated Systems Inc. (abbreviated I.R.I.S.Inc.) Delray Office Plaza

4731 West Atlantic Avenue, Suite B1 & B2

Delray Beach, Florida 33445, USA

(share: 2000: 100%; 2001: 100%; 2002: 100%)

> Amos IncDelray Office Plaza

4731 West Atlantic Avenue, Suite B1 & B2

Delray Beach, Florida 33445, USA

(share: 2000: 100%; 2001: 100%; 2002: 100%)

> Image Recognition Integrated Systems Luxembourg S.A. (abbreviated I.R.I.S.Luxembourg)Route des 3 Cantons 11

L-8399 Windhof

Grandy Duchy of Luxembourg

(share: 2000: 100%; 2001: 100%; 2002: 100%)

V. APPLICATION CRITERIA FOR THE CONSOLIDATION METHODS

Subsidiaries over which the consolidating company exercises

control “de iure” or “de facto” are fully consolidated.

Proportional integration is applied to subsidiaries owned and

managed jointly by a limited number of shareholders.

Affiliated companies in which one or more of the companies

included in the consolidation exercise a significant influence, are

accounted for by the equity method.

VI. A. VALUATION RULES

A. General principlesThe consolidated accounts are prepared in conformity with

the accounting principles and consolidation rules of the

Belgian accounting legislation. The consolidated accounts

are drawn up on December 31, the closing date for all the

consolidated entities.

B. Consolidation differencesThe amount by which the price paid to acquire subsidiaries

exceeds the share of the corresponding capital and reser-

ves at the date of acquisition is appropriated, by decision

of the Board of Directors, to the appropriate balance sheet

headings. These are then depreciated or included in the

income statement according to the rules that apply to these

headings.

The remaining surplus not appropriated in this way consti-

tutes a consolidation difference, which is depreciated on an

individual basis, over a period that does not exceed 20 years.

Additional or extraordinary depreciation is applied to these

differences whenever a change in the economic situation

means that there is no longer any justification for maintai-

ning them in the consolidated balance sheet at this value.

In the consolidated accounts, the consolidation differences

are depreciated on a straight-line basis over a 20 year period,

pro rata to the period of the fiscal year during which the

accounts of the subsidiary are consolidated.

C. Conversion of financial reports drawn up in foreign currencies

Financial reports expressed in foreign currencies are con-

verted by the closing rate method. All balance sheet items,

with the exception of capital and reserves, are converted at

the exchange rate prevailing at the balance sheet closing

date. Income statement items are converted at the average

exchange rate for the fiscal year. The difference resulting

from the application of these exchange rates is recorded

in capital and reserves under the line item “Conversion

differences”.

D. Provisions for pensionsRetirement pensions due under the various mandatory

retirement schemes to which employers and employees

contribute are, in general, handled by specialised outside

organisations. The contributions due for the fiscal year are

included in the income statement for the period.

There are no complementary retirement schemes applicable

to the consolidated companies that generate obligations for

the companies concerned.

E. Deferred taxesTemporary tax timing differences caused, on the one hand,

by certain restatements of local accounts in order to make

them homogenous with the Group’s accounting consolida-

tion principles and, on the other, by certain tax carryforwards,

give rise to deferred tax items which are calculated using the

variable carryforward method. Deferred tax assets are not

included in he accounts.

F. Restatements and eliminationsThe application of homogenous accounting rules and

evaluation methods within the group make it possible to

present the accounts of the consolidated companies on an

identical basis, and leads to a restatement of the unconso-

lidated accounts, in accordance with the accounting princi-

ples described below.

In this way, in the consolidation, economic depreciation,

reductions in value and provisions that are not justified

economically are corrected providing that the required

information regarding these items can be obtained in time

and without disproportional expense and in so far as these

restatements significantly impact the capital and reserves

and the profit of the group.

After aggregation of the balance sheets and income state-

ments, restated where appropriate, the reciprocal balances,

as well as losses and profits on operations between group

companies, are eliminated.

G. Special rulesThe various expenses and fixed assets are capitalised at their

acquisition value when they are acquired from third parties.

Other fixed assets are capitalised at their production cost.

INCORPORATION EXPENSES

Incorporation expenses are depreciated as follows: 20% to

100%, on a straight-line basis.

INTANGIBLE FIXED ASSETS

Research and development charges are not capitalised, but

are charged during the fiscal year in which they are incurred.


Appendices to the consolidated accounts

Licences are amortised at 33% to 100%.

Intellectual property rights, patents and know-how acquired

from third parties are depreciated from 20% to 100% on a

straight-line basis.

Businesses that include essentially technology or customer-

ship are depreciated at a 5% rate on a straight-line basis.

TANGIBLE FIXED ASSETS

Tangible fixed assets are depreciated from the outset. For

the first year, depending on the country concerned, depre-

ciation is taken pro rata to the amount of time held or for a

whole year. These assets are depreciated on a straight-line

basis at the following rates:

Computer equipment

(hardware and software) 20% à 33%

Office equipment 10% à 20%

Office furniture 10% à 20%

Building alterations 10% à 20%

New vehicles 20% à 25%

Second-hand vehicles 33%

FINANCIAL FIXED ASSETS

Financial fixed assets are valued periodically. Reductions in

value are applied case by case, based on the information

available to the Board of Directors.

INVENTORIES

Stocks of goods for resale and raw materials and consuma-

bles acquired from third parties are valued at their acquisi-

tion cost, using the “First In First Out” (FIFO) method.

Reductions in value on stocks are taken case by case, based

on the judgement of the Board of Directors.

TRADE RECEIVABLES

Trade receivables are valued individually.

Reductions in value are decided case by case, based on the

information available to the Board of Directors.

TRADE DEBTS

Trade debts are valued individually.

FIXED-PRICE CONTRACTS

Most contracts entered into by the company are fixed price

contracts. Their income is recorded in accordance with

their invoicing. The accounting department verifies on a

regular basis that the invoiced amounts correctly reflect the

progress of the services rendered. The company records

the amount of work done at the end of the fiscal year but

not yet invoiced and paid as on-going order. Work that

hasn’t been done yet but was invoiced at the end of the

fiscal year is registered under the heading ”Products to be

carried forward”.

ASSET AND LIABILITIES ITEMS EXPRESSED IN FOREIGN CURRENCIES

At the balance sheet closing date:

> the non-monetary items in the balance sheet, i.e. intan-

gible, tangible and financial fixed assets, capital and

reserve items, are maintained at their value expressed in

Euro at the time of their acquisition, whatever the closing

rate of the currency in which the acquisition took place.

> The monetary items in the balance sheet, i.e. amounts

receivable after or within one year, current investments,

amounts at the bank and in hand, provisions for liabili-

ties and charges, amounts payable after and within one

year, and deferred and accrued income and charges, are

valued at the exchange rate applicable at the balance

sheet closing date.

For each currency the conversion differences are aggrega-

ted and the positive or negative difference recorded in the

income statement.

OTHER HEADINGS

With regard to the other headings, we refer to the valuation

rules that apply to the unconsolidated annual accounts.

VI. B. DEFERRED TAXES AND TAX LATENCIES

BREAKDOWN OF HEADING IX.B. OF LIABILITIES AND EQUITY 0

- Deferred taxes 0

- Tax latencies 0

VII. SCHEDULE OF INCORPORATION EXPENSES (EN EUR)

NET BOOK VALUE AT THE END OF THE PREVIOUS FISCAL YEAR 10,967

Changes during the fiscal year: - New expenses incurred 6,831

- Depreciation -17,798

NET BOOK VALUE AT THE END OF THE FISCAL YEAR 0

of which: - cost of incorporation and capital increase, loan issue costs, redemption

premiums and other incorporation expenses

0

R&D COSTS PATENTS,

LICENCES,

FRANCHISES, ETC.

A. ACQUISITION VALUE

At the end of the previous fiscal year: 0 2,203,608

Changes during the fiscal year: - Acquisitions, including own production 0 267,504

- Sales and decommissioning -606

- Transfer from and to other headings 0 62,547

- Consolidation differences -2,841

- Other changes 0 -13,960

At the end of the fiscal year: 0 2,516,252

C. DEPRECIATION AND WRITTEN-OFF AMOUNTS

At the end of the previous fiscal year: 0 822,876

Changes during the fiscal year: - Recorded 0 363,063

- Cancelled because of sales and decommissioning -606

- Transfer from and to other headings 0 0

- Consolidation differences -1,601

- Other changes 0 0

At the end of the fiscal year: 0 1,183,732

D. NET BOOK VALUE AT THE END OF THE FISCAL YEAR 0 1,332,520

VIII. SCHEDULE OF INTANGIBLE ASSETS

LAND AND

BUILDING

PLANT,

MACHINERY

AND EQUIPMENT.

FURNITURE AND

VEHICLES


At the end of the previous fiscal year: 218,688 1,428,888 775,434

Changes during the fiscal year: - Acquisitions, including own production 0 191,862 84,712

- Disposals and deallocation -218,688 0 -20,301

- Transferred from and to

other headings

0 127,974 0

- Conversion differences 0 -2,118 -15,237

- Other changes 0 0 0

At the end of the fiscal year: 0 1,746,606 824,608


At the end of the previous fiscal year: 85,619 1,010,795 498,528

Changes during the fiscal year: - Recorded 0 322,573 119,878

- Cancelled after disposal/deallocation -85,619 0 -17,135

- Transferred from and to

other headings

0 10,909 0

- Conversion differences 0 -1,737 -9,682

- Other changes 0 0

At the end of the fiscal year: 0 1,342,540 591,589

D. NET BOOK VALUE AT THE END OF THE FISCAL YEAR 0 404,066 233,019

IX. SCHEDULE OF TANGIBLE FIXED ASSETS (EN EUR)


Appendices to the consolidated accounts Appendices to the consolidated accounts

IX. SCHEDULE OF TANGIBLE FIXED ASSETS (EN EUR)

LEASING

AND SIMILAR

RIGHTS.

OTHER

TANGIBLE

ASSETS

FIXED ASSETS

IN PROGRESS &

DOWNPAYMENT


At the end of the previous fiscal year: 30,988 420,632 124,136

Changes during the fiscal year: - Acquisitions, including own

production

0 15,569 55,110

- Disposals and deallocation -17,624

- Transferred to other item in

accounts

0 -11,275 -179,246

- Conversion differences 1

At the end of the fiscal year: 13,364 424,927 0


At the end of the previous fiscal year: 23,880 173,985 0

Changes during the fiscal year: - Recorded 2,673 52,756 0

- Transferred from and to other

headings

-15,862 0 0

- Conversion differences -10,909

- Other changes 0 0 0

At the end of the fiscal year: 10,691 215,832 0

D. NET BOOK VALUE AT THE END OF THE FISCAL YEAR 2,673 209,095 0

X. SCHEDULE OF FINANCIAL FIXED ASSETS (EN EUR)

ENTERPRISES

ACCOUNTED BY

EQUITY METHOD

OTHER

ENTERPRISES

2. AMOUNTS RECEIVABLE

NET BOOK VALUE AT THE END OF THE PREVIOUS FISCAL YEAR 0 236,540

Changes during the fiscal year: - Additions 0 146,148

- Refundings 0 -20,519

- Consolidation differences -307

- Other changes 0 -1,636

NET BOOK VALUE AT THE END OF THE FISCAL YEAR 0 360,226

ACCRUED ALLOWANCE FOR DOUBTFUL ACCOUNTS

AT THE END OF THE FISCAL YEAR

0 0

XI. SCHEDULE OF CONSOLIDATED RESERVES (EN EUR)

CONSOLIDATED RESERVES AT THE END OF THE PREVIOUS FISCAL YEAR 1,295,192

Changes during the fiscal year: - Other changes -2

- Group’s share in consolidated income -1,950,760

CONSOLIDATED RESERVES AT THE END OF THE FISCAL YEAR -655,570

CONSOLIDATION DIFFERENCES

POSITIVE NEGATIVE

NET BOOK VALUE AT THE END OF THE PREVIOUS YEAR 14,297,523 28,667

Changes during the fiscal year: - Changes due to an increase

in the percentage of detention

578,199

- Depreciation -2,158,237 0

- Other changes 578,733 0

NET BOOK VALUE AT THE END OF THE FISCAL YEAR 13,296,218 0

XII. SCHEDULE OF CONSOLIDATION DIFFERENCES (EN EUR)

A. BREAKDOWN OF DEBTS ORIGINALLY PAYABLE AFTER ONE YEAR, BY REMAINING TERM

LESS THAN 1

YEAR.

1 TO 5

YEARS

ABOVE 5

YEARS.

Financial debts 319,683 0 0

- Leasing and similar debts 0 0 0

- Credit institutions 319,683 0 0

TOTAL 319,683 0 0

B. DEBTS GUARANTEED BY REAL GUARANTEES GIVEN OR IRREVOCABLY PROMISED ON COMPANY ASSETS

Financial debts 319,683

- Leasing and similar debts

- Credit institutions 319,683

TOTAL 319,683

XIII. SCHEDULE OF DEBTS (EN EUR)



XIV. RESULTS OF CURRENT PERIOD AND PREVIOUS PERIOD (EN EUR)

CURRENT

PERIOD

PREVIOUS

PERIOD

A. NET TURNOVER

A.1 Broken down by geographical market

- Belgium 16,185,807 14,488,904

- France 11,514,181 10,309,096

- Grand Duchy of Luxembourg 7,190,618 4,863,377

- Other Western European countries 1,492,431 2,753,814

- Eastern Europe 33,523 107,928

- North America 4,679,816 2,458,168

- Asia/Australasia 499,285 322,041

- Other 51,313 36,706

TOTAL 41,646,974 35,340,034

A.2 Aggregated group figures in Belgium 16,185,807 14,488,904

B. AVERAGE STAFF LEVELS AND STAFF COSTS

B.1. Average staff levels 206.52 196.14

Employees 174.34 167.57

Management personnel 32.18 28.57

B.2. Staff costs

Remuneration and social security payments 11,825,404 9,768,639

B.3. Average staff numbers in Belgium working

for companies of the Group

101.59 99.96

C. EXTRAORDINARY RESULTS

C.1. Breakdown of other extraordinary products, where significant:

- Use of provisions for legal actions 86,885 0

- Surplus on realisation of tangible assets 60,905 0

- Other extraordinary products 17,350 0

C.2. Breakdown of other exceptional costs, where significant:

- Extraordinary amortisements on positive consolidation differential for AMOS 1,300,000 0

- Costs of lawsuit over industrial property 589,960 0

- Industrial lawsuits 114,014 0

- Costs arising from nullity of SOP 2005 8,397 0

- Other extraordinary costs 17,341 0

- Internal reorganisation expenditure 0 249,350

D. TAX ON THE RESULT

D.2. Influence of extraordinary results on the value of taxes on the result from the period 135,398 56,922

XV. NON-BALANCE SHEET DUTIES AND OBLIGATIONS (EN EUR)

A.2. Amount of guarantees given or irrevocably promised by the consolidated companies on their as-

sets, to guarantee debts and liabilities of companies that participate in the consolidation: 319,683

C. MAJOR LITIGATION AND OTHER SIGNIFICANT COMMITMENTS

I.R.I.S. Group carries is co-debtor of consolidated subsidiaries an amount of bank debts

on December 31, 2001 of: 1,000,000

I.R.I.S. Group has issued warrants in favour of its personnel (Stock option plan 1999). The number of

warrants still outstanding at the end of year is:

22,207 warrants at

the price of EUR

15.89 per share

I.R.I.S. Group has taken the commitment to issue warrants in favour of its personnel (Stock option plan

Horizon 2005). After issuance, the number of warrants still outstanding is:

112,250 warrants

at the price of EUR

24.59 per share

Lawsuit pertaining to unfair competition in Luxembourg

I.R.I.S. is the defendant in a court case in which the plaintiff alleges unfair competition through the

appointment of a member of its management staff, and requests compensation of 2,479 thousand EUR.

The ruling, delivered on 13th May 2002, dismissed the plaintiff’s action, declaring it to be unfounded.

However, the plaintiff appealed against the ruling on 19th August 2002. I.R.I.S.’s advisors are confident

of a favourable outcome to the case. The risks to I.R.I.S. remain limited. I.R.I.S. has therefore made no

provision for this lawsuit.

Lawsuit pertaining to industrial property in the United States

I.R.I.S. has been sued, along with other software publishers and IT manufacturers, by a person claiming

an invention patent dating back to 1983. Although no infringement has been proven, I.R.I.S. has had to

disburse substantial fees in defending itself in the USA. The case is currently approaching final settle-

ment. In order to present a faithful image of I.R.I.S.’s position, the Board of Directors decided to record

all charges relating to this lawsuit ($US 587m) under the 2002 period.

Industrial lawsuit in the United States

The former Managing Director of Amos Inc. was dismissed at the start of the second semester of 2002

for misconduct. He is claiming compensation of $US 125,000. I.R.I.S. has set aside a provision

of $US 50,000 as a proposed settlement.

Tax lawsuit in Belgium

The I.R.I.S. SA company has received a demand from the Belgian tax authorities for a figure of around

500,000 EUR, based on an interpretation of the concept of innovation capital, with regard to I.R.I.S.’s

specific tax status as an innovation company. More than half of these taxes have been paid to the

Treasury, but I.R.I.S. is contesting the interpretation which underlies the demand, using legal arguments.

The matter is still at the administrative stage. I.R.I.S.’s risks remain limited. I.R.I.S. has therefore made no

provision for this lawsuit.

XVII. FINANCIAL RELATIONSHIP WITH DIRECTORS OF THE COMPANY

OR ITS SUBSIDIARIES (EN EUR)

A. Global amount of salaries paid to the directors and managers of the parent company due to their func-

tions in the parent company, its subsidiaries and related companies, including the pensions paid to the

former directors and managers: 499,292



Control of the consolidated accounts

The statutory and consolidated accounts on December 31,

2000, 2001 and 2002 have been verified and stated without

reserve by:

Ernst & Young Auditors S.C.C.

Avenue Marcel Thiry 204

1200 Brussels

Represented by Eric Golenvaux, Partner

AUDITOR’S REPORT ON THE CONSOLIDATED

ACCOUNTS OF DECEMBER 31, 2002

It is with pleasure that we comply with the legal and statutory

requirements by communicating the results of our auditing.

We have audited the annual consolidated accounts of

the S.A. I.R.I.S Group, prepared under the responsibility

of the Board of Directors, for the fiscal year that ends on

December 31, 2002, with a balance sheet total of 42,453

thousand Euro and an income statement closing with a

consolidated loss for the fiscal year of 1,951 thousand Euro.

We have also verified the management report.

STATEMENT WITHOUT RESERVE OF THE

CONSOLIDATED ACCOUNTS

Our audit was undertaken in accordance with the standards

of the Belgian Institute of Company Auditors. These profes-

sional standards require our audit to be organised and car-

ried out in such a way as to obtain a reasonable measure

of certainty that the consolidated annual accounts do not

contain any significant inaccuracies, given all Belgian legal

and regulatory provisions.

In accordance with these standards, we have taken into

account the administrative and book-keeping organisation

of the consolidated whole, as well as the internal control

procedures. We have received the explanations and infor-

mation we required for our audit. Using random samples,

we have examined the justified nature of the amounts given

in the consolidated annual accounts. We have assessed the

validity of the consolidation and valuation rules, of the sig-

nificant accounting estimates made by the company and of

the presentation of the consolidated annual accounts as a

whole. We believe that these efforts constitute a reasonable

basis to express our opinion.

We therefore state that, in our opinion, the consolidated

annual accounts for the fiscal year that ends on December

31, 2002 give a true and fair view of the net financial assets,

the financial situation and the earnings of the consolidated

whole, in accordance with the applicable Belgian legal and

regulatory provisions. We also state that the information

held in the appendices is adequate.

Additionnally, the management report contains the information

required by law and is complies with the consolidated accounts.

Brussels, May 2, 2003

Ernst & Young Auditors S.C.C. (B 160)

Represented by Eric Golenvaux, Partner


statutory accounts of I.R.I.S. Group S.A.

Statutory accounts

Statutory accounts

The statutory accounts as we publish them below are abridged. They do not comprise all appendices or the auditor’s report

that verifies and states the statutory accounts without reserve.

The complete version of these accounts will be transmitted to the Belgian National Bank and can be consulted at the com-

pany’s head office.

ASSETS (EUR) 2002 2001 2000

FIXED ASSETS 20,566,826.10 20,528,694.30 17,031,969.98

IV. Financial fixed assets 20,566,826.10 20,528,694.30 17,031,969.98

A. Affiliated enterprises 20,566,826.10 19,232,892.90 15,736,168.58

1. Participating interests 19,271,024.70 19,232,892.90 15,736,168.58

2. Amounts receivable 1,295,801.40 1,295,801.40 1,295,801.40

CURRENT ASSETS 8,121,326.55 7,296,639.16 8,064,504.08

VII. Amounts receivable within one year 7,908,743.10 6,171,505.08 6,599,792.49

A. Trade receivables 149,586.50 399,441.91 541,660.47

B. Others amounts receivable 7,759,156.50 5,772,063.17 6,058,132.02

VIII. Current investments 0 25,000.00 995,480.95

B. Other investments 0 25,000.00 995,480.95

X. Cash 209,873.85 1,097,939.85 463,528.10

X. Deferred charges and accrued income 2,709.60 2,194.23 5,702.54

TOTAL 28,688,152.65 27,825,333.46 25,096,474.06

LIABILITIES AND STOCKHOLDERS EQUITY (EUR) 2002 2001 2000

STOCKHOLDERS’ EQUITY 25,179,570.36 25,455,014.17 22,262,483.03

I. Capital 24,971,186.35 24,197,125.45 20,630,652.51

A. Issued capital 24,971,186.35 24,197,125.45 20,630,652.51

II. Issue premium 6,610.33 6,610.33 6,610.33

IV. Reserves 1,585,543.95 1,585,543.95 1,625,220.19

A. Legal reserve 112,358.07 112,358.07 112,358.06

D. Available reserve 1,473,185.88 1,473,185.88 1,512,862.13

V. Profit/loss carried forward -1,383,770.27 -334,265.56 0

PROVISIONS AND DIFFERED TAXES 34,717.00 34,717.00 0

VII. A. Provisions for general risks 34,717.00 34,717.00 0

4. Other provisions 34,717.00 34,717.00 0

DEBTS 34,738,865.29 2,335,602.29 2,833,991.05

VIII. Amounts payable after one year 0 0 36,254.43

A. Financial debts 0 0 36,254.43

4. Credit institutions 0 0 36,254.43

IX. Amounts payable within one year 3,463,481.97 2,326,009.26 2,797,736.62

A. Current portion of debts over one year 0 36,254.42 48,339.24

B. Financial debts 2,500,000.00 1,623,918.37 0

1. Credit institutions 2,500,000.00 1,623,918.37 0

C. Trade debts 36,761.36 117,117.03 80,586.52

1. Suppliers 36,761.36 117,117.03 80,586.52

E. Taxes, salaries and social debts 377,241.19 197,810.66 16,327.09

1. Taxes 377,241.19 197,810.66 16,096.20

2. Salaries and social debts 0 0 230.89

F. Other debts 549,479.42 350,908.78 2,652,483.77

X. Deferred income and accrued charges 10,383.32 9,593.03 0

TOTAL 28,688,152.65 27,825,333.46 25,096,474.08


INCOME STATEMENT (EUR) 2002 2001 2000

I. Sales 484,813.09 436,374.97 381,962.13

A. Turnover 484,813.09 0 0

D. Other operating income 0 436,374.97 381,962.13

II. Operating expenses -464,350.14 -479,531.46 -380,599.31

B. Administrative and general expenses -459,021.89 -417,860.25 -380,594.14

C. Personnel expenses 0 0 0

D. Depreciation on fixed assets -5,046.65 -59,221.78 0

G. Other operating expenses -281.60 -2,449.43 -5.16

III. Operating income 20,462.95 -43,156.49 1,362.82

IV. Financial income 650,805.13 528,791.68 1,457,433.11

A. Income from financial fixed assets 637,757.39 472,489.20 1,287,836.53

B. Income from current assets 7,253.20 22,556.69 169,273.60

C. Other financial income -5,794,54 33,746.79 322.98

V. Financial expenses -197,430.57 -42,677.18 -21,622.19

A. Interests on debts -160,555.15 -33,786.20 -6,906.96

C. Other financial expenses -36,875.42 -8,890.98 -14,715.23

VI. Current income before taxes 473,837.51 442,958.01 1,437,173.74

VIII. Extraordinary expenses -1,308,397.04 -592,064.29 -7,423.10

B. Depreciation on participating interests -1,300,000 -552,539.40 0

C. Provisions for liabilities and charges 0 -34,717.00 0

E. Other extraordinary expenses -8,397.04 -4,807.89 -7,423.10

IX. Net income before taxes -834,559.53 -149,106.28 1,429,750.64

X. Income tax -214,945.18 -185,159.28 -46,811.32

A. Income tax -214,945.18 -191,706.25 -46,811.32

B. Tax regularisation 0 6,546.97 0

XI. Net income -1,049,504.71 -334,265.56 1,382,939.32

Profit (loss) available for appropriation -1,383,770.27 -334,265.56 967,591.79

Profit (loss) of the fiscal year for appropriation -1,049,504.71 -334,265.56 1,382,939.32

Profit (loss) carried forward from the previous year -334,265.56 0 -415,347.53

Profit (loss) to carry forward to the next years -1,383,770.27 -334,265.56 0

Assigned to legal reserve 0 0 74,368.06

Assigned to available reserve 0 0 893,223.73


Statutory accounts

contacts

Coordinates

Financial agenda

Investor relations and financial communication

Contacts

COORDINATES

Image Recognition Integrated Systems Group S.A.

(abbreviated I.R.I.S. Group S.A.)

Rue du Bosquet 10 – Parc Scientifique of Louvain-la-Neuve – B-1435 Mont Saint Guibert – Belgium

Tel +32/10/45.13.64 – Fax +32/10/45.74.73

www.irislink.com

R.C. Nivelles 72.057

TVA BE-448.040.624

FINANCIAL AGENDA

Ordinary general meeting 3rd Tuesday of May – May 20, 2003 at 2 p.m.

Announcement of annual results 4th week of March – March 29, 2003

Announcement of half-year results 3rd week of September – September 20, 2003

INVESTOR RELATIONS AND FINANCIAL COMMUNICATION

Etienne Van de Kerckhove, CEO


Tel +32/10/487.460 – Fax +32/10/457.468 – E-mail: [email protected]

RESPONSIBLE EDITORS

Pierre De Muelenaere & Etienne Van de Kerckhove


RAPPORT ANNUEL

Ce rapport annuel est également disponible en français.

OFFICIAL VERSION

The French version of this annual report is construed as the exclusive official annual report.

Any other version is a translation that does not legally bind the company.

Design: www.hoetethoet.be


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