Gemalto Annual Report 2010 - Prepaid MVNO

Annual Report 2010
Extending the boundaries of
Digital Security

Our vision
Gemalto Annual Report 2010
01
Our vision
In an increasingly connected
society, Gemalto is the leader
in making digital interactions
secure and easy
02 Our business profile
04 Our segments
06 Our global presence
08 Chairman’s statement
09 Chief Executive’s review
12 Our strategy
14 The digital security market
20 Mobile communication
24 Machine-to-Machine
26 Secure transactions
30 Security
35 Others
Our vision Segmental review
Performance highlights ( * )
Revenue
€1,906m
+19%
(2009: €1,602m)
Net cash
€255m
-33%
(2009: €381m)
IFRS net profit
€167m
+42%
(2009: €118m)
Profit from operations ( ** )
€216m
+19%
(2009: €181m)
Cash generated by operating activities
€174m
-13%
(2009: 200m)
Adjusted basic earnings per share ( ** )
€2.56
+34%
(2009: €1.91)
Further information
Links to further information are illustrated
with the following markers:
For more information visit
www.gemalto.com
For more information see
pages XX-XX
Profit margin from operations ( ** )
11.3%
(2009: 11.3%)
Cash returned to shareholders
(share buy-back plus dividend)
€60m
-8%
(2009: €65m)
Return on Capital Employed (ROCE) ( ** )
16.0%
+70 basis points
(2009: 15.3%)
(
* ) The Company business in point of sales terminals was
disposed of on December 31, 2010. As per IFRS, the
contribution of this activity to the Company IFRS income
statement is reclassified for both 2009 and 2010 reporting
periods, and its net contribution is presented as a single
amount on the line item “Profit (loss) from discontinued
operations (net of income tax)”. As a result, financial
information for the 2009 reporting period differs from
previously reported figures.
(
** ) Adjusted financial information.
“Gemalto delivered a strong performance
in 2010, posting a new revenue record of
more than one billion euros in the second
semester. Secure Transactions and Security
reached their profit margin objective one
year ahead of schedule. Their significant
profit expansion strengthens and diversifies
our sources of profit as anticipated in our
2010-2013 plan. We continued to invest in the
development of our software and services
offers in Mobile Communication, doubling
revenue and delivering on several flagship
customer projects. The good performance
of the Machine-to-Machine business also
contributed to our profit in the Telecom
space. On this solid basis, and in particular
leveraging the acquisitions we’ve made, we
intend to continue to grow our revenue and
profit in 2011, and are bolstered in our ability
to deliver on the €300 million profit from
operations target in 2013.”
Olivier Piou
Chief Executive Officer
The Board report comprises the following sections:
‘Our vision’, ‘Segmental review’, ‘Group financial and
operating review’, and ‘Governance’.
Gemalto N.V. is a public company incorporated
in the Netherlands. It is headquartered in Amsterdam
and has subsidiaries around the world. Unless
otherwise specified, we refer to them as ‘Gemalto’.
38 Financial review
42 Principal risks
44 Our approach to sustainability
48 Governance at a glance
50 Corporate governance
56 Internal risk management
and control systems
59 Board compliance statement
60 The Board and the management
64 Report of the Non-executive
Board members
66 Remuneration
76 Consolidated financial statements
and notes
129 Company financial statements
and notes
144 Auditor’s report
145 Appropriation of profit
146 Post-closing events
147 Adjusted measures
150 Investor information
152 Glossary of digital security terms
Group financial and
operating review Governance Financial statements Other information
For more information see
pages 147-149

Our vision
02 Gemalto Annual Report 2010
Our business profile
03
Our business profile
Gemalto’s expertise spans the entire process for creating digital
security solutions. We develop operating systems and software, and
produce and personalize secure devices – of which we have already
delivered over 12 billion worldwide. We continue to innovate with new
forms and architectures, and to expand our software and services
portfolio for clients who want to provide secure, convenient applications
to their end-users.
Our vision
Innovation Solutions, software and services Markets Consumers
Digital scientists
1,400
Gemalto’s internationally renowned
team of security and cryptography
experts leads the way in the invention,
design and development of new
products, solutions and applications
certified to the highest standards.
4,200
Patents and patent applications
in our patent portfolio, representing
about 1,300 patent families.
103
New inventions first filed
in 2010.
Value-added services
€252m
value of services sold 2010
Personalization facilities
30
Software and services: Gemalto’s know-how and field experience mean we are
uniquely placed to offer a range of software and services that support our clients
in the delivery of digital security solutions to end-users. We also offer our clients a
wide range of training, consulting, integration and managed services.
Secure remote management: to ensure that end-users always enjoy up-to-date
information and services, our secure server software can connect with our devices
when they are in the field and connected to digital networks. For cellphones this is done
via Over-the-Air (OTA) platforms. ID badges, banking cards and USB tokens can be
updated when they are connected to a computer, often via a smart card reader.
Personalized devices: Gemalto is the trusted partner for the
individual personalization of millions of secure personal devices
daily, effected under various security certification schemes.
These include SIMs, banking cards, ePassports, eID cards
and so on. Particularly in the financial services sector, the
outsourcing of personalization is gaining momentum as the
worldwide deployment of cards increases and issuers look
to outsource this activity.
Telecommunications
Machine-to-Machine
Financial services and retail
Transport
Pay TV
1 billion+
EMV cards in circulation
(source: EMVco).
670 million
3G subscribers worldwide 2010
(source: Informa WCIS).
20 million
online banking customers use our solutions
(source: Gemalto).
R&D centers
13
Licensing of intellectual property
With the aim of promoting digital security
and convenience, we have developed
a number of licensing programs based
on our patent portfolio, including our
latest innovations.
Production sites
18
Partner network
Technology partners: develop products
(hardware and/or software) for the same
ecosystem as Gemalto’s. The combination
of our offers increases the value delivered to
the end-user. Technology partners and Gemalto
commit to making their products interoperable
and engage in co-marketing activities.
• A complete range of SIMs, MIMs and UICC cards.
• Smart cards and banking cards.
• Electronic passports, identity documents,
health cards, etc.
• USB dongles and other devices.
Original Equipment Manufacturers: embed and
resell Gemalto technologies in their own products with
their own branding.
Channel partners: resell and market Gemalto
products and services as distributors, value-added
resellers or system integrators. They belong to the
Gemalto Certified Partner community.
PASSPORT
Government programs
Online authentication
eBanking and eCommerce
Machines
30 million
M2M modules shipped 2010,
30% year-on-year growth (source: Gartner).
106 million+
M2M modules to be shipped 2015
(estimated number; source: Gartner).
For more information visit
www.gemalto.com

Our vision
04 Gemalto Annual Report 2010
Our segments
05
Our segments
Gemalto is at the heart of our evolving digital society. The freedom
to communicate, travel, shop, bank, entertain and work – anytime,
anywhere, and in ways that are convenient, enjoyable and secure –
has become an integral part of what people want and expect.
Gemalto meets these growing demands from billions of people
worldwide by offering our services to the following segments:
Everyone knows what a
SIM is – but do you know
what a MIM is?
If a SIM (Subscriber Identity Module) identifies a
person using a mobile phone, a MIM (Machine
Identification Module) identifies a machine when it’s
calling another machine. MIMs are used in the
Machine-to-Machine (M2M) market,
of which Gemalto is now the world leader.
Want to know more?
See a more detailed explanation on page 25.
Our vision
Segments Solutions Markets
Revenue ( * ) Profit from operations ( * ) Highlights
Mobile communication
For more information see
pages 20-23
A unique portfolio of solutions for Mobile Network
Operators (MNOs) to help serve their subscribers.
Telecommunications: the world’s leading supplier of
SIM and UICC cards to the mobile industry, as well as
client-server software and services. We deliver a vast
range of solutions including roaming, mobile payment
and data management to billions of customers via
hundreds of operators.
€981m
(2009: €888m)
€118m
53% 57%
(2009: €151m)
• Growth driven by software and services revenue
doubling to €152 million.
• Promising developments in new form factor products.
• Profit margin profile of traditional SIM card unchanged.
• Profit variation essentially resulting from operating
expenses investment in fast growing software and
services areas, consolidation effects of acquired
businesses and exceptional items.
Machine-to-Machine (M2M)
For more information see
pages 24-25
Powering the “internet of things” with fully certified,
high-quality M2M modules and terminals.
Highly durable Machine Identity Modules (MIMs)
as well as support for integration, software
and services.
M2M: the world’s leading supplier of modules that
connect machines to improve operations, productivity
and efficiency.
MIM: the leading supplier of MIMs, we provide three
families of secure, durable and long-lasting modules.
We also provide integration support for a broad range
of industries worldwide, such as utilities and automotive.
€81m €7m
4% 3%
• Integration of Cinterion now essentially complete.
• Solid 15% revenue growth (pro forma) driven by
the increasing use of cellular connectivity by
multiple industrial sectors.
• Profit from operations doubled (pro forma), directly
benefiting from the increased volume of sales,
and customer confidence.
Secure transactions
For more information see
pages 26-29
Innovative and secure payment solutions for
financial institutions and retailers.
Rapid, convenient, contactless electronic ticketing
(eTicketing) solutions for public transport.
Pay TV subscriber authentication and rights
management solutions.
Financial services and retail: the leading player
in this sector, we deliver a wide range of chip and
contactless payment solutions and services to
banks and other issuers with hundreds of millions
of end-users. We also offer a range of mobile
financial solutions.
Transport: we provide eTicketing solutions to
mass transit authorities.
Pay TV: we offer a range of Pay TV solutions to
secure access service providers.
€462m
(2009: €411m)
€41m
25% 20%
(2009: €12m)
• Growth driven by worldwide migration to EMV and
dual-interface contactless products.
• The drag on growth, caused both by the UK triennial trough
and the shift to standard mailing, faded in the second half
as anticipated.
• Significant improvement of gross margin as a result of
better product mix and high personalization service activity.
• Operating expenses increase in line with revenue
after accounting for the impact of acquisitions.
• The strong growth in the second half had excellent
fall through to profit.
Security
For more information see
pages 30-34
Highly secure, durable identity products,
solutions and services for governments.
Identity and Access Management (IAM) solutions
including online authentication for many large public
and private organizations, plus security solutions,
including multi-factor authentication and transaction
verification, for eBanking and eCommerce.
Licensing of our intellectual property rights.
Government programs: the world’s leading supplier
of ePassports, we also provide secure electronic
documents for eID, eHealth, eDriving license and
other eGovernment initiatives, as well as services
such as enrollment and issuance.
Online authentication: we provide strong
authentication solutions such as ID badges and their
management for enterprises, governments, banks
and other organizations, enabling them to better
control access to their digital and physical resources.
eBanking & eCommerce: our solutions let people
bank and shop online and conduct transactions
conveniently, with their privacy respected and secure
from fraud.
€318m
(2009: €236m)
€39m
17% 19%
(2009: €4m)
• 16% growth in Government Programs.
• 50% growth in IAM due to strong activity in eBanking.
• Patent licensing revenue above Company plan at
€33 million, productivity gains and scale effect lead
to 450 basis points gross margin improvement.
• Operating expenses down 620 basis points to 28%
of revenue.
• The operational leverage combining strong growth,
gross margin performance and operating expenses
control lifts profit margin from operations margin
12.4% in 2010, and to 6.8% when excluding the
patent contribution.
Others
For more information see
pages 35
Phone cards for public telephony operators.
Point-of-Sale (POS) terminals and services
for retailers.
We sell a vast range of pre-paid cards and solutions
for public telephony.
At the end of 2010, our POS terminals business
was sold to VeriFone (see page 35).
€19m
(2009: €24m)
€2m
1% 1%
(2009: €4m)
(
* ) ‘Our segments’ financial information and
highlights are based on adjusted financial
information for ongoing operations.
For more information see
pages 147-149

Our vision
06 Gemalto Annual Report 2010
Our global presence
07
Our global presence
Gemalto’s global presence is key to the way we serve our
clients, with our sites and facilities strategically spread across
every continent. Beyond this, it’s our worldwide network of
partners and our employees of some 90 nationalities who make
the difference. So wherever our clients are based, we’re not
far away and we speak their language.
Our vision
Key figures
North and South America Europe, CIS, Middle East and Africa Asia Pacific
Nationalities of our customers
190+
Headcount
21%
Headcount
49%
Headcount
30%
Nationalities of our employees
90
Countries worldwide with a site
in operation
45
Employees worldwide
10,000+
Revenue
26%
Argentina
Brazil
Canada
Columbia
Mexico
USA
Buenos Aires•
Curitiba•• Rio de Janeiro• São Paulo••
Burlington•• Montreal••
Bogota•
Cuernavaca•• Iztapalapa•• Mexico City•
Arlington• Austin•• Bellevue•
Montgomeryville••• New York• North Wales•
Key
•
Research & Development centers 13
Production sites 18
Personalization facilities 30
Sales and Marketing offices 87
Revenue
53%
Europe
Belgium
Czech Republic
Denmark
Finland
France
Germany
Hungary
Italy
Israel
Netherlands
Norway
Poland
Slovenia
Spain
Sweden
Turkey
UK
Brussels•
Prague••
Ballerup•• Copenhagen•
Vantaa••••
Boulogne-Billancourt• Gemenos/ La Ciotat••••
Meudon•• Pont-Audemer•• Sophia-Antipolis••
Tours•
Berlin•• Bocholt• Filderstadt••• Ismaning•
Cologne• Leipzig• Munich• Overath•
Budapest•
Agrate Brianza• Milan• Rome•
Netanya•• Tel Aviv•
Amsterdam•
Oslo•
Tczew••• Warsaw•
Sencur•
Barcelona••• Madrid•
Gothenburg•• Sollentuna• Stockholm••
Istanbul•
Fareham••• Ferndown• Havant• London•
St Helens• Warrington•
CIS, Middle East and Africa
Egypt
Cairo•••
Kazakhstan Almaty•
Oman
Muscat•
Pakistan
Lahore•
Russia
Moscow•••
Saudi Arabia Riyad•
Senegal
Dakar•
South Africa Cape Town•• Johannesburg•••
UAE
Dubai•
Revenue
21%
Australia
Bangladesh
China
India
Indonesia
Japan
Korea
Malaysia
New Zealand
Philippines
Singapore
Thailand
Vietnam
Sydney•• Melbourne•
Dhaka•
Beijing•• Changsha• Guangzhou• Hong Kong•
Qingdao• Shanghai••• Taipei, Taiwan••
Tianjin••• Zuhai•••
Bangalore• Gurgaon• Mumbai• New Delhi•
Noida•
Jakarta••
Tokyo•
Seoul•
Kuala Lumpur••
Auckland•
Manila•
Singapore••••
Bangkok•
Hanoi•
For more information visit
www.gemalto.com

Our vision
08 Gemalto Annual Report 2010
Chief executive’s review
09
Chairman’s statement
Chief Executive’s review
Our vision
Commendable
progress towards
ambitious goals
On track towards
our bold objective
Stock price at December 31, 2010
€31.845
+4%
(2009: €30.50)
Cash dividend paid in 2010 per share
€0.25
“Our business has the culture,
leadership and market
positions to thrive as the
global economy gets moving
again. Astute planning around
a clear strategy is delivering
well for our shareholders.”
A global identity
Gemalto delivered superior results in 2010, in
line with our plans for both organic and
non-organic growth. Given the economic
backdrop, this was a commendable
performance. Despite later signs of recovery,
both Western Europe and North America were
struggling last year. However, with Gemalto’s
global footprint, we were able to offset this
sluggishness with strong results in Africa, Asia
and South America.
Acting with authority
Gemalto can deliver in this way partly because
its management team has the ability and ambition
to exploit emerging opportunities – in new regions,
markets and technologies. During 2010 the
Board backed management in the acquisition
of five companies. Thanks to some carefully
considered and timely deals, we’ve broadened
the base for serving our customers, by
targeting companies which add specific
technologies, routes to market or new growth
areas such as M2M. These new capabilities
are critical building blocks for the future.
Secure for the long term
Another key factor in strengthening the company
is sound corporate governance. As a Board, we
devote time ensuring that we’re well informed
about the latest legislation and best practice in
this area. This translates into clear action plans
for our Board responsibilities. In 2010 we
published our first stand-alone sustainability
report. This is important to a company like
Gemalto, which helps its customers build and
protect mission-critical infrastructure.
In this environment, we are proud to have
a long-term, long-lasting vision.
A positive performance
That we are making progress is clearly
supported by our 2010 figures. Growing
revenues, rising EBITDA, improving margins and
strong cash generation all point to a business
that’s successful and well managed – though
this positive performance hasn’t yet been
reflected in our share price. Nevertheless, our
results allowed us to pay a dividend in 2010 –
the first in our history. This demonstrates that
Gemalto has the scale, the market positions and
the confidence to generate reliable cash flows.
Ambitious goals
In the light of these outcomes, I am optimistic
about the future. Our widening portfolio means
we’re in the right position to make the most
of the growth that’s re-emerging. Better still,
we sit at the heart of some exciting sectors
where demand for our solutions can only
increase. Shareholders rightly expect the
company to perform consistently and to hit
the demanding milestones we have set for
ourselves. I’m confident that they will see
the inherent value of this business as we
work towards those ambitious goals.
Alex Mandl
Chairman
When we announced our 2010-2013
Development Plan in November 2009 we
set ourselves a very bold objective: €300m
in profits in 2013, up more than 50% from an
already record 2009. And we were convinced
it was achievable, thanks to the sound platform
for growth we’ve been laying since Gemalto’s
creation in 2006.
The market developments and our performance
in 2010 show that we got our strategy right,
and that we’re capable of hitting our targets.
We have significantly expanded our revenue,
in particular in software and services, and
once again grown our profit from operations.
In addition, we have further increased our
customers’ satisfaction and loyalty, and
kept our employees motivated and happy.
Gemalto is a leading player in markets
brimming with opportunities: mobile
financial services, contactless payment,
trusted service management, mobile money,
strong authentication for cloud computing
applications, eGovernment enrollment and
issuance services, machine-to-machine
technology, the internet-of-things and so
on. In each area we’ve delivered significant
progress, through a combination of in-house
innovations, organic investments and
judicious acquisitions.
An appetite for innovation
Significantly, we did well in very contrasting
economies and regions. After a long pause,
many of our developed markets progressively
showed a revitalized appetite for innovation.
For the quickly developing nations, which now
account for about half of our business, this
enthusiasm had never gone away.
Not only have they continued to grow in volume
of products delivered over the past couple of
years, they’re also eagerly willing to adopt our
latest technologies – and they haven’t got any
embedded infrastructure to hold them back.
That’s why, for example, mobile money was
pioneered with such success in Africa. Our
global reach, our long-standing commitment to
diversity – with over 90 nationalities working in
Gemalto – and our strong, long-term presence
in many of these markets clearly benefit us.
A developing digital security market
2010 saw significant developments in our digital
security eco-system. For example, this year the
mobile internet went really mass market, and
we quickly detected the rapid acceleration in
demand for mobile commerce. We know from
experience that when markets go mobile, they
get big, fast. Add our expertise in Near-Field
Communication (NFC) solutions for proximity
interactions and many opportunities come to life.
Another of the biggest shifts has been the
escalating importance of cloud computing.
We’ll soon be seeing plenty of private clouds
for large corporations as well as specific
offerings for smaller businesses and individuals.
These will require new security and identity
management solutions to make sure these
high-value data are accessible online only
to the right users – all of which is creating a
significant potential market for us.
“After the first full year of our
Development Plan, two things
are increasingly clear: we have
put together an excellent suite
of products, software and
services for many rapidly
expanding markets, and
we’re capable of achieving
the ambitious targets we’ve
set for ourselves”

Our vision
Gemalto Annual Report 2010
10 Chief executive’s review
11
Our vision
Added value is the key
As we described in the Development Plan, our
strategy is about extending our role and the
boundaries of digital security, and that’s what
we’re doing. Our software and services
increasingly touch people’s daily lives in
convenient and positive ways, and we are
constantly adding value to the diversifying
range of secure devices through which they’re
delivered to end-users: smart cards,
passports, SIMs, modules, USB keys,
microSDs and so on.
Our mobile communication business is a good
example. The advanced fourth generation
Long Term Evolution (LTE) system of mobile
telephony uses UICC ( * ) . It’s like having a full
PC on a single chip, dedicated to security,
privacy and convenience, with all the potential
that offers. Yet the real value is in our software
and services management that enables it to
run a host of applications, only one of which
is called “voice”.
Our Digital Life Management suite is
likewise helping operators strengthen
their customer relationships, while offering
end-users more freedom and convenience.
And we’re leading the way in the move to
introduce new sources of revenue from mobile
devices with our unique, interactive solutions
for mobile marketing.
New opportunities in payment
In the financial services sector, the migration
of old technology magnetic stripe bank cards
to those with the more secure and intelligent
EMV chip is moving ahead worldwide, and
this continues to create considerable
business opportunities.
In Asia, the People’s Bank of China issued
specific instructions in 2010 with the aim of
migrating the country to microprocessor-based
payment cards compatible with EMV over
the medium term.
At the same time, in the massive US market,
Americans who go abroad are getting
increasingly tired of having their old technology
cards declined at retailers and ATM’s in more
and more countries. This is partly why the
United Nations’ Credit Union moved to EMV
chip cards in 2010; and with the US Federal
Reserve now accountable by law for fraud
management in payments systems, the
argument for EMV and convenient contactless
payment cards is increasingly being heard there.
Meanwhile, we’re also seeing an accelerating
drive globally to have financial services derive
more benefit from the online and mobile
channels. Rapidly increasing use of
smartphones, combined with the banks’ desire
to offer customers convenience and security
while improving their own efficiency, mean our
electronic and mobile banking activity is
reaching new record levels.
Modernizing state services
In the public sector, our ePassport business
also continued to prosper in 2010. Protecting
air travel and securing borders – the principal
drivers of early adoption – are only the start.
Increasingly Governments deploying ePassport
programs are becoming convinced that issuing
digital credentials (eID) is more feasible and
popular than they thought. They’ve realized
that they can safely entrust this technically
complex operation to an experienced company
like Gemalto and thereby enjoy the benefits of
reduced cost and strong voter support with
low execution risks.
As a result, they’ve begun to call on us for new
projects such as helping facilitate enrollment in
their election processes, and to reduce
inefficiency and fraud in the delivery of
healthcare and social benefits. For their
citizens, it’s satisfying to see that their state
services are becoming more modern and
convenient. People in early-adopter countries
frequently say they’re proud their governments
now exist in the same 24/7 digital world that
they’ve become used to in their daily lives.
A culture of innovation
We couldn’t perform well in these rapidly
evolving markets without a strong culture of
innovation. It’s a cornerstone of our enterprise:
last year our investment in R&D was again
more than twice that of our physical equipment
capex. And it’s borne fruit. Amongst many
developments, 2010 saw us announcing
“E-Go”, a technology which is poised to
radically simplify digital interactions.
With E-Go, you’ll be able to authorize a
transaction simply by touching a digital device.
If you’ve got banking cards in your pocket and
you decide to buy something, you’ll simply
touch a payment terminal and E-Go will make it
ask which account you want to debit. If you’re
wearing your company ID pass and touch a
computer mouse, you’ll be able to
automatically log on with your own preferences
and environment. And when you walk away,
you’ll be automatically disconnected. If you’ve
got a SIM card, you’ll touch a phone and
immediately make it yours, with your own
number and all your data. And all this will
be done anonymously, without leaving
unnecessary remnants while still being genuine.
It will be a couple of years before it goes
mainstream – but it’ll be nothing short of
a revolution when it happens.
Smart M&A
So we place a high value on innovation.
Yet knowing well that we won’t invent
everything ourselves, we constantly look
around for smart ideas and great technologies
that can complement our own. And where
we’ve been able to do a friendly, mutually
beneficial deal, we’ve been propelling our
growth by making acquisitions.
At the start of the year we took a controlling
stake in Netsize, with its under-utilized mobile
commerce and mobile marketing platform.
This makes Gemalto a key player in mobile
application sales, and rounds out the
services we provide to operators to bolster
their subscriber revenues. Soon after, we
acquired Valimo, the world leader in mobile
PKI authentication, aiming at growing usage
of legally-binding mobile digital signature.
In April we acquired Todos, making
us the only truly global eBanking vendor
with such a comprehensive range of
authentication solutions for internet
banking and eCommerce.
“We couldn’t perform well in
these rapidly evolving markets
without a strong culture of
innovation. It’s a cornerstone
of our enterprise.”
During the summer, Cinterion, the leading
provider of Machine-to-Machine (M2M)
communications, suddenly became available.
Since we’d already got a well considered plan
in place, ratified with our Board and explained
in our Development Plan, we were able to
seize the opportunity.
Finally, we acquired Trivnet, one of the top
technology providers in mobile money and
mobile financial services.
We started this campaign of acquisitions
ahead of the field, so we concluded them on
far more favourable terms than if we’d waited.
Our Board was challenging and supportive i
n assessing our targets and our integration
processes, and I thank them for their
encouragement. In each case the deal has
reinforced our position in a high-growth market
where we’re already a recognized player.
And now, in order to get the best from these
technologies and business additions, we’re
focused on integrating these new talents
into our existing teams.
Satisfying our clients
In fact, when I look back on 2010, it’s what our
people have achieved that excites me most.
They’ve shown their capacity for customer
service, quality and innovation, winning
contracts and awards in so many different
markets and regions. They’ve demonstrated
their ability to accelerate the pace of growth
and profit, yet they never forgot about caring
for and satisfying our customers.
Every year we commission an independent
survey of clients, representing around half
our global revenues. For the third year in a
row we’ve increased their satisfaction levels,
and maintained our ranking among the very
best companies in the world in this respect.
And since one key to customer satisfaction
is happy, talented and motivated people, I was
also pleased to see that our employee survey
results were again very positive in 2010.
A host of opportunities
The companies that do best coming out of
a downturn are usually those that have been
willing and able to invest through it. Gemalto is
one of those companies. We’ve worked hard at
enriching our portfolio and serving our customers
in the tough times they’ve been through.
We will dedicate 2011 to leveraging our new
acquisitions, and further developing our
portfolio of products, software and services.
We strongly believe, as ever, that these efforts
will bear fruit through to 2013 and beyond.
Our ambitions are bold – and our results
in 2010 demonstrate our potential.
Olivier Piou
Chief Executive Officer
(
* ) UICC: Universal Integrated Circuit Card

Our vision
Gemalto Annual Report 2010
12 Our strategy
13
Our strategy:
extending the boundaries
In November 2009 we announced our 2010-2013 Development Plan.
At its core is our objective to increase our profit from operations
to €300 million in 2013 through a strategy of profitable growth.
In 2010 we made a promising start in this direction.
Did you know that
by 2015 the market
will expand to:
• 3.8 billion mobile users
• 2.6 billion internet users
• 15 billion connected machines
Our vision
Progress
Objective
Through revenue growth and margin expansion, our objective is to expand
our profit from operations ( * ) by more than 50% to €300 million in 2013
Profit from operations ( * ) €m
181 216
Target:
300
(
* ) Profit from operations is a non-GAAP measure defined as
the IFRS operating result adjusted for all equity-based
compensation charges and associated costs, amortization
and depreciation of intangibles resulting from acquisitions,
and restructuring and acquisition-related expenses.
2009 2010 2011 2012
2013
For more information see
pages 147-149
We will achieve this objective through:
Our strategic priorities:
We plan to generate strong levels
ofoperating cash flows, and to:
Growth in all business segments, with a double-digit revenue increase in security
Growth will be generated by: developments in wireless offers, with new devices and
remote services; steady worldwide expansion of payment cards; and global spread
of new government projects and authentication solutions.
Double-digit revenue increase in software and services across all
business segments
Further margin improvements driven by Secure Transactions and Security
Tight management of capital employed, with further ambition to increase our
return on capital employed (ROCE)
Actively replicate successful models across geographies
Capture more value with remote services
Speed up commercialization of innovations
Leverage our unique position to serve customers with converging needs
Leverage our efficient base and expand through bolt-on acquisitions
Re-invest our cash to fuel organic growth and fund bolt-on acquisitions
Enhance return to shareholders, via a combination of share buy-back and
dividend distribution
2011: another year of expansion
The Company targets for 2011 another increase in revenue and profit from
its ongoing operations.
• In Mobile Communication the Company is looking at substantial
commercial deployments of mobile contactless services and LTE fourth
generation networks. Software & Services and acquired companies will
increase their contribution to profit and the Company will maintain its
organic investments toward strategic growth areas.
• In Machine-to-Machine, the Company anticipates strong activity in the
automotive and metering sectors. With the expected development of the
internet of things, the company intends to increase its investments in
research and development in this M2M segment.
• In Secure Transactions, the Company should continue to benefit from the
widespread migration to EMV and higher-end contactless products.
• In Security, the Company aims at delivering another year of revenue growth
in 2011, on the back of continued deployment of secure electronic document
programs and substantial growth in eBanking.
• Starting January 1st, 2011 the contribution from the patent licensing
activity, currently reported in the Security segment, will be reported in a
new “Patents” segment. The Company does not anticipate significant patent
licensing revenue in 2011 due to the public patent litigation initiated by
Gemalto in the US.
The Company reiterates its expectation to have Secure Transactions
delivering a high single-digit profit margin from operations in 2011, and
upgrades its view on the Security segment which is now expected to deliver
a high single-digit profit margin from operations even without a patent
licensing contribution in 2011.
Slide 14 of ‘Gemalto Investment Conference 2009’ presentation
sets out the key assumptions and potential growth accelerators
underpinning our plan.
For more information visit
www.gemalto.com

Our vision
Gemalto Annual Report 2010
14 The digital security market
15
The digital security market
Evolving end-user expectations, new business
opportunities, technological advances and changing
threats are driving significant growth in the variety,
scope and value of digital security services.
Growth potential in mobile 3G
Current subscribers
•
Growth potential
US
3G subscribers 136.6m
Penetration 48%
Growth y/y 31%
Brazil
3G subscribers 13.3m
Penetration 8%
Growth y/y 148%
UK
3G subscribers 29.5m
Penetration 38%
Growth y/y 34%
China
3G subscribers 14.5m
Penetration 2%
Growth y/y 941%
Russia
3G subscribers 9.6m
Penetration 5%
Growth y/y 81%
Indonesia
3G subscribers 19.2m
Penetration 12%
Growth y/y 57%
Companies around the world are discovering
the power of M2M technology to save money,
increase revenue or generate new sources
of income by leveraging new channels to
their customers. Further growth comes from
governments that are forced to save money,
increase income and meet carbon emission
targets. Legislation favoring the implementation
of M2M in eCall, smart metering for smart grids,
stolen vehicle tracking and intelligent traffic
systems is increasing. Furthermore, the aging
population wishing to live an independent and
healthy lifestyle is driving growth in mobile
healthcare applications.
With increasing penetration of M2M into all
aspects of business and life, security of the
network and data privacy will be increasing
in relevance for M2M adopters.
Financial services and retail
There are already around one billion EMV ( * )
cards in circulation. Some of the fastestdeveloping
economies in the world (such as
Brazil, South Africa and Turkey) already have
EMV in place. But potentially huge markets such
as China, India and much of the Americas
remain largely untapped.
There are signs that US issuers – with a base
of more than 700 million credit cards and 460
million debit cards – are being won over by the
anti-fraud and user benefits of chip payment
cards. In February 2009, American Express
became the fourth member of the EMV
consortium, massively expanding its reach.
And even in the more mature European market,
the Single Euro Payments Area (SEPA) initiative
could also drive higher uptake.
Mobile voice has already been surpassed by mobile
data traffic worldwide, driven by the rapid adoption of
smartphones. By 2012, their shipments are predicted to
exceed those of both Desktop and Notebook PCs combined.
Global Unit Shipments
(MM)
700
600
500
400
300
200
100
Desktop PC’s
Notebook PC’s
Smartphones
2009 2010E 2011E 2012E 2013E
Source: Morgan Stanley
E: estimate
Our vision
Source: Morgan Stanley
Digital dynamics
Virtually every human activity can now be
expressed as digital data – whether it’s the
simplest conversation or the most complex
financial transaction. We can communicate,
monitor, view, access and enable a vast range
of information in the digital realm.
Convergence creates convenience
At the same time, technologies are
converging. Until recently, devices had fixed
roles – a cellphone to make a call, a computer
to manipulate data. Those distinctions have
blurred. Now, we expect the digital world to
revolve around us as individuals, regardless
of the device we’re using. We’re starting to
make payments and access our email with
our cellphones, and using our bank cards
as a travel pass.
Telecommunications
Smartphone adoption has created new
markets for wireless services, on top of
continued organic growth in areas such as
voice and messaging. These ongoing revenue
opportunities are supported by a more
pervasive digital lifestyle and businesses that
now integrate mobile communications into their
products and marketing.
High-speed mobile data and multi-function
smartphones, for example, are creating demand
for more advanced SIM cards allowing users
secure access to a host of new applications in
sensitive areas such as banking and retail.
For mobile users, value no longer resides
purely in their handset. They expect to be able
to access upgrades, applications and content
Over-the-Air (OTA), regardless of the device.
They also want to protect their digital lives,
safeguarding their contacts, their identities
and their contents. The SIM card is the only
universal and secured application platform
working with 100% of handsets.
Machine-to-Machine (M2M)
In a growing world of smart applications and
things, M2M is the key enabling technology for
the Internet of Things. M2M is used to optimize
business processes by connecting machines
to one another. It’s used in an astonishing array
of vertical markets and industries such as
remote maintenance and control; metering;
payment systems; routers and gateways;
security systems; healthcare; automotive and
eToll; tracking and tracing; environmental
monitoring and more.
Aside from enhanced security, convenience
is a key driver for EMV. Contactless cards
and faster, more reliable authentication are
delivering in-store efficiencies that create real
competitive advantage for retailers.
Government programs
Governments need systems that offer efficient
interactions with their citizens, who in turn
demand security and convenience from their
authorities. That’s why nations around the
world are investing in digital identity. Regulatory
pressures – for instance, the visa waiver
scheme to gain entry to the US, which now
mandates biometric passports – are also
driving growth in this market, such that more
than 100 countries already have an ePassport
program in place.
Electronic ID schemes go one stage further,
since they require every citizen to carry an eID
card. Many governments are already deploying
them for access to health and social security
(
* ) EMV: EuroPay, MasterCard, Visa: the industry standard for
international debit/credit cards
SIM shipments worldwide 2010
4 billion+
(source: Eurosmart)
Microcontroller payment cards to be shipped 2011
1 billion ( * )
(*estimate; source: Gemalto)
Microcontroller cards sold for all Government eID projects 2010
190 million ( * )
(*estimate; source: Gemalto)

Our vision
Gemalto Annual Report 2010
16 The digital security market
17
Top internet markets – percentage of penetration
USA
Brazil
Russia
39%
42%
76%
“Today some 21
countries worldwide
issue eID cards to their
citizens, and over 60
countries issue
ePassports.”
Securing the cloud
Our vision
China
India
18%
29%
“IDC has forecast the identity and
access management market to
reach over $5 billion by 2014.
Gemalto is positioning itself
to capitalize on market and
convergence opportunities.
It has expanded beyond its
traditional smart card roots to
create end-to-end solutions for
digital security.”
(IDC, Gemalto: Secure authentication for Securing
the Cloud, June 2010)
Shipments of secure eGovernment documents year-on-year growth
20%+
(source: Eurosmart)
Value of US mobile payment transactions 2009
$5.2 billion ( * )
(
* ) Estimate; source: www.mobile-financial.com
services, and as drivers’ licenses. In a growing
number of cases, they are also combining
functions to derive even more efficiency and
convenience for users. The potential here is
immense. For example, India, with a population
of 1.2 billion, has initiated a scheme to provide
multipurpose national identity cards (MNIC)
to every citizen by 2011.
Beyond such card schemes, there is a
widespread move towards “eGovernment”.
Ministers from the EU and EFTA recently
approved a declaration recognizing that this
“increases efficiency and effectiveness...to
constantly improve public services” and set
priorities in this area to be achieved by 2015.
Online authentication
Cloud computing services – data and
applications that are accessed via the internet
or virtual private networks – are going
mainstream. IDC expects spending on IT cloud
services to reach $42 billion in 2012. By then, it
will represent 25% of IT spending growth and
nearly a third of growth the following year. ( * )
But freedom of access places a huge additional
burden on security. It’s essential to verify the
identity of authorized users without hampering
the convenience and efficiency of cloud
computing. At the same time, complex software
tends to have more security vulnerabilities, not
fewer. This is increasing demand for ‘strong’
(two- or even three-factor) authentication. For
example, a user might need a password as well
as a physical component like a fingerprint; or
an ultra-secure one-time password generated
by a smart card and reader.
The need to meet compliance regulations is by
far the greatest market driver. According to IDC
this accounted for approximately 85% of all
online authentication sales in 2009. Other factors
contributing to market growth in this area are:
• Continued issuance and enforcement of
regulatory requirements worldwide;
• Steadily increasing need for secure, scalable
identity-driven cloud models for both private
and public cloud deployments;
• Increased demand for strong authentication
for both enterprise and consumer interactions.
eBanking and eCommerce
Secure online banking comes with the
potential for increased revenue and new
business opportunities. Switching focus
from low-value transactions, such as cash
withdrawals and check deposits, to high-value
sales, such as loans and eCommerce,
as well as financial and business advice,
is the future in this domain.
The business case for eBanking rests on
four pillars:
• Cost control: when customers do more
online, they can cut the cost of a transaction
by up to 80%.
• Increased utilization: spending increases
when people prefer a particular provider’s
services and cards – the ‘top of wallet’ effect.
Similarly, people will do more online with a
provider they trust.
• Competition: banks are facing increased
competition from online payment providers
such as PayPal, and from mobile operators
offering payment services. Non-traditional
businesses, such as supermarkets, are also
promoting a growing range of banking
services. By improving their eBanking offer,
banks can differentiate themselves and
increase loyalty.
• Security: increased security makes each
customer more valuable and more profitable
by enabling greater uptake of online services.
It lets branches and call centers focus on
high-value relationship banking and
high-touch services. It also enables new
services such as electronic invoicing, for
example, by utility companies.
“Cloud computing” simply means internet-based
computing. Your data and applications aren’t stored
on your PC, but on servers located elsewhere (in “the
cloud”) which provide resources, software and so on,
on demand. Users benefit from greater convenience and
lower cost. They can consume computing resources
as a service and only pay for what they use; access data,
applications and services from any location; and employ
greater computing power than they might otherwise be
able to afford.
The global market for enterprise cloud-based services
will grow from US $12.1 billion (€9.4 billion) in 2010 to
US $35.6 billion (€27.5 billion) by 2015 ( * ) . Yet while many
enterprises are embracing cloud computing, others are
resisting, held back by security concerns.
In the old days, security meant putting a firewall around
the physical network in your office and giving people
a password to access it. But it’s in the nature of cloud
services that you can access them from anywhere, so
there’s been a shift from “border” security to “identitybased”
security. And the simplest way of strengthening
this is to deploy a two-factor Single Sign On (SSO)
solution. This requires both a password and a physical
token, such as a smart card or encrypted USB key,
before the user can be logged in. Even if the password
is discovered, access is denied if the unique hardware
token is not present. Two-factor authentication greatly
enhances network security and allows enterprises to
ensure that employees can securely access company
information and networks, both locally and remotely.
This text is based on a full-length article in the Autumn 2010 edition of The Review,
Gemalto’s corporate magazine: http://www.gemalto.com/brochures/corp_brochures.html
(
* ) Source: Analysis Mason
(
* ) Source: IDC

The segmental review is based on adjusted financial information
for ongoing operations. ‘Ongoing operations’ exclude the
contribution from discontinued operations and from assets
classified as held for sale to the income statement. The adjusted
financial information are non-GAAP measures, where the key
metric to evaluate the business and to take operating decisions
is the profit from operations (PFO). PFO is defined as the IFRS
operating result adjusted for all equity-based compensation
charges and associated costs, amortization and depreciation of
intangibles resulting from acquisitions, and restructuring and
acquisition-related expenses.
For more information see
pages 147-149
20 Mobile communication
24 Machine-to-Machine
26 Secure transactions
30 Security
35 Others
Segmental review
Added security for eBanking in Mexico
Financial institutions increasingly want to add eBanking
services to their portfolio. They also want them to be trusted
by their customers and scalable to future developments.
During 2010 one Mexican bank achieved this by selecting
Gemalto’s Ezio strong authentication server and One-Time
Password tokens, which combine to create a more secure
environment for eBanking. The extra security provides
enhanced protection for users while they’re accessing their
accounts and performing transactions online. The solution can
also be expanded to other authentication devices, including
EMV payment cards, connected readers and mobile phones.
For more information see
page 34
For more information visit
www.gemalto.com

Segmental review
Gemalto Annual Report 2010
20 Mobile communication
21
Mobile communication
Mobile communication is set to enter a new phase with faster
access to data and massive growth in mobile applications.
In 2010, Gemalto demonstrated again that it is at the forefront
of these changes and is delivering significant returns from its
ongoing investment in innovative technology.
Segmental review
Our performance ( * )
Our products, software and services
Our positioning
Acquisitions
Netsize
In January 2010, Gemalto increased its stake in Netsize
S.A. to 85.65%. Netsize offers mobile payment solutions
based on operator billing for 100 mobile operators in 28
countries, reaching over 1 billion billable subscribers, and
provides mobile messaging with SMS and MMS delivery
to over 200 countries. Netsize was founded in 1998.
For further information see page 95.
Trivnet
In August 2010, Gemalto acquired Trivnet, one of the
leading players in Mobile Financial Services. Trivnet
helps Mobile Network Operators and banks to increase
their customer base, enhance loyalty and drive revenue
by enabling mobile payments, mobile commerce, mobile
wallet, “banking the unbanked” and mobile money
transfer. Trivnet was founded in 1997.
Revenue
€981m
(2009: €888m)
Gross profit
€376m
(2009: €383m)
Profit from operations
€118m
(2009: €151m)
• Growth was driven by success in software and services, whose
revenue doubled to €152 million
• Promising developments in new form factor products offset the
slightly lower revenue from traditional SIM card business
• Margin profile of traditional SIM card business remained unchanged
• Year-on-year profit variation is essentially resulting from operating
expenses investment in fast growing software and services areas,
consolidation effects of acquired businesses and exceptional items
(
* ) Adjusted financial information for ongoing operations.
For more information see
pages 147-149
Up 5% year-on-year at constant
exchange rates
Gross margin
38.3%
(down 490 basis points)
Profit margin from operations
12.0%
(down 500 basis points)
More than 450 Mobile Network Operators (MNOs) worldwide benefit
from our products, software and services. These include:
Digital Life Management
We help MNOs who want to expand their services onto the internet,
and end-users who want to put their data onto any platform, whether
their handset or PC. Our LinqUs Life Mobilizer lets them protect,
organize, manage and share their data securely, and so enables
the experience that both users and operators have been seeking.
Mobile Marketing Solutions
We help operators, content providers, advertising agencies and brands
to deliver personalized, rich and relevant content and campaigns via
mobile handsets, with unrivaled efficiency.
Mobile Financial Services
We provide mobile solutions for banking, payment and money
transfer, so that banks and MNOs can offer innovative, high-value
services at lower cost and with maximum security. LinqUs Mobile
Banking also provides such services to millions of unbanked
subscribers in emerging economies.
Roaming Services
LinqUs Roaming Director puts users onto the preferred network when
abroad. This highly efficient traffic redirection steering system helps
operators maximize revenues and deliver the optimum performance
for subscribers. Our solutions help drive up profitable roaming traffic
and give end-users a superior experience.
Trusted Service Manager (TSM)
Thanks to Near-Field Communication (NFC) technology, the mobile
handset has become a mobile wallet for a wide range of applications.
Allynis TSM helps mass transit operators, banks, businesses and MNOs
deploy services seamlessly and securely.
Long-Term Evolution (LTE)
Gemalto sits at the forefront of the roll-out of 4G – the long-term
evolution of mobile broadband services, bringing all our expertise
in digital identity and security to a vast range of new applications.
• Some 1.8 billion ( ** ) subscribers benefit from at least one of
our solutions.
• People increasingly access and manage many essential services via
their mobile device. Since this involves their personal data, they need
to trust the systems they use. Ensuring that sensitive information is
secure is at the core of Gemalto’s expertise.
• With a leading share in advanced markets, we are therefore firmly
positioned to address fast-growing premium opportunities – such as
mobile broadband, mobile contactless transactions, remote
management and Machine-to-Machine.
• We are also continuing to help narrow the gap between premium
technology and worldwide accessibility, giving billions of users access
to the advantages of a range of mobile services.
• With our broad expertise across a range of markets we are in a unique
position to serve customers with converging needs, such as those who
want to use their phone as a payment device.
• In order to offer the best user experience, our end-to-end technology
stands both at the heart of the MNOs’ systems and in the hands of
consumers, providing an unbreakable link and high interactivity
between them.
• We have strengthened our hand in the Mobile communication sector
by making strategic acquisitions.
• We are engaged in active partnerships with handset manufacturers
to establish seamless solutions.
• We have a strong involvement in organizations and bodies defining
standards, setting trends and shaping the industry.
(
** ) Source: Gemalto

Segmental review
22 Gemalto Annual Report 2010
Mobile communication
23
Keeping the world in contact
Mobile communication is a key domain for
Gemalto, which has been providing products,
solutions and software to the industry for more
than 30 years. In 2010, we saw significant
advances in all areas of this segment, including
major contract wins, awards for our technology
and plaudits for our innovations; and our
performance reaffirmed our global leadership in
this massive and growing market.
Digital Life Management
Users now expect their digital content
and services to be with them everywhere –
particularly on their mobile handset. And
our technology ensures that they can protect,
manage, organize and share their personal
data on any platform, whether it’s in their
mobile, on their computer or in the cloud.
Uptake of these offerings has been remarkable.
In 2010, the number of contacts being
managed by our Digital Life Management
Services surpassed the 3 billion mark.
Our solutions work on more than 1,000
different devices – which ensures that end
users retain choice about every aspect of their
digital lives wherever their data is and whenever
they decide to change phones.
Not only are we constantly working to link the
internet with the mobile, we are also striving to
narrow the gap between premium technology
and worldwide accessibility – as, for example,
our solutions giving potentially billions of mobile
users access to Facebook and Windows Live.
Mobile Marketing
Both operators and major brands are keen to
exploit mobile devices as a marketing channel
– they’re the one thing that people never leave
home without. In many markets, there are more
handsets than people, and smartphones are
rapidly increasing in market share. As a result,
we’re seeing great interest in our LinqUs mobile
marketing solutions that deliver personalized,
targeted and relevant content and campaigns
via the phone.
Our solutions offer wide reach and built-in
interactivity – improving measurement of return
on investment, profiling and targeting. Gemalto
has a competitive advantage in this arena: we are
the only company able to deploy interactive SMS
messages that can pop-up on an idle phone
screen. This makes them a valuable, extra directmarketing
channel to any CRM or ad server.
In 2010 we showed how we can blend the range
of Gemalto solutions to maximize the impact
of mobile marketing. When Belgian telco
Mobistar wanted to get more subscribers
to use its “ContactSave” service, we
recommended our LinqUs traffic boosting
solution to increase the discovery and usage
rate. Then we targeted two million subscribers
with a promotional interactive SMS campaign,
which resulted in a five-fold increase of traffic
generated. In February 2010, Mobistar
confirmed that use of ContactSave had
multiplied by ten over a four-month period.
Mobile Financial Services
The popularity of our Mobile Financial Services
(MFS) offering continued to rise in 2010. Our
expertise in strong authentication means our
solutions meet the highest security standards.
And because they work on all devices, MNOs
and banks can offer these highly secure
services without compromising on customer
reach. This is particularly relevant in emerging
economies, where most handsets are basic
models. It makes Gemalto solutions a powerful
driver of digital democracy. By opening up
financial services to anyone with a handset,
we’re helping give them significant life choices
– especially if they’re one of the five billion
people worldwide without a bank account.
We strengthened our MFS offering in 2010.
In order to augment our solutions for enterprises,
access management and identification, we
announced in February that we had acquired
Valimo, a world leader in mobile authentication.
Valimo enables mobile phone users to securely
sign digital documents simply by entering a
password or PIN code.
Naturally, that commitment to strengthening
our solutions is translating into new business.
For example, in 2010 we announced that MTN
Middle-East and North Africa had selected our
LinqUs security solution to launch MFS in five
countries, a potential new market of 30 million
people. And in March, we agreed a deal with
Texas Instruments to integrate our MFS
capabilities into its mobile security platform
(OMAP), helping manufacturers and operators
roll out secure financial transaction capabilities
more easily.
Roaming Services
Gemalto continues to provide Roaming Services
to help operators optimize costs and increase
revenues. This is more important than ever as
people are increasingly using mobile internet
services when abroad. Consequently, data
roaming is rising sharply, and assigning users
to preferred networks can make a real difference
in cost for operators. Gemalto’s Roaming Director
service delivers 90% successful traffic redirection
– other technologies typically achieve just 60%
– ensuring MNOs can connect subscribers to
preferred partners seamlessly. It also means
they can place a call or go online the moment
they step off the plane.
That’s one of the reasons why, in February
2010, the Netherlands’ largest operator, KPN,
started using our LinqUs Roaming Director to
offer enhanced services to its eight million
subscribers, as well as offering it new
capabilities to fine-tune traffic redirection.
Trusted Service Manager (TSM)
Near-Field Communication (NFC) technology
has turned the handset into a versatile
electronic wallet, capable of accessing an array
of applications such as payments and ticketing
systems. As a result, MNOs, banks and other
providers are seeing new opportunities to bring
together their services in one convenient device.
To merge these functions securely and ensure
only legitimate users access the right services,
Gemalto provides a Trusted Service Manager
(TSM) solution.
Our deal in May 2010 to provide Orange with
Allynis TSM services for the “Nice, mobile
contactless city” project illustrates how it
works. This is the first commercial launch
of contactless mobile services in Europe and
allows citizens and visitors to Nice to use an
NFC mobile handset to pay at restaurants,
supermarkets and local stores, as well as ride city
busses and trams – all with total digital security.
In June 2010, we announced that KDDI’s 31
million subscribers in Japan would be able to
take part in their own NFC roll-out thanks to
our TSM solution. Elsewhere, we agreed a deal
in July with Kasikornbank, Thailand’s second
largest bank, and Advanced Info Services (AIS),
its largest telecommunications operator, to
introduce their own NFC services using TSM.
Long-Term Evolution (LTE)
We are also a driving force in rolling out the
next generation of mobile networks, known
as Long-Term Evolution (LTE) or 4G, helping
MNOs deploy new value-added services
using ultra-high-speed data access and IP
connectivity. With our solutions, MNOs not
only seamlessly overcome obstacles in their
migration to these high-bandwidth data
services, they can also transform their
relationships with subscribers.
Mobile financial services in the Middle East
Thirty million MTN subscribers in Africa and the Middle
East now use a wide variety of mobile financial services
thanks to Gemalto’s SIM-based security solution.
MTN’s MobileMoney service includes money transfer,
mobile purchase, payment and balance checking,
as well as the immediate purchase of airtime. The
user-friendly interface makes it easy and convenient
for subscribers to enjoy these services, which
feature simple menus in English plus a number of
local languages.
Gemalto’s SIM-based technology, with end-to-end
encryption, guarantees the highest level of security for
these transactions and gives subscribers the freedom
to use the services from any type of handset by simply
swapping the SIM card.
Mobile financial services are considered to be one of
the world’s fastest-growing and dynamic wireless
markets, set to be worth USD 65 billion by 2014 ( * ) .
(
* ) Juniper Research, January 2010
Gemalto is supplying Over-the-Air (OTA)
services and Universal Integrated Circuit
Card (UICC – multi-function SIM) solutions to
a range of major LTE projects. In January 2010
we began deploying them for Verizon Wireless,
the leading US 4G and 3G operator with 93
million customers. They help Verizon deliver
a secure and reliable multimedia data
connection, provide global roaming
capabilities, and remotely add new UICC
30 million
MTN subscribers now use a wide variety
of mobile financial services.
applications and services on its 4G LTE
wireless broadband network.
Only two months later, MetroPCS, the fifth
largest facilities-based carrier in the US,
selected Gemalto to provide these solutions
for its mobile broadband launch covering
6.6 million subscribers. This meant that by the
end of 2010, it was able to offer LTE coverage
in five major metropolitan cities, including Los
Angeles and Dallas.
In October, Gemalto was shortlisted in
three categories at the LTE North America
Awards, reaffirming our position as a global
leader in the drive to accelerate adoption of
this critical new technology.
$65 billion
The estimated value of the mobile financial
services market by 2014.
For more information visit
www.gemalto.com
Segmental review

Segmental review
24 Gemalto Annual Report 2010
Machine-to-Machine
25
Machine-to-Machine (M2M)
The combination of Gemalto and Cinterion strengthens
our position as leader in M2M modules, MIMs and device
management. M2M technology connects devices across a wide
range of industries to reduce cost through improved processes,
and to generate revenues by enabling new business models.
Segmental review
Our performance ( * )
Our products, software and services
Our positioning
Revenue
€81m
Gross profit
€27m
Up 15% year-on-year at constant
exchange rates ( ** )
Gross margin
32.6%
Wireless modules
Gemalto, notably through Cinterion, its affiliate company, is the leading
supplier of M2M devices and solutions based on HSPA, UMTS, EDGE,
GPRS and GSM technologies. Our portfolio of fully certified, high-quality
products offers communication for a wide range of applications,
including automotive, metering, remote maintenance, mHealth, e-toll
systems, POS systems, industrial PDAs, routers and gateways, tracking
and tracing, as well as security systems.
This provides users with unlimited mobility due to worldwide coverage
and seamless roaming across networks. The respective data standards
offer reliable connections with high data rates enabling data-centric
applications. The modules can be readily customized to suit unique
needs or combined with other innovative features such as Java,
GPS and SIM Access Profile.
• Cinterion is the world’s undisputed market leader in cellular M2M
modules with a market share of 26% ( * ) .
• We provide vertical-specific consulting and integration support
to help customers reduce time-to-market and avoid costly loops.
• We offer a broad product portfolio scalable to customer needs.
• Our products are designed for long-term availability.
• Our products meet the highest standards of quality and reliability
required for industrial applications and the automotive industry.
• We provide unique integrated hardware expertise from MIM to M2M
modules, delivering end-to-end solutions for M2M applications.
• We facilitate and simplify the deployment of M2M value-added-services.
• We add security to M2M applications.
• Our high innovation potential is demonstrated by our latest awards,
most recently in the form of the GSMA Award and Oracle’s Duke’s
Choice Java Innovation Award.
Acquisition
Cinterion
In June 2010, Gemalto acquired Cinterion Wireless
Modules GmbH (CWM). Cinterion is the leading
provider of industrial Machine-to-Machine wireless
communication modules, with approximately 26% ( * )
market share. The business was started in 1995 and
has major centers in Munich and Berlin, Germany.
For further information see page 95.
(
* ) Source: Gartner
Profit from operations
€7m
For more information on adjusted measures see
pages 147-149
Profit margin from operations
8.7%
• The integration of Cinterion is now essentially complete
• The solid 15% revenue growth was driven by the increasing use of
cellular connectivity by multiple industrial sectors such as the
automotive and metering industries
• Profit from operations doubles, directly benefiting from the increased
volume of sales
(
* ) Adjusted financial information for ongoing operations.
(
** ) Pro-forma, by comparing the activities reported in the Machine-to-Machine segment
starting August 1, 2010, consolidation date of the acquired Cinterion business, with the
corresponding activities for the same period of 2009.
MIMs (Machine Identification Modules)
Through Gemalto’s leadership in the SIM industry, we have developed a
comprehensive set of MIM cards. This ranges from plug-in format and 3FF
(Third Form Factor) to the latest ETSI standardized MFF-M2M form factor.
MIMs need to meet the high demands of industrial applications,
including extremes of vibration, temperature and humidity, as well
as a longer lifespan than consumer mobile applications.
Our offer includes three product families to cover these needs, including
FullM2M in semiconductor packaging, as well as other unique features
like eXtended Life for long-term applications. These products have been
massively deployed throughout the world.
Services
Gemalto provides leading-edge support for integration worldwide, from
design to delivery and in-life management. By combining vertical-specific
know-how with consulting, we reduce time-to-market for our customers.
And with our unique security expertise, global leadership in Over-The-Air
and long-standing experience in software verticals such as device
management, mobile financial services and roaming, we are able to
facilitate the deployment of value-added M2M services.
M2M and MIM – what’s behind the acronyms?
• M2M (Machine-to-Machine) technology enables
communication between machines for applications
such as smart meters, mobile health solutions and
many more.
• An M2M module effectively has the functionality
of a cellphone although it has none of the normal
appearance (i.e. it has no display, keypad, battery, etc).
It cannot authenticate itself or connect to the mobile
network without a MIM.
• A MIM (Machine Identification Module) is the equivalent
of a SIM (Subscriber Identity Module) with specific
features such that it can be used in machines and
enable authentication. Machine Identification Module
(MIM) is a Gemalto registered Trademark.
(
* ) Source: Gartner Inc.

Segmental review
26 Gemalto Annual Report 2010
Secure transactions
27
Secure transactions
In 2010, Gemalto continued to win new contracts that
bolstered its leadership position in serving global
financial institutions.
Segmental review
Our performance ( * )
Our products, software and services
Our positioning
Revenue
€462m
(2009: €411m)
Gross profit
€140m
(2009: €99m)
Profit from operations
€41m
(2009: €12m)
Up 7% year-on-year at constant
exchange rates
Gross margin
30.3%
(up 620 basis points)
Profit margin from operations
8.9%
(up 600 basis points)
Gemalto offers a full range of solutions for secure transactions in
financial services, transport and other emerging markets. These include:
Payment and loyalty cards
• Our Clarista, Optelio and Desineo brands, segmented by unique
customer needs, represent our complete EMV card payment solutions.
They support all profiles – such as JCB, MasterCard and Visa – in both
Static Data Authentication (SDA) and the more advanced Dynamic
(DDA) systems. Clarista and Optelio also relate to our loyalty solutions.
Contactless solutions
• Our contactless card and sticker solutions offer faster, more
convenient ways to make payments, driving up retail activity and
reducing the number of cash-based transactions.
• We apply innovative designs and form factors to payment solutions,
as well as eco-friendly biodegradable cards opening up co-branding
and marketing opportunities.
Secure services and solutions
• Our Allynis range of secure services includes personalization,
packaging and card distribution, plus a full set of e-services such
as PIN by SMS and PIN self-definition.
• Our Dexxis Instant Issuance solution allows banks and retailers
to issue cards immediately in the store or in-branch.
• Gemalto is the world leader in chip payment cards, and the preferred
partner of global banks.
• A progressive worldwide demand for migration to EMV cards and
contactless payments is driving our core business.
• We are leveraging our local knowledge, world leadership and scale to
develop attractive markets ready for EMV, such as Brazil, Mexico,
Canada, Russia, Poland and Indonesia.
• In the US, we are also recognized for the expertise and support we
bring to major banks, and in 2010 we won the first EMV migration
program there.
• We are combining the technology used in Secure Transactions with
those from other segments, to create converged solutions such as
online and mobile banking.
• During ten years’ experience in contactless technology we have
delivered more than 100 million contactless cards to customers.
• Hence we are well positioned in the fast-growing market of dual
interface (DI) contact/contactless cards, with one in two issued by
Gemalto in 2010.
• Our contactless cards are used by many major transit authorities,
including those in London, Paris, São Paulo, Rio de Janeiro and
Santiago, in order to maximize throughput and replace cash.
• Our retail customers benefit from our extensive experience in
delivering smart card based solutions for loyalty, vouchers and
private payment applications.
• Growth was driven by global migration to EMV and dual-interface
contactless products
• The drag on growth, caused both by the UK triennial trough and the
shift to standard mailing, faded in the second half as anticipated
• Gross margin improved significantly, as a result of a better product
mix and high personalization service activity
• Operating expenses increase was in line with revenue growth, after
accounting for the impact of acquisitions
• Fall through of the second half strong growth was excellent,
and consequently profit margin from operations for the full year
improved sharply
(
* ) Adjusted financial information for ongoing operations.
Trusted Service Manager (TSM)
• Our TSM solution supports a variety of convergent payment offerings,
including mobile contactless payment programs.
Transport
• Mass transit operators need to maximize commuter throughput
as well as reduce fraud and create opportunities for marketing
and co-branding. Our solutions address all these issues in one
clear proposition.
Pay TV
• We supply subscriber authentication and rights management cards
to large secure-access TV service providers.
For more information see
pages 147-149

Segmental review
28 Gemalto Annual Report 2010
Secure transactions
29
6.5 million
Customers of PKO Bank Polski will receive their
new contactless EMV Visa cards by the end of 2011.
22 million
EMV contactless cards were delivered by Gemalto
worldwide in 2010.
For more information visit
www.gemalto.com
Contactless debit cards for Poland
In November 2010, Poland’s largest financial institution,
PKO Bank Polski S.A, selected Gemalto to migrate
its entire portfolio of individual Visa debit cards to
EMV contactless.
The bank plans to issue around 6.5 million Visa
payWave cards to its customers by the end of 2011.
This massive deployment is part of PKO BP’s strategy
to offer innovative products to its customers and
to boost the development of cashless transactions
in Poland.
In addition to the security of EMV, the card provides
a new and simple way to make low-value purchases
up to 50 Polish Zloty (€12.5, USD17).
Users benefit from the speed and convenience of
contactless in thousands of acceptance points, at
department stores, fast-food restaurants, cinemas,
bookstores and pharmacies.
In February 2010, BNP Paribas in France granted
us a two-year contract for the supply and
personalization of EMV DDA payment cards.
Expert services
Applying our expertise in handling secure data,
we personalize cards for each user and then
manage their distribution and administration.
With the widest range of value-added services
in the market and 30 personalization centers
around the world, close to our customers and
certified by Visa and MasterCard, Gemalto is
reputed for the flexibility, reliability, speed and
security of its issuance services.
We are also innovating in issuance solutions
for emerging markets. In November we
announced the deployment of our Dexxis
Instant Issuance offering in Indonesia, where
consumers – 90% without bank accounts –
require micro-banking services. Dexxis offers
them instant, on-the-spot issuance of EMV
cards. The package also includes servers,
software, printers and training to deploy the
solution over a secure network.
Our customization services also allow banks
and retailers to issue unique designs to enhance
their market position. In May, Raiffeisen was
the first issuer in Austria to deploy Gemalto’s
picture-on-card solution, which prints one of the
customers’ favorite photos onto the card. For
more advanced projects, our Optelio range of
payment cards includes on-board applications
which open up a number of possibilities for both
issuers and customers.
business. In June, Gemalto achieved
MasterCard certification for our consulting
services, demonstrating our unique ability
to support our customers during their EMV
migration programs.
By incorporating EMV services into a SIM card,
we have already been able to provide five
French banks with a contactless payment
system called “Payez Mobile”, built into users’
cellphones. In May, Gemalto and Orange
announced their partnership in the deployment
of our Trusted Service Manager (TSM) for NFC
solutions in the “Nice (France) contactless city”
commercial project.
Transport
Our Celigo smart cards are already being used
to access mass transit systems in 30 cities that
have more than one million inhabitants each.
Passengers appreciate the convenience of our
contactless cards while operators value the
additional revenue protection. Unauthorized
travel is reduced and with our cryptographic
expertise, fraud is all but eliminated.
During 2010, we saw increasing interest from
financial institutions and mass transit operators
to leverage the success of contactless
technology by combining payment and
transport ticketing on a single card.
Segmental review
Consumers appreciate the security and
convenience of credit and debit cards. EMV ( * )
chip cards offer the highest level of trust and
security, protecting both cardholders and
issuers. Gemalto’s experience in technology
and encryption means we are strongly
positioned to respond to increasing demands
from financial institutions worldwide for their
deployment. Contactless technology
increasingly enables issuers to combine
different services, such as payment and
transport, on a single card.
Banking cards
Although consumers appreciate the
convenience of credit and debit cards, secure
access to their credentials remains a major
priority ( ** ) . New technical and security
standards, as well as consumer demand
for more choice and convenience, are
driving suppliers to look for innovative
payment solutions.
At the same time, financial and retail card
issuers want better security and innovative
platforms to create new revenue streams.
Gemalto’s years of experience in card
technology and expertise in encryption mean we
are strongly positioned to address these issues.
Migrating abroad
Adoption of EMV standards for smart payment
cards is growing, and with American Express
joining the EMV consortium in 2009, it is stronger
than ever. The familiar PIN authentication
process makes EMV cards easy to use for
customers and keeps transaction times low for
retailers – a crucial factor. Thus by the end of
2010 there were more than 1 billion ( * ) of them in
use worldwide, and market growth potential
remains high. Javelin Strategy & Research
estimates that $16.6 billion in card fraud in the
US alone could be immediately affected by
EMV implementation.
Alongside our existing EMV contracts, 2010
saw us supporting our clients in their EMV
migration programs in Poland, Spain, Brazil
and Canada amongst others.
Our global presence makes us a logical partner
for banks looking to manage their migration from
magnetic stripe (mag-stripe) cards to EMV. In May
2010, Gemalto won the first such program in the
US with the United Nations Federal Credit Union
(UNFCU). Its motivation for deploying EMV was
driven by the need for US cardholders to be
able to make payments when travelling abroad.
In most mature EMV markets, mag-stripe cards
(those typically used in the US) are no longer
accepted in machines such as those used for
transport ticketing systems and road tolls. In
July 2010, Hometrust in Canada also selected
Gemalto to support its EMV migration program.
Dynamic security
Gemalto’s latest generation of Dynamic Data
Authentication (DDA) cards increases their
security yet further. Visa and MasterCard
have mandated DDA for all their EMV cards
in Europe by January 2011. Similar mandates
are expected in the rest of the world soon.
Contactless payments
Gemalto has been supplying contactless
technology for over a decade, delivering
more than 100 million contactless cards to
customers. Users make a payment by simply
holding their card near a reader, even if it’s still
in their wallet or purse. That means we can
offer new form factors, such as keyfobs, as
payment tokens. It also makes it easier for
banks and retailers to create co-branded
payment cards.
Gemalto had several successes during 2010
with dual interface (DI) contact/contactless
cards. For example, in January Setefi (Intesa
Sanpaolo Group) in Italy deployed our EMV
cards with MasterCard PayPass contactless
payment. And in December, PKO Bank Polski
in Poland adopted our solutions to migrate
straight from magnetic stripe cards all the way
to EMV contactless for its entire portfolio of
debit cards.
Our ability to navigate the converging worlds
of banking, mobile communications, transport
and retailing is also opening up new
opportunities for our Secure Transactions
(
* ) Source: EMVCo
(
** ) Source: TNS Sofres

Segmental review
30 Gemalto Annual Report 2010
Security
31
Security
The Security segment is characterized by growth and
diversification. We are producing an increasing range of
software, services and solutions for an ever-expanding
number of markets, from governments and their agencies
to organizations and enterprises.
Segmental review
Our performance ( * ) Our products, software and services Our positioning
Acquisitions
Todos
In April 2010, Gemalto acquired Todos AB, a leading
provider of strong authentication solutions for internet
banking. Todos has delivered some 20 million products
to over 100 financial institutions in 30 countries. With
their EMV card and a reader, consumers use their PIN
code to securely sign internet banking transactions.
An additional layer of security can be provided by
displaying transaction details on the reader, so that
users “sign what they see”. Todos was founded in 1987.
Valimo
In February 2010, Gemalto acquired Valimo Wireless
OY, the world leader in mobile authentication. Valimo’s
solutions enable mobile users to securely authenticate
themselves, digitally sign documents and confirm legally
binding transactions. This facilitates secure online
banking, mobile payments, governmental services,
electronic and mobile commerce, and identity and
access rights management for enterprises.
Valimo was founded in 2000.
Revenue
€318m
(2009: €236m)
Gross profit
€129m
(2009: €85m)
Profit from operations
€39m
(2009: €4m)
Up 31% year-on-year at constant
exchange rates
Gross margin
40.6%
(up 450 basis points)
Profit margin from operations
12.4%
(up 1,060 basis points)
• Government Programs revenue was up 16%, on the back of certain
large-scale ePassport and eID programs starting their deployment
• Identity & Access Management revenue was up 50%, thanks to
strong sales of eBanking solutions.
• Productivity gains and scale effect, together with the higher patent
contribution, led to 450 basis points gross margin improvement.
• Operating expenses were down 620 basis points to 28% of revenue.
• The operational leverage – combination of strong growth, gross
margin performance and operating expenses control – lifted profit
margin from operations to 12.4% in 2010, and to 6.8% when
excluding the patent contribution.
(
* ) Adjusted financial information for ongoing operations.
For more information see
pages 147-149
Government programs
We provide identity management solutions and services comprising secure
documents, enrollment, issuance and national registry solutions for
governments, national printers and integrators.
• Sealys: physical, visual and electronic security for travel documents,
national eID, eHealth cards, drivers licenses and registration certificates.
• Coesys: end-to-end solutions for enrollment, issuance, border control
and eGovernment.
• Allynis: secure operated services, outsourced personalization and
delivery, plus strong engineering and financial capabilities.
Identity and Access Management
Online Authentication (OA): We provide strong authentication for
enterprises, governments, banks and other organizations, enabling
them to control access to their physical and logical assets.
• Protiva: a full suite of products, software and services to protect
information and provide encryption for sensitive data. This includes
multi-function smart cards, contact and contactless readers, USB
memory with built-in security, One-Time Password devices and Public
Key Infrastructure for access control in fixed and mobile environments.
• Protiva enables customers to implement secure access to and storage
of data, secure remote access, digital signature, pre-boot
authentication, identity verification and biometric authentication.
• Our end-to-end services take customer projects from definition to
infrastructure integration, fulfillment and ID provisioning.
eBanking and eCommerce: We enable banks and retailers to
offer customers in each end-user segment tailored solutions that
deliver maximum confidence in their online transactions without
compromising convenience.
• Ezio online banking solutions: digital signature and secure access
to home banking, retail and corporate bank networks, eCommerce
sites and cloud computing services.
• Cards, USB tokens, connected and unconnected readers, central
servers, plus fulfillment, integration and hosted authentication services.
Licensing of intellectual property rights
We have a unique portfolio of proprietary technology and patents,
and we license use of our rights to other players.
• Governments are increasingly using electronic ID solutions to enhance
national security and increase administrative efficiency.
• Gemalto is the world leader in this domain in terms of the number of
ePassport and eID systems implemented, with over 50 active projects.
• We have unrivalled experience in managing programs involving a wide
variety of interactions between citizen and state, and in compliance
with regulations for electronic documentation and software.
• Our global footprint and efficient operations enable us to address
market opportunities with a strong local dimension.
• Gemalto is trusted by governments and financial institutions to protect
access to their sensitive data.
• Our clients include many Fortune 500 companies such as Boeing,
Chevron, HP, Schlumberger, Shell, Microsoft and the US Dept. of
Defense.
• We deliver strong access control and help clients meet industry
standards and governmental security directives.
• We provide advanced solutions in fixed and mobile environments,
minimizing total cost of ownership and maximizing convenience
without compromising security.
• Our solutions provide the highest level of protection against fraud while
being simple for IT departments to administer and very easy to use,
ensuring maximum compliance with security protocols.
• Gemalto is a global leader in eBanking deployments based on
EMV-CAP (Chip Authentication Programs).
• We have delivered some 50 million Ezio units, half of which are
advanced unconnected and connectable eBanking card readers.
• Our worldwide footprint enables us to serve customers locally from
design to integration and fulfillment services.
• With the broadest portfolio on offer, we are chosen by banks facing an
increasing diversity of needs, from light, unconnected to major
connected solutions over fixed and mobile networks.

Segmental review
32 Gemalto Annual Report 2010
Security
33
Government programs
National security and border integrity continued
to dominate headlines around the world during
2010. Many countries are investing heavily in
additional security measures to protect against
hostile intent – from within and outside their
borders – and to enforce policies on travel and
access. Meanwhile global interest in, and
deployment of, electronic identity solutions for
citizens is at an all-time high as governments
look for ways to become more efficient and at
the same time to enhance the services they offer.
Electronic passports
Gemalto saw steady revenues from ePassports
and related services in 2010. The best testament
to the strength of our business in this sector is
the number of our satisfied customers.
In May, for example, the Norwegian Police
renewed its multi-year contract to personalize
and issue Sealys ePassports. Gemalto
manages the entire delivery process from our
secure service center in Oslo, from the
production of travel documents through to
personalization and issuance services. The new
solution features extended access control (EAC)
(a high-security mechanism for second generation
passports) and includes an innovative data
page hinge to prevent fraudulent use.
Elsewhere, in June, we announced that we had
been selected by the Turkish Ministry of Foreign
Affairs for its ePassport program. Our Coesys
issuance solution, including the certificate
authority and associated integration services,
is being used to personalize new electronic
passports for Turkey’s 72.5 million citizens.
In September, the Moroccan Mint commissioned
Gemalto to deliver a complete solution for the
Kingdom’s new biometric passport program. Our
solution includes the highly secure Sealys eTravel
operating system; integrated contactless
microprocessors containing the holder’s digital
data; plus our Coesys Issuance solution, training
and maintenance services. We are also supplying
the Ministry of the Interior with our Coesys
Enrolment solution to ease data capture.
In November, the Danish State Police also
renewed its contract for our Sealys ePassport
production and issuance service, a five-year
deal with an option for a further five. We are
also providing our Allynis Issuance services
for ePassport personalization at our Danish
service center. The document has a secure
laser-engraved polycarbonate data-page with
innovative features including a contactless
microprocessor running our highly secure OS.
To cater for increased global demand for
premium products manufactured in a highlysecure
environment, in 2010 we opened
a new production line for core ePassport
technology in Poland. Our additional capabilities
in Tczew mean that we can continue to
guarantee our customers high quality and
excellent service levels.
Electronic IDs and drivers’ licenses
We reached several milestones for our
electronic IDs and drivers’ licenses (eID
and eDL) business in 2010. For example,
in India we surpassed the ten million mark
for deliveries of electronic drivers’ licenses
and electronic registration certificates for
vehicles. The program is expected to
become the largest of its kind in the world.
We continued to break new ground for eID
in 2010. For example, the Republic of Benin is
benefiting from our Coesys enrollment solution
to manage the secure biometric registration of
an estimated six million voters for its 2011
presidential elections, by using more than 3,200
Coesys mobile enrollment stations.
Gemalto is also supplying the software for
national data consolidation, training services,
technical assistance and fulfillment. This
success reinforces our presence in Africa where
we have already deployed several government
programs, notably in Algeria, the Ivory Coast,
Gabon, Morocco, Tunisia and South Africa.
Health cards
Governments around the world prioritized
efficiency in 2010, and Gemalto solutions
are helping them manage health administration,
a key area of public spending. Electronic
Healthcare Records (EHR) are unquestionably
the next stage in restructuring the relationship
between patients, healthcare practitioners
and public-sector authorities. They can help
reduce benefit fraud, provide healthcare to
the right patients and ensure only authorized
people can access their data.
In February 2010, Bulgaria began deploying
a national EHR program to optimize, simplify
and secure health treatment and information
for its military personnel and their families
using Gemalto technology and middleware.
The personal electronic health record enables
healthcare professionals to access a patient’s
medical data instantly and make more accurate
decisions, especially in emergency situations.
Innovation and awards
A core part of the Gemalto proposition to
governments is innovation, helping them to
streamline their services and achieve costcontrols.
In June, we launched Sealys
CoreMark, a semi-transparent opening fused
into a 100% polycarbonate card body that is
impossible to delaminate. Its distinctive
watermark effect is produced by laser
engraving deep into the card’s core layers.
This new security feature can be applied to
documents such as ID cards, health cards,
drivers’ licenses, vehicle registration, voting
and resident permit cards.
Not all of our innovation is technological. In May,
we announced a partnership with The World
Bank to support social and economic
advancement in developing countries.
This collaboration is part of the World Bank’s
eTransform Initiative and will see Gemalto’s
international experience in secure electronic
identity and mobile financial services applied
to help governments gain wider access to
best-in-class technology, expertise and practices.
10 million
Electronic drivers’ licenses delivered to date in India
100 million+
Electronic documents ( * ) issued to date by Gemalto
(
* ) Includes ePassports, eDrivers’ licenses, eID, eResident,
eHealth and eRegistration (vehicles) cards.
It’s always pleasing when our innovative products
achieve industry recognition – and awards
underpin our business case with government
clients, too. In November, our Personal Identity
Verification credential was named Best Smart
Card Solution at the US Government Security
News Homeland Security Awards in Washington
DC. Our secure Coesys Enrollment Solution for
US ID projects was also a finalist in the Biometric
Solutions category.
Online authentication (OA)
In 2010, Gemalto continued to supply solutions
to manage access for employees to both
physical infrastructure and IT systems in
markets such as higher education,
government, healthcare, banks and
eGovernment 2.0
The expression “eGovernment”, which has been current
for some years, refers to the use of information and
communication technology in government services.
More recently, “eGovernment 2.0” (or eGov 2.0), was coined
to describe programs offering even more effective delivery
of these services. The most common goals of eGov 2.0
programs are increased efficiency, lowered costs and
reduction in bureaucracy. They also include modernization
of the social contract and strengthening of social cohesion.
For Gemalto, eGov 2.0 means a resolutely citizen-centric
approach to the delivery of public services, making them
more intimate and personalized. We enable this through
programs using our secure electronic identification
technologies. By offering an increasing range of flexible,
responsive and convenient solutions, the public face of
government is progressively growing closer to the
citizens it is serving.
For more information visit
www.gemalto.com
corporations. Our expertise in issuance and
personalization ensures that each employee or
member is properly accredited; and that
authorizations, from the most senior decisionmakers
to the freshest recruits, can be
managed centrally for maximum efficiency.
Partnerships with leading IT suppliers ensure our
solutions are easy for corporate IT departments
to deploy and easy for their employees to use.
For example, our Protiva .NET Bio solution,
available for Windows 7, is delivering increased
levels of corporate security by applying
multi-factor authentication with biometrics on the
smart card. Microsoft itself manages physical
and logical access control worldwide using our
smart cards with .NET technology.
OA for governments
Gemalto’s extensive government contracts for
electronic authentication demonstrate our
ability to deliver the highest levels of security for
all our potential customers. Their systems hold
highly personal information about millions of
people. Their employees are often engaged on
work of great sensitivity. And reliability is
paramount – both to protect data and ensure
key staff can access secure information and
networks wherever they are in the world. So
our enterprise and banking customers can be
reassured that our solutions have been tested
in the most secure environments.
In January 2010 we announced that Australia’s
Queensland Police Service had selected
Segmental review

Segmental review
34 Gemalto Annual Report 2010
Others
35
Gemalto to provide new electronic ID cards
for its staff. This is the first police force to adopt
an innovative solution that strengthens access
security and enhances operational management.
OA in financial services
The most valuable assets for financial services
firms today aren’t held in vaults or safes –
they’re in databases, and in their employees’
ability to perform secure transactions without
delay. Banks can secure vital data and
premises with world-class encryption systems
using Gemalto smart cards, while ensuring the
right employees have access to both physical
infrastructure and IT systems.
The Financial Services sector is a fast-moving
market, and in 2010 we continued to innovate
with products tailor-made for its most testing
environments. In December, for instance, we
launched a specific strong authentication
solution for traders: Protiva One4all. With it,
each trader only needs one secure credential
to perform logon, logout and desktop locking
for multiple PCs. This stand-alone software is
designed to work with any PKI smart card and
middleware. It can be easily installed on
workstations with no impact on a bank’s
existing IT systems, and has been implemented
in the trading rooms of major banks worldwide.
Securing education
Higher education is a showcase for our
authentication solutions. On any campus,
thousands of staff, students and support
workers need secure access to buildings,
networks, banking, transportation, and even for
voting in student elections. Our multi-function
cards act as a single credential allowing them
to access a uniquely tailored set of services.
The user-friendliness of our solutions is a key
asset for fast adoption and deployment. In
2010, more than 7 million students around the
world used our eID solutions.
Cloud computing
As companies strive to meet the demands of
their mobile workforces, cloud computing ( * ) has
become the focus of IT departments looking to
deliver data services from a centralized location.
One of the significant challenges in this service
delivery model is the need for strong security
controls and an audit trail of all access events.
Gemalto’s Protiva suite of strong authentication
products and services provides a flexible solution
to meet the needs of any size of organization.
This includes both on-premise authentication,
a blend of on-premise and hosted, and a fully
hosted authentication service including fulfillment,
life-cycle management, authentication services
and support. These services are also applicable
to the emerging needs within online gaming
communities where users need to secure access
to their accounts and control their digital assets.
For example, Amazon Web Services (AWS)
offers Gemalto’s OTP token to add strong
authentication for their users to access their
online data resources. Gemalto provides the
fulfillment services and manages the webstore
where tokens can be bought by AWS users.
eBanking and eCommerce
The drive to move financial services online
continued in 2010. Rapidly increasing use of
smartphones and the need for banks to offer
customers both convenience and security –
as well as improve their own efficiency at a
time when they remain under financial
pressure – meant electronic banking activity
reached record levels.
Gemalto is the only truly global eBanking
authentication provider with a strong local
presence worldwide. Our solutions allow
people to seamlessly prove their identity and
conveniently conduct transactions online,
with their privacy respected and secure from
fraud. We also recognize that online security is
increasingly about people and behavior, not just
technology. That’s why banks continued to rely
on us in 2010 to deliver the most appropriate
strong authentication solution to each individual.
Pushing boundaries
Banks are looking to Gemalto for even stronger,
more trustworthy options for multi-factor
authentication. That’s why we offer a full range
of solutions that add context, establish consent
and manage risk. It’s also why we offer a range
of services from consultancy and back-end
authentication servers, to producing,
personalizing and distributing security devices.
This has translated into a number of contract
wins. In January 2010, for example, we
announced that the Advanced Bank of Asia
(ABA) in Cambodia would deploy our Ezio card
readers for its new internet banking services. It
means ABA customers can securely access and
perform online banking transactions using their
Ezio Reader and EMV card. This combination
of “something you have” (the card) and
“something you know” (the one-time PIN)
“Gemalto’s Ezio Suite
brings together a
unique authentication
server, plug-in
modules and a range
of authentication
devices, ensuring our
customers get exactly
the solution they need.”
provides a much higher level of security
compared with simple username and
password schemes.
Alongside our existing innovations we have
sought to complement our eBanking offer
through acquisitions. At the end of 2009 we
acquired the banking business unit of Xiring,
and its rapid integration saw us strengthening
our position as a global leader in eBanking,
eCommerce and access security.
Then in April 2010 we acquired Todos AB,
a provider of strong authentication for internet
banking that has delivered more than 20
million devices to over 100 financial institutions
worldwide. Its product suite allows consumers
to use their PIN to securely sign internet
banking transactions. Todos was quickly
integrated with our existing activities and
is a perfect fit with our eBanking business.
Strong authentication
Gemalto’s Ezio Suite brings together a unique
authentication server, plug-in modules and
a range of authentication devices, ensuring
our customers get exactly the solution they need.
The result is a completely flexible, future-proof
system. In November 2010 we augmented Ezio
with the industry’s first credit card combining
One-Time Password (OTP) security with
standard payment. End-users are happy to
have a security token embedded in a familiar
form-factor, guaranteeing high acceptance –
and allowing banks to lower fullfilment costs
while increasing security, particularly online.
This kind of innovation helps us win new
business. For example, in October, Consultoría
International Banco (CI Banco) in Mexico
announced the roll-out of our Ezio strong
authentication server and OTP tokens, enabling
it to deploy multiple authentication devices,
including EMV payment cards, connected
readers and mobile phones. Leading banks
such as Barclays, ABN AMRO, Nordea and
many of their peers around the globe continued
to trust us last year to deliver more than 50
million eBanking security devices to the
doorsteps of their clients.
Others
Our performance ( * )
Revenue
€19m
(2009: €24m) Down 22% year-on-year at constant
exchange rates
Gross profit
€4m
(2009: €6m)
Profit from operations
€2m
(2009: €4m)
Gross margin
22.3%
(down 230 basis points)
Profit margin from operations
10.9%
(down 450 basis points)
• Sales of memory cards for fixed line public telephony
applications continued to decline, as usage is substituted
by mobile telephony
• Our POS terminal business was transferred to VeriFone
(
* ) Adjusted financial information for ongoing operations.
For more information see
pages 147-149
Our products, software and services
Public Telephony
Gemalto provides multi-function prepaid cards for public telephony.
These enable operators to offer services to users when making
payments at kiosks and going online.
• Gemalto is the world’s leading supplier of prepaid phone cards
with over 150 million units shipped in 2010.
• Our phone card solutions offer strong security for both operators
and their customers. Our open Key Management System for
authenticating card-based activities delivers a combination of
security and flexibility.
• With our global footprint and diverse customer base, we support
public telephony operators in a wide range of initiatives designed
to promote their business.
• By sharing our market and technical expertise, we help operators
develop fresh approaches to the highly mature fixed-line market.
This enables public telephony to remain distinctive and relevant in
a world increasingly dominated by mobile communication.
• Our tamper-proof UniSAM (Security Application Module) system
can be installed in payphones or terminals to authenticate prepaid
user cards. This offers security against fraud and allows storage
of issuers’ private information. Since it is built on open standards,
it works with almost any legacy system.
POS terminals
Effective December 31, 2010, Gemalto finalized the transfer
of its POS solutions business to VeriFone. The latter has assumed
the fulfillment of existing customer relationships and product
requirements for Gemalto POS customers.
Segmental review
(
* ) See page 17

Safe, convenient payment in America
Payment card holders naturally expect to be able to use their
cards anywhere in the world. And with most countries moving
to EMV-based (Chip and PIN) payment for greater security,
travelers with magnetic stripe cards are increasingly having
trouble using them abroad. During 2010, Gemalto was chosen
by banks in Canada and the US to help them migrate to EMV
cards, including those with dual interface Dynamic Data
Authentication (DDA) for contact and contactless use. This
means their cardholders will have a secure, hassle-free means
of payment that is globally accepted.
For more information see
pages 28-29
For more information visit
www.gemalto.com
38 Financial review
42 Principal risks
44 Our approach to sustainability
Group financial and
operating review

Group financial and operating review
38 Gemalto Annual Report 2010
Financial review
39
Financial review
Gemalto delivered a strong performance in 2010
with Secure Transactions and Security reaching their
profit margin objective one year ahead of schedule.
Income statement
Extract of the adjusted income statement:
€m 2009 2010
Revenue 1,602.0 1,905.6 + 19%
Gross profit 587.8 36.7% 689.4 36.2% (0.5 ppt)
Operating expenses (1) 407.1 25.4% 473.7 24.9% (0.5 ppt)
EBITDA (2) 233.9 14.6% 277.2 14.5% (0.1 ppt)
Profit from operations 180.7 11.3% 215.7 11.3% +0.0 ppt
Net profit 160.9 10.0% 216.4 11.4% +1.3 ppt
Earnings per share
(€ per share) (3)
– basic 1.91 2.56 +34%
– diluted 1.88 2.52 +34%
(1)
In the adjusted income statement, operating expenses are defined as the sum of Research
and Engineering, Sales and Marketing and General and Administrative expenses, and Other
income (expense) net.
(2)
EBITDA is defined as PFO plus depreciation and amortization expenses, excluding the above
amortization and depreciation of intangibles resulting from acquisitions.
(3)
The
full year 2010 adjusted basic earnings per share are determined on the basis of the
weighted average number of Gemalto shares outstanding during the twelve-month period
ended December 31, 2010, i.e. 83,030,525 shares, which takes into account the effect of the
share buy-back program. The full year 2010 adjusted diluted earnings per share were
determined using 84,399,768 shares corresponding to the IFRS treasury stock method, i.e.
on the basis of the same weighted average number of Gemalto shares outstanding for the
twelve-month period ended December 31, 2010 and considering that all outstanding “in the
money” stock options were exercised (5,976,566 options) and the proceeds received from
the options exercised (€142,268,568) were used to buy-back shares at the average share
price of the full year 2010 (4,607,323 shares at €30.88).
The financial review is based on adjusted financial information: non-GAAP
measures where the key metric to evaluate the business and to take operating
decisions is the profit from operations (PFO). PFO is defined as the IFRS operating
result adjusted for all equity-based compensation charges and associated costs,
amortization and depreciation of intangibles resulting from acquisitions, and
restructuring and acquisition-related expenses. For a better understanding of
Gemalto’s year-on-year business evolution, financial information and comments in
the ‘Segment information’ paragraph address the ongoing operations i.e. exclude
the contribution from discontinued operations and from assets classified as held
for sale to the income statement.
Figures in the financial review are at historical exchange rates, except where
otherwise noted. Fluctuations in currencies exchange rates against the Euro have a
translation impact on the Euro value of Group revenues: comparisons at constant
exchange rates aim at eliminating the effect of currencies translation movements
on the analysis of the Group results by translating prior year revenues at the same
average exchange rate as applied in the current year.
For more information on adjusted measures see
pages 147-149
Revenue for the full year 2010 was up by 19% at historical rates to €1,906
million, fuelled by double-digit growth in all 4 main segments, and by a
strong second semester which, for the first time, saw Company revenue
clearly surpassing the one billion euro revenue mark for a semester.
Revenue from software and services grew by 54% to €252 million,
contributing significantly to the Company’s overall growth, and
representing 13% of 2010 revenue.
Business conditions in the fourth quarter were generally comparable to
those observed during the rest of the year. The seasonality of revenue
throughout 2010 was, as expected, more pronounced than in 2009,
leading to much stronger seasonality in profit generation.
Gross profit for the Company was up €102 million or 17% at €689 million.
This represents a gross margin of 36.2%, lower by 50 basis points on the
previous year. Profitability expanded in the Secure Transactions and Security
segments offset by lower gross margin in Mobile Communication.
The increase in operating expenses was much less than revenue growth,
and was essentially attributable to the consolidation of acquired
businesses and to some specific organic operating expense investments
made in software and services and strategic growth areas. As a
consequence, operating expenses were down 60 basis points when
expressed as a percentage of revenue.
The operational leverage combining strong revenue growth and
controlled operating expenses generated a 19% increase in profit
from operations to €216 million.
The profit margin from operations of the Company was kept at its record
level of 11.3% of revenue.
Financial income for 2010 came in as a €0.8 million profit, versus a
€2.2 million charge the year before; and share of profit of associates
was essentially stable at €1.7 million. Hence, the profit before tax was
up year-on-year by 21% to €218 million.
Income tax amounted this year to a credit of €0.6 million, reflecting the
effect of the recognition of some previously unrecognized deferred tax
assets. In 2009, income tax expense amounted to €21.6 million.
The divestiture of the Point-of-sale (POS) activity, previously reported in
the segment ‘Others’, became effective on December 31, 2010. As per
IFRS, the contribution of this activity to the income statement is
reclassified, and its net contribution is presented as a single amount on
the line item “Profit (loss) from discontinued operation (net of income tax)”
for both the 2010 and 2009 accounts. In 2010, this net contribution from
discontinued operation was a loss of € 2.4 million, essentially reflecting
the net loss recorded on the disposal of the associated assets and
liabilities. In 2009, the net contribution of the POS operations was a profit
of € 2.6 million.
For the full year 2010 Gemalto generated an adjusted net profit of €216
million, higher by €55.5 million than the adjusted net profit for full year
2009. Basic adjusted earnings per share rose to €2.56 for 2010, and
diluted adjusted earnings per share settled at €2.52, representing an
earnings growth of 34% compared to 2009.
Discontinued operation and Assets held for sale
Within the framework of a strategic partnership between VeriFone
and Gemalto announced in October 2010, the two companies entered
into exclusive discussion for the transfer of Gemalto’s electronic point
of sale (POS) terminals business to VeriFone. The disposal of the
POS business became effective on December 31, 2010, and therefore
this activity, formerly reported within the segment “Others”, is now
classified as a “discontinued operation”. As per IFRS, its net contribution
is presented as a single amount on the line item “Profit (loss) from
discontinued operation (net of income tax)”, together with the €3 million
net loss on the disposal of the related assets and corresponding
liabilities. Without this reclassification, the POS activity would have
contributed €51 million in revenue and €1 million in profit from
operations in 2010, respectively €52 million and €3 million in 2009.
The assets of one of the Company joint ventures (the JV) active in China
in Secure Transactions and Security have been classified as
“held for sale” due to the shareholding restructuring in process with
the partner. In 2010 this JV revenue was €44 million and its profit from
operations was €8 million, in 2009 its revenue was €42 million and its
profit from operations was €10 million.
Ongoing operations analysis
For a better understanding of the current and future year-on-year
evolution of the business, the Company also provides the adjusted
income statement for the “ongoing operations”; i.e. excluding
discontinued operation and assets held for sale. See pages 148-149
for the reconciliation between the ongoing operations figures and the
adjusted and IFRS income statements.
Extract of the adjusted income statement for ongoing operations:
€m, ongoing operations 2009 2010
Revenue 1,560.0 1,861.8 + 19%
Gross profit 573.8 36.8% 676.0 36.3% (0.5 ppt)
Operating expenses 403.4 25.9% 468.6 25.2% (0.7 ppt)
EBITDA 222.3 14.3% 267.2 14.4% +0.1 ppt
Profit from operations 170.4 10.9% 207.5 11.1% +0.2 ppt
Net profit 150.0 9.6% 212.5 11.4% +1.8 ppt
Earnings per share
(€ per share)
The 22% increase in profit from operations to €207 million in 2010 leads to
11.1% profit margin from operations, both new records for the Company.
The vast majority of this €37 million positive variation comes from the
higher performance of the underlying business. This was complemented
by the net effect of one-off items and acquired businesses.
In Security the strong fall through from the double-digit growth was
augmented by a greater contribution from the patent licensing activity.
In Secure Transactions, the high operational leverage was driven by
worldwide migration to EMV standards and strong demand for dual
interface cards, and was partially offset by the triennial renewal trough
in the UK. In the Telecom sector, the Mobile Communication segment
reported lower profit due to limited large scale deployment of innovative
projects and operating expense investments in software and service
growth areas, while in the Machine-to-Machine segment customers
reacted positively to the fast integration of Cinterion. The contribution
to profit from operations from acquired businesses was slightly positive
for the year.
Constant perimeter analysis
Businesses acquired in 2010 contributed €158 million to revenue.
Taking as a reference the group’s perimeter as at December 31, 2010,
the ongoing operations year-on-year revenue growth (4) at constant
perimeter was +7% at historical rates.
Segment information
For a better understanding of Gemalto’s year-on-year business
evolution, in this section ‘Segment information’ comments and
comparison address the ongoing operations as defined on
pages 147-149.
Mobile communication
€m, ongoing operations 2009 2010
Revenue 888.1 980.9 + 10%
Gross profit 383.5 43.2% 375.9 38.3% ( 4.9 ppt)
Operating expenses 232.8 26.2% 258.2 26.3% + 0.1 ppt
Profit from operations 150.7 17.0% 117.7 12.0% ( 5.0 ppt)
Mobile Communication posted revenue of €981 million, higher by 5% at
constant exchange rates from the previous year.
Growth was driven by success in software and services whose revenue
doubled year on year to €152 million as investment towards new offerings
was sustained both through bolt-on acquisitions and organic developments.
On the product side, promising developments in new form factors (5)
products used in new wireless usage such as mobile TV and mobile
contactless services partly offset the slightly lower revenue from a
traditional SIM card business whose product mix improvement was
slowed by a less favorable regional sales breakdown and by the year’s
limited return to large-scale commercial deployment of innovative projects.
Gross profit remained relatively stable at €376 million. Operating
expenses grew by €25 million to €258 million with the consolidation
of acquired technology companies and continued organic investment
in strategic fast-growing areas such as Trusted Service Management
(TSM), Mobile Money and Digital Life Management services.
Group financial and
operating review
– basic 1.81 2.54 +41%
– diluted 1.78 2.50 +41%
(4)
i.e. as if all businesses acquired in 2009 and 2010 were consolidated as at January 1st 2009,
and discontinued operations and asset held for sale were deconsolidated as at January 1st
2009, and based on pre-acquisition available revenue figures and best estimates.
(5)
Among the new form factors, revenue from Machine Identification Module products (MIM)
is reported starting August 2010 in the segment Machine-to-Machine (M2M).

Group financial and operating review
40 Gemalto Annual Report 2010
Financial review
41
Hence, profit from operations was lower by €33 million year on year,
at €118 million, representing a profit margin of 12.0%. The margin profile
of the traditional SIM card business remained unchanged and the
segment’s year-on-year profit variation was essentially attributable to the
pro-active investments in operating expenses to grow the software and
service offerings, to the consolidation effects of the acquired businesses
and to a series of non-recurring items.
Machine-to-Machine
The Machine-to-Machine (M2M) segment formed at the beginning of
August 2010 essentially corresponds to the acquired Cinterion activity. It
also includes Gemalto’s existing M2M activity previously reported in the
Mobile Communication segment. As a result, the Machine-to-Machine
segment encompasses wireless modules from Cinterion, Gemalto’s
Machine Identification Modules (MIM) products and emerging M2M
management platforms and services.
€m, ongoing operations 2010
Revenue 81.3 + 22%
Gross profit 26.5 32.6%
Operating expenses 19.4 23.9%
Profit from operations 7.1 8.7%
M2M posted revenue of €81 million over the 5-month consolidation
period, higher by 15% at constant exchange rates on the previous year
on a pro-forma basis (6) .
The integration of Cinterion and Gemalto M2M activities progressed well
over the second half and the development of integrated offers began by
year-end. During this period, revenue expansion was driven by the
growing adoption of cellular connectivity solutions in a variety of
industries such as automotive and metering.
Gross profit grew accordingly, even if the strong rebound in the M2M
applications came with slightly lower gross margins.
Nevertheless, profit from operations doubled on a pro-forma basis, to €7
million, or 8.7% of revenue, benefiting from the strong operating
leverage.
Secure transactions
€m, ongoing operations 2009 2010
Revenue 411.4 462.1 + 12%
Gross profit 99.1 24.1% 140.2 30.3% + 6.2 ppt
Operating expenses 87.3 21.2% 99.0 21.4% + 0.2 ppt
Profit from operations 11.8 2.9% 41.2 8.9% + 6.0 ppt
Secure Transactions revenue grew by 7% over the previous year at
constant exchange rates, to €462 million. This growth was once again
driven by global worldwide migration to EMV, and was boosted by the
rapid adoption by certain countries of upgrades to dual-interface
contactless payment cards. As expected, the twin negative effects of the
triennial payment card renewal trough in the United Kingdom and of the
shift from registered mail to standard mail for personalized card deliveries
faded out in the second half of the year, leading to very strong 16%
revenue growth in the second semester at constant exchange rates.
As a result of the improvement in product mix, of the better absorption of
fixed costs in high growth areas and of higher personalization activity,
gross margin increased by 620 basis points on the previous year, to
30.3%. On the back of the revenue growth and gross margin
improvement, gross profit settled at €140 million for the year, 41% above
that of 2009.
Operating expenses were kept tightly controlled and grew in line with
revenue despite the consolidation of acquired technology companies
and the continued investment in geographical growth areas.
There was hence excellent fall-through to profit from operations from the
strong second half surge in demand, and profit margin from operations
thus progressed sharply, by 600 basis points, to 8.9% for the full year.
Security
€m, ongoing operations 2009 2010
Revenue 236.0 318.1 + 35%
Gross profit 85.2 36.1% 129.1 40.6% + 4.5 ppt
Operating expenses 81.1 34.4% 89.7 28.2% (6.2 ppt)
Profit from operations 4.1 1.8% 39.4 12.4% + 10.6 ppt
Security posted another very dynamic year, with excellent revenue growth,
up 31% year-on-year at constant exchange rates, to €318 million. Identity
& Access Management (IAM) led the way at +50% on the back of strong
sales of our Ezio solution for ebanking deployments and on the integration
of acquired ebanking activities. Government Programs also continued to
grow fast, by 16%, as certain large-scale ePassport and eID programs
entered their deployment phases. Patent licensing revenue was also
extremely strong this year, with revenue exceeding the Company’s plan at
€33 million, €19 million above that of 2009, as some on-going licensing
negotiations came to an early conclusion. Additionally, a high profile patent
litigation was initiated by Gemalto in the US.
Gross margin improved by 450 basis points to 40.6% in 2010, and by 200
basis points when excluding the effect of the higher patent contribution,
due to continued productivity gains in Government Programs and a greater
share of IAM activity. The resulting gross margin improvement combined with
the segment’s double-digit revenue expansion to create a sharp increase
in gross profit that settled at €129 million for the year, up 51% year on year.
In this segment as well, operating expenses reflected the consolidation
effect of acquired businesses and investment in promising areas, such
as eGovernment solutions. Still, operating expenses remained tightly
controlled, growing by only 11% to €90 million and bringing operating
expenses when expressed as a percentage of revenue down
significantly, by 620 basis points.
For the year, the operational leverage of a strong top line growth and
gross margin improvement on limited operating expenses expansion
led to a 1060 basis points expansion in the segment’s profit margin
from operations, to 12.4%. When excluding the patent licensing activity,
this increase was 760 basis points, to 6.8%.
Others
€m, ongoing operations 2009 2010
Revenue 24.5 19.5 (20%)
Gross profit 6.0 24.6% 4.3 22.3% (2.3 ppt)
Operating expenses 2.3 9.2% 2.2 11.5% +2.2 ppt
Profit from operations 3.8 15.3% 2.1 10.9% (4.5 ppt)
Following the disposal of the point of sale (POS) terminals activities at
the end of December 2010, POS has been classified as a “discontinued
operation” in compliance with IFRS, and its net contribution is thus
presented in the income statement as a single line item “Profit (loss) from
discontinued operation (net of income tax)” below the “profit from
operations”. On a pro-forma basis the POS activity would have contributed
in to the Segment “Others” €51 million in revenue and €1 million in profit
from operations in 2010 (€52 million and €3 million respectively in 2009).
The Public Telephony activity continues to decline as it is now almost
fully substituted globally by mobile telephony.
Balance sheet and cash position variation schedule
€m 2009 2010
Cash and cash equivalents, beginning of period 367 404
Cash generated by operating activities, before cash
outflows related to restructuring actions 224 183
Including cash provided (used) by working capital
decrease (increase) 9 (38)
Cash used in restructuring actions (24) (9)
Cash generated by operating activities 200 174
Capital expenditure and acquisitions of intangibles (53) (73)
Free cash flow 147 101
Interest received, net 2 2
Cash used by acquisitions (74) (198)
Other cash provided (used) by investing activities 4 9
Currency translation adjustments 8 9
Cash generated (used) by operating and investing
activities 87 (77)
Cash used by the share buy-back program (65) (39)
Dividend paid to Gemalto shareholders 0 (21)
Other cash provided (used) by financing activities 14 8
Cash and cash equivalents, end of period (7) 404 276
Current and non-current borrowings including finance
lease and bank overdrafts, end of period (23) (20)
Net cash, end of period 381 255
In the full year 2010, operating activities generated a cash flow of
€183 million before the €9 million cash outflow related to restructuring
and acquisition related expenses. This figure was unfavourably impacted
by a €38 million increase in working capital requirement essentially
generated by the strong revenue growth of the second semester.
Capital expenditure and acquisition of intangibles amounted to
€73 million, or 3.8% of revenue, of which €44 million were incurred
for Plant, Property and Equipment purchases net of proceeds from
sales (respectively €53 million and €40 million in 2009). Acquisition of
subsidiaries and businesses, net of cash acquired, used €198 million in
cash, of which €154 million were incurred for the acquisition of Cinterion.
Other investing activities generated €9 million and Currency translation
adjustments amounted to €9 million leading to a total of €77 million used
in operating and investing activities.
Gemalto’s share buy-back program used €39 million in cash for
the purchase of 1,281,254 shares in 2010. As at December 31, 2010,
the Company owned 4,884,596 shares, i.e. 5.55% of its own shares
in treasury. The average acquisition price of the shares repurchased
on the market and held in treasury as of December 31, 2010 was
€27.03. The total number of Gemalto shares issued is unchanged,
at 88,015,844 shares. Net of the 4,884,596 shares held in treasury,
83,131,248 shares were outstanding on December 31, 2010.
On May 31, 2010, Gemalto paid a cash dividend of €0.25 per share
in respect of the fiscal year 2009. This distribution, the first ever in
Gemalto’s history, used €21 million in cash. Other investing activities
generated €8 million in cash, including €16 million of proceeds received
by the Company from the exercise of stock options by employees.
Combined with impact from the share buy-back program this resulted in
€51 million used in financing activities.
As a result of these elements Gemalto’s net cash position 7 as at
December 31, 2010 was €255 million. It was €381 million as at
December 31, 2009.
The Company also took advantage of favourable conditions to
renegotiate and replace its existing syndicated credit facility that was
about to expire by arranging a set of bilateral facilities for a total amount
of €210 million as at December 31, 2010, and €300 million as at March
10, 2011.
Outlook
In 2011, Gemalto targets another year of expansion in revenue and profit
from its ongoing operations, progressing in its 2010-2013 development
plan. The Company expects a substantially lower contribution from
patent licensing activities in 2011, due to the public patent litigation it
initiated in the USA; stable or expanding profits in Mobile
Communication, with a pronounced seasonality due to the large
deployments of Near-Field Communication (NFC) mobile contactless
services and LTE fourth generation networks announced for the latter
part of the year; and reiterates its expectation to have Secure
Transactions delivering a high single-digit profit margin from operations
in 2011. It upgrades its view on the Security segment, which is now
expected to deliver high single-digit profit margin from operations in 2011
even without patent licensing contribution. Gemalto confirms its target of
€300 million in profit from operations in 2013.
Group financial and
operating review
(6)
Pro-forma, by comparing the activities reported in the Machine-to-Machine segment
starting August 1, 2010, consolidation date of the acquired Cinterion business, with the
corresponding activities for the same period of 2009.
(7)
As at December 31, 2010, net cash amounting €19 million were in the JV and reported in
the item “Asset held for sale”

Group financial and operating review
42 Gemalto Annual Report 2010
Principal risks
43
Principal risks
In common with most organizations worldwide, Gemalto is affected by a number of risk factors,
not all of which are within our control. Some factors, such as macroeconomic factors, are likely
to affect the performance of businesses generally, while others are particular to our operations.
This section sets out the risks that Gemalto’s management believes are the principal risks to the
Company, most being specific to our business. Accordingly, it is not intended to be an exhaustive
list of all the risks that may affect our business, but aims at reporting on the main identified risks
that stem from our activity and the actions developed in order to mitigate them.
Risk area
Most important potential
impacts on Gemalto
Mitigating actions
Risk area
Most important potential
impacts on Gemalto
Mitigating actions
Strategic risks
Operational risks
Lower growth, decrease
in activities and/or increase
in competition
(Change in business environment, emerging
market competition, etc.)
Wrong acquisitions
and/or joint ventures
(Technological bricks, geographical
coverage etc.)
Technology shift
(Change in business model)
Financial
Financial and operational,
loss of key people
Financial and reputational
• Critical size, global presence.
• Competitive and market intelligence program.
• 2010-2013 Development Plan.
• Diversified portfolio of activities.
• Capacity of innovation to bring new products
and applications to the market. In 2010, Gemalto
filed 103 new patent applications (103 in 2009).
• Bolt-on acquisitions.
• Cross-segments selling.
• Strict pricing discipline.
• Focus on creating value to clients. In 2010,
overall client satisfaction remained strong
at 712 points (2009: 715, 2008: 631).
• 2010-2013 Development Plan.
• Experience of successful combinations
(twelve acquisitions since the Combination).
• Dedicated M&A team and processes.
• Strategy and M&A Committee with
Board Members.
• Diversified technology portfolio approach
(including through M&A).
• Participation in industrial bodies and
standardization organizations. Many
awards for technological innovations (see
www.gemalto.com/companyinfo/about/awards).
• Strong Research & Development and
standardization teams.
• Competitive and market intelligence program.
Bidding and execution failures
of major contracts
(Amount, duration, technology, commitments)
Exposure to country risk
(Political, regulatory and trade exposure
impacting our staff, footprint and receivables)
Infringement to intellectual
property rights (IPR)
(R&D is an important part of our activity)
Sensitive data mismanagement
(Leakage and/or loss of customers’ data)
Financial risks
Foreign exchange risk
(Manufacturing footprint, portfolio of
receivables, future cash flows, competition)
Commercial, financial and reputational
Financial
Financial and reputational
Financial and reputational
Financial
• Project-based organization for government
program bids.
• Key account managers.
• Security certifications and organization.
• Crisis management.
• Involvement of treasury, tax and legal
departments at the early stages of
international operations.
• Travel intelligence and medical
repatriation cover.
• Dedicated IPR team.
• Protection clauses in contracts.
• Internal inventors policy.
• Internal audits.
• Security and IT policies and related trainings.
• Worldwide Security organization.
• Security certifications (including ISO 27001,
EMV, etc.).
• Centralized currency risk management.
• Natural hedging (i.e. matching costs and
revenue currencies).
• Hedging transactions (foreign exchange
forward contracts and options recorded
as cash flow hedges).
Group financial and
operating review
Operational risks
Business interruption, including
crisis mismanagement
(Inability to serve our customers in a timely
way and protect our stakeholders)
Sourcing failures including
unavailability of chips
(Sophisticated technical requirements etc.)
Decoding of encryption programs
(Encryption is key to security)
Financial, commercial and reputational
Financial, commercial and reputational
Financial and reputational
• Risk mapping with regular updates (both at
site and group levels).
• Crisis management framework and worldwide
training program.
• Business continuity responses build-up.
• Diversified industrial footprint.
• Multiple sourcing.
• Safety stocks management.
• Protection clauses in contracts.
• Strong security and cryptography expertise.
• Market Intelligence team.
• Eight sites with ISO 27001 certification (6 in 2009).
Financial counterparty risk
(Long-term contracts, terms of payment,
cash deposit)
Financial reporting risks
(Revenue recognition process, inventory
valuation, taxation and other complex
accounting issues)
Financial
Financial and reputational
• Risk limits set for counterparties.
• Usage of plain vanilla hedging instruments
and low risk money market investment.
• Working with financial institutions of investment
grade (deposits, hedging transactions).
• Financial policies and procedures.
• Internal Audit department.
• Dedicated team on internal control over
financial reporting.
• Single financial reporting tool company wide.
• Single Enterprise Resource Planning (ERP)
under deployment.
Defective products and/or
service failures
(Manufacturing, personalization services
and development of software etc.)
Commercial, financial and reputational
• Standardized manufacturing processes.
• Quality Management system and world-class
enterprise organization.
• 27 sites with ISO 9001 certification (27 in 2009).
• Product and Professional liability insurance.
• Customer satisfaction survey. In 2010,
overall client satisfaction remained strong
at 712 (2009: 715, 2008: 631).

Group financial and operating review
44 Gemalto Annual Report 2010
Our approach to sustainability
45
Our approach
to sustainability
We’ve been working towards business excellence for
many years and in so doing we’ve formalized our approach
to sustainability, integrating it into our management
systems and structures to help improve our performance
as a responsible company.
Introducing
our first
Sustainability
report
In November 2010 Gemalto published its first
stand-alone Sustainability Report. This can be
viewed online or downloaded as a pdf from
www.gemalto.com. Our 2010 edition will be
published in summer 2011.
Our values
The way we approach and manage
sustainability is closely aligned to our values.
Over the years, our three core commitments
to customers, employees and innovation have
created a robust ethical framework which
underpins all our sustainability activities.
Managing Sustainability
As a company that has always pursued
“business performance excellence”, Gemalto
has a strong background in many aspects of
sustainability. We’ve continually challenged
our own practices through external evaluations
and certifications. We’ve benchmarked
our performance against best-in-class
companies and have always worked to meet
expectations of corporate citizenship from
our key stakeholders.
A few years ago, we decided to combine our
numerous corporate responsibility initiatives
within a coordinated framework. At this point,
our Board intensified its involvement in
Gemalto’s sustainability performance and
reporting, and we took a more systematic
approach to managing sustainability within
the company. (For information on our
Governance structure see page 50.)
Our first priority was to set up a combined,
formal sustainability management system. In
2009, we created a multidisciplinary
Sustainable Development Steering Committee,
supervised by three Executive Vice-Presidents:
Human Resources, Marketing and General
Counsel. This committee meets at least once
a year to review our sustainability improvement
strategy. We also set up two sub-commissions,
Ecology and Social & Ethics, which meet every
two months to review our sustainability projects.
In particular, the sub-commissions focus on:
• Measurement of climate impact and
carbon footprint;
• Development of more eco-friendly
and safer products;
• Responsible purchasing practices;
• Measurement of performance against
sustainability indicators.
In September 2009, we signed up to the
United Nations Global Compact (UNGC),
benchmarking our policies and results with
world-class standards, and verifying the
alignment of our current practices with the
Compact’s ten principles on human rights,
labor rights, anti-corruption and the
environment. Also, we recently upgraded
our Corporate Policy on Health, Safety and
Environment (HSE) to a Sustainable
Development Policy, which reflects the
scope of our commitments in this area.
Our first Communication of Progress (COP)
to the UN was sent in September 2010.
Materiality
In our approach to sustainability, we aim to
tackle the issues that matter most to Gemalto
and our stakeholders. Based on our
experience and knowledge, and taking into
account requests from our customers and
other stakeholders, as well as evolving HSE
regulations, we have historically addressed
critical issues such as:
• The environmental risks and impacts of our
assembly and supply chain activities;
• Our capacity to design and create
eco-friendly products;
• The impact of our products and industrial
processes on the health of our employees
and end-users.
In 2009, we introduced new programs
in the areas of People Care and Responsible
Purchasing. We also began to define and
implement a Corporate Social Responsibility
(CSR) dashboard to help us monitor our
CSR performance and progress.
“It is essential to us that
sustainability is at the
core of our Company.
We expect our employees
to understand, embody
and uphold our commitments
and beliefs.”
Our global Enterprise Risk Assessment
encompassed several sustainability issues
and helped us map and mitigate key risks.
Our next step is to conduct a dedicated
sustainability risk analysis for the Company
as a whole. This will enable us to better
identify and prioritize the issues we engage
with in the future.
Stakeholder dialogue
We communicate regularly with our key
stakeholders, and invite their views on our
performance. Whether they are customers,
suppliers, employees, investors or local
communities, our stakeholders’ opinions
are of great importance to us.
This view certainly underpins our approach
to our investors. The confidence and loyalty
of private and institutional shareholders are
essential to our successful long-term
development. Our investor relations policy is
therefore aimed at informing shareholders in
a timely and detailed way about developments
that are relevant to Gemalto.
In addition to the shareholders’ Annual General
Meetings (AGM), we have implemented a wide
variety of communication tools to keep
investors informed on a regular basis, and to
encourage their feedback. At the publication
of interim and annual financial statements,
we hold conference calls and investor
meetings. In addition, we regularly hold road
shows and participate in conferences for
institutional investors. All these contacts help
us to get a clear picture of investors’ and
analysts’ opinions (see page 150).
Our annual “Tell Me” survey, meanwhile,
enables us to assess levels of customer
satisfaction. It also allows us to answer queries
from customers who want to maintain certain
corporate responsibility standards throughout
their own supply chains.
Another key opportunity for customer dialogue
on sustainability comes at the point of tender.
During this process, as we answer questions
put to us by customers, we are able to
describe in detail our main management
systems and practices. When requested,
we also complete customer-specific
questionnaires demonstrating how we can
meet expectations for sustainable products
and services.
For our biggest suppliers, we hold Quarterly
Business Review meetings where we discuss
commercial and technical issues relating to
the supply chain, product quality and our
mutual relationship. In 2009, we also asked our
suppliers for direct feedback on our
procurement practices.
We also regularly engage with people
from the areas where we operate. These
communications are conducted at a local level
and can address issues such as noise pollution
and people transport. For greatest efficiency,
they are managed on a site-by-site basis.
Internally, our annual employee survey,
PeopleQuest, helps us to track employee
satisfaction across our global operations.
Employee engagement
It is essential to us that sustainability is
at the core of our Company. We expect our
employees to understand, embody and uphold
our commitments and beliefs. In 2009 we
revisited our Code of Ethics, upgrading some
of the rules that govern the conduct of our
operations worldwide and strengthening
the high ethical standards to which we aspire
as a business. By the end of the year, 98.7%
of targeted employees (more than 2,500) had
read and signed this Code, confirming a strong
level of engagement at all levels.
We also communicate regularly with our
employees about sustainability at Gemalto.
We deliver information via established internal
communications channels, and every year
we disseminate our HSE and Sustainable
Development Strategic Agenda. Last year,
our commitment to support the UNGC,
and our new sustainability projects and
management structure, were communicated
to all of our 10,000 + employees. We also
introduced staff training on specific key issues
such as fraud and launched a bi-monthly
newsletter on internal control and risk
management matters.
Since 2008, we’ve been holding an annual
Gemalto Sustainable Development Day –
with events held in all our sites worldwide
which serve to update and engage our staff
with our sustainability actions. And as of June
2010, we now have a dedicated CSR intranet.
This site provides articles and information
on sustainability topics, and serves as a key
communication platform for our employees.
Group financial and
operating review
Full details of Gemalto’s policies and
performance with regard to Sustainability
can be found in its Sustainability Report on
www.gemalto.com

48 Governance at a glance
50 Corporate governance
56 Internal risk management
and control systems
59 Board compliance statement
60 The Board and the management
64 Report of the Non-executive
Board members
66 Remuneration
Governance
An easier route to democracy in Benin
When a country’s citizens live in remote areas, it’s difficult
to involve them in democratic life. Preparing for its 2011
presidential elections, the Republic of Benin selected Gemalto’s
Coesys mobile enrollment solution to manage the secure
biometric registration of its six million voters. Packed inside
a robust field case is all the software needed to capture citizens’
demographic data, fingerprints and digital photographs,
anywhere in the country. This means voters can enroll rapidly
without having to travel long distances. Gemalto delivered over
3,200 stations, plus the software for national data consolidation,
training services, technical assistance and fulfillment.
For more information see
page 32
For more information visit
www.gemalto.com

Governance
48 Gemalto Annual Report 2010
Governance at a glance
49
Governance at a glance
Corporate governance
Remuneration
For more information see
pages 50 to 55
For more information see
pages 66 to 73
Core principles
The Board is responsible for Gemalto’s
corporate governance structure and for
compliance with the Dutch corporate
governance code, as applicable during the
2010 financial year. The Company complies
with the principles and best practice provisions
of the Dutch corporate governance code with
the exception of the best practice provisions
listed on page 50.
Board compliance statement
The Board compliance statement for purposes of
compliance with the Dutch corporate
governance code and in accordance with the
implemented European Union Transparency
Directive, can be found on page 59.
Internal risk management and control systems
For more information see
pages 56 to 58
Board structure
The Company has a one-tier Board comprising:
• Executive Board member, the CEO.
• Non-executive Chairman.
• Eight further Non-executive Board members.
The Board held eight meetings during 2010,
four in person and four by conference call.
The Board has ultimate responsibility for the
management, general affairs, direction and
performance of the business as a whole.
The CEO conducts the day-to-day
management of the Company.
The CEO is supported by the senior management
team that consists of ten Executive Vice-
Presidents, including the Chief Financial Officer.
Board committees
The Board committees are:
• Audit committee – held six meetings
during 2010.
• Compensation committee – held five
meetings during 2010.
• Nomination and Governance committee
– held four meetings during 2010.
• Strategy and M&A committee – held six
meetings during 2010.
Board composition
The members of the Board can be found on
pages 60 to 61. Board member changes are
set out on page 52 and 53.
Report of the Non-executive Board members
The report of the Non-executive Board members
describes the activities of the Board and the
different Board committees during 2010. The
report can be found on pages 64 and 65.
2010 Remuneration Report of the Board
The 2010 Remuneration Report of the Board,
as drawn up by the Compensation committee,
contains an account of the manner in which the
Remuneration Policy for the CEO was
implemented in 2010, and is scheduled to be
implemented in 2011 (see pages 66 to 73).
Remuneration Policy for the CEO
The Remuneration Policy for the CEO was
adopted by the Annual General Meeting (AGM)
on May 11, 2005 and was most recently
amended by the AGM of May 14, 2008.
The Remuneration Policy is published on
Gemalto’s web site. The Remuneration Policy
also serves as a guidance to establish the
senior management remuneration.
The objectives of the Remuneration Policy
and the remuneration policy for the management
are to attract, retain and reward talented staff
and management, by offering compensation
that is competitive in the industry, motivates
management to surpass the Company’s
business objectives and aligns the interests
of management with the interests of
the shareholders.
Remuneration of the CEO, including his
function as Executive Board member
The General Meeting, upon the proposal of the
Board, determines the Remuneration Policy for
the CEO, including for his function as Executive
Board member. The remuneration of the CEO
shall, with due observance of the
Remuneration Policy, be determined by the
Board. For details on the compensation of the
CEO for the financial year 2010, see page 69.
Remuneration of the Non-executive
Board members
The remuneration of the Non-executive Board
members, including the remuneration of the
Chairman of the Board and the members of the
Board committees, is determined by the
General Meeting. The remuneration is reviewed
annually by the Compensation committee. For
details on the remuneration structure for the
Non-executive Board members, see page 72.
Long-term incentive plans – Global Equity
Incentive Plan
Gemalto has established a Global Equity
Incentive Plan enabling the Board to grant
options, restricted shares units and/or share
appreciation rights to eligible employees
(see page 73).
Long-term incentive plans – Global
Employee Share Purchase Plan
Gemalto has established a Global Employee
Share Purchase Plan enabling the Board to
offer the opportunity to eligible employees to
purchase shares in the Company at a discount
to the prevailing market price (see page 73).
Governance
Core principles
The principal aim of Gemalto’s internal risk
management structure and control systems is
to manage business risks, with a view to
enhancing the value of shareholders’
investments and safeguarding assets and cash
flows. Management has put in place, and
regularly reviews and updates, a number of key
policies, processes and independent controls
to provide assurance to the Board as to the
integrity of Gemalto’s reporting and
effectiveness of its systems of internal control
and risk management.
Risk assessment
Risk assessment is part of management
responsibilities at all levels. At Group level, a
risk mapping was performed in 2007 and a
new one was launched in 2010. The results
and progresses on the action plans are
regularly presented to the Audit committee and
to the Board. For a detailed description, see
page 58.
Internal control
Gemalto’s management regards internal
control as a responsibility that is shared by all
managers and that is met by implementing
a set of processes and procedures within
Gemalto intended to provide reasonable
assurance that risks are mitigated, financial
reporting is reliable, applicable laws and
regulations are complied with, and that the
objectives of the Board can be attained (see
pages 58 and 59).

Governance
50 Gemalto Annual Report 2010
Corporate governance
51
Corporate governance
This section provides a broad outline of Gemalto’s corporate
governance structure, its implementation during 2010, and its
compliance with the Dutch corporate governance code.
General
Gemalto N.V. (‘Gemalto N.V.’ or the ‘Company’)
is the parent company of the Gemalto group
(‘Gemalto’ or the ‘Group’). The Company was
incorporated in the Netherlands as a private
company with limited liability on December 10,
2002. The Company was formerly named
Axalto Holding N.V. and changed its name on
June 2, 2006 in connection with the
combination with Gemplus International S.A.
(‘Gemplus’), hereinafter the ‘Combination’. The
Company’s shares have been listed on Eurolist
by Euronext Paris S.A. (formerly named
Premier Marché) (Euronext NL0000400653)
since 2004. The corporate seat of the
Company is Amsterdam, the Netherlands, and
its registered office address is Barbara
Strozzilaan 382, 1083 HN, Amsterdam, the
Netherlands. The Company is registered with
the trade register in Amsterdam, the
Netherlands under No. 27.25.50.26.
The Company is required to comply with, inter
alia, Dutch law, Dutch corporate governance
rules, Dutch AFM rules, French AMF rules and
Euronext Paris Stock Exchange rules and related
regulations, insofar as applicable to the Company.
Compliance with the Dutch corporate
governance code
The Board is responsible for Gemalto’s
corporate governance structure and for
compliance with the Dutch corporate
governance code, as applicable during the
2010 financial year. The Company complies
with the principles and best practice provisions
of the Dutch corporate governance code with
the exception of the below listed best practice
provisions. These deviations are explained in
the relevant sections of the Annual Report.
• Provision II.1.7: a whistle-blower procedure
has been established compliant with the
French legal requirements and as a
consequence with a restricted scope. Please
refer to ‘Internal risk management and control
systems’, page 56.
• Provision II.2.7: amendment of the vesting
date of options granted to Mr. O. Piou as
CEO. Please refer to ‘Deviations from the
Dutch corporate governance code in terms
of remuneration’, page 72.
• Provision II.2.8: maximum remuneration in the
event of dismissal of Mr. O. Piou as CEO.
Please refer to ‘Deviations from the Dutch
corporate governance code in terms of
remuneration’, page 72.
• Provision II.2.10: (ultimum remedium). Please
refer to ‘Deviations from the Dutch corporate
governance code in terms of remuneration’,
page 72.
• Provision II.2.13 (e): content of the
Remuneration Report; i.e. non-disclosure of
the companies of the Comparison Group.
Please refer to ‘Deviations from the Dutch
corporate governance code in terms of
remuneration’, page 72.
• Provision III.8.1: appointment of the former
Executive Chairman as Non-executive
Chairman of the Board. Please refer to
‘Composition of the Board – (term of)
appointment’, page 51.
Board of Directors
One-tier Board
The Company has a one-tier Board,
comprising one Executive Board member, the
CEO, and a majority of Non-executive Board
members. The Board has ultimate
responsibility for the management, general
affairs, direction and performance of the
business as a whole. The tasks and functions
of the Board, as described in the Articles of
Association and the Board charter, include the
duties recommended in the Dutch corporate
governance code.
The CEO conducts the day-to-day
management. The CEO does not require
the approval or consent of the Board for
any decisions in respect of day-to-day
management. The duties and powers of
the Board include those matters specified
in the Articles of Association. The Board may
delegate powers regarding matters that fall
outside the area of the day-to-day
management to the CEO and consequently
these matters do not require a resolution
of the Board.
For information on the Board meetings held
and the activities performed by the Board
during 2010, please refer to ‘Board meetings
and activities during 2010’, page 64.
The Articles of Association and the Board
charter are published on Gemalto’s web site.
Operational and financial objectives
and strategy
During 2010, the Board discussed the
parameters to be used for measuring
performance and adopted the operational
and financial objectives of Gemalto for 2011.
The Board discussed at several meetings
Gemalto’s strategic plans and their
implementation, reviewed the development
of business activities and various investment
opportunities. For more information on
the Company’s strategy, please refer to
‘Our strategy’, pages 12 to 13.
The Board sets the framework and key
objectives of the budget, which includes the
operational and financial objectives of Gemalto.
Budgets are constructed bottom-up, assessed
by the Board and adjusted top-down where
necessary to meet Gemalto’s objectives.
The budget for 2010 was approved by the
Board at the December 2009 Board meeting.
The budget for 2011 was approved by the
Board at the December 2010 Board meeting.
Corporate Social Responsibility
The Board is responsible for the corporate
social responsibility issues that are relevant to
Gemalto. For more information, please refer to
‘Our approach to sustainability’, pages 44 to 45.
Internal risk management and
control systems
Gemalto maintains operational and financial
risk management systems and procedures
and has monitoring and reporting systems
and procedures.
Among those procedures, Gemalto has a code
of ethics, which provides guidelines for the
conduct of all employees with respect to
internal controls, financial disclosures,
accountability, business practices and
legal principles.
Gemalto has a whistle-blower procedure for
the receipt, retention and treatment of
complaints received by Gemalto regarding
suspected financial irregularities. Departing
from the Dutch corporate governance code,
to be in line with EU and French rules regarding
data protection, suspected irregularities of a
general or operational nature are not covered
by the whistle-blower code, but shall be
reported internally to the relevant manager.
Gemalto has a policy on the ownership of,
and transactions in Gemalto securities,
which was updated in 2010.
The code of ethics, the whistle-blower code
and the policy on the ownership of and
transactions in Gemalto securities are
published on Gemalto´s web site.
For more details on the internal risk management
and control systems, please refer to ‘Internal risk
management and control systems’, pages 56 to
58. The statement of the Board in accordance
with best practice provision II.1.5 of the Dutch
corporate governance code can be found in
‘Board compliance statement’, page 59.
Composition of the Board —
(term of) appointment
At the 2007 AGM, the maximum number of
Board members was set at eleven to allow
the Board to determine from time to time its
optimal size. The Board currently consists
of ten Board members: nine Non-executive
Board members and one Executive Board
member, the CEO.
Executive and Non-executive Board members
are appointed by the General Meeting of
Shareholders (‘General Meeting’), whether or
not on the binding or non-binding proposal
of the Board. If the Board has not made a
proposal for appointment, the General Meeting
can appoint a candidate by absolute majority
of the votes cast in a meeting at which at least
one-third of the issued share capital is
represented. If the Board has made a
non-binding proposal for appointment, the
General Meeting can appoint a candidate by
absolute majority of the votes cast without a
quorum required. If the Board has made a
binding proposal, the General Meeting may
override the binding nature of such proposal
by an absolute majority representing at least
one-third of the issued share capital. If the
majority has been met, but the quorum not, a
second meeting is held at which no quorum is
required. So far the Board has not made use
of the option to make a binding nomination.
Board members are appointed for a maximum
term of four years and may be reappointed
for subsequent four year periods. However,
Non-executive Board members may only be
reappointed twice. The Non-executive Board
members appoint the Executive Board
member as the CEO and can at any time
revoke such appointment. If the appointment
as CEO of the Executive Board member is
revoked, his powers and duties shall be carried
out by an ‘Acting CEO’, temporarily appointed
by the Non-executive Board members,
whether or not from among their midst. The
Board appoints one of its Non-executive Board
members as Chairman of the Board.
Absent proposal of the Board, the General
Meeting may suspend or dismiss Board
members only by an absolute majority of votes
cast representing at least one-fourth of the
Company’s issued share capital. If the quorum
is not met, a second meeting can be held at
which no quorum is required. If the Board has
made a proposal to suspend or dismiss a
Board member, a quorum is not required. If
Dutch law so permits, the Executive Board
member may also be suspended by the Board.
Governance
The Dutch corporate governance code can be
found on www.commissiecorporategovernance.nl.

Governance
52 Gemalto Annual Report 2010
Corporate governance
53
The profile setting out the desired expertise
and background of the Non-executive Board
members was updated by the Board in
October 2009 and is published on Gemalto’s
web site. With respect to diversity among
Non-executive Board members, the objective
pursued is to have a variation of age, gender,
expertise, social background and nationality.
The present composition of the Board differs
from the intended situation, as the majority of
Board members were appointed prior to the
introduction of this objective. In as much as
possible, the Company strives for a balance
to achieve the above-mentioned variation.
The Company believes that at least one of
the Non-executive Board members can be
regarded as a financial expert within the
meaning of best practice III.3.2 of the Dutch
corporate governance code.
Although the appointment of a former
Executive Board member as Chairman of a
one-tier Board is not in line with the Dutch
corporate governance code, after Mr. A.
Mandl’s reappointment by the 2007 AGM as
Non-executive Board member as of December
2, 2007 for a first term ending at the end of the
2011 AGM, the Board appointed Mr. A. Mandl
as Non-executive Chairman of the Board, as of
December 2, 2007. The Board is pleased to be
able to capitalize further on the knowledge and
experience of Mr. A. Mandl within the Group,
which is of particular added value for Gemalto
and its stakeholders.
At the 2010 AGM, Mr. D. Bonderman resigned
from his position as Non-executive Board
member. In view hereof there was one vacancy
to be filled on the Board. The 2010 AGM, upon
proposal by the Board, appointed Mr. Ph.
Alfroid as Non-executive Board member for a
first term ending at the end of the AGM to be
held in 2014.
At the 2011 AGM, the present term of
Messrs. A. Mandl and M Soublin will end.
The Board will propose to the 2011 AGM
the reappointment of Mr. A. Mandl as
Non-executive Board member for a
second term and the reappointment of
Mr. M. Soublin as Non-executive Board
member for a third term, both terms ending
at the end of the 2015 AGM.
In 2010 the Board adopted a new
reappointment schedule, published on
Gemalto’s web site, in order to avoid, as far as
possible, a situation in which many Board
members retire at the same time.
For information on the members of the Board,
please refer to ‘The Board’, pages 60 and 61.
Board committees
The Board has formed an Audit committee,
a Compensation committee, a Nomination and
Governance committee and a Strategy and
M&A committee from among the Non-executive
Board members. The committees have as their
main role to provide a focused analysis and
preparation of the subjects within their
respective areas of expertise and to report and
make recommendations to the Board, subject
to the overall responsibility of the Board. The
committees do not have executive powers. The
duties of each committee are described in their
respective charters.
Board mandates with third parties
With respect to the number and type of
supervisory Board memberships that the
Board members may hold, Executive and
Non-executive Board members shall comply
with the recommendations of the Dutch
corporate governance code, as set out in best
practice provisions II.1.8 and III.3.4 respectively.
Conflicts of interest
The Articles of Association state the conditions
under which potential conflicts of interest exist
and Gemalto has formalized rules to avoid
conflicts of interests between Gemalto and
Board members. For more information on
these rules, please refer to article 17 of the
Articles of Association.
The Company complied with best practice
provisions II.3.2 through II.3.4 and III.6.1 to
III.6.3 of the Dutch corporate governance code
in relation to conflicts of interest.
For an overview of the related party transactions
during 2010, please refer to note 32 of the
consolidated financial statements.
Loans or guarantees
Gemalto does not grant personal loans,
guarantees, or the like to Board members,
and no such loans and guarantees, waivers of
loans or guarantees were granted to the Board
members in 2010, nor are outstanding as of
December 31, 2010.
Indemnification of Board members
To the extent permitted by Dutch law, Board
members shall be indemnified by the Company
against expenses, such as the reasonable
costs of defending claims, as formalized in
article 19 of the Articles of Association. Under
certain circumstances, such as a claim, issue
or matter as to which a Board member has
been held liable for gross negligence or willful
misconduct in the performance of his duty to
the Company, there will be no entitlement to
this reimbursement. Gemalto has a liability
insurance (Directors & Officers — D&O) for
Board members and corporate officers.
(Vice-) Chairman of the Board and
Company Secretary
The Chairman ensures the proper functioning
of the Board and the Board committees and
acts as the main contact for shareholders
regarding the functioning of the Board. The
Chairman presides over Board meetings and
General Meetings and is responsible for a
proper conduct of business at meetings.
In case of the Chairman’s absence or inability
to act, the committee chairmen will designate
among themselves a vice-chairman, who will
temporarily assume the position.
The Board is assisted by a Company Secretary,
also General Counsel and Central Officer of the
Group. Mr. J-P. Charlet was appointed as
Company Secretary by the Board in July 2005.
Senior management team
The CEO is supported by the senior
management team that consists of ten
Executive Vice-Presidents, including the Chief
Financial Officer.
For information on the members of the senior
management team, please refer to ‘Members
of the senior management’, pages 62 and 63.
Shares owned and rights to
acquire shares
Board members, including the CEO, hold
shares in the Company for the purpose of
long-term investment and they are required to
comply with the policy on the ownership of,
and transactions in Gemalto securities, as
posted on Gemalto’s web site.
Gemalto shares
Certain Board members are shareholders of
the Company. On December 31, 2010, they
jointly held 371,300 shares, of which Mr. O.
Piou owned 367,000 shares. Mr. G. Fink owned
2,800 shares resulting from the exchange of
Gemplus shares following the voluntary public
exchange offer for the shares of Gemplus (the
‘Offer’) and Mr. M. Soublin owned 1,500 shares
purchased in 2004.
FCPE units
On December 31, 2010, Mr. O. Piou owned
4,233.51 units in a FCPE (Fonds Commun de
Placement d’Entreprise), which units were
purchased by his contribution to the Global
Employee Share Purchase Plans in 2004,
2005, 2008 and 2010.
Restricted Share Units
On December 31, 2010, Mr. O. Piou held a
maximum of 250,000 RSU.
Gemalto share options
On December 31, 2010, Mr. O. Piou held
800,000 Gemalto share options, and Mr. A.
Mandl (through a company controlled by him)
held 200,000 Gemalto share options.
Gemplus share options
On December 31, 2010, the following Board
members held Gemplus share options: Mr. A.
Mandl held 4,520,800 (through a company
controlled by him) and Mr. J. Fritz held 11,302.
Those Gemplus share options can be exercized
for Gemplus shares that can be exchanged for
Gemalto shares at a ratio of 25/2, resulting in
361,664 Gemalto shares for Mr. A. Mandl and
904 Gemalto shares for Mr. J. Fritz.
Shares or other Financial Instruments in
listed companies other than Gemalto N.V.
Board members are required to comply with
regulations concerning the ownership of, and
transactions in, securities in listed companies
other than Gemalto N.V. This policy is
published on Gemalto’s web site.
Governance
For information on the committee meetings
held and the activities performed by the
committees during 2010, please refer to
the respective committee reports in ‘Report
of the Non-executive Board members’, pages
64 and 65.

Governance
54 Gemalto Annual Report 2010
Corporate governance
55
Shareholders and General Meetings
Share capital and shares of the Company
The Company’s authorized share capital
amounts to €150,000,000 and is divided into
150,000,000 ordinary shares, with a nominal
value of €1 per share. As of December 31,
2010, the Company’s issued and paid-up share
capital amounted to €88,015,844, consisting
of 88,015,844 ordinary shares, of which
4,884,596 shares were held in treasury; as a
consequence of which 83,131,248 shares were
in circulation. During 2010, there were no
changes in the amount of the issued share
capital of the Company.
Based upon the authorization of the Board to
repurchase shares in the Company’s share
capital, which authorization was granted by the
2009 AGM and renewed by the 2010 AGM,
shares were purchased during 2010 with the
objective to animate the secondary market, to
grant shares to employees and to fund external
growth. As of December 31, 2010, 4,884,596
shares were held in treasury, acquired at an
average price of €27.03 with a market value as
of December 31, 2010 of €155,549,959.62.
There are no voting rights attached to shares
when held by the Company in treasury.
The Company has only issued ordinary shares,
all of the same category, and all in registered
form. No certificates representing shares have
been issued. Shares are listed on Eurolist by
Euronext Paris S.A. Company shares can be
held in two ways:
• in an account in a bank, a financial institution,
an account holder or an intermediary, these
shares then being included in the Company’s
shareholders register in the name of
Euroclear France S.A. (“Euroclear”); or
• listed in the shareholder’s own name in the
Company’s shareholders register.
AGM held in 2010
The AGM was held on May 19, 2010. No
shareholders exercised their right to place
items on the agenda for the AGM. In
accordance with the Articles of Association,
a registration date for the exercise of voting
rights was determined for the 2010 AGM.
At the AGM the following items were dealt with,
all as separate agenda items: the 2009 annual
report, the corporate governance chapter in
the 2009 annual report, the adoption of the
2009 financial statements, the Company’s
dividend policy and a proposal for a dividend in
cash of €0.25 per share for the 2009 financial
year, discharge of the CEO and of the
Non-executive Board members for the
fulfillment of their respective duties during
the financial year 2009, appointment of a
Non-executive Board member, renewal of the
authorization of the Board to repurchase
shares in the Company’s share capital and the
reappointment of the external auditor for the
year 2010.
The minutes of the meeting are published on
Gemalto’s web site.
All shares carry equal rights of voting at the
General Meeting. Votes may be cast directly, or
voting proxies or voting instructions may be
issued to an independent third party prior
to the General Meeting. Unless otherwise
required by Dutch law or the Articles of
Association, resolutions are adopted by an
absolute majority of votes cast in a General
Meeting where at least one-tenth of the issued
share capital is represented.
A General Meeting shall be held in the
Netherlands: in Amsterdam, The Hague,
Haarlemmermeer (Schiphol-Airport),
Utrecht or Rotterdam.
Authorizations to the Board
The Board has the following authorizations,
as granted by the AGM:
• To issue shares or grant rights to acquire
shares in the Company, as well as to limit
or exclude pre-emptive rights accruing to
shareholders, as from March 18, 2009 for a
period of five years up to and including March
17, 2014. The authorization relates to all
shares that can be issued as allowed by the
authorized share capital as expressed in the
Articles of Association as they may provide
from time to time (as of December 31, 2010,
61,984,156 shares remaining out of the
150,000,000 shares);
• To acquire shares in the share capital of the
Company up to the maximum of 10% of the
issued share capital of the Company, within
the limits of the Articles of Association and
within a certain price range, up to and
including November 18, 2011. On December
31, 2010, the Company’s issued and paid up
share capital consisted of 88,015,844 shares,
of which 4,884,596 shares were held in
treasury, based on which on that date the
authorization related to 83,131,248 shares;
• To cancel a number of shares not exceeding
9,101,584 shares, which cancellation may be
executed in one or more tranches and the
number of shares that may be cancelled
(whether or not in one tranche) shall be
determined by the Board.
Distribution of profits
The dividend policy of the Company was dealt
with and explained as a separate item on the
agenda for the first time at the 2005 AGM. The
Company’s dividend policy is that the amount
of dividends to be paid by the Company to its
shareholders shall be determined by taking
into consideration the Company’s capital
requirements, return on capital, current and
future rates of return and market practices,
notably in its business sector, as regards the
distribution of dividends. In 2010, the Company
paid a dividend in cash of €0.25 per share for
the 2009 financial year. With due observance
of the dividend policy, the Company will
propose to the 2011 AGM to distribute a
dividend in cash of €0.28 per share in respect
of the 2010 financial year.
Prior to the General Meeting’s authority to
resolve upon the appropriation of the (remaining)
result, the Board has the authority to reserve all
or part of the profits made in a financial year. For
more information on the distribution of profits or
reserves, please refer to articles 32 to 35 of the
Articles of Association.
Notification date
Dec 30, 2010
May 28, 2009
Sept 18, 2008
Notifier
FMR LLC
(held indirectly through Fidelity Management & Research
Company, Pyramis Global Advisors Trust Company,
Pyramis Global Advisors LLC)
Caisse des Dépôts et Consignations
(held indirectly through Fonds Stratégique
d’Investissment (FSI) and CDC EVM)
Gemalto N.V.
(4,884,596 shares (5.55%) were held in treasury by the
Company as of Dec 31, 2010)
Shareholders’ disclosures
During 2010, the Company was notified by the
Dutch market authorities (‘AFM’) that it had
received disclosures of a substantial holding in
the share capital of the Company, which
disclosures are published on the web site of
the AFM (www.afm.nl). As at December 31,
2010, the following disclosures were published
on the web site of the AFM, as included in the
table here below.
Specific provisions of the Articles
of Association
Amendment of the Articles of Association,
liquidation or (de-)merger
The General Meeting, upon the proposal of the
Board, has the authority to amend the Articles
of Association, to dissolve the Company,
to legally merge, or to legally demerge, by
resolutions adopted by a majority of at least
two-thirds of the votes cast at such General
Meeting at which at least one-third of the
issued share capital is represented. Absent
such quorum, a second meeting can be held at
which no quorum is required.
Disclosure
(% of capital)
10.72%
(9,439,128 shares)
8.43%
(7,418,500 shares)
5.17%
(4,549,965 shares)
Appointment of the external auditor
The Audit committee and Board review the
functioning of the external auditor annually.
Upon proposal of the Board, the 2010 AGM
appointed PricewaterhouseCoopers
Accountants N.V. as the Company’s external
auditor for the financial year 2010. The Board
will propose to the 2011 AGM to reappoint
PricewaterhouseCoopers Accountants N.V.
as the Company’s external auditor for the
financial year 2011.
Quorum requirement
Unless otherwise provided by law or the
Company’s Articles of Association of the
Company, the General Meeting can only adopt
resolutions with an absolute majority in a
meeting at which at least 10% of the issued
share capital is represented. Absent such
quorum, a second meeting can be held at
which no quorum is required.
Governance

Governance
56 Gemalto Annual Report 2010
Internal risk management and control systems
57
Internal risk management
and control systems
Risk management and internal
control principles
Risk management and internal controls are
critical to the stability of the Company. The aim
of our internal risk management is to expand
our ability to achieve our objectives by:
• Effectively constraining threats to
acceptable levels,
• Making informed decisions,
• Enhancing our capacity to exploit opportunities,
while trying to protect the interests of our
stakeholders and our shareholders’ investments.
The Company operates in a dynamic
environment and there may be circumstances
in which risks occur that had not yet been
identified or in which the impact of identified
risks is greater than expected. Management
Risk management organization
Oversight structure
Board and its committees
(Audit, Compensation, Nomination and Governance, Strategy and M&A)
Senior management, Anti-fraud commission
Assurance bodies Business units Support functions Operations & Innovation
Internal audit &
internal control
Risk management
& insurance
Controlling
External auditors
Certification bodies
has put in place a number of key policies,
processes and independent controls to provide
assurance to the Board, as to the integrity of
Gemalto’s reporting and effectiveness of its
systems of internal risk management and
control, but they may not always prevent
or detect all misstatements, inaccuracies,
errors, fraud or non-compliance with law and
regulations, neither can they provide certainty as
to the achievement of the Company’s objectives.
The Board is responsible for reviewing the
Company’s system of internal risk management
and controls and for assessing their
effectiveness. The Audit committee regularly
reviews with management and internal audit
the Company’s system of internal risk
management and controls focusing on financial
RISK ASSESSMENT
CRISIS & BUSINESS CONTINUITY MANAGEMENT
BUDGET, PLANNING & REPORTING
Foundations
Strategy and objectives
Governance (procedures and policies)
Culture and values
reporting matters, on main operational risks
and on the results of improvement actions.
The Board subsequently considers the
outcome of the Audit committee’s review.
The Company’s risk profile is reported in
‘Principal risks’, pages 42 and 43.
Risk management organization
The diagram below gives a synthetic view of
the Gemalto risk management organization,
as explained hereafter.
Foundations: Risk management at Gemalto is
built on solid foundations, as described in ‘Our
Strategy’, pages 12 and 13, ‘Our approach to
sustainability’, pages 44 to 45 and ‘Corporate
governance’, pages 50 to 55.
Gemalto has developed three levers to manage
its operational and financial risks in a transversal
manner throughout the organization:
Risk assessment: Identifying and assessing our
major operational and financial risks enables
Gemalto to focus on those that matter and
align its action plans and resources accordingly.
Risk assessment is carried out at all management
levels, for example, covering bid to contract
reviews, sites (e.g. ISO 27001), new asset
acquisitions, etc. Specifically at Group level,
a risk mapping is performed and action plans
identified and followed.
Crisis and business continuity management:
Having a flexible and tested crisis management
organization and business continuity responses
helps to reduce the impact of events inherent
to Gemalto’s operations and the type of
industries in which Gemalto is engaged. Through
the standardization of production tools and
processes, multi-sourcing strategies, IT availability
and redundancy infrastructure, Gemalto has
developed systems that help to respond to
unforeseen circumstances with minimal
disruptions to our customers and our business.
Budget, planning and reporting: Various
complementary reporting systems enable
Gemalto to obtain the right information
when required, facilitating the decisionmaking.
Gemalto has also detailed budget
and planning processes.
For more information, please refer to ‘Internal
Control over Financial Information’, below and
on page 58.
Oversight structure
The oversight structure ensures that
the organization is geared towards effective
risk management.
Business units and Operations & Innovation
Operations and business managers identify
and manage risks in their respective sites or
scope of responsibilities in line with Group
strategy, policies and standards.
Support functions
Support functions (Finance, Purchasing,
Security, IT, Quality, Health Safety and
Environment, HR, and Legal) analyze risks,
define prevention and protection standards, as
well as policies and procedures. They monitor
implementation of the respective risk policies
in their own field of expertise.
Assurance bodies
The assurance bodies provide assurance on
the design and effectiveness of the risk
management processes and compliance with
the relevant standards, policies and norms.
The Group Risk Manager, reporting to the General
Counsel and Company Secretary and to
the CFO, is in charge of driving the enterprise
risk assessment (in close cooperation with
the Internal Audit Director) and promoting
transversal risk management projects. The
Group Risk Manager is also responsible for
managing the insurance programs.
Strategy of risk transfer to insurers
The Group policy on insurance cover focuses
on optimizing and securing the policies
contracted by Gemalto. The aim is to protect
the Company against exceptionally large
or numerous claims, at a cost that does not
impair the Group’s competitiveness. The Group
does not own or operate any insurance captive.
Gemalto has set up global insurance programs
with only quality and financially sound insurers
and which combine master policies and local
insurance policies in countries requiring it. The
negotiation and coordination of these programs
is carried out centrally with assistance from
leading insurance brokers having an integrated
international network.
Such an organization facilitates a broad and
consistent cover of all Gemalto activities and
locations worldwide, cost optimization, global
reporting and control, while ensuring compliance
with local regulatory requirements. Insurance
coverage strategies are periodically reviewed,
taking into account changes in Gemalto’s risk
profile (acquisitions, claims and loss events,
activities, etc.) and insurance market trends.
Gemalto maintains insurance programs
with policies encompassing property damage,
business interruption, public, product and
professional liability and Directors’ and
Officers’ exposures.
In 2010, the Group continued improvement
actions through subscriptions to multiyear
contracts in a hardening insurance market.
Internal control environment
Principles
Gemalto’s management regards internal
control as a responsibility that is shared by all
managers and that is met by implementing a
set of processes and procedures intended to
provide reasonable assurance that the Board’s
objectives will be attained under the corporate
governance rules and respecting local laws
and regulations.
It has also defined internal control principles
and procedures applicable to its main transaction
cycles and to its central functions. Internal control
is based on granting extended responsibilities
and powers to the managers of subsidiaries, to
management bodies and to their functional
teams (Legal, HR, Purchasing, etc.).
The Company’s internal control system cannot
provide absolute assurance. However, while
keeping a reasonable balance between cost
and assurance, it aims to ensure that realization
of objectives is monitored, financial reporting is
reliable and applicable laws and regulations are
complied with.
Anti-fraud commission
The 2007 anti-fraud assessment project
included an inventory of the Company tools
and processes covering fraud prevention and
detection. As from 2008, a senior management
level operational structure called the ‘Anti-fraud
commission’ was put in place. Its first objective
was to coordinate the various programs already
in place inside the Company. Subsequent
objectives encompass the continuous fraud risk
assessment, anti-fraud policy and procedures,
and response actions in case of fraud.
This structure comprises the Group General
Counsel, the EVP Human Resources, the Chief
Information Officer, the Quality, HSE ( * ) , Security
and WCE ( ** ) Director and the Internal Audit
Director. Its charter was approved by
management on August 18, 2008. The
commission meets formally on a quarterly
basis and on an ad hoc basis in between when
required. It has developed an anti-fraud action
plan which, among other things, included the
issuance of the Gemalto anti-fraud policy in
2009 and the implementation in 2010 of a frame
agreement with two forensic specialized firms.
Internal Audit
In order to assess and test the internal risk
management and control systems, the Company
has a dedicated internal audit team that operates
in conformity with a charter approved by the
Audit committee (updated in 2010) and in line
with international professional standards
(Institute of Internal Auditors). The team is
composed of eight auditors (as in the previous
two years). It has direct and unlimited access to
Group operations, documents and employees.
The Internal Audit Director reports directly to
the CFO and has an open independent line of
communication with the Audit committee
Chairman, as well as regular private sessions
with the Audit committee.
Governance
(
* ) HSE: Health, Safety & Environment.
(
** ) WCE: World-Class Enterprise.

Governance
58 Gemalto Annual Report 2010
Board compliance statement
59
Internal Audit conducts its missions according
to an audit plan approved once a year by the
Audit committee based on a risk assessment.
Upon request of the Group’s management
or the Audit committee, Internal Audit also
performs several ad hoc audits on certain
aspects of the business. Work is coordinated
with the external auditors.
The implementation of recommended and
accepted corrective actions is systematically
followed up.
The Internal Audit Director prepares a monthly
report which includes a summary of the activity
of his department and the key internal control
issues and their status, and submits it to the
Chairman of the Audit committee and the CFO.
On November 2, 2010, Gemalto received the
professional certification of its internal audit
activities from the Institut Français de l’Audit et du
Contrôle Internes (IFACI) – France representative
of the Institute of Internal Auditors (IIA).
Internal control over financial
information (ICFR)
The production and control of financial
information is organized so as to be consistent
with Gemalto’s operational organization. To
ensure the quality and completeness of the
financial data produced and reported, Gemalto
has set up a process for the production and
review of the operating results by management,
identified the main risks which have significant
impact on the financial statements elements,
and implemented preventive and corrective
controls so as to mitigate those risks.
As part of ICFR, the following elements are
worth highlighting:
Gemalto 2010-2013 Development Plan
This plan was prepared in 2009 encompassing
the whole Group and in line with the Group
objectives and strategy.
Budget and forecast updating process and
business reviews
The budget process covers all operational entities
and corporate departments, including treasury.
The process begins in October and the result is
an annual budget for the Group presented to the
Board in December for the following year.
Whenever changes in activity justify it,
current-quarter and current-year forecasts are
reviewed, and consolidated into an updated
forecast for the Group on the basis of actions
undertaken to meet Group objectives. They
form a key part of the system to co-ordinate
and monitor the Group activity.
Monthly operating and financial results review
and reporting processes
Monthly and quarterly operating results are
reviewed in detail in the first days of the
following month between Gemalto’s Corporate
Controller and the President and/or Controller
of each business segment and geographic
area, on a date fixed in advance in the monthly
or quarterly reporting calendar. The Chief
Accounting Officer and the Internal Audit
Director attend, and from time to time the CFO.
Once validated by each area and segment
Controller, operating results are consolidated
by the corporate accounting department,
reviewed by the Corporate Controller, the Chief
Accounting Officer and the Finance Director (in
charge of treasury and tax), then presented
and discussed with the CFO. They are then
presented jointly by the Corporate Controller
and the CFO to the CEO.
The Corporate Treasurer prepares a monthly
report which includes a review of the financial
result of the period, of the efficiency of the
balance sheet and cash flow hedges, of the
client receivables position and of the Group’s
cash and debt positions.
On the basis of the operating results review and
of the treasury report, the monthly operating
dashboard and accompanying CEO and CFO
letter are prepared by the Corporate Controller
and CFO, and reviewed by the CEO before they
are sent to the Board and circulated to the first
line of management. The dashboard and
accompanying letter cover the activity of the
month by business segment, the updated
operating income statement forecast for the
current quarter, as well as a review of the cash
and debt positions and of the working capital.
A review of the activity is presented by the CEO
and the CFO at each meeting of the Board.
Quarterly pre-close reviews with each business
segment and geographic area are organized
by the Chief Accounting Officer in the last days
of the quarter. They allow prompt identification
and communication of any transaction or event
which could potentially result in significant
impacts on the results or the financial condition
of the Group.
Internal Control over Financial Reporting
In 2007, a corporate project was launched with
the objective of improving internal control over
and above the quality of financial reporting.
A self-assessment campaign is now performed
each year through a financial risks based
scoping exercise following the COSO2 model.
The self-evaluations of the controls are tested
for some critical processes and entities by
internal auditors, as well as by the Company’s
external auditors. This campaign is also aimed
at defining remediation plans based on
identified deficiencies and to follow up the
progress of those plans year-on-year.
An annual report on financial internal control
and on internal audit activity is prepared by the
Internal Audit Director, reviewed and agreed by
the CFO, approved by the CEO and presented
to the Audit committee.
Actions taken in 2010
Enterprise risk assessment: In 2010, action
plans launched on risk and identified in the 2008
ERA continued and their status were regularly
presented to the Audit committee and to the
Board. In 2010 a new risk mapping exercise was
launched on the risks that could impact the
objectives and/or reputation of the Group.
Policies and procedures: Gemalto maintains
operational and financial policies and
procedures, which are published on Gemalto´s
intranet and regularly updated when required.
For example, during 2010, the following main
policies and procedures were updated or
first-time issued: the agent management policy,
the R&D financial policy and the hedging policy.
Crisis management: In 2009, Gemalto
defined a Crisis Management Framework
which encompasses basic escalation and
communication rules, guidelines for anticipation
and action, and clarified roles and responsibilities.
Training sessions (including simulation
exercises) started in 2009 and are currently
87% completed with, for example, 61 crisis
management leaders trained worldwide.
This proactive approach to crisis management
enabled us to respond to unforeseen events,
minimizing the impact for our customers and
our business during the year.
Business continuity: The capability of
Gemalto to provide business continuity response
has been strengthened by the enhancement
of the standardization of the production tools
and processes, with improved centralization
of pertinent data and of relevant architecture
for the seamless distribution of those data
to back-up sites. Additional manufacturing
capacities have been implemented to cater
for unplanned circumstances.
Training: In addition to trainings on internal
control, ethics, anti-fraud, authority limits,
contract management and competition rules,
regularly given throughout the organization,
in 2010 a special focus was put on newcomers
(whether newly hired employees or newly
acquired entities), on delegation of power
and agents management.
Board compliance statement
The objectives set for the internal risk
management process are to identify the
significant financial, operational, social,
regulatory, legal and environmental risks that
the Company may face, to perform a mapping
of these risks and to initiate actions to mitigate,
reduce, transfer, hedge, keep and manage, or
suppress them. The Company’s risk profile is
reported in ‘Principal risks’, pages 42 and 43,
with a description of principal risks, their most
important impact on the Company and the
main mitigation actions, and the internal risk
management and control systems are
described on pages 56 to 58.
The Company operates in a dynamic
environment and there may be circumstances
in which risks occur that had not yet been
identified or in which the impact of identified
risks is greater than expected. The Company’s
internal controls are designed to manage these
risks within limits acceptable to the Company,
but may not always prevent or detect all
misstatements, inaccuracies, errors, fraud or
non-compliance with law and regulations,
neither can they provide certainty as to the
achievement of the Company’s objectives.
The Board is responsible for reviewing
the Company’s organization of internal risk
management and controls and for assessing
their effectiveness. The Audit committee
reviewed with management and internal
audit the Company’s process of internal risk
management and controls focusing on matters
relating to financial reporting and on the main
operational risks that have been identified,
and on the result of actions that had
been previously presented and performed
by management.
The Board subsequently considered the results
of the Audit committee’s review.
For purpose of compliance with the Dutch
corporate governance code, to the best of its
knowledge, the Board believes that, as regards
the risks relating to financial reporting:
• Gemalto’s internal risk management and
control organization provide a reasonable
assurance that its financial reporting does not
contain any error of material importance;
• Gemalto’s internal risk management
and control process in relation to financial
reporting have worked properly in
the year 2010.
In conjunction with the European Union
Transparency Directive, as incorporated in
chapter 5.3 of the Dutch Financial Markets
Supervision Act (Wet op het financieel toezicht),
the Board hereby declares that, to the best of
its knowledge:
• the annual financial statements for the year
ended December 31, 2010 give a true and fair
view of the assets, liabilities, financial position
and profit or loss of Gemalto and its
consolidated companies;
• the annual management report gives a true
and fair view of the position as per the
balance sheet date and the state of affairs
during 2010 of Gemalto and its affiliated
companies of which the data has been
included in the financial statements; and
• the annual management report describes the
principal risks that Gemalto faces.
The Board
Mr. Alex Mandl
Non-executive Chairman of the Board
Mr. Olivier Piou
Executive Board member
and Chief Executive Officer
Mr. Buford Alexander
Non-executive Board member
Mr. Philippe Alfroid
Non-executive Board member
Mr. Kent Atkinson
Non-executive Board member
Mr. Geoffrey Fink
Non-executive Board member
Mr. Johannes Fritz
Non-executive Board member
Mr. John Ormerod
Non-executive Board member
Mr. Arthur van der Poel
Non-executive Board member
Mr. Michel Soublin
Non-executive Board member
Amsterdam, March 8, 2011
Governance

Governance
60 Gemalto Annual Report 2010
The Board and the management
61
The Board
The Board is composed of the
following members: ( * )
3
4
5
6
1
2
7
8
9
10
1. Alex Mandl (1943) American
Non-executive, non-independent
Board member, Chairman of
the Board.
Appointed: December 2, 2007 for four
years until the AGM of 2011 (first term).
Executive Chairman from June 2, 2006
until December 2, 2007.
Chairman of the Nomination and
Governance committee.
Lead director, chairman of the audit
committee and member of the
governance committee of Dell Inc,
non-executive chairman, chairman of
the nomination and governance
committee and member of the audit
committee of Horizon Lines.
Prior to June 2, 2006, Alex Mandl
served as President and CEO of
Gemplus from September 2002 to
June 2006. From April 2001 through
August 2002, he was a principal in
ASM Investments focusing on
technology investments. Previously, he
served as chairman and CEO of
Teligent, a company he started in 1996,
offering the business markets an
alternative to the local Bell Companies
for telecommunication and internet
services. From 1991 to 1996, Alex
Mandl was with AT&T where he served
as President and Chief Operating
Officer with responsibility for long
distance, wireless, local
communications and internet services.
Prior to his President/COO position he
was AT&T’s CFO. Between 1987 and
1991, he was chairman and CEO of
Sea-Land Services, Inc., the world’s
leading provider of ocean transport
services. In 1980, he joined Seaboard
Coastline Industries, a diversified
transportation company, as Senior Vice
President and CFO. He began his
career in 1969, when he joined Boise
Cascade Corp., as a merger and
acquisition analyst, and he held various
financial positions during the next
eleven years. Until September 2010,
Alex Mandl was board member and
chairman of the leadership and
compensation committee of Hewitt
Associates and board member
and member of the audit committee
and of the finance committee of
Visteon Corporation.
Alex Mandl holds an MBA from the
University of California at Berkeley and
a BA in economics from Willamette
University in Salem, Oregon.
2. Olivier Piou (1958) French
Executive Board member and Chief
Executive Officer, non-independent.
Appointed: February 17, 2004,
reappointed at the AGM of 2008 for
four years until the AGM of 2012
(second term).
Member of the board of directors of
Alcatel-Lucent and of Institut National
de Recherche en Informatique et en
Automatique (INRIA) the French
national institute for research in
computer science and control.
Olivier Piou has been CEO of Gemalto
since its creation in 2006. He was
previously CEO of Axalto, from 2004 to
2006. In 2004 he successfully
introduced Axalto, at that time a
division of Schlumberger Limited, to
the stock market through an IPO, and
in 2006 conducted the merger of
Gemplus and Axalto which formed
Gemalto. He graduated in Engineering
from the Ecole Centrale de Lyon, in
1980, joined Schlumberger in 1981,
and held numerous positions across
technology, marketing and operations
in France and in the US until 2004.
From 1998 onwards he was in charge
of the smart cards business. From
2004 to 2006 he was a member of the
board of directors of Axalto, and from
2003 to 2006 was President of
Eurosmart, the international non-profit
association based in Brussels, which
represents the chip card industry.
Olivier Piou is a knight of the Legion of
Honor in France.
3. Buford Alexander (1949) American
Non-executive, independent
Board member.
Appointed: May 20, 2009 for
four years until the AGM of 2013
(first term). Member of the Strategy
and M&A committee.
Member of the board of Viking River
Cruises, Ltd. Member of non-profit
boards including the Holland America
Friendship Foundation (chairman),
the American Chamber of Commerce
in the Netherlands (president emeritus),
and the Fulbright Commission in
the Netherlands.
Until 2008, Buford Alexander was a
senior director of McKinsey &
Company, where he pursued a
consulting career for more than 30
years. He was a leader of McKinsey’s
European banking practice and later of
McKinsey’s European high-tech
practice, and founded McKinsey’s
European Corporate Finance practice
(restructuring, M&A, turnarounds and
post-merger management). He has
spent much of the last years designing
and leading the transformation of
global European multinationals.
Amsterdam has served as his
European base since 1983.
Buford Alexander holds a Bachelor’s
degree in mathematics and economics
from Rice University in Houston, Texas,
as well as a MBA degree from the
Harvard Business School. In May 2001,
Queen Beatrix granted him the Royal
Distinction of Officer in the Order of
Oranje-Nassau.
4. Philippe Alfroid (1945) French
Non-executive, independent
Board member.
Appointed: May 19, 2010 for four years
until the AGM of 2014 (first term).
Member of the Audit committee
Chairman of the supervisory board of
Faiveley Transport. Board member of
Essilor International and Eurogerm.
Until mid-2009, Philippe Alfroid was
Chief Operating Officer of Essilor
International, the world leader in
ophthalmic optics. He joined the
company when it was created in 1972
and has held several operational and
senior management positions,
including that of group CFO. In the 90s,
he was chairman and CEO
of Sperian a leader in personal
protective equipment.
Philippe Alfroid is an engineering
graduate from ENSEHRMA Grenoble
and holds a Master of Science from the
Massachusetts Institute of Technology.
5. Kent Atkinson (1945) British
Non-executive, independent
Board member.
Appointed: May 11, 2005, reappointed
at the AGM of 2009 for four years until
the AGM of 2013 (second term).
Member of the Audit committee and of
the Strategy and M&A committee.
Senior independent director and
chairman of the audit committee of
Coca-Cola HBC SA. Non-executive
director and chairman of the group
audit and compliance committee of
Standard Life plc, and a member of its
risk & capital committee and its
investment committee. Senior
independent director, chairman of the
audit committee and a member of the
risk committee of UK Asset Resolution
Limited (which includes Northern Rock
(Asset Management) plc and Bradford
& Bingley plc).
Kent Atkinson originally joined the Bank
of London and South America (later
acquired by Lloyds Bank) and held a
number of senior managerial positions
in Latin America and the Middle East
before returning to the UK. He was
Regional Executive Director for Lloyds
TSB’s South East Region until he
joined the main board as Group
Finance Director, a position he held for
eight years until his retirement as an
executive. He remained on the Lloyds
TSB board for a further year as a
non-executive director. Until April 2005
Kent Atkinson was the senior
independent director, chairman of the
audit committee and a member of the
remuneration and nominations
committees of Cookson Group plc,
and until November 2007 he was the
senior independent director, chairman
of the audit committee and a member
of the remuneration and nominations
committees of Telent plc (previously
Marconi Corporation plc). He was also
chairman of Link Plus Corporation Inc
until April 2008. He was non-executive
director of Millicom International
Cellular SA and a member of its audit
and compensation committees until
May 2010.
6. Geoffrey Fink (1969) French
Non-executive, independent
Board member.
Appointed: June 2, 2006, reappointed
at the AGM of 2008 for four years
until the AGM of 2012 (second term).
Member of the Compensation
committee and of the Strategy
and M&A committee.
Geoffrey Fink is based in Dubai where
he is a Managing Partner and Head of
Investments for Delta Partners Group,
a leading emerging markets-focused
TMT advisory firm. From December
2000 through September 2010 he
was a London-based Partner of
TPG Capital, LLP. From May 1998
to December 2000, he was a
Vice-President and subsequently
Senior Vice-President with Security
Capital Group. Between August 1999
and December 2000, Geoffrey Fink
was also Chief Operating Officer, head
of the Management committee, and
board member of Access Space.
In 1993 and from 1995 to 1998, he was
a Consultant and then Engagement
Manager with McKinsey & Company
in London. Prior to joining McKinsey,
he worked in the M&A departments
of both Goldman Sachs in London and
PaineWebber in New York. Geoffrey
Fink was previously a director of
Gemplus until June 2, 2006 and
has served on the board of Eutelsat
S.A., Eden Springs Ltd., and various
private companies.
Geoffrey Fink is a member of the New
York Bar. He received a Bachelor of
Arts degree summa cum laude from
Yale University, a Juris Doctoris degree
magna cum laude from Harvard
University and a Master’s degree focused
on international business from the
Fletcher School of Law and Diplomacy.
7. Johannes Fritz (1954) German
Non-executive, non-independent
Board member.
Appointed: June 2, 2006, reappointed
at the AGM of 2009 for three years
until the AGM of 2012 (second term).
Chairman of the Strategy and
M&A committee and member of
the Audit committee. Head of the
Quandt Family office since June 2000.
Johannes Fritz studied at Mannheim
University (MBA) and New York
University (post-graduate). He then
spent two years with Bertelsmann
(assistant to CEO) and subsequently
five years at KPMG covering financial
institutions and industrial companies
(CPA). In 1989 he joined the Quandt
Family office. From 1990 to June
2000 he was responsible for all
financial questions and running
the day-to-day-business (managing
director). Johannes Fritz was
previously a director of Gemplus
until June 2, 2006.
8. John Ormerod (1949) British
Non-executive, independent
Board member.
Appointed: June 2, 2006, reappointed
at the AGM of 2009 for four years
until the AGM of 2013 (second term).
Chairman of the Audit committee
and member of the Compensation
committee.
Chairman of Tribal Group PLC,
a UK-listed company. Senior
independent, non-executive
director and chairman of the audit
committee of Misys plc and director
and chairman of the audit committee
of Computacenter plc, UK listed
companies. Non-executive director
and chairman of the audit committee of
ITV plc, a UK-listed company. Trustee
of the Design Museum.
John Ormerod is a UK chartered
accountant and since 2004 has been
a director of a number of private and
public companies. He retired as a
partner in the UK firm of Deloitte &
Touche LLP in 2004 where he was
Practice Senior Partner London. After
graduating from Oxford University, Mr.
Ormerod joined the London office of
Arthur Andersen where he remained
until he joined Deloitte in 2002. He led
the development of the firm’s European
capability in Telecoms, Media and
Technology (‘TMT’) as industry leader
and member of the Global TMT
Industry team executive. He was
elected Andersen’s UK managing
partner for 2001-2002. John Ormerod
was previously a director of Gemplus
until June 2, 2006.
9. Arthur van der Poel (1948) Dutch
Non-executive, independent
Board member.
Appointed: May 1, 2004, reappointed
at the AGM of 2008 for four years until
the AGM of 2012 (second term).
Chairman of the Compensation
committee and member of the
Nomination and Governance committee.
Chairman of the supervisory board of
semiconductor equipment maker
ASML and member of the supervisory
boards of engineering company DHV
and soccer club PSV Eindhoven.
Arthur van der Poel is a graduate of the
Eindhoven Technical University. Upon
graduation, he worked for the research
and development group of Dutch PTT
and then went on to work for the
International Telecommunication Union
in Indonesia. In 1984, he began
working at Philips Semiconductors
where he held different marketing and
management positions and became
chairman and CEO in March 1996. In
May 1998, he was appointed member
of the management board of Royal
Philips Electronics. He remained a
member of Philips’ group management
committee until he retired from Philips
on April 1, 2004.
10. Michel Soublin (1945) French
Non-executive, independent Board
member.
Appointed: February 17, 2004,
reappointed at the AGM of 2007 for
four years until the AGM of 2011
(second term). Member of the
Nomination and Governance
committee and of the Strategy
and M&A committee.
Director, Ligue Nationale contre
le Cancer
Michel Soublin joined Schlumberger in
1973 and has held several positions in
the financial sector and management
in Paris, New York and Moscow,
including from 1983 to 1990, CEO
of Schlumberger’s e-Transactions
subsidiary (Smart cards, POS
terminals, service station equipment
and parking divisions), financial director
of Oilfield Services from 1996 to 1998,
Schlumberger Group Treasurer from
2001 to February 2005 and financial
advisor from 2005 to 2007. Michel
Soublin retired from Schlumberger
in July 2007.
Michel Soublin is a graduate of the
Institute of Political Studies (IEP) and
of the Faculty of Law and Economics
in Paris.
Governance
(
* ) Situation as of the date of this Annual Report

Governance
62 Gemalto Annual Report 2010
The Board and the management
63
Members of the senior
management
The senior management is composed of the
following senior managers: ( * )
Paul Beverly (1962) American
Executive Vice-President,
Corporate Marketing & President
North America
Paul Beverly began his career as
a Marketing Manager within the
Schlumberger group. Over the course
of his 19 years within Schlumberger,
he held various management positions
in operations, marketing and sales in
North America and in France. From
1999 to 2003, he was Vice-President
in Test & Transactions for Schlumberger
in North America, while also serving as
Chairman of the Smart Card Alliance.
He was President of the Americas from
April 2003 until June 2006.
Paul Beverly holds Business and
Economics degrees from Auburn
University and the Management
Program at Harvard University.
Philippe Cabanettes (1955) French
Executive Vice-President,
Human Resources
Philippe Cabanettes worked with
Schlumberger for 23 years and has
held different positions of worldwide
responsibility for human resources
in the petroleum, industrial and
services sectors in France, Italy
and the US. From 1997 to 2001,
he was Director of Personnel of the
Resources Management Services
division of Schlumberger. In May 2001,
he became the Director of Personnel
of Schlumberger’s Volume Products
business. In May 2004, he became
Vice President Human Resources for
Axalto. He has been the Executive
Vice President Human Resources
of Gemalto since July 2006.
Since 2002, Philippe Cabanettes
has served as President of PartnerJob.
com, a non-profit, cross-industry
organization facilitating Dual
Career management.
Philippe Cabanettes is a graduate from
Institut d’Etudes Politiques in Paris
(Sciences-Po) and holds a Master in
Economics from Université de Paris X.
Philippe Cambriel (1958) French
Executive Vice-President, Secure
Transactions Business Unit
Philippe Cambriel began his career
at Aerospatiale in 1983. From 1989
to 1996, he held various sales and
marketing positions at Compaq in
France and in Germany. From 1996 to
1998, he was General Manager for IPC
in France before managing the PC and
Intel server unit of Bull. In 1998 he was
appointed Chief Officer, sales and
marketing at Bull CP8. From 2001
to 2003, he was Vice-President of
Schlumberger’s e-Transaction Cards
business. In April 2003, he was
appointed President of Schlumberger’s
Smart Cards business for Europe,
the Middle East and Africa.
Philippe Cambriel is a graduate from
the Ecole Nationale Supérieure de
l’Aéronautique et de l’Espace (Sup’Aéro)
and has an MBA from INSEAD.
Jean-Pierre Charlet (1953) French
Executive Vice-President, General
Counsel and Company Secretary
Jean-Pierre Charlet was admitted to
the Bar in Paris where he began his
career in law firms in 1974. From
1981 to 1996, he held positions
within the Legal Departments of
Société Métallurgique Le Nickel-SLN,
Schlumberger group, Pinault Printemps
Redoute group and Carnaud-Metalbox.
He subsequently served as General
Counsel of Synthélabo, Deputy General
Counsel of Sanofi-Synthélabo and
General Counsel of Rexel. He joined
Gemalto in June 2005.
Jean-Pierre Charlet holds a Master in Law
from Université de Paris X and a Master
of Comparative Law from Georgetown
University in Washington D.C.
Claude Dahan (1947) French
Executive Vice-President,
Operations
Claude Dahan began his career with
the Office National d’Etudes et de
Recherches Aérospatiales (ONERA)
in 1977, and served as Vice-President
of a research center until 1982.
Between 1982 and 2001, he held
various management positions in
Schlumberger’s many different
businesses, including research and
engineering, marketing and production
in both France and the USA. From 2001
to 2002, he was the Vice-President in
charge of marketing and product
development for Schlumberger. In
January 2003, he became Vice-
President of Schlumberger’s Smart
Cards business.
Claude Dahan is a graduate from the
Ecole des Mines de Paris, has a PhD
in physics and fluid mechanics, and
holds an advanced management
degree from INSEAD.
Martin McCourt (1962) Irish
Executive Vice-President, Strategy,
Mergers and Acquisitions
Martin McCourt previously served as
President of Gemalto’s South Asia
operations. Prior to this position, he
was also President of Gemplus Asia.
In this capacity, he was responsible for
the whole of Asia. He has 20 years of
experience in the Telecom sector,
working in Europe, the US and China.
He has held leadership roles in R&D,
Sales and Marketing, Operations,
Strategy and M&A and was Vice
President of Corning Cable System’s
worldwide Project Services business.
Martin McCourt has a Master of
Business Administration from INSEAD,
a Ph.D in Integrated Optics from the
Institut National Polytechnique in Grenoble
and a Bachelor of Electronic Engineering
from University College Dublin.
Christophe Pagezy (1958) French
Executive Vice-President,
Corporate Projects
Having joined Schlumberger in 1983 as
a project engineer, Christophe Pagezy
held various operational, technical
and business positions in France and
Italy within that company until 2001.
Between 2001 and 2002, he was
business development manager for
Schlumberger’s Volume Products and
Global Market Segments business. In
June 2002, he became Vice-President
of Schlumberger’s Terminals division
and in May 2004 Vice-President
Business Development in charge of
Mergers and Acquisitions and of the
POS Terminal division of Axalto.
Christophe Pagezy is a graduate
from the Ecole Supérieure d’Electricité
(Supelec) and from the Massachusetts
Institute of Technology (MIT).
Jacques Sénéca (1959) French
Executive Vice-President,
Security Business Unit
Previously, Jacques Sénéca was in
charge of Gemalto’s European
operations. Prior to these appointments,
he served as head of the ID & Security
Business Unit, as well as head of
Business Development Unit. He joined
Gemplus in 1989 as Project Manager.
He has held several management
positions such as Products
Department Manager, General
Manager for Sales and Manufacturing
Operations in Germany, General
Manager for the Telecom Business
Division, Executive Vice President
for Gemplus Marketing & Technology
and General Manager of Gemplus’
GemVentures Services Unit. He
was also a member of the Gemplus
Executive Committee. Prior to joining
Gemplus, he worked with
STMicroelectronics where he held
various positions in the fields of
manufacturing, marketing and
business development.
Jacques Sénéca holds a Degree
in Engineering from Ecole Nationale
Supérieure d’Arts et Métiers (ENSAM
– Paris, France) and a Business
Administration degree from the IAE
of Aix-en-Provence in France.
Jacques Tierny (1954) French
and Swiss
Chief Financial Officer
Jacques Tierny began his career
as a trader. He then spent 23 years in
different finance positions at Michelin in
France and abroad, where he became
the Group Deputy CFO. In 2003 he
joined the retail group Casino as Group
CFO, later becoming Casino’s Executive
Deputy General Manager.
Since January 2007, Jacques Tierny
was heading the Valuation and Strategic
Finance practice at KPMG Corporate
Finance in Paris. He joined Gemalto in
September 2007.
Jacques Tierny graduated in 1977
from the HEC School of Management
in Paris and later from the International
Management Program from New York
University and the Mestrado from
Gétulio Vargas in São Paulo.
Philippe Vallée (1964) French
Executive Vice-President,
Telecommunications Business Unit
Philippe Vallée was previously Chief
Technology Officer of Gemplus,
heading the Product and Marketing
Center. Prior to this appointment,
he had served as Vice-President
Marketing and then President of the
Telecom Business Unit of Gemplus.
He was previously based in Singapore
as Executive Vice-President of Gemplus
Technologies Asia. He has more than
21 years of experience in the Telecom
industry and held various positions
within Gemplus in the fields of marketing,
product management and sales.
Prior to joining Gemplus, he began
his career with Matra Communication
(now Lagardère Group) in France
as a product manager on the first
generation of GSM mobile phones.
Philippe Vallée is a graduate from
the Institut National Polytechnique
de Grenoble (Engineering degree in
Telecom and Microelectronics) and
from the ESSEC Business School.
Governance
(
* ) Situation as of the date of this Annual Report.

Governance
64 Gemalto Annual Report 2010
Report of the Non-executive Board members
65
Report of the Non-executive
Board members
Board meetings and activities
during 2010
Meetings
The Board held eight meetings: four in person
and four by conference call. Each of the Board
members attended the majority of the meetings.
The Board addressed in different meetings the
following main subjects:
• The corporate strategy and main risks of the
business, the result of the assessment of the
design and effectiveness of the internal risk
management and control systems, as well as
any significant changes in such matters.
• Financial performance of the Group.
• Parameters to be used for measuring
performance.
• Annual budget plan for 2011.
• Development of business activities and
various investment opportunities.
• Share buy-back and dividend policy.
• Convocation of the AGM.
• Reports of the Board committees following
each of their meetings.
• Performance of the Board, of the committees
and of its individual members, including
the CEO.
• Succession planning and management
development.
• Remuneration of the CEO and the
senior management.
• Grants to eligible employees under the Global
Equity Incentive Plan, and opportunity for
eligible employees to purchase discounted
shares under the Global Equity Share
Purchase Plan.
• Corporate governance requirements
and developments.
The CEO was not present and did not take part
in the discussion or decision-making by the
Board at the part of meetings in which his
remuneration and performance was discussed.
The Board members met regularly in the absence
of the CEO and of the senior management.
Performance evaluation
The Board evaluated its own performance, the
performance of the committees and of its
individual members, including the CEO. The
Board followed-up on the 2009 evaluation and
noted the implementation of several
suggestions. Other items discussed included
the composition and competencies of the
Board, the setup and content of meetings and
meeting materials. Also the relationship with
the senior management was discussed.
Suggestions for improvement either have been
fully implemented, or will be implemented as it
becomes feasible to do so.
Training
The Board made a visit to one of its factories
for training on Gemalto’s products and held
meetings with managers to further familiarize
themselves with the business and the senior
management team.
Board composition
For information on the composition of the
Board, please refer to ‘Composition of the
Board – (term of) appointment’, pages 51 and
53. For information on the individual Board
members, please refer to ‘The Board’, pages
60 and 61.
Independence
The Board currently consists of ten Board
members: nine Non-executive Board members
and one Executive Board member, the CEO.
The Board considers that seven Non-executive
Board members are independent, within the
meaning of best practice provision III.2.2; thus
the Company complies with best practice
provision III.8.4.
The following Non-executive Board members
are considered non-independent:
• Mr. J. Fritz, Head of the Quandt Family office.
• Mr. A. Mandl, former Executive Chairman
of Gemalto.
Report of the Audit committee
The committee advises the Board with respect
to the oversight of the quality and integrity of
Gemalto’s financial statements; – risk
management and internal control
arrangements; – compliance with legal and
regulatory requirements; – the performance,
qualifications and independence of the external
auditor; – and the performance of the internal
audit function. The committee consists of four
Non-executive Board members, listed in ‘The
Board’, pages 62 and 63. One committee
member is considered non-independent.
The Board believes that at least one committee
member is a financial expert within the
meaning of best practice III.3.2 of the Dutch
corporate governance code.
During 2010, the committee held six meetings.
The Chairman, CEO, CFO, Chief Accounting
Officer, the Internal Audit Director and the
external auditors were invited to attend the
committee meetings. The committee also met
on at least one occasion privately with the
CFO, the Internal Audit Director, the external
auditors and the General Counsel (without
other members of management being present).
During 2010, the committee reviewed the 2009
annual financial statements and the related
audit report from the external auditors. The
committee also reviewed the condensed
interim financial statements as of June 30, 2010
and the related report by the external auditors,
as well as the announcements of the 2010
quarterly revenue figures. In connection with
these reviews, the committee reviewed the
Company’s accounting policies and
compliance with accounting standards.
During the year, the committee received and
considered reports on the Company’s risk
management system and key internal financial
control policies and procedures.
With regard to the internal audit, the committee
reviewed the revised internal audit charter, the
internal audit plan for 2011 and its coverage in
relation to the scope of external audit. It also
reviewed the effectiveness and independence
of the internal audit process. The committee
received reports on the work of the internal
audit department and considered their
significant findings and recommendations.
With regard to the external audit, the
committee reviewed the independent auditor’s
audit plan for the financial year ended
December 31, 2010. The committee assessed
the performance and independence of the
auditors and considered steps taken to ensure
their independence, including receiving a
report on the auditors internal procedures for
maintaining independence, including policies
for rotation of responsibilities of key personnel;
approving key non-audit assignments; and
reviewing the fees paid for non-audit services.
For an overview of the aggregate fees billed by
the external auditors for professional services
rendered for the fiscal year 2010, please refer to
note 10 of the company financial statements.
The committee considered these and other
factors in concluding its recommendation
to the Board for the reappointment of the
external auditors.
The committee carried out the review and
assessment of the effectiveness of internal
controls. This included a review of the tax and
treasury risks, and the information and
communication technology risks. The
committee also reviewed the effectiveness of
the whistle-blowing arrangements, received
reports on whistle-blowing, significant claims
and disputes, including those resulting in
litigation, and related party transactions.
During the year, the committee reviewed the
effectiveness of its performance with input
from all Board members. Changes are then
implemented to make improvements. During
the year, as a result of this process, the
committee arranged for a technical accounting
update presentation and discussion led by the
technical staff of the auditors, focusing on
recent and planned developments in
accounting and reporting which are most likely
to affect the Company.
Report of the Compensation committee
The committee advises the Board with a
proposal for a Remuneration Policy for the
CEO, which is reviewed annually, and with a
proposal for the remuneration of the Nonexecutive
Board members, which is reviewed
from time to time, to be adopted by the General
Meeting. The committee proposes the
remuneration of the CEO within the limits of the
Remuneration Policy. Furthermore, the
committee oversees the general remuneration
policy of Gemalto and discusses the grant of
Awards, i.e. options, restricted share units and/
or share appreciation rights, and the
opportunity for eligible employees of Gemalto
to purchase shares in the Company at a
discount to the prevailing market price.
The committee consists of three Non-executive
Board members, listed in ‘The Board’, pages 60
and 61. All committee members are considered
independent.
During 2010, the committee held five meetings.
In these meetings, the committee reviewed the
2009 achievements and associated bonus
payments for the CEO and senior management,
as well as the 2010 salary increases, objectives
and bonus levels. The remuneration for the
CEO was determined within the limits of the
Remuneration Policy for the CEO. The committee
prepared the 2010 Remuneration Report, which
report can be found in ‘2010 Remuneration
report of the Board’, pages 66 to 73.
The committee made recommendations to
the Board on the grant of restricted share
units to eligible employees, as well as on the
performance conditions relating to such share
incentive. Details of the grant of restricted
share units to the CEO are disclosed in
‘Compensation of the CEO for the financial
year 2010’, page 69.
The committee also recommended to the
Board that eligible employees be offered
the opportunity to purchase shares in the
Company at a discount of 15% to the prevailing
market price within the Global Employee Share
Purchase Plan (`GESPP´), as described in more
detail on page 73. As part of their duties, the
committee requested external advice from
Mercer, an independent internationally
recognized firm of compensation specialists,
which firm did not provide advice services
to management, but only to the Board via
the committee.
Report of the Nomination and
Governance committee
The committee advises the Board with respect
to overseeing new candidates for service on
the Board, as well as new members of the
senior management of Gemalto. The
committee reviews the corporate governance
principles applicable to Gemalto and advises
the Board on any changes to these principles
as it deems appropriate.
The committee consists of three Non-executive
Board members, listed in ‘The Board’, pages
60 and 61. One committee member is
considered non-independent.
During 2010, the committee held four
meetings. The committee advised the Board in
2010 on the appointment of Mr. Ph. Alfroid as
Non-executive Board member. The committee
advised the Board on a new reappointment
schedule following the appointment of a new
Board member.
The committee discussed further steps that the
Company could take to improve its corporate
governance, reviewed the Governance section
of the Annual Report and the agenda for the
AGM. The committee also reviewed the
Sustainability report that was prepared for
the first time in 2010. The committee proposed
changes to the insider trading policy. The
committee prepared and coordinated with
the Chairman of the Board the annual
self-assessment of the Board and of the
committees, which took place in the second
half year of 2010.
Report of the Strategy and
M&A committee
The Strategy and M&A committee advises the
Board with respect to Gemalto’s strategy and
the major features of its merger, acquisition and
divestiture activities.
The committee consists of five Non-executive
Board members, listed in ‘The Board’, pages
60 and 61. One committee member is
considered non-independent.
During 2010, the committee held six
meetings. The committee reviewed all material
investment and divestiture proposals. It
advised and submitted recommendations
to the Board on Gemalto’s M&A and divestiture
activities, and Gemalto’s strategic plans and
their implementation.
Financial statements 2010
The financial statements of the Company for
2010, as presented by the Board, have been
audited by PricewaterhouseCoopers
Accountants N.V., the Company’s external
auditors. Please refer to the ‘Auditor’s report’,
page 144. All individual Board members have
signed the financial statements. The Board
proposes that the financial statements for the
year 2010 be adopted by the AGM of May 18,
2011 and that the other resolutions proposed
to the shareholders be approved.
Finally, we would like to express our thanks
to the CEO, the senior management and all
employees of the Group for their continued
dedication and contribution during the past
twelve months, making 2010 a successful
year for Gemalto.
The Non-executive Board members
Amsterdam, March 8, 2011
Governance

Governance
66 Gemalto Annual Report 2010
Remuneration
67
Remuneration
This section consists of the following:
• 2010 Remuneration Report of the Board.
• Remuneration of the Non-executive Board members.
• Long-term incentive plans.
2010 Remuneration Report of the Board
The 2010 Remuneration Report of the Board,
as drawn up by the Compensation committee,
contains an account of the manner in which
the Remuneration Policy for the CEO was
implemented in 2010, and is planned to
be implemented in 2011.
Remuneration of the CEO, including his
function as Executive Board member
The General Meeting, upon the proposal of the
Board, determines the Remuneration Policy for
the CEO, including for his function as Executive
Board member. The remuneration of the CEO
shall, with due observance of the Remuneration
Policy, be determined by the Board.
Remuneration Policy for the CEO
The Remuneration Policy for the CEO was
adopted by the AGM on May 11, 2005 and was
most recently amended by the AGM of May 14,
2008. The Remuneration Policy is published on
Gemalto’s web site.
The Remuneration Policy also serves as a
guidance to establish the senior management
remuneration (not addressed in this report).
The compensation package of the CEO
consists of four elements: (i) base salary,
(ii) variable incentive, (iii) long-term or deferred
incentive and (iv) a fixed fee as Executive Board
member of Gemalto N.V.
The compensation of the CEO is calibrated
by comparison to a group of other relevant
companies, particularly continental European
high-tech and industrial companies (the
‘Comparison Group’) and surveys are performed
by Towers Watson, an independent internationally
recognized firm of compensation specialists.
Positioning of the Remuneration Policy
The table opposite (page 69) summarizes the
positioning of the Remuneration Policy by
comparison with the Comparison Group and
applies to the compensation package of the CEO.
Compensation package of the CEO
The table on pages 68 and 69 sets out:
• Key elements of the compensation package
of the CEO.
• Compensation of the CEO for the financial
year 2010.
Positioning of the Remuneration Policy
Types of compensation
Overall compensation
Total Reference Compensation
(‘TRC’), i.e. base salary and a fixed
fee as Executive Board member of
Gemalto N.V.
Variable incentive
Policy relating to compensation
Assuming that challenging but achievable targets
set by the Board have been met, the overall
compensation is set to be about the 60th percentile
by comparison with the remuneration practices of
the Comparison Group.
The TRC is targeted around 50th percentile by
comparison with the Comparison Group.
The total variable compensation at 100% (on-target)
achievement of all objectives is designed to be clearly
above 50th percentile, with an average over the years
of about 60th percentile by comparison with the
Comparison Group.
In case of exceptional performance, the total
compensation is set to be in the upper quartile.
Governance
The objectives of the Remuneration Policy and
the remuneration policy for the management
are to attract, retain and reward talented staff
and management, by offering compensation
that is competitive in the industry, motivates
management to surpass the Company’s
business objectives and aligns the interests
of management with the interests of the
shareholders. The Company considers that
it has a balanced set of clearly defined
objectives and performance targets that do
not encourage the CEO to take risks that are
not in line with the adopted strategy and which
are within the Company’s risk appetite.
Long-term or deferred incentive
The long-term or deferred incentive part of the total
compensation package for the CEO is designed to
be clearly above 50th percentile by comparison with
the Comparison Group, which may be the upper
quartile in case of exceptional performance.

Governance
68 Gemalto Annual Report 2010
Remuneration
69
Compensation package of the CEO
Short-term
Key elements of the compensation package of the CEO Compensation of the CEO for the financial year 2010
Total Reference Compensation (‘TRC’)
The TRC is fixed and reviewed every year, but not
necessarily adjusted every year.
The TRC of the CEO was adjusted effective February 1, 2010
to €670,000 (including a fixed fee as Executive Board member
of Gemalto N.V. of €35,000).
Variable incentive
The variable compensation of the CEO, based on
the achievement of personal and financial objectives,
ranges from 0 to 180% of the TRC. A variable incentive
of 120% of the TRC is payable on achievement of
100% of on-target performance by reference to a
predefined set of personal and financial objectives.
In case of exceptional performance in excess of
the 100% (on-target) achievement of objectives, the
variable compensation can be increased so that
the total variable compensation can reach up to 180%
of the TRC.
The personal and financial objectives for variable
compensation typically relate to short-term (annual)
performance targets and are key drivers for value
creation and growth in shareholders’ value. Part of
the variable compensation is related to Gemalto’s
financial results, e.g. revenue, cash flow and operating
income, and is determined by the Board on the
recommendation of the Compensation committee
on an annual basis. The remainder depends on
success in achieving a limited number of specific
strategic, tactical or individual objectives, also
determined annually by the Board on the
recommendation of the Compensation committee.
Below a minimum performance
threshold, the variable compensation
for financial performance is zero.
The compensation is 120% at target
level and at a maximum of 180% at
stretch level. This compensation is
calculated using two linear interpolation
scales from threshold to target and from
target to stretch.
In exceptional cases, the Board may
add a discretionary amount.
€1,148,820 (143% of on target Variable Incentive,
172% of TRC).
For 2010, the CEO’s financial targets accounted for
2/3 of the variable compensation and were:
• Revenue: 4/15 of the variable compensation.
• Profit from Operations: 4/15 of the variable compensation.
• Free cash flow: 2/15 of the variable compensation.
The personal targets, accounting for 1/3 of the CEO’s variable
compensation, depended on his specific responsibilities and
were defined as measurable actions linked with the success
and development of Gemalto.
In accordance with best practice provision II.2.13 (b) of
the Dutch corporate governance code, the Compensation
committee, and subsequently the Board, analyzed
the possible outcomes of the variable compensation
components and how they may affect the compensation
of the CEO.
Long-term or deferred incentive
Global Equity Incentive Plan (‘GEIP’)
Under the GEIP and the French Sub-Plan, the CEO
may receive options, restricted share units and/or
share appreciation rights (jointly referred to as ‘Awards’).
For further information, please see page 72.
The Board is authorized to grant to the CEO annually
any combination of Awards, including any awards, as
defined in the GEIP, similar in substance and/or
nature, with a maximum value equivalent to the value
of 250,000 options valued by reference
to any of the generally recognized
valuation methods applied in a manner
as approved by the Board.
Grant of 32,500 RSU, if conditions allow for 100% vesting.
The number of RSU granted may be either zero or may vary,
with a linear sliding scale between 100% and 200% vesting,
from 32,500 RSU to 65,000 RSU.
This corresponds to a cost that varies from €877,104 to
€1,754,207 for Gemalto depending on the multiplier effect of
the RSU conditions. The cost will be expensed over 36 months.
Vesting occurs in March 2013, if both a performance
condition and a service condition are met. The performance
condition being the Company achieving a target level of Profit
from Operations for 2010.
Governance
Global Employee Share Purchase
Plan (‘GESPP’)
Under the GESPP, the Company may offer eligible
employees, including the CEO, the opportunity to
purchase shares in the Company at a discount to the
prevailing market price. The discount of the purchase
price of the shares is 15% based on the lesser of the
value of the shares on the first and last day of the
offering period.
The CEO may participate in the GESPP (as well as in
any future similar plans), through a ‘Fonds Commun
de Placement d’Entreprise’.
(‘FCPE’), in which case the FCPE
subscribes to Gemalto shares and
the CEO receives in exchange units
of the FCPE.
The CEO participated to the 2010 GESPP, subscribing
for €20,000 (plus €984.79 Company matching) for which he
received 685.35 FCPE units.
Other benefits
Pension
The CEO does not benefit from any special pension
plan provided by Gemalto, other than the mandatory
legal pension system in France.
There are no agreed arrangements for early
retirement of the CEO.
€58,013 Costs for 2010 for the CEO’s mandatory French legal
pension scheme.
Employee benefits
The CEO enjoys any and all benefits that may be
applicable to French employees.
The CEO enjoyed any and all benefits that
were also applicable to French employees.

Governance
70 Gemalto Annual Report 2010
Remuneration
71
Global Equity Incentive Plan (‘GEIP’): Awards and Conditions
Awards
Options
When granting options, the Board applies performance
and vesting conditions, as set out below.
The exercise price of options is equal to the average
of the Gemalto share closing price on the Euronext
Paris Stock Exchange during the five trading days
preceding the grant date. The options do not benefit
from any discount.
The table below summarizes information on Awards granted to the CEO in previous years, in accordance with best practice provision II.2.13 (d)
of the Dutch corporate governance code.
Options
Date of grant Number Value at grant
date
June 2006 200,000 €1,269,781 Unconditional (past
performance related)
Sept 2008 150,000 €1,049,761 Unconditional (past
performance related)
(Un)conditional Date of vesting Value at vesting
date
June 2010 (4 years
after date of grant)
Sept 2012 (4 years
after date of grant)
End of lock-up Exercise price (€)
€1,408,000 Not applicable 23.10
Not applicable Not applicable 26.44
Restricted share units (‘RSU’)
A RSU is a right to acquire shares in exchange for
the RSU. There is no purchase price to be paid to
acquire a RSU. When granting a RSU, the Board
applies performance and vesting conditions, as set
out below. At any time after the granting of a RSU,
the Board may accelerate the vesting of such RSU.
Under no circumstances, except in case of death,
shall the delivery of shares related to a RSU occur
prior to the second anniversary of the date of grant.
Except in case of death, the sale of shares acquired
pursuant to the exchange of the RSU may not occur
prior to the expiration of a two-year period from the
date delivery of the shares.
RSU
Date of grant Number Value at grant
date
Sept 2007
The number
may vary from
0 to 80,000
with a maximum
multiplier of 3
(Un)conditional Date of vesting Value at vesting
date
€1,727,828 Conditional Dependent on
whether thresholds
are reached
before Dec 31,
2009 or before
Dec 31, 2010
End of lock-up
Value at end of
lock-up
66% vested in 2008 €1,424,544 2011 Not applicable
Share appreciation rights (‘SAR’)
Conditions
A SAR is a right to receive the difference between
the fair market value of a share on the exercise date
and the exercise price of the right being exercised.
So far, the Company has not granted SAR
to the CEO.
84% vested in 2009
(in total 150%)
As per Dec 31,
2010, the remainder
of the RSU were not
vested and hence
were forfeited
€2,026,080 2011 Not applicable
Oct 2009 65,000 €1,689,377 Conditional Oct 2012 Not applicable Oct 2014
(if vested)
March 2010
The number €877,104 Conditional March 2013 Not applicable March 2015
may vary from 0
(if vested)
to 32,500 with a
maximum
multiplier of 2
Not applicable
Not applicable
Governance
Performance factors
Awards may be granted or vest on the basis of the
achievement of specified financial or personal
performance conditions, as included in the
Remuneration Policy.
In 2010, Awards made during the year were subject to
the Company achieving a target level of Profit from
Operations for 2010. The Board expects to consider
applying similar performance conditions for future
grants.
Vesting in certain circumstances
In addition to any performance conditions, Awards
have generally been subject to vesting over a
specified future period of time. However, any
option rights granted to the CEO will vest automatically
upon any decision to terminate the appointment of
the CEO and will remain exercisable for the full term
of the option, notwithstanding any early termination
provided in the GEIP and the relevant Sub-Plan,
and all other eventual equity-based schemes
will continue to vest even after the date of termination.
These termination arrangements do not apply where
the employment of the CEO with Gemalto
International SAS or the Company is terminated for
willful misconduct (‘faute lourde’ within the meaning
established by the French Supreme Court case law).
Under specific circumstances, the Board has the
discretionary power to grant unconditional options
(e.g. in case of new hire).

Governance
72 Gemalto Annual Report 2010
Remuneration
73
Contracts of employment
Mr. O. Piou was appointed as CEO in 2004 for
a term of four years until the AGM of 2008. He
was reappointed on May 14, 2008 as Board
member with the title of CEO for a term of four
years until the AGM of 2012. Mr. O. Piou has an
employment contract (originally dated 1981),
not limited in time, governed by French law with
Gemalto International SAS, a Gemalto
subsidiary. He has a six-month notice period.
If Gemalto terminates Mr. O. Piou’s
employment contract, he is entitled to a
severance payment equal to one year of
reference salary. The reference salary used to
calculate this payment will be the annual gross
salary paid under Mr. O. Piou’s employment
contract during the twelve months preceding
its termination, including bonuses and other
discretionary cash incentives, if any, as well as
the Board member fees he is entitled to.
The severance payment will be in addition to
the indemnities and benefits that would be
provided by French laws and regulations and
the collective bargaining agreement for the
Engineers and Management level Employees in
the Metallurgical Industry (Convention collective
nationale de la Métallurgie – Ingénieurs et
Cadres). In the event of termination of his
employment contract, Mr. O. Piou has a
recognized seniority since 1981 and is entitled
to a six-month notice period indemnity, as well
as the dismissal and paid vacation indemnities.
The severance payment will not be due if the
employment contract of Mr. O. Piou is
terminated for willful misconduct (‘faute lourde’
within the meaning established by the French
Supreme Court case law) or upon voluntary
resignation of Mr. O. Piou.
Details regarding the compensation of the CEO
are also disclosed in note 9 to the company
financial statements.
Changes to the compensation of the CEO
for the 2011 financial year
The CEO’s TRC will be adjusted in 2011.
For 2011, the CEO’s financial targets will
account for 2/3 of the variable compensation
and are:
• Revenue: 4/15 of the variable compensation
• Profit from operations: 4/15 of the variable
compensation
• Free cash flow: 2/15 of the variable
compensation
The personal targets for 2011 will account for
1/3 of his variable compensation and will
depend on his specific responsibilities and are
defined as measurable actions linked with the
success and development of Gemalto.
Loans or guarantees
Gemalto does not grant personal loans,
guarantees or the like to the CEO, and none
were granted to the CEO in 2010, nor are
outstanding as of December 31, 2010.
Deviations from the Dutch corporate
governance code in terms of remuneration
• Provision II.2.7: amendment of the vesting
date of options granted to Mr. O. Piou as
CEO. The CEO’s Remuneration Policy
provides that, unless his employment with
Gemalto International SAS or Gemalto N.V. is
terminated for willful misconduct, any option
rights vest automatically upon decision to
terminate the appointment of the CEO and
remain exercisable for the full term of the
option, notwithstanding any early termination
provided in the GEIP and the relevant
Sub-Plan. All other equity-based schemes
will continue to vest even after the date of
termination. Although it is not the Company’s
policy to amend conditions regarding options
granted to Executive Board members during
the option term, the amendment of the
vesting date of the options granted to the
CEO is included in the Remuneration Policy
adopted by the shareholders, as proposed by
the Board, as a result of the execution of the
Combination agreement signed between
Gemalto N.V. (at that time named Axalto
Holding N.V.) and Gemplus International S.A.
on December 6, 2005.
• Provision II.2.8: maximum remuneration in the
event of dismissal of Mr. O. Piou as CEO. The
severance payment for the CEO is not in line
with the Dutch corporate governance code,
which recommends that the maximum
remuneration of one year’s salary is based on
the fixed remuneration component. However,
the severance payment of the CEO reflects
his accrued seniority with Gemalto and is
included in the Remuneration Policy adopted
by the shareholders, as proposed by the
Board, as a result of the execution of the
Combination agreement signed between
Gemalto N.V. (at that time named Axalto
Holding N.V.) and Gemplus International S.A.
on December 6, 2005.
• Provisions II.2.10 (ultimum remedium).
Although recommended by the Dutch
corporate governance code, the existing
employment contract of the CEO does not
specifically include the possibility to adjust the
value of conditionally awarded variable
compensation if it would produce an unfair
result due to extraordinary circumstances. In
these cases, the Company will make such
adjustments as is feasible under applicable
law.
• Provision II.2.13 (e): content of the
Remuneration Report, i.e. non-disclosure of
the companies of the Comparison Group.
Although recommended by the Dutch
corporate governance code, the Company
does not disclose the names of the
companies in the Comparison Group.
The Company compares the compensation
of the CEO to those of a group of other
relevant companies, particularly continental
European high-tech and industrial companies
and surveys are performed by Towers
Watson, an independent internationally
recognized firm of compensation specialists.
Remuneration of the Non-executive
Board members
The remuneration of the Non-executive Board
members, including the remuneration of the
Chairman of the Board and the members
of the Board committees is determined by
the General Meeting. The remuneration
is reviewed from time to time by the
Compensation committee.
The remuneration structure for the Non-executive
Board members (per calendar year) is as follows:
• €200,000 for the Non-executive Chairman of
the Board.
• €65,000 for each other Non-executive
Board member.
• An additional fee of €24,000 for the chairman
of the Audit committee and an additional
fee of €16,000 for each member of the
Audit committee.
• An additional fee of €12,000 for the chairman
of the other Board committees, and an
additional fee of €8,000 for the other
members of those Board committees.
The remuneration of a Non-executive
Board member is not dependent on the
results of Gemalto.
The Company does not grant shares or rights
to acquire shares by way of remuneration to
Non-executive Board members. Details
regarding the remuneration of the individual
Board members are disclosed in note 9 to the
company financial statements.
Long-term incentive plans
Global Equity Incentive Plan
In 2004, the General Meeting adopted a Global
Equity Incentive Plan (‘GEIP’) enabling the
Board to grant options, RSU and/or share
appreciation rights (‘Awards’) to eligible
employees. A total number of 14 million shares
have been made available for grant and issue
under the GEIP. As of December 31, 2010 the
remaining number of shares available amounts
to 5,498,464. During 2010, the Board granted
380,318 RSU to eligible employees, including
the CEO. For more information on the grant of
RSU to the CEO, please refer to
‘Compensation of the CEO for the financial
year 2010’, page 69.
The 2007 AGM approved a stock option plan,
further to the undertakings by the Company in
the Combination agreement, to exchange
options to acquire Gemplus or Gemalto S.A.
(formerly named Gemplus S.A.) shares for
options to acquire Company shares. A total
number of 7 million shares are available for
grant and issue under this stock option plan.
So far, the Company has not made any grants
under this stock option plan.
In the event the Company and/or its affiliates
are absorbed by merger and liquidated, or
undergo a change of control, and provided no
other resolutions are adopted by the Board on
such events, and subject to the terms of such
resolutions, each outstanding Award not
otherwise fully vested shall automatically vest
so that each outstanding Award shall,
immediately prior the effective date of the
event, become exercisable with regards to all
or part of the underlying shares and each RSU
will be immediately refunded or compensated
through the granting of shares, except to the
extent such Award is maintained in effect by
the Company, or assumed by a successor
corporation or otherwise substituted by a plan
giving substantially equivalent rights to the
employee upon surrender of the Awards.
For more information on the grant of RSU
during 2010, please refer to note 25 to the
consolidated financial statements.
Global Employee Share Purchase Plan
In 2004, the General Meeting adopted a Global
Employee Share Purchase Plan (‘GESPP’)
enabling the Board to offer the opportunity
to eligible employees to purchase shares in
the Company at a discount to the prevailing
market price. A total number of 3.2 million
shares have been made available for issue or
transfer under the GESPP. As of December 31,
2010 the remaining number of shares available
amounts to 2,481,261. In 2010, the Board
offered eligible employees the opportunity to
participate in the plan and 39,602 shares
were purchased by employees.
In order to benefit from preferential tax
treatment, employees of Gemalto’s French
subsidiaries are able to participate in the
GESPP through a Fonds Commun de
Placement d’Entreprise (‘FCPE’), in which case
the FCPE subscribes to Gemalto shares and
employees receive in exchange units of the
FCPE. Participation in the FCPE does not give
rise to direct ownership of shares or the right to
acquire shares in the Company. The FCPE has
an independent Board of directors and owns
166,395 shares of Gemalto as of December 31,
2010. The FCPE exercises the voting rights on
these shares, without instructions from the
employees who participate in the FCPE.
For more information on the participation in the
GESPP during 2010, please refer to note 25 to
the consolidated financial statements.
Governance

Digital freedom for Thai consumers
Mobile subscribers in Thailand benefited from two innovative
roll-outs in 2010. In one case, deployment of Gemalto’s 3G
USIM cards with our Over-the-Air (OTA) platform is enabling
the operator to offer its customers an increasing range of
cutting-edge services like video telephony and high-speed
internet access. In the other, a pioneering project supported
by Gemalto’s Trusted Service Manager (TSM) service is
bringing together a bank and an operator to launch a mobile
NFC program. This is enabling users to transform their
handsets into contactless payment devices, opening up fast
and fuss-free payment for food, entertainment and shopping.
For more information see
page 23
For more information visit
www.gemalto.com
76 Consolidated financial statements
and notes
129 Company financial statements
and notes
Financial statements

76
Financial statements
Gemalto Annual Report 2010
Consolidated statement of financial position
77
Consolidated financial
statements and notes
Consolidated statement
of financial position
76 Consolidated financial statements
77 Consolidated statement of financial position
78 Consolidated income statement
79 Consolidated statement of comprehensive income
80 Consolidated statement of changes in equity
82 Consolidated cash flow statement
83 Notes to the consolidated financial statements
83 Note 1 General information
83 Note 2 Summary of significant accounting policies
92 Note 3 Financial risk management
95 Note 4 Business combinations
98 Note 5 Additional information on specific line items of
the income statement
99 Note 6 Segment information
102 Note 7 Financial assets/liabilities by category
103 Note 8 Property, plant and equipment
104 Note 9 Goodwill and intangible assets
106 Note 10 Investments in associates and available-for-sale
financial assets
106 Note 11 Assets held for sale and discontinued operations
108 Note 12 Other non-current assets
108 Note 13 Inventories
108 Note 14 Trade and other receivables
109 Note 15 Cash and cash equivalents
109 Note 16 Borrowings
110 Note 17 Employee benefit obligations
113 Note 18 Non-current provisions and other liabilities
114 Note 19 Trade and other payables
114 Note 20 Derivative financial instruments
115 Note 21 Current provisions and other liabilities
116 Note 22 Revenue
116 Note 23 Costs of sales and operating expenses by nature
116 Note 24 Employee compensation and benefit expense
117 Note 25 Share-based compensation plans
120 Note 26 Other income (expense), net
120 Note 27 Financial income (expense), net
121 Note 28 Net foreign exchange gains (losses)
121 Note 29 Taxes
122 Note 30 Earnings per share
123 Note 31 Cash generated from operations
124 Note 32 Related party transactions
124 Note 33 Commitments and contingencies
125 Note 34 Dividends
125 Note 35 Post-closing events
126 Note 36 Consolidated entities
Year ended December 31,
In thousands of Euro Notes 2009 2010
Assets
Non-current assets
Property, plant and equipment, net 8 220,005 217,211
Goodwill, net 9 596,602 798,993
Intangible assets, net 9 81,527 152,561
Investments in associates 10 9,970 10,934
Deferred income tax assets 29 24,192 51,318
Available-for-sale financial assets, net 10 1,270 1,667
Other non-current assets (1) 12 22,791 33,335
Derivative financial instruments 20 1,765 7,451
Total non-current assets 958,122 1,273,470
Current assets
Inventories, net 13 150,621 155,254
Trade and other receivables, net (1) 14 432,072 537,099
Derivative financial instruments 20 15,401 7,937
Cash and cash equivalents 15 403,704 256,110
Total current assets 1,001,798 956,400
Assets held for sale 11 1,711 57,183
Total assets 1,961,631 2,287,053
Equity
Share capital 88,016 88,016
Share premium 1,215,868 1,209,437
Treasury shares (129,640) (132,046)
Fair value and other reserves 55,101 79,962
Cumulative translation adjustments (22,879) 5,879
Retained earnings 201,226 344,302
Capital and reserves attributable to the owners of the Company 1,407,692 1,595,550
Non-controlling interests 11,795 14,757
Total equity 1,419,487 1,610,307
Liabilities
Non-current liabilities
Borrowings 16 14,946 14,772
Deferred income tax liabilities 29 22,293 19,213
Employee benefit obligations 17 32,706 43,587
Provisions and other liabilities 18 74,010 71,712
Derivative financial instruments 20 216 764
Total non-current liabilities 144,171 150,048
Financial statements
Current liabilities
Trade and other payables 19 353,911 463,094
Current income tax liabilities 6,370 15,754
Borrowings 16 8,244 5,423
Derivative financial instruments 20 3,434 8,929
Provisions and other liabilities 21 26,014 13,710
Total current liabilities 397,973 506,910
Liabilities associated with assets held for sale 11 – 19,788
Total liabilities 542,144 676,746
Total equity and liabilities 1,961,631 2,287,053
(1)
Compared to the published consolidated financial statements for the year ended December 31, 2009, Trade and other receivables of €4,300 have been
reclassified to Other non-current assets.

Financial statements
78 Gemalto Annual Report 2010
Consolidated statement of comprehensive income
79
Consolidated income statement
Consolidated statement of
comprehensive income
Year ended December 31,
In thousands of Euro (except earnings per share) Notes 2009 2010
(represented*)
Continuing operations
Revenue 22 1,601,893 1,905,568
Cost of sales (1,015,920) (1,218,720)
Gross profit 585,973 686,848
Operating expenses
Research and engineering (92,309) (104,612)
Sales and marketing (231,475) (267,545)
General and administrative (99,480) (127,621)
Other income (expense), net 26 4,013 8,406
Restructuring and acquisition-related expenses 5 (9,316) (9,268)
Amortization and depreciation of intangible assets resulting from acquisitions 5 (23,699) (22,792)
Operating result 133,707 163,416
Financial income (expense), net 27 (2,246) 796
Share of profit of associates 10 1,380 1,717
Gain on sale of investment in associate 78 –
Profit before income tax 132,919 165,929
Income tax (expense) credit 29 (17,425) 3,871
Profit from continuing operations 115,494 169,800
Discontinued operation
Profit (loss) from discontinued operation (net of income tax) 11 2,630 (2,422)
Profit for the period 118,124 167,378
Attributable to:
Owners of the Company 114,796 163,920
Non-controlling interests 3,328 3,458
Year ended December 31,
In thousands of Euro Notes 2009 2010
Profit for the period 118,124 167,378
Gains (losses) recognized directly in equity:
Currency translation adjustments
– currency translation 17,071 30,426
– transfer to profit and loss account (Financial income)
on liquidated entities – (197)
Gains on Treasury shares (liquidity program) 1,006 580
Fair value gains (losses) on:
– financial assets available-for-sale 10 73 808
– transfer to profit and loss account (Financial expense)
on disposal of available-for-sale financial assets – 764
– variation of actuarial gains and losses in benefit obligations 17 (5,391) (3,654)
– cash flow hedges 10,054 1,071
– currency translation adjustments on fair value gains (losses) (416) (938)
Other comprehensive income for the period 22,397 28,860
Income tax relating to components of other comprehensive income(*) – 1,252
Total comprehensive income for the period, net of tax 140,521 197,490
Attributable to:
Owners of the Company 137,229 192,561
Non-controlling interests 3,292 4,929
(
* ) Tax has been recognized on changes in actuarial gains and losses in benefit obligations.
Earnings per share
Basic earnings per share 30 1.39 1.97
Diluted earnings per share 30 1.37 1.94
Earnings per share – continuing operations
Basic earnings per share 1.36 2.00
Diluted earnings per share 1.34 1.97
Weighted average number of shares outstanding (in thousands) 30 82,520 83,031
Weighted average number of shares outstanding assuming dilution
(in thousands) 30 83,789 84,400
Financial statements
(
* ) Compared to the published consolidated financial statements for the year ended December 31, 2009, the income statement has been represented to take into
account the operation discontinued in 2010.

Financial statements
80 Gemalto Annual Report 2010
Consolidated statement of changes in equity
81
Consolidated statement of
changes in equity
Number of shares (1)
In thousands of Euro Issued Outstanding
Attributable to owners of the Company
Balance as of January 1, 2009 88,015,844 82,296,192 88,016 1,214,429 (114,933) 56,835 (39,986) 84,118 14,142 1,302,621
Profit for the period 114,796 3,328 118,124
Other comprehensive income (loss) 5,326 17,107 (36) 22,397
Total comprehensive income 5,326 17,107 114,796 3,292 140,521
Share-based compensation expense 12,327 12,327
Employee share option scheme 2,684,452 50,257 (19,387) 30,870
Purchase of Treasury shares, net (2,204,431) (64,964) (64,964)
Acquisition of non-controlling interest (823) (823)
Excess of purchase price on SAIT non-controlling interest acquisition (1,937) (1,937)
Correction of the excess of purchase price on subsequent acquisition of Gemplus shares (2) 3,843 3,843
Excess of purchase price on subsequent acquisition of Serverside Group Limited (467) (467)
Revaluation further to the acquisition of Trusted Logic S.A. 2,312 2,312
Dividend paid to non-controlling interests (4,815) (4,815)
Balance as of December 31, 2009 88,015,844 82,776,213 88,016 1,215,868 (129,640) 55,101 (22,879) 201,226 11,795 1,419,487
Share
capital
Share
premium
Treasury
shares
Fair value and
other reserves
Cumulative
translation
adjustments
Retained
earnings
Noncontrolling
interests
Total equity
Profit for the period 163,920 3,458 167,378
Other comprehensive income (loss) (117) 28,758 1,471 30,112
Total comprehensive income (117) 28,758 163,920 4,929 197,490
Share-based compensation expense 19,447 19,447
Employee share option scheme 836,289 14,940 664 15,604
Purchase of Treasury shares, net (1,281,254) (39,279) (39,279)
Treasury shares used for the acquisition of Todos AB 800,000 21,933 4,867 26,800
Excess of purchase price on subsequent acquisition of Netsize S.A. (6,431) (34) (6,465)
Minimum dividend payable to SAIT non-controlling interests (1,064) (1,064)
Dividend paid/payable to group shareholders (3) (20,844) (20,844)
Dividend paid to non-controlling interests (869) (869)
Balance as of December 31, 2010 88,015,844 83,131,248 88,016 1,209,437 (132,046) 79,962 5,879 344,302 14,757 1,610,307
(1)
As at December 31, 2009 and 2010, the difference between the number of shares issued and the number of shares outstanding corresponds to the 5,239,631
and 4,884,596 shares held in treasury, respectively.
(2)
As at December 31, 2009, the Company recognized some deferred tax assets that did not meet the recognition criteria at the date of the Combination with Gemplus.
As a result, in accordance with the provisions of IFRS 3 and IAS 12, the Company reduced the carrying value of the goodwill and increased the value of the share premium
by €3.0 million and €3.8 million, respectively.
(3)
See note 34.
Financial statements

Financial statements
82 Gemalto Annual Report 2010
Notes to the consolidated financial statements
83
Consolidated cash flow statement
Notes to the consolidated
financial statements
Year ended December 31,
In thousands of Euro Notes 2009 2010
Cash flows provided by (used in) operating activities
Cash generated from operations 31 223,032 192,944
Income tax paid (22,776) (19,260)
Net cash provided by operating activities 200,256 173,684
Cash flows provided by (used in) investing activities
Acquisition of subsidiaries, net of cash acquired (37,545) (195,325)
Acquisition of businesses (30,866) (856)
Purchase of Non-controlling interests in subsidiaries (2,760) –
Purchase of property, plant & equipment 8 (40,158) (44,214)
Proceeds from sale of property, plant & equipment 961 786
Acquisition and capitalization of intangible assets 9 (14,708) (29,438)
Proceeds from sale of non-current assets 545 246
Proceeds from sale of a subsidiary 333 –
Proceeds from sale of investments in associate 2,058 –
Proceeds from sale of an available-for-sale financial asset – 430
Purchase of investments in associate (2,550) (2,000)
Proceeds from sale of a discontinued operation – 7,374
Interest paid (1,916) (1,513)
Interest received 4,084 3,332
Dividends received from investments in associates 10 1,125 1,502
Net cash used in investing activities (121,397) (259,676)
Cash flows provided by (used in) financing activities
Proceeds from exercise of stocks options 31,827 15,604
Purchase of Treasury shares (net) (64,941) (38,713)
Repayments of borrowings (7,022) (5,322)
Dividends paid to Company shareholders 34 – (20,844)
Dividends paid to Non-controlling interests (4,815) (869)
Net cash used in financing activities (44,951) (50,144)
Net increase (decrease) in cash and bank overdrafts 33,908 (136,136)
Cash and bank overdrafts, beginning of period 15 360,034 402,174
Currency translation effect on cash and bank overdrafts 8,232 9,263
Cash and bank overdrafts, end of period 15 402,174 275,301
All amounts are stated in thousands of Euro, except per share
amounts which are stated in Euro and unless otherwise stated.
Note 1. General information
Gemalto, the world leader in digital security, is at the heart
of our evolving digital society. The freedom to communicate,
travel, shop, bank, entertain, and work – anytime, anywhere
– has become an integral part of what people want and
expect, in ways that are convenient, enjoyable and secure.
Gemalto delivers on the growing demands of billions of
people worldwide for mobile connectivity, identity and data
protection, credit card safety, health and transportation
services, e-government and national security. We do this
by supplying to governments, wireless operators, banks
and enterprises a wide range of secure personal devices,
such as subscriber identification modules (SIM) in mobile
phones, smart banking cards, electronic passports, and
USB tokens for online identity protection. To complete the
solutions, we also provide software, systems and services
to help our customers achieve their goals. The Group has
facilities and sells around the world.
The Company is a limited liability company incorporated
and domiciled in the Netherlands. The address of its
registered office is Barbara Strozzilaan 382, 1083 HN
Amsterdam, the Netherlands.
The Company was first listed on Eurolist by Euronext Paris
on May 18, 2004.
These consolidated financial statements for the year ended
December 31, 2010 have been authorized for issue by the
Board of the Company on March 8, 2011 and are subject
to adoption at the Annual General Meeting of Shareholders
on May 18, 2011.
Note 2. Summary of significant accounting policies
2.1 Basis of preparation
The consolidated financial statements of Gemalto for
the year ended December 31, 2010 have been prepared
in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union
(available at the following internet address: www.ec.europa.
eu/internal_market/accounting/ias/index_en.htm).
The preparation of financial statements in conformity with
IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgment in
the process of applying the Group’s accounting policies.
The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates
are significant to the consolidated financial statements
are disclosed in note 2.23.
The principal accounting policies applied in the preparation
of these consolidated financial statements are set out
below. These policies have been consistently applied to
all the years presented, except as noted below.
2.2 Changes in accounting policies and disclosures
2.2.1 Standards, amendments to existing standards and
interpretations mandatory for financial statements as at
December 31, 2010
a. Standards which have an impact on the Group’s financial
statements as at December 31, 2010
• IFRS 3 Business Combinations (Revised)
The Group has applied the revised standard since January 1,
2010. IFRS 3 (Revised) has introduced significant changes in
the accounting for business combinations occurring after
that date. Changes affect the valuation of Non-controlling
interest, the accounting for transaction costs, the initial
recognition and subsequent measurement of a contingent
consideration and business combinations achieved in stages.
• IAS 27 Consolidated and Separate Financial
Statements (Amended)
The amended standard requires that a change in the
ownership interest of a subsidiary (without loss of control)
is accounted for as an equity transaction. Therefore, such
transactions will no longer give rise to goodwill, nor gains
or losses. Furthermore, the amended standard changes
the accounting for losses incurred by the subsidiary as
well as the loss of control of a subsidiary.
• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction
(Amended) – Prepayments of a Minimum Funding Requirement.
This amendment has been early adopted by the Group.
Financial statements
The consolidated financial statements have been prepared
under the historical cost convention, as modified by the
revaluation of available-for-sale financial assets and financial
assets and liabilities (including derivative financial instruments)
at fair value through profit and loss.

Financial statements
84 Gemalto Annual Report 2010
Notes to the consolidated financial statements
85
b. The following standards, amendments to existing standards
and interpretations did not have any impact on the Group’s
financial statements as at December 31, 2010
• IFRS 1 First-time Adoption of International Financial
Reporting Standards (Amended) – Additional Exemptions
for First-time Adopters
• IFRS 2 Share-based Payment (Amended) – Group
Cash-settled Share-based Payment Transactions
• 2008 Improvements to IFRS (for those effective for
periods beginning after January 1, 2009 and on or
before January 1, 2010)
• 2009 Improvements to IFRS (for those effective for
periods beginning on or before January 1, 2010)
• IAS 39 Financial Instruments: Recognition and
Measurement (Amended) – Eligible Hedged Items
• IFRIC 15 Agreements for the Construction of Real Estate
• IFRIC 17 Distribution of Non-cash Assets to Owners
• IFRIC 18 Transfer of assets from Customers
2.2.2 Standards, amendments to existing standards
and interpretations issued but not mandatory for financial
statements as at December 31, 2010 (and not early adopted
by the Group)
• IFRS 1 First-time Adoption of International Financial
Reporting Standards (Amended) – Limited Exemption
from Comparative IFRS 7 Disclosures for First-time Adopters
• IAS 32 Financial Instruments: Presentation (Amended) –
Classification of Rights Issues
• IFRIC 19 Extinguishing Financial Liabilities with
Equity Instruments
• IFRS 9 Financial Instruments: Classification and Measurement
• IAS 24 Related Party Disclosures (Revised)
• 2010 Improvements to IFRS
The standards, amendments to existing standards and
interpretations above are not anticipated to have a material
impact on the Group’s future financial position or performance.
2.2.3 Presentation of the income statement
The Group reports under the line ‘Restructuring and
acquisition-related expenses’ (as detailed in note 5)
(i) restructuring expenses which are the costs incurred in
connection with a restructuring as defined in accordance
with the provision of IAS 37 (e.g. sale or termination of a
business, closure of a plant,…), and consequent costs;
(ii) reorganization expenses defined as the costs incurred
in connection with headcount reductions, consolidation
of manufacturing and offices sites, as well as the
rationalization and harmonization of the product and service
portfolio, and the integration of IT systems, consequent to a
business combination; and
(iii) transaction costs (such as fees paid as part of the
acquisition process) which were previously capitalized as
part of the cost of an acquisition, according to the
International Financial Reporting Standards.
The Group also discloses under the line named “Amortization
and depreciation of intangibles resulting from acquisitions”
the amortization and depreciation expense related to the
intangibles recognized as part of the allocation of the excess
purchase consideration over the share of net assets acquired.
2.3 Method of accounting of subsidiaries and associates
(a) Subsidiaries
Subsidiaries are all entities over which Gemalto has
the power to govern the financial and operating policies
generally accompanying a shareholding of more than one
half of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible
are considered when assessing whether Gemalto controls
another entity. Subsidiaries are fully consolidated from the
date on which control is transferred to Gemalto.
The acquisition method of accounting is used to account
for the acquisition of subsidiaries by the Group. The cost
of an acquisition is measured as the fair value of the assets
transferred in consideration, equity instruments issued and
liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of
the extent of any Non-controlling interest. The excess of the
cost of acquisition over the fair value of the Group’s share of
the identifiable net assets acquired is recorded as goodwill.
If the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is
recognized directly in the income statement (see note 2.7).
For further acquisitions of Non-controlling interest, the
excess of the cost of acquisition over the carrying value of
the Group’s additional share of the identifiable net assets
acquired is recorded against the share premium in the equity.
Adjustments to the fair value of the assets acquired and
liabilities and contingent liabilities assumed can occur during
a period of twelve months following the date of acquisition.
Inter-company transactions, balances and unrealized gains
on transactions between Group companies are eliminated.
Unrealized losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
(b) Associates
Associates are all entities over which Gemalto has
significant influence but not control, generally accompanying
a shareholding of between 20% and 50% of the voting rights.
Investments in associate are accounted for by the equity
method of accounting and are initially recognized at cost.
Gemalto’s investment in associate includes goodwill (net of
any accumulated impairment loss) identified on acquisition.
Gemalto’s share of its associates’ post-acquisition profits
or losses is recognized in the income statement, and its share
of other post-acquisition movements in reserves is recognized
in the Group’s reserves. The cumulative post-acquisition
movements are adjusted against the carrying amount of the
investment. When Gemalto’s share of losses in an associate
equals or exceeds its interest in the associate, including any
other unsecured receivables, Gemalto does not recognize
further losses, unless it has incurred obligations or made
payments on behalf of the associate.
Unrealized gains on transactions between Gemalto and its
associates are eliminated to the extent of Gemalto’s interest
in the associates. Unrealized losses are similarly eliminated
unless the transaction provides evidence of an impairment
of the asset transferred.
Dilution gains and losses in associates are recognized in the
income statement.
2.4 Segment reporting
An operating segment is a component of the entity that
engages in business activities from which it may earn revenues
and incur expenses and for which the operating results
are regularly reviewed to take decisions about resources
to be allocated to the segment and assess its performance
(see note 6).
2.5 Foreign currency translation
(a) Functional and reporting currency
Items included in the financial statements of each of
Gemalto’s entities are measured using the currency of
the primary economic environment in which the entity
operates (‘the functional currency’). The consolidated
financial statements are presented in Euro, which is the
Company’s reporting currency.
(b) Transactions and balances
Foreign currency transactions are translated into
the functional currency of the entity where they are
recorded using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign
currencies are recognized in the income statement, except
when deferred in equity as qualifying cash flow hedges or
when related to an intra-Group advance as part of a hedge
on net investment in a foreign entity.
Translation differences on non-monetary items, such as
equities classified as available-for-sale financial assets,
are included in the fair value reserve in equity.
(c) Group companies
The results and financial position of all the Group entities
that have a functional currency different from the reporting
currency are translated into the reporting currency
as follows:
(i) assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet;
(ii) income and expenses for each income statement
are translated at average exchange rates on a monthly
basis; and
(iii) all resulting exchange differences are recognized as
a separate component of equity.
On consolidation, exchange differences arising from the
translation of the net investment in foreign entities, and
of borrowings and other currency instruments designated
as hedges of such investments, are taken to shareholders’
equity. When a foreign operation is partially disposed of, sold,
or liquidated, such exchange differences are recognized in
the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Financial statements

Financial statements
86 Gemalto Annual Report 2010
Notes to the consolidated financial statements
87
2.6 Property, plant and equipment
Property, plant and equipment is stated at historical cost,
less depreciation and, if any, impairment losses. Historical
cost includes expenditure that is directly attributable to the
acquisition of the items. Subsequent costs are included in the
asset carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic
benefits associated with the item will flow to Gemalto and the
cost of the item can be measured reliably. All other repairs
and maintenance are charged to the income statement
during the financial period in which they are incurred.
Land is not depreciated. Depreciation on other assets is
calculated using the straight-line method to allocate their
costs less their residual values over their estimated useful
lives, as follows:
Building
Leasehold improvement
Machinery and equipment
20-30 years
5-12 years
3-10 years
Leasehold improvements are amortized on a straight-line
basis over their estimated useful lives, which cannot exceed
the lease term.
The asset residual values and useful lives are reviewed,
and adjusted if appropriate, at each balance sheet date.
An asset carrying amount is written down immediately
to its recoverable amount if the asset carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount and are reflected in the
operating result.
Leases of property, plant and equipment where Gemalto
has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalized
at the lease commencement at the lower of the fair value of
the leased property and the present value of the minimum
lease payments. Each lease payment is allocated between
the liability and finance charges so as to achieve a constant
rate of interest on the finance balance outstanding. The
corresponding rental obligations, net of finance charges,
are included in other borrowings (and classified as current or
non-current items depending on the timing of expected
cash outflows). The property, plant and equipment acquired
under finance lease is depreciated over the shorter of the
useful life of the asset and the lease term.
2.7 Goodwill and intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary/associate at the date of
acquisition. Goodwill on acquisition of subsidiaries is presented
separately in the balance sheet. Goodwill on acquisitions of
associates is included in ‘Investments in associate’. Separately
recognized goodwill is tested annually for impairment or
more frequently when there is an indication that it may be
impaired, and carried at cost less accumulated impairment
losses. Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the
purpose of impairment testing. The allocation is made to
those cash-generating units or groups of cash-generating
units that are expected to benefit from the business
combination in which the goodwill arose.
(b) Brand names
Brand names acquired in a business combination are
recognized at fair value at the acquisition date and may
have an indefinite useful life.
(c) Other intangible assets
Other intangible assets have a definite useful life and are
carried at cost less accumulated amortization. Amortization
is calculated using the straight-line method to allocate the
cost of other intangible assets over their estimated useful
lives as follows:
Software
Patents and technologies
Capitalized development costs
Other
3-5 years
1-13 years
2-7 years
1-15 years
2.8 Impairment of non-financial assets
Assets that have an indefinite useful life are not subject
to amortization and are tested annually for impairment
or more frequently when there is an indication that they
may be impaired. Assets that are subject to amortization
are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognized for
the amount by which the asset carrying amount exceeds
its recoverable amount. The recoverable amount is the higher
of an asset fair value less costs to sell and value in use.
For the purpose of assessing impairment, assets are
grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units or CGU’s).
Non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the
impairment at each reporting date.
2.9 Investments and financial assets
Gemalto classifies its investments in the following categories:
financial assets at fair value through profit or loss, loans
and receivables, and available-for-sale financial assets.
The classification depends on the purpose for which the
investments were acquired. Management determines the
classification of its investments at initial recognition and
re-evaluates this designation at every reporting date.
(a) Financial assets at fair value through profit and loss
Financial assets at fair value through profit or loss are
financial assets held for trading. A financial asset is classified
in this category if acquired principally for the purpose of selling
in the short term. Derivatives are classified as held for trading
unless they are designated as hedges. Assets in this
category are classified as current assets.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. They arise when Gemalto provides
money, goods or services directly to a debtor with no
intention of trading the receivable. They are included in
current assets in ‘trade and other receivables’ in the
balance sheet,except for maturities greater than 12 months
after the balance sheet date, which are classified as other
non-current assets in the balance sheet. Loans and
receivables are initially recognized at fair value and
subsequently recorded at amortized cost using the effective
interest method, less provision for impairment.
(c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that
are either designated in this category or not classified in
any of the other categories. They are included in non-current
assets, as management does not intend to dispose of the
investment within 12 months of the balance sheet date.
Investments representing less than 20% of the equity of the
investee are classified as available-for-sale financial assets.
Available-for-sale financial assets are carried at fair value
but if fair value cannot be reliably measured, these items are
accounted for using the cost method. Unrealized gains and
losses arising from changes in the fair value of available-forsale
financial assets are recognized in equity.
In the case of equity securities classified as available-forsale
financial assets, a significant or prolonged decline in
the fair value of the security below its cost is considered in
determining whether the securities are impaired. If any such
evidence exists for available-for-sale financial assets, the
cumulative loss – measured as the difference between the
acquisition cost and the current fair value, less any impairment
loss on that financial asset previously recognized in profit or
loss – is removed from equity and recognized in the income
statement. Impairment losses recognized in the income
statement on equity instruments are not reversed through
the income statement.
2.10 Inventories
Inventories are stated at the lower of cost and net realizable
value. Cost is determined using the first in / first out method.
The cost of finished goods and work in progress comprises
design costs, raw materials, direct labor, other direct costs
and related production overheads (based on normal operating
capacity). It excludes borrowing costs. Net realizable value is
the estimated selling price in the ordinary course of business,
less applicable variable selling expenses. Gemalto also provides
inventory allowances for excess and obsolete inventories.
2.11 Trade receivables
Trade receivables are recognized initially at fair value and
subsequently measured at amortized cost using the effective
interest method, less provision for impairment. A provision
for impairment of trade receivables is established when
there is objective evidence that Gemalto will not be able
to collect all amounts due according to the original terms
of the receivables and appraisal of market conditions.
The amount of the provision is recognized in the income
statement within sales and marketing expenses.
Financial statements

Financial statements
88 Gemalto Annual Report 2010
Notes to the consolidated financial statements
89
2.12 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits
held at call with banks and other short-term highly liquid
investments. Bank overdrafts are shown within borrowings
in current liabilities on the balance sheet.
2.13 Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Where any Gemalto company purchases the Company’s
equity share capital (Treasury shares), the consideration
paid, including any directly attributable incremental costs
(net of income taxes) is deducted from equity attributable
to the Company’s equity holders until the shares are
cancelled, reissued or disposed of. Where such shares are
subsequently sold or reissued, any consideration received,
net of any directly attributable incremental transaction costs
and the related income tax effects, is included in equity
attributable to the Company’s equity holders.
2.14 Borrowings
Borrowings are recognized initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated
at amortized cost. Any difference between the proceeds (net of
transaction costs) and the redemption value is recognized in the
income statement over the period of the borrowing using the
effective interest method. Borrowings are classified as current
liabilities unless Gemalto has a right to defer settlement of the
liability for at least 12 months after the balance sheet date.
2.15 Taxes on income
The tax expense for the period comprises current and
deferred tax. Tax is recognized in the income statement,
except to the extent that it relates to items recognized in
other comprehensive income or directly in equity. In this
case, the tax is also recognized in other comprehensive
income or directly in equity, respectively.
The current income tax charge is calculated on the basis
of the tax laws enacted or substantively enacted at the
balance sheet date in the countries where the Company
and its subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is calculated on the basis of the
temporary differences between the carrying amount of an
asset or liability in the balance sheet and its tax base. The
deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction, other than
a business combination, that at the time of the transaction
affects neither accounting nor taxable profit or loss.
Deferred tax liabilities are provided in full on taxable
temporary differences. Deferred tax assets on deductible
temporary differences are recognized to the extent that it is
probable that future taxable profit will be available against
which the deductible temporary differences can be utilized.
Deferred income tax is measured using tax rates (and laws)
that have been enacted or substantially enacted at the
balance sheet date and are expected to apply when the
related asset is realized or the liability is settled.
Deferred income tax is provided on temporary differences
arising on investments in subsidiaries and associates, except
where the Group controls the timing of the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
2.16 Research tax credits and government grants
Research tax credits are provided by various governments
to give incentives for companies to perform technical
and scientific research. These research tax credits are
presented as a reduction of research and development
expenses in the income statement when companies that
have qualifying expenses can receive such grants in the
form of a tax credit irrespective of taxes ever paid or ever
to be paid. These tax credits are included in ‘Trade and
other receivables’ and ‘Other non-current assets’ in the
balance sheet depending on the timing of expected cash
inflows. The Company records the benefit of this credit only
when all qualifying research has been performed and the
Company has obtained sufficient evidence from the relevant
government authority that the credit will be granted.
In addition, grants may be available to companies that
perform technical and scientific research. Such grants are
typically subject to performance conditions over an extended
period of time. The Company recognizes in the income
statement these grants when the performance conditions are
met and any risk of repayment is assessed as remote.
2.17 Research and development costs
Research and development costs mainly comprise
software development. Gemalto capitalizes eligible software
development costs upon achievement of commercial and
technological feasibility, reliability of measurement costs
and subject to net realizable value considerations. Based on
Gemalto’s development process, technological feasibility is
generally established upon completion of a working model.
Research and development costs prior to a determination
of technological feasibility are expensed as incurred.
Amortization of capitalized software development costs
begins when the products are available for general release
over their estimated useful life on a straight-line basis.
Unamortized capitalized software development costs
determined to be in excess of the net realizable value of the
product are expensed immediately.
2.18 Employee benefits
(a) Pension and similar obligations
The Company operates various pension schemes under both
defined benefit and defined contribution plans (see note 17).
The liability recognized in the balance sheet in respect of
defined benefit pension plans is the present value of the
defined benefit obligation at the balance sheet date less
the fair value of plan assets, together with adjustment for
past-service costs. The defined benefit obligation is
calculated annually by independent actuaries using the
projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the
estimated future cash outflows using interest rates of high
quality corporate bonds that are denominated in the currency
in which the benefits will be paid, and that have terms to
maturity approximating the terms of the related pension liability.
Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are
reported in the statement of comprehensive income.
Past-service costs are recognized immediately in the
income statement unless the changes to the pension plan
are conditional on the employees remaining in service for
a specified period of time (the vesting period). In this case,
the past-service costs are amortized on a straight-line basis
over the vesting period.
For defined contribution plans, the Company pays
contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary
basis. The Company has no further payment obligations
once the contributions have been paid. The contributions
are recognized as employee benefit expense when they are
due. Prepaid contributions are recognized as an asset to
the extent that a cash refund or a reduction in the future
payments is recognized.
(b) Termination benefits
Termination benefits are payable when employment is
terminated before the normal retirement date, or whenever
an employee accepts voluntary redundancy in exchange
for these benefits. Gemalto recognizes termination benefits
when it is demonstrably committed to either terminating
the employment of current employees according to a
detailed formal plan without possibility of withdrawal, or
providing termination benefits as a result of an offer made
to encourage voluntary redundancy. Benefits falling due
more than 12 months after balance sheet date are
discounted to present value.
(c) Profit-sharing and bonus plans
Gemalto recognizes liabilities and expenses for bonuses
and profit sharing. The Group recognizes a provision where
contractually obliged or where there is a past practice that
has created a constructive obligation.
2.19 Share-based payment
(a) Share-based compensation
Gemalto operates equity-settled share-based compensation
plans (see note 25). The fair value of the employee services
received in exchange for the grant of the options is recognized
as an expense. The total amount to be expensed over the
vesting period is determined by reference to the fair value
of the equity instruments granted, excluding the impact
of any non-market vesting conditions. Non-market vesting
conditions are included in assumptions about the number
of equity instruments that are expected to become exercisable.
At each balance sheet date, the entity revises its estimates
of the number of equity instruments that are expected to
become exercisable. It recognizes the impact of the revision
of original estimates, if any, in the income statement, and a
corresponding adjustment to equity.
(b) Share-based transaction
The fair value of the amount payable in respect of share
appreciation rights, which are settled in cash, is recognized
as an expense with a corresponding increase in liabilities,
over the vesting period. The liability is remeasured at each
reporting date and at settlement date. Any changes in fair
value of the liability are recognized as other financial expenses
in the consolidated income statement.
2.20 Provisions
Provisions for environmental restoration, restructuring and
reorganization costs, legal claims and warranty are recognized
when the Group has a present legal or constructive obligation
as a result of past events, it is more likely than not that an
outflow of resources will be required to settle the obligation
and the amount can be reliably estimated. Provisions are not
recognized for future operating losses.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole.
2.21 Revenue recognition
Revenue comprises the fair value for the sale of goods
and services, net of value-added tax, rebates and discounts
and after eliminating sales within Gemalto. Revenue is
recognized as follows:
Financial statements

Financial statements
90 Gemalto Annual Report 2010
Notes to the consolidated financial statements
91
(a) Product and service revenue
Gemalto’s products and services are generally sold based
upon contracts or purchase orders with the customer that
include fixed and determinable prices and that do not include
right of return, other similar provisions or other significant
post-delivery obligations but for customary warranty terms.
Revenue is recognized for products upon delivery when
title and risk pass, the price is fixed and determinable and
collectibility is reasonably assured. Revenue for services
is recognized over the period when services are rendered
and collectibility is reasonably assured. Revenue for royalties
is recognized when income is earned and collectibility is
reasonably assured.
Certain revenues are recognized using the percentage
of completion method as services are provided (according
to criteria applied on a consistent basis). These services
include the development of specific software platforms.
Under the percentage of completion method, the extent of
progress towards completion is measured based on actual
costs incurred to total estimated costs. Losses on contracts
are recognized during the period in which the loss first
becomes probable and can be reasonably estimated.
(b) Multiple-element arrangements
Revenue from contracts with multiple elements, such as
those including services, is recognized as each element is
earned based on the relative fair value of each element and
when there are no undelivered elements that are essential
to the functionality of the delivered elements.
(c) Collectibility
As part of the revenue recognition process, Gemalto determines
whether trade receivables and notes receivable are reasonably
assured of collection based on various factors, and whether
there has been deterioration in the credit quality of customers
that could result in the inability to sell those receivables.
(d) Deferred and unbilled revenue
Deferred revenue includes amounts that have been billed per
contractual terms but have not been recognized as income.
2.22 Leases
Leases in which a significant portion of the risks and
rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under
operating leases (net of any incentives received from
the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.
2.23 Use of judgments and estimates
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make judgments, estimates and
assumptions that affect the reported amounts of
assets, liabilities (including the classification of assets
and liabilities as held for sale – see note 11), disclosure of
contingent liabilities at the date of the consolidated financial
statements, and the reported amounts of revenues and
expenses (including the classification as restructuring
and acquisition-related expenses – see note 5) during the
reporting period. On an ongoing basis, Gemalto evaluates
its estimates, including those related to doubtful accounts,
valuation of inventories and investments, warranty obligations,
recoverability of goodwill, intangible assets and property,
plant and equipment, income tax provision and recoverability
of deferred taxes, contingencies and litigations, and
actuarial assumptions for employee benefit plans. Gemalto
bases its estimates on historical experience and on various
other assumptions that, in management’s opinion, are
reasonable under the circumstances. These results form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates
under different assumptions or conditions.
2.24 Derivative financial instruments and
hedging activities
Derivatives are initially recognized at fair value on the date
a derivative contract is entered into and are subsequently
re-measured at their fair value. These instruments, which
are expected to mature within 36 months after the balance
sheet date, are presented under ‘Derivative financial
instruments’ in current or non-current assets or liabilities
depending on their maturity. The method of recognizing the
resulting gain or loss depends on whether the derivative is
designated and qualifies as a hedging instrument for
accounting purposes and, if so, on the nature of the item
being hedged. Some of the derivative financial instruments
used to hedge the Company’s foreign exchange exposure
qualify as cash flow hedges since they reduce the variability
in cash flows attributable to the Company’s forecasted
transactions.
The Company documents at the inception of the transaction
the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategy
for undertaking various hedge transactions.
For derivatives qualified as cash flow hedges, the Company
also documents its assessment, both at hedge inception
and on an ongoing basis, of whether the derivatives that
are used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of hedged
items. The fair values of the derivative instruments used for
hedging purposes are disclosed in note 20. Movements on
the hedging reserve are shown in the consolidated
statement of comprehensive income.
The effective portion of changes in fair value of derivatives
that are designated and qualify as cash flow hedges is
recognized in the consolidated statement of comprehensive
income. The gain or loss relating to the ineffective portion is
recognized immediately in the income statement within the
foreign exchange gains and losses. Amounts accumulated
in equity are recycled in the income statement in the periods
when the hedged items will affect profit or loss. When a
hedging instrument expires or is sold, or when a hedge
no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains
in equity and is recognized when the forecast transaction is
ultimately recognized in the income statement. When a
forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in equity is
immediately transferred to the income statement as foreign
exchange gain or loss in the financial income.
For fair value hedges of existing assets and liabilities, the
change in fair value of the derivative is recognized in the
income statement under the same heading as the change
in fair value of the hedged item for the portion attributable
to the hedged risk.
For hedges that do not qualify for hedge accounting, any
gains or losses arising from changes in fair value of the
hedging instruments are recorded immediately as foreign
exchange gains and losses for the period.
2.25 Estimation of derivative financial instrument
fair value
The fair value of financial instruments traded in active
markets such as investment funds is based on quoted
market prices at the balance sheet date. A market is
regarded as active if quoted prices are readily and regularly
available from a foreign exchange dealer, broker, industry
group, pricing service, or regulatory agency and those
prices represent actual and regularly occurring market
transactions on an arm’s-length basis. These instruments
are included in Level 1.
The fair value of financial instruments that are not traded in
an active market (for example, over-the-counter derivatives)
is determined by using valuation techniques requiring
financial inputs observable on the markets. The fair value
of derivative financial instruments is calculated at inception
and over the life of the derivative. These instruments are
classified in Level 2.
The fair value of forward and exchange contracts at inception
is zero. Over the life of the contract, the fair value is derived
from the following parameters communicated by the
Company’s banks or official financial information providers:
(i) spot foreign exchange rate and (ii) interest rate differential
between the two currencies. Fair value is then obtained by
discounting, for the remaining life of each contract, its
expected gain or loss calculated by difference between
the contract rate and the market forward rate, applied to
the notional amount of the contract. At maturity, the fair
value is calculated by difference between the contract rate
and the prevailing accounting rate, applied to the notional
amount of the contract.
An option contract value at inception is the initial premium
paid or received. Over the life of the contract, fair value
is determined using standard option pricing models (such
as Cox Ross & Rubinstein option pricing model), based
on market parameters obtained from the Company’s banks
or official financial information providers, and using the
following variables: (i) spot foreign exchange rate, (ii) volatility
and (iii) risk-free interest rate, applied to the terms of the
contract (notional amount, strike rate and expiration date).
At maturity, the fair value is either zero if the option is not
exercised or, when exercised, calculated by difference
between the strike rate and the prevailing accounting rate,
applied to the notional amount of the contract.
For the available-for-sale assets, they are either quoted on
official market prices and classified in Level 1, otherwise
their fair value is based on a valuation model using
assumptions neither supported by prices from observable
current transactions nor on available market data. They
are consequently disclosed in the Level 3 of the fair value
hierarchy. At year-end, this amount remains non-material
at Group level.
The following table presents the Group’s assets and liabilities
that were measured at fair value as at December 31, 2009:
Level 1 Level 2 Level 3
Total
Balance
Assets
Derivatives used for
hedging – 17,166 – 17,166
Short-term bank
deposits and
investment funds 318,812 – – 318,812
Available-for-sale
financial assets 265 – 1,005 1,270
Total Assets 319,077 17,166 1,005 337,248
Liabilities
Derivatives used for
hedging – 3,650 – 3,650
Total Liabilities – 3,650 – 3,650
Financial statements

Financial statements
92 Gemalto Annual Report 2010
Notes to the consolidated financial statements
93
The following table presents the Group’s assets and liabilities
that were measured at fair value as at December 31, 2010:
Level 1 Level 2 Level 3
Total
Balance
Assets
Derivatives used
for hedging – 15,388 – 15,388
Short-term bank
deposits and
investment funds 157,765 – – 157,765
Available-for-sale
financial assets – – 1,667 1,667
Total Assets 157,765 15,388 1,667 174,820
Liabilities
Derivatives used for
hedging – 9,693 – 9,693
Total Liabilities – 9,693 – 9,693
Note 3. Financial risk management
The Company is exposed to a variety of financial risks,
including foreign exchange risk, interest rate risk, liquidity
risk, financial counterparty risk and credit risk.
Gemalto overall risk management program focuses on
the unpredictability of financial markets and seeks to
minimize potential adverse effects on the Company’s
financial performance. Gemalto has developed risk
management guidelines that set forth its tolerance
for risk and its overall risk management policies.
3.1 Foreign exchange risk
Significant portions of Gemalto revenue, cost of sales
and expenses are generated in currencies other than the
Euro, mainly the US Dollar, Sterling Pound, Japanese Yen,
Brazilian Real, Chinese Renminbi, Singapore Dollar and
Polish Zloty. Revenue and gross profit are therefore
exposed to exchange rate fluctuations.
The Company attempts in a first stage to match the currencies
of its revenue and expenses in order to naturally hedge
its exposure to foreign currency fluctuations, and then enters
into derivative financial instruments to hedge part of its
residual exposure. The decision to hedge or not a given
currency depends on the level of forecast net exposure for that
currency and on a cost-and-risk analysis using several market
parameters such as volatility, hedge costs, forecasts, etc…
The Company formally documents all relationships between
the hedging instruments and hedged items, as well as its
risk management objectives and strategies for undertaking
various hedge transactions.
Foreign exchange forward contracts and options that hedge
a portion of subsidiaries’ known or forecast commercial
transactions, not denominated in their functional currencies,
are qualified as cash flow hedges under IAS 39 until the time
when the underlying transactions materialize in the income
statement. Other foreign exchange forward contracts that
hedge the foreign exchange risk incurred in the settlement
of balance sheet items not denominated in the relevant
subsidiary’s functional currency, are not qualified in hedge
accounting (see note 20).
The following table shows the sensitivity of the Group’s
results to reasonably possible changes in the US Dollar
exchange rate against the Euro, all other variables being
held constant, split between:
• effect on profit and loss due to changes in the fair value of
financial assets and liabilities (including those denominated
in US Dollar-linked currencies); and
• effect on equity due to changes in the fair value of cash
flow hedges held at the balance sheet date.
The impacts of other currencies to similar fluctuations
on the profit and loss do not exceed €0.4 million for any
given currency.
Year ended December 31,
2009 2010
Change in $/€ exchange rate
2.50% -2.50% 2.50% -2.50%
Effect on Profit before tax
Income/(expense)
– Underlying ( * ) (1,049) 1,102 (1,233) 1,297
– Hedges ( ** ) 844 (892) 1,385 (1,456)
Net (205) 210 152 (159)
Effect on Equity
Gain/(loss)
– Hedges ( *** ) 2,757 (2,415) 6,816 (7,166)
(
* ) Effect of revaluation of financial assets and liabilities, excluding hedges
(
** ) Effect on mark-to-market valuation of fair value hedges
(
*** ) Effect on intrinsic value of cash flow hedges
3.2 Interest rate risk
Financial assets are invested in bank deposits and money
market funds with maturities no longer than three months,
classified as cash and cash equivalents. Financial liabilities
are mainly floating rate finance leases. Financial income
(expense) can therefore be sensitive to interest rate
fluctuations. The Company however considers that this risk
may not have a significant impact on its financial situation
in the short term, and does not use derivative financial
instruments to hedge interest rate risk. The following table
shows the sensitivity of the Group’s results to reasonably
possible changes in the interest rates, all other variables
being held constant. There is no effect on the Group’s equity.
Effect on Profit
before tax
Not later than
1 year
2009
Later than 1 year and
not later than 5 years Later than 5 years Total
Finance lease liabilities 3,676 8,139 – 11,815
Other borrowings 4,723 7,486 ( * ) – 12,209
Derivative financial instruments 3,434 216 ( ** ) – 3,650
Trade & other payables 353,911 – – 353,911
365,744 15,841 – 381,585
Not later than
1 year
2010
Later than 1 year and
not later than 5 years Later than 5 years Total
Finance lease liabilities 2,451 5,918 – 8,369
Other borrowings 3,086 9,423 – 12,509
Derivative financial instruments 8,929 764 ( ** ) – 9,693
Trade & other payables 463,094 – – 463,094
477,560 16,105 – 493,665
(
* ) Compared to the published consolidated financial statements for the year ended December 31, 2009, the amount is reported for its
undiscounted value.
(
** ) The amounts reported for derivative financial instruments are discounted but the difference with the contractual undiscounted cash flows is
not material.
Variation
in interest rate
(in basis points) 2009 2010
Income/(expense)
Borrowings (50) 81 54
50 (81) (54)
Short-term deposits
and investment funds (50) (1,440) (1,065)
50 1,440 1,065
3.3 Liquidity risk
By maintaining sufficient cash and cash equivalent positions
as well as an adequate amount of committed credit facilities,
including €210 million bilateral credit facilities referred to in
note 16, the Company considers that it is not exposed, in the
short term, to significant liquidity risk. The Company cannot
however guarantee that under any circumstances the level
of liquidity will be enough to cover all of the Company’s future
cash requirements.
The table below analyzes the Group’s financial liabilities
and derivative financial liabilities into relevant maturity ranges
based on the remaining period at the balance sheet date to
the contractual maturity date. The amounts disclosed in the
table are the contractual undiscounted cash flows. With the
exception of finance lease liabilities, the balances due within
12 months equal their carrying balances as the impact of
discounting is not significant.
In addition to the below liabilities, Gemalto N.V. has issued
various guarantees which amounted to €186.9 million as
of December 31, 2009 and €20.7 million as of December 31,
2010 (see note 33).
Financial statements
The impacts of translation of foreign currency financial
statements from their functional currency to the Company’s
reporting currency are not included in the above computation.

Financial statements
94 Gemalto Annual Report 2010
Notes to the consolidated financial statements
95
3.4 Financial counterparty risk
Derivative financial instruments and all short-term deposits
and investment funds are exclusively held with major
counterparties of strong credit rating.
Short-term deposits and investment funds are invested in
fixed-term deposits with banks and money market mutual
funds with a maturity of less than 3 months and the objective
that no counterparty represents more than 15% of the total
at any time. Money market mutual funds consist of openended
investment companies (French SICAV) authorized
by the French AMF. Funds are selected based on the quality
of the management company, the low level of risk with a
diversified portfolio of short-term fixed income securities
and money market instruments (bonds, treasury bills and
notes, commercial paper, certificates of deposit, etc…) and
a daily liquidity. A portion of our short term deposits and
investment funds can be invested in commercial paper with
a strong credit rating. The Company also maintains
credit lines with various banks. It includes uncommitted
short-term facilities, short term bonds and guarantee lines,
and also a series of committed bank bilateral credit facilities
totaling €210 million arranged with international banks of
strong credit rating referred to in note 16. The maturities of
these facilities are comprised between December 9, 2013
and December 17, 2015.
As at December 31, 2010, no financial institution accounted
for more than 24% of the notional amount of derivative
financial instruments, 9% of the cash and cash equivalents,
and 30% of the credit lines (27% including bonds and
guarantee lines). In addition, the Company has temporary
exposure to non-investment grade financial institutions
on payments made by customers in certain countries, until
the Company transfers such amounts to investment grade
institutions. This exposure is not significant. Maximum risk
with any single counterparty is as follows:
3.5 Credit risk
The Company’s broad geographic and customer
distribution limits the concentration of credit risk. No single
customer accounted for more than 10% of the Company’s
sales in 2009 and 2010. An allowance for uncollectible
accounts receivable is maintained based on expected
collectibility. The expected collectibility of accounts
receivable is assessed periodically or when events lead
to believe that collectibility is uncertain. Additionally, the
Company performs ongoing credit evaluations of
customers’ financial condition.
As of December 31, 2010, trade receivables of €97,474
were past due but not impaired (2009: €80,496). These
relate to a number of independent customers for whom
there is no recent history of default and whose credit
standing is regularly assessed. The ageing analysis of
these trade receivables is as follows:
Note 4. Business combinations
In 2010, the Group completed a number of acquisitions.
The most significant acquisitions relate to Cinterion Wireless
Modules Group (Cinterion) and Netsize Group (Netsize)
as detailed below. These acquisitions have been accounted
for under the acquisition method as prescribed by IFRS 3
Business Combinations (Revised) and IAS 27 Consolidated
and Separate Financial Statements (Amended). They have
been included in the Company’s consolidated financial
statements since the date of their acquisition.
Cinterion
On July 28, 2010, Gemalto acquired Cinterion, the leading
provider of industrial Machine-to-Machine (M2M) wireless
communication modules. Cinterion, which uses a fabless
business model, employs 335 staff with major centers in
Munich and Berlin, Germany. The business was started
by Siemens in 1995 and spun out to a financial sponsor
consortium in 2008.
Year ended December 31,
2009 2010
Borrowings
Syndicated bank loan ( * ) Committed credit line (undrawn) 26,736 –
Bilateral credit facilities Committed credit line (undrawn) – 75,000
Overdrafts and other short-term loans Uncommitted credit lines (partially drawn) 16,762 16,766
Bonds and guarantee facilities Uncommitted credit lines (partially drawn) 40,200 40,200
Cumulated borrowing risk with
a single counterparty 74,436 97,700
in % of total borrowing risk for Gemalto 23% 27%
Cash and cash equivalents
Short-term bank deposits
and cash at bank and in hand 43,261 22,883
Money market mutual funds 31,545 19,591
Cumulated cash and cash equivalents
risk with a single counterparty 43,261 22,883
in % of total cash & cash
equivalents risk for Gemalto 11% 9%
Derivative financial instruments
Notional amount 90,378 144,093
in % of total derivative financial
instruments risk for Gemalto 27% 24%
Mark-to-market 4,530 2,509
Total risk for any single counterparty 119,548 102,506
in % of total counterparty risk for Gemalto 16% 16%
(
* ) USD 250 million syndicated bank loan facility was cancelled on October, 21, 2010.
Year ended December 31,
2009 2010
Carrying
amount
Carrying
amount
Bad
debt
reserve
Overdue
but not
impaired
Overdue by:
Up to 1 month 43,042 55,858 (54) 55,804
2 to 3 months 18,729 26,343 (737) 25,606
4 to 6 months 8,232 10,435 (885) 9,550
Later than
6 months 19,439 13,414 (6,900) 6,514
89,442 106,050 97,474
Provision for
impairment of
receivables (8,496) (8,576)
Trade
receivables
overdue but
not impaired 80,946 97,474
Year ended December 31,
2009 2010
As at January 1, (8,898) (8,496)
Provision for impairment of receivables (3,042) (3,204)
Receivables written off over the
year as uncollectible 1,158 3,756
Unused amounts reversed 2,546 1,406
Reclassification (56) 30
Currency translation adjustment (204) (534)
Acquisition of subsidiary – (1,708)
Reclassification to assets held
for sale – 174
As at December 31, (8,496) (8,576)
Yearly loss
(as a percentage of annual revenue) (0.00%) (0.00%)
Building on the investments made in the last twenty years by
mobile network operators worldwide that provide wireless
data coverage in almost every part of the world, wireless
M2M applications are increasingly revolutionizing businesses
by enabling simple and cost-effective connectivity for a
variety of applications. These include, among others, remote
monitoring of utility meters or patients at home, tracking of
high-value items or stolen vehicles and optimized real-time
management of fleets, smart energy grids for more efficient
energy consumption and air pollution detection systems for
urban reduction programs in CO 2 emissions. Combining
Cinterion’s M2M module technology with Gemalto’s expertise
in deploying software and services for mobile network
operators will provide M2M solutions with proven security
and demonstrated remote ‘Over-the-Air’ management of
devices for industrial companies, for administrations and for
mobile network operators which are increasingly seeking to
offer M2M communication services.
Netsize
On January 4, 2010, Gemalto, which already held a 24.12%
interest in Netsize, subscribed to a capital contribution
increasing its stake to 85.65%. Netsize offers mobile
payment solutions based on operator billing (through
premium SMS, MMS and WAP for example) for 100 mobile
operators in 28 countries, reaching over 1 billion billable
subscribers worldwide, and provides mobile messaging,
with SMS and MMS delivery to over 200 countries.
Gemalto and Netsize minority shareholders have the
option to force the purchase/sale of the remaining
14.35% non-controlling interests in Netsize respectively.
Financial statements

Financial statements
96 Gemalto Annual Report 2010
Notes to the consolidated financial statements
97
As a result, Gemalto has already considered 100% of
control and interest in Netsize against a €4.9 million liability.
The acquisition of 61.53% gave rise to a €18.1 million
goodwill and the acquisition of the remaining 14.35% is
shown as a €6.4 million decrease in share premium.
Other acquisitions
In 2010, the Group completed various other acquisitions
which were less material either individually or in aggregate.
The total purchase consideration transferred and the total
goodwill arising from these acquisitions amounted to €77
million and €68 million, respectively.
From the date of acquisition, Cinterion has contributed €80
million and €2 million to the Group’s revenue and net profit,
respectively. Netsize has contributed €61 million and €(4)
million to the Group’s revenue and net profit, respectively.
The following table summarizes the estimated fair values of the intangible assets acquired and their remaining useful life at
the date of the acquisitions:
In millions of Euro
Fair value
Cinterion Netsize Other acquisitions
Remaining
useful life
From 1 year
The other acquisitions have contributed €17 million and €(3)
million to the Group’s revenue and net profit, respectively.
If the acquisitions had occurred on January 1, 2010,
management estimates that revenue from Cinterion would have
been €176 million and net profit €0 million. The management
also estimates the other acquisitions would have
contributed €21 million and €4 million respectively.
Intangible assets identified as part of the purchase
price allocation
In most instances, Gemalto management, assisted by
independent qualified experts, provisionally identified and
allocated the combination value to the assets acquired and
liabilities and contingent liabilities assumed, including those
not previously recognized by the acquiree. The tax effect on
the fair value of the intangible assets recognized amounted
to €8.4 million.
Fair value
Remaining
useful life
Fair value
Remaining
useful life
From 2 years
to 9 years
Existing technologies 21.1 to 5 years 6.2 13 years 7.5
Capitalized development costs 8.7 7 years (1) – – – –
From 7 years
Customer relationships 13.1 6 years – – 3.2 to 9 years
Backlogs 3.8 5 months – – – –
From 2 years
Brand names 7.5 Indefinite 0.6 Indefinite 0.4 to 4 years
(1)
Amortization of capitalized development costs will start when the underlying technologies are launched (expected in 2011).
Identifiable assets and liabilities at the date of acquisition
The effects of these acquisitions on the Group’s assets and liabilities as of the respective acquisition dates are
described below:
In thousands of Euro Cinterion Netsize Other acquisitions
Assets
Property, plant and equipment, net 3,812 753 296
Intangible assets, net 57,165 7,183 11,085
Deferred income tax assets 178 211 2,564
Other non-current assets 234 289 255
Inventories, net 4,786 – 206
Trade and other receivables, net 26,527 42,489 5,200
Cash and cash equivalents 8,592 14,201 4,102
Total assets 101,294 65,126 23,708
Liabilities
Borrowings (non-current) – 188 2,047
Deferred income tax liabilities 6,732 207 2,564
Employee benefit obligations 3,208 146 –
Provisions and other liabilities
(non-current) 15 8,348 407
Trade and other payables 40,772 59,868 8,267
Current income tax liabilities 117 103 –
Borrowings (current) – 5,263 214
Derivative financial instruments (current) 4,732 – –
Provisions and other liabilities (current) 2,214 1,632 924
Total liabilities 57,790 75,755 14,423
Fair value of identifiable net assets 43,504 (10,629) 9,285
Purchase consideration 163,000 9,000 77,020 (1)
Non-controlling interests, based on their proportionate
interest in the recognized amounts of the asset and liabilities
of the acquiree – (1,525) –
Goodwill 119,496 18,104 67,735
(1)
Of which €26.8 million has been settled in 800,000 Gemalto shares valued at the acquisition date.
Goodwill, which amounted to €205.3 million represented the complementary technological expertise, the skills and
know-how of the workforce acquired and the synergies expected to be achieved through the integration of our acquisitions.
Financial statements

Financial statements
98 Gemalto Annual Report 2010
Notes to the consolidated financial statements
99
Analysis of cash flows on acquisitions
Cinterion Netsize Other acquisitions
Purchase consideration settled in cash 163,000 9,000 50,220
Net cash acquired (8,592) (14,201) (4,102)
Net cash flow on acquisitions 154,408 (5,201) 46,118
Note 5. Additional information on specific line
items of the income statement
The Group reported ‘Restructuring and acquisition-related
expenses’ (see note 2.2.3) for €9,268 as at December 31,
2010 (€9,316 in 2009). This amount consisted of employee
benefits, severance and associated costs for €3,893 (€3,303
in 2009), of property, plant and equipment, intangible asset
and inventory write-offs and impairments for €321 (€162
in 2009) and of other costs for €5,054 (€5,851 in 2009).
Transaction costs for €3,972 (these costs were capitalized
in 2009) are included in this amount in 2010.
Amortization and depreciation of intangibles resulting
from acquisitions amounted to €22,792 for the year ended
December 31, 2010 (€23,699 for the year ended December
31, 2009).
In 2009, the Company recognized some deferred tax assets
that did not meet the recognition criteria at the date of the
combination with Gemplus. As a result, in accordance with
the provisions of IFRS 3 and IAS 12, the Company reduced
the carrying value of the goodwill and increased the value of
the share premium by €3.0 million and €3.8 million respectively.
These adjustments have been recognized as an expense
under the line item ‘Amortization and depreciation of intangible
assets resulting from acquisitions’ in the 2009 consolidated
income statement (and included in the €23,699 expense).
Note 6. Segment information
In accordance with IFRS 8 Operating Segments, the
information by operating segment is derived from the
business organization and activities of Gemalto.
Gemalto operates four core activities – Mobile Communication,
Machine-to-Machine, Secure Transactions, and Security –
and sells microprocessor cards (including embedded
software), software solutions and services (including device
management platforms, services to personalize each device
individually), and intellectual property rights licenses. The
Company also sells, mostly in the security segment, other
microprocessor-based products such as electronic passports
and secured USB keys.
Mobile Communication customers are mobile operators.
Machine-to-Machine supplies wireless communication
modules; these include among others, remote monitoring
of utility meters or patients at home, tracking of high-value
items or stolen vehicles and optimized real-time management
of fleets, smart energy grids for more efficient energy
consumption and air pollution detection systems for urban
reduction programs in CO 2 emissions. Secure Transactions
supply financial cards to financial institutions, transportation
cards to large urban mass transit operators, and Pay TV
subscriber authentication and right management cards to
large secure access service providers. Security offers
include secure electronic documents, such as e-passports
or e-identity cards, and issuance related services for
governmental agencies; they also include products and
solutions based on microprocessor technology for strong
user authentication, typically used in a corporate environment
or to securely access services over the internet such as
e-banking. Revenue, gross and operating profit derived
from the licensing of the Group’s patent portfolio is included
into the Security segment’s income statement.
Gemalto also operates a Public Telephony activity, which
sells memory cards. For reporting purposes, this activity is
presented under the heading ‘Others’.
To supplement the financial statements presented on an IFRS
basis, and to better assess its past and future performance,
the Group also prepares an additional income statement
where the key metric used to understand, evaluate the
business and take operating decisions over the period 2010
to 2013 is the Profit from operations. Profit from operations
is a non-GAAP measure defined as IFRS operating result
adjusted for (i) all equity-based compensation charges and
associated costs (reported in the column ‘Adjustments’
within the tables below); (ii) amortization and depreciation of
intangibles resulting from acquisitions; and (iii) restructuring
and acquisition-related expenses. This supplemental
non-GAAP measure is used internally to understand, manage
and evaluate business and take operating decisions. It is
among the primary factors management uses in planning for
and forecasting future periods. Compensation of executives
is based in part on the performance of the business based
on this non-GAAP measure.
For a better understanding of the year-on-year performance
of the business, the adjusted income statement for Ongoing
operations, as reported within the tables below, not only
excludes the contribution from discontinued operation, but
also the contribution from assets held for sale reported in
the column ‘Reconciling items’ (see note 11).
The information reported for each operating segment is the
same as reported and reviewed internally on a monthly basis
in order to assess performance and allocate resources to
the operating segments. Gemalto’s operating segments
have been determined based on these internal reports.
Financial income and expenses are not included in the result
for each operating segment that is reviewed internally. Nor is
asset or liability information on a segmented basis reviewed
in order to assess performance and allocate resources.
The information by operating segment reported in the tables
below applies the same accounting policies as those used
and described in these consolidated financial statements.
Financial statements

Financial statements
100 Gemalto Annual Report 2010
Notes to the consolidated financial statements
101
In thousands of Euro
Ongoing operations
Secure
Transactions
Security Others
Adjusted
financial
information
for ongoing
operations
Reconciling
items (1)
Adjusted
financial
information
Year ended December 31, 2009 Year ended December 31, 2010
Mobile
Communication
Adjustments
(2)
IFRS
financial
information
Ongoing operations
Mobile
Communication
Machine-to-
Machine
Secure
Transactions
Security Others
Revenue 888,070 411,418 235,978 24,484 1,559,950 42,065 1,602,015 (122) 1,601,893 980,871 81,329 462,072 318,077 19,493 1,861,842 43,726 1,905,568 – 1,905,568
Cost of sales (504,618) (312,303) (150,741) (18,467) (986,129) (28,082) (1,014,211) (1,709) (1,015,920) (604,986) (54,798) (321,879) (189,012) (15,144) (1,185,819) (30,389) (1,216,208) (2,512) (1,218,720)
Gross profit 383,452 99,115 85,237 6,017 573,821 13,983 587,804 (1,831) 585,973 375,885 26,531 140,193 129,065 4,349 676,023 13,337 689,360 (2,512) 686,848
Operating expenses
Research and
engineering (53,568) (15,894) (21,593) (59) (91,114) (178) (91,292) (1,017) (92,309) (58,188) (2,941) (17,252) (25,088) (77) (103,546) (255) (103,801) (811) (104,612)
Sales and marketing (122,810) (50,430) (48,325) (2,086) (223,651) (3,193) (226,844) (4,631) (231,475) (134,433) (7,995) (57,307) (54,574) (1,913) (256,222) (4,146) (260,368) (7,177) (267,545)
General and
administrative (59,312) (21,354) (11,291) (242) (92,199) (793) (92,992) (6,488) (99,480) (67,755) (8,562) (24,971) (15,486) (293) (117,067) (867) (117,934) (9,687) (127,621)
Other income
(expense), net 2,937 397 118 128 3,580 433 4,013 – 4,013 2,185 67 500 5,475 50 8,277 129 8,406 – 8,406
Profit from
operations 150,699 11,834 4,146 3,758 170,437 10,252 180,689 117,694 7,100 41,163 39,392 2,116 207,465 8,198 215,663
Adjusted
financial
information
for ongoing
operations
Reconciling
items (1)
Adjusted
financial
information
Adjustments
(3)
IFRS
financial
information
Restructuring &
acquisition-related
expenses (9,316) (9,268)
Amortization and
depreciation of
intangibles resulting
from acquisitions (23,699) (22,792)
Operating result
(EBIT) 133,707 163,416
Financial income
(expense), net (2,246) 796
Share of profit
of associates 1,380 1,717
Gain on sale
of investment
in associate 78 –
Profit before
income tax 132,919 165,929
Income tax
(expense) credit (17,425) 3,871
Profit from
continuing
operations 115,494 169,800
Profit (loss) from
discontinued
operation (net of
income tax) 2,630 (2,422)
Profit for the period 118,124 167,378
Financial statements
(1)
‘Reconciling items’ comprise the contribution from the assets held for sale (see note 11).
(2)
Compared to the published consolidated financial statements as of December 31, 2009, the €12.7 million equity-based compensation charge has been excluded from
the Profit from operations and reported in the column ‘Adjustments’ within the table above. This €12.7 million was included in the adjusted operating result reported in the
published consolidated financial statements as of December 31, 2009.
(3)
The amounts reported in the column ‘Adjustments’ correspond to the €20,187 equity-based compensation charges and associated costs.

Financial statements
102 Gemalto Annual Report 2010
Notes to the consolidated financial statements
103
Geographical information
The table below shows revenue and non-current assets
(excluding goodwill) attributed to geographic areas, on the
basis of the location of the customers and the location of
the assets respectively:
Year ended December 31,
2009 2010
Revenue
North and South America 392,955 487,773
Europe, Middle East and Africa 890,409 1,008,744
Asia Pacific 318,529 409,051
Total 1,601,893 1,905,568
Year ended December 31,
2009 2010
Non-current assets excluding
goodwill (net)
North and South America 51,506 58,643
Europe, Middle East and Africa
excluding France 95,338 155,487
France 148,048 195,519
Asia Pacific 66,628 64,828
Total 361,520 474,477
Note 8. Property, plant and equipment
Property, plant and equipment (net) consist of the following:
Land
Building &
improvement
Machinery &
equipment
Total property,
plant and
equipment
Gross book value as of January 1, 2009 6,142 206,630 504,026 716,798
Acquisition of subsidiary and business – 492 3,680 4,172
Additions 3 6,914 33,241 40,158
Reclassification to assets held for sale (1) (67) (4,923) – (4,990)
Other reclassifications (83) (782) 553 (312)
Disposals – (1,316) (30,378) (31,694)
Currency translation adjustment 19 1,569 7,038 8,626
Gross book value as of December 31, 2009 6,014 208,584 518,160 732,758
Note 7. Financial assets/liabilities by category
In accordance with IFRS 7 provisions, financial assets and liabilities would be allocated as follows:
December 31, 2009
Loans and
receivables
Assets at fair
value through
profit and loss
Derivatives
used for
hedging
Availablefor-sale
Assets
Available-for-sale financial assets, net – – – 1,270 1,270
Other non-current assets 22,791 – – – 22,791
Trade and other receivables, net 432,072 – – – 432,072
Derivative financial instruments – – 17,166 – 17,166
Cash and cash equivalents 84,892 318,812 – – 403,704
Total 539,755 318,812 17,166 1,270 877,003
Derivatives
used for
hedging
Financial
liabilities
Liabilities
Borrowings – 23,190 23,190
Derivative financial instruments 3,650 – 3,650
Total 3,650 23,190 26,840
December 31, 2010
Loans and
receivables
Assets at fair
value through
profit and loss
Derivatives
used for
hedging
Availablefor-sale
Assets
Available-for-sale financial assets, net 1,667 1,667
Other non-current assets 33,335 – – – 33,335
Trade and other receivables, net 537,099 – – – 537,099
Derivative financial instruments – – 15,388 – 15,388
Cash and cash equivalents 98,345 157,765 – – 256,110
Total 668,779 157,765 15,388 1,667 843,599
Total
Total
Total
Accumulated depreciation as of January 1, 2009 – (110,095) (391,346) (501,441)
Depreciation charge (39) (13,049) (28,696) (41,784)
Reclassification to assets held for sale (1) – 4,533 – 4,533
Other reclassifications (353) 353 102 102
Disposals – 1,241 29,118 30,359
Currency translation adjustment 5 (530) (3,997) (4,522)
Accumulated depreciation as of December 31, 2009 (387) (117,547) (394,819) (512,753)
Net book value as of December 31, 2009 5,627 91,037 123,341 220,005
Land
Building &
improvement
Machinery &
equipment
Total property,
plant and
equipment
Gross book value as of January 1, 2010 6,014 208,584 518,160 732,758
Acquisition of subsidiary and business – 196 4,665 4,861
Additions – 4,326 39,888 44,214
Discontinued operation – (77) (5,636) (5,713)
Reclassification to assets held for sale (2) (400) (4,249) (14,940) (19,589)
Other reclassifications – 1,112 (1,581) (469)
Disposals – (3,256) (27,698) (30,954)
Currency translation adjustment 153 4,943 20,177 25,273
Gross book value as of December 31, 2010 5,767 211,579 533,035 750,381
Accumulated depreciation as of January 1, 2010 (387) (117,547) (394,819) (512,753)
Depreciation charge (35) (14,102) (33,850) (47,987)
Impairment charge – – (204) (204)
Discontinued operation – 7 3,814 3,821
Reclassification to assets held for sale (2) 232 1,238 9,513 10,983
Other reclassifications – 268 (115) 153
Disposals – 2,986 26,679 29,665
Currency translation adjustment (43) (2,478) (14,327) (16,848)
Accumulated depreciation as of December 31, 2010 (233) (129,628) (403,309) (533,170)
Financial statements
Derivatives
used for
hedging
Financial
liabilities
Liabilities
Borrowings – 20,195 20,195
Derivative financial instruments 9,693 – 9,693
Total 9,693 20,195 29,888
Total
Net book value as of December 31, 2010 5,534 81,951 129,726 217,211
(1)
Reclassification to asset held for sale relates to the buildings located in Saint-Cyr en Val, France.
(2)
Reclassification to asset held for sale relates to the disposal group held for sale (see note 11).

Financial statements
104 Gemalto Annual Report 2010
Notes to the consolidated financial statements
105
For the year ended December 31, 2009, depreciation
expense of €35,190 was recorded in cost of sales, €1,190
in research and engineering expenses, €657 in sales and
marketing expenses, €4,698 in general and administrative
expenses and €49 in other income and expenses.
For the year ended December 31, 2010, depreciation
expense of €38,071 was recorded in cost of sales, €2,108 in
research and engineering expenses, €1,001 in sales and
marketing expenses, €5,898 in general and administrative
expenses and €49 in other income and expenses and €860
in discontinued operation.
Note 9. Goodwill and intangible assets
Goodwill and intangible assets (net) consist of the following:
Goodwill
Capitalized leases included in Property, plant and equipment
above, are as follows:
Patents and
technology
Capitalized
development
costs
Year ended December 31,
2009 2010
Gross book value 54,161 54,129
Accumulated depreciation (28,831) (30,738)
Net book value 25,330 23,391
Other
intangibles
Gross book value as of January 1, 2009 565,218 246,860 69,508 105,437 987,023
Acquisition of subsidiary
and business 46,830 23,024 6,011 8,665 84,530
Additions – 322 8,739 7,659 16,720
Write-offs (2,971) (931) (474) (75) (4,451)
Reclassifications within intangibles – 1,420 – (1,420) –
Other reclassifications 224 – 303 312 839
Currency translation adjustment (67) 100 (8) (39) (14)
Gross book value as of December 31, 2009 609,234 270,795 84,079 120,539 1,084,647
Accumulated amortization as of January 1, 2009 (12,786) (231,373) (56,581) (77,786) (378,526)
Amortization charge – (10,935) (3,644) (14,590) (29,169)
Write-offs – 931 305 57 1,293
Other reclassifications – – (303) (102) (405)
Currency translation adjustment 154 112 (1) 24 289
Accumulated amortization as of December 31, 2009 (12,632) (241,265) (60,224) (92,397) (406,518)
Net book value as of December 31, 2009 596,602 29,530 23,855 28,142 678,129
Total
Goodwill
Patents and
technology
Capitalized
development
costs
Other
intangibles
Gross book value as of January 1, 2010 609,234 270,795 84,079 120,539 1,084,647
Acquisition of subsidiary and business (1) 207,438 33,899 8,668 31,800 281,805
Additions – 1,277 24,793 6,385 32,455
Write-offs – (10) (2,605) (3,032) (5,647)
Discontinued operation (3,879) – (942) (239) (5,060)
Reclassification to assets held for sale (5,800) – – – (5,800)
Other reclassifications – 202 (20) 478 660
Currency translation adjustment 5,255 997 57 650 6,959
Gross book value as of December 31, 2010 812,248 307,160 114,030 156,581 1,390,019
Accumulated amortization as of January 1, 2010 (12,632) (241,265) (60,224) (92,397) (406,518)
Amortization charge – (13,675) (5,108) (17,006) (35,789)
Write-offs – 10 1,298 3,030 4,338
Discontinued operation – – 942 203 1,145
Other reclassifications – (202) 25 (204) (381)
Currency translation adjustment (623) (366) (7) (264) (1,260)
Accumulated amortization as of December 31, 2010 (13,255) (255,498) (63,074) (106,638) (438,465)
Net book value as of December 31, 2010 798,993 51,662 50,956 49,943 951,554
(1)
Of which €2,103 relates to the change in the acquisition balance sheet of Xiring and Trusted Logic.
For the year ended December 31, 2009, amortization expense
of €11,126 was charged to cost of sales, €804 was recorded
in research and engineering expenses, €44 was recorded in
selling and marketing expenses, €315 was recorded in general
and administrative expenses, €16,880 was recorded in the
line named ‘Amortization and depreciation of intangible
assets resulting from acquisitions’.
For the year ended December 31, 2010, amortization expense
of €11,636 was charged to cost of sales, €575 was recorded in
research and engineering expenses, €141 was recorded in
selling and marketing expenses, €645 was recorded in general
and administrative expenses, €22,792 was recorded in the line
named ‘Amortization and depreciation of intangible assets
resulting from acquisitions’.
and depreciation of intangible assets resulting from
acquisition’ in the consolidated income statement
(see note 5).
Total
Goodwill impairment test
The Company has organized its operations and reporting
structure into five operating segments and cash generating
units: Mobile Communication, Machine-to-Machine, Secure
Transactions, Security and Others. Long-range planning,
operating performance measurement and resource allocation
are carried out by management on the basis of this structure.
Goodwill has been allocated to these cash generating units
on the basis of their expected contribution to the operating
profits of the Group, pursuant to management business plan.
Financial statements
Other intangibles mainly consist of licensing rights to use
and distribute licensed technology for €6,815, acquired
customer relationships for €20,601, acquired brand names
for €10,795 and miscellaneous software for €9,940.
Goodwill write-off
As at December 31, 2009, the Company recognized some
deferred tax assets that did not meet the recognition criteria
at the date of the Combination with Gemplus. As a result,
in accordance with the provisions of IFRS 3 and IAS 12, the
Company reduced the carrying value of the goodwill and
increased the value of the share premium by €3.0 million
and €3.8 million respectively. These adjustments have been
recognized as an expense under the line item ‘Amortization
Mobile Communication, Machine-to-Machine, Secure
Transactions and Security are the cash generating units that
include, in their carrying value, a goodwill that is a significant
proportion of the total goodwill reported by Gemalto, for €387
million, €119 million , €137 million and €153 million respectively.
The recoverable amount of the cash generating units is
determined based on projected cash flows after tax derived
from management plans as of the date the review was
carried out. Cash flows beyond management plans horizon
are extrapolated using a growth rate, which does not
exceed the average growth rate for the industry in which
Gemalto operates. The discount rate used in this calculation
is the after-tax weighted average cost of capital used by the

Financial statements
106 Gemalto Annual Report 2010
Notes to the consolidated financial statements
107
Company, estimated at 12% in 2010. The outcome
of the computation yields recoverable amounts above the
carrying values of the cash generating units.
No impairment charge was recognized in 2009 nor 2010.
No impairment charge would be recognized in 2010 if
discounted projected cash flows were 10% lower.
Note 10. Investments in associates and availablefor-sale
financial assets
Investments in associates consist of the following:
Year ended December 31,
2009 2010
Investments as of beginning of period 10,469 9,970
Acquisition of associates (1) 4,550 –
Dividends paid by associates (1,125) (1,502)
Share of profit 1,380 1,717
Disposals (2) (2,208) –
Other movements (3) (3,224) –
Currency translation adjustment 128 749
Investments as of end of period 9,970 10,934
(1)
Gemalto acquired 49% and 19.87% of the voting shares of Raidax
S.A and OpenTrust S.A for €550 and €4,000 respectively. Net assets
acquired amounted respectively to €33 and €1,450. As a consequence,
goodwill of €517 and €2,550 have been recognized.
(2)
Gemalto sold its investment in Atchik Realtime S.A in October 2009.
(3)
The amount of €(3,224) includes the value of 32.04% of Trusted Logic
shares for €(3,054). Further to the acquisition of an additional 67.96%
interest in September 2009, the entity is now fully consolidated.
The Company’s investments in associates include goodwill
(net of any impairment loss) identified on acquisition.
As of December 31, 2010, the net book value of goodwill
in associates amounted to €3,067 and related to
investments in Raidax S.A. and OpenTrust S.A.
Gemalto’s associates’ aggregated key data were as follows
(in total):
Associates’ total
Year Assets Liabilities Revenue Profit/(loss)
2009 (1) 66,258 63,596 182,048 (1,353)
2010 (1) 28,330 9,407 34,658 1,187
Available-for-sale financial assets consist of the following:
Year ended December 31,
2009 2010
Available-for-sale financial assets as
of beginning of period 1,203 1,270
Net gains transferred to equity (1) 67 808
Disposals – (411)
Available-for-sale financial assets as
of end of period 1,270 1,667
(1)
It mainly relates to the revaluation of Keynectis S.A investment from €1,005
to €1,667.
Note 11. Assets held for sale and
discontinued operation
Assets held for sale
One of our joint ventures, whose shareholding should
evolve in 2011 along negotiations, is presented as a
disposal group held for sale. As at December 31, 2010,
the disposal group comprised assets for €55 million
and liabilities for €20 million.
Year ended December 31,
2009 2010
Assets classified as held for sale
as of beginning of period (1) 1,711 1,711
Additions 457 55,058
Disposals (457) –
Currency translation adjustment – 414
Assets classified as held for sale
as of end of period 1,711 57,183
Year ended December 31,
2009 2010
Liabilities associated with
assets held for sale as of
beginning of period – –
Additions – 19,636
Currency translation adjustment – 152
Liabilities associated with assets
held for sale as of end of period – 19,788
(1)
As at January 1, 2010, the assets held for sale related to building
located in Orleans (France).
Effect of the reclassification to assets and liabilities
associated with assets held for sale on the consolidated
statement of financial position:
Year ended December 31,
2010
Goodwill (5,800)
Property, plant and equipment, net (8,608)
Deferred income tax assets (43)
Other non-current assets (48)
Inventories, net (7,836)
Trade and other receivables, net (13,320)
Cash and cash equivalents (19,403)
Assets classified as held for sale 55,058
Deferred income tax liabilities (2,157)
Trade and other payables (16,388)
Current income tax liabilities (299)
Provisions and other liabilities (792)
Liabilities associated with assets
held for sale 19,636
The currency translation adjustment reserve, related to the
disposal group, amounted to €3,182 (deferred gain) as at
December 31, 2010.
Discontinued operation
On December 31, 2010, Gemalto and VeriFone Systems Inc.
completed the transfer of the Group’s POS solutions business.
The POS activity was not a discontinued operation or classified
as held for sale as at December 31, 2009. Therefore, the 2009
comparative consolidated income statement has been
restated to present the POS activity as a discontinued
operation separately from continuing operations.
The net gain/(loss) from discontinued operation comprises
the following:
Year ended December 31,
In thousands of Euro
(except earnings per share) 2009 2010
Revenue of discontinued
operation 52,354 50,776
Cost of sales (38,310) (36,199)
Gross profit of discontinued
operation 14,044 14,577
Operating expenses (11,414) (13,912)
Operating result of
discontinued operation 2,630 665
Financial income (expense), net – –
Profit before income tax of
discontinued operation 2,630 665
Income tax expense – –
Profit from discontinued
operation 2,630 665
Loss on sale of discontinued
operation – (2,969)
Income tax on loss on sale of
discontinued operation – (118)
Profit (loss) from
discontinued operation
(net of income tax) 2,630 (2,422)
Attributable to:
– Equity holders of the company 2,630 (2,422)
– Non-controlling interests – –
– Weighted average number
of shares outstanding
(in thousands) 30 82,520 83,031
– Weighted average number of
shares outstanding assuming
dilution (in thousands) 30 83,789 84,400
Earnings per share –
discontinued operation
Basic earnings per share 0.03 (0.03)
Diluted earnings per share 0.03 (0.03)
Financial statements
(1)
Previous year financial information is disclosed when current year financial
information is not available.

Financial statements
108 Gemalto Annual Report 2010
Notes to the consolidated financial statements
109
Effect of disposal on the consolidated statement
of financial position:
Note 13. Inventories
Inventories consist of the following:
Note 15. Cash and cash equivalents
Cash and cash equivalents consist of the following:
Note 16. Borrowings
Borrowings consist of the following:
Year ended December 31,
2010
Goodwill (3,879)
Property, plant & equipment, net (1,932)
Inventories, net (4,271)
Trade & other Receivables, net (14,414)
Employee benefit obligations (595)
Non-current provisions & other liabilities (2,167)
Trade & other payables (7,822)
Current provisions & other liabilities (130)
Net assets and liabilities transferred (13,782)
Total consideration (in cash) 10,813
Loss on sale of discontinued operation (2,969)
Year ended December 31,
2009 2010
Gross book value
Raw materials and spares 48,830 41,877
Work in progress (1) 80,199 86,875
Finished goods 37,928 40,503
Total 166,957 169,255
Obsolescence reserve
Raw materials and spares (6,533) (4,645)
Work in progress (4,606) (4,981)
Finished goods (5,197) (4,375)
Total (16,336) (14,001)
Net book value 150,621 155,254
Year ended December 31,
2009 2010
Cash at bank and in hand 84,892 98,345
Short term bank deposits
and investment funds 318,812 157,765
Total 403,704 256,110
The average effective interest rate on short term deposits
was 1.43% in 2010 (1.42% in 2009). These deposits are
invested in the form of overnight and fixed term deposits,
in money market funds or in commercial paper, with
maturities of less than three months at the balance sheet date.
The amount of cash and bank overdrafts shown in the cash
flow statement is net of bank overdrafts as reconciled below:
Year ended December 31,
2009 2010
Non-current portion
Other financial liability ( * ) 7,038 8,997
Finance lease liabilities 7,908 5,775
Total Non-current portion 14,946 14,772
Current portion
Short term loans 3,193 2,875
Bank overdrafts 1,530 212
Finance lease liabilities 3,521 2,336
Total Current portion 8,244 5,423
Total 23,190 20,195
(
* ) Debts mainly related to the anticipated acquisition of an additional 49.9%
As a result of the difference between the consideration
received and the net assets and liabilities transferred,
a €2,969 loss on sale of discontinued operation was
recognized in the line Profit (loss) from discontinued
operation (net of income tax) as at December 31, 2010.
Note 12. Other non-current assets
Other non-current assets consist of the following:
Year ended December 31,
2009 2010
Loan receivable from former
Gemplus Board chairman
(net of provision) (1) 8,488 9,097
Research tax credits (2) – 10,940
Long term deposits (3) 2,636 3,583
Tax receivable (4) 7,131 7,013
Other 4,536 2,702
Total 22,791 33,335
(1)
In 2000, a former chairman of Gemplus Board was granted a loan of
€71,900 to finance the exercise of stock options. In December 2001, this
former chairman ceased his active involvement with Gemplus. In the
second quarter of 2002, Gemplus learned that the former chairman had
financial difficulties that would affect his ability to repay the loan.
Accordingly, Gemplus recorded a provision originally as of June 30, 2002
amounting to €69,620 as of December 31, 2006 taking into account a
severance payable, which is conditional on reimbursement of the loan (see
note 18). In proceedings brought by Gemplus in April 2004, an arbitral
tribunal issued a final award in favor of Gemplus and its indirect subsidiary
against this former chairman in the amount of €71,900, plus accrued
interest and attorneys’ fees and costs.
Gemplus has not forgiven the loan nor released the arbitration award.
(2)
The option granted by the French regulation ‘Loi de Finance rectificative
2008’ enabling French companies to get an accelerated refund of their
research tax credit, is no longer effective. As a result, research tax credit
are classified as non-current assets.
(3)
The €3,583 carrying value of long term deposits is assessed
to be equivalent to their fair value.
(4)
Compared to the published consolidated financial statements for
the year ended December 31, 2009, Trade and other receivables
of €4,300 have been reclassified to Other non-current assets.
(1)
Work in progress as at December 31, 2009 included € 3,838 which has
been reclassified to other receivables in 2010.
Note 14. Trade and other receivables
Trade and other receivables consist of the following:
Year ended December 31,
2009 2010
Trade receivables 317,766 398,367
Provision for impairment
of receivables (8,496) (8,576)
Trade receivables, net 309,270 389,791
Prepaid expenses 16,642 13,521
VAT recoverable and tax
receivable (1) 41,031 51,761
Advances to suppliers
and related 8,177 8,756
Unbilled customers 32,232 42,198
Other (2) 24,720 31,072
Total (3) 432,072 537,099
(1)
Compared to the published consolidated financial statements for the year
ended December 31, 2009, Trade and other receivables of €4,300 have
been reclassified to Other non-current assets.
(2)
€3,838 has been reclassified from inventories to other receivables as
at January 1, 2010.
(3)
Change in Trade and other receivables includes a €74,216 related to
the newly acquired companies (contribution at acquisition date).
Year ended December 31,
2009 2010
Cash and cash equivalents 403,704 256,110
Bank overdrafts (1,530) (212)
Cash included in assets
classified as held for sale – 19,403
Total 402,174 275,301
interest in Serverside.
The nominal interest rates as at December 31, 2009 and 2010 were as follows:
In 2010, the Group refinanced its back-up credit facilities by
arranging a series of bilateral committed revolving credit
lines, arranged with first rank banks. The total amount is
€210 million and the maturities are comprised between
December 9, 2013 and December 17, 2015.
Amount EUR XAF SGD PLN GBP AED INR CNY
Other financial
liability
Floating
rate 7,038 2.65% – – – n/a – – –
Short-term loans Floating
and bank overdrafts rate 4,723 – – – – – n/s 10.00% n/s
Finance lease
liabilities
Floating
rate 11,170 2.55% – – – – – – –
Finance lease
liabilities Fixed rate 259 9.14% 14.38% – – 9.00% – – –
Amount EUR XAF USD PLN GBP AED INR CNY
Other financial
liability
Floating
rate 10,297 2.27% – 0.78% – n/a – – n/a
Short-term loans
and bank overdrafts Floating
rate 1,787 – – – – – n/s – n/s
Finance lease
liabilities
Floating
rate 7,804 1.50% – – – – – – –
Finance lease
liabilities Fixed rate 307 n/s – – – 9.00% – – –
n/a: not applicable. No specific interest rate as it relates to the liabilities for additional compensation/guaranteed dividend payable to
non-controlling interests.
n/s: not significant.
2009
2010
Financial statements

Financial statements
110 Gemalto Annual Report 2010
Notes to the consolidated financial statements
111
These funding sources do not require Gemalto to comply
with any financial ratio.
The syndicated bank loan facility of USD 250 million was
cancelled on October 21, 2010.
Neither the syndicated loan nor the bilateral credit lines
were drawn respectively at December 31, 2009 and
December 31, 2010.
To the exception of minor finance leases totaling €0.3 million
as at December 31, 2010, the total amount of borrowings is
based on floating interest rates.
The carrying amounts of Gemalto’s borrowings are
denominated in the following currencies:
Year ended December 31,
2009 2010
Euro (EUR) 12,479 10,255
Central African Franc (XAF) 16 –
British Pound (GBP) 5,973 6,419
Arab Emirates Dirham (AED) 340 22
India Rupee (INR) 1,190 –
Chinese Yuan (CNY) 3,192 2,562
US Dollar (USD) – 937
Total 23,190 20,195
Finance lease liabilities are split by maturity as follows:
Finance lease liabilities
– minimum lease payments
Year ended December 31,
2009 2010
Not later than 1 year 3,676 2,450
Later than 1 year and not
later than 5 years 8,139 5,918
Total 11,815 8,368
Future finance charges
on finance leases (386) (257)
Present value of finance
lease liabilities 11,429 8,111
The present value of finance lease liabilities is as follows:
Year ended December 31,
2009 2010
Not later than 1 year 3,521 2,336
Later than 1 year and not later
than 5 years 7,908 5,775
Later than 5 years – –
Total 11,429 8,111
Note 17. Employee benefit obligations
The Company operates its principal defined benefit plans
in France and in the United Kingdom. The net liabilities as at
December 31, 2009 and 2010 were as follows:
Year ended December 31,
2009 2010
France 22,462 27,555
UK 6,774 7,181
Other countries (1) 3,470 8,851
Total 32,706 43,587
(1)
Change in Net liabilities for Other countries includes a €3,353 related
to the newly acquired companies (contribution at acquisition date).
In France, the Company contributes to the mandatory
national pension system and other compulsory plans.
Pursuant to applicable French law and industry labor
agreements, a lump-sum payment is made to employees
upon retirement (‘Indemnités de fin de carrière’ or IFC).
The amount depends on the length of service on the date
the employee reaches retirement age. Long service awards
are granted after respectively 20, 30, 35 and 40 years of
employment (‘Jubilees’). During the year ended December
31, 2010, conditions were improved on both plans following
a change in the industry labor agreements and
an agreement with the workers union. Past service costs
due to the change in the retirement plan are amortized
on a straight-line basis over the average expected remaining
service of the employees as from August 1, 2010. Actuarial
movements and past service costs for Jubilees are
recognized immediately in the income statement.
The defined benefit plan that the Company operated in the
United Kingdom was closed on March 31, 2007. Employees
ceased to accrue benefits under the old defined benefit
scheme from that date and joined a defined contribution
scheme effective from April 1, 2007.
Other less significant defined benefit plans are applied in
other countries such as Germany, Finland, Italy, Mexico,
Poland and South Africa.
Actuarial evaluations have been performed as at December
31, 2009 and 2010.
The amounts recognized in the income statement in respect
of defined benefit plans are as follows:
Year ended December 31,
2009 2010
Current year service cost 1,719 2,837
Past service cost (12) 581
Interest cost 3,022 3,520
Expected return on plan assets (909) (777)
Total 3,820 6,161
The following table sets forth the funded status of defined benefit plans by country:
Year ended December 31, 2009 France UK Other countries Total
Projected benefit obligations 22,293 32,086 6,649 61,028
Plan assets at fair value – 25,312 3,179 28,491
Projected benefit obligations in excess of plan assets 22,293 6,774 3,470 32,537
Past service costs 169 – – 169
Net liability 22,462 6,774 3,470 32,706
Year ended December 31, 2010 France UK Other countries Total
Projected benefit obligations 29,995 36,370 18,213 84,578
Plan assets at fair value – 29,189 9,362 38,551
Projected benefit obligations in excess of plan assets 29,995 7,181 8,851 46,027
Past service costs (2,440) – – (2,440)
Net liability 27,555 7,181 8,851 43,587
The amounts recognized in the income statement in respect
of defined benefit plans by country are as follows:
Year ended December 31,
2009 2010
France 2,594 4,059
UK 659 719
Other countries 567 1,383
Total 3,820 6,161
Changes in the projected benefit obligations over the year
are as follows:
Year ended December 31,
2009 2010
Beginning of period 47,275 61,028
Service cost 1,719 3,280
Interest cost 3,022 3,520
Acquisition of subsidiary
and business 230 8,196
Past service cost 12 3,158
Reclassifications – 595
Actuarial (gain) and loss 8,561 5,852
Benefits paid (1,538) (2,348)
Discontinued operation – (595)
Gain on curtailment – (139)
Currency translation adjustment 1,747 2,031
End of period 61,028 84,578
Changes in the fair value of the plan assets are as follows:
Year ended December 31,
2009 2010
Beginning of period 21,810 28,491
Actual return on plan assets 4,079 2,976
Acquisition of subsidiary
and business – 4,842
Employer contribution 1,898 2,083
Benefits paid (810) (1,340)
Currency translation adjustment 1,514 1,499
End of period 28,491 38,551
The actual return on plan assets amounted to €2,976 in 2010
and €4,079 in 2009. The assets of the pension schemes have
significantly performed, with a significant increase in the UK
asset value. This increase in asset value has been offset
by an increase in the pension scheme liability as a result
of a lower discount rate and a slightly higher inflation rate.
The plan assets in the UK are composed of the following:
Year ended December 31,
2009 2010
Equity securities 12,074 17,518
Government bonds 9,076 11,464
Other investments 7,341 9,569
Total plan asset fair value 28,491 38,551
In France, the regulations do not provide for any obligation
to fund the liability arising from IFC which are lump-sum
payments made to employees upon their retirement.
Financial statements

Financial statements
112 Gemalto Annual Report 2010
Notes to the consolidated financial statements
113
In the United Kingdom, Germany and Finland, plan assets
are comprised of equity securities, corporate bonds and
other investments.
In 2008, in accordance with the Pensions Act 2004 which
requires that the employer and pension scheme trustees in
the United Kingdom agree and submit a funding plan to the
Pension Regulator within 15 months of the valuation date
for all schemes showing an asset deficit, Gemalto N.V. and
the trustees of the Gemplus Limited Staff Pension scheme
reached an agreement on the ongoing funding of the
scheme, which consisted of a plan to fund the deficit over
8 years on a going concern basis and a parental guarantee
put in place by Gemalto N.V. in the event that Gemalto UK
Ltd were unable to fulfill its funding obligations.
Changes in other comprehensive income are as follows:
Increase/(Decrease)
in the liability
0.5 percentage
point increase
0.5 percentage
point decrease
Discount rate (5,175) 5,948
Inflation rate 2,715 (2,364)
Demographic assumptions
Mortality assumptions for the most important countries are
based on the following post-retirement tables: (i) INSEE TV/
TD 2006-2008 for France and (ii) PA92 MC and the medium
cohort improvement factors for the United Kingdom.
Assumptions regarding future mortality are based on
published statistics and mortality tables. The current
longevities underlying the values of the liabilities in the
defined benefit plans are as follows:
Note 18. Non-current provisions and other liabilities
Year ended December 31,
2009 2010
Non-current provisions 34,776 37,116
Other liabilities 39,234 34,596
Total 74,010 71,712
Year ended December 31,
2009 2010
Management compensation (1) 8,489 9,098
Government grants 10,382 8,473
Long term payables (2) 20,363 17,025
Total other non-current liabilities 39,234 34,596
(1)
Management compensation relates to former Gemplus Board chairman’s termination package conditioned to the refund of a loan granted to him by Gemplus
in 2000 (see note 12).
(2)
The €17,025 carrying value of long-term payables is assessed to be equivalent to their fair value.
Year ended December 31,
2009 2010
Beginning of period 4,396 (995)
Recognized during the period (5,391) (3,654)
End of period (995) (4,649)
The main actuarial assumptions used were as follows:
Year ended December 31,
2009 2010
France
Discount rate 5.15% 4.75%
Future salary increase 3.50% 3.50%
Inflation rate 2.00% 2.00%
UK
Discount rate 5.80% 5.45%
Inflation rate 3.40% 3.50%
Expected rate of return on
plan assets 6.22% 6.86%
Discount rate source
The Group uses the i-BOXX index for the French and the
United Kingdom plans as a basis when determining the
discount rate to be applied for the liability calculation.
Both indexes refer to Euro denominated and Sterling
corporate bonds with AA rating maturing over 10 years.
The assumptions in respect of discount rate and inflation
rate have a significant effect on the liability valuation.
Changes to these assumptions in the light of prevailing
market conditions may have a significant impact on
future valuations.
Sensitivity analysis
The following table shows the sensitivity of the UK and
French liabilities for the year ended December 31, 2010
to reasonable changes in main assumptions used, all other
variables being held constant:
Year ended December 31, 2009
France
United
Kingdom
Longevity at age 65 for current
pensioners (years)
Males 17.8 21.7
Females 22.1 23.7
Longevity at age 65 for current
members aged 45 (years)
Males 17.8 22.6
Females 22.1 25.4
Year ended December 31, 2010
France
United
Kingdom
Longevity at age 65 for current
pensioners (years)
Males 18.1 22.7
Females 22.4 26.0
Longevity at age 65 for current
members aged 45 (years)
Males 18.1 24.7
Females 22.4 28.1
Historical data
Year ended December 31,
2009 2008 2007
Projected benefit obligations 61,028 47,275 58,142
Plan assets at fair value (28,491) (21,810) (32,376)
Deficit/(surplus) in the plan 32,537 25,465 25,766
Experience adjustments
arising on plan liabilities (30) 564 353
Experience adjustments
arising on plan assets (141) 19 306
Variation analysis of the non-current provisions is as follows:
Warranty
non-current
Restr.
& Reorg.
Reserves Litigation Tax claims
Prov. for
other risks
As of January 1, 2009 4,582 4,983 646 12,271 5,950 28,432
Additional provisions 1,540 – 1,959 6,189 2,357 12,045
Acquisition of a subsidiary – – 30 – – 30
Unused amount reversed (57) (274) (200) (2,543) (959) (4,033)
Used during the year (524) (808) (22) (46) (2,517) (3,917)
Reclassifications (138) 64 67 1,185 30 1,208
Cumulative translation adjustment 1 354 82 605 (31) 1,011
As of December 31, 2009 5,404 4,319 2,562 17,661 4,830 34,776
Warranty
non-current
Restr.
& Reorg.
Reserves Litigation Tax claims
Prov. for
other risks
As of January 1, 2010 5,404 4,319 2,562 17,661 4,830 34,776
Additional provisions 1,267 332 311 2,985 791 5,686
Acquisition of a subsidiary – – 1,406 6,770 317 8,493
Unused amount reversed (475) (2,177) (882) (6,646) (961) (11,141)
Used during the year (129) (832) (1,376) (255) (1,356) (3,948)
Discontinued operation (28) – – – (160) (188)
Reclassifications 182 120 355 56 546 1,259
Cumulative translation adjustment 35 266 37 1,697 144 2,179
As of December 31, 2010 6,256 2,028 2,413 22,268 4,151 37,116
Total
Total
Financial statements

Financial statements
114 Gemalto Annual Report 2010
Notes to the consolidated financial statements
115
Note 19. Trade and other payables
Trade and other payables for the years ended December
31, 2009 and 2010 consist of the following:
Year ended December 31,
2009 2010
Trade payables 141,689 188,106
Employee related payables 114,562 148,076
Accrued expenses 39,321 54,371
Accrued VAT 15,097 22,177
Deferred revenue 39,147 45,201
Other 4,095 5,163
Total trade and other
payables (1) 353,911 463,094
(1)
Change in Trade and other payables includes a €108,907 related
to the newly acquired companies (contribution at acquisition date).
Note 20. Derivative financial instruments
As set out in note 3 ‘Financial risk management’, Gemalto
enters into foreign exchange contracts as cash flow hedges
and fair value hedges in order to manage its foreign currency
exposure incurred in the normal course of business.
As at December 31, 2010, the Company held forward
and option contracts which were designated as qualifying
cash flow hedges of forecast sales and purchases
denominated in US Dollar, Sterling Pound, Japanese Yen,
Singapore Dollar and Polish Zloty. It also held forward and
option contracts designated as fair value hedges of assets
and liabilities denominated in the same currencies and in
South African Rand.
The fair value of the Company’s financial instruments
is recorded either in current or non-current assets and liabilities
as ‘Derivative Financial Instruments’ and details as follows
(Mark-to-market valuations):
Year ended December 31,
2009 2010
Note 21. Current provisions and other liabilities
Current provisions and other liabilities consist of the following:
Year ended December 31,
2009 2010
Warranty – current 3,200 4,527
Provisions for loss on contract 1,248 534
Restructuring and reorganization 3,790 2,141
Other 17,776 6,508
Total current provisions and other liabilities 26,014 13,710
Warranty
– current
Provisions
for loss on
contract
Restr.
& Reorg.
Reserves (1) Other Total
As of January 1, 2009 2,881 1,444 18,631 9,522 32,478
Additional provisions 2,120 665 2,198 12,762 17,745
Acquisition of a subsidiary 30 – – 2,333 2,363
Unused amount reversed (719) (1,005) (2) (6,559) (8,285)
Used during the year (854) (195) (16,969) (522) (18,540)
Other reclassifications (242) 331 (64) (31) (6)
Cumulative translation adjustment (16) 8 (4) 271 259
As of December 31, 2009 3,200 1,248 3,790 17,776 (2) 26,014
USD GBP JPY SGD PLN Other USD GBP JPY SGD PLN ZAR
Cash flow hedges
Forward contracts 7,045 756 27 133 1,831 – 9,879 (539) (1,684) 232 866 –
Option contracts – – 918 – – – – – (904) – – –
Fair value hedges
Forward contracts 760 (18) (249) (107) (87) (679) (913) (192) 33 (43) (40) (465)
Option contracts 2,845 994 (653) – – – – – (535) – – –
10,650 1,732 43 26 1,744 (679) 8,966 (731) (3,090) 189 826 (465)
At the balance sheet date, the above cash flow hedging
contracts represented for Gemalto unrecognized pre-tax
profits of €16.5 million and losses of €(4.9) million which were
recorded in equity. Under constant market conditions, these
profits and losses would be reclassified as debits or credits to
sales or cost of sales over the next 36 months.
The effective portion of Gemalto’s cash flow hedges
generated a €2.3 million net loss in 2010 (€5 million net gain
in 2009), recorded in the income statement as a debit of
€5.5 million to sales and a credit of €3.2 million to cost
of sales. Foreign exchange transactions, fair value and
disqualified hedges, and the ineffective portion of Gemalto’s
cash flow and fair value hedges generated a €1.1 million
loss in 2010 (€1.4 million loss in 2009), which was included
in financial income.
Warranty
– current
Provisions
for loss on
contract
Restr.
& Reorg.
Reserves (1) Other Total
As of January 1, 2010 3,200 1,248 3,790 17,776 26,014
Additional provisions 1,281 468 1,315 1,094 4,158
Acquisition of a subsidiary 2,302 342 1,359 767 4,770
Unused amount reversed (858) (1,108) (852) (2,762) (5,580)
Used during the year (1,265) (416) (3,363) (9,211) (14,255)
Discontinued operation (127) – – – (127)
Reclassifications to liabilities held for sale – – – (792) (792)
Other reclassifications (107) – (120) (492) (719)
Cumulative translation adjustment 101 – 12 128 241
As of December 31, 2010 4,527 534 2,141 6,508 (2) 13,710
(1)
Usage mainly consists of severance payments made in connection with restructuring and reorganization plans.
(2)
A €11.2 million special provision was recorded as at December 31, 2009 to cover the consequences for Gemalto of the situation related to some German
payment cards identified at the beginning of the year 2010 when card holders became unable to conduct transactions. This provision has been released for
€9.3 million in 2010.
Financial statements

Financial statements
116 Gemalto Annual Report 2010
Notes to the consolidated financial statements
117
Note 22. Revenue
Revenue by category is analyzed as follows:
Year ended December 31,
2009 2010
(represented)
Sales of goods 1,416,723 1, 624,472
Revenue from services 163,837 253,557
Others ( * ) 21,333 27,539
Total 1,601,893 1, 905,568
(
* ) Others includes the revenue derived from Gemalto patent licensing activities, as well as gains and losses on certain cash flow hedge instruments.
Note 25. Share-based compensation plans
All exercise prices are expressed in Euro.
Gemalto has established a Global Equity Incentive Plan (“GEIP”) for its employees.
Gemalto share option and restricted share unit plans (excluding Gemplus share option plans)
The GEIP authorizes the company to grant eligible employees over the duration of the plan ending March 18, 2014 the right
to acquire 14 million ordinary shares of Gemalto N.V.
Gemalto share options:
The following table summarizes the main characteristics of the share option plans granted by the Board of Gemalto N.V.
since 2004.
Note 23. Costs of sales and operating expenses by nature
The costs of sales and operating expenses by nature are as follows:
Year ended December 31,
2009 2010
(represented)
Depreciation, amortization, impairment charges and write-offs 49,009 61,595
Amortization and impairment charges related to the accounting treatment of the
combinations 23,699 22,792
Employee compensation and benefit expense (see note 24) 509,009 615,659
Change in inventories (finished goods and work in progress) (12,517) (12,860)
Raw materials used and consumables 556,711 700,625
Freight and transportation costs 47,855 53,622
Travel costs 36,632 41,794
Building and office leases 71,004 72,518
Royalties, legal and professional fees 93,642 114,495
Subcontracting and temporary workforce 82,244 82,713
Other 10,898 (10,801)
Total expenses 1,468,186 1,742,152
Note 24. Employee compensation and benefit expense
Year ended December 31,
2009 2010
(represented)
Wages and salaries (including severance costs incurred in 2009 and 2010 and recorded
in restructuring and acquisition-related expenses) 435,521 522,422
Pension – Defined benefit plans (1) 1,670 3,418
Pension – Defined contribution plan 18,868 21,847
Share-based compensation 12,327 18,645
Other 40,623 49,327
Employee compensation and benefit expense 509,009 615,659
(1)
Includes mainly the annual charge related to the French IFC which are lump-sum payments made to the French employees upon their retirement.
Share options
granted
Exercise price
(Euro)
Grant date
Valuation assumptions used (stochastic models)
3,196,000 May 04
No dividend
14.80 Expected volatility of 25%
Risk-free interest rate of 3%
Expected option life of 4.13 years
5,000 Dec 04
No dividend
18.21 Expected volatility of 25%
Risk-free interest rate of 3%
Expected option life of 3 years
15,000 Jun 05 22.41
685,000 Sep 05 30.65
1,600,000 Jun 06 23.10
872,000 Sep 07 20.83
1,399,000 Sep 08 26.44
No dividend
Expected volatility of 27%
Risk-free interest rate of 3%
Expected option life of 4.5 years
No dividend
Expected volatility of 28%
Risk-free interest rate of 2.8%
Expected option life of 4.12 years
No dividend
Expected volatility of 36%
Risk-free interest rate of 3.8%
Expected option life of 3.7 years
No dividend
Expected volatility of 28.5%
Risk-free interest rate between 4.01% and 4.15%
Expected option life between 1.5 and 4.5 years
No dividend
Expected volatility between 30% and 39%
Risk-free interest rate between 4.02% and 4.17%
Expected option life between 1.5 and 4.5 years
For all the share option plans listed in the table above (except for the June 2006 plan), the vesting schedule differs,
depending on the country of employment of the optionee, and varies from a 25% vesting per year over 4 years to a cliff
vesting at the end of the 4-year period. For the June 2006 plan, the vesting schedule varied from a full vesting after 18
months to a cliff vesting at the end of the 4-year period.
For the share options granted in 2004, 2005 and 2006, volatility was determined by calculating the historical volatility of the
Company’s share price returns over the last 360 market days prior to the grant date, when enough historical data were
available. For the share options and the restricted share units granted in 2007, and for the share options granted in 2008, the
historical volatility of the Company’s share price returns over the last 360 market days prior to the grant date was adjusted to
take into account a negative volatility curve.
Financial statements

Financial statements
118 Gemalto Annual Report 2010
Notes to the consolidated financial statements
119
The following table summarizes information with respect to Gemalto share options outstanding as at December 31, 2009
and 2010 (excluding Gemplus share options):
Grant date
Exercise price
(Euro)
Number of options outstanding
as of December 31, 2009
Number of options outstanding
as of December 31, 2010
17 May 04 14.80 1,048,697 798,994
01 Jun 05 22.41 15,000 15,000
08 Sep 05 30.65 607,500 575,500
02 Jun 06 23.10 1,222,750 1,092,152
27 Sep 07 20.83 753,400 683,250
25 Sep 08 26.44 1,371,750 1,323,250
5,019,097 4,488,146
Gemalto restricted share units (RSU):
The following table summarizes the main characteristics of the restricted share unit plans granted by the Board of
Gemalto N.V.:
RSU granted Grant date Vesting schedule and conditions RSU vested Valuation assumptions used
560,000 Sep 07 End of the vesting period: Dec 10 840,000
Vesting conditions are both service-based
and performance-based
611,500 Oct 09
380,318 Mar 10
End of the vesting period: Oct 12
Vesting conditions are both service-based
and performance-based
8,000 RSU were forfeited in 2010
End of the vesting period: Mar 13
Vesting conditions are both service-based
and performance-based
4,250 RSU were forfeited in 2010
Gemplus S.A. and Gemplus International S.A. share option plans
nil
nil
Share price of 20.36 Euro
No dividend
Risk-free interest rate of 4.17%
Implicit volatility of 28.5%
Fair value discounted by 4% for each
year of restriction on share trading
Stochastic model used
Share price of 30.71 Euro
Dividend of 0.20 Euro per share
1-year risk-free rate of 0.69%
2-year risk-free rate of 1.27%
3-year risk-free rate of 1.67%
Fair value discounted by 7.5% for each
year of restriction on share trading
Share price of 30.20 Euro
Dividend of 0.25 Euro per share
1-year risk-free rate of 0.56%
2-year risk-free rate of 0.92%
3-year risk-free rate of 1.37%
4-year risk-free rate of 1.82%
5-year risk-free rate of 2.27%
Fair value discounted by 4.49% for each
year of restriction on share trading
Pursuant to the undertaking under article 3.3(a) of the Combination agreement between Gemalto N.V. and Gemplus
International S.A. signed on December 6, 2005, Gemalto guarantees to the Gemplus share option holders the right to
exchange their future Gemplus shares for Gemalto shares, on the basis of the exchange ratio of the public exchange offer
(i.e. 25 Gemplus shares for 2 Gemalto shares).
The following table summarizes information with respect to Gemplus share options outstanding as of December 31, 2009
and 2010. The initial numbers and exercise prices of the options for Gemplus International S.A. and Gemplus S.A. shares
granted to Gemplus share option holders have been adjusted for the 0.26 Euro distribution of available reserves to the
Gemplus shareholders on June 2, 2006, and converted at the ratio of the public exchange offer (i.e. 25 Gemplus shares for
2 Gemalto shares).
Upon exercise of Gemplus S.A. or Gemplus International S.A. share options, the optionee is offered the exchange of shares
of these companies with Gemalto shares.
Grant date
Exercise
price (Euro)
Number of
options
outstanding as
of December
31, 2009
Number of
options
outstanding as
of December
31, 2010
22 Apr 99 28.58 11,844 –
22 Apr 99 25.25 904 –
22 Apr 99 43.88 25,200 –
22 Apr 99 38.75 904 –
27 Jul 00 38.75 295,268 –
27 Jul 00 38.75 45,208 –
08 Dec 00 66.25 72,789 –
13 Jun 01 45.75 420 420
13 Jun 01 47.38 7,205 6,903
14 Sep 01 32.00 4,715 4,715
03 Dec 01 35.00 904 904
31 Jan 02 28.75 2,260 2,260
31 Jan 02 29.50 1,040 –
29 Jul 02 14.13 9,042 9,042
29 Aug 02 24.88 361,664 361,664
10 Dec 02 12.38 251,744 170,875
29 Apr 03 10.50 1,808 904
22 Jul 03 15.50 2,099 1,693
14 Aug 03 13.50 81,374 54,250
14 Aug 03 9.13 90,416 90,416
01 Oct 03 16.75 199,633 147,411
01 Oct 03 16.13 48,633 43,014
21 Apr 04 20.13 7,262 762
21 Apr 04 16.00 18,083 18,083
01 Jun 04 17.38 48,416 –
18 Apr 05 20.13 36,166 36,166
23 May 05 19.13 66,455 37,976
27 May 05 19.50 115,688 70,567
25 Aug 05 22.00 3,526 3,526
26 Aug 05 22.25 36,166 36,166
10 Apr 06 27.50 9,042 2,042
1,855,878 1,099,759
The fair value of each grant has been calculated as of June
2, 2006. It has been estimated on the date of grant using
a stochastic option-pricing model. The following average
parameters were used: no dividend, volatility of 32% and
risk-free interest rate from 3.71% to 3.97%. Options typically
vest in equal amounts over a period of three to four years.
In the income statement for the period ended December
31, 2010, a compensation expense of €17,894 (€12,026
in 2009) corresponding to the amortization of the fair
value of all the outstanding share options and restricted
share units was recorded for €2,400 (€1,543 in 2009)
in cost of sales, €750 (€461 in 2009) in research and
engineering expenses, €6,775 (€4,150 in 2009) in sales
and marketing expenses and €7,969 (€5,872 in 2009)
in general and administrative expenses.
Movements in the number of share options outstanding
(Gemalto and Gemplus) and their related weighted average
exercise price are as follows:
Average
exercise
price Outstanding
(Euro) options
Year ended December 31,
2009 2010
Average
exercise
price Outstanding
(Euro) options
Beginning
of the
period 22.05 9,232,655 23.25 6,874,975
Granted – – – –
Forfeited 28.16 (502,968) 41.29 (494,438)
Exercised(*) 16.00 (1,854,712) 18.32 (792,632)
End of the
period 23.25 6,874,975 22.35 5,587,905
(
* ) In 2009, 1,854,712 shares were exercised, of which 215 were not delivered
but cash settled as a monetary compensating balance. In 2010, 792,632
shares were exercised of which 99 were not delivered but settled in cash.
As of December 31, 2010, the average remaining life of the
5,587,905 outstanding options was 5.2 years. It was 5.7
years as of December 31, 2009 for the 6,874,975 options.
Share options outstanding (Gemalto and Gemplus) at the
end of the period have the following expiry dates and
exercise prices:
Expiry date
Average
exercise
price
(Euro)
Year ended December 31,
2009 2010
Outstanding
options
Average
exercise
price
(Euro)
Outstanding
options
2010 43.17 452,113 – –
2011 41.01 13,245 40.86 12,941
2012 19.72 625,750 20.79 543,840
2013 14.67 1,338,162 14.56 1,021,697
2014 16.14 223,262 15.74 148,831
2015 25.53 1,564,335 25.87 1,379,838
2016 23.12 532,958 23.05 474,258
2017 20.83 753,400 20.83 683,250
2018 26.44 1,371,750 26.44 1,323,250
6,874,975 5,587,905
Out of the 5,587,905 above mentioned outstanding options
as of December 31, 2010, a total of 3,869,405 are vested
and exercisable at a 21.33 Euro average exercise price.
Financial statements

Financial statements
120 Gemalto Annual Report 2010
Notes to the consolidated financial statements
121
Gemalto has established a Global Employee Share
Purchase Plan (‘GESPP”) for its employees.
Employee Share Purchase plan 2009
In the period from October 26, 2009 to November 6, 2009,
Gemalto employees were offered the opportunity to buy
Gemalto shares at a price 15% below the lower of the
closing prices for the Gemalto share on October 26, 2009
and November 6, 2009. 49,525 Treasury shares were
subscribed by the employees at 24.06 Euro per share.
The compensation expense corresponding to the discount
granted to employees under that program of €301 was
recorded as a compensation expense in the 2009 income
statement: €50 were recorded in cost of sales, €73 in research
and development expenses, €85 in sales and marketing
expenses and €93 in general and administrative expenses.
Employee Share Purchase plan 2010
In the period from October 25, 2010 to November 5, 2010,
Gemalto employees were offered the opportunity to buy
Gemalto shares at a price 15% below the lower of the closing
prices for the Gemalto share on October 25, 2010 and
November 5, 2010. 39,602 Treasury shares were subscribed
by the employees at 27.58 Euro per share.
The compensation expense corresponding to the discount
granted to employees under that program of €193
was recorded as a compensation expense in the 2010
income statement: €24 were recorded in cost of sales,
€64 in research and development expenses, €10 in
sales and marketing expenses and €95 in general and
administrative expenses.
Note 26. Other income (expense), net
Year ended December 31,
2009 2010
Fixed assets write-offs and
net gains/losses on sales 1,190 113
Compensation from customers
and suppliers, net (1) 1,146 6,089
Other 1,677 2,204
Total 4,013 8,406
(1)
Mainly composed of a compensation resulting from the final judgment in a
lawsuit in 2010.
Note 27. Financial income (expense), net
Financial income/(expense) details are as follows:
Year ended December 31,
2009 2010
Interest expense (4,009) (4,419)
Interest income 4,084 3,238
Foreign exchange transaction
gains (losses)
– Foreign exchange gains
(losses), including derivative
instruments not designated
as cash flow hedges 798 3,240
– Ineffective part of derivative
instruments Cash flow
hedges (hedging) (2,173) (4,284)
Loss on sale of an availablefor-sale
financial asset – (730)
Other financial income
(expense), net (946) 3,751 (*)
Financial income
(expense), net (2,246) 796
(*)
Mainly composed of a reassessment to fair-value of a financial liability
relating to the subsequent acquisition of non-controlling interests.
Note 28. Net foreign exchange gains (losses)
The exchange differences charged/credited to the income
statement are as follows (see note 20):
Year ended December 31,
2009 2010
Net sales 7,069 (5,518)
Cost of sales (2,048) 3,166
Financial income (expense), net (1,375) (1,044)
Net foreign exchange
gains (losses) 3,646 (3,396)
Foreign exchange gains or losses arising from the
Company’s qualified hedges under IAS 39 are recorded
in sales if the underlying net exposure is positive (net selling
position) and in cost of sales if the underlying net exposure
is negative (net buying position).
Note 29. Taxes
Deferred income tax assets and liabilities are offset when
there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred
income taxes relate to the same tax authority. Net amounts
are as follows:
Year ended December 31,
2009 2010
Deferred tax assets:
– Deferred tax asset to be
recovered after more than
12 months 7,733 38,804
– Deferred tax asset to be
recovered within 12 months 16,459 12,514
24,192 51,318
Deferred tax liabilities:
– Deferred tax liabilities due
after more than 12 months (20,528) (18,799)
– Deferred tax liabilities due
within 12 months (1,765) (414)
(22,293) (19,213)
Deferred tax assets
(liabilities), net 1,899 32,105
The changes in the net deferred income tax assets
(liabilities) are as follows:
Year ended December 31,
2009 2010
Beginning of the period 7,556 1,899
Acquisition of subsidiary
and business (11,143) (6,550)
Credited to income statement 3,999 32,248
Tax credit recognized in equity – 1,252
Reclassification to liabilities
held for sale – 2,114
Cumulative translation
adjustment 1,487 1,142
End of the period 1,899 32,105
Deferred tax assets and liabilities for the years ended
December 31, 2009 and 2010 detail as follows:
Year ended December 31,
2009 2010
Assets
Loss carry-forward 1,280 37,468
Excess book over tax
depreciation and amortization 3,077 5,212
Employee and retirement benefits 4,298 4,877
Warranty reserves and accruals 1,575 1,716
Other temporary differences 13,962 20,671
Total Assets 24,192 69,944
Liabilities
Excess tax over book
depreciation and amortization (19,657) (30,459)
Other temporary differences (2,636) (7,380)
Total Liabilities (22,293) (37,839)
Deferred tax assets
(liabilities), net 1,899 32,105
The income tax credit (expense) is as follows:
Year ended December 31,
2009 2010
Current tax (21,424) (28,377)
Deferred tax 3,999 32,248
(17,425) 3,871
Financial statements

Financial statements
122 Gemalto Annual Report 2010
Notes to the consolidated financial statements
123
The reconciliation between the income tax credit
(expense) on Gemalto’s profit (loss) before tax and the
amount that would arise using the tax rate applicable
in the country of incorporation of the Company (i.e. the
Netherlands), is as follows:
Year ended December 31,
2009 2010
€ % € %
Profit (loss) before
income tax 132,919 100.0 165,929 100.0
Tax calculated at the rate
of the holding company (33,894) (25.5) (42,312) (25.5)
Effect of difference in
nominal tax rate between
the holding and the
consolidated entities 9,049 12,224
Effect of the reassessment
of the recognition of
deferred tax assets (923) 35,660
Effect of utilization of tax
assets not recognized in
prior years 26,000 12,410
Effect of unrecognized
deferred tax assets arising
in the year (4,917) (6,494)
Other permanent
differences (12,740) (7,617)
Income tax credit
(expense) (17,425) (13.1) 3,871 2.3
In 2010, the Company recorded an income tax credit
of €3.9 million on a pretax profit of €165.9 million, inclusive
of a €32.2 million reassessment in relation to the recognition
of a deferred tax asset on loss carry forwards for France.
Deferred income tax assets are recognized for tax loss
carry forwards and other future deductions to the extent
that the realization of the related tax benefit through the
future taxable profits is probable.
As of December 31, 2010, Gemalto did not recognize
tax assets amounting to €367.8 million (€444 million as
of December 31, 2009) relating to tax losses and other
future tax deductions. Of this amount, €337.4 million (1)
related to tax loss carry forwards amounting to €1,031.3
million (2) of which €946.1 million can be used indefinitely.
In 2009, those amounts were €406.9 million, €1,339 million
and €1,249 million respectively.
Deferred income tax liabilities have been recognized for
withholding taxes and other tax payables according to
applicable laws on the unremitted earnings of subsidiaries
when Gemalto does not intend to reinvest its earnings
and when such taxes cannot be recovered. Deferred taxes
are accrued on unremitted earnings of associates when
Gemalto does not control the dividend distribution process.
(1)
Including €230.4 million (€231.2 million in 2009) related to Gemplus
International S.A. (Luxemburg) tax loss carry forwards.
(2)
Including €805.9 million (€808.8 million in 2009) related to Gemplus
International S.A. (Luxemburg)
Note 30. Earnings per share
Year ended December 31,
2009 2010
Basic
Profit attributable to equity
holders of the Company 114,796 163,920
Weighted average number of
ordinary shares outstanding
(thousands) 82,520 83,031
Basic earnings per share 1.39 1.97
Year ended December 31,
2009 2010
Diluted
Profit attributable to equity
holders of the Company 114,796 163,920
Weighted average number of
ordinary shares outstanding
(thousands) 82,520 83,031
Dilution from share options
(thousands) 1,269 1,369
Weighted average number of
ordinary shares for diluted
earnings per share (thousands) 83,789 84,400
Diluted earnings per share 1.37 1.94
The Company presents both basic and diluted earnings
per share (EPS) amounts. Basic EPS is calculated by
dividing net income by the weighted average number of
common shares outstanding during the period. Diluted
EPS is calculated according to the Treasury Stock method
by dividing net income by the average number of common
shares outstanding assuming dilution. Dilution is determined
assuming that all share options, which are in the money, are
exercised at the beginning of the period and the proceeds
used, by the Company, to purchase shares at the average
market price for the period.
Note 31. Cash generated from operations
Year ended December 31,
Notes 2009 2010
Profit for the period including Non-controlling interests 118,124 167,378
Adjustment for:
Tax 29 17,425 (3,871)
Research tax credit (9,013) (12,305)
Depreciation and impairment 8 41,784 48,191
Amortization 9 35,982 37,098
Gemalto Employee Share Purchase Plan discount 25 301 193
Share-based payment expense 13,225 19,254
Gains and losses on sale of fixed assets and write-offs 700 638
Gains and losses on sale of assets held for sale (795) –
Gains and losses on sale of available-for-sale financial assets – 730
Gains and losses on sale of investment in affiliate (182) –
Gains and losses on sale of investment in associate (78) –
Loss on sale of a discontinued operation, net of tax 11 – 3,087
Cumulated translation adjustment transferred to financial
income upon liquidation of consolidated entities 3,991 (197)
Net movement in provisions and other liabilities (7,042) (25,994)
Employee benefit obligations (556) 1,164
Interest income 27 (4,084) (6,989)
Interest expense and other financial expense 27 5,509 4,419
Share of profit from associates 10 (1,380) (1,717)
Changes in current assets and liabilities (excluding the effects
of acquisitions and exchange differences in consolidation):
Inventories 19,994 (4,390)
Trade & other receivables 33,183 (46,632)
Derivative financial instruments (1,684) 4,160
Trade & other payables (42,372) 8,727
Cash generated from operations 223,032 192,944
Financial statements

Financial statements
124 Gemalto Annual Report 2010
Notes to the consolidated financial statements
125
Note 32. Related party transactions
a) Key Management compensation
The compensation of key management personnel (persons
having the authority and responsibility for planning, directing
and controlling the activities of the Company, directly or
indirectly, including any Board member – whether Executive
or Non-executive – of the Company) paid in 2009 and 2010
by the Company is summarized as follows:
Year ended December 31,
2009 2010
Salaries and other short term
employee benefits 6,606 9,036
Share-based compensation
charge 5,835 9,367
Total expenses 12,441 18,403
b) Purchases of goods and services
Gemalto and its affiliates are buying computer equipment
from Dell. In 2010, the Company purchased some €1,567
(€3,893 in 2009) of equipment under existing agreements.
Mr. Alex Mandl, who has been the Company’s Non-Executive
Chairman of the Board of Directors since December 2,
2007, is also a director of Dell Computer Corporation. Mr.
Mandl had no involvement in this transaction.
DataCard Corporation is a related party to certain individual
members of the Quandt Family who themselves control entities
which have been shareholders of the Company since June
2, 2006. In 2010, the Company purchased some €2,022 of
equipment and services under existing agreements (€2,742 in
2009). Neither the members nor the representatives of the
Quandt Family entities were involved in this transaction.
In 2010, total purchases from associated companies
amounted to €2,418 (€255 in 2009).
c) Sales of goods and services
In 2010, total sales to related parties amounted to
€38 (€0 in 2009).
In 2010, total sales to associated companies amounted to
€5,776 (€7,187 in 2009).
d) Year-end balances arising from sales/purchases
of goods and services:
Year ended December 31,
2009 2010
Receivables from:
Associates 1,430 1,464
Related parties 0 6
Total receivables 1,430 1,470
Payables to:
Associates 21 353
Related parties 1,264 143
Total payables 1,285 496
Note 33. Commitments and contingencies
Legal proceedings
The Company is subject to legal proceedings, claims
and legal actions arising in the ordinary course of business.
The Company’s management does not expect that the
ultimate costs to resolve these matters will have a material
adverse effect on the Company’s consolidated financial
position, results of operations or cash flows.
Schlumberger residuals
Pursuant to the terms of the Master Separation
Agreement signed on March 19, 2004, Schlumberger
and the Company agreed to carry out the complete
transfer of the Schlumberger group’s Cards and POS
businesses to the Company or one of its subsidiaries.
These undertakings remain in effect as long as there are
contracts, assets or liabilities falling within the scope of
the Company’s business that have not been transferred
at the time of the Separation. This also applies to contracts,
assets or liabilities falling within the scope of Schlumberger’s
business that have not been transferred at that same time.
Until the date of transfer of these contracts, assets or
liabilities to the Company or to Schlumberger or in the event
that they could not be transferred or shall not be transferred
as agreed by the parties, Schlumberger and the Company
have agreed to cooperate and execute the contracts or
manage the assets and liabilities in the name of and for the
account of the other party, pursuant to the instructions of
such party, who will receive all profits and bear all losses
resulting from these contracts, assets and liabilities.
Therefore, the activities, assets and liabilities pertaining
to Schlumberger activities falling under the provisions
of the Master Separation Agreement are not disclosed
in the accompanying consolidated financial statements
of the Company nor is the associated payable from the
Company to Schlumberger or the associated receivable
by the Company from Schlumberger.
However, one legal action is reported here below. Any
liability arising from this action will be assumed by
Schlumberger under the applicable provisions of the Master
Separation Agreement. Accordingly, the Company has not
made any provision in respect of this matter.
In 2002, a €12.5 million claim was brought against Gemalto
in front of the Brussels commercial court by a distributor for
damages suffered and costs incurred resulting from the
Company’s alleged failure to deliver POS terminal software
on time and to provide agreed specifications. The court
ordered a report by a technical expert. The expert’s final
report issued in July 2007 established damages at €2,376.
As of December 31, 2010, the balance of the assets
and liabilities belonging to Schlumberger was nil.
Lease commitments
Minimum rental lease commitments under non-cancelable
operating leases, primarily real estate and office facilities in
effect as of December 31, 2010, are as follows:
Year ended December 31,
2009 2010
Not later than 1 year 19,333 22,170
Later than 1 year and not later
than 5 years 55,375 53,596
Later than 5 years 36,976 26,020
111,684 101,786
Bank guarantees
As at December 31, 2010, bank guarantees, mainly
performance and bid bonds, amounted to €48 million.
These guarantees have been issued as part of the Group’s
normal operations in order to secure the Group’s
performance under contracts or tenders for business.
These guarantees become payable based upon the
non-performance of the Group.
Microprocessor chip purchase commitments
Gemalto is committed by contracts with its suppliers
of chips to purchase the whole quantity of products
in safety stocks within a period of time of one year from
the availability date of the safety stocks. As at December
31, 2010, the commitments to purchase these safety
stocks valued at the average purchase price amounted
to €32,962 (€28,439 in 2009).
Gemalto N.V. guarantees
Gemalto N.V. has issued a guarantee of GBP17.7 million
(equivalent to €20.7 million) granted to the trustees of the
Gemplus Ltd Staff Pension Scheme for the funding deficit
of the pension plan.
Shanghai Axalto IC Card Technologies Co., Ltd
commitment
Gemalto holds a 82.85% interest in Shanghai Axalto IC Card
Technologies Co., Ltd, a Chinese joint venture. This joint
venture is fully consolidated. Gemalto and the joint venture
partners agreed that Gemalto guaranteed the profit of the
joint venture would not be less than Chinese Renminbi 18
million (approximately €2 million) for 2010, 2011 and 2012.
In exchange, Gemalto was granted and shall exercise control
of the joint venture until December 31, 2012.
This liability towards the non-controlling interest has been
recognized at fair value for Chinese Renminbi 9.2 million
(approximately €1 million) as at December 31, 2010, and the
liability will be re-valued at the end of each reporting date.
Note 34. Dividends
Amounts in this note are stated in Euro.
The Annual General Meeting of May 19, 2010 has approved
the distribution of a €20,843,844 dividend in respect of
the financial year 2009. This represents a dividend of
€0.25 per share.
Note 35. Post-closing events
In February 2011, Gemalto finalized the signature of three
additional bilateral revolving credit facilities for a total
amount of €90 million, maturing in February 2016 and with
no financial covenant. Those facilities complement the
existing bilateral revolving credit facilities arranged in
December 2010 (see note 16). With a total of €300 million
credit lines, all not requiring to comply with any financial
ratio, Gemalto has reinforced its financial flexibility and
extended the maturity of its financial resources.
Financial statements
To management’s knowledge, there is no significant event
that occurred since December 31, 2010 which would
materially impact the consolidated financial statements.

Financial statements
126 Gemalto Annual Report 2010
Notes to the consolidated financial statements
127
Note 36. Consolidated entities
The consolidated financial statements as of December 31, 2010 include the accounts of Gemalto N.V. and the
following entities:
Country of incorporation Company name
Percentage of Group
voting rights
Argentina Gemalto Argentina S.A. 100%
Australia Gemalto Pty Ltd 100%
Australia Multos International Pty Ltd 100%
Australia Netsize Australia PTY Ltd 86%
Belgium Gemplus N.V. 100%
Belgium Gemventures 1 N.V. 100%
Brazil
Cinterion Brazil Comércio de Produtos Eletrônicos e Assistência
100%
Técnica Ltda.
Brazil Gemalto do Brasil Cartoes e Terminais Ltda 100%
British Virgin Islands Axalto Cards & Terminals Ltd 100%
British Virgin Islands Axalto Technology Ltd 100%
Canada Cinterion Wireless Modules Canada Inc. 100%
Canada Gemalto Canada, Inc 100%
Canada Solutions Fides ( * ) 49%
China Axalto Smart Cards Technology Co. Ltd 100%
China Cinterion Wireless Communication Technology (Shanghai) Co., Ltd 100%
China Gemalto Technologies (Shanghai) Co. Ltd 100%
China Gemplus (Beijing) Electronics Research and Development Co. Ltd 100%
China Gemplus (Tianjin) New Technologies Co. Ltd 100%
China Gemplus International Trade (Shanghai) Co. Ltd 100%
China Shanghai Axalto IC Card Technologies Co. Ltd 83%
China Tianjin Gemplus Smart Cards Co. Ltd 51%
China Todos Qingdao Co. Ltd 100%
China Zhuhai Goldpac SecurCard Co. Ltd 67%
Colombia Gemalto Colombia S.A. 100%
Czech Republic Gemalto S.R.O. 100%
Czech Republic Gemplus S.R.O. 100%
Denmark Gemalto Danmark A/S 100%
Egypt Makxalto Advanced Card Technology Co. ( * ) 34%
Finland Gemalto Nordic Oy 100%
Finland Gemalto Oy 100%
Finland Valimo Wireless Oy 100%
France Axalto Participations S.A.S. 100%
France Bantry Technologies S.A.S. 100%
France CP8 Technologies S.A. 100%
France Gemalto International S.A.S. 100%
France Gemalto S.A. 100%
France Gemalto Treasury Services S.A. 100%
France Gkard S.A.S. ( * ) 50%
France Netsize S.A. 86%
France OpenTrust S.A. ( * ) 20%
France Setelis S.A. ( * ) 22%
France SLP S.A.S. 100%
France Trusted Labs S.A.S.U. 100%
France Trusted Logic S.A. 100%
Country of incorporation Company name
Percentage of Group
voting rights
Germany Celo Communications GmbH 100%
Germany Cinterion Wireless Modules GmbH 100%
Germany CLM GmbH & Co. KG ( * ) 50%
Germany CLM GmbH ( * ) 50%
Germany Gemalto GmbH 100%
Germany Netsize Deutschland GmbH 86%
Germany O3SIS Information Technologies AG 100%
Gibraltar Zenzus Holdings Ltd 100%
Hong Kong Gemalto Technologies Asia Ltd 100%
Hong Kong Gemplus Goldpac Group Ltd 67%
Hong Kong Goldpac Datacard Solutions Co. Ltd 67%
Hungary Gemalto Hungary Commercial and Services Ltd 100%
Hungary Netsize KFT 83%
India Cinterion Wireless Modules India Private Limited 100%
India Gemalto Digital Security Ltd 100%
India Gemalto Terminals India Private Ltd 100%
India Gemplus India Private Ltd 100%
Indonesia PT Gemalto Indonesia 100%
Indonesia PT Gemalto Smart Cards 100%
Ireland Celocom Ltd 100%
Ireland Trusted Logic Ltd 100%
Israel Trivnet Ltd 100%
Italy Gemalto SPA 100%
Italy Netsize Italia SRL 86%
Japan Gemalto KK 100%
Japan SPOM Japan Co.Ltd 100%
Japan Toppan Gemalto Services Co. Ltd ( * ) 50%
Japan Trivnet Japan Ltd 100%
Luxemburg Gemplus International S.A. 100%
Malaysia Axalto International Ltd 100%
Malaysia Gemalto Sdn Bhd 100%
Mexico Conrena S.A. de CV ( * ) 20%
Mexico CP8 Mexico S.A. de CV 100%
Mexico Gemalto Mexico S.A. de CV 100%
Netherlands Antilles Cards & Terminals N.V. 100%
New Zealand Serverside Graphics (NZ) Limited 50%
Norway Gemalto Norge AS 100%
Philippines Gemalto Philippines Inc. 100%
Poland Gemalto Sp. z o.o 100%
Poland Gemplus Sp. z o.o 100%
Russia Gemalto LLC 100%
Senegal Gemalto Senegal S.A.R.L. 100%
Singapore Gemalto Holding Pte Ltd 100%
Singapore Gemalto Pte Ltd 100%
Singapore Gemplus Asia Pacific Pte Ltd 100%
Singapore Multos International Pte Ltd 100%
Financial statements

Financial statements
128 Gemalto Annual Report 2010
Company financial statements and notes
129
Company financial statements
and notes
Country of incorporation Company name
Percentage of Group
voting rights
Singapore Netsize SGP PTE Ltd 86%
Singapore Trusted Logic Asia (Pte) Ltd 100%
Singapore V3 Teletec Pte Ltd ( * ) 21%
South Africa Gemalto (Pty) Ltd 100%
South Africa Gemalto Southern Africa Pty Ltd 70%
South Africa Netsize South Africa Proprietary Ltd 86%
South Africa Trusted Logic Africa (Pty) Ltd 100%
Spain Gemalto SP S.A. 100%
Spain Gemplus Card International Espana S.A. 100%
Spain Netsize Espana SL 85%
Sweden AB Svenska Pass ( * ) 50%
Sweden Gemalto AB 100%
Sweden Gemalto Sverige AB 100%
Sweden Netsize Swerige AB 86%
Sweden Todos AB 100%
Sweden Todos eCode Security AB 100%
Switzerland Gemplus Management and Trading S.A. 100%
Switzerland Raidax Technology S.A. ( * ) 49%
Taiwan Gemalto Taiwan Co. Ltd 100%
Taiwan Todos Security Asia Co. Ltd 100%
Thailand Gemalto (Thailand) Ltd 100%
Thailand Trivnet (Thailand) Ltd 100%
The Netherlands Gemalto B.V. 100%
The Netherlands Gemplus B.V. 100%
Turkey Gemalto Kart ve Terminaller Ltd Sirketi 100%
United Arab Emirates Gemalto Middle East FZ LLC 100%
United Kingdom Axalto Cards Ltd 100%
United Kingdom Gemalto Terminals Ltd 100%
United Kingdom Gemalto UK Ltd 100%
United Kingdom Gemplus Ltd 100%
United Kingdom Maosco Ltd 100%
United Kingdom Multos Ltd 100%
United Kingdom Netsize UK Ltd 86%
United kingdom Posdesk Ltd 100%
United Kingdom Serverside Group Limited 50%
United Kingdom Step Nexus Ltd 100%
United States of America Cinterion Wireless Modules NAFTA LLC (Delaware) 100%
United States of America Gemalto Inc. 100%
United States of America Netsize Inc. 86%
United States of America Serverside Graphics, Inc. 50%
United States of America Trivnet Inc. 100%
130 Company financial statements
130 Company statement of financial position
131 Company income statement
132 Company statement of changes in shareholders’ equity
134 Notes to the Company financial statements
134 Note 1 Significant accounting policies
134 Note 2 Intangible assets
134 Note 3 Property, plant and equipment
135 Note 4 Investments and loans
137 Note 5 Cash and cash equivalents
137 Note 6 Equity
137 Note 7 Long term debt
137 Note 8 Employees
138 Note 9 Information relating to the board
141 Note 10 Auditors’ fees
141 Note 11 Guarantees granted by the Company
Financial statements
(
* ) Associated companies accounted for according to the equity method
For all companies listed above, the percentage of ownership interest equals the percentage of voting rights with the
exception of Serverside Graphics (NZ) Limited (New Zealand), Serverside Group Limited (United Kingdom), Serverside
Graphics, Inc (United States of America), Netsize Australia PTY Ltd (Australia), Netsize S.A. (France), Netsize Deutschland
GmbH (Germany), Netsize Italia SRL (Italy), Netsize SGP PTE Ltd (Singapore), Netsize South Africa Proprietary Ltd (South
Africa), Netsize Espana SL (Spain), Netsize Swerige AB (Sweden), Netsize UK Ltd (United Kingdom), Netsize Inc. (United
States of America) and Gemalto Southern Africa Pty Ltd (South Africa) for which the ownership interest is 100%, and with
the exception of Netsize KFT (Hungary) for which ownership interest is 97%.

Financial statements
Gemalto Annual Report 2010
130 Company income statement
131
Company statement of
financial position
Company income statement
Year ended December 31,
In thousands of Euro
Before appropriation of the result for the period Notes 2009 2010
Assets
Non-current assets
Goodwill 2 538,233 599,587
Property, plant and equipment 3 300 244
Investments in subsidiaries and associates 4 649,761 902,999
Long-term loans to subsidiaries 4 20,071 13,789
Total non-current assets 1,208,365 1,516,619
Year ended December 31,
In thousands of Euro 2009 2010
Loss after taxes (32,769) (26,135)
Income from subsidiaries 147,565 190,055
Net income for the period 114,796 163,920
Current assets
Short-term loans to subsidiaries 4 217,281 87,714
Receivables due from subsidiaries 4,323 5,202
Other receivables 2,790 6,140
Cash and cash equivalents 5 3,363 7,650
Total current assets 227,757 106,706
Total assets 1,436,122 1,623,325
Equity
Issued and paid in share capital 6 88,016 88,016
Share premium 6 1,215,868 1,209,437
Legal reserves 6 7,461 15,681
Other reserves 6 (104,879) (61,886)
Retained earnings 6 86,430 180,382
Net income for the period 6 114,796 163,920
Total equity 1,407,692 1,595,550
Liabilities
Non-current liabilities
Long-term debt 7 5,921 6,399
Provisions on investments in subsidiaries and associates 4 12,904 4,034
Total non-current liabilities 18,825 10,433
Current liabilities
Short-term borrowing from a subsidiary – 3,816
Payables to subsidiaries 5,582 8,652
Other payables 3,688 4,874
Bank overdraft 335 –
Total current liabilities 9,605 17,342
Total liabilities 28,430 27,775
Total equity and liabilities 1,436,122 1,623,325
Financial statements

Financial statements
132 Gemalto Annual Report 2010
Company statement of changes in shareholders’ equity
133
Company statement of changes
in shareholders’ equity
Number of shares (1)
Attributable to equity holders of the Company
In thousands of Euro Issued Outstanding Share capital Share premium Legal reserves Other reserves Retained earnings Total equity
Shareholders’ equity as of January 1, 2009 88,015,844 82,296,192 88,016 1,214,429 4,447 (102,531) 84,118 1,288,479
Movements in fair value and other reserves:
Currency translation adjustments 17,107 17,107
Gain/(losses) on Treasury shares 1,006 1,006
Fair value gains/(losses), net of tax:
– Financial assets available-for-sale 73 73
– Variation of actuarial gains and losses in benefit obligations (5,391) (5,391)
– Cash flow hedges 9,638 9,638
Transfer from Legal reserves to Other reserves (4,396) 4,396 –
Transfer from Other reserves to Legal reserves 7,410 (7,410) –
Net income recognized directly in equity 3,014 19,419 22,433
Net income for the period 114,796 114,796
Total recognized income for 2009 3,014 19,419 114,796 137,229
Share-based compensation expense 12,327 12,327
Employee share option scheme 2,684,452 30,870 30,870
Purchase of Treasury shares, net (2,204,431) (64,964) (64,964)
Excess of purchase price on SAIT minority interest acquisition (1,937) (1,937)
Correction of the excess of purchase price on subsequent acquisition of
Gemplus shares 3,843 3,843
Excess of purchase price on subsequent acquisition of Serverside Group Limited (467) (467)
Revaluation further to the acquisition of Trusted Logic SA 2,312 2,312
Balance as of December 31, 2009 88,015,844 82,776,213 88,016 1,215,868 7,461 (104,879) 201,226 1,407,692
Shareholders’ equity as of January 1, 2010
Movements in fair value and other reserves:
Currency translation adjustments 28,758 28,758
Gain/(losses) on Treasury shares 580 580
Fair value gains/(losses), net of tax:
– Financial assets available-for-sale 1,572 1,572
– Variation of actuarial gains and losses in benefit obligations (2,402) (2,402)
– Cash flow hedges 1,071 1,071
– Currency translation adjustments on fair value gains/(losses) (938) (938)
Transfer from Other reserves to Legal reserves (23,181) 23,181 –
Net income recognized directly in equity 8,220 20,421 28,641
Net income for the period 163,920 163,920
Total recognized income for 2010 8,220 20,421 163,920 192,561
Share-based compensation expense 19,447 19,447
Employee share option scheme 836,289 15,604 15,604
Purchase of Treasury shares, net (1,281,254) (39,293) (39,293)
Treasury shares used for the acquisition of Todos AB 800,000 26,814 26,814
Excess of purchase price on subsequent acquisition of Netsize S.A. (6,431) (6,431)
Dividends paid/payable to shareholders (20,844) (20,844)
Balance as of December 31, 2010 88,015,844 83,131,248 88,016 1,209,437 15,681 (61,886) 344,302 1,595,550
Financial statements
(1)
As of December 31, 2010, the difference between the number of shares issued and the number of shares outstanding corresponds to the 4,884,596 shares held in treasury.

Financial statements
134 Gemalto Annual Report 2010
Notes to the company financial statements
135
Notes to the company
financial statements
The Company financial statements should be read in
conjunction with the consolidated financial statements.
The notes below are an integral part of the Company
financial statements.
All amounts are stated in thousands of Euro, except per
share amounts which are stated in Euro and unless
otherwise mentioned.
Note 1. Significant accounting policies
1.1 Basis of preparation
The Company financial statements of Gemalto N.V.,
with its statutory seat in Amsterdam (‘the Company’ or
‘Gemalto’), have been prepared in accordance with the
statutory provisions of Part 9, Book 2 of the Netherlands
Civil Code. In accordance with subsection 8 of section 362,
Book 2 of the Netherlands Civil Code, the measurement
principles and determination of assets, liabilities and results
applied in these Company financial statements are the same
as those applied in the consolidated financial statements
(see note 2 to the consolidated financial statements).
The Company’s financial data are included in the
consolidated financial statements. As allowed by section
402, Book 2 of the Netherlands Civil Code, the income
statement is presented in a condensed form.
1.2 Investments
Subsidiaries are all entities (including special purpose
entities) over which the Company has the power to govern
the financial and operating policies generally accompanying
a shareholding of more than one half of the voting rights.
The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when
assessing whether the Company controls another entity.
Associates are all entities over which the Company has
significant influence but not control, generally accompanying
a shareholding of between 20% and 50% of the voting rights.
Investments in subsidiaries are valued at net asset value while
associates are valued using the equity method. The Company
calculates the net asset value using the accounting policies as
described in note 2 to the consolidated accounts. The net
asset value of the subsidiaries comprises the cost, excluding
goodwill for subsidiaries owned directly by the Company and
including goodwill for subsidiaries indirectly owned by the
Company, plus the Company’s share in income and losses
since acquisition, less dividends received. The Company’s
investment in associates includes goodwill (net of any
accumulated impairment loss) identified on acquisition.
The Company’s share of its associates’ and subsidiaries’
post-acquisition profits or losses is recognized in the income
statement, and its share of post-acquisition movements
in retained earnings is recognized in retained earnings.
The cumulative post-acquisition movements are adjusted
against the carrying amount of the investment. Investments
with negative net asset value should be first deducted from
loans that form part of the net investments (if any). Provision
should be formed by the Company only if the Company has
the firm intention to settle and that the obligations meet the
criteria for recognition as provision (e.g. constructive and
legal obligations, potential cash outflow, etc).
Note 2. Intangible assets
Goodwill
January 1, 2010 538,233
Acquisition of Todos AB 38,183
Acquisition of Trivnet Ltd 24,005
Business disvestment
(discontinued operation) (3,879)
Currency translation adjustment 3,045
December 31, 2010 599,587
Note 3. Property, plant and equipment
Leasehold
improvements
and office furniture
and equipment
January 1, 2010
Gross book value 472
Accumulated depreciation (172)
Net book value 300
2010 movements
Additions –
Depreciation (56)
December 31, 2010
Gross book value 472
Accumulated depreciation (228)
Net book value 244
Note 4. Investments and loans
Year ended December 31,
2009 2010
Investments in subsidiaries and associates 649,761 902,999
Provisions on investments in subsidiaries and associates (12,904) (4,034)
Net investments in subsidiaries and associates 636,857 898,965
An overview of the movements in investments and loans is presented below:
Net Investments
in subsidiaries
Investments in
associates
Long-term loans Short-term loans
to subsidiaries to subsidiaries
January 1, 2010 635,120 1,737 20,071 217,281 874,209
2010 movements
Acquisition of Todos AB 8,617 8,617
Acquisition of Trivnet Ltd 2,000 2,000
Contributions to Gemalto GmbH 50,000 50,000
Contributions to other subsidiaries 5,928 5,928
Excess of purchase price on subsequent
acquisition of Netsize S.A. (6,431) (6,431)
Business disvestment
(discontinued operation) 3,879 3,879
Fair value losses (697) (697)
Dividends (13,769) (270) (14,039)
Net result from subsidiaries 190,055 190,055
Net result from associates 67 67
Refund of loans (8,932) (129,567) (138,499)
Currency translation adjustment 22,664 65 2,650 25,379
December 31, 2010 897,366 1,599 13,789 87,714 1,000,468
Total
Financial statements

Financial statements
136 Gemalto Annual Report 2010
Notes to the company financial statements
137
Loans to subsidiaries
Subsidiaries
Year Ended December 31, 2010
Long-term Short-term
Loans Loans
Gemalto LLC 900
Gemalto Treasury Services S.A. 87,714
Gemalto Namitech Pty Ltd 12,096
PT Gemalto Smart Cards Indonesia 793
Total 13,789 87,714
On April 2, 2004, the Company financed its Indian subsidiary,
Gemalto Digital Security Ltd, with two interest-bearing loans
denominated in US Dollars. The first loan, with a maximum
facility of USD3 million, had a three-year maturity and was
drawn for USD2.5 million as of December 31, 2009 (€1.8
million as at December 31, 2009).
The USD2.5 million outstanding principal amount was
repaid in October 2010 and the corresponding outstanding
interests were paid in August and December 2010.
The second loan, with a maximum draw capacity of USD8
million, had a three and a half-year maturity and was drawn
for USD7.3 million as of December 31, 2009 (€5.1 million
as at December 31, 2009).
The USD7.3 million outstanding principal amount was
repaid in November 2010 and the corresponding outstanding
interests were paid in August and December 2010.
On June 26, 2008, the Company financed a new Russian
subsidiary, Gemalto LLC, with an interest-bearing loan
denominated in Euro. The loan, with a maximum facility
of €3.4 million, has a five-year maturity till June 2013. The
balance as at December 31, 2010 amounted to €0.9 million
(€3.4 million as at December 31, 2009).
On March 18, 2009, the Company financed its South
African subsidiary with a non-interest-bearing loan
denominated in South African Rand (ZAR). The loan,
with a maximum facility of ZAR110 million, has a five-year
maturity till March 18, 2014. The balance as at December
31, 2010 amounted to ZAR106.2 million, equivalent to
€12.1 million (ZAR97.2 million equivalent to €9.1 million
as at 31 December 2009).
On July 28, 2009, the Company financed its Indonesian
subsidiary with an interest-bearing loan denominated
in US Dollars (USD). The loan, with a maximum facility
of USD1.1 million, has a five-year maturity till July 28,
2014. The balance as at December 31, 2010 amounted
to USD1.1 million equivalent to €0.8 million (As at December
31, 2009 €0.7 million).
Effective November 1, 2008, the Company started to
operate a new Treasury Center based in Meudon in a
new entity, Gemalto Treasury Services S.A. (‘GTS’)
replacing the Swiss entity, Gemplus International Swiss
Branch (‘Swiss Branch’). The new entity has taken over
the role of the former cash pool entity. The Company
agreed to borrow from or lend to GTS. The agreement is
valid for a time period of one year, automatically renewable
for further periods of one year, if not cancelled. As at
December 31, 2010, the amount borrowed from the
Company amounted to €87.7 million (as at December 31,
2009, €136.3 million were borrowed by the Company).
On December 14, 2010, the Company concluded a loan
agreement with its Curaçao subsidiary, Cards & Terminals
N.V., at interest-bearing conditions. The loan, with a
maximum facility of USD1.8 million has a threeyear
maturity.
As at December 31, 2010, no drawdown was taken.
In 2008, the Company granted short term advances to
Gemplus International S.A. (GISA) which were refunded
in GISA shares for €12.2 million. In December 2009, GISA
reduced its share capital by €79.5 million resulting in a loan
payable to the Company for the same amount. This amount
was repaid in January 2010.
Note 5. Cash and cash equivalents
Cash and cash equivalents consist of the following:
Year ended December 31,
2009 2010
Cash at bank and in hand 264 4,491
Short-term bank deposits
and investment funds 3,099 3,159
Total 3,363 7,650
The average effective interest rate on short term deposits
was 0.31% in 2010 (0.31% in 2009).
Note 6. Equity
Share capital
The authorized share capital of the Company amounted
to €150 million as at December 31, 2010 and consisted
of 150 million ordinary shares with a nominal value of €1.
Issued and fully paid-in share capital amounted to €88,016
as at December 31, 2010 and 2009, and consisted of
88,015,844 ordinary shares with a nominal value of €1.
Share premium
As at December 31, 2010, the share premium amounted
to €1,209,437 (€1,215,868 as at December 31, 2009). In 2010,
share premium decreased by €6,431 due to the excess
purchase price on subsequent acquisition of Netsize S.A.
(see note 4 to the consolidated financial statements).
Legal reserves
Movements in legal reserves, which cannot be distributed
freely, are presented below:
Income
recognized
directly in
equity
Undistributable
results of Group
companies
Total
January 1, 2010 7,410 51 7,461
2010 movements 31,401 – 31,401
Transfers (23,181) – (23,181)
December 31, 2010 15,630 51 15,681
Pursuant to section 373, Book 2 of the Netherlands
Civil Code, the part of retained earnings in relation to
non-distributable results of Group companies and
associates (including pension reserves) and cash flow
hedges (if their balances are positive) are legal reserves.
As at December 31, 2010, ‘Income recognized directly in
equity’ mainly consisted of cumulative translation
adjustments for €5,880, cash flow hedges for €8,481 and
fair value adjustments on financial assets available-for-sale
for €1,270. The transfer is mainly due to the transfer from
“Other reserves” of the reserves for fair value adjustment on
financial assets available-for-sale and the cumulative
translation adjustment (as they became positive in 2010).
Other reserves
As at December 31, 2010, ‘Other reserves’ mainly consisted
of Treasury shares for €(132,046), (€(129,640) as at
December 31, 2009), stock option reserve amounting to
€91,856 (€66,992 as at December 31, 2009), net gains
(losses) on Treasury shares in connection with the liquidity
program for €1,448 (€868 as at December 31, 2009), the
reserve for actuarial gains and losses in benefit obligations
for €(3,397) (€(995) as at December 31, 2009) and related
cumulative translation adjustments for €(938), and a loss on
Treasury shares canceled for the share capital reduction in
2008 for €(18,923). The cumulative translation adjustment
amounting to €(22,879) and the accumulated fair value
adjustment on financial assets available-for-sale amounting
to €(302) as at December 31, 2009 have been transferred to
‘Legal reserves’ as they became positive.
Retained earnings (including net income for the period)
Retained earnings amounted to €344,302 as at December
31, 2010 (€201,226 as at December 31, 2009).
Note 7. Long term debt
Year ended December 31,
2009 2010
Other financial liability 5,921 6,399
Total 5,921 6,399
This debt relates to the anticipated acquisition of an
additional 49.9% interest in Serverside (SSGL).
Note 8. Employees
The average number of staff employed by the Company
during 2010 was 10.5 (2009: 9). None of these employees
was employed abroad (2009: nil).
Financial statements

Financial statements
138 Gemalto Annual Report 2010
Notes to the company financial statements
139
Note 9. Information relating to the Board
Amounts in this note are stated in Euro.
Remuneration of the Board
The Board currently consists of ten Board members: nine
Non-executive Board members and one Executive Board
member, the CEO.
At the 2010 Annual General Meeting (AGM), Mr. D.
Bonderman resigned from his position as Non-executive
Board member.
Gemalto Board
At the 2010 AGM, Mr. Ph. Alfroid was appointed as
Non-executive Board member for a first term ending at the
end of the AGM to be held in 2014.
At the 2011 AGM, the present term of Messrs. A. Mandl and
M. Soublin will end. The Board will propose to the 2011
AGM the reappointment of Mr. A. Mandl as Non-executive
Board member for a second term and the reappointment of
Mr. M. Soublin as Non-executive Board member for a third
term, both terms ending at the end of the 2015 AGM.
Board member
fee per annum
Board committee
fee per annum
Remuneration from
January 1 until
December 31, 2009
Fiscal year 2009
Alex Mandl Non-executive Chairman 200,000 12,000 212,000
Olivier Piou Chief Executive Officer 35,000 – 35,000
Kent Atkinson Non-executive Board member 65,000 24,000 89,000
David Bonderman Non-executive Board member 65,000 8,000 73,000
Geoffrey Fink Non-executive Board member 65,000 16,000 81,000
Johannes Fritz Non-executive Board member 65,000 28,000 93,000
John Ormerod Non-executive Board member 65,000 32,000 97,000
Michel Soublin Non-executive Board member 65,000 24,000 89,000
Buford Alexander Non-executive Board member 40,247 4,953 45,200
Arthur van der Poel Non-executive Board member 65,000 20,000 85,000
Total 730,247 168,953 899,200
The remuneration of the Non-executive Board members,
including the remuneration of the Chairman of the Board
and the members of the Board committees, is determined
by the General Meeting. The remuneration is reviewed from
time to time by the Compensation committee. The
remuneration structure for the Non-executive Board
members (per calendar year) is as follows:
• €200,000 per calendar year for the Non-executive
Chairman of the Board;
• €65,000 per calendar year for each other Non-executive
Board member;
• an additional fee of €24,000 per calendar year for the
chairman of the Audit committee and an additional fee
of €16,000 per calendar year for each member of the
Audit committee;
• an additional fee of €12,000 per calendar year for the
chairman of the other Board committees and an additional
fee of €8,000 per calendar year for the other members
of those Board committees.
In addition to the remuneration mentioned above, the
Board members received income in kind amounting to
€6,423 in 2010.
The remuneration paid by the Company or by companies of
the Group to the CEO, Mr. O. Piou, for the 2010 financial
year is as follows:
Total Reference
Compensation
Bonus
(percentage of
on target
Variable
Incentive)
Total gross
compensation
paid for 2010
O. Piou ( * ) 668,826 143% 1,817,646
(
* ) Including Board member fees
Mr. O. Piou was appointed as CEO in 2004 for a term of
four years ending at the end of the AGM of May 14, 2008.
He was reappointed as Board member with the title of CEO
for a term of four years until the AGM of 2012. Mr. O. Piou
has an employment contract (originally dated 1981), not
limited in time, governed by French law with Gemalto
International S.A.S., a Gemalto subsidiary and he enjoys
any and all benefits that may be applicable to French
employees. He has a six-month notice period.
Share options granted to Board members
Share options have been attributed under the Global Equity
Incentive Plan as described in note 25 to the consolidated
financial statements.
Gemalto Board
Board member
fee per annum
Board Committee
fee per annum
Remuneration from
January 1 until
December 31, 2010
Fiscal year 2010
Alex Mandl Non-executive Chairman 200,000 12,000 212,000
Olivier Piou Chief Executive Officer 35,000 – 35,000
Kent Atkinson Non-executive Board member 65,000 24,000 89,000
David Bonderman Non-executive Board member 65,000 8,000 73,000
Geoffrey Fink Non-executive Board member 65,000 16,000 81,000
Johannes Fritz Non-executive Board member 65,000 28,000 93,000
John Ormerod Non-executive Board member 65,000 32,000 97,000
Michel Soublin Non-executive Board member 65,000 16,000 81,000
Buford Alexander Non-executive Board member 65,000 8,000 73,000
Philippe Alfroid Non-executive Board member 40,425 8,066 48,491
Arthur van der Poel Non-executive Board member 65,000 20,000 85,000
Total 795,425 172,066 967,491
Date of
attribution
Number
Exercise
price (€)
Fair value of share
options granted (€)
Date of exercise
Alex Mandl June 2006 200,000 23.10 1,052,000 18 months after
the attribution
Olivier Piou May 2004 600,000 14.80 2,230,662 4 years after
the attribution
Sept. 2005 150,000 30.65 1,099,745 4 years after
the attribution
June 2006 200,000 23.10 1,269,781 4 years after
the attribution
Sept. 2008 150,000 26.44 1,049,761 4 years after
the attribution
Financial statements

Financial statements
140 Gemalto Annual Report 2010
Notes to the company financial statements
141
On September 27, 2007, the Board granted restricted
share units to Mr. O. Piou with a performance criteria
based on the stock market value of the Gemalto shares.
The number of restricted share units may vary from 0 up
to 80,000 with a maximum multiplier of three in case of
exceptional performance. On September 25, 2008, the
Board recognized that, according to the vesting conditions,
66% of the granted restricted share units had vested on
September 9, 2008. On November 13, 2009, the Board
recognized that, according to the vesting conditions, an
additional 84% of the granted share units had vested on
November 6, 2009.
In October 2009, the Board of Gemalto N.V. granted to
Mr. O. Piou 65,000 restricted share units. The vesting
period ends on October 2, 2012. Vesting conditions are
both service-based and performance-based. If vesting
conditions are met, restricted share units will be exchanged
against Gemalto shares and the ratio of exchange will
depend on the achievement of adjusted EBIT margin
targets. The Gemalto shares resulting from the exchange,
if any, will not be transferred to Mr. O. Piou before the end
of a 2-year period starting on the date of the exchange,
and he is not allowed to trade those shares during the
2-year period starting on the date of the transfer. On March
2, 2010, the Board recognized that the performance-based
vesting condition had been met.
In March 2010, the Board granted restricted share units
to Mr. O. Piou with a performance criteria based on the
stock market value of the Gemalto shares. The number
of restricted share units may vary from 0 up to 32,500
with a maximum multiplier of two in case of exceptional
performance. The vesting period ends on March, 2013.
Vesting conditions are both service-based and
performance-based. If vesting conditions are met, restricted
share units will be exchanged against Gemalto shares and
the ratio of exchange will depend on the achievement of
Profit from Operation. The Gemalto shares resulting from
the exchange, if any, will not be transferred to Mr. O. Piou
before the end of a 2-year period starting on the date of the
exchange, and he is not allowed to trade those shares during
the 2-year period starting on the date of the transfer.
The gross compensation paid for 2010 (disclosed in section
‘Remuneration of the Board’ of this note) excludes
share-based compensation charge.
Share-based compensation charge related to Mr. O. Piou’s
share options and restricted shares amounted to
€2,123,334 in 2010 (€1,682,273 in 2009). No charge was
recorded during the period in relation with Mr. A. Mandl’s
share options (no charge in 2009 neither). There is no
forfeited share option in 2010.
Gemalto shares held by Board Members
Gemalto shares
Certain Board members are shareholders of the Company.
On December 31, 2010, they jointly held 371,300 shares, of
which Mr. O. Piou owned 367,000 shares. Mr. G. Fink
owned 2,800 shares resulting from the exchange of
Gemplus shares following the voluntary public exchange
offer for the shares of Gemplus (the ‘Offer’) and Mr. M.
Soublin owned 1,500 shares purchased in 2004.
FCPE units
On December 31, 2010, Mr. O. Piou owned 4,233.51 units
in a FCPE (Fonds Commun de Placement d’Entreprise),
which units were purchased by his contribution to the
Global Employee Share Purchase Plans in 2004, 2005,
2008 and 2010.
Restricted Share Units
On December 31, 2010, Mr. O. Piou held a maximum of
250,000 RSU.
Gemalto share options
On December 31, 2010, Mr. O. Piou held 800,000 Gemalto
share options, and Mr. A. Mandl (through a company
controlled by him) held 200,000 Gemalto share options.
Gemplus share options
On December 31, 2010, the following Board members held
Gemplus share options: Mr. A. Mandl held 4,520,800
(through a company controlled by him) and Mr. J. Fritz held
11,302. At a ratio of 25/2, those Gemplus share options can
be exercised for Gemplus shares that can be exchanged for
Gemalto shares at the same 25/2 ratio, resulting in 361,664
Gemalto shares for Mr. A. Mandl and 904 Gemalto shares
for Mr. J. Fritz.
Note 10. Auditors’ fees
The aggregate fees billed by the external auditors,
Pricewaterhouse Coopers, for professional services rendered
for the fiscal years 2009 and 2010 were are follows:
2009
Fee PWC
Accountants
N.V.
Fee other
PWC
offices
Total
fee
PWC
Audit of the financial
statements 100 2,194 2,294
Other audit procedures 41 419 460
Fees relating to tax advice – 34 34
Other non-audit fees 1 45 46
Total 142 2,692 2,834
2010
Fee PWC
Accountants
N.V.
Fee other
PWC
offices
Total
fee
PWC
Audit of the financial
statements 100 2,516 2,616
Other audit procedures – 588 588
Fees relating to tax advice – 39 39
Total 100 3,143 3,243
Note 11. Guarantees granted by the Company
Gemalto N.V. guarantees
Gemalto N.V. has issued a guarantee of GBP 17.7 million
(equivalent to €20.7 million) granted to the trustees of the
Gemplus Ltd Staff Pension Scheme for the funding deficit
of the pension plan.
Lease commitments
Minimum rental lease commitments under non-cancelable
operating leases, primarily real estate and office facilities in
effect as of December 31, 2010, are as follows:
2010
Not later than 1 year 263
Later than 1 year and not
later than 5 years 391
Later than 5 years –
Total 644
The Board
Mr. Alex Mandl
Non-executive
Chairman of the Board
Mr. Buford Alexander
Non-executive
Board member
Mr. Philippe Alfroid
Non-executive
Board member
Mr. Johannes Fritz
Non-executive
Board member
Mr. Arthur van der Poel
Non-executive
Board member
Amsterdam, March 8, 2011
Mr. Olivier Piou
Executive Board
member and Chief
Executive Officer
Mr. Kent Atkinson
Non-executive
Board member
Mr. Geoffrey Fink
Non-executive
Board member
Mr. John Ormerod
Non-executive
Board member
Mr. Michel Soublin
Non-executive
Board member
(A signed version of The Annual Report is available at the
Company’s office)
Financial statements

Contactless mobile payment in France
The convergence of mobile communication and banking is
enabling businesses to offer convenient new services to their
customers. Near-Field Communication (NFC) marks a genuine
revolution in payment, and 2010 saw the first commercial launch
of its kind in Europe. The project in Nice, France, saw Gemalto
joining forces with mobile operators, banks, transport operators
and retailers. It allows people to use their NFC-enabled mobile
phones to make payments at restaurants, supermarkets and
shops, as well as the city’s transport networks. They can also
access information at museums and the university campus.
For more information see
page 22
For more information visit
www.gemalto.com
144 Auditor’s report
145 Appropriation of profit
146 Post-closing events
147 Adjusted measures
150 Investor information
152 Glossary of digital security terms
Other information

Other information
144 Gemalto Annual Report 2010
Appropriation of profit
145
Auditor’s report
Appropriation of profit
Independent auditor’s report on statutory
financial statements
To: the General Meeting of Shareholders of Gemalto N.V.
Report on the financial statements
We have audited the accompanying financial statements
2010 as set out on pages 76 to 141 of Gemalto N.V.,
Amsterdam, which comprise the consolidated and
company statement of financial position as at 31 December
2010, the consolidated and company income statement,
the statements of comprehensive income, changes in
equity and cash flows for the year then ended and the
notes, comprising a summary of significant accounting
policies and other explanatory information.
Board of directors’ responsibility
The board of directors is responsible for the preparation and
fair presentation of these financial statements in accordance
with International Financial Reporting Standards as adopted
by the European Union and with Part 9 of Book 2 of the
Dutch Civil Code, and for the preparation of the directors’
report in accordance with Part 9 of Book 2 of the Dutch
Civil Code. Furthermore, the board of directors is
responsible for such internal control as it determines is
necessary to enable the preparation of the financial
statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
accordance with Dutch law, including the Dutch Standards
on Auditing. This requires that we comply with ethical
requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free from material misstatement.
of directors, as well as evaluating the overall presentation
of the financial statements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion with respect to consolidated financial statements
In our opinion, the consolidated financial statements give a
true and fair view of the financial position of Gemalto N.V. as
at 31 December 2010, and of its result and its cash flows for
the year then ended in accordance with International
Financial Reporting Standards as adopted by the European
Union and with Part 9 of Book 2 of the Dutch Civil Code.
Opinion with respect to company financial statements
In our opinion, the company financial statements give
a true and fair view of the financial position of Gemalto
N.V. as at 31 December 2010, and of its result for the
year then ended in accordance with Part 9 of Book 2
of the Dutch Civil Code.
Report on other legal and regulatory requirements
Pursuant to the legal requirement under Section 2: 393
sub 5 at e and f of the Dutch Civil Code, we have no
deficiencies to report as a result of our examination whether
the directors’ report as included in this annual report which
comprises of sections Our Vision, Segmental Review,
Group Financial and Operating Review and Governance,
to the extent we can assess, has been prepared in
accordance with Part 9 of Book 2 of this Code, and
whether the information as required under Section 2: 392
sub 1 at b-h has been annexed. Further we report that the
directors’ report, to the extent we can assess, is consistent
with the financial statements as required by Section 2: 391
sub 4 of the Dutch Civil Code.
Profit appropriation according to the Articles of
Association
Stipulations relating to the distribution of profits and
dividends by the Company to its shareholders are provided
in articles 32 to 35 of the Articles of Association.
Distribution of profits shall be made following adoption of
the annual accounts which show that the distribution is
permitted. The Company may only make distributions to
shareholders and other persons entitled to distributable
profits to the extent that its equity exceeds the total amount
of its issued capital and the reserves which must be
maintained by law.
The Board shall with due observance of the policy of the
Company on additions to reserves and on distributions of
profits determine what portion of the profit shall be retained
by way of reserve, having regard to the legal provisions
relating to obligatory reserves. The portion of the profit that
shall not be reserved shall be at the disposal of the General
Meeting of Shareholders.
Upon the proposal of the Board, the General Meeting of
Shareholders shall be entitled to resolve to make
distributions charged to the share premium reserve or
charged to the other reserves shown in the annual accounts
not prescribed by the law.
The Board may determine the terms and conditions of
distributions to shareholders and may grant to shareholders
the option to choose between distribution in whole or in part
in the form of shares in the share capital of the Company
(bonus shares, stock dividend), subject to having obtained
the authorization of the General Meeting of Shareholders to
issue shares. If, however, such designation is not in force,
any distributions in the form of shares in the share capital of
the Company require a resolution of the General Meeting of
Shareholders upon the proposal of the Board.
Subject to section 105, subsection 4, Book 2, Civil Code
and with due observance of the policy of the Company on
additions to reserves and on distributions of profits, the
Board may at its own discretion resolve to distribute one or
more interim dividends before the annual accounts for any
financial year have been adopted at a General Meeting
of Shareholders.
Appropriation of result
The Board has determined with due observance of the
Company’s policy on additions to reserves and on
distributions of profits to propose to the 2011 General
Meeting of Shareholders to distribute a dividend in cash of
€0.28 per share in respect of the 2010 financial year and to
allocate the remaining result for the period to the reserves.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the company’s
preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal
control. An audit also includes evaluating the
appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the board
The Hague, 8 March 2011
PricewaterhouseCoopers Accountants N.V.
Original signed by Fernand Izeboud RA
Other information

Other information
146 Gemalto Annual Report 2010
Adjusted measures
147
Post-closing events
Adjusted measures
In February 2011, Gemalto finalized the signature of three
additional bilateral revolving credit facilities for a total
amount of €90 million, maturing in February 2016 and with
no financial covenant. Those facilities complement the
existing bilateral revolving credit facilities arranged in
December 2010 (see note 16). With a total of €300 million
credit lines, all not requiring to comply with any financial
ratio, Gemalto has reinforced its financial flexibility and
extended the maturity of its financial resources.
Adjusted income statement and profit from operations
non-GAAP measure
The consolidated financial statements are prepared in
accordance with the International Financial Reporting
Standards. To better assess its past and future
performance, the Company also prepares an adjusted
income statement where the key metric used to evaluate
the business and take operating decisions over the period
2010 to 2013 is the profit from operations.
In the adjusted income statement, Operating Expenses are
defined as the sum of Research and Engineering, Sales and
Marketing and General and Administrative expenses, and
Other income (expense) net.
EBITDA is defined as PFO plus depreciation and
amortization expenses, excluding the above amortization
and depreciation of intangibles resulting from acquisitions.
To management’s knowledge, there is no significant event
that occurred since December 31, 2010 which would
materially impact the consolidated financial statements.
Profit from operations (PFO) is a non-GAAP measure
defined as the IFRS operating result adjusted for the
amortization and depreciation of intangibles resulting from
acquisitions, for equity-based compensation charges, and
for restructuring and acquisition-related expenses. These
items are further explained as follows:
• Amortization and depreciation of intangibles resulting from
acquisitions are defined as the amortization and
depreciation expenses related to the intangibles
recognized as part of the allocation of the excess
purchase consideration over the share of net assets
acquired.
• Equity-based compensation charges are defined as (i) the
discount granted to employees acquiring Gemalto shares
under Gemalto Employee Stock Purchase plans; and (ii)
the amortization of the fair value of stock options and
restricted share units granted by the Board of Directors to
employees, and the related costs.
• Restructuring and acquisitions-related expenses are
defined as (i) restructuring expenses which are the costs
incurred in connection with a restructuring as defined in
accordance with the provision of IAS 37 (e.g. sale or
termination of a business, closure of a plant,…), and
consequent costs; (ii) reorganization expenses defined as
the costs incurred in connection with headcount
reductions, consolidation of manufacturing and offices
sites, as well as the rationalization and harmonization of
the product and service portfolio, and the integration
of IT systems, consequent to a business combination; and
(iii) transaction costs (such as fees paid as part
of the acquisition process) which were previously
capitalized as part of the cost of an acquisition under
previous IFRS versions.
These non-GAAP financial measures are not meant to be
considered in isolation or as a substitute for comparable
IFRS measures and should be read only in conjunction with
our consolidated financial statements prepared in
accordance with IFRS.
Return on capital employed (ROCE) is defined as after-tax
PFO divided by capital employed.
Adjusted income statement for ongoing operations
For a better understanding of the current and future
year-on-year evolution of the business, the Company also
provides an adjusted income statement for the “ongoing
operations”.
• Ongoing operations
The adjusted income statement for “Ongoing operations”
not only excludes, as per the IFRS income statement, the
contribution from discontinued operation to the income
statement, but also the contribution from assets classified
as held for sale.
• Assets held for sale
The assets of one of the Company joint ventures (the “JV”)
active in China in Secure Transactions and Security have
been classified as “held for sale” due to the shareholding
restructuring in process with the partner. As per IFRS, the
assets and corresponding liabilities are isolated in the
balance sheet and reported as “held for sale”.
• Continuing operations
The IFRS “Continuing operations” comprises the above
“Ongoing operations” and “Assets held for sale”.
• Discontinued operation
The disposal of the Company business in point of sale
(“POS”) terminals was effective on December 31, 2010. As
per IFRS, the contribution of this activity to the IFRS
income statement is reclassified for both 2009 and 2010
reporting periods and its net contribution is presented on
the line item “Profit (loss) from discontinued operation (net
of income tax)”. For 2010, this line item also comprises the
net loss on the disposal of the related assets and
corresponding liabilities. Consequently, in the adjusted
income statement, the contribution of POS and the impact
of the transaction are not included in the profit from
operations.
Other information

Other information
148 Gemalto Annual Report 2010
Adjusted measures
149
Adjusted information for ongoing operations by segment, assets held for sales by segment,
adjusted financial information and discontinued operation
In thousands of Euro
Mobile
Communication
M2M
Ongoing operations:
Secure
Transactions
Security Others
Adjusted
financial
information
for ongoing
operations
Assets held for sale:
Secure
Transactions
(JV)
Security
(JV)
Adjusted
financial
information
Year ended December 31, 2009
Discontinued
operation:
Adjusted
financial
information
as reported
previously
Revenue 888,070 – 411,418 235,978 24,484 1,559,950 29,963 12,102 1,602,015 52,354 1,654,369
Gross profit 383,452 – 99,115 85,237 6,017 573,821 9,477 4,506 587,804 14,044 601,848
Operating expenses (232,753) – (87,281) (81,091) (2,259) (403,384) (3,347) (384) (407,115) (11,414) (418,529)
Profit from
operations 150,699 – 11,834 4,146 3,758 170,437 6,130 4,122 180,689 2,630 183,319
Others
(POS)
In thousands of Euro
Mobile
Communication
Ongoing operations:
M2M
Secure
Transactions
Security Others
Adjusted
financial
information
for ongoing
operations
Assets held for sale:
Secure
Transactions
(JV)
Security
(JV)
Year ended December 31, 2010
Adjusted
financial
information
Pro-forma
Discontinued
operation:
Revenue 980,871 81,329 462,072 318,077 19,493 1,861,842 41,298 2,428 1,905,568 50,776
Gross profit 375,885 26,531 140,193 129,065 4,349 676,023 12,548 789 689,360 14,577
Operating expenses (258,191) (19,431) (99,030) (89,673) (2,233) (468,558) (4,955) (184) (473,697) (13,912)
Profit from
operations 117,694 7,100 41,163 39,392 2,116 207,465 7,593 605 215,663 665
Others
(POS)
Reconciliation between adjusted financial information and IFRS financial information
In thousands of Euro
Adjusted
financial
information
for ongoing
operations
Contribution from
JV and POS
Adjusted financial
information
Year ended December 31, 2009
Adjustments
IFRS financial
information
Revenue 1,559,950 42,065 1,602,015 (122) 1,601,893
Cost of sales (986,129) (28,082) (1,014,211) (1,709) (1,015,920)
Gross profit 573,821 13,983 587,804 (1,831) 585,973
Operating expenses
Research and engineering (91,114) (178) (91,292) (1,017) (92,309)
Sales and marketing (223,651) (3,193) (226,844) (4,631) (231,475)
General and administrative (92,199) (793) (92,992) (6,488) (99,480)
Other income (expense), net 3,580 433 4,013 – 4,013
Profit from operations (PFO) 170,437 10,252 180,689
Equity-based compensation charges (13,967)
Restructuring & acquisition-related expenses (9,316) (9,316)
Amortization and depreciation of intangibles
resulting from acquisitions (23,699) (23,699)
Operating result (EBIT) (46,982) 133,708
Financial income (expense), net (2,246) (2,246) (2,246)
Share of profit of associates 1,380 1,380 1,380
Gain on sale of investment in associate 78 78 78
Profit before income tax 169,649 10,252 179,901 (46,982) 132,919
Income tax (expense) credit (19,649) (1,998) (21,647) 4,222 (17,425)
Profit from continuing operations 150,000 8,254 158,254 (42,760) 115,494
In thousands of Euro
Adjusted
financial
information
for ongoing
operations
Contribution from
JV and POS
Adjusted financial
information
Year ended December 31, 2010
Adjustments
IFRS financial
information
Revenue 1,861,842 43,726 1,905,568 – 1,905,568
Cost of sales (1,185,819) (30,389) (1,216,208) (2,512) (1,218,720)
Gross profit 676,023 13,337 689,360 (2,512) 686,848
Operating expenses
Research and engineering (103,546) (255) (103,801) (811) (104,612)
Sales and marketing (256,222) (4,146) (260,368) (7,177) (267,545)
General and administrative (117,067) (867) (117,934) (9,687) (127,621)
Other income (expense), net 8,277 129 8,406 – 8,406
Profit from operations (PFO) 207,465 8,198 215,663
Equity-based compensation charges (20,187)
Restructuring & acquisition-related expenses (9,268) (9,268)
Amortization and depreciation of intangibles
resulting from acquisitions (22,792) (22,792)
Operating result (EBIT) (52,247) 163,416
Financial income (expense), net 796 796 796
Share of profit of associates 1,717 1,717 1,717
Gain on sale of investment in associate – – –
Profit before income tax 209,978 8,198 218,176 (52,247) 165,929
Income tax (expense) credit 2,519 (1,904) 615 3,256 3,871
Profit from continuing operations 212,497 6,294 218,791 (48,991) 169,800
Profit from discontinued operation (POS)
(net of income tax) 2,630 2,630 2,630
Profit for the period (Net profit) 150,000 10,884 160,884 (42,760) 118,124
Loss from discontinued operation (POS)
(net of income tax) (2,422) (2,422) (2,422)
Profit for the period (Net profit) 212,497 3,872 216,369 (48,991) 167,378
Attributable to:
Owners of the Company 149,014 8,542 157,556 114,796
Non-controlling interests 986 2,342 3,328 3,328
Earnings per share (€ per share)
Basic 1.81 1.91 1.39
Diluted 1.78 1.88 1.37
Attributable to:
Owners of the Company 211,243 1,669 212,912 163,920
Non-controlling interests 1,254 2,203 3,457 3,458
Earnings per share (€ per share)
Basic 2.54 2.56 1.97
Diluted 2.50 2.52 1.94
Other information

Other information
Gemalto Annual Report 2010
150 Investor information
151
Investor information
ADR (American Depositary Receipt)
Gemalto established a sponsored Level I American
Depository Receipt (ADR) Program in the US in November
2009. Each Gemalto ordinary share is represented by two
ADRs. Gemalto’s ADRs trade in US dollars and have full
voting rights. The dividends are the same as for Gemalto’s
shares and are paid to investors in US dollars. Dividends
are converted into US dollars by the depositary bank at
the prevailing rate.
Geographic spread of share holdings
Geographical spread of identified shareholding as of
November 2010
North America 28%
UK and Ireland 14%
Continental Europe 55%
Other 3%
Investor relation policy
Maintaining positive relations with our investors is key to
Gemalto’s growth. The confidence and loyalty of private
and institutional shareholders are essential to our successful
long-term development. Gemalto’s investor relations policy
is aimed at informing shareholders in a timely and detailed
way about developments that are relevant to Gemalto in
order to provide a faithful and clear picture of investment
decisions involving Gemalto. Price sensitive information
is disseminated without delay through press releases and
web site updates.
In addition to the AGMs, Gemalto has implemented a wide
variety of communication tools to keep investors informed
on a regular basis. These include the annual reports, legal
announcements, press releases and financial statements.
At the publication of interim and annual financial statements,
Gemalto holds conference calls or investor meetings.
In addition, Gemalto regularly features road shows and
participates in conferences for institutional investors.
These contacts help Gemalto to get a clear picture of
investors’ and analysts’ opinions. Relevant information
for potential and current shareholders may be found on
the Gemalto web site under the link ‘Investor Relations’
www.gemalto.com/investors
Gemalto also observes ‘black out’ periods during which
no road shows and interviews with potential or current
investors take place. For interim and annual publications,
this covers at least fifteen days prior to the publication date.
Corporate seat
Gemalto N.V. is the holding company of the Group.
The corporate seat of Gemalto N.V. is Amsterdam, the
Netherlands, and its registered office address is Barbara
Strozzilaan 382, 1083 HN Amsterdam, the Netherlands.
Gemalto N.V. is registered with the trade register in
Amsterdam, the Netherlands under No. 27.25.50.26.
Share capital structure
The Company’s authorized share capital amounts to
€150,000,000 and is divided into 150,000,000 ordinary
shares, with a nominal value of €1 per share. As of
December 31, 2010 the Company’s issued and paid-up
share capital amounted to €88,015,844, consisting of
88,015,844 ordinary shares with a nominal value of €1 per
share, of which 4,884,596 shares were held in treasury.
83,131,248 shares were in circulation on December 31,
2010.
Stock exchange listing – 2010 stock market data
Gemalto N.V. (Euronext NL 0000400653) is listed on Eurolist
by Euronext Paris S.A. in the compartment A (Large Caps).
Gemalto shares were eligible for the Deferred Settlement
System or Service de Règlement Différé (SRD) from
January 26, 2006 onwards. Among other stock indices,
Gemalto is part of the SBF 120 (FR0003999481), CAC
NEXT 20 (QS0010989109) and Dow Jones STOXX 600
Index (EU0009658202).
Mnemonic: GTO
Exchange: NYSE Euronext Paris
ISIN Code: NL0000400653
Reuters: GTO.PA
Bloomberg: GTO:FP
Share price evolution
Gemalto (in Euro)
40
30
20
10
0
2008 2009 2010
Gemalto
SBF120
Rebased (100 on 1/1/2008)
• Average daily trading volume on Euronext Paris in 2010: 378,441 shares
• Market capitalization as of December 31, 2010: €2,802,864,552
180
150
120
90
60
30
0
Structure: Sponsored Level I ADR
Mnemonic: GTOMY
Exchange: OTC
Ratio (ORD:DR): 1:2
DR ISIN: US36863N2080
DR CUSIP: 36863N 208
Shareholders’ disclosures
The following shareholding threshold disclosures were
applicable as at December 31, 2010. For further information,
please refer to Shareholders’ disclosures, page 55.
Notification date Notifier
Disclosure
(% of
capital)
December 30, 2010
FMR LLC (Fidelity
Management & Research)
(USA) 10.72%
May 28, 2009
Caisse des Dépôts
et Consignations
(CDC) (France) 8.43%
Sept 18, 2008 (1) Gemalto N.V 5.17%
(1)
4,884,596 shares, or 5,55% of the capital, were held in treasury
by Gemalto as of December 31, 2010.
Financial calendar 2011
Important dates of financial calendar
March 10, 2011
April 28, 2011
May 18, 2011
August 25, 2011
October 20, 2011
Publication of 2010 Fourth Quarter
Revenue and Full Year Results
Publication of 2011 First Quarter
Revenue
AGM
Publication of 2011 Second Quarter
Revenue and First Half Results
Publication of 2011 Third Quarter
Revenue
2011 AGM
Gemalto N.V. will hold its 2011 AGM at the Sheraton
Amsterdam Airport Hotel & Conference Center, Schiphol
Boulevard 101, 1118 BG Schiphol Airport, the Netherlands
on Wednesday, May 18, 2011 at 10 a.m. CET.
For the AGM on May 18, 2011 a record date (being April
20, 2011) will apply: those persons, who on April 20, 2011
hold shares in the Company and are registered as such in
a register designated thereto by the Board for the AGM,
will be entitled to participate and vote at that meeting.
Dividend
The Company paid the first dividend of its history in 2010,
with a cash dividend of €0.25 per share in respect of the
2009 financial year. With due observance of the Company’s
dividend policy the Board will propose to the 2011 AGM
to distribute a dividend in cash of €0.28 per share in
respect of the 2010 financial year. For more information
on the dividend policy, please refer to Distribution of
profits, page 55.
Share buy-back program
As authorized by the 2010 AGM, the Company has renewed
its share buy-back program up to and including November
18, 2011. During the full year 2010, the Company used €39
million to purchase Gemalto shares within this program. For
further information on the share buy-back program, please
refer to Authorizations to the Board, page 54.
Investor Relations contact:
Gemalto shareholders service
Tel: +33 1 55 01 50 96
Fax: +33 1 55 01 51 20
Email: investor@gemalto.com
Investor Center: www.gemalto.com/investors
Contact us at: http://www.gemalto.com/php/contactus.php
Contact details for ADR holders:
Deutsche Bank Shareholder Services
American Stock Transfer & Trust Company
Peck Slip Station
P.O. Box 2050
New York, NY 10272-2050
Email: DB@amstock.com
Toll-free number: +1 866 706 0509
Direct Dial: +1 718 921 8137
Gemalto’s registrar
Netherlands Management Company B.V.
Visiting address: Parnassustoren, Locatellikade 1,
1076 AZ Amsterdam, the Netherlands
P.O. Box 75215, 1070 AE Amsterdam, the Netherlands
Tel: +31 20 57 57 124 / fax +31 20 42 06 190
Email: registrar.and.shareholder.services@tmf-group.com
Other information

Other information
Gemalto Annual Report 2010
152 Glossary of digital security terms
153
Glossary of digital
security terms
3FF (3rd Form Factor): a very small SIM card, also
known as a “micro-SIM”, for use in small mobile devices.
3G (Third Generation): the broadband
telecommunications systems that combine high-speed
voice, data and multimedia.
3GPP (3G Partnership Project): a group that aims
to produce specifications for a 3G system based on
GSM networks.
4G: the 4th generation of wireless standards offering a
comprehensive, secure all-IP based mobile broadband
solution to smartphones, laptop computer wireless
modems and other mobile devices.
CAC (Common Access Card): a US Department of
Defense smart card issued as standard physical and
network identification for military and other personnel.
CDMA (Code Division Multiple Access): a wireless
communications technology that uses the spread spectrum
communication to provide increased bandwidth.
Contactless: a card that communicates by means of
a radio frequency signal, eliminating the need for physical
contact with a reader.
DDA (Dynamic Data Authentication): an
authentication technology that allows banks to approve
transactions at the terminal in a highly secure way.
DI (Dual Interface): a device that is both contact
and contactless.
Digital signature: an electronic signature created with
a public-key algorithm that can be used by the recipient
to authenticate the identity of the sender.
Dongle: any small piece of hardware that plugs into
a computer.
EAC (Extended Access Control): a mechanism
enhancing the security of ePassports whereby only
authorized inspection systems can read biometric data.
EDGE: a pre-3G digital mobile phone technology allowing
improved data transmission rates.
EMV: the industry standard for international debit/ credit
cards established by Europay, MasterCard and Visa.
ePassport: an electronic passport with high
security printing, an inlay including an antenna
and a microprocessor, and other security features.
ePurse: a small portable device that contains electronic
money and is generally used for low-value transactions.
eTicketing: electronic systems for issuing, checking
and paying for tickets , mainly for public transport.
ETSI: the European Telecommunications
Standards Institute.
FIPS 201 (Federal Information Processing
Standard): a US federal government standard that
specifies personal identity verification requirements for
employees and contractors.
FOMA (Freedom of Mobile Multimedia Access):
the brand name for the world’s first W-CDMA 3G services
offered by NTT DoCoMo, the Japanese operator.
GSM (Global System for Mobile communications):
a European standard for digital cellphones that has now
been widely adopted throughout the world.
GSMA (GSM Association): the global association for
mobile phone operators.
HSPD-12 (Homeland Security Presidential
Directive-12): orders all US federal agencies to issue secure
and reliable forms of identification to employees and contractors,
with a recommendation in favor of smart card technology.
ICAO (International Civil Aviation Organization):
a UN agency that defines standards and practices for air
navigation, prevention of unlawful interference, and
facilitation of border-crossing procedures for international
civil aviation.
IP (Internet Protocol): a protocol for communicating
data across a network; hence an IP address is a unique
computer address using the IP standard.
Java: a network oriented programming language invented
by Sun Microsystems and specifically designed so that
programs can be safely downloaded to remote devices.
LTE (Long Term Evolution): the standard in advanced
mobile network technology, often referred to as 4G
(see above).
M2M (Machine-to-Machine): technology enabling
communication between machines for applications such
as smart meters, mobile health solutions, etc.
MFS (Mobile Financial Services): banking services
such as transfer and payment available via a mobile device.
Microprocessor: a “smart” card comprising a module
embedded with a chip, a computer with its own processor,
memory, operating system and application software.
MIM (Machine Identification Module): the equivalent
of a SIM with specific features such that it can be used in
machines to enable authentication.
MMS (Multimedia Messaging Service): a standard
way of sending messages that include multimedia content
(e.g. photographs) to and from mobile phones.
MNO (Mobile Network Operator): a company that
provides services for mobile phone subscribers.
Module: the unit formed of a chip and a contact plate.
NFC (Near-Field Communication): a wireless
technology that enables communication over short
distances (e.g. 4cm), typically between a mobile device
and a reader.
OATH (The Initiative for Open Authentication):
an industry coalition comprising Gemalto, Citrix, IBM,
Verisign and others, that is creating open standards for
strong authentication.
OMA (Open Mobile Alliance): a body that develops
open standards for the mobile phone industry.
OS (Operating System): software that runs on
computers and other smart devices and that manages
the way they function.
OTA (Over-The-Air): a method of distributing new
software updates to cellphones which are already in use.
OTP (One-Time Password): a password that is valid
for only one login session or transaction.
PDA (Personal Digital Assistant): a mobile device that
functions as a personal information manager, often with the
ability to connect to the internet.
PIN (Personal Identification Number): a secret code
required to confirm a user’s identity.
PKI (Public Key Infrastructure): the software and/or
hardware components necessary to enable the effective
use of public key encryption technology. Public Key is a
system that uses two different keys (public and private)
for encrypting and signing data.
RUIM (Removable User Identity Module): an identity
module for standards other than GSM.
SIM (Subscriber Identity Module): a smart card for
GSM systems.
SMS (Short Message Service): a GSM service that
sends and receives messages to and from a mobile phone.
Thin client: a computer (client) that depends primarily
on a central server for processing activities. By contrast,
a large client does as much processing as possible.
TSM (Trusted Services Manager): A third-party
enabling mobile operators, mass transit operators,
banks and businesses to offer combined services
seamlessly and securely.
UICC (Universal Integrated Circuit Card):
a high-capacity smart card used in mobile terminals
for GSM and UMTS/3G networks.
UMTS (Universal Mobile Telecommunications
System): one of the 3G mobile telecommunications
technologies which is also being developed into a
4G technology.
USB (Universal Serial Bus): a standard input/output
bus that supports very high transmission rates.
USIM (Universal Subscriber Identity Module):
ensures continuity when migrating to 3G services.
VPN (Virtual Private Network): a private network
often used within a company or group of companies
to communicate confidentially over a public network.
W-CDMA (Wideband – Code Division Multiple
Access):
a 3G technology for wireless systems based on CDMA
technology.
Other information

154
Other information
Gemalto Annual Report 2010
Printed on Revive Pure White Silk, a 100%
recycled paper with FSC certification.
The composition of the paper is 85%
de-inked post-consumer waste and
15% unprinted pre-consumer waste.
All pulps used are Elemental Chlorine
Free (ECF) and the manufacturing mill is
accredited with the ISO 14001 standard
for environmental management. The use
of the FSC logo identifies products which
contain wood from well-managed forests
certified in accordance with the rules of
the Forest Stewardship Council.
Design and production
Addison
www.addison.co.uk
© 2010 Gemalto N.V. All rights reserved.
Gemalto, Gemalto logos and product
and service names are trademarks of
Gemalto N.V. or its affiliates.

These photos were taken at
various Gemalto sites around
the world during 2010
“We’ve talked about Gemalto’s
successes in this report. In
reality, they’re the achievements
of our employees.”
Olivier Piou, CEO

“Introducing the people
behind digital security”