QUESTIONS // marKeTsANSWERS // soLuTioNs 2010

aNNuaL reporT

QUESTIONS //our marKeTs

people all over the world now want to be able to pay, communicate, work, travel, and network without boundaries anytime, anywhere. security, effi ciency, and convenience are key. can these expectations be met?

ViSiOn, MiSSiOn, VAlUESEvery organization needs to know what its core purpose is. Giesecke & Devrient has a shared mission that unites all its business segments and locations across the globe: We make the world secure by ensuring reliable transactions and the authenticity of identities as well as tangible and intangible values thus contributing to everybodys peace of mind.

A shared vision enables us to build on this solid foundation and become ever stronger and more successful: We safeguard reliable transactions and authenticity. We are the technology leader, trusted partner, and preferred provider of products, services, and solutions in all our markets. We act with intercultural excellence and entrepreneurial drive.

We observe five corporate values in the daily implementation of our vision and mission:

trust, quality, sustainability, responsibility, and integrity.

KEy figURES

BAnKnOTE: SAlES (EUR million)

2010_________

2009_________ 753

896

CARdS And SERViCES: SAlES (EUR million)

2010_________

2009_________ 705

589

gOVERnMEnT SOlUTiOnS: SAlES (EUR million)

2010_________

2009_________ 210

183

nEw BUSinESS: SAlES (EUR million)

2010_________

2009_________ 20

16

BAnKnOTE: EMPlOyEES

2010_________

2009_________ 4,050

3,975

nEw BUSinESS: EMPlOyEES

2010_________

2009_________ 93

85

gOVERnMEnT SOlUTiOnS: EMPlOyEES

2010_________

2009_________ 658

675

CARdS And SERViCES: EMPlOyEES

2010_________

2009_________ 5,176

4,963

giESECKE & dEVRiEnT gROUP (EUR million)

2010 2009 % Change

Sales 1,688.2 1,684.2 0.2

Sales (Germany) 227.4 248.8 -8.6

Sales (other countries) 1,460.8 1,435.4 1.8

Capital expenditure 100.4 175.1 -42.7

Research and development 116.7 93.7 24.5

EBIT 131.3 139.5 -5.9

Net income 80.5 104.5 -23.0

Employees as of December 31 10,413 10,122 2.9

* Excluding payments to the G&D Foundation (EUR 20 million)

*

*

CORPORATE STRATEgy

iS SECURiTy STill POSSiBlE in OUR inTER- COnnECTEd wORld?In todays world, people, data, and goods are globally connected and constantly on the move. Sometimes we pay by cash, sometimes by card, and increasingly often by cell phone. Smartphones and notebooks enable communication in every corner of the globe. We log on to the corporate network from home, and even machines automatically communicate with one another. The amount of data sent via mobile devices alone will, at minimum, double each year from now through 2014, while the flow of international goods and travel is gradually regaining pre-crisis levels. The constant in this fast-paced world is security of data, transactions, identities, and values. Something that G&D delivers every day.

> Corporate strategy _____ page 010

S_02 S_03

05S_05

PAyMEnT

iS CASh indiSPEnSABlE?Cash is still king, but new methods of secure, flexible payment are emerging all the time. However, it is just these attributes security and flexibility that make cash the worlds most popular payment method. With G&Ds cutting-edge paper, printing, and processing solutions, manipulation of bank-notes is virtually impossible. Of course, many people now use cards for payment too. And we produce a wide variety, with each new version featuring more functionality than the last. G&D is also energetically driving development of cell phones with a wallet function. Whether cash or electronic, we strive every day to make payment transactions secure and convenient all over the world.

> Payment _____ page 012

S_04

07S_0706

COMMUniCATiOn

will iT SOOn BE iMPOSSiBlE TO liVE wiThOUT My CEll PhOnE?Well, why miss out on the many helpful cell phone applications that make everyday life more exciting, convenient, and flexible? What began in the US at the end of the 1940s with the worlds first cell phone network is now a booming mass market. Thanks in no small part to our solutions, modern cell phones are fast becoming the nerve center of our lives, opening up myriad applications both over the air and online. They help us stay in touch both by calls and through mobile access to e-mails and social networks such as Twitter and Facebook, they make traveling easier, and they can be used for payment and other monetary transactions such as banking. As one of the worlds leading providers, G&D offers tailored hardware, software, and services for all these scenarios.

> Communication _____ page 016

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idEnTiTy

dO PEOPlE REAllyKnOw ExACTly whERE i AM And whAT iM dOing, 24/7 ?With the increasing use of modern payment and communication tools such as the Internet, cell phones, and cards, it is vital to prevent unauthorized parties gaining access to data or secure systems, for instance via business premises or IT networks. Our expertise is also helping to make travel safer. For example, G&D helps countries to protect their borders against international terrorism and organized crime. Unambiguous verification of identity lies at the heart of all these precautions on entering air-ports or a companys server room, or in the event of a vehicle check. Identity management can also help to avoid unnecessary repeat examinations in the healthcare sector. G&D provides cutting-edge solutions for all these applications and more.

> Identity _____ page 020

S_09

RESEARCh And dEVElOPMEnT

dOnT TEChniCAl AdVAnCES AlwAyS MAKE ThingS MORE COMPliCATEd? Our researchers help to make anytime, anywhere payments, communications, work, travel, and networking safer and more convenient. Technology is advancing at a breathtaking pace: the first e-mail was sent in 1971, almost 150 years after the invention of the electrical telegraph system in 1837, but it took less than 20 years for the mobile Internet to reach critical mass following emergence of the first online chat room (1988), SMS (1992), and social media (1995). G&D makes a pioneering con-tribution to user-friendliness and state-of-the-art security and will continue to do so in the future.

> Research and development _____ page 024

S_10 11S_11

EMPlOyEES

whAT fUTURE liES in STORE fOR OUR EMPlOyEES?All our technology would come to nothing without people to develop, market, and use it. So a tech-nology provider such as G&D, in particular, needs employees who put their heart and soul into what they do. We value and support our staff of around 10,000 as the most important factor in our success. We provide varied challenges within a climate of innovation, an entrepreneurial outlook combined with a real sense of responsibility and tradition, a work environment where people feel valued, person-al progression opportunities through ongoing development and training, the chance to experience assignments in different countries and cultures, a transparent pay structure, and open communication.

> Employees _____ page 026

S_12 S_13

S_14 S_15

CORPORATE SOCiAl RESPOnSiBiliTy

hOw CAn wE liVE UP TO RESPOnSiBiliTy TOdAy?With the global interconnection of politics, business, and civil society proceeding at a rapid pace, it is more important than ever to behave responsibly and observe strict ethical principles. Our actions today have a far-reaching impact and everything we do affects others. That is why it is in the interest of every company in the global marketplace to rise to the challenge of responsible and sustainable business practices. G&D has embraced this concept with a view to adding long-term value for our customers, employees, and owner, as well as society as a whole. Rather than merely focusing on short-term profits, we aim to create value that will still be relevant to future generations. As an independent company now in its fifth generation of family ownership, long-term thinking is not just important to Giesecke & Devrient it is the cornerstone of our success.

> Corporate social responsibility _____ page 030

Payment

Communication

Identity

Q4 2010

G&D delivers components for the new German ID card to the Bundesdruckerei

Q1 2010

The joint venture Original1 commences operations

Q2 2010

G&D receives another award in recognition of its family-friendly policies

Q3 2010

G&D sets up its own foundation

giesecke & devrient achieved some significant milestones in 2010, continuing to align its operations more closely with market and customer requirements. This enables us to play an active role in shaping major trends of the future.

Giesecke & Devrient safeguards reliable transactions and the authenticity of identities and values. As a technology provider, we make the world more secure through our activities in the payment, communication, and identity markets.

ANSWERS // OUR SOLUTIONS

FORewORD 004 MANAGeMeNT BOARD 006

SUpeRvISORy BOARD RepORT 008 CORpORATe STRATeGy 010

pAyMeNT 012

COMMUNICATION 016

IDeNTITy 020

ReSeARCh AND DeveLOpMeNT 024

eMpLOyeeS 026

CORpORATe SOCIAL ReSpONSIBILITy 030

GROUp MANAGeMeNT RepORT 038 CONSOLIDATeD FINANCIAL STATeMeNTS 068

CORpORATe BODIeS 126 GLOSSARy 128

CONTeNTS

004 005

Thiscombinesourhardware,software,andserviceportfoliosforintegratedsolutionscoveringtelecom-municationsandcashlesspayment,mobilebusinessapplications,andpublictransport,aswellasInternetandnetworksecurity.JustasG&Dtechnologiesalreadycreatetrustandsecurityforpaymentproductsinpeopleswallets,thisneworganizationalstructureleavesusevenbetterplacedtoensuretrustandsecurityformobileservicesonsmartphones.Thenewbusinessunitscomprehensivesolutionsportfoliowillnowbemarketedbyajointglobalsalesteam.

G&Disthusextremelywellpositionedtorespondtothechallengesandrequirementsofcustomersacrossallitsmarkets.Accordingly,thisyearsannualreportfeaturesaquestion-and-answerformatforourcoremarketsofpayment,communication,andidentityverification.

Thesignificantprogressachievedonsomanyfrontsin2010wouldnothavebeenpossiblewithouttheoutstandingcommitmentofouremployees.OnbehalfoftheentireManagementBoard,Iwouldliketothankyouallforyourdedicationandloyalty.Weareconstantlystrivingtoenhanceourstandingasanattractiveandreliableemployer,sowewereparticularlypleasedtolearnfromourmostrecentglob-alemployeesurveyin2010thatsome71percentofourstaffwouldrecommendG&Dasanemployer.Thatisahugesourceofmotivationforusandasolidplatformforthefuture.

Attheendof2010,westartedtoimplementourCHANGEprogramtoharmonizeandstandardizeourglobalprocessandITenvironmentacrosstheGroup.Theaimistocreateasignificantlymoreefficientorganizationalstructurethroughoutallourbusinessunitsandinternationalsubsidiaries,enablingustoalignourinternalcompetencieswithexternalmarketandcustomerrequirementsevenfasterandmoreeffectively.Thisiscrucialtomaintainingourprofitablegrowthtrajectorybeyond2012.

Weexpecttheglobalrecoverytocontinuein2011,albeitatalimitedpace.Wewilldoourutmosttomaintainourleadingroleinourcoresectorsandsuccessfullypositionournewbusinessunitanditssolutionsportfoliointheburgeoningmobilesecuritymarkets.Overall,weanticipatemoderatesalesgrowthfortheG&DGroupoverthecomingyear.Weplantoincreaseinvestmentagainin2011,whileremainingcommittedtoboostingenterprisevalue.

Dr.KarstenOttenbergChairmanoftheManagementBoard

FORewORD

Dr. Karsten OttenbergChairman of the Management Board

LadiesandGentlemen:

Giesecke&Devrientproveditselfresilientinthefaceoftherecentglobaleconomicandfinancialcrisis.ThetotalsalesofaroundEUR1.7billionachievedonthebackofrobustgrowthpriortothecrisiswererivaledinfiscal2010,withtheexpecteddropinsalesintheBanknotebusinessunitmorethanoffsetbysignificantgrowthinCardsandServicesandGovernmentSolutions.Wewereabletomaintainorexpandourmarketshareacrossallbusinessunits.Inaddition,thecompanysoperatingprofitincreasedcom-paredwiththepreviousyear,risingtomorethanEUR150million.Thisagainenabledustofundourconsistentlyhighinvestmentinfuturedevelopmentfromourowncashflowin2010.

ThekeypillarsofourGroupstrategyremaininnovativedrive,globalcustomerproximity,andthetrustinourbrandthatGiesecke&Devrienthasbuiltupoveralmost160years.Thesethreepillarsagaindeter-minedthefocusofourcapitalexpenditurein2010,withfundingallocatedtoresearchanddevelopmentincreasingbysome25percentandexpenditureonourglobalsalescapabilitiesrisingaround10percent.2010alsosawusunderlineourcommitmenttothesustainabledevelopmentofourcompanyandthesocietyinwhichweliveandoperatebyestablishingtheGiesecke&DevrientFoundation,whichweendowedwithEUR20million.Inaddition,weinvestedsignificantlyingloballyintegratedmanagementofenvironmentalsustainability,employeedevelopment,andcompliance.OuradoptionoftheUNGlobalCompactin2010representsanimportantmilestoneinthisprocess.

Takenasawhole,weregardfiscal2010asasuccessandnotjustfromabusinessperspective.AllofusintheGroupworkedintensivelyonessential,forward-lookingprojects.TheoverarchingaimistomaintainG&Dssuccessasatechnologyleaderandindependent,family-ownedcompanybyplayinganactiveroleinshapingthefutureofthebanknoteanddeliveringsecurityandtrustinourmobile,globallynet-workedworld.OurCreatingConfidence.claimremainsourcoreperformancepromisetoourcustomersandbusinesspartnersworldwide.

Inaworldwherepeople,data,andgoodsareconstantlyonthemoveandgloballyinterconnected,trustisacentralrequirementespeciallyintermsofthesecurityoftransactionsandtheauthenticityofidentities,assets,andvalues.Thisisparticularlyimportantintherapidlygrowing(andconverging)fieldsofpay-ment,mobilecommunications,andInternetservices.Giesecke&Devrienthasinvestedsubstantiallyinitsportfolioofsecureproducts,software,andservicesthroughoutrecentyearstohelpshapethedynamicnewmarketforsecuremobileapplications.KeymilestoneshereincludedestablishingtheNewBusinessstart-updivisionandVenyonservicesubsidiaryin2006andacquiringsoftwarecompanySmartTrustin2009.Atthestartof2011,wetookthisworkforwardbycreatingthenewMobileSecuritybusinessunit.

1854

From 1854 up to the creation of the German Empire in 1871, G&D prints state-issued paper money for 8 German principalities and banknotes for 19 private note-issuing banks

1852

Hermann Giesecke and Alphonse Devrient establish the Officin fr Geld- und Werthpapiere in Leipzig, Germany

007007

MANAGeMeNT BOARD

006

1922

Printing of banknotes for the German Reichsbank begins with the Giesecke Tausender

Dr. Karsten OttenbergChairman of the Management Board, CEO

hans wolfgang KunzGovernment Solutions Business Unit

Dr. peter ZattlerCFO

Dr. walter SchlebuschBanknote Business Unit

Michael KuemmerleMobile Security Business Unit

008 009

LadiesandGentlemen:

Duringthe2010fiscalyear,theSupervisoryBoardofGiesecke&DevrientGmbHperformedallitsdutiesasstipulatedbylegalprovisionsandtheArticlesofIncorporation.TheSupervisoryBoardalsomonitoredtheManagementBoardandadvisedonissuesofnote.

AtmeetingsoftheSupervisoryBoard,theManagementBoardprovidedregular,comprehensiveinfor-mationaboutthecompanyssituation.TheSupervisoryBoardadditionallyreceivedoralandwrittenupdatesonG&Dsperformanceandfinancesintheformofquarterlyreports.Outsidethescheduledmeetings,theChairmanoftheSupervisoryBoardwasalsoinregularcontactwiththeManagementBoardandwaskeptinformedofissuesrelatingtothecurrentbusinesssituation.

TheSupervisoryBoardheldthreescheduledmeetingsduringfiscal2010toconsidertheeconomicsituationofthecompanyandmajorinvestmentdecisions.ItalsousedthesemeetingstodealwithcorporateplanningandG&Dsfinancingstrategy.Further,itadvisedtheManagementBoardonmattersrelatingtoHRpolicyandreviewedcomplianceandriskmanagementprocedures.AnotherimportantissuediscussedbytheSupervisoryBoardwasthenewstrategicalignmentoftheTelecommunicationsandPaymentdivisionsandtheassociatedcreationofanewMobileSecuritybusinessunit,comprisingtheSecureDevicesdivisionandtheServerSoftwareandServicesdivision.TheSupervisoryBoardalsoconsideredtheCHANGEprogram,whichentailsglobalrestructuringoftheprocessandITenvironment.

TheSupervisoryBoarddulyreceivedtheannualfinancialstatementsandmanagementreportofGiesecke&DevrientGmbHfortheperiodendingDecember31,2010,preparedinaccordancewiththeGermanCommercialCode(HGB),andtheconsolidatedfinancialstatementsandGroupmanage-mentreportfortheperiodendingDecember31,2010,preparedinaccordancewithIFRS,alongwiththeManagementBoardsproposalforappropriationofnetincomeandtheauditreport.

Theauditor,KPMG,issueditsopinionontheaccounts.ThiswasunqualifiedwiththeexceptionthatthenotestotheconsolidatedfinancialstatementsdonotcontaindisclosuresrequiredbyIFRSwithregardtotheremunerationofmanagersinkeypositionswherethisinformationexceedsthereportingrequire-mentsofSection314oftheGermanCommercialCode.

TheSupervisoryBoardacceptedKPMGsauditopinionofbothsetsoffinancialstatements.Theaudi-torattendedthemeetingonMay4,2011,inwhichthefinancialstatementsandproposednetincomeappropriationwerediscussed,andreportedonthemainfindingsoftheaudit,particularlyconcerningtheinternalcontrolandriskmanagementsysteminrelationtothefinancialreportingprocess.

TheSupervisoryBoardconcludeditsreviewwithnoobjectionsraised.Itdiscussed,examined,andapprovedtheannualandconsolidatedfinancialstatements,includingthecorrespondingmanagementreports,andagreedtotheproposednetincomeappropriationatitsmeetingofMay4,2011.

TheSupervisoryBoardwouldliketothanktheManagementBoard,allemployees,andtheWorksCouncilsoftheG&DGroupfortheireffortsandvaluablecontributionstoasuccessfulfiscalyear.

Dr.Peter-AlexanderWackerChairmanoftheSupervisoryBoard

Munich,May2011

Dr. Peter-Alexander Wacker Chairman of the Supervisory Board

SUpeRvISORy BOARD RepORT

1948

Following the destruction of G&Ds headquarters in Leipzig, Siegfried Otto starts to rebuild the company in Munich

1955

Development of the first standard Deutsche Mark travelers checks in collaboration with the German banking industry

010 011

Giesecke&Devrientisatechnologyleader,trustedpartner,andpreferredproviderinallitsmarkets.Assuch,wearealreadyseeingsignsofanemergingmega-trend:theworldsofpayment,mobilecommunications,andtheInternetarerapidlyconverging,withmodernsmartphonesasthenervecenterandnexus.Thesedevicesareusedforsupermarketandonlineshopping;ascontact-lessdriverslicenses;toperformbanktransfers,displaymedia,andlinkupwithcustomersandcolleagues.Asmobilitypicksuppaceandbarriersfall,theimportanceofdatasecurityandreliablewaystoidentifypeopleincreases.SoG&Dpro-videsend-to-endsolutionsformobilesecurityapplicationscomprisinghardware,(server)soft-ware,andservices,meetingtheneedsofthesehigh-growthmarketsofthefuture.

Solutions for a mobile society

Toguaranteesecurity,youneedtobeaheadofyourtime.Thisisastruetodayasitwasinthenineteenthcentury,whenourfounders,HermannGieseckeandAlphonseDevrient,laidthecorner-stoneforalmost160yearsofsuccess.Sincethen,wehavedevelopedasuccessionofhomegrowninnovationsthatmakedailylifemoresecureandconvenient.ExamplesincludetheEurochequesystem,cardsforthefirstGermancellphonenet-work,andelectronicpassportswithbiometricfeatures.Wearenowbuildinguptothecrestofanothermajorwaveofinnovations,withmobility,networking,andflexibleavailabilityallhavingasignificantimpactonourlives.Whetherathomeorintheoffice;onprivateorbusinesstrips;peoplewantanytime,anywhereaccesstoinformation,services,contacts,andentertainment.ConvergenceoftheInternetandmobiletelephonymakesallthispossible.Morethanfivebillioncellphonesarenowinuseworldwide,withInternet-enabledsmartphonesthemostdynamicmarketsegment.MobileInternetuseisgrowingsignificantlyfasterthanonlineaccessviastationaryPCs.

AtG&D,wehaverespondedtotheburgeoningimportanceofmobileapplicationsbyestablishingtheMobileSecuritybusinessunit,whichalignsusevenmorecloselywiththerequirementsof

ourmarkets.MobileSecurityincorporatesourhardwareandsoftwaresolutionsfortelecommu-nicationsandcashlesspayment,mobilebusinessapplications,andpublictransport,aswellasInter-netandnetworksecurity.Ourproductportfoliohererangesfromsecurehardware(e.g.paymentcards,SIMcards,andtokens)toservers,software,andservicesallmarketedbyajointsalesteam.Wearethusevenbetterequippedtomeettheneedsofourcustomersforintegrated,commer-ciallyattractiveofferings.Weoffertailor-madesolutionsthatguaranteesecurityintodaysvirtualworld,suchasnewcontactlesscellphoneswithNFCtechnology,secureintegrationofexternalstaffintocompanynetworks,securefinancialandbanktransactionsviacellphone,tap-prooftele-phonecallsandSMStexts,andwirelessmachine-to-machinecommunication.

ThenewMobileSecuritybusinessunitcomprisestheformerCardsandServicesunit,theTransitsegmentofGovernmentSolutions,andtheNewBusinessdivision.FormersubsidiariesVenyonandSmartTrusthavebeenintegratedintoG&Dscomprehensiveoffering,retainingrecognizedbrandssuchasConvego,SmartTrust,SkySIM,andStarSign.

Thankstothisgloballyuniquesolutionportfolio,G&Diswellpositionedinthepayment,commu-nication,andidentitymarkets.Findoutmoreonthefollowingpages.

CORpORATe STRATeGy

we SAFeGUARD ReLIABLe TRANSACTIONS AND The AUTheNTICITy OF IDeNTITIeS AND vALUeS :

159 years of innovation by Giesecke & Devrient

1968

G&D files the first patent application for cards with embedded chips

1971

The European banking industry develops the Eurocheque and Eurocheque card in conjunction with G&D

012 013

Inthe21stcentury,secure,convenient,andflexiblepaymentisamust.Peopledontwanttospendtimethinkingabouthowandwheretheycanpay:themainrequirementisthatitworks.Payingbycardinsteadofcashisalreadystandardpracticeformany.Andnowathirdoptionisavailablewiththelatestgenerationofcellphones,whichofferattractive,reliablemethodsofconductingmone-tarytransactions.

G&D banknotes in global circulation

Fourfactorsarecrucialtothesuccessofabank-note:security,durability,quality,anddesign.Fromtheusersperspective,notesshouldbegenuine,clean,andpleasingtotheeye.Thisisallveryfamiliarterritorytous.

Worldwide,morethan100countrieshavealreadychosentoprinttheircurrenciesonG&Dbank-notepaper.Wealsoproducebillionsofbanknotesayearourselves,workingunderultra-strictsecurityconditionsonbehalfoftheGermanBundesbankandover60othercentralbanksaroundtheglobe.Ineachcase,theproductispreciselytailoredtothelocalrequirementsoftheissuingcountry.ThemostadvancedsubstratecurrentlyontheworldmarketisourinnovativeHybridTMsolution,whichunitesthebenefitsofpaperandpolymerbanknotesinapioneeringcombination.Theresultantbanknotesareextremelydurableandsecure.Sinceitslaunchin2010,HybridTMhasalreadybeensuccessfullydeployedinthreecoun-tries,withmoretofollowin2011.Wearesocon-fidentofitsmarketpotentialthatoursubsidiaryLouisenthalhasinvestedinaproductionfacilitythatenableswindowsolutionsusingthissubstrate.G&Dhasalsomadeotherinvestmentstoensureitremainswellpositionedtoleveragethegrow-ingglobaldemandforbanknotes.Notably,theseincludedchanneling70millioneurosintoanewcylindermouldpapermachine,whichhasbeenworkingextremelyefficientlyandatfullcapacityeveninitsfirstyearofuse.

Themainrequirementofabanknoteisthatitshouldoffermaximumprotectionagainstcoun-terfeiting.G&Dspaperandbanknotesbenefitfrominnovative,highlycomplexsecurityfeaturesthatofferunrivaledprotectionagainstforgerywhencombined.OnlyaglobalsystemsproviderlikeGiesecke&Devrientcanfulfilltheneedfor

banknoteauthenticitytothisextentandwithsuchimpressiveresults.Thewidespreadavailabil-ityofhigh-resolutionscannersandcolorphoto-copiershasledtoasharpriseincounterfeitingattemptsinrecentyears.Thatiswhywedevelopatleastonenewsecurityfeatureeachyear,stay-ingastepaheadoftheforgers.Manyofthesedevelopmentsaredesignedtobeseenorfeltbyusers(humanfeatures),whileotherscanonlybereadbyspecialsensorsandofferadditionalprotectioninthebackground.Oursecuritytech-nologyisacompellingcombinationofproventechniquesandinnovation:theFIT(FineInta-glioTechnology)feature,forexample,isbasedontheoldestprintingmethodintheworld,whileLOOK(LaserOriginatedOpticalKey)har-nessesthepotentialofmodernlasertechnology.Securitythreadsandfoilsalsoofferreliablepro-tection.ThevarifeyeC2see-throughwindowchangescolorandimagedependingontheangleatwhichthebanknoteisviewed.Usingholo-graphicfoileffectsfurtherenhancestheattrac-tivenessofthenote.Sucheye-catchingelementsarefamiliartothepublicandtheopticallyvari-ableeffectscannotbereproducedbydigitalcopiers.OurvarifeyeMagicfeatureonKazakh-stans1,000tengenotewontheBestAppliedSecurityProductawardin2010fromtheInter-nationalHologramManufacturersAssociation.

pAyMeNT

TheReS ROOM IN OUR wALLeTS FOR BOTh BANKNOTeS AND CARDS AND NOw CeLL phONeS ARe pROvIDING ANOTheR SeCURe wAy TO pAy:

100 countries print banknotes on paper from G&D

1975

Introduction of automated banknote processing systems and the worlds first machine-readable banknote

1979

G&D develops the worlds first system for laser personalization of credit cards

>>www.louisenthal.com

014

BANkNotES

TRUSTeD By ALL

When explorer Marco Polo became the first European to encounter paper money in China around 1300, little did he know that these bank-notes, which were fully accepted as a payment method alongside coins, would fundamentally change the way business was conducted in his own country too. However, it was to be another 150 years before coins faced serious competition from notes in Europe. Today, banknotes are the most popular method of payment worldwide, still preferred to cards or electronic transactions. In Germany, for example, 58 percent of goods and services purchased are paid for in cash, according to the Bundesbank. The reasons are many and varied: banknotes are flexible and discreet, and cash can also make it easier to keep an eye on ones spending. In countries with a less developed infrastructure, cash gives the general population access to the economy. But the main reason for the widespread acceptance of cash lies in the huge technical advances made in banknote production, particularly during recent years. Counterfeiters had it relatively easy in centuries past, but the barriers to manipulation are now so formidable that the banknote represents a genuine promise of value.

015

Tofacilitatecompletecash-cycleautomation,G&Dalsoprovidessystemsforcounting,authen-ticating,sorting,packing,anddestroyingbank-notes.Oursolutionsareusedbyover150countriesaroundtheglobe.Attheheartofoursystemsliesensorsthatunambiguouslyverifybanknoteau-thenticityandcondition.Afterall,anti-counter-feitingprotectionisnottheonlyfactorbywhichacurrencyisjudged.Aestheticsarealsoimportant,whichiswhymoreandmorecountriesarepursuingacleannotepolicy,underwhichonlynotesthataresufficientlycleanandundamagedremainincirculation.Inturn,theincreasingqualityofbank-notesenablesfurtherautomation.OurproductportfoliointhisarearangesfromNumerondesktopdevices(withtheten-thousandthsystemdeliveredin2010)throughhigh-performancemodularmachinessuchastheBPSM7launchedin2010andshippedtoover40customersinthefirstyearalonetospecialprocessingsystemsthathandle40banknotespersecondandareintegratedintohighlyefficientproductionprocesses.Suchsystemsaretypicallydeployedinlargecashcen-ters.Wealsoofferourcustomersend-to-endsolu-tionsthatencompassconsulting,planning,delivery,installation,maintenance,andrepair,aswellasongoingoptimization.Attheendoftheirusefullife,banknotesaredestroyedyetanotherareainwhichwearepioneersandtechnologyleaders.

G&D cards for secure, cashless payment

TheemergenceofEurochequesandECcardsinthe1970smarkedthedebutofanewfinancialtransactionmethod:thepaymentcard.Today,billionsofcash,bank,EC,credit,andcustomercardsareincirculationaroundtheglobe.Onlinetransactions,inparticular,areexperiencingamassivegrowthsurge.Witharound40yearsofexperiencetodrawon,G&Disoneofthebiggestplayersinthismarket,providinghigh-qualityservicesaswellascards.Ourcustomersincludebanks,creditcardorganizations,andotherenter-prisesworldwide.ThesewereamongthefactorsthatconvincedtheUniCreditGrouptomakeG&Ditsenterprise-widestrategicpartnerforitsentirerangeofcutting-edgepaymentcardsfrom2011onwards.

Thepaymentmarketiscurrentlyinastateofflux,withnewproviderssuchascellphonecompaniesandonlineretailersofferingfinancialservices,causingtraditionalproviderslikebankstorevisetheirbusinessmodels.Thisisopeningupopportu-nitiesforindependent,one-stopsolutionprovid-ers,suchasG&D,thatcandeliverbothhigh-volumestandardproductsandcustomsolutionpackages.OneofourlatestinnovationsistheGDC5120displaycard,featuringanadditionallygeneratedone-timepasswordthatguaranteesmaximumprotectionforpaymenttransactionsinaccordancewiththeinternationalEMVstandardbothinstoreandonline.

Anotherpaymenttrendismobilemoney,i.e.transferringmoneybetweencellphoneswithoutabankorotheraccountbeinginvolved.Weofferhighlysecureproductsandsolutionstomeetthisneed,whichisparticularlystronginemergingecon-omiesthatlackamodernbankinginfrastructure.

Cellphonesareavaluableadditiontotheworldofpayment,andasinthecashandcardarenasG&Disattheforefrontoftechnicaldevelop-mentshere. >>> More on page 16

pAyMeNT

1981

G&D is commissioned by French banks and the Deutsche Bundespost (German federal post office) to produce the first smartcards for a point-of-sale trial in France

016 017

Backwhencellphoneswereusedsolelyforcom-munication,G&Dwasalreadyhelpingtoshapethemarket.WeprovidedsmartcardsforthefirstGermancellphonenetworkinthe1980sandproducedthefirstcommercialSIMcardsin1991.Today,ourcustomersincludehundredsofmobilenetworkoperatorsandotherserviceprovidersworldwide,whorequiremuchmorethanjustvoiceandmessage-basedsolutions.Theever-smaller,flatter,andimpressivelystylishcellphonenowperformsnumerousdifferenttasksforwhichconsumersexpectmaximumsecurity.

Inthemobilecommunicationsmarket,threepara-metersarevitalforbusinesssuccessandcustom-ersatisfaction:attractiveserviceofferings;secure,high-performancedevices;andasecureconnectionandhighlevelofservicebetweenproviderandconsumer.Manycompaniesofferattractivemo-bileservices,givingcustomersanever-increasingvarietytochoosefromincludingtelephonyanddataofferings,ticketsforpublictransport,loyaltypointswhenshopping,navigationsoftware,mobilemedia,onlinebanking,paymentservices,mobileInternet,andmuchmore.Butalltheseappsandservicescanonlysucceedifsimplicityandcon-venienceareunderpinnedbymaximumsecurityanddataprotectionwhichispreciselythepointinthevaluechainwhereG&Dcomesin.

Secure devices; secure connections

Wespecializeinprovidingsecurityformobilede-vices,suchassmartphones,notebooks,andPDAs.Forexample,themobilesecuritycardproducedbyourjointventureG&DSecureFlashSolutions(SFS)guaranteesprotectionformobilemonetarytransactionssuchasbankingandonlineorders.Morethan500millioncellphonesworldwidealreadycontainaslotforsuchamicroSDTMcard

andthisnumberisgrowingallthetime,sothemobilesecuritycardisalsoanidealsolutionforintegratingmobiledevicesintoacompanyssecurityconcept.WiththemobilesecuritycardVE2.0,wehaveevendevelopedasolutionforsecurevoiceandmessaging.ThankstoG&Dtechnology,bothcallsandSMStextsfromGermangovernmentemployeeshavebeentap-proofsince2010.

G&Disalsoatrustedpartnerwithregardtothethirdparameterofmobilebusinessmodelstheconnectionbetweentheserviceproviderandtheconsumerssecuredevice.Oneofthekeytechnol-ogieshereisNearFieldCommunication(NFC).Availablein2011fromeverymajormanufactur-erandsettocaptureafast-growingmarketshare,NFC-enabledcellphonesallowuserstopayforitemsbywavingtheirdeviceatasupermarketcashregister,todownloadatrainticket(e.g.usingDeutscheBahnsTouch&Traveloffering,poweredbyG&Dtechnology),topassthroughaccesscontrols,ortogainentrancetotheirhotelroom.AsanindependentproviderinthehighlypromisingNFCmarket,wecanoffermobilenet-workoperatorsandserviceproviderssuchasbanksandpublictransportcompaniesawholehostofsecuremanagement,supply,andperson-alizationservicesthroughouttheentirelifecycle.G&Dleadsthewayinindependenttrustedser-vicemanagement(TSM).Totakeoneexample,

017

COMMUNICATION

CeLL phONeS SIMpLIFy OUR INCReASINGLy COMpLex LIveS AND The MODeRN SMARTphONe IS FAST BeCOMING UBIqUITOUS:

297,000,000 smartphones were bought in 2010* Source: Gartner 2011

1984

G&D launches the SIM plug-in, which soon becomes the global standard

1990

G&D receives a major contract from the US Federal Reserve for the new ISS 3000 high- performance banknote processing system

*

>>www.gd-sfs.com

018 019

theUNestimatesthattheworlds60largestmegacitiesalonewillnumber600millioninhabi-tantsby2015.Thismakesrapidaccesstopublictransitticketsessentialiftransportationcompa-niesaretocopewiththeflowofcommuters.G&Doffersend-to-endsolutionsthatenablecellphoneuserstoobtaintheirticketsquicklyandeasilyatterminals,withouthavingtostandinlineatcoun-tersormachines.

AnotherwayinwhichG&DbridgesthesecuritygapbetweenserviceandconsumeristhroughtheSIMcardtheheartofeverycellphone.Thisprovidestheperfectplatformformobilenetworkoperators,enablingsecureexecutionofbothcon-sumerandnetworkproviderservices.WeofferSIMproductsthatmeetthespecialrequirementspresentedbyinnovativeNFCtechnology,wherebanks,creditcardorganizations,andpublictransitoperatorsexpectstringentsecuritystandards.Atthesametime,thedynamicandvariednatureofNFCapplicationsmakestoughdemandsontheoperatingsystemofourNFC-enabledSIMcards.AswellasproducinglargequantitiesofSIMcards,G&Dsupportsmobilenetworkproviderswithbusinessmodelsthatfocusonaddedvalue,innovation,andcustomerservice.OurnewMobileSecuritybusinessunit,whichincludesourSmartTrustandVenyonacquisitions,offersone-stopsolutionsforallSIMcardmanagementactivities.Keyfunctionsincludeinitialconfiguration,per-sonalization,applicationmanagement,andongo-ingmonitoringofmobiledevices,fromthefirstdayofusethroughtoeventualdecommissioning.OurSmartInsightTMproduct,forexample,pro-videsmobilenetworkoperatorswithinformationaboutthedevicesusedintheirnetworkswhichtheycanthenusetoplannetworkinvestment,de-velopmarketingcampaigns,andaddnewservices.Meanwhile,SmartRoamTMenablesnetworkop-eratorstoofferanoptimumroamingservicethatreducesthecostofcustomercallsmadeabroad.Featuresthatimproveuser-friendlinessarealsoextremelypopular,forinstancesimpleswitchingbetweenaprivateandbusinesscellphonecon-tractonasingledevice,blockingappsonalostorstolenphone,PINprotectionforthephone

COMMUNICATION

1991

G&D supplies the worlds first commercial SIM cards to a Finnish network operator

book,SMSnotificationofmissedcalls,andmeta-passwordsforcreditcardnumbersandpasswordsstoredonthecellphone,etc.ThankstoG&DsSmartTrustDPTMsolution,since2010mobilenetworkoperatorshavealsobeenabletopro-videtheircustomerswithsecureaccesstosocialmediasuchasTwitterandFacebookfromvirtu-allyeverytypeofcellphone.

M2M communication powered by G&D

G&Disalsosettoparticipateinthehugepoten-tialopenedupbymachine-to-machine(M2M)communication.Wearealreadyplayingaleadingroleinthestandardizationandcommercialroll-outofthistechnologyinmanyindustries,frommedicinethroughlogisticsandtransportationtotradeandtraffic.G&DsM2MportfoliohelpsserviceandmobilenetworkproviderstodesignasuccessfulM2Mbusinessmodel.Theunderlyingprincipleisthatmachines,systems,andindividualmodulesautomaticallyexchangeinformationwith-outhumaninput.ApplicationscenariosincludeSMS,GPRS,orUMTStransferofelectricityme-terreadingstoautilitycompany,orremoteaccesstoafaultydevicebyasupporttechnician.Withanestimated50billionM2M-capabledevicesworldwide,thepossibilitiesareendless.

Toensurethatourincreasinglymobileliferemainssecure,reliableidentityverificationisbecomingevermoreimportant.>>> More on page 20

CARdS

SIMpLe, CONveNIeNT eLeCTRONIC pAyMeNT

There are billions of debit and credit cards in cir-culation around the globe. Basic versions feature a simple magnetic stripe. In Europe, migration to smartcards that comply with the forgery-resistant EMV standard is set for completion in 2011, with other high-volume markets such as the USA and China soon to follow. Increasing numbers of cards are also equipped with contactless technology, which conveniently enables them to be waved in front of a cash register or other terminal rather than inserted in a reader. In 2010, G&D became the first card pro-ducer to supply more than 50 million contactless smartcards in the US. We also produce dual inter-face cards, which feature both a contact-based and a contactless interface. G&D is developing complete-ly new cashless payment options in the form of con-tactless stickers (e.g. for smartphones) and key rings containing an embedded payment function. These products are particularly attractive to the young, mobile generation. Equally, banks, retailers, and service providers have long recognized that the po-tential of cards extends well beyond making pay-ments. With the help of our solutions, the payment card becomes a marketing and customer loyalty tool by means of personalization, attractive design, and points programs. G&D also meets the current high demand for eco-friendly card features, includ-ing solvent-free ink, recyclable materials, and non-PVC products.

020 021

G&Doffersahostofproductsandsolutionstoreliablyidentifypeople,whetherfortravelorac-cesscontrol,whensigningcontracts,orinthehealthcaresector.OurpassportandIDsystemsensuredependableauthenticationandmaximumdataprotection.

Oneofourcoreareasofexpertiseissecurityofnationalbordersandinternationaltravel.Cross-bordermobilityhasrisendramaticallyinrecentyears,increasingthechallengescountriesarefac-ing.Internationalairports,forexample,havetosecurelyidentifyagrowingnumberofpassengerswithinashortspaceoftime.G&Dsupportsgov-ernmentsallovertheworldwithpassportandIDsolutions,aswellashighlysecurebordercontrolmanagementsystemsthataretypicallyconnect-edtonationalandinternationalcriminalinvesti-gationdatabases.Ourcost-effective,ultra-reliableproductsleveragethelatestadvancesintheworldsofbiometrics,microprocessortechnology,andcryptography.

ThecoreelementineverybordercontrolsystemisthepassportorIDdocumentpresentedbythetraveler.Anincreasingnumberofcountries(cur-rentlymorethan90intotal)aremigratingtothelatestgenerationofhighlysecureelectronicpass-ports.BotswanahasachievedamajorleapforwardinthisareawiththehelpofG&D.In2010,thecountryseamlesslyreplaceditsoldhandwrittenpassportswithstate-of-the-arte-passportsintimefortheFIFAWorldCupsoccertournament,heldinneighboringSouthAfrica.

Secure documents for secure borders

Securityfeaturesarecentraltoourproductdevel-opmentwork.In2010,forinstance,weintroducedMAGIC-IDtechnologyforintegrating3DimagesintoIDdocuments.Theseimagescreateanim-pressionofdepthorarollingmovementwhenthedocumentistiltedeffectsthatcannotbereplicatedevenbytheverylatestscannersorcopiers.Anothersourceofanti-counterfeitingprotectionisournewFEEL-IDfeature,whichrespondstotemperaturechanges.Rubbingthe

documentwithafingercausesadifferentopticalelementtoappear.

Themostimportantsecurityelementinapass-portisthedatapage.Whenmadeofplastic,thiscanalsoincorporateacontactlesschipandan-tenna.In2010,welaunchedthelatestgenerationofourPECSECdatapageforpassports,onwhichtheholderspersonaldataarelaser-engravedoneofthemostcounterfeit-proofpersonalizationmethodsinexistence.AnimportantprojectforG&DisthenewGermanIDcard,forwhichwehavebeensupplyingkeycomponentstothe

Bundesdruckerei(federalprinter)since2010:chip,operatingsystem,andantenna.Thiscredit-card-sizedIDliesattheforefrontofglobaltechnologythankstoitsversatility,contactlessinterface,andhighlevelofsecurity.Thecardhasthreeapplications:identification(includingviathestoredbiometricdata),forinstanceatpolicecheckpoints;authenticationontheInternet;andelectronicsignatures,whichcanbeusedforlegallybindingcontracts.

G&Dalsosupportsreliableidentificationinotherofficialcontexts.Forinstance,morethan20mil-lionthird-countrynationalsintheEUrequirearesidencepermit.ThenewelectronicEUresidencepermit(eERP)toberolledoutinMay2011isasmartcard-baseddocumentthatstoresbiometricdatasecurely.G&DissettingthepaceherewithaHIGHSECdocumentthatprovidesholderswithaccesstoe-governmentservicesandisac-ceptedasameansofunambiguousidentificationwhenshoppingonlineandusingotherInternetservices.Flexibilityandreliabilityarealsopro-videdbyourelectronicvehicleregistrationcard(eVRC),whichwillgraduallyreplacethepaper-basedvehicleregistrationdocumentthroughouttheEU.Wehavebeensupplyingthistovarious

021

IDeNTITy

ReLIABLe IDeNTITy veRIFICATION IS eSSeNTIAL TO Keep OUR INTeRCONNeCTeD wORLD SeCURe:

90 countries are migrating to highly secure e-passports

1993

The German healthcare sector introduces memory chip cards manufactured by G&D

1996

G&D produces the first contactless multifunction smartcard for Lufthansa

1996

G&D launches the BPS 1000, a highly modular banknote processing system

memberstatessince2010.Amongotherbenefits,thecardallowsfaster,morereliabledocumentandvehiclechecksandmakeslifemoredifficultforcarthieves.AlsointheEU,busesandcom-mercialvehicleswhosetotalweightexceeds3.5tonnesmustbeequippedwithanelectronictach-ograph,whichrecordsdataincludingthedriversresttimes.G&DhasimplementedthiskindoftachographsystemincountriessuchasBelgium,Ireland,andGreece,andoffersacertifiedplat-form.In2010,wewonourfirstcontractfromtheGermanFederalMotorTransportAuthority(KBA)forthetachographcard.Ourleading-edgedriverslicensecardswithanintegratedmicro-processorchipalsoaddsignificantvaluecom-paredwiththeoldpaper-basedlicenses,enablingfastdatacaptureduringtrafficchecksandadminis-trativeprocessesorwhenhiringacar.Insomecountries,theyactasbothdriverslicenseandIDcard.G&Dproduces3.5milliondriverslicensesperyearfortheMinistryofTransportationintheCanadianprovinceofOntario,forexample.

Online security with G&D

IntheborderlessworldoftheInternet,too,G&Dmakesasignificantcontributiontoensuringthatonlyauthorizedindividualscanconducttransac-tions.Ourcorporateaccesssolutions,whichcoverthecompleterangeoftokens,smartcards,andsoftware,guaranteesecureaccesstocompanynetworksintheofficeoronthemoveandau-thorizedentrytocompanypremises.OurStarSignmobilitytokens,forexample,launchapplicationsdirectlyonanycomputerintheoffice,athome,inanInternetcafwithoutinstallationortheneedforadministratorrights.Consumerscanuseourdisplaycardtodigitallysignonlinetransac-tionsviaadynamicallygeneratedone-timepass-word.Thisfunctioncanalsobeintegratedintoamainstreamdebitorcreditcard.

022 023

IDeNTITy

1998

The first SIM card made in China comes from G&D

IdentificationandsecurityalsopresentchallengesforthehealthcaresystemchallengesthatcanbeefficientlymanagedwithG&Dsolutions.BycombiningsophisticatedITinfrastructureswithintelligenthealthcarecards,G&Denablesthenecessaryprocessoptimizationtogetherwithahighlevelofdataprotection.Oursolutionport-folioisbuiltaroundane-health/telematicsinfra-structurethatincludeselectronichealthinsurancecardsandhealthprofessionalcards.Thisinfra-structureenablessecurecommunicationbetweendoctors,healthinsurers,hospitals,andsoon,pro-vidingsharedaccesstoimportantinformation.Benefitsincludeimprovedqualityoftreatmentandavoidanceofexpensiverepeatexaminations.Wearethushelpingtoimprovepatientcareandstemthetideofinsurancefraud.InGermanyalone,itisestimatedthatbillionsofeurosarelosteveryyearthroughidentitytheftinthehealth-caresystem.Asapioneerofcard-basedhealth-caresolutions,G&Dcanalreadycitereferencesworldwide.In2010,forexample,wesuppliedasignificantnumberofsocialsecuritycardstoAustria.Theseareusedforhealth,accident,re-tirementpension,andunemploymentinsurancecombined,thusensuringvirtuallypaperlessad-ministrativeprocessesbetweentheinsuredindi-vidual,publicauthorities,andserviceproviders.

SmARtphoNES

MULTIMeDIA IN yOUR pOCKeT

The Internet and mobile telephony are rapidly con-verging, and smartphones are the technical nexus. This new generation of devices can be used to make payments, perform bank transactions, send e-mails, make phone calls, pass through access controls or log on to an IT network, download train tickets, check share prices, and much more. The key question in each case is this: Is the device protected against data misuse? Part of our response here is to ensure that security-related data are processed in a trusted exe-cution environment. Previously, security extended only to the device processor and connection to a third party, such as a bank. Now, the display and keypad are also secure an important factor when entering a PIN, for example. Mobile devices thus benefit from a seamless security architecture. With our partner ARM and our highly secure MobiCore platform, we have been instrumental in making security-critical services attractive to a mass market. Chip manufacturer Qualcomm is in the process of integrating our package into its products; other commercial applications are also in the pipeline.

024 025

Toconvertinnovationsintousableproducts,G&Dinvestsanaverageofsixpercentofitssalesinre-searchanddevelopmenteveryyear.Around1,000employeesarecurrentlyworkingonnewproductsandsolutions,includingmorethan600inthenewMobileSecurityunit.TheG&DTechnologyAwardispresentedinrecognitionofourstaffsoutstandingdevelopmentachievements.In2010,twoemploy-eesreceivedfirstprizeforaprintablemagneticdis-playtobeusedinvaluedocuments.Wealsomain-tainclosetieswithuniversitiestoattractthetopresearchersofthefuture.2010sawusenterintoapartnershipwithIngolstadtUniversityofAp-pliedSciences,whosebuddingcomputerscientistscombinetheirstudieswithresearchworkatG&D.

Security at the forefront of research

Wherebanknotesareconcerned,thefocusisonincreasinglycomplexsecurityfeatures.G&Dislaunchingafeaturein2011thatisexpectedtoachievesignificantmarketvolume:RollingStar.Aroundfourmillimeterswide,thissecuritythreadisintegratedintothebanknotepaperandcreatestheimpressionofarollingwavewhenthenoteistilted.Anotherproductpoisedforlaunchisourmachine-readableMultiCodeTMcodingforsecu-ritythreads,whichwillmakelifeextremelydiffi-cultforforgers.Ourbanknoteprintersalsoharnessthepossibilitiesofcutting-edgelasertechnology.In2011,G&Dwillcommenceseriesproductionofashort-pulselaserprocessthatprintssecurityfeaturesdirectlyontothesheet.AndwearenowputtingthefinishingtouchestoourCompassVMSbanknoteprocessingsystem,whichwillenablecentralbanks,commercialbanks,andsecuritytransportcompaniestomanagetheentirecashcycleevenmoreefficiently.

TheresearchactivitiesofournewMobileSecuritybusinessunitareinformedbyseveralemergingtrends.Theseincludesustainableproductsandgreenproductionprocesses,whichforusmeansimprovingthedurabilityandrecyclingpossibili-tiesofourcardbodies.Wearedrivingforwardsolutionsaimedatconvergingtraditionallysepa-rateapplicationsoncellphones,suchaspayment,

telecommunications,identification,andlocaltrans-portticketing.Atthesametime,weareworkingcloselywithchipmanufacturerstoimprovethesecurityofmobiledevices.Anothermarketofthefutureismachine-to-machine(M2M)communi-cation,whereourcurrentfocusisonSIMmodulesthatareextremelyrobustanddurableandcanwithstandtoughconditionssuchasconstantvibra-tionorextremetemperatures.OpportunitiesforotherM2MapplicationsincludevehicletelematicssuchastheEUseCallinitiativeforin-vehicleemergencycallsandelectricvehicles.

Withourcustomersdemandingdocumentsthatcanbeusedforuptotenyearsinthefield,itisvitalthatourpassportandIDsolutionsareequal-lyinnovative.Thismeansourdevelopersmust

anticipatethetechnicalcapabilitiesofpassportforgersintenyearstime,whichiswhyweworkcloselywiththeBanknoteunittobringanewse-curityfeaturetomarketeveryyear.Thishighrateofinnovationensuresthatoursolutionswillstillprovidereliableinformationabouttheownersidentityadecadefromtoday.WearealsofurtherdevelopingourpliablePECSECcardbodies,whichofferaconvenientalternativetothestifferpolycarbonateversion.Anothertrendistheuseofsophisticatedsmartphonesintheareaofiden-tification.Inthefuture,cellphoneswillbeabletosupportcertainIDcardfunctionsandbecomeanextensionofthephysicaldocument.

ReSeARCh AND DeveLOpMeNT

OUR ReSeARCh MAKeS The wORLD A SAFeR, MORe CONveNIeNT pLACe:

116,700,000 euros for research and development

1999

G&D prints the new European currency the euro to state-of-the-art security standards for the European Central Bank, and is the largest euro printer by volume of the 15 involved

2000

G&D successfully completes a project involving production of 42 million Egyptian ID cards

>>www.haw-ingolstadt.dewww.e-mobility-21.de

026 027

Ourperformancepromisetoourcustomersisbasedonstate-of-the-arttechnologies,outstand-ingservice,partnership,andtrust.Sincetheknowl-edgeandpersonalskillsofourstaffarecrucialfactorshere,ourHRstrategyincludesawiderangeofmeasuresdesignedtomaximizelong-termper-formancepotential.Internalandexternalfeedbackconfirmsthatweareontherighttrack.79.2per-centofourstaffparticipatedinoursecondglobalemployeesurveyin2010anincreaseoffivepercentonthelastonein2008and,tellingly,71percentofthosesurveyedwouldwholeheartedlyrecommendG&Dasanemployer.G&DwasrankedamongGermanystop100employersinthe2010listproducedbyGreatPlacetoWorkInstituteDeutschland,despitebeingafirst-timeentrant,andhasalsobeenawardedtheFairCompanysealofapproval.

Appreciation and incentives

EmployeesatG&Dhelpshapethemarketsandeverydayhabitsofthepeopleoftomorrow.Throughoutallareasofpayment,communication,mobility,andidentification,ouroperationsarefoundedonfivevalues:trust,quality,sustainabili-ty,responsibility,andintegrity.Ourstaffcanalsorelyonthesecorevalues,whicharereflectedinafairandconsistentleadershipcultureinformedbyourGlobalHRStandardsandGuidingPrin-ciples.Ourcourseisclear:Wewanttoshapethefuturetogethersothatoursuccesswillcontinuetogrowworldwide.

AtG&D,weshowourappreciationofindividualperformanceinavarietyofways.Ourperfor-mance-relatedremunerationsystemtakesaccountoftheemployeesrolewithinthecompany,theirindividualcontribution,standardpracticeinourmarkets,andG&Dsbusinesssuccess.

Inaddition,personalrecognitionandarangeofsocialandotherbenefitsallowustoactivelydem-onstratehowmuchwevalueouremployees.Forover40yearsnow,wehavebeenpayingacompa-nypensionfinancedwhollybyG&Dandprovidedonacompletelyvoluntarybasis.Staffcanalsotakeadvantageofadeferredremunerationschemetomaintaintheirstandardoflivinginoldage.

Intodaysknowledgesociety,thebestinvestmentisineducationandtraining.AcquiringadditionalexpertiseimprovesindividualcareerandincomeprospectswhilealsosafeguardingtheabilityofatechnologyprovidersuchasG&Dtoinnovateandremainsuccessful.Weprovidepersonalizedsupportandawide-ranginginternaltrainingprogramtoensurethatourpeoplearealwaysattheforefrontoftheirfield.Ourmeasureshererangefromtailoredone-on-onesessionstoexternaltraining,suchasMBAsandeveningcourses.Weplaceparticular

emphasisonhealthandsafety,communicationandcollaboration,andinterculturalskills.

ProfessionaldevelopmentatGiesecke&Devrientisnotrestrictedtoyoungeremployees.Againstabackdropofdemographicchangeandanincreaseinaverageemployeeage,wehavedecidedtoalignourdevelopmentandtrainingprogramsevenmorecloselywiththedifferentstagesoflifeapplicabletoourworkforce.ThisprocesshasalreadybegunatG&Dwithprofessionaltraininganddualstudyprogramsinmorethantenskilledtradesplusatraineeprogramforcollegegraduates.Withaviewtofillingseniorpositionswithtopqualitystafffromourownranks,employeeswhoshowparticularpotentialareplacedintheTalentPoolorTopTalentPool.Thisprofessionaldevelopmentprocesspreparesstafftotakeongreaterrespon-sibilitywithinourinternationalGroup.Launchedin2006,theprogramhasprovedagreatsuccess,

71 percent of employees recommend G&D as an employer

eMpLOyeeS

OUR eMpLOyeeS ARe The Key TO OUR SUCCeSS:

>>www.greatplacetowork.dewww.karriere.de

2002

G&D produces the Numeron desktop banknote processing system for local deployment by commer-cial banks, security transport companies, casinos, business enterprises, institutions, and retailers

2004

G&D provides modern ID documents containing biometric data stored on a chip

withrenewedintakein2010.Followingonfromthis,exceptionalmiddlemanagersmaybeselectedbytheManagementBoardtojointheExecutivePool,whichactsasaspringboardforexecutiverolesthroughouttheG&DGroupworldwide.Ourlife-phase-orientedprofessionaldevelopmentprogramisroundedoffbymanagementtrainingcoursestacklingdemographicissues,forinstancemanagingmixed-ageteams,plusspecialoptionsforolderemployeescoveringtopicssuchashealthorplanningthethirdphaseoflife.

worklife balance for optimum performance

Demographicchangecombinedwiththealteredlifepatternsandexpectationsofouremployeesmeansthatwork-lifebalanceisbecominganin-creasinglyimportantaspectofourHRstrategy.Ifprofessionalaspirationsandpersonalneedscannotbereconciledoveralongerperiod,em-ployeesatisfactionandcommitmentsuffers,soahealthybalancebetweenworkandprivatelifebenefitsbothstaffandcompanyalike.

EmployeesatG&Denjoyaworkenvironmentthattakesaccountoftheirfamilysituationandper-sonalneeds.Inturn,webenefitfromamoresatis-fiedandproductiveworkforceandcanstrengthenourappealasanemployer.Asbefitsaplayerinthemobilecommunicationsmarket,G&Ddeploysaninnovativesystemwherebyouremployeeshavenocoreworkinghours,nominimumdailyatten-dance,andnolimitontimeoffpermonth.Ouremployeeshaveahighlevelofautonomyovertheirworkinghours,whichtheymanageaccord-ingtothedemandsoftheirroleandourcorpo-rateinterests.

Since2004,wehavealsobeenutilizingastrategicmanagementtoolprovidedbyberufundfamiliegGmbH(anot-for-profitorganizationactiveinthisfield)withgreatsuccess,asevincedbyG&Dsrecertificationforthesecondtimein2010followingtherelatedaudit.Aswellasdeliveringflexibilityintermsofworkingarrangementsandlocation,thisprogramincludesprovisionofdaycareplacesforthechildrenofemployees,aplacementandadvisoryserviceforstaffcaringforchildrenorotherfamilymembers,andseminarsforemploy-eesreturningfromparentalleave.

028 029

2005

The first EMV cards with contactless functionality worldwide are issued in Malaysia

eMpLOyeeS

>>www.berufundfamilie.de

030 031

Everyday,wearecommittedtodeliveringonourperformancepromiseCreatingConfidence.andfulfillingthetrustplacedinus.Thisappliesequallytoourproductsandsolutions,ourconductasanemployer,andourapproachtowidersociety.Acceptingresponsibilityispartofearningtrust.Assuch,corporatesocialresponsibility(CSR)isembeddedinG&Dsdailyactivities,ratherthanmerelybeingabolt-onaddition.Itisalsoinourownintereststoadoptsuchapolicy,becauseweaimtogenerateourearningssustainably.Thisenablesustobeasociallyresponsiblecorporatecitizenineveryrespectacompanythatdischarg-esitsdutyasemployer,taxpayer,andtechnicalinnovatorandadditionallyprovidesfinancialandothersupporttoprojectswithasocialimpact.

UnderpinningthisapproachisourbindingCSRCommitment,adoptedin2010,whichdocumentsourconceptofsocialresponsibility.Weseektoreconcilethecommercial,social,andenvironmen-talimpactofourworkonalastingbasis,bothwithinourdailyoperationsandwhendevelopingandmarketingourproductsandservices.Ourlong-termobjectivehereistoadoptasustainableapproachalongtheentirevaluechain.

OurintentionistoanchortheissuesandchallengesofCSRfirmlyinourcorporatestrategy.Overayearago,welaunchedacomprehensiveprocesstostrategicallyalignoursocialcommitment,super-visedbytheChairmanoftheManagementBoard.Adoptionofaunified,Group-wideCSRstrategyin2010representedasignificantmilestoneinthisprocess.Asapublicdemonstrationofthestrictstandardswesetourselves,wealsosigneduptotheUNGlobalCompactinSeptember2010.Thegoalofthisworldwideinitiativeistoalignglobal-izationwithsocialandenvironmentalconcerns.ByparticipatingintheGlobalCompact,G&Discommittingitselftouniversallyacceptedprinci-plesintheareasofhumanrights,labor,environ-mentalprotection,andanti-corruption,aswellastosystematic,measurableimplementationofCSRwithinthecompany.Havingtakentheseimpor-tantsteps,wearenowfocusingonconcreteproj-ectsandmeasuresacrosstheGroup.

Systematic, binding, and targeted approach

BasedonourCSRstrategy,in2010webegancon-solidatingourexistingsocialactivitiesintothreeareasinwhichourcorebusinesshasaparticularimpactonsociety:theenvironment,employees,andsecurityandsociety.WidersocietyexpectsustomeetourresponsibilitiesintermsofclimateprotectionandHRpolicyaboveandbeyondthelegalrequirements,notleastinordertosecurethecompanysfuture.Wearealsoawarethatourworkinthefieldofsecurityisofparticularsocialrelevance,andthisisanareainwhichweintendtointensifyoureffortsandsharpenourfocusevenfurtherinthefuture.Ourapproachtosecurityissuesembracesnotonlythetechnicalchallengestheypresent,butalsotheirimpactonsocietyasawhole.Inyearstocome,ourbusinesssuccesswillpartlydependonthelevelofsocialresponsibilitywithwhichthesetechnologiesaredeveloped,produced,anddeployed.In2010,wedevelopedconcreteguidelines,bind-ingprinciples,andprogramsforeachofthese

threeactionareas.ThisstrategicalignmentandimplementationofourcurrentandfutureCSRactivitiesunderpinsourcommitmenttocorpo-ratesocialresponsibility.

CORpORATe SOCIAL ReSpONSIBILITy

ReSpONSIBILITy LIeS AT The heART OF OUR BUSINeSS:

2006

G&D is awarded a contract for the first electronic healthcare cards by DAK, one of Germanys largest statutory health insurers

2007

Introduction of the first 1 GB GalaxSIM cards at TeliaSonera in Scandinavia

participants are commit-ted to the ten principles of the UN Global Compact

>>www.unglobalcompact.org

8,684

032 033

environment: considering generations

to come

UsingresourcesresponsiblyandprotectingourclimateandtheenvironmentarecoreelementsofG&DsCSRpolicy.Ourguidingprincipleofconsideringgenerationstocomeembodiesourcommitmenttoputtingecologicalawarenessintopracticeinsuchawaythatwegivefuturegenerationsthesameopportunitiestomeettheirneedsaswehavetoday.Atthesametime,long-termthinkingandsustainableoperationsofferasolidfoundationforsafeguardingthecontinuedsuccessofourcompany.

TheGroup-wideGreenSustainabilitytargetsys-temwasestablishedin2010tostrategicallyalignG&Dsvariousworldwideactivitiesandprogramsaimedatprotectingtheenvironmentandclimate.Wehavedefinedbindingprinciplesandpressedaheadwithconcretemeasurestomoveclosertoourobjectiveofasustainablevaluechain,fromintroducingenvironmentalstandardsacrosstheGroupandimplementingaclimateprotectionstrategythroughtoefficientuseofrawmaterialsandthedevelopmentofgreenproducts.

Ouraimistoestablishstrict,uniformenviron-mentalstandardsfortheentireGroup,whichiswhywearecontinuallyextendingourISO14001-certifiedenvironmentalmanagementsystem.Thisenablesustomonitorouractivitiesintermsofmakingmoreefficientuseofenergyandre-sourcesandreducingourcarbonfootprint,andthustoachievesystematicimprovements.Wearegraduallyintegratingourvariousproductionlo-cationsandsubsidiariesworldwideintothissys-tem.Similarly,G&Dhasincorporatedhealthandsafetystandardsintoitsexistingenvironmentalmanagementsystemtocreateanintegratedenvi-ronment,healthandsafety(EHS)system.Thisbringstogetherallourpoliciesandstrategiesre-latingtoenvironmentalprotection,health,andoccupationalsafetyandleveragessynergies.Inadditiontotheecologicalaspects,thisallowsustoprotecttheoccupationalhealthandsafetyofouremployeesevenmoreeffectively.

Toreduceourcarbonfootprintthroughoutallareasofourcorporateactivity,wehaveimple-mentedanefficientclimateprotectionstrategy.ThefirststephereistocalculatetheCO2emis-sionsatourlocationsarisingfrombusinessandproductionoperations.Thisallowsustodefineactivitiesandobjectivestoreduceemissions.In2010,wedeterminedthecarbonfootprintforthepilotlocationsMunich,Leipzig,Louisenthal,andKnigsteininGermanyandNitrainSlovakia,withallproductionsitessettofollowbytheendof2011.Thisdatawillserveasthebasisforourreductiongoals.Ourstrategyherealsoin-volvesemployeesatamorepersonallevel,forinstancebyadoptingagreencompanycarpolicyforG&DsfleetinMunichwithanupperCO2limitof160g/km(withabonus/malussystem).Energyefficiencyprogramsallowustomeasureourenergyconsumptionateachlocationandde-velopappropriateactionplanstoreduceit.In2010,wesystematicallytrackedelectricityandwaterconsumptionatmanyofourlocationsandsetupprogramsformoreefficientuseofre-sources.

Productdevelopmentanddesignisanotherareawhereweaimtocombineoutstandingtechnicalqualitywithefficientuseofrawmaterialsandeco-friendlyalternatives.Ourintentionistoap-plyecologicalcriteriathroughouttheentireproductlifecycle.Forexample,theproductcar-bonfootprintallowsustotrackandthusre-ducethelifecycleemissionsofspecificprod-ucts.Wecontinuedtodevelopclimate-neutralproductsin2010,includingacarbon-neutralbank-note.2011willseecalculationoftheproductcarbonfootprintforG&DsMobileSecuritybusinessunitandselectedcardsolutionsfromtheGovernmentSolutionsbusinessunit.Wecanalsosignificantlyreducetheenvironmentalim-pactofourproductionactivitiesbyusingalterna-tivematerials.G&DprovidespaymentcardsmadeofrecycledPVC,forinstance,andinothercasesreplacesPVCwithPCorPET.Wearecon-tinuallytestingmaterialsthataredurable,easytorecycle,andstemfromrenewableresources.Inaddition,weprovidepackagingsolutionsmanu-

033

CORpORATe SOCIAL ReSpONSIBILITy

facturedfromrecycledmaterials.Inselectedmarkets,G&Discommittedtotakingbackandrecyclingcardbodiesandchipmodules.

employees: showing appreciation

working together

ThisguidingprinciplewasestablishedbyG&Din2010aspartofitscommitmenttobeingare-sponsibleandreliableemployerforitsstaffofaround10,000.Thebondthatexistswithandbe-tweenouremployeesistheproductofrespectforeachindividualandtheirpersonalenviron-ment.Ouraimisthustoaccommodatethediffer-ingcircumstancesandoutlooksofourstaff,butwithoutlosingourfocusonbusinessefficiency.

Abalancedlifefostersjobsatisfactionandem-ployeecommitment,whichiswhywefurtherex-pandedourfamily-friendlyHRpoliciesin2010.Examplesincludedaycareplaces,childcaredur-ingschoolvacations,andsupportofferingsatourMunichsite.Ouremployeesshouldbeabletocommitthemselvestotheirwork,assumere-sponsibilityforothers,benefitfromtrainingandfurthereducation,andperformvoluntaryorcharitableactivities.Asaglobalcompany,wearealwaysawareofregionalandculturaldifferencesinthisregard.

Giventhedemographicchangestakingplaceinsociety,oursuccesspartlydependsontakingac-countofthedifferentstagesoflifeouremploy-eesaregoingthrough.Alongsideournumerouspart-time,job-sharing,andteleworkingmodels,supportingolderemployeesisparticularlyim-portanttous.In2010,weimplementedarangeoftailoredtrainingprograms,suchas50-Plus:ProspectsforYourProfessionalFutureandWhenParentsAge.

Settingupaglobalhealthmanagementprogramhasconsolidatedandsharpenedthestrategicfocusofourhealthcareactivities.In2010,ouremployeeswereabletobenefitfromsportandhealth-relatedcourses,screeningoptions,andvariousinitiativessuchasthehealthawarenessweekinMunich,check-upsinIndia,andvaccinationsintheUK.Theseactivitiesarealldesignedtosupporttheperformanceofemployeesofallagesinaccord-ancewithlocalhealthcareprovisionandpriorities.

Asatechnologycompany,weregardeducationasaparticularlycrucialinvestmentinthefuture.Oureducationprojectsaredesignedtoraiseyoungpeoplesenthusiasmforthenaturalsci-encesandtechnology.WeareapartneroftheGermangovernmentsITHochburginitiative,enablinggiftedyoungITstudentstogainprojectexperienceatG&D.In2010,participantsdevel-opedideasfortheelectronicverificationofbank-notes.AsamemberoftheknowledgefactoryassociationWissensfabrikUnternehmenfrDeutschlande.V.,weworkwithelementaryschoolstoinspireathirstforknowledgeinchil-drenandencouragethemtoexploreandexperi-mentthroughtheKiTecKinderentdeckenTechnik(childrendiscovertechnology)project.Aswellasprovidingearlysupportforfutureca-reerchoices,wewanttocommunicatetheexperi-encesofemployeesandthevaluesbywhichG&Doperates.

2008

G&D launches a microSDTM card with smartcard functionality that provides highly secure access and content protection for mobile devices

2009

Introduction of the new BPS M7 banknote process-ing system, which can check up to 120,000 banknotes per hour for authenticity and fitness

>>www.it-hochburg.dewww.wissensfabrik-deutschland.de

034 035

Security and society: safeguarding values

shaping the future

AtG&D,securityisnotjustabouttechnologyitisthefoundationofourbusinessand,inanin-creasinglynetworkedworld,hasagrowingim-pactonsocietyasawhole.Ouraimforthefutureistoengageevenmorefullywithpeoplessecuri-tyrequirementsandexpectations.Weseektosupportourtechnicalinnovationbyenteringintodialogwithourcustomersandstakeholdersinordertounderstandcurrentsecurityissuesandintegratethepublicsneedforsafeguardsintoouractivities.Thisalsoappliestoemotionalas-pectsofsecuritywithregardtoidentity,authenti-cation,anddataprotection,aswellascateringtoarangeofculturalbackgrounds.Weintendtomaintainastrongawarenessofourresponsibilitytoourcustomersandtosocietyinthisregard.Accordingly,aprogramwasdevelopedlastyearthatwilllaunchadialogbetweenG&Danditsstakeholdersin2011todiscussissuessurround-ingthefuturedevelopmentofidentitiesandhowtoprotectthem.

Compliance: applying values

respecting rules

Rulesandvaluesarelikeacompassthathelpsustostayoncourse.Observingsharedprinciplesandguidelinesisessentialtoachievinggreatersuccess,whichiswhycompliancewithrulesandlegalrequirementsbyanorganizationanditsemployeesiskeybothtoacompanysreputationandtobuildingcustomertrust.Complyingwiththelawisvitaltoourbusinessoperations,partic-ularlywithregardtoanti-corruption,anti-trust,andsubsidylegislation,accountingandconsoli-dationregulations,andtax,export,import,andcustomsrequirements.AtG&D,integrityalsoin-cludesrespectingthespiritofcompetitionandpreservingourindependence.

Forus,complianceisnotsimplyaquestionofobeyinglawsandinternalcorporateguidelinesitalsomeansstayingtruetoourvalues.Throughpreventivemeasuressuchasemployeetrainingand

support,compliancealsorepresentsaneffectivetoolforimplementingourCSRstrategythrough-outourorganization.OuraimistoembedarobustcompliancecultureatG&Dby2015.Everyoneinvolvedshouldinternalizeamindsetinwhichcomplianceisunderstoodasabasicrequirementforsustainedcorporatesuccess.TheComplianceOfficehelpsourmanagers,employees,andallourpartnersalongthevaluechaintoconductthem-selvesinaccordancewithlegislation,internalcorporateguidelines,andG&Dsvalues.OurCodeofConductisanimportanttoolhere.Itappliestoeachandeveryemployeeandsetsoutbindingprincipleswithregardtoresponsiblebehaviorandethicalvalues.ItistheequivalentofaG&Dcon-stitutionforthecompanysworkforceworldwide.

2010sawusreachanimportantmilestonebyset-tingupanoverarchingcomplianceorganizationtocoordinateouractivitiesinthisareaaroundtheglobe.Thisnewstructure,combinedwithclearresponsibilities,isenablingustodevelopcompliancemanagementonanongoingbasissothatwecanimmediatelyrespondtochangesinglobalrequirements.ThecentralelementhereistheComplianceOfficeatourcorporatehead-quartersinMunich.TheComplianceOfficeteamtrainsandsupportsemployeesacrosstheGroup,workingcloselywithourcomplianceambassa-dors,i.e.themanagingdirectorsofalloursubsid-iaries,andwithourregionalcomplianceadvisorsintheAmericas,Asia,Europe,Africa,andtheMiddleEast.Regulartraininghelpsouremploy-eestoactinaccordancewithlawsandinternalguidelines,therebyraisingtheirawarenessoftheneedforcompliantbehavior.

OurcompliancemanagersalsomonitoradherencewithlegalrequirementsandinternalguidelinesthroughouttheGroup.TheCorporateAuditingdepartmentchecksandevaluatestheexistenceandeffectivenessofthecompanyscontrolandmonitoringprocesses.Keyfocusareasherein-cluderiskmanagement,theinternalcontrolsys-tem,legalrequirements,andcorporateguide-lines.WehavethusestablishedacomprehensivereportingsystemthatensuresboththeManage-

CORpORATe SOCIAL ReSpONSIBILITy

mentBoardandSupervisoryBoardareregularlyinformedofpertinenteventsandupdatedontheongoingdevelopmentofcompliancemanage-mentacrosstheGroup.

CompliancemanagementatG&Dfollowstheprinciple:prevent,investigate,act.Preventionandtrainingarekeytooptimumimplementation,whichiswhyG&DiscommittedtoprovidingGroup-widesupporttohelpstaffavoidcontra-veningrulesintheirdailywork.Compliancevio-lationsarepenalizedaccordingly.Wehavedevel-opedaworldwidee-learningprogramtoassistemployeesbyenhancingtheirknowledgeandex-perienceofdealingwithlawsandinternalcorpo-rateguidelines.Theprogramprovidesadviceonapplyinglegalregulations,suchasanti-trustlaw,aswellascombatingcorruption.Inadditiontoourrangeoftraininginitiatives,wearesettingupaglobalhelplinethatwillprovideacentralpointofcontactforanyemployee,customer,orsupplierwithqueriesconcerninglegalorcompanyrequire-ments.Thehelplinewillalsoprovideasimplemeansofreportingpotentialviolationsinthestrictestconfidence.

Corporate citizenship: taking responsibility

providing active support

Webelievethatbusinessactivityshouldentailcontinuousdevelopmentoftheconceptofrespon-sibility.Corporatecitizenshipisthereforeanongo-ing,open-endedprocessatG&D.Asignificantmilestonewasachievedlastyear,whenwecom-binedouractivitiesfocusingoneducation,culture,andinterculturalexchangeintheindependent,not-for-profitGiesecke&DevrientFoundation.Thisgivesourextensivedonationsalong-termfocus.TheFoundationisendowedwith20millioneurosandakeyaspectofitsworkliesintrainingandeducatingup-and-comingtalentboththroughitsownprojectsandbysupportingtheBerlin-basednewresponsibilityfoundation(stiftungneueverantwortung).Thisinitiativeenablesyoungpeopletoconductinterdisciplinaryresearchintoinnovativesolutionstothesocialchallengesofourtime.Aswellassupportingthe

educationofyoungpeople,animportantobjec-tiveoftheG&DFoundationispromotingrela-tionsbetweendifferentnationsandcultures.Wearedevelopingourownprogramtohelpachievethis.Infuture,ourfundingfortheMuseumofthePrintingArtsinLeipzigwillalsocomeundertheumbrellaoftheG&DFoundation,fulfillinganobjectiveclosetoourhearts:topreservethehis-toricalheritageoftheprintingarts.Themuseumdisplaysmachineryandpressesforproducingprintedworksandprovidesinformationabouttheculturalhistoryoftypesetting,printing,andbookbinding.

AlongsideourFoundationsactivities,G&Dbegantodrawupuniformguidelinesforourcorporatecitizenshipin2010.Thesewillenablethecompanytofocusmorestronglyonregionalcommitmentinareaswherewemaintainoperationsandtostrategicallyalignourglobalcorporatecitizenshipactivities.Wealsoaimtoencouragethecommit-mentofindividualemployees.

2010

The Bundesdruckerei (federal printer) selects G&D as prime contractor to supply inlays for the new German ID card

2010

G&D launches a new microSDTM card to prevent phone tapping

>>www.gi-de-stiftung.orgwww.stiftung-nv.dewww.druckkunst-museum.de

037037

CORpORATe SOCIAL ReSpONSIBILITy

036

OUR CSR pROGRAM

objective measures timeframe Status

CSR strategy

management and measurability participation in UN Global Compact 2010 Signed up on September 9, 2010

CSR Commitment and definition of specific CSR action areas 2010 Completed

publication of annual UN Global Compact progress reports From 2011 New objective

Raising awareness: employees and customers provision of information in print and online 2010; ongoing Employee/customer flyers and intranet 2010; Internet Q1 2011

Seminars and e-learning programs 2011-13 In development

Action area: environment

management system Group-wide Green Sustainability target system plus Group-wide metrics and reporting system

2010-11 In development

Group-wide EhS standards 2010 Completed

Group-wide rollout of ISo 14001 and ohSAS 18001 2011-13 In development

Climate protection Corporate carbon footprint Group-wide by end of 2011 Completed for pilot locations munich, Leipzig, Louisenthal, and knigstein (Germany) and Nitra (Slovakia)

product carbon footprint for selected products 2011-13 New objective

manufacturing and products Introduction of efficiency programs ongoing In development

Continued development of eco-friendly products, e.g. green SIm cards ongoing Introduction of task force

Carbon-neutral banknote 2010 Completed

Action area: employees

management Regular global employee satisfaction surveys 2010; ongoing (every 2 years) Completed for 2010: 21 countries surveyed in october and November

360 feedback for managers worldwide ongoing

Introduction of global hR guideline (hR Standards and Guiding principles) 2010; ongoing Completed; implementation ongoing

demographic change Life-phase-oriented professional development and seminars ongoing Incorporated in training program for 2011

Youth succession Expansion of partnerships with schools and universities ongoing

Work/life balance Recertification by berufundfamilie gGmbh 2010 Completed; ongoing introduction of new measures, e.g. support for women in management positions and for flexible working time models; family issues and the executive role, etc.

health management Implementation of global health management program 2010-13 In development; 2010: health awareness week and opening of health and fitness center at munich site

Action area: Security and society

Stakeholder dialog Flagship project (dialog platform) 2011-13 project defined 2010; implementation from 2011

Compliance

Corporate compliance management system Worldwide implementation/rollout of compliance management system 2010-13 Started Q2 2010

helpline for employees, customers, and service providers 2010-11 Established Q1 2011

International e-learning program and employee training 2010-11 program launched

Compliance in value chain Business partner questionnaire 2010 Implemented

Integration of compliance in business processes (m&A, hR) 2011 New objective

Corporate citizenship

G&d Foundation Establishment of Foundation 2010 Completed; first sponsorship programs under way

038 039

GRoUp mANAGEmENt REpoRt

Giesecke&Devrient(G&D)isaleadinginternationaltechnologygroupthathasbeenfamily-ownedforfivegenerations.In1852,HermannGieseckeandAlphonseDevrientestablishedtheOfficinfrGeld-undWerthpapiereinLeipzig,acitywitharichprintingandpublishingheritage.Today,theGroupisheadquarteredinMunichanditsoperationscomprise61subsidiaries,jointventures,andassociatedcompaniesacrosstheglobe.Attheendof2010,G&Dnumbered10,413employeesworldwide,including6,493outsideGermany.

Weareatrustedpartnertoourcustomersinthepublicandprivatesectorsworldwide,supplyingprod-uctsandsolutionsforthefollowingmarkets:

Paperproduction,printing,andbanknoteprocessing(Banknotebusinessunit)Cards(magneticstripe,smart,anddualinterfacecards)andcomplexsystemsolutionsforsafeguardingelectronic transactions and data, particularly in the fields of telecommunications and electronicpayment(CardsandServicesbusinessunit)

Security-related solutions for governments and public authorities, such as identification and traveldocuments,IDandhealthcarecards,e-governmentsolutionsandITsecurity,andcontactlesscardsforpublictransport(GovernmentSolutionsbusinessunit)

Solutionsfornewmarketsandtechnologies,especiallyinthefieldofmobilecommunications(NewBusinessdivision)

Uptotheendof2010,theoperatingactivitiesoftheG&DGroupweredividedintothreebusinessunitswitheightdivisions.Theninthdivision,NewBusiness,workedcloselywiththeCardsandServicesandGovernmentSolutionsbusinessunits,primarilyinrelationtomarketing/salesandresearch.

Inordertofurtherextendourglobalsuccesswithinnovativeproductsfortelecommunicationsandpay-mentwhilemeeting the clearmarket requirement for an integrated, solution-based range of secureproducts, software, and services, theactivitiesof the formerCardsandServicesbusinessunit, theNewBusinessdivision,andtheTransitsegmentoftheGovernmentdivisionwerecombinedwithinanewMobileSecuritybusinessunitatthestartof2011.

1.BUSINeSS ACTIvITy

GROUp STRUCTURe Up TO DeCeMBeR 31, 2010

operating Activities

Business Unit Banknote Cards and Services Government Solutions

division paper printing processing

telecommunications payment Smarttrust

Government secunet

New Business

Corporate Functions

041

TheBanknoteProcessingdivisioncontinuedtofeeltheeffectsofthefinancialcrisis,especiallyinourmarkets in theUnitedStates,Europe, andEasternEurope regions. Investmentdecisionswerepost-ponedduetobudgetcutbacks.Inotherregions,however,suchasLatinAmericaandtheBRICcountries(Brazil,Russia,India,andChina),recoveryisincreasinglyapparent.Thecostpressuresinvolvedinman-agingthebanknotecyclearemakingautomationanevenhigherpriorityforourcustomers,leadingtogreaterdemandforhighlyintegratedautomationsolutionsforbanknotesecurity(securityfeaturesandsensors)andcashcyclemanagement(systems,software,andservices).

PerformanceofthemarketsservedbyourCardsandServicesbusinessunitwasconsistentlypositivein2010.ThemarketenvironmentfortheTelecommunicationsdivisionwasmarkedbyreinvigorateddemand forSIMcards, followingsingle-digitgrowthrates in2009.GainswereseenworldwidebutwereparticularlystronginAsiaandAfrica.ConsiderableadditionaldemandisalsoanticipatedfromNorthAmericainthefuture,mainlydueto4G/LTEtechnologybeingrolledoutbynetworkoperatorswhohavenotpreviouslyusedSIMcards.TheSIMindustrydoes,however,remainexposedtodeclin-ingprices.G&Dwasincreasinglyabletofreeitselfofthesepressures,though,becauseourspecificproductportfolioisgearedmoretowardshigher-valueSIMcards.Ourmarketpositionthereforeim-provedveryfavorably.

ThePaymentdivisionsawitsmarketgrowmuchmorestronglyin2010thananticipated.Theglobalfinancialcrisishadonlyaminorimpactonthesmartcardsegment.DemandwasalsostimulatedbycardreplacementcyclesinCanadaandSpain,forexample,aswellasrebrandingactivities.Overall,growthinG&DsPaymentdivisionfarexceededthatofthewidermarket.Mobilemoney(financialtransactionsperformedby cellphoneandSIMcard) is anotherG&Dpaymentmarket thatoffersexcitingprospects,especiallyintheemergingmarketsofSoutheastAsia,Africa,andEasternEurope.

OursubsidiarySmartTrustAB,anditssubsidiariesinturn,experiencednogrowthintheirmarketsduring2010.Projectsweredelayedbylegalrequirements,forexample,andbytheafter-effectsofthefinancialandeconomiccrisis.Assoonasnewtechnologieslikemachine-to-machine(M2M)commu-nicationandNearFieldTechnology(NFC)takeoff,thiswillboostthemarketformobiledeviceman-agement(MDM)andSIMmanagementsolutions.Suchsolutionsallowmobilenetworkoperatorstoofferabetterservicetotheirendcustomers,managethedevicesintheirnetworkmoreefficiently,andprovidehigh-revenue,customer-focusedservicesandapplicationsquicklyandeasily.

TheGovernmentSolutionsbusinessunitbenefitedfromtheongoingfocusonreliablepersonalidentifi-cationbywayofsecure,durableIDdocumentsthatalsoofferahighlevelofprotectionagainstdatamisuse.AswellasIDdocuments,G&Dsuppliesassociatedsystemsolutionsandpersonalization,authentication,andverificationservicestogovernmentsworldwide.Manycustomerslaunchedelectronicidentificationdocuments, suchas IDcards, in2010.Byprovidingproofof identity, these innovationsboostsecurityatnationalborders,inthelocalandlong-haultransportationsector,withincompaniesandnetworks, and foronline transactions.G&Dalso supplies technologies thatmeet thegrowingpublicneedtoprotect,securelytransfer,andstorepersonaldata.G&Disactiveinallthesemarketsandwasabletoextenditspositionthroughlastinginnovations.

This new business unit comprises two new divisions SecureDevices, and Server Software andServices(3S).Goingforward,ajointmarketingandsalesorganizationwillrepresentbothdivisionsontheglobalmarket,ensuringacustomer-focusedapproach.Thisfollowsthepatternforthepurchasingandqualitymanagementfunctions,whichpreviouslyprovidedservicestoalldivisionswithinCardsandServicesandwillnowalsosupportMobileSecurity.

In2010,theglobaleconomylargelyemergedfromthetoughrecessionof2008and2009,experiencingabroad-basedrecoveryandevenastrongupswinginsomeareas.Havingcontractednearly2%in2009,globaleconomicgrowthapproached4%onaveragein2010.Thekeydriverwasresurgentinternationaltrade,whichhadtakenadramatic11%tumblein2009butclimbedback12%during2010.

TheBanknotebusinessunitexperiencedreduceddemandfor itsproductsandservices in2010com-paredwiththepreviousyear.However,thetrendtowardscashlesspaymentcontinuesandcashremainstheworldsmostpopularpaymentmethod.Asatechnologyleader,G&Disclearlydifferentiatedfromits competitors in thebanknote segmentand investsheavily in researchanddevelopment to furtherenhanceitscompetitiveedge.

Modest global economic growthmeant that quantities of banknotes in circulation increased onlyslightly.Themarket for theBanknotePaperdivision thereforemovedsidewayswithout significantgrowthdrivers.Themove towardsdurable substrates and the implementationof complex securityfeaturescontinued.Showinggreaterresponsivenesstocustomerrequirementswithoutlongleadtimesisbecomingincreasinglyimportant.

Althoughprintingvolumesinthemarketplacearestableatatotalofaround130billionbanknotes,manufacturersandprintingplantshave significantlyboosted their capacity throughmodernizationandexpansioninrecentyears.Asaresult,thePrintingdivisionisexperiencingever-toughercompeti-tion at a global level. In particular, new state-owned banknote printers with surplus capacity arecrowdingintothemarketinLatinAmericaandAsia.Anotherfactoristhegeneralriseinthepriceofrawmaterials,withcottoninparticularbecomingmoreexpensive.Thereisalsoatrendtowardsissuingtendersforcontractsinternationally.TheGermancentralbank(DeutscheBundesbank),forexample,haschangedthewayitawardscontractsandplacedalargeproportionofitsprintingrequirementfor2011withforeignprinters.

040 | Group management Report

GROUp STRUCTURe FROM JANUARy 01, 2011

operating Activities

Business Unit Banknote Mobile Security Government Solutions

division paper printing processing

Secure devices Server Software

and Services

Government secunet

Corporate Functions

2.MARKeT TReNDS

Structural costs, i.e. selling, research anddevelopment (R&D), and general and administrative ex-penses, rose disproportionately comparedwith theprevious year byEUR49.0million (13.4%) toEUR415.5million.FactorsherewerethefullconsolidationofSmartTrustforacompletefiscalyear(+EUR11.2million)andtheweakeningoftheeuroagainstmostforeigncurrencies(+EUR7.9mil-lion).Servicesorfunctionsperformedatnon-Germancompaniesprovedconsiderablymoreexpen-sivefortheGroupduetoexchangeratedevelopments.Thisappliesespeciallytosellingandadminis-trativeexpenses,asthesefunctionsarenotperformedcentrally,whereasR&DisconcentratedatasmallnumberofmostlyGermanlocations.TheremainingincreaseincostsofEUR29.9millioncanbeattributedtoR&D(EUR20.0million)andsalesactivities(EUR12.5million).Generalandadminis-trativecostsweredownbysomeEUR2.6million.

Aftermoreprojectandorder-relatedresearchanddevelopmentinthepreviousyear,resultinginthecapitalizationofassociatedexpensesandimpactingthecostofgoodssold,R&DexpensesincreasedtoEUR116.7millionintheyearunderreview(previousyear:EUR93.7million).TheGovernmentSolu-tionsbusinessunitinvestedinaddingvalueanddevelopingelectroniccomponentsforIDcards.Devel-opmenteffortsrelatingtonewcardbodies,newcardpersonalizationtechnologies,andadvancesinthefieldofmobilepaymentalsocontributedtotheriseinR&Dexpenses.

OftheEUR24.2millionincreaseinsellingexpenses,EUR7.5millionisattributabletoSmartTrustconsolidationandEUR4.1milliontoexchangeratefluctuations.TheremainingincreaseofEUR12.5million(+7.6%)wasduetoanumberoffactors,includingexpandinginternationalsalesactivitiesinIndonesiaandelsewhere.ThegrowthinsellingexpensesisdirectlyrelatedtohighersaleswithintheCardsandServicesbusinessunit,inparticular.

In consequence, the significantly improved gross profit was countered by increased structural costs,meaningthatoperatingprofitwasuponlyEUR12.2million(8.8%)yearonyear,toEUR147.9million.

Therewereone-offpayments in thefiscal yearnowended to theGiesecke&DevrientFoundation,whichwasestablishedin2010.Theseexpensesareshownasaseparatelineitemintheconsolidatedin-comestatementandhaveanimpactonearnings.

Intheyearunderreview,positivefinancialincomeofEUR3.4millionwasagainachieved.Lowerin-comefromusingtheequitymethodreducedfinancialincomeonlyslightlycomparedwiththeprioryear,byEUR0.3million.Areductioninincomefromsecuritieswasalmostcompletelyoffsetbyin-come from the saleof anassociated company.Excluding theone-offpayments to theGiesecke&DevrientFoundation,earningsbeforeinterestandincometaxes(EBIT)totaledEUR151.3million.ThisrepresentsanincreaseofEUR11.8million(8.5%).TheEBITmarginroseaccordinglyto9.0%from8.3%inthepreviousyear.Includingtheone-offeffectsofestablishingtheFoundation,EBITamountedtoEUR131.3million.

TheNewBusinessdivisionwasestablishedasan innovation incubator in2006. In todaysworld,peopleincreasinglywanttomakepayments,communicate,work,travel,andnetworkunhinderedbyboundariesorrestrictions.TechnologyfromG&Dmakesalltheseeverydayactivitiesmoresecureandconvenient.Inaddition,theinnovationsandsolutionswehavedevelopedinrecentyearshavecon-tributedtoatrendthatistransformingourmarkets:theincreasingconvergenceofthepaymentworld,mobilecommunication,and theInternet.Forexample, it isalreadypossible forbankcustomers tomakepaymentsviacard,cellphone,oronlineapplications.Atthesametime,cellphoneoperatorsarestartingtoofferfinancialservices.Intheprocess,mobiledeviceslikesmartphonesarebecomingthevirtualnervecenterofdailylife.

TheGiesecke&DevrientGroupcomprises61subsidiaries,jointventures,andassociatedcompanies.Intheyearunderreview, the followingchangesoccurred: thesales subsidiaryPTGiesecke&DevrientIndonesiawasestablishedinJakarta;thestakeinShenzhenG&DCurrencyAutomationSystemCo.Ltd.inChinawasincreasedfrom40%to50%;andthe35%interestintheRussiancompanySITRONICSmartTechnologiesLLCwassold,aswasthe8.33%holdinginSepedoServiosdePersonalizaodeDocumentosS.A.,Portugal.

While thesalesandearningsofSmartTrustAB,whichwasacquired in2009,wereconsolidatedoveronlysevenmonthsthatyear,theywerefullyconsolidatedfortheentirefiscalyearforthefirsttimein2010.Operatingincomewasimpactedbywritingdownassetsacquiredaspartofpurchasepricealloca-tionandstatedatfairvalue.

Giventheprevailingcircumstances,G&Dperformedverywellintheyearfollowingthefinancialandeconomic crisis. Strongperformanceby theGovernment Solutions andCards andServices businessunitscompensatedforthedropinsalesexperiencedbytheBanknotebusinessunit.Overall,Giesecke&DevrientwasabletoincreasesalesslightlyfromEUR1,684.2millionin2009toEUR1,688.2millionintheyearunderreview.DevaluationoftheeuroboostedsalesgrowthbyEUR55.5million.

IncreasedbusinessvolumesandthelowercostofgoodssoldresultedingrossprofitofEUR563.7mil-lion,upEUR60.6millionor12.0%comparedwith2009.Grossmarginclimbed3.5percentagepointsfrom29.9%to33.4%.TheimprovementsweredrivenbytheBanknoteProcessing,Telecommunica-tions,andGovernmentdivisions,inparticular.TheBanknoteProcessingdivisionhasstreamlineditsproductportfolioandnowfocusesoncashcentersolutions,includingservices.CashhandlingproductswerediscontinuedandOEMoperationswillbecomepartofajointventurewithWincorNixdorfasof2011.Somechangeswerealsomadetopartsoftheorganizationalstructure.Despiteaslightfall insales,theoptimizedproductmixresultedinasignificantlyimprovedgrossmargin.Additionally,whilethefiscal2010incomestatementdoesincludesomeextraordinaryexpensesarisingfromrestructuringactivities,theeffectwasmuchsmallerthaninthepreviousyear.Inlinewithgeneralmarketgrowth,theTelecommunicationsdivisionwasabletoachieveconsiderablyhighersalesin2010.Sinceproduc-tioncapacitieswereconsolidatedintheprioryear,costsassociatedwithidlecapacitywerelowerin2010too.Furthermore,theone-offeffectofconsolidationactivitieswasnolongerafactorintheyearunder review.The Government division successfully completed its restructuring program, Break-through,and thanks tobuoyantprojectbusinesswasable to significantly improve itsgrossmargincomparedwiththepreviousyear.

042 | Group management Report 043

3.BUSINeSS peRFORMANCe

3.1.Group Business performance

3.1.1.Results of operations

045

CurrentassetsrosebyEUR40.8milliontoEUR975.0million.Thiswasprimarilyduetocashandcashequivalentsandinvestmentswithtermsbetweenthreemonthsandoneyear,butalsotohigherinventories.Non-currentassetsrosebyaroundthesameamount.ThekeyfactorsherewereloanstotheassociatedcompanyMCVermgensverwaltungGmbH&CoKGandariseinintangibleassets.The latter increaseddue toadditions tocapitalizedR&Dexpensesandtheca