Part III - Security market trends: a fast-changing world General drivers of security market Growing security needs & favorable regulatory environment

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Part III - Security


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Video clipMorpho today


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Creating trust around the world

Philippe Petitcolin - Chairman & CEO Morpho

Thomas Chenevier - VP Products & Markets,

Morpho Identification

/ June 16, 2013 /


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Accelerated refocusing since 2007

2008

Acq

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Div

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2009

Contribution of Sagem Monetel to Ingenico

2011

Morpho now top 3 global player - €1.55bn 2012 revenue

2010

HLP

2012

Sale of 12.57% of Ingenico

Europe

Colombia/Peru

2013

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Morpho: world leader in security and identity

Identification Banking & Telco

Detection

Others

24%

BIOMETRIC TERMINALS

IDENTIFICATION SERVICES

IDENTIFICATION SOLUTIONS

SMART CARDS

PERSONALISATION SERVICES

HOLD BAGGAGE SCREENING EQUIPMENT

AIRPORT CHECKPOINT SOLUTIONS

MAINTENANCE SERVICES

TRANSPORT

LOTTERY TERMINALS

2012 revenue: €1.55bn

Total employees: 7,700

75% Government(incl. agencies and airports)

22%57%

15%

6%


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Morpho: significant revenue growth

Revenue growth including acquisitions

2007

2012

€0.6bn

€1.55bn

Acquisitions (2007-2012)

SDU ID (Netherlands) PRINTRAK (U.S.) GE HLP (US) L-1 ID solutions (U.S.) Carvajal Cards business (Colombia) Syagen Technologies(U.S.) CASSIS (Singapore) ABN Europe (France and Czech rep.)

+20% CAGR 2007-2012 includes + 11% CAGR for organic growth, better than market

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Identification Solutions

€4.8bn

€8.5bn

CAGR 2012-20E: 8%

#1 WW

SAFRAN

Source: in-house estimation, ABI-2012, IMS-2012

Major trends Needs from emerging countries to deliver a secure identity to their citizens (India, Indonesia, Kenya,

etc.) Development of new needs (biometrics in banking, mobile payments) beyond governmental

applications

Identification markets

New additional opportunities/

emerging markets

3M, NEC, Gemalto

Competition 2012 2020

> €4.0bn

2020E

Core market segments currently addressed by Morpho

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SIM cards€3.4bn

€5.7bn

CAGR 2012-20E: 6%

Note: Smart cards for Government & healthcare are included in the Identification segment Source: in-house estimation, ABI-2012

Major trends Booming smartphone and mobile internet create new authentication needs Bank cards migration to EMV (Eurocard, mastercard, Visa), starting with the US and China and

followed by India

Banking & Telco markets

Gemalto, Giesecke &

Devrient, Oberthur

SAFRAN Competition

#4 WW

2020E

> €1.1bn

Core market segments currently addressed by Morpho New additional opportunities/

emerging markets

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Source: in-house estimation, ABI-2012

Major Trends Upcoming regulations reinforce need for airport explosives detection:

o Hold baggage: EU mandatory requirement to screen baggage by Computer Tomography (CT) at first level

o Checkpoint: EU mandatory requirement to detect threats from Liquids and Gels o Detection of Home Made Explosives

Increasing passenger volumes and airport infrastructure

Detection markets

Smiths, Rapiscan (OSI Systems),

L3, Nuctech

SAFRAN

Competition

A leader in aviation

detection

Detection/ Aviation€4.6bn

CAGR 2012-20E: 8%

> €0.6bn2.4B€

2020E2012 2020

Core market segments currently addressed by Morpho New additional opportunities/

emerging markets

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Security market trends: a fast-changing world

General drivers of security market Growing security needs & favorable regulatory environment Continued terrorist threats, often linked to usage of forged identities

Evolution of the security market

a. Government budgets under pressure due to economic crisis Expanding demand for services rather than CAPEX: PPP model

a. New needs for secure identity management and biometrics beyond government Banking: customer identification, secure transactions, VIP services Digital identity: e-government, mobile payment, e-health

§ New technical developments open the way to new markets Facial recognition X-ray diffraction for checkpoint (XDi) Fast DNA analysis

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Morpho is well positioned to catch these opportunities

a. Unique ability to deliver large-scale operations services (PPP’s) Major track-record in carrying out large-scale enrolment operations Strong experience in operating government-outsourced identity management

systems

a. Expansion in non governmental security markets Banking domain offers opportunities for identity management, e-Identity

& access control Development of service-oriented SW platforms (e-Identity, TSM)

a. Technological leadership World leader in biometrics for fingerprint, face and iris Best-in-class detection technologies (CT, X-ray diffraction, mass

spectrometry) Only company able to build solutions based on all security technologies 1,600 employees in Research, Technology and Development

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Strong presence in the US market

MorphoTrust USA: market leadership in civil ID Driver license issuance solutions to 42 of 50 states (80% of U.S. driver

licences, 60M IDs issued per year) Nationwide network of over 1,200 enrolment centres Prime contractor for the new UES (Universal Enrolment Service), which

consolidates TSA multiple transportation security programs into a single service with convenient enrollment and registration locations

MorphoTrak : market leadership in law enforcement AFIS solutions in 28 states Supplier of biometrics technology to the FBI

MorphoDetection: market leadership in aviation security explosives detection

Installed based of more than 680 CT units across the US (60% of in-line installed base)

More than 3,800 Explosive Trace Detection units across U.S.(55% of installed base)

5-year non-exclusive CT contract from the U.S. TSA for up to $528M Multi-year TSA Service Contracts of $85M per year

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A successful PPP (Public Private Partnership)

Biometric ID Cards & e-passports in Chile Customer

Identification and Civil Registry Service

Service provided Training and equipment for enrolment campaign Personalization and delivery of biometric ID Cards

and e-passports Help-Desk, Back-office and eServices

Timeline November 2011: Signature of the 10-year PPP contract

Key facts Pay-per-document

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A successful PPP (Public Private Partnership)

Electronic identity documents in Albania Customer

Ministry of Interior Affairs

Service provided Enrolment of the population Personalization and delivery of biometric ID Cards

and e-passports On line digital ID services Pay-per-document

Timeline July 2008: Signature of the 5 year PPP contract April 2013: Renewal for 10 years

Achievements July 2013: 3.2M ID Cards and 2.6M passports

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A banking identity management program ITAU Bank, Brazil Customer

ITAU Bank, the largest private bank in Brazil

Service provided Provision of a large scale multi-biometric engine to secure

customer access to banking services and to reduce fraud

Timeline February 2011: Signature of the contract April 2012: 3 years maintenance contract signed till 2015

Key Facts Cross selling from banking network. The central system provided by Morpho is sized for 30M

persons (can handle all ITAU bank customers & employees) Additional prospects for biometric & identity services

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Benefits of PPP business model

Public Private Partnership modelPay per document model

Current model (turnkey and maintenance)50% system and 50% documents

1 2 3 4 5 6 7 8 9 10

PPP

Current Model

Cumulated cash flow comparison

Typical civil ID programme for 15M population country10 year contract

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MorphoPASS (Checkpoint of the future)Process view

1. Passengerenrolment & identification

4. Passenger & hold baggage

scanning

5. Automated border control

2. Security zoneaccess control

3. Passenger risk assessment

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MorphoPASS (Checkpoint of the future)Integrated passenger management for airports Unique integrated solution Combines high security and high

throughput Passenger identification and hold

baggage detection Interoperability with airport systems Overall risk management solution

Timeline Pilots in 2014 Certification in 2015

2020 Target More than 100 million airport

passengers treated per annum €120M+ revenue (50% recurring)

First deployment First deployment

20162016First deployment First deployment

20162016

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MorphoPASS (Checkpoint of the future)Breakthrough products

XDI

MorphoWayIris at-a-distance

Finger on-the-fly

Argus

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Finger-on-the-fly: World unique contactless on-the-fly fingerprint sensor

Unique features Contactless acquisition leads to :

Unique usability An answer to “coronavirus“

Fast & on-the-fly <1s !

Multiple use cases Border control flow management such

as Entry / Exit programs Defense Secure / fast access control Etc.

Product LaunchProduct Launch

Q1 2014Q1 2014Product LaunchProduct Launch

Q1 2014Q1 2014

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XDILiquid & Laptop explosive detection inside baggage

Unique technology Liquid and sheet explosive detection Liquids & laptops remain inside bags High detection, low false alarms Faster passenger throughput

Expected Expected deploymentdeployment

20152015

Expected Expected deploymentdeployment

20152015

High market prospects Designed to meet new EU

regulatory targets ECAC certification beginning in

Q4 2013 Adaptable to other threats

(narcotics)

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ARGUSReal time facial identification

Video screening solution Face extraction from video Real time face matching

Multiple use-cases Real-time identification

Black-listed people VIP, Customer

People tracking Ex-post localization

Illegal immigrants Urban violence Already in operationAlready in operation

New release in New release in 20142014

Already in operationAlready in operation

New release in New release in 20142014

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Morpho Way

Morpho Way Crossing time < 10 sec Modular & adaptive Multibiometrics Connected to airport / police systems High ROI for airport control police

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Intelligent radiation detection

2014 2015 2016 +

3D & Colour Photo on Polycarbonate cards

XRD-based checkpoint baggage screening systems

Fast DNA for forensic applications

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Post issuance card personalisation

Morpho e-documents Morpho DetectionMorpho Identification

Crime scene workstation

Integrated checkpoint solutions

Mass spectrometry-based explosive trace detection

Air cargo screening solutions

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Finger on-the-Fly

Digital & mobileidentity services platform

2013

Mobile biometric solutions

Video screening

Mobile Security: Embedded Secure Elements, Trusted environment, secured chipMobile payment:

NFC, TSM

Breakthrough security solutions roadmap

Biometric authentication & proof solutions

Privacy-by-design ID solutions

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Aadhaar project - delivering according to plan

2011-2013Trial phase

Extended to 400M ID numbers

Authentication enabled services

Morpho currently has leadership positions on all market segments

Significant majority of numbers generated by Morpho

Leadership position in biometric devices(enrolment and verification)

Logical access control solution deployedin major banks

Morpho well positioned on all market segments

Potential total value of addressable marketsgenerated by UID: €2Bn+

2013 onwardsProduction and Services phase

Backend biometric engines

Field enrolment services

Biometric devices

Authentication transaction terminals

Up to 1.2bn ID numbers

Backend biometric engines

Field enrolment services

Biometric devices

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Conclusion

New leadership team from July 1st, 2013

Morpho is highly adaptive in a growing and fast-changing security market

Morpho masters the key technologies needed to ensure its leadership

Over the years, Morpho should grow faster than market and provide operating margins above 10%

Ph.PetitcolinChairman & CEO Morpho

K.Bomba (US Citizen)In charge of US operations

CMD’13 / JUNE 16, 2013 /


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Q&A sessionSecurity


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Documents

Part III - Security market trends: a fast-changing world General drivers of security market Growing security needs & favorable regulatory environment