1

ANNUAL REPORT 2013

2

KEY FIGURES

in TEUR in TEUR

2013 2012

Consolidated income statement

Net sales 954 159

EBITDA -4'035 -4'090

EBIT -5'907 -5'605

Net result -6'244 -5'969

Net result per share in EUR -0.54 -0.62

Consolidated cash flow 307 -40

Consolidated balance sheet

Cash and cash equivalents 443 138

Shareholders' equity 8'774 795

Balance sheet total 21'251 14'216

3

TABLE OF CONTENTS

Profile of IPS Group 4

Report from the Board of Directors 5

Financial review 6

Corporate governance 7

Financial reporting 2013 15

Corporate calendar and addresses 49

4

PROFILE OF IPS GROUP I.P.S. Innovative Packaging Solutions AG is a leading developer and supplier of mechanical and pressure-controlled dispensing packaging technologies and systems for manufacturers and suppliers of cosmetics, body care, pharmaceutical and food products. Its patented, innovative Airopack

® technology offers

clear environmental benefits compared to conventional aluminum dispensers thanks to the use of PET packaging and natural air as a propellant instead of aerosols. Airopack does not only offer this patented technology but also has a full-service offering. With this full-service offering Airopack provides a turnkey solution to quickly and easily launch customer products in Airopack

®. Via the unique full-service concept, Airopack

can mold, assemble, sleeve or label, fill and pack

Airopack® to customer specifications. On top, Airopack

has a highly experienced laboratory for formulation development and bulk production to ensure the best quality and control. Within the context of a joint venture (Airolux AG) with Resilux (www.resilux.com), the company operates a manufacturing facility in Glarus Nord (Switzerland), a full-service manufacturing facility in Heist-op-den-Berg (Belgium), a global R&D and customer service facility in Waalwijk (the Netherlands) and a sales office in Morristown NJ (United States of America). With the delivery of its first products, IPS Group reached an important milestone in 2012 with respect to commercial market entry. The shares of the company are listed on the Domestic Standard of the SIX Swiss Exchange since 2010. (ticker: IPS / ISIN: CH0002013826).

5

REPORT FROM THE BOARD OF DIRECTORS

General In May 2013 I.P.S. Innovative Packaging Solutions AG has successfully completed its capital increase, through a tradable rights offering to existing shareholders, and achieved gross proceeds of EUR 14.7 million. In total 2’823’592 IPS bearer shares have been subscribed respectively placed by the lead manager during the offering. 1’108’819 IPS bearer shares have been paid for in cash and 1’714’773 bearer shares have been paid for through conversion of existing shareholder loans by the anchor shareholders Kelders and Mathys, and the contribution of a pump technology by major shareholder Kelders. IPS Group will primarily use the net cash proceeds from the capital increase of EUR 5.0 million to finance the expansion of its operating business. Investments in the short to medium term are in particular foreseen in the machine park of the joint venture which is critical for the production of the commercial products. Further sales Airopack In 2013 IPS Group’s joint venture company Airolux shipped roughly 1.4 million pieces of Airopack to various customers including Procter & Gamble, Elizabeth Arden (Ceramide), Method Products and Remark Groep (for its brands Amando, Therme, Vogue) translating into consolidated net sales of EUR 1.0 million. However the total sales volume lagged behind management’s expectations mainly due to unexpected delays in the start of various customer projects and the underperforming of one major customer compared to his confirmed volume requirement. Result development The consolidated 2013 income statement shows a net loss of EUR 6.2 million. The 2013 result reflects the operational cost of the production organisation set up to fulfil contracted sales volumes. Due to the lower than expected volume ramp up the absorption of the fixed organizational expenses could not be achieved. Short term priorities Main focus will be on the efficient order fulfilment for the existing customer base, where especially the volume ramp up for Method Products and Procter and Gamble will push the full supply chain for Airopack to an increased level of professionalism. The Method products are being produced through the Airopack full service operation in Belgium which allows the dispensers to be produced, filled, sleeved and packed to the customers high specification standards while guaranteeing a flawless and on-time delivery. The full service approach provides IPS Group with an additional competitive advantage and fully exploits the advantages of Airopack over existing pressurized dispensing systems. Therefore, the further expansion of the customer base – which remains a key priority for the Group Management – will have an increased focus on full service sales.

Prospects Based on the current volume forecasts of the existing customers and the firm expectation that additional customer projects will start in the next months, the Board of Directors and Group Management are confident that the operational business of the Group will achieve break-even in 2014. Based on the existing customer base, it is the expectation of the Group Management that the geographical spread of the sales volume for 2014 and 2015 will show a strong concentration in the United States of America. Therefore, the Group Management is currently preparing various scenario’s which will enable a localization of production to the United States of America during the course of 2015. As a consequence of the expected strong increase in sales volumes in 2014 the IPS Group will experience additional pressure on the Group’s working capital needs. To accommodate this, IPS Group’s joint venture company Airolux has entered into a factoring arrangement. Despite the uncertainties that by nature arise from the current development phase of the IPS Group, the Board of Directors is confident that the Group will be able to obtain sufficient financing to realize its business plan. On behalf of both the Board of Directors and the Group Management we would like to thank our employees for their outstanding commitment in this challenging but exiting period. We highly appreciate it. Special thanks also go to our customers, suppliers, business partners and to you, our shareholders, for the confidence you place in us. Baar, March 2014 Alexander Vogel Quint Kelders Chairman of the CEO and Member of the Board of Directors Board of Directors

6

FINANCIAL REVIEW Capital structure Issued capital On 15 May 2013, 2’823’592 IPS bearer shares with a nominal value of CHF 5.00 each were issued from the authorised capital. Authorized capital On 11 April 2013, the General Assembly of Shareholders has approved the proposal of the Board of Directors to issue new authorized capital up to a maximum of 3.8 million bearer shares and a maximum aggregate amount of CHF 19 million at any time up to 11 April 2015. After the capital increase of 15 May 2013, the remaining authorized capital amounts to a maximum of 976’408 bearer shares or CHF 4.9 million. Conditional capital On 11 April 2013, the General Assembly of Shareholders has approved the proposal of the Board of Directors to create conditional capital up to CHF 6.75 million through the issuance of up to 1.35 million fully paid bearer shares with a nominal value of CHF 5 each through the exercise of option rights which shall be granted to key employees and members of the Board of Directors of the Company or Group companies according to a stock option plan as adopted by the Board of Directors. Income statement The consolidated net loss amounted to EUR 6.2 million, on EBITDA level the loss amounted to EUR 4.0 million. The major positions of the income statement 2013 can be explained as follows: Operating income The joint venture company Airolux realized a sales volume of 1.4 million pieces of Airopack which resulted in net sales of EUR 1.0 million on a consolidated level. On top an income of EUR 0.3 million was created by increased inventory of finished goods to fulfil orders placed by the customer. Other income includes external development fees and revenues from pilot tooling delivered to customers. Raw material expense Raw material expense consists of plastic parts purchased from third parties and external cost of purchased decorating materials and bulk formulations to fill Airopack. Personnel expense Personnel expenses amounted to EUR 2.4 million. The increase of EUR 0.4 million compared to 2012 mainly reflects cost of additional production staff employed by the joint venture Airolux. Other operating expense Other operating expense remained stable at EUR 2.3 million and includes EUR 0.3 million for charges for operations for the joint-venture Airolux. These charges primarily relate to the premises that Airolux rents from Resilux Schweiz AG. A detailed breakdown of other operating expense can be found on page 26 of the Annual Report.

Depreciation / Amortization Depreciation of tangible fixed assets amounted to EUR 1.1 million compared to EUR 0.7 million in 2012. This increase is caused by depreciation of assets that have been taken into use in the second half of 2012 and early 2013. Amortization of intangible assets remained stable at EUR 0.8 million. Amortization of the patent application for the Airopump-technology, that was acquired in the course of the capital increase in May 2013, has not yet commenced. Balance sheet The major assets of the IPS Group are machinery, molds and intellectual property. On 15 May 2013, 2’823’592 IPS bearer shares with a nominal value of CHF 5.00 each were issued from the authorised capital. These bearer shares have been subscribed respectively placed by the lead manager during the offering at an issue price of CHF 6.50. 1’108’819 IPS bearer shares have been paid for in cash and 1’714’773 bearer shares have been paid for through conversion of existing shareholder loans by the anchor shareholders Kelders and Mathys, and the contribution of a pump technology by major shareholder Kelders. As a result, the Group equity was increased by EUR 13.9 million consisting of EUR 11.3 million share capital and EUR 2.6 million capital reserves. Shareholder loans amounting to EUR 5.7 million were converted into equity. Net of transaction cost, the capital increase generated EUR 5.0 million in new cash for IPS Group. As the future value of the Business would represent self-created goodwill, it is not recognized in the consolidated accounts which explains why the consolidated equity of the Group as at 31 December 2013 is EUR 8.8 million, whereas the equity of the parent company, I.P.S. Innovative Packaging Solutions AG is EUR 61.8 million (CHF 75.8 million). Liquidity In 2013 the cash flow from operating activities amounted to negative EUR 3.6 million. On top of this, a net amount of EUR 1.1 million was invested in tangible fixed assets and EUR 3.1 million was used to fund the joint venture. The resulting negative cash flow of in total EUR 7.8 million was financed by additional loans of EUR 3.1 million and EUR 5.0 million in new cash generated by the capital increase of May 2013. At 31 December 2013, the cash position of the Group amounted to EUR 0.4 million. In January 2014, IPS Group received EUR 1.0 million in new cash generated as a result of the exercise of stock options from the conditional capital. The Board of Directors and Group Management are confident that the IPS Group will be able to obtain sufficient financing to realize its business plan. Baar, March 2014 Frans van der Vorst CFO

7

CORPORATE GOVERNANCE IPS Group is committed to modern corporate governance principles and aims to provide all stakeholders with the greatest transparency possible. The following information complies with the current corporate governance guidelines of the SIX Swiss Exchange. Group structure Change in Group structure in 2013 On 10 September 2013 Airopack NV was incorporated as a 100% participation of Airolux AG. Group structure as at 31 December 2013 I.P.S. Innovative Packaging Solutions AG is the parent company of IPS Group and has its statutory seat in Baar, Switzerland. The shares of the Company are listed on the SIX Swiss Exchange (Ticker: IPS / Security number: 201382; ISIN: CH 0002013826). I.P.S. Innovative Packaging Solutions AG is the only listed company of IPS Group. All investments in subsidiaries and associates are listed on page 37 of the Financial Report together with the information on location, share capital and the size of the equity interest. IPS Group currently is active in one business segment. Shareholders The market capitalisation of the Company reached EUR 91.2 million (CHF 111.8 million) as at 31 December 2013. Significant shareholders The Company is aware of the following shareholders, who according to Article 20 SESTA held more than 3% of the voting rights based on the share capital registered in the commercial register as at 31 December 2013: Jan Kelders, Riederalp (Switzerland) 59.25% Nicolas Mathys, Baar (Switzerland) 5.87% Balfidor Fondsleitung AG, Basel (Switzerland) 3.13% Cross-shareholdings No cross-shareholdings exist with other companies.

Capital structure Ordinary share capital The share capital of I.P.S. Innovative Packaging Solutions AG, the parent company of IPS Group, as per 31 December 2013 amounts to a total of 12’706’163 bearer shares (31.12.2012: 9’882’571). Each bearer share carries one vote at the Annual General Meeting. There are no shares affording preferential voting rights. There are no limits on transferability. Authorized capital On 11 April 2013, the General Assembly of Shareholders has approved the proposal of the Board of Directors to issue new authorized capital up to a maximum of 3.8 million bearer shares and a maximum aggregate amount of CHF 19 million at any time up to 11 April 2015. After the capital increase of 15 May 2013, the remaining authorized capital amounts to a maximum of 976’408 bearer shares or CHF 4.9 million. The Board of Directors is authorized to limit or exclude subscription rights of shareholders and to allocate them to third parties if the new shares are to be used for the acquisition of companies, parts of companies, equity stakes or the financing of such transactions, to enable a participation of strategic partners or investors or for the fast and flexible raising of equity capital through a placement of shares that would be difficult to implement with subscription rights. Conditional capital On 11 April 2013, the General Assembly of Shareholders has approved the proposal of the Board of Directors to create conditional capital up to CHF 6.75 million through the issuance of up to 1.35 million fully paid bearer shares with a nominal value of CHF 5 each through the exercise of option rights which shall be granted to the key employees and members of the Board of Directors of the Company or Group companies according to a stock option plan as adopted by the Board of Directors.

Capital structure

Capital as at 31 December 2013 Number of

shares

Par value per

share in CHF

Total

in CHF

Ordinary share capital 12'706'163 5.00 63'530'815

Authorized capital (until 11 April 2015) 976'408 5.00 4'882'040

Conditional capital 1'350'000 5.00 6'750'000

Changes in share capital over the last three years Number of

shares

Par value per

share in CHF

Total

in CHF

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

Changes in 2011 - - -

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

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

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

Capital increase 15 May 2013 2'823'592 5.00 14'117'960

As at 31 December 2013 12'706'163 5.00 63'530'815

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CORPORATE GOVERNANCE Ordinary Shares The issued bearer shares are fully paid in. Participation and dividend right certificates I.P.S. Innovative Packaging Solutions AG has issued neither participation certificates nor dividend right certificates. Convertible bonds As per 31 December 2013 there are no convertible bonds outstanding.

Share option rights In 2011 an option program for the members of the Board of Directors, Group Management and key employees was launched. As at 31 December 2013 a total of 975’058 (31.12.2012: 466’750) share option rights were allocated as per the table below corresponding to 7.674% of the outstanding ordinary share capital of the Company as at 31 December 2013 (capital registered in the commercial register). Detailed information regarding allocation to members of the Board of Directors and the Group Management can be found on page 45 of the Annual Report.

Outstanding options as of 31 December 2013

Number of

options

Excercise price in

CHF Ratio Vesting period

347'077 8.25 1 : 1 2 years 07.09.2013 - 06.09.2015

123'531 9.10 1 : 1 2 years 23.05.2014 - 22.05-2016

38'150 9.10 1 : 1 2 years 04.07.2014 - 03.07.2016

21'800 9.10 1 : 1 2 years 24.09.2014 - 23.09.2016

54'500 9.00 1 : 1 2 years 19.02.2015 - 18.02.2017

390'000 9.00 1 : 1 2 years 09.12.2015 - 08.12.2017

Excercise period

For the options granted before May 2013 the exercise price and number of options allocated have been adjusted to compensate for the dilution resulting from the capital increase of 15 May 2013. Board of Directors The duties of the Board of Directors are defined in the Swiss Code of Obligations, the Articles of Association and the Organizational Regulations. The primary duties of the Board of Directors are: • Strategic direction and management of the IPS

Group, • Determining the organization, appointing and

dismissing members of Group Management and other key executives,

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

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

• Determining principles of risk management and internal controls.

The Board of Directors delegates all management duties to the Group Management to the extent permitted by law and by the Articles of Association. The Organizational Regulations contain detailed rules for the delegation of competencies. The remit of the Board of Directors covers decisions on the acquisition and sale of shareholdings, strategic partnerships, and investments not included in the budget or exceeding a certain significance threshold. Changes to the Board of Directors In 2013 there were no changes to the Board of Directors.

Election and term of office The members of the Board of Directors are elected by the General Meeting for a term of two years, on completion of which they can be re-elected. A member of the Board of Directors must resign at the Annual General Meeting at which the Annual Report for the financial year in which he reached the age of 65 is approved; however, in particular cases the Board may derogate from this rule by an unanimous decision. Internal Organization The Board elects the Chairman from its members and appoints the Secretary. As at 31 December 2013 the Board is organized as follows: Dr. Alexander Vogel, Chairman, non-executive Quint Kelders (CEO), Member, executive Daniel Gutenberg, Member, non-executive Benno Zehnder, Member, non-executive Nicolas Mathys, Member, non-executive John McKernan, Member, non-executive The Chairman convenes a meeting of the Board of Directors as often as the Group’s business requires, but at least four times a year. The meetings are chaired by the Chairman who also sets the agenda. Each member of the Board of Directors can request the convocation of a meeting and the inclusion of an item in the agenda. Minutes are taken of the discussions and resolutions at the meetings. The Board of Directors convenes for ordinary half-day meetings. In the calendar year 2013, the Board held 15 meetings, of which 10 via telephone conference. The Board meetings usually lasted around 4 hours, telephone conferences around 1 hour.

9

CORPORATE GOVERNANCE Committees Two committees were set up to support the Board of Directors: the Audit Committee and the Compensation Committee. The committees meet regularly and are required to prepare minutes of their meetings and recommendations for perusal at the meetings of the Board of Directors. The committees notify the full Board of Directors of important matters immediately. Audit Committee The Audit Committee’s primary task is to maintain a comprehensive and efficient auditing system for I.P.S. Innovative Packaging Solutions AG and the IPS Group. The committee also approves the focal points of the audits and reviews the audit results, accounting principles and financial control mechanisms. The Audit Committee‘s decisions are subject to approval by the full Board of Directors. The members of the Audit Committee are the Board members Benno Zehnder (Chairman) and Daniel Gutenberg. The CFO also attends all meetings as well as representatives of the external auditors as required. Two meetings were held in 2013, both of which were attended by the external auditor. Compensation Committee The Compensation Committee submits proposals to the full Board of Directors concerning the compensation (including employee participation schemes) of the members of the Board of Directors and Group Management. Details of the IPS Group’s remuneration policy can be found on page 44. The members of the Compensation Committee are the Board members Dr. Alexander Vogel (Chairman) and Benno Zehnder. Four meetings were held in 2013. Transactions with parties related to the Board of Directors Details of transactions with related parties can be found in Note 20 (page 33 of the Annual Report). Information and control instruments vis-à-vis Group Management The CEO and the CFO inform the Board of Directors about current business performance and key projects at each board meeting. On a monthly basis the CFO prepares a consolidated income statement and provides it with respective comments and key information on the liquidity status and major risk positions to the Board of Directors. All members of the Board of Directors may request to see any information relevant to the Company. Group risk analyses are conducted on a regular basis by the Audit Committee. The main risks are analysed at least once a year at the Board of Directors level. Group Management Members of Group Management and their activities CEO and CFO are elected by the Board of Directors at the recommendation of the Compensation Committee. The members of Group Management also have positions in the Boards of Directors of the IPS Group’s subsidiaries. Change in Group Management In 2013 the Group Management remained unchanged.

Management Contracts As at 31 December 2013 and during the reportable period, there have been no management contracts between the Group and companies or persons entrusted with management tasks. Compensations, shareholdings and loans Content and method of determining compensation and share ownership programs The Compensation Committee makes recommendations regarding the definition of the compensation programs for the members of the Board of Directors and Group Management, which are then submitted to the full Board of Directors for decision according to its reasonable discretion. The Members of the Board of Directors and the members of Group Management receive a fixed cash compensation and share option rights. As per 2013 all non-executive Members of the Board of Directors have opted to receive their total compensation in share option rights only until the Company reaches break even. Compensation to serving members of the Board of Directors and Group Management For details on compensation and shareholdings of members of the Board of Directors and Group Management, please refer to Note 8 of the Financial Statements of I.P.S. Innovative Packaging Solutions AG (page 44 of the Annual Report). Compensation to former members of the Board of Directors and Group Management No fees, salaries, credits, bonuses or non-cash benefits were paid to former members of the Board of Directors or Group Management in the year under review. Share allocations in the year under review No shares were allocated to members of the Board of Directors or members of Group Management and affiliated persons in the year under review. Ownership of shares and options by members of the Board of Directors and Group Management As at 31 December 2013, the non-executive members of the Board of Directors and affiliated persons living in the same household held a total of 802’214 shares in the Company (detailed information on page 45 of the Annual Report). As at 31 December 2013, the members of Group Management and affiliated persons living in the same household held no shares in the Company. In 2011 an option program for the members of the Board of Directors and the Group Management was launched. Each option entitles the holder to buy one share in I.P.S. Innovative Packaging Solutions AG at a fixed exercise price. Options allocated under the plan expire four years after the issue date and are subject to a vesting period of two years, during which period the options cannot be exercised. Options expire without compensation in case the employment is terminated during the vesting period.

10

CORPORATE GOVERNANCE As per 31 December 2013, a total of 923’258 share option rights in the Company were allocated to the members of the Board of Directors and the Group Management and affiliated persons living in the same household (detailed information on page 45 of the Annual Report). Additional fees and remuneration No additional fees or remuneration were paid out. Loans extended to directors and officers of the Company As at 31 December 2013, IPS Group had not granted loans to nor acted as guarantor for any members of the Board of Directors or to/for any members of Group Management or to/for any persons affiliated to said parties. Employee stock ownership and management incentive programmes IPS Group currently has no stock ownership programs for employees or management. Shareholders’ participation Voting-rights Each bearer share carries one vote at the Annual General Meeting. There are no shares affording preferential voting rights. There are no limits on transferability and the exercise of voting rights. Statutory quorums Provided there are no mandatory legal or statutory provisions to the contrary, the General Meeting of Shareholders takes its decisions and holds elections with an absolute majority of the valid votes cast. In a second ballot a relative majority is required. At least two-thirds of the votes represented, together with an absolute majority of the represented total share value are required for decisions on: 1. a change of the corporate purpose; 2. an increase of the voting power of existing voting

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

3. the introduction of more stringent transferability restrictions;

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

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

rights; 7. the relocation of the Company domicile; 8. dissolving the Company. As a general rule, an open ballot is used for decision making and elections. A secret ballot is held at the request of the Chairman, or if one or more shareholders representing a total of at least 10 percent of the voting shares request this. Convocation of the General Meeting of Shareholders The General Meeting of Shareholders is held annually, at the latest six months after the end of the fiscal year. It is convened by the Board of Directors. The invitation, together with the agenda and the motions, must be published at least twenty days before the meeting is to be

held. Shareholders representing shares with a total par value of at least CHF 1 million may request an item for discussion to be placed on the agenda. If this right for agenda proposals is exercised, the proposals have to be announced in time, in order that the inclusion on the agenda is reasonable for the Board of Directors. The Board of Directors considers a period of 60 days before the respective meeting as reasonable. One or more shareholders who, together, represent at least 10 percent of the share capital may ask the Board of Directors to call a General Meeting and/or request an item for discussion to be put on the agenda. Changes of control and defence measures Duty to make an offer The legal threshold of 33 1/3% of the voting rights, which obliges to make a takeover offer to the public stockholders is revoked in article 5bis (“opting out clause”) of the Company’s articles of association (as per the decision of the shareholders at the meeting on 7 May 2009). Clauses on changes of control There are no clauses on changes of control in favour of the members of the Board of Directors, Group Management or other employees. Auditing body Duration of the mandate and term of office of the lead auditor BDO AG, Zurich, have been the statutory auditors for I.P.S. Innovative Packaging Solutions AG since 2007. The statutory auditors are elected by the Annual General Meeting of Shareholders for a period of one year. The lead auditor is René Füglister, Swiss Certified Accountant. He has been responsible for this auditing mandate since 2011. Auditing fees In 2013, BDO AG as statutory auditors received audit fees for their services in the amount of CHF 101k (2012: CHF 85k). Additional fees In 2013, BDO AG received fees for tax compliance in the amount of CHF 25k (2012: CHF 11k). Furthermore, BDO AG received fees for activities relating to the capital increase of CHF 38k. Supervisory and controlling instruments towards the statutory auditors The Board of Directors’ Audit Committee assesses the performance, invoicing and independence of the external auditors and provides the Board of Directors with corresponding recommendations. The auditors provide Group Management and the Audit Committee with regular reports that set out the results of their work and recommendations. The Audit Committee annually reviews the scope of the external audit, the audit plans and the relevant procedures, and discusses the audit reports with the external auditors. The external auditors attended two meetings of the Audit Committee in 2013.

11

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

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

12

CORPORATE GOVERNANCE

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

Daniel Gutenberg, Swiss Citizen, Born 1966 Member of the Board of Directors (non-executive) Member of the Audit Committee Member since 12 May 2005, elected until the 2015 Annual General Meeting Present position General Partner of VI Partners AG, a Swiss venture capital company. Other activities Financier, coach and consultant of several start-up companies mainly in technical fields. In the context of those activities, he has been elected in several Boards of Directors, of which the following are the most essential: SonicEmotion AG and Gonnado AG. Furthermore, he is President of the Schweizer Technion Gesellschaft. Previous positions 1991 – 2001 Founder, Managing Director and sole shareholder of Gutenberg Communication Systems AG Until 2001: Member of the Executive Board and Country Manager of Telindus. Education and qualification Engineer in high frequency technology with a masters degree of CPLN Neuchâtel, Switzerland.

13

CORPORATE GOVERNANCE

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

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

14

CORPORATE GOVERNANCE

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

Members of the Group Management Quint Kelders, Chief Executive Officer (CEO) since 12 August 2010 and member of the Board of Directors since 29 June 2010 (for further information consult page 12). Frans van der Vorst, Citizen of the Netherlands, Born 1967, Chief Financial Officer (CFO) since 1 February 2011. Prior to his appointment, Frans van der Vorst worked as a corporate finance consultant at Witlox Van den Boomen in Waalre, the Netherlands. Before that, he held leading positions, inter alia as Financial Director of MeadWestvaco Calmar Netherlands B.V., a global packaging company. Frans van der Vorst holds a master’s degree in Business Economics from Tilburg University (Netherlands). Corporate Calendar 13 May 2014 Annual General Meeting of

Shareholders 2014 26 September 2014 Half year report 2014 27 March 2015 Financial reporting 2014 Important Web-links www.ips-grp.com Website of the IPS Group http://www.ips-grp.com/en/investor-relations/financial-news/ Ad-hoc-Information http://www.ips-grp.com/en/investor-relations/investor-relations-contact/ Registration in the mailing-list info@ips-grp.com Contact address

15

FINANCIAL REPORTING 2013

16

17

TABLE OF CONTENTS

Information on IPS bearer shares 18

Consolidated income statement 19

Consolidated balance sheet 20

Consolidated cash flow statement 21

Consolidated statement of changes in equity 22

Notes to the consolidated financial statements 23

Report of the statutory auditor 38

Income statement 39

Balance sheet 40

Notes to the financial statements 41

Proposed appropriation of available earnings 47

Report of the statutory auditor 48

Corporate calendar and addresses 49

18

INFORMATION ON IPS BEARER SHARES

Ticker: IPS

ISIN Code: CH 0002013826

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

Packaging Solutions AG increased its capital through contribution in kind by I.P.S. Holding B.V.

Until that moment, the operating activity of the group was trading with Memory-modules.

2009 2010 2011 2012 2013

Number of issued shares 1'887'390 8'987'571 8'987'571 9'882'571 12'706'163

Par value per share in CHF 5.00 5.00 5.00 5.00 5.00

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

Net result of the Group per share in CHF 0.22 -0.37 -0.46 -0.74 -0.66

Market prices (Closing prices Zürich)1

Highest price (CHF) 9.98 9.20 10.00 12.80 10.65

Lowest price (CHF) 6.00 6.01 7.53 7.85 8.00

Closing price as at 31 December (CHF) 7.52 8.10 9.17 10.00 8.80

Market capitalization as at 31 December (million CHF) 14.19 72.80 82.42 98.83 111.81

1 Source: www.six-swiss-exchange.com

Investor Relations

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

19

CONSOLIDATED INCOME STATEMENT

in TEUR in TEUR

Notes 2013 2012

Net sales 4 954 159

Other operating income 419 449

Profit from disposal of tangible fixed assets - -

Change in inventory of finished and semi finished goods 298 285

Operating income 1'671 893

Raw material expense -1'088 -834

Personnel expense 5 -2'365 -1'966

Other operating expense 6 -2'253 -2'183

Operating expense -5'706 -4'983

Earnings before interest, taxes, depreciation and amortization (EBITDA) -4'035 -4'090

Depreciation of tangible fixed assets 12 -1'095 -738

Amortization of intangible assets 13 -777 -777

Earnings before interest and taxes (EBIT) -5'907 -5'605

Financial result 7 -337 -364

Earnings before taxes (EBT) -6'244 -5'969

Income taxes 8 - -

Net result -6'244 -5'969

Net result per share in EUR 9 -0.54 -0.62

20

in TEUR in TEUR

Assets Notes 31.12.2013 31.12.2012

Cash and cash equivalents 443 138

Trade accounts receivable 650 63

Other receivables 10 557 489

Inventories 11 1'355 559

Prepayments and accrued income 172 130

Current assets 3'177 1'379

Other receivables 10 4'878 1'887

Tangible fixed assets 12 5'010 5'247

Intangible assets 13 8'186 5'703

Non current assets 18'074 12'837

Total assets 21'251 14'216

Liabilities and shareholders' equity

Financial liabilities

Bank overdrafts 16 406 422

Short term portion of financial liabilities 16 904 908

Trade accounts payable 14 3'094 1'213

Other current payables 15 140 54

Accrued liabilities and deferred income 249 331

Current liabilities 4'793 2'928

Financial liabilities* 16 7'603 10'410

Provisions 17 81 83

Non current liabilities 7'684 10'493

Liabilities 12'477 13'421

Share capital 18 48'566 37'251

Capital reserves 18 -20'977 -23'600

Cumulative translation adjustments -263 -548

Accumulated losses -18'552 -12'308

Shareholders' equity 8'774 795

Total Liabilities and Shareholders' equity 21'251 14'216

* thereof subordinated 4'933 3'721

CONSOLIDATED BALANCE SHEET

21

CONSOLIDATED CASH FLOW STATEMENT

in TEUR in TEUR

Notes 2013 2012

-6'244 -5'969

1'872 1'515

Profit from disposal of tangible fixed assets 0 0

220 268

-4'152 -4'186

-588 -12

-70 -92

-804 -333

-25 44

1'896 464

86 35

118 118

-78 124

-3'617 -3'838

Investments -1'176 -877

Disposals 60 37

Change in long term receivables from joint venture 10 -3'088 -1'474

-4'204 -2'314

Change in current financial liabilities third parties -14 -14

Change in shareholder loan 1'767 976

Change in long-term financial liabilities 1'370 1'137

Capital paid in at capital increase 18 5'005 4'013

8'128 6'112

307 -40

138 176

307 -40

-1 2

443 138

-59 -80

Received interest payments (included in Cash flow from operating activities) 7 19

Change in accrued liabilities and deferred income

Net result

Depreciation, impairments and amortization

Other positions with no impact on liquidity

Operating cash flow

Change in trade accounts receivable

Change in other receivables

Change in inventories

Change in prepayments and accrued income

Change in trade accounts payable

Change in other current payables

Paid income tax and received tax refunds (net)

Cash flow from operating activities

Tangible and intangible assets

Cash flow from investing activities

Cash flow from financing activities

Total Cash flow

Cash and cash equivalents as at 1 January

Total Cash flow

Impact of currency translation

Cash and cash equivalents as at 31 December

Paid interest (included in Cash flow from operating activities)

22

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Number of

shares in TEUR in TEUR in TEUR in TEUR in TEUR in TEUR in TEUR

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

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

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

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

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

Capital increase 15 May 2013 2'823'592 11'315 3'395 - 3'395 - - 14'710

Equity transaction cost - - -772 - -772 - - -772

Net result of the period - - - - - - -6'244 -6'244

Exchange differences - - - - - 285 - 285

Shareholders' equity at 31 Dec. 2013 12'706'163 48'566 12'419 -33'396 -20'977 -262 -18'553 8'774

Share capital Capital reserves IPS Group Accu-

mulated

exchange

differences

Accu-

mulated

lossesOther

Capital

reserves

Total

Capital

reserves

Capital

reserves

parent

company

(premium)

Total

Equity

The share capital of I.P.S. Innovative Packaging Solutions AG is held in Swiss Franc (CHF) and converted to Euro at historical rates. All shares issued as at 31 December 2013 are entitled to dividends and voting rights in relation to their par value at the meeting of shareholders.

Issued capital On 15 May 2013, 2’823’592 IPS bearer shares with a nominal value of CHF 5.00 each were issued from the authorised capital. These bearer shares have been subscribed respectively placed by the lead manager during the offering at an issue price of CHF 6.50. 1’108’819 IPS bearer shares have been paid for in cash and 1’714’773 bearer shares have been paid for through conversion of existing shareholder loans by the anchor shareholders Kelders and Mathys, and the contribution of a pump technology by major shareholder Kelders. As a result the Group equity was increased by EUR 13.9 million consisting of EUR 11.3 million share capital and EUR 2.6 million capital reserves. Shareholder loans amounting to EUR 5.7 million were converted into equity. Net of transaction cost, the capital increase generated EUR 5.0 million in new cash for IPS Group.

Authorized capital On 11 April 2013, the General Assembly of Shareholders has approved the proposal of the Board of Directors to issue new authorized capital up to a maximum of 3.8 million bearer shares and a maximum aggregate amount of CHF 19.0 million at any time up to 11 April 2015. After the capital increase of 15 May 2013, the remaining authorized capital amounts to a maximum of 976’408 bearer shares or CHF 4.9 million.

Conditional capital On 11 April 2013, the General Assembly of Shareholders has approved the proposal of the Board of Directors to create conditional capital up to a maximum CHF 6.75 million through the issuance of up to 1.35 million fully paid bearer shares with a nominal value of CHF 5 each through the exercise of option rights which shall be granted to the key employees and members of the Board of Directors of the Company or Group companies according to a stock option plan as adopted by the Board of Directors.

Authorized and conditional capital

in TEUR in TEUR

31.12.2013 31.12.2012

Authorized capital: bearer shares at CHF 5 par value 3'983 6'627

Conditional capital: bearer shares at CHF 5 par value 5'507 3'728

9'490 10'355

23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL POLICIES FOR THE CONSOLIDATED FINANCIAL STATEMENTS General I.P.S. Innovative Packaging Solutions AG is a Swiss limited company, domiciled in Baar, and is the parent company of the IPS Group. Basis of preparation The consolidated financial statements are based on the annual accounts of I.P.S. Innovative Packaging Solutions AG and its Group companies for the year ending 31 December 2013, prepared on an uniform basis. The Group prepares its accounts in compliance with the existing guidelines of Swiss GAAP ARR (Swiss Accounting and Reporting Recommendations) using the historical cost principle. The consolidated financial statements are based on economic values and present a true and fair view of the Company’s assets, financial position and results of operations and are in accordance with Swiss law. The annual financial statements are prepared under the assumption of going concern. The preparation of financial statements requires management to make estimates and other judgments that affect the reported amounts of assets and liabilities as well as the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual outcomes could differ from those estimates. Consolidated companies The consolidated financial statements include the annual accounts of I.P.S. Innovative Packaging Solutions AG as well as the Group companies in which I.P.S. Innovative Packaging Solutions AG directly or indirectly holds 50% or more of the voting rights or has a controlling influence by contractual agreement (control principle). Investments of 50% where the Group does not hold sole management control (joint ventures) are consolidated using the quotal-method and investments between 20% and 49% (associated companies) are accounted for using the equity method. Minority holdings of less than 20% are carried in the balance sheet at acquisition cost less any adjustments for impairment required by generally accepted accounting principles. The consolidated companies are listed in Note 26 to the Consolidated Financial Statements. Changes to the Group of consolidated companies Changes in 2013 On 10 September 2013 Airopack NV was incorporated as a 100% participation of Airolux AG, Bilten (Switzerland). Airopack NV is proportionally consolidated at 50%. Changes in 2012 On 2 July 2012, Airopack Competence Centre B.V., Vlijmen (the Netherlands) was incorporated as a 100% participation of Airolux AG, Bilten (Switzerland). Airopack Competence Centre B.V. is proportionally consolidated at 50%. Consolidation principles Capital has been consolidated using the purchase method. Assets and liabilities as well as expenses and income of the fully consolidated companies are included in their entirety; those of classical joint ventures with voting share of exactly 50% are included at 50%. Minority holdings in consolidated shareholders’ equity and Group profit are shown separately. Companies and businesses acquired during the course of the year are re-valued on their acquisition date on the basis of uniform Group principles and consolidated from that date onwards. Any goodwill or negative goodwill remaining after this revaluation (the difference between the purchase price and the total shareholders’ equity reported) is recognized under assets or liabilities and written off through the income statement over its useful life of which is usually five years. A provision in the amount of negative goodwill is written back over a maximum of five years. Companies sold during the year are excluded from the consolidated financial statements from the date of sale. Transactions with related parties Parties (individuals or legal entities) are considered to be related if one party has the ability to directly or indirectly exercise significant influence on the other party (organisation) in making financial or operating decisions. Organisations that are controlled directly or indirectly by the same related parties are also considered to be related. In addition, members of the Board of Directors and the Group Management or close members of their families are also considered related parties. As per the most recent information available to the Company, the major shareholder of I.P.S. Innovative Packaging Solutions AG, Jan Kelders has ownership of 59.25% of the voting rights and therefore exercises control over the IPS Group.

24

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

Currency exchange rates in EUR

Balance sheet Income statement /

Cash flow statement

31.12.2013 31.12.2012 2013 2012

0.8159 0.8284 0.8126 0.8297CHF

Currency

Income statement The consolidated income statement of IPS Group has been prepared pursuant to the period-based costing method. Cash flow statement Cash and cash equivalents are the basis for the cash flow statement. Cash flow from operating activities is calculated using the indirect method. Segment reporting The IPS Group currently operates in one business segment. Therefore, segment reporting is only performed according to geographic areas (see: Note 4).

2. SIGNIFICANT ACCOUNTING AND VALUATION POLICIES Income statement Net sales and revenue recognition The IPS Group records invoiced amounts for the sale of goods and services, net of sales taxes, discounts, rebates and return of goods, as net sales. Intercompany sales are eliminated on consolidation. Revenue from the sale of goods is recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer, which is usually on delivery to third parties. Revenue from services is generally recognized in the period the services are provided. Research and development Research costs are expensed as incurred. Development costs are capitalized only if the identifiable asset is commercially and technically feasible, can be completed, its costs can be measured reliably and will generate probable future economic benefits. Such capitalized intangibles are recognized at cost less accumulated amortization and impairment adjustments. Amortization starts when the capitalized asset is taken into use. These assets are amortized over their estimated useful life applying the straight line method. Impairment of assets The value of non-current assets is assessed on the balance sheet date for signs of impairment. If there is evidence of any lasting reduction in value, the realizable value is calculated (impairment test). If the book value exceeds the realizable value, the difference is recognized in the income statement.

25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Balance sheet Cash and cash equivalents Cash and cash equivalents include cash, balances in postal giro and bank accounts, and term deposits with a residual term of less than three months. They are valued at their par value. Trade accounts receivable / Other receivables These items include short-term receivables with a residual term of up to one year. These receivables are valued at their par values. Any value adjustments required are made when appropriate. Inventories Goods manufactured by the Group itself, merchandise and other stocks of goods such as raw materials, packaging materials, etc., are valued at the lower of cost or market price. Discounts are treated as reductions in purchase value. Intercompany profits are eliminated on consolidation. Tangible assets Tangible assets are valued at purchase cost less any depreciation required by generally accepted accounting principles. Company produced additions to plant and equipment are only capitalized if they are clearly identifiable and the costs reliably determinable, and they bring a measurable benefit to the Company over the course of several years. Depreciation is charged on a straight line basis over the economic life of the fixed asset. The useful lives of assets have been determined as follows: - Machinery and assembly lines 7 - 10 years - Molds 3 - 5 years - Other tangible assets 2 - 5 years Intangible assets This item includes patents, capitalized development costs and goodwill from the reverse acquisition. Intangible assets are capitalized if they are clearly identifiable and the costs reliably determinable and they bring a measurable benefit to the Company over the course of several years. Intangible assets are valued at purchase cost less amortization. Amortization is charged on a straight line basis over the expected useful life. Goodwill is amortized over a period of five years. Patents and capitalized development cost are amortized over a period of ten years. Deferred taxes The accrual of deferred income taxes is based on a balance-sheet oriented approach and essentially takes all future income tax effects into account. The deferred income tax to be accrued annually is calculated on the basis of the future tax rate valid on the balance sheet date for the tax subject in question. Deferred tax credit for loss carry-forwards is only established to the extent to which it is likely that future earnings with which loss carry-forwards can be offset will be available. As at the balance sheet date, no such deferred tax credit was capitalized. Payables Payables include current and noncurrent liabilities, as well as accruals and deferrals at par values. Provisions A provision is a potential future obligation arising from an event which occurs before the balance sheet date. A provision is recorded when it is judged probable that a liability has been incurred and the amount can be reliably estimated. Provisions are adjusted periodically as assessments change or additional information becomes available. Pension benefit obligations Employees and former employees receive various employee benefits and old age pensions which are provided in accordance with the laws of the countries in question. I.P.S. Innovative Packaging Solutions AG is a member of a collective occupational pension foundation. Both I.P.S. Research and Development B.V. and Airopack Competence Centre B.V. provide a defined contribution pension plan to all its employees. Airolux AG provides a fully insured occupational pension plan to its employees. All pension plans mentioned above are financed by both employer and employee contributions. With regard to the application of Swiss GAAP ARR 16 “Employee benefit obligations” we refer readers to Note 19 in the notes to the consolidated financial statements.

26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Contingent liabilities A contingent liability is recognized when there is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events or when there is a present obligation that cannot be recognized as a liability because it is not probable that an outflow of resources will be required, alternatively because the amount of the obligation cannot be measured with sufficient reliability. 3. FINANCIAL RISK MANAGEMENT IPS Group applies a central risk assessment system which covers both strategic and operational risks. The Board of Directors of I.P.S. Innovative Packaging Solutions AG conducts a review, at least once a year, of whether the risk governance and reduction measures in place are adequate for the Group’s needs. Ongoing monitoring of the risks is the responsibility of the Group management. Accounting and financial reporting risks are monitored and reduced through a suitable internal control system. The Group’s activities expose it to a variety of financial risks: market risks, credit risks and liquidity risks. The Group’s financial risk management program focuses on reducing financial risks with the potential to adversely affect its financial performance. Financial risk management is carried out by the CFO of the Group in close cooperation with the Group companies.

in TEUR in TEUR

4. SEGMENT REPORTING 2013 2012

Geographical segments

Net sales to third parties

Europe 737 35

Middle East and Africa -18 123

North America 235 1

Asia/Pacific - -

Latin America/Rest of the world - -

954 159

in TEUR in TEUR

5. PERSONNEL EXPENSE 2013 2012

Salaries -1'936 -1'574

Social security expense -327 -282

Other personnel expense -102 -110

-2'365 -1'966

in TEUR in TEUR

6. OTHER OPERATING EXPENSE 2013 2012

Research and development cost -236 -197

Charges for operation of the production facility -294 -280

Office rental and maintenance -442 -322

Marketing and public relations -459 -522

Audit, legal and consulting -352 -374

Other operating cost -470 -488

-2'253 -2'183

27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

in TEUR in TEUR

7. FINANCIAL RESULT 2013 2012

Interest income 28 44

Other financial income 0 0

Financial income 28 44

Interest expense third parties -228 -229

Interest expense related parties 20 -72 -143

Other financial expense -6 -10

Financial expense -306 -382

Financial result (net) -278 -338

Exchange (loss) / gain -59 -26

Total Financial result -337 -364

in TEUR in TEUR

8. INCOME TAXES 2013 2012

Current income taxes - -

Change in deferred taxes - -

0 0

in TEUR in TEUR

31.12.2013 31.12.2012

Expiry of unused tax loss carryforwards

tax loss

carryforwards

theoretical tax

assets

(not

capitalized)

tax loss

carryforwards

theoretical tax

assets

(not

capitalized)

within five years 11'547 1'084 49'664 4'333

over five years 12'914 1'968 9'431 1'267

24'461 3'052 59'095 5'600

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

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

be used in the foreseeable future. The existing corporate and financing structure severely limits or makes impossible

the use of existing tax loss carryforwards in the future. This fact and taking into consideration possible tax-relevant

developments in earnings of individual subsidiaries have led to the conclusion that utilization of tax loss carryforwards in

the foreseeable future cannot be expected with a sufficient degree of probability and that thus the conditions for

capitalizing any deferred tax assets are not met. The gross values of unused tax loss carryforwards which have not

been capitalized expire as follows:

28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

9. EARNINGS PER SHARE

Earnings per share is calculated by dividing the IPS Group's net result for the year by the average number of shares

outstanding (issued shares less treasury shares).

The exercise of stock options will not have a dilutive effect on the earnings per share.

in TEUR in TEUR

2013 2012

Net result for the year -6'244 -5'969

Weighted average number of shares outstanding 11'669'557 9'682'052

Basic earnings per share in EUR -0.54 -0.62

in TEUR in TEUR

10. OTHER RECEIVABLES 31.12.2013 31.12.2012

Receivable from German Tax authorities1

430 527

Value added tax receivables 215 229

Other receivables from third parties 227 146

Other receivables from joint venture 4'563 1'474

5'435 2'376

557 489

4'878 1'887

5'435 2'376

in TEUR in TEUR

Receivable from German Tax authorities 31.12.2013 31.12.2012

Net present value at 1 January 527 620

Receipt of annual installment -118 -118

Interest accrual 21 25

Net present value at 31 December 430 527

Current (< 1 year)

Long-term (> 1 year)

1 This receivable represents corporate tax receivables from the German Tax authorities which have been assigned to

I.P.S. Innovative Packaging Solutions AG by former COS Group companies. The receivables are paid out by the

German Tax authorities in 10 annual installments from 2008 to 2017. The amount shown is the net present value of the

remaining installments, discounted at a discount rate of 4.2%.

in TEUR in TEUR

11. INVENTORIES 31.12.2013 31.12.2012

Raw materials and consumables 563 259

Semi-finished goods 486 193

Finished goods 306 107

1'355 559

29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. TANGIBLE FIXED ASSETS in TEUR

Machinery & Molds Other tangible Total

assembly lines assets

Purchase value at 1.1.2012 2'482 1'095 242 3'819

Transfer within group of consolidated companies1

- - - 0

Additions 1'218 635 449 2'302

Disposals - -37 - -37

Exchange differences 26 8 1 35

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

Transfer within group of consolidated companies1

-375 375 -542 -542

Reclassifications -466 13 453 0

Additions 701 112 604 1'417

Disposals -71 - -29 -100

Exchange differences -31 -18 -6 -55

Purchase value at 31.12.2013 3'484 2'183 1'172 6'839

Accumulated depreciation at 1.1.2012 -54 0 -79 -133

Transfer within group of consolidated companies1

- - - 0

Ordinary depreciation -339 -311 -88 -738

Disposals - - - 0

Exchange differences - - -1 -1

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

Transfer within group of consolidated companies1

140 -147 100 93

Ordinary depreciation -522 -337 -236 -1'095

Disposals 20 - 20 40

Exchange differences 1 3 1 5

Accumulated depreciation at 31.12.2013 -754 -792 -283 -1'829

Net book value at 1 January 2012 2'428 1'095 163 3'686

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

Net book value at 31 December 2013 2'730 1'391 889 5'010

in TEUR in TEUR

Notes 31.12.2013 31.12.2012

Fire insurance values 7'438 7'545

Assets pledged to secure a financial liability 16 839 1'319

Assets included in financial lease 16 1'575 1'417

1 These amounts arise from the fact that assets have been transferred from group companies that are consolidated at

100% to group companies that are consolidated at 50% and vice versa.

Virtually all tangible fixed assets are used for the assembling and filling of Airopack. The recoverability of these values depends on future sales. As the Group Management believes in the realization of the business plan the valuation is based on the going concern principle. Should the business plan not be realized as expected, a significant value adjustment would be required. These conditions indicate the existence of a material uncertainty that may cause significant doubt about the valuation.

30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13. INTANGIBLE ASSETS in TEUR

Development Patents Goodwill Total

cost

Purchase value at 1.1.2012 5'080 721 940 6'741

Additions - - - 0

Disposals - - - 0

Exchange differences 5 - - 5

Purchase value at 31.12.2012 5'085 721 940 6'746

Additions - 3'250 - 3'250

Disposals - - - 0

Exchange differences -4 13 - 9

Purchase value at 31.12.2013 5'081 3'984 940 10'005

Accumulated amortization at 1.1.2012 0 0 -266 -266

Ordinary amortization -506 -83 -188 -777

Disposals - - - 0

Exchange differences - - - 0

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

Ordinary amortization -506 -83 -188 -777

Disposals - - - 0

Exchange differences 1 - - 1

Accumulated amortization at 31.12.2013 -1'011 -166 -642 -1'819

Net book value at 1 January 2012 5'080 721 674 6'475

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

Net book value at 31 December 2013 4'070 3'818 298 8'186 Development costs and patents represent capitalized expenses for patents and external and internal development costs relating to the Airopack (EUR 4.5 million) and Airopump (EUR 3.3 million) technology. The development cost and patents are amortized over a period of ten years starting from the moment of operational use of the technology. The recoverability of these values depends on future sales. As the Group Management believes in the realization of the business plan, the valuation is based on the going concern principle. Should the business plan not be realized as expected, a significant value adjustment would be required. These conditions indicate the existence of a material uncertainty that may cause significant doubt about the valuation. Goodwill represents the premium on I.P.S. Innovative Packaging Solutions AG in the reverse acquisition which mainly consists of the value for the listing on the SIX Swiss Exchange. The goodwill is amortized over a period of five years. The intangible assets are checked at the balance sheet date for signs of impairment losses. Group management conducts the impairment test by means of a Discounted Cash Flow calculation, applying a discount rate of between 9.1% and 10.7%, on the most recently updated version of its business plan. However, given the fact that IPS Group is currently still in the start-up phase several assumptions underlying the business plan cannot yet be validated by actual achieved results. In case Group Management's assumptions on timing of expected revenue's and/or expected EBIT-Margins would prove to be incorrect, a significant value adjustment would be required.

31

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

in TEUR in TEUR

14. TRADE ACCOUNTS PAYABLE Notes 31.12.2013 31.12.2012

To third parties 3'094 1'213

To related parties 20 0 0

3'094 1'213

in TEUR in TEUR

15. OTHER CURRENT PAYABLES Notes 31.12.2013 31.12.2012

To third parties 140 54

To related parties 20 0 0

140 54

in TEUR in TEUR

16. FINANCIAL LIABILITIES 31.12.2013 31.12.2012

Current financial liabilities

Bank loans 1

406 422

Non-current financial liabilities in TEUR

Current Non-current Total Average

interest rate

Residual term Residual terms

up to one year 1 to 5 years

2013

Loan from third parties 2

509 6'598 7'107 2.8%

Loan from shareholders - - 0 3.8%

Financial lease obligations 395 1'005 1'400 2.8%

904 7'603 8'507 2.8%

2012

Loan from third parties 2

514 5'291 5'805 2.9%

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

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

908 10'410 11'318 3.2% 1 Thereof TEUR 406 (31.12.2012: TEUR 422) secured with a personal bank guarantee from the major shareholder (see

Note 20). 2 Thereof subordinated EUR 4.9 million (31.12.2012: EUR 3.7 million) to all other current and future liabilities.

To secure loans of EUR 0.7 million (31.12.2012: EUR 1.2 million) within this position, machinery with a carrying amount of EUR 0.8 million (31.12.2012: EUR 1.3 million) has been pledged (see Note 12).

32

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17. PROVISIONS in TEUR

Other provisions

As at 1 January 2012 81

Created 0

Released (income statement) 0

Utilized 0

Exchange differences 2

As at 31 December 2012 83

Created 0

Released (income statement) 0

Utilized 0

Exchange differences -2

As at 31 December 2013 81

in TEUR in TEUR

Term of provisions 31.12.2013 31.12.2012

Current provisions (< 1 year) 0 0

Long-term provisions (> 1 year) 81 83

81 83 Other provisions include provisions for pending legal matters and other matters where outflows of funds are likely. In all events, the likelihood of such events occurring has been assessed as being well above 50%. In the periods under review there existed no provisions for pension liabilities and no restructuring provisions. Tax provisions are included in the balance sheet position "tax liability". 18. CAPITAL STRUCTURE Issued capital On 15 May 2013, 2’823’592 IPS bearer shares with a nominal value of CHF 5.00 each were issued from the authorized capital. These bearer shares have been subscribed respectively placed by the lead manager during the offering at an issue price of CHF 6.50. 1’108’819 IPS bearer shares have been paid for in cash and 1’714’773 bearer shares have been paid for through conversion of existing shareholder loans by the anchor shareholders Kelders and Mathys, and the contribution of a pump technology by major shareholder Kelders. As a result, the Group equity was increased by EUR 13.9 million consisting of EUR 11.3 million share capital and EUR 2.6 million capital reserves (net of transaction cost). Shareholder loans amounting to EUR 5.7 million were converted into equity. Net of transaction cost, the capital increase generated EUR 5.0 million in new cash for IPS Group. Authorized capital On 11 April 2013, the General Assembly of Shareholders has approved the proposal of the Board of Directors to issue new authorized capital up to a maximum of 3.8 million bearer shares and a maximum aggregate amount of CHF 19.0 million at any time up to 11 April 2015. After the capital increase of 15 May 2013, the remaining authorized capital amounts to a maximum of 976’408 bearer shares or CHF 4.9 million. Conditional capital On 11 April 2013, the General Assembly of Shareholders has approved the proposal of the Board of Directors to create new conditional capital up to CHF 6.75 million through the issuance of up to 1.35 million fully paid bearer shares with a nominal value of CHF 5 each through the exercise of option rights which shall be granted to the key employees and members of the Board of Directors of the Company or Group companies according to a stock option plan as adopted by the Board of Directors.

33

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. PENSION BENEFIT OBLIGATIONS in TEUR

Economic benefit / economic obligation

31.12.2013 31.12.2013 31.12.2012

Pension schemes without excess/insufficient cover - - -

Pension schemes with insufficient cover - - -

Total 0 0 0

Economic benefit / economic obligation

and pension expense

2013 2013 2013 2012

Pension schemes without excess/insufficient cover 0 81 81 44

Pension schemes with insufficient cover 0 2 2 8

0 83 83 52

Excess /

insufficient

cover as per

Swiss GAAP

ARR 26

Economic benefit / obligation

for the Group

Change vs.

prior year /

taken to the

income state-

ment in the FY

Contributions

limited to the

period

Pension expenses (included

in personnel expense)

20. TRANSACTIONS WITH SHAREHOLDERS AND RELATED PARTIES

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

Transactions with shareholders and with parties controlled by shareholders

•

Issued Capital

in TEUR in TEUR

Expense 2013 2012

Interest expense (not paid out but accrued to the shareholders loan) -60 -143

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

Shareholder loans

Balance as at 1 January 3'637 4'965

Conversion to capital -4'864 -2'303

Settlement trade accounts payable - 175

Additional loan 1'306 563

Interest (3.75 %) 60 143

Exchange differences (loan is mainly denominated in CHF) -139 94

Balance as at 31 December 0 3'637

Jan Kelders, Riederalp (Switzerland), major Shareholder of I.P.S. Innovative Packaging Solutions AG and father of

Quint Kelders (CEO IPS Group). As per the most recent information available to the Company, Jan Kelders has

ownership of 59.25% of the voting rights and therefore exercises control over the IPS Group.

In the capital increase of 15 May 2013, the Company issued to Jan Kelders 933'675 bearer shares (representing EUR

4.9 million) against set-off of his existing shareholder loan and further 615'384 bearer shares for his contribution in kind

of a pump technology valued at EUR 3.3 million.

34

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

in TEUR in TEUR

Off Balance Sheet positions: 2013 2012

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

- due within one year 80 78

- due between one and five years 20 100

Total 100 178

406 422

•

Issued Capital

Expense

Interest expense (not paid out but accrued to the shareholders loan) -12 -1

Shareholder loans

Balance as at 1 January 415 0

Conversion to capital -863 -

Additional loan 733 414

Repayment loan -275 -

Interest (3.75 %) 12 1

Exchange differences (loan is denominated in CHF) -22 -

Balance as at 31 December 0 415

In the capital increase of 15 May 2013, the Company issued to anchor shareholder Nicolas Mathys 165'714 bearer

shares (representing EUR 0.9 million) against set-off of his existing shareholder loan.

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

company

Nicolas Mathys, Baar (Switzerland), holds 5.87% of the shares issued by I.P.S. Innovative Packaging Solutions

AG as at 31 December 2013.

Transactions with members of the Board of Directors and Group Management

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

Remuneration in cash 438 471

Social security contributions 17 21

Benefits in kind 24 17

479 509 Options In 2011, an option program for the members of the Board of Directors and the Group Management was launched. Each option entitles the holder to buy one bearer share in I.P.S. Innovative Packaging Solutions AG at a fixed exercise price. Options allocated under the plan expire four years after the issue date and are subject to a vesting period of two years, during which period the options cannot be exercised. Options expire without compensation in case the employment is terminated during the vesting period. As per 31 December 2013 a total of 923'258 (31.12.2012: 466'750) share option rights in the Company were allocated to the members of the Board of Directors and the Group Management and affiliated persons living in the same household. For further details we refer to page 45 of the Annual Report.

35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

in TEUR in TEUR

Transactions with other related parties 2013 2012

• meyerlustenberger | lachenal Rechtsanwälte, Baar (Switzerland)

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

Legal and notary costs 73 55

• ZSP Consulting AG, Baar (Switzerland)

Board member Benno Zehnder is a partner of ZSP Consulting AG

Office rent Baar 65 74

21. OFF-BALANCE SHEET LEASING / RENTAL LIABILITIES

Operating leases and rent commitments

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

in TEUR in TEUR

31.12.2013 31.12.2012

one year 448 316

one to five years 1'067 1'239

more than five years 0 0

1'5151

1'555

Due within

1 thereof related party: EUR 100k (31.12.2012: EUR 178k), see Note 20.

22. DERIVATIVE FINANCIAL INSTRUMENTS Currency forward contracts are used to hedge currency exposures. As at 31 December 2013, CHF/EUR forward contracts with a contract volume of EUR 1.9 million (31.12.2012: EUR 2.0 million) were outstanding. As at 31 December 2013, the replacement value amounted to 8 TEUR (31.12.2012: 0 TEUR) and has been booked to accrued income. All forward contracts were realized during January 2014, with the last one being realized on 22 January 2014. There have been no other derivative financial instruments. 23. CONTINGENT ASSETS AND LIABILITIES Earn-Out agreements In case of positive future results of the sold Memory business as well as in case of a positive outcome of a VAT-lawsuit of the former group company COS Distribution GmbH, (Austria) IPS Group participates in accordance with existing earn-out agreements. At the date of the financial statements, the Group had no other major contingent assets. Residual liabilities from the "old COS business" In the sales transactions of the old COS companies in 2010, I.P.S. Innovative Packaging Solutions AG guaranteed nothing but the transfer of the unrestricted ownership in the respective companies. However, there might be a residual risk due to the possibility of a company that was sold becoming insolvent in the future. In such a case, an insolvency administrator could challenge payments made from the insolvent company to IPS Group before the insolvency. If payments were made according to an existing obligation, if the paying company had not been insolvent at the time of payment and if the payment was made at least twelve months before insolvency, the entrusted German lawyers consider this risk to be remote. The last payments from sold companies to IPS group companies occurred at the end of 2009 and the beginning of 2010 with a total amount of EUR 2.7 million. Up until the date the 2013 annual accounts were approved, none of the companies sold in 2010 filed insolvency.

36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Pledge of future license and dividend payments In 2004, IPS Group acquired the rights to the basis technology (Pressure Control Device) of Airopack from a third party. The parties determined the purchase price according to the following earn-out model:

- 50.00% of the license income from the Airopack Business (without limitation in time) - 33.33% of dividend payments from Airolux AG (without limitation in time) - 33.33% of capital gains, should IPS Group sell its participation in Airolux AG (without limitation in time)

To safeguard the counterparty rights in the mentioned agreement, the transfer of the rights to the acquired base technology is subject to certain restrictions. Furthermore, the future license and dividend payments from Airolux AG to IPS Group are pledged to the seller of that base technology. In March 2013, IPS Group has entered into an agreement with the former owner, pursuant to which IPS has been granted the option to settle the aforementioned purchase price for a fixed amount of EUR 25 million. The newly negotiated purchase price can be paid no later than 31 December 2018, whereby it has been agreed that, within the fixed period, a certain amount per Airopack sold is paid as an advance payment. In case IPS Group has not paid off the agreed fixed amount of EUR 25 million until 31 December 2018, the earn-out model as originally agreed between the parties will revive. In 2013, IPS Group has paid 15 TEUR as advance payment (relating to the full calendar year 2012 and the first half year 2013) and as at 31 December 2013 IPS Group has accrued a liability of 12 TEUR (relating to the second half-year 2013) payable in the first quarter 2014. The accrued amount is included in the balance sheet position "Accrued liabilities and deferred income". Legal disputes IPS Group is involved in legal disputes in connection with ordinary operating activities. Although the outcome of these disputes cannot be predicted with certainty at present, IPS Group assumes that it will not have a major negative impact on business activity or the financial situation of the Group. Expected outgoing payments are provided for accordingly. 24. GOING CONCERN The consolidated 2013 income statement shows a net loss of EUR 6.2 million. The 2013 result reflects the operational cost of the production organisation set up to fulfil contracted sales volumes. Due to the lower than expected volume ramp up the absorption of the fixed organizational expenses could not be achieved. In the current phase of IPS Group’s development accurate forecasting of expected revenues from customer projects remains difficult. However, the Board of Directors and the Group Management are confident that in 2014 the operational business of the Group will achieve break-even. As at 31 December 2013, the available cash amounted to EUR 0.4 million. In January 2014, IPS Group received EUR 1.0 million in new cash generated as a result of the exercise of stock options from the conditional capital. The Board of Directors and Group management are confident that the IPS Group will be able to obtain sufficient financing and believes the Group is able to meet its targets over the next 12 months, even though unexpected delays in the start of customer projects cannot be ruled out. Nevertheless, the aforementioned conditions indicate the existence of a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern. 25. EVENTS AFTER THE BALANCE SHEET DATE From the accounting reference date until the consolidated financial statements were approved by the Board of Directors on 24 March 2014, the following major events occurred: - In January 2014, IPS Group received EUR 1.0 million in new cash generated as a result of the exercise of stock options from the conditional capital.

37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Company name Statutory seat Function Currency Capital Capital

share1

Capital

share1

31.12.2013 31.12.2012

I.P.S. Innovative Packaging Solutions AG Baar (CH) Holding CHF 63'530'815 100% 100%

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

Development

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

Trade

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

Airopack NV Wetteren (B) Production & EUR 61'500 50% n/a Trade

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

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

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

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

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

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

26. CONSOLIDATED COMPANIES

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

38

REPORT OF THE STATUTORY AUDITOR Report of the Statutory Auditor to the General Meeting of I.P.S. Innovative Packaging Solutions AG, Baar Report of the Statutory Auditor on the Consolidated Financial Statements As statutory auditor, we have audited the accompanying consolidated financial statements (pages 19 to 37) of I.P.S. Innovative Packaging Solutions AG, which comprise the consolidated balance sheet as at 31 December 2013, and the consolidated statement of income, consolidated