2017 ANnuAl REporT - SES-imagotag€¦ · 700 connected stores (NFC) installed 1992 SES formed 2011 New G-tag and S-tag+ products 2005 SES operating in 10 countries 1993 First store

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2017ANnuAl REporT

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MANAGEMENT REPORT

DOCUMENT FILED WITH FINANCIAL MARKETS AUTHORITY

This reference document containing the annual financial report was filed with the Financial Markets Authority (AMF) on May 17, 2018, in compliance with Article 212-13 of its General Rules. This document can be used to support a financial operation if accompanied by a prospectus duly approved by the Financial Markets Authority.

This document was prepared by the issuer, and its signatories are liable for its content.

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TAB

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F CON

TENT

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A. 2017 ANNUAL REPORT 4

B. FINANCIAL REPORT 36

I. Management report 39

II. Governance report 95

III. Report on stock options 123

IV. Report on bonus share allocation 131

V. Consolidated financial statements 139

VI. Corporate financial statements 175

VII. Shareholders’ meeting of June 22, 2018 197

VIII. Reports by the statutory auditors and certifications 215

IX. Certifications from person in charge of the annual report 237

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5

Profile 7

A word from the Chairman 8

More than 200 retail chains in 61 countries 10

A global leader 13

History 12

Shareholder structure 14

Stock market information 15

Key figures 16

2017 at a glance 18

Innovations 23

A 2017Annual report

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MANAGEMENT REPORTRapport d’activité

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PROFILEGlobal leader in digital solutions for physical retail

Our mission is to help retailers in their digital transformation to assist them with:

a Building ultra-efficient, connected stores.

a Achieving a true omnichannel expe-rience for the consumer.

15,000 stores

61 countries

160 million digital smart retail labels

153 M€ in sales

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MANAGEMENT REPORT

GLOBAL VUSION !For SES-imagotag, 2017 was a year of major transition in terms of inter-national expansion, technological innovation, and share ownership. The year was also a turning point for the market. In just 12 months, Am-azon’s acquisition of Whole Foods, the Walmart-Google agreement, and the many investments by Alibaba, Tencent and JD.com in chain stores illustrated this reality for the world: physical stores will be at the heart of the omnichannel retail model of the future. This growing awareness ex-plains the acceleration of digitaliza-tion projects and the proliferation of consultations and new smart digital retail label pilot programs all around the world. To be sure, massive roll-

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A word from the Chairman

Thierry GADOUChairman and CEO

outs are still to come for all of these new customers, but there is a belief that has now taken root in the minds of our customers: the digitalization of all points of sale is now under way. This can be seen in the new projec-tions that have been revised upwards for the digital price tags market over the next five years.

Because we saw this change com-ing, we are ready to support mass retail with the shift to this new era of omnichannel stores. Of course, our market is still emerging, and it will take time to see this worldwide awareness translate into tangible, large-scale investments. That is why our short-term results show the ef-fort rather than the fruit of our in-

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vestments. Currently, our priorities are technological innovation and gaining international market share to strengthen our worldwide leadership position. To achieve these goals, we need a stable shareholder with long-term vision and strong added value. We have that now with BOE. And what an amazing partnership it is!

Cooperation with BOE isalready active on three fronts

1. Geographic, with the creation of an entity dedicated to the devel-opment of the Chinese market, which is probably the most dy-namic in terms of digital and om-nichannel commerce. More than 15 retail chains, including some of the country’s biggest, have al-ready equipped their first stores with our solutions. The market is expected to grow quickly, driv-en by consumers who demand connected, interactive points of sale with a high level of ser-vice (30-minute delivery, etc.). SES-imagotag is targeting the number one spot in China.

2. Industrial, with the construction of a latest-generation integrated plant aimed at very high capaci-ty and competitiveness. The goal is to speed up the growth of the smart tag market in the coming years. The plant is located in the city of Chongqing (China), a ma-jor industrial city in the center of the infrastructure initiative called “The New Silk Roads,” which is linked to Eu-rope via a direct rail connection. The new build-ing is complete, and installation of the first industrial equipment began as soon as the financial transac-tion between BOE and SES was finalized on December 21, 2017. The ramp-up is under way and should reach its first target ca-pacity threshold by the start of the second semester.

PHYSICAL POINTS OF SALE WILL BE AT THE HEART OF THE OMNICHANNEL RETAIL

MODEL OF THE FUTURE

3. Technological, with, for example, the development of V:Rail, which aims to transform shelving with powerful advertising and promo-tional interfaces. Other extensions of the offer to all digital communi-cation tools used at points of sale will follow. Another major 2017 accomplishment ‒ the devel-

opment and suc-cessful launch of VU-SION ‒ is keeping us a step ahead. In addition to the most advanced IoT tech-nology, SES-imag-otag delivers a dig-ital platform that is far more effective, easier to deploy (Cloud), and func-

tionally aligned with merchants’ current priorities: omnichannel synchronization, POS digitaliza-tion, precision shelf management, reduction of inventory shortag-es, optimization of store picking, collaboration with manufactur-

ers, and massive enhancement of store data available. The number of smart tags connected to the Cloud and therefore accessible to the new value-added appli-cations of the VUSION platform should surpass 20 million units in the next few weeks, amounting to the biggest IoT deployment in the world. Our solutions are paving the way for a new golden age in brick-and-mortar retail! All these undertakings are opening up new medium-term opportunities for SES-imagotag that will be reflect-ed in our new five-year strategic plan (2018-2022), which will be presented next May.

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MANAGEMENT REPORT

MORE THAN 200 RETAIL CHAINS IN 61 COUNTRIES

MANAGEMENT REPORT

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A GLOBAL LEADER

Group’s HQ

Europe: Paris

Logistics

Europe: France and Austria

Americas: United States and Mexico

Asia : Hong Kong

Subsidiaries and sales offices

Europe : France, Austria, Germany, Italy, Spain, Swe-den, United Kingdom

Americas: United States, Canada, Mexico

Asia: Singapore, Hong Kong, China, Taiwan PRC

R&D centers, processes

IoT : France, Austria, Germany, Taiwan PRCSoftware : France, Germany, Ireland

For more than 25 years, SES-imagotag has been supporting the growth of its long-standing clients (e.g. Leclerc, Intermarché, Système U, Auchan, Monoprix, and Carrefour), as well as numerous international chains (Media Markt, Saturn, Jysk, Kiwi, Dansk, Fairprice, Muticedi, Spar,

PAM, Rewe, T-Mobile, Dixons, Nojima, Euronics, etc.), in total around 200 retail chains worldwide. Today, the Group has 12 subsidiaries and sales offices and more than 50 international partners

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MANAGEMENT REPORT

History

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MANAGEMENT REPORT

2012

2013

G-tag+, NFC-tag (LSA and Equipmag awards) and new Jeegy 2.0 software

Geographic expansion (Sweden, United Kingdom, Australia, North America)

Over 6,700 stores installed

First connected store

2014Strategic alliance with imagotag GmbH (Austria)

First digital connected model store (3D store) in partnership with Atos

Launch of PPS (product positioning systems), Equipmag award

First store equipped with color tags

Over 9,000 stores installed, including more than 1,000 connected stores

SES operating in more than 52 countries

700 connected stores (NFC) installed

1992SES formed

2011New G-tag and S-tag+ products

2005SES operating in 10 countries

1993First store equipped

2006SES listed on the Paris Stock Exchange

2000One million digital price tagging systems installed

2007Operations in Asia and Latin America

2002First international contract

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Alliance with BOE Technology Group Launch of VUSION Retail IoT platform

Intermarché and Casino choose SES-imagotag as their electronic tag supplier

Dixons Carphone Nordic picks SES-imagotag for a 100% Cloud deployment in its stores

Partnership with Hussmannen Australia

SES-imagotag wins the 2017 LSA Merchandising Award for its automatic inventory shortage detection solution

SES-imagotag wins the “Best Use of In-store Technology” Award at the Seamless Asia show in Singapore

SES-imagotag and EZ Workspace take top prize for Innovation at the 2017 Workspace Expo trade show

20172015Biggest contract in the history of electronic tagging (€98 million, 1,000 stores)

Total sales exceed €110 million

First entirely connected self-scan-to-pay store, awarded the LSA Innovation Trophy

SES voted best “touch-free” solution at World Smart Week Awards 2015

Launch of Jeegy S

Over 10,000 stores installed

2016SES becomes SES-imagotag

Total sales exceed €175 million

Casino Group selects SES-imagotag to modernize its stores

SES-imagotag signs an exclusive contract with JYSK Nordic

Sephora selects SES-imagotag for its stores in France

Acquisition of Findbox GmbH and Pervasive Displays Inc. (PDi)

SES-imagotag wins the LSA 2016 Trophies in the Merchandising category for its product geolocation system

Launch of the 100% Cloud offering

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MANAGEMENT REPORT

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Shareholding structureas of 12/31/2017

MANAGEMENT REPORT

boe smart retail(hong kong) co

53,84%

sycomore

2,24%

Phison capital

1,33%

OTHER

42,59%

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STOCK MARKET INFORMATION

Date EVents

February 2 2017 preliminary sales and earnings

February 6 Ordinary Shareholders’ Meeting

MARCH 8 2017 sales and earnings

APRIL 26 2018 Q1 sales

JUNE 22 Annual shareholders’ meeting

August 1 First semester sales

August 30 2018 First semester earnings

octobER 24 2018 Q3 sales

2018 FINANCIAL CALENDAR

FINANCIAL COMMUNICATION

DIVIDEND DISTRIBUTION POLICY

Alliance SES-imagotag and BOE Technology Group

On December 21, 2017, BOE Technology Group and SES-imagotag announced the acquisition of a majority stake of 6,669,176 SES-imagotag shares at the price of 30 Euros through a company formed for this purpose, BOE Smart Retail (Hong Kong) Co. Limited (“BOE Smart Retail”). The company is indirectly held by BOE Technology Group (around 80%) and by a company controlled by SES-imagotag management (around 20%), which partici-pated in the transaction.

Prior to the acquisition of the above block of shares, the managers in question contributed 487,520 SES-imagotag shares to BOE Smart Retail and took part in a BOE Smart Retail capital increase, which they subscribed to in cash. In addition, a shareholders’ agreement was signed governing in particular the relationship between BOE Smart Retail shareholders and constituting a concerted action with regard to SES-imagotag. Under the terms of the agree-

ment, the managers committed to keep their BOE Smart Retail shares for five years, demonstrating their ongoing commitment and their involvement in SES-imagotag.

BOE’s goal is to ensure that SES-imagotag remains listed on the Euronext Regulated Market in Paris. It is not plan-ning to implement a squeeze-out procedure following the bid at this time. BOE Smart Retail also wants to maintain a high float level and significant share liquidity.

BOE Technology Group’s majority interest will provide SES-imagotag with a long-term shareholder that is an expert in the industry and an industrial partner to sup-port its international growth, in Asia, in particular.

BOE Technology Group intends to provide its expertise to accelerate the development of an increasingly-connected product line and support the international development of SES-imagotag’s product and services sales in the most dynamic regions (North America and Asia).

The company does not plan to distribute dividends in the 2018 fiscal year.

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MANAGEMENT REPORT

KEY FIGURES

61countries

370employees

Over

25 YEARSof history

Global leader with

160ESLs installed in over

15 000stores

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MANAGEMENT REPORT

2017 at a glance

JanuarySES-imagotag at NRF in New York

SES-imagotag exhibits at the Smart Stores trade show in Abu Dhabi

FebruaryIntermarché and Casino choose SES-imagotag as their smart digital retail label supplier SES-imagotag at EuroShop in Dusseldorf

MarchFirst waterproof e-paper electronic tag launched

SES-imagotag at Retail Tech in Tokyo

SES-imagotag partners with TCG Summit in Berlin

SES-imagotag in Paris for the Système U trade show

AprilSES-imagotag and EZ Workspace take top prize for Innovation at the 2017 Workspace Expo 2017

Extra-large (A4, 12”) e-paper electronic tag launched

SES-imagotag wins the “Best Use of In-store technology” Award at the Seamless Asia show in Singapore

SES-imagotag at the World Retail Congress in Dubai

SES-imagotag at the Seamless Asia show in Singapore

SES-imagotag in Shanghai for the C-Star trade show

MaySES-imagotag in London at the RBTE trade show

SES-imagotag at the Seamless show in Dubai

Thierry Gadou’s talk at the Paris Wine & Business Club on the future of retail

JuneAlliance with BOE Technology Group

SES-imagotag at Future en Seine in Paris

SES-imagotag in Hong Kong for the Retail Asia Expo

SES-imagotag at the Bricomarché trade show

SES-imagotag in Lyon for the Carrefour Market exhibition

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SeptemberDixons Carphone Nordic picks SES-imagotag for a 100% Cloud deploy-ment to its stores

SES-imagotag at Paris Retail Week, where it is honored as the most premium booth at the salon

SES-imagotag’s NFC electronic tags become compatible with iPhones

SES-imagotag in Milan for the Carrefour Italy trade show

OctoberFirst store In Japan (Nojima)

SES-imagotag in Aarhus at the ATEA Denmark trade show

SES-imagotag at the Casino Proximité expo in Lyon

SES-imagotag at the GALEC Leclerc trade show

NovemberSES-imagotag and Hussmann team up in Australia to design ultra-efficient, connected stores

First stores in China equipped with BOE

First stores en South Korea

Launch of Fashion Tag, a specialized electronic tag for the fashion and textile industry

SES-imagotag in Wuhan for BOE Technology Group’s International Partner Conference

SES-imagotag at La Défense for the Institut du Commerce exhibition

SES-imagotag at the Franprix expo in Paris

SES-imagotag in Milan at the Forum Retail expo

DecemberSES-imagotag wins the 2017 LSA Merchandising Award for its auto-matic inventory shortage detection solution

Finalization of the SES-imagotag and BOE Technology Group alliance

Launch of VUSION Retail IoT platform

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MANAGEMENT REPORT

41.6

39.6

81.2

68.2

43.0

111.2

44.5

37.8

82.3

22.9

40.1

63.0

109.1

83.8

67.8 69.2

176.9 153.0

Key figures

Sales in million €

InternationalFrance

2012 2013 2014 2015 2016 2017

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81.2 111.282.363.0

98.6

54.4

153.0176.9

New facilitiesInstalled base

2012 2013 2014 2015 20172016

Sales in million € (Breakdown of total sales by activity, million €).

37.8

25.2

52.9

29.4

46.0

35.2

75.2

36.0

135.2

41.7

21

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MANAGEMENT REPORT

DisplayManager

Studio

AutomatedGeolocation

OptiPick

Retail IoT platform

ConnectedCommerce

Cloud

Storeefficiency

V:Core

Enterprise

V:Cloud

Realogram

ShelfWatch

V:Shelf

Storefront

StorefrontPortal

StorefrontConnect

AdShelf

V:Connect

Pulse

StoreTraffic

TSO

ShopperAnalytics

V:Analytics

Shopperengagement

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management report

VUSION

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VUSION IoTPlatform

A few months ago, at the NRF show in New York City, SES-imagotag launched its new platform VUSION IoT for physical retail.

VUSION is the culmination of five years of intensive R&D and the fusion of the technological assets of several high value-added acquisitions made by the Group (Imagotag, Findbox, Pervasive Displays, Findbox and Market Hub). This platform combines the most advanced ultra-low power IoT communication infrastructure, color e-paper and high-resolution TFT screens, sensors like the NFC, high-speed flash, image recognition, and data analysis.

The goal of VUSION is literally to enable the fusion of physical and

eCommerce and to create a real-time digital picture of the shelves and shoppers ‒ a digital twin of the brick-and-mortar store.

It is also the fusion of hardware and software, which makes connected tags the gateway to a platform of applica-tions managed in the Cloud. This en-ables merchants to connect and fully digitalize their points of sale; automate low value-added processes; better un-derstand, inform and serve their cus-tomers; produce quality information to optimize shelf stocking at all times and prevent shortages and waste ‒ all while creating a connected service that builds loyalty with customers who no longer want to choose between shopping in a store and the comfort and convenience of the Internet.

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MANAGEMENT REPORT

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management report

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innovationS

A brand-new, minimalist, modern design: VUSION smart digital labels blend effortlessly into any environ-ment. Thinner than any other elec-tronic tag and offered in an array of colors, the VUSION tag brings a touch of modern flair to each store, where it is affixed or mounted on an exclusive rail that showcases it. The VUSION line comes with a variety of clips and fasteners that combine visual appeal with security.

The VUSION tags are interactive (NFC & QR Code) and dynamic (LED flash) to improve the customer’s in-store experience thanks to enriched content displayed on the tags or ac-cessible using a smartphone.

VUSION

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MANAGEMENT REPORT

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The SES-imagotag digital tags geo-locate products in-store so order pickers and managers can see in real time the location of any product at any time.

Deployed by the thousands and po-sitioned with an accuracy within a few centimeters, connected tags now offer extremely precise cover-age of the store. When paired with the V:Shelf solution from the VUSION Retail IoT platform by SES-imagotag, they help order pickers in the aisles. This is due both to the information sent to the software but also to their flashing LEDs, which indicate their location in less than one second.

The OptiPick solution is synonymous with time savings for order pickers and with increased sales owing to more effective store management.

OptiPickIn-store picking assistance

V:ShelfinnovationS

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MANAGEMENT REPORT

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management report

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The SES-imagotag geolocated smart digital retail labels, which racked up awards in 2016, show the exact loca-tion of each product. Now they are combined with security cameras that watch and control gondolas, which makes it possible to detect inventory stockouts and to see anomalies in the aisles. This data can be viewed on a tablet with indications about the corrective measures to take. With this helpful tool, staff can focus their attention on keeping the shelves in perfect order, avoid shortages and the ensuing loss of revenue, and make themselves more available for customer service.

Thanks to ShelfWatch, stores can meet their number-one operational imperative: access accurate informa-tion about shelf stocking and inven-tory at all times.

ShelfWatchAutomatic Stockout Detection

V:ShelfinnovationS

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MANAGEMENT REPORT

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management report

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Brands and retailers can now col-laborate seamlessly (merchandising team, marketing graphic design-ers, etc.) on the design, manage-ment, and deployment of in-store digital advertising campaigns that are perfectly synchronized. Now, with a single click, an advertising campaign can be sent to the store through our platform, which con-nects to the digital tags that are instantly transformed into veritable media outlets. With AdShelf, retail-ers turn their gondolas into commu-nication tools, like JC Decaux did with bus stops.

AdShelf is an advertising platform that makes it possible to manage the promotions orchestrated by brands in real time and in one click.

It runs on a Cloud platform that en-ables the brands to manage their product information and deploy their campaigns in conjunction with the distributor on large-size labels (4.2”, 7.4”, 12”). These labels can interact (NFC, QR Code) with smart-phones. They allow the consumer to get additional, high value-added in-formation with more context. These interactions are measured, which gives the brand and the chain a tool to analyze the impact and engage-ment sparked by these ads.

The brand, the store, and the retail chain can access the platform 24/7 to design the advertisements and manage them remotely. In-store ad-vertising campaigns are deployed in a single click from anywhere.

AdShelfAdvertise at the shelf

V:Connect

innovationS

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MANAGEMENT REPORT

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management report

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FashionTAG is the first e-paper digtal tag designed specifically for fashion. FashionTAG is at the heart of the om-nichannel store, offering a compre-hensive solution for clothing stores:

• Dynamic prices

• E-paper screen

• Customizable colors

• Real-time geolocationing

• Automatic inventories

FashionTAG is available in several sizes and colors to meet the varying needs of fashion clients (clothing, handbags, accessories, etc.).

FashionTAGFashion finally hasits own digital tag!

innovationS

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MANAGEMENT REPORT

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management report

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B

FinancialReportBI. MANAGEMENT REPORT 39

A. Report on the activity 39

B. Shareholding structure and information on the share capital 52

C. Administration and control of the company 59

D. 2017 Corporate Social Responsibility Report 64

E. Risk factors and uncertainties 86

II. GOVERNANCE REPORT 95

A. Composition and functioning of the Board of Directors 96

III. REPORT ON STOCK OPTIONS 123

IV. REPORT ON BONUS SHARE ALLOCATION 131

V. CONSOLIDATED FINANCIAL STATEMENTS 139

I. Consolidated financial statements 140

II) Notes to the consolidated financial statements 145

VI. CORPORATE FINANCIAL STATEMENTS 175

1. Balance sheet 176

2. Income statement 178

3. Changes in shareholders’ equity 179

4. Notes 180

VII. SHAREHOLDERS’ MEETING OF JUNE 22, 2018 197

1. The purview of the Ordinary General Meeting 199

2. The purview of the Extraordinary General Meeting 200

3. Report of the Board of Directors to the combined shareholders’ meeting of June 22, 2018 205

VIII. REPORTS BY THE STATUTORY AUDITORS AND CERTIFICATIONS 213

IX. CERTIFICATIONS FROM PERSON IN CHARGE OF THE ANNUAL REPORT 235

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I. Management report

Dear Shareholders,

In accordance with the law and the Articles of Association, we have called an Ordinary Shareholders’ Meeting in order to report to you on the position and activity of our Company (hereinafter referred to as “SES-imagotag” or “the Company”) and its Group over the financial year ended December 31, 2017. We also submit the annual financial statements and the consolidated financial statements for that financial year for your approval.

We will provide you with all details and additional information pertaining to the items and documents required by the regulations in force, which were made available to you in accordance with the legally required time periods.

The reports from the Statutory Auditors will then be read to you.

A. REPORT ON THE ACTIVITY

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financial REport

Please find below our report on the position and activity of the Company and the Group, in accordance with the provi-sions of Articles L. 225-100, L. 225-100-2, L. 225-100-3, L. 225-102, L. 225-102-1, and L. 232-1 II of the French com-mercial code and Article 222-3 of the AMF General Regulation.

1) Report on the activity of the group and the company

Highlights in 2017

Activity

2017 is a transition year:

First, on the sales side, more and more European retailers focus on digitalization, resulting in:

• higher competition over signifi-cant potential deals;

• accelerated products range transi-tion to launch a new ESL generation (Vusion) combining the very best of our existing technologies (either in house developed or acquired through SES-imagotag Gmbh, SES-imagotag Deutschland GmbH and Pervasive Displays Inc acquisi-tions) to address the widest func-tionalities portfolio possible and thus, triggering economies of scale in our production costs.

Second, stakeholders transition with the acquisition of a majority stake of our capital by BOE, a Chinese Group which plan is to support our indus-trial and marketing development, worldwide.

This transition period led to quite a robust order entry performance with € 200M vs. €145M in 2016, a 40% increase, but also to a disappoint-ing financial performance compared

to expectations, a great deal of roll outs being postponed in 2018, our customers willing to benefit from the new range features (Vusion).

Eventually, the group consolidated re-sults show, for the 2017 fiscal year, those major events: a sales level lower than last year as well as the profitability ratios, even more impacted by the change in the shareholding structure which triggered extra lawyers’ fees costs as well as extraordinary costs relating to the accelerated free shares alloca-tion to the group employees because of the change in the majority stakes (IFRS2).

Debt and Equity

SES-imagotag carried out a new bond issue of €30M, bearing interest at 3.5% per year to European Institu-tional investors and maturing in 2023. This issue is adding up to the previ-ous €10M issue dated December 29, 2016, totalizing a €40M debt.

Société Générale acted as the place-ment agent for the operation.

Simplified public tender offer process

On December 20, 2017, BOE Smart Retail (Hong Kong), jointly held by

BOE and SES-imagotag’s manage-ment, acquired a majority share in SES-imagotag via the purchase of 6,669,176 shares at a price of €30.0 per share. Prior to the acquisition of the above-mentioned block of shares, the management-controlled company contributed 537,520 SES-imagotag shares to BOE Smart Retail and took part in a €17.9 million capital increase for BOE Smart Retail. The management will hold their BOE Smart Retail shares for at least five years thus underlining the manage-ment team’s strong commitment to the Company’s long-term growth.

In compliance with regulations, BOE Smart Retail submitted an offering memorandum to the AMF in the perspective of the simplified ten-der offer to acquire the remaining SES-imagotag shares at the same €30 per share price. On February 20, 2018, the AMF gave approval n°18-050 for the note and the BOE Smart Retail offer was initiated on March 2 for a March 15 close.

The Initiator does not plan to request a squeeze-out upon completion of the bid, nor to request the delisting of its Euronext shares. The Initiator also wants to maintain a significant free-float and share liquidity. They do not exclude opening the capital

41

Management report

of SES-imagotag to new investors in the future as part of the Company’s development strategy.

Reflecting this change in the share-holding structure, two new Board members have been appointed: Mr Kinas (Director) and Mr Hainguerlot (no voting director) quit, as well as Pechel Industries, represented by Mrs Hélène Ploix (Director), and M. Xiangjun Yao and Mrs Xiangshun Yin have been coopted in the Board.

Acquisitions

• Acquisition of Pervasive Displays Inc. (PDi): In addition to the approval of the Shareholders’ Meeting held on November 30, 2016, the com-pletion of this deal also remained subject to the approval of the Tai-wanese authorities responsible for foreign investments (Investment Commission, Ministry of Economic Affairs of the Republic of China), which was received on February 2, 2017. At its meeting on February 16, 2017, the Board acknowledged that all of the conditions precedent of the Pervasive Displays contribu-tion were satisfied and therefore approved the Company’s capital increase for a nominal amount of €1,581,368 in consideration for the Pervasive Displays contribution.

• Anticipated acquisition of the 2d tranche of Findbox now named SES-imagotag Deutschland GmbH, (authorized by the May 17th 2017 Board meeting) now 100% owned.

• Acquisition of another 5979 shares of Market Hub, now 60% owned. A third and last tranche (7462 out-standing shares) is contemplated : the value of these minority interests will be based on the 2018 financial results of the company.

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financial REport

Financial results 2017

Sales breakdown per geographical area is the following:

176,9millions

153,0millions

67,8

83,8 109,1

69,2

-23,2%

-13,5%

+2,1%

International France

20162017

€M 31/12/17 31/12/16

France 69,2 45% 67,8 38%

INTERNATIONAL 83,8 55% 109,1 62%

TOTAL 153,0 176,9

sales per geographical area

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Management report

€M 31/12/17 31/12/161 N / N-1

REVENUES 153.0 176.9 -13.5%

Variable Costs Margin 40.3 44.1 -8.8%

% of revenues 26% 25% +1 pt

Opex (34.1) (27.5) 24.0%

Ebitda 6.1 16.6 -63.2%

% of revenues 4% 9% -5 pts

Depreciation (8.3) (7.0) 18.8%

Current EBIT (2.2) 9.6 N/A

% of revenues -1% 5% -6 pts

Non-recurring / non-cash items (18.8) (2.2) N/A

EBIT (21.0) 7.4 N/A


Financial Income / (Loss) (4.5) (2.0) 132.8%

tax 4.4 (2.1) N/A

Net Income / (Loss) (21.1) 3.4 N/A


1 The 2016 EBIT and Net Result were restated to take into account the fair value and employer contribution which were not recognized in 2016 although the performance criteria had been met and opened rights to the final vesting of a tranche of free shares. The corresponding IFRS2 expense was assessed at €1.3 million for 2016. The expense excluding the employer contribution of €1 million for 2016 did not have an impact on the Group’s equity or on its cash position. The 2016 annual financial statements were restated for these amounts.

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financial REport

Annual revenue was €153 million, down by -14% from 2016, a year which benefited from the peak roll-out of the MSH contract, the first-ever contract of more than €100 million for SES-imagotag.

The decline in revenue was the re-sult of both a volume effect resulting from the switch by certain customers of their roll-outs to the new line of VUSION labels in 2018, the indus-trialization of which only started to ramp up in Q4 2017 and a downward pressure on prices exacerbated by our competitors.

The variable cost margin was €40.3 million, down -9% on 2016. The variable cost margin ratio improved from 24.9% to 26.3% (+1.4pts), due the integration of PDi and a favor-able exchange rate effect. However, this improvement was weaker than expected because of substantial pricing pressure in 2017, especially as most of sales came from the G1 range whilst efforts to reduce costs focused on the VUSION project.

The current operating expenditure was up by +€6.6 million. €3.2 million

of this increase was due to the ad-dition of PDi and Findbox within the overall scope. €3.4 million was due to continuing international expansion ef-forts undertaken in 2017, prior to the overall market acceleration phase. Nearly all of the increase in expenses reflect commitments made in 2016. The Group l imited additional expenses in 2017 to maintain its fi-nancial equilibrium without compro-mising its commercial deployment.

Therefore, EBITDA was €6.1 million compared to €16.6 million in 2016.

Operating profit (EBIT) and net in-come were negatively impacted by non-recurring items, many of which were noncash and related to the BOE Technology transaction:

• banking advisory, lawyers and ex-perts (in France, China and Tai-wan) associated with this complex international transaction;

• the IFRS2 expense (noncash) of €10 million before social security contributions of €2.9 million for the accelerated vesting of perfor-mance shares;

• other expenses, independent of the transaction, including the amorti-zation of separate intangible assets identified as part of the acquisitions.

Therefore, operating income (EBIT) was -€21.0 million compared to €7.4 million in the previous financial year.

Financial income was -€4.5 million, comprised essentially of interest on the EuroPP bond of €40 million raised in two times at the end of 2016 and the end of March 2017, and from foreign exchange income.

2017 income tax resulted in a profit of €4.4 million following the recog-nition of deferred tax assets on tax losses of legal entities whose poten-tial for recovery are deemed positive by the Group.

In all, the net result for the 2017 finan-cial year was a loss of €21.1 million whereas it was positive by €3.4 million in 2016.

EBIT to EBITDA

Group performance as well as manage-ment performance is based on EBITDA, please find below a detailed breakdown of the bridge between EBIT and EBITDA:

M€ 31/12/17 31/12/16*

Operating Income (EBIT) (21.0) 7.4

- IFRS2 expense relating to Free Share Plans (12.9) (1.2)

- GdW amortization (0.9) (0.3)

- Equity / debt related fees (3.0) (0.8)

- Onerous contracts (1.1) 0.0

- Severance pay (0.4) (0.3)

- Others (0.5) 0.5

= Current EBIT (2.2) 9.6

- Fixed & Intangible Asset Depreciation Expense (8.3) (7.0)

= EBITDA 6.1 16.6

* The 2016 EBIT and Net Result were restated to take into account the fair value and employer contribution which were not recognized in 2016 although the performance criteria had been met and opened rights to the final vesting of a tranche of free shares. The corresponding IFRS2 expense was assessed at €1.3 million for 2016. The expense excluding the employer contribution of €1 million for 2016 did not have an impact on the Group’s equity or on its cash position. The 2016 annual financial statements were restated for these amounts.

45

Management report

Net Indebtedness

As of December 31, 2017, available cash was €38.5 million compared to €33.3 million at the end of 2016 and net financial debt was -€13.4 million compared to a net position of €6.3 million on December 31, 2016.

Net cash consumption was €19.7 million due to the decrease in EBITDA and the acceleration of the VUSION pro-gram. This translated into an increase in investment (Capex) over the finan-cial period as well as the constitution of preparatory supply inventories for 2018. In addition, the capital transac-tion with BOE resulted in exceptional fees (bank advisory, legal, experts and auditors) and the payment of a social security expense for the allocation of free shares. Lastly, financial income included the cost of interest on loans and part of the income from currency exchange.

SES-imagotag recorded new orders of €200 million, an increase of +40% on 2016 thanks to a record number of new clients signed and significant breakthroughs made outside of Eu-rope. In China, the alliance with BOE ignited a strong start on this large global market. The first stores have been installed, notably with the Hema Fresh retail chain (Alibaba group), as well as in Taiwan and South Ko-rea. A first major roll-out in Japan was signed in Q4 2017. In the Unit-ed States, SES-imagotag inked con-tracts with several hundred stores. In Europe, new major brands chose SES-imagotag for roll-outs or pilot projects in every retail sector.

SES-imagotag’s rapid acquisition of new client bases and geographic markets in 2017 revealed itself as a key asset for future growth, strongly reinforcing SES-imagotag’s position as the true global leader in electronic shelf labeling, smart digital tags and digital retail.

Cooperation with BOE already active on three fronts:

M€ 2017 2016

Ebitda 6.1 16.6

Capex (12.1) (9.3)

Change in Working Capital (5.2) (6.7)

Financial Investments 2.2 (7.0)

Financial result (2.4) (1.6)

Tax - (1.2)

Others (8.3) (1.6)

dont :

Of wich : BOE Deal fees (3.0)

social charges on Free Shares (2.9)

Onerous contracts (1.1)

Severance Pay (0.4)

Others (0.9)

Change in Net Debt (19.7) (10.8)

Net Cash / (Debt) (13.4) 6.3

Cash 38.5 33.3

Debt (51.9) (27.0)

change in Net Cash / (Debt) (19.7)

Outlook

• Technological, with the develop-ment of V:Rail, which aims to trans-form retail shelves into powerful advertising and promotional inter-faces. Other extensions of the offer include all digital communication tools used at points of sale;

• Industrial, with the launch of a next generation-integrated manufacturing plant aimed at ultra-high capacity and competitiveness starting from the second half of 2018;

• Geographical, with the creation of an entity dedicated to the development of the Chinese market, the most dy-namic market in the world in terms of digital and omni-channel commerce. Already, several major Chinese brands have set up their first stores, including one of Alibaba’s most in-novative chains with whom BOE signed a cooperation agreement in November in IoT retail. With BOE, SES-imagotag aims at becoming the market leader in China. More-over, SES-imagotag will leverage BOE’s commercial sites in other regions of the world (USA, Russia,

India, South America, South Korea, etc.).

All of these projects open up new medium-term prospects for SES-imagotag which will be pre-sented in an upcoming five-year strategy plan (2018-2022) currently being prepared in close coopera-tion with BOE.

With the sales momentum fueled by the successful launch of VUSION, SES-imagotag expects strong growth again during H2 2018, once the new fully-automated production site is up and running.

46

financial REport

Events after the close date

R&D and Innovation

Simplified public tender offer outcome

Société Générale has announced to AMF (Autorité des Marchés Financiers) that, the simplified public tender offer on SES-imagotag shares from March 2 to March 15th , 2018, resulted in the acquisition by BOE Smart Retail of 3 582 490 shares with a € 30 unit price.

BOE Smart Retail now owns 10 789 186 SES-imagotag’s shares in total, thus 79,94% of the total voting rights.

New Board members

An Ordinary General Meeting dated February 6, 2018 has approved the following resolutions:

Ratification of the co-optation of Ms. Xiangshun Yin as a director (1st resolution)

Under the terms of the 1st resolution, it is proposed to the General Meeting to ratify the co-optation by the Board of Directors at its Meeting of December 21, 2017 of Ms. Xiangshun Yin as a director, replacing Pechel Industries Partenaires, the latter having resigned

AdShelf

Brands and distributors can now col-laborate seamlessly (merchandising team, marketing graphic designers, etc.) on the design, management and deployment of in-store digital adver-tising campaigns that are perfect-ly synchronized. Now, with a single click, an advertising campaign can be sent to the store through our plat-form, which connects to the digital tags that are instantly transformed into veritable media outlets. With AdShelf, retailers turn their gondo-las into communication tools, like JC Decaux did with bus stop shelters. Retail outlets currently display their products in stores with tags that only indicate the product name and its price. This description is often not

on December 20, 2017.

Ratification of the co-optation of Mr. Xiangjun Yao as a director (2nd reso-lution)

Under the terms of the 2nd resolution, it is proposed to the General Meeting to ratify the co-optation by the Board of Directors at its Meeting of Decem-ber 21, 2017 of Ms. Xiangjun Yao as a director, replacing Mr. Jérôme Kinas, the latter having resigned on Decem-ber 20, 2017.

Appointment of Mr. Feng Bai as a di-rector (3rd resolution)

Under the 3rd resolution, it is proposed to the General Meeting to appoint Mr. Feng Bai as director, for a term of three years, which will end at the end of the General Meeting called to approve the financial statements for the year ended December 31, 2020, to be held in 2021.

Appointment of Ms. Fangqi Ye as a director (4th resolution)

Under the 4th resolution, it is proposed to the General Meeting to appoint Ms. Fangqi Ye as director, for a term of three

years, which will end at the end of the General Meeting called to approve the financial statements for the year ended December 31, 2020, to be held in 2021.

Appointment of Mr. Xingqun Jiang as a director (5th resolution)

Under the 5th resolution, it is proposed to the General Meeting to appoint Mr. Xingqun Jiang as director, for a term of three years, which will end at the end of the General Meeting called to approve the financial statements for the year ended December 31, 2020, to be held in 2021.

Appointment of Ms. Hélène PLOIX as an independent director (6th resolution)

Under the 6th resolution, it is proposed to the General Meeting to appoint Ms. Hélène Ploix as director, for a term of three years, which will end at the end of the General Meeting called to ap-prove the financial statements for the year ended December 31, 2020, to be held in 2021.

All resolutions have been approved by the Shareholders meeting on February 6th 2018.

enough to reassure a shopper who is not accustomed to the wealth of in-formation contained in the product pages available through e-commerce sites (Amazon, Alibaba, etc.) which provide consumer reviews, product characteristics and, most importantly, sales campaigns and promotions.

Until now, this enhanced informa-tion was very difficult to manage and synchronize in stores that sell tens of thousands of distinct prod-ucts that are merchandised manual-ly, which limits the possibilities.

AdShelf is the answer to this problem. AdShelf is an advertising platform that makes it possible to manage in real time and in one click the promo-tions orchestrated by brands.

It runs on a Cloud platform that enables the brands to manage their product in-formation and deploy their campaigns in conjunction with the distributor on large-size labels (4.2”, 7.4”, 12”). These labels can interact (NFC, QR Code) with smartphones. They allow the consumer to get additional, high value-added information with more context. These interactions are mea-sured, which gives the brand and the chain a tool to analyze the impact and engagement sparked by these ads.

The brand, the store and the chain can access the platform 24/7 to de-sign the advertisements and man-age them remotely.

In-store advertising campaigns are de-ployed in a single click from anywhere.

47

Management report

Avoid the costs associated with the manual synchronization of cam-paigns which require traveling, paper printing and complex, time-consum-ing set-ups in the store.

Track the campaign in real-time with comprehensive monitoring of results thanks to numerous measurement tools for each level (national, region-al, store, etc.).

Shelf watch / OOS

The number one rule of operations for any store is to have accurate data on shelf and stock status at all times.

Shelf Watch technology uses geo-localized digital labels that show at any time the exact location of each product and the number of face-outs, as well as security cameras that track and monitor all shortages and anomalies in the aisles. Now it is possible to identify on a digital store map any necessary corrections needed to ensure the perfect maintenance of store inventory and optimize the added value of personnel.

Shelf Watch identifies all products affected by shortages and anomalies (product in the wrong place, improper face-out, etc.) by recognizing each elec-tronic tag and its corresponding product.

From the products on the shelves to the traffic in the store, everything can be monitored and measured, enabling automation and remote management of certain operational tasks. The store of the future will be able to dramatically reduce shortages and waste and optimize operating expenses by controlling inventory overages and lost sales.

Store Front

Many retail chains have recently ex-perimented with developing mobile apps for their stores.

They all face the same obstacles: low number of downloads and virtually zero in-store use of the apps.

To tackle these issues, StoreFront was developed as a web page that is instantly accessible when the user connects to the store Wi-Fi (integrated in the tag radio access points) or connects directly with digital interac-tive tags (NFC tap or QR code scan).

This eliminates all the obstacles to accessing services:

• no App Store;

• no download time;

• no account creation;

• no password;

• a single digital infrastructure.

In-store customers are immediately connected and save time: they can access the list of new products and promotions in a single click, they find the products are looking for and can easily navigate the store thanks to the search button geo-positioning map. They can see all product information with a simple NFC tap or QR code scan. Similarly, they can use this function to fill their shopping carts, pay on their mobile phones and then have the purchase delivered to their home. They can also easily pay for their cart without stopping at the cash register and walk out the doors with their pur-chases. If a product is out of stock, customers can report it through the same app, which makes their in-store experience collaborative and useful for the store which, of course, rewards them. StoreFront can also integrate games such as treasure hunts or fitness circuits to “gamify” the point of sale. This feature in par-ticular relies on geolocation tags.

Finally, customers can also identify themselves by providing their tele-phone number and enjoying VIP services like a virtual loyalty card and access to personalized promo-tions. It’s simple and it’s an opt-in function.

VUSION

VUSION is comprehensive IoT and digital platform that delivers an array of services to retailers. Its solutions enable them to connect and fully digitize stores; automate low-value-added processes; better understand, inform and serve cus-tomers; generate quality informa-tion to continuously optimize floor inventory; prevent stock-outs and waste; and create an omnichannel servicethat builds loyalty and meets emerging consumer expectations.

VUSION Tag : An all new design

Sleek and modern, the VUSION elec-tronic shelf label fits every environ-ment seamlessly. Thinner than any tag before, it adds a modern touch to every retailer’s store. In a variety of colors, VUSION remains elegant while fitting the retailer’s corporate de-sign. Standing on its own, attached to a shelf or on exclusive rails, which provide the best fit for the labels, VU-SION comes with a variety of clips and stands to choose from. Each option marries well with the elegant designed electronic shelf labels, and provides a level of security and flexi-bility that was never seen before.

Adapt the front and back casing color to fit your corporate design perfect-ly. Choose the unique display colors based on the information you wish to display. Also, choose between bright white or multicolored flashing LED lights as an additional option to help draw attention at the shelf! Secure your labels with our patent Easylock solution. It’s up to you - your VUSION tag can be customized exactly as you wish it to be. Choose the frequency that best fits your needs. You have the choice between different radio frequencies, 2.4 GHz and SubGig, which offer different functionalities for your VUSION ESLs – based on your needs, the frequencies avail-able allow options of changes to the displays of these tags and the store layout too! Our patented Easylock Anti-theft system secures the digital price tags with ease and reliability to your shelves. VUSION labels with the Easylock Anti-theft system are super easy to lock and unlock. Your staff will be able to manage these without any hassle to guarantee your digital tags to remain in a locked position! Damp, wet, dusty, hot or cold – our VUSION electronic shelf labels work in every environment. Based on the appropriate choice of labels, you can cover your fresh produce sections, or mount them to areas exposed to heat and sun exposure, and even in the freezer!

48

financial REport

2) Report on the corporate financial statements

1. Review of the financial statements and results

2. Proposed allocation of the Company’s result

3. Non-deductible expenses

During the financial year ended on December 31, 2017, the Company’s net sales amounted to €98.6 million, versus €96.4 million in 2016, an increase of 2.3%.

Operating expenses for the financial year reached a total of €1 12.3mn (including amortization and depre-ciation) and primarily consisted of the following items:

We ask that you approve the annual financial statements (balance sheet, income statement, and notes) as presented to you, showing a net result of -€8.9 M, and allocate it as follows:

In accordance with the provisions of Article 223 quater of the French general tax code, we would like to inform you that the Company had expenses or charges referred to in Articles 39-4 and 54 quater of said code amounting to €142 386;

Result for the financial year -8,886 K€

Result fully allocated to retained earnings -8,886 K€

Which, added to prior retained earnings, now stands at 36,160 K€

In accordance with the provisions of Article 243 bis of the French general tax code, we wish to remind you that no dividends were distributed for the 2013 and 2014 financial years. In 2012, the Company paid out €5,491,011.50 in dividends.

Raw materials 64.8 M€

Other 23.5 M€

Personnel 17.3 M€

The operating result was therefore -7.8 M€

The financial result (mainly foreign exchange gains) amounted to -1.5 M€

Pre-tax profit before extraordinary items therefore stood at -9.4 M€

In the end. the Company generated a net result of -8.9 M€

49

Management report

4. Payment terms: suppliers & customers

* Inclus 1 148 K€ dont le paiement est contesté par la Société, une procédure contre ce fournisseur est actuellement en cours

agingValue in K€

as of Dec 2017 Number

of invoicesValue in K€

as of Dec 2017Number

of invoices

current 3,791 334 1 830 254

Overdue < 60 jours 7,032 770 780 119

Overdue > 60 jours (*) 5,414 344 1 405 62

Total général 16,238 4 015

Soit 19% des achats HT

Soit 5% des achats HT

agingValue in K€

as of Dec 2017 Number

of invoicesValue in K€

as of Dec 2017Number

of invoices

current 12,659 2,426 10,522 3,212

Overdue < 60 jours 4,024 1,511 4,755 841

Overdue > 60 jours 7,187 1,381 1,971 1,201

Total général 23,871 17,248

Soit 24%du CA HT

Soit 18%du CA HT

Accounts payables aging balance

Accounts receivables aging balance

50

financial REport

5. Five-year financial summary

In accordance with the provisions of Article R. 225-102 of the French commercial code, the summary of the Company’s results for the last five financial years is attached to this management report.

Type of information / Period / € 2017 2016 2015 2014 2013

I- Year-end financial position

a) Capital 26,768,458 24,155,000 23,329,544 23,263,184 22,050,046

b) Number of shares (year end) 13,384,229 12,077,500 11,664,772 11,631,592 11,025,023

II- Overall result of operations completed

a) Sales 98,557,486 96,432,412 74,516,166 74,729,711 82,017,230

Profits -8,885,912 -2,517,452 712,438 3,791,858 4,934,796

Allowances for depreciation and amortization 5,234,374 5,277,390 4,455,499 4,191,644 2,493,353

Release on depreciation and amortization

Allowances for provisions 3,272,039 2,335,063 3,411,497 1,705,087 1,636,006

Release on provisions -2,406,594 -3,019,470 -1,577,715 -1,255,779 -673,156

b) Earning before taxes, amortization, depreciation and provisions

-3,280,103 1,497,325 7,245,992 9,811,038 9,654,200

c) Corporate tax -494,010 -578,204 244,273 1,378,228 1,263,202

d) Earnings after tax and before amortization, depreciation, and provisions

-2,786,093 2,075,529 7,001,719 8,432,810 8,390,999

e) Earnings after tax, amortization, depreciation, and provisions

-8,885,912 -2,517,452 712,438 3,791,858 4,934,796

f) Amounts of distributed earnings 0 0 0 0 0

g) Employee profit sharing 0 0 0 0 0

III- Result of operations expressed per share

a) Earnings after tax and before amortization and depreciation per share

-0,21 0,17 0,60 0,72 0,76

H/X

b) Earnings after tax, amortization, depreciation, and provisions per share

-0,66 -0,21 0,06 0,33 0,45

A/X

c) Dividend paid to each share 0 0 0 0 0

IV - Personnel

a) Number of employees - average headcount 195 171 170 166 148

b) Total payroll 10,034,650 9,612,662 8,615,730 7,885,840 7,948,913

c) Total sums paid for corporate benefits 7,269,528 4,338,699 3,917,960 3,564,232 3,540,548

51

Nature of the indications / Period / € 2017 2016 2015 2014 2013

Allowance for amortization of intangible assets 4,705,823 4,761,748 3,889,778 3,237,715 2,042,519

Allowance for depreciation of tangible assets 528,551 515,642 565,720 460,830 450,834

Exceptional allowance 493,099

Total allowances for amortizationand depreciation

5,234,374 5,277,390 4,455,499 4,191,644 2,493,353

Allowance for provision 156,000 92,000 152,000 126,000 34,442

for operating risks and expenses 535,000 534,651 527,720 519,227 516,042

Allowance for provision 565,712 209,831 322,963 489,627 371,830

for impairment of tangible assets 152,490 224,746 308,548 183,531 87,240

Allowance for provision 1,862,837 1,273,835 921,254 386,701 527,616

for impairment of inventories 1,179,012 98,836

Total allowances for provisions -2,406,594 -3,019,470 -1,577,715 -1,255,779 -673,156

for impairment of bad debt

Allowance for provision

for financial risks and expenses 310,051 40,000 126,000 44,442 138,336

Allowance for provision for extraordinary risks and expenses

580,402 371,798 881,483 584,885

Reprise s/Provision pour dépréciation Créances douteuses

242,306 625,457 183,531 227,499

Reprise s/Provision pour risques & charges financiers

1,273,835 921,255 386,701 527,616 203,922

Reprise s/Provision pour risques & charges exceptionnels

1,060,961 98,836 103,400

Total reprises sur provisions 2,406,594 3,019,470 1,577,715 1,255,779 673,156

Income Tax -656 845,540 2,151,249 2,222,147

Withholding tax -21,701 31,001

Tax credit -494,010 -577,548 -601,267 -751,320 -989,947

Tax on net profits -494,010 -578,204 244,273 1,378,228 1,263,202

Management report

52

financial REport

B. Shareholding structure and information on the share capital

1) Change in the amount of share capital over the last five years

At December 31, 2017, the Company’s share capital totaled €26,768,458, divided into 13,384,229 shares, each with a nominal value of 2 euros.

Year Change in capital Date of recognition New Shares Number of shares representing the

capital

Successive amount of capital in euros

Fiscal Year

2013 None 11 025 023 22 050 046 31/12/2013

2014Contribution in kind (iMAGOTAG GmbH acquisition)

21/05/2014 591,969 11,616,992 23,233,984 31/12/2014

2014 Options exercised 17/03/2015 14,600 11,631,592 23,263,184 31/12/2015

2015 Options exerciced 30/11/2015 33,180 11,664,772 23,329,544 31/12/2015

2016 Options exercised 11/03/2016 23,900 11,688,672 23,377,344 31/12/2015

2016 in Dec 2015 30/11/2016 265,114 11,953,786 23,907,572 31/12/2016

2017

Contribution in kind (Findbox GmbHacquisition)

16/02/2017 123,714 12,077,500 24,155,000 31/12/2016

Options exercised Contribution in kind (PERVASIVE DISPLAYS Inc acquisition)

16/02/2017 790,684 12,868,184 25,736,368 31/12/2017

Bonus Sharesdelivery

27/04/2017 110,014 12,978,198 25,956,396 31/12/2017

Options exerciced 27/04/2017 32,044 13,010,242 26,020,484 31/12/2017

Options exercised 23/10/2017 33,577 13,043,819 26,087,638 31/12/2017


Bonus shares delivery 06/02/2018 226,000 13,278,519 26,557,038 31/12/2017


53

Management report

B. Shareholding structure and information on the share capital

2) Structure of the Company’s share capital

Below you will find a summary of the identified major shareholders (i.e., those who hold at least 5% of the share capital at December 31, on at least one of the last three fiscal years) according to the information available to the Company.

* 6,669,176 shares sold by the sellers ad 537,520 shares invested by the managers through SESIM* The 2016 EBIT and Net Result were restated to take into account the fair value and employer contribution which were not recognized in 2016 although the performance criteria had been met and opened rights to the final vesting of a tranche of free shares. The corresponding IFRS2 expense was assessed at €1.3 million for 2016. The expense excluding the employer contribution of €1 million for 2016 did not have an impact on the Group’s equity or on its cash position. The 2016 annual financial statements were restated for these amounts.

31/12/2017 31/12/2016 31/12/2015

SHAREHOLDERSNombre

d’actions% capital

% voting rights

Number of shares

% capital% voting

rightsNumber of

shares% capital

% voting rights

BOE SMART RETAIL (HONG KONG) CO

7,206,696* 53.84% 53.84%,

Chequers 0 2,347,502 19.44% 19.44% 2,347,502 20.10% 20.20%

Pechel Industries III 0 782,498 6.48% 6.48% 782,498 6.70% 6.70%

Concert Chequers / Pechel Industries III

0 3,130,000 25.92% 25.92% 3,130,000 26.80% 26.90%

Tikehau Capital Partners

0 1,823,411 15.00% 15.00% 1,823,411 15.6% 15.6%

Sycomore 300,451 2.24% 2.24%, 944,643 7.82% 7.82% 898,969 7.7% 7.7%

Phison Capital 178,469 1.33% 1.33%, 624,309 5.17% 5.17% 624,309 5.34% 5.39%

Below is a projection with a summary of the diluted capital:

Diluted Capital 2017 % 2016 % 2015 %

Shares 13,384,229 97.90% 12,077,500 93.80% 11,664,772 95.40%

Stock-options allocated 106,925 0.78% 281,956 2,20% 359,270 2.90%

Free Shares allocated on 31/12/15

110,017 0.80% 220,031 1.70% 208,459 1.70%

Free shares allocated on 30/11/16

69,500 0.51% 298,500 2.30%

Total dilution 13,670,671 100% 12,877,987 100% 12,232,501 100%

NB: Free shares plan 31.12.15: allocation cap: 232,632 sharesNB: Free shares plan 31.12.15: allocation cap: 358 shares

54

financial REport

3) Legal threshold crossing declarations and declarations of intentions

4) Share buyback program - Number of shares and share of the capital held by the Company at December 31, 2017

In accordance with the provisions of Article L. 233-13 of the French com-mercial code, the Company was in-formed that the following thresholds were crossed during 2017:

By Sycomore Asset Management:On January 11, 2017, an upward threshold breach with 938,143 shares, or approximately 8% of capital.

On February 10, 2017, a downward threshold breach for 938,143 shares, or approximately 8% of capital.

On December 21, 2017, a downward threshold breach for 681,080 shares, or approximately 5% of capital.

The Board of Directors was authorized by the Combined Shareholders’ Meeting of June 22, 2012 (Resolution 6) to put a share buyback program in place.

The Board of Directors used this au-thorization and the option to sub-delegate, in its meeting of June 22, 2012, and gave all powers to the Chairman & CEO for the purposes of implementing the objectives of the share buyback program and to pro-ceed with the signing of a liquidity contract with Gilbert Dupont in ac-cordance with (i) the provisions of European Regulation 2273-2003 of December 22, 2003, implementing Directive 2003/6/EC of January 28, 2003, with regard to the exemptions provided for buyback programs and the stabilization of financial instru-ments, (ii) the provisions of Articles L. 225-209 et seq. of the French commercial code, (iii) the provisions of the AMF General Regulation, and (iv) the AMF’s decision of March

By Phison Capital:On May 31, 2017 a downward threshold breach caused by the in-crease in the total number of shares in SES-imagotag, causing Phison Capital to drop from 5.17% to 4.98% of capital.

On December 21, 2017, a downward threshold breach for 445,840 shares, or approximately 3% of capital.

By Pechel Industries Partenaires and Chequers Partenaires:On December 21, 2017, a down-ward threshold breach for all of their shares, or approximately 25% of capital.

21, 2011 to update accepted market practices, number 2011-07, relating to liquidity contracts.

The Liquidity Contract complies with the Code of Ethics drawn up by the French financial markets association and approved by the AMF by a deci-sion dated March 21, 2008.

This liquidity contract was entered into on June 22, 2012, for an automati-cally renewable term of twelve months.

The company Gilbert Dupont is paid an annual lump-sum compensation of €26,000 excluding taxes.

Legal framework

Pursuant to the decisions of the Com-bined Shareholders’ Meetings of May 21, 2014 Resolution 8), June 30, 2015 (Resolution 8), November 30, 2016 and June 23, 2017 (Resolution 7), each year the Board of Directors has

By TikehauCapital:On December 21, 2017, a downward threshold breach for all of their shares, or approximately 14% of capital.

By SESIM:On December 20, 2017, an upward threshold breach for 487,520 shares

On December 20, 2017, a downward threshold breach for the same number of shares, or approximately 3% of capital.

By BOE Smart Retail (Hong Kong) Co:On December 22, 2017, an upward threshold breach for 7,206,696 shares, or approximately 54% of capital.

renewed the authorization given to the Chairman & CEO to continue the Liquidity Contract with Gilbert Dupont.

The Combined Shareholders’ Meeting of November 30, 2016 (Resolution 1) authorized the adaptation of the share buyback program as it resulted from the Shareholders’ Meeting of June 23, 2016 (Resolution 7) by setting the maximum overall amount of the program to ten (10) million euros instead of five (5) million euros previously.

SES-imagotag’s buyback program for its own shares, authorized by the Combined Shareholders’ Meeting of June, 23, 2017 has the following characteristics:

• securities concerned: shares;

• maximum authorized share buy-back percentage: 10% or 5% for shares acquired by the Company in order to retain them, deliver them

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Management report

for payment, or exchange them as part of a merger, demerger, or transfer;

• maximum overall amount of the program: ten (10) million euros,

• maximum unit purchase price: 150% of the last market price of the Company’s shares on the day when the Board of Directors uses its authorization,

• duration: 18 months

• goal of the program: to enable the Company to take opportunities to trade in its own shares as provided for by law, particularly for the fol-lowing purposes:

- stimulating the secondary mar-ket or share liquidity through an investment services provider, acting independently as part of a liquidity contract compliant with the code of ethics recog-nized by the AMF;

- distributing all or some of the acquired shares to employees and/or the Company’s corporate officers following the conditions and procedures described in the law, especially in terms of participa-tion in the Company’s expansion, distributing stock options, freely distributing shares, or selling shares for their own profit or under the conditions described in Article L. 3332-1 et seq. of the French labor code;

- remitting shares while exercising the rights attached to securities with conversion, exercise, refund, or exchange rights, or any other Company share allocation mecha-nism within the bounds of stock market regulations;

- canceling purchased shares through capital reduction under the conditions described in the French commercial code, as long as Resolution 10 is approved;

- keeping all or some of the ac-quired shares for later use in exchange or as payment as part

of a future external growth oper-ation or any other operation that may be authorized by current regulations.

The Company may use this resolution and pursue its share buyback program if Company shares are offered publicly in line with the stipulations of Article 232-17 of the AMF General Regula-tion (or any other legal, regulatory, or other provisions that apply or may apply in the future).

It is important for the Company to be able to continue, even in an offer period, to meet its commitments towards the holders of instruments representing debt securities granting access to the capital (3rd objective).

The acquisition, disposal, transfer, or exchange of these shares may be undertaken and paid for by any means, particularly as part of a li-quidity contract entered into by the Company with an investment service provider, subject to the regulations in force, including over the counter and by block of shares, through the use of derivatives and the establishment of option-based strategies (purchase and sale of call and put options and all combinations thereof in accordance with the applicable regulations), and at such times as the Board of Directors deems fit.

In order to ensure the execution of this authorization, the Shareholders’ Meeting conferred all powers to the Board of Directors to:

• decide how to implement this au-thorization;

• place all stock market orders;

• enter into a liquidity contract with a financial services provider in line with the code of ethics recognized by the AMF;

• make any declarations or fulfill any formalities necessary with the AMF that may relate to the buyback pro-gram described above; and

• fulfill any other formalities or en-ter into any other agreements to

this end and, more generally, to do whatever is necessary to implement the buyback program described above.

This authorization replaced the au-thorization given by the Combined Shareholders’ Meeting of November 30, 2016, which became null and void for the remainder of its duration.

The Shareholders’ Meeting is there-fore informed of the continuation of the share buyback program in ac-cordance with the provisions of Ar-ticle L. 225-209 paragraph 4 of the French commercial code, namely:

• percentage of capital directly or in-directly held by the Company 0.08%;

• number of shares canceled during the past 24 months: 0

• number of shares held in the portfo-lio: 10,106

• purchase: 201,081 shares for a total value of €6,056 K

• sale: 201,307 shares for a total value of €6,012 K

At December 31, 2017, the resourc-es held by the Liquidity Contract are 10,106 shares and €300,771 in the cash account.

Following the delegation granted by the Combined Shareholders’ Meeting of June, 23, 2017, authorizing the Board, for a maximum duration of eighteen months, to put in place a share buyback program, the Board proposes to the Shareholders’ Meeting called to rule on the accounts for the 2017 financial year to authorize it to put in place a new share buyback program.

Description of the buyback program submitted to the Combined Shareholders’ Meeting of June 22, 2018, for authorization

As part of the share buyback program, it is proposed that the Combined Shareholders’ Meeting of June 23, 2017, renew the share buyback autho-

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financial REport

rization granted during the Share-holders’ Meeting of June, 23, 2017.

Pursuant to the AMF General Regula-tion (Articles 241 to 241-5) and Article L. 451-3 of the French monetary and financial code, this description is in-tended to describe the objectives and terms of SES-imagotag’s buyback program for its own shares, which will be submitted to the Combined Share-holders’ Meeting of June 22, 2018.

The buyback program will have the following characteristics:

• securities concerned: shares;

• maximum authorized share buyback percentage: 10% or 5% for shares acquired by the Company in order to retain them, deliver them for pay-ment, or exchange them as part of a merger, demerger, or transfer;

• maximum overall amount of the program: ten (10) million euros;

• maximum unit purchase price: 150% of the last market price of the Company’s shares on the day when the Board of Directors uses its authorization;

• duration: 18 months.

Goal of the program: to enable the Company to take opportunities to trade in its own shares as provided for by law, particularly for the fol-lowing purposes:

- stimulating the secondary market or share liquidity through an in-vestment services provider, acting independently as part of a liquidity contract compliant with the code of ethics recognized by the AMF;

- distributing all or some of the acquired shares to employees and/or the Company’s corporate officers following the conditions and procedures described in the law, especially in terms of par-ticipation in the Company’s ex-pansion, distributing stock op-tions, freely distributing shares, or selling shares for their own profit or under the conditions

described in Article L. 3332- 1 et seq. of the French labor code;

- remitting shares while exercising the rights attached to securities with conversion, exercise, re-fund, or exchange rights, or any other Company share allocation mechanism within the bounds of stock market regulations;

- canceling purchased shares through capital reduction under the conditions described in the French commercial code, as long as Resolution 10 is approved;

- keeping all or some of the ac-quired shares for later use in ex-change or as payment as part of a future external growth operation or any other operation that may be authorized by current regulations.

The Company would be able to use this resolution and pursue its share buyback program if Company shares are offered publicly in line with the stipulations of Article 232-17 of the AMF General Regulation (or any other legal, regulatory, or other provisions that apply or may apply in the future).

It is important for the Company to be able to continue, even in an of-fer period, to meet its commitments towards the holders of instruments representing debt securities granting access to the capital (3rd objective).

The acquisition, disposal, transfer, or exchange of these shares may be un-dertaken and paid for by any means, particularly as part of a liquidity con-tract entered into by the Company with an investment service provider, subject to the regulations in force, including over the counter and by block of shares, through the use of derivatives and the establishment of option-based strate-gies (purchase and sale of call and put options and all combinations thereof in accordance with the applicable regula-tions), and at such times as the Board of Directors deems fit.

In order to ensure the execution of this authorization, it will be pro-posed to confer all powers to the Board of Directors to:




• make any declarations or fulfill any formalities necessary with the AMF that may relate to the buyback program described above; and

• fulfill any other formalities or en-ter into any other agreements to this end and, more generally, to do whatever is necessary to im-plement the buyback program de-scribed above.

This authorization would replace the authorization given by the Combined Shareholders’ Meeting of June 23, 2017, which would then become null and void for the remainder of its duration.

57

5.2.1 Allocation of stock options during the financial year ended December 31, 2017

At December 31, 2017, two stock op-tion allocation plans are being expired:

• the 2009 plan dated April 15, 2010, expiring on April 15, 2017;

• the 2010 plan dated September 15, 2010, expiring on September 15, 2017.

At December 31, 2017, six stock option allocation plans were in progress:

Within the framework of the authori-zation granted by the Extraordinary Shareholders’ Meeting on June 10, 2009:

• The 2011 plan dated October 21, 2011, expiring on October 21, 2018.

Dans le cadre de l’autorisation par l’AGE du 10 juin 2009,

• le Plan 2011 en date du 21 octobre 2011 et arrivant à échéance le 21 octobre 2018.

Within the framework of the autho-rization granted by the Extraordinary Shareholders’ Meeting on March 1, 2012:

• the 2012 plan dated August 31, 2012, expiring on August 31, 2019;

• the 2013 plan dated December 18, 2012, expiring on December 18, 2019;

5.1 Profit-sharing agreement

5.2. Allocation and exercise of stock options during the financial year ended December 31, 2017

At its meeting of May 15, 2005, the Board of Directors of SES-ESL decided to introduce a profit-sharing agree-ment for Group employees and del-egated all powers to the Chairman & CEO of SES-ESL for that purpose.

The agreement was signed on June 7, 2005, with the aim of defin-ing the methods used to calculate

5) Employee share ownership

• the 2013 plan dated May 28, 2013, expiring on May 28, 2020;

• the 2014 plan dated April 3, 2014, expiring on April 3, 2021.

Within the framework of the autho-rization granted by the Extraordi-nary Shareholders’ Meeting on May 21, 2014:

• The 2014 plan dated October 23, 2014, expiring on October 23, 2021.

A summary of the stock options au-thorized and allocated/ not allocat-ed on December 31, 2017, is provid-ed in the previous section (Structure of the Company’s share capital).

The Shareholders’ Meeting is informed in greater detail of the transactions relating to the allocation of stock op-tions during the financial year ended December 31, 2017, via a special re-port drawn up in accordance with the provisions of Article L. 225-184 of the French commercial code and attached to this Management Report.

5.2.2. Exercise of stock options and capital increase

At December 31, 2017, the Com-pany’s share capital totaled €26,768,458.

On April 27, 2017, pursuant to the au-thorizations granted by the Combined Shareholders’ Meetings of March 1,

2012 (Resolution 5), May 21, 2014 (Resolution 17), and June 30, 2015 (Resolution 12), the Board of Direc-tors confirmed the exercise of stock options resulting from the 2012 (first wave of August 31, 2012) and 2014 (second wave of October 23, 2014) plans occurring in the first quarter of 2017 and amended the Company’s Articles of Association accordingly.

On October 23, 2017, pursuant to the authorizations granted by the Combined Shareholders’ Meetings of June 10, 2009 (Resolution 7), March 1, 2012 (Resolution 5), May 21, 2014 (Resolution 17), and June 30, 2015 (Resolution 12), the Board of Direc-tors confirmed the exercise of stock options resulting from the 2009, 2011, 2012 (first wave) and 2014 (first and second wave) plans occurring in the second and third quarters of 2017 and amended the Company’s Articles of Association accordingly.

On December 15, 2017, pursuant to the authorizations granted by the Combined Shareholders’ Meetings of June 10, 2009 (Resolution 7), March 1, 2012 (Resolution 5), May 21, 2014 (Resolution 17), and June 30, 2015 (Resolution 12), the Board of Directors confirmed the exercise of stock options resulting from the 2011, 2012 (first wave) and 2014 (second wave) plans occurring in October and November 2017 and amended the Company’s Articles of Association accordingly.

Management report

the special reserve for sharing the profits of the Group’s companies and determining how this reserve will be allocated between the ben-eficiaries, as well as the rules for managing employee rights, the procedure for resolving any con-flicts between the Parties, and the rules for informing staff both indi-vidually and collectively.

On December 21, 2012, an amend-ment to this profit-sharing agree-ment was signed in order to incor-porate an employee savings plan created and managed in accordance with Articles L. 3332-1 et seq. of the French labor code. This agreement has been amended on October 5th, 2016, when the account holder was switched to BNPSS.

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financial REport

On February 6, 2018, pursuant to the authorizations granted by the Combined Shareholders’ Meetings of June 10, 2009 (Resolution 7), March 1, 2012 (Resolution 5) and June 30, 2015 (Resolution 12), the Board of Directors

Plans Number Allocated Number outstanding *

15/04/2010 14,000 0

15/09/2010 8,500 0

21/10/2011 58,500 13,500

31/08/2012 315,800 69,675

18/12/2012 19,000 4,000

30/05/2013 65,200 5,200

03/04/2014 43,000 9,350

23/10/2014 33,150 5,200

557,150 106,925

(*)including voided stock options

5.3 Free allocation of shares during the financial year ended December 31, 2017

5.5 Percentage of capital held by employees

5.4 Allocation of stock warrants

The Shareholders’ Meeting is informed in greater detail of the transactions relating to the allocation of bonus shares via a spe-cial report drawn up in accordance with the provisions of Article L. 225-197-4 of the French commercial code and attached to this management report.

At December 31, 2017, no employees held more than 3% of the capital, in accordance with the provisions of Ar-ticle L. 225-102 of the French com-mercial code.

The Extraordinary Shareholders’ Meeting of June 23, 2017, approved a draft resolution to carry out a capital increase reserved for employees who are members of a company savings plan pursuant to Article L. 225-129-6 of the French commercial code.

The Shareholders’ Meeting decided:

1) That the Board of Directors shall have a period of 6 months from the date of the Shareholders’ Meeting to set up a company savings plan pursuant to Article L. 3332-1 et seq. of the French labor code;

The Shareholders’ Meeting is notified that no stock warrants were allocated over the 2016 financial year.

confirmed the exercise of stock op-tions resulting from the 2010, 2011, 2012 (first wave of August 31, 2012), 2012 (second wave of December 18, 2012) and 2013 plans occurring in December 2017 and amended the

Company’s Articles of Association accordingly.

No other stock option plans in force were exercised over the 2017 finan-cial year.

2) To authorize the Board of Directors, within a maximum of twenty-six months from the date of the Share-holders’ Meeting, to carry out a capital increase of a maximum nom-inal amount of €750,000 reserved for employees who are members of this plan and carried out in accor-dance with the provisions of Arti-cles L. 3332-18 et seq. of the French labor code and L. 225-138-1 of the French commercial code.

The Shareholders’ Meeting noted that these decisions entailed the shareholders’ waiver of their prefer-ential subscription right in favor of the employees for whom the capital increase is reserved.

The Shareholders’ Meeting noted that the share subscription price, in

view of the fact that the Company’s securities are admitted to trading on a regulated market, may not ex-ceed the average quoted prices of the share during the twenty stock market trading days preceding the date of the decision to open the subscription, or be less than 20% of this average (30% when the period of unavailability stipulated by the plan pursuant to Articles L. 3332-25 and 3332-26 of the French labor code is equal to at least ten years).

The Shareholders’ Meeting then conferred full powers on the Board of Directors to determine the other terms and conditions of the capital increase, and in particular to:

• set and determine the subscription opening and closing dates;

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Management report

The report from the Statutory Auditors on the regulated agreements and commitments referred to in Article L. 225-38 of the French commercial code will be read to you. We will ask you for your views on the terms of the said report.

In accordance with Article L. 225-35 of the French labor code, at its meeting of June 23, 2017, the Board of Directors renewed the authorization given, as and when needed, to the Company’s Chairman and Chief Executive Officer, with the ability to delegate to any person of his choice, to grant de-posits, advances and guarantees, in the Company’s name, for third par-ties, subject to dual limitations on duration and amount.

In addition to the annual authori-zation given by the Board on June 23, 2017, the shareholders’ meeting

The reader is reminded that the Ordi-nary General Shareholders’ Meeting of June 23, 2017, decided on the term of the statutory auditors and named as statutory auditors the firm KPMG, rep-resented by Mr. Grégoire Menou, and the firm DELOITTE ET ASSOCIES, rep-resented by Mr. Julien RAZUNGLES.

The term of office is granted for 6 years and shall terminate after the Ordinary Shareholders’ Meeting

C. Administration and control of the company

1) Agreements referred to in article L. 225-38 of the French commercial code

2) Deposits, advances and guarantees

3) Statutory auditors

authorized the Chairman and Chief Executive Officer, with the abili-ty to delegate to any person of his choice, to sign two specific guar-antees sought by a supplier (part of the BOE Technology group) of the company Pervasive Displays Inc. in Taiwan, a wholly-owned subsidiary of the Company, first, and by the company SES-imagotag GmbH, a subsidiary of the Company, second.

Those guarantees granted on Sep-tember 13th 2017 et December 15th 2017 are now entering the regulato-ry agreements scope since Decem-

ber 21st 2017, as the majority stakes of the Company are now belonging to BOE Smart Retail Co (part of the BOE technology group).

After hearing the conclusions of the statutory auditors on these agree-ments which pertains to “regulated” agreements

(Article L. 225-38 of the French commercial code), you will be asked to approve it as well as the agreements referred to therein.

called to rule on the accounts for the financial year ending December 31, 2022, and to be held in 2023.

In accordance with the new wording of paragraph 2 of Article L. 823-1 of the French Commercial Code intro-duced by Act No. 2016-1691 of De-cember 9, 2016, the Shareholders’ Meeting decided to amend article 26 of the articles of association of the company dealing with auditors

appointment and thus decided that the appointment of an Alternate Au-ditor s no longer necessary.

• set the issue price of the shares as required by law and current regu-lations, in particular by Articles L. 225-129 paragraph 2 and L. 225-129-2 paragraph 1 of the French Commercial Code, L. 225-138-1 of

the French Commercial Code and Articles L. 3332-18 et seq. of the French Labor Code;

• determine the number of new shares to be issued;

• record the completion of the capital increase, amend the Company’s ar-ticles of incorporation accordingly, and, in general, do everything re-quired by law and current regula-tions.

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financial REport

The terms of the members of the Board of Directors were renewed at the An-nual Shareholders Meeting on June 23, 2017, for a period of three years pursuant to the provisions of Article 11.1 of the Company’s articles of in-corporation, namely until the Ordinary General Shareholders’ Meeting meant to approve the statements for the 2019 fiscal year, slated to be held in 2020.

On December 21, 2017, the Board of Directors acknowledged, effective as of December 20, 2017, the resignation of:

• the company Pechel Industries Partenaires from its role as a mem-ber of the Board of Directors; which also caused the termination of the duties of Ms. Hélène Ploix (as a representative of Pechel Industries Partenaires) within the Company’s Accounting Committee, effective immediately;

4) Board members

5) Directors’ attendance fees and other compensation received by non-executive corporate officers

• mr. Jérôme Kinas from his role as a Director; which also caused the termination of the duties of Mr. Jérôme Kinas within the Company’s Appointments and Compensation Committee, effective immediately.

Therefore, at its meeting of December 21, 2017, the Board of Directors decided to appoint, temporarily and effective immediately:

• Ms. Xiangshun Yin to the role of Director and president of the Audit Committee, to replace the compa-ny Pechel Industries Partenaires, which resigned, for the remainder of the latter’s term;

• Mr. Xiangshun Yao to the role of Director and member of the Com-pensation Committee, to replace Mr, Jérôme Kinas, who resigned, for the remainder of the latter’s term.

The Ordinary General Shareholders’ Meeting which was held on February 6, 2018, ratified the nominations of Ms. Xiangshun Yin and Mr. Xiangjun Yao and also approved the nomina-tion of four other Directors, including one independent member, namely:

• Mr. Feng Bai as a Director;

• Ms. Fangqi Ye as a Director;

• Mr. Xingqun Jiang as a Director;

• Ms. Hélène Ploix as a Director.

Directors Fees 2017 in € Fees 2016 in €

Jérôme Kinas

Attendance fees 0 0

Other compensations 0 0

Péchel Industries represented by Hélène Ploix

Attendance fees 0 0


Renaud Vaillant

Attendance fees 20,000 € 20,000 €


Candace Johnson

Attendance fees 23,528€ 23,528 €


We remind you that, in accordance with the decision of the Shareholders’ Meeting of June 23, 2017 (Resolution 4), the Shareholders’ Meeting decided to set the annual maximum amount of directors’ attendance fees to fifty thousand (50,000) euros for the financial year ended December 31, 2017.

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Management report

At December 31, 2017 the Company has twelve subsidiaries (including eleven consolidated) whose activi-ty is set out in the first part of this Management Report.

The subsidiaries are all entities in which the Group directly or in-directly exerts control. Control is characterized by the power to gov-ern financial and operating policies.

SES-imagotag created its first two subsidiaries in 2011:

• STORE ELECTRONIC SYSTEMS ASIA PACIFIC PTE. LTD. in Singa-pore, wholly owned by the Compa-ny; whose name has been changed into SES-imagotag PTE, Ltd in 2017;

• STORE ELECTRONIC SYSTEMS LATINO AMERICA S de RL de CV in Mexico City, 99% owned by the Company; whose name has been changed into SES-imagotag mexi-co, Ltda in 2017.

In 2013, SES-imagotag created two more subsidiaries:

• STORE ELECTRONIC SYSTEMS, IN-CORPORATED in the United States in the state of Delaware, wholly owned by the Company (not con-solidated in 2016); whose name has been changed into SES-ima-gotag Inc; in 2017;

6) Subsidiaries and holdings • STORE ELECTRONIC SYSTEMS

ITALIA S.R.L. in the Milan region of Italy, wholly owned by the Compa-ny; whose name has been changed into SES-imagotag Italia SRL in 2017.

SES-imagotag created SYSTEMES ELECTRONIQUES POUR MAGASINS LTEE in Montreal, Canada in 2014. whose name has been changed into SES-imagotag Digital Solutions LTD in 2017.

In addition, pursuant to a final proto-col dated March 7, 2014, SES-imag-otag acquired 100% of the Austrian company IMAGOTAG GmbH in two stages, spread over a period of two years. On May 22, 2014, the Board of Directors confirmed SES-imagotag’s acquisition of 69.3% of the shares of IMAGOTAG GmbH, which constituted the first stage of the acquisition of this company. At its meeting of March 11, 2016, the Board of Directors ap-proved the exercise of SES-imagotag’s option to purchase the balance of IMAGOTAG GmbH shares.

In 2016, SES-imagotag acquired:

• 67% of FINDBOX GmbH in Germany; (consolidation limited to the bal-ance sheet at December 31, 2016) whose name has been changed into SES-imagotag Deutschland GmbH in 2017 and wholly owned since H2 2017;

• 60% of MARKET HUB, with the un-derstanding that the balance of MARKET HUB shares, or 40% of the capital, may be acquired in 2019.

Similarly, SES-imagotag decided to acquire 100% of the shares of PERVASIVE DISPLAYS Inc. in Taiwan. This acquisition was approved by the Shareholders’ Meeting of November 30, 2016, subject to the fulfillment of the conditions precedent, which were lifted by the Board at its meeting of February 16, 2017. This entity is therefore consolidated in 2017.

In 2017, SES-imagotag has created three new subsidiaries (none of them consolidated in 2017):

• SES-imagotag Netherlands B.V. in the Netherlands; fully owned;

• SES-imagotag Danmark A.P.S. in Denmark, fully owned;

• SES-imagotag Hong Kong Ltc in Hong-Kong; fully owned.

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financial REport

Summary of subsidiaries and holdings

% of shares held at December 31, 2017

Austria

ses-Imagotag GmbH 100%

Germany

ses-Imagotag deutschland GmbH 100%

Canada

ses-Imagotag digital solutions ltd 100%

DeNMARK

SES-imagotag Danmark APS 100%

USA

ses-Imagotag. inc. 100%

Netherlands

SES-imagotag Netherlands B.V 100%

Hong kong

SES-imagotag Hong Kong LTc 100%

Ireland

MARKET HUB TECHNOLOGIES LTD 52,08%

Italy

ses-Imagotag ITALIA S.R.L 100%

Mexico

ses-Imagotag mexico ltda 99%

Singapore

ses-Imagotag PTE. LTD 100%

TAIWAN

Pervasive Displays Inc 100%

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Management report

The Shareholders’ Meeting is informed of the share purchases by the Company’s directors or their relatives at December 31, 2017, by the following table:

7)) Information on transactions carried out by directors & relatives on securities

Name of directorsor their relatives

Number of sharesat December 31, 2017

Thierry GADOU Gadou in his capacity as Chairman & CEO,As well as his relatives

149,534

Other Managers/ Directors* 227,921

No injunctions or penalties for anti-competitive practices have been issued by the Competition Council with regard to the Company.

8) Injunctions or penalties for anticompetitive practices (article L. 464 3 i of the French commercial code)

* Managers and directors and / or historical shareholders of findox, GmbH or PDi.

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financial REport

D. 2017 Corporate Social Responsibility Report

SES-imagotag is the worldwide number one supplier for Electronic Shelf Labeling (ESL) solutions and digital price tags. Our focus is on constant innovation and developing solutions that will help reinvent and strengthen retail industry and other sectors. Our goal is to create value for customers, make opportunities for employees, provide benefit to shareholders, and take responsibility for our impacts on the environment and society. Since our formation we have fulfilled our social and envi-ronmental responsibilities while ex-panding our business internationally.

CSR and circular economy thinking is much more than just a legal reporting requirement. By continuing to embed this thinking into the Group we consider that we will:

• save financial and environmental costs and increase our quality;

• build closer and more enduring relationships with all of our stake-holders;

• through co-creation of service solutions with partners, generate more value from our shared activities;

• build more effective and efficient supply chains;

• have more motivated and engaged employees;

• be rewarded by our long term focus.

In this summary we want to highlight three areas of activity in 2017 that show how CSR and circular economy thinking is driving the business for-wards, in production, product inno-vation and reverse logistics.

In this field, we continue to invest in our product takeback processes and have seen excellent results in 2017, increasing the amount of labels recycled by 2.8% and labels repro-cessed and returned to the market by 61%. A key Group project for 2018 is to further our work in this area. Detailed process is described below in this report.

In 2017 BOE Technology Group took a majority shareholding in SES-imagotag. BOE Technology Group intends to provide its exper-tise to accelerate the development of an increasingly connected prod-uct line and support the international development of SES-imagotag’s product and services sales in the most dynamic regions (North America and Asia). As part of this, in 2017

we confirmed our plans to focus our production to a new 157,000 m2 smart manufacturing base in Chongqing, China. This intelligent factory integrates last technologies with full automated processes. As well as allowing for cost and envi-ronmental efficiency through inno-vative and high-tech production, this decision will also improve the environmental performance of our distribution. The factory is located on the “New Silk Road”, a freight rail route linking Chongqing with Duisburg, Germany.

Innovation

VUSION

Our product innovation contin-ues with VUSION, our latest con-nected and interactive digital tag fits every environment seamless-ly. Produced in a new and energy efficient streamlined. Thinner, adaptable, more energy efficient and longer lasting than any tag before. Additionally, for the first time we can provide an entire rail solution that is powered by mains electricity instead of cell batteries.

AdShelf

Brands and retailers can now design, manage and deploy fully synchro-nized digital advertising campaigns in-store. This collaborative platform connected to electronic labels now makes it possible to relay a campaign at the point of sale with a single click. Through Adshelf, stores are able to transform their shelves into active displays and avoid costs due to manual campaign synchronizations (paper printing, travel, installation phases…).

Pulse

Moreover, it’s important to under-line also PULSE which is our next

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Management report

generation Digital Retail Intelligence Assistant. PULSE identifies, analyses and monitors key trends in sales, stock and waste that go unnoticed in-store and lose the retailer money. It provides highly effective, actionable recommendations to improve margins and sales and empower retailers to cut waste dramatically.

Shelf watch / OOS

Stock and price automation and intelligence are essential to the fu-ture growth of SES-imagotag and will deliver true win-wins in terms of commercial and environmental performance. By enabling accurate real-time management of store in-ventory and on-shelf availability, major productivity and efficiency gains are now deliverable.

Below we report in detail on our CSR and circular economy activity in 2017.

Declaration

The methodology used to produce this report is in accordance with the provisions of Articles L.225-102- 1 paragraph 5, R.225-104, and R.225-105 of the French Commercial Code, the following is the declaration of the social and environmental data for SES-imagotag from January 1 to December 31, 2017.

Scope of reporting

For social indicators, the scope is for the entire SES-imagotag Group.

Then the following indicators only cover the company SES-imagotag S.A., based in France. This company accounts for 49% of Group employees:

• Organization of social dialogue

• Absence rates

• Social dialogue, employee infor-

mation, consultation and negotia-tion procedures

• Collective agreements

• Health and safety conditions

• Work accidents and occupational illnesses

• Local economic and social im-pacts of business in terms of em-ployment and regional develop-ment, as well as on neighbouring and local populations

For environmental indicators, the scope includes SES-imagotag S.A unless otherwise stated. Other enti-ties recently acquired by the Group were excluded for this fiscal year as it is not yet possible to collect the necessary detail. Note that we plan to remedy this in 2018.

Information related to fair competi-tion covers the SES-imagotag Group.

Grenelle II

Published on 12 July 2010, the Grenelle II Law presents concrete actions needed for France to reach the de-fined 2020 sustainability targets in six main sectors: buildings and urbani-sation, transport, energy and climate, biodiversity, health and governance. The Law requires companies to report on their environmental and social in-formation and actions.

The Ten Principles of the UN Global Compact

Corporate sustainability starts with a company’s value system and a principled approach to doing busi-ness. This means operating in ways that, at a minimum, meet funda-mental responsibilities in the areas of human rights, labour, environment and anti-corruption. Responsible businesses enact the same values and principles wherever they have a

presence, and know that good prac-tices in one area do not offset harm in another. By incorporating the Ten Principles of the UN Global Compact into strategies, policies and proce-dures, and establishing a culture of integrity, companies are not only upholding their basic responsibili-ties to people and planet, but also setting the stage for long-term success.

The Ten Principles of the United Nations Global Compact are de-rived from: the Universal Declaration of Human Rights, the Internation-al Labour Organization’s Declara-tion on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption.

The Group intends to join the Com-pact in 2018.

Mapping of Grenelle II and the UN Global Compact

To make the information covered by Article 225 of the Grenelle II Law more readily understandable in the context of the UN Global Compact, a summary table is included below:

66

financial REport

F1 Total workforce and breakdown of employees by gender, age, and geographic areaF2 Hiring and terminationsF3 Remuneration and changes

F4 Organization of work hoursF5 Absence rate

F6 Organization of social dialog, particularly employee information, consultation and negotiation proceduresF7 Statement of collective agreements

F8 Occupational health and safety conditionsF9 Record of agreements signed with labor unions or personnel representatives relating to occupational health and

safetyF10 Work accidents, particularly their frequency and severity, and occupational illnesses

F11 Policies implemented for trainingF12 Total number of training hours

F13 Measures taken for gender equalityF14 Measures taken for employment and integration of people with disabilitiesF15 Policy of fighting discrimination

F16 Respect for the freedom of association and the right to collective bargainingF17 Elimination of discrimination in respect of employment and occupationF18 Elimination of forced or compulsory laborF19 Effective abolition of child labor

EMPLOYMENT

GENERAL POLICY

PROMOTION OF AND ADHERENCE TO THE FUNDAMENTAL CONVENTIONS OF THE ILO

ALL ACTIONS TAKEN TO PROMOTE HUMAN RIGHTS THROUGH THESE COMMITMENTS

EQUAL TREATMENT

FAIR COMPETITION

TRAINING

SUBCONTRACTORSAND SUPPLIERS

PROTECTION OF BIODIVERSITY

HEALTH AND SAFETY

RELATIONS WITH STAKEHOLDERS

CLIMATE CHANGE

LABOR RELATIONS

LOCAL ECONOMIC AND SOCIAL IMPACTS

CIRCULAR ECONOMY

ORGANIZATION OF WORK

POLLUTION

F20 Company measures to take into account environmental issues and, if applicable, environmental evaluation or certification measures

F21 Actions for training and informing employees about environmental protection F22 Resources dedicated to preventing environmental risks and pollution F23 Amount of reserves and guarantees for environmental risks

F24 Measures of prevention, reduction or compensation for discharges into air, water or soil with serious consequencesfor the environmentF25 Accounting for noise pollution and any other form of pollution specific to an activity

Waste management

F26 Measures for prevention, recycling, reuse and other forms of repurposing and elimination of wasteF27 Actions to fight food waste

Sustainable use of natural ressources

F28 Consumption of water and use according to local restrictionsF29 Consumption of raw materials and measures taken to improve efficiency of their useF30 Consumption of energy, measures taken to improve energy efficiency, and use of renewable energy sourcesF31 Land use

F32 Significant sources of greenhouse gas emissions generated by the company’s business, particularly through the useof the goods and services that it produces

F33 Adaptation to the consequences of climate changeMeasures taken to preserve or develop biodiversity

G35 In terms of employment and regional developmentG36 On local or neighbouring populations

G37 Conditions of dialogue with stakeholdersG38 Partnerships and sponsorships

G39 Taking into account social and environmnetal issues in procurement policyG40 The importance of subcontracting and taking into account social and environmental policies of suppliers and subcontractors

G41 Actions taken to prevent corruptionG42 Measures taken to promote consumer health and safety

Hum

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s re

late

d in

form

atio

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FORM

ATIO

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COR

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OMM

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ENTS

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Envi

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rela

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info

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1 The company has no impact on these issues

Table of correspondence with article 225 of the Grenelle II Act and UN Global Compact

67

No direct equivalentNo direct equivalentNo direct equivalent

No direct equivalentNo direct equivalent

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargainingPrinciple 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining


No direct equivalent


Principle 6: the elimination of discrimination in respect of employment and occupationPrinciple 6: the elimination of discrimination in respect of employment and occupationPrinciple 6: the elimination of discrimination in respect of employment and occupation

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargainingPrinciple 6: the elimination of discrimination in respect of employment and occupationPrinciple 1: Businesses should support and respect the protection of internationally proclaimed human rightsPrinciple 5: the effective abolition of child labour

Principle 7: Businesses should support a precautionary approach to environmental challengesPrinciple 8: undertake initiatives to promote greater environmental responsibilityPrinciple 9: encourage the development and diffusion of environmentally friendly technologies







Principe N°4 : the elimination of all forms of forced and compulsory labourPrincipe N°5 : the effective abolition of child labourPrincipe N°8 : undertake initiatives to promote greater environmental responsibility

Principe N°10 : Businesses should work against corruption in all its forms, including extortion and bribery

Principe N°1 : Businesses should support and respect the protection of internationally proclaimed human rights; andPrincipe N°2 : make sure that they are not complicit in human rights abuses

Management report

68

financial REport

Exclusions

Certain data on pollution was ex-cluded as it was considered not to be directly pertinent in terms of the business activities of SES-imagotag:

• Land use;

• Protection of biodiversity.

In 2017, as in previous fiscal years, as there were no significant risks in terms of the environment, SES-imag-otag did not set aside any reserves or guarantees and paid no damages for environmental accidents.

Decree 2016-1138 of August 19, 2016, issued in application of Article L.225-102-1 of the French Commercial Code and relating to environmental infor-mation included in the management

Since being founded in 1992, all of the SES-imagotag innovations and know-how have come from the expertise and commitment of our people.

NB: a scope effect is to be noticed in 2017 with the Taiwanese, Irish and German entities for 80 people.

reports of companies, now requires that companies identify major sourc-es of greenhouse gas emissions gen-erated during their operations, spe-cifically arising from the use of the goods and services they produce. Under these conditions, the Group already reports its emissions arising from parts of its supply chain and business travel.

External audit

The reporting tools and procedures, as well as a selection of relevant indi-cators, were subject to external audit-ing by Deloitte.

The conclusions of this audit are available in chapter 4 of the Reference Document.

1. 1. Human capital: the critical resource for SES-imagotag

Dec 31, 2017 In % of workforce Dec 31, 2016 In % of workforce

Number of permanent contract employees 363 97% 260 96%

Number of fixed-term contract employees 7 2% 5 2%

Number of apprentices 5 1% 6 2%

Total Workforce 375 100% 271 100%

69

As of December 31, 2017, the average age of an SES-imagotag Group employee was 37 years old and the average company tenure was 4.8 years, stable compared to last year.

Age evolution from january 2017 to december 2017

Total workforce and breakdown of employees by geographic area

over 60

55-59

50-54

45-49

40-44

35-39

30-34

25-29

Less than 24

10% 20% 30% 40% 50% 60% 70% 80% 90%0%

S2 2017S1 2017

Dec 31, 2017 % of the workforce Dec 31, 2016 % of the workforce

France 184 49% 179 66%

Europe (other than France) 118 31% 80 29%

Americas 15 4% 10 4%

Asia 58 15% 2 1%

TOTAL 375 100% 271 100%

Management report

70

financial REport

Originally the company employed and deployed national sales teams to drive business growth.This had been the case for France, Italy, Spain, Germany, Austria, UK…. In driving its international markets, SES-imagotag also makes use of existing and well established local distributors in each of the new markets.

New installation projects are mainly sub-contracted, with only the testing phase requiring the presence of SES-imagotag teams. Once the operation of the system has been verified, the rest of the project is either handed over to the teams of the partner distributor or handed over to subcontractors (in the form of delegated person-nel) for some historic markets like France or Italy.

i. Developing skills through training

SES-imagotag is committed to pro-viding continuous employee train-ing. With the Group operating in a particularly innovative market sec-tor, it aims to ensure that each of its employees has the necessary means to grow within the company and the industry, and to fully develop their skills and expertise.

37% of SES-imagotag employees received face to face training in 2017 vs. 42% in 2016, with an average of 0,69 days of training per employee trained, compared with 2.5 days in 2016 (excluding the e-learning plat-form). This can be explained by the increase of the e-learning sessions and the structure of the 2017 training sessions: many short-term training sessions (1-2 hours maximum) to a larger audience.

Employee reviews, combined with valuable information from annual in-terviews, have helped better identify the training needs of our employees, relative to the challenges facing the

In accordance with its development plan, SES-imagotag further strength-ened its teams in fiscal year 2017. This growth was mostly in its inter-national business teams.

2017 2016

recruitments 92 79

departures 68 39

NB: a scope effect is to be noticed with the Taiwanese (51 people), Irish 7 (people) and German (22 people) entities for 80 people.

Among employee departures in 2017, they were 4 terminations, 46 resignations and 4mutually-agreed departures. The remainder were fixed-term contracts, deceased or trial periods that ended.

In total, 1,411 days of absence were counted in 2017 (versus 1,426 in 2016).

1. Increasing the motivation and skills of our employees

Group. This has helped the Group establish individual training plans that are more relevant, focussed and diverse.

In 2017 a total of 2660 training hours were delivered (excluding training via the e-learning platform).

In 2016 the Group created an e-learning platform for all employees. This platform went on-line in Septem-ber 2016, offering 6 programs with 144 modules available in English and French. All of the programs were cre-ated by company employees, experts in their subject matter, assisted by the Human Resources Department, which supervised the overall project. In 2017 the platform was expanded to include modules on the Group code of ethics and personal data protection.

In 2017, 150 people followed tran-ings on the e-learning platform : it amounts to more than 594 hours of training.

In addition to training provided internally, training costs paid to

external organizations amounted to € 113 651, compared to €77,969 in 2016 i.e. a 46% increase in funds dedicated to external training.

The training is purposefully focused on supporting the Group’s policy of tech-nological innovation, industrialization, and international growth (training on trading skills, SES-imagotag solutions, and foreign languages).

All categories of employees had access to training in 2017.

71

ii.Recognizing and attracting talent while maximizing em-ployee well-being within the company

a. Supporting positive social dialogue

SES-imagotag maintain proactive dialogue with all its stakeholders, most particularly with its employees. Except in specific cases, SES-ima-gotag rarely establishes its own collective agreements, instead the Group applies industry-wide agree-ments under the wider metallurgic industries collective agreements. These agreements cover most of the

CategoriesNumber of employees

in 2017% of the global work-

forceNumber of employees in

2016% of the workforce

in 2016

Total 138 37% 114 42%

rights of employees in terms of con-ditions and organization of work.

In accordance with French law, worker representative elections are held on a regular basis. The most recent elections took place on De-cember 16, 2013, and led to the establishment of a new Unified Per-sonnel Delegation made up of 10 management- level employees and 3 non-management employees.

The Employee Representative Committee meets once every two months. It is in-formed and consulted on strategic and organizational matters that affect

Group employees. This has meant that for many years now, thanks to the open and productive social dia-logue, the mandatory annual negoti-ations have resulted in statements of agreement, such as the agreement to move the Company’s headquarters in 2015 or the project to have BOE Technology Grop as a new major stakeholder in 2017.

The Health, Safety and Working Conditions Committee (HSWCC), with 3 members, meets every quar-ter and is a key stakeholder in cre-ating and leading our safety at work policy.

Safety

IT

Sales

Languages

Solution SES-imagotag

Management

Commercial training

Qualité

33%

34%

3%

8%

7%

0%

10%

3%2%

Communication and personal development

Management report

72

financial REport

In 2015, a survey on the prevention of psycho-social risks was co-organized by SES-imagotag in France and the HSWCC. The results of this sur-vey were presented to the Employee Representative Committee, the HSWCC, and the Management Committee. A new survey has been organized in 2017 for comparison and triggered a new plan for improvement

The Group continues to promote more social events to help improve interactions between all the teams. “Friday lunches” help pass on key Group messages to employees over a meal. The “Junior Team”, created in early 2016, allows new young em-ployees (recent university graduates with less than 2 years’ experience) to meet one evening a month and find out about the various jobs that exist within the Group, through visits (to stores, warehouses, work sites, etc.) and presentations.

Sporting and cultural activities are also regularly organized to help pro-mote team cohesion (e.g. photo, video contests, company fun-runs, soccer tournaments, etc.).

At the end of every year, there is an annual gala for all e that brings everyone together to learn about and celebrate successes during the year.

A Group wide cloud-based social network also allows all employees to post significant events relating to their day-to-day work and maintain contact with their co-workers abroad.

A study of psycho-social risks was conducted in 2015 in partnership with the French entity’s insurer, Malakoff Médéric. A comparison was carried out with national and inter-national data to identify any actions needed. Each quarter, this action plan is included on the Executive Committee Agenda. There are two objectives here: encouraging in-ter-team communication and pro-viding high-quality training to all.

b. Compensations and Benefits

The Group has experienced rap-id growth since 2012. This upward

trend for SES-imagotag’s sales and financial performance is directly linked to the level of commitment and expertise of our teams. As such, it is essential that their rewards reflect their contributions to the Group’s growth and success.

Change in remuneration

Pay increases are individually nego-tiated.

Benefits paid

Since 2008, several stock-option distribution plans have been imple-mented by the Group. As of December 31, 2017, six stock-option distribution plans were still valid.

In 2016, bonus allocation plans were introduced in the context of the au-thorization given by the Combined Shareholders’ Meeting of November 30, 2016:

The bonus share plans subject to per-formance conditions implemented by the Company have as their main goal the involvement of employees and managers who play decisive direct or indirect roles in the Company’s per-formance, results, and the creation of value. These supplementary com-pensation mechanisms, which are often used in the corporate world, have become essential tools for attracting and keeping the most talented employees, especially within companies like SES-imagotag that are international technology companies with strong growth.

SES-imagotag has now entered a new stage in its development with its “Leap-frog 2020” strategic plan, which aims to accelerate the Company’s global growth, especially in the United States and Asia, and to attain average annual growth of +30% between 2015 and 2020, with sales of €400-500 million by 2020.

In order to maximize our chances of reaching these ambitious goals, we put a plan into place, including managers and employees who make signifi-cant contributions to the Company’s performance as well as new talented

individuals whom we hope to attract as part of our technological and international development, a pop-ulation representing 15% to 20% of all personnel. Along with this plan, the incentive agreement was sig-nificantly strengthened, focused on similar objectives, and open to all legally eligible employees. This is a communal initiative that affects all employees and aims to make mo-tivation the primary driver of the Company’s performance.

The SES-imagotag Group Board of Directors agreed a profit-sharing agree-ment for employees at its meeting on May 15, 2005. This agreement was signed on June 7, 2005, and re-mains in force. On December 21, 2012, an amendment to this profit-sharing agreement was signed in order to incorporate a company savings plan created and managed in accordance with Articles L.3332-1 et seq. of the French Labor Code.

In 2016, SES-imagotag S.A. signed a new incentive agreement for the period from 2017 to 2019 which provides for doubling the potential incentive bonus allocation com-pared to the previous agreement. The incentive is open to all employ-ees with a French employment con-tract with the company, provided that they have been with the com-pany for at least three months as of the last day of the reference fiscal year.

SES-imagotag Italia also benefit from an incentive agreement since 2016.

c. Facilitating professional growth

The Group conducts biannual in-dividual interviews. These inter-views evaluate employee perfor-mance and set objectives for each employee in accordance with the company’s strategy. In 2016 and 2017, SES-imagotag rolled out the “Foederis” tool, a platform that cre-ates a paperless biannual individual interview process. At a time of rapid international growth, this platform makes it possible to standardize practices across the Group, and ensure

73

a consistent and fair application of the policy.

To support and maintain strong ex-ternal growth, creating team cohe-sion has become a priority for the SES-imagotag Group. Within a dy-namic and stimulating work envi-ronment, it is important to establish an innovative and collective spirit that enables the company to suc-cessfully face the challenges it has set itself.

Being able to make decisions quickly to fit the Group’s growth ambitions within a highly innova-tive industry requires continuous, regular, dynamic training to help teams stay on track and make an optimum contribution to its per-formance. The e-learning platform makes it possible to update training content quarterly and have it avail-able to all employees as quickly as possible. A Managerial Committee that meets monthly was also estab-

lished to help managers sort out the information they need to share with their teams. Going paperless for an-nual evaluation interviews also make it possible to process all employee requests more quickly.

A structured, equitable organization of work for all

In France, in 2001, the Group imple-mented the current rules applying the provisions of the French law on re-ducing work hours. Within this frame-work, the work week is 37 hours, which, when factoring in compensa-tory days off (French “RTT” days to reduce the average number of work hours), brings the annual number of work hours to 1,607.

A company agreement on work con-tracts for installers and team leaders was established in order to define their rights, particularly for overtime and night work. Overtime worked by these teams is balanced with com-

pensatory time off. Travel time above an hour and a half is counted as work time. This installation service is not covered by Code du travail - Article L3122-2, a French law that covers workers operating in difficult work conditions.

In 2015, all personnel representatives gave their support for establishing an agreement covering the work contracts of installers. This agree-ment demonstrates the commitment of management to better support and organize the work of our mobile teams who install our solution for our customers. This agreement remains in place.

First level telephone customer sup-port is provided by an external company, Webhelp. SES-imagotag teams provide the support solutions for problems that require higher lev-els of expertise.

2. Ensuring safety for our teams and the teams of our subcontractors

i. Health and Safety Policy

The safety of its employees is a key priority for SES- imagotag. In the collective policy, updated each quarter by the Group, a certain number of risks were identified ac-cording to the tasks and locations of employees. Among the most critical risks were risks related to isolation, risks associated with working at heights, night shifts and road risks.

The Group has established a con-tinuous improvement plan to place safety at the core of its corporate culture. SES-imagotag has invested in high-end individual protective equipment and in vehicles adapted for transporting equipment. It has established enduring partnerships to get the best work site equipment possible, and to ensure the mainte-nance of this equipment.

The Group has continued its efforts by creating a supportive safety

policy with mandatory digital tools and procedures on iPads (e.g. Risk prevention plans, specific safety and health-protection plans, pre-work equipment checks, individual protective equipment checks).

In order to minimize risks, SES-ima-gotag limits the use of temporary workers and has established a safety policy specifically for them. When the Group uses sub-contrac-tors, they are subject to the same safety guidelines as Group employ-ees. These guidelines are sent di-rectly to the sub-contracted work-ers by their employment agency. This aspect is covered in the legally binding signed contract. Wearing of individual protective equipment (IPE) is verified, as is all the equipment before work starts.

This mandatory inspection is con-ducted by work-site managers us-ing a checklist, and adherence is checked through regular audits.

ii. Health and safety training and tracking of the frequency and severity of accidents

A large number of training sessions were held in 2017 to support the im-plementation of the new tools and mandatory procedures and raise awareness among the most at-risk teams (e.g. safety trainings, CACES and ISO 9 certifications,...).

The e-learning platform includes a comprehensive program on installa-tions, providing additional support for teams relating to the safety pro-cesses for installation work in stores. The training module on risks of the road was made available to teams in 2017.

In 2017, the company recorded 0 work accidents which resulted in 0 days of absence from work. 0 case of an occupational illness was declared in 2017.

Management report

74

financial REport

SES-imagotag follows applicable regulations and agreements and is committed to offering all employees equal opportunities for recognition and career development, no matter their background, gender or beliefs. SES-imagotag does not tolerate any form of discrimination.

The Group also forbids any form of dis-crimination in hiring. Employees are hired solely on the basis of their educa-tion, their professional experience, and the quality of their interviews.

With multiple nationalities represent-ed among its employees, SES-ima-gotag is particularly mindful of the diversity of its teams and of the rep-resentations of the cultures to which these individuals belong.

i. Ease of access to work for people with disabilities

The headquarters in France allow ap-propriate disabled persons access.

SES-imagotag is actively engaged in the social and professional integra-tion of adults with disabilities. The Group has been collaborating on this with the French Eragny ESAT (Val-d’Oise 95 province) since the 2000’s.

ESATs are Établissements et Ser-vices d’Aide par le Travail (Sup-port-through-Work Establishments and Services) for people with dis-abilities. The mission of ESATs is to help people who cannot work in an ordinary environment get a job. The ESAT workers perform various tasks, particularly marketing and screen printing for labels. The budget ded-icated to this subcontracted work was €105,000 in 2017, compared to €83,000 in 2016.

The Group also directly employs 1 person with a declared disability.

ii. Gender equality

With a Board of Directors composed of 3 men and 2 women. SES-imagotag actively works for women’s repre-sentation in management bodies.

Dec 31, 2017% of the work-

forceDec 31. 2016

% of the work-force

Number of women 107 29% 63 23%

Number of men 268 71% 208 77%

total 375 100% 271 100%

iii. Encouraging youth employment

Through a number of partnerships with schools and universities in Paris and the surrounding region, the Group has a proven commitment to helping younger generations gain access to the workplace, offering apprenticeship and internship programs. In 2017, 22 interns and 8 apprentices (of whom 5 were still with the company on December 31, 2017) were welcomed into the organization.

Partnership with Centrale Supelec

Since 2015 SES-imagotag part-ners with the combined Ecole Centrale-Supelec, increasing the Group’s visibility to students of this school through events such as round-table and forum discussions.

The Group regularly hosted ap-prentices from the Ecole Centrale Paris and one of them has since been recruited at the end of his apprenticeship. In 2017, the Group strengthened its ties with the Ecole Centrale-Supelec by recruiting four interns from the school.

Partnership with Audencia Business School in Nantes.

With the goal of improving the Group’s visibility among business school stu-dents, SES-imagotag decided in 2015 to partner with Audencia Nantes, particularly with the Business Devel-opment Major program. This part-nership helps develop special rela-tionships with students taking this program through lectures and other educational events with the goal of creating a dialog around the innova-tions of the SES-imagotag group. As a result and since then, 3 interns from the school have already worked with SES-imagotag since the partnership was established. We also recruited one student from this school with a permanent contract and we trans-formed one of the interns into a VIE contract at our American subsidiary.

Partnership with the Université de Technologie de Compiègne (UTC)

With a growing need to recruit workers with technical skills, in 2016, SES-imagotag developed a

3. Promoting diversity within our teams

75

Partnership with ESIEE, the Engineering School of the Chamber of Commerce and Industry for the Paris/Ile-de-France region

Adherence to ILO Conventions is clearly stipulated in contracts with our suppliers and subcontractors. The industrial subcontracting facilities are regularly visited by the sales and procurement teams, which enables monitoring to ensure that child and forced labor are not being practiced.

The Group does not have a separate dedicated environment function. But, the Group, through its operational and R&D teams, is increasingly committed to environmental concerns. And the Group does is already working to increase the company focus on environment and circular economy matters through 2018 and beyond.

No environmental complaints were brought to the attention of the Group

In 2016, SES-imagotag carried out a partial evaluation of the carbon footprint of its business. According to this initial assessment, which the

1. Measuring and managing the carbon footprint of our business

4. Promoting human rights and the Fundamental Conventions of the International Labour Organization (ILO)

2. Managing the environmental impact of our business

new partnership with the Compiègne Technology University. Thanks to this partnership, the Group was able to take part in a forum organized at the school. This led to the Group receiving an intern from UTC in 2016. This led to the Group receiving three interns from UTC in 2017.

And our subcontractors have long established processes in place to ensure human rights are respected, for example Flextronics is a member of the Global Business Initiative on Human Rights.

SES-imagotag also recently developed a partnership with the ESIEE school. Through this partnership, SES-imagotag was able to participate in a forum organized at the school, which led to the recruitment of the first intern from ESIEE in 2016.

in 2017, either for pollution or any other disturbance.

At the end of 2014, the Group’s head-quarters were moved to the Via Verde building, which is French “High En-vironmental Quality” (HQE) Excel-lent-level certified, as well as French “Low Consumption Building” (BBC) certified. This building guarantees increased comfort for employees in terms of lighting, ergonomics, social

spaces and other facilities. On the sides of the building most exposed to the sun, motorized shades are automatically adjusted according to the sunlight. Additionally, the surface of the windows has a solar-filtering treatment. Sensors evaluate the levelof lighting and detect human presence before automatically adjusting lights.

The Paris Nanterre headquarters.

Group will advance in 2018, emissions related to logistics were by far the largest source of carbon (see section “Transport of our label systems”).

Management report

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financial REport

As part of their research and in-novation work, the SES-imagotag teams are increasingly incorpo-rating environmental and energy efficiency thinking into their new solutions. Energy efficiency prod-ucts are a priority for the Group and represent a key factor in differen-tiating SES-imagotag in the mar-ket. The expertise and skills of the R&D teams have made it possible to achieve reduced levels of energy use compared to alternative tech-nologies already on the market.

Working to decrease the environmen-tal impact of its digital labels allows SES-imagotag to assume the role of leader in the market, as well as de-livering operational excellence to its customers. Digital labels have varying environmental impacts depending on the stages of their life cycle.

i. The production of ESL’s

All production facilities are ISO 14001 certified, a mark of quality in managing environmental risks for industrial facilities. Half of the production phase for the labels is subcontracted to Hong Kong-based companies with facilities in main-land China, in the Shenzhen region. Half of production is subcontracted in Eastern Europe to reduce delivery times for customers, also reducing the number of kilometers traveled.

Major components suppliers to the Group are signatories to the UN Global Compact and the Electronic Industry Citizenship Coalition (EICC) Code of Conduct. They have in place a longstanding programme of CSR and environmental initiatives. Epson Semiconductor, another major supplier, have similar programmes in place. They follow the Global Reporting Ini-tiative Sustainability G4 Guidelines, and are certified to ISO 26000, an International Standard that provides guidance on socially responsible behavior for organizations.

Our Group´s main assembly part-ners have a long established CSR

2. Limiting the environmental impact of our products

programme. The scope of their en-vironmental management system extends far beyond what is typically found in an ISO14001:2015 system, including such elements as prod-uct environmental compliance and e-waste management.

The products that make up the SES-imagotag product offer (elec-tronic tags, transmitters and rails) require the use of electronic com-ponents and plastic. Materials are supplied by market leaders, who all have environmental management systems within their production systems. Equipment is collected, sorted and repaired or returned to the production circuit to prevent any loss of materials and to support the principles of the circular econo-my (see section “End of equipment life cycles”).

ii. Transportation of ESL’s

The environmental impact of the transport of our electronic label sys-tems is predominantly related to CO2 and other air emissions. The carbon footprint varies dependent on the transport mode used. There are two transportation flows:

• upstream freight that involves the transport of components to as-sembly facilities or transport of finished products to logistical centers;

• downstream freight that involves sending packaged installation products and materials to customers.

A number of haulage companies are currently used to cover all transporta-tion segments, i.e. package delivery, pallet delivery and chartering. Ship-ping container transportation is only used for export outside of Europe.

Kuehne+Nagel transports a signifi-cant share of the Group’s products. Kuehne+Nagel are ISO 9001 quality-management, ISO 14001 environ-mental-management and OHSAS 18001 occupational health and safe-

ty certified. They are committed to selecting suppliers and service pro-viders according to their environ-mental policies. Kuehne+Nagel uses a questionnaire to survey these and measure their environmental perfor-mances. Among the questions in the survey, the carrier must provide de-tails of empty journeys, the average age of their vehicle fleets, and any sort of actions they’ve taken to reduce fuel consumption, exhaust emis-sions and noise pollution. Kuehne + Nagel ranks amongst the 25 more sustainable companies according to the SXI Switzerland Sustainability 25 index.

Greenhouse gas emissions related to logistics managed by SES-ima-gotag France, for the entire period from January to December 2016, amounted to 2,601 metric tons of CO2 equivalent and 575 metric tons in 2017 due to a dramatic decrease in airfreight from Asia.

As part of its plan for industrial re-gionalization, the SES-imagotag group subcontracted in Eastern Europe for the equivalent of 30% of its sales revenue. Having this production in Europe helps considerably reduce transportation and the number of kilometers travelled between pro-duction facilities and the stores of customers.

The upcoming move to a Group owned dedicated production facil-ity offers up future improvements in our ability to measure and man-age our energy use and associated environmental impacts. The smart manufacturing base in Chongqing, China will allow, starting in 2018 and onwards, for cost and environ-mental efficiency through innova-tive and high tech production And it will improve the environmental performance of our transport and distribution, with factory is located on the “New Silk Road”, a freight rail route linking Chongqing with Duisburg, Germany.

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iii. Installation and use of ESL’s

The Group is consistently working to optimize the energy use of our elec-tronic shelf labels (ESLs). The increase in uses for our ESLs, while keeping the same lifespan (minimum 5 years), has led to significant efforts on the part of the R&D teams to respond to these new uses.

Our R&D teams have also continued their work to optimize energy consumption of labels to respond to their increased usage due to accelerated price changes and increasing amounts of management data becoming available in stores. The goal is to substantially improve the lifes-pan while further improving communi-cation speeds. To do so, the R&D teams:

• Study energy consumption pro-cesses and the phenomena that can increase communication speeds;

• Develop algorithms for labels to selectively go online, transmit and go into standby;

• Develop image compression and decompression algorithms;

• Optimize the processes for memory allocation and reallocation.

The Vusion range, SES-imagotag’s newest digital tags, is no exception to this rule, and will even offer a new rail-powered solution, resulting in battery-less labels powered by elec-trified rails mounted on shelves. This allows the Group to offer different and adaptable solutions to retailers, whilst ensuring a low energy-con-sumption rate.

Furthermore, the SES-imagotag solution enables retailers to adopt paperless strategies for the informa-tion displayed in-store. In addition to price automation, the first ben-efit of ESL systems, digital tags al-low shoppers to interact with labels in-store by using their smartphones through NFC or QR codes. They thus

have access digitally to rich con-tent at the shelf, such as customer reviews or nutritional information. The Group estimates at 8 billion the number of price changes operated every year through our system, re-sulting in a substantial paper waste reduction.

Energy consumption of data centers

Many of the Group´s customers are small and medium-sized compa-nies, many of whom may not have an IT department. SES-imagotag has developed a product offer for hosting customer data, as well as managing updates to information sent to labels and enabling manage-ment of associated inventory.

Thanks to the company’s “Private Cloud Data Center” solution, created in collaboration with Microsoft Azure, the Group can guarantee on-demand energy consumption. To limit the financial and energy impact asso-ciated with this infrastructure, the servers are virtualized - multiple virtual servers are at work on the same physical server. On average, only 15% of a server’s capacity is used. Thus, putting multiple servers on the same machine provides sig-nificant flexibility and modularity in how usage is divided, while considerably increasing energy efficiency of equip-ment and providing highly secure operations available 24/7.

iv. End of life

Recycling of batteries for our labels

Electronic labels manufactured and sold by SES-imagotag for stand-alone shelves are powered by batteries. The application of Article R. 543-130 of the French Environmental Code requires producers of industrial bat-teries and capacitors to organize the free collection of the items producers have sold on the French market once they have been depleted.

SES-imagotag has partnered with Corepile to collect and recycle all

of its spent batteries. With 35,000 collection locations, Corepile is the leading company in France for collecting and recycling batteries and capacitors. Corepile has been ISO 14001 certified since 2004 and recycles 100% of the batteries that it collects. Corepile recycled over 135 tonnes on our behalf in 2017.

In Austria, collection and recycling of batteries is done by Elektro Recycling Austria, a subsidiary of Altstoff Recycling Austria AG, a company specializing in recycling e-waste and batteries since 2005. In Italy, collection and recycling is provided by the environmental organization CONAI.

Among the various existing categories of batteries, the Group makes particu-lar use of lithium-ion batteries. To be recycled, these batteries are sent to various industrial companies for processing.

Our goal of “zero unrecycled waste”

As part of its move toward a circular economy, in 2014, SES-imagotag began implementing an action plan to ensure the complete recyclability and reuse of its equipment.

With this goal, SES-imagotag has partnered with Ecologic to collect old or broken labels, modems and routers from each customer, trans-porting them directly to an ANOVO recycling center. ANOVO is one of the leading players in the sustainable management of electronic product life cycles. Each year, this company brings new life to more than 20 million products throughout the world.

ANOVO then sorts the components of the used equipment and makes cosmetic repairs or sends off those components that are to return to the production chain.

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Remanufacturingusing production subcontracting (China)

Service requests

• Unused labels

• Update adhesive overlays

• Damaged labels

• Dead labels

• Étiquettes obsolète

• Piles usagées

Recyclingof used batteries

Requestto pick uplabels

Labelrepairing

Drop of at recycling center

Sorting of recyclable

componentsCustomer feedback

• Replacement of batteries

• Replacement of adhesive overlays

• Reprogramming of labels

Stores& Supermarkets

VOLUME Not eligible Eligible Total

1- Labels collected and recycled in 2017 96,967 565,556 662,523

2- Labels sent for reprocessing in 2017 - 702,606 702,606

3- Labels reprocessed in 2017 - 597,897 597,897

Comparing 2017 to 2016, the Group has increased collections for recycling by 2.8% and labels reprocessed and returned to the market by 61%.

During 2017, SES-imagotag further improved tracking of label waste. When customers place orders they are offered a free GreenBox. They can then put their old and broken labels in this box. Once the box is full (around 100 labels), the customer

can submit a pick-up request for their labels to be directly sent to an ANOVO recycling center.

All products delivered by SES-imagotag comply with international directives relating to the use and transport of

hazardous substances in electric and electronic equipment (RoHS Directive).

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Our service, administrative and lo-gistics related activities have envi-ronmental impacts, particularly in terms of the energy consumption of our buildings, our business travel, and our use of paper and cardboard.

3. Limiting the impact of our administrative, commercial, and logistical activities

Energy use

In 2014, SES-imagotag consciously decided to look for an environmentally friendly designed building for its head-quarters. The Via Verde building has the highest environmental certifications, with primary energy consumption (heating, ventilation, and air condition-ing) of less than 40 kWh/m²/year, for optimal financial performance.

The logistics center based in Cergy, France also uses natural gas, mainly for heating buildings. In 2017, 201 MWh of natural gas were consumed compared to 245 last year.

Energy consumption of the head-quarters building in France totals 100 MWh compared to 84 last year as number of employees increased in the meantime.

Reducing CO2 emissions related to

employee journeys.

Reducing CO2 emissions re-lated to employee journeys

Business vehicles

The vehicle fleet in France, Italy, Germany is currently made up of around ninety vehicles, eighty of them being classified with emis-sions per vehicle set at/ under 120 g CO2e/km. Reductions in CO2 emis-sions are delivered as vehicles have been replaced.

In 2017 the general services teams added a road safety module to the e-learning platform to remind employees of responsible driving behavior and best practices.

Business travel

Reservations for business travel are centralized using the Havas Voyages Connect tool. Access to this tool is available to more than 80% of SES-imagotag employees. In 2017, business travel resulted in 495 metric tons of CO2 emissions, compared with 417 metric tons in 2016, this

increase being closely linked to the Group international growth

A video conferencing room is available to employees at the Nanterre head-quarters to hold remote meetings with international-based team.

Paper use

The Services activities of SES-imagotag involve using paper and producing paper waste.

• When buying paper, the compa-ny targets recycled paper with an environmental certification. As such, in France, since 2014, all paper used is 100% recycled and certified, replacing “conventional” white paper of equal quality. This paper complies with the ISO 14021 and 14024 standards, two environ-mental labelling standards.

• For use, in order to minimize paper consumption, printers have been progressively set by default to print double-sided.

Continuous optimization of packaging for labels has taken place since 2014 to decrease the number of pallets and boxes used for distribution. To decrease the volume of packaging and the footprint of inventory, the Group decided to review its packaging strategy for its products, eliminating all elements identified as non-essential. This action helped reduce the size of boxes by 25% and significantly improved shipping container filling rates and the number of shipments.

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SES-imagotag HQ facilities are located in the city of Nanterre, in the northwest suburbs of Paris. Within the Paris region, Nanterre is highly urbanized and the Group’s local impact is mostly in terms of employment.

The Group has a positive social and economic impact on the region. The company’s circular economy approach, in place since 2014, is a good example. It involves business for two French companies: Ecologic,

i. Choosing responsible suppliers and subcontractors

Components

For its direct supply of strategic com-ponents, SES-imagotag relies on an ecosystem of world-class companies that are leaders in their respective specialties (special electronic chips, custom TFT LCD or e-paper displays, etc.). Most of these companies have specific policies relating to their so-cial and environmental responsibility. Three of the seven largest suppliers for the Group have signed the United Nations Global Compact, a voluntary initiative based on CEO commitments to implement universal sustainability principles and to undertake partner-ships in support of UN goals.

The Group’s top seven suppliers represent more than 80% of the annual volume of components purchased. All are ISO 14001 certified and two of them are OHSAS 18001 certified. In addi-tion to ISO certification, one of the suppliers has been recognized as a “Sony Green Partner”. This standard encourages the responsible produc-tion and use of electronic products and components going into Sony products.

3. Information on the corporate commitment to sustainable development

1. Local, economic and social impacts of business

2. Responsibility regarding our suppliers and subcontractors

an environmental organization that collects e-waste, in turn working with various regional partners for the pick-up operations; and ANOVO, a company that repairs and sorts the components of labels and with its operations mainly based in Brive-la-Gaillarde and Beauvais, France.

More generally, looking at the entire geographic scope of the Group, it has impacts of varying degrees on the regions in which it operates through logistics services, call center support

platforms, and the partner distribu-tors that it uses.

To date, no program has been imple-mented to assess the indirect impacts of the Group’s activities on local communities.

Plastic rails

Our main supplier of plastic rails reuses scrap materials from the production process in order to avoid any wastage of resources. This suppliers’ industrial facility is equipped with a closed-circuit installation to optimize its water consumption and prevent any acci-dental spillage of waste water into the environment.

Subcontractors (delegation of em-ployment)

Each partnership contract signed with our subcontractors requires them to meet our requirements for human rights, freedom to form unions, and employee health and safety.

The Group is aware of the risk of financial dependence for small and medium-sized suppliers. The finan-cial dependence threshold limit has been set at 20%.

ii. Monitoring of production subcontracting

The SES-imagotag group has been working for many years with its Hong Kong-based production partners with

locations in mainland China, in the Shenzhen region. With an increas-ingly strict Chinese regulatory con-text in terms of environmental and social issues, the Group’s production subcontractors are ISO 14001 certified.

Additionally, as part of its in-dustrial regionalization plan, the SES-imagotag group also subcon-tracts the equivalent of 30% of its volumes in Eastern Europe. In this region, SES-imagotag uses the lo-cal subsidiary of a global industrial subcontracting company. This lo-cal subsidiary has ISO 14001 and OHSAS 18001 certifications. This sourcing-region diversification strategy helps the Group reduce its risks of supply interruption in case of diplomatic, climatic, or financial incidents.

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3. Relations with stakeholders

The main stakeholders for SES-imagotag are its customers, suppliers, consumers, civil society, shareholders, employees and government.

The Group has set a formal policy of being honest and sincere with external stakeholders concerning the Group’s activities, results, financial situation and environmental and social policies.

i.Investors and shareholders

As SES-imagotag has been listedon the regulated Euronext market in Paris since 2006, the Group main-tains a policy of regularly informing its shareholders through state-ments sent directly to them and published in financial and business media. The Group also organizes a num-ber of investor meetings throughout the year. Additionally, a General Meeting of Shareholders is held in the second quarter of each year. Lastly, all financial communications are available on the Group’s website (http://www.ses-imagotag.com), where there is also a section dedicated to investors.

ii. Customers

a. Real-time price automation

Enhancing responsiveness, preci-sion and quality by digitizing and automating price displays in the aisles is now imperative for retail-ers. The meteoric rise of the Internet and increased competition between retail outlets have caused prices to change faster in mass retail, which is very hard to keep up with in physical stores. With manual processes and paper price tags, employees are in-creasingly engrossed in managing label changes. Meanwhile, other, more important tasks are neglected and price errors proliferate with myriad negative consequences on customer satisfaction, complaints and government fines.

This irresistible increase of price change velocity is prompting more and more retailers around the world to digitize price displays and automate

price updates with electronic shelf labels. The SES-imagotag solution frees store managers and assistants from this time-consuming manu-al update work. Employees will be cheerier and more helpful with cus-tomers, and return their focus to cleaner and tidier store with neat well-stocked shelves, fresher fruit and vegetables, etc.

b. Accurate management of store inventory and on-shelf availability

The geolocated electronic shelf labels from SES-imagotag offer retailers the ability to check the exact location of each product and the number of facings at any time.

Using the resulting real planograms (realograms), store managers can op-timize the value added of store per-sonnel by enabling them to focus on restocking and tidying the sales floor.

In fact, the “Total Shopfloor Optimiza-tion” mobile app from SES-imagotag, which is available for tablets and PDAs, identifies and pinpoints on a digital map of the store every anomaly such as theoretical stocks with zero or negative values, insufficient sales coverage, too many or too few facings based on daily SKU sales, decreasing sales per square foot, etc.

The application helps staff save time and go straight to the problem spots to check and correct anomalies. With its task and incident resolution tracking functions, the app is also a powerful management tool for the store manager.

c. Optimized pricing and margins

The key to quickly bolstering mar-gins is, first and foremost, detailed, accurate and responsive manage-ment of retail prices and make better daily pricing decisions based on the competition, stock and demand, i.e. based on the local context of each store.

Each store has a specific context with regard to local market, local compe-

tition, temporary stock-outs or over-stocks, etc. Pricing decisions must take into account this local or regional context each day to maximize the store’s sales and profitability. Analysis of internal and external data makes it possible to decide on shrewdly tar-geted price changes each day that are implemented rapidly and at no cost thanks to the smart tag digital solu-tion. This approach leads to improved margins and sales, while optimizing the price index. There is a substantial top and bottom-line impact at stake.

Multiple clients of SES-imagotag have deployed pricing strategies such as these have added 100 to 200 basis points to their margins thanks to:

• improved sales: better targeted and thus more effecti ve promotions, faster sell-through of overstock, reduced food waste.

• Optimized margins: more targeted mark-downs, fewer unjustified pro-motions, fewer discounts granted by sales staff in store, fewer govern-ment fines, faster return to pre-sale prices, etc.

• Reduced personnel costs: elimina-tion of time devoted to label updates and verifications, less time spent on customer complaints (elimination of pricing errors), etc.

d. Click & Collect optimization

Click & Collect and home delivery from local stores are fast-growing services; the trend will expand quickly because these are the ultimate omni-channel services. They capitalize on both the proximity and the benefits of physical stores, as well as the ease and speed of the Internet. They align with consumers’ new buying behav-iors, leverage the wide assortment in stores and enable shoppers to differ-entiate between their regular (online) restocking orders and “pleasurable” or “impulsive” in-store purchases. It is the fusion of physical and digital with the best of both worlds combined in one seamless omnichannel service.Thanks to geolocations solutions in-

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tegrated in the SES-imagotag digital platform, retailers can increase pick-ing productivity and reduce missing items. On average, stores experience a +30% productivity increase, while reducing the order preparation time by up to -30%.

e. Preventing food waste

The combination of the Pulse soft-ware and electronic labels represents a real advance in fighting food waste. For example, by analyzing daily sales in bakery aisles this technology en-ables automated, smart management of inventory and individuals, adapt-ing baking schedules and changing the rotation of prices and promotions according to the time of day. This “self-learning” bakery is designed to optimize sales and decrease the number of unsold items. On average, food waste is reduced by more than 50% each day.

f. Protecting consumer health: In-creasing access to information

Electronic labels with NFC technology allow consumers to obtain infor-mation about the products they might consume, including informa-tion about products that could be harmful to their health due to aller-gens contained in the products.

With an application developed by the start-up Alkemics that can be accessed through an NFC or QR-code message from SES-imagotag electronic labels, consumers can access more information on food al-lergies. By scanning products in the store, consumers can get an imme-diate warning about whether or not those products contain a particular allergen.

g. Enhancing in-store shopper engagement

In-store digital services

Retail is currently divided between two worlds: digital and brick & mortar. Digital services only cover retailers’ mobile websites and e-commerce sites, with no direct connection to each store.,In the future, each store

will have its own mobile site to bring digital services locally to the store and promote targeted offers tailored to the store’s specific context (inven-tory, business hours, climate, sales, etc.): this is the underlying princi-ple of the “Storefront” solution from SES-imagotag and its range of e-ser-vices.

As our communications platform han-dles radio-frequency transmissions, Bluetooth low-energy and Wi-Fi, SES-imagotag provides a completely connected environment to retailers.

When in-store, shoppers are notified they can use free Wi-Fi, and then ac-cess current deals and the full range of digital services available in-store:

• product search with geolocation to easily find what they are looking for;

• instant rich content (videos, cus-tomer reviews, product compari-son, nutritional information, etc.) via NFC tap or QR code scan on the digital tag;

• saving favorite products they are interested in;

• personalized discount coupons;

• mobile payment to avoid long lines;

Digital price tags as micro web pages

Labels are no longer just a simple, passive mechanism for displaying prices. They play a much bigger role in giving information in-store. They are “micro web pages” that display essential data like consumer ratings, in-store or online availability, related products and promotional informa-tion. Retailers are then able to provide their customers with all the informa-tion available to them, reinforcing shoppers’ trust in physical stores.

iii. Fair competition

Actions taken to prevent corruption

The vast majority of the Group’s business is conducted in coun-

tries where the risk of corruption is low. The Group’s economic sector is not identified as being at risk from a market standpoint. Nevertheless, the company is pay-ing close attention to this aspect during hiring processes and de-cided on the implementation of a specific training program in 2017: a code of conduct as well as a training on corruption and bribery has been loaded on the e-learning platform. This new ethical code of business is embedded within the organisation. This will be further strengthened by our plans for joining the UN Global Compact in 2018.

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To the shareholders,

In our capacity as an independent third party organisation, member of the Mazars network, auditor of the SES company, accredited by the French Accreditation Body (COFRAC) under number 3-10481, we hereby present our report on the consoli-dated employee, environmental and social information relating to the fi-nancial year ended on December 31, 2017, presented in the management report (hereinafter referred to as “CSR information”), in application of the provisions of article L.225-102-1 of the French Commercial Code.

4. Report from the independent third-party organisation on the Corporate Social Responsibility Report

Financial year ended December 31, 2017

Responsibility of the company

It is the Board of Directors’ responsi-bility to draw up a management re-port containing the CRS information set out in article R.225-105-1 of the French Commercial Code, prepared in accordance with the procedures used by the company (hereinaf-ter the “Guidelines”), a summary of which is shown in the management report and available on request to the company’s head office.

Independence and quality control

Our independence is defined by regulatory texts, the Code of Pro-fessional Ethics and the provisions of article L.822-11 of the French Commercial Code. We have also established a quality control sys-tem which comprises documented policies and procedures designed to ensure the observance of ethical values, professional standards and the applicable legal and regulatory texts.

Responsabilité ducommissaire aux comptes

Based on the work we carry out, we are responsible for the following:

- certifying that the required CSR information is included in the Management Report or, where omitted, subject to an explana-tion in accordance with the third

paragraph of article R.225-105 of the French Commercial Code (Certification of inclusion of CSR information);

- expressing a moderately confi-dent conclusion that all signifi-cant aspects of the CSR informa-tion, considered as a whole, are presented accurately in accor-dance with the Guidelines (Rea-soned opinion on the authenticity of CSR information).

Our work was carried out by a team of 4 people between February and April 2018 over a period of approxi-mately 2 week.

We carried out the tasks described below in accordance with the pro-fessional standards applicable in France and the Decree of May 13, 2013 specifying the procedures governing the assignments of inde-pendent third-party organisations and, in terms of the reasoned opin-ion on authenticity, the ISAE 30002 international standard.

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1. Certification of inclusion of CSR information

2. Reasoned opinion on the authenticity of CSR information

Nature and scope of work

By means of interviews with the managers of the departments con-cerned, we reviewed the guidance provided in terms of sustainable de-velopment based on the social and environmental consequences related to the company’s activity and its social commitments, as well as the resulting initiatives or programmes where applicable.

We compared the CSR information presented in the Management Re-port with the list set out in article R.225-105-1 of the French Commercial Code. In the event of absence of certain consolidated information.

We have checked that explanations were provided in accordance with the provisions of article R.225-105, paragraph 3, of the French Commercial Code.

We have checked that the CSR infor-mation covered the scope of con-solidation, namely the company as well as its subsidiaries within the meaning of article L.233-1 and the companies that it controls within the meaning of article L.233-3 of the French Commercial Code with the limits specified in the methodology note presented in introduction of the section Corporate Social Responsi-bility” of the management report.

Based on this work, and in con-sideration of the abovementioned limits, we hereby certify that the required CRS information has been included in the Management Report.

Nature and scope of work

We conducted four interviews with the people responsible for prepar-ing the CSR information with the departments in charge of the pro-cesses of collecting the information and, as applicable, responsible for the internal control and risk man-agement procedures, with a view to:

• assess the suitability of the Guide-lines in terms of their relevance, comprehensiveness, reliability, neutrality, understandability, tak-ing into account industry best practices where applicable;

For the french entity:

• check that a collection, compila-tion, processing and control pro-cess has been established to en-sure the comprehensiveness and consistency of CSR information, and to take account of the internal control and risk management pro-

cedures relating to the provision of that information.

We determined the nature and the scope of our tests and controls based on the nature and the importance of the CSR information concerning the characteristics of the company, the social and environmental challenges of its activities, its orientations in terms of sustainable development and industry-based best practices.

For the CSR Information that we con-sidered to be the most important, at Group level we have3:

• consulted documentary sources and conducted interviews to corroborate qualitative information (organisation, policies, actions), we have imple-mented analytical procedures on quantitative information and used tests to check calculations together with the consolidation of data and we have checked for consistency and concordance with the other

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information shown in the manage-ment report;

• conducted interviews to check the correct application of procedures and implemented detailed tests on the basis of sampling, consisting of checking the calculations made and reconciling the data of supporting documents.

The sample selected in this manner represents 51% of the workforce and 100% of the environmental quantita-tive information.

For the rest of the consolidated CSR information, we assessed its consis-tency in relation to our knowledge of the company.

Lastly, we assessed the relevance of the explanations provided, where necessary, for the total or partial lack of certain information.

We feel that the sampling meth-ods and sample sizes we selected using our professional judgement were sufficient to form a reasonably confident conclusion. A higher level of confidence would have required more extensive audit work. In light of the use of sampling techniques and the other limits inherent in the operation of any information and internal control system, the risk of

1. Which signification is available on www.cofrac.fr

2. ISAE 3000 – Assurance engagements other than audits or reviews of historical financial information

3. Social data: Number of employees at year-end and share by contract (Temporary / Permanent) and by country; Number of interns; Number of recruitments and exits; Staff trained during the period; Total number of training hours

Environmental data: Labels collected and sorted in 2017; Labels sent for reprocessing in 2017; Labels reprocessed in 2017

Social and Environmental data: Product end of life cycle policy; Suppliers of components; Plastic rails suppliers

Neuilly-sur-Seine, May 14, 2018

The independent third party organisation,

Deloitte & Associés

Julien RAZUNGLES / Associé

Julien RIVALS / Associé, Développement Durable

not detecting a significant anomaly in the CSR information cannot be entirely ruled out.

Conclusion

Based on the work we carried out, we detected no significant anom-alies which would suggest the CSR information, considered as a whole, has not been presented accurately or in accordance with the Guide-lines.

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E. RISK FACTORS AND UNCERTAINTIES

The SES-imagotag Group conducts business in a constantly changing environment and is exposed to risks that, if they were to materialize, could a significant adverse effect on its operations, its financial situation, its assets, its income, its outlook or the trading price of the Company’s stock.

Risk of not meeting the stated ob-jectives

The Group’s financial performance will depend on several factors, espe-cially on its ability to:

• grow sales of its historic electronic labeling solutions business, both in mature markets and in the inter-national markets that are currently adopting our solutions;

• grow sales of its services, es-pecially by developing leasing contracts for our solutions and by marketing the provisioning of these value-added services;

The Group meticulously analyzes its financing needs to be sure it has the means to:

• pursue its external growth policy to generate synergies with its op-erations and acquire new technol-ogies to accelerate the develop-ment of its services strategy;

• implement technological changes that require significant investments in new technologies and new offers;

• endure a potential contraction in sales and margins caused by events beyond the Group’s control; and,

Risks relating to operations and strategy

Risk of emergence of new financing needs in Euros and foreign currencies

This chapter discusses the significant risks to which the Group believes it is exposed, as of the date of this Annu-al Report. Nevertheless, other risks of which the Group is unaware or whose materialization is not considered, as of this date, to be likely to have an adverse effect on the Group, its

operations, its financial situation, its assets, its income, its outlook or the trading price of the Company’s stock may exist or appear.

• grow sales derived from the de-velopment of new vertical markets and new non-food markets;

• control the Group’s operating and developments costs during peri-ods of intense commercial growth.

The Finance Division prepares monthly performance analyses and periodic forecasts and regu-larly reports to the Board of Direc-tors on performance and potential gaps.

However, the Group’s operations, income and financial situation could be affected if:

• the Group did not reach all or some of the defined objectives for business growth and industrial cost savings;

• prices on the electronic labels market dropped significantly and continuously; or

• growth in demand for our solutions slowed significantly as a result, in particular, of an adverse change in the economic climate which could re-sult in a major drop in consumption (some existing and potential custom-ers are regularly forced to abandon or postpone their plans to install SES-imagotag solutions because of restricted investment budgets).

• finally, more broadly, weather ma-jor changes in the electronic la-beling market as it is increasing-ly competitive with, notably, new Asian arrivals seeking to rapidly acquire market share.

Therefore, the Group is contending with:

• the international expansion of players from emerging countries; and

• the arrival of large groups that pre-viously specialized in manufac-turing electronic goods and now want to establish themselves in the digital display value chain.

This competitive evolution could have an adverse impact on the Group’s op-erations, its income, its financial sit-uation or its ability to meet its goals.

The Group cannot guarantee the avail-ability of adequate financing at the right time, which could have adverse consequences on its capacity for growth. The Group has unused sources of financing, as described in the “Net Cash Flow” section of the management report. Furthermore, to plan for and manage any changes in cash positions, regular forecasts are drawn up and cash pooling mechanisms in Euro and U.S. dollars are being set up this year

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The Group does business in over 50 countries around the world with the intention to continue growing its operations in China, Russia, the Middle East and the countries of Southeast Asia.

The primary risks associated with doing business internationally are:

• the local economic and political situation;

• exchange rate fluctuations;

• restrictions on capital repatriation;

• unexpected changes in the regula-tory environment;

• the various tax systems, which can have negative effects on the Group’s operating income or on its cash flow, especially regu-lations on the determination of transfer prices, withholdings on repatriated funds and other trans-fers made by holding companies and subsidiaries;

• import restrictions; and

• customs duties, inspections of ex-ported products and services and other trade barriers.

The Group pays close attention to export Incoterms and terms of pay-ment, especially in the countries of Africa, the Middle East, Southeast Asia and Eastern Europe.

Risks associated with doing business in different countries

The Group pays close attention to export Incoterms and terms of pay-ment, especially in the countries of Africa, the Middle East, Southeast Asia and Eastern Europe.

The Group is also managing this risk through the geographic diver-sification of its activities, both in developed and developing markets, enabling it to spread its exposure to the potential hazards of a given country.

Despite procedures implemented by the Group, it may not be able to guard against or cover itself vis-à-vis these risks and could encounter difficulties in conducting business in these countries, which could affect some of its expatriate staff and/or have an impact on its earnings.

Risk associated with the Group’s growth

In pursuit of its development poli-cy, the Group carried out external growth transactions (including ac-quisitions of operations and com-panies). Although the Group reviews and analyzes all investment projects according to a very strict procedure, it cannot be certain that the as-sumptions underlying the profitabil-ity of these investment projects will be borne out or that it will success-fully integrate the companies in-volved in mergers and acquisitions. Consequently, the benefits expected from past or future external or inter-

nal growth measures may not mate-rialize in the time frame and to the extent expected and could affect the Group’s financial situation.

The Group must also maintain the ability to accommodate fast chang-es in its organization to adapt to changes in technology and cus-tomer demand. The Group may not invest in products and services adapted to demand and compet-itive prices and may not succeed in adapting its products and ser-vices, its costs or its organization as quickly as necessary or may encounter difficulties in carrying out certain critical projects. Such a development could have a negative impact on the Group’s operations, financial performance or ability to meet its objectives.

Risk associated with a trans-formation of the Group’s human resources

The SES-imagotag Group is grow-ing and diversifying, offering new methods for using display solu-tions, managing stores and using available data about prices and products. “Leapfrog”, the Group’s strategic plan for 2020, aims to make it the undisputed leader in omnichannel electronic display solutions. To this end, and against the backdrop of a competitive, evolving technology industry, it is critical to attract, develop and re-tain the necessary skills.

Currency risks

SES-imagotag is heavily exposed to fluctuations in the €/$ exchange rate, with a large portion of its sales in Euro and the majority (approximately 80%) of its components and manufacturing costs in U.S. dollars. Consequently, upward fluctuations in the dollar im-mediately cause an increase in the cost of sales in Euro.

Alongside foreign exchange hedging policies, several actions have been put in place to reduce this exposure in the coming years, including the in-sertion of price-adjusting clauses in customer contracts in Euro and the development of sales in the dollar zone (international expansion plan, cash pooling in U.S. dollars).

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Thus, the Group must position itself to respond to a series of qualitative and quantitative challenges in terms of talent management:

• reinforce its pool of the skills - especially technical (including in software engineering) - it needs to sustain growth and enable it to de-liver an array of new, value-added services at an international scale;

• strengthen leadership capabilities at all levels to support its growth and ongoing transformation; and

• effectively on-board new employees, especially in the case of acquisitions.

For the Group, it is a matter of looking ahead and planning the acquisition and development of the skills it will need for future success, with the risk being not to have them at the right time to drive its strategy. Therefore, a number of programs and initiatives are in place to prevent this risk and notably include the following aspects:

• a people review to specifically de-fine the new skills needs in light of the current pool of skills;

• development of an employer brand and the intensification of its re-cruiting strike force (with, for ex-ample, increased use of social net-works);

• training of all employees with, in par-ticular, investments in an e-learning platform; employee commitment achieved through appropriate internal communication and development of internal tools for communicating and sharing information and knowledge; This platform came online in September 2016 and contains 6 pro-grams and 144 modules offered in English and French. All the programs were developed by internal sub-ject matter experts with assistance from the Human Resources Division, which supervised the entire project. The six training programs are geared toward on-boarding new staff, product programs (software and hardware), the commercial phase, high-frequency techniques and low frequency installation.

• loyalty building and performance recognition in the form of Group long-term remuneration plans or special arrangements in the case of acquisitions. In 2016, the Group implemented a new free share allocation plan with the goal of boosting our entrepreneurial spirit and sharing the fruits of the company’s performance with the managers and employees who play a decisive result in achieving our results and creating value.

Thus, the SES-imagotag Group has a proactive, multi-faceted approach to positioning itself to have access to the skills and talents necessary to its future success, though there is uncertainty as to the degree of impact the actions taken will have on adding the resources it needs to grow at the right time and on satis-factory terms.

Customer dependence risk

While the Group’s revenue is broadly distributed among a large number of customers, some of them account for a significant share of its total sales. A loss of or reduction in business from one or more of these customers could cause the Group’s revenue to decrease proportionally.

Supplier dependence risk

The group outsourced all the pro-duction of its hardware (electronic labels) to top-tier industrial partners that specialize in electronic product assembly (external manufacturing services, or EMS). Today the Group works with a few preeminent inter-national sub-assembly subcontrac-tors, who perform the vast majority of their manufacturing at sites dis-persed throughout the world. This worldwide network means that, if necessary, production can be shift-ed from one EMS to another if one of them fails to deliver. Nevertheless, even though the geographic distri-bution of the production sites of the various EMSs covers geopolitical and natural risks, the Group cannot rule out the possibility that, in the case of a major political problem, a change in manufacturing site could

cause temporary challenges in ter-minal production.

Parts procurement risk

The Group depends on the smooth procurement of electronic components to maintain industrial sequencing with its partner EMSs. Because the risk of an electronic parts shortage is a clearly identified risk in the elec-tronics industry, the Group takes spe-cial care to monitor its manufacturing forecasts and regularly conduct pipe reviews to ensure their consistency by comparing its manufacturing pro-jections with sales projections in order to forestall any risk of a parts shortage. To better plan for the risk of a dis-ruption in procurements caused by a shortage, supplier breach or natural risk, the Group systematically ap-plies a multi-sourcing policy for its components whenever possible. In some cases, buffer stock is built up for critical parts. In addition, some strategic suppliers are required to have two manufacturing sites for sensitive components. Nevertheless, the Group’s enforcement of these prevention measures does not eliminate all risk of parts shortages.

Risk associated withmanufacturing electronic labels

A defect in the manufacture or function or the assembly of defective compo-nents in any of the Group’s products or systems could result in liability suits of varying significance that could harm the Group’s reputation and adversely affect its operations, its income, its financial situation or its ability to meet its objectives.

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The environmental risks associated with the Group’s operations derive mainly from increasingly stringent environmental laws and regulations. If the Group does not comply with the regulations in effect, it could be bound to pay fines and the authori-ties could go so far as to prohibit it from marketing its products.

Production methods risk

For the direct procurement of stra-tegic components, SES-imagotag relies on an ecosystem of top-tier in-ternational players who are renowned in their respective fields (special electronic chips, TFT-LCD screens, customized e-paper, etc.), most of whom take great care to follow en-vironmentally and socially respon-sible practices. Two of the Group’s five largest suppliers have signed the United Nations Global Compact.

The Group’s five top suppliers ac-count for more than 80% of its an-nual volume of parts purchases. Four of them have ISO 14001 certification and two have the OHSAS 18001 cer-tification. Beyond its ISO certifica-tion, one of the suppliers has also been designated a Sony Green Partner. This standard encourages the respon-sible production and use of electronic products and components used to manufacture Sony products.

Risk associated with handling electrical and electronic waste

To limit the risk of uncontrolled pollu-tion, the Group ensures that programs to collect and recycle end-of-life products are in place and available to its customers in Europe, in compliance with the WEEE Directive, and in other countries outside the European Union. In countries where required by regulations, the quantities of products placed on the market, collected and recycled are reported periodically to national manufacturer registries. The Group also notifies users of these measures with specific marking on the products and it gives recyclers dismantling instructions.

Environmental risks

Recycling of the batteriesin our labels

The electronic shelf labels manufac-tured and marketed by SES-imagotag require a battery to operate.

The enforcement of Article R. 543-130 of the French Environment Code re-quires manufacturers of industrial ac-cumulators and batteries to arrange for the free collection of the batteries and accumulators they placed on the French market after their use.

In Europe, the Group has chosen:

• the eco-organization COREPILE to collect and recycle all obsolete batteries in France;

• in Austria, the task of collecting and recycling batteries is entrusted to Elektro Recycling Austria, a sub-sidiary of Altstoff Recycling Austria AG, which has specialized in recy-cling electronic waste since 2005;

• in Italy, recycling is handled by the CONAI organization.

Recycling of labelsand hardware equipment

In 2014, SES-imagotag adopted an action plan to move toward circular economy practices, including the full recyclability and reuse of its equipment.

In this framework, SES-imagotag uses the services of the eco-organi-zation Ecologic, which picks up ob-solete or damaged labels, boxes and routers from each customer for direct transportation to one of the sorting centers managed by ANOVO, one of the main players in the sustainable management of electronic product life cycles. Each year, this company gives a second life to over 20 million products around the world.

This organization then sorts the components from the end-of-life equipment and makes cosmetic re-pairs or returns those intended for reuse in production.

In 2017, SES-imagotag began rein-forcing its approach to better track label rejects. The concept is simple: when a customer orders, they receive a free GreenBox to store obsolete or damaged labels. When the box is full (approximately 100 labels), the cus-tomer can send a pick-up request so that its labels are sent directly to an ANOVO sorting center.

All products delivered by SES-imagotag comply with international directives pertaining to the use and transporta-tion of the hazardous materials found in electrical and electronic equipment (ROHS directive).

Nevertheless, despite the proce-dures put in place by the Group and in light of the risks of environmen-tal harm that are not limited to the Group’s operations, it cannot guar-antee coverage of the environmental risk and could encounter difficulties in conducting its business if one of these risks were to materialize, which could have an adverse impact on the Group’s operations, income, financial situation or ability to meet its objectives.

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Technology and data security risks

Legal and compliance risks

Information systems risk

The Group may fall victim to com-puter attacks (virus, denial of service, etc.), technical failures resulting in the unavailability of IT tools or data theft. The Information Systems Divi-sion is responsible for the security of networks and systems, as well as for the applications needed for the Group’s continuity of operations; it regularly conducts intrusion tests and back-ups. In spite of these arrange-ments, the occurrence of one of these events could have a negative impact on the Group’s performance.

The introduction of new technolo-gies (cloud computing), upgrades to industrial control systems and the development of new uses, including social networks, expose the Group to new threats. Computer attacks

Risk associated with changes in regulations

The Group’s business activities are subject to many regulations - including commercial, customs and tax regula-tions - in France and around the world.

A change in one of these regulations or in the terms of enforcement could result in application challenges or in different kinds of sanctions, which could have a significant adverse effect on the Group’s operations, financial situation, ability to meet its objectives or reputation.

Ethics risk

The Group ensures that all its em-ployees are always working in ac-cordance with the values that form the foundation of its culture: integ-rity and compliance with company and external standards.

and intrusion attempts are increas-ingly targeted and carried out by true specialists who may set their sights on the company or its private or public partners. More broadly, a systems failure could result in infor-mation losses or leaks, delays or cost overages that may harm the Group’s strategy or image.

The Group applies security measures which are adapted to the identified risks to its information systems. In connection with its internal control and security policy, these organiza-tional, functional, technical and legal security measures are controlled on an annual basis.

Nevertheless, despite the proce-dures put in place by the Group, it cannot guarantee coverage of these technological and computer risks

and could encounter difficulties in conducting its business if one of these risks were to materialize, which could have an adverse impact on the Group’s operations, income, financial situation or ability to meet its objectives

Any behavior in violation of these values, in spite of the Group’s ef-forts, could cause the Group to be held liable and have serious reper-cussions on its reputation.

Therefore, in the last quarter of 2017, the Group deployed an em-ployee awareness and training pro-gram devoted to these matters on its e-learning platform.

Intellectual property risk

If third parties were to believe the Group’s technologies or products make unauthorized use of their rights and that SES-imagotag did not obtain licenses to use this tech-nology, a legitimate claim by such third parties could result in a ban on the use of said technology and on the sale of products. Any lawsuits that may arise from such a situation could lead to significant expenses,

production delays and an overhaul of its product designs. Each of these situations could have an adverse impact on the Group’s operations, its income, its financial situation or its ability to meet its goals.

The Company ensures that third-party rights are honored when it seems appropriate, especially with regard to intellectual proper-ty, infringement clearance searches and portfolio monitoring. With the assistance of specialized counsel, it tracks claims for recovery and lawsuits that may arise from these actions.

From a financial point of view, in light of the risk analysis conducted as of this date and in keeping with applicable accounting standards, no provision was entered in the con-solidated financial statements of December, 31, 2017.

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Exceptional circumstances and lawsuits

Insurance

The Group pursues a policy which consists in obtaining external insur-ance coverage to address the risks of the company and its personnel that can be insured at reasonable rates. It believes that the nature of the risks covered and the guaran-

In the normal course of its business, the Group may be involved in certain ad-ministrative or legal procedures in which it may be held liable on various grounds.

The Group periodically reviews the assessment of this risk in light of changes in audits and claims and believes that no audit under way will have a significant impact on its fi-nancial situation or liquidity.

Tax disputes

During the 2016 and prior fiscal years, the companies of the Group were the subject of tax audits and, sometimes, suggested rectifications. The financial impacts of these tax ad-justments were entered in the books as provisions for the amounts announced and accepted or considered likely to result in an outflow of resources and whose amount can be determined reliably.

The Group periodically reviews the assessment of this risk in light of

changes in audits and claims and believes that no audit under way will have a significant impact on its fi-nancial situation or liquidity.

In general, one of the objectives of the internal control system is to prevent and manage risks arising from the company’s operations and the risks of fraud or error, especially those re-lated to bookkeeping.

This overall objective is met through the efforts of the Finance Division, auditing firms and the Accounting Committee.

Another overall objective is to en-sure the independence of the board members and determine the remu-neration of the executive director in keeping with the company’s strate-gic objectives. This objective is met through the work of the Compensa-tion Committee, which meets twice a year to gauge the performance of the executive director and to calcu-late his variable compensation.

Commercial and Employers disputes

Disputes are reviewed regularly by the Group’s Legal Division and are covered by provisions when the Group believes it is likely that an outflow of resources will be need-ed to cover the risk incurred and a reliable estimate of this amount can be made. Reversals for unused pro-visions are mainly the result of the resolution of these disputes, which the Group won or in which the actual amount of the claim was lower than the estimated amount.

To the Company’s knowledge, there are no, for the period covering the last 12 months preceding December 31, 2017, court or arbitration pro-ceedings of which the Company is aware that could have or have re-cently had significant adverse effects on the financial situation or profit-ability of the Company and/or Group other than the disputes listed above.

tees afforded by these insurance policies comply with practices in use in its business sector.

The 2017 insurance scheme includes the following types of insurance:

• civil liability ;

• cybercrime;

• operating damage and losses;

• goods carried;

• civil liability for the company’s officers.

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Generally speaking, one of the inter-nal control objective is to prevent and monitor risks arising from the com-pany’s activity, as well as mistakes or frauds mostly in the accounting field.

This global objective is covered through the financial department controls as well as the auditors and audit com-mittee controls.

Other objectives consist in ensuring independant directors appointment as well as a convenient CEO remu-neration, in line with the company’s strategic issues and targets. This objective is achieved through the remuneration committee working sessions, twice a year, where the CEO performance is reviewed and apraised to come up withthe vari-able part of his remuneration.

The key players in the Company’s internal control are as follows:

The Executive Committee this Committee meets once a quarter to draw up the strategic guidelines, to report on global competition, as well as define the R&D road map. It therefore analyses the risks inherent in the busi-ness sector, the level of competition both in terms of price and technology.

The Audit Committee ensures that the account statements are audited in accordance with the rules and free of interference. In par-ticular, it ensures that adequate pro-visions are being made for foreign exchange, liquidity and debt risks.

The Compensation Committee determines the remuneration policy implemented or to be implemented for the Chairman.

The Board of Directors meets several times a year to review management’s proposals concerning debt, currency hedges and possible acquisitions. The budget estimates are also submitted to it as well as their successive revisions during the year.

Management(sales, finance, supply chain) meets weekly to analyze the portfolio of sales opportunities, their feasibility and the forecast scheduling for these opportunities to ensure that the sup-ply of finished products and solutions matches the level of market demand. There is a also a weekly review of significant contracts to maintain the profitability of these contracts and proposed selling prices based on the production costs incurred by the company. These management meet-ings are thus instrumental in correct-ly anticipating business volumes and profitability levels.

The Finance Department ensures that cash flows in euros and in foreign currencies are in line with bud-get and debt forecasts, and that the Company has complied with key man-

agement indicators as per the monthly reporting required under IFRS. It thus provides direct internal quality con-trol of the accounts, Group profitability and the use of available cash.

The Company’s strategy is to hold a majority stake in its subsidiaries. The Company ensures that Board of Di-rectors’ meetings take place and it is active in the management bodies of its subsidiaries. Monthly management reports are submitted by each subsid-iary to the Company which then de-termines the appropriate measures to be taken.

The newly acquired entites are inte-grated through a two-step process: one, tailor-made according to weak-nesses identified during the due dili-gences, the other, standardized (IT au-dit, POA’s, chart of accounts mapping with the group chart, …)

In addition, the bank accounts of all subsidiaries are currently being consolidated in a single telematics gateway to enable the Group’s Fi-nance Department to manage cash flow.

Finally, the largest subsidiaries are subject to a statutory annual audit by an independent auditing firm, which is a member of the network of our statutory auditors.

A Code of Ethics and Business Con-duct was issued in 2017 that reviews and formalizes the behavioral rules expected at the group from all em-ployees, as well as from all suppliers and subcontractors. This document is an important tool in maintaining the quality of the inspection envi-ronment within the group and can be easily accessed via the e-learning platform available to our employees.

Delegations of power were imple-mented in 2017 for the directors of subsidiaries.

INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES RELATED TO THE PREPARATION AND PROCESSING OF ACCOUNTING AND FINANCIAL INFORMATION

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Once you have read the reports pre-sented by your Statutory Auditors, your Board urges you to adopt the resolutions that it has submitted for your approval.

The Board of Directors

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II. Governance Report

Dear stockholders,

In accordance with the provisions of Article L. 225-37 of the French Commercial Code, this report presents information on the Board’s composition and on the application of the principle of balanced gender representation as it relates to board members for the year ended December 31, 2017, the conditions for preparing and organizing the work of your Board of Directors, as well as the limitations imposed by the Board of Directors on the powers of the Chairman and Chief Executive Officer as well as on the specific terms and conditions relating to shareholder participation in Stockholders’ Meetings.

Furthermore, this report presents information on the specific terms and conditions relating to stockholder participation in stockholders’ meetings and on the current delegations granted by the Stockholders’ Meeting in the matter of capital increases, as well as a list of all the appointments and functions held in any company by each corporate officer and regulated agreements concluded directly or indirectly (Article L. 225-37-4 of the French commercial code

This report refers to the management report with regard to the disclosures stipulated in Articles L. 225-37-2 and L. 225-37-3 and the principles and rules approved by the Board of Directors to determine the compensation and all benefits granted to corporate officers.

The Board of Directors approved this report on March 5, 2018.

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1) Members of the board of directors

The Company is pursuing a corporate governance policy.

The Company adopted a charter on December 12, 2005, which entered into force on February 2, 2006 (hereinafter “the Corporate Governance Charter” or “the Charter”), which refers to the Code of Government developed by professional organizations.

The Company drew inspiration from the AFEP-MEDEF Consolidated Code of Novem- ber 2016, which constitutes the Corporate Governance Code to which it refers in preparing this report.

The AFEP-MEDEF Code is available on the MEDEF website (http://www.medef.com/ medef-tv/actualites/detail/article/code-afep-medef-de-novembre-2016.html).

A. Composition and functioning of the Board of Directors

Alphabetical Order Age IndependEnt Other roles Audit CommitteeAppointment &

Comp. CommitteeYears of presence

Mr Thierry GADOU 51 No 0 5

Ms Candace JOHNSON 65 Yes 3 Member Member 5

Mr Jérôme KINASuntil December 20th

Mr Xiangjun YAOfrom December 21st 2017

53 No 12 President 8

PECHEL INDUSTRIES PARTENAIRES, represented by Ms Hélène PLOIX until December 20th Ms Xiangshun YINfrom December 21st 2017

73 No 11 President 7

Mr Renaud VAILLANT 39 Yes 1 Member Member 10

The table below summarizes the composition of the Board of Directors at December 31, 2017. The Board consists of 5 mem-bers, including two independent Directors.

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1.1 The Chairman

1.1.1 Appointment

In accordance with the provisions of the New Economic Regulations Act, the possibility of separating the functions of Chairman of the Board of Directors from those of Chief Executive Officer is stipulated in the Company’s Articles of Incorporation.

In the Company’s best interests, the Board of Directors has decided that the Company’s General Manage-ment is to be performed through the Chairman of the Board of Directors. The functions of Chairman of the Board of Directors and of the Chief Executive Officer are thus unified, but with the utmost respect for the respective prerogatives of the different corporate bodies.

This governance method corre-sponds to the way the Company’s organization operates.

Pursuant to the Company’s Articles of Incorporation, the Board of Directors appoints the Chairman of the Board from among its members for a peri-od set by the Board of Directors and which cannot under any circumstances exceed the term of office as a Director. The Chairman can be reelected (Article 12 of the Articles of Incor-poration).

As per Article 12 of the Company’s Articles of Incorporation, the Board of Directors appointed Thierry Gadou as Chairman of the Board at its meeting held on January 18, 2012 for the duration of his term as a Di-rector. Thierry Gadou’s term of of-fice expired at the end of the stock-holders Meeting called to approve the financial statements for the year ended December 31, 2013, which was held on May 21, 2014.

The Stockholders’ Meeting of May 21, 2014 decided to renew Thierry GADOU’s term of office of as Direc-tor for a 3-year period until the Ordi-nary Stockholders’ Meeting called to approve the financial statements for the 2016 financial year, to be held in 2017.

The Ordinary Stockholders Meeting held on June 23, 2017, decided to re-new Thierry Gadou’s term as a Direc-tor for a period of three years, i.e. un-til the Ordinary Stockholders’ Meeting to be called in 2020 to approve the accounts for the 2019 financial year.

At its meeting of June 23, 2017, the Board of Directors then decided, with the unanimous approval of those in attendance, to renew Thierry Gadou’s term as Chairman of the Company’s Board of Directors for the duration of his term as a director.

In his role as corporate officer, Mr. GADOU does not serve as a director for any listed companies outside this group or for any foreign companies.

1.1.2 Duties

The duties of the Chairman and Chief Executive Officer are to:

• approve documents prepared by the company’s internal departments;

• organize and supervise the work of the Board of Directors;

• ensure that Directors can perform their duties and in particular ensure that they have the information and documents necessary to accomplish these;

• ensure that representatives of the staff representative bodies are reg-ularly convened and have the infor-mation and documents necessary to perform their duties.

As decided by the Board of Directors on June 11, 2008, it should be noted that the limitations imposed on the powers of the Company’s Chairman and Chief Executive Officer, which are for internal purposes and are not binding on third parties, cover the following actions, operations and commitments that must receive the prior authorization of the Board of Directors:

• creation of pledges, endorsements and guarantees;

• approval of the objectives, the

budget for the following year and the means of financing necessary for its implementation, for the Company and its subsidiaries;

• decisions to acquire or dispose of assets or a holding in the Compa-ny or its subsidiaries by any means whatsoever;

• plans to enter into partnerships and/or strategic alliances by the Company and/or its subsidiaries;

• any investment greater than €500,000 per year (other than those provided for in the Company’s annual budget);

• decisions to sell buildings and holdings;

• settlement or compromise in the event of litigation that may have a significant impact on the business of the Company and the subsidiaries.

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1.2 Directors

1.2.1 Appointments

In accordance with the AFEP-MEDEF Governance Code, the members of the Board of Directors are appointed by a Stockholders’ Meeting for a 3-year term.

The term of office of a Director con-cludes at the end of the ordinary Stockholders’ Meeting called to ap-prove the financial statements for the past financial year and held in the year in which their term expires (Article 11 of the Articles of Incorpo-ration). Duringhe life of the compa-ny, the Ordinary Stockholders’ Meet-ing appoints, renews or dismisses Directors. They can always be re-elected. However, should there be a vacancy due to the death or resig-nation of one or more Directors from the Board, the Board of Directors may, between two Stockholders’ Meet-ings, make provisional appoint-ments in accordance with the con-ditions provided for under the law. The provisional appointments made by the Board of Directors must be ratified by the next Stockholders’ Meeting. A Director appointed to replace another shall hold office only for the remainder of their pre-decessor’s term of office.

1.2.2 Renewal

The terms of the members of the Board of Directors were renewed at the Annual Stockholders Meeting on June 23, 2017, for a period of three years pursuant to the provisions of Article 11.1 of the Company’s arti-cles of incorporation, namely until the Ordinary General Stockhold-ers’ Meeting meant to approve the statements for the 2019 fiscal year, slated to be held in 2020.

On December 21, 2017, the Board of Directors acknowledged, effective as of December 20, 2017, the resigna-tion of:

• the company Pechel Industries Partenaires from its role as a member of the Board of Directors; which also caused the termination

of the duties of Ms. Hélène Ploix (as a representative of Pechel Industries Partenaires) within the Company’s Accounting Committee, effective immediately.

• Mr. Jérôme Kinas from his role as a Director; which also caused the termination of the duties of Mr. Jérôme Kinas within the Company’s Appointments and Compensation Committee, effective immediately.

Therefore, at its meeting of December 21, 2017, the Board of Directors de-cided to appoint, temporarily and effective immediately:

• Ms. Xiangshun Yin to the role of Director, to replace the compa-ny Pechel Industries Partenaires, which resigned, for the remainder of the latter’s term.

• Mr. Xiangjun Yao to the role of Director, to replace Mr. Jérôme Kinas, who resigned, for the remainder of the latter’s term.

The Ordinary General Stockholders’ Meeting which was held on February 6, 2018, ratified the nominations of Ms. Xiangshun Yin and Mr. Xiangjun Yao and also approved the nomination of four other Directors, including one independent member, namely:

• Mr. Feng Bai as a Director;

• Ms. Fangqi Ye as a Director;

• Mr. Xingqun Jiang as a Director;

• Ms. Hélène Ploix as a Director.

1.2.3 Independence of Directors

As a reminder, the recommendations of the AFEP- MEDEF Code for assessing the independence of its Directors are as follows:

• they must not be nor have been over the preceding five years:

• an employee or executive corporate officer of the company;

• an employee, executive corporate officer or director of a company

within the scope of the company’s consolidation;

• an employee, executive corporate officer or director of the parent com-pany of the company or of a com-pany within the scope of that parent company’s consolidation;

• they must not be an executive cor-porate officer of a company in which the company directly or indirect-ly holds a director’s mandate or in which an employee designated as such or an executive officer of the company (current or within the last five years) holds a term of office as director;

• a client, supplier, investment banker, corporate banker:

- of significant importance to the company or its group;

- or for which the company or its group represents a significant part of the business;

• they must not have close family ties with a corporate officer;

• they must not have been an auditor of the company within the last five years;

• they must not have been a Direc-tor of the company for more than twelve years. The status of Inde-pendent Director ceases on the twelfth anniversary;

• a non-executive corporate officer cannot be considered independent if he or she receives variable com-pensation in cash or securities or any compensation tied to the com-pany’s or group’s performance;

• directors representing major stock-holders of the company or its par-ent may be consideredindependent if these stockholders do not take part in the company’s management. However, beyond a 10% threshold in capital or voting rights, based on a report by the Appointments Committee, the Board must always examine the independent status taking into account the composition

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of the company’s equity and the existence of any potential conflicts of interest.

1.2.4 Principle of equal gender representation on the Board of Directors

It has been specified that in accor-dance with the provisions of Law 2011-103 of January 27, 2011 on balanced gender representation on the boards of directors and supervi-sory boards as well as on professional equality as per Article L. 225-17 of the French Commercial Code, the Board of Directors must seek to have balanced gender representation.

To this end, the law of January 27, 2011 stipulates that as of January 1st of the sixth year following the publi-cation year of said law, the propor-tion of directors of each gender may not be less than 40% in companies with shares traded on a regulated market at the conclusion of the next Stockholders’ Meeting called to rule on appointments.

In these companies, when the board of directors consists of fewer than eight members, the difference between the number of directors of each gender may not be greater than two. These provisions came into force on January 1st of the sixth year following the year of publication of the aforementioned law, i.e. on January 1, 2017.

1.2.5. Duties of the board of Directors

The Board of Directors has been granted the powers attributed to it by law, the Company’s Articles of Incor-poration (in particular Article 11-6) and by the Corporate Governance Charter.

In accordance with the provisions of the Charter (IV “Committees”), the Board of Directors has set up two committees whose role is to foster director discussions:

• the Accounts Committee consists of three members, two of whom are independent: Mrs Yangshun YIN (Director), Mr Renaud VAILLANT (Independent Director), and Mrs

Candace JOHNSON (Independent Director);

• the Appointments and Compensation Committee consists of three mem-bers, two of whom are independent: Mr Xiangjun YAO (Director), Mrs Candace JOHNSON (Independent Director), and Mr Renaud VAILLANT (Independent Director).

• the Board of Directors determines the compensation and benefits of any kind granted to corporate officers after review and an opinion from the Appointments and Compensation Committee.

1.2.6. Principal role of the boardof directors

Organization

The functioning of the Board is governed by the Company’s Articles of Incor-poration and the principles set forth in the Charter. In addition to the mandatory meetings of the Board (for approval of yearly and half- yearly financial statements), it also holds all meetings as required in the normal course of business.

Board of Directors meetings and attendance

Pursuant to Article 11-2 of the Com-pany’s Articles of Incorporation, the Board of Directors is convened by the Chairman by any means, and in an emergency, at least five days in advance.

During the 2017 financial year, the Company’s Board of Directors met as necessary and held 15 meetings. The average rate of attendance of Directors at meetings was greater than 95%.

The Board of Directors met to dis-cuss the following matters:

Financial information and commitments and the budget:

• Review and approval of the annu-al statements closed on December 31, 2016;

• dividend distribution policy;

• authorization of pledges, endorse-ments and guarantees to be granted by SES-imagotag;

• implementation of the share buy-back program under delegation of authority by the Stockholders’ Meeting and authorization given to the Chairman and Chief Executive Officer to sign a liquidity contract (stockholders’ Meeting of June 23, 2016 - Resolution 7, and Meeting held on November 30, 2016 - Resolution 1);

• approval of the half-yearly financial statements for 2017 and prepara-tion of the half-year activity report;

• presentation of the results from the 3rd quarter 2017 and the prepa-ration of forecast documents pro-vided for in Articles L. 232-2 et seq. of the French Commercial Code;

• review of financial presentations and press releases;

• update on business operations in late November 2017 and Presentation of the 2018 budget;

• authorizations with a view to raising a bond issue.

Strateg ic and operational plans:

• Decision not to proceed with a re-valuation of the Pervasive Displays Contribution, in compliance with Article L. 225-147-1, I, 2° of the French commercial code;

• approval of the Pervasive Displays Contribution, its valuation and re-muneration, and consequently, an increase in the Company’s share capital in the nominal amount of 1,581,368 euros as compensation for the Pervasive Displays Contri-bution, via the issuance and allo-cation of 790,684 new ordinary Company shares at a par value of 2 euros each;

• update on partnership projects in Asia;

• update on the acquisition of Findbox;

• note on the valuation of the variable compensation for the acquisition

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tranche of 5,980 Market Hub shares authorized on November 30, 2016;

• update on business activity;

• update on the simplified takeover bid initiated by BOE Smart Retail (Hong Kong) Co., Ltd.

Remuneration:

• Recognition of the exercise of op-tions during 2016 and 2017;

• confirmation of fulfillment of the performance conditions of the free share allocation plans authorized by the Board Meetings of December 16, 2015, and March 11, 2016;

• confirmation of fulfillment of the alternative conditions of the free share allocation plans put in place by the Board of Directors at its meetings on December 16, 2015, March 11, 2016, November 30, 2016, and December 22, 2016;

• approval of the remuneration of Thierry Gadou as Chairman and Chief Executive Officer based on proposals from the Compensation Committee;

• distribution of directors’ attendance fees for the 2016 financial year;

• allocation of free shares with attached performance conditions to recently hired employees accordance with the authorization granted to the Board by the Extraordinary Stock-holders’ Meeting of November 30, 2016 (Resolution 5);

• review and clarifications pertain-ing to certain terms of the “Per-formance Shares Leapfrog 2017-2020” plan for free share allocation with attached performance condi-tions (Resolution 5 of the Stock-holders Meeting on November 30, 2016).

Governance:

• Approval of the minutes of the various Board meetings;

• approval of all documentation re-lating to the Annual Stockholders’ Meeting of June 23, 2017, and the Ordinary Stockholders’ Meeting of February 6, 2018;

• convening of the Stockholders’ Meetings and determination of the agenda and the draft text of the resolutions to be presented to the Stockholders’ Meetings;

• appointment of the principal statu-tory auditors;

• replacement of non-voting director;

• confirmation of the resignation of two directors and cooptation of two new directors to replace them;

• annual review of regulated agree-ments entered into and authorized in previous financial years and continued to be performed during the 2017 financial year (Article L. 225-40-1 of the French commercial code).

The Board received the Auditor’s report and the reports on the work of the two standing committees of the Board of Directors – i.e. the Audit Committee and the Appointments and Compensation Committee.

The Statutory Auditors are invited to all meetings of the Board of Directors at which the annual or interim financial statements are reviewed or approved.

The Chairman of the Board chaired the meetings of the Board of Directors.

The following representatives of the Employee Representative Committee were appointed as representatives to the Board of Directors for 2017:

• Cédric NOBLET; and

• Jérôme CHEVAL.

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1.3 Minutes of the meetingsAppointed at each meeting, the Secretary of the Board prepares the Minutes of the meeting. These Minutes, as well as the attendance sheet, are then signed by the Chair-man, or are submitted for approval at the next Board meeting. These meetings are then recorded in the Minute book after being signed by the Chairman and a Director

1.4 Board information

For Board meetings, the directors shall receive, in good time, all documents and information necessary to ade-quately fulfill their duties. Outside of Board meetings, Directors regularly receive all important information relating to the Company.

To ensure that Directors can attend these meetings, a schedule of Board of Directors meetings is set at the beginning of the year.

1.5 Directors’ fees

Pursuant to the decision of the Stock-holders’ Meeting of June 23, 2016 (Resolution 4), the Meeting decided to set the total annual attendance fees at fifty thousand euros (€50,000) for the year ended on December 31, 2016.

A share of these directors’ fees have been allocated to the Independent Directors, contingent upon their attendance at meetings of the Board of Directors.

The independent directors, Renaud Vaillant and Candace Johnson, received €20,000 gross and €23,528 gross in directors’ fees, which consisted of a fixed base element of €10,000 and a variable element of €10,000 and €13,528 respectively.

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Pursuant to the provisions of Order 2008-1278 of December 2008, which transposed EC Directive 2006/43 of May 17, 2006, and codified in par-ticular in Article L.823-19 of the French Commercial Code, in 2009, the Company created a specific committee to monitor issues relating to the preparation and control of ac-counting and financial information.

The Company drew on the AFEP-MEDEF Corporate Governance Code revised in November 2016 and the recommendations of the Autorité des Marchés Financiers (AMF) con-cerning Audit Committees.

The Board of Directors approved the internal regulations for this specif-ic committee at its meeting held on December 18, 2013.

2.1 Membership As the Audit Committee stems from the Board of Directors, its mem-bers are therefore appointed by the Board of Directors on the rec-ommendation of the Appointments and Compensation Committee from among the Directors, with the ex-ception of those exercising man-agement functions.

Furthermore, at least one of the members of the Accounts Committee must have specific financial or ac-counting experience and be inde-pendent.

In accordance with the AFEP-MEDEF Code, the Audit Committee must consist of at least three members, two of whom must be independent Directors and this Committee must not include any executive officers.

The term of office of the members of the Audit Committee coincides with that of their directorship.

No specific compensation is stipulated for the duties undertaken by Directors on the Audit Committee.

The members of the Audit Committee are as follows:

• Xiangshun YIN (Director);

• Renaud VAILLANT (Independent Director), and;

• Candace JOHNSON (Independent Director).

This membership therefore complies with the requirements of the above-men-tioned recommendations.

Please note, as a post-closing date event, that Ms Hélène Ploix has been appointed in the Audit Committee as of March 5th 2018.

2.2 Duties In accordance with Article L. 823-19 of the French Commercial Code, this Com-mittee is responsible for monitoring the:

• process of preparing financial infor-mation;

• effectiveness of internal control and risk management systems;

• statutory auditing of the annual statements and, where applicable, the consolidated accounts by the Statutory Auditors;

• independence of the Statutory Auditors.

The AFEP-MEDEF Code states that the main task of the Audit Committee is to:

• examine the financial statements and to ensure that the accounting methods used for preparing the Company’s consolidated and corporate state-ments are relevant and consistent;

• monitor the financial reporting process;

• monitor the effectiveness of internal control and risk management systems.

The duties of the Audit Committee are therefore as follows:

Duties relating to preparingfinancial information

• Monitoring the preparation of ac-counting and financial information, both historical (periodic informa-tion) and forecast;

• ensuring there is a process for pre-paring press releases for the publi-cation of the yearly, half-yearly and quarterly financial statements;

• verifying the accounting procedures for significant events or complex transactions that affect the Company’s statements;

• ensuring that corrective actions are taken should a malfunction occur in the financial reporting process.

Duties relating to monitoring and reviewing income and consolidated financial statements

• Reviewing the Company’s yearly and half-yearly financial statements and related reports before the Board of Directors approves them;

• preparing for review by the Board of Directors the half-yearly and annual financial statements and consolidated financial statements;

• ensuring compliance with legal and regulatory requirements relating to accounting and financial information;

• ensuring the relevance and consis-tency of the accounting methods used for preparing the income and consolidated financial statements.

Duties relating to the independence and objectivity of the Statutory Auditors

• Examining the risks related to the independence and objectivity of the Statutory Auditors and, as appropriate, any measures taken to mitigate these;

2) Composition and duties of the audit committee

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• meeting with the Statutory Auditors at each accounting closing and as often as deemed necessary;

• in particular, receiving the follow-ing from the Statutory Auditors an-nually:

- their declaration of independence;

- the amount of fees paid to the network of auditors by the com-panies controlled by the com-pany or the entity that runs it, for services not directly related to the Statutory Auditors’ duties;

- information on the services per-formed as part of the audit pro-cedures directly related to the duties as Statutory Auditors.

Duties relating to internal control and risk management

• Ensuring that internal control and risk management systems are in place and implementing these;

• reviewing the effectiveness of in-ternal control and risk manage-ment procedures and therefore being cognizant of the findings of the internal audit and/or external audit work carried out regarding these matters to ensure that should malfunctions arise, appropriate action plans have been set up and follow-up actions have been taken;

• assessing the extent of the mal-functions or weaknesses commu-nicated to it and informing the Board of Directors, if necessary.

2.3 Functioning In compliance with the principle of independence, members of the Audit Committee attend Committee meetings alone. The Chairman and Chief Executive Officer may partici-pate in Committee meetings at the invitation of the Audit Committee Chairman.

The Chief Financial Officer (and po-tentially his/her senior assistants), the internal auditor, the external au-ditors or any other person deemed necessary may attend Audit Com-mittee meetings.

The Audit Committee meets at least 3 times a year in March, August and October to consider respectively the yearly, half-yearly and quarterly fi-nancial statements and the manage-ment planning documents, and as often as it deems necessary.

Meetings are held either at the head office or at any other location in-dicated in the notice of meeting. Meeting notifications are to be sent in writing by any available means (letter, fax, email). Even if no notice is sent, the Committee can always validly deliberate if all its members are present or represented.

Except in emergency circumstances, an agenda shall be sent at least five days before the Committee meeting.

Minutes of each meeting of the Audit Committee are drawn up and signed by its Chairman and at least one of its members. These Minutes provide an accurate account of the debates and discussions during each meet-ing. The Board of Directors Minutes include a summary of the work of the Audit Committee and report on its opinions and recommendations.

Over the past year, the Committee met on:

• February 21, 2017: Review of annual financial statements, duties and pro-fessional fees of the statutory auditors;

• August 29, 2017: Review and ap-proval of accounting options for the 2017 interim financial state-ments and approval of the content of the financial communication of August 30, 2017;

• September 8, 2017: Review of 2017 interim statements, recommendations

to the Board of Directors on the drafting of the interim management report;

• October 23, 2017: Recommenda-tions to the Board of Directors on the drafting of management plan-ning documents.

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It should be noted that the Annual Stockholders’ Meeting of June 28, 2011 decided to amend the Company’s Articles of Incorporation to allow non- voting Directors to sit on the Board of Directors. The Articles of Incorporation stipulate that the Board of Directors may appoint one or more non-votingDirectors from the population of stockholders, natural or legal persons, or from outside of said population.

The non-voting directors shall perform general, ongoing duties to assist the Board of Directors, but they may not be involved in the Company’s management or be substituted for those serving on the Company’s legal bodies. Non-voting Directors, however, may participate in an advi-sory capacity as observers at Board

of Directors meetings. Within the framework of their duties, non-voting Directors may submit observations to the Board of Directors whenever they deem so necessary.

Their term of office shall be set by the Board of Directors but may not exceed three years. Non-voting Directors are always eligible for re-election. The Board of Directors may, at any time, terminate their appointment without having to state any reasons. Should a non- voting Director die, resign or stripped of office, for any reason, the Board of Directors may replace that Director for the remainder of the term.

Pursuant to Article 11.7 of the Com-pany’s Articles of Incorporation,

the Board of Directors appointed Mr. Bertrand HAINGUERLOT as a non-voting Director at its meeting held on June 28, 2011 for a 3-year term. At its meeting of May 21, 2014, the Board of Directors decid-ed to renew Bertrand HAINGUER-LOT’s term of office as a non-voting Director for another 3-year term. The decision to again renew Mr. HAINGUERLOT ‘s term of office as a non-voting Director shall be put on the agenda of the Board of Directors meeting held on April 12, 2017.

At its meeting on December 21, 2017, the Board of Directors not-ed the resignation of Mr. Bertrand Hainguerlot from his position as a non-voting director.

4) Non-voting directors

The Company has drawn on the AFEP-MEDEF Corporate Governance Code revised in November 2016.

In accordance with the AFEP-MEDEF Code, the Appointments and Com-pensations Committee must not include any executive officer and must consist of a majority of inde-pendent Directors.

The Appointments and Compen-sation Committee consists of three members, including two Independent Directors:

• Chairman, Renaud VAILLANT (In-dependent Director);

• Candace JOHNSON (Independent Director), and;

• Xiangjun YAO (Director).

Over the past year, the Committee met on: March 2, 2017;

Please note, as a post-closing date event, that Ms Hélène Ploix has been appointed in the Appointment and remuneration Committee as of March 5th 2018.

3) Membership of the appointments and compensation committee

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Stockholders’ Meetings are convened under the conditions and within the time limits set by the applicable laws and regulations.

All stockholders have the right to information, communication and consultation in accordance with the conditions and procedures provided for under the legal and regulatory provisions. The Company’s Articles of Incorporation as well as general information on the company can be found on its website to provide further information to stockholders (www.ses-imagotag.com).

Thierry Gadou, Chairman of the Board of Directors, chaired the Stockholders’ Meeting and proposed an executive of a Chairman and two Tellers. The Chairman has suggested that stockholders with the greatest number of votes serve as tellers.

The Stockholders’ Meeting is a place for decision- making in those areas defined by law and the Company is committed to ensuring that it is also an opportunity to communicate with its stockholders.

Minutes shall be drawn up as soon as possible after the Stockholders’ Meeting and no later than four months following it.

In accordance with the last paragraph of Article L. 225-123 of the French Commercial Code introduced by the Law of March 29, 2014, known as the “Florange Law,” and on the initiative of the Board of Directors, the Extraor-dinary Stockholders’ Meeting of May 21, 2014 decided that no Company shares may be granted double voting rights. Article 9.3 of the Company’s Articles of Incorporation has been amended accordingly.

In accordance with Article L. 225-27-1 of the French Commercial Code, in-troduced by the Act of June 14, 2013 on securing employment, Article L. 225-23 of the French Commercial Code and on the Board of Directors’ initiative, the Extraordinary Stock-holders’ Meeting of June 23, 2016 amended the Articles of Incorporation to define the procedures for appointing Directors representing employees and to incorporate provisions relating to employee shareholder representatives

(Article 11 of the company’s Articles of Incorporation).

Pursuant to Article R. 225-85 of the Code issued by Decree 2014-1466 of December 8, 2014, and on the ini-tiative of the Board of Directors, the Extraordinary Stockholders’ Meeting held on June 23, 2016 decided to harmonize Article 20 of the Compa-ny’s Articles of Incorporation with the French regime of the “record date”.

Lastly, in accordance with Article L. 823-1 of the French Commercial Code arising from Law 2016-1691 of December 9, 2016 and on the ini-tiative of the Board of Directors, the Extraordinary Stockholders’ Meeting held on June 23, 2017 is being called to rule on the harmonization of Article 26 of the Company’s Articles of Incorporation with the new rules for appointing Statutory Auditors and in particular the removal of the obligation to appoint one or more Alternate Statutory Auditors when the auditor is not a natural person or a one-person company.

5) Stockholders’ meetings and shareholder participation

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6) Table of delegations

Nature of authorization date of stockholders meeting Duration / Expiration date maximum amount authorized use by the Board of Directors

Authorization to grant options forsubscription or purchase of shares to oneor more employees and/or corporate officer including a general delegation to complete all formalities required to finalize the capital increases arising from the exercise of options

For the allocation of options: On February 16th 2017 the Board of Directors acknowledged the exercising of shares subscription options resulting from the 2011, 2012, (1st & 2d wave) 2013 and 2014 (2d wave) over the course of 2016.

On April 2017, the Board of Directors acknowledged the exercising of shares subscription options resulting from the 2012, (1st wave) and 2014 (2d wave) over the course of Q1 2017.

On October 23d 2017, the Board of Directors acknowledged the exercising of shares subscription options resulting from the 2009,2011, 2012, (1st wave) and 2014 (1st & 2d wave) over the course of Q2 & Q3 2017.

On December 15th 2017, the Board of Directors acknowledged the exercising of shares subscription options resulting from the 2011, 2012, (1st wave) and 2014 (2d wave) over the course of October and November 2017.

On February 6th 2018, the Board of Directors acknowledged the exercising of shares subscription op-tions resulting from the 2010,2011, 2012, (1st & 2d waves) and 2013 over the course of December 2017.

Extraordinary Stockholders’ MeetingMarch 1, 2012 Resolution 5

26 months Extended by the ExtraordinaryStockholders’ Meeting May 21, 2014 Resolution

17until May 01, 2015

Up to 5% of the number of shares repre-senting the Company’s capital on the day of their allocation by the Board of Directors

Extraordinary Stockholders’ MeetingJune 10, 2009 Resolution 7

38 months until August 10, 2012Up to 4% of the number of shares repre-senting the Company’s capital on the day of their allocation by the Board of Directors

Extraordinary Stockholders’ MeetingJanuary 20, 2006 Resolution 6

38 months until March 20, 2009Up to 4% of the number of shares repre-senting the Company’s capital on the day of their allocation by the Board of Directors

Authorization granted to the Boardof Directors to freely allocate sharesto one or more employees and/ormanaging corporate officers withperformance conditions attached

Extraordinary Stockholders’ MeetingNovember 30, 2016 Resolution 5

26 months until January 30, 2019Up to 3% of the number of shares repre-senting the Company’s capital on the day of their allocation by the Board of Directors

On November 30, 2016, the Board of Directors decided to allocate bonus shares to the Chairman & CEO up to a limit of 80,000 shares and the majority of the bonus shares to key employees.

On December 22, 2016, the Board of Directors decided, under the conditions set in its meeting of November 30, 2016, on the allocation of 218,500 bonus ordinary shares to employees.

On March 10, 2017 the Board of Directors decided to allocate 5,000 bonus shares to an employee (same conditions as described during the November 30 2016 Board).

Extraordinary Stockholders’ Meeting December 16, 2015 Resolution 1 (In place of the bonus shares previously authorized by

the Stockholders’ Meeting of March 1, 2012, without further dilution))

26 months until February 15, 2018Up to 2% of the number of shares repre-senting the Company’s capital on the day of their allocation by the Board of Directors

On December 16, 2015, and after having noted that all the beneficiaries of the previous bonus share allocation plans had each individually waived their right to receive the bonus shares arising from the plan authorized by the Stockholders’ Meeting held on March 1, 2012, as well as to all associated rights, the Board of Directors decided to allocate a total of 208,459 bonus shares to the members of the Executive Committee and to the Chairman in the same quantities as the bonus shares previously allocated under the bonus share allocation plan authorized by the Combined Stockholders’ Meeting held on March 1, 2012, which the new shares are intended to replace.

On March 11, 2016, the Board of Directors decided to carry out, as from April 1, 2016, a new allocation of 20,000 bonus shares to two new members of the Executive Committee who had not received bo-nus shares under the previous bonus share allocation plan authorized by the Combined Stockholders’ Meeting of March 1, 2012.

Authorization to reduce the share capitalin accordance with the provisions of ArticleL. 225-209 of the French commercial code


18 months until December 23, 2017Up to 10% of the share capital per period of 24 months

NoneExtraordinary Stockholders’ Meeting

June 23, 2017 Resolution 1918 months until December 23, 2018

capital increase dedicated to employees, with no prefered voting rights attached, for invest-ment on the company’s saving plan

Ordinary Stockholders’ MeetingJune 23, 2017 Resolution 22

26 months until August 23, 2019 750,000€ None

Authorization to implementof a share buyback program


18 months until December 23, 2018

Maximum amount: €10,000,000 Maximum unit price: 150% of the last market price of the shares on the day of use of the authori-zation by the Board of Directors

On June 23, 2017, the Board of Directors authorized the Chairman & CEO to renew or enter into any new liquidity contract.

Ordinary Stockholders’ MeetingNovember 30th, 2016 Resolution 1

18 months until May 30, 2017


On November 30, 2016, the Board of Directors authorized the Chairman & CEO to renew or enter into any new liquidity contract.

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Table of delegations granted to the Board of Directors (Article L .225-100, paragraph 7 of the French commercial code).

In accordance with Article L. 225-100, paragraph 7, of the French commercial code, we have detailed the currently valid delegations granted to the Board of Directors and the use of these delegations by the Board of Directors during the past financial year ended December 31, 2017.

Nature of authorization date of stockholders meeting Duration / Expiration date maximum amount authorized use by the Board of Directors

Authorization to grant options forsubscription or purchase of shares to oneor more employees and/or corporate officer including a general delegation to complete all formalities required to finalize the capital increases arising from the exercise of options

For the allocation of options: On February 16th 2017 the Board of Directors acknowledged the exercising of shares subscription options resulting from the 2011, 2012, (1st & 2d wave) 2013 and 2014 (2d wave) over the course of 2016.

On April 2017, the Board of Directors acknowledged the exercising of shares subscription options resulting from the 2012, (1st wave) and 2014 (2d wave) over the course of Q1 2017.

On October 23d 2017, the Board of Directors acknowledged the exercising of shares subscription options resulting from the 2009,2011, 2012, (1st wave) and 2014 (1st & 2d wave) over the course of Q2 & Q3 2017.

On December 15th 2017, the Board of Directors acknowledged the exercising of shares subscription options resulting from the 2011, 2012, (1st wave) and 2014 (2d wave) over the course of October and November 2017.

On February 6th 2018, the Board of Directors acknowledged the exercising of shares subscription op-tions resulting from the 2010,2011, 2012, (1st & 2d waves) and 2013 over the course of December 2017.

Extraordinary Stockholders’ MeetingMarch 1, 2012 Resolution 5

26 months Extended by the ExtraordinaryStockholders’ Meeting May 21, 2014 Resolution

17until May 01, 2015

Up to 5% of the number of shares repre-senting the Company’s capital on the day of their allocation by the Board of Directors


38 months until August 10, 2012Up to 4% of the number of shares repre-senting the Company’s capital on the day of their allocation by the Board of Directors

Extraordinary Stockholders’ MeetingJanuary 20, 2006 Resolution 6

38 months until March 20, 2009Up to 4% of the number of shares repre-senting the Company’s capital on the day of their allocation by the Board of Directors

Authorization granted to the Boardof Directors to freely allocate sharesto one or more employees and/ormanaging corporate officers withperformance conditions attached

Extraordinary Stockholders’ MeetingNovember 30, 2016 Resolution 5

26 months until January 30, 2019Up to 3% of the number of shares repre-senting the Company’s capital on the day of their allocation by the Board of Directors

On November 30, 2016, the Board of Directors decided to allocate bonus shares to the Chairman & CEO up to a limit of 80,000 shares and the majority of the bonus shares to key employees.

On December 22, 2016, the Board of Directors decided, under the conditions set in its meeting of November 30, 2016, on the allocation of 218,500 bonus ordinary shares to employees.

On March 10, 2017 the Board of Directors decided to allocate 5,000 bonus shares to an employee (same conditions as described during the November 30 2016 Board).

Extraordinary Stockholders’ Meeting December 16, 2015 Resolution 1 (In place of the bonus shares previously authorized by

the Stockholders’ Meeting of March 1, 2012, without further dilution))

26 months until February 15, 2018Up to 2% of the number of shares repre-senting the Company’s capital on the day of their allocation by the Board of Directors

On December 16, 2015, and after having noted that all the beneficiaries of the previous bonus share allocation plans had each individually waived their right to receive the bonus shares arising from the plan authorized by the Stockholders’ Meeting held on March 1, 2012, as well as to all associated rights, the Board of Directors decided to allocate a total of 208,459 bonus shares to the members of the Executive Committee and to the Chairman in the same quantities as the bonus shares previously allocated under the bonus share allocation plan authorized by the Combined Stockholders’ Meeting held on March 1, 2012, which the new shares are intended to replace.

On March 11, 2016, the Board of Directors decided to carry out, as from April 1, 2016, a new allocation of 20,000 bonus shares to two new members of the Executive Committee who had not received bo-nus shares under the previous bonus share allocation plan authorized by the Combined Stockholders’ Meeting of March 1, 2012.

Authorization to reduce the share capitalin accordance with the provisions of ArticleL. 225-209 of the French commercial code


18 months until December 23, 2017Up to 10% of the share capital per period of 24 months

NoneExtraordinary Stockholders’ Meeting

June 23, 2017 Resolution 1918 months until December 23, 2018

capital increase dedicated to employees, with no prefered voting rights attached, for invest-ment on the company’s saving plan


26 months until August 23, 2019 750,000€ None

Authorization to implementof a share buyback program


18 months until December 23, 2018


On June 23, 2017, the Board of Directors authorized the Chairman & CEO to renew or enter into any new liquidity contract.

Ordinary Stockholders’ MeetingNovember 30th, 2016 Resolution 1

18 months until May 30, 2017


On November 30, 2016, the Board of Directors authorized the Chairman & CEO to renew or enter into any new liquidity contract.

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7) Informations about corporate officers

Name Role and length of term History/NotesOther roles and functions held by the officer during the financial year

Mr. Thierry GADOU

51 years oldFrench

Chairman and CEO

Until the Ordinary Shareholders’ Meeting is held to approve the accountsfor the financial year ending December 31, 2019

Appointment of Thierry Gadou as CEO by the Board of Directors to replace Yves Martin for an indeterminate period (meeting of January 13, 2012)

Appointment of Thierry Gadou as Chairman of the Board of Directors by the Board of Directors (meeting of January 18, 2012) to replace Yves Martin

Appointment of Thierry Gadou by cooptation as Director by the Board of Directors (meeting of January 18, 2012) to replace Yves Martin; ratification by the Combined Shareholders’ Meeting of March 1, 2012 (Resolution 1)

Renewal of term as Director by the Ordinary Shareholders’ Meeting on May 21, 2014 (Resolution 9)

Renewal of term as Director by the Ordinary Shareholders’ Meeting on June 23, 2017 (Resolution 12)

Director – BOE Smart Retail(Hong Kong) Co

Mr. Xiangjun YAO

40 years oldChinese

Director


Appointment as Director by the Board of Directors dated December 21, 2017, to replace Jérôme Kinas Until the Ordinary Shareholders’ Meeting is held to approve the accounts for the financial year ending December 31, 2019

Senior Vice president and COO of BOE Technology Group Co, Ltd

MS. Xiangshun YIN

35 years oldChinese

Director


Appointment as Director by the Board of Directors dated December 21, 2017,to replace Mrs Hélène PLoix representing PECHEL INDUSTIRES PARTENAIRES


CFO Budget MDGT dept of Smart System Business Group

MS. Candace JOHNSON

65 years old American

Independent Director


Resignation of Bernard Joliey from his post as Director on August 31, 2012

Appointment by cooptation in the capacity of Director by the Board of Directors (meeting of August 31, 2012) to replace Bernard Joliey; ratification by the Ordinary Shareholders’ Meeting called to decide on the accounts for the financial year ended December 31, 2012



Succès Europe SA Chairmanand CEO Croissance Europe SA ChairmanDhimyotis SA Independent director

Mr. Renaud VAILLANT

39 years oldFrench



Appointment as interim Chairman of the Board of Directors by the Board of Directors (meeting on January 13, 2012) to replace Yves Martin until the appointment of Thierry Gadou by the Board of Directors on January 18, 2012

Appointment by cooptation as Director by the Board of Directors (meeting on June 29, 2012) to replace Xavier Jaspar; ratification by the Combined Shareholders’ Meeting on September 14, 2007 (Resolution 4)

Renewal of the term as Director by the Ordinary Shareholders’ Meeting on June 11, 2008 (Resolution 10)



Renewal of the term as Director by the Ordinary Shareholders’ Meeting on May 21, 2014 (Resolution 12)


SARL DB Consulting Manager

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In accordance with the provisions of Article L.225-102-1 of the French commercial code, we have provided below the list of roles filled by the corporate officers:

Name Role and length of term History/NotesOther roles and functions held by the officer during the financial year

Mr. Thierry GADOU

51 years oldFrench

Chairman and CEO


Appointment of Thierry Gadou as CEO by the Board of Directors to replace Yves Martin for an indeterminate period (meeting of January 13, 2012)

Appointment of Thierry Gadou as Chairman of the Board of Directors by the Board of Directors (meeting of January 18, 2012) to replace Yves Martin

Appointment of Thierry Gadou by cooptation as Director by the Board of Directors (meeting of January 18, 2012) to replace Yves Martin; ratification by the Combined Shareholders’ Meeting of March 1, 2012 (Resolution 1)



Director – BOE Smart Retail(Hong Kong) Co

Mr. Xiangjun YAO

40 years oldChinese

Director


Appointment as Director by the Board of Directors dated December 21, 2017, to replace Jérôme Kinas Until the Ordinary Shareholders’ Meeting is held to approve the accounts for the financial year ending December 31, 2019

Senior Vice president and COO of BOE Technology Group Co, Ltd

MS. Xiangshun YIN

35 years oldChinese

Director


Appointment as Director by the Board of Directors dated December 21, 2017,to replace Mrs Hélène PLoix representing PECHEL INDUSTIRES PARTENAIRES


CFO Budget MDGT dept of Smart System Business Group

MS. Candace JOHNSON

65 years old American



Resignation of Bernard Joliey from his post as Director on August 31, 2012

Appointment by cooptation in the capacity of Director by the Board of Directors (meeting of August 31, 2012) to replace Bernard Joliey; ratification by the Ordinary Shareholders’ Meeting called to decide on the accounts for the financial year ended December 31, 2012



Succès Europe SA Chairmanand CEO Croissance Europe SA ChairmanDhimyotis SA Independent director

Mr. Renaud VAILLANT

39 years oldFrench



Appointment as interim Chairman of the Board of Directors by the Board of Directors (meeting on January 13, 2012) to replace Yves Martin until the appointment of Thierry Gadou by the Board of Directors on January 18, 2012

Appointment by cooptation as Director by the Board of Directors (meeting on June 29, 2012) to replace Xavier Jaspar; ratification by the Combined Shareholders’ Meeting on September 14, 2007 (Resolution 4)




Renewal of the term as Director by the Ordinary Shareholders’ Meeting on May 21, 2014 (Resolution 12)


SARL DB Consulting Manager

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financiAL REPORT

Post closing, the Shareholders’ meeting dated February 6th, 2018 has approved Ms Xiangshun YIN and Mr Xiangjun YAO appointments as Directors.

During that same shareholders’ meeting, four other Directors have been appointed, (including one independent director) for a three year assignment, until the Ordinary Shareholders’ Meeting is held to approve the accounts for the financial year ending December 31, 2020:

• Mr Feng BAI as director ;

• Ms Fangqi YE as director ;

• Mr Xingqun JIANG as director;

• Ms Hélène PLOIX as independent director.

Compensation and benefits of any kind paid to corporate officers @ December 2017

In accordance with Articles L. 225-102-1, L. 225-185, and L. 225-197-1 II of the French commercial code, we have presented in the tables below the total compensation and benefits of any kind paid during the financial year to each corporate officer.

The Company’s approach is based on the AFEP-MEDEF Code of Corporate Governance expanded and clari-fied by the recommendations on the compensation for directors and corporate officers of listed compa-nies adopted on October 6, 2008. The Company discloses the details of compensation for directors and corporate officers in accordance with the law and the AFEP-MEDEF recommendations.

Ten tables are proposed by the French financial markets authority (AMF) in its recommendation con-cerning the information to be dis-closed in registration documents about the remuneration of corpo-rate officers, expressly specifying that “issuers use the tables below or other table templates, provided that the equivalent information is given”.

Information on options for the sub-scription or purchase of shares al-located during the financial year to each corporate officer (Table 4), on options for subscription or pur-chase of shares exercised during the financial year by each corporate officer (Table 5), on the history of share subscription or purchase op-tions allocated (Table 8), and on op-tions for subscription or purchase of shares granted to the ten employees (other than corporate officers) with the highest number of options and options exercised by these ten em-ployees (Table 9) is provided in the special report on options and its appendices.

Information on the allocation of bo-nus shares and their availability is provided in the special report on bonus shares (Tables 6 and 7).

Consequently, the Company has chosen the following presentation, comprehensively listing the compo-nents of compensation paid to di-rectors and corporate officers cor-responding to:

• a table providing information equivalent to the information contained in table 2 of the AMF nomenclature: “Summary table of compensation paid to each corporate officer,”

• the information contained in table 3 of the AMF nomenclature: “Table on directors’ attendance fees and other compensation received by non-executive corporate officers”, and

• the information contained in table 10 of the AMF nomenclature.

1. Compensation for the

executive director On January 18, 2012, the Board of Directors appointed Thierry Gadou in the capacity of Chairman of the Board of Directors and Chief Executive Officer.

The Stockholders’ Meeting of May 21, 2014 decided to renew Thierry

GADOU’s term of office of as Director for a 3-year period until the Ordinary Stockholders’ Meeting called to approve the financial statements for the 2016 financial year, to be held in 2017.

The Stockholders’ Meeting of June 23, 2017 decided to renew Thierry GADOU’s term of office of as Director for a 3-year period until the Ordinary Stockholders’ Meeting called to approve the financial statements for the 2019 financial year, to be held in 2020.

The Board of Directors of June 23, 2017 then decided with a unanimous vote to renew Thierry GADOU’s term of office of Chairman for the same duration as his Director appointment.

With regard to the termination of employment contracts upon appoint-ment to a corporate office, the AFEP-MEDEF Code recommends that, when a director becomes a corporate officer of the Company, the employ-ment contract binding the director to that company or to a company of the Group should be terminated, whether through contractual termi-nation or resignation.

The Company complies with this recommendation insofar as Thierry Gadou, in his capacity as Chairman & CEO, has no employment contract. Thierry Gadou was recruited as Chief Executive Officer, a corporate officer, before being co-opted in the capacity of Director, then appointed Chairman of the Company by the Board of Directors.

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AMF Table

Summary of compensation paid to the executive director for the financial year ended December 31, 2017, submitted to the Approval during the Shareholders’ Meeting of June 22, 2018

Executive Director

employement contract

supplemental retirement plan

allowances or benefits due or

likely to be due in case of termination

or change of function

Allowances relating to anon-compete

clause

Other(insurance…)

Yes No Yes No Yes No Yes No Yes No

Thierry GADOUceo1

X X X2 X3 X4

in €2017

current year2016

previous year

Fixed Compensation 320,000 300,000

Annual variable compensation 160,000 150,000

Variable compensation cashed out on the current year regarding previous year 142,000 130,000

% annual variable compensation 95% 86%

Variable compensation booked for current fiscal year 50,000 142,000


Exceptional bonus 50,000 25,000

Benefits in kind 39,629 34,783

Director attendance fees NA NA

The compensation for the Chairman & CEO is established by the Board of Directors after examination by and with the opinion of the Compensation Committee.

The compensation for the Chairman & CEO comprises a fixed component and a variable component, the amounts of which are reviewed every year.

As the Company uses the AFEP-MEDEF Code as a reference, the quantitative and qualitative criteria for allocating the variable component are precise and pre- established. Within the variable component, the qualita-tive is measured and allows excep-tional circumstances to be taken into account where applicable. Moreover, the quantitative criteria are simple,

few in number, objective, measurable, and adapted to company strategy.

On the basis of the Compensation Committee’s recommendations dated February 26th 2018, the Board of Directors unanimously voted in favor of the following items at its meeting of March 5, 2018:

1 Start and end of term (see “List of roles lilled”).2 Thierry GADOU’s role as CEO includes severance pay. See chapter 10 below, page 120 on «Agreements providing for compensation paid to members of the Board of Directors if they resign or are dismissed without real or proper cause or if their employement ends in the event of a public offering (severance pay, golden parachutes)».3 Thierry GADOU’s role as CEO includes a non-compete clause. See chapter 10 below, page 120 on «Agreements providing for compensation paid to members of the Boar of Directors if they resign or are dismissed without real or proper cause or if their employement ends in the event of a public offering (severance pay, golden parachutes)».4 The Company has obteined unemployement insurance for directors as well as liability cover for Thierry GADOU. Thierry GADOU is provided with a vehicle and driver.

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financiAL REPORT

Compensation paid for the 2017 financial year

• The amount of the variable com-ponent of the compensation of the Chairman & CEO for the 2017 financial year is equal to the sum of €50,000, corresponding to 31% of his maximum bonus.

The variable component was determined based on two separate tranches, namely a qualitative portion referring to objectives set at the beginning of the year and a quantitative portion associated with performance criteria also set at the beginning of the year:

- variable component on quanti-tative objectives:

the financial targets of the year are not reached, the variable component is then equal to zero for 2017

- variable component on qualita-tive objectives:

given the time dedicated to the equity project with BOE, the signatures of strategic partnerships worldwide and the acceleration in the Innovation roadmap with the Vusion plat-form (hardware and software) the variable component on qualitative objectives was set to €50,000.

• A special bonus:

The Board Meeting of March 10, 2017, was given the possibility of paying the Chairman & CEO an exceptional bonus relating to the Company’s creation of value.

On March 5, 2018, on the proposal of the Compensation Committee of February 28 , 2018, the Board de-cided to grant a special bonus of €50,000 to the Chairman & CEO con-sidering the Group’s dynamics over the 2017 financial year in its market.

Stock options allocatedto the Chairman & CEO

None

Bonus shares allocatedto the Chairman & CEO7

At its meeting of December 16, 2015, the Board put in place a bonus share allocation plan, under the authori-zation given by the Extraordinary Shareholders’ Meeting of December 16, 2015. This allocation was made in place of the bonus shares authorized previously under the authorization given by the Extraordinary General Meeting of March 1, 2012, without fur-ther dilution. This plan corresponded to the period of the “i3” (innovation, international, industrialization) stra-tegic plan.

Pursuant to this plan, it is recalled that the Chairman & CEO waived his right to the bonus shares authorized on delegation of the Combined Share-holders’ Meeting of March 1, 2012, and to all associated rights. Further-more, at its meeting of December 16, 2015, the Board of Directors, acting on delegation from the Extraordi-nary General Meeting of December 16, 2015 (Resolution 1), decided to allocate 139,069 bonus shares to the Chairman & CEO in place of the bonus shares previously authorized (without further dilution), subject to proper fulfillment of the relevant conditions.

Almost five years after the first bonus share allocation plan, SES-imagotag has now entered a new stage in its development with its “Leapfrog 2020” strategic plan, which aims to acceler-ate the Company’s global growth and to attain average annual growth of 30% between 2015 and 2020, with sales of €400-500 million by 2020.

On November 30, 2016, following the authorization given by the Combined Shareholders’ Meeting of November 30, 2016, the Board of Directors put in place a new bonus share allocation plan subject to demanding quanti-tative performance conditions to be assessed over a period of several years (2017-2020). In keeping with the Leapfrog 2020 plan, these perfor-mance conditions will include strong growth targets for company sales and profitability.

Pursuant to this plan, it is indicated that the Board of Directors, acting on delegation of the Combined Share-holders’ Meeting of November 30, 2016, decided, at its meeting of No-vember 30, 2016, to allocate 80,000 bonus shares to the Chairman & CEO, subject to meeting the associated conditions.

It is also noted that the Board of Directors decided that the Chairman would be required to keep 30% of the registered shares allocated to him until the cessation of his duties, across all bonus share plans.

On December 21, 2017, the Board of Directors noted the significance of the investment made by Mr. Thierry Gadou both in cash and in Company shares, which, moreover, amounts to a much higher percentage of capital than the 30% of shares which have been or will be allocated to Mr. Thierry Gadou under the Company’s free share allocation plans currently in effect.

In light of this investment and the holding commitments made in this matter by Mr. Thierry Gadou, the Company’s Board of Directors has decided to modify the number of free shares allocated to Mr. Thierry Gadou which are to be held (directly) by him until he ceases to hold the position of Chairman and Chief Executive Officer, setting it at 20,000 shares (for all free share allocation plans combined).

The details of these allocated shares also appear in the special report on bonus shares attached to this management report.

2018 compensation policy

The compensation for the Chairman & CEO is established by the Board of Directors after examination by and with the opinion of the Compensation Committee.

The compensation for the Chairman & CEO comprises a fixed compo-nent and a variable component, the amounts of which are reviewed every year.

7 (Voir « Rapport spécial sur les actions attribuées gratuitement »)

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Governance report

As the Company uses the AFEP-MEDEF Code as a reference, the quantitative and qualitative criteria for allocating the variable compo-nent are precise and pre-established. Within the variable component, the qualitative share is measured and allows exceptional circumstances to be taken into account where applica-ble. Moreover, the quantitative criteria are simple, few in number, objective, measurable, and adapted to company strategy.

On the basis of the Compensation Committee’s recommendations dated March 5 2018, the Board of Directors unanimously voted in favor of the fol-lowing items:

• the amount of fixed compensation for the Chairman & CEO for the 2017 financial year is equal to the gross annual sum of €320,000;

• the amount of the variable com-pensation for the Chairman & CEO for the 2017 financial year is main-tained at 50% of fixed compensa-tion, i.e., a maximum of 160,000 euros, divided into two separate tranches:

- qualitative variable compo-nent of a maximum of €50,000: this bonus will take account of the Group’s development and its overall commercial perfor-mance with a particular emphasis on the Chinese market. It may be increased if the scale and diffi-culty of projects to be conducted during the year justify this. Lastly, changes in the share price will also be taken into account, discounting the stock market environment in general;

- quantitative variable component of a maximum of €110,000 based on based on budget targets for revenue, OE, Net result and net cash.

Commitments made for the benefit of the Chairman and Chief Executive Officer

All the commitments listed below, made for the benefit of Mr. Gadou,

as Chairman and Chief Executive Of-ficer, have been authorized by the Board of Directors and submitted to the Ordinary General Meeting of Shareholders for approval:

• severance pay in the event of ter-mination of his duties as Chief Ex-ecutive Officer;

• non-competition payment;

• senior executive insurance policy (garantie sociale des chefs d’en-treprises or “GSC”).

Company car

The Chairman and Chief Executive Officer has a company car at his disposal.

No simultaneous holding ofan employment contractand a corporate office

As Chairman and Chief Executive Officer, Mr. Gadou does not benefit from an employment contract since he was recruited as Chief Executive Officer, a corporate office, before being co-opted as a Director and was thereafter appointed Company Chairman by the Board of Directors.

Approval of Mr. Gadou’s compensation policy for 2018 as Chairman and Chief Executive Officer in accordance with Article L. 225-37-2 of the French Commercial Code

In accordance with the new legisla-tive provisions n° 2016-1691 dated December 9, 2016, named “Loi Sapin II”, and according to article L.225-100 of the French Code of Commerce, the compensation policy granted to Mr Thierry Gadou for the 2017 fiscal year will be submitted to the approval of the shareholders meeting on June 22, 2018.

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financiAL REPORT

So the following resolution will be submitted:

Approval of Mr. Gadou’s compen-sation policy for 2018 as Chairman and Chief Executive Officer in ac-cordance with Article L. 225-37-2 of the French Commercial Code

In accordance with the new legislative provisions n° 2016-1691 dated December 9, 2016, named “Loi Sapin II”,and according to article L.225-100

of the French Code of Commerce, the compensation policy granted to Mr Thierry Gadou for the 2018 fiscal year is submitted to the approval of the shareholders meeting.

The Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for Ordinary General Meetings and having re-viewed the Board of Directors’ report on Mr. Gadou’s compensation policy as Company Chairman and Chief

Executive Officer, prepared pursuant to Article L. 225-37-2 of the French Commercial Code, approves the principles and criteria for determining, distributing and allocating the base, variable and exceptional compo-nents of total compensation as well as all benefits in kind attributable to Mr. Gadou as Chairman and Chief Executive Officer, by virtue of his mandate, as presented in this report.

SUMMARY of components of the compensation for the Chairman & CEO for the 2018 financial year

Components of compensationAmount subject

to voteExplanation

Fixed compensation €320,000

Annual variable compensation€160,000 maximum

Variable part split in two parts one qualitative (31%) and one quantitative (69%)

Deferred variable compensation NA No deferred variable compensation is provided for

Multi year variable compensation NA No multi-year variable compensation is provided for

Exceptional bonus -

On proposal of the Compensation Committee on March 5 2018, the Board decided to allow the possibility of paying to the Chairman, as appropriate, an exceptional bonus relating

to the company's creation of value

Bonus shares -

Directors attendance fees - no attendance fees

Benefits of any kind (value) No change company car and unemployement insurance for Directors

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Governance report

Components of compensation under the procedure of regulated agreements

Amount subjectto vote

Explanation

Severance pay in the event of cessation of duties of CEO following a change in control

-In accordance with the procedure relating to regulated agreements, the shareholders

approved the severance pay on march 1st 2012 for a period of 5 years - the renewal of this arrangement was authorized by the Board on March 10, 2017.

Non compete agreement -In accordance with the procedure relating to regulated agreements, the shareholders

approved the severance pay on march 1st 2012.

Supplementary pension system 0 € No supplementary pension system has been subscribed.

2. Directors’ attendance fees and other compensation received

by non-executive corporate officers

We remind you that, in accordance with the decision of the Shareholders’ Meeting of June 23, 2017 (Resolution 4), the Shareholders’ Meeting decided to set the annual overall amount of directors’ attendance fees to fifty thousand (50,000) euros for the financial year ended December 31, 2017.

Tableau sur les jetons de présence et autres rémunérations perçues par les mandataires sociaux non dirigeants (Tableau 3 – Nomenclature AMF)

Montants versés au cours de l’exercice 2017

Montants versés au cours de l’exercice 2016

Jérôme KINAS

Attendance fees None None

Other compensation None None

PECHEL INDUSTRIES, represented by Madame Hélène PLOIX

Attendance fees None None


Renaud VAILLANT



Candace JOHNSON



3. Sums allocated to provisions by the Company for payment of pensions, retirement, or

other benefits for directors and other corporate officers

No sums alIocated to provisions have been recorded by the Company for directors and other corporate officers.

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financiAL REPORT

8) Information that may have an impact in the eventof a public offeringIn accordance with the provisions of Articles L. 225-100-3 of the French commercial code, we hereby present the factors that may have a significant impact in the event of a public offering:

1. Structure of the capital

2. Statutory restrictions on the exercise of voting rights and share transfers or clauses of agreements brought to the knowledge of the Company pursuant to Article L. 233-11of the French commercial code

3. Direct or indirect holdings in the Company’s capital of which it is aware pursuantto Articles L. 233-7 and L. 233-12 of the French commercial code(significant or company-owned holdings)

4. List of holders of any securities involving special control rightsand a description of those rights (especially resulting from preference shares)

The structure of the capital, as recalled in paragraph III of this Management Report, in accordance with the provisions of Article L. 233-7 and L.233-13 of the French commercial code, is not likely to have an impact in the event of a public offering.

There are no statutory restrictions on the exercise of voting rights and share transfers pursuant to Article L. 233-11 of the French commercial code.

Furthermore, Article 9.4 of the Company’s articles of incorporation stipulate that any legal or natural person acting alone or in concert, which comes to own or ceases to own, directly or indirectly through one or more companies in which it has a majority controlling interest, a percentage of ownership greater

than or equal to 1% of the capital stock and/or voting rights or a multiple of this percentage is required to notify the Company of the total number of shares and voting rights and se-curities giving access to equity or voting rights that it owns, within a period of five trading days following the crossing of said threshold(s) by sending to its corporate headquar-ters a registered letter with return receipt requested.

If they are not reported in accor-dance with the conditions de-

scribed above, the shares or vot-ing rights in excess of the fraction that should have been reported are stripped of voting rights in the stock-holders meetings, if the failure to report was noted and if one or more stock-holders in possession of less than 1% of the capital stock file a request that is recorded in the minutes of the stockholders meeting. The afore-mentioned provisions apply without prejudice to the reporting of threshold breaches stipulated by legal or regu-latory provisions in effect.

There are no direct or indirect hold-ings in the Company’s capital of which it is aware pursuant to Arti-

cles L. 233-7 and L. 233-12 of the French commercial code (signifi-cant or company-owned holdings).

None

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Governance report

5. Control procedures provided for in a potential employee shareholding plan when control rights are not exercised by the employees (e.g., FCPEs [collective employee shareholding plans])

6. Agreements between shareholders of which the Company is aware and which may lead to restrictions on share transfers and the exercise of voting rights (shareholders’ agreements)

7. 7. Rules relating to the appointment and replacement of members of the Board of Directors as well as the amendment of the Company’s Articles of AssociationMembers of the Board of Directors

General Provisions

None

On December 20, 2017, Chequers Capital XV and Pechel Industries III confirmed the termination of the stockholders pact signed on May 26, 2009 (the main provisions of which are described in the Company annual

report 2016 p. 94) which governed their relations up to that date.

With the exception of the agree-ments described in sections 2.3.2, 2.3.3 and 2.9 of the Draft Information

Note, the Company has no knowl-edge of any agreement between stockholders in effect at this time which could result in restrictions on the transfer of Company shares and on the exercising of voting rights.

The Articles of Association state that the Company is managed by a Board of Directors comprising no fewer than three and no more than eighteen members, subject to the exception provided for by law in the event of a merger (Art. L. 225-95 of the French commercial code)

The term of office for the directors is three (3) years, which shall come to an end following completion of the Ordinary General Meeting called to approve the accounts for the previous year and held in the year during which their terms of office expire.

Article 11.1 of the Company’s Arti-cles of Association specifies that, during the life of the Company, the directors are appointed, renewed, or dismissed by the Ordinary Gen-eral Meeting. They can always be re-elected.

In the event of vacancy due to the death or resignation of one or more directors, the Board may make temporary appointments between two General Meetings, in accor-dance with the conditions provided

for by law. Temporary appointments made by the Board of Directors are subject to ratification by the next General Meeting.

A director appointed to replace an-other shall only carry out his/her duties for the remainder of his/her predecessor’s term of office.

Each director must own a share.

Director representing employee shareholders

Article 11.1 of the Company’s Arti-cles of Association also specifies that pursuant to Article L. 225-23 of the French commercial code, when the portion of capital held – within the framework of the provisions of Article L. 225-102 of that same Code – by the staff of the Company and affiliated companies as defined by Article

L. 225-180 of that same Code represents more than 3%, a director representing employee shareholders shall be elected by the Ordinary General Meeting according to the procedures laid down both by the regulations in force and by

these Articles of Association, provided that the Board of Directors does not include one or more directors ap-pointed from among the members of the Supervisory Board for Employee Investment Funds representing em-ployees, or one or more employees elected in accordance with Article L. 225-27 of that same Code.

Candidates for appointment as an employee shareholder director are chosen under the following condi-tions:

• If the voting right attached to the shares held by the employees or by the employee investment funds of which they are members is exercised by the members of the Supervisory Board for those employee invest-ment funds, candidates shall be chosen by the Supervisory Board from among its members

• If the voting right attached to the shares held by the employees or by the employee investment funds of which they are members is exer-cised directly by those employees, candidates shall be chosen via the consultation provided for by

5 Please refer to§1 for the Board members list.

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financiAL REPORT

Article L. 225-106 of the French commercial code, either by the employee shareholders having convened specially for such a pur-pose or via written consultation. Only applications submitted by a group of shareholders representing at least 5% of the shares held by employees exercising their individual voting right will be admissible.

The procedures for selecting can-didates not defined by the legal and regulatory provisions in force or by these Articles of Association shall be approved by the Chairman of the Board of Directors, namely concerning the candidate selection schedule.

A list of all validly selected candi-dates shall be drawn up, comprising at least two names. The list of candi-dates will be attached to the notice of Shareholders’ Meeting convened to appoint a director representing employee shareholders.

The director representing employee shareholders shall be elected by the Ordinary General Meeting under the conditions applicable to all appoint-ments of directors, at the proposal of the shareholders referred to in Article

L. 225-102 of the French commer-cial code. The Board of Directors shall present the General Meeting with the list of candidates in order of preference and may approve the first candidate on the list. The can-didate with the most votes from the shareholders present or represented at the Ordinary General Meeting will

be appointed as the director repre-senting employee shareholders.

The director representing employee shareholders is not taken into ac-count when determining the maxi-mum number of directors laid down by Article L. 225-17 of the French commercial code.

The term of the duties of the director representing employee shareholders is three years. However, this term shall expire by operation of law, and the di-rector representing employee share-holders shall be deemed as having resigned in the event that he/she ceases to be an employee of the Company (or an affiliated company or economic interest grouping as defined by Article L. 225-180 of the French commercial code) or a shareholder (or a member of an employee invest-ment fund whose shares comprise at least 90% shares in the Company). The Board of Directors may validly meet and deliberate until the date on which the director representing em-ployee shareholders is appointed or replaced.

In the event that the position of di-rector representing employee share-holders becomes vacant for any rea-son, he/she shall be replaced under the conditions set out above, with the new director being appointed by the Ordinary General Meeting for a new term of three years.

The provisions concerning the di-rector representing employee share-holders shall cease to apply if, at the end of a given financial year, the per-

centage of capital held by staff of the Company and affiliated companies as defined by Article L. 225-180 men-tioned above, in accordance with the provisions of Article L. 225- 102 men-tioned above, represents less than 3% of the capital, with the understand-ing that the offices of any directors appointed in accordance with para-graph 6 will expire at their term.

Amendments to the Articles of As-sociation

Article 16 of the Company’s Articles of Association formally states that “Extraordinary General Meetings are those called to decide on or autho-rize direct or indirect amendments to the Articles of Association.”

Article 24 of the Company’s Arti-cles of Association specifies that the decisions of Extraordinary General Meetings shall only be considered valid if the shareholders present or represented own, upon convening for the first time, at least one-fourth of the shares bearing the right to vote and, upon convening for the second time, one-fifth of the shares bearing the right to vote.

Where this quorum is not met, the second Meeting may be postponed for a maximum of one month fol-lowing that during which it was con-vened.

Extraordinary General Meetings shall act by a two-thirds majority of the votes held by the shareholders pres-ent or represented, including those having voted by mail.

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Governance report

The terms of the “Euro PP” bonds issued for the amount of 40 million euros in two series in December 2016 and March 2017 (the “Bonds”) call for the early redemption of Bonds, as desired by each bondholder, if there is a change in control of the Company (Article 5.3) (as indicated in the consolidated financial statements appendix of this annual report). The majority of persons holding Bonds (in the amount of 25 million euros) have waived their option to request early redemption of the Bonds as part of the acquisition of the Con-trolling Stake. One bearer holding Bonds worth a total of 15 million eu-ros sold the Bonds he held to a third

party, which informed the Company that he did not intend to request early redemption of the Bonds as part of the acquisition of the Controlling Stake.

Similarly, certain lines of credit granted to the Company (as indi-cated in the consolidated financial statements appendix of this an-nual report), including by Société Générale, BNP Paribas and BPI, also include early reimbursement claus-es in the event of a change in con-trol of the Company, clauses which the aforementioned lenders have agreed to waive in the context of the change in control resulting from the acquisition of the Controlling Stake.

Finally, it is recalled that the contrac-tual holding commitments made to the Company by sellers (other than the Mangers who participated in the acquisition of the Controlling Stake) as part of the acquisitions of Findbox GmbH and Pervasive Displays Inc., carried out by the Company respec-tively in November 2016 and February 2017, shall be automatically lifted in accordance with the terms agreed to during said acquisitions when the Offer opens, thus enabling the sellers concerned to contribute their shares to the Offer.

8. Powers granted to the Board of Directors, in particular for the issue or buyback of shares

9. Agreements entered into by the Company that are amended or terminated in the event of a change in control of the Company, except in the event of a legal obligation of disclosure, and that would severely affect its interests (including clauses of com-mercial or financial contracts)

The powers (delegations of powers and authority) granted at December 31, 2017, are listed in the table of delegations attached above. They may have an impact in the event of a public offering, especially given the fact that they allow the Board of Directors to issue new shares or securities granting access to the capital:

• Authorization granted to the Board of Directors to reduce the share

capital in accordance with the terms of Article L. 225-209 of the French commercial code;

• Authorization granted to the Board of Directors to implement a share buyback program;

• Authorization granted to the Board of Directors to freely distribute shares to one or more employees and/or corporate officers subject to performance conditions

• Authorization granted to the Board of Directors to increase the capital dedicated to employees, with no preferred voting rights attached, for investment on the company’s saving plan

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Severance pay

The compensation due to Thierry Gadou in the event of cessation of his duties as Chief Executive Officer is in the form of contractual severance pay, the terms and conditions of which were ap-proved by the Shareholders’ Meeting held on March 1, 2012.

In the specific case of a change in con-trol, the authorization would be valid for a period of 60 months. On March 10, 2017, the Board of Directors therefore decided to renew this authorization.

Compensation shall therefore only be due if the following conditions are met:

• Event triggering the right to severance pay: : the cessation of the duties of SES-imagotag’s CEO in case of dismissal (unless it is because of serious or severe misconduct) or resignation within six months following a change in control of SES-imagotag;

• Amount of compensation: lump-sum payment of a gross nominal amount equal to 18 months of fixed and variable compensation;

• Performance condition governing severance pay: this condition will be met if at least 75% of the quanti-tative objectives established for the bonus for the year preceding that of the cessation of duties as Chief Executive Officer are achieved.

A Change in Control is defined as the exchange of at least 40% of SES-ima-gotag’s capital, on or off the mar-ket, or the filing and execution of a public offering for SES-imagotag’s shares.

Non compete

Moreover, in the event of cessation of his duties as Chief Executive Of-

ficer for any reason whatsoever, Thierry Gadou’s term of office, in the capacity of Chief Executive Offi-cer, includes a non-compete clause under the terms of which Thierry Gadou undertakes:

• not to join a company carrying out a competing activity;

• not to exercise or be involved, ei-ther directly or indirectly, in any way whatsoever (in particular as a self-employed worker or share-holder holding more than 3% of the capital or voting rights), in a com-peting activity;

• not to exercise or be involved, ei-ther directly or indirectly, in any way whatsoever, and not to invest in, in any way whatsoever (in par-ticular as a shareholder), in the companies Pricer or ZBD;

• not to approach or recruit or try to recruit any person who is or was employed by SES- imagotag or one of its subsidiaries in the pre-vious 12 months, with a view to using the specific knowledge or skills of that person for the benefit of a natural person or legal entity whose activities are in competi-tion with those of SES-imagotag.

The term rival activity refers to any activity involving the design, mar-keting, or installation of electronic labeling systems.

This non-compete obligation is limited to France, Belgium, Italy, Germany, Denmark, Spain, the United Kingdom, Switzerland, Hungary, Romania, Poland, Sweden, Brazil, Mexico, Argentina, Canada, the United States of America, and South Africa.

The clause is limited to a duration of one year as of the end of his term of office as Chief Executive Officer

of the Company. At the end of this period of one year, SES-imagotag may renew the clause for another one-year period. This renewal must be notified by registered letter with acknowledgment of receipt or de-livered by hand against receipt, at the latest 60 calendar days before the expiry of the initial period of the non-compete obligation.

In consideration of this non-com-pete obligation, Thierry Gadou shall receive, following the effective ces-sation of his term of office as Chief Executive Officer of SES-imagotag, and for the entire duration of this prohibition, a special flat-rate monthly compensation, the gross amount of which will be equal to 50% of his gross fixed monthly salary.

This special compensation shall be paid by bank transfer at the end of each month for the entire duration of the non-compete obligation and it shall be subject to social security contributions.

Any violation or infringement of this non-compete clause shall authorize SES- imagotag to put a stop to the violation or infringement in question and to order, subject to a penalty, the cessation of the competition that infringes on the above provisions, without prejudice to any damages or interest it may claim because of the violation of this obligation.

Similarly, any violation of the non-compete obligation would re-lease SES-imagotag from payment of this compensation and would render Thierry Gadou liable to pay back any sums he may have received in this respect, with interest at the statutory rate from the date of formal notice to immediately cease the rival activity, without prejudice to any damages or interest it may claim because of the violation of this ob-ligation.

10. Agreements providing for compensation paid to members of the Board of Directors if they resign or are dismissed without real and proper cause or if their employment ends in the event of a public offering (severance pay, golden parachutes)

Thierry GADOU

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Governance report

SES-imagotag may release Thierry Gadou from the non-compete clause at the end of his term of office as Chief Executive Officer of SES-imagotag. In this case, the financial compensa-tion shall not be payable. This waiver must be notified by letter sent by registered mail with return receipt

or hand-delivered in exchange for a receipt within 8 calendar days following the date when it is no-tified to Thierry Gadou, or Thierry Gadou gives notice of the termi-nation of his term of office as Chief Executive Officer at SES-imagotag.

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III. Report on stock options

Board of Directors’ special report on the transactions carried out pursuant to the provisions of Articles

L. 225-177 to L. 225-186 of the French Commercial Code

Financial year ended on December 31, 2017

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financial Report

Dear Sir/Madam,

In accordance with the provisions of Article L. 225-184 of the French Commercial Code, we are pleased to report on the transactions carried out pursuant to the provisions of Articles L. 225-177 to L. 225-186 of the French Commercial Code relating to stock and share subscription options.

Employee corporate officers in the company or in the controlled companies

No options have been granted to the Company’s corporate officers.

We hereby inform you that no subscription options have been granted by the Company to corporate officers due to the offices held and the duties per-formed in the Company and in its subsidiaries in accordance with the conditions provided for under Article L. 225-180 of the French Commercial Code.

We also hereby inform you that no options have been granted to corporate officers for the duties they performed or the offices they held through controlled companies within the meaning of Arti-cle L. 233-16 of the French Commercial Code.

Non-corporate officer employees

Please note that the Company did not grant any new subscription options to non- corporate offi-cers during the 2016 financial year.

Please note that subscription options have been exercised during the past year by non-corporate officer employees.

The number of options thus exercised is shown in the table in Appendix 1.

In a table contained in Appendix 1, we have re-ported all the options granted by the Company to non-executive beneficiary employees, including the 10 employees who were granted the largest number of options.

Allocation of subscription options

At December 31, 2016, the following eight stock sub-scription option plans were in operation:

Under the authorization granted by the EGM of June 10, 2009,

• The 2009 Plan dated April 15, 2010 expiring on April 15, 2017

• The 2010 Plan dated September 15, 2010 expiring on September 15, 2017

• The 2011 Plan dated October 21, 2011 expiring on October 21, 2018

Under the authorization by the EGM of March 1, 2012,

• The 2012 Plan dated August 31, 2012 expiring on Au-gust 31, 2019

• The 2013 Plan dated December 18, 2012 expiring on December 18, 2019

• The 2013 Plan dated May 28, 2013 expiring on May 28, 2020

• The 2014 Plan dated April 3, 2014 expiring on April 3, 2021

Under the authorization granted by the EGM of May 21, 2014,

• The 2014 Plan dated October 23, 2014 expiring on October 23, 2021

2009 Plan

In accordance with the authorization granted by the Stockholders’ General Meeting of June 10, 2009 (Res-olution 7), of April 15, 2010 the Board of Directors decided to allocate 14,000 stock options to Company employees under the following conditions:

Formula for calculating the subscription price set in accordance with Article L. 225-177 of the French Commercial Code; 95% of the average price quoted in the 20 trading sessions preceding their allocation, or €10.96.

1) Stock and share subscription options

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Condition of presence

As a reminder, the number of options thus granted by the Board on April 15, 2010 is shown in the table in Appendix 1.

2010 Plan

Under the authorization granted by the Shareholders’ Meeting of June 10, 2009 (Resolution 7), on September 15, 2010 the Board of Directors decided to grant 8,500 stock options to Company employees under the following conditions:

• The formula for calculating the subscription price has been set in accordance with Article L. 225-177 of the French Commercial Code; 95% of the average of the quoted prices for the 20 trading sessions preceding their allocation, or €8.89.

• Condition of presence

As a reminder, the number of options thus granted by the Board on September 15, 2010 is shown in the table in Appendix 1.

2011 Plan

Under the authorization granted by the Shareholders’ Meeting of June 10, 2009 (Resolution 7), on October 21, 2011 the Board of Directors decided to grant 58,500 stock options to Company employees under the following conditions:

• The formula for calculating the subscription price has been set in accordance with Article L. 225-177 of the French Commercial Code; 95% of the average of the quoted prices for the 20 trading sessions preceding their allocation, or €9.38.

• Condition of presence

As a reminder, the number of options thus granted by the Board on October 21, 2011 is shown in the table in Appendix 1.

2012 Plan

Please note that the Board of Directors meeting of August 31, 2012 decided to grant stock options under the following conditions (“1st Wave 2012 Plan”):

• Beneficiaries: an allocation to all Company employees in an amount equivalent to 3 months of gross base sal-ary (calculated at the value of the subscription price) as well as any additional allocation made on the Chairman and Chief Executive Officer’s initiative.

• Volume of options to be allocated: 400,000

• Allocation deadline: before June 30, 2013

• The formula for calculating the subscription price has been set in accordance with Article L. 225-177 of the French Commercial Code; average of the quoted prices for the 20 trading sessions preceding their allocation, less a 5% discount; or €9.34 for the options allocated by the Board meeting of August 31, 2012

Regarding the stock option pricing formula, the Compa-ny is aware of the recommendations found in the AFEP-MEDEF Code, in which it is stipulated that no discount should be applied. However, the Company would point out that this recommendation applies only to managing corporate officers, whereas this is a stock option allocation made to non-corporate officer employees.

• Option exercise date: November 28, 2014

• Period of option validity: seven years as of their allocation date.

• Two cumulative conditions: a performance and a presence condition

The Board of Directors has delegated to the Chairman and Chief Executive Officer the task of notifying each beneficiary by letter of the number of options granted to them and the conditions for exercising them.

In accordance with the 1st Wave 2012 Plan and under the terms and conditions set by the Board of Directors meeting of August 31, 2012, 315,800 options were granted to Company non-corporate officers employees during the year ended December 31, 2012 of which 162,000 options for the 10 Company non-corporate officer employees granted the highest number of options.

The number of options thus granted by the Board at the meet-ing of August 31, 2012 is shown in the table in Appendix 1.

In addition, we remind you that by decision of December 18, 2012 (“2nd Wave 2012 Plan”), the Board of Directors

Report on stock options

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financial Report

decided to grant stock options to certain employees who started working for the Company as of September 1, 2012, in accordance with the authorization granted by the Shareholders’ Meeting of March 1, 2012 (5th resolution) and under the terms and conditions set by the Board meeting of August 31, 2012.

Based on the calculation formula used by the Board of August 31, 2012 and in accordance with Article L. 225-177 of the French Commercial Code, the subscription price shall be set at €9.02, or the average price quot-ed on the 20 trading days preceding the Board meet-ing allocating the stock options, less a 5% discount.

The Board of Directors has delegated to the Chairman and Chief Executive Officer the task of notifying each beneficiary by letter of the number of options granted to them and the conditions for exercising them.

Given the delays in determining the beneficiaries and the number of options granted, this notification was not given during the financial year ended on Decem-ber 31, 2012 but rather at the beginning of 2013 for 19,000 options split between 6 employees who start-ed working for the Company as of September 1, 2012.

The number of options thus granted by the Board at the meeting of Tuesday, December 18, 2012 is shown in the table in Appendix 1.

2013 Plan

We remind you that by decision of May 28, 2013, the Board of Directors decided to grant stock options to 3 additional employees in accordance with the authori-zation granted by the Shareholders’ Meeting of March 01, 2012 (Resolution 5) and under the terms and con-ditions set by the Board on August 31, 2012.

Based on the calculation formula used by the Board on August 31, 2012 and in accordance with Article L. 225-177 of the French Commercial Code, the sub-scription price shall be set at €10.44, or the average price quoted on the 20 trading days preceding the Board meeting allocating the stock options, less a 5% discount.

The Board of Directors has delegated to the Chairman and Chief Executive Officer the task of notifying each beneficiary by letter of the number of options granted to them and the conditions for exercising them; the aforementioned notification concerned 65,200 op-

tions split between 3 employees.

The number of options thus granted by the Board at the meeting of May 28, 2013 is shown in the table in Appendix 1.

2014 Plan

In accordance with the authorization granted to the Stockholders’ General Meeting on March 1, 2012 (Resolution 5), the Board of Directors meeting of April 3, 2014 decided to grant a new sub-delegation to the Chairman to allocate (before May 01, 2014) 43,000 subscription options to Company employees under the following conditions (“1st Wave 2014 Plan”):


• The formula for calculating the subscription price has been set in accordance with Article L. 225-177 of the French Commercial Code; average of the quoted prices for the 20 trading sessions preceding their allocation, less a 5% discount; or €14.84 for the options allocated by the Board Meeting of April 3, 2014.

• Option exercise date: on the day of the Board meet-ing called to approve the statements for the 2015 financial year

• Period of option validity: seven years as of their allocation date

• Two cumulative conditions: a performance and a presence condition

As a reminder, the number of options thus granted by the Board of April 03, 2014 is shown in the table in Appendix 1.

Pursuant to the extension granted by the General Shareholders’ Meeting of May 21, 2012 (Resolution 17) for the delegation granted by the Stockholders’ General Meeting of March 01, 2012 (Resolution ) on October 23, 2014, the Board of Directors decided to grant stock options to IMAGOTAG employees under the following conditions (“2nd Wave 2014 Plan”):


• The formula for calculating the subscription price has been set in accordance with Article L. 225-177

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of the French Commercial Code; average of the quoted prices for the 20 trading sessions preceding their al-location, less a 5% discount; or €12.21 for the options allocated by the Board Meeting of October 23, 2014.

• Option exercise date: on the day of the Board meeting called to approve the statements for the 2015 financial year

• Period of option validity: seven years as of their alloca-tion date.

• Two cumulative conditions: a performance and a pres-ence condition

As a reminder, the number of options thus granted by the Board on October 23, 2014 is shown in the table in Appendix 1.

Options exercised during 2017

We hereby inform you that subscription options have been exercised during the year under the conditions stipulated in Article L. 225-180 of the French Commercial Code.

On February 16, 2017, in accordance with the provisions of Article L. 225-178 paragraph 3 of the French Commer-cial Code and pursuant to the authorizations granted by the Combined Stockholders’ General Meetings of June 10, 2009 (Resolution 7), March 1, 2012 (Resolution 5), May 21, 2014 (Resolution 17), and June 30, 2015 (Resolution 12), the Board of Directors reported exercising subscription options for shares from the 2011, 2012 (1st and 2nd Wave), 2013 and 2014 Plans (2nd Wave) occurring in 2016, and amended the Company’s Articles of Incorporation accordingly.

On April 27, 2017, pursuant to the authorizations granted by the Combined Shareholders’ Meetings of March 1, 2012 (Resolution 5), May 21, 2014 (Resolution 17) and June 30, 2015 (Resolution 12), the Board of Directors confirmed the exercise of stock options resulting from the 2012 (first wave of August 31, 2012) and 2014 (second wave of October 23, 2014) plans occurring in the first quarter of 2017 and amended the Company’s Articles of Association accordingly.

On October 23, 2017, pursuant to the authorizations granted by the Combined Shareholders’ Meetings of June 10, 2009 (Resolution 7), March 1, 2012 (Resolution 5), May 21, 2014 (Resolution 17), and June 30, 2015 (Resolution 12), the Board of Directors confirmed the exercise of stock options resulting from the 2009,

2011, 2012 (first wave) and 2014 (first and second wave) plans occurring in the second and third quarters of 2017 and amended the Company’s Articles of Association ac-cordingly.

On December 15, 2017, pursuant to the authorizations granted by the Combined Shareholders’ Meetings of June 10, 2009 (Resolution 7), March 1, 2012 (Resolution 5), May 21, 2014 (Resolution 17), and June 30, 2015 (Reso-lution 12), the Board of Directors confirmed the exercise of stock options resulting from the 2011, 2012 (first wave) and 2014 (second wave) plans occurring in October and November 2017 and amended the Company’s Articles of Association accordingly.

On February 6, 2018, pursuant to the authorizations granted by the Combined Shareholders’ Meetings of June 10, 2009 (Resolution 7), March 1, 2012 (Resolution 5) and June 30, 2015 (Resolution 12), the Board of Directors confirmed the exercise of stock options resulting from the 2010, 2011, 2012 (first wave of August 31, 2012), 2012 (second wave of December 18, 2012) and 2013 plans oc-curring in December 2017 and amended the Company’s Articles of Association accordingly.

The number of options thus exercised is shown in the table in Appendix 1.

The other stock option plans in force did not result in exercising in the 2017 financial year.


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financial Report

Plan 2009 1 Plan 2010 Plan 2011 Plan 2012²1st wave

Plan 2012²2nd wave

Plan 2013² Plan 20141st wave

Plan 20142nd wave

Authorization date by EGMOctober 6, 2009 7th resolution

38 months until October 8th 2012January 3, 2012 26th resolution

26 months until January 5th 2014

May 21, 201417th resolution

EXTENSION untilJanuary 5th 2015

Maximum quantity 375,0004 551,2515

Allocation date 6 15/04/2010 15/09/2010 21/10/2011 31/08/2012 18/12/2012 28/05/20137 3/04/20148 23/10/20149

Exercise Price 10 10,96 € 8,89 € 9,38 € 9,34 € 9,02 € 10,44 € 14,84 € 12,21 €

Maturity date 11 Expiré au 15/04/2017 Expiré au 15/09/2017 21/10/2018 31/08/2019 18/12/2019 28/05/2020 3/04/2021 23/10/2021

Number of Options notified 14.000 8.500 58.500 315.800 19.000 65.200 43.000 33.150

Employees 9,000 8,500 32,000 130,000 10,000 60,000 20,000 6,150

Employees appointed as Director (subsidiaries)

10,000

Number of Options exercised 14.000 8.500 43.000 214.025 15.000 30.000 4.150 27.950

Number of Options canceledOut of the 375.000 options authorized, only 81.000 options

were allocated, and 296.000 null and void.

The 400.000 options authorized by the Board on 08/31/2012were allocated. The balance of 151.251 options correspondingto the maximum volume authorized by the GM on 03/01/2012

expired on 01/05/2014.

Prior to May 2014 the Board decided to use the remainder of

43.000 options

In accordance with the extension until

01/05/2015, the Board decided to use the

remainder of 33.150 options. The remainder of 75.101 options have

been voided since 01.05.2015.

Outstanding Options 0 13.500 69.675 4.000 5.200 9.350 5.200

1 - The terms and conditions of the 2009 plan were set by the Board meeting dated 27/08/20092 - The terms and conditions of the 2012 and 2013 plans were set by the Board meeting on 31/08/20123 - The EGM dated 21/05/2014 decided to grant an extension until 01/05/2015 of the delegation given to the Board by the EGM dated

01/03/2012, which expired on 01.05.2014 4 - 4 % of the capital stock at the options grant date 5 - 5 % of the capital stock at the options grant date 6 - The options grant date corresponds to the date the Board of Directors decision to grant the options

2) Appendix 1 Breakdown of stock options

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Breakdown of the options granted by the Company to employee beneficiaries distinguishing between employees who are corporate officers in the subsidiaries from non-corporate officer employees, including the 10 employees granted the largest number of options:

Plan 2009 1 Plan 2010 Plan 2011 Plan 2012²1st wave

Plan 2012²2nd wave

Plan 2013² Plan 20141st wave

Plan 20142nd wave

Authorization date by EGMOctober 6, 2009 7th resolution

38 months until October 8th 2012January 3, 2012 26th resolution

26 months until January 5th 2014

May 21, 201417th resolution

EXTENSION untilJanuary 5th 2015

Maximum quantity 375,0004 551,2515

Allocation date 6 15/04/2010 15/09/2010 21/10/2011 31/08/2012 18/12/2012 28/05/20137 3/04/20148 23/10/20149

Exercise Price 10 10,96 € 8,89 € 9,38 € 9,34 € 9,02 € 10,44 € 14,84 € 12,21 €

Maturity date 11 Expiré au 15/04/2017 Expiré au 15/09/2017 21/10/2018 31/08/2019 18/12/2019 28/05/2020 3/04/2021 23/10/2021

Number of Options notified 14.000 8.500 58.500 315.800 19.000 65.200 43.000 33.150

Employees 9,000 8,500 32,000 130,000 10,000 60,000 20,000 6,150

Employees appointed as Director (subsidiaries)

10,000

Number of Options exercised 14.000 8.500 43.000 214.025 15.000 30.000 4.150 27.950

Number of Options canceledOut of the 375.000 options authorized, only 81.000 options

were allocated, and 296.000 null and void.

The 400.000 options authorized by the Board on 08/31/2012were allocated. The balance of 151.251 options correspondingto the maximum volume authorized by the GM on 03/01/2012

expired on 01/05/2014.

Prior to May 2014 the Board decided to use the remainder of

43.000 options

In accordance with the extension until

01/05/2015, the Board decided to use the

remainder of 33.150 options. The remainder of 75.101 options have

been voided since 01.05.2015.

Outstanding Options 0 13.500 69.675 4.000 5.200 9.350 5.200

7 - On 08/05/2013 the 400.000 stock options authorized by the 31/08/2012 Board were used. Given the tax and social charges impact involved with stock options granting process, the Board decided not to use the remainder 151.251 options corresponding to the maximum quantity authorized by the 01/03/2012 EGM.

8 - The terms and conditions of the 2014 plan were set by the Board dated 03/04/2014 (authorized volume 43.000 stock options)9 - The Board decided to grant stock options to iMAGOTAG GmbH employees in connection with the extension granted by the EGM dates 21/05/2014.10 - Exercice price in euros, set in accordance with article L. 225-177 of the French Code de Commerce.11 - Options not granted are null and void


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IV. Report on bonus share allocation

Board of Directors’ special report on the transactions carried out pursuant to the provisions of Articles L. 225-197-4 of the French Commercial Code

Financial year ended on December 31, 2017

132

financial Report

Dear Sir/Madam,

In accordance with the provisions of Article L. 225-197-4 of the French Commercial Code, we are pleased to report to you on the transactions carried out pursuant to the provisions of Articles L. 225-197-1 to L. 225-197-3 of said Code relating to bonus share allocations.

The “i3” (innovation, international,industrialization) strategic plan

We hereby inform you that on December 16, 2015, the Board of Directors, acting on the authorization of the Extraordinary Stockholders’ Meeting of De-cember 16, 2015 (Resolution 1), decided to set up a bonus share plan with associated conditions to sub-stitute previously authorized bonus shares (without further dilution) authorized by the Combined Stock-holders’ Meeting of March 1, 2012 (Resolution 4).

After reporting that all beneficiaries of the previous bonus share plans had individually waived the bo-nus shares in the plan authorized by the Combined Stockholders’ Meeting of March 1, 2012, as well as all related rights, the Board of Directors decided to allo-cate bonus shares to Executive Committee members in the same quantities as the bonus shares previously granted under the bonus share plan authorized by the Combined Stockholders’ Meeting of March 01, 2012, which the new shares are designed to replace.

Please note that the total amount allocated is 208,459 bonus shares to be issued, i.e. less than the total authorized by the Stockholders’ Meeting (2% of the capital stock at the Extraordinary Stockholders’ Meeting of December 16, 2015, or 232,632 shares).

The Board of Directors stated that, in accordance with Article L225-197-1, the authorization granted by the Extraordinary Stockholders’ Meeting of De-cember 16 automatically resulted in the waiving by stockholders of their preferential subscription rights.

The allocation conditions for these bonus shares are therefore as follows:

• Prior waiver by each Beneficiary of all bonus shares previously granted to them.

• Fulfilling of the associated conditions in 2016 and 2017

• Acquisition period: the shares shall be definitively allocated as follows:

- 2016 Tranche: final allocation of 50% of the shares after December 16, 2016, at the Board of Directors meeting called to approve the 2016 annual statements, if the performance condi-tions are met; and

1) Bonus share allocation

133

- 2017 Tranche: final allocation of the second half of the shares (or of all shares if none has been allocated the previous year) after December 16, 2017, at the Board of Directors meeting which shall be called to approve the 2017 annual statements, if the perfor-mance conditions are met;

- Or, for both tranches, on the date of the start of a public offering if earlier, without the final allocation taking place before December 16, 2016.

• Period of retention:

The period of retention is as follows:

- 2016 Tranche: December 16, 2017; and

- 2017 Tranche: no period of retention for shares if the final allocation date is the date of the Board of Di-rectors meeting called to approve the 2017 financial statements (or December 16, 2017 otherwise).

• Condition of uninterrupted presence throughout the ac-quisition period

We have listed the bonus allocation conditions for these shares in the table contained in Appendix 1.

Furthermore, on March 11, 2016, the Board of Directors, acting on the delegation of the Extraordinary Stock-holders’ Meeting of December 16, 2015 (Resolution 1), decided to, as of April 1, 2016, allocate 20,000 new bonus shares to two new members of the Executive Committee who had not received bonus shares under the previous bonus share allocation plan authorized by the Combined Stockholders’ Meeting of March 1, 2012.


• Prior waiver by each Beneficiary of all bonus shares previously allocated to them.

• Fulfilling associated conditions in 2016 and 2017

• Acquisition period: the shares shall be definitively allo-cated, as follows:

- 2016 Tranche: definitive allocation of 50% of the shares on April 1, 2017 if performance conditions are met;

- 2017 Tranche: definitive allocation of the second half of the shares (or all shares if none has been granted the previous year) on April 1, 2018 or on the date of the Board of Direc- tors will approve the 2017 annual statements if this board meeting is held after April 1, 2018, should the performance condi-tions be met;

- Or, for both tranches, on the start date of the public offering referred to above if earlier, without the final allocation being made before April 01, 2017.

• Period of retention: the length of the Period of retention is as follows:

- 2016 Tranche: April 1, 2018;

- 2017 Tranche: no Period of retention for shares if the final grant date is April 1, 2018, or the date of the Board of Directors meeting called to approve the 2017 financial statements if this board meeting is held after April 1, 2018

• Condition of uninterrupted presence throughout the ac-quisition period

We also report the bonus allocation conditions of these shares in the table appearing in Appendix 1.

.The “Leapfrog” strategic plan

Lastly, in order to build on the entrepreneurial dynamic and to involve managers and employees who play a decisive role in achieving results and creating value, we hereby in-form you that extraordinary resolution 5 as agreed at the Stockholders’ Meeting of November 30, 2016 created a new bonus plan with strict performance conditions in line with the ambitious trajectory of the “Leapfrog 2020” stra-tegic plan.

This is why nearly five years after this first plan, SES- ima-gotag is now entering a new stage in its development with the “Leapfrog 2020” strategic plan, which aims to speed up the company’s global growth.

With the aim of maximizing our chances of reaching these ambitious goals, the company wants to set up a new plan, one designed for a wider population than the previous plan, including managers and employees who make significant contributions to the company’s performance as well as new talented individuals who we hope to attract as we develop technologically and expand internationally.

Report on bonus share allocation

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financial Report

Extraordinary resolution 5 as agreed by the Stock-holders’ Meeting of November 30, 2016 authorized the Board of Directors, on one or more occasions, pursuant to Article L 225-197-1 of the French Com-mercial Code, to allocate new ordinary bonus shares through a capital increase by capitalizing reserves, premiums or profits, or by delivering existing shares, to an overall ceiling of 3% of the capital stock existing on the date of the decision to allocate them (i.e. 358,614 shares).

Under this authorization, and on the recommendation of the Appointments and Compensation Committee, the Board of Directors decided at the meeting of November 30, 2016 to allocate up to 80,000 bonus shares to the Company Chairman and Chief Executive Officer.

On December 22, 2016, and on the Chairman’s pro-posal, the Board of Directors decided to allocate 218,500 existing shares or shares to be issued to Company employees.

On march 10, 2017, and on the Chairman’s proposal, the Board of Directors decided to allocate 5,000 existing shares or shares to be issued to one Company employee.


• Fulfilling associated conditions from 2017 to 2020

• Acquisition period: the shares shall be definitively allocated, as follows:

- In 2018: 30% of the shares will be definitively allo-cated on March 31, 2018 if the cumulative perfor-mance conditions (individual and collective) have been met (2017 Target);

- In 2019: 30% of the shares will be definitively allo-cated on Sunday, March 31, 2019 if the cumulative performance conditions (individual and collec-tive) have been met (2018 Target);

- In 2020: 20% of the shares will be definitively allocated on Tuesday, March 31, 2020 if the cu-mulative performance conditions (individual and collective) have been met (2019 Target);

- In 2021: 20% of the shares will be definitively al-located on Wednesday, March 31, 2021 if the cu-mulative performance conditions (individual and collective) have been met (2020 Target);

- Or, a definitive allocation of all shares should a public offering be made (i) recommended by the Board of Directors and (ii) covering the Compa-ny’s total capital stock.

• Period of retention: the length of the period of re-tention is as follows:

- For shares acquired in 2018, a 1-year period of retention is stipulated after the 1-year acquisition period expiring on March 30, 2019,

- For shares acquired in 2019, 2020 and 2021, no holding period has been stipulated because the acquisition period is at least 2 years. Consequent-ly, these shares will be available respectively and therefore transferable on March 31, 2019, March 31, 2020 and March 31, 2021

• Condition of uninterrupted presence throughout the acquisition period.

On October 23, 2017, the Board of Directors indicated that the periods for allocating and holding these free shares would be defined as described below in the case of an effective change in control of SES-ima-gotag followed by a takeover bid endorsed by the Board of Directors:

• If the alternative condition is met before the first an-niversary of the allocation of the free shares, all the shares shall be delivered on this anniversary date and shall be restricted by a holding period of one year beginning on the date of said anniversary, i.e.

- for shares allocated on November 30, 2016, a de-finitive delivery date of November 30, 2017, and a holding period ending on November 30, 2018; and

- for shares allocated on December 22, 2016, a de-finitive delivery date of December 22, 2017, and a holding period ending on December 22, 2018.

• If the alternative condition is met after the first an-niversary of the allocation of the free shares, all the shares shall be delivered on the date on which the alternative condition is met and shall be restricted by a holding period of one year beginning on said date of fulfillment of the alternative condition.

November, the Board of Directors wanted to allow beneficiaries the possibility to opt for the delivery of all the shares two years after their allocation, namely, in the event that the alternative condition is met be-fore the second anniversary of allocation of the free shares, i.e. November 30, 2018, for shares allocated on November 30, 2016, and December 22, 2018, for shares allocated on December 22, 2016. In this case, the shares delivered would not be restricted by any holding period.

This possibility would notably allow beneficiaries who file taxes in a foreign country and whose capital gains are taxable on the date of acquisition of the shares to immediately dispose of their shares to cover the

135

amount of social security and/or income tax owed on the date of delivery of the shares.

On December 21, 2017, the Board of Directors confirmed fulfillment of the alternative conditions for free share allocation put in place by the Board of Directors at its meetings on December 16, 2015, March 11, 2016, November 30, 2016, December 22, 2016, and March 10, 2017.

We list the bonus allocation conditions of these shares in the table contained in Appendix 1.

The Board of Directors’ meeting of November 30, 2016 also stated that the corporate officers allocated bonus shares would undertake to retain 30% of the shares de-finitively allocated until the end of their term of office, regardless of the reason, as well as all combined bonus share plans.

On December 21, 2017, the Board of Directors noted the significance of the investment made by Mr. Thierry Gadou both in cash and in Company shares, which, moreover, amounts to a much higher percentage of capital than the 30% of shares which have been or will be allocated to Mr. Thierry Gadou under the Company’s free share allocation plans currently in effect.

In light of this investment and the holding commitments made in this matter by Mr. Thierry Gadou, the Company’s Board of Directors has decided to modify the number of free shares allocated to Mr. Thierry Gadou which are to be held (directly) by him until he ceases to hold the posi-tion of Chairman and Chief Executive Officer, setting it at 20,000 shares (for all free share allocation plans combined).

Finally, we hereby inform you that no other shares have been allocated free-of-charge during the financial year to officers by the Company and by those associated with it in accordance with the provisions provided for in Article L. 225-197-2 of the French Commercial Code, or (ii) based on their duties and functions they perform in the controlled companies within the meaning of Article L. 233-16 of the French Commercial Code, (iii) by the Company and by the companies and groups associated with it, in accordance with Article L. 225- 197-2 of the French Commercial Code, to any of the top ten Company non-corporate officer employees with the highest number of shares allocated to them.

1 - Avec effet pour celles-ci à la date de l’ouverture de l’offre publique.


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2) Appendix 1 Breakdown of bonus share allocation

Authorization date by the EGM

EGM dated 16/12/2015 1

Maximum Volume : 2% of the capital stock on the Board meeting date 16/12/2015 i.e 232.632 bonus shares maximum

EGM dated 11/30/2016

Maximum Volume: 3% of the stock capital on the Board meeting date30/11/2016 i.e. 358.614 maximum

Allocation date 2 16/12/2015 11/03/2016 30/11/2016 12/12/2016 10/03/2017

Bene

ficia

ries

Mr Thierry Gadouas Chaiman and CEO

139.069 maximum None 80.000 maximum None None

Other employees 69.390 maximum 20.000 maximum None 218.500 maximum 5.000 maximum

Acquisition date 3

Tranche 2016 : acquisition of 50 % of the shares on

21/02/2017

Tranche 2017 : definitive allo-cation (anticipated) of 50 % of the shares, the day the public

offer is open


01/04/2017

Tranche 2017 : definitive allocation (anticipated) of 50 % of the shares, the day

the public offer is open

definitive allocation of 80.000 actions (anticipated) - alternative conditions

fulfilled i.e. 21/12/2017



definitive allocation one year after their allocation on 10/03/2018

Availability date 5 16/12/17 01/04/18 21/12/18 12/12/18 10/03/19

1- Powers granted during EGM dated 16/12/2015 replace those granted pursuant to the authorization of the EGM of March 1, 2012; the beneficiaries of the prior plan having beforehand formally waived their rights under said previous plan.

2- Allocation date by the Board of Directors

3- The allocation of the shares to their beneficiaries will become final after a minimum acquisition period of one year.

4- Possibility to opt for the delivery of all the shares two years after their allocation,

5- The cumulative acquisition and holding periods may not be less than two years, as the term of the holding period begins to run from the final share allocation.

137

Breakdown of bonus share allocation pursuant to the provisions of Articles L. 225-197-1 to L. 225-197-3

Authorization date by the EGM

EGM dated 16/12/2015 1

Maximum Volume : 2% of the capital stock on the Board meeting date 16/12/2015 i.e 232.632 bonus shares maximum

EGM dated 11/30/2016

Maximum Volume: 3% of the stock capital on the Board meeting date30/11/2016 i.e. 358.614 maximum

Allocation date 2 16/12/2015 11/03/2016 30/11/2016 12/12/2016 10/03/2017

Bene

ficia

ries

Mr Thierry Gadouas Chaiman and CEO

139.069 maximum None 80.000 maximum None None

Other employees 69.390 maximum 20.000 maximum None 218.500 maximum 5.000 maximum

Acquisition date 3


21/02/2017

Tranche 2017 : definitive allo-cation (anticipated) of 50 % of the shares, the day the public

offer is open


01/04/2017

Tranche 2017 : definitive allocation (anticipated) of 50 % of the shares, the day

the public offer is open





definitive allocation one year after their allocation on 10/03/2018

Availability date 5 16/12/17 01/04/18 21/12/18 12/12/18 10/03/19


138

SES-imagotag, a company with a Board of Directors, is listed on Euronext Paris Eurolist (Compartment C, ISIN code FR 0010282822).

The consolidated financial statements of the SES-imagotag Group (hereinafter “the Group”) at December 31, 2017 cover a 12-month period and show a balance sheet total of €271,467 K and consolidated net income of -€21,069 K. The Board of Directors approved these financial statements on March 5, 2018.

V. Consolidated financial statements

AT DECEMBER 31, 2017 (UNDER IFRS)

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€k NOTES 12/31/2017 (12 MONTHS) 12/31/2016 (12 MONTHS)

INTANGIBLE FIXED ASSETS 1 95,744 66,857

TANGIBLE FIXED ASSETS 2 11,403 6,422

FINANCIAL ASSETS 3 818 1,319

DEFERRED TAX ASSETS 22 6,197 1,512

NON-CURRENT ASSETS 114,161 76,110

INVENTORIES AND WORK IN PROGRESS 4 65,266 58,615

TRADE RECEIVABLES 5 42,503 17,740

CURRENT TAXES 2,044 1,409

OTHER CURRENT RECEIVABLES 6 9,015 15,675

CASH AND CASH EQUIVALENTS 7 38,478 33,314

CURRENT ASSETS 157,306 126,754

TOTAL ASSETS 271,467 202,864

I.1 CONSOLIDATED BALANCE SHEET

Assets

I) Consolidated financial statements

141

Consolidated financial statements

€K NOTES 12/31/2017 (12 MONTHS) 12/31/2016 RESTATED* (12 MONTHS)

CAPITAL 8 26,769 24,155

CONSOLIDATED RESERVES 10 123,208 97,596

PROFIT (LOSS) - GROUP SHARE -21,069 3,361

SHAREHOLDERS’ EQUITY 128,908 125,113

NON-CURRENT PROVISIONS 10 711 199

DEFERRED TAX LIABILITIES 22 3,616 689

LONG-TERM LOANS 11 51,870 27,032

OTHER NON-CURRENT LIABILITIES 12 12,307 5,485

NON-CURRENT LIABILITIES 68,503 33,404

TRADE PAYABLES 13 57,829 13,116

OTHER DEBTS AND ACCRUAL ACCOUNTS 14 16,226 31,231

CURRENT LIABILITIES 74,056 44,347

TOTAL EQUITY & LIABILITIES 271,467 202,864

Liabilities and shareholders’ equity

* The details of the restatements made are presented in Note II 1.1.4

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I.2 CONSOLIDATED INCOME STATEMENT

€K NOTES12/31/201712 MONTHS

31/12/2016retraité* 12 mois

SALES 15 153,000 176,924

PURCHASES CONSUMED 16 -103,697 -123,817

EXTERNAL EXPENSES 17 -28,192 -19,803

PAYROLL COSTS 18 -34,242 -17,436

TAXES AND DUTIES -815 -843

ALLOWANCES FOR DEPRECIATION AND AMORTIZATION -9,182 -6,863

NET ALLOWANCES FOR PROVISIONS 19 2,701 174

OTHER OPERATING INCOME AND EXPENSES 20 -564 -942

OPERATING PROFIT (LOSS) -20,991 7,394

INCOME FROM CASH AND CASH EQUIVALENTS 0 88

OTHER FINANCIAL INCOME AND EXPENSES 21 -4,490 -2,016

FINANCIAL PROFIT (LOSS) -4,490 -1,928

TAX EXPENSE 22 4,412 -2,105

NET INCOME -21,069 3,361

EARNINGS PER SHARE12/31/201712 MONTHS

12/31/2016RESTATED** 12 MONTHS

PROFIT (LOSS) (€K) -21,069 3,361

CLOSING NUMBER OF SHARES 13,384,229 12,077,500

STOCK OPTIONS 106,925 281,956

BONUS SHARES * 179,517 518,531

EARNINGS PER SHARE [IN EUROS]

- BEFORE DILUTION -1.57 0.28

- AFTER DILUTION -1.57 0.26

* Following the fulfillment of the alternative conditions of the bonus share plans, the shares were acquired as of the close of the period. The associated capital increase was recognized for the shares delivered during the period. As of December 31, 2017, 179,517 shares have not yet been delivered.

** The details of the restatements made are presented in Note II 1.1.4


143


I.3 NET INCOME AND GAINS AND LOSSES RECOGNIZED DIRECTLY IN SHAREHOLDERS’ EQUITY

€K 12/31/201712/31/2016

RESTATED* 12 MONTHS

NET INCOME -21,069 3,361

TRANSLATION ADJUSTMENTS

CASH FLOW HEDGE -7,741 4,178

REVALUATION DIFFERENCES

ACTUARIAL GAINS AND LOSSES -57

COMPREHENSIVE INCOME -28,810 7,482

- PARENT COMPANY’S SHARE -28,810 7,482

- MINORITY INTERESTS’ SHARE

€K CAPITALOTHER EQUITY INSTRUMENTS

RESERVES PROFIT (LOSS) TOTAL

SHAREHOLDERS’ EQUITY AT 12/31/2015 23,330 4,886 82,575 1,296 112,087

APPROPRIATION OF 2015 PROFIT (LOSS) 1,296 -1,296 0

ALLOCATION OF BONUS SHARES (IFRS 2) 988 0 988

RESTATED 2016 PROFIT (LOSS) 3,361 3,361

OTHER CHANGES 825 4,206 3,647 8,678

SHAREHOLDERS’ EQUITY AT 12/31/2016 RESTATED 24,155 9,091 88,506 3,361 125,113

APPROPRIATION OF THE RESTATED 2016 PROFIT (LOSS) 3,361 -3,361 0

ALLOCATION OF BONUS SHARES (IFRS 2) 672 9,088 9,760

CAPITAL INCREASE 1,941 24,262 26,203

IMPACT OF ACQUISITIONS OF SUBSIDIARIES -3,210 -3,210

TREASURY SHARES -37 -37

2017 PROFIT (LOSS) -21,069 -21,069

FINANCIAL INSTRUMENTS -7,741 -7,742

OTHER CHANGES -111 -111

SHAREHOLDERS’ EQUITY AT 12/31/2017 26,769 1,349 121,859 -21,069 128,908

I.4 CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY

The consolidated reserves include the €67,693 K issue premium resulting from various capital increases carried out since the creation of the company.

Over the period, the €24,262 K increase was mainly due to the exchange of shares as part of the acquisition of PDi for €22,827 K.


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financial report

I.5 CONSOLIDATED STATEMENT OF CASH FLOWS

€K 12/31/201712/31/2016RESTATED*

+ CONSOLIDATED NET INCOME (INCLUDING MINORITY INTERESTS) -21,069 3,361

+/- NET ALLOWANCES FOR AMORTIZATION/DEPRECIATION AND PROVISIONS (EXCLUDING THOSE RELATING TO CURRENT ASSETS) 6,323 7,221

+/- CALCULATED EXPENSES AND INCOME RELATED TO STOCK OPTIONS AND SIMILAR INSTRUMENTS 9,760 1,016

-/+ OTHER CALCULATED INCOME AND EXPENSES 351 -1,959

-/+ GAINS AND LOSSES ON DISPOSALS (FROM EXCHANGE DIFFERENCE IN IFRS P&L AND FINANCIAL INSTRUMENT PROFIT OR LOSS) 1,148 198

CASH FLOW AFTER COST OF NET FINANCIAL DEBT AND TAX -3,487 9,837

+/- TAX EXPENSE (INCLUDING DEFERRED TAXES) -4,412 2,105

= CASH FLOW AFTER COST OF NET FINANCIAL DEBT AND TAXES -7,899 11,942

- TAXES PAID -643

+/- CHANGE IN WCR RELATED TO OPERATIONS -3,061 -7,047

= NET CASH FLOW GENERATED FROM OPERATIONS -10,961 4,252

- DISBURSEMENTS RELATED TO ACQUISITIONS OF TANGIBLE AND INTANGIBLE FIXED ASSETS -12,082 -9,310

+ PROCEEDS FROM DISPOSALS OF TANGIBLE AND INTANGIBLE FIXED ASSETS

- DISBURSEMENTS RELATED TO THE ACQUISITION OF LONG-TERM INVESTMENTS -91 -3,645

+ PROCEEDS FROM DISPOSALS OF LONG-TERM INVESTMENTS 42 74

+/- IMPACT OF CHANGES IN SCOPE 2,221 -2,345

+ INVESTMENT SUBSIDIES RECEIVED -77 -808

= NET CASH FLOW FROM INVESTING ACTIVITIES -9,987 -16,034

+ AMOUNTS RECEIVED FROM SHAREHOLDERS DURING CAPITAL INCREASES 1,795 1,403

+ LOAN ISSUES 30,000 14,200

+ LOAN REPAYMENTS -5,717 -3,196

- DIVIDEND DISTRIBUTION

-/+ TREASURY SHARE BUYBACKS AND RESALES -37 -4

= NET CASH FLOW FROM FINANCING ACTIVITIES 26,041 12,403

+/- IMPACT OF CHANGES IN FOREIGN CURRENCY EXCHANGE RATES 70 140

= CHANGE IN CASH FLOW 5,163 762

OPENING CASH POSITION 33,314 32,553

CLOSING CASH POSITION 38,478 33,314


145


II.1 ACCOUNTING RULES AND METHODS

II.1.1 BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

II) Notes to the consolidated financial statements

II.1.1.1 Consolidated financial statements – Basis of preparation

Pursuant to European Regulation 1606/2002 of July 19, 2002 on in-ternational accounting standards, the consolidated financial statements of the SES-imagotag Group for the period ended December 31, 2017 have been prepared in accordance with the Inter-national Financial Reporting Standards (“IFRS”) applicable on this date as appro-ved by the European Union, as of the clo-sing date of these financial statements.

The euro is the presentation currency of the consolidated financial statements. Un-less otherwise indicated, all amounts are rounded to the nearest thousand (€000).

The financial statements are prepared according to the historical cost principle with the exception of a number of as-set and liability accounts that have been measured at fair value.

The consolidated financial statements include the financial statements of the subsidiaries listed in § II.7. The financial statements of the subsidiaries are pre-pared over the same reference period as those of the parent company, based on the same accounting methods.

The Companies close their annual financial statements on December 31. All intra-group balances, intra-group transactions, and unrealized income, expenses, and gains that are included in the book value of as-sets from internal transactions are fully eliminated.

The financial statements of each of the Group’s Companies are prepared in ac-cordance with the accounting principles and regulations in force in their respective countries. They are subject to restate-ments in order to comply with the consoli-dation principles in force in the Group.

New mandatory implementing regu-lations as of January 1, 2017 applied for the first time by the SES-imagotag Group:

For the preparation of its consolidated financial statements at December 31, 2017, the SES-imagotag Group ap-plied the new standards applicable as of January 1, 2017, which are as follows:

• amendments to IAS 7: “Statement of cash flows” concerning additional information to be provided on the change in financial liabilities on the balance sheet;

• amendments to IAS 12: “Income taxes” on the recognition of deferred tax as-sets for unrealized losses;

• annual improvements to IFRS: 2014 - 2016 cycle.

The application of these texts had no significant impact on the 2017 conso-lidated financial statements.

New standards, interpretations of, and amendments to IFRS published and applied in advance by the Group as of January 1, 2017:

None

New standards, interpretations of, and amendments to IFRS published but not yet applicable or applied in advance by the Group:

Texts adopted by the European Union:

• IFRS 9 “Financial Instruments: Hedge Accounting,” mandatory starting on January 1, 2018. This standard will replace IAS 39 “Financial Instruments: Recognition and Measurement.” The Group is currently reviewing the im-plementation of this standard; the measurement of the impact still can-not be reasonably estimated at this stage;

• IFRS 15 “Revenue from Contracts with Customers,” mandatory starting on January 1, 2018.

This standard defines the revenue recognition model and will replace IAS

18 “Revenue” and IAS 11 “Construction Contracts” and the related interpre-tations;

• Clarification of IFRS 15 “Revenue from Contracts with Customers,” mandatory starting on January 1, 2018, according to the IASB.

The effects of the application of IFRS 15 on the recognition of sales starting from January 1, 2018 will be marginal given the nature of the Group’s activi-ties.

The Group also analyzed its contract portfolio to quantify the expected im-pacts on its consolidated financial sta-tements.

A contract may provide for one or more obligations, namely:

the supply of labels;

- the placement of labels;

- the supply of software;

- software maintenance.

A price list is applied for each of the contract obligations and is the subject of an independent invoice or at least a separate line on the invoice.

Sales revenues are recognized when the obligation is fulfilled. Only main-tenance contracts are invoiced in ad-vance for periods of four to six months but are the subject of deferred income on a prorated basis to recognize the re-venue only when the performance obli-gations are fulfilled.

• IFRS 16 “Leases,” mandatory star-ting on January 1, 2019, according to the IASB. This standard, which will replace IAS 17 “Leases” and the related interpretations, establi-shes the accounting principles for leases and will result in most leases being recorded on the lessee’s ba-lance sheet according to a single

146

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model (abandonment for lessees of the classification in operating leases or finance leases). It will therefore affect the presentation of these transactions on the income statement and the cash flow state-ment. On the balance sheet, fixed assets and lease liabilities will be increased. The Group is currently reviewing the implementation of this standard; the measurement of the impact still cannot be reaso-nably estimated at this stage.

• amendment to IFRS 2 “Classifica-tion and valuation of share-based payment transactions,” mandatory starting on January 1, 2018, accor-ding to the IASB;

• IFRIC Interpretation 22 “Foreign Currency Transactions and Antici-pated Consideration,” mandatory starting on January 1, 2018, accor-ding to the IASB;

Texts not yet adopted by the Euro-pean Union:

• IFRIC Interpretation 23 “Uncertainty over Income Tax Treatments,” man-datory starting on January 1, 2019 according to the IASB;

The Group is currently assessing the impacts resulting from the initial implementation of these new texts

II 1.1.2 Business combinations

Business combinations are dealt with under revised IFRS 3, which assesses, in particular, the notion of “takeover” in the application to securities acquisition transactions; depending on the circumstance, the impacts are taken into account in income or in equity.

In a business combination, the fair value of the transferred conside-ration is allocated to the acquired identifiable assets and liabilities. They are measured at fair value as of the acquisition date.

Fair value is the price that would be received for the sale of an asset or paid for the transfer of a liability in a

normal transaction between market participants on the valuation date.

In this context, goodwill represents the residual surplus of the transfer-red consideration over the share of the acquiring company’s interest in the fair value of the identifiable assets, liabilities, and contingent liabilities that can be reliably mea-sured at the acquisition date.

The allocation period is limited to the period required to identify and measure the assets and liabi-lities of the acquired company, the non-controlling interests, the price paid, and the fair value of the share previously acquired, without excee-ding 12 months.

Subsequently, goodwill is measured annually at its cost less any accu-mulated impairment losses deter-mined in accordance with IAS 36, as described in the paragraph below entitled “Intangible fixed assets.”

In the event of a decline in value, impairment is recognized on the income statement, under operating income.

II 1.1.3 Estimates and judgments

The financial statements have been prepared using the historical cost basis, except for financial instru-ments, which are recognized in accordance with the fair value ba-sis. As per the IFRS conceptual framework, the preparation of finan-cial statements requires making es-timates and assumptions that affect the amounts appearing on these fi-nancial statements. The significant estimates made by SES-imagotag for the preparation of the financial statements mainly relate to:

• the fair value measurement of as-sets, liabilities, and contingent lia-bilities acquired during a business acquisition (IFRS 3 - Business Combinations);

• the valuations used to test impair-ment losses, in particular the reco-verable amount of goodwill;

• the fair value measurement of finan-cial instruments;

• the valuation of provisions for contingencies and charges;

• the measurement of the recove-rable value of receivables and in-ventories.

Due to the uncertainties inherent in any assessment process, SES-imagotag revises its estimates based on regu-larly updated information. It is pos-sible that the future results of the transactions concerned will differ from these estimates.

II 1.1.4 Accounting policies, changes in accounting estimates, and errors

In accordance with IAS 8, the 2016 financial statements were restated to take into account the fair value and employer contribution not re-cognized in 2016 although the per-formance criteria had been met and provided entitlement to the final acquisition of a tranche of bonus shares. The corresponding IFRS 2 ex-pense was valued at €1.3 M for 2016. The €1 M expense, excluding the em-ployer contribution, for 2016 did not have an impact on the Group’s equity or cash position. The 2016 annual fi-nancial statements were restated for this impact as follows:

147


€K12/31/2016

REPORTED 12 MONTHSADJUSTMENTS

12/31/2016RESTATED 12 MONTHS

CAPITAL 24,155 24,155

OTHER EQUITY INSTRUMENTS 9,091 9,091

CONSOLIDATED RESERVES 87,518 988 88,506

PROFIT (LOSS) - GROUP SHARE 4,609 -1,248 3,361

SHAREHOLDERS’ EQUITY 125,373 -260 125,113

NON-CURRENT LIABILITIES 33,404 0 33,404

TRADE PAYABLES 13,116 13,116

OTHER DEBTS AND ACCRUAL ACCOUNTS 30,971 260 31,231

CURRENT LIABILITIES 44,087 260 44,347

TOTAL EQUITY & LIABILITIES 202,864 0 202,864

€K12/31/2016

REPORTED 12 MONTHSADJUSTMENTS

12/31/2016RESTATED 12 MONTHS

SALES 176,924 176,924

OTHER OPERATING EXPENSES -152,094 -152,094

PAYROLL COSTS -16,188 -1,248 -17,436

OPERATING PROFIT (LOSS) 8,642 -1,248 7,394

NET INCOME 4,609 -1,248 3,361



BONUS SHARES 518,531 518,531


BEFORE DILUTION 0.38 0.28

AFTER DILUTION 0.36 0.26

Liabilities and shareholders’ equity

Income statement

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Intangible fixed assets include:

• development costs;

• patents;

• software;

• an ERP;

• goodwill;

• technologies.

Intangible fixed assets acquired se-parately are recorded at their ac-quisition cost and are amortized.

Amortization is calculated on a straight-line basis over the esti-mated useful life of the fixed assets, on the following bases:

II.1.2 INTANGIBLE FIXED ASSETS (IAS 38)

No residual value was used to deter-mine the basis of amortization.

In accordance with IAS 36, goodwill is tested for impairment annually, and other amortizable intangible fixed assets are tested when there is evidence of a loss of value. This evi-dence is examined at each annual and interim closing.

The impairment test involves compa-ring the net book value of the capital

asset with its recoverable amount, de-termined as the higher amount between its fair value and its value in use.

Impairment is recognized in the event of impairment loss. Impair-ment losses may be reversed when conditions have changed, except for goodwill. With the exception of goodwill, impairment losses change the amortization plan prospectively, since they are applied against the amortizable base.

Development costs

SES’s development costs are reco-gnized in the period in which they are incurred, with the exception of project development costs that meet the following criteria:

• the product or process is clearly identified, and the costs are indi-vidualized on a reliable basis;

• the technical feasibility of the pro-duct has been demonstrated;

• the product or process will be marketed or used internally;

• there is a potential market for the product, or its internal usefulness has been demonstrated;

• the necessary resources are avai-lable to complete the project.

Development costs that do not meet the above criteria are recognized as expenses in the period in which they are incurred. Capitalized deve-lopment costs are amortized on a straight-line basis over their useful lives.

Patents

Concerning the valuation of patents, in the absence of an active market, the Group used the acquisition cost method.

AMORTIZATION PERIOD

TECHNOLOGIES 15 years

DEVELOPMENT COSTS 5 years

PATENTS 10 years

ERP 10 years

SOFTWARE 2 to 5 years

149


VALUE OF SHARES ACQUIRED BEFORE ACQUISITION OF CONTROL (5.38%) €555 K*

VALUE OF ACQUIRED CONTROLLING SHARES (61.62%) €6,360 K

TOTAL ACQUISITION VALUE OF 67% OF FINDBOX €6,915 K

FINDBOX’S NET POSITION AT 11/30/2016 X 67% -€1,212 K

DIFFERENCE €8,127 K

OF WHICH IDENTIFIED TECHNOLOGY €2,000 K

RESIDUAL GOODWILL BEFORE IMPACT OF DEFERRED TAXES €6,127 K

DEFERRED TAXES €600 K

RESIDUAL GOODWILL AFTER IMPACT OF DEFERRED TAXES €6,727 K

Goodwill

Findbox Goodwill

Founded in 2012 in Ettenheim (Germany), Findbox is a start-up specializing in innovative technologies for retail. The Company has developed a lea-ding-edge optical product-recogni-tion technology that helps consu-mers instantly find the product they are looking for.

Given the significant commercial syner-gies that will come into play between the two companies, SES-imagotag hopes to boost its sales by several tens of millions of euros by 2020 with this technology.

Following its acquisition of a minority stake in 2016, SES-imagotag and the shareholders of Findbox signed an agreement dated November 30, 2016 for the acquisition by SES-imagotag of 100% of the shares of Findbox in two stages over a 3-year period.

The first stage of acquisition of 67% of the shares of Findbox was re-corded at December 31, 2016 in the amount of €6,860 K. The compen-sation for this deal was the issue of 265,114 new shares on the basis of a value of €23.99 per share and €500 K in cash. The amount of acquisition fees recorded in 2016 was €761 K.

Following this transaction, the final goodwill amount at December 31, 2017 was €6.7 M.

The goodwill allocation work was carried out and enabled the recogni-tion of technology as the only intan-gible fixed asset identified for a value of €2 M and €0.6 M in deferred taxes. The amortization of the technology, spread over a 15-year period, was re-cognized in the financial statements at December 31, 2017 for €0.1 M ex-cluding the impact of deferred tax.

The value of the technology results from the average of the valuation

* including €55 K recognized in other operating income over financial year 2017 and corresponding to the revaluation of the proportion of shares held before acquisition of control.

based on the following two ap-proaches:

a. a cost method considering that the value of the technology is equivalent to the sum of the costs incurred for its development;

b. the “Relief from royalties” me-thod: the value of the technolo-gy is equal to the sum of future royalties net of maintenance costs and tax, which the owner of the technology is able to claim for licensing its technology.

During the second half of 2017, the Company signed an amendment to the contract for the second stage of acquisition of the 33% minority in-terests. Its price was set for a firm and final amount of €5.5 M payable in 2018, 2019, and 2021. Additional acquisition fees recorded during the period totaled €104 K.

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VALUE OF SHARES €24,408 K*

BALANCING PAYMENT €3,277 K

CONDITIONAL CONSIDERATION €3,282 K

TOTAL ACQUISITION VALUE OF 100% OF PDI €30,967 K

PDI NET SITUATION AT 02/15/2017 €6,963 K

DIFFERENCE €24,004 K

OF WHICH IDENTIFIED TECHNOLOGY €6,900 K

RESIDUAL GOODWILL BEFORE IMPACT OF DEFERRED TAXES €17,104 K

DEFERRED TAXES €1,173 K

RESIDUAL GOODWILL AFTER IMPACT OF DEFERRED TAXES €18,277 K

Goodwill from Pervasive Displays Inc. (PDi)

Founded in 2010, Pervasive Displays Inc. (PDi) is a display design house based in Taiwan that develops ul-tra-low power e-paper displays. PDi is a pioneer in integrating pa-per-like graphic displays into digital price tags and is the leading com-pany in this field. It is SES-imago-tag’s leading partner for providing paper-like graphic displays, and by the same token, SES-imagotag is its largest client. This operation is the result of many years of collabora-tion between the two companies to produce the industry’s best e-paper digital price tag solutions.

Following the approval on February 2, 2017 by the Taiwanese authorities responsible for foreign investments, the Company’s Board of Directors, acting under a delegation of authority granted by the Combined General Meeting of SES-imagotag on

November 30, 2016, decided on February 16, 2017 to issue 790,684 new common shares of SES-imagotag in consideration of the contribution in kind relating to 15,035,747 shares of Pervasive Displays Inc. (PDi), representing 100% of its capital and voting rights.

The acquisition of PDI was carried out through an exchange of shares and a payment of a cash supplement.

A conditional consideration payable in 2018, the amount of which de-pends on PDI’s performance during financial year 2017, was determined by the Company to be €3.3 M.

Acquisition fees recorded during the period totaled €196 K.

The amount of goodwill adjusted accordingly at December 31, 2017 was €18.3 M and was calculated as follows:

* corresponds to 790,684 shares x €30.87

The goodwill allocation work was carried out and enabled the reco-gnition of the technology as an in-tangible asset for a value of €6.9 M and €1.2 M in deferred taxes. The amortization of the technology, spread over a 15-year period, was recognized in the financial state-ments at December 31, 2017, for €0.4 M excluding the impact of the deferred tax.

The value of the technology results from the average of the valuation based on the following two ap-proaches:

c. a cost method considering that the value of the technology is equivalent to the sum of the costs incurred for its development;

d. the “Relief from royalties” me-thod: the value of the technolo-gy is equal to the sum of future royalties net of maintenance costs and tax, which the owner of the technology is able to claim for licensing its technology.

MARKET HUB Goodwill

Founded in 2013, Market Hub is an Iri-sh start-up specializing in new tech-nologies applied to retail. Its software connected to cash registers in stores is designed to make them more agile and responsive. Market Hub’s algo-rithm analyzes and predicts trends in sales, inventory, and waste contribu-ting to lost profitability for stores. It suggests recommendations that are easy to manage and implement by managers, who can make the neces-sary changes to increase their sales, improve their margins, and reduce the waste of perishable products.

This investment allows the Group to strengthen its development in the United Kingdom and Ireland, while exploiting the leading-edge tech-nology developed by Market Hub to promote its adoption by merchants worldwide.

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The acquisition of Market Hub was done in several stages in the fol-lowing proportions:

• SES-imagotag Austria acquired 10.6% of the capital for €87 K in 2015;

• SES-imagotag SA continued to increase the Group’s stake in Mar-

ket Hub by investing an additional €500 K to increase its holding to 27.95% in June 2016;

• the Group then acquired control and increased its stake to 60% in March 2017 by paying €300 K in cash.

In all likelihood, the Company will

acquire the remaining 40% of the shares within the next 18 months.

Acquisition fees recorded during the year totaled €9 K.

The goodwill recognized at December 31, 2017 totaled €365 K and was calculated as follows:

Under IFRS 3, SES-imagotag has a one-year period from the Market Hub acquisition date to allocate rea-lizable assets and liabilities. Conse-quently, the amount of goodwill re-cognized at December 31, 2017 is provisional and will be allocated de-finitively during the 12 months fol-lowing the acquisition (March 2018).

SES-imagotag Goodwill

Two historical goodwill items have been recognized in the Company’s assets.

The first for €12.6 M corresponds to the value attributed to goodwill in the merger between SES and SES-ESL carried out on May 16, 2007. The second for €13.4 M comes from the acquisition of iMAGOTAG on May 21, 2014.

Impairment test

The ESL and Imagotag goodwill im-pairment test is conducted at each

annual close, or more frequently if there is an indication of loss of va-lue, based on the Discounted Cash Flows (DCF) method, which confirms the value of goodwill on the balance sheet. The present value resulting from this test is significantly higher than the book value of the assets.

Considering the merger and overall management of the historical activi-ties of SES and Imagotag, it is now impossible to allocate assets and cash generation to clearly identi-fied sub-groups within the Group. This goodwill has been tracked on the basis of a single CGU since De-cember 31, 2016.

The main assumptions used are based on the following:

• Management’s 10-year forecast: the electronic labeling market is not yet mature globally and has been growing strongly; hence, a forecast longer than five years was

made, which is more in line with this market’s outlook;

• the 5% growth rate used reflects the growth rates of a technology market that is still dynamic over that time;

• an 11% discount rate applied to cash flows.

The sensitivity of the result to va-riations of one point more or less of the assumptions adopted should not prompt reconsideration of the goodwill impairment test.

VALUE OF SHARES ACQUIRED BEFORE ACQUISITION OF CONTROL (27.95%) €262 K*

VALUE OF ACQUIRED CONTROLLING SHARES (32.05%) €300 K

TOTAL ACQUISITION VALUE OF 60% OF MARKET HUB €562 K

MARKET HUB’S NET POSITION AT 4/30/2017 x 60% €197 K

PROVISIONAL GOODWILL AT 12/31/2017 €365 K

* Including -€325 K recognized in other operating expenses over financial year 2017 and corresponding to the revaluation of the proportion of shares held before acquisition of control.

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No residual value was used to deter-mine the basis of depreciation.

The depreciation periods are re-viewed annually at each accoun-ting close. Any change in duration is treated as a prospective estimate change in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates, and Errors” and results in the recognition of ad-ditional impairment.

The book values of tangible fixed assets are reviewed for impairment when events or changes indicate that the book value may not be re-coverable. If there is any such index and if the book values exceed the estimated recoverable amount, the assets are written down to their re-coverable amount.

The recoverable amount of tan-gible fixed assets is the higher value between the sale price net of dis-posal costs and the value in use. In assessing value in use, estimated future cash flows are discounted using a pre-tax discount rate that reflects current market assessments, the time value of money, and as-set-specific risks.

II.1.4 LEASES (IAS 17)

Rents paid under these contracts, which are classified as operating leases, constitute expenses for the financial year. In some cases,

the Group is required to enter into contracts to sell equipment for which a return may be possible in order to renew a lease. These contracts are analyzed as finance leases.

II.1.5 FINANCIAL ASSETS (IAS 39)

Non-current financial assets include deposits and guarantees as well as loans. They are recorded at their nominal value and are subject to a provision for impairment when their inventory value is lower than their probable recovery value.

II.1.6 INVENTORIES (IAS 2)

Inventories are measured in accor-dance with IAS 2 at the lower of the cost and the net realizable value.

The valuation of finished products consists of the following:

• cost price of components valued at the weighted average cost per unit;

• cost of assembly by the subcontractor;

• additional costs consisting essen-tially of component storage costs;

• transit costs for labels.

Net realizable value is the estimated selling price in the normal course of business less the estimated costs for completion and the estimated costs necessary to complete the sale.

II.1.3. TANGIBLE FIXED ASSETS (IAS 16)

Tangible fixed assets are recorded at their acquisition cost.

Depreciation is calculated on a straight-line basis over the following useful lives:

DEPRECIATION PERIOD

TOOLS 3 to 5 years

INSTALLATIONS AND IMPROVEMENTS 5 to 10 years

FURNITURE, OFFICE AND COMPUTER EQUIPMENT 3 to 10 years

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If the net realizable value is less than the value of the inventory, a provi-sion for impairment is recorded (see details in Note 4).

II.1.7 Créances et autres actifs courants

Les créances et autres actifs cou-rants sont comptabilisés pour leur montant brut, déduction faite des provisions pour dépréciation des montants estimés non recouvrables.

La dépréciation des créances et des autres actifs courants est ba-sée sur une analyse individuelle des risques de non recouvrement (cf. détail note 5).

II.1.7 RECEIVABLES AND OTHER CURRENT ASSETSReceivables and other current as-sets are recorded at their gross amount, less the provisions for im-pairment of estimated non-recove-rable amounts.

The impairment of receivables and other current assets is based on an individual analysis of the risks of non-recovery (see details in Note 5).

II.1.8 DERIVATIVES (IAS 39)All derivatives are valued on the balance sheet at fair value in ac-cordance with IAS 39 (Level 2 fair value).

Derivatives consist of currency forwards.

The management of financial risks by the SES-imagotag Group (inte-rest rate risk, currency risk, coun-terparty risk, and liquidity risk) is described in Note 29 of this docu-ment.

Derivatives are contracted by the SES-imagotag Group under its cur-rency risk management policy. The recording of financial instruments as hedging instruments depends on whether they qualify for hedge ac-counting.

II.1.9 FORWARD PURCHASESThe SES-imagotag Group has opted for cash flow hedge accounting for its forward purchases.

Forward exchange contracts used by the SES-imagotag Group may be classified as hedges of future cash flows. Hedging future cash flows protects against changes in the va-lue of cash flows denominated in foreign currencies.

Derivatives are measured at fair va-lue upon initial recognition. The-reafter, the fair value of derivatives is re-estimated at each closing date.

The fair value of foreign currency forwards is determined by referring to what the Group would receive (or pay) to settle the outstanding contracts as of the closing date.

Efficiency tests of cash flow hedges are carried out at each closing to ensure that the hedge is highly ef-fective.

Changes in the value of the effec-tive portion of cash flow hedge de-rivatives are recognized in equity in a specific revaluation reserve ac-count. At 12/31/2017, the amount recycled in equity was €65 K.

The non-performing portion is the subject of a €1,048 K loss on the in-come statement.

The discount/premium component is excluded from the hedging rela-tionship, and changes in value are recognized on the income state-ment under “Other financial income and expenses.”

II.1.10 CASH AND CASH EQUIVALENTSCash and cash equivalents include:

• financial investments that are highly liquid and present a very li-mited risk of change in value;

• bank accounts;

• cash accounts.

Investment securities (money mar-ket funds) are recognized at fair va-lue at the closing date (Level 1 fair value).

Term deposits are recorded at amortized cost.

II.1.11 TREASURY SHARES (IAS 32)

According to IAS 32 “Financial Ins-truments,” if an entity purchases its own equity instruments, they must be deducted from shareholders’ equity. No profit or loss should be recognized in income at the time of purchase, sale, issue, or cancellation of the entity’s equity instruments.

Such treasury shares may be ac-quired and held by the entity or by other members of the consolidated Group. The consideration paid or received must be recognized direc-tly in shareholders’ equity.

II.1.12 PROVISIONS (IAS 37)In accordance with IAS 37 “Provi-sions, Contingent Liabilities, and Contingent Assets,” the Group reco-gnizes a provision when, as of the closing date of the period, it has an obligation (legal or implicit) towar-ds a third party due to a past event whose settlement is likely to result in an outflow of resources for the Group representing economic be-nefits and when the amount of the loss or liability can be measured re-liably.

Should such a loss or liability be unlikely, or cannot be reliably mea-sured, but is still possible, the Group must report a contingent liability in its commitments.

Provisions are intended in particular to cover the probable costs that li-tigation or on-going litigation could incur, the cause of which predated the closing date.

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II.1.13 STOCK OPTIONS AND GRANTING OF BONUS SHARES (IFRS 2)

IFRS 2 “Share-based Payment” pro-vides for the recording of an ex-pense in consideration for services obtained under share purchase plans (and similar plans) granted to employees.

The Group has set up stock option, bonus share, or share purchase plans and has issued subscription warrants to some employees. The Board of Directors, which grants the options, sets the option or purchase prices.

Changes in values subsequent to the grant dates have no impact on the initial valuation of the options; the number of options taken into ac-count to value the plans is adjusted at each accounting close to factor in the presence of beneficiaries and the fulfillment of internal perfor-mance conditions at the end of the rights vesting periods.

The valued benefit is equivalent to compensation for the beneficia-ries, which is therefore recognized as payroll costs, on a straight-line basis over the vesting period, in consideration of a corresponding adjustment in shareholders’ equity.

The stock option plans have been valued by referring to the fair value of the granted instruments.

The fair value of the allocated bonus shares corresponds to the value of the share on the date of the grant less the dividend distribution assumption during the vesting period. The total cost of the plan corresponds to the estimated fair value multiplied by the number of shares allocated over the vesting periods in the plan, multi-plied by the probability of achieving the performance objectives.

II.1.14 EMPLOYEE BENEFITS(IAS 19 REVISED)

End-of-career benefits

The provision for employee benefits relates exclusively to retirement be-

nefits that are legally owed to em-ployees in France.

The calculation is done in accor-dance with IAS 19 (revised) based on the projected unit credit me-thod. Under this method, benefit entitlements are allocated to service periods based on the plan’s vesting formula, taking into account a li-nearization effect when the rate of vesting is not uniform during sub-sequent service periods.

The amount of the future payments corresponding to the benefits granted to employees is measured on the basis of assumptions of sala-ry trends, retirement age, and mor-tality and then reduced to their pre-sent value on the basis of interest rates on long-term bonds of first-class issuers.

The expense for the year corres-ponding to the change in the cost of services rendered is recognized as payroll costs, and the discounting cost is recognized as a financial ex-pense.

The main assumptions used in the calculation of pension liabilities are as follows:

• retirement age: 65 to 67 years;

• employer contribution rate: 46%;

• discount rate: 1.3%;

• mortality table used: INSEE 2015;

• collective bargaining agreement: metallurgy.

In addition, actuarial gains and losses arising from experience-related ad-justments and changes in actuarial assumptions are now recognized in “Other income and expense reco-gnized directly in equity.”

II.1.15 DEFERRED TAXES (IAS 12)

Deferred taxes arise from temporary differences between the book and tax values of assets and liabilities on the balance sheet. In accordance

with IAS 12 “Income Taxes,” they are recognized according to the liability method, based on future tax rates adopted at the end of the financial year. The rate currently used is the ordinary tax rate of 33 1/3% (exclu-ding social security contributions).

The 2017 Finance Act (Act no. 2016-1917 of December 29, 2016) includes a reduction in the corporate tax rate, which will gradually decrease to 28% for all companies for periods begin-ning on or after January 1, 2020. The impact on the Group’s financial statements at December 31, 2017 is not significant.

II.1.16 RESEARCH TAX CREDIT (IAS 20)The research tax credit is a tax in-centive similar to a subsidy. It the-refore falls within the scope of IAS 20. According to this standard, an allocation of the research tax cre-dit should be made according to whether the research expenditure is recognized as an asset (recording in intangible fixed assets in accordance with IAS 38) or in profit and loss.

The Group capitalizes its develop-ment costs in accordance with IAS 38. The tax credit must therefore be deferred over time over the amor-tization period of the research and development expenses that gene-rated this tax credit.

II.1.17 CONVERSION OF ITEMS IN FOREIGN CURRENCIESThe consolidated financial state-ments at December 31, 2017 were prepared in euros, which is the pa-rent company’s functional currency.

Each Group entity determines its own functional currency, and the items included in the financial sta-tements of each entity are measured using that functional currency.

Recognition of foreign currency transactions in the consolidated companies’ accounts

Foreign currency transactions re-cognized on the income statement are translated at the exchange rate prevailing on the transaction date,

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except for transactions for which the Company has hedges (USD), which are recorded at the hedging rate. Monetary items expressed in foreign currencies recorded on the balance sheet are translated at the exchange rate prevailing as of the date of the accounting close, with the excep-tion of debts denominated in USD, which are converted at the hedging rate. The resulting exchange rate differences are recorded on the in-come statement

Conversion of accounts of foreign subsidiaries

The financial statements of Group companies whose functional curren-cy is different from that of the parent company are translated into euros:

• assets and liabilities are translated into euros at the exchange rate prevailing as of the date of the ac-counting close;

• income and expenses are trans-lated at the average exchange rate for the period as long as said ex-change rate is not affected by si-gnificant price changes;

• the resulting translation differences are recognized directly in equity.

II.1.18 EARNINGS PER SHAREThe Group reports basic earnings per share and diluted earnings per share.

Earnings per share are calculated by dividing net income by the weighted average number of shares outstanding during the financial year. Net diluted earnings per share are calculated using the conversion of dilutive instruments outstanding as of the closing date into common shares.

II.1.19 REVENUE (IAS 18)Sales are recognized and presented in accordance with IAS 18 “Revenue.”

The revenue-generating event va-ries depending on the type of sale:

• when the Group is responsible for installing label systems, revenue is

recognized when the system be-comes operational (installation of the antenna). At the closing of the accounts, for installations invoiced but not yet completed, deferred in-come is recognized, and for installa-tions completed but not yet invoiced, accrued income is recognized.

• when the Group only delivers labels, revenue is recognized when the goods are taken over by the carrier or the freight forwarder (in the case of FOB sales).

In addition, training is invoiced se-parately, when the service is perfor-med.

Annual lump-sum rebates granted to customers are recorded as a reduction of sales.

Lastly, maintenance contracts are invoiced in advance for periods from four to six months. Deferred income is recognized to prorate sales related to the following period.

II.1.20 OPERATING SEGMENTS (IFRS 8)The SES-imagotag Group presents only uniform activity for the installa-tion and maintenance of electronic shelf labels.

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II.2 HIGHLIGHTS OF THE PERIOD

Highlights of the year

The Company’s consolidated finan-cial statements for the period ended 12/31/2017 reflect the shift by cus-tomers of a number of deployments and orders from 2017 to 2018 in or-der to benefit from the new range of VUSION labels, which was launched at the end of 2017. These postpo-nements of orders and deployments mainly resulted in a decline in sales and profitability compared with 2016. The value of the working capi-tal requirement, stable as a percen-tage of sales between 2016 and 2017, was also impacted in its com-ponents, while inventory and trade payables increased under the effect of significant supplies at the end of the year to guarantee the delivery of large customer orders in 2018.

The merger with the new Chinese majority shareholder, BOE, had the effect of generating extraordinary expenses for legal fees in particu-lar or reflecting in the financial sta-tements the accelerated vesting of bonus shares for Group employees due to the change of control (IFRS 2 expense).

Debt and shareholders’ equity

• New private bond investment for €30 M, maturing at the end of 2023, with a 3.5% annual inte-rest rate. The bonds were placed with European institutional inves-tors. This transaction is subject to the same obligations as the €10 M transaction completed on December 29, 2016, bringing the Group’s total bond debt to €40 M. The placement agent of this tran-saction is Société Générale;

• Simplified takeover process.

On December 20, 2017, BOE Smart Retail (Hong Kong), which is jointly held by BOE and the SES-imagotag management, acquired a majority share of SES-imagotag through the purchase of 6,669,176 shares at a

price of 30 euros. Prior to the acqui-sition of the above block of shares, the controlled Company contributed 537,520 SES-imagotag shares to BOE Smart Retail and took part in a €17.9 Mcapital increase in cash for BOE Smart Retail.

Of note, the managers have com-mitted to holding on to their BOE Smart Retail shares for at least five years. This major reinvestment illus-trates the management team’s strong commitment to the long-term growth of the company.

In compliance with regulations, BOE Smart Retail submitted a briefing note to the AMF in view of a simplified takeover offer to sell SES-imagotag shares at the same €30 per share price. On February 20, 2018, the AMF gave approval no. 18-050 for the note, and the BOE Smart Retail offer was initiated on March 2 for a March 15 close.

The initiator does not plan to request a squeeze-out upon completion of the offer or to request the delisting of its Euronext shares. The initiator also wants to maintain a high float level and significant share liquidity and is not ruling out opening the capital of SES-imagotag to new investors in the future as part of the Company’s deve-lopment strategy.

At the same time, the composition of the Board of Directors of SES-imagotag changed to take into account the re-signation, on December 21, 2017, of Mr. Kinas and Mr. Hainguerlot, res-pectively director and non-voting di-rector, as well as Pechel Industries, re-presented by Ms. Hélène Ploix, which was followed by the cooptation of Mr. Xiangjun Yao and Ms. Xiangshun Yin on the Board of Directors.

External growth

• Acquisition of Pervasive Displays Inc. (PDi): In addition to the ap-proval of the General Meeting of Shareholders held on November 30, 2016, the completion of this deal also remained subject to the ap-

proval of the Taiwanese authorities responsible for foreign investments (Investment Commission, Ministry of Economic Affairs of the Republic of China), which was received on February 2, 2017.

At its meeting on February 16, 2017, the Board acknowledged that all of the conditions precedent of the Pervasive Displays contribution were satisfied and therefore approved the Company’s capital increase for a nominal amount of €1,581,368 in consideration for the Pervasive Displays contribution;

• Anticipation of the purchase of tranche 2 (authorized by the Board of Directors on May 17, 2017) of Findbox, which is now 100% owned;

• Acquisition of 5,979 additional shares of Market Hub, now 60% owned. A third and final tranche of 7,462 shares is planned in the next 18 months. Its valuation will be cal-culated according to the Company’s 2018 economic performance.

II.3 POST-CLOSING EVENTS

• Results of the simplified takeover process

Société Générale informed the AMF (French financial markets authority) that, as part of the simplified takeo-ver bid for the SES IMAGOTAG shares, open from March 2, 2018 until and including March 15, 2018, BOE Smart Retail purchased 3,582,490 SES IMAGOTAG shares on the market at a unit price of 30 euros.

At the closing of the offer, the initiator holds 10,789,186 SES IMAGOTAG shares, representing as many voting rights, or 79.94% of the capital and voting rights of this Company.

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II.4 NOTES TO THE FINANCIAL STATEMENTS

NOTES TO THE BALANCE SHEET - ASSETS AND EQUITY & LIABILITIES

Transfers between line items mainly correspond to:

• assets identified following the good-will allocation work related to the acquisitions of PDI and Findbox for €8,900 K and for prior acquisitions for €7,548 K;

• cost of development of the ERP for €3,178 K placed in service over the year.

As of December 31, 2017, the amount of goodwill is broken down as follows:

• SES-ESL merger: €12.6 M;

• acquisition of Imagotag: €13.4 M;

• acquisition of PDi: €18.3 M;

• acquisition of Findbox: €6.7 M;

• acquisition of Market Hub: €0.4 M (provisional goodwill).

Research and development expenses represent the cost of the research and innovation expenditures incur-red by the Group that allowed our product offering to be improved and diversified.

Intangible fixed assets in progress

correspond to expenditures incur-red for research and development projects, development of the ERP, as well as expenses incurred for the filing of patents not yet issued as of the close of the period.

The increase over the period of €5,798 K breaks down as follows:

• research and development expen-diture for €3,676 K;

• ERP development expenditure for €1,930 K;

• patent expenditures for €192 K.

GROSS FIXED ASSETS OPENING INCREASETRANSFERS BETWEEN

LINE ITEMSCHANGE IN SCOPE CLOSING

GOODWILL 39,183 28,637 -16,448 - 51,372

RESEARCH AND DEVELOPMENT 30,945 672 152 104 31,873

CONCESSIONS, PATENTS & SIMILAR RIGHTS 16,889 439 19,627 421 37,375

INTANGIBLE FIXED ASSETS IN PROGRESS 6,959 5,798 -3,331 - 9,427

TOTAL 93,977 34,396 - 524 130,047

Note 1 - Intangible fixed assets

AMORTIZATION OPENING ALLOWANCETRANSFERS BETWEEN

LINE ITEMSCHANGE IN SCOPE WRITE-BACK CLOSING

RESEARCH AND DEVELOPMENT 19,734 5,105 0 172 25,011

CONCESSIONS, PATENTS & SIMILAR RIGHTS 7,387 1,735 0 169 9,489

TOTAL 27,121 6,840 0 341 0 34,302

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Note 2 - Tangible fixed assets

Note 3 - Financial assets


LINE ITEMSCHANGE IN SCOPE

WRITE-BACK

CLOSING

BUILDINGS AND IMPROVEMENTS 1,126 124 0 223 0 1,473

MACHINERY, EQUIPMENT, AND TOOLS 7,736 2,861 1,780 2,632 -91 14,918

OTHER TANGIBLE FIXED ASSETS 2,003 2,188 -1,780 854 -172 3,093

TOTAL 10,864 5,173 0 3,710 -263 19,484

AMORTIZATION OPENING ALLOWANCE WRITE-BACK CHANGE IN SCOPE CLOSING

BUILDINGS AND IMPROVEMENTS 370 160 0 66 595

MACHINERY, EQUIPMENT, AND TOOLS 3,254 2,281 -14 717 6,239

OTHER TANGIBLE FIXED ASSETS 818 315 0 113 1,247

TOTAL 4,442 2,757 -14 897 8,081

FINANCIAL ASSETS OPENING INCREASE DECREASE CHANGE IN SCOPE CLOSING

DEPOSITS AND GUARANTEES 428 48 -37 38 477

OTHER LOANS 293 44 -5 0 332

OTHER 598 3 0 -592 9

TOTAL 1,319 95 -42 -554 818

The change in scope corresponds mainly to the entry into the scope of consolidation of the companies Market Hub and SES-imagotag Inc. The corresponding participating interests were neutralized in the accounts closed as of December 31, 2017 for €592 K

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Note 4 - Inventories

In addition to the above impairment rule, a reference-by-reference analysis was conducted to refine the provision on the basis of initiated action plans and sales prospects.

The inventory of finished products as of December 31, 2016 includes €13M in products installed at customer sites on a “try and buy” basis to allow them to test the Group’s products. These inventories remain the pro-perty of SES-imagotag throughout the entire trial period.

The corresponding debt is presented on the line “Other debts and accrual accounts.”

The increase in inventory at December 31, 2017 is mainly related to the acqui-

sition of labels and components in ad-vance, in particular in view of the de-ployment of the VUSION product line.

Inventory impairment is based on the following rule:

• category A: items whose turnover is less than 6 months => no impairment;

• category B: items with a turnover rate of between 6 months and 12 months => 50% impairment;

• category C:

• after 12 months without movements within the Group, 80% impairment;

• after 18 months without move-ments within the Group, these items are transferred to a “Scrap” inventory, resulting in 100% im-pairment.

INVENTORIES 12/31/2017 12/31/2016

INVENTORY OF RAW MATERIALS 26,479 20,015

INVENTORY OF FINISHED PRODUCTS 29,479 29,741

INVENTORY OF GOODS PURCHASED FOR RESALE 10,557 9,556

IMPAIRMENT OF INVENTORY -1,250 -697

TOTAL 65,266 58,615

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Note 5 - Trade receivables

TRADE RECEIVABLES 12/31/2017 12/31/2016

GROSS TRADE RECEIVABLES 42,763 17,761

PROVISION FOR IMPAIRMENT -311 -285

CUSTOMERS – ACCRUED INCOME 51 264

TOTAL 42,503 17,740

Under the factoring contract, the amount of assigned trade recei-vables is €4.3 M, of which €3.5 M has already been repaid. The amount of assigned receivables not yet repaid at December 31, 2017 was €0.8 M.

Impairment of trade receivables is as follows:

Group A - any individual receivable exceeding a €2 K threshold and 90 days late is analyzed on a case-by-case basis:

• a 35% provision is established for cases of equipment recovery;

• a provision is established for re-ceivables in litigation according to the historical recovery success ratio (50%);

• a 100% provision is established for accounts receivable deemed non-recoverable.

Groupe B - receivables below the €2 K threshold and more than 90 days late are classified as outstanding payments:

• no provision is established for requests for additional documentation;

• a provision is established on any grounds related to a disagreement or dispute on a prorated basis de-termined during the impairment of Group A receivables.

The amount of receivables overdue for more than one year is com-posed of:

• €518 K in doubtful receivables with a provision of €311 K according to the rule described above;

• receivables deemed recoverable of €185 K;

• receivables pertaining to loans of equipment of €386 K that were the subject of a credit note to be esta-blished for the same amount.

€K GROSS VALUE IMPAIRMENT NET VALUEAMOUNT OF ASSETS NOT YET MATURED

AMOUNTS OF MATURED ASSETS

< 6 months 6 MONTHS TO 1 YEAR > 1 YEAR

RECEIVABLES 42,763 -311 42,452 29,356 11,703 615 1,089

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Note 6 - Other current receivables

Note 7 - Cash and cash equivalents

In accordance with its currency risk hedging policy, the Company makes forward currency purchases. The por-tion of these hedges not settled, de-pending on whether there is a poten-tial gain or loss, results in the booking of respectively another receivable or another debt as of 12/31/2017. In

contrast to 2016, the unsettled portion as of December 31, 2017 resulted in an unrealized loss of €988 K recorded in other debts.

In addition, in 2016, the value of goods sold corresponding to sales recognized as deferred income was

recognized in prepaid expenses for €3,916 K. Unlike at December 31, 2016, the value of these goods is very low at December 31, 2017.

RECEIVABLES 12/31/2017 12/31/2016

TAX RECEIVABLES 8,642 3,466

SOCIAL SECURITY RECEIVABLES 70 63

SUPPLIERS - ADVANCES AND PREPAYMENTS 684 131

FINANCIAL INSTRUMENTS 8,088

OTHER RECEIVABLES 403 439

PREPAID EXPENSES 1,260 4,898

TOTAL 11,059 17,085

RECEIVABLES 12/31/2017 12/31/2016

SHORT-TERM INVESTMENTS 17 17

CASH - ACCOUNTS RECEIVABLE 38,461 33,298

AVAILABLE CASH 38,478 33,314

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Note 8 - Capital

Note 9 - Other equity instruments

MOVEMENT OF SHARES NUMBER NOMINAL VAL. SHARE CAPITAL

STARTING SHARES 12,077,500 2 24,155,000

SHARES ISSUED 1,306,729 2 2,613,458

ENDING SHARES 13,384,229 2 26,768,458

This number of shares making up the capital reflects:

a) all exercised stock options booked over financial year 2017 until December 31;

b) all performance shares granted after recognition of the fulfillment

of the alternative conditions, by the Board of Directors on December 21, 2017, of the general shareholders’ meeting plans of December 16, 2015, March 11, 2016, November 30, 2016, and December 22, 2016;

c) the capital increase relating to the acquisition of PDi.

At December 31, 2017, the Company held a total of 10,106 treasury shares, all of which relate to the cash contract renewed during financial year 2014.

Treasury shares have been restated less shareholders’ equity in accordance with IAS 32.

Stock options and allocation of bonus shares

Allocation of stock options

At December 31, 2017, two stock option plans – the 2009 Plan dated April 15, 2010 and the 2010 Plan dated September 15, 2010 – expired on April 15, 2017 and September 15, 2017 respectively.

At December 31, 2017, six stock option allocation plans were therefore in progress:

Within the framework of the authoriza-tion granted by EGM of June 10, 2009

• the 2011 Plan dated October 21, 2011, expiring on October 21, 2018.

Within the framework of the authori-zation granted by the EGM on March 1, 2012

• the 2012 Plan (1st wave) dated Au-gust 31, 2012, expiring on August 31, 2019;

• the 2012 Plan (2nd wave) dated December 18, 2012, expiring on December 18, 2019;

• the 2013 Plan dated May 28, 2013, expiring on May 28, 2020;

• the 2014 Plan (1st wave) dated April 3, 2014, expiring on April 3, 2021.

Within the framework of the authori-zation granted by the EGM on May 21, 2014,

• the 2014 Plan (2nd wave) dated October 23, 2014, expiring on October 23, 2021.

The table below shows the informa-tion relating to stock options in ef-fect as of December 31, 2017:

163


Note 10 - Non-current provisions

At December 31, 2017, the number of stock options in force, which can be used to subscribe for a total number of 106,925 shares, represents 0.8% of the share capital and voting rights of SES-imagotag after dilution.

Bonus share allocations

On December 21, 2017, the Board of Directors confirmed fulfillment of the alternative conditions for bo-nus share plans put in place by the Board of Directors at its meetings on December 16, 2015, March 11, 2016,

November 30, 2016, December 22, 2016, and March 10, 2017.

The impact of this accelerated acqui-sition was recognized in the financial statements as of December 31, 2017 for €10 M with no cash impact and €2.9 M in employer contributions.

* Net of options exercised and/or canceled

Non-current provisions mainly in-clude labor court disputes and a pro-vision for returned merchandise.

Pervasive Displays (PDI) booked a provision for returned defective screens. The efforts made by the Group in recent years to constant-ly improve the stability of its labels

also benefited PDI, whose return rate over 2017 dropped conside-rably. The corresponding provision was therefore adjusted as of December 31, 2017.

PLANS NUMBER OF OPTIONS NOTIFIED NUMBER OF REMAINING OPTIONS OUTSTANDING *

4/15/2010 14,000 -

9/15/2010 8,500 -

10/21/2011 58,500 13,500

8/31/2012 315,800 69,675

12/18/2012 19,000 4,000

6/30/2013 65,200 5,200

4/3/2014 43,000 9,350

10/23/2014 33,150 5,200

557,150 106,925

NATURE OF PROVISIONS OPENING ALLOWANCE WRITE-BACK USED CHANGE IN SCOPEWRITE-BACK

NOT USEDCLOSING

OTHER PROVISIONS FOR CONTINGENCIES AND CHARGES

199 961 -310 3,373 -3,512 711

TOTAL 199 961 -310 3,373 -3,512 711

164

financial report

Note 11 - Long-term loans

Loans are recognized at the amortized cost using the effective interest rate method.

In 2017, the Company issued a second bond debt for €30 M, bearing interest at 3.5% per year and maturing on December 29, 2023.

This investment is subject to the fol-lowing obligations:

• the Company has committed to maintaining a consolidated leve-rage ratio, representing the re-lationship between net financial debt and EBITDA, below 3.5;

• in addition, financial debt in the sub-sidiaries, with the exception of subsi-diaries acquired after this bond issue and for a period of one year, must not exceed 20% of the Group’s debt;

• lastly, in the event of a change in control, i.e., a shareholder co-mes to hold more than 50% of the Company’s capital or voting rights directly or indirectly, each bondholder may request the early redemption of all or some of the

bonds held. This clause is also consistent with the commitments made for other lines of credit ob-tained from BPI and Société Géné-rale in particular.

As of December 31, 2017, the Group complied with the consolidated le-verage ratio and obtained confirma-tion from all lenders and bondhol-ders that they will not request early redemption following the capital al-liance with the BOE Group.

LONG-TERM LOANS OPENING + - CLOSING

BOND DEBTS 10,000 29,761 39,761

OTHER LONG-TERM LOANS FROM CREDIT INSTITUTIONS 17,032 793 -5,716 12,109

TOTAL 27,032 30,554 -5,716 51,870

LONG-TERM LOANS 12/31/2017LESS THAN 1

YEAR1 TO 5 YEARS MORE THAN 5 YEARS

LONG-TERM LOANS 51,870 5,555 6,358 39,956

TOTAL 51,870 5,555 6,358 39,956

165


Note 12 - Other non-current liabilities

Note 13 - Trade payables

The other operating grants correspond to a grant obtained by PDI on the acquisition of industrial tools.

Debts relating to price supplements consist of:

• €5,500 K for the put on the 33% tranche of the acquisition of SES-imagotag Deutschland GmbH, which was the

subject of a firm and final agree-ment in August 2017;

• €3,282 K for the earn-out on the acquisition of PDi;

• €1,000 K for the acquisition price balance (retention payment) on the PDi acquisition.

The amount of €1,910 K corresponds to the share of the research tax credit for capitalized development projects, reported on the income statement at the rate of depreciation of the under-lying assets.

The increase in the balance of trade payables is due to the greater level of purchases made by the Group at the end of 2017 compared with the previous year (see Note 4 on inven-

tories). These purchases were made in order to build the inventories of products needed for customer deli-veries in 2018, particularly those who wanted to shift their deployment from

2017 to 2018 in order to benefit from the products of the new VUSION product line.

TYPE OF OTHER NON-CURRENT LIABILITIES OPENING CHANGE IN SCOPE + - CLOSING

RESEARCH TAX CREDIT 1,987 390 -467 1,910

OTHER OPERATING GRANTS 949 -412 538

OTHER DEBTS - PRICE SUPPLEMENT 3,421 6,361 9,782

OTHER 77 77

TOTAL 5,485 949 6,751 -878 12,307

TRADE PAYABLES 12/31/2017 12/31/2016


SUPPLIERS - ACCRUED EXPENSES 12,915 4,324

TOTAL 57,829 13,116

166

financial report

Note 14 - Other debts and accrual accounts

Note 16 - Purchases consumed

Note 15 – Sales

Sales for the period break down as follows by geographical zone:

At December 31, 2016, sales and services invoiced for installations not recognized in sales revenues were the subject of a restatement in deferred income and include, in

particular, €17 M relating to “try and buy” contracts (see Note 4 on in-ventories). In 2017, invoicing proce-dures were aligned with revenue recognition criteria for installation

operations. The amount of deferred income is therefore very low as of December 31, 2017.

The amount of purchases consumed is composed of the following:

• consumption of purchases of raw materials and merchandise;• consumption of inventories of finished products;• transportation and incidental expenses relating to these purchases.

OTHER DEBTS 12/31/2017 12/31/2016

FINANCIAL INSTRUMENTS 984 0

CUSTOMERS - ADVANCES AND PREPAYMENTS 2,140 439

CUSTOMERS - ACCRUED INCOME 1,749 549

SOCIAL SECURITY AND TAX LIABILITIES, PENSION COMMITMENTS 9,133 7,440

DEFERRED INCOME AND OTHER LIABILITIES 2,221 22,803

TOTAL 16,226 31,231

NOTES TO THE INCOME STATEMENT

Millions of € 12/31/2017 12/31/2016

MAINLAND FRANCE 69.2 45% 67.8 38%

EXPORTS 83.8 55% 109.1 62%

TOTAL 153.0 176.9

167


Note 17 - External expenses

Note 18 - Payroll costs

Recognition and presentation of the CICE (Crédit d’impôt pour la compé-titivité et l’emploi or Tax Credit for Competitiveness and Job Creation):

The CICE is recorded at the rate of the commitment and is taken into

account as corresponding compen-sation costs are incurred.

Accounting for the CICE was carried out via the option of lowering payroll costs, in accordance with IAS 20.

The impact of taking into account the CICE on the financial statements is €225 K.

The purpose of the tax credit was to facilitate the Company’s continued training and recruitment efforts.

OTHER EXTERNAL EXPENSES 12/31/2017 12/31/2016

VARIABLE EXTERNAL EXPENSES -10,101 -8,982

EXTERNAL PAYROLL COSTS AND RECRUITMENT COSTS -2,551 -1,911

TRAVEL COSTS -4,264 -2,930

MARKETING -2,122 -1,258

FEES -5,396 -1,940

IT AND TELECOM EXPENSES -1,617 -1,115

OTHER EXTERNAL EXPENSES -2,141 -1,667

TOTAL -28,192 -19,803

PAYROLL COSTS 12/31/2017 12/31/2016

PAYROLL COSTS -24,264 -18,886

PENSION COMMITMENTS 1 -73

CAPITALIZED FIXED ASSET EXPENSES - DEVELOPMENT COSTS 2,929 2,799

STOCK OPTIONS -28

BONUS SHARES (IFRS 2 EXPENSES INCLUDING EMPLOYER CONTRIBUTION) -12,908 -1,248

TOTAL -34,242 -17,436

168

financial report

Note 19 - Net allowance for provisions

Note 20 - Details of other operating income and expenses

Note 21 - Other financial income and expenses

NET ALLOWANCE FOR PROVISIONS 12/31/2017 12/31/2016

CHANGE IN PROVISIONS FOR CONTINGENCIES AND CHARGES 2,861 47

CHANGE IN PROVISIONS FOR TRADE RECEIVABLES -132 340

CHANGE IN PROVISIONS FOR INVENTORY -130 202

TOTAL 2,599 589

OF WHICH CLASSIFIED IN OTHER INCOME AND EXPENSES 102 -416

TOTAL 2,701 174

OTHER INCOME AND EXPENSES 12/31/2017 12/31/2016

FEES RELATING TO ACQUISITIONS (*) 810

AMORTIZATION OF TECHNOLOGIES (*) 306

WRITE-BACK ON TAX RISK -606

NET BOOK VALUE OF DISPOSED FIXED ASSETS 249

OTHER INCOME AND EXPENSES 45 432

FAIR VALUE OF ACQUIRED SHARES 270

TOTAL 564 942

* In 2017, fees relating to acquisitions are booked in external expenses, and amortization of technologies is booked in allowances for amortization and depreciation.

12/31/2017 12/31/2016

FINANCIAL INSTRUMENTS -565 -59

BANK INTEREST EXPENSES -1,587 -351

CASH PRODUCTS 88

EXCHANGE GAINS 2,873 3,097

EXCHANGE LOSSES -5,211 -4,703

TOTAL -4,490 -1,928

169


Note 22 – Income tax and deferred taxes

1 Including €333 K in deferred tax assets and €10 K in deferred tax liabilities relating to Pervasive Displays Inc., which entered the scope of consolidation on 2/15/17

€K 12/31/2017 12/31/2016

DEFERRED TAXES 4,449 -826

TAX LIABILITIES -37 -1,279

TAX EXPENSE 4,412 -2,105

€K

RATE APPLICABLE IN FRANCE 33.33%

-21,069

NET INCOME

THEORETICAL TAX 8,494

TAX REPORTED 4,412

DIFFERENCE -4,081

IMPACTS:

PERMANENT DIFFERENCES -3,780

OTHER - TAX RATE DIFFERENCES -301

Total -4,081

The permanent differences are mainly explained by the impact of the IFRS 2 expense (excluding the employer contribution), i.e., a tax difference of €3.2 M.

Deferred tax assets relating to tax loss carry-forwards mainly concern SES-imagotag SA, SES-imagotag Inc., and Findbox.

The deferred tax liabilities relating to the technologies identified following

the goodwill allocation work break down as follows:

• Pervasive Displays Inc: €1,105 K net of tax recorded over the period for €68 K.

• Findbox: €557 K net of tax recorded over the period for €43 K.

• SES-imagotag GmbH: €875 K net of tax recorded over the period for €77 K.

€ K 12/31/2017 12/31/2016

Deferred tax assets

TAX LOSS CARRY-FORWARDS 4,189

TEMPORARY DIFFERENCES 1 1,658 1,512

FINANCIAL INSTRUMENTS 350

Total DTA 6,197 1,512

DEFERRED TAXLIABILITIES

AMORTIZATION OF TECHNOLOGIES 2,537

CAPITALIZATION OF R&D EXPENSES 948 556

TEMPORARY DIFFERENCES 1 131 40

Instruments financiers 94

Total DTL 3,616 689

170

financial report

Note 23 - Net income - Earnings per share

Note 24 - Employee headcount

The headcount at December 31, 2017 breaks down as follows:

Net profit for the year amounted to -€21,069 K

Effect of potential dilution on the capital

Earnings per share

INSTRUMENTS NUMBER EFFECT

STOCK OPTIONS 106,925 0.8%

BONUS SHARES 179,517 1.3%

TOTAL 286,442 2.1%

EARNINGS PER SHARE 12/31/2017 12/31/2016

PROFIT (LOSS) (€K) -21,069 3,361



BONUS SHARES * 179,517 518,531


- BEFORE DILUTION -1.57 0.28

- After dilution -1.57 0.26

II.5 OTHER INFORMATION

GEOGRAPHICAL ZONE EMPLOYEES

FRANCE 183

INTERNATIONAL 190

TOTAL 373

* Following the fulfillment of the alternative conditions of the bonus share plans, the shares were acquired as of the close of the period. The associated capital increase was recorded only for the shares whose delivery date is during the period. As of December 31, 2017, 179,517 shares have not yet been delivered.

171


Note 25 - Off-balance sheet commitments

Note 26 - Executive compensation

Note 27 - Auditors’ fees

Commitments made:

• comfort letter to Bank Austria (SES-imagotag GmbH’s bank): €4,600 K throughout the term of the loan;

• guarantee granted to Chongqing BOE Smart Electronics System Co. Ltd. on behalf of SES-imagotag GmbH, a wholly owned subsidiary, for USD 10 M for a period of 12 months

• guarantee granted to Chongqing BOE Smart Electronics System Co. Ltd. on behalf of Pervasive Displays Inc., a wholly owned subsidiary, for USD 10 M for a period of 12 months

• guarantee made to Steiermärkische Bank (SES-imagotag GmbH’s bank): €108 K;

• rental payment guarantee of €182 K (CIC);

• interest-bearing collateral account (CIC);

• rent payment guarantee of €45 K (BNP).

As part of the bond debt, the Com-pany has committed to maintaining a consolidated leverage ratio, repre-senting the relationship between net financial debt and EBITDA, below 3.5. The other commitments are described in Note 12.

The gross compensation paid to the Chairman and Chief Executive Officer for the past period was €462 K, in-cluding €142 K for the 2016 variable portion paid in 2017.

A contract under the Company Guarantee for Company Executives (GSC) was signed in 2012 for the benefit of the Chairman and Chief Executive Officer.

This contract includes the basic plan as well as a supplementary plan provi-ding for compensation coverage over a 12-month period (former plan).

The expense recognized for the Au-ditors’ fees amounted to €322 K for the certification of the individual and

consolidated financial statements and €29 K for services other than certifi-cation of the financial statements and

is detailed as follows:

LEASES (€) < 1 year BETWEEN 1 AND 5 YEARS > 5 years

OFFICES/ WAREHOUSES 1,228,621 3,064,870 447,348

VEHICLES 741,680 1,571,603 -

TOTAL 1,970,302 4,636,474 447,348

Deloitte KPMG Total

€k AMOUNT AMOUNT AMOUNT

FEES RELATED TO THE CERTIFICATION OF THE INDIVIDUAL AND CONSOLIDATED FINANCIAL STATEMENTS

- ISSUER 126 126 252

- SUBSIDIARIES 35 35 70

SERVICES OTHER THAN CERTIFICATION OF THE FINANCIAL STATEMENTS *

- ISSUER 10 10

- SUBSIDIARIES 19 19

TOTAL 171 180 351

* For Deloitte, services other than certification of the financial statements pertain to the validation of the completeness and sincerity of the social and environmental responsibility information contained in the management report. For KPMG, services other than certification of the financial statements pertain to tax compliance services and assistance in the review of transfer price reports for the subsidiary Pervasive Displays Inc.

172

financial report

Note 28 - Degree of exposure to market risks

Note 29 - Research and development expenditure

Note 30 - Transactions with related parties

Sales in foreign currencies in 2017 totaled $7,229 K due to the inclu-sion of the subsidiaries PDi and SES-imagotag Inc. in the scope over the period.

In financial terms, the Company is mainly exposed to currency fluc-tuations on its purchases made in dollars (approximately 80% of the volumes).

In 2017, the Company made forward currency purchases to limit its cur-rency risk over 2018.

Over financial year 2017, €4,348 K in research and development expenditure was capitalized on the balance sheet, including €3,676 K in fixed assets in progress.

The related parties identified by the Group are:

• Group shareholders owning more than 5% of the share capital;

• members of the Board of Directors.

As of December 31, 2017, the amount of transactions completed with the Group’s majority shareholder after

the acquisition of the equity stake on December 20, 2017 was €1,089 K.

The compensation of the Chairman and Chief Executive Officer is as follows:

$K AT December 31, 2017

HEDGING PORTFOLIO AT THE END OF DECEMBER 2016 120,000

SETTLED OVER 2017 71,000

FORWARD PURCHASES MATURING IN 2018 90,000

COVERAGE PORTFOLIO AT THE END OF DECEMBER 2017 (2018 MATURITY) 139,000

CATEGORY 12/31/2017 12/31/2016

SHORT-TERM BENEFITS 462,000 430,000

POST-EMPLOYMENT BENEFITS 0 0

OTHER LONG-TERM BENEFITS 0 0

END-OF-CONTRACT COMPENSATION 0 0

SHARE-BASED PAYMENTS 0 0

173


Note 31 - Credit, liquidity, and cash flow risks

Liquidity risk

To manage the liquidity risk that may arise from the collectability of financial liabilities, whether at their contrac-tual due date or early, the Group im-plements a cautious financing policy based in particular on the investment of its excess available cash in risk-free financial investments.

All short-term investments consist of term deposits.

Credit risk

The financial assets that could poten-tially expose the Group to credit or counterparty risk mainly correspond to:

• trade receivables: customer accep-tance procedures and related credit risk analyses are fully incorporated into the overall risk assessment pro-cess implemented by the Group. This risk is controlled on a daily ba-sis through the collection and reco-very processes. In addition, the large number of individual customers mi-nimizes the risk of concentration of credit relating to trade receivables;

• and financial investments: the Group’s policy is to spread out its invest-ments over short-term monetary instruments, generally for less than one month, in keeping with rules of diversification and counterparty quality. The book value of financial

assets recognized on the financial statements, which is presented net of impairment losses, represents the Group’s maximum exposure to credit risk.

The Group does not hold any signi-ficant financial assets that are outs-tanding and not impaired.

All the Companies closed their accounts as of December 31, 2017.

II.6 CONSOLIDATION SCOPE

COMPANY NAME SiègeCONSOLIDATION

METHOD% CONTROLLED

12/31/2017% HELD

12/31/2017% HELD

12/31/2016

SES-imagotag S.A. Nanterre (France) (Parent) (Parent) (Parent) (Parent)

SES-imagotag Pte Ltd Singapore FC 100 100 100

SES-imagotag Mexico srl. de cv Mexico FC 99 99 99

SES-imagotag Italia Srl. Italy FC 100 100 100

SES-imagotag Gmbh Austria FC 100 100 100

Solutions Digitales SES-imagotag Ltd Canada FC 100 100 100

Market Hub Technologies Ltd1 Ireland FC 60 60 28

SES-imagotag Inc 1 United States FC 100 100 100

SES-imagotag Netherlands BV Netherlands FC 100 100 0

SES-imagotag DAnmark Aps. Denmark FC 100 100 0

SES-imagotag Deutschland GmbH Germany FC 100 100 67

Pervasive Displays Inc Taiwan FC 100 100 0

NON-CONSOLIDATED COMPANY BECAUSE THE ACTIVITY WAS NOT SIGNIFICANT OVER THE PERIOD

SES-imagotag Hong Kong Ltc Hong Kong 100 100 0

1 Non-consolidated company at December 31, 2016

174

VI. Corporate financial statementsAT DECEMBER 31, 2017

176

financiAL REPORT

€K PERIOD ENDED 12/31/2017 PERIOD ENDED 12/31/2016

(12 MONTHS)

GROSS AMORT./ DEPR. & PROV. NET NET

RESEARCH AND DEVELOPMENT COSTS 26,063 19,317 6,746 10,624

CONCESSIONS, PATENTS & SIMILAR RIGHTS 22,670 11,881 10,789 4,913

GOODWILL 12,639 - 12,639 16,653

INTANGIBLE FIXED ASSETS IN PROGRESS 7,501 - 7,501 6,960

BUILDINGS 1,214 490 724 729

PLANT, MACHINERY, AND EQUIPMENT 2,612 2,355 257 390

OTHER TANGIBLE ASSETS 1,753 947 806 566

PARTICIPATING INTERESTS 61,754 - 61,754 24,977

RECEIVABLES DUE FROM EQUITY INTERESTS 10,197 - 10,197 6,390

LOANS 337 - 337 293

OTHER LONG-TERM INVESTMENTS AND LOANS 359 - 359 386

FIXED ASSETS 147,099 34,990 112,109 72,882

RAW MATERIALS, SUPPLIES 5,472 5,472 5,644

INTERMEDIATE AND FINISHED PRODUCTS 18,882 566 18,316 12,348

GOODS PURCHASED FOR RESALE 7,120 7,120 9,375

ADVANCE PAYMENTS TO SUPPLIERS - - 0 0

TRADE RECEIVABLES 23,595 135 23,460 15,413

OTHER RECEIVABLES 36,143 - 36,143 11,631

SHORT-TERM INVESTMENTS 332 - 332 295

CASH AND CASH EQUIVALENTS 31,581 - 31,581 27,332

PREPAID EXPENSES 936 - 936 4,796

CURRENT ASSETS 124,060 701 123,360 86,833

UNREALIZED FOREIGN EXCHANGE LOSSES 1,863 - 1,863 1,274

TOTAL ASSETS 273,022 35,690 237,332 160,989

1. BALANCE SHEET (ASSETS)

177

Corporate financial statements

€K PERIOD ENDED 12/31/2017Exercice clos le 31/12/2016

(12 mois)

CAPITAL (MULTIPLE OR SINGLE SHAREHOLDER) (OF WHICH, PAID UP: 23,330) 26,768 24,155

ISSUE, MERGER, AND ACQUISITION PREMIUMS 67,693 34,253

STATUTORY RESERVE 2,604 2,604

RETAINED EARNINGS 45,046 57,414

PROFIT (LOSS) FOR THE PERIOD -8,886 -2,517

SHAREHOLDERS’ EQUITY 133,226 115,909

PROVISIONS FOR CONTINGENCIES 2,031 1,596

PROVISIONS FOR CHARGES - -

PROVISIONS FOR CONTINGENCIES AND CHARGES 2,031 1,596

LONG-TERM LOANS AND DEBTS FROM FINANCIAL INSTITUTIONS 49,972 22,806

ADVANCE PAYMENTS FROM CUSTOMERS 1,610 395


TAXES AND SOCIAL SECURITY CONTRIBUTIONS PAYABLE 6,450 4,028

OTHER DEBTS 10,561 557

DEFERRED INCOME 148 6,081

LONG-TERM LOANS AND DEBTS 101,874 43,465

UNREALIZED FOREIGN EXCHANGE GAINS 201 19

TOTAL EQUITY & LIABILITIES 237,332 160,989

BALANCE SHEET (EQUITY & LIABILITIES)

178

financiAL REPORT

€KPERIOD ENDED 12/31/2017

(12 MONTHS)PERIOD ENDED 12/31/2016

(12 MONTHS)

SALES 98,557 96,432

INCREASE IN STOCKS OF FINISHED GOODS AND WORK IN PROGRESS -4,478 -934

OWN WORK CAPITALIZED 1,386 1,486

WRITE-BACKS OF AMORT., DEPR., AND PROVISIONS, EXPENSES REALLOCATED 1,235 1,317

OTHER INCOME 4,481 147

FOREIGN EXCHANGE GAINS ON COMMERCIAL RECEIVABLES AND PAYABLES 3,307

TOTAL OPERATING INCOME 104,488 98,448

PURCHASES OF RAW MATERIALS AND OTHER SUPPLIES -64,792 -58,997

INVENTORY CHANGES (RAW MATERIALS AND OTHER SUPPLIES) 1,199 -974

OTHER PURCHASES AND EXTERNAL EXPENSES -23,471 -18,888

TAXES AND SIMILAR CHARGES -740 -783

WAGES AND SALARIES -10,035 -9,613

SOCIAL SECURITY CONTRIBUTIONS -7,270 -4,339

ALLOWANCES FOR AMORTIZATION/DEPRECIATION OF FIXED ASSETS -5,234 -5,277

ALLOWANCES FOR PROVISIONS ON FIXED ASSETS -535 -535

ALLOWANCES FOR PROVISIONS ON CURRENT ASSETS -718 -435

ALLOWANCES FOR PROVISIONS FOR CONTINGENCIES AND CHARGES -156 -92

OTHER EXPENSES -109 -407

FOREIGN EXCHANGE LOSSES ON COMMERCIAL RECEIVABLES AND PAYABLES -473

TOTAL OPERATING EXPENSES -112,334 -100,340

OPERATING PROFIT (LOSS) -7,846 -1,892

INCOME FROM OTHER SHORT-TERM INVESTMENTS AND RECEIVABLES 1 167

OTHER INTEREST AND RELATED INCOME 2,608 20

AMOUNTS RELEASED FROM PROVISIONS AND EXPENSES REALLOCATED 1,274 921

POSITIVE EXCHANGE DIFFERENCES 1,632

NET INCOME FROM DISPOSALS OF SHORT-TERM INVESTMENTS 49 164

TOTAL FINANCIAL INCOME 3,931 2,904

FINANCIAL ALLOWANCES FOR AMORTIZATION/DEPRECIATION AND PROVISIONS -1,863 -1,274

INTEREST AND SIMILAR EXPENSES -1,344 -215

NEGATIVE EXCHANGE DIFFERENCES -2,191 -3,588

2. INCOME STATEMENT

179


€KPERIOD ENDED 12/31/2017

(12 MONTHS)PERIOD ENDED 12/31/2016

(12 MONTHS)

NET EXPENSES ON DISPOSALS OF SHORT-TERM INVESTMENTS -56 -89

TOTAL FINANCIAL EXPENSES -5,453 -5,166


PROFIT (LOSS) BEFORE TAXES AND EXTRAORDINARY ITEMS -9,368 -4,154

EXTRAORDINARY OPERATING INCOME 1 0

EXTRAORDINARY INCOME ON CAPITAL OPERATIONS 0 0

AMOUNTS RELEASED FROM PROVISIONS AND EXPENSES REALLOCATED 0 1,061

TOTAL EXTRAORDINARY INCOME 1 1,061

EXTRAORDINARY OPERATING EXPENSES -13 -2

EXTRAORDINARY EXPENSES ON CAPITAL OPERATIONS 0 0

EXTRAORDINARY ALLOWANCES FOR AMORTIZATION/DEPRECIATION AND PROVISIONS 0 0

TOTAL EXTRAORDINARY EXPENSES -13 -2

EXTRAORDINARY PROFIT (LOSS) -12 1,058

TAX ON PROFITS 494 578

NET INCOME -8,886 -2,517

€K CAPITAL CAPITAL RESERVESRESERVES AND PROFIT

(LOSS)TOTAL

SHAREHOLDERS’ EQUITY AT 12/31/2015 23,330 27,316 60,018 110,664

NET INCOME FOR THE PERIOD -2,517 -2,517

CAPITAL INCREASE 825 6,937 7,763


NET INCOME FOR THE PERIOD -8,886 - 8,886

CAPITAL INCREASE 2,613 33,440 -9,851 26,203


INCOME STATEMENT (CONTINUED)

3. CHANGES IN SHAREHOLDERS’ EQUITY

180

financiAL REPORT

I. INTRODUCTION

The annual financial statements at December 31, 2017 cover a period of 12 months.

The following information is an in-tegral part of the annual financial statements for the period ended December 31, 2017, approved by the Board of Directors on March 5, 2018.

Only significant information is mentioned in these notes. Unless otherwise indicated, the presented data are in thousands of euros.

II. ACCOUNTING RULES AND METHODS

The financial statements for the period ended December 31, 2017 were prepared in accordance with the provisions of the French com-mercial code, the French general accounting code (Plan Comptable Général) as described in ANC re-gulation 2016-07 of November 4, 2016, and the generally accepted accounting practices in France.

General accounting conventions were applied in keeping with the principle of prudence, in accor-dance with the following basic as-sumptions:

• going concern;

• consistency of accounting methods between periods;

• independence of accounting periods

and in accordance with the general rules for preparation and presenta-tion of annual financial statements.

The basic method used to value items booked to the accounts is the historical cost method.

The main methods used are the fol-lowing:

1) Intangible fixed assets

Self-financed research and deve-lopment costs are recognized in the period in which they are incur-red, with the exception of project research and development costs that meet the following criteria:

• the product or process is clearly identified, and the costs are indi-vidualized on a reliable basis;

• the technical feasibility of the pro-duct has been demonstrated;

• the product or process will be marketed or used internally;

• there is a potential market for the product, or its internal usefulness has been demonstrated;

• the necessary resources are avai-lable to complete the project.

Research and development costs are amortized over a period of 3 to 5 years on a straight-line basis. Pa-tents and trademarks are amortized on a straight-line basis over a pe-riod of 10 to 15 years, and software is amortized over a period of 2 to 5 years. Development costs for the ERP are amortized on a straight-line basis over 10 years.

The merger completed on May 16, 2007 between SES-imagotag and SES ESL resulted in a technical loss. In accordance with ANC re-gulation 2015-06, this technical loss was allocated to the various assets contributed by the Trans-ferring Company, insofar as the unrealized gains recognized per asset are significant.

In this case, the technical loss cor-responds to the contributed pa-tents for €8,025 K and goodwill for €12,639 K.

Impairment tests are performed at each annual close and whenever in-terim financial statements are pre-pared if there is an indication of loss of value. In this case, the asset’s net book value is compared with its present value as of the same date.

With regard to goodwill, the pre-sent value is reviewed according to the Discounted Cash Flows method, based on future earnings prospects.

2) Tangible fixed assets

Tangible fixed assets are valued at their acquisition cost (purchase price and incidental expenses, ex-cluding fixed asset acquisition costs) or their production cost.

Since January 1, 2005, the corpo-rate financial statements have been based on the new texts of the CRC (French accounting regulatory com-mittee) on the definition and valua-tion of assets (CRC 2004-06) and the depreciation, and impairment of assets (CRC 2002-10 and 2003-07).

Depreciation is calculated based on the useful life of the fixed as-sets concerned, according to the straight-line method. If tax depre-ciation is different from economic depreciation, the difference is re-corded as excess tax depreciation.

Breakdown of useful lives used to calculate depreciation:

4. NOTES

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of the date of the transaction. As of the closing date, assets and liabilities denominated in foreign currencies are translated into euros at the ex-change rate in force on that date. The difference resulting from the trans-lation of payables and receivables in foreign currencies is recognized on the balance sheet in “translation ad-justments.” Unrealized losses are the subject of a provision.

8) Revenue recognition

The revenue-generating event varies depending on the type of sale:

• When SES-imagotag is res-ponsible for installing label systems, revenue is recognized when the system becomes ope-rational (installation of the an-tenna). At the closing of the ac-counts, for installations invoiced but not yet completed, deferred income is recognized, and for installations completed but not yet invoiced, accrued income is recognized;

• when SES-imagotag only de-livers labels, revenue is reco-gnized when the goods are taken over by the carrier or the freight forwarder (in the case of FOB sales).

In addition, training is invoiced separa-tely, when the service is performed.

Annual lump-sum rebates granted to customers are recorded as a reduction of sales.

Lastly, maintenance contracts are in-voiced in advance for monthly, quar-terly, four-month, or six-month periods. Deferred income is recognized to pro-rate sales related to the following pe-riod.

3) Long-term investments and loans

These items primarily consist of partici-pating interests and receivables related to these interests.

Participating interests appear on the balance sheet at their acquisition cost. Where appropriate, an impairment loss is recorded to reduce this cost to the value in use. The value in use is based on cash flow and operating projections of the entities involved, prepared by the operational depart-ments as part of their budget process and with the business plans established as part of the acquisitions of equity interests. In the event of a loss of value, impairment tests are carried out based on an estimate of the value in use according to the prospects of future business and profitability.

4) Inventories and work in progress

The valuation of inventory compo-nents is determined according to their cost price valued at the average weighted cost.

Work in progress consists of installa-tion projects started but not yet com-pleted at the close of the period. They are valued at the cost price of mate-rials and the cost of time spent as of the closing date.

The valuation of finished products consists of the following:

• cost price of components valued at the weighted average unit cost;

• cost of assembly by the subcontractor;

• additional costs consisting essen-tially of component storage costs and transit costs for labels.

A provision for inventory impairment is recorded when an item shows slow turnover either because it can no lon-ger be sold or because it is defective or obsolete.

5) Provisions for asset impairment

These are recorded to take into ac-count the risk of non-recoverability relating to assets existing at the close.

6) Provisions for contingencies and charges

In accordance with CRC Regulation 2000-06 on liabilities, a provision is recorded for any obligation of the Company to a third party able to be estimated with sufficient reliability and requiring a likely outflow of re-sources without consideration.

7) Translation of transactions denominated in foreign currencies

These transactions in foreign cur-rencies are initially recorded in eu-ros at the exchange rate in force as

NATURE OF CAPITAL ASSETS DURATION

INSTALLATIONS AND IMPROVEMENTS 5 to 10 years

INDUSTRIAL TOOLS 3 to 5 years

INDUSTRIAL EQUIPMENT 2 to 5 years

TRANSPORT EQUIPMENT 4 to 5 years

OFFICE AND IT EQUIPMENT 3 to 5 years

OFFICE FURNITURE 5 to 10 years

182

financiAL REPORT

9) End-of-career benefits

No provision is established for reti-rement benefits. Where appropriate, the Company pays all or part of the debt for these commitments to the insurance company.

The unpaid balance appears in off-balance sheet commitments.

10) Foreign exchange gains and losses

In accordance with regulation no. 2015-05 of July 2, 2015, applicable to periods beginning on or after January 1, 2017, foreign exchange gains and losses on trade recei-vables and payables, previously re-cognized in financial income, are recognized in operating income and expenses respectively. Foreign exchange gains and losses on finan-cial transactions are recognized in financial income and expense res-pectively.

The allowance for the foreign ex-change loss provision follows the same classification on the income statement.

III. HIGHLIGHTS OF THE PERIOD

Operations

The Company’s annual financial statements for the period ended 12/31/2017 reflect the shift by cus-tomers of a number of deployments and orders from 2017 to 2018 in or-der to benefit from the new range of VUSION labels, which was launched at the end of 2017. These postpo-nements of orders and deployments primarily resulted in a decline in sales and profitability compared with 2016. The value of the wor-king capital requirement, stable as a percentage of sales between 2016 and 2017, was also impacted in its components, while inventory and trade payables increased un-der the effect of significant supplies obtained at the end of the year to guarantee the delivery of large cus-tomer orders in 2018.

The merger with the new Chinese majority shareholder, BOE, had the effect of generating non-recurring expenses for legal fees in particular and the accelerated vesting of bo-nus shares by Group employees due to the change of control.

Debt and shareholders’ equity

• New private bond investment for €30 million, maturing at the end of 2023, with a 3.5% annual inte-rest rate. The bonds were placed with European institutional inves-tors. This transaction is subject to the same obligations as the €10 million transaction completed on December 29, 2016, bringing the Group’s total bond debt to €40 million. The placement agent of this transaction is Société Géné-rale;

• simplified takeover offer.

On December 20, 2017, BOE Smart Retail (Hong Kong), which is jointly held by BOE and the SES-imago-tag management, acquired a majo-rity share of SES-imagotag through the purchase of 6,669,176 shares at a price of 30 euros. Prior to the acquisition of the above block of shares, the Company controlled by the management contributed 537,520 SES-imagotag shares to BOE Smart Retail and took part in a €17.9 million capital increase in cash for BOE Smart Retail. Of note, the managers have committed to holding on to their BOE Smart Retail shares for at least five years. This major reinvestment illustrates the management team’s strong com-mitment to the long-term growth of the company.

In compliance with regulations, BOE Smart Retail submitted a briefing note to the AMF in view of a simpli-fied takeover offer to sell SES-ima-gotag shares at the same €30 per share price. On February 20, 2018, the AMF gave approval no. 18-050 for the note, and the BOE Smart Re-tail offer was initiated on March 2 for a March 15 close.

The initiator does not plan to re-quest a squeeze-out upon comple-tion of the offer or to request the delisting of its Euronext shares. The initiator also wants to maintain a high float level and significant share liquidity and is not ruling out ope-ning the capital of SES-imagotag to new investors in the future as part of the Company’s development strategy.

At the same time, the composi-tion of the Board of Directors of SES-imagotag changed to take into account the resignation, on De-cember 21, 2017, of Mr. Kinas and Mr. Hainguerlot, respectively direc-tor and non-voting director, as well as Pechel Industries, represented by Ms. Hélène Ploix, which was followed by the cooptation of Mr. Xiangjun Yao and Ms. Xiangshun Yin on the Board of Directors.

External growth

• Acquisition of Pervasive Displays Inc. (PDi): In addition to the ap-proval of the Shareholders’ Mee-ting held on November 30, 2016, the completion of this deal also remained subject to the approval of the Taiwanese authorities res-ponsible for foreign investments (Investment Commission, Ministry of Economic Affairs of the Repu-blic of China), which was received on February 2, 2017. At its mee-ting on February 16, 2017, the Board acknowledged that all of the conditions precedent of the Per-vasive Displays contribution were satisfied and therefore approved the Company’s capital increase for a nominal amount of €1,581,368 in consideration for the Pervasive Displays contribution.

• Anticipation of the purchase of tranche 2 (authorized by the Board of Directors on May 17, 2017) of Findbox, which is now 100% owned.

• Acquisition of 5,979 additional shares of Market Hub, now 60% owned. A third and final tranche of 7,462 shares is planned in the next

183


18 months. Its valuation will be cal-culated according to the Company’s 2018 economic performance.

IV. POST-CLOSE EVENTS

• Results of the simplified takeover process.

V. NOTES TO THE BALANCE SHEET

Note 1 – Fixed assetsMovements during the period are detailed in the tables below:

Intangible fixed assets

Tangible fixed assets

Transfers between line items correspond to:

• part of the technical loss on merger between SES-imagotag and SES ESL allocated to the transferred patents for €8,025 K;

• ERP development cost for €3,178 K.

Société Générale informed the AMF (French financial markets authority) that, as part of the simplified takeover bid for the SES-imagotag shares, open from March 2, 2018 until and including March 15, 2018, BOE Smart Retail purchased 3,582,490 SES-imagotag shares on the market at a unit price of 30 euros.

At the closing of the offer, the initia-tor holds 10,789,186 SES-imagotag shares, representing as many voting rights, or 79.94% of the capital and voting rights of this Company.

GROSS FIXED ASSETS IN €K OPENING INCREASETRANSFERS

BETWEEN LINE ITEMSDECREASE CLOSING

GOODWILL 20,664 -8,025 12,639

RESEARCH & DEVELOPMENT 26,063 26,063

CONCESSIONS, PATENTS & SIMILAR RIGHTS 11,427 39 11,203 22,670

INTANGIBLE FIXED ASSETS IN PROGRESS 6,960 3,719 -3,178 7,501

TOTAL 65,114 3,758 0 0 68,873


LINE ITEMSDECREASE CLOSING

BUILDINGS AND IMPROVEMENTS 1,098 117 1,214

MACHINERY, EQUIPMENT, AND TOOLS 2,537 75 2,612

OTHER TANGIBLE FIXED ASSETS 1,306 447 1,753

TOTAL 4,941 639 0 0 5,580

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financiAL REPORT

Long-term investments and loans

Tangible fixed assets

Note 3 - Inventories

The increase in participating interests mainly corresponds to the acquisitions of PDi for €30,968 K, Findbox for €5,500 K, and Market Hub for €300 K. Given the absence of loss of value, no impairment was recorded at December 31, 2016 and December 31, 2017.

At December 31, 2017, the impairment of the technical loss corresponds to the impairment of the fair value of patents for €535 K (gross value: €8,025 K at 01/01/2004, amortized over 15 years on a straight-line basis).

The increase in inventory at December 31, 2017 is mainly due to the shift in deployments by customers from 2017 to 2018.

FINANCIAL ASSETS OPENING INCREASE DECREASE CLOSING

PARTICIPATING INTERESTS 24,977 36,777 0 61,754

RECEIVABLES DUE FROM EQUITY INTERESTS 6,390 4,248 -442 10,197

OTHER LONG-TERM INVESTMENTS AND LOANS 679 57 -40 696

TOTAL 32,047 41,082 -482 72,647

DEPRECIATION OPENING ALLOWANCE WRITE-BACK CLOSING

BUILDINGS AND IMPROVEMENTS 369 121 490

MACHINERY, EQUIPMENT, AND TOOLS 2,148 207 2,355

OTHER TANGIBLE FIXED ASSETS 739 208 947

TOTAL 3,257 536 3,792

INVENTORIES 12/31/2017 12/31/2016

INVENTORY OF RAW MATERIALS 5,472 5,644

INVENTORY OF FINISHED PRODUCTS 18,882 12,928

INVENTORY OF GOODS PURCHASED FOR RESALE 7,120 9,375

IMPAIRMENT OF INVENTORY 566 580

TOTAL 30,909 27,366

Note 2 – Amortization and depreciation

Intangible fixed assets

AMORTIZATION OPENING ALLOWANCE TRANSFEROPENING

RESTATEMENTCLOSING

RESEARCH & DEVELOPMENT 15,439 3,879 19,317

CONCESSIONS, PATENTS & SIMILAR RIGHTS 6,514 821 -2,944 4,391

TECHNICAL LOSS ALLOCATED TO PATENTS 4,011 535 2,944 7,490

TOTAL 25,964 5,234 0 0 31,198

185


Other asset impairments

Provisions for contingencies are established to take account of contingencies existing as of the closing of the accounts.

The provision for foreign exchange losses was recorded following the recognition as of December 31, 2017 of an unrea-lized foreign exchange loss mainly on receivables denominated in Mexican pesos of €1,168 K and on receivables deno-minated in other currencies for €694 K.

Other provisions for contingencies totaled €168 K and were related to labor court disputes.

NATURE OF PROVISIONS OPENING ALLOWANCE WRITE-BACK NOT USED CLOSING

INVENTORIES AND WORK IN PROGRESS 580 566 -580 566

TRADE RECEIVABLES 225 152 -242 135

TOTAL 805 718 -823 701

Provisions for contingencies and charges

NATURE OF PROVISIONS OPENING ALLOWANCE WRITE-BACK USED NOT USED CLOSING

PROVISION FOR FOREIGN EXCHANGE LOSSES 1,274 1,863 -1,274 0 1,863

OTHER PROVISIONS FOR CONTINGENCIES 322 156 -310 0 168

TOTAL 1,596 2,019 -1,584 0 2,031

Impairment of trade receivables is as follows:

Group A - any individual receivable exceeding a €2 K threshold and 90 days late is analyzed on a case-by-case basis:

• a 35% provision is established for cases of equipment recovery;

• a provision is established for re-ceivables in litigation according to the historical recovery success ratio (50%);

• a 100% provision is established for accounts receivable deemed non-recoverable.

Group B - receivables below the €2 K threshold and more than 90 days late are classified as outstanding payments:

• no provision is established for requests for additional documen-tation;

• a provision is established on any grounds related to a disagreement or dispute on a prorated basis de-termined at impairment of Group A receivables.

Inventory impairment is based on the following rule:

The average item turnover is between 0 and 6 months; for all stored items whose consolidated turnover is longer than 6 months, three categories are identified:

• category A: items with a turnover of less than 6 months and items subject to upgrading/industrial adaptation - no impairment;

• category B: items that cannot be transformed industrially having a turnover rate of between 6 months and 12 months => 50% impairment;

• category C:

- after 12 months without move-ments within the Group, 80% impairment;

- after 18 months without mo-vements within the Group, these items are transferred to a “Scrap” inventory, resulting in 100% impairment.

In addition to the above impairment rule, a reference-by-reference ana-lysis was conducted to refine the provision on the basis of initiated action plans and sales prospects.

186

financiAL REPORT

Note 4 – Receivables and payables

Receivables

RECEIVABLES GROSS AMOUNT AT 1 YEAR OVER 1 YEAR

RECEIVABLES DUE FROM EQUITY INTERESTS 10,197 10,197

LOANS AND OTHER LONG-TERM INVESTMENTS 696 696

TRADE RECEIVABLES 23,595 23,595



CURRENT ACCOUNTS AND ACCRUED INTEREST 27,246 27,246

OTHER RECEIVABLES 5,047 5,047

PREPAID EXPENSES 936 936

TOTAL 71,566 60,673 10,893

RECEIVABLES 2017 2016

RECEIVABLES DUE FROM EQUITY INTERESTS 10,197 6,390

LOANS AND OTHER LONG-TERM INVESTMENTS 696 679

TRADE RECEIVABLES 23,595 15,638



CURRENT ACCOUNTS AND ACCRUED INTEREST 27,246 7,203

OTHER RECEIVABLES 5,047 2,632

PREPAID EXPENSES 936 4,796

TOTAL 71,566 39,134

The increase in the balance of trade receivables at December 31, 2017 compared with December 2016 is mainly due to isolated payment de-lays with certain large customers without justifying a risk of non-pay-ment.

The increase in receivables from equity interests is mainly due to loans made over the period to the main subsidiaries SES-imagotag GmbH and Pervasive Displays Inc.

The increase in current accounts and accrued interest mainly relates to cash advances granted over the pe-riod to the subsidiaries SES-imagotag Inc., SES-imagotag GmbH, and SES-imagotag Deutschland GmbH.

In 2016, the amount of prepaid ex-penses was strongly impacted by the cost of sales and services in-voiced but not recognized in sales. In 2017, invoicing procedures were aligned with the revenue recogni-

tion criteria, which did not result in the recognition of prepaid ex-penses.

187


In addition, at December 31, 2017, trade payables include €12.5 million in overdue debts, compared with €2.2 million at December 31, 2016.

The amount of other debts at December 31, 2017 mainly concerns the following price supplements:

• €5,500 K for the put on the 33% tranche of the acquisition of SES-imagotag Deutschland GmbH, which was the subject of a firm and final agreement in August 2017;

• €3,282 K for the earn-out on the acquisition of PDi;

• €505 K for the acquisition price balance (retention payment) on the PDi acquisition.

Deferred income consists only of ordi-nary income related to future periods. In 2016, sales and services invoiced for installations not recognized in sales were restated in deferred income. In 2017, invoicing procedures were aligned with revenue recognition criteria for installation operations. The amount of deferred income is therefore very low as of December 31, 2017

In 2017, the Company issued its se-cond bond debt for €30 million in a private placement with institutional investors, bearing interest at 3.5% per year and maturing on December 29, 2023. The total bond debt amount is therefore €40 million.

The increase in the balance of trade payables is due to greater pur-chases by the Company at the end of 2017 compared with the previous year in order to build up the inven-tory of products to be delivered to customers in 2018, especially those who wished to shift their deploy-ment from 2017 to 2018.

Payable

PAYABLES TOTAL AMOUNT AT 1 YEAR 1 TO 5 YEARS MORE THAN 5 YEARS

LOANS 49,972 4,118 5,854 40,000

ADVANCE PAYMENTS FROM CUSTOMERS 1,610 1,610

TRADE PAYABLES 33,133 31,984 1,148

TAX AND SOCIAL SECURITY LIABILITIES

• EMPLOYEES 1,610 1,610

• SOCIAL AGENCIES 3,512 3,512

CENTRAL GOVERNMENT: SALES TAXES 1,048 1,048

OTHER TAXES AND SIMILAR CHARGES 281 281

ACCRUED CREDIT NOTES AND OTHER DEBTS 10,561 7,561 3,000

DEFERRED INCOME 148 148

TOTAL 101,874 51,871 10,003 40,000

PAYABLES 2017 2016

LOANS 49,972 22,806

ADVANCE PAYMENTS FROM CUSTOMERS 1,610 395


TAX AND SOCIAL SECURITY LIABILITIES

• EMPLOYEES 1,610 1,960

• SOCIAL AGENCIES 3,512 1,588

CENTRAL GOVERNMENT: SALES TAXES 1,048 172

OTHER TAXES AND SIMILAR CHARGES 281 308

ACCRUED CREDIT NOTES AND OTHER DEBTS 10,561 557

DEFERRED INCOME 148 6,081

TOTAL 101,874 43,465

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financiAL REPORT

Note 5 – Accrued income

Note 6 – Accrued expenses

Note 7 – Accrual accounts

Prepaid expenses amounted to €936 K, and deferred income totaled €148 K.Unrealized foreign exchange losses were €1,863 K, and unrealized foreign exchange gains were €201 K.

Note 8 – Cash

Short-term investmentsShort-term investments totaled €16 K (excluding treasury shares) at December 31, 2017. They are composed of term deposits.

Liquidity agreementUnder a liquidity agreement dated June 22, 2012, €531 K and 3,000 shares were made available to Gilbert Dupont SNC. This liquidity agreement was signed for a term of 12 months, automatically renewable, with the aim of promoting the liquidity of transactions and the regularity of quotations of the shares on the market.

Under this agreement, 10,106 treasury shares were held by SES-imagotag as of December 31, 2017, for a total of €315 K, leaving €301 K in cash available.

LONG-TERM INVESTMENTS AND LOANS - ACCRUED INTEREST 126

CUSTOMERS – ACCRUED INCOME 4,499

ACCRUED INTEREST ON CURRENT ACCOUNTS 214

ACCRUED EXPENSES Gross amount

CREDIT INSTITUTION 9

SUPPLIERS – ACCRUED EXPENSES 16,894

DEBTS – PROVISION FOR PAID LEAVE 797

STAFF – OTHER ACCRUED EXPENSES 803

SOCIAL SECURITY CONTRIBUTIONS ON PAID LEAVE 351

OTHER ACCRUED SOCIAL SECURITY CONTRIBUTIONS 2,268

CENTRAL GOVERNMENT – OTHER ACCRUED EXPENSES 281

TAXES AND SOCIAL SECURITY CONTRIBUTIONS PAYABLE 4,500

ACCRUED CREDIT NOTES 1,213

TOTAL 22,614

The amount of accrued income mainly corresponds to the invoicing of management fees within the Group for 2017.

Accrued social security contributions mainly correspond to the employer contribution relating to the distribution of bonus shares in December 2017.

189


Note 9 – Shareholders’ equity

Share capital

Allocation of stock options

As of December 31, 2017, two stock op-tion plans – the 2009 plan dated April 15, 2010 and the 2010 plan dated September 15, 2010 – expired on April 15, 2017 and September 15, 2017 respectively.

At December 31, 2017, six stock option allocation plans were therefore in progress:

Within the framework of the authorizationgranted by the Extraordinary Share-holders’ Meeting on June 10, 2009:

• the 2011 plan dated October 21,

2011, expiring on October 21, 2018.

Within the framework of the authori-zation granted by the Extraordinary Shareholders’ Meeting on March 1, 2012:

• the 2012 plan (1st wave) dated August 31, 2012, expiring on August 31, 2019;

• the 2012 plan (2nd wave) dated December 18, 2012, expiring on December 18, 2019;

• the 2013 plan dated May 28, 2013, expiring on May 28, 2020;

• the 2014 plan (1st wave) dated April 3, 2014, expiring on April 3, 2021.

Within the framework of the authori-zation granted by the Extraordinary Shareholders’ Meeting on May 21, 2014:

• the 2014 plan (2nd wave) dated October 23, 2014, expiring on October 23, 2021.

The table below shows the informa-tion relating to stock options in ef-fect as of December 31, 2017:

At December 31, 2017, the number of stock options granted, which can be subscribed for a total of 106,925 shares, represents 0.8% of the share capital and voting rights of SES-imagotag after dilution.

* net of options exercised and/or canceled

MOVEMENT OF SHARES NUMBER NOMINAL VAL. SHARE CAPITAL IN €

SHARES AT START OF PERIOD 12,077,500 2 24,155,000

SHARES ISSUED 1,306,729 2 2,613,458

SHARES AT END OF PERIOD 13,384,229 2 26,768,458

PLANS NUMBER OF NOTIFIED OPTIONS NUMBER OF REMAINING OPTIONS OUTSTANDING *

4/15/2010 14,000 -

9/15/2010 8,500 -

10/21/2011 58,500 13,500

8/31/2012 315,800 69,675

12/18/2012 19,000 4,000

6/30/2013 65,200 5,200

4/3/2014 43,000 9,350

10/23/2014 33,150 5,200

557,150 106,925

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financiAL REPORT

Bonus share allocations

Note 10 – Loans

On December 21, 2017, the Board of Directors confirmed fulfillment of the alternative conditions for bonus share plans put in place by the Board of Directors at its meetings on December 16, 2015, March 11, 2016, November 30, 2016, December 22, 2016, and March 10, 2017.

In 2017, the Company issued a second bond debt for €30 million, bearing interest at 3.5% per year and maturing on December 29, 2023.

Given the clauses in the bond debt agreement and the various lines of credit

obtained, the debt would become due in the event of a change of control as part of the capital alliance tran-saction. All the bondholders and credit institutions have already confirmed that they will not request early redemption. The maturities of

these bond debts are presented in the statement of payables in note 4 of this report.

Effect of potential dilution on the capital

Earnings per share

Issue premium

The issue premium of €67,693 K is the result of various capital increases carried out since the creation of the company. Over the period, the issue premium increased by €33,440 K, including €22,827 K related to the acquisition of PDi.

EARNINGS PER SHARE 12/31/2017 12/31/2016

EARNINGS (€K) -8,886 -2,517

WEIGHTED AVERAGE NUMBER OF SHARES 13,384,229 12,077,500


BONUS SHARES 179,517 518,531

EARNINGS PER SHARE (IN EUROS)

- BEFORE DILUTION

- AFTER DILUTION

INSTRUMENTS NUMBER EFFECT

STOCK OPTIONS 106,925 0.8%

BONUS SHARES 179,517 1.3%

TOTAL 286,442 2.1%

LOANS OPENING + - CLOSING

BOND DEBTS 10,000 30,000 40,000

OTHER LOANS FROM CREDIT INSTITUTIONS 12,806 -2,834 9,972

TOTAL 22,806 30,000 -2,834 49,972

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As of December 31, 2017, the Company recognized a tax loss of €8,879 K.

The amount of €494 K corresponds to the amount of the research tax credit recognized for 2017 for €600 K and

the recognition of the research tax credit rejected during the tax audit for €106 K (offset by a provision write-back).

Recognition and presentation of the CICE (Crédit d’impôt pour la compé-titivité et l’emploi or Tax Credit for Competitiveness and Job Creation).

The CICE is recorded at the rate of the commitment and is taken into account as corresponding compen-sation costs are incurred.

Accounting for the CICE was carried out via the option of lowering pay-roll costs.

The impact of taking into account the CICE on the financial statements is €255 K.

The purpose of the tax credit was to facilitate the Company’s continued training and recruitment efforts.

Millions of € 12/31/2017 12/31/2016

MAINLAND FRANCE 69.2 70% 67.8 70%

EXPORTS 29.4 30% 28.6 30%

TOTAL 98.6 96.4

VI. NOTES TO THE INCOME STATEMENT

Note 11 – Sales

Sales for the period break down as follows:

Note 12 – Tax on profits

Breakdown of tax on profits

Increases and reductions in future tax liabilities

LEVEL OF PROFIT (LOSS) BEFORE TAX TAX AFTER TAX

OPERATING PROFIT (LOSS) -7,846 494 -7,352


EXTRAORDINARY PROFIT (LOSS) -12 -12

TOTAL -9,380 494 -8,886

INCREASES AND REDUCTIONS IN €K AMOUNT TAXES

INCREASES

REDUCTIONS

- PROVISION NOT DEDUCTIBLE IN THE YEAR OF FUNDING 2,533 844

TOTAL 2,533 844

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financiAL REPORT

VII. ADDITIONAL INFORMATION

Note 14 – Employee headcount

The headcount at December 31, 2017 breaks down as follows:

Contingent liabilities N/A

Commitments made:

Guarantee made to Bank Steier-märkische (SES-imagotag Gmbh’s bank): €108 K.

Guarantee granted to Chongqing BOE Smart Electronics System Co., Ltd. on behalf of SES-imagotag GmbH, a wholly owned subsidiary, for USD 10 million for a period of 12 months.

Guarantee granted to Chongqing BOE Smart Electronics System Co., Ltd. on behalf of Pervasive Displays Inc., a wholly owned subsidiary, for USD 10 million for a period of 12 months.

Rent payment guarantee of €182 K (CIC).

Interest-bearing collateral account (CIC).

Rent payment guarantee of €45 K (BNP).

• an “end-of-career benefits” insu-rance contract was signed with “CIC Assurances” on September 17, 2007. The payments made to this organization are intended to cover this commitment, esti-mated at €398 K at December 31, 2017. No sums were paid in 2017. The amount of commitments related to retirement benefits not covered by the contract is estimated at €324 K;

• the method used for this esti-mate is the retrospective pro-jected credit units method.

The assumptions considered in determining this commitment are as follows:

• retirement age: 65 to 67 years;

• employer contribution rate: 46%;

• discount rate: 1.3%;

• mortality table used: INSEE 2015;

• collective bargaining agree-ment: Metallurgy.

Note 13 – Financial income and expenses

Note 15 – Commitments

Financial income totaled €3,931 K, including €2,240 K in dividends, €323 K in accrued interest on re-ceivables from equity interests and current accounts, and €1,274 K in

write-backs of provisions on foreign exchange losses.

Financial expenses amounted to €5,453 K, including €2,191 K in foreign exchange

losses on the revaluation of bank accounts in foreign currencies, €1,344 K in interest on loans, and €1,863 K in net provisions for foreign exchange losses.

EMPLOYEE CATEGORIES EMPLOYEES

MANAGERIAL STAFF 114

SUPERVISORS AND TECHNICIANS 27

WORKERS 45

APPRENTICES UNDER CONTRACT 6

TOTAL 192

LEASES (€) < 1 YEAR BETWEEN 1 AND 5 YEARS > 5 YEARS

OFFICES/WAREHOUSES 993,256 2,648,898 237,348

VEHICLES 640,515 1,366,988

TOTAL 1,633,772 4,015,886 237,348

193


Note 16 – Executive Compensation

Note 17 – Auditors’ fees

Note 18 – Degree of exposure to market risks

Note 19 – Amounts concerning related companies

The gross compensation paid to the Chairman and Chief Executive Officer for the period amounted to €462 K for his 2017 base pay and his 2016 bonus.

A contract under the Company Guarantee for Company Executives (GSC) was signed in 2012 for the benefit of the Chairman and Chief Executive Officer.

This contract includes the basic plan as well as a supplementary plan providing for compensation cove-rage over a 12-month period (former plan).

The expense recognized for the Au-ditors’ fees amounted to €252 K for

the statutory audit and €10 K for services other than certification of

the financial statements.

With regard to receivables and payables subject to exchange rate fluctuations:

Total sales in foreign currencies in financial year 2017 are insignificant.

Total purchases in foreign curren-cies in financial year 2017 amount to $39,757 K. As of December 31,

2017, outstanding debts in foreign currencies represented $12,983 K, or €10,825 K, resulting in the re-cognition of an unrealized foreign ex-change loss of €107 K and an unrea-lized foreign exchange gain of €177 K.

In financial terms, the Company is mainly exposed to currency fluc-tuations on its purchases made in

dollars (approximately 80% of the volume).

In 2017, the Company purchased term deposits to limit its foreign exchange risk.

€K AMOUNT

SALES AND OTHER INCOME 4,920

EXTERNAL EXPENSES 116

FINANCIAL INCOME 323

EQUITY INTERESTS 61,754

RECEIVABLES DUE FROM EQUITY INTERESTS 10,197

TRADE RECEIVABLES 8,714

CURRENT AND RELATED ACCOUNTS 27,210

TRADE PAYABLES -6,070

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financiAL REPORT

Note 20 – Subsidiaries and equity interests

SUBSIDIARIES ANDEQUITY INTERESTS

SHARE CAPITAL

RESERVES AND

RETAINED EARNINGS

% OFCAPITAL HELD

GROSS VALUE OF SHARES

HELD

NET VALUE OF SHARES

HELD

LOANS AND ADVANCES

GRANTED BY THE

COMPANY

DEPOSITS AND

GUARANTEES PROVIDED

BY THE COMPANY1

DIVIDENDS RECEIVED

BY THE COMPANY

TURNOVER EXCLUDING TAXES OF THE PRIOR

PERIOD

PROFIT (LOSS) FOR THE PRIOR

PERIOD

SES-IMAGOTAG MEXICO SRL. DE CV

0 -837 99 0 0 2,196 743 -140

SES-IMAGOTAG PTE LTD 29 -279 100 29 29 497 -160

SES-IMAGOTAG ITALIA SRL. 10 255 100 10 10 144 9,270 46

SES-IMAGOTAG GMBH 50 6,161 100 17,570 17,570 21,496 64,952 -1,921

SOLUTIONS DIGITALES SES-IMAGOTAG LTD

0 -689 100 0 0 1,399 217 -717

SES-IMAGOTAG INC. 7 -739 100 7 7 4,106 1,788 -1,713

SES-IMAGOTAG DEUTSCHLAND GMBH

67 -1,752 100 12,360 12,360 5,562 2,820 -1,418

PERVASIVE DISPLAYS INC 4,222 241 100 30,968 30,968 2,069 2,240 24,910 1,766

SES-IMAGOTAG DENMARK APS.

7 100 7 7 124 0 -151

SES-IMAGOTAGNETHERLANDS BV

1 100 83 0 -101

MARKET HUBTECHNOLOGIES LTD

872 522 60 800 800 255 400 -345

Data presented in thousands of euros, converted on the basis of the average rate observed for the period ended December 31, 2017. 1 Information provided in Note 15 of the report on off-balance sheet commitments.

Note 21 – Credit, liquidity, and cash flow risks

The Company does not hold any risky investments. All short-term investments consist of term deposits.

The Company obtained a new bond debt for €30,000 K maturing on December 29, 2023, bringing its total bond debt to €40,000 K. The details of this transaction are presented in note 10.

195


196

VII. General meeting 2018

Draft resolutions proposed at the combined shareholders’ meetingof June 22, 2018

Report of the Board of Directorsto the combined shareholders’ meetingof June 22, 2018

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financiAL REPORT

The Chairman reminded those present that the Meeting had been called to deliberate on the following agenda:

Ordinary resolutions:

• Approval of the financial statements for the year ending December 31, 2017

• Approval of the consolidated financial statements for the year ending December 31, 2017

• Allocation of Directors’ fees

• Net income appropriation for 2017

• Approval of the agreements referred to in sections L. 225-38 et seq. of the French Commercial Code

• Ratification of two agreements referred to in sections L. 225-38 et seq. of the French Commercial Code not already authorized by the Board of Directors

• Ratification of two agreements referred to in sections L. 225-38 et seq. of the French Commercial Code;

• Implementation of a share buyback program

• Approval of the remuneration items due or allocated for the year ending December 31, 2017 to Mr Thierry GADOU, Chief Executive Officer, pursuant to section L. 225-100 of the Commercial Code

• Approval of the principles and criteria for the determination, breakdown and allocation of the fixed, variable and exceptional items comprising the total remuneration and benefits of all types attributable to Mr Thierry GADOU, Chief Executive Officer in relation to the 2018 fiscal year pursuant to section L. 225-37-2 of the Commercial Code

Extraordinary resolutions:

• Authorization to be given to the Board of Directors to reduce the company capital in pursuance of the provisions of section L. 225-209 of the Commercial Code

• Delegation of authority to the board of directors to increase the share capital, without removal of the shareholders’ preferential subscription, by the issuance of shares and/or debt securities granting access to new shares;

• Delegation of authority to the board of directors to increase the share capital by the issuance of shares in consideration for contributions in kind within the limit of 10 % of the share capital;

• Delegation of authority to the board of directors to increase the share capital, with removal of the shareholders’ preferential subscription right, by the issuance of shares of the Company reserved for members of company saving plans;

• Delegation of authority to the board of directors to increase the share capital, with removal of the shareholders’ preferential subscription right for the benefit of Yuen-Yu Investment Co. Ltd, a subsidiary of E-ink Holdings Inc., by the issuance of 866,666 shares in a total nominal amount of 1,733,332 euros.

• Powers conferred.

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General Meeting

1. The purview of the Ordinary General Meeting

FIRST RESOLUTION

Approval of the financial statements for the financial year ending Decem-ber 31, 2017

The Shareholders’ Meeting, ruling under the quorum and majority con-ditions required for ordinary share-holders’ meetings, having reviewed the Board of Directors’ and Auditors’ reports on the financial year end-ed December 31, 2017, approved, as presented, the annual accounts pre-pared as at that date, in addition to the transactions recorded or summa-rized in these accounts and reports and which show a net income of – €8,886 K.

In accordance with the provisions of Article 223 quater of the French General Tax Code, the Shareholders’ Meeting noted that the Company had expenses or charges referred to in Articles 39-4 and 54 quater of said Code amounting to €142,386.

SECOND RESOLUTION

Approval of the consolidated finan-cial statements for the financial year ending December 31, 2017

The Shareholders’ Meeting, ruling under the quorum and majority con-ditions required for ordinary share-holders’ meetings, having reviewed the Board of Directors’ and Auditors’ reports on the consolidated accounts, approved the consolidated accounts for the financial year ended Decem-ber 31, 2017 as presented to it, in addition to the transactions recorded in these accounts and summarized in these reports.

THIRD RESOLUTION

Allocation of Directors’ fees

The Shareholders’ Meeting, ruling under the quorum and majority con-

ditions required for ordinary share-holders’ meetings, having reviewed the Board of Directors’ report, set the overall maximum annual amount of attendance fees to be allocated to the Directors for the current financial year at €50,000.

FOURTH RESOLUTION

Net Income appropriation for 2017

On the proposal of the Board of Direc-tors, the Shareholders’ Meeting, ruling under the quorum and majority con-ditions required for ordinary share-holders’ meetings, having reviewed the Board of Directors’ and Auditors’ reports on the financial year ended December 31, 2016, decided to allo-cate the income for the 2017 financial year, in the amount of -€8,886 K, as follows:

Income for the financial year -€8,886 K

Income fully allocated to retained earnings -€8,886 K

Which, added to prior retained earnings,now stands at €36,160 K

In accordance with the provisions of Article 243 of the French Gen-eral Tax Code, the Shareholders’ Meeting also stipulated that no dividends were distributed for the 2013, 2014 and 2015 financial years. In 2012, the Company paid out €5,491,011.50 in dividends.

FIFTH RESOLUTION

Approval of agreements referred to in sections L. 225-38 et seq. of the French Commercial Code

The Shareholders’ Meeting, ruling under the quorum and majority

conditions required for ordinary shareholders’ meetings, and hav-ing reviewed the Auditors’ special report on the regulated agreements and commitments referred to in Ar-ticle L. 225-38 of the French Com-mercial Code, and ruling on this report, approved, under the condi-tions set out in the last paragraph of Article L. 225-40 of the French Commercial Code, each of the agreements referred to therein.

FIRST RESOLUTION

Approval of the financial statements for the financial year ending Decem-ber 31, 2017

The Shareholders’ Meeting, ruling under the quorum and majority con-ditions required for ordinary share-holders’ meetings, having reviewed the Board of Directors’ and Auditors’ reports on the financial year end-ed December 31, 2017, approved, as presented, the annual accounts pre-pared as at that date, in addition to the transactions recorded or summa-rized in these accounts and reports and which show a net income of – €8,886 K.

In accordance with the provisions of Article 223 quater of the French General Tax Code, the Shareholders’ Meeting noted that the Company had expenses or charges referred to in Articles 39-4 and 54 quater of said Code amounting to €142,386.

SECOND RESOLUTION

Approval of the consolidated finan-cial statements for the financial year ending December 31, 2017

The Shareholders’ Meeting, ruling under the quorum and majority con-ditions required for ordinary share-holders’ meetings, having reviewed the Board of Directors’ and Auditors’ reports on the consolidated accounts,

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approved the consolidated accounts for the financial year ended Decem-ber 31, 2017 as presented to it, in addition to the transactions recorded in these accounts and summarized in these reports.

THIRD RESOLUTION

Allocation of Directors’ fees

The Shareholders’ Meeting, ruling under the quorum and majority con-ditions required for ordinary share-holders’ meetings, having reviewed the Board of Directors’ report, set the overall maximum annual amount of attendance fees to be allocated to the Directors for the current financial year at €50,000.

FOURTH RESOLUTION

Net Income appropriation for 2017

On the proposal of the Board of Direc-tors, the Shareholders’ Meeting, ruling under the quorum and majority con-

ditions required for ordinary share-holders’ meetings, having reviewed the Board of Directors’ and Auditors’ reports on the financial year ended December 31, 2016, decided to allo-cate the income for the 2017 financial year, in the amount of -€8,886 K, as follows:

Income for the financial year -€8,886 K

Income fully allocated to retained earnings -€8,886 K

Which, added to prior retained earnings,now stands at €36,160 K

In accordance with the provisions of Article 243 of the French Gen-eral Tax Code, the Shareholders’ Meeting also stipulated that no dividends were distributed for the 2013, 2014 and 2015 financial years. In 2012, the Company paid out €5,491,011.50 in dividends.

FIFTH RESOLUTION

Approval of agreements referred to in sections L. 225-38 et seq. of the French Commercial Code

The Shareholders’ Meeting, ruling under the quorum and majority conditions required for ordinary shareholders’ meetings, and hav-ing reviewed the Auditors’ special report on the regulated agreements and commitments referred to in Ar-ticle L. 225-38 of the French Com-mercial Code, and ruling on this report, approved, under the condi-tions set out in the last paragraph of Article L. 225-40 of the French Commercial Code, each of the agreements referred to therein.

ELEVENTH RESOLUTION

Authorization to be given to the Board of Directors to reduce the company capital in pursuance of the provisions of section L. 225-209 of the Commercial Code

The Shareholders’ Meeting, ruling under the quorum and majority con-ditions required for extraordinary shareholders’ meetings and in ac-cordance with the provisions of Ar-ticle L. 225-209 of the French Com-mercial Code, having reviewed the Board of Directors’ report and the Auditors’ special report, decided to authorize the Board of Directors, with the option to sub-delegate un-der the conditions set out by law, to reduce the share capital, on one or more occasions and at such times as it deems fit, by canceling shares

that the Company might purchase within the context of implementing a share buyback program decided on by the Company.

As required by law, the capital reduc-tion may be carried out on no more than 10% of the share capital during each twenty-four month-period.

The Shareholders’ Meeting granted the most extensive powers to the Board of Directors, with the option to sub-delegate under the condi-tions set out by law, to determine the terms and conditions of share cancellations, to apply the differ-ence between the book vale of the canceled shares and their nominal value against any reserve or premi-um accounts, to make the amend-ments to the articles of incorpora-tion arising from this authorization

and to complete all necessary for-malities.

This authorization is given for a maximum of eighteen months start-ing on the date of this Meeting.

This authorization replaces that giv-en by the Combined Shareholders’ Meeting of June 23, 2017, which be-comes null and void for the remain-der of its duration.

TWELFTH RESOLUTION

Delegation of authority to the board of directors to increase the share capital, without removal of the shareholders’ preferential subscription, by the issuance of shares and/or debt securities granting access to new shares

2. The purview of the Extraordinary General Meeting

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General Meeting

The general meeting, voting in accor-dance with the quorum and majority requirements for extraordinary gen-eral meetings, after having reviewed (i) the board of directors’ report and (ii) the statutory auditors’ special report, and in accordance with the provisions of the French Commer-cial Code and in particular with its Articles L. 225-129 et seq., L. 225-132, L. 225-133 and L. 228-92:

1. Delegates to the board of direc-tors, with the right to sub-dele-gate under conditions set by law and regulations, its authority to proceed, in one or more install-ments, in the proportion and at the time it will deem fit, either in France and/or abroad, in euros, without removal of the share-holders’ preferential subscription, to the issuance of shares of the Company and/or debt securities granting access to new shares, subscription of which may be either carried out in cash, or by set-off with certain, due and payable receivables, or, entirely or partially, through the incorpo-ration of reserves, profits or pre-miums;

2. Decides that the total nominal amount of the share capital in-creases which may be carried out immediately and/or in the future pursuant to this delegation shall not exceed a maximum amount of thirteen million euros (€ 13,000,000), it being specified that the nominal amount of the share capital increases carried out under this resolution as well as the 13th and 14th resolutions submitted to this general meet-ing shall be deducted from this ceiling. This ceiling shall be in-creased, as the case may be, by the nominal value of shares to be issued, in accordance with legal and regulatory provisions and, as the case may be, any appli-cable contractual provisions, to preserve the rights of holders of securities or any other rights granting access to the Company’s share capital;

3. Decides that the overall nominal maximum amount of the issu-ances of debt securities giving access to new shares which may be carried out on the basis of this delegation shall not exceed one hundred million euros (€ 100,000,000);

4. Acknowledges that under this delegation, the shareholders shall waive their preferential subscrip-tion right to the new Company’s shares upon which debt securi-ties that may be issued pursuant to this delegation will give right immediately or in the future;

5. Decides that the shareholders shall be entitled to exercise, un-der conditions set by law, their preferential subscription right on a non-reducible basis to subscribe for new shares and/or debt securities granting access to new shares which issuance shall be decided by the board of di-rectors pursuant to this dele-gation of authority. The board of directors shall have the right to grant to shareholders the right to subscribe on a reducible basis to a number of new shares or debt securities which may be above the entitlement given by their preferential subscription right, in proportion to the subscription rights they hold and within the limits of their requests. If sub-scriptions made on a non-reduc-ible basis and, as the case may be, reducible basis, do not ab-sorb all new issued shares and/or debt securities, the board of di-rectors shall have the right, in the order it will determine, either to limit, according to law, the issu-ance to the amount of subscrip-tions received, provided that it reaches at least three-fourths of the issuance decided upon, or to freely allocate all or part of the unsubscribed securities among any persons at its discretion, or to offer them in the same way to the public, the board of directors may use all of the aforementioned rights or only some of them;

6. Specifies, in addition, that the board of directors, with right to sub-delegate under conditions set by law and regulations, may in particular:

i. Decide and set the character-istics of the shares and debt securities issuances and, in particular, their issuance price (with or without premium), the terms of their subscription and their entitlement date;

ii. More generally, set the charac-teristics of all debt securities and, in particular, the condi-tions and terms for the allot-ment of shares, the duration of loans that may be issued in form of bonds, subordinat-ed or non-subordinated, the issuance currency, the terms for repayment of principal, with or without premium, the amortization conditions and terms and, as the case may be, exchange or early redemp-tion conditions and terms, the interest rates, either fixed or variable, and the payment date; the compensation may include a variable part based on the Company’s activity and results and a deferred payment in the absence of distributable profits;

iii. Decide to use the shares ac-quired under a shares repur-chase program authorized by the shareholders to allocate them as a result of the issu-ance of debt securities issued pursuant to this delegation;

iv. Take all measures to preserve the right of holders of secu-rities issued or any other rights granting access to the Company’s share capital re-quired under legal and regula-tory provisions and applicable contractual provisions;

v. Suspend if appropriate the ex-ercise of the rights attached to these securities for a fixed period determined in accor-

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financiAL REPORT

dance with legal and regula-tory provisions and applicable contractual provisions;

vi. Acknowledge the completion of all share capital increases and debt securities issuanc-es, amend the by-laws ac-cordingly, charge the costs of the share capital increase on the premium amount arising thereon and, if it deems fit, deduct from the share capital increases amount the neces-sary sums to increase the le-gal reserve to one tenth of the new share capital;

vii.Take all measures and carry out all required formalities for the admission to trading on a regulated market of the secu-rities created thereon.

7. Decides that the board of direc-tors may not, without the pri-or authorization of the general meeting, make use of this del-egation of authority as from the filing by a third party of a public tender offer on the Company’s securities, and so, until the clos-ing of the offering period;

8. Decides that this delegation is granted for a period of twenty-six (26) months as from the date of this general meeting.

THIRTEENTH RESOLUTION

Delegation of authority to the board of directors to increase the share capital by the issuance of shares in consideration for contributions in kind within the limit of 10 % of the share capital

The general meeting, voting in accor-dance with the quorum and majority requirements for extraordinary gen-eral meetings, after having reviewed (i) the board of directors’ report and (ii) the statutory auditors’ special report, and in accordance with the provisions of the French Commer-cial Code and in particular its Arti-cles L. 225-129 et seq., L. 225-147 and L. 228-92:

1. Delegates to the board of direc-tors, with right to sub-delegate under conditions set by law and regulations, the authority to de-cide to proceed, on the basis of the contribution auditor’s report, in one or more installments, in the proportion and at the time it will deem fit, either in France and/or abroad, in euros, by the issuance of Company’s shares, in consideration for contributions in kind granted to the Company and consisting of equity securities or securities granting access to the share capital, whenever the pro-visions of Article L. 225-148 of the French Commercial Code do not apply;

2. Decides that the total nominal amount of the share capital in-creases which may be carried out under this delegation shall not ex-ceed a maximum amount of two million six hundred thousand eu-ros (€ 2,600,000), it being spec-ified that the nominal amount of any share capital increase carried out under this resolution will be charged on the overall nominal ceiling for share capital increas-es set in paragraph 2 of the 12th resolution submitted to this gen-eral meeting. This ceiling shall be increased, as the case may be, by the nominal value of shares to be issued, in accordance with legal and regulatory provisions and, as the case may be, any applicable contractual provisions, to pre-serve the right of holders of secu-rities or any other rights granting access to the Company’s share capital;

3. Decides to cancel the share-holders’ preferential subscrip-tion right to shares to be issued pursuant to this delegation, for the benefit of holders of equity securities or securities that are the subject matter of such contri-butions in kind;

4. Specifies, in addition, that the board of directors, with the right to sub-delegate under conditions set by law and regulations, may in particular:

i. Determine, on the basis of the contribution auditor’s report, the valuation of the contributions and the potential granting of particu-lar benefits;

ii. Set the characteristics of shares issuances and, in particular, their issuance price (with or without premium), the terms of their sub-scription and their entitlement date;

iii. On its own initiative, deduct the costs of the share capital in-crease from the premium amount arising from these contributions and deduct from this amount the necessary sums to increase the statutory reserve to one tenth of the new share capital after each share capital increase;

iv. Take all measures to preserve the right of holders of securities is-sued or any other rights granting access to the Company’s share capital required under legal and regulatory provisions and appli-cable contractual provisions;

v. Acknowledge the completion of any share capital increase, amend the by-laws accordingly, charge the issuance costs on the premium if it deems fit and also increase the legal reserve to one tenth of the new share capital as well as carry out all formalities and all declarations before any organization and do all that is necessary for the completion of these contributions;

vi. Take all measures and carry out all required formalities for the ad-mission to trading on a regulated market of the securities created thereunder.

5. Decides that the board of direc-tors may not, without the pri-or authorization of the general meeting, make use of this del-egation of authority as from the filing by a third party of a public tender offer on the Company’s se-curities, and so, until the closing of the offering period;

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General Meeting

6. Decides that this delegation is granted for a period of twenty-six (26) months as from the date of this general meeting.

FOURTEENTH RESOLUTION

Delegation of authority to the board of directors to increase the share capital, with removal of the shareholders’ preferential subscription right, by the issuance of shares of the Company reserved for members of company saving plans

The general meeting, voting in accor-dance with the quorum and majority requirements for extraordinary general meetings, after having reviewed (i) the board of directors’ report and (ii) the statutory auditors’ special report, and in accordance with the provisions of Articles L. 225-129-2, L. 225-129-6, L. 225-138 and L. 225-138-1 of the French Commercial Code and with those of Articles L. 3332-18 et seq. of the French Labour Code:

1. Delegates to the board of direc-tors, with the right to sub-dele-gate under the conditions set by law and regulations, its authori-ty, to proceed in one or more in-stalments, on its sole decisions, in the proportion and at the time it will deem fit, either in France or abroad, to the issuance of new shares, the issuance being reserved for employees, former employees and eligible corporate officers, of the Company and/or companies related to the Compa-ny within the meaning of the pro-visions of Article L. 225-180 of the French Commercial Code and Article L. 3344-1 of the French Labour Code being member of a company savings plan;

2. Cancels, in favour of so-called members, the shareholders’ pref-erential subscription right to the shares that may be issued pursu-ant to this delegation and waive any and all rights to free shares that may be allocated pursuant to this resolution;

3. Decides that the nominal amount of the share capital increase that may be carried out, pursuant to this delegation of authority shall not exceed seven hundred fifty thousand euros (€ 750,000), it being specified (i) that the nom-inal amount of any share capital increase that may be carried out under this resolution submitted to this general meeting will be de-ducted from this maximum, and (ii) that the nominal amount of any share capital increase com-pleted under this delegation will be charged on the overall nominal ceiling for share capital increases set in paragraph 2 of the 12th res-olution submitted to this general meeting. This ceiling shall be in-creased, as the case may be, by the nominal value of shares to be issued, in accordance with legal and regulatory provisions and, as the case may be, any applicable contractual provisions, to pre-serve the right of holders of secu-rities or any other rights granting access to the Company’s share capital;

4. Decides that the price of the se-curities issued pursuant to this delegation shall be determined under the conditions set out in the provisions of Article L. 3332-19 of the French Labour Code, it being specified that the maximum discount of the average opening prices of SES-Imagotag’s share quoted during the twenty (20) trading days preceding the deci-sion setting the opening date for the subscriptions shall thus not exceed 20%. Nevertheless, in im-plementing this delegation, the board of directors may reduce the discount on a case by case ba-sis, in particular due to tax, social or accounting constraints applicable in certain countries in which the group companies participating in the share capital transactions are located. The board of direc-tors may also decide to freely allocate shares to subscribers of new shares, as a substitute of the discount and/or in respect of the contribution (abondement);

5. Decides that the board of direc-tors shall have full powers, with the right to sub-delegate under the conditions set by law and regula-tions, to implement this delega-tion, within the limits and under the conditions specified above, in particular to:

i. Establish the list of companies whose employees, former em-ployees and eligible corporate officers, may benefit from the issuance, set the conditions that must be met by the bene-ficiaries to subscribe, directly or through the intermediary of a common investment fund, to shares that will be issued pursuant to this delegation of authority;

ii. Set the amounts of these is-suances and set the subscrip-tion prices and dates, terms of each issuance and conditions of subscription, of release, and of delivery of the shares issued pursuant to this del-egation of authority, as well as the date, even retroactive, from which the new shares will enjoy rights;

iii. Decide, according to Article L. 3332-21 of the French Labour Code, to freely allocate shares to be issued or existing, in respect of the contribution (abondement) and/or, as the case may be, of the discount, provided that their monetary counter-value, evaluated at the subscription price, does not have the effect of exceeding the limits set forth in article L. 3332-11 of the French Labour Code;

iv. Set the period for subscribers to pay for their securities;

v. Acknowledge or make ac-knowledgment of the com-pletion of the share capital increase for the amount of the shares that will be effectively subscribed;

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financiAL REPORT

vi. On its own initiative, deduct the costs of the share capital increase from the premium amount arising thereon and deduct from this amount the necessary sums to increase the statutory reserve to one tenth of the new share capital after each share capital in-crease;

vii.More generally, take all mea-sures and carry out all formal-ities necessary to the issuance and the quotation of the shares issued and consequently to the share capital increase amend the bylaws accordingly pursuant to this delegation.

6. Decides that the board of direc-tors may not, without the pri-or authorization of the general meeting, make use of this del-egation of authority as from the filing by a third party of a public tender offer on the Company’s se-curities, and so, until the closing of the offering period;

7. Decides that this delegation, which terminate and supersede the one granted by the general meeting of 23 June 2017, pur-suant to its twenty-second reso-lution, is granted for a period of twenty-six (26) months as from the date of this general meeting.

FIFTEENTH RESOLUTION

Delegation of authority to the board of directors to increase the share capital, with removal of the shareholders’ preferential subscription right for the benefit of Yuen-Yu Investment Co. Ltd, a subsidiaryof E Ink Holdings Inc., by the issuance of 866,666shares in a total nominal amount of 1,733,332 euros

The general meeting, voting in accor-dance with the quorum and majority requirements for extraordinary gen-eral meetings, after having reviewed (i) the board of directors’ report and (ii) the statutory auditors’ special

report, and in accordance with the provisions of the French Commer-cial Code and in particular with its Articles L. 225-127 to L. 225-129-6 and L. 225-138:

1. Delegates to the board of direc-tors, with the right to sub-dele-gate under conditions set by law and the bylaws, its authority to proceed, on its own deliberations, in the proportion and at the time it will deem fit, to the issuance of ordinary shares of the Company, subscription of which shall be carried out in cash;

2. Decides that the total nominal amount of this share capital in-crease shall be equal to one mil-lion seven hundred thirty three thousand three hundred thirty two euros (1,733,332 euros) by the issuance of a number of eight hundred sixty six thousand six hundred sixty six (866,666) new shares with a par value of two (2) euros each and that this amount is independent of the overall nomi-nal ceiling of thirteen million eu-ros set in the 12th resolution sub-mitted to this general meeting;

3. Decides that the new shares with a par value of two (2) euros shall be issued at a unit price of thirty euros (30 euros), i.e. with an is-suance premium of twenty eight euros (28 euros) per share;

4. Decides to cancel the share-holders’ preferential subscrip-tion and reserve this entire share capital increase to Yuen-Yu In-vestment Co. Ltd, a company or-ganized under Taiwan laws with its registered office at 15F, No.51, Sec.2, Chung Ching South Rd, Taipei, Taiwan, registered under number 70565389;

5. Grants all powers to the board of directors, with the right to sub-del-egate under conditions set by law and bylaws, to implement this del-egation, and in particular to:

i. Decide the share capital in-crease and, as the case may be, postpone it;

ii. Set, within the abovemen-tioned limits, the characteris-tics, the terms and conditions of the issuance, and in partic-ular the dividend entitlement date of the shares, as well as the terms of their payment;

iii. Charge, as the case may be, the costs of the share capi-tal increase on the premium amount arising thereon and deduct from this amount the necessary sums to increase the legal reserve;

iv. Receive and acknowledge the subscription of the new shares and acknowledge the conse-quent completion of the share capital increase and amend the by-laws accordingly;

v. More generally, enter into any agreement, take all measures and carry out all necessary formalities for the issuance, for admission to trading and for the financial servicing of shares issued pursuant to this delegation, as well as the ex-ercise of the rights attached thereto.

This delegation is granted for a pe-riod of six (6) months as from the date of this general meeting.

SIXTEENTH RESOLUTION

Powers conferred

The Shareholders’ Meeting confers full powers on the bearer of an orig-inal, a copy or an extract of these minutes in order to carry out any fil-ing, publication, and other formali-ties required by law.

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3. Report of the Board of Directors to the combined

shareholders’ meeting of June 22, 2018

Dear Shareholders,

We have called a Combined Share-holders’ Meeting to deliberate on the following agenda items:

Ordinary resolutions:

• approval of the financial statements for the year ending December 31, 2017;

• approval of the consolidated finan-cial statements for the year ending December 31, 2017;

• allocation of Directors’ fees ;

• net income appropriation for 2017;

• approval of agreements referred to in sections L. 225-38 et seq of the Commercial Code;

• ratification of two agreements re-ferred to in sections L. 225-38 et seq. of the French Commercial Code not already authorized by the Board of Directors;

• ratification of two agreements re-ferred to in sections L. 225-38 et seq of the Commercial Code;

• implementation of a share buyback program ;

• approval of the remuneration items due or allocated for the year ending December 31, 2017 to Mr Thierry GADOU, Chief Executive Officer, pursuant to section L. 225-100 of the Commercial Code;

• approval of the principles and cri-teria for the determination, break-down and allocation of the fixed, variable and exceptional items com-prising the total remuneration and benefits of all types attributable to Mr Thierry GADOU, Chief Executive Officer in relation to the 2018 fiscal year pursuant to section L. 225-37-2 of the Commercial Code.

Extraordinary resolutions:

• authorization to be given to the Board of Directors to reduce the company capital in pursuance of the provisions of section L. 225-209 of the Commercial Code

• delegation of authority to the board of directors to increase the share capital, without removal of the shareholders’ preferential sub-scription, by the issuance of shares and/or debt securities granting access to new shares;

• delegation of authority to the board of directors to increase the share capital by the issuance of shares in consideration for contri-butions in kind within the limit of 10 % of the share capital;

• delegation of authority to the board of directors to increase the share capital, with removal of the shareholders’ preferential sub-scription right, by the issuance of shares of the Company reserved for members of company saving plans;

• delegation of authority to the board of directors to increase the share capital, with removal of the share-holders’ preferential subscription right for the benefit of Yuen-Yu In-vestment Co. Ltd, a subsidiary of E-ink Holdings Inc., by the issuance of 866,666 shares in a total nominal amount of 1,733,332 euros;

• powers conferred.

The purpose of this report is to set out the reasons for the resolutions to be submitted for your approval during the Combined Shareholders’ Meeting.

1 – Approval of the annual and con-solidated financial statements for the financial year ended December 31, 2017, Allocation of Directors’ fees,

Allocation of the Company’s result, and Approval of the agreements referred to in Articles L. 225-38 et seq. of the French commercial code (Resolutions 1 to 7)

Resolutions 1 and 2 proposed to you pertain to the approval of the Compa-ny’s individual annual financial state-ments and the consolidated financial statements. Comments on these fi-nancial statements appear in the an-nual financial report made available to you on the Company’s website (http:// www.ses-imagotag.com).

The individual financial statements for the financial year show net income of -€8.886 K.

We propose that you approve these financial statements.

In Resolution 4, the Board of Direc-tors proposes allocating the result for financial year 2017 amounting to -€8.886 K as follows:

• Result for the financial year -8 886 K€

• Result fully allocated to retained earnings -8 886 K€

• Which, added to priorretained earnings,now stands at 36 160 K€

In accordance with the provisions of Article 243 of the French General Tax Code, the Shareholders’ Meeting also stipulated that no dividends were distributed for the 2013, 2014, 2015 and 2016 financial years. In 2012, the Company paid out €5,491,011.50 in dividends.

Resolution 5 pertains to “regulated” agreements approved by your Board (Article L. 225-38 of the French com-mercial code). These agreements resulted in the preparation by your Statutory Auditors of the special re-

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port, which also lists the agreements ap-proved in prior financial years that con-tinued to be performed during financial year 2017. After hearing this report, you will be asked to approve it as well as the agreements referred to therein.

Resolution 6 pertains to the ratifi-cation of two so-called “regulated” agreements (Article L. 225-38 of the French commercial code) not sub-ject to the procedure for prior autho-rization by your Board, namely a credit facility agreement and a services agreement signed on July 1, 2017, with MARKETHUB TECHNOLOGIES Limited, a British subsidiary of the Company. These agreements led to the preparation of the special report by your Statutory Auditors. After re-viewing this report, you will be asked to ratify and approve the terms of said agreements to protect against their being voided.

Resolution 7 pertains to the ratifi-cation of two so-called “regulated” agreements approved by your Board (Article L. 225-38 of the French commercial code) referring to guar-antees granted by the Company to BOE Optical Science and Technology Co, Ltd and Chongquing BOE Smart Electronics System Co, Ltd (after substitution) and ruling on this re-port decide to ratify and approve the terms of said agreements to protect against their being voided.

In Resolution 3, we propose setting the maximum annual overall amount of Directors’ attendance fees for the current financial year to fifty thou-sand euros (€50,000). In accor-dance with the provisions of Article L. 225-45 of the French commercial code, this is an overall amount, and it will be up to the Board of Directors to decide on its distribution.

2 – Authorization to be given to the Board of Directors to put in place a share buy back program and to re-duce the share capital in accordance with the provisions of Article L. 225-209 of the French commercial code (Resolutions 8, 11)

The objective of Resolution 8 is to renew the authorization of the

Board of Directors to buy shares in the Company. The Company must be able to trade in its own shares at any time. We therefore propose that you authorize the Board to again buy a number of shares in the Company within the limits set by your Share-holders’ Meeting and in accordance with the law.

Information about the use of the program previously authorized by the Shareholders’ Meeting of June 23, 2017, is available to you in the management report.

The buyback program we propose that you authorize during the Com-bined Shareholders’ Meeting of June 22, 2018, would have the following characteristics:

• Securities concerned: shares

• maximum authorized capital buy-back percentage: 10%, or 5% for shares acquired by the Company in order to retain them, deliver them for payment, or exchange them as part of a merger, de-merger, or transfer

• maximum overall amount of the program: ten (10) million euros

• maximum unit purchase price: 150% of the last market price of the Company’s shares on the day when the Board of Directors uses its authorization

• duration: 18 months

• goal of the program: to enable the Company to take opportuni-ties to trade in its own shares as provided for by law, particularly for the following purposes:

- stimulating the secondary market or share liquidity through an in-vestment services provider, acting independently, as part of a li-quidity contract compliant with the code of ethics recognized by the AMF;

- distributing all or some of the acquired shares to employees and/or the Company’s corporate

officers under the conditions and procedures described in the law, especially in terms of their par-ticipation in the Company’s ex-pansion, distributing stock op-tions, distributing free shares, or selling shares for their own profit or under the conditions described in Article L. 3332-1 et seq. of the French labor code;

- remitting shares while exercising the rights attached to securities with conversion, exercise, re-fund, or exchange rights, or any other Company share allocation mechanism within the bounds of stock market regulations;

- canceling shares purchased through capital reduction under the con-ditions described in the French commercial code, as long as the Resolution 10 is approved;

- keeping all or some of the ac-quired shares for later use in ex-change or as payment as part of a future external growth opera-tion or any other operation that may be authorized by current regulations.

The Company would be able to use this resolution and pursue its share buyback program if Company shares are offered publicly in line with the stipulations of Article 232-17 of the AMF General Regulation (or any other legal, regulatory, or other provisions that apply or may apply in the future).

It is important for the Company to be able to continue, even in an of-fer period, to meet its commitments towards the holders of instruments representing debt securities granting access to the capital (3rd objective).

The acquisition, disposal, transfer, or exchange of these shares may be un-dertaken and paid for by any means, particularly as part of a liquidity con-tract entered into by the Company with an investment service provider, subject to the regulations in force, in-cluding over the counter and by block of shares, through the use of deriva-tives and the establishment of op-tion-based strategies (purchase and

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sale of call and put options and all combinations thereof in accordance with the applicable regulations), and at such times as the Board of Direc-tors deems fit.

In order to ensure the execution of this authorization, it will be proposed to confer all powers to the Board of Directors to:




• make all declarations and fulfill all formalities necessary with the AMF that may relate to the buy-back program described above; and

• to fulfill any other formalities or enter into any other agreements to this end and, more generally, do whatever is necessary to im-plement the buyback program described above.

This authorization would replace the authorization given by the Combined Shareholders’ Meeting of June 23, 2017, which would then become null and void for the remainder of its du-

ration; this authorization was granted for a period of 18 months.

Under the terms of Resolution 11 pro-posed to you, you are asked to renew the authorization for the Board of Directors, granted to it on June 23, 2017, for 18 months, to potentially cancel the Company shares acquired under the share buyback program, up to a limit of 10% per period of 24 months.

This cancellation of shares would en-tail a reduction of the share capital and, accordingly, a modification of the provisions of the articles of asso-ciation, which involves submission of this resolution under the conditions of quorum and majority of an extraor-dinary shareholders’ meeting.

This authorization would also replace the authorization given by the Com-bined Shareholders’ Meeting of June 23, 2017, which would then become null and void for the remainder of its duration. Note that, to date, there has been no cancellation of shares.

3 – Compensation of Thierry Gadou in his capacity as Chairman and CEO (Resolutions 9 to 10)

• Approval of Mr. Gadou’s compen-sation policy for 2017 as Chairman and Chief Executive Officer in accor-dance with Article L. 225-100 of the French Commercial Code

In accordance with the new legisla-tive provisions n° 2016-1691 dated December 9, 2016, named “Loi Sapin II”, and according to article L.225-100 of the French Code of Commerce, the compensation policy granted to Mr. Thierry Gadou for the 2017 fiscal year is submitted to the approval of the shareholders meeting.

The Shareholders’ Meeting, de-liberating in accordance with the quorum and majority requirements for Ordinary General Meetings and having reviewed the Board of Di-rectors’ report on Mr. Gadou’s com-pensation policy as Company Chairman and Chief Executive Officer, prepared pursuant to Article L. 225-37-2 of the French Commercial Code, approves the principles and criteria for deter-mining, distributing and allocating the base, variable and exceptional components of total compensation as well as all benefits in kind attributable to Mr. Gadou as Chairman and Chief Executive Officer, by virtue of his mandate, as presented in this report.

Under the terms of Resolution 9 pro-posed to you, and after reading the Compensation committee recom-mendation, you are asked to ap-prove the CEO compensation as described in the Governance report, set according to article 225-37 of the French Code of Commerce.

IN €2017

current year2016

previous year

Fixed Compensation 320,000 300,000

Annual variable compensation 160,000 150,000

Variable compensation cashed out on the current year regarding previous year 142,000 130,000


Variable compensation booked for current fiscal year 50,000 142,000


Exceptional bonus 50,000 25,000

Benefits in kind 39,629 34,783

Director attendance fees NA NA

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financiAL REPORT

• Approval of Mr. Gadou’s compen-sation policy for 2018 as Chairman and Chief Executive Officer in ac-cordance with Article L. 225-37-2 of the French Commercial Code

In accordance with the new legisla-tive provisions n° 2016-1691 dated December 9, 2016, named “Loi Sapin II”, and according to article L.225-100 of the French Code of Commerce, the compensation policy granted to Mr Thierry Gadou for the 2018 fiscal year is submitted to the approval of the shareholders meeting.

The Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for Ordinary General Meetings and having reviewed the Board of Directors’ report on Mr. Gadou’s compensation policy as Com-pany Chairman and Chief Executive Officer, prepared pursuant to Article L. 225-37-2 of the French Commercial Code, approves the principles and cri-teria for determining, distributing and allocating the base, variable and excep-tional components of total compen-sation as well as all benefits in kind attributable to Mr. Gadou as Chairman

and Chief Executive Officer, by virtue of his mandate, as presented in this report.

Under the terms of Resolution 10 proposed to you, and after read-ing the Compensation committee recommendation, you are asked to approve the CEO compensation as described in the Governance report, set according to article 225-37 of the French Code of Commerce.

Components of compensation Amount subjectto vote explanation

Fixed compensation 320,000 €

Annual variable compensation160,000 €maximum

Variable part split in two parts one qualitative (31%) and one quantitative (69%)

Deferred variable compensation NA No deferred variable compensation is provided for

Multi year variable compensation NA No multi-year variable compensation is provided for

Exceptional bonus -

On proposal of the Compensation Committee on March 10 2017, the Board decided to allow the possibility of paying to the Chairman, as appropriate, an exceptional bonus relating to the company's creation of value

Bonus shares -

Directors attendance fees NA no attendance fees

Benefits of any kind (value) no changecompany car and unemployement insurance for Directors

Components of compensation underthe procedure of regulated agreements

Amount subject to vote explanation

Severance pay in the event of cessationof duties of CEO following a change in control

In accordance with the procedure relating to regulated agreements, the shareholders approved the severance pay on march 1st 2012 for a period of 5 years - the renewal of this arrangement was authorized by the Board on March 10, 2017.

Non compete agreementIn accordance with the procedure relating to regulated agreements, the shareholders approved the severance pay on march 1st 2012

Supplementary pension systemNo supplementary pension system has been subscribed.

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4 – Authorization to be given to the Board of Directors to increase the share capital by maintaining pref-erential subscription rights, or to remunerate contributions in kind to the Company (resolutions 12, 13).

Under the terms of Resolution 12, 13 we propose, in accordance with the provisions of Articles L225-132, L 225-133, L225-129, and L 228-192 of the French Commercial Code, to authorize the Board of Directors, with the option to sub-delegate under the conditions set out by law, to directors to have authority to issue new shares, on one or more occasions and at such times as it deems fit, by issuing new shares:

• by maintaining the preferential subscription right of the share-holders, in a swift manner when it deems appropriate for the Com-pany. The main characteristics of this delegation are as follows:

- maximum nominal amount of capital increase: € 13,000,000;

- maximum amount of debt secu-rities: €100,000,000;

- duration: 26 months.

• in order to remunerate contribu-tions in kind to the Company, of shares or equity securities in an-other entity. This delegation aims at facilitating the ability of the Company, if and when it deems appropriate, to conduct external acquisitions including a stock-based payment, in a swift and competitive manner.

- The main characteristics of this delegation are as follows:

- Maximum nominal

5 - Authorization to be given to the Board of Directors to increase the share capital with withdrawal of pref-erential subscription rights, by issu-ance of shares reserved to the mem-bers of a company saving plan (plan d’épargne d’entreprise) Resolution 14

This delegation is a mandatory re-quirement under French laws each time when a resolution aiming at approving o authorizing a capital in-crease in cash is submitted to the ap-proval of the shareholders’ meeting.

The main characteristics of this del-egation are as follows:

• maximum nominal amount of capital increase: € 750,000;

• duration: 26 months;

• price: to be determined by the Board of directors in accordance with applicable laws and regulations.

However, the Board recommends the shareholders not to approve this last delegation.

6 – 15th resolution: Delegation of au-thority to the Board of directors, to increase the share capital, with re-moval of the shareholders’ preferen-tial subscription right for the benefit of Yuen-Yu Investment Co. Ltd, sub-sidiary of E-Ink Holdings Inc., by the issuance of 866,666 shares in a total nominal amount of 1,733,332 euros

In a press release dated 8 May 2018, the Company announced a project of strategic partnership with the E-Ink group (“E-Ink”), whereupon E-ink would take a stake in the Company’s share capital, through its 100% sub-sidiary Yuen-Yu Investment Co. Ltd.

The company Yuen-Yu Investment Co. Ltd would thus subscribe to a reserved share capital increase of 25,999,980 euros, at a subscription price of thirty (30) euros per share, corresponding to 866,666 ordinary shares (the “Re-served Capital Increase”).

The New shares with a par value of two (2) euros would be issued at a unit price of thirty (30) euros, i.e. with an issuance premium of twenty-eight (28) euros per share. This price pres-ents a premium of 1.2% compared to the average stock price1 over the last 12 months2 which was of 29.65 euros,

a premium of 1.1% compared to the average stock price3 since the pub-lication date of the 2017 annual re-sults (2 February 2018) and of 19.8% compared to the average stock price since the publication date of the turn-over for the first quarter of 2018 (26 April 2018). Compared to the closing stock price of 7 May 2018 [D-1], the subscription price presents a premi-um of 25.5%. The choice in the cal-culation components retained for the determination of the shares issuance price and its amount results from ne-gotiations conducted between the Company and E-Ink, initiated during a period where the stock price amount-ed to about thirty (30) euros; this price also corresponds to the price per share offered by BOE Smart Retail Hong Kong Co., Ltd in the context of its simplified tender offer in March 2018.

The Reserved Capital Increase shall en-able the Company to finance its work-ing capital needs as well as to develop its activities and investment projects.

The amount of the Reserved Capital Increase is independent of the overall nominal ceiling of thirteen (13) million euros set in the 12th resolution sub-mitted to this general meeting.

With the 15th resolution, the Board of directors thus requests a delega-tion of authority from your Gener-al Assembly to proceed to the Re-served Capital Increase.

Theoretical impact of the transaction on the shareholders’ equity per share.

For information purposes only, the theoretical impact of the issuance of the issued shares as part of the Re-served Capital Increase (the “New Shares”) on the Group consolidated shareholders’ equity per share (calcu-lation based on the Group consolidated shareholders’ equity - group share on 31 December 2017 as they appear in the audited consolidated statements on 31 December 2017 and on a number of 13,374,123 shares composing the Company’s share capital on 31 December 2017 after deducting 10,106 treasury shares held by the Company) would be as follows:

1 Weighted average stock price over the trading days prior to 4 May 2018.2 As of the date of 3 May 2018.3 Weighted average stock price over the trading days prior to 4 May 2018.

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Theoretical impact of the New Shares issuance on the current stock-market value of theSES-imagotag share

The theoretical impact on the current stock-market value of the SES-imagotag share, i.e. 25.14 euros (weighted average stock price over the 20 trading days prior to 4 May 2018) would be as follows (on the basis of the number of shares representing the Company’s share capital on 31 December 2017):

The stock-market value (on a non-diluted basis after issuance of the New Shares) was obtained by taking the market capitalization be-fore the transaction, corresponding to the weighted average stock price over the 20 trading days prior to 4 May 2018 (i.e. 25.14 euros) multi-plied by the total number of shares (i.e. 13,374,123 shares on 31 December 2017), adding to it the proceeds of the New Shares and then dividing the total by 14,240,789 corresponding to the sum of the number of shares on 31 December 2017 (i.e. 13,374,123

Shareholders’ equity per share (in euros)

Non-diluted basis Diluted basis1

Before issuance of the New Shares 9.64 9.44

After issuance of 866,666 New Shares 9.05 8.87

(1) If all the 106,925 stock options and 179,517 free shares are exercised.

Number of shares(non-diluted basis)

Stock-market value per share (in euros)(non-diluted basis)

Number of shares(diluted basis1)

Stock-market valueper share (in euros)(diluted basis1)

Before issuanceof the New Shares

13,374,123 25.14 13,660,565 24.61

After issuanceof 866,666 New Shares

14,240,789 25.44 14,527,231 24.94

(1) If all the 106,925 stock options and 179,517 free shares are exercised.

actions) and of the total number of shares resulting in the issuance of the New Shares (i.e. 866,666 shares).

7 – Pouvoirs (16ème Résolution)

Cette 16ème résolution a pour objet de donner pouvoir pour l’exécution des formalités légales ou adminis-tratives et tous dépôts de publicité des décisions de la présente As-semblée générale.

Le Conseil d’administration

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VIII. Statutory Auditors’ reports

Statutory Auditors’ reports on: :

• financial statements

• consolidated financial statements

• regulated agreements and commitments

• certification of the information communicated pursuant to Article L. 225-115 4° of the French commercial code

• share capital decrease

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FinanciAL REPORT

To the SES-imagotag S.A. Annual General Meeting,

Opinion

In compliance with the engagement entrusted to us by your annual general meeting, we have audited the accompanying financial statements of SES-imagotag S.A. for the year ended December 31, 2017.

In our opinion, the financial statements give a true and fair view of the assets and liabilities and of the financial position of the Company as of December 31, 2017 and of the results of its operations for the year then ended in accordance with French accounting principles.

The audit opinion expressed above is consistent with our report to the Accounts Committee

Basis for Opinion

Audit Framework

We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the “Statutory Auditors’ Responsibilities for the Audit of the Financial Statements” section of our report.

Independence

We conducted our audit engagement in compliance with independence rules applicable to us, for the period from January 1, 2017 to the date of our report and specifically we did not provide any prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No. 537/2014 or in the French Code of ethics (code de déontologie) for statutory auditors.

Justification of Assessments - Key Audit Matters

In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (code de commerce) relating to the justification of our assessments, we bring your attention to the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in the audit of the financial statements of the current period, as well as our responses to those risks.

Statutory Auditors’ report on the financial statements

Year ended December 31, 2017

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Statutory Auditors’ reports

Measurement of equity securities

• Risk identified

Equity securities are recognized in the balance sheet at a net carrying amount of €61,754 thousand and constitute the largest balance sheet heading. They are recognized at acquisition cost on initial recognition and impaired where necessary based on their realizable value.

As indicated in Note II. Accounting rules and methods – 3) Financial assets to the financial statements, the realizable value is estimated by management based on the business outlook and future profitability.

In determining the realizable value of these securities, management is required to exercise judgment to estimate these forward-looking components.

Given the inherent uncertainties surrounding the realization of forecasts, we considered the correct measurement of equity securities and related receivables to be a key audit matter.

• Audit procedures implemented responsive to the risk identified

To assess the reasonableness of the realizable value estimates for equity securities, based on the information communicated to us, our work mainly consisted in:

- substantiating the consistency of assumptions adopted with cash flow and operating forecasts for the businesses of the relevant entities prepared by operating management in the budget process and with business plans prepared on acquisition of the investments;

- assessing the relevance of analyses performed by management to substantiate the absence of any loss in value of equity securities and particularly the outlook for technologies held by the relevant entities.

In addition to assessing the realizable value of equity securities, our work also consisted in assessing the recoverability of related receivables based on analyses of the equity securities.

Lastly, we also assessed the appropriateness of the disclosures in the notes to the financial statements.

These matters were addressed in the context of our audit of the annual financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on specific items of the consolidated financial statements.

Verification of the Management Report and of the Other Documents Provided to Shareholders

We have also performed, in accordance with professional standards applicable in France, the specific verifications required by French law.

Information given in the management report and other documents provided to shareholders with respect to the financial position and the financial statements.

We have no matters to report as to the fair presentation and the consistency with the financial statements of the information given in the management report of the Board of Directors and in the other documents provided to shareholders with respect to the financial position and the financial statements.

Report on corporate governance

We attest that the Board of Directors’ report on corporate governance contains the information required by Articles L. 225-37-3 and L. 225-37-4 of the French Commercial Code (code de commerce).

Concerning the information given in accordance with the requirements of Article L. 225-37-3 of the French Commercial Code relating to remunerations and benefits received by the directors and any other commitments made in their favor, we have verified its consistency with the financial statements, or with the underlying information used to prepare these financial statements and, where applicable, with the information obtained by your Company from controlling and controlled companies. Based on this work, we attest the accuracy and fair presentation of this information.

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FinanciAL REPORT

Concerning the information relating to items your Company considers likely to have an impact in the event of a public tender offer or public exchange offer, provided pursuant to Article L. 225-37-5 of the French Commercial Code (code de commerce), we have verified its compliance with the source documents communicated to us. Based on this work, we have no comments to make on this information.

Other information

In accordance with French law, we have verified that the required information concerning the purchase of investments and controlling interests and the identity of the shareholders and holders of the voting rights has been properly disclosed in the management report.

Report on Other Legal and Regulatory Requirements

Appointment of the Statutory Auditors

We were appointed as statutory auditors of SES-imagotag S.A. by the Annual General Meeting held on June 23, 2017 for Deloitte & Associés and KPMG.

As of December 31, 2017, Deloitte & Associés and KPMG were in the 1st year of total uninterrupted engagement, which is the 1st year since securities of the Company were admitted to trading on a regulated market

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with French accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate the Company or to cease operations.

The Accounting Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk management systems and, where applicable, its internal audit, regarding the accounting and financial reporting procedures.

The financial statements were approved by the Board of Directors.

Statutory Auditors’ Responsibilities for the Audit of the Financial Statements

Objectives and audit approach

Our role is to issue a report on the financial statements. Our objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As specified in Article L. 823-10-1 of the French Commercial Code (code de commerce), our statutory audit does not include assurance on the viability of the Company or the quality of management of the affairs of the Company.

As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional judgment throughout the audit and furthermore:

• Identifies and assesses the risks of material misstatement of the financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to provide a basis for his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

217


• Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control;

• Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the financial statements;

• Assesses the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of his audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the statutory auditor concludes that a material uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the financial statements or, if such disclosures are not provided or inadequate, to modify the opinion expressed therein;

• Evaluates the overall presentation of the financial statements and assesses whether these statements represent the underlying transactions and events in a manner that achieves fair presentation

Report to the Accounts Committee

We submit a report to the Accounts Committee which includes in particular a description of the scope of the audit and the audit program implemented, as well as the results of our audit. We also report, if any, significant deficiencies in internal control regarding the accounting and financial reporting procedures that we have identified.

Our report to the Accounts Committee includes the risks of material misstatement that, in our professional judgment, were of most significance in the audit of the financial statements of the current period and which are therefore the key audit matters that we are required to describe in this report.

We also provide the Accounts Committee with the declaration referred to in Article 6 of Regulation (EU) No. 537/2014, confirming our independence in the sense of the rules applicable in France as defined in particular by Articles L.822-10 to L.822-14 of the French Commercial Code and or in the French Code of ethics for statutory auditors. Where appropriate, we discuss with the Accounts Committee the risks that may reasonably be thought to bear on our independence, and the related safeguards

The Statutory Auditors

Paris La Défense, May 14, 2018 Neuilly-sur-Seine, May 14, 2018

KPMG Audit Deloitte & AssociésDivision of KPMG S.A.

Grégoire Menou Julien Razungles Partner Partner

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FinanciAL REPORT

To the SES-imagotag Annual General Meeting,

Opinion

In compliance with the engagement entrusted to us by your annual general meeting, we have audited the accompanying consolidated financial statements of SES-imagotag for the year ended December 31, 2017.

In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as of December 31, 2017 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

The audit opinion expressed above is consistent with our report to the Accounts Committee.

Basis for Opinion

Audit Framework

Nous avons effectué notre audit selon les normes d’exercice professionnel applicables en France. Nous estimons que les éléments que nous avons collectés sont suffisants et appropriés pour fonder notre opinion.

Les responsabilités qui nous incombent en vertu de ces normes sont indiquées dans la partie «Responsabilités des commissaires aux comptes relatives à l’audit des comptes consolidés» du présent rapport.

Indépendance

Nous avons réalisé notre mission d’audit dans le respect des règles d’indépendance qui nous sont applicables, sur la période du 1er janvier 2017 à la date d’émission de notre rapport, et notamment nous n’avons pas fourni de services interdits par l’article 5, paragraphe 1, du règlement (UE) n°537/2014 ou par le code de déontologie de la profession de commissaire aux comptes.

Justification des appréciations - Points clés de l’audit

In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (code de commerce) relating to the justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period, as well as how we addressed those risks.

These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on specific items of the consolidated financial statements.

Assessment of the share-based payment

(Notes II.1.1.4, II.1.13 and II.4 - Note 9 to the consolidated financial statements)

Statutory Auditors’ report on the consolidated financial statements

Year ended December 31, 2017

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• Risk identified

Since its creation, the Company has set-up several equity-settled remuneration plans in favor of employees. In accordance with the applicable accounting standard, the cost of equity-settled transactions is expensed to profit or loss based on the fair value of the instruments granted, through an increase in equity in the period in which the rights to benefit from the equity instruments vest.

The Company recognized a corresponding expense of €12.9 million in payroll costs in the period.

On December 20, 2017, BOE Smart Retail (Hong Kong) acquired a 51.59% majority stake in the share capital of the Company. Accordingly, the Board of Directors noted the realization of the alternative conditions set out in the free share plans approved by its meetings of December 16, 2015, March 11, 2016, November 30, 2016, December 22, 2016 and March 10, 2017, resulting in the accelerated vesting of the corresponding free shares.

As disclosed in Note 9, Other equity instruments, to the consolidated financial statements, the Company therefore accelerated the recognition of expenses relating to the free share plans in the course of vesting at that date. The residual expense was recognized in full in the consolidated financial statements for the year ended December 31, 2017 in the amount of €12.9 million.

In addition, as disclosed in Note II.1.1.4 to the consolidated financial statements, 2016 comparative information was restated to recognize an expense of €1.3 million in respect of the free share grant, not recognized in 2016.

In this context, the valuation of the expense relating to equity-settled remuneration plans is a key audit matter, given the number and diversity of equity instruments and the material impact on net income for the year.

• Our response

We familiarized ourselves with the contractual agreements, the decisions of the Board of Directors, the valuation methods and the key assumptions adopted by Management to estimate the fair value of the equity instruments.

We performed the following procedures, with the assistance of internal specialists where appropriate:

- assessing the valuation methods used by the Company for the different equity instruments granted,

- analyzing the main assumptions underlying the valuation of the payroll expense and the contractual clauses that led to the accelerated recognition of the expense relating to the free share plans following the takeover by BOE Smart Retail (Hong Kong),

- assessing the integrity of the calculation models used by the Company and the correct modeling of the assumptions adopted,

- analyzing the items that led Management to restate the financial statements for the year ended December 31, 2016.


Accounting treatment of recent material acquisitions (Pervasive Displays Inc. and Findbox

(Notes II.1.1.2, II.1.1.3, II.1.2, II.2 and II.4 - Notes 1, 12, 20 and 22 to the consolidated financial statements)

• Risk identified

On February 16, 2017, the SES-imagotag group acquired the entire share capital of the Taiwanese company, Pervasive Displays Inc.

On November 30, 2016, the SES-imagotag group, increased its 5.38% stake in the German company, Findbox (renamed SES-imagotag Deutschland GmbH), acquiring an additional 61.62%.

Goodwill of €18.3 million (Pervasive Displays Inc) and €6.7 million (Findbox) was recognized in respect of these acquisitions, after determining the fair value of identifiable assets acquired and liabilities and

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contingent liabilities assumed that could be reliably measured at the acquisition date. Management identified separable intangible assets (technologies) estimated at €6.9 million (Pervasive Displays Inc.) and €2 million (Findbox). The acquisition price for Pervasive Displays Inc. included an earn-out based on performance indicators for fiscal 2017, estimated by the Company at €3.3 million and recognized in other non-current liabilities as of December 31, 2017.

These acquisitions had a material impact on the consolidated financial statements. The identification and estimation of assets acquired and liabilities assumed and the earn-out at the acquisition date is largely based on Management judgment. We considered the accounting treatment of recent material acquisitions to be a key audit matter.

• Notre réponse

We performed the following procedures, with the assistance of internal specialists where appropriate:

- analyzing the purchase agreements and amendments and assessing the correct accounting treatment of the acquisitions with respect to contractual terms and applicable accounting standards,

- performing a critical analysis of the valuation report prepared by the independent experts hired by the Company that served as a basis for estimating the fair value of assets acquired and liabilities assumed,

- assessing the expertise and independence of valuation experts hired by the Company,

- analyzing the valuation methods applied by the independent experts to estimate the fair value of assets acquired and liabilities assumed, in particular technologies, and assessing the assumptions and critical judgments adopted with regard to sector standards, our understanding of the group’s business, its economic environment, previous acquisitions, business plans underlying these acquisitions and applicable accounting standards,

- analyzing the estimate of the Pervasive Displays Inc. earn-out determined by Management and assessing the assumptions adopted and in particular revenue forecasts for 2017 and firm orders received in 2017.


Measurement of SES-ESL and Imagotag goodwill

(Notes II.1.1.2, II.1.1.3, II.1.2 and II.4 - Note 1 to the consolidated financial statements)

• Risk identified

Two historical goodwill balances are recognized in assets in the consolidated financial statements, in respect of the merger of SES and SES-ESL on May 16, 2007 and the acquisition of Imagotag on May 21, 2014.

These goodwill balances, with a net carrying amount of €26 million as of December 31, 2017, reflect the difference between the fair value of the consideration transferred and the fair value of assets acquired and liabilities assumed. They were allocated to the same cash-generating unit (CGU).

Management confirms at each year end and more frequently where there is indication of loss in value, that the net carrying amount of these goodwill balances does not exceed their recoverable amount and that there is no risk of loss in value.

The impairment test methodology and the assumptions adopted are presented in the “Impairment test” paragraph of Note II.1.2 to the consolidated financial statements.

The recoverable amount of goodwill is largely determined based on Management judgment, particularly with regard to the growth and profitability rates underlying cash flow projections and the discount rate applied to such projections. We therefore considered the measurement of goodwill to be a key audit matter.

• Our response

We familiarized ourselves with the implementation methods for impairment tests performed by Management and reviewed the compliance of the methodology applied with prevailing accounting standards.

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We also performed a critical analysis of the implementation of this methodology and assessed, in particular

- the relevance of the method used by Management to determine the cash-generating unit,

- the reasonableness of cash flow projections for periods after 2017 prepared by Management, with regard to our knowledge of the economic environment in which the group operates,

- the consistency of these cash flow projections with the most recent Management estimates prepared in the budget process and the latest sales forecasts for 2018,

- the accuracy of projections prepared in previous years compared with 2017 actual figures to assess their reliability,

- the consistency of long-term growth rates and discount rates applied with market analyses and with the external expert’s report prepared pursuant to the takeover bid for the Company’s shares,

- the sensitivity of the value in use determined by Management to a change in one of the main assumptions adopted.


Verification of the Information Pertaining to the Group Presented in the Management Report

As required by law, we have also verified in accordance with professional standards applicable in France the information pertaining to the Group presented in the Board of Directors’ management report.

We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.

Report on Other Legal and Regulatory Requirements

Appointment of the Statutory Auditors

We were appointed as statutory auditors of SES-imagotag S.A. by the Annual General Meeting held on June 23, 2017 for Deloitte & Associés and KPMG.

As of December 31, 2017, Deloitte & Associés and KPMG were in the 1st year of total uninterrupted engagement, which is the 1st year since securities of the Company were admitted to trading on a regulated market.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate the Company or to cease operations.

The Accounts Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk management systems and, where applicable, its internal audit, regarding the accounting and financial reporting procedures.

The consolidated financial statements were approved by the Board of Directors.

Statutory Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Objectives and audit approach

Our role is to issue a report on the consolidated financial statements. Our objective is to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement. Reasonable

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assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As specified in Article L. 823-10-1 of the French Commercial Code (code de commerce), our statutory audit does not include assurance on the viability of the Company or the quality of management of the affairs of the Company.

As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional judgment throughout the audit and furthermore:

• Identifies and assesses the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to provide a basis for his opinion The risk of not de-tecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

• Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control;

• Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the consolidated financial statements;

• Assesses the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of his audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the statutory auditor concludes that a mate-rial uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the consolidated financial statements or, if such disclosures are not provided or inadequate, to modify the opinion expressed therein;

• Evaluates the overall presentation of the consolidated financial statements and assesses whether these sta-tements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtains sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. The statutory au-ditor is responsible for the direction, supervision and performance of the audit of the consolidated financial statements and for the opinion expressed on these consolidated financial statements.

Report to the Accounts Committee

We submit a report to the Accounts Committee which includes in particular a description of the scope of the audit and the audit program implemented, as well as the results of our audit. We also report, if any, significant deficiencies in internal control regarding the accounting and financial reporting procedures that we have identified.

Our report to the Accounts Committee includes the risks of material misstatement that, in our professional judgment, were of most significance in the audit of the consolidated financial statements of the current period and which are therefore the key audit matters that we are required to describe in this report.

We also provide the Accounts Committee with the declaration provided for in Article 6 of Regulation (EU) No. 537/2014, confirming our independence within the meaning of the rules applicable in France such as they are set in particular by Articles L. 822-10 to L. 822-14 of the French Commercial Code (code de commerce) and in the French Code of Ethics (code de déontologie) for statutory auditors. Where appropriate, we discuss with the Audit Committee the risks that may reasonably be thought to bear on our independence, and the related safeguards.

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The Statutory Auditors


KPMG Audit Deloitte & AssociésDivision of KPMG S.A.

Grégoire Menou Julien Razungles Partner Partner

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FinanciAL REPORT

To the SES-imagotag S.A. Annual General Meeting,

In our capacity as statutory auditors of your Company, we hereby report to you on regulated agreements and commitments.

The terms of our engagement require us to communicate to you, based on information provided to us, the principal terms and conditions of those agreements and commitments brought to our attention or which we may have discovered during the course of our audit, as well as the reasons justifying that such commitments and agreements are in the Company’s interest, without expressing an opinion on their usefulness and appropriateness or identifying other such agreements and commitments, if any. It is your responsibility, pursuant to article R. 225-31 of the French Commercial Code (code de commerce), to assess the interest involved in respect of the conclusion of these agreements and commitments for the purpose of approving them.

Our role is also to provide you with the information stipulated in Article R. 225-31 of the French Commercial Code relating to the implementation during the past year of agreements and commitments previously approved by the Shareholders’ Meeting, if any.

We performed the procedures that we considered necessary with regard to the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) applicable to this engagement. These procedures consisted in agreeing the information provided to us with the relevant source documents.

AGREEMENTS AND COMMITMENTS SUBMITTED TO THE APPROVAL OF THE ANNUAL GENERAL MEETING

Agreements and commitments authorized and entered into during the year

Pursuant to Article L. 225-40 of the French Commercial Code, the following agreements and commitments, entered into during the year and previously authorized by the Board of Directors, have been brought to our attention.

Renewal of the Board of Directors’ resolution of January 13, 2012 on the payment of severance pay to Thierry Gadou in the event of termination of his duties as Chief Executive Officer

• Person concerned:

Thierry Gadou, Chief Executive Officer since January 13, 2012 and Chairman of the Board of Directors since January 18, 2012.

• Nature and purpose:

Payment of severance pay in the event of termination of his duties as Chief Executive Officer.

Statutory Auditors’ special report on regulated agreements and commitments

Annual General Meeting held to approve the financial statementsfor the year ended December 31, 2017

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In accordance with the regulated agreements procedure, on March 1, 2012 shareholders approved for a period of 5 years this severance pay, previously authorized by the Board of Directors on January 13, 2012.

The Board of Directors’ meeting of March 10, 2017 authorized the renewal and update of this resolution concerning the payment of severance pay to Thierry Gadou in the event of the termination of his duties as Chief Executive Officer, notably on a change in control.

• Principal terms and conditions and reasons justifying the agreement is in your Company’s interest:

The severance pay is defined as follows:

In the event the Chief Executive Officer of your Company ceases to exercise his duties following dismissal (except for serious or severe misconduct) or resignation within six months of a change in control of your Company, the Chief Executive Officer will be entitled to a lump-sum payment of a gross amount equal to 18 months of fixed and variable remuneration.

In accordance with the law and without prejudice to any damages which the Chief Executive Officer may claim based on the conditions of his departure, payment of this severance pay will be subject to meeting performance criteria corresponding to achieving at least 75% of the quantitative targets set for the bonus in the year prior to the termination of his duties as Chief Executive Officer.

Furthermore, in the event that, at any time whatsoever after the Chief Executive Officer of your Company takes up his post, he terminates his duties following dismissal (except for serious or severe misconduct) or resignation, it being stipulated that this dismissal or resignation must occur within six months of a change in control of your Company, all free shares allocated to him will definitively vest, notwithstanding the presence and performance conditions stipulated in the governing plan, provided however that he has met the performance criteria specified above and without prejudice to compliance with the minimum legal vesting period after which the shares may be transferred to him.

A change in control is defined as the exchange of at least 40% of your Company’s capital, on or off market, or the filing of a public offering for your Company’s shares.

Agreements and commitments not previously authorized

Pursuant to Article L. 225-42 of the French Commercial Code, we bring to your attention the following agreements and commitments which were not previously authorized by your Board of Directors.

Our role is to communicate to you the circumstances which explain why the authorization procedure was not followed.

Credit facility agreement with Markethub Technologies Ltd.

• Person concerned, nature and object:

Credit facility agreement signed on July 1, 2017 with Markethub Technologies Ltd., a UK subsidiary owned 60% by your Company.

• Terms and conditions:

Your Company granted its subsidiary a 5-year credit facility up to a maximum amount of K€500 and bearing interest at EURIBOR + 1.5%.

As of December 31, 2017, the credit facility granted by your Company was drawn K€254 and interest for the year totaled K€1.

• Reasons justifying the agreement is in your Company’s interest:

This credit facility enables SES-imagotag S.A. to expand in the UK market through its subsidiary Markethub Technologies Ltd.

This agreement was not previously authorized by the Board of Directors of your Company due to an omission.

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Service agreement with Markethub Technologies Ltd.

• Person concerned, nature and object:

Service agreement (business provider and distributor) signed on July 1, 2017 with Markethub Technologies Ltd., a UK subsidiary owned 60% by your Company.


This agreement was entered into for a 5-year period and covers the United Kingdom and Ireland.

Your Company pays its subsidiary a commission for business provider services based on revenue collected (rate revised annually).

The agreement defines the price of products and services sold by your Company to its subsidiary for distri-butor services.

In the year ended December 31, 2017, your Company recognized income of K€7 for products sold to its subsidiary under the distribution agreement.


This agreement authorizes Markethub Technologies Ltd. to distribute and promote SES-imagotag group products and services in the British market.

This agreement, entered into on July 1, 2017, was not previously authorized by the Board of Directors of your Company due to an omission.

Financial guarantee granted to a supplier of the subsidiary Pervasive Displays Inc.


BOE Optical Science and Technology Co., Ltd and Chongqing BOE Smart Electronics System Co., Ltd (after substitution), companies indirectly related to BOE Smart Retail (Hong Kong) Co., Ltd, a shareholder of your Company since December 21, 2017.


On September 13, 2017, your Company granted a guarantee to the supplier, BOE Optical Science and Technology Co., Ltd, on behalf of its wholly-owned Taiwanese subsidiary, Pervasive Displays Inc.

The agreement was previously authorized by the Board of Directors on September 8, 2017 as a security, endorsement or guarantee as defined by Article L. 225-35 of the French Commercial Code. On December 21, 2017, it became a regulated agreement following the acquisition by BOE Smart Retail (Hong-Kong) Co., Ltd of over 50% of the share capital of your Company.

The Board of Directors’ meeting of February 6, 2018 decided to change the beneficiary of the guarantee, replacing BOE Optical Science and Technology Co., Ltd. by Chongqing BOE Smart Electronics Systems Co., Ltd.


This guarantee is for a maximum of USD 10 million and a period of 12 months.


The guarantee was granted by your Company on behalf of its subsidiary responsible for the industrial scheduling of its product ranges, in favor of a supplier-subsidiary of BOE Technology Group, in order to obtain an invoice settlement period for supply and assembly services.

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Financial guarantee granted to a supplier of the subsidiary SES-imagotag GmbH


BOE Optical Science and Technology Co., Ltd and Chongqing BOE Smart Electronics System Co., Ltd (after substitution), companies indirectly related to BOE Smart Retail (Hong Kong) Co., Ltd, a shareholder of your Company since December 21, 2017.


On December 15, 2017, your Company granted a guarantee to BOE Optical Science and Technology Co., Ltd on behalf of its wholly-owned Austrian subsidiary, SES-imagotag GmbH.

The agreement was previously authorized by the Board of Directors on December 15, 2017 as a security, endorsement or guarantee as defined by Article L. 225-35 of the French Commercial Code. On December 21, 2017, it became a regulated agreement following the acquisition by BOE Smart Retail (Hong-Kong) Co., Ltd of over 50% of the share capital of your Company.

The Board of Directors’ meeting of February 6, 2018 decided to change the beneficiary of the guarantee, replacing BOE Optical Science and Technology Co., Ltd. by Chongqing BOE Smart Electronics Systems Co., Ltd.


This guarantee is for a maximum of USD 10 million and a period of 12 months.


The guarantee was granted by your Company on behalf of its subsidiary responsible for the industrial scheduling of its product ranges, in favor of a supplier-subsidiary of BOE Technology Group, in order to obtain an invoice settlement period for supply and assembly services.

AGREEMENTS AND COMMITMENTS PREVIOUSLY APPROVED BY ANNUAL GENERAL MEETING

Previously approved agreements and commitments that remained in force during the year

Pursuant to Article R. 225-30 of the French Commercial Code, we have been informed that the following agreements and commitments, previously approved by prior-year Shareholders’ Meetings, have remained in force during the year.

Thierry Gadou’s non-compete clause

This clause concerns Thierry Gadou, Chief Executive Officer since January 13, 2012 and Chairman of the Board of Directors since January 18, 2012.

Payment of a non-compete allowance to Thierry Gadou was authorized by the Board of Directors on January 13, 2012 and approved by Shareholders’ Meeting on March 1, 2012. The non-compete clause states that, in the event of his departure, for any reason whatever, Thierry Gadou undertakes:

• not to join a company carrying out a competing activity;

• not to exercise or be involved, either directly or indirectly, in any way whatsoever (in particular as a self-employed worker or shareholder holding more than 3% of the capital or voting rights), in a competing activity;

• not to exercise or be involved, either directly or indirectly, in any way whatsoever, and not to invest in, in any way whatsoever (in particular as a shareholder), in the following companies (space left intentionally blank in the minutes of the Board of Directors’ meeting of January 13, 2012),

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• not to approach or recruit or try to recruit any person who is or was employed by your Company or one of its subsidiaries in the previous 12 months, with a view to using the specific knowledge or skills of that person for the benefit of a natural person or legal entity whose activities are in competition with those of your Company.

The term competing activity refers to any activity involving the design, marketing, or installation of electronic labeling systems.

This non-compete obligation is limited to the following countries: France, Belgium, Italy, Germany, Denmark, Spain, the United Kingdom, Switzerland, Hungary, Romania, Poland, Sweden, Brazil, Mexico, Argentina, Canada, the United States of America, and South Africa.

The clause is limited to a duration of one year from the end of his term of office as Chief Executive Officer of your Company. At the end of this one-year period, your Company may renew the clause for the same period. This renewal must be notified by registered letter with acknowledgment of receipt or delivered by hand against receipt, at the latest sixty calendar days before the expiry of the initial period of the non-compete obligation.

In consideration of this non-compete obligation, Thierry Gadou shall receive, following the effective cessation of his term of office as Chief Executive Officer of your Company, and for the entire duration of this prohibition, a special flat-rate monthly allowance, the gross amount of which will be equal to 50% of his gross fixed monthly salary.

This special allowance shall be paid by bank transfer at the end of each month for the entire duration of the non-compete obligation and will be liable to social security contributions.

Any violation or infringement of this non-compete clause will authorize your Company to put a stop to the violation or infringement in question and to order, subject to a penalty, the cessation of the competition that infringes on the above provisions, without prejudice to any damages it may claim because of the violation of this obligation.

Similarly, any violation of the non-compete obligation would release your Company from payment of this allowance and would render Thierry Gadou liable to pay back any sums he may have received in this respect, with interest at the statutory rate from the date of formal notice to immediately cease the competing activity, without prejudice to any damages it may claim because of the violation of this obligation.

Your Company may release Thierry Gadou from the non-compete clause at the end of his term of office as Chief Executive Officer of your Company. In this case, the financial compensation shall not be payable.

Chairman and Chief Executive Officer director insurance policy (GSC)

This policy concerns Thierry Gadou, Chief Executive Officer since January 13, 2012 and Chairman of the Board of Directors since January 18, 2012.

On January 13, 2012, the Board of Directors authorized your Company to take out an unemployment insurance policy for directors (GSC) in favor of Thierry Gadou, with effect from January 18, 2012.

Your Company paid premiums of €19,000 for the fiscal year ended December 31, 2017.

Agreements and commitments approved during the year

We have been informed that the following agreements and commitments, previously approved by the Shareholders’ Meeting of June 23, 2017, based on the Statutory Auditors’ special report of April 19, 2017, continued in force during the year.

Credit facility agreement with Findbox GmbH (renamed SES-imagotag Deutschland GmbH)

On September 7, 2016, the Board of Directors authorized the conclusion of a credit facility agreement between your Company and FINDBOX GmbH, a German subsidiary owned 67% as of December 31, 2016 and 100% as of December 31, 2017.

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The agreement was signed on November 30, 2016 for a period of 5 years. The applicable interest rate is EURIBOR + 1.5%.

As of December 31, 2017, advances granted by your Company to its subsidiary totaled K€5,510 and interest for the year totaled K€52.

You Board justified the agreement is in your Company’s interest as follows: “within the framework of the acquisition of Findbox GmbH, paragraph 2.6 of the Master Agreement stipulates that on the acquisition date (i.e. November 30, 2016), your Company will substitute itself in the external bank loans contracted by Findbox GmbH (loans repaid early following a change of control of the borrowing entity)”.


KPMG Audit Deloitte & Associés

Division of KPMG S.A.

Grégoire Menou Julien Razungles

Partner Partner

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To the shareholders,

In our capacity as your Company’s Statutory Auditors and pursuant to Article L. 225-115 4° of the French commercial code, we have drawn up this certification on the information relating to the overall amount of compensation paid to the highest-paid individuals for the fiscal year ended December 31, 2017, appearing in the attached document.

This information was put together the responsibility of your Board of directors. It is our duty to certify this information.

As part of our statutory auditing duties, we performed an audit of your Company’s annual financial statements for the fiscal year ended December 31, 2017. The purpose of our audit, conducted according to the professional standards applicable in France, was to express an opinion on the annual financial statements, taken as a whole, and not on specific items of these financial statements used to calculate the overall amount of compensation paid to the highest-paid individuals. Accordingly, we did not perform our audit tests and our sampling for this purpose, and we have no opinion to express on these items considered in isolation.

We implemented the due diligence measures that we deemed necessary in accordance with the professional guidance issued by the French national auditing body (Compagnie nationale des commissaires aux comptes) relating to this mission. These due diligence measures, which do not constitute an audit or a limited review, involved performing the necessary reconciliations between the overall amount of compensation paid to the highest-paid individuals and the accounting records from which the amount was derived and verifying that it is consistent with the information used to prepare the annual financial statements for the fiscal year ended December 31, 2017.

On the basis of our work, we have no comments to make regarding the consistency of the overall amount of compensation paid to the highest-paid individuals, appearing in the attached document and totaling €1,165,004, with the accounting records used to prepare the annual financial statements of fiscal year ended December 31, 2017.

This document serves as certification of the accuracy of the overall amount of compensation paid to the highest-paid individuals within the meaning of Article L. 225-115 4° of the French commercial code.

It is drawn up for your attention within the context specified in the first paragraph and must not be used, disseminated, or cited for other purposes.

Statutory auditors’ certification of the information communicated pursuant to Article L. 225-115 4° of the French commercial code relating to the overall amount of compensation paid to the highest-paid individuals for the fiscal year ended December 31, 2017

Fiscal year ended December 31, 2017

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Partner Partner

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FinanciAL REPORT

To the SES-imagotag S.A. Shareholders’ Meeting,

In our capacity as statutory auditors of your Company and pursuant to the provisions of Article L.225-209 of the French Commercial Code (code de commerce) concerning share capital decreases by cancellation of shares purchased, we hereby report to you on our assessment of the reasons for and the terms and conditions of the proposed share capital decrease.

Shareholders are requested to confer all necessary powers on the Board of Directors, during a period of 18 months starting from this Shareholders’ Meeting, to cancel, up to a maximum of 10% of the share capital in any twenty-four month period, shares purchased by the Company pursuant to the authorization to purchase its own shares under the provisions of the above-mentioned Article.

We performed the procedures that we considered necessary in accordance with the professional guidelines of the French National Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) relating to this engagement. Those procedures consisted in examining whether the reasons for and the terms and conditions of the proposed share capital decrease, which does not interfere with the equal treatment of shareholders, are due and proper.

We have no matters to report on the reasons for or terms and conditions of the proposed share capital decrease.

Paris La Défense, May 14, 2018




Partner Partner

Statutory Auditors’ report on the share capital decreaseShareholders’ Meeting of June 22, 2018, Resolution no. 11

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IX. Certificate from the person responsible for the Annual Report

I hereby certify that, to the best of my knowledge, the consolidated financial statements have been drawn up in accordance with the applicable accounting standards and provide a true and fair view of the assets and liabilities, the financial position and the profits of the company and all companies included in the scope of consolidation, and that the Activity Report provides a true and fair view of the major events having occurred during the financial year, their impact and the main transactions between related parties, as well as a description of the main risks and uncertainties to which the Group is exposed.

Mr Thierry Gadou

Chairman & Managing Director

Annu

al r

epor

t 201

7

55 Place Nelson Mandela

CS 60106

92024 Nanterre Cedex, France

Tél. : +33 1 34 34 61 61

Fax : +33 1 55 69 78 00

www.ses-imagotag.com