QUESTIONS //

marKeTs
ANSWERS //
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,
efficiency, and convenience are key. can these expectations be met?

Key figures

Giesecke & Devrient Group (EUR million)

Sales

2010

2009

% Change

1,688.2

1,684.2

0.2
-8.6

227.4

248.8

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

80.5 *

104.5

-23.0

10,122

2.9

Sales (Germany)
Sales (other countries)

Net income

10,413

Employees as of December 31

Banknote: Sales (EUR million)

We observe five corporate values in the daily implementation of our vision and mission:
trust, quality, sustainability, responsibility, and integrity.

Banknote: Employees
753
896

2010_________
2009_________

4,050
3,975

cards and services: Sales (EUR million)

cards and services: Employees

2010_________
2009_________

2010_________
2009_________

705
589

5,176
4,963

government solutions: Sales (EUR million)

government solutions: Employees

2010_________
2009_________

2010_________
2009_________

210
183

Every 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.

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

2010_________
2009_________

Vision, Mission,
Values

658
675

New business: Sales (EUR million)

New business: Employees

2010_________ 20
2009_________ 16

2010_________ 93
2009_________ 85

S_02

Corporate
strategy

Is security
still possible
in our interconnected
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_03

S_04

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

05
S_05

06
S_06

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

07
S_07

S_08

Identity

Do people really
know 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 airports 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

S_10

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 contribution to user-friendliness and state-of-the-art security and will continue to do so in the future.

> Research and development _____ page 024

11
S_11

S_12

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_13

S_14

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 shortterm 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

S_15

Payment

Communication

Identity

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.

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

Q4 2010
G&D delivers components for
the new German ID card to the
Bundesdruckerei

ANSWERS //
OUR SOLUTIONS

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.

Contents

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

004

005

Ladies and Gentlemen:

Foreword
Giesecke & Devrient proved itself resilient in the face of the recent global economic and financial crisis.
The total sales of around EUR 1.7 billion achieved on the back of robust growth prior to the crisis were
rivaled in fiscal 2010, with the expected drop in sales in the Banknote business unit more than offset by
significant growth in Cards and Services and Government Solutions. We were able to maintain or expand
our market share across all business units. In addition, the companys operating profit increased compared with the previous year, rising to more than EUR 150 million. This again enabled us to fund our
consistently high investment in future development from our own cash flow in 2010.
The key pillars of our Group strategy remain innovative drive, global customer proximity, and the trust in
our brand that Giesecke & Devrient has built up over almost 160 years. These three pillars again determined the focus of our capital expenditure in 2010, with funding allocated to research and development
increasing by some 25 percent and expenditure on our global sales capabilities rising around 10 percent.
2010 also saw us underline our commitment to the sustainable development of our company and the
society in which we live and operate by establishing the Giesecke & Devrient Foundation, which we
endowed with EUR 20 million. In addition, we invested significantly in globally integrated management
of environmental sustainability, employee development, and compliance. Our adoption of the UN
Global Compact in 2010 represents an important milestone in this process.
Taken as a whole, we regard fiscal 2010 as a success and not just from a business perspective. All of us
in the Group worked intensively on essential, forward-looking projects. The overarching aim is to maintain
G&Ds success as a technology leader and independent, family-owned company by playing an active
role in shaping the future of the banknote and delivering security and trust in our mobile, globally networked world. Our Creating Confidence. claim remains our core performance promise to our customers
and business partners worldwide.
In a world where people, data, and goods are constantly on the move and globally interconnected, trust is
a central requirement especially in terms of the security of transactions and the authenticity of identities,
assets, and values. This is particularly important in the rapidly growing (and converging) fields of payment, mobile communications, and Internet services. Giesecke & Devrient has invested substantially in
its portfolio of secure products, software, and services throughout recent years to help shape the dynamic
new market for secure mobile applications. Key milestones here included establishing the New Business
start-up division and Venyon service subsidiary in 2006 and acquiring software company SmartTrust in
2009. At the start of 2011, we took this work forward by creating the new Mobile Security business unit.

This combines our hardware, software, and service portfolios for integrated solutions covering telecommunications and cashless payment, mobile business applications, and public transport, as well as Internet
and network security. Just as G&D technologies already create trust and security for payment products
in peoples wallets, this new organizational structure leaves us even better placed to ensure trust and
security for mobile services on smartphones. The new business units comprehensive solutions portfolio
will now be marketed by a joint global sales team.
G&D is thus extremely well positioned to respond to the challenges and requirements of customers
across all its markets. Accordingly, this years annual report features a question-and-answer format for
our core markets of payment, communication, and identity verification.
The significant progress achieved on so many fronts in 2010 would not have been possible without the
outstanding commitment of our employees. On behalf of the entire Management Board, I would like
to thank you all for your dedication and loyalty. We are constantly striving to enhance our standing as
an attractive and reliable employer, so we were particularly pleased to learn from our most recent glob
al employee survey in 2010 that some 71 percent of our staff would recommend G&D as an employer.
That is a huge source of motivation for us and a solid platform for the future.
At the end of 2010, we started to implement our CHANGE program to harmonize and standardize our
global process and IT environment across the Group. The aim is to create a significantly more efficient
organizational structure throughout all our business units and international subsidiaries, enabling us to
align our internal competencies with external market and customer requirements even faster and more
effectively. This is crucial to maintaining our profitable growth trajectory beyond 2012.
We expect the global recovery to continue in 2011, albeit at a limited pace. We will do our utmost to
maintain our leading role in our core sectors and successfully position our new business unit and its
solutions portfolio in the burgeoning mobile security markets. Overall, we anticipate moderate sales
growth for the G&D Group over the coming year. We plan to increase investment again in 2011, while
remaining committed to boosting enterprise value.

Dr. Karsten Ottenberg

Chairman of the Management Board

1852
Hermann Giesecke and Alphonse Devrient
establish the Officin fr Geld- und Werthpapiere
in Leipzig, Germany

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

Dr. Karsten Ottenberg

Chairman of the
Management Board

006

007

Management
Board

Dr. Karsten Ottenberg

Dr. Peter Zattler

Dr. Walter Schlebusch

Michael Kuemmerle

Hans Wolfgang Kunz

Chairman of the
Management Board,
CEO

CFO

Banknote
Business Unit

Mobile Security
Business Unit

Government Solutions
Business Unit

1922
Printing of banknotes for the German Reichsbank
begins with the Giesecke Tausender

008

009

Ladies and Gentlemen:

Supervisory
Board report

During the 2010 fiscal year, the Supervisory Board of Giesecke & Devrient GmbH performed all its
duties as stipulated by legal provisions and the Articles of Incorporation. The Supervisory Board also
monitored the Management Board and advised on issues of note.
At meetings of the Supervisory Board, the Management Board provided regular, comprehensive information about the companys situation. The Supervisory Board additionally received oral and written
updates on G&Ds performance and finances in the form of quarterly reports. Outside the scheduled
meetings, the Chairman of the Supervisory Board was also in regular contact with the Management
Board and was kept informed of issues relating to the current business situation.
The Supervisory Board held three scheduled meetings during fiscal 2010 to consider the economic
situation of the company and major investment decisions. It also used these meetings to deal with
corporate planning and G&Ds financing strategy. Further, it advised the Management Board on matters
relating to HR policy and reviewed compliance and risk management procedures. Another important
issue discussed by the Supervisory Board was the new strategic alignment of the Telecommunications
and Payment divisions and the associated creation of a new Mobile Security business unit, comprising
the Secure Devices division and the Server Software and Services division. The Supervisory Board
also considered the CHANGE program, which entails global restructuring of the process and IT
environment.
The Supervisory Board duly received the annual financial statements and management report of
Giesecke & Devrient GmbH for the period ending December 31, 2010, prepared in accordance with
the German Commercial Code (HGB), and the consolidated financial statements and Group management report for the period ending December 31, 2010, prepared in accordance with IFRS, along with
the Management Boards proposal for appropriation of net income and the audit report.

The auditor, KPMG, issued its opinion on the accounts. This was unqualified with the exception that the
notes to the consolidated financial statements do not contain disclosures required by IFRS with regard
to the remuneration of managers in key positions where this information exceeds the reporting requirements of Section 314 of the German Commercial Code.
The Supervisory Board accepted KPMGs audit opinion of both sets of financial statements. The auditor attended the meeting on May 4, 2011, in which the financial statements and proposed net income
appropriation were discussed, and reported on the main findings of the audit, particularly concerning
the internal control and risk management system in relation to the financial reporting process.

Dr. Peter-Alexander Wacker

Chairman of the
Supervisory Board

The Supervisory Board concluded its review with no objections raised. It discussed, examined, and
approved the annual and consolidated financial statements, including the corresponding management
reports, and agreed to the proposed net income appropriation at its meeting of May 4, 2011.
The Supervisory Board would like to thank the Management Board, all employees, and the Works
Councils of the G&D Group for their efforts and valuable contributions to a successful fiscal year.

Dr. Peter-Alexander Wacker

Chairman of the Supervisory Board
Munich, May 2011

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

Corporate
STrategy

We safeguard
reliable trans
actions and the
authenticity of
identities and
values
:

1968
G&D files the first patent application
for cards with embedded chips

Giesecke & Devrient is a technology leader,

trusted partner, and preferred provider in all its
markets. As such, we are already seeing signs of
an emerging mega-trend: the worlds of payment,
mobile communications, and the Internet are
rapidly converging, with modern smartphones as
the nerve center and nexus. These devices are used
for supermarket and online shopping; as contactless drivers licenses; to perform bank transfers,
display media, and link up with customers and
colleagues. As mobility picks up pace and barriers
fall, the importance of data security and reliable
ways to identify people increases. So G&D provides end-to-end solutions for mobile security
applications comprising hardware, (server) software, and services, meeting the needs of these highgrowth markets of the future.
Solutions for a mobile society

To guarantee security, you need to be ahead of

your time. This is as true today as it was in the
nineteenth century, when our founders, Hermann
Giesecke and Alphonse Devrient, laid the cornerstone for almost 160 years of success. Since then,
we have developed a succession of homegrown
innovations that make daily life more secure and
convenient. Examples include the Eurocheque
system, cards for the first German cell phone network, and electronic passports with biometric
features. We are now building up to the crest of
another major wave of innovations, with mobility,
networking, and flexible availability all having a
significant impact on our lives. Whether at home
or in the office; on private or business trips; people
want anytime, anywhere access to information,
services, contacts, and entertainment. Convergence
of the Internet and mobile telephony makes all
this possible. More than five billion cell phones
are now in use worldwide, with Internet-enabled
smartphones the most dynamic market segment.
Mobile Internet use is growing significantly faster
than online access via stationary PCs.

1971
The European banking industry develops
the Eurocheque and Eurocheque card in
conjunction with G&D

At G&D, we have responded to the burgeoning

importance of mobile applications by establishing
the Mobile Security business unit, which aligns
us even more closely with the requirements of

159
our markets. Mobile Security incorporates our
hardware and software solutions for telecommunications and cashless payment, mobile business
applications, and public transport, as well as Internet and network security. Our product portfolio
here ranges from secure hardware (e.g. payment
cards, SIM cards, and tokens) to servers, software,
and services all marketed by a joint sales team.
We are thus even better equipped to meet the
needs of our customers for integrated, commercially attractive offerings. We offer tailor-made
solutions that guarantee security in todays virtual
world, such as new contactless cell phones with
NFC technology, secure integration of external
staff into company networks, secure financial and
bank transactions via cell phone, tap-proof telephone calls and SMS texts, and wireless machineto-machine communication.
The new Mobile Security business unit comprises
the former Cards and Services unit, the Transit
segment of Government Solutions, and the New
Business division. Former subsidiaries Venyon
and SmartTrust have been integrated into G&Ds
comprehensive offering, retaining recognized
brands such as Convego, SmartTrust, SkySIM,
and StarSign.
Thanks to this globally unique solution portfolio,
G&D is well positioned in the payment, communication, and identity markets. Find out more on
the following pages.

years of innovation
by Giesecke & Devrient

012

013

In the 21st century, secure, convenient, and flexible

payment is a must. People dont want to spend
time thinking about how and where they can pay:
the main requirement is that it works. Paying by
card instead of cash is already standard practice
for many. And now a third option is available with
the latest generation of cell phones, which offer
attractive, reliable methods of conducting monetary transactions.

Payment

Theres room in
our wallets for
both banknotes
and cards and
now cell phones
are providing
another secure
way to pay
:

1975
Introduction of automated banknote
processing systems and the worlds
first machine-readable banknote

The main requirement of a banknote is that it

should offer maximum protection against counterfeiting. G&Ds paper and banknotes benefit
from innovative, highly complex security features
that offer unrivaled protection against forgery
when combined. Only a global systems provider
like Giesecke & Devrient can fulfill the need for

100

G&D banknotes in global circulation

Four factors are crucial to the success of a bank

note: security, durability, quality, and design. From
the users perspective, notes should be genuine,
clean, and pleasing to the eye. This is all very
familiar territory to us.
Worldwide, more than 100 countries have already
chosen to print their currencies on G&D bank
note paper. We also produce billions of banknotes
a year ourselves, working under ultra-strict security
conditions on behalf of the German Bundesbank
and over 60 other central banks around the globe.
In each case, the product is precisely tailored
to the local requirements of the issuing country.
The most advanced substrate currently on the
world market is our innovative HybridTM solution,
which unites the benefits of paper and polymer
banknotes in a pioneering combination. The
resultant banknotes are extremely durable and
secure. Since its launch in 2010, HybridTM has
already been successfully deployed in three countries, with more to follow in 2011. We are so confident of its market potential that our subsidiary
Louisenthal has invested in a production facility
that enables window solutions using this substrate.
G&D has also made other investments to ensure
it remains well positioned to leverage the growing global demand for banknotes. Notably, these
included channeling 70 million euros into a new
cylinder mould paper machine, which has been
working extremely efficiently and at full capacity
even in its first year of use.

banknote authenticity to this extent and with

such impressive results. The widespread availabil
ity of high-resolution scanners and color photocopiers has led to a sharp rise in counterfeiting
attempts in recent years. That is why we develop
at least one new security feature each year, staying a step ahead of the forgers. Many of these
developments are designed to be seen or felt by
users (human features), while others can only
be read by special sensors and offer additional
protection in the background. Our security tech
nology is a compelling combination of proven
techniques and innovation: the FIT (Fine Inta
glio Technology) feature, for example, is based
on the oldest printing method in the world, while
LOOK (Laser Originated Optical Key) harnesses the potential of modern laser technology.
Security threads and foils also offer reliable protection. The varifeye C2 see-through window
changes color and image depending on the angle
at which the banknote is viewed. Using holographic foil effects further enhances the attrac
tiveness of the note. Such eye-catching elements
are familiar to the public and the optically vari
able effects cannot be reproduced by digital
copiers. Our varifeye Magic feature on Kazakh
stans 1,000 tenge note won the Best Applied
Security Product award in 2010 from the Inter
national Hologram Manufacturers Association.

countries print banknotes

on paper from G&D

>>
www.louisenthal.com

1979
G&D develops the worlds first system
for laser personalization of credit cards

014

Payment

015

To facilitate complete cash-cycle automation,

G&D also provides systems for counting, authenticating, sorting, packing, and destroying bank
notes. Our solutions are used by over 150 countries
around the globe. At the heart of our systems lie
sensors that unambiguously verify banknote authenticity and condition. After all, anti-counterfeiting protection is not the only factor by which a
currency is judged. Aesthetics are also important,
which is why more and more countries are pursuing
a clean note policy, under which only notes that
are sufficiently clean and undamaged remain in
circulation. In turn, the increasing quality of bank
notes enables further automation. Our product
portfolio in this area ranges from Numeron
desktop devices (with the ten-thousandth system
delivered in 2010) through high-performance
modular machines such as the BPS M7 launched
in 2010 and shipped to over 40 customers in the
first year alone to special processing systems that
handle 40 banknotes per second and are integrated
into highly efficient production processes. Such
systems are typically deployed in large cash cen
ters. We also offer our customers end-to-end solutions that encompass consulting, planning, delivery,
installation, maintenance, and repair, as well as
ongoing optimization. At the end of their useful
life, banknotes are destroyed yet another area
in which we are pioneers and technology leaders.

G&D cards for secure, cashless payment

The emergence of Eurocheques and EC cards

in the 1970s marked the debut of a new financial
transaction method: the payment card. Today,
billions of cash, bank, EC, credit, and customer
cards are in circulation around the globe. Online
transactions, in particular, are experiencing a
massive growth surge. With around 40 years of
experience to draw on, G&D is one of the biggest
players in this market, providing high-quality
services as well as cards. Our customers include
banks, credit card organizations, and other enterprises worldwide. These were among the factors
that convinced the UniCredit Group to make
G&D its enterprise-wide strategic partner for
its entire range of cutting-edge payment cards
from 2011 onwards.
The payment market is currently in a state of flux,
with new providers such as cell phone companies
and online retailers offering financial services,
causing traditional providers like banks to revise
their business models. This is opening up opportu
nities for independent, one-stop solution provid
ers, such as G&D, that can deliver both highvolume standard products and custom solution
packages. One of our latest innovations is the
GDC5120 display card, featuring an additionally
generated one-time password that guarantees
maximum protection for payment transactions in
accordance with the international EMV standard
both in store and online.
Another payment trend is mobile money, i.e.
transferring money between cell phones without
a bank or other account being involved. We offer
highly secure products and solutions to meet this
need, which is particularly strong in emerging econ
omies that lack a modern banking infrastructure.
Cell phones are a valuable addition to the world
of payment, and as in the cash and card arenas
G&D is at the forefront of technical developments here.
>>> More on page 16

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

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.

016

017

Back when cell phones were used solely for communication, G&D was already helping to shape
the market. We provided smartcards for the first
German cell phone network in the 1980s and
produced the first commercial SIM cards in 1991.
Today, our customers include hundreds of mobile
network operators and other service providers
worldwide, who require much more than just voice
and message-based solutions. The ever-smaller,
flatter, and impressively stylish cell phone now
performs numerous different tasks for which
consumers expect maximum security.

CommuniCation

Cell phones simplify

our increasingly
complex lives and
the modern smart
phone is fast becom
ing ubiquitous
:

1984
G&D launches the SIM plug-in, which
soon becomes the global standard

In the mobile communications market, three para

meters are vital for business success and customer satisfaction: attractive service offerings; secure,
high-performance devices; and a secure connection
and high level of service between provider and
consumer. Many companies offer attractive mobile services, giving customers an ever-increasing
variety to choose from including telephony and
data offerings, tickets for public transport, loyalty
points when shopping, navigation software, mobile
media, online banking, payment services, mobile
Internet, and much more. But all these apps and
services can only succeed if simplicity and convenience are underpinned by maximum security
and data protection which is precisely the point
in the value chain where G&D comes in.

Secure devices; secure connections

We specialize in providing security for mobile de

vices, such as smartphones, notebooks, and PDAs.
For example, the mobile security card produced by
our joint venture G&D Secure Flash Solutions
(SFS) guarantees protection for mobile monetary
transactions such as banking and online orders.
More than 500 million cell phones worldwide
already contain a slot for such a microSDTM card

297,000,000
and this number is growing all the time, so the
mobile security card is also an ideal solution for
integrating mobile devices into a companys security
concept. With the mobile security card VE 2.0,
we have even developed a solution for secure voice
and messaging. Thanks to G&D technology, both
calls and SMS texts from German government
employees have been tap-proof since 2010.
G&D is also a trusted partner with regard to the
third parameter of mobile business models the
connection between the service provider and the
consumers secure device. One of the key technol
ogies here is Near Field Communication (NFC).
Available in 2011 from every major manufacturer and set to capture a fast-growing market share,
NFC-enabled cell phones allow users to pay for
items by waving their device at a supermarket
cash register, to download a train ticket (e.g.
using Deutsche Bahns Touch&Travel offering,
powered by G&D technology), to pass through
access controls, or to gain entrance to their hotel
room. As an independent provider in the highly
promising NFC market, we can offer mobile network operators and service providers such as
banks and public transport companies a whole
host of secure management, supply, and personalization services throughout the entire lifecycle.
G&D leads the way in independent trusted ser
vice management (TSM). To take one example,

1990
G&D receives a major contract from the
US Federal Reserve for the new ISS 3000 highperformance banknote processing system

smartphones
were bought in 2010
* Source: Gartner 2011

>>
www.gd-sfs.com

018

019

the UN estimates that the worlds 60 largest

megacities alone will number 600 million inhabi
tants by 2015. This makes rapid access to public
transit tickets essential if transportation companies are to cope with the flow of commuters. G&D
offers end-to-end solutions that enable cell phone
users to obtain their tickets quickly and easily at
terminals, without having to stand in line at coun
ters or machines.

book, SMS notification of missed calls, and metapasswords for credit card numbers and passwords
stored on the cell phone, etc. Thanks to G&Ds
SmartTrust DPTM solution, since 2010 mobile
network operators have also been able to provide their customers with secure access to social
media such as Twitter and Facebook from virtually every type of cell phone.
M2M communication powered by G&D

Communication

1991
G&D supplies the worlds first commercial
SIM cards to a Finnish network operator

Another way in which G&D bridges the security

gap between service and consumer is through the
SIM card the heart of every cell phone. This
provides the perfect platform for mobile network
operators, enabling secure execution of both consumer and network provider services. We offer
SIM products that meet the special requirements
presented by innovative NFC technology, where
banks, credit card organizations, and public transit
operators expect stringent security standards.
At the same time, the dynamic and varied nature
of NFC applications makes tough demands on
the operating system of our NFC-enabled SIM
cards. As well as producing large quantities of SIM
cards, G&D supports mobile network providers
with business models that focus on added value,
innovation, and customer service. Our new
Mobile Security business unit, which includes our
SmartTrust and Venyon acquisitions, offers one-stop
solutions for all SIM card management activities.
Key functions include initial configuration, personalization, application management, and ongoing monitoring of mobile devices, from the first
day of use through to eventual decommissioning.
Our SmartInsightTM product, for example, provides mobile network operators with information
about the devices used in their networks which
they can then use to plan network investment, de
velop marketing campaigns, and add new services.
Meanwhile, SmartRoamTM enables network operators to offer an optimum roaming service that
reduces the cost of customer calls made abroad.
Features that improve user-friendliness are also
extremely popular, for instance simple switching
between a private and business cell phone contract on a single device, blocking apps on a lost
or stolen phone, PIN protection for the phone

G&D is also set to participate in the huge potential opened up by machine-to-machine (M2M)
communication. We are already playing a leading
role in the standardization and commercial rollout of this technology in many industries, from
medicine through logistics and transportation to
trade and traffic. G&Ds M2M portfolio helps
service and mobile network providers to design a
successful M2M business model. The underlying
principle is that machines, systems, and individual
modules automatically exchange information without human input. Application scenarios include
SMS, GPRS, or UMTS transfer of electricity meter readings to a utility company, or remote access
to a faulty device by a support technician. With
an estimated 50 billion M2M-capable devices
worldwide, the possibilities are endless.
To ensure that our increasingly mobile life remains
secure, reliable identity verification is becoming
ever more important.
>>> More on page 20

Cards

simple, convenient
electronic payment
There are billions of debit and credit cards in circulation 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 interface 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 contactless 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 potential of cards extends well beyond making payments. 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, including solvent-free ink, recyclable materials, and nonPVC products.

020

021

G&D offers a host of products and solutions to

reliably identify people, whether for travel or access control, when signing contracts, or in the
healthcare sector. Our passport and ID systems
ensure dependable authentication and maximum
data protection.

Identity

Reliable identity
verification is
essential to keep
our interconnected
world secure
:

One of our core areas of expertise is security of

national borders and international travel. Crossborder mobility has risen dramatically in recent
years, increasing the challenges countries are facing. International airports, for example, have to
securely identify a growing number of passengers
within a short space of time. G&D supports governments all over the world with passport and ID
solutions, as well as highly secure border control
management systems that are typically connected to national and international criminal investigation databases. Our cost-effective, ultra-reliable
products leverage the latest advances in the worlds
of biometrics, microprocessor technology, and
cryptography.
The core element in every border control system
is the passport or ID document presented by the
traveler. An increasing number of countries (currently more than 90 in total) are migrating to the
latest generation of highly secure electronic passports. Botswana has achieved a major leap forward
in this area with the help of G&D. In 2010, the
country seamlessly replaced its old handwritten
passports with state-of-the-art e-passports in time
for the FIFA World Cup soccer tournament, held
in neighboring South Africa.
Secure documents for secure borders

Security features are central to our product devel

opment work. In 2010, for instance, we introduced
MAGIC-ID technology for integrating 3D images
into ID documents. These images create an impression of depth or a rolling movement when
the document is tilted effects that cannot be
replicated even by the very latest scanners or
copiers. Another source of anti-counterfeiting
protection is our new FEEL-ID feature, which
responds to temperature changes. Rubbing the

1993
The German healthcare sector introduces
memory chip cards manufactured by G&D

document with a finger causes a different optical

element to appear.
The most important security element in a passport is the data page. When made of plastic, this
can also incorporate a contactless chip and antenna. In 2010, we launched the latest generation
of our PECSEC data page for passports, on which
the holders personal data are laser-engraved one
of the most counterfeit-proof personalization
methods in existence. An important project for
G&D is the new German ID card, for which
we have been supplying key components to the

90
Bundesdruckerei (federal printer) since 2010:
chip, operating system, and antenna. This creditcard-sized ID lies at the forefront of global
technology thanks to its versatility, contactless
interface, and high level of security. The card has
three applications: identification (including via
the stored biometric data), for instance at police
checkpoints; authentication on the Internet;
and electronic signatures, which can be used for
legally binding contracts.

countries are migrating

to highly secure e-passports

G&D also supports reliable identification in other

official contexts. For instance, more than 20 million third-country nationals in the EU require a
residence permit. The new electronic EU residence
permit (eERP) to be rolled out in May 2011 is a
smartcard-based document that stores biometric
data securely. G&D is setting the pace here with
a HIGHSEC document that provides holders
with access to e-government services and is accepted as a means of unambiguous identification
when shopping online and using other Internet
services. Flexibility and reliability are also provided by our electronic vehicle registration card
(eVRC), which will gradually replace the paperbased vehicle registration document throughout
the EU. We have been supplying this to various

1996
G&D produces the first contactless
multifunction smartcard for Lufthansa

1996
G&D launches the BPS 1000, a highly
modular banknote processing system

022

Identity

023

member states since 2010. Among other benefits,

the card allows faster, more reliable document
and vehicle checks and makes life more difficult
for car thieves. Also in the EU, buses and commercial vehicles whose total weight exceeds 3.5
tonnes must be equipped with an electronic tachograph, which records data including the drivers
rest times. G&D has implemented this kind of
tachograph system in countries such as Belgium,
Ireland, and Greece, and offers a certified platform. In 2010, we won our first contract from the
German Federal Motor Transport Authority
(KBA) for the tachograph card. Our leading-edge
drivers license cards with an integrated microprocessor chip also add significant value compared with the old paper-based licenses, enabling
fast data capture during traffic checks and adminis
trative processes or when hiring a car. In some
countries, they act as both drivers license and ID
card. G&D produces 3.5 million drivers licenses
per year for the Ministry of Transportation in the
Canadian province of Ontario, for example.
Online security with G&D

In the borderless world of the Internet, too, G&D

makes a significant contribution to ensuring that
only authorized individuals can conduct transactions. Our corporate access solutions, which cover
the complete range of tokens, smartcards, and
software, guarantee secure access to company
networks in the office or on the move and authorized entry to company premises. Our StarSign
mobility tokens, for example, launch applications
directly on any computer in the office, at home,
in an Internet caf without installation or the
need for administrator rights. Consumers can use
our display card to digitally sign online transactions via a dynamically generated one-time password. This function can also be integrated into a
mainstream debit or credit card.

1998
The first SIM card made in
China comes from G&D

Identification and security also present challenges

for the healthcare system challenges that can
be efficiently managed with G&D solutions. By
combining sophisticated IT infrastructures with
intelligent healthcare cards, G&D enables the
necessary process optimization together with a
high level of data protection. Our solution portfolio is built around an e-health/telematics infrastructure that includes electronic health insurance
cards and health professional cards. This infrastructure enables secure communication between
doctors, health insurers, hospitals, and so on, providing shared access to important information.
Benefits include improved quality of treatment
and avoidance of expensive repeat examinations.
We are thus helping to improve patient care and
stem the tide of insurance fraud. In Germany
alone, it is estimated that billions of euros are lost
every year through identity theft in the healthcare system. As a pioneer of card-based healthcare solutions, G&D can already cite references
worldwide. In 2010, for example, we supplied a
significant number of social security cards to
Austria. These are used for health, accident, retirement pension, and unemployment insurance
combined, thus ensuring virtually paperless administrative processes between the insured individual, public authorities, and service providers.

smartphones

Multimedia in your pocket

The Internet and mobile telephony are rapidly converging, 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 execution 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

To convert innovations into usable products, G&D

invests an average of six percent of its sales in research and development every year. Around 1,000
employees are currently working on new products
and solutions, including more than 600 in the new
Mobile Security unit. The G&D Technology Award
is presented in recognition of our staffs outstanding
development achievements. In 2010, two employees received first prize for a printable magnetic dis
play to be used in value documents. We also main
tain close ties with universities to attract the top
researchers of the future. 2010 saw us enter into
a partnership with Ingolstadt University of Applied Sciences, whose budding computer scientists
combine their studies with research work at G&D.
Security at the forefront of research

Research and
Development

Our research
makes the world
a safer, more
convenient place
:

Where banknotes are concerned, the focus is on

increasingly complex security features. G&D is
launching a feature in 2011 that is expected to
achieve significant market volume: RollingStar.
Around four millimeters wide, this security thread
is integrated into the banknote paper and creates
the impression of a rolling wave when the note is
tilted. Another product poised for launch is our
machine-readable MultiCodeTM coding for security threads, which will make life extremely difficult for forgers. Our banknote printers also harness
the possibilities of cutting-edge laser technology.
In 2011, G&D will commence series production
of a short-pulse laser process that prints security
features directly onto the sheet. And we are now
putting the finishing touches to our Compass VMS
banknote processing system, which will enable
central banks, commercial banks, and security
transport companies to manage the entire cash
cycle even more efficiently.
The research activities of our new Mobile Security
business unit are informed by several emerging
trends. These include sustainable products and
green production processes, which for us means
improving the durability and recycling possibilities of our card bodies. We are driving forward
solutions aimed at converging traditionally separate applications on cell phones, such as payment,

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

telecommunications, identification, and local transport ticketing. At the same time, we are working
closely with chip manufacturers to improve the
security of mobile devices. Another market of the
future is machine-to-machine (M2M) communication, where our current focus is on SIM modules
that are extremely robust and durable and can
withstand tough conditions such as constant vibration or extreme temperatures. Opportunities for
other M2M applications include vehicle telematics
such as the EUs eCall initiative for in-vehicle
emergency calls and electric vehicles.
With our customers demanding documents that
can be used for up to ten years in the field, it is
vital that our passport and ID solutions are equal
ly innovative. This means our developers must

116,700,000
anticipate the technical capabilities of passport
forgers in ten years time, which is why we work
closely with the Banknote unit to bring a new security feature to market every year. This high rate
of innovation ensures that our solutions will still
provide reliable information about the owners
identity a decade from today. We are also further
developing our pliable PECSEC card bodies,
which offer a convenient alternative to the stiffer
polycarbonate version. Another trend is the use
of sophisticated smartphones in the area of identification. In the future, cell phones will be able to
support certain ID card functions and become an
extension of the physical document.

euros for research

and development

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

026

027

Our performance promise to our customers is

based on state-of-the-art technologies, outstanding service, partnership, and trust. Since the knowledge and personal skills of our staff are crucial
factors here, our HR strategy includes a wide range
of measures designed to maximize long-term performance potential. Internal and external feedback
confirms that we are on the right track. 79.2 percent of our staff participated in our second global
employee survey in 2010 an increase of five
percent on the last one in 2008 and, tellingly, 71
percent of those surveyed would wholeheartedly
recommend G&D as an employer. G&D was
ranked among Germanys top 100 employers in
the 2010 list produced by Great Place to Work
Institute Deutschland, despite being a first-time
entrant, and has also been awarded the Fair
Company seal of approval.
Appreciation and incentives

Employees

Our employees
are the key to
our success
:

2002

Employees at G&D help shape the markets and

everyday habits of the people of tomorrow.
Throughout all areas of payment, communication,
mobility, and identification, our operations are
founded on five values: trust, quality, sustainability, responsibility, and integrity. Our staff can also
rely on these core values, which are reflected in a
fair and consistent leadership culture informed
by our Global HR Standards and Guiding Prin
ciples. Our course is clear: We want to shape the
future together so that our success will continue
to grow worldwide.
At G&D, we show our appreciation of individual
performance in a variety of ways. Our perfor
mance-related remuneration system takes account
of the employees role within the company, their
individual contribution, standard practice in our
markets, and G&Ds business success.

In addition, personal recognition and a range of

social and other benefits allow us to actively dem
onstrate how much we value our employees. For
over 40 years now, we have been paying a compa
ny pension financed wholly by G&D and provided
on a completely voluntary basis. Staff can also take
advantage of a deferred remuneration scheme to
maintain their standard of living in old age.
In todays knowledge society, the best investment
is in education and training. Acquiring additional
expertise improves individual career and income
prospects while also safeguarding the ability of a
technology provider such as G&D to innovate and
remain successful. We provide personalized support
and a wide-ranging internal training program to
ensure that our people are always at the forefront
of their field. Our measures here range from tailored
one-on-one sessions to external training, such as
MBAs and evening courses. We place particular

71
emphasis on health and safety, communication
and collaboration, and intercultural skills.
Professional development at Giesecke & Devrient
is not restricted to younger employees. Against a
backdrop of demographic change and an increase
in average employee age, we have decided to align
our development and training programs even more
closely with the different stages of life applicable
to our workforce. This process has already begun
at G&D with professional training and dual study
programs in more than ten skilled trades plus a
trainee program for college graduates. With a
view to filling senior positions with top quality
staff from our own ranks, employees who show
particular potential are placed in the Talent Pool
or Top Talent Pool. This professional development
process prepares staff to take on greater responsibility within our international Group. Launched
in 2006, the program has proved a great success,

2004

G&D produces the Numeron desktop banknote

processing system for local deployment by commercial banks, security transport companies, casinos,
business enterprises, institutions, and retailers

G&D provides modern ID documents

containing biometric data stored on a chip

percent of employees
recommend G&D as an
employer

>>
www.greatplacetowork.de
www.karriere.de

028

029

with renewed intake in 2010. Following on from

this, exceptional middle managers may be selected
by the Management Board to join the Executive
Pool, which acts as a springboard for executive
roles throughout the G&D Group worldwide. Our
life-phase-oriented professional development
program is rounded off by management training
courses tackling demographic issues, for instance
managing mixed-age teams, plus special options
for older employees covering topics such as health
or planning the third phase of life.
Work-life balance for optimum performance

Employees

Demographic change combined with the altered

life patterns and expectations of our employees
means that work-life balance is becoming an increasingly important aspect of our HR strategy.
If professional aspirations and personal needs
cannot be reconciled over a longer period, employee satisfaction and commitment suffers, so
a healthy balance between work and private life
benefits both staff and company alike.

Employees at G&D enjoy a work environment

that takes account of their family situation and per
sonal needs. In turn, we benefit from a more satis
fied and productive workforce and can strengthen
our appeal as an employer. As befits a player in the
mobile communications market, G&D deploys an
innovative system whereby our employees have
no core working hours, no minimum daily atten
dance, and no limit on time off per month. Our
employees have a high level of autonomy over
their working hours, which they manage according to the demands of their role and our corpo-
rate interests.
Since 2004, we have also been utilizing a strategic
management tool provided by berufundfamilie
gGmbH (a not-for-profit organization active in
this field) with great success, as evinced by G&Ds
recertification for the second time in 2010 following
the related audit. As well as delivering flexibility
in terms of working arrangements and location,
this program includes provision of daycare places
for the children of employees, a placement and
advisory service for staff caring for children or
other family members, and seminars for employees returning from parental leave.

>>
www.berufundfamilie.de

2005
The first EMV cards with contactless functionality
worldwide are issued in Malaysia

030

031

Every day, we are committed to delivering on our

performance promise Creating Confidence.
and fulfilling the trust placed in us. This applies
equally to our products and solutions, our conduct
as an employer, and our approach to wider society.
Accepting responsibility is part of earning trust.
As such, corporate social responsibility (CSR) is
embedded in G&Ds daily activities, rather than
merely being a bolt-on addition. It is also in our
own interests to adopt such a policy, because we
aim to generate our earnings sustainably. This
enables us to be a socially responsible corporate
citizen in every respect a company that discharges its duty as employer, taxpayer, and technical
innovator and additionally provides financial and
other support to projects with a social impact.
Underpinning this approach is our binding CSR
Commitment, adopted in 2010, which documents
our concept of social responsibility. We seek to
reconcile the commercial, social, and environmen
tal impact of our work on a lasting basis, both
within our daily operations and when developing
and marketing our products and services. Our
long-term objective here is to adopt a sustainable
approach along the entire value chain.

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

Our intention is to anchor the issues and challenges

of CSR firmly in our corporate strategy. Over a
year ago, we launched a comprehensive process to
strategically align our social commitment, supervised by the Chairman of the Management Board.
Adoption of a unified, Group-wide CSR strategy
in 2010 represented a significant milestone in this
process. As a public demonstration of the strict
standards we set ourselves, we also signed up to
the UN Global Compact in September 2010. The
goal of this worldwide initiative is to align global
ization with social and environmental concerns.
By participating in the Global Compact, G&D is
committing itself to universally accepted principles in the areas of human rights, labor, environmental protection, and anti-corruption, as well as
to systematic, measurable implementation of CSR
within the company. Having taken these important steps, we are now focusing on concrete proj
ects and measures across the Group.

Systematic, binding, and targeted approach

Based on our CSR strategy, in 2010 we began consolidating our existing social activities into three
areas in which our core business has a particular
impact on society: the environment, employees,
and security and society. Wider society expects us
to meet our responsibilities in terms of climate
protection and HR policy above and beyond the
legal requirements, not least in order to secure
the companys future. We are also aware that our
work in the field of security is of particular social
relevance, and this is an area in which we intend
to intensify our efforts and sharpen our focus even
further in the future. Our approach to security
issues embraces not only the technical challenges
they present, but also their impact on society as a
whole. In years to come, our business success will
partly depend on the level of social responsibility
with which these technologies are developed,
produced, and deployed.
In 2010, we developed concrete guidelines, binding principles, and programs for each of these

8,684
three action areas. This strategic alignment and
implementation of our current and future CSR
activities underpins our commitment to corporate social responsibility.

participants are committed to the ten principles of

the UN Global Compact

>>
www.unglobalcompact.org

032

033

Environment: considering generations

to come

Using resources responsibly and protecting our

climate and the environment are core elements
of G&Ds CSR policy. Our guiding principle of
considering generations to come embodies
our commitment to putting ecological awareness
into practice in such a way that we give future
generations the same opportunities to meet their
needs as we have today. At the same time, longterm thinking and sustainable operations offer a
solid foundation for safeguarding the continued
success of our company.

corporate social
responsibility

The Group-wide Green Sustainability target system was established in 2010 to strategically align
G&Ds various worldwide activities and programs
aimed at protecting the environment and climate.
We have defined binding principles and pressed
ahead with concrete measures to move closer to
our objective of a sustainable value chain, from
introducing environmental standards across the
Group and implementing a climate protection
strategy through to efficient use of raw materials
and the development of green products.
Our aim is to establish strict, uniform environmental standards for the entire Group, which is
why we are continually extending our ISO 14001certified environmental management system.
This enables us to monitor our activities in terms
of making more efficient use of energy and resources and reducing our carbon footprint, and
thus to achieve systematic improvements. We are
gradually integrating our various production locations and subsidiaries worldwide into this system. Similarly, G&D has incorporated health and
safety standards into its existing environmental
management system to create an integrated environment, health and safety (EHS) system. This
brings together all our policies and strategies relating to environmental protection, health, and
occupational safety and leverages synergies. In
addition to the ecological aspects, this allows us
to protect the occupational health and safety of
our employees even more effectively.

To reduce our carbon footprint throughout all

areas of our corporate activity, we have implemented an efficient climate protection strategy.
The first step here is to calculate the CO2 emissions at our locations arising from business and
production operations. This allows us to define
activities and objectives to reduce emissions. In
2010, we determined the carbon footprint for the
pilot locations Munich, Leipzig, Louisenthal, and
Knigstein in Germany and Nitra in Slovakia,
with all production sites set to follow by the
end of 2011. This data will serve as the basis for
our reduction goals. Our strategy here also involves employees at a more personal level, for
instance by adopting a green company car policy
for G&Ds fleet in Munich with an upper CO2
limit of 160 g/km (with a bonus/malus system).
Energy efficiency programs allow us to measure
our energy consumption at each location and develop appropriate action plans to reduce it. In
2010, we systematically tracked electricity and
water consumption at many of our locations and
set up programs for more efficient use of resources.
Product development and design is another area
where we aim to combine outstanding technical
quality with efficient use of raw materials and
eco-friendly alternatives. Our intention is to apply ecological criteria throughout the entire
product lifecycle. For example, the product carbon footprint allows us to track and thus reduce the lifecycle emissions of specific products. We continued to develop climate-neutral
products in 2010, including a carbon-neutral bank
note. 2011 will see calculation of the product
carbon footprint for G&Ds Mobile Security
business unit and selected card solutions from
the Government Solutions business unit. We can
also significantly reduce the environmental impact of our production activities by using alternative materials. G&D provides payment cards
made of recycled PVC, for instance, and in other
cases replaces PVC with PC or PET. We are continually testing materials that are durable, easy to
recycle, and stem from renewable resources. In
addition, we provide packaging solutions manu-

2008

factured from recycled materials. In selected

markets, G&D is committed to taking back and
recycling card bodies and chip modules.
Employees: showing appreciation
working together

This guiding principle was established by G&D

in 2010 as part of its commitment to being a responsible and reliable employer for its staff of
around 10,000. The bond that exists with and between our employees is the product of respect
for each individual and their personal environment. Our aim is thus to accommodate the differing circumstances and outlooks of our staff, but
without losing our focus on business efficiency.
A balanced life fosters job satisfaction and employee commitment, which is why we further expanded our family-friendly HR policies in 2010.
Examples include daycare places, childcare during school vacations, and support offerings at our
Munich site. Our employees should be able to
commit themselves to their work, assume responsibility for others, benefit from training and
further education, and perform voluntary or
charitable activities. As a global company, we are
always aware of regional and cultural differences
in this regard.
Given the demographic changes taking place in
society, our success partly depends on taking account of the different stages of life our employees are going through. Alongside our numerous
part-time, job-sharing, and teleworking models,
supporting older employees is particularly important to us. In 2010, we implemented a range
of tailored training programs, such as 50-Plus:
Prospects for Your Professional Future and
When Parents Age.

2009

G&D launches a microSD card with smartcard

functionality that provides highly secure access and
content protection for mobile devices
TM

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

Setting up a global health management program

has consolidated and sharpened the strategic focus
of our healthcare activities. In 2010, our employees
were able to benefit from sport and health-related
courses, screening options, and various initiatives
such as the health awareness week in Munich,
check-ups in India, and vaccinations in the UK.
These activities are all designed to support the
performance of employees of all ages in accordance with local healthcare provision and priorities.
As a technology company, we regard education
as a particularly crucial investment in the future.
Our education projects are designed to raise
young peoples enthusiasm for the natural sciences and technology. We are a partner of the
German governments IT Hochburg initiative,
enabling gifted young IT students to gain project
experience at G&D. In 2010, participants developed ideas for the electronic verification of bank
notes. As a member of the knowledge factory
association Wissensfabrik Unternehmen fr
Deutschland e.V., we work with elementary
schools to inspire a thirst for knowledge in children and encourage them to explore and experiment through the KiTec Kinder entdecken
Technik (children discover technology) project.
As well as providing early support for future career choices, we want to communicate the experiences of employees and the values by which
G&D operates.

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

034

035

Security and society: safeguarding values

shaping the future

At G&D, security is not just about technology

it is the foundation of our business and, in an increasingly networked world, has a growing impact on society as a whole. Our aim for the future
is to engage even more fully with peoples security requirements and expectations. We seek to
support our technical innovation by entering into
dialog with our customers and stakeholders in
order to understand current security issues and
integrate the publics need for safeguards into
our activities. This also applies to emotional aspects of security with regard to identity, authentication, and data protection, as well as catering to
a range of cultural backgrounds. We intend to
maintain a strong awareness of our responsibility
to our customers and to society in this regard.
Accordingly, a program was developed last year
that will launch a dialog between G&D and its
stakeholders in 2011 to discuss issues surrounding the future development of identities and how
to protect them.

corporate social
responsibility

Compliance: applying values

respecting rules

Rules and values are like a compass that helps us

to stay on course. Observing shared principles
and guidelines is essential to achieving greater
success, which is why compliance with rules and
legal requirements by an organization and its
employees is key both to a companys reputation
and to building customer trust. Complying with
the law is vital to our business operations, particularly with regard to anti-corruption, anti-trust,
and subsidy legislation, accounting and consolidation regulations, and tax, export, import, and
customs requirements. At G&D, integrity also includes respecting the spirit of competition and
preserving our independence.
For us, compliance is not simply a question of
obeying laws and internal corporate guidelines
it also means staying true to our values. Through
preventive measures such as employee training and

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

support, compliance also represents an effective

tool for implementing our CSR strategy throughout our organization. Our aim is to embed a robust
compliance culture at G&D by 2015. Everyone
involved should internalize a mindset in which
compliance is understood as a basic requirement
for sustained corporate success. The Compliance
Office helps our managers, employees, and all our
partners along the value chain to conduct themselves in accordance with legislation, internal
corporate guidelines, and G&Ds values. Our Code
of Conduct is an important tool here. It applies
to each and every employee and sets out binding
principles with regard to responsible behavior and
ethical values. It is the equivalent of a G&D constitution for the companys workforce worldwide.
2010 saw us reach an important milestone by setting up an overarching compliance organization
to coordinate our activities in this area around
the globe. This new structure, combined with
clear responsibilities, is enabling us to develop
compliance management on an ongoing basis so
that we can immediately respond to changes in
global requirements. The central element here is
the Compliance Office at our corporate headquarters in Munich. The Compliance Office team
trains and supports employees across the Group,
working closely with our compliance ambassadors, i.e. the managing directors of all our subsidiaries, and with our regional compliance advisors
in the Americas, Asia, Europe, Africa, and the
Middle East. Regular training helps our employees to act in accordance with laws and internal
guidelines, thereby raising their awareness of the
need for compliant behavior.
Our compliance managers also monitor adherence
with legal requirements and internal guidelines
throughout the Group. The Corporate Auditing
department checks and evaluates the existence
and effectiveness of the companys control and
monitoring processes. Key focus areas here include risk management, the internal control system, legal requirements, and corporate guidelines. We have thus established a comprehensive
reporting system that ensures both the Manage-

ment Board and Supervisory Board are regularly

informed of pertinent events and updated on the
ongoing development of compliance management across the Group.
Compliance management at G&D follows the
principle: prevent, investigate, act. Prevention
and training are key to optimum implementation,
which is why G&D is committed to providing
Group-wide support to help staff avoid contravening rules in their daily work. Compliance violations are penalized accordingly. We have developed a worldwide e-learning program to assist
employees by enhancing their knowledge and experience of dealing with laws and internal corporate guidelines. The program provides advice on
applying legal regulations, such as anti-trust law,
as well as combating corruption. In addition to
our range of training initiatives, we are setting up
a global helpline that will provide a central point
of contact for any employee, customer, or supplier
with queries concerning legal or company requirements. The helpline will also provide a simple
means of reporting potential violations in the
strictest confidence.

education of young people, an important objective of the G&D Foundation is promoting relations between different nations and cultures. We
are developing our own program to help achieve
this. In future, our funding for the Museum of the
Printing Arts in Leipzig will also come under the
umbrella of the G&D Foundation, fulfilling an
objective close to our hearts: to preserve the historical heritage of the printing arts. The museum
displays machinery and presses for producing
printed works and provides information about
the cultural history of typesetting, printing, and
bookbinding.
Alongside our Foundations activities, G&D began
to draw up uniform guidelines for our corporate
citizenship in 2010. These will enable the company
to focus more strongly on regional commitment
in areas where we maintain operations and to
strategically align our global corporate citizenship
activities. We also aim to encourage the commitment of individual employees.

Corporate citizenship: taking responsibility

providing active support

We believe that business activity should entail

continuous development of the concept of respon
sibility. Corporate citizenship is therefore an ongo
ing, open-ended process at G&D. A significant
milestone was achieved last year, when we combined our activities focusing on education, culture,
and intercultural exchange in the independent,
not-for-profit Giesecke & Devrient Foundation.
This gives our extensive donations a long-term
focus. The Foundation is endowed with 20 million
euros and a key aspect of its work lies in training
and educating up-and-coming talent both
through its own projects and by supporting the
Berlin-based new responsibility foundation
(stiftung neue verantwortung). This initiative
enables young people to conduct interdisciplinary
research into innovative solutions to the social
challenges of our time. As well as supporting the

>>
www.gi-de-stiftung.org
www.stiftung-nv.de
www.druckkunst-museum.de

036

037

our CSR PROGRAM

Objective

Measures

Timeframe

Status

CSR strategy
Management and measurability

Raising awareness: employees and customers

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

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

Group-wide Green Sustainability target system

plus Group-wide metrics and reporting system

2010-11

In development

Group-wide EHS standards

2010

Completed

Action area: Environment

Management system

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

Regular global employee satisfaction surveys

2010; ongoing (every 2 years)

Completed for 2010: 21 countries surveyed in October and November

Action area: Employees

Management

corporate social
responsibility

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

Flagship project (dialog platform)

2011-13

Project defined 2010; implementation from 2011

Worldwide implementation/rollout of compliance management system

2010-13

Started Q2 2010
Established Q1 2011

Action area: Security and society

Stakeholder dialog
Compliance
Corporate compliance management system

Compliance in value chain

Helpline for employees, customers, and service providers

2010-11

International e-learning program and employee training

2010-11

Program launched

Business partner questionnaire

2010

Implemented

Integration of compliance in business processes (M&A, HR)

2011

New objective

Establishment of Foundation

2010

Completed; first sponsorship programs under way

Corporate citizenship
G&D Foundation

038

Group Management
Report

039

Giesecke & Devrient (G&D) is a leading international technology group that has been family-owned
for five generations. In 1852, Hermann Giesecke and Alphonse Devrient established the Officin fr
Geld- und Werthpapiere in Leipzig, a city with a rich printing and publishing heritage. Today, the Group
is headquartered in Munich and its operations comprise 61 subsidiaries, joint ventures, and associated
companies across the globe. At the end of 2010, G&D numbered 10,413 employees worldwide, including
6,493 outside Germany.
We are a trusted partner to our customers in the public and private sectors worldwide, supplying products and solutions for the following markets:
Paper production, printing, and banknote processing (Banknote business unit)
Cards (magnetic stripe, smart, and dual interface cards) and complex system solutions for safeguarding
electronic transactions and data, particularly in the fields of telecommunications and electronic
payment (Cards and Services business unit)
Security-related solutions for governments and public authorities, such as identification and travel
documents, ID and healthcare cards, e-government solutions and IT security, and contactless cards for
public transport (Government Solutions business unit)
Solutions for new markets and technologies, especially in the field of mobile communications (New
Business division)
Up to the end of 2010, the operating activities of the G&D Group were divided into three business units
with eight divisions. The ninth division, New Business, worked closely with the Cards and Services and
Government Solutions business units, primarily in relation to marketing/sales and research.

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

In order to further extend our global success with innovative products for telecommunications and payment while meeting the clear market requirement for an integrated, solution-based range of secure
products, software, and services, the activities of the former Cards and Services business unit, the
New Business division, and the Transit segment of the Government division were combined within a
new Mobile Security business unit at the start of 2011.

1.
Business Activity

040 |

041

Group Management Report

This new business unit comprises two new divisions Secure Devices, and Server Software and
Services (3S). Going forward, a joint marketing and sales organization will represent both divisions on
the global market, ensuring a customer-focused approach. This follows the pattern for the purchasing
and quality management functions, which previously provided services to all divisions within Cards and
Services and will now also support Mobile Security.

Group Structure from January 01, 2011

Operating Activities
Business Unit

Banknote

Mobile Security

Government
Solutions

Division

Paper
Printing
Processing

Secure Devices
S erver Software
and Services

Government
secunet

Corporate Functions

2.
Market Trends

In 2010, the global economy largely emerged from the tough recession of 2008 and 2009, experiencing a
broad-based recovery and even a strong upswing in some areas. Having contracted nearly 2% in 2009,
global economic growth approached 4% on average in 2010. The key driver was resurgent international
trade, which had taken a dramatic 11% tumble in 2009 but climbed back 12% during 2010.
The Banknote business unit experienced reduced demand for its products and services in 2010 compared with the previous year. However, the trend towards cashless payment continues and cash remains
the worlds most popular payment method. As a technology leader, G&D is clearly differentiated from
its competitors in the banknote segment and invests heavily in research and development to further
enhance its competitive edge.
Modest global economic growth meant that quantities of banknotes in circulation increased only
slightly. The market for the Banknote Paper division therefore moved sideways without significant
growth drivers. The move towards durable substrates and the implementation of complex security
features continued. Showing greater responsiveness to customer requirements without long lead times
is becoming increasingly important.
Although printing volumes in the marketplace are stable at a total of around 130 billion banknotes,
manufacturers and printing plants have significantly boosted their capacity through modernization
and expansion in recent years. As a result, the Printing division is experiencing ever-tougher competition at a global level. In particular, new state-owned banknote printers with surplus capacity are
crowding into the market in Latin America and Asia. Another factor is the general rise in the price of
raw materials, with cotton in particular becoming more expensive. There is also a trend towards issuing
tenders for contracts internationally. The German central bank (Deutsche Bundesbank), for example,
has changed the way it awards contracts and placed a large proportion of its printing requirement for
2011 with foreign printers.

The Banknote Processing division continued to feel the effects of the financial crisis, especially in our
markets in the United States, Europe, and Eastern Europe regions. Investment decisions were postponed due to budget cutbacks. In other regions, however, such as Latin America and the BRIC countries
(Brazil, Russia, India, and China), recovery is increasingly apparent. The cost pressures involved in managing the banknote cycle are making automation an even higher priority for our customers, leading to
greater demand for highly integrated automation solutions for banknote security (security features and
sensors) and cash cycle management (systems, software, and services).
Performance of the markets served by our Cards and Services business unit was consistently positive
in 2010. The market environment for the Telecommunications division was marked by reinvigorated
demand for SIM cards, following single-digit growth rates in 2009. Gains were seen worldwide but
were particularly strong in Asia and Africa. Considerable additional demand is also anticipated from
North America in the future, mainly due to 4G/LTE technology being rolled out by network operators
who have not previously used SIM cards. The SIM industry does, however, remain exposed to declining prices. G&D was increasingly able to free itself of these pressures, though, because our specific
product portfolio is geared more towards higher-value SIM cards. Our market position therefore improved very favorably.
The Payment division saw its market grow much more strongly in 2010 than anticipated. The global
financial crisis had only a minor impact on the smartcard segment. Demand was also stimulated by
card replacement cycles in Canada and Spain, for example, as well as rebranding activities. Overall,
growth in G&Ds Payment division far exceeded that of the wider market. Mobile money (financial
transactions performed by cell phone and SIM card) is another G&D payment market that offers
exciting prospects, especially in the emerging markets of Southeast Asia, Africa, and Eastern Europe.
Our subsidiary SmartTrust AB, and its subsidiaries in turn, experienced no growth in their markets
during 2010. Projects were delayed by legal requirements, for example, and by the after-effects of the
financial and economic crisis. As soon as new technologies like machine-to-machine (M2M) communication and Near Field Technology (NFC) take off, this will boost the market for mobile device management (MDM) and SIM management solutions. Such solutions allow mobile network operators to
offer a better service to their end customers, manage the devices in their network more efficiently, and
provide high-revenue, customer-focused services and applications quickly and easily.
The Government Solutions business unit benefited from the ongoing focus on reliable personal identification by way of secure, durable ID documents that also offer a high level of protection against data
misuse. As well as ID documents, G&D supplies associated system solutions and personalization,
authentication, and verification services to governments worldwide. Many customers launched electronic
identification documents, such as ID cards, in 2010. By providing proof of identity, these innovations
boost security at national borders, in the local and long-haul transportation sector, within companies and
networks, and for online transactions. G&D also supplies technologies that meet the growing public
need to protect, securely transfer, and store personal data. G&D is active in all these markets and was
able to extend its position through lasting innovations.

042 |

043

Group Management Report

The New Business division was established as an innovation incubator in 2006. In todays world,
people increasingly want to make payments, communicate, work, travel, and network unhindered by
boundaries or restrictions. Technology from G&D makes all these everyday activities more secure and
convenient. In addition, the innovations and solutions we have developed in recent years have contributed to a trend that is transforming our markets: the increasing convergence of the payment world,
mobile communication, and the Internet. For example, it is already possible for bank customers to
make payments via card, cell phone, or online applications. At the same time, cell phone operators are
starting to offer financial services. In the process, mobile devices like smartphones are becoming the
virtual nerve center of daily life.

Structural costs, i.e. selling, research and development (R&D), and general and administrative expenses, rose disproportionately compared with the previous year by EUR 49.0 million (13.4%) to
EUR 415.5 million. Factors here were the full consolidation of SmartTrust for a complete fiscal year
(+ EUR 11.2 million) and the weakening of the euro against most foreign currencies (+ EUR 7.9 million). Services or functions performed at non-German companies proved considerably more expensive for the Group due to exchange rate developments. This applies especially to selling and administrative expenses, as these functions are not performed centrally, whereas R&D is concentrated at a
small number of mostly German locations. The remaining increase in costs of EUR 29.9 million can be
attributed to R&D (EUR 20.0 million) and sales activities (EUR 12.5 million). General and administrative costs were down by some EUR 2.6 million.

The Giesecke & Devrient Group comprises 61 subsidiaries, joint ventures, and associated companies. In
the year under review, the following changes occurred: the sales subsidiary PT Giesecke & Devrient
Indonesia was established in Jakarta; the stake in Shenzhen G&D Currency Automation System Co. Ltd.
in China was increased from 40% to 50%; and the 35% interest in the Russian company SITRONIC
Smart Technologies LLC was sold, as was the 8.33% holding in Sepedo Servios de Personalizao de
Documentos S.A., Portugal.

After more project and order-related research and development in the previous year, resulting in the
capitalization of associated expenses and impacting the cost of goods sold, R&D expenses increased to
EUR 116.7 million in the year under review (previous year: EUR 93.7 million). The Government Solutions business unit invested in adding value and developing electronic components for ID cards. Development efforts relating to new card bodies, new card personalization technologies, and advances in the
field of mobile payment also contributed to the rise in R&D expenses.

Group Business
Performance

While the sales and earnings of SmartTrust AB, which was acquired in 2009, were consolidated over
only seven months that year, they were fully consolidated for the entire fiscal year for the first time in
2010. Operating income was impacted by writing down assets acquired as part of purchase price allocation and stated at fair value.

Of the EUR 24.2 million increase in selling expenses, EUR 7.5 million is attributable to SmartTrust
consolidation and EUR 4.1 million to exchange rate fluctuations. The remaining increase of EUR 12.5
million (+7.6%) was due to a number of factors, including expanding international sales activities in
Indonesia and elsewhere. The growth in selling expenses is directly related to higher sales within the
Cards and Services business unit, in particular.

3.1.1.

Given the prevailing circumstances, G&D performed very well in the year following the financial and
economic crisis. Strong performance by the Government Solutions and Cards and Services business
units compensated for the drop in sales experienced by the Banknote business unit. Overall, Giesecke &
Devrient was able to increase sales slightly from EUR 1,684.2 million in 2009 to EUR 1,688.2 million in
the year under review. Devaluation of the euro boosted sales growth by EUR 55.5 million.

In consequence, the significantly improved gross profit was countered by increased structural costs,
meaning that operating profit was up only EUR 12.2 million (8.8%) year on year, to EUR 147.9 million.

3.
Business
Performance

3.1.

Results of Operations

Increased business volumes and the lower cost of goods sold resulted in gross profit of EUR 563.7 million, up EUR 60.6 million or 12.0% compared with 2009. Gross margin climbed 3.5 percentage points
from 29.9% to 33.4%. The improvements were driven by the Banknote Processing, Telecommunications, and Government divisions, in particular. The Banknote Processing division has streamlined its
product portfolio and now focuses on cash center solutions, including services. Cash handling products
were discontinued and OEM operations will become part of a joint venture with Wincor Nixdorf as of
2011. Some changes were also made to parts of the organizational structure. Despite a slight fall in
sales, the optimized product mix resulted in a significantly improved gross margin. Additionally, while
the fiscal 2010 income statement does include some extraordinary expenses arising from restructuring
activities, the effect was much smaller than in the previous year. In line with general market growth,
the Telecommunications division was able to achieve considerably higher sales in 2010. Since production capacities were consolidated in the prior year, costs associated with idle capacity were lower in
2010 too. Furthermore, the one-off effect of consolidation activities was no longer a factor in the year
under review. The Government division successfully completed its restructuring program, Breakthrough, and thanks to buoyant project business was able to significantly improve its gross margin
compared with the previous year.

There were one-off payments in the fiscal year now ended to the Giesecke & Devrient Foundation,
which was established in 2010. These expenses are shown as a separate line item in the consolidated income statement and have an impact on earnings.
In the year under review, positive financial income of EUR 3.4 million was again achieved. Lower income from using the equity method reduced financial income only slightly compared with the prior
year, by EUR 0.3 million. A reduction in income from securities was almost completely offset by income from the sale of an associated company. Excluding the one-off payments to the Giesecke &
Devrient Foundation, earnings before interest and income taxes (EBIT) totaled EUR 151.3 million.
This represents an increase of EUR 11.8 million (8.5%). The EBIT margin rose accordingly to 9.0%
from 8.3% in the previous year. Including the one-off effects of establishing the Foundation, EBIT
amounted to EUR 131.3 million.

044 |

045

Group Management Report

Due to the fall in market interest rates, interest income was down 18.8% to EUR 6.1 million. Interest expenses increased by EUR 5.3 million in 2010, primarily due to new long-term borrowing by
G&D GmbH. G&D is utilizing low interest rates to take out new loans to cover its long-term capital
requirements.
At EUR 38.7 million, tax expenditure was up EUR 9.1 million compared with 2009. This development
was largely driven by impairment of deferred taxes capitalized in the prior year.

Balance sheet structure Assets (EUR million)

Non-current assets
2010____

Consolidated income statement

2009

2010

2009

% of sales

% of sales

1,688.2

1,684.2

100

100

1,124.5

1,181.1

66.6

70.1

Gross profit

563.7

503.1

33.4

29.9

Selling expenses

188.3

164.1

11.2

9.7

Research and development expenses

116.7

93.7

6.9

5.6

General and administrative expenses

110.4

108.6

6.5

6.5

2009____

-0.4

-0.9

0.0

-0.1

147.9

135.7

8.8

8.1

20.0

0.0

1.2

Operating profit
Payments to the Giesecke & Devrient Foundation
Financial income
Earnings before interest and income taxes (EBIT)
Interest income

0.2

0.2

7.8

8.3

6.1

7.5

0.4

0.4

18.2

12.9

1.1

0.8

134.1

7.1

8.0

Income taxes

38.7

29.6

2.3

1.8

Net income

80.5

104.5

4.8

6.2

Earnings before income taxes (EBT)

3.1.2.

3.7
139.5

119.2

Interest expenses

Net Assets and

Financial Position

3.4
131.3

Netting receivables and payables between Group companies and Giesecke & Devrient Holding GmbH
(hereinafter G&D Holding) reduced assets by EUR 78.3 million in fiscal 2010.
However, despite the impact of this netting agreement on the balance sheet, total assets increased by
5.3%, or EUR 85.0 million, to EUR 1,700.6 million. The balance sheet structure on the assets side
remained virtually unchanged compared with the prior year, whereas on the liabilities side, there was
a shift from current to non-current liabilities and a higher equity ratio was recorded.

42.2%

200

400

57.8%

600

800

1,000

1,200

1,400

1,600

1,800

Current assets rose by EUR 40.8 million to EUR 975.0 million. This was primarily due to cash and
cash equivalents and investments with terms between three months and one year, but also to higher
inventories. Non-current assets rose by around the same amount. The key factors here were loans to
the associated company MC Vermgensverwaltung GmbH & Co KG and a rise in intangible assets.
The latter increased due to additions to capitalized R&D expenses and the capitalization of costs
associated with the CHANGE program.

EUR million

Other operating income and expenses, net

57.3%

1,615.6

2010

Cost of goods sold

42.7%

2009____

EUR million

Net sales

1,700.6

In total, net income for the fiscal year now ended amounted to EUR 80.5 million. Eliminating the effect
of establishing the Foundation (EUR 20.0 million) would leave net income only EUR 4.0 million down
(3.8%) on the previous year.

Current assets

Balance sheet structure Liabilities (EUR million)

Non-current assets

Current assets

Equity

2010____

1,700.6

35.5%

38.7%

25.8%

1,615.6
29.1%

200

47.8%

400

600

800

23.1%

1,000

1,200

1,400

1,600

1,800

On the liabilities side, the current liabilities of the G&D Group to G&D Holding were reduced due to
the netting agreement. The non-consolidated G&D Holding company also made loan repayments
amounting to EUR 106.3 million in the year under review. There is a cash pooling agreement between
G&D Holding and G&D GmbH, whereby repayment was made from G&D GmbHs liquid assets.
Accordingly, the liabilities payable to G&D Holding under the profit and loss transfer agreement fell.
This also contributed to the reduction in the Groups current liabilities. Conversely, the Group took out
long-term bank loans with the European Investment Bank and BayernLB totaling EUR 130.0 million.
Despite the profit and loss transfer agreement with Giesecke & Devrient Holding GmbH, equity
increased by 17.6% from EUR 372.7 million to EUR 438.3 million at the balance sheet date of December 31, 2010. The equity ratio was up 2.7 percentage points from 23.1% to 25.8%.
Giesecke & Devrient has operated a working capital management program since 2008 to boost internal
financing. Working capital intensity the ratio of average working capital to sales over the preceding
twelve months increased from 14.3% at the end of 2009 to 15.7% in December 2010. This was largely
attributable to two effects: Due to the ongoing shortage of semiconductors, safety stocks of raw materials
and supplies were increased. In addition, due to its focus on cash center solutions as opposed to OEM
business, the Banknote Processing division needs to hold more inventory and has a longer cash conversion cycle, which both impact working capital. The Groups defined objective for working capital was
nonetheless achieved.

046 |

047

Group Management Report

3.1.3.
Capital Expenditure

The ratio of equity to non-current assets climbed 20.0 percentage points to 143.7%. Non-current assets
reached EUR 725.7 million for the year under review, while equity and non-current borrowings totaled
EUR 1,043.1 million.

The increase in working capital of EUR 32.3 million and endowing the Giesecke & Devrient Foundation
with EUR 20.0 million had a significant impact on cash flow from operating activities. At EUR 155.9 million, this figure was EUR 42.9 million (21.6%) down on the prior-year level.

In 2010, it was established that the annual financial statements of subsidiary SECUNET s.r.o. for the
period ending December 31, 2008 needed to be revised. The resulting adjustments to prior-year figures
were made to the relevant balance sheet items in the consolidated financial statements of Giesecke &
Devrient GmbH in accordance with IAS 8 (see section 1(u) of the notes to consolidated financial statements for details).

Free cash flow amounted to EUR 10.3 million, as against EUR 61.0 million in the previous year.

In the year under review, G&Ds capital expenditure totaled EUR 100.4 million around 43% below the
record level of the previous year (EUR 175.1 million). During 2010, additional short-term investments
were made (EUR 20.6 million), as well as a loan of EUR 26.5 million to an associated company, of which
EUR 1.8 million had been repaid by year-end. It should be noted here that 2009 saw an exceptionally
high level of capital expenditure due to the acquisition of SmartTrust AB and commissioning of a stateof-the-art paper machine at the Knigstein site. However, investment during the year under review remained significantly above the level of depreciation/amortization, which also rose. The investment ratio
as a percentage of sales fell from 10.4% to 5.9%.
The Banknote business unit invested in expanding and upgrading its production facilities worldwide in
order to safeguard and extend its competitive position. Notable individual investments included construction of a new warehouse at the Knigstein paper mill, expanding production capacity for security
foils, and modernizing and developing the site in Malaysia. This business unit also invested in overhauling
its entire range of banknote processing machines. There was additional investment within the Banknote
Processing division due to capitalization of development expenses on achieving defined milestones. The
Cards and Services business unit focused on replacement investment in 2010 and modernizing personalization systems. Across all business units, we primarily invested in the CHANGE and Globalize-IT
programs in order to drive forward harmonization of the Groups global IT environment and processes.

Capital expenditure and planned depreciation/amortization (EUR million)

80.4 Depreciation/amortization
175.1 Capital expenditure

2009____

74.6 Depreciation/amortization

20

40

60

80

100

120

140

160

180

Change in cash and cash equivalents (EUR million)

155.9

-145.6

-3.0

237.8

Cash and cash

equivalents
Dec. 31, 2009

Cash from
operating activities

Cash from
investing activities

Cash from
financing activities

7.1

Exchange rate
effects

252.2

Cash and cash

equivalents
Dec. 31, 2010

The Group received EUR 157.0 million from taking out long-term loans. Two bank loans taken out by
G&D GmbH comprised the lions share of this sum. By contrast, liabilities payable to G&D Holding
were settled in the amount of EUR 123.7 million. EUR 25.7 million of non-current liabilities were
also repaid to financial institutions. Other cash outflows, for example for repayment of finance lease
obligations and payments to minority interests, resulted in a negative cash flow from financing activities of EUR 3.0 million.
On a net basis, the Groups cash and cash equivalents increased by EUR 14.4 million compared with
the previous year.

One of the core objectives of G&Ds value-based management concept is to enhance the value of the
company on a long-term basis. The key performance indicator for the Group here is economic value
added (EVA).

100.4 Capital expenditure

2010____

200

3.1.4.
Statement of Cash Flows

EVA constitutes the excess return arising from the difference between return on capital employed
(ROCE) and the weighted average cost of capital (WACC). The latter represents the minimum return
required over the long term and was fixed at 10.8%, unchanged from the previous year. Internal
ROCE is calculated based on the ratio between adjusted EBIT and average capital employed. The
interest cost component of pension expenses is added to obtain the adjusted EBIT. Average capital
employed is calculated from the mean of capital employed in the prior year and the period under review. The increase in earnings was somewhat lower than the rise in average capital employed. Internal
ROCE therefore decreased by 3.0 percentage points to 17.6%. This translates into an excess return of
6.8% for 2010, corresponding to an absolute rise in EVA of EUR 56.4 million, down EUR 16.3 million
on the previous year.

3.1.5.
Return on Capital and
Economic Value Added

048 |

049

Group Management Report

In 2010, EBIT and therefore the EVA metric was affected by establishing the Foundation. Given
average capital employed of EUR 825.7 million, the one-off expenses of EUR 20.0 million reduced
excess return by 2.4 percentage points.

3.1.6.
Employees

G&Ds reputation with customers is built on state-of-the-art technology, outstanding service, and
trust-based relationships that often go back many years. With all these factors, the skills, commitment,
and service focus of our employees are crucial. Our people are key to the success of our business.
Boosting their commitment and encouraging them to fulfill their potential is a core aspect of our HR
strategy, for which we are rated highly both by our employees and by external bodies. 79.2% of employees participated in our second global employee survey conducted in 2010 5% more than in 2008.
A core finding was that 71% of those surveyed would recommend G&D as an employer. In 2008,
the equivalent figure was 68%. G&D participated in the nationwide competition held by the Great
Place to Work Institute Deutschland for the first time in 2010 and made it straight into the list of
Germanys top 100 employers.
In the year under review, the number of employees worldwide rose by 291 (2.9%) to 10,413 full-time
equivalents (FTE) at the balance sheet date. Production recorded the largest increase in headcount in
absolute terms, of 208 FTE, followed by technical support and project management (+74 FTE) and
internal sales (+34 FTE). With the exception of the Government Solutions business unit (-17 FTE), all
business units employed more people than in 2009. In the Banknote business unit, the focus was on
setting up cash center solutions in Brazil and reinforcing the service team in India. The Cards and
Services business unit (+213 FTE) primarily invested in expanding production capacity in Canada and
China, plus research and development capacity in India. The increase in Corporate Functions related
mainly to central IT services and was associated with the CHANGE program and the need to set up
centralized management of master data. The headcount for Compliance also increased.

Employees by business unit

Banknote 2010____
2009____

4,050
3,975

Cards and Services 2010____

2009____

5,176
4,963

Government Solutions 2010____

2009____

658
675

New Business 2010____ 93

2009____ 85
Corporate Functions 2010____
2009____

436
424

Total 2010____
2009____
0

10,413
10,122
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000

In 2010, some 62.4% of employees were based outside Germany. In regional terms, headcount changes
largely tracked sales. The number of G&D employees worldwide increased by a total of 2.9%. The
headcount was higher in both the Americas (+14.3%) and Asia (+3.9%) than in the previous year. In
the EMEA region (Europe, the Middle East, and Africa), the number of employees was down slightly
compared with the previous year.

Employees by region
EMEA 2010____
2009____
Asia 2010____
2009____
Americas 2010____
2009____
0

58.1%
60.4%

2,072

21.2%

2,000

6,115

2,152

20.7%
20.5%

19.1%

6,049

2,212

1,935
4,000

6,000

8,000

In fiscal 2010, Group sales slightly exceeded the high prior-year level. Huge sales growth in the Cards and
Services business unit largely compensated for the lower level of sales generated by the Banknote business unit. Government Solutions also posted gratifying sales growth of EUR 27.0 million, or 14.8%.

3.2.
Business Unit Reporting

050 |

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Group Management Report

The first of a new generation of banknote destruction solutions and enhanced automation solutions
for packaging banknotes are also attracting considerable interest in the marketplace.

Sales by business unit (EUR million)

Banknote 2010____
2009____

753
896

Cards and Services 2010____

2009____
Government Solutions 2010____
2009____

The Cards and Services business unit performed very well in 2010, especially within the Payment and Tele
communications divisions. Sales for the business unit rose by EUR 116.9 million (19.9%) from EUR 588.6
million in the previous year to EUR 705.5 million. The Payment division recorded the biggest sales growth
both in percentage and absolute terms and also generated the highest sales within the business unit.

705
589
210
183

The Telecommunications division operated in a positive market environment in 2010 and was able to
significantly increase sales compared with the prior year thanks to major existing and new customers.
The year was marked by reinvigorated demand for SIM cards, following single-digit growth rates in
2009. The upturn was global and displayed particular momentum in Asia and Africa. In 2010, the division launched a number of innovative products: STARSIM Atlas, SkySIM Avior, SkySIM Argo,
ProxSIM Taurus, and SkySIM CX Scorpius. All these SIM cards from G&D provide security for
mobile communication and offer a variety of mobile services.

New Business 2010____ 20

2009____ 16

Total 2010____
2009____
0

3.2.1.
Banknote Business Unit

3.2.2.
Cards and Services
Business Unit

1,688
1,684
500

1,000

1,500

2,000

Following exceptional growth in recent years, the Banknote business unit suffered a drop in sales of
EUR 143.9 million (16.0%) to EUR 752.6 million in 2010. This is largely attributable to the perfor
mance of the banknote printing business.
The Paper division benefited from healthy business volumes on a par with the previous year. Our
customers showed increased interest in complex security features that are difficult to forge. The development of the HybridTM banknote substrate by our Papierfabrik Louisenthal GmbH subsidiary made
it possible to significantly enhance banknote durability without impacting security. This substrate combines cotton and plastic and is currently the most advanced solution on the market. HybridTM has already
been deployed successfully in three countries, with further denominations set to follow in 2011.
The Printing division experienced lower demand in 2010 coupled with increased price pressure. For
non-German banknotes in particular, a decline in order intake was accompanied by an adverse pricing
environment. Despite this trend, G&D remains committed to its high-quality strategy: Our customers
expect banknotes to incorporate effective security features that people can see, hear, and feel, thus
allowing unaided authentication. Our LOOK security feature, for example, leverages sophisticated
laser technology to create attractive and prominent optical effects on banknotes that can be easily
checked by the person on the street. By integrating colors, foils, and substrates, laser technology can
be used to produce individual information. Our portfolio also includes 3D watermarks, foils, holograms, security threads, and transparent windows.
The Processing division proved to be the strongest sales performer by far within this business unit.
Despite focusing the product portfolio more on cash center solutions and exiting the market for cash
handling products, sales in 2010 reached almost the same level as in the previous year. This is primar
ily due to expanding the service side of the business. Although key sectors served by G&D continued
to be cautious about investment in the wake of the financial crisis, we were also able to acquire new
customers. The successful market launch of the BPS M7 and associated upgrade packages continued.

Due to its acquisition of SmartTrust AB in 2009, G&D enjoys a leading position in the strategically important market for mobile device management and over-the-air (OTA) SIM management solutions. This
enables us to meet rising global demand from mobile network operators for comprehensive SIM card
and mobile device management solutions, as well as for valued-added services with strong growth potential. SIM cards are no longer just an identification interface between phone companies and consumers
they have become one of the key drivers of business success for mobile network operators. Innovations
in the fields of 4G/LTE networks, NFC, and mobile money will create new opportunities in 2011.
The Payment division benefited in 2010 from ongoing migration from simple payment cards to more
sophisticated smartcards. Thanks to G&Ds excellent market position, we are well able to benefit from
dynamic demand worldwide. Electronic media are increasingly central to many aspects of peoples
lives, from straightforward communication and data transfer right through to mobile financial services.
Moving away from tangible transactions increases the need for security and trust. G&Ds innovative
products and solutions provide a secure, trustworthy environment for conducting transactions in the
digital world and enabling secure payment and data transfer at ATMs, online, or by cell phone.

Government Solutions performed well in fiscal 2010, with sales up EUR 27.0 million (14.7%) to EUR
210.4 million. This rise was made possible by the success of new projects in the e-passport, ID document,
and system solution segments. The biggest new projects involved electronic ID cards, components, and
solutions. Pleasingly, this was also true of the German market in the year under review. Sales from
ongoing orders placed by existing customers also rose.
IT security is another area that is becoming increasingly important, with a strong focus on preventing
data loss or damage to IT infrastructures stemming from operating errors, negligence, or cyber crime.
Essen-based secunet Security Networks AG, in which we have a majority holding, provides an extensive
portfolio of products in this field. One notable example is the SINA (Secure Inter-Network Architecture) encryption system, which enables classified documents and other confidential information to be
processed, stored, and transferred securely online. We were able to reinforce our significant share in this
specialist area of the domestic German market during the year under review.

3.2.3.
Government Solutions
Business Unit

052 |

053

Group Management Report

3.2.4.
New Business Division

The New Business division boosted its sales by EUR 4.0 million (25.5%) to EUR 19.7 million. StarSign
products in the company ID field played a crucial role here. Secure authentication of employees and
secure communication with colleagues and partners both inside and outside an organization are two of
the biggest challenges when it comes to managing IT processes within companies and public agencies
With data growing ever more mobile and available, authentication is also becoming more challenging.
IT security alone is not enough if factors such as economic efficiency and processing speeds are compromised. The major benefits of security applications from G&D arise from the in-depth process
knowledge of the research team. Card systems leverage many different features to provide users with
cost-effective, forward-looking IT security.

3.3.
Regional Breakdown

For fiscal 2010, G&D posted Group sales of EUR 1,688.2 million. 87% of sales were generated in
159 countries outside Germany. Compared with the prior year, sales outside Germany grew by 1.3%.
The EMEA region remained the most significant market, accounting for 53% of sales. The total of
EUR 897.1 million in 2010 represented a decline of EUR 129.2 million, or 12.6%. In Asia and the
Americas, G&D recorded sales growth during 2010. Asias share of Group sales rose from 21% to
25%. In absolute terms, the region recorded an increase of EUR 63.3 million (17.8%), with sales
totaling EUR 418.3 million. Sales in the Americas rose 23.0% to EUR 372.8 million.

The following events occurred after the balance sheet date of December 31, 2010 and prior to approval
of the consolidated financial statements by the Management Board, requiring disclosure in accordance
with IAS 10:

4.
Subsequent Events

G&D GmbH, Munich, intends to acquire the remaining 40% of the shares in Huangshi Wanda Security
Card Co. Ltd, China, from existing partner Hubei Tri-Ring Metal-Forming Co. Ltd.
G&D has reached an agreement in principle with Deutsche Investitions- und Entwicklungsgesellschaft
mbH (DEG), Cologne, to acquire its 13.9% stake in G&D LOMO, ZAO, St. Petersburg. We expect to
sign the relevant contract in the first quarter of 2011. Transfer of ownership and registration of the shares
is expected to take place at the start of the second quarter.
G&D has joined forces with Wincor Nixdorf International GmbH to create a joint venture. Called
CI Tech Components AG, this will develop and market security technology for authenticating and
processing banknotes. The focus is on sensors and cash-in / cash-out modules. The goal is to pool the
expertise of the two parent companies with regard to automating the cash cycle from consumers
through banks, retailers, and cash-in-transit companies to central banks. The partners will also be cooperating more closely to standardize systems and processes, making for efficient cash processing.
Giesecke & Devrient Bahrain S.P.C. was sold to a local partner with effect from January 1, 2011.

Sales by region (EUR million)

EMEA* 2010____
2009____

53%

61%

Asia 2010____
2009____

25%
21%

Americas 2010____
2009____
*E
 urope, the Middle East,
and Africa

897

22%
18%
200

400

1,026

418

In fiscal 2011, it is intended to merge Giesecke & Devrient Holding GmbH with Giesecke & Devrient
GmbH with retroactive effect from January 1, 2011. This will make Giesecke & Devrient GmbH the new
Group holding company from 2011.

Thanks to its strong research and development capabilities, Giesecke & Devrient is actively shaping
key markets and the everyday applications of the future. Our innovations contribute to ever-greater
security, convenience, and efficiency when making payments, communicating, working, and traveling.

355
373

303
600

800

1,000

1,200

As a technology provider, we invest an average of 6% of sales in research and development every

year. In 2010, the figure was even higher, at nearly 7%. Indeed, during the year under review, research
and development expenses climbed 24.5% to the record total of EUR 116.7 million. G&D holds some
6,500 current patents and patent applications worldwide, filing over 170 new patents in fiscal 2010.

Research and development expenses (EUR million)

2010____
2009____
0

116.7
93.7
10

20

30

40

50

60

70

80

90

100

110

120

5.
Research and
Development

054 |

055

Group Management Report

Investment in research and development is the key factor in ensuring long-term sales growth. Due to
its intensive efforts over recent years, G&D will once again be able to offer many new products and
solutions in 2011.
In the Banknote business unit, we are focusing our research activity on increasingly sophisticated
security features that render forgery virtually impossible. In 2011, we will be bringing a feature to
market that we expect will generate high customer demand: RollingStar. The core element is a security thread approximately four millimeters wide in the form of a window, which is integrated into the
banknote paper. Tilting the banknote creates an optical effect as if a wave were moving across it. Also
scheduled for 2011 is the launch of our new MultiCodeTM security thread in banknote paper, which
represents a huge obstacle to counterfeiters. These threads are based on a magnetic code that is recognized by banknote processing machines. A unique code can even be assigned to each denomination. In
order to meet customer requirements for integrated solutions, we will be providing the appropriate
sensor for our banknote processing machines to accompany this new security feature. Our research
department is also making more intensive use of laser technology. In 2011, G&D is commencing series
production of printing sheets using a new short-pulse laser process. This prints security features directly onto the sheet, considerably enhancing the scope for banknote design. Optically variable color
effects, uncovering parts of multi-layer elements, and visibly altering the surface of the substrate all
become possible, creating completely new and very high barriers to counterfeiting. Banknote printing
will also be advanced by the development of printable magnetic displays. This security feature can be
checked anywhere using a simple magnet. For example, holding a banknote against a cell phone can
show the outline of the magnet or reveal hidden information. Within Banknote Processing, our new
Compass VMS vault management system is nearly ready for launch. This will have standardized interfaces for the relevant ERP system and our customers other IT applications. It will enable commercial banks, cash-in-transit companies, and others to manage their entire cash cycle more efficiently,
from deposits, registration, accounting, and vault storage through to returning banknotes to circulation.
The Cards and Services business unit (Mobile Security from January 1, 2011) focuses its research activities
on enabling convergence between cell phone applications previously regarded as separate. Solutions for
payment, telecommunications, identification, and public transport are rapidly coming together on modern
smartphones. G&D is actively helping to shape this trend with innovative hardware and software solutions.
At the same time, our researchers are working closely with major chip manufacturers to continually improve the security of mobile devices. Environmentally friendly products and manufacturing processes are
another focus of our research efforts. For example, we are continually improving the durability of our card
bodies and making them easier to recycle. Communication between machines (M2M) is another market of
the future. SIM modules used here need to be extremely tough and durable, so we are developing products
that will even work reliably even when subjected to constant vibrations or extreme temperatures. Areas
likely to adopt M2M applications over the next few years include vehicle telematics and electric vehicles.
We also face ongoing pressure in the Government Solutions business unit to supply increasingly innovative passport and ID solutions. For cost reasons, our customers in this area demand documents that can
withstand up to ten years of use before needing to be replaced. For our researchers, this means incorporating security solutions and features into todays products that criminals, terrorists, or spies will be unable to crack even in a decades time. Another trend shaped by G&D is the use of todays smartphones
for identity verification. We believe that cell phones will be able to fulfill various functions of an ID card
in the future, so we are working on ways of using these devices to prove ones identity, grant access to
buildings, or sign legally binding contracts electronically.

The New Business division part of the Mobile Security business unit as of January 1, 2011 is launching
a new microSDTM card for making tamper-proof telephone calls. The mobile security card VE 2.0 contains an encryption controller, which encrypts cell phone calls and securely authenticates the user.
Thanks to a key length of up to 521 bits based on elliptic curves, this unique encryption card provides
strong authentication for cell phones and smartphones. Designed to be inserted into the cell phone, this
microSD card was developed by Giesecke & Devrient Secure Flash Solutions, a joint venture between
G&D and Phison Electronics Corp. Two new display card models have also been added to the product
range to make online banking and payment even more secure. These innovative solutions in a compact,
credit-card-sized format can dynamically generate one-time passwords for online applications at the
touch of a button. Passwords are shown on a flexible display integrated into the card. This means that
conventional bank cards for electronic payment can now also be enhanced to include a groundbreaking
security function for banking and payment online.

The CHANGE Growth through Change program was set up in 2008 as part of Group strategy for
the medium and long term. It is geared towards optimizing and integrating business processes worldwide
across all business units, divisions, subsidiaries, and sites. The objectives are greater workflow efficiency
and synergy effects between business units. To support this, a globally integrated SAP system is gradually being rolled out to replace the various disparate legacy IT systems and create a standardized data
set within the Group.
CHANGE was launched successfully at the first subsidiary, Giesecke & Devrient S.A. in Belgium, during
2010, with GyD Ibrica in Spain set to follow during early 2011. At our Group headquarters in Munich,
the first core functionalities have already been deployed on the development side. A complete roll-out
in Munich and at other major sites is scheduled for early 2012.
The CHANGE program will enable us to boost productivity, improve the quality of our services to our
customers, and fulfill market requirements more rapidly and effectively worldwide. The objective is to
make us more competitive, which in turn will drive growth and secure our future as an independent,
family-owned enterprise.

6.
CHANGE Program

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Group Management Report

7.
Risk and
Compliance
Management

7.1.
Risk Management System

As a commercial enterprise with global operations, G&D has to find the right balance between opportunity
and risk. Effectively leveraging business opportunities automatically entails risk, but failing to identify
and/or manage risk satisfactorily could jeopardize individual business units or even threaten the Groups
existence. Effective risk management forms part of responsible and sustainable corporate governance.
The objectives are to minimize any potential impact on the Groups net assets, financial position, and
profitability, safeguard the ongoing existence of G&D as an independent business, strengthen its market
position, and achieve real increases in enterprise value.

To maintain customer confidence and the Groups reputation worldwide, G&D continued to enhance its
compliance management system in the year under review. Ensuring that employees in all parts of the
Group observe all legal requirements and internal corporate guidelines is essential to the perception of
G&D as a reliable partner. Establishing shared values and encouraging proper conduct have always
been important management functions at G&D. Given the continual changes in the regulatory environment worldwide, we review compliance management within the Group on an ongoing basis, making
modifications where necessary.

The risk management system incorporates all the process and organizational guidelines needed to identify,
analyze, assess, and manage the Groups overall risk situation. This system is embedded into standard
Group-wide strategy, planning, and controlling mechanisms. While operating and financial risks are dealt
with on an ongoing basis whenever necessary in the course of day-to-day business management and
assessed during the quarterly performance reviews, strategic risk is subject to an annual review as part
of the strategy process and therefore to separate reporting. Compliance risk is likewise managed via our
own compliance organization and is also subject to separate reporting, including reporting to Corporate
Controlling in case of financial implications.

We took an important step in 2010 by putting in place an overarching compliance framework worldwide,
with the aim of establishing a strong compliance culture within the Group by 2015. Responsibilities were
clearly defined. The Compliance Office, based at our Group headquarters in Munich, is a central element
here. Among other activities, it supports and trains those responsible for compliance at local level in
the various Group companies. Our extensive range of training opportunities is designed to enable those
responsible to prevent violations from occurring in the course of day-to-day operations. All employees
are aware that any misconduct will have consequences.

Operations are examined systematically and comprehensively as part of an integrated risk analysis process.
This means that any risks associated with a transaction or project are examined from signing the contract
through to expiry of any warranty period. Where the transaction or project comes under the operational
responsibility of a Group company and this company receives technical, logistical, or other specialist
support or supplies from a different Group company, joint risk analysis is carried out for all Group companies involved. The degree of potential risk is quantified and the probability of occurrence defined.
For customer business and associated risks, a standard procedure for identifying and evaluating risk is
applied across all divisions. The GAAPS Committee, an entity within Corporate Functions that supports
customer projects and their management, was increasingly able to contribute its expertise and underpin
risk management in the fiscal year now ended.
Corporate Controlling compiles a Group risk report on a monthly basis, which sets out the current status
of specific risks. The risk report is provided to members of the Supervisory Board and Advisory Board
on a quarterly basis.
To ensure that the consolidated financial statements are correctly prepared in accordance with IFRS, a
standard accounting policy applies across the Group. The Group accounting department updates this
policy when new IFRS standards are published or existing ones amended. In order to evaluate all risks
relevant to accounting (e.g. inventory valuation, credit risk with regard to receivables, valuation of provisions), the accounting department has defined standard requirements for the Group. External experts
are consulted to help assess special areas, such as pension obligations.

7.2.
Compliance Management

The Compliance Office reports to the Groups Management Board on a quarterly basis. This report
covers all key events and developments across all relevant parts of the Group in that period. Since 2010,
the Management Board reports annually to the Supervisory Board (in the presence of the auditor) on
compliance management within the Group.
Individual events are reported separately and immediately to the Chairman of the Management Board,
who takes appropriate measures in conjunction with the Board members. Compliance matters are examined
and considered on a case-by-case basis; external consultants may be called in to assist.
On behalf of the Management Board, the internal auditing department (Corporate Auditing) conducts regular spot checks to assess the implementation and effectiveness of Group management and
monitoring processes. The main aspects looked at are risk management, the internal control system,
legal regulations, and internal corporate guidelines. In fiscal 2010, Corporate Auditing carried out a
total of 16 audits (2009: 14). Findings are reported to the Management Board and the management
of the audited entity. Corporate Auditing checks that measures arising from these investigations are
implemented appropriately.

Giesecke & Devrients business operations are affected by the global economy and financial markets
and by regional developments within our markets. In the wake of the financial crisis of 2008 and 2009,
performance varied across the markets in which G&D is active. The nature of our product portfolio
enabled downturns in some areas to be compensated for by growth in others. Following a cautious
phase in G&Ds key customer industries, such as banks and financial service providers, telecommunications and IT companies, and retailers, these sectors stepped up their investment activities again in
2010. Thanks to its position as a technology leader, G&D was able to benefit significantly from demand for high-quality products. Nonetheless, investing in innovative solutions and in research and
development also presents a risk if market requirements are not met or specific solutions are not yet
ready to bring to market.

8.
Risks,
Opportunities,
and Forecast

8.1.
Industry-Specific Business
Risks, Opportunities, and
Forecast

058 |

059

Group Management Report

In the Banknote business unit, the barriers to entry by competitors remain relatively high. In order to
maintain and build on its position as a technology leader, G&D plays an active role in shaping market
trends. Nevertheless, there is a risk of losing market share, particularly due to the activities of governmentowned competitors in banknote printing. As a rule, such competitors do not need to give great consideration to commercial factors and are increasingly operating outside their domestic markets. This
may lead to excess capacity and greater pressure on prices and margins. G&D responds to this pressure
by implementing measures to boost productivity on an ongoing basis (e.g. Six Sigma programs) and
extending its technology leadership. By issuing tenders for its German euro quotas internationally in
2010, the Deutsche Bundesbank has again changed the way it awards contracts. Conversely, G&D remains
largely unable to access volume markets in other EU countries. To date, however, the Louisenthal paper
mill has been well able to maintain its market position as one of the biggest suppliers of banknote paper.
G&D has responded to the trend for ever-more durable banknote paper without compromising on
security via its HybridTM substrate. The primary material used to make paper continues to be cotton and
cotton fibers, the cost of which rose by up to 150% during fiscal 2010. This may have a significant impact
on the Paper divisions profitability. In order to protect itself as much as possible from the effects of
further price fluctuations, G&D is using options and forward contracts to partially hedge purchase prices.
On the Asian markets, G&Ds product portfolio in the banknote processing sector is more and more
exposed to competition from cheaper imitations and product piracy. G&D is responding to the battle for
price leadership by expanding its product range. In addition to solely supplying equipment, G&D is increasingly providing complete automation solutions for the cash cycle, including services. In some business areas, G&D will be sharing its expertise with Wincor Nixdorf in a joint venture. The aim of this cooperation is to generate synergies in the development of leading-edge technologies and tap into
additional market segments.
The Banknote business unit again expects mid-single-digit sales growth in 2011, buoyed by an upturn in
banknote printing. Earnings in 2011 are set to weaken slightly further, largely due to the rise in the price
of cotton, but should increase considerably in the medium term.
The Cards and Services business unit or Mobile Security as of 2011 has been facing intense price
competition and consolidation among customers for some years now. G&D is therefore seeking to
achieve ever-greater cost efficiency in production and sell more products and solutions with higher
margins. Ongoing restricted availability of memory chips (semiconductors) could affect sales growth.
The SmartTrust division anticipates significant growth trends. Overall, sales by Mobile Security are set to
increase considerably, in part due to the activities taken over from other business units. Profitability is,
however, being impacted by capital expenditure on mobile applications. In the Telecommunications
division, considerable future demand is anticipated from North America, in particular, mainly due to
4G/LTE (Long Term Evolution) technology being rolled out by network operators who have not previously used SIM cards. There is a risk, however, that demand for SIM cards may contract or that the
market launch of SIM-based NFC or M2M solutions may be delayed. For G&D, this could mean a decline
in production volumes and also prevent transition to a product mix with higher margins. Sustained consolidation among network providers is also reducing the number of potential customers and strengthening
the negotiating position of individual customers. Having said that, G&D is extremely well positioned
with regard to the major network operators. The Payment division benefits from the fact that the world
is becoming ever more interconnected. Demand for mobile solutions that add value and thus for secure
products, software, and services is rising as a result. These innovative solutions often entail developing
entirely new ecosystems, which means redefining important aspects of the way network operators, banks,
equipment manufacturers, and service providers interact. All market players are attempting to reposition

themselves in this environment. This may significantly alter the current distribution of market share and
sales. Traditional businesses may reinvent themselves, new form factors could emerge, and so on. But
whatever changes occur, transaction security requirements will increase. All this presents opportunities
for G&D. Backed by the expertise of SmartTrust and Venyon, which are now fully integrated Group
companies, G&D is taking a leading position in the strategically important market for mobile device
management and OTA SIM management solutions. This enables us to meet rising global demand from
mobile network operators for comprehensive SIM card and mobile device management solutions, as
well as for valued-added services with strong growth potential. Over the next few years, we will invest
even more in developing secure applications for the mobile world, which will necessarily have an impact
on earnings. Innovations in the fields of NFC, mobile money, and M2M in particular will create new
opportunities in 2011.
The Government Solutions business unit is facing increasing consolidation among foreign competitors.
Over the long term, this could intensify competition. The business unit will therefore continue to take
steps aimed at boosting efficiency and cutting costs. At the same time, rising demand worldwide for electronic ID systems and secure IT solutions presents substantial opportunities. Due to a diverse portfolio
of solutions, this business unit occupies an excellent position and anticipates sales growth in 2011, with
the supply of components for electronic ID documents set to be a major contributing factor. In addition,
the first orders associated with the German electronic healthcare card indicate that this long-planned
project is being implemented. Profitability should continue to rise.
Overall, the Group expects only a slight increase in sales for 2011. However, earnings will decline compared with 2010 due to increased price pressure, ongoing major investment in the Mobile Security business unit, and the rising cost of raw materials. From 2012 onwards, we expect our business to experience
both sales and earnings growth again, assuming stable economic conditions.

Legal and political factors: These have a significant influence on Giesecke & Devrients commercial
success. For example, public policy with regard to awarding contracts may be modified, governments
may change, and budgets could be cut.
Procurement market / supply chain: The performance of the Group is highly dependent on effective
management of the supply chain, including logistics. Supply chain management is handled centrally at
G&D. Disruptions may have adverse effects on the availability, quality, and cost of G&D products and
therefore impact sales and earnings. The Group sources components, input products, and services from a
variety of third-party companies worldwide. G&D has only indirect influence over productivity, quality
assurance, and deadline compliance in such cases. There may also be allocation changes and price
fluctuations on the procurement side. The Cards and Services business unit purchases large quantities of
semiconductors, for instance, and the Banknote Paper division substantial amounts of cotton. In the
Banknote Processing division, plant engineering is outsourced to an external manufacturer. If an important
supplier encountered financial difficulties, this could likewise have a negative impact on G&D.
Product lifecycle management: G&D works extensively with innovative technologies. Innovation is
synonymous with competitiveness. Spending on underlying research, product development, and orderrelated R&D is correspondingly high. Technology cycles are getting shorter all the time. In order to
manage the opportunities and risks associated with innovative technologies in a professional manner, we
need a clear understanding of market requirements. We also need to implement projects quickly while

8.2.
Other Risks

060 |

061

Group Management Report

adhering to time and cost schedules, incorporate comprehensive quality assurance mechanisms throughout, and have a clear strategy for discontinuing products. In some cases, technologies are combined to
form new solutions. This makes differentiation more difficult and requires great care on the part of the
Groups patent department.
Production/quality: G&D operates in an environment characterized by considerable competition and
price pressure. Accordingly, innovation and quality leadership need to go hand in hand with a strict focus
on cost efficiency. Interruptions to operations at production sites around the world at different stages of
the value chain can have a negative impact on timely availability of products and on manufacturing costs.
Software components and products may also suffer from quality problems that compromise agreed
functionality.
Data security: To enable personalization of cards and documents, customer data must be provided and
processed. This takes place in a security-certified environment. Any security breaches could significantly
harm G&Ds reputation. This would also indirectly have an adverse effect on our competitive position.
Acquisitions: To support corporate strategy and expand our portfolio of products and services, targeted
acquisitions are necessary, which tie up capital. Implementing the acquired companys business plan and
necessary post-merger integration measures entails considerable risk. Failing to meet objectives may
cause the value of the holding to fall and thus impact results.
Employees: In order to defend and build on its position as a technology leader, it is vital that the Group
attracts highly qualified, skilled employees and managers. Participating in competitions, such as the quest
to find Germanys best employers, is intended to boost awareness of G&Ds attractiveness as an employer. Internally, an integrated program to nurture talent is designed to foster staff loyalty. Employee
satisfaction is measured via regular surveys. All these activities are aimed at finding the right people to
fill key positions.
Prices: Other price risks affecting G&D, which mainly arise from purchase price increases for semiconductors, are as follows: Given a procurement volume of EUR 208.8 million, a 10% variation in purchase
prices would have a negative or positive effect on earnings before taxes and on total equity of EUR
20.9 million, assuming all other variables remained constant. The price of cotton rose sharply in the
second half of 2010. G&D has calculated the impact of future price fluctuations for different scenarios
and will hedge potential effects on earnings using appropriate forward contracts.

Giesecke & Devrients operations expose it to typical liquidity risk, counterparty credit risk, and market
risks stemming from changes to exchange rates, interest rates, and share prices. On the procurement side,
risks are associated with price rises in raw materials (particularly semiconductors and cotton). These risks
can adversely impact our net assets, financial position, and results of operations and are primarily managed
as part of the Groups ongoing business and financing activities. Additionally, there are written guidelines
in place for identifying financial risks affecting the G&D Group and its operating subsidiaries. These risks
are identified centrally and their management is also largely handled by Giesecke & Devrient GmbH.
Risk reports are submitted to the Management Board each month, as well as on a regular basis to the
Supervisory and Advisory Boards.

8.3.
Financial Risk

Derivative financial instruments are used in relation to foreign currency to hedge underlying transactions. All trading activity is subject to financial monitoring that is independent of the Groups treasury
department in accordance with risk management standards applying to international banks.

Risk positions (relating to foreign currency, interest rates, and financial investment) are monitored
regularly using sensitivity analysis. The modified duration risk measure is used for interest rate risks
associated with bond investments. This measure indicates the percentage by which the price of the bond
changes if market interest rates move by one percentage point. The Value-at-Risk (VaR) measure is used
for equity investments. Total risk comprises equity risk and specific risk. This measure indicates the
maximum loss not exceeded for a specific equity position with a given probability of 95% and a holding
period of 10 days.

Liquidity risk is managed centrally by Giesecke & Devrient GmbH based on annual planning for all
Group companies. This is complemented by short-term liquidity planning for the main Group companies.
Centralized cash management is based on a contractual agreement, which sees the majority of German
and foreign Group companies participating in a cash pooling system.
In addition to the provision of sufficient cash, the agreement of short-term credit lines with blue chip
banks assures appropriate liquidity for operating activities and capital expenditure. At the balance
sheet date of December 31, 2010 (2009), written credit line facilities were available to the amount of
EUR 422.2 million (EUR 502.2 million), of which EUR 247.2 million (EUR 194.9 million) were utilized
in the form of guaranteed credit and bank loan agreements.
In addition, securities with a carrying and market value of EUR 62.7 million (EUR 62.2 million) were
held within the G&D Group. Most of these were realizable within three months. Financial investments
with a maturity of longer than three months totaled EUR 30.9 million (EUR 10.3 million). The following
tables show the G&D Groups contractually agreed (undiscounted) interest payments and repayments
for the original financial liabilities, as well as derivative financial instruments with a negative fair value.

8.3.1.
Risk Measurement
Method

8.3.2.
Liquidity Risk

062 |

063

Group Management Report

Information on Liquidity risk at december 31, 2010 (EUR million)

Up to 1 year

1 2 years

2 3 years

3 4 years

4 5 years

Over 5 years

Carrying
value

Gross
outflows

Repayment

Interest

Repayment

Interest

Repayment

Interest

Repayment

Interest

Repayment

Interest

Repayment

Interest

Accounts payable trade and other

accounts payable

216.9

216.9

216.5

0.0

0.4

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Financial liabilities

216.1

244.0

42.2

8.7

19.0

6.1

36.0

5.2

36.3

4.1

51.5

2.2

31.1

1.6

99.7

142.6

9.0

7.3

9.4

6.7

8.7

6.1

8.9

5.5

9.4

4.8

54.3

12.5

Original financial liabilities

Financial lease obligations

Derivative financial liabilities
Derivative financial instruments
Total

1.5

1.5

1.5

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

534.2

605.0

269.2

16.0

28.8

12.8

44.7

11.3

45.2

9.6

60.9

7.0

85.4

14.1

The net assets associated with Group companies located outside the Eurozone and translation risks relating to the sales and earnings of these companies are not hedged against exchange rate fluctuations.

Information on Liquidity risk at december 31, 2009 (EUR million)

Up to 1 year

Carrying
value

Gross
outflows

Repayment

Interest

344.4

344.4

344.4

77.1

88.1

33.3

108.3

159.1

0.7
530.5

1 2 years
Repayment

0.0
4.2

8.5

7.9

0.7

0.7

592.3

386.9

Due to its international focus, Giesecke & Devrient has supply streams and cash flows in various currencies
related to both import and export activities. Maintaining production locations worldwide is a response
to currency risk, as is netting imports and exports in the appropriate foreign currency at Group level.
Here, relevant foreign currency risks and obligations (fixed contracts, orders) for the Group as a whole
are identified centrally, aggregated, and netted as far as possible. The balance remaining from operations
and financing activities within the Group as of the balance sheet date is fully covered on an ongoing
basis using appropriate financial instruments, i.e. exclusively foreign exchange contracts and swap transactions. In the main foreign currency, the US dollar, exports and imports virtually balance out over the
year. From fiscal 2011, therefore, US dollar risk will be identified based on rolling 12-month cash flow
planning and only hedged if defined net threshold amounts are exceeded. Hedge accounting will not be
applied in this respect. However, contracts with a value greater than USD 10 million will continue to be
hedged separately using forward exchange contracts and accounted for as fair value hedges.

2 3 years

Interest

Repayment

0.0

0.0

13.0

2.6

9.0

0.0
12.1

3 4 years

4 5 years

Over 5 years

Interest

Repayment

Interest

At the balance sheet date of December 31, 2010 (2009), G&D was exposed to the following net risks in
foreign currencies:

0.0

0.0

0.0

0.0

Net Currency Exposure at December 31, 2010 (December 31, 2009) (Foreign currency risk in EUR million)

7.3

0.9

8.8

0.0

6.1

8.9

5.5

63.8

17.3

0.0

0.0

0.0

0.0

0.0

0.0

15.7

7.5

16.2

6.4

72.6

17.3

Interest

Repayment

Interest

Repayment

0.0

0.0

7.7

1.9

0.0

0.0

7.0

1.4

7.3

9.4

6.7

8.7

0.0

0.0

0.0

0.0

22.0

9.9

17.1

8.6

Original financial liabilities

Accounts payable trade and other
accounts payable
Financial liabilities
Financial lease obligations
Derivative financial liabilities
Derivative financial instruments
Total

All financial instruments held as of December 31, 2009 and December 31, 2010 for which payments were
already contractually agreed have been included. Target figures for future new liabilities are not included.
Amounts in foreign currencies were translated at the closing rate applicable on the reporting date. Variable
interest payments from financial instruments were determined by applying the last fixed interest rates
before December 31, 2009 or December 31, 2010, respectively. Financial liabilities that are repayable at
any time are always assigned to the earliest time period.

8.3.3.
Credit Risk

Giesecke & Devrient protects itself against the risk of bad debts through an internal system of assessing
customers with regard to their payment ability. Based on a rating process, customers are categorized as
A, B, or C customers. Doubtful positions are strictly limited and agreed payment terms are monitored
closely. Where customer creditworthiness is an issue, confirmed and unconfirmed letters of credit are
requested where possible to minimize credit risk. To fulfill reporting requirements in accordance with
IFRS 7, we wish to note that the maximum credit risk with regard to loans and receivables to customers
corresponds to the carrying value of these financial assets. With regard to financial guarantees, the
maximum amount that the Group would have to pay corresponds to the maximum credit risk.

USD
2010

GBP

CAD

ZAR

AUD

INR

2009

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

BRL
2010

2009

7.8

0.7

17.7

0.0

0.0

0.0

0.0

0.5

0.0

0.0

0.0

0.0

0.0

0.0

Receivables and loans

43.6

33.4

5.3

0.1

2.5

5.8

2.5

2.2

2.1

0.0

5.7

3.6

11.8

0.0

Liabilities

23.0

12.0

15.5

0.0

21.8

1.8

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net exposure

28.4

22.1

7.5

0.1

-19.3

4.0

2.5

2.7

2.1

0.0

5.7

3.6

11.8

0.0

Financial derivates

45.8

33.5

0.1

3.8

-24.7

-1.6

2.2

6.0

2.7

0.7

17.8

14.4

8.6

5.4

Cash and cash equivalents

USD = US dollar, GBP = British pound, CAD = Canadian dollar, AUD = Australian dollar,
ZAR = South African rand, INR = Indian rupee, BRL = Brazilian real

Net Currency Exposure at December 31, 2010 (December 31, 2009) (Foreign currency risk in EUR million)
JPY

RMB

SEK

HKD

MYR

MXN

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

2010

2009

Cash and cash equivalents

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

1.1

Receivables and loans

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

3.1

4.0

Liabilities

0.0

0.0

0.0

0.0

4.1

0.0

0.0

0.0

0.0

0.0

0.0

3.5

Net exposure

0.0

0.0

0.0

0.0

-4.1

0.0

0.0

0.0

0.0

0.0

3.1

1.6

Financial derivates

2.3

2.4

-12.2

0.0

-10.3

0.0

-2.5

-13.5

-4.3

-4.5

3.1

0.0

JPY = Japanese yen, RMB = Chinese renminbi yuan, SEK = Swedish krona,
MYR = Malaysian ringgit, HKD = Hong Kong dollar, MXN = Mexican peso

8.3.4.
Market Risk

8.3.4.1.
Currency Risk

064 |

065

Group Management Report

Intercompany receivables and payables in foreign currencies are included in net risks. The effects of
valuation as of the balance sheet date influence the consolidated income statement and are not
eliminated.
Sensitivity analysis allows the impact of hypothetical changes to the respective risk variables to be determined in relation to gains/losses and total equity as of the balance sheet date. Only the main foreign
currencies are considered here.
Assuming that the euro had risen or fallen by 10% against the specified foreign currencies as of December 31, 2010 (2009), the effect on total equity and the income statement (without consideration of tax
effects) is shown below. Differences arising from translating the financial statements into the reporting
currency are not considered here.

Minimum Information on market risk: Foreign currencies (Effects in EUR million)

Equity

Gain/loss

2010

2010

2009

2009

2010

2010

2009

2009

-10%

+10%

-10%

+10%

-10%

+10%

-10%

+10%

-2.2

USD

2.8

-2.8

2.2

-2.2

2.8

-2.8

2.2

GBP

0.7

-0.7

0.0

0.0

0.7

-0.7

0.0

0.0

CAD

-1.9

1.9

0.4

-0.4

-1.9

1.9

0.4

-0.4

INR

0.6

-0.6

0.4

-0.4

0.6

-0.6

0.4

-0.4

BRL

1.2

-1.2

0.0

0.0

1.2

-1.2

0.0

0.0

Derivative financial instruments

Equity

Gain/loss

2010

2010

2009

2009

2010

2010

2009

2009

-10%

+10%

-10%

+10%

-10%

+10%

-10%

+10%

USD

-4.2

5.1

-3.0

3.7

-4.2

5.1

-3.0

3.7

CAD

2.2

-2.7

-0.2

0.1

2.2

-2.7

-0.2

0.1

AUD

-0.2

0.2

-0.5

0.7

-0.2

0.2

-0.5

0.7

INR

-1.6

2.0

-1.3

1.6

-1.6

2.0

-1.3

1.6

0.2

-0.3

1.2

-1.5

0.2

-0.3

1.2

-1.5
-0.5

HKD

0.4

-0.5

0.4

-0.5

0.4

-0.5

0.4

BRL

-0.8

1.0

-0.5

0.6

-0.8

1.0

-0.5

0.6

SEK

0.9

-1.1

0.0

0.0

0.9

-1.1

0.0

0.0

RMB

1.1

-1.4

0.0

0.0

1.1

-1.4

0.0

0.0

8.3.4.2.
Interest Rate Risk

Interest rate risk: Financial instruments (EUR million)

Effective rate
of interest
2010

2009

Total amount

Up to 1 year

2010

2009

2010

2009

1 2 years
2010

2009

2 5 years
2010

2009

Over 5 years
2010

2009

0.0

Fixed-interest financial instruments

10.6

7.0

30.6

25.2

30.6

25.2

0.0

0.0

0.0

0.0

0.0

Non-current financial liabilities

3.7

7.0

173.9

43.8

0.0

0.0

19.0

13.0

123.8

22.0

31.1

8.8

Financial lease obligations

7.5

7.8

99.7

108.3

9.0

8.5

9.4

9.0

27.0

27.1

54.3

63.7

304.1

177.3

39.6

33.7

28.4

22.0

150.8

49.1

85.4

72.5

11.6

8.1

11.6

8.1

0.0

0.0

0.0

0.0

0.0

0.0

11.6

8.1

11.6

8.1

0.0

0.0

0.0

0.0

0.0

0.0

Current financial liabilities

Net exposure

Original financial instruments

MYR

The interest rates for the majority of the Groups bank loans and finance leases are fixed until the end
of the respective term. In contrast, most interest-rate-sensitive financial assets are subject to a variable
interest rate. Cash and cash equivalents are excluded here. Market interest rate changes therefore
have an effect on Group earnings and equity. At the balance sheet date of December 31, 2010 (2009),
the values were as follows:

Variable-interest financial instruments

Financial liabilities
Net exposure

10.6

7.0

Risks from interest rate changes are identified at regular intervals and included in risk reporting. Derivative financial instruments (e.g. interest rate swaps) are not used to manage interest rate risk. Sensitivity
analysis of interest rate risk shows the effect of a change in market interest rates of 100 basis points (one
percentage point) on the income statement (without consideration of tax effects) and on total equity. All
other variables are assumed to be constant. Within the sensitivity analysis prescribed by IFRS 7, however,
only the impact on net income and total equity is considered and not the impact on future cash flows.
Deferred interest payments recognized as liabilities are therefore restated using the hypothetical market
interest rate as of the balance sheet date.

066 |

067

Group Management Report

The effect of a 100-basis-point change in market interest rates on net income and total equity as of
December 31, 2010 (2009) is below EUR 0.1 million for financial assets and liabilities, with the exception
of bonds, and is therefore immaterial. For bonds, the following sensitivity analysis applies:

Modified Duration: Bonds

2010

2009

Portfolio 1

Portfolio 2

Total

16.5

18.1

34.6

1.5

1.1

Duration

years

2.1

1.4

Modified duration

2.1

1.4

Potential loss/gain

EUR million

-0.3

-0.3

-0.6

Bond holdings

EUR million

22.2

20.8

43.0

Return

3.5

1.6

Duration

years

2.9

2.0

Modified Duration

2.8

2.0

Potential loss/gain

EUR million

-0.6

-0.4

Bond holdings

EUR million

Return

-1.0

The effect of a one-percentage-point rise in the market interest rate on net income (without consideration
of tax effects) and total equity as of December 31, 2010 (2009) is EUR -0.6 million (EUR -1.0 million). A
corresponding one-percentage-point decrease in the market interest rate would have an equal but opposite
impact on pre-tax earnings and total equity, assuming all other variables remained constant.

Financial Investment Risk

2010

2009

The modified duration table indicates the change in total income from bonds if the market interest rate
falls or rises by one percentage point.

8.3.4.3.

Value-at-risk: Equities

Liquid cash is invested in overnight and time deposits and commercial paper. Decisions regarding
duration are based on liquidity planning, sometimes favoring short-term deposits with a maturity of less
than three months (cash and cash equivalents) and sometimes deposits with a maturity of longer than
three months (current financial assets). We also invest in equities and bonds through special funds. For
all forms of investment, emphasis is placed on ensuring that the counterparty is robust and that the price
risk is as low as possible.
As well as bank deposits, larger amounts are invested in special funds with established German investment management companies in order to achieve higher returns. For reasons of efficiency, the special
funds were consolidated and placed with a single investment management company in September 2010.
The investment is in a portfolio of blue chip bonds (government and corporate bonds) and equities (blue
chip companies). This mix minimizes the related risk. Equities comprise a maximum of 40% of the total
portfolio. The risk associated with these financial investments is stated monthly for equities using the
Value-at-Risk (VaR) measure as provided by the investment management company responsible. As of
December 31, 2010 (2009), the values were as follows:

Portfolio 1

Portfolio 2

Total

10.4

11.2

21.6

7.2

7.5

Equity holdings

EUR million

VaR

Potential loss/gain

EUR million

-0.8

-0.8

-1.6

Equity holdings

EUR million

4.4

7.0

11.4

VaR

1.2

8.9

Potential loss/gain

EUR million

-0.1

-0.6

-0.7

VaR analysis is based on the assumption of a 10-day holding period, a 95% confidence interval, and a
past observation period of 52 weeks. To calculate volatility and correlations, expected figures are used.
These are dynamically derived from the relevant equity/bond structure (interest rate structure).
In addition to the special funds, the Group holds securities, which are classified as available-for-sale
securities. The carrying value as of December 31, 2010 (2009) was EUR 6.4 million (EUR 7.3 million).
The majority of these securities are holdings in investment funds, which serve as insolvency insurance to
cover the provision for pensions and pre-retirement part-time working arrangements. No sensitivity
analysis was performed on these holdings due to the very minor fluctuations in their value.
The Management Board has not identified any concentration of risk as defined in IFRS 7.34.
The above information is disclosed in accordance with IFRS 7, Financial Instruments: Disclosures.

068

069

IFRS Consolidated
Financial Statements
069

Auditors Report

070

Consolidated Income Statement

071

Consolidated Statement of Comprehensive Income

072

Consolidated Balance Sheet

074

Consolidated Statement of Changes in Equity

075

Consolidated Statement of Cash Flows

076

Notes to Consolidated Financial Statements

To Giesecke & Devrient Gesellschaft mit beschrnkter Haftung, Munich

We have audited the consolidated financial statements prepared by Giesecke & Devrient Gesellschaft mit
beschrnkter Haftung, comprising a balance sheet, income statement, statement of comprehensive income,
statement of changes in equity, statement of cash flows and notes to the consolidated financial statements,
together with the Group management report for the business year from January 1 to December 31, 2010.
The preparation of the consolidated financial statements and the Group management report in accordance
with IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant
to 315a Para. 1 HGB are the responsibility of the companys management. Our responsibility is to express
an opinion on the consolidated financial statements and on the Group management report based on our
audit. In addition, we have been instructed to express an opinion as to whether the consolidated financial
statements comply with full IFRS.
We conducted our audit of the consolidated financial statements in accordance with 317 HGB and
German generally accepted standards for the audit of financial statements promulgated by the Institute
of Public Auditors in Germany. Those standards require that we plan and perform the audit such that
misstatements materially affecting the presentation of the net assets, financial position and results of
operations in the consolidated financial statements in accordance with the applicable financial reporting
framework and in the Group management report are detected with reasonable assurance. Knowledge of
the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness
of the accounting-related internal control system and the evidence supporting the disclosures in the
consolidated financial statements and the Group management report are examined primarily on a test
basis within the framework of the audit. The audit includes assessing the annual financial statements of
those entities included in consolidation, the determination of entities to be included in consolidation, the
accounting and consolidation principles used and significant estimates made by the companys management, as well as evaluating the overall presentation of the consolidated financial statements and the
Group management report. We believe that our audit provides a reasonable basis for our opinion.
With the exception of the following qualification our audit has not led to any reservations: The required
disclosures regarding the remuneration of the key management personnel pursuant to IAS 24.16 and
IAS 24.17 (a) and (b) have not been made as far as they exceed the required disclosures pursuant to
314 Para. 1 no. 6 (a) and (b) HGB.
In our opinion, based on the findings of our audit, the consolidated financial statements comply, except for the
above-mentioned qualification, with IFRSs as adopted by the EU, the additional requirements of German
commercial law pursuant to 315a Para. 1 HGB and full IFRS and give a true and fair view of the net assets,
financial position and results of operations of the Group in accordance with these requirements. The Group
management report is consistent with the consolidated financial statements and as a whole provides a suitable
view of the Groups position and suitably presents the opportunities and risks of future development.
Munich, March 28, 2011
KPMG AG
Wirtschaftsprfungsgesellschaft
Original German version signed by
Huber

Wirtschaftsprfer
German Public Auditor

Hachmann
Wirtschaftsprfer
German Public Auditor

Auditors Report

070

071

STATEMENT OF COMPREHENSIVE INCOME for the years ended December 31, 2010 and 2009

CONSOLIDATED INCOME STATEMENT for the years ended December 31, 2010 and 2009
Note

2010

2009

[15]

1,688,228

1,684,194

Net income

1,124,501

1,181,061

Changes in income and expenses recognized directly in equity

563,727

503,133

Currency effects from the translation of foreign operations

Selling expenses

188,315

164,139

Research and development expenses

116,690

93,706

Share of income and expenses recognized directly in equity

resulting from the use of the equity method of accounting

Net sales
Cost of goods sold
Gross profit

General and administrative expenses

Other operating (income)/expenses, net

Donations to the Giesecke & Devrient Foundation

Other financial income/(expenses), net

[6]
[17]

Earnings before interest and income taxes

Interest income

[18]

Interest expense

[18]

Earnings before income taxes

Income taxes
Net income
thereof apportioned to minority interests
thereof apportioned to Giesecke & Devrient Holding GmbH

108,642

371

911

147,863

Operating profit

Share in earnings from equity investments

110,488

[19]

135,735

20,000

1,494

1,764

1,930

1,977

131,287

139,476

6,113

7,529

(18,189)

(12,925)

119,211

134,080

38,714

29,571

80,497

104,509

2,223

2,618

78,274

101,891

80,497

104,509
in thousands of EUR

Total changes in income and expenses recognized directly in equity

Total income and expenses
thereof apportioned to minority interests
thereof apportioned to Giesecke & Devrient Holding GmbH

2010

2009

80,497

104,509

31,706

7,999

307

(88)

32,013

7,911

112,510

112,420

4,386

2,308

108,124

110,112

112,510

112,420
in thousands of EUR

072

073

CONSOLIDATED BALANCE SHEET as of December 31, 2010 and 2009

Assets

CONSOLIDATED BALANCE SHEET as of December 31, 2010 and 2009

Note

December 31,
2010

December 31,
2009

252,230

237,780

Current assets

Note

December 31,
2010

December 31,
2009

Accounts payable trade and other accounts payable

[10]

358,556

470,299

Current portion of provisions

[11]

132,572

150,281

[13]

43,727

33,918

Liabilities and equity

Current liabilities

Cash and cash equivalents

Financial assets

[2]

99,725

74,107

Accounts receivable trade and other receivables, net

[3]

299,312

334,335

Financial liabilities

Inventories, net

[4]

286,473

249,125

Finance lease obligations

11,355

8,363

Accrual for income taxes and income taxes payable

Other current liabilities

Income tax receivable

Non-current assets held for sale

[6]

1,979

Other current assets

[5]

25,889

28,468

Total current liabilities

974,984

934,157

Non-current liabilities

Total current assets

Non-current assets

19,085

18,081

173,905

43,827

[9]

90,727

99,762

Pension and related liabilities

[14]

271,690

255,353

Deferred tax liabilities

[19]

11,389

11,607

Financial assets

[2]

40,934

18,120

Accounts receivable trade and other receivables, net

[3]

4,345

4,323

Intangible assets

[7]

115,190

92,058

[8]

462,821

458,529

[19]

70,180

76,380

Total non-current liabilities

20,140

23,151

Equity

2,993

2,278

725,661

681,427

1,700,645

1,615,584
in thousands of EUR

38,282

[13]

24

Total assets

35,267

[11]

6,564

1,600

Total non-current assets

91,937
772,255

Financial liabilities

7,458

[6]

Other non-current assets

93,519
657,559

Non-current portion of provisions

[6]

Income tax receivable

8,502
17,318

[10]

Investments in other related parties

Deferred tax assets

[12]

8,997
20,188

Accounts payable trade and other accounts payable

Investments accounted for under the equity method

Property, plant and equipment

[9]

Finance lease obligations

Other non-current liabilities

Capital stock

[20]

Retained earnings
Accumulated income and expenses recognized directly in equity
Treasury stock
Minority interest
Total equity
Total liabilities and equity

[20]

2,687

3,692

604,750

470,604

25,000

25,000

434,898

400,016

21,446

(8,404)

(68,404)

(68,404)

25,396

24,517

438,336

372,725

1,700,645

1,615,584
in thousands of EUR

074

075

CONSOLIDATED STATEMENT OF CASH FLOWS for the years ended December 31, 2010 and 2009

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the years ended December 31, 2010 and 2009

Capital stock
Balance as of January 1, 2009
Adjustment in accordance with IAS 8 (see Note 1(u))
Adjusted balance as of January 1, 2009
Net income

Retained
earnings

Accumulated
income and
expenses
recognized directly
in equity 1

Treasury stock

Subtotal

Minority interest

Total

25,000

404,834

(16,625)

(68,404)

344,805

31,846

376,651

(1,581)

(1,581)

(1,565)

(3,146)

25,000

403,253

(16,625)

(68,404)

343,224

30,281

373,505

101,891

101,891

2,618

104,509

Changes in income and expenses

recognized directly in equity

8,221

8,221

(310)

7,911

Total income and expenses for the period

101,891

8,221

110,112

2,308

112,420

Acquisition of minority interests

(19,670)

(19,670)

(6,560)

(26,230)

Total changes in equity

82,221

8,221

90,442

(4,252)

86,190

Profit transfer to Giesecke & Devrient Holding GmbH

(85,458)

(85,458)

(85,458)

Cash received from minority interests

900

900

Dividends paid

(2,412)

(2,412)

25,000

400,016

(8,404)

(68,404)

348,208

24,517

372,725

Net income

78,274

78,274

2,223

80,497

Changes in income and expenses

recognized directly in equity

29,850

29,850

2,163

32,013

Balance as of December 31, 2009

Total income and expenses for the period

78,274

29,850

108,124

4,386

112,510

Release of contingent purchase price payment from

the acquisition of minority interests

200

200

200

Total changes in equity

78,474

29,850

108,324

4,386

89,504

76,730

(Gain)/loss on sale of investments, net

(515)

(Gain)/loss on sale and disposal of intangible assets and property, plant and equipment

(150)

695

(Gain)/loss on the purchase of shares in associated companies

Undistributed earnings in associated companies and joint ventures
Dividends received from associated companies and joint ventures

1,344

(Increase)/decrease in investments in trading securities

(Increase)/decrease in accounts receivable trade and other accounts receivable, net
(Increase)/decrease in prepaid expenses and other assets
(Increase)/decrease in inventories, net
Increase/(decrease) in accounts payable trade and other accounts payable
Increase/(decrease) in provisions
Increase/(decrease) in pension and related liabilities
Increase/(decrease) in other liabilities
Income taxes paid, net

(1,197)

(12,341)

(32,770)

(24,220)

216

(7,512)

(27,511)

36,692

35,704

11,911

(14,015)

1,924

17,071

16,598

(1,462)

1,605

(29,192)

(37,759)

155,966

198,841

Cash flows from investing activities

(43,592)

(43,592)

(3,507)

(3,507)

25,396

1,110

Change in operating assets and liabilities

Net cash provided by operating activities

412,940

(1,764)

112,710

(68,404)

(325)
(1,494)

6,655

Cumulative translation adjustment

Depreciation, amortization and impairment/recoveries

(11,193)

(43,592)

21,446

139,476

5,421

434,898

131,287

Adjustments to reconcile income before interest and taxes to cash provided by operations

(15,716)

25,000

2009

Interest paid

Dividends paid

Earnings before interest and income taxes

Interest received

Profit transfer to Giesecke & Devrient Holding GmbH

Balance as of December 31, 2010

2010
Cash flows from operating activities

438,336
in thousands of EUR

(Increase)/decrease in short-term investments

(20,556)

37,286

Additions to and prepayments on intangible assets

(33,320)

(24,698)

Additions to and prepayments on property, plant and equipment

(71,884)

(108,152)

6,517

7,692

Proceeds from investment grants, net

Capital increase in investments in related companies

(1,595)

Acquisitions, net of cash acquired

(5,763)

(48,934)

943

(2,692)

(26,500)

Payments received on loans to related parties

1,800

Proceeds from sale of investments

2,640

69

44

Proceeds from the sale/purchase of available-for-sale securities

Loans to related parties

Proceeds from sale of intangible assets

Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Free cash flow 1

2,014

1,644

(145,635)

(137,810)

10,331

61,031

(700)

(17,635)

142,978

64,678

Cash flows from financing activities

Investment in subsidiaries under common control
Proceeds from issuance of long-term debt
Proceeds from issuance of long-term debt from the Giesecke & Devrient Foundation
Repayment of long-term debt
Payments on capital lease obligations
Net (decrease)/increase in short-term debt and borrowings
Payment to Giesecke & Devrient Holding GmbH

14,000

(25,684)

(7,919)

(8,546)

(7,731)

2,121

(1,288)

(123,691)

(26,293)

900

(3,507)

(2,412)

Net cash used in/provided by financing activities

(3,029)

2,300

Effect of exchange rates on cash and cash equivalents

7,148

342

14,450

63,673

237,780

174,107

252,230

237,780

Cash received from minority interests

Dividends paid to minority interests

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
1

Free cash flow consists of net cash provided by operating activities less net cash used in investing activities.

in thousands of EUR

076 |

077

Notes

(1)
Summary of
Significant
Accounting
Policies and
Practices

(a)
Description of Business

Giesecke & Devrient Gesellschaft mit beschrnkter Haftung and subsidiaries (G&D or Giesecke &
Devrient) is in the business of printing banknotes and securities, as well as the development and production of security paper and currency automation equipment. Giesecke & Devrient also develops and
manufactures magnetic stripe cards and smartcards mainly for the telecommunications, banking, and
health services industries. A further field of business includes security-related solutions for governments
and public authorities, ranging from ID cards and travel documents to e-government solutions. New
technologies comprise network solutions and secure mobile transaction solutions.
Giesecke & Devrient, headquartered in Prinzregentenstrae 159, 81607 Munich, Germany, has a strong
international orientation. One of G&Ds major markets is in Germany, and other key markets include
the United States, Canada, Great Britain, and China. As of December 31, 2010, G&D had subsidiaries in
33 countries. Giesecke & Devrient employs 10,413 people worldwide, including 6,493 outside Germany.

Principles of consolidation

The financial statements of the companies included in the consolidated financial statements are prepared using uniform accounting policies in accordance with IFRS.
Income and expenses, receivables, payables and provisions, as well as intragroup profits between companies included in the consolidated financial statements are eliminated.
A subsidiary is deconsolidated from the date it is no longer controlled by G&D.
Investments in joint ventures and associates accounted for using the equity method are initially recognized at cost and adjusted accordingly in subsequent periods. Intragroup profits from transactions with
these companies are eliminated in proportion to the acquirers interest.

The consolidated financial statements were approved by the Management Board on March 28, 2011.

(b)
Basis of Presentation

(c)
Consolidated Group and
Principles of Consolidation

The consolidated financial statements as of December 31, 2010 have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by the EU. The accounting policies
and practices applied in preparing the consolidated financial statements also comply with the full International Financial Reporting Standards issued by the International Accounting Standards Board (IASB).

Consolidated Group

All material G&D subsidiaries, joint ventures, and associates are included in the consolidated financial
statements.
Subsidiaries are companies controlled by Giesecke & Devrient; such companies are fully consolidated.
Joint ventures are companies jointly controlled by G&D and other companies.
Associates are companies in which Giesecke & Devrient has significant influence. These are generally investments in which G&D has an ownership interest of between 20% and 50%. Joint ventures and associated companies are accounted for in the consolidated financial statements using the equity method.
The consolidated Group comprises eight domestic and 50 foreign subsidiaries which are fully consolidated.
Additionally, three joint ventures and/or associated companies are accounted for using the equity method
of accounting. The consolidated financial statements include all material companies which are presented in
the schedule of shareholdings (see Note 34).

In fiscal 2010, Giesecke & Devrient has applied the revised standards IFRS 3, Business Combinations
(IFRS 3 (2008)) and IAS 27, Consolidated and Separate Financial Statements in accordance with IFRS
(IAS 27 (2008)).
Under IFRS, all business combinations are accounted for using the purchase method. The acquirer allocates the cost of a business combination by recognizing the acquirees identifiable assets, liabilities, and
contingent liabilities that satisfy the recognition criteria at their fair value on the date control over the
entity is obtained (acquisition date). The full amounts of identifiable assets and liabilities and contingent
liabilities irrespective of the companys ownership interest are recognized at their fair values. Any excess
of the purchase price over the fair value of the identifiable assets, liabilities, and contingent liabilities less
any minority interests is recognized as goodwill. Where the fair value exceeds the purchase price, the
resulting amount is recorded in the income statement.
Minority interests are measured at the fair value of the proportionate identifiable net assets. In a business
combination achieved in stages, interests held at the time of transfer of control are revalued and the resulting gain or loss is recognized in profit or loss. An adjustment of conditional purchase price components
that were reported as liability at the acquisition date are recognized in profit or loss for business combinations beginning in 2010. Transaction costs are recognized as expenses at the time they are incurred.
Upon acquisition of additional ownership in less than 100%-owned subsidiaries, the difference between
the purchase price and the proportionate share of the subsidiarys equity is charged against retained
earnings. Transactions which do not result in loss of control have no impact on the income statement and
are recorded as equity transactions.
Remaining interests are measured at fair value at the time of loss of control. In the case of minority interests, the reporting of negative balances is permitted, i.e. future losses are allocated in proportion to the
participation without restriction.

078 |

079

Notes

(d)
Use of Estimates

The preparation of the accompanying financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
amounts and liabilities as of the date of the financial statements and reported amounts of revenues and
expenses during the reporting period.
Information about significant areas of estimation, uncertainty and critical judgments in applying
accounting policies that have the most significant effect on the amounts recognized in the consolidated
financial statements is included in the following notes:
Note 1(k) Goodwill and Other Intangible Assets
Note 1(o) Provisions

(e)
Foreign Currency
Translation

Transactions in foreign currency are translated into euros using the exchange rate on the date of the transaction. At the balance sheet date, monetary assets and liabilities are remeasured using the closing rate. Any
differences upon remeasurement are recognized in the income statement. Non-monetary assets and liabilities denominated in foreign currency are translated using the historical exchange rate as of the date of the
transaction.
The individual functional currency of each of the Group companies is the currency of the primary economic environment in which the entity operates. The assets and liabilities of foreign subsidiaries with functional currencies other than the euro are translated using period-end exchange rates, while the revenues
and expenses are translated using average exchange rates during the period. Differences arising from the
translation of assets and liabilities in comparison with the translation of the previous periods are included
in cumulative translation adjustment and reported as a separate component of equity.

The average and closing rates for the fiscal years ended December 31 are as follows:
Rates December 31, 2010

Rates December 31, 2009

Average

Closing

Average

Closing

US dollar USD

1.3275

1.3362

1.3933

1.4406

Australian dollar AUD

1.4442

1.3136

1.7749

1.6008

British pound GBP

0.8582

0.8607

0.8911

0.8881

Canadian dollar CAD

1.3665

1.3322

1.5852

1.5128

Chinese renminbi RMB

8.9805

8.8220

9.5174

9.8350

Egyptian pound EGP

7.4976

7.7648

7.7609

7.9425

Hong Kong dollar HKD

10.3077

10.3856

10.7997

11.1709

Malaysian ringgit MYR

4.2733

4.0950

4.9040

4.9326

Swedish krona SEK

9.5469

8.9655

10.4526

10.2520

1 euro equals X units of foreign currency

Since fiscal 2009, Giesecke & Devrient has applied the revised standard IAS 1, Presentation of Financial
Statements. With the revision of IAS 1, the consolidated financial statements now include a statement
of comprehensive income in addition to the income statement. The statement of comprehensive income
includes net income and changes in income and expenses recognized directly in equity during the period
which do not result from transactions with the shareholder.

Since fiscal 2009, Giesecke & Devrient has applied the changes to IFRS 7, Financial Instruments:
Disclosures. This standard requires additional information for the determination of fair values and
the liquidity risk. The changes have no effect on the results of operations, net assets and financial position of the Group.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
Financial assets include, in particular, cash and cash equivalents, accounts receivable trade, loans, other
receivables, marketable securities, and derivative instruments.
For regular-way purchases and sales of all categories of financial assets, with the exception of derivative
financial instruments, the date of initial recognition in the balance sheet or of derecognition is the settlement date, i.e. the date on which an asset is delivered to or by an entity. The trade date is determinant for
derivative financial instruments.
Financial liabilities include accounts payable trade, liabilities to banks, finance lease obligations, and
derivative financial liabilities.
Financial assets and liabilities are generally measured at fair value on initial recognition. Financial assets,
which are not valued at fair value through profit or loss, include the direct acquisition costs. The fair
value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,
willing parties in an arms length transaction.
A financial asset is derecognized when the contractual rights to the cash flows relating to the financial
asset expire, that is, when the asset is realized or forfeited or is no longer under the control of the company. Up to now, G&D has not exercised the right to record financial assets as financial assets measured
at fair value through profit or loss at the time of initial recognition. The measurement category held-tomaturity investments is also not used. Interest income was not recorded on impaired financial assets.

(f)
Presentation of Financial
Statements

(g)
Financial Instruments

080 |

081

Notes

Cash and cash equivalents/Short-term investments

Giesecke & Devrient considers all highly liquid investments with an original maturity of three months
or less to be cash equivalents. These are valued at amortized cost.
Highly liquid commercial paper with an original maturity of up to three months is also classified as cash
and is measured at fair value.
Short-term investments with durations between three months and one year are classified as current
financial assets.

Unrealized gains and losses on available-for-sale securities are included in accumulated income and
expenses recognized directly in equity. Impairments are recognized through profit and loss on other than
temporary declines in value. An impairment is recorded on equity securities when there is a permanent
or significant reduction in the fair value below the original acquisition costs. For debt securities, an impairment is recorded when there is a considerable decline in the creditworthiness of the debtor. If, in a
subsequent period, the fair value increases and the increase can be objectively related to an event occurring after the impairment loss was recognized, the impairment loss shall be reversed in the income statement (for equity securities the reversal is recognized directly in equity).
Equity investments in other related companies are recognized at cost, since an active market price does
not exist and their fair market value cannot be reliably determined.

Accounts receivable trade and other receivables, net

Other financial assets

Accounts receivable trade and other receivables, net are allocated to the category loans and receiv
ables. They are measured at fair value at the time of initial recognition, which represents the acquisition
costs at the date of acquisition. The valuation at subsequent balance sheet dates is at amortized cost.
At the same time, credit risk impairments in the form of specific allowances for doubtful accounts are
carried out. Specific defaults (i.e. the start of an insolvency proceeding) lead to derecognition of the
receivables affected. In addition, lump-sum specific allowances are also recorded. The indication of a
possible impairment begins when the agreed payment terms are exceeded, moreover when the start of
insolvency proceedings or similar becomes known. Allowances on accounts receivable trade and other
receivables are recorded in separate allowance accounts.

With the exception of derivative financial instruments, other financial assets recognized as assets are
allocated to the measurement category loans and receivables. The valuation is in accordance with the
explanation provided for accounts receivable trade and other receivables, net. If there are indications
of an impairment for financial assets which are valued at amortized cost, an impairment is carried out
to the extent of the lowest possible realizable amount. Irrecoverable financial assets are derecognized.
An impairment is reversed when the reasons for the impairment recorded no longer prevail.
Financial liabilities

Income and expenses in connection with the recognition and reversal of specific allowances, lump-sum
specific allowances, as well as direct derecognitions of receivables are recorded in selling expenses. Nonand low-interest-bearing non-current receivables are recorded at the present value of the expected
future cash flows when the interest effect is material. For such amounts, the subsequent valuation is made
using the effective interest method. Assets are classified as non-current when the remaining duration
at the balance sheet date exceeds 12 months.

With the exception of derivative financial instruments, financial liabilities recorded as liabilities are
allocated to the measurement category financial liabilities measured at amortized cost. The initial
valuation of these financial liabilities is at fair value and in subsequent periods at amortized cost using
the effective interest method. Transaction costs are deducted from the acquisition costs, in as much as
they are directly attributable. Liabilities are classified as non-current when the remaining maturity as
of the balance sheet date exceeds 12 months.

Marketable securities and investments

The valuation of accounts payable trade is in accordance with the procedures noted previously for financial liabilities.

G&Ds marketable securities are classified as trading or available-for-sale securities and are stated at
fair value as determined by the most recently traded price of each security at the balance sheet date. The
trading securities contain numerous shares in two closed and fully consolidated special funds, which invest in publicly traded equity and debt securities. The available-for-sale securities are shares in investment funds, which serve as insolvency insurance to cover the provision for pre-retirement part-time
working arrangements. Highly liquid commercial paper with an original maturity of up to three months
is classified as cash and is measured at fair value.
Unrealized gains and losses on trading securities are included in income on a current basis.

A financial liability is derecognized when the underlying obligation relating to the liability is fulfilled,
terminated or extinguished.
Giesecke & Devrient has not made use of the option to designate financial liabilities as financial liabilities measured at fair value through profit or loss at the time of initial recognition in the balance sheet.

082 |

083

Notes

Derivative financial instruments

Derivative instruments are only used to manage the foreign currency exposure incurred in the normal
course of business and only in the form of forward exchange contracts. G&D does not apply hedge
accounting where the contract volume covered falls below USD 10 million. These derivative financial
instruments therefore qualify as held-for-trading, and are recorded at fair value at the balance sheet
date as either an asset or a liability. Changes in fair value are recognized in the income statement as
financial income or expense. The fair market value of forward exchange contracts is calculated on the
basis of the applicable spot market rates as well as the forward contract premium or discount compared
to the contracted forward contract rate.
Currency risks from contracts with a nominal volume exceeding USD 10 million are secured via forward
exchange contracts within the scope of a micro hedge and presented as fair value hedges in the balance
sheet. If the conditions for hedge accounting in accordance with IAS 39 are fulfilled, Giesecke & Devrient
classifies and documents the hedge as a fair value hedge during the period. A fair value hedge is a hedge
of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm commitment. Documentation of the hedging relationship includes the objectives and strategy of the companys
risk management, the nature of the hedging activity, the risk covered by the hedge, a description of the
hedge instrument and the hedged item, as well as a description of the method used in measuring its effectiveness. The hedge is expected to be highly effective in offsetting changes in fair value attributable to the
hedged risk and is assessed on an ongoing basis throughout the financial period for which the hedge was
designated. Changes in fair value of the derivatives, as well as changes in the market values of their corresponding hedged items, are recognized in net financial income. The fair values of the hedged items are
recognized as current financial assets and current financial liabilities. If derivative financial instruments
no longer meet the criteria for hedge accounting, they are classified as held for trading.
Giesecke & Devrient identifies derivative instruments embedded in host contracts and accounts for them
separately according to the provisions of IAS 39 Financial Instruments: Recognition and Measurement. These derivatives consist solely of foreign currency derivatives embedded in certain firm sales
and purchase contracts denominated in a currency that is neither the functional currency of G&D nor
of the contractual counterparty and which is also not a currency in which transactions are commonly
denominated in the jurisdiction in which the transaction is to occur.
The fair values of foreign currency embedded derivatives are included in the balance sheet under current
financial assets and current financial liabilities.
The relevant classes of financial instruments used by G&D include the measurement categories in accordance with IAS 39, cash and cash equivalents, short-term investments, receivables and payables from
construction contracts, as well as finance lease obligations, financial guarantees and derivative financial
instruments that are eligible for hedge accounting.

Risk management for the entire Group is coordinated centrally. Policies for risk management, foreign
currency exposure, and documentation requirements are set forth in guidelines and procedures issued by
the corporate treasury department. These guidelines are examined and updated on a regular basis. The
approval of the guidelines is the responsibility of management.

(h)
Risk Management
and Foreign Currency
Exposure Policies

Derivative financial instruments are used by G&D solely to reduce the risks inherent within its worldwide business. As such, Giesecke & Devrient does not hold or issue derivative instruments for speculative purposes.
Refer to section 8.3. of the Group management report in the risk report, Financial risk, for additional
related disclosures.

Inventories are carried at cost. Cost is determined using the weighted average or FIFO method. Finished
goods and work-in-progress inventories include direct material, labor, and manufacturing overhead
costs, which are based on the normal capacity of the production facilities. Items in inventory are written
down at the balance sheet date if their net realizable value is lower than their carrying amount.

Non-current assets are classified as held for sale if they are available for immediate sale in their present
condition, subject only to terms that are usual and customary for sales of such assets and their sale is
highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell.

Intangible assets consist of purchased intangible assets, such as standard software, licenses, patents, water
rights, know-how, goodwill, and internally developed intangible assets.
Intangible assets with definite useful lives are valued at cost and are amortized on a straight-line basis
over their estimated economic useful lives.
Development costs are capitalized when the requirements of IAS 38, Intangible Assets, are fulfilled.
Such costs are amortized on a straight-line basis over the estimated economic useful lives. Research costs
are expensed in the period in which they are incurred.
The useful lives of intangible assets with definite useful lives are generally as follows:
Years
Development costs/Technology
Software, rights, customer base etc.

310
38

(i)
Inventories

(j)
Non-Current Assets
Held for Sale

(k)
Goodwill and Other
Intangible Assets

084 |

085

Notes

Goodwill is not amortized but rather tested at least annually for impairment. Reversals of impairments
on goodwill are not permitted.
At least once a year, Giesecke & Devrient evaluates the recoverability of goodwill at the cash-generating unit (CGU) level or group of CGUs using a one-step impairment test. Where the recoverable
amount (value in use equal to the present value of future cash flows) of the CGU or group of CGUs, to
which the goodwill was allocated, is less than the carrying amount, an impairment loss is recognized. If
the impairment loss exceeds the goodwill of the CGU, the excess is allocated to the other assets (generally property, plant and equipment and intangible assets) of the CGU or group of CGUs pro rata on the
basis of the carrying amount of each asset.

Impairment of other intangible assets and items of property, plant and equipment is identified by comparing the carrying amount with the recoverable amount (the higher of fair value less costs to sell and
value in use). If no future cash flows generated independently of other assets can be allocated to the individual assets, recoverability is tested on the basis of the cash-generating unit to which the assets can be
allocated. Impairment losses are reversed, with the exception of goodwill, if the reasons for recognizing
the original impairment loss no longer apply.

Beneficial ownership of leased assets is attributed to the contracting party in the lease, to which substantially all risks and rewards incidental to ownership of the asset are transferred.

(m)
Impairment of Intangible
Assets and Property, Plant
and Equipment

(n)
Leasing

The most critical assumptions the calculation of the fair value less costs to sell and the calculation of the
value in use are based on, include estimated growth rates, weighted average capital costs and tax rates.
Such premises, as well as the underlying methodology, can materially influence the respective values and
therefore impact the determination of a potential impairment of the goodwill. As far as property, plant
and equipment, as well as intangible assets, are tested for impairment, the determination of the recoverable amount is based on estimates of the management.

(l)
Property, Plant
and Equipment

Property, plant and equipment are valued at cost less accumulated depreciation. Depreciation of property, plant and equipment is calculated on the straight-line method over the estimated economic useful
lives of the assets. Depreciation on an asset commences once it has been placed in service.
The cost of self-constructed property, plant and equipment comprises the direct cost of materials and
direct manufacturing expenses, plus appropriate allocations of material and manufacturing overheads as
well as production and output-related general and administrative costs.
The acquisition or manufacturing costs also include estimated dismantling and removal costs as well as
costs relating to the restoration of the location to its original state.
Any investment allowances or grants received reduce the acquisition or manufacturing costs of the
assets for which they were granted.
If an item of property, plant and equipment is comprised of several components with differing useful
lives, the separate components are depreciated over the individual useful lives. Expenses for the day-today repair and maintenance of property, plant and equipment are normally charged against income.
Estimated economic useful lives of G&Ds property, plant and equipment are as follows:
Years
Buildings

up to 50

Technical equipment and machinery

320

Other plant and office equipment

323

If substantially all the risks and rewards are attributable to the lessor (operating lease), the leased asset is recognized by the lessor. Measurement of the leased asset is then governed by the accounting
policies applicable to that asset. During the term of the lease, the operating lease payments are recognized in the income statement by the lessor and the lessee.
If substantially all the risks and rewards incidental to ownership of the leased asset are transferred to
the lessee (finance lease), the lessee must recognize the leased asset. At the commencement of the
lease term, the leased asset is measured at fair value or the lower present value of the future lease
payments and depreciated over the shorter of the estimated economic useful life and the lease term.
The lessee recognizes a lease liability at the commencement of the lease term. In subsequent periods,
the lease liability is reduced using the effective interest method and the carrying amount is adjusted
accordingly.

Provisions for pensions and other employee benefits

Pension obligations, other post-employment benefits and related income/expenses are determined on
the basis of actuarial reports. Actuarial reports are based on key premises such as discount rates, expected profits on fund assets, rates of compensation increases, life expectancy and assumptions on medical
cost trend rates. The rate used to discount post-employment benefit obligations is determined by reference to market yields on runtime-specific high-quality corporate bonds with a fixed rate of interest at the
balance sheet date. The return on fund assets is determined on the basis of long-term historical returns
and the structure of the portfolio. Due to fluctuant market and economic conditions, the underlying
assumptions can deviate from actual developments and may therefore have a material impact on pension obligations and other post-employment benefits.
Provisions for defined benefit plans are measured using the projected unit credit method, taking into
account not only the pension obligations and vested pension rights known at the balance sheet date, but
also expected future salary and benefit increases. Actuarial gains or losses are recognized at the balance
sheet date only to the extent that they fall outside a corridor of 10% of the amount of the defined benefit obligation. The amount of actuarial gains or losses exceeding the corridor is amortized over the average remaining working life of the eligible employees and recognized as income or expense. The interest
component of the addition to provisions contained in pension expenses is reported in operating income/
expense as personnel expense. The return on plan assets is also reported in operating income/expense.
The amounts payable under defined contribution plans are expensed.

(o)
Provisions

086 |

087

Notes

Pre-retirement part-time working arrangements

Other provisions

A liability is recognized for obligations under pre-retirement part-time working arrangements as soon
as an employee is entitled to end the employment relationship early. In the case of pre-retirement parttime working arrangements based on the phased working time model, the outstanding obligation for
work performed by the employee during the work phase and the obligation to pay top-up amounts are
measured separately. The resulting obligations are measured at their present value on the basis of actuarial principles. Whereas the obligation for work performed by the employee during the work phase is
recognized in installments, the top-up amounts are recognized as expense as soon as the obligation
arises. The interest component of the allocation to the provision for pre-retirement part-time working
arrangements is presented within personnel expense.

Other provisions are recognized where there are legal or constructive obligations to third parties on the
basis of past transactions or events that will probably require an outflow of resources to settle, and this
outflow can be reliably measured. They are carried at their expected settlement amount, taking into
account all identifiable risks, and may not be offset against potential reimbursements, for example, via
insurance claims. The settlement amount is calculated on the basis of a best estimate. Provisions are
discounted where the effect of the time value of money is material.

Product warranties

A provision for the expected warranty-related costs is established when the product is sold. Estimates
for accrued warranty costs are primarily based on historical experience.
Provision for restructuring costs

A provision for restructuring costs is recorded where a legal or constructive obligation exists. A constructive obligation for restructuring costs arises only when there is a detailed formal plan identifying
key features of the plan and its implementation and a valid expectation on the part of those affected,
either by starting to implement the plan or announcing its main features to those affected by it. A restructuring provision should include only the direct expenditures arising from the restructuring, which
are those that are both necessarily entailed by the restructuring and not associated with the ongoing
activities of G&D.
Provision for onerous contracts

The calculation of provisions for onerous contracts is to a significant extent based on estimates. Such
estimates are mainly related to the status of the projects, the fulfillment of the services requested,
changes regarding the volume of the projects, the update of budgeted costs as well as applied customized
and runtime-specific discount rates.
Giesecke & Devrient records a provision for onerous contracts on contracts where the unavoidable
costs of meeting the obligations exceed the expected benefits. The unavoidable costs under a contract
reflect the minimum net costs of exiting from the contract, which is the lower of the cost of fulfilling it
and any compensation or penalties arising from failure to fulfill it. Before a separate provision for an
onerous contract is established, any impairment loss that has occurred on assets dedicated to that
contract is recognized.

Changes in estimates of the amount and timing of payments or changes in the discount rate applied in
measuring provisions for decommissioning, restoration, and similar obligations are recognized in the
same amount for the related asset. Where the decrease in the amount of a provision is greater than the
carrying amount of the related asset, the excess is recognized immediately in profit or loss.

Revenue is generally recognized when a product is shipped and title is transferred to the customer or
services are performed. If product sales require customer acceptance, revenues are recognized generally
upon acceptance by the customer. For arrangements requiring installation of a product at the customer
location, where installation is essential to the functionality of the product, revenue is recognized when
the product is delivered and installed at the customer location.
In certain instances, G&D is the general contractor concerning the construction of paper mills, special
facilities (e.g. production of security products), and personalization centers. The fulfillment of these types
of contracts usually extends over a long period and can last up to several years until final completion. For
construction contracts, the percentage-of-completion method is applied, provided that the revenue and
expenses can be estimated reliably. The percentage of completion is generally determined using the costto-cost method. Profit recognized in the period is calculated by multiplying the contract revenues and
costs by the percentage of completion less the results recognized in prior periods.
For long-term customer contracts in which the major components consist of the production, modification, or customizing of software, the percentage-of-completion method is also used for revenue recognition.
Giesecke & Devrient has contractual arrangements in which it performs multiple revenue-generating
activities, mainly for cards, passports and ID documents. For arrangements involving multiple revenuegenerating activities (e.g. the delivery of card bodies and personalization services) the immediate recognition of revenue is only possible under certain circumstances. In these cases, the revenue allocation is
based upon the relative fair values of the individual components of the total arrangement. The amount
allocable to the delivered elements is limited to the amount that is not contingent upon delivery of additional elements.
Interest is recognized using the effective interest method. Dividends are recognized when the shareholders right to receive payment is established.

(p)
Recognition of Revenue,
Interest and Dividends

088 |

089

Notes

(q)
Grants

Where grants are received for certain assets, they are offset against the acquisition or manufacturing
costs of the related assets and therefore reduce the acquisition costs. The grants/allowances are released
to the income statement in installments in the form of a reduction in depreciation expense.
Other types of grants are recorded in the income statement in the period in which the entitlement arises.

(r)
Borrowing Costs

(s)
Deferred Taxes

(t)
Statement of Cash Flows

Since 2009, Giesecke & Devrient has applied the revised IAS 23, Borrowing costs. According to the
revised standard, borrowing costs that are directly attributable to a qualifying asset have to be capitalized. A qualifying asset is an asset that takes a substantial period of time to get ready for its intended
use or sale, including the acquisition, construction or manufacture. No such borrowing costs have been
capitalized in 2010 and 2009.

Deferred tax assets and liabilities are recognized for temporary differences between the carrying
amounts in the consolidated balance sheet and the tax base, as well as for tax loss carryforwards that are
expected to reduce tax expense in future periods.

The statement of cash flows is prepared in accordance with IAS 7 and shows the cash inflows and
outflows during the fiscal year classified by cash flows from operating activities, investing activities and
financing activities. The cash flows from operating activities are presented using the indirect method,
in which earnings are adjusted for non-cash transactions. Moreover, items attributable to cash flows
from investing activities and financing activities are eliminated. Cash flows from interest received and
interest paid, as well as dividends received, are allocated to cash flows from operating activities. Cash
outflows for the acquisition of additional shares in affiliated companies under common control are
classified as cash flows from financing activities.
The cash flow funds comprise the balance sheet line item cash and cash equivalents. Cash and cash
equivalents include cash on hand and cash at banks, as well as cash from funds and investments with an
original maturity of up to three months.

In 2010, an adjustment to the financial statements of the subsidiary SECUNET s.r.o., Prague, as of
December 31, 2008 was ascertained. The resulting adjustments to the prior year figures for fiscal
2009 were made to the respective balance sheet items in the consolidated financial statements of
Giesecke & Devrient GmbH in accordance with IAS 8.42. The misstatement primarily relates to
current accounts receivable trade and other receivables, net, as well as equity. Both line items were
reduced by EUR 3.1 million as of January 1, 2009. The value of minority interests acquired in 2009
was reduced by EUR 0.9 million. A 3-year presentation was omitted, since only immaterial errors
were adjusted.

Within the scope of the project to revise the accounting standards for financial instruments, the IASB
published IFRS 9, Financial Instruments, in November 2009 and accordingly in October 2010. The new
standard specifies the classification and measurement of financial assets and liabilities. An entity shall
apply this standard for annual periods beginning on or after January 1, 2013. Earlier application is permitted. IFRS 9 has not yet been adopted by the EU. Giesecke & Devrient has not yet applied IFRS 9.
In November 2009, the IASB published IAS 24, Related Party Disclosures (revised 2009). Up to
now, companies that are controlled or considerably influenced by government were obligated to disclose information for all transactions with companies that are controlled or considerably influenced by
the same government. With the change to IAS 24, detailed disclosures have to be made only for individual material transactions. Additionally, quantitative or qualitative indications of effects for transactions that are not individually, but, when combined, material, have to be made. Furthermore, a clear
definition of a related company or a related person was made via the change to IAS 24. The changes
have to be adopted for accounting periods beginning on or after January 1, 2011. Currently, no changes
are foreseen for Giesecke & Devrient.
In April 2009 and in May 2010, the IASB published several amendments to various IFRS standards as
part of its annual improvement process. The adjustments mainly relate to terminology as well as editorial aspects. The timeframe for the earliest application of the April 2009 adjustments is the financial year
beginning on or after July 1, 2009 or accordingly on or after January 1, 2010. The timeframe for the earliest
application of the May 2010 adjustments is the financial year beginning on or after July 1, 2010 or on
or after January 1, 2011. The changes have not had or rather will not have a significant influence on the
financial position and result of operations of G&D.

(u)
Changes to the
Prior Year Figures

(v)
New Accounting
Pronouncements

090 |

091

Notes

(2)

Financial assets are comprised of the following as of December 31, 2010 and 2009:

Aging structure of accounts receivable trade and other accounts receivable (excluding prepayments)
as of December 31, 2010 and 2009:
December 31

Financial Assets

December 31

2010

2009
2010

2009

Short-term investments (> 3 months and < 1 year)

30,890

10,313

Receivables past due between 1 30 days, but not impaired

35,462

40,812

Trading securities

Current

56,274

54,883

Receivables past due between 31 90 days, but not impaired

21,627

21,479

Available-for-sale securities

6,400

7,343

Receivables past due between 91 180 days, but not impaired

11,648

5,346

Derivative financial instruments

2,561

1,566

Receivables past due between 181 360 days, but not impaired

3,904

2,720

Receivables past due more than 360 days, but not impaired

3,600

Total receivables past due, but not impaired

99,725

74,107

Loans to third parties

Loans receivable from other related parties

Cash surrender value of insurance policies

17,003

15,289

Loans to related parties

23,931

2,831

40,934

18,120
in thousands of EUR

Acquisition costs for available-for-sale securities in the amount of EUR 6.4 million have been included
in marketable securities as of December 31, 2010 and EUR 7.3 million as of December 31, 2009. As of
December 31, 2010 and 2009, the fair market value of these securities was EUR 6.4 million and EUR 7.3
million, respectively.
Loans to related parties relate to a loan and the security for rent to MC Vermgensverwaltung GmbH
& Co. KG. All loans receivable are not yet due. Specific allowances on loans to third parties in the amount
of EUR 0.0 million and EUR 0.1 million were recorded as of December 31, 2010 and 2009, respectively.

(3)
Accounts Receivable Trade and
Other Accounts
Receivable, net

Impaired or not past due accounts receivable trade and other receivables
Total accounts receivable trade and other receivables, gross

Non-current

68

83

72,709

70,440

219,695

249,094

292,404

319,534
in thousands of EUR

The following table serves as a summary of the development of the specific allowances as well as lump-sum
specific allowances for doubtful accounts:
Allowance for doubtful accounts
(specific)

Allowance for doubtful accounts

(lump-sum specific)

2010

2009

2010

2009

Opening balance

5,185

5,501

790

872

Additions (through profit or loss)

3,390

3,531

Recoveries (through profit or loss)

(1,906)

(1,801)

(27)

Utilization

(1,655)

(1,987)

(146)

(39)

Currency effects

477

(59)

(16)

5,491

5,185

653

790
in thousands of EUR

Accounts receivable trade and other accounts receivable, net are comprised of the following as of
December 31, 2010 and 2009:
December 31
2010

2009

272,972

245,659

9,336

6,801

Current
Accounts receivable trade
Accounts receivable from joint ventures and associated companies
Accounts receivable from related parties
Accounts receivable from Giesecke & Devrient Holding GmbH
Accounts receivable from undertakings in which G&D has a participating interest
Other
Prepayments

107

58,070

1,080

7,486

6,158

15,555

22,542

305,456

340,310

(6,144)

(5,975)

299,312

334,335

Accounts receivable trade

2,503

1,766

Prepayments on property, plant and equipment

1,842

2,557

4,345

4,323

Allowance for doubtful accounts

Non-current

in thousands of EUR

The specific allowances for doubtful accounts relate to gross receivables in the amount of EUR 6.3 million
and EUR 6.0 million as of December 31, 2010 and 2009, respectively.
Relating to accounts receivable trade and other receivables in the amount of EUR 213.4 million and
EUR 243.1 million as of December 31, 2010 and 2009, which have neither been provided for nor are past
due as of the balance sheet date, there is no indication that the debtors will not be able to meet their
payment obligations.
Allowances for doubtful accounts on accounts receivable from joint ventures, associated companies,
Giesecke & Devrient Holding GmbH, as well as other receivables were not recorded.

092 |

093

Notes

(4)
Inventories, net

Inventories are comprised of the following as of December 31, 2010 and 2009:

Shenzhen G&D Currency Automation Systems Co. Ltd. sells and installs banknote processing systems.
December 31
2010

2009

94,221

75,641

Work in process

161,478

137,259

Finished goods

17,550

15,154

Raw materials

Merchandise

13,224

21,071

286,473

249,125

The main activity of EPC Electronic Payment Cards, Gesellschaft fr Kartenmanagement mbH is the
production and sale of cards and card systems.
Effective October 1, 2010, Giesecke & Devrient acquired an additional 10% of shares in Shenzhen G&D
Currency Automation Systems Co. Ltd. at a purchase price of EUR 0.4 million. The outflow of funds
took place in 2011. As a result of this acquisition, negative goodwill in the amount of EUR 0.3 million
was recorded in the income statement in other financial income/(expenses), net in 2010.

in thousands of EUR

In fiscal years 2010 and 2009, write-downs on inventory amounted to EUR 19.5 million and EUR 8.5 million, respectively.

(5)
Other Current
Assets

The investment in SITRONICS Smart Technologies LLC (SITRONICS), which was classified as noncurrent assets held for sale as of December 31, 2009, was sold at a selling price of EUR 2.6 million. The
net gain on sale, less foreign exchange losses in the amount of EUR 0.1 million that were previously
not recognized in the income statement, amounted to EUR 0.5 million and is presented within other
financial income/(expenses), net.

December 31
2010

2009

Taxes receivable (other than income taxes)

6,486

5,173

Restricted cash

2,900

3,016

Gross amount due from customers for contract work (see Note 22)

5,154

13,048

11,349

7,231

25,889

28,468

Other

in thousands of EUR

Considering the respective ownership, the aggregate summarized financial information for all associated
companies and joint ventures as of and for the years ended December 31, 2010 and 2009 is as follows:
December 31

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net sales

(6)
Investments

Investments include the following:

Gross profit
December 31

Investments accounted for under the equity method

Investments in other related parties

2010

2009

7,458

6,564

1,600

24

9,058

6,588
in thousands of EUR

The following investments (see Note 1c) are accounted for using the equity method of accounting:
Name of the associated company/joint venture

Interest in the company

E-Kart Elektronik Kart Sistemleri Sanayi ve Ticaret Anonim Sirketi, Turkey

50.00

Shenzhen G&D Currency Automation Systems Co. Ltd., China

50.00

EPC Electronic Payment Cards, Gesellschaft fr Kartenmanagement mbH, Germany

49.00
in %

E-Kart Elektronik Kart Sistemleri Sanayi ve Ticaret Anonim Sirketi manufactures and sells cards,
card systems, and card-based solutions.

2010

2009

19,968

13,361

6,667

5,989

16,337

9,919

1,640

2,228

34,807

33,279

5,320

5,617

189

136

Other expenses

4,015

3,989

Net income

1,494

1,764

Other income

in thousands of EUR

094 |

095

Notes

(7)
Intangible Assets

The amounts of amortization on intangible assets recorded in the functional areas of the income
statement are as follows:

A summary of the activity for goodwill and other intangible assets is as follows:

Costs
January 1, 2009
Additions
Transfers

Customer base/
Rights

Development
costs/
Technology

Software

Goodwill

Total

28,453

17,488

31,905

7,213

85,059

415

13,895

10,414

24,724

27

523

550

3,366

15,585

259

27,394

46,604

(10)

(1,040)

(1,050)

1,712

1,162

437

1,345

4,656

December 31, 2009

33,963

48,130

42,498

35,952

160,543

January 1, 2010

33,963

48,130

42,498

35,952

160,543

1,122

5,328

26,700

33,150

Additions due to changes in

consolidation structure
Disposals
Foreign currency effects

Additions

169

169

Disposals

(79)

(4,590)

(693)

(5,362)

Foreign currency effects

December 31, 2010

3,327

2,944

808

4,360

11,439

38,333

51,812

69,482

40,312

199,939
in thousands of EUR

The additions in 2010 and 2009 comprise self constructed intangible assets in the amount of EUR 5.3 million and EUR 13.9 million, respectively.
Customer base/
Rights

Development
costs/
Technology

Software

Goodwill

Total

27,056

9,154

21,605

57,815

609

2,967

4,302

7,878

Impairment losses

1,981

1,981

Reversal of impairment losses

(153)

(153)
(1,006)

Accumulated amortization
January 1, 2009
Additions

Disposals

(10)

(996)

1,595

63

312

1,970

December 31, 2009

29,250

14,012

25,223

68,485

January 1, 2010

29,250

14,012

25,223

68,485

1,102

4,824

3,730

9,656

7,899

7,899
(5,293)

Foreign currency effects

Additions
Impairment losses
Disposals

(79)

(4,590)

(624)

2,835

516

651

4,002

33,108

22,661

28,980

84,749

January 1, 2009

1,397

8,334

10,300

7,213

27,244

December 31, 2009

4,713

34,118

17,275

35,952

92,058

December 31, 2010

5,225

29,151

40,502

40,312

115,190

Foreign currency effects

December 31, 2010
Carrying value

in thousands of EUR

2009

6,704

5,085

Selling expenses

348

382

Research and development expenses

812

653

1,792

1,758

9,656

7,878

Cost of goods sold

General and administrative expenses

Transfers

2010

in thousands of EUR

In fiscal year 2010, impairment losses in the amount of EUR 7.9 million were among others recorded on
capitalized development costs relating to product lines and products which will no longer be produced.
No reversals of impairment losses were recognized. Impairment losses recognized were recorded in the
amount of EUR 5.2 million in cost of goods sold and in the amount of EUR 2.7 million in research and
development expenses.
In fiscal year 2009, impairment losses in the amount of EUR 2.0 million were recorded on capitalized
development costs relating to a product line which will no longer be produced. Additionally, reversals of
impairment losses on capitalized development costs in the amount of EUR 0.2 million were recognized.
Impairment losses recognized and reversed were recorded in cost of goods sold.
In 2010, the goodwill of a Canadian subsidiary in the amount of EUR 2.2 million was allocated to the
Banknote Printing CGU (EUR 0.6 million) and to the Banknote Paper CGU (EUR 1.6 million)
according to the relative fair values of future cash flows. This was performed in accordance with IFRS 8,
Operating segments. The goodwill from secunet AG in the amount of EUR 3.4 million was assigned
to the secunet CGU. The goodwill from Giesecke & Devrient Matsoukis, Security Printing, S.A. in the
amount of EUR 2.1 million was allocated to the Government CGU. The goodwill from SmartTrust AB
in the amount of EUR 32.6 million was assigned to the SmartTrust CGU. Until 2009, the CGU SmartTrust was comprised solely of the company SmartTrust AB, Stockholm. As a result of the restructuring
of the former Cards and Services business unit, the CGU SmartTrust now consists of the new Server
Software and Services (3S) division of the business unit Mobile Security. Refer to section 1 of the Group
management report, Business Activity, for the related disclosures.
In performing the annual impairment testing for goodwill, the recoverable amount of the CGU or group
of CGUs is based on the value in use. The value in use is the present value of the future cash flows expected to be derived from the CGU or a group of CGUs. The cash flow projections, with the exception of
the Government CGU and the SmartTrust CGU, are based upon G&Ds forecasts for the next three
years. Terminal values are generally based upon the average projected cash flows from forecasts for the
following three years. For the terminal values of the Government CGU, the average cash flows for the next
four years are utilized and the terminal values for the SmartTrust CGU are based on the average cash flow
for the next eight years. In discounting the cash flows of the secunet CGU, pre-tax interest rates of 12.3%
and 13.9% were used in 2010 and 2009. For the CGU Banknote Paper and the CGU Banknote Printing,
pre-tax interest rates of 11.0% and 13.2% were applied in 2010 and 2009 to discount cash flows. In discounting the cash flows of the Government CGU, pre-tax interest rates of 12.3% and 13.9% were used in 2010
and 2009. In discounting the cash flows of the SmartTrust CGU, pre-tax interest rates of 11.4% and
12.9% were used in 2010 and 2009. No goodwill impairments were recorded in fiscal years 2010 and 2009.

096 |

097

Notes

(8)
Property, Plant
and Equipment

A summary of the activity for property, plant and equipment is as follows:

During the current fiscal year, Giesecke & Devrient recorded impairments in the amount of EUR 1.3 million on technical equipment and machinery which had no further economic useful lives. Impairment
losses were recorded solely in cost of goods sold.

Land and
buildings1

Technical
equipment
and machinery1

Other plant
and office
equipment1

Construction
in process

Total

331,977

469,500

156,618

31,265

989,360

Additions

9,149

51,748

19,296

22,162

102,355

Transfers

6,183

22,566

2,994

(30,717)

1,026

Costs
January 1, 2009

Additions due to changes in consolidation

structure

162

162

(3,990)

(17,009)

(10,574)

(203)

(31,776)

480

9,013

196

302

9,991

December 31, 2009

343,799

535,980

168,530

22,809

1,071,118

January 1, 2010

343,799

535,980

168,530

22,809

1,071,118

Additions

1,799

32,031

13,347

14,599

61,776

Transfers

3,844

25,862

1,225

(26,489)

4,442

Disposals

(3,818)

(21,334)

(12,152)

(37,304)

Disposals
Foreign currency effects

Foreign currency effects

December 31, 2010
1

4,599

18,156

3,955

835

27,545

350,223

590,695

174,905

11,754

1,127,577

Including assets under finance leases (see Note 9)

Accumulated depreciation
January 1, 2009
Additions
Transfers
Impairment losses
Reversal of impairment loss
Disposals
Foreign currency effects
December 31, 2009
January 1, 2010
Additions
Transfers
Impairment losses
Reversal of impairment loss
Disposals
Foreign currency effects

in thousands of EUR

Land and
buildings1

Technical
equipment
and machinery1

Other plant
and office
equipment1

Construction
in process

Total

144,319

314,102

110,920

569,341

12,274

38,461

15,978

66,713

(64)

64

144

2,024

88

2,256

(1,945)

(1,945)

(3,879)

(15,784)

(9,774)

(29,437)

591

5,073

(3)

5,661

153,449

341,867

117,273

612,589

153,449

341,867

117,273

612,589

12,478

41,881

16,376

70,735

(37)

1,345

(1,308)

1,263

1,263

(47)

(47)

(3,703)

(20,135)

(11,602)

(35,440)

1,594

11,162

2,900

15,656

163,781

377,383

123,592

664,756

January 1, 2009

187,658

155,398

45,698

31,265

420,019

December 31, 2009

190,350

194,113

51,257

22,809

458,529

December 31, 2010

186,442

213,312

51,313

11,754

462,821

December 31, 2010

Carrying value

Including assets under finance leases (see Note 9)

in thousands of EUR

During 2009, Giesecke & Devrient recorded impairments in the amount of EUR 2.3 million on land
and buildings, technical equipment and machinery, and other plant and office equipment which had no
further economic useful lives. Impairment losses in the amount of EUR 2.0 million were recorded in
cost of goods sold, EUR 0.1 million in selling expenses and EUR 0.2 million in general and administrative expenses.
In fiscal year 2009, reversals of impairment losses in the amount of EUR 1.9 million were recorded on
fixed assets that were impaired in the prior year. The impairment losses were reversed since the impaired
assets could be used for new customer contracts. The reversals of impairment losses were recorded in
cost of goods sold.
The carrying value of property, plant and equipment which serves as collateral on financial liabilities
(see Note 13) amounted to EUR 82.8 million and EUR 93.3 million as of December 31, 2010 and 2009,
respectively.
Commitments for the purchase of property, plant and equipment amounted to EUR 9.0 million and
EUR 4.1 million as of December 31, 2010 and 2009, respectively.

Giesecke & Devrient has obligations under finance leases covering buildings and certain machinery
and equipment that expire at various dates over the next ten years.

(9)

As of December 31, 2010 and 2009, the carrying values of buildings, machinery and equipment recorded
under finance leases were as follows:

Leasing

December 31

Buildings

2010

2009

60,348

65,746

5,310

7,269

65,658

73,015

Machinery and equipment

in thousands of EUR

Giesecke & Devrient leases office and manufacturing facilities from MC Vermgensverwaltung GmbH
& Co. KG, a related company. The headquarters and main manufacturing facilities are located at this
leased site. The lease is for an initial thirty-year term expiring in 2020, with annual renewal thereafter.
Lease payments are subject to future increases in accordance with stipulations stated in the lease agreement, which are based on the consumer price index for private households as published by the Federal
Statistics Office in Wiesbaden.
Depreciation on assets held under finance leases is included in depreciation expense.

098 |

099

Notes

Giesecke & Devrient also has several non-cancelable operating leases, primarily for office facilities, electronic data processing equipment, motor vehicles, and other office equipment, which expire over the
next 12 years. Rental expenses for operating leases during 2010 and 2009 amounted to EUR 27.2 million
and EUR 25.0 million, respectively.

Finance leases

Operating leases

Less than one year

16,319

20,074

Between one and five years

59,477

49,840

More than five years

66,793

Total minimum lease payments

142,589

Less amount representing interest (at rates ranging from 5.3% to 8.8%)

(42,865)

Accounts payable trade due to third parties

Present value of net minimum finance lease payments

Less current installments of obligations under finance leases

(8,997)

Non-current obligations under finance leases

90,727

147,683

46,082

188,961

965

Accounts payable due to related parties

700

301

Accounts payable due to associated companies

and undertakings in which G&D has a participating interest
Other similar liabilities
Deposits received/deferred income

146

47

7,044

7,432

142,009

125,875

358,556

470,299

34,881

38,212

Accounts Payable
Trade and Other
Accounts Payable

Non-current
Deposits received/deferred income
Accounts payable trade due to third parties

99,724

161,610

Accounts payable due to MC Holding GmbH & Co. KG

30,464
100,378

2009

Current

Accounts payable due to Giesecke & Devrient Holding GmbH

Future minimum lease payments under non-cancelable operating leases and future minimum finance
lease payments are:

(10)

December 31
2010

386

70

35,267

38,282
in thousands of EUR

in thousands of EUR

The amounts payable to related parties relate to MC Vermgensverwaltung GmbH & Co. KG.
The present value of net minimum finance lease liabilities is as follows:

(11)

Finance leases
Less than one year

8,997

Between one and five years

36,483

More than five years

54,244

Present value of net minimum finance lease payments

99,724
in thousands of EUR

Included in the future minimum operating lease payments is an annual amount of EUR 3.4 million payable to the related party MC Vermgensverwaltung GmbH & Co. KG over the next ten years pertaining
to rental increases since the inception of the related finance lease. The total annual lease payments
amounted to EUR 15.3 million.

Provisions

Warranties

Personnel and
social costs

Licenses and
patent
infringements

Restructuring

Other

Total

January 1, 2010

69,726

15,633

9,435

11,943

3,568

58,057

168,362

Additions

26,803

2,588

1,324

4,340

2,004

15,486

52,545

Transfers

1,087

(990)

(3)

94

1,145

1,145

Interest component
Utilization

Onerous
contracts

(6,836)

(3,014)

(7,412)

(3,405)

(17,779)

(38,446)

(16,834)

(5,975)

(1,757)

(75)

(9,372)

(34,013)

848

51

174

146

751

1,970

December 31, 2010

74,794

15,258

4,784

6,298

2,238

48,285

151,657

thereof current

74,794

10,801

4,784

6,298

2,238

33,657

132,572

4,457

14,628

19,085

Release
Foreign currency effects

thereof non-current

in thousands of EUR

Personnel-related provisions include provisions for pre-retirement part-time working arrangements and
long-service awards. The interest components of these provisions are included in personnel expenses.
Other provisions include, in particular, provisions for asset retirement obligations, archival storage
costs, contractual commitments, and outstanding credits.

100 |

101

Notes

(12)
Other Current
Liabilities

December 31

The aggregate maturities of financial liabilities for each of the following years are as follows:

2010

2009

Payroll and social security taxes

75,715

73,332

2011

43,727

Sales and other taxes

11,967

11,430

2012

19,025

2,068

1,820

2013

35,976

199

2014

36,319

3,570

5,355

2015

51,479

93,519

91,937

Gross amount due to customers for contract work (see Note 22)
Amounts payable to minority interests
Other liabilities

thereafter

31,106
217,632

in thousands of EUR

in thousands of EUR

(13)
Financial
Liabilities

Financial liabilities as of December 31, 2010 and 2009 consist of the following:

Lines of credit
December 31
2010

2009

Current financial liabilities

Short-term borrowings due to financial institutions

11,581

8,057

Current portion of long-term debt due to financial institutions

29,233

25,172

1,371

Accrued interest of long-term debt to financial institutions

Derivative financial instruments
Total

1,542

689

43,727

33,918

152,914

21,929

Giesecke & Devrient maintains global credit facilities in the amount of EUR 422.2 million. As of
December 31, 2010, G&D used EUR 182.1 million of these facilities for bank guarantee purposes and
EUR 65.1 million for credit orders. These are primarily used for the subsidiaries financing requirements. These facilities carry no significant commitment fees.

Giesecke & Devrient has defined benefit pension plans for a significant number of its employees in
Germany, as well as for certain employees at two subsidiaries outside of Germany.

(14)

Defined benefit pension plans are principally based upon years of service and salary earned. G&D
also extends the option to employees in Germany to apply designated portions of their compensation
to count toward future pension amounts.

Pension and
Related Liabilities

Non-current financial liabilities

Unsecured notes payable to financial institutions, rates 2.98% to 14.89%, due through May 31, 2018
Unsecured notes payable to the Giesecke & Devrient Foundation, rate 4.7%, due through May 11, 2015
Unsecured notes payable to other third parties, rate 1.4%, indefinite maturity date
Mortgage notes payable to financial institutions, rate 5.64%, due through January 30, 2012
Secured notes payable to bank, rate 4.8%, due through December 31, 2015

14,000

337

337

4,781

35,887

41,952

Total

203,138

68,999

Less current portion of non-current financial liabilities

(29,233)

(25,172)

Total non-current portion of financial liabilities

173,905

43,827

Total financial liabilities

217,632

77,745
in thousands of EUR

The fair value of embedded derivatives included in derivative financial instruments amounted to
EUR 0.0 million and EUR 0.3 million as of December 31, 2010 and 2009, respectively.

The other postretirement benefits relate primarily to retiree health and dental plans in Canada.
The measurement date of the defined benefit obligation for the principal pension plans, as well as the
principal other postretirement benefits, is December 31. The pension plans are generally unfunded
except for one Canadian and three German plans.
Furthermore, G&D maintains payment obligations for defined contribution state plans in Germany
and abroad.
Total provision for pension and related liabilities

Liabilities for G&Ds principal defined benefit pension plans and other postretirement benefit plans are
comprised of the following components:
December 31

Pension benefits
Other postretirement benefits
Other
Total provision for pension and related liabilities

2010

2009

267,049

251,641

4,349

3,480

292

232

271,690

255,353
in thousands of EUR

102 |

103

Notes

Obligation for pension benefit and other postretirement benefit plans and funded status

Defined benefit obligation, plan assets, and experience adjustments

Information regarding changes in the defined benefit obligation, in the fair value of plan assets, and
other postretirement benefit plans, as well as the reconciliation of the funded status, is presented in the
following tables:

The amounts of the present value of the defined benefit obligation (DBO), the fair value of the plan
assets and the surplus or deficit in the plan, as well as experience adjustments arising on liabilities and
plan assets can be viewed in the following summary:

Pension benefit plans

Other postretirement benefit plans

December 31
2010

2009

December 31
2010

2009

Defined benefit obligation at beginning of year

Foreign currency exchange rate changes

Defined benefit obligation (DBO)

Plan assets

Change in defined benefit obligation

271,885

242,266

2,750

2,196

1,165

1,593

389

246

Surplus/(deficit)
Experience adjustments on liabilities

12,354

10,690

243

201

Interest cost

14,084

13,196

194

148

Settlements

34

(49)

(6)

Defined benefit obligation (DBO)

Plan participants contributions

214

500

Experience adjustments on liabilities

Amendments

452

48

Actuarial (gains)/losses

24,046

11,119

204

21

Benefits paid

(9,193)

(7,430)

(49)

(62)

315,041

271,885

3,773

2,750

301,109

264,246

13,932

7,639

7,036

4,733

thereof not covered by plan assets

thereof partially covered by plan assets

2009

2008

2007

2006

(315,041)

(271,885)

(242,266)

(236,072)

(248,441)

11,063

7,036

4,733

6,436

5,643

(303,978)

(264,849)

(237,533)

(229,636)

(242,798)

1,690

4,157

2,759

567

1,942

243

430

(1,348)

(197)

286

(3,773)

(2,750)

(2,196)

(3,597)

(2,037)

(403)

(23)

1,146

157

Experience adjustments on plan assets

Service cost

Defined benefit obligation at the end of the year

2010
Pension benefit plans

Other postretirement benefit plans

in thousands of EUR

Net liability

The development of the net liability recorded for the fiscal years ended December 31, 2010 and 2009
was as follows:

Change in plan assets

Fair value of plan assets at beginning of year
Foreign currency exchange rate changes
Actual return on plan assets
Employer contribution
Plan participants contributions
Benefits paid
Fair value of plan assets at end of year

1,152

649

649

792

2,159

463

Net liability at the beginning of the year

Unrecognized actuarial (gains)/losses

Unrecognized prior service cost/(benefit)
Provision

Other postretirement benefit plans

December 31

December 31

2010

2009

2010

2009

251,641

235,104

3,480

2,885
315

214

500

Net periodic benefit costs

26,288

23,552

444

(147)

(101)

Contributions to plan assets

(2,159)

(463)

11,063

7,036

Benefits paid

(9,046)

(7,329)

(49)

(62)

Foreign currency exchange rate changes

Reconciliation of funded status

Funded status

Pension benefit plans

(303,978)

(264,849)

(3,773)

(2,750)

36,904

13,208

(785)

(1,004)

25

209

274

(267,049)

(251,641)

(4,349)

(3,480)

Net liability at the end of the year

325

777

474

342

267,049

251,641

4,349

3,480
in thousands of EUR

Plan assets

in thousands of EUR

The asset allocation of plan assets is as follows:

December 31
2010

2009

Equity securities

52.0

62.0

Debt securities

26.0

33.0

Other

22.0

5.0

100.0

100.0
in % of plan assets

104 |

105

Notes

The majority of plan assets is invested in a pooled fund containing, e.g. Canadian and other foreign equity
and debt securities and are actively monitored by a fund manager. Management activity and reinvestment
are covered by a detailed investment policy, which restricts investments to high-quality assets and ensures
diversification across different asset classes. The expected future composition of the investment portfolio
has a 50 - 65% bias towards equities. Additionally, in 2010 plan assets were invested in reinsurance and
investment funds for German companies.

The health and dental care inflation trend rate assumption has a significant effect on the amounts reported.
A one-percentage-point change in the health and dental care trend rate would have the following effects
for the year ended December 31, 2010:

The employer contributions to plan assets in 2011 are expected to be EUR 0.6 million.

Effect on total of service and interest costs

Effect on the defined benefit obligation

Onepercentagepoint increase

Onepercentagepoint decrease

568

463

52

53
in thousands of EUR

Weighted-average assumptions for actuarial valuation

Net periodic pension cost

Assumed discount rates and rates of increase in remuneration and pension entitlements used in calculating the projected benefit obligation and the net periodic benefit costs vary according to the economic
conditions of the country in which the retirement plans are situated. The weighted-average assumptions
used in calculating the actuarial values were as follows:

The components of the net periodic pension cost included in personnel expenses for the years ended
December 31, 2010 and 2009, were as follows:
Pension benefit plans

Other postretirement benefit plans

Pension benefit plans

Other postretirement benefit plans

2010

2009

2010

2009

December 31

December 31

Service cost

12,354

10,690

243

201

2009

Interest cost

14,084

13,196

194

148

(525)

(377)

2010

2009

2010

Expected return on plan assets

Defined benefit obligation

Discount rate

4.8

5.3

5.6

6.1

Amortization of unrecognized prior service cost/(benefit)

401

153

90

Rate of compensation increase

3.0

3.0

3.2

3.2

Amortization of unrecognized actuarial (gains)/losses

(60)

(6)

(140)

(124)

2.1

Loss/(Gain) from settlements and curtailments

34

49

(6)

26,288

23,552

444

315

Rate of pension progression

2.0

2.0

2.2

Net periodic pension cost

Net periodic benefit cost

Discount rate

5.3

5.5

6.1

Expected return on plan assets

6.6

7.0

Rate of compensation increase

3.0

3.1

3.2

5.3

Rate of pension progression

2.0

2.1

2.1

3.4

in thousands of EUR

6.1

Net periodic pension cost has been recorded in the following functional areas:
Pension benefit plans

in %

The determination of the expected long-term return on plan assets is based on the expected future
returns on the invested assets. The expected long-term return is reviewed regularly.
The assumed health and dental care inflation trend rates are as follows:
December 31

Health and dental care inflation trend rate assumed for next year

2010

2009

5.0

6.0
in %

The health and dental care inflation trend rate decreased at the rate of one percentage point per year to
a rate of 5.0% in 2010.

Other postretirement benefit plans

2010

2009

2010

2009

14,861

13,472

359

279

Selling expenses

3,655

4,392

16

Research and development expenses

4,753

2,498

General and administrative expenses

3,019

3,190

69

28

26,288

23,552

444

315

Cost of goods sold

Net periodic pension cost

in thousands of EUR

Expenses relating to defined contribution state plans

In fiscal years 2010 and 2009, expenses relating to state plans amounted to EUR 25.0 million and
EUR 22.6 million, respectively.

106 |

107

Notes

(15)
Revenue

Revenue is comprised of the following categories:

2010

2009

Loans and receivables

1,626

1,870

Cash and cash equivalents/short-term investments

1,768

3,337

Trading securities

1,668

1,464

Tax receivables

1,039

800

Interest income
Sales of goods
Rendering of services
Royalties

2010

2009

1,527,632

1,539,038

142,177

139,932

18,419

5,224

1,688,228

1,684,194

Other

in thousands of EUR

12

58

6,113

7,529

40

16,937

12,782

Interest expense
Loans and receivables

(16)
Income and
Expenses Relating
to Other Periods

2010
Income relating to other periods
Expenses relating to other periods

39,142

2009
37,512

Other Financial
Income, net

103

18,189

12,925

36,041

30,860

in thousands of EUR

in thousands of EUR

Other interest expense in fiscal 2010 and 2009 mainly contains interest expense relating to accrued
interest on provisions.

2009

Gains/(losses) from marketable securities, net

1,071

2,624

Foreign currency exchange gains/(losses), net

4,378

3,506

(4,733)

(3,993)

1,214

(160)

1,930

1,977

Other financial income/(expenses), net

1,246

(6,652)

2010

Gains/(losses) from derivative financial instruments, net

Other

(3,101)

Income relating to other periods consists primarily of reversals from warranty provisions and royalty
provisions that are included in cost of goods sold. Expenses relating to other periods mainly comprise tax
expenses for prior periods.

(17)

Financial liabilities, finance lease obligations and accounts payable

due to Giesecke & Devrient Holding GmbH

Interest income and expense relating to financial assets and financial liabilities that are not valued at
fair value are as follows:

Loans and receivables

Cash and cash equivalents/short-term investments

2009

1,626

1,870

1,768

3,337

3,394

5,207

Interest expense
Loans and receivables
Financial liabilities measured at amortized cost

in thousands of EUR

2010
Interest income

40

16,937

12,782

16,943

12,822
in thousands of EUR

The changes in net unrealized gains and (losses) on trading securities included in earnings during
the fiscal periods ending December 31, 2010 and 2009 were EUR 2.3 million and EUR 5.5 million,
respectively.
Regarding other financial income/(expenses) refer to Note 6.

(18)
Interest Income
and Interest
Expense

108 |

109

Notes

(19)
Income Taxes

Income tax expense

The income tax expense/(income) for the 2010 and 2009 fiscal years is comprised of:
2010

2009

30,326

18,815

809

3,628

31,135

22,443

(5,473)

6,489

(101)

(380)

13,153

1,019

Current income tax

Current year
Adjustments for prior periods

Deferred income tax

Origination and reversal of temporary differences
Income tax expense from changes in tax rates and introduction of new taxes
Change in tax loss carryforwards

Income tax expense, net

7,579

7,128

38,714

29,571
in thousands of EUR

subsidiary companies only had to bear the income tax expense that was actually accrued, this lead to a
reconciling item resulting from the tax allocation in the amount of EUR (1.6) million and EUR (2.8) million
as of December 31, 2010 and 2009. This can be attributed to the fact that the controlling company if
regarded on a stand-alone basis had made a tax loss in the amount of EUR 5.0 million and EUR 8.9 million
in 2010 and 2009, respectively.
Deferred tax assets and liabilities

The gross values of deferred tax assets and liabilities as of December 31, 2010 and 2009 are attributable
to the following balance sheet line items:

Financial assets
Accounts receivable and other receivables, net
Inventories, net

For the fiscal year ended December 31, 2010, G&D was subject to German federal corporation tax at a
base rate of 15% plus a solidarity surcharge of 5.5% on federal corporation taxes payable. As a result,
the statutory rate consisted of a federal corporate tax rate of 15.8% and trade tax of 16%, resulting in a
combined tax rate of 31.79%.

Expected income tax expense

Foreign taxation differential

2009

37,897

42,624

(10,856)

(12,062)

(1,581)

(2,840)

Non-deductible expenses

5,266

3,859

Change in tax rate

(101)

(380)

Tax-free income

(2,267)

(8,142)

Additions due to tax risks and tax payments (refunds) for prior periods

(4,049)

3,628

967

1,105

13,153

1,019

582

502

(297)

258

38,714

29,571

Effect due to tax allocation

Trade tax add-backs

Change in tax loss carryforwards
Withholding tax
Other
Actual income tax expense

in thousands of EUR

Effective January 1, 2007, Giesecke & Devrient GmbH (controlled subsidiary company) transferred its
entire profits to Giesecke & Devrient Holding GmbH (controlling company). Due to an intercompany
tax allocation agreement, the controlled subsidiary companies opted to bear the overall amount of the
current taxes of the controlling company for the 2010 and 2009 assessment periods. As the controlled

2010

2009

2010

2009

2010

2009

730

338

(713)

(688)

17

(350)

694

539

(285)

(360)

409

179

12,219

18,237

(23)

(329)

12,196

17,908

267

58

(1,531)

(301)

(1,264)

(243)

2,978

(8,678)

(5,174)

(6,076)

(2,196)

Property, plant and equipment

6,979

1,839

(30,665)

(29,473)

(23,686)

(27,634)

Accounts payable trade and other accounts payable

Finance lease obligations

2010

Net
December 31

2,602

Financial liabilities

Following is a reconciliation of the expected income tax expense to the actual income tax expense which
was recorded. The calculation of the expected income tax expense is based on the multiplication of income
before income tax with the German corporate combined statutory rate of 31.79% in 2010 and 2009.

Liabilities
December 31

Intangible assets

Other assets

Provisions

Reconciliation between the expected and actual income tax expense

Assets
December 31

Deposits received/deferred income

635

777

(7)

635

770

22,386

23,058

(3,707)

(5,268)

18,679

17,790

888

278

888

278

26,494

28,671

(11)

26,494

28,660

112

(16)

96

17,032

15,918

17,032

15,918

Other liabilities

2,415

2,202

(2,042)

(1,103)

373

1,099

Donations

3,189

3,189

Tax loss carryforwards

9,901

12,498

9,901

12,498

Deferred tax assets (liabilities), gross

106,435

107,503

(47,644)

(42,730)

58,791

64,773

Set-off of tax

(36,255)

(31,123)

36,255

31,123

70,180

76,380

(11,389)

(11,607)

58,791

64,773

Pension and related liabilities

Deferred tax assets (liabilities), net

in thousands of EUR

The changes in deferred tax assets, net for fiscal years 2010 and 2009 are included in the following
summary:
2010

2009

Deferred tax assets, net as of January 1

64,773

63,643

Changes affecting net income

(7,579)

(7,128)

7,261

Changes in net deferred tax assets not affecting net income resulting from
changes in consolidation structure
Changes in deferred taxes resulting from exchange rate effects which
were recognized directly in equity
Deferred tax assets, net as of December 31

1,597

997

58,791

64,773
in thousands of EUR

110 |

111

Notes

Deferred tax assets not recorded in the balance sheet

The amount of deductible timing differences and tax loss carryforwards, for which deferred tax assets
were not recorded, are as follows:
2010

2009

Deductible temporary differences, gross

12,941

3,597

Unused tax losses, gross

82,566

71,449

681

1,003

96,188

76,049

Unused tax credits

bear interest. The unconditional claim for refund not linked to any dividend payments was recognized as a
current tax asset within the definition of IAS 1.68 (m) and in the income statement in 2006. The fair value
of the income tax claims amounted to EUR 23.9 million and EUR 26.4 million as of December 31, 2010
and 2009, respectively.

The total share capital of G&D amounted to EUR 25.0 million as of December 31, 2010 and 2009.
All shares have been paid in full. The nominal value of treasury stock amounted to EUR 4.8 million as
of December 31, 2010 and December 31, 2009. The acquisition costs amounted to EUR 68.4 million as of
December 31, 20010 and December 31, 2009.

in thousands of EUR

Unused tax loss carryforwards in the amount of EUR 6.2 million can be carried forward for limited
periods. The remaining EUR 76.4 million is available indefinitely.
Furthermore, deferred tax assets in the amount of EUR 9.9 million and EUR 12.5 million on tax loss
carryforwards in the amount of EUR 36.2 million and EUR 41.6 million were recorded as of December
31, 2010 and 2009, respectively.
The determining factor in the recognition of deferred tax assets is the probability of the reversal of the
temporary differences which resulted in the recognition of the deferred tax assets and future taxable
profit against which the unused tax losses can be utilized. Based upon the level of historical taxable
income and projections for future taxable income, G&D believes that it is not probable that the benefits
of deductible timing differences and carryforward tax losses in the amount of EUR 96.2 million and
EUR 76.0 million will be realized and therefore has not recognized deferred tax assets for these amounts
in 2010 and 2009.
Income tax on dividends

As of December 31, 2010 and 2009, G&D recorded deferred tax liabilities on cumulative earnings in
subsidiaries and investments that are intended for distribution. Furthermore, deferred taxes were
recorded on the taxable temporary differences relating to investments in associated companies and joint
ventures. As of December 31, 2010 and 2009, the amount of these liabilities was EUR 1.4 million and
EUR 0.6 million, respectively.
The temporary differences relating to investments in subsidiaries, for which deferred tax liabilities were
not recorded, amounted to EUR 38.3 million and EUR 18.1 million as of December 31, 2010 and 2009,
respectively.
The Gesetz ber steuerliche Begleitmanahmen zur Einfhrung der Europischen Gesellschaft und
zur nderung weiterer steuerrechtlicher Vorschriften (SEStEG Act on Fiscal Measures Accompanying
the Introduction of the Societas Europaea and on Amending Further Tax Provisions) published in the
Federal Law Gazette on December 12, 2006 revised the treatment of corporation tax credits. As the law
previously stood, the annual realization of these tax credits was linked to dividend payments and thus to
future events. The SEStEG stipulates that the corporation tax credit will be refunded irrespective of
dividend payments. The recoverable amounts will thus be paid out in ten equal annual amounts between
2008 and 2017. The full amount of the refund became recoverable as of December 31, 2006 and does not

Unappropriated retained earnings amounted to EUR 421.9 million and EUR 388.3 million as of December 31, 2010 and 2009, respectively.
In connection with the acquisition of minority interests in fiscal year 2009, EUR 19.7 million was netted
against retained earnings. In 2010, a related contingent purchase price in the amount of EUR 0.2 million
was not paid out. As a result, the retained earnings were increased by that amount. Refer to the summary in Note 23.
As a result of the profit transfer agreement which became effective on January 1, 2007, Giesecke & Devrient
transferred its profit in accordance with German GAAP in the amount of EUR 43.6 million in 2010 and
EUR 85.5 million in 2009 to Giesecke & Devrient Holding GmbH.
With respect to its capital management, the aim of Giesecke & Devrient, in particular, is to secure its
continuation as well as generating value for the shareholder, i.e. in the form of dividend payments. In this
context, reference is made to the equity reported in the balance sheet in accordance with IFRS. As of
December 31, 2010 and 2009, the equity ratio amounted to 25.8% and 23.1%, respectively. G&D is not
subject to external minimum capital requirements.
In addition, refer to the corresponding explanations in Section 3.1.5. Return on capital and economic
value added in the Group management report.

(20)
Equity

112 |

113

Notes

(21)
Financial
Instruments

The following table incorporates the carrying amounts and fair values of G&Ds financial instruments.
The fair value of a financial instrument is the value at which a party would accept the rights and/or
obligations of this financial instrument from another independent party.
December 31, 2010

Cash and cash equivalents

Short-term investments

The carrying values represent cost or amortized cost. The carrying values of financial assets and financial
liabilities summarized by the individual classes are as follows:
December 31, 2010

December 31, 2009

Carrying value

Fair Value

Carrying value

Fair Value

252,230

252,230

237,780

237,780

30,890

30,890

10,313

10,313

Financial assets 1

Loans and receivables

2,068

720

720

54,883

54,883

Total financial assets held for trading

58,342

58,342

55,603

55,603

493

493

846

846

8,000

8,000

7,367

7,367

252,230

252,230

237,780

237,780

30,890

30,890

10,313

10,313

5,154

5,154

13,048

13,048

1,979

1,979

668,900

668,900

643,328

643,328

216,090

215,175

77,056

77,230

2,068

2,068

1,820

1,820

Accounts payable

216,933

216,933

344,493

344,493

Total financial liabilities measured at amortized cost

435,091

434,176

423,369

423,543

1,542

1,542

689

689

99,724

111,698

108,264

125,109

536,357

547,416

532,322

549,341

54,883

54,883

7,343

7,343

Derivative financial instruments included in hedge accounting

Derivative financial assets

2,561

2,561

1,566

1,566

Available-for-sale securities

27,531

27,531

2,833

2,833

Special classes

Other assets 3
Non-current assets held for sale
Investment in other related parties
Total financial assets
Accounts payable trade and other accounts payable 4
Other current liabilities 5

92,766

92,766

66,625

66,625

286,260

313,559

313,559

5,154

5,154

13,048

13,048

1,979

1,979

1,600

1,600

24

24

668,900

668,900

643,328

643,328

216,933

216,933

344,493

344,493

2,068

2,068

1,820

216,090

215,175

77,056

1,542

1,542

689

217,632

216,717

77,745

77,919

99,724

111,698

108,264

125,109

536,357

547,416

532,322

549,341

1,820

Financial liabilities
Financial liabilities measured at amortized cost
Derivative financial liabilities
Total
Finance lease obligations
Total financial liabilities

77,230
689

in thousands of EUR
 mount does not include the cash surrender value of insurance policies in the amount of EUR 17.0 million and EUR 15.3 million as of
A
December 31, 2010 and 2009, respectively, as this is not included in the scope of IFRS 7.
A mount does not include prepayments in the amount of EUR 17.4 million and EUR 25.1 million as of December 31, 2010 and 2009,
respectively, as these are not included in the scope of IFRS 7.
3
A mount consists solely of receivables from construction contracts. Other current assets in the amount of EUR 23.7 million and
EUR 17.7 million as of December 31, 2010 and 2009, respectively, are not included in the scope of IFRS 7.
4
A mount does not include deposits received in the amount of EUR 176.9 million and EUR 164.2 million as of December 31, 2010
and 2009, respectively, as these are not included in the scope of IFRS 7.
5
A mount includes gross amount due to customers for contract work.

316,392

56,274

6,400

286,260

Fair Value

316,392

2,068

56,274

Total

Carrying value

313,791

56,274

6,400

Accounts receivable trade and other receivables, net 2

Fair Value

313,791

Trading securities

Derivative financial assets

56,274

Loans

Carrying value

Financial assets held for trading

Available-for-sale securities

Trading securities

December 31, 2009

Cash and cash equivalents

Short-term investments
Gross amount due from customers for contract work
Non-current assets held for sale
Financial assets
Financial liabilities measured at amortized cost
Financial liabilities
Gross amount due to customers for contract work

Financial liabilities held for trading

Special class
Finance lease obligations
Financial liabilities

in thousands of EUR

The fair value of G&Ds foreign currency forward contracts and embedded foreign currency derivatives is based on forward exchange rates. Derivative financial instruments are stated at fair value and
recorded on the balance sheet under current financial assets in the amount of EUR 2.6 million and
EUR 1.6 million and under current financial liabilities in the amount of EUR 1.5 million and EUR 0.7 million as of December 31, 2010 and 2009, respectively.

114 |

115

Notes

The nominal volume of foreign currency forward contracts entered into by Giesecke & Devrient as of
December 31, 2010 amounted to (in thousands of foreign currency units):

US dollar
Australian dollar
Brazilian real
British pound

Purchase
contracts

Sales
contracts

26,146

64,084

1,737

4,574

19,119

918

1,000

32,877

108,000

Indian rupee

1,063,795

Japanese yen

68,943

321,909

Malaysian ringgit

10,417

Canadian dollar
Chinese renminbi

Mexican peso

Polish zloty

500

8,008

31,541

92,648

South African rand

Swedish krona

51,234

Non-current financial assets and financial liabilities as well as finance lease obligations

The fair value is determined based on the amortized cost using the effective interest method. Under this
method, the expected future cash flows are discounted using the prevailing market rate as of the balance
sheet date for similar maturities and contracts.
As of December 31, 2010 and 2009, there were no significant differences between the fair values and the
carrying values of non-current financial assets.
Impairment losses and reversals of impairment losses during fiscal years 2010 and 2009 related solely to
financial assets in the class loans and receivables.

Impairment losses
Reversals of impairment losses

2010

2009

(3,607)

(3,611)

1,759

2,570

(1,848)

(1,041)
in thousands of EUR

in thousands of foreign currency units

Net gains and losses from financial assets and liabilities by measurement category amounted to:
The fair values of non-derivative financial instruments are as follows:
Cash, short-term investments as well as the current portion of receivables, other assets,
trade accounts payable and other accounts payable, financial liabilities and other liabilities

The carrying amounts of these financial instruments are considered to approximate fair value because of
the relatively short period of time between origination and their expected realization.

Loans and receivables

Financial assets and financial liabilities held for trading
Available-for-sale financial assets
Financial liabilities measured at amortized cost

2010

2009

1,927

(76)

(3,128)

(108)

515

(355)

(122)

(1,041)

(306)
in thousands of EUR

Marketable securities

Debt and equity securities are carried at fair value, which is based on quoted market prices at the
balance sheet date.
Non-current assets held for sale

Non-current assets classified as held for sale are measured at the lower of their carrying amount and
fair value less costs to sell. As of December 31, 2009, there were no material differences between the
fair value and the carrying value.

Net gains and losses on loans and receivables consist of results from impairments, reversals of impairments and foreign currency exchange effects.
Net gains and losses on financial assets and liabilities measured at their fair values contain results from
changes in fair market values and adjustments on settlement of these financial instruments.
Net gains and losses from financial liabilities measured at amortized cost contain foreign currency
exchange effects.
Derivative financial instruments within the scope of hedge accounting

Investments

If the fair value cannot be readily determined, investments are recorded at acquisition cost (other
related parties). All investments in other related parties are presently recognized at the lower of their
acquisition cost or recoverable amounts.

Operating segments applied hedge accounting for specific material pending transactions in foreign
currency. G&D used forward exchange contracts on pending transactions to manage the foreign
currency exposure on future cash flows resulting from significant individual USD orders exceeding
USD 10 million.

116 |

117

Notes

Allocation of the fair value measurement classes of financial assets and liabilities to levels in accordance with IFRS 7 as of December 31, 2009:

Fair value hedges

From fiscal year 2009 on, pending transactions are hedged by using forward exchange contracts that are
classified as foreign currency fair value hedges for future sales. Changes in market value of such transactions were recognized in financial income. Changes in derivatives were also recognized in financial income resulting in valuation effects in the amount of EUR (0.3) million and EUR 0.8 million on hedging
instruments and EUR 0.3 and EUR (0.8) million on firm commitments in 2010 and 2009.

thereof fair value measurement at the end

of the reporting period using
Classes of financial instruments

December 31, 2009

Level 1

Level 2

Level 3

31,386

31,386

Financial assets
Special class
Commercial paper
Financial assets held for trading

Calculation of the fair values of financial instruments

Derivative financial instruments

In the following table, financial instruments measured at fair value are allocated to the levels in accordance
with IFRS 7, Financial Instruments: Disclosures. Thereby, the fair value measurement of a financial
instrument is allocated in its entirety to the level for which inputs are material to determine its fair value.
In level 1, fair values are mainly determined by using quoted prices in active markets for identical financial
assets or liabilities. The basis to determine fair values of level 2 are mainly observable quoted prices for
similar financial assets or liabilities. Fair value measurements of level 3 are mainly based on unobservable
market data. In 2010 and 2009, Giesecke & Devrient determined fair values of financial instruments
based on level 1 and level 2. The fair value measurement of level 3 was not used. In 2010 and 2009, no
material reclassifications between the levels were recorded.

Trading securities
Available-for-sale securities

1,566

1,566

54,883

54,883

7,348

7,348

689

689

Financial liabilities
Financial liabilities held for trading
Derivative financial instruments

in thousands of EUR

The details relating to construction contracts in progress are as follows:

Allocation of the fair value measurement of classes of financial assets and liabilities to levels in accordance with IFRS 7 as of December 31, 2010:
thereof fair value measurement at the end
of the reporting period using
Classes of financial instruments

December 31, 2010

Level 1

Level 2

Level 3

December 31

Costs incurred to date

Recognized profits/(losses), net

Financial assets
Special class
Commercial paper

Progress billings
45,268

45,268

2,561

2,561

56,274

56,274

6,400

6,400

1,542

1,542

Financial assets held for trading

Derivative financial instruments
Trading securities
Available-for-sale securities

Gross amount due from customers for contract work

Gross amount due to customers for contract work

2010

2009

6,171

21,329

10,673

4,041

16,844

25,370

(13,758)

(14,142)

3,086

11,228

5,154

13,048

(2,068)

(1,820)

3,086

11,228
in thousands of EUR

Financial liabilities
Financial liabilities held for trading
Derivative financial instruments

Receivables from and liabilities due to construction contracts are included under other current assets
and under other current liabilities, respectively.

in thousands of EUR

Contract revenues recognized in fiscal years 2010 and 2009 amounted to EUR 12.6 million and
EUR 13.1 million, respectively.

(22)
Construction
Contracts

118 |

119

Notes

(23)
Business
Combinations

For business combinations, G&D includes the results of operations of the acquired business starting from
the date of acquisition. The net assets acquired are recorded at their fair value at the date of acquisition.
The excess of the purchase price over the fair value of tangible and identifiable intangible net assets
acquired is recorded as goodwill in the accompanying consolidated balance sheet.
Effective December 1, 2009, Giesecke & Devrient acquired an additional 43% of the shares in Venyon Oy,
Helsinki, Venyon GmbH, Munich, and Venyon Inc., Irving. With the acquisition of these shares, Giesecke &
Devrient now holds 100% of the shares in each of the three companies. The companies operate as service
providers in the field of NFC. The net present value of the estimated purchase price which is dependent on
future events amounted to EUR 7.7 million. As all companies were previously controlled and therefore
fully consolidated as of December 1, 2009, the acquisition is treated as a business combination under common
control. The difference between the estimated net present value of the purchase price and the proportionate
share of the subsidiarys equity in the amount of EUR 7.8 million was charged against retained earnings.
As of December 31, 2010, the contingent purchase price payment amounted to EUR 8.8 million. This
amount includes compounded interest, which totaled EUR 1.1 million in 2010.
On July 1, 2009 and October 1, 2009, Giesecke & Devrient acquired an additional 23.6% and 2.8% of the
shares in the secunet Security Networks AG, Essen, secunet SwissIT AB, Solothurn, SECUNET s.r.o.,
Prague, and secunet Inc., Austin. With the purchase of the shares, Giesecke & Devrient holds 76.4% in
each of the four companies. The companies are engaged in security analysis of data processing-based
systems. The companies also consult on and implement security concepts, provide sales and integration
services of security products as well as maintenance and long-term support of IT systems. The acquisition
price amounted to EUR 9.8 million on July 1, 2009 and EUR 1.0 million on October 1, 2009. As all companies had already been controlled and therefore fully consolidated as of July 1, 2009 and October 1, 2009,
the acquisitions are treated as business combinations under common control. The difference between
the estimated net present value of the purchase price and the proportionate share of the subsidiarys
equity in the amount of EUR 4.6 million was charged against retained earnings.
Effective June 1, 2009 (initial consolidation), G&D acquired 100% of the shares of SmartTrust AB
(SmartTrust) at a purchase price of EUR 62.6 million. Of this amount, EUR 56.8 million was paid in
cash in 2009 and the remaining amount of EUR 5.8 million was paid in 2010. Incidental acquisition costs
totaled EUR 0.4 million. As a result of the transaction, goodwill in the amount of EUR 27.4 million was
recorded initially. SmartTrust operates in the field of SIM card software management for mobile devices.
In connection with the purchase, cash and cash equivalents in the amount of EUR 8.3 million were
acquired. In fiscal 2009, the acquisition resulted in cash outflows in the amount of EUR 48.9 million,
in fiscal 2010 EUR 5.8 million.
With the acquisition of SmartTrust, G&D is now more offensively positioned in the market of SIM card
management.
The major balance sheet line items for SmartTrust at the time of the initial consolidation were as follows:
Carrying value

Fair value

Current assets

26,351

26,351

Non-current assets

14,152

26,647

Liabilities

17,439

17,439

Equity

23,064

35,559
in thousands of EUR

The amounts presented above represent the carrying amounts and fair values of the balance sheet
classifications determined in accordance with IFRS immediately before the combination.
In the period between the acquisition on June 1, 2009 and December 31, 2009, SmartTrust contributed
EUR 3.0 million to the Group result. If the acquisition had taken place on January 1, 2009, the consolidated net income would have amounted to EUR 104.2 million. The consolidated net sales would have
amounted to EUR 1,696.4 million.
Effective January 1, 2009, Giesecke & Devrient acquired additional 32% of shares in the affiliated companies Giesecke & Devrient Asia Pacific Ltd., Hong Kong, Giesecke & Devrient Asia Pacific Banking
Systems (Shanghai) Co. Ltd., Shanghai, and Giesecke & Devrient Asia Pacific (Korea), Seoul. With the
acquisition of the residual shares, Giesecke & Devrient now holds all shares in each of the three companies.
The companies are engaged in sales and services for banknote processing machines. The purchase price
amounted to EUR 7.6 million. As all companies had already been controlled and therefore fully consolidated as of December 31, 2008, the acquisition in 2009 is considered as a business combination under
common control. The difference between the purchase price and the proportionate share of the subsidiarys equity in the amount of EUR 7.3 million was charged against retained earnings in 2009. In 2010, the
contingent purchase price in the amount of EUR 0.2 million was not paid out. As a result, the retained
earnings were increased by that amount.

Transactions with the shareholder Giesecke & Devrient Holding GmbH

Giesecke & Devrient Holding GmbH is the parent company of Giesecke & Devrient GmbH.
Giesecke & Devrient GmbH entered into a profit and loss transfer agreement with Giesecke & Devrient
Holding GmbH which became effective on January 1, 2007. The profit and loss transfer amounts are
offset against retained earnings and recognized directly in the equity of Giesecke & Devrient GmbH.
Payments made to Giesecke & Devrient Holding GmbH are included in net cash used in financing
activities.
Income taxes include expenses from tax allocations from the shareholder Giesecke & Devrient Holding
GmbH in the amount of EUR 2.6 million and EUR 5.7 million for fiscal 2010 and 2009, respectively,
which originate from the consolidated tax filing arrangement for income tax.
In addition, Giesecke & Devrient Holding GmbH is the controlling company regarding a consolidated
tax filing arrangement for sales tax. Furthermore, Giesecke & Devrient Holding GmbH provides various
services for the Group companies.
As of December 31, 2010 and 2009, accounts receivable from Giesecke & Devrient Holding GmbH
amounted to EUR 0.0 million and EUR 58.1 million, while accounts payable amounted to EUR 46.1
million and EUR 189.0 million.
For fiscal 2010 and 2009, the consolidated financial statements contain expenses including interest expense
resulting from transactions with Giesecke & Devrient Holding GmbH in the amount of EUR 0.9 million
and EUR 2.2 million. Furthermore, they contain income including interest income in the amount of
EUR 0.9 million and EUR 1.2 million for 2010 and 2009, respectively.

(24)
Related Party
Disclosures

120 |

121

Notes

Transactions with MC Vermgensverwaltung GmbH & Co. KG

Key management personnel compensation in accordance with 314 Para. 1 no. 6 HGB

In fiscal year 2010, Giesecke & Devrient rendered a loan to MC Vermgensverwaltung GmbH & Co. KG
amounting to EUR 26.5 million. The residual debt as of December 31, 2010 amounts to EUR 24.7 million.
The average variable interest rate in 2010 was 3.0%. Interest income in 2010 amounted to EUR 0.4 million. The loan is due on February 28, 2012.

Members of key management personnel encompass members of the Management Board of Giesecke &
Devrient GmbH as well as members of the Supervisory Board and the Advisory Board.

Regarding the lease agreement between Giesecke & Devrient and MC Vermgensverwaltung GmbH &
Co. KG, refer to Note 9.

Total personnel compensation for 2010 and 2009 amounted to EUR 6.1 million and EUR 5.3 million for
the Management Board, EUR 0.2 million each year for the Supervisory Board and EUR 0.3 million each
year for members of the Advisory Board.
In fiscal years 2010 and 2009, total personnel compensation for former members of the Management
Board and their surviving dependents amounted to EUR 1.0 million and EUR 0.9 million, respectively.

Transactions with Giesecke & Devrient Foundation

In fiscal year 2010, G&D established the Giesecke & Devrient Foundation. The grants amounted to
EUR 20.0 million. In addition the company received a loan from the Giesecke & Devrient Foundation
in the amount of EUR 14.0 million. Interest expenses in 2010 amounted to EUR 0.4 million (see Note 13).

Pension obligations to former members of the Management Board and their surviving dependents
amounted to EUR 14.0 million and EUR 14.4 million as of December 31, 2010 and 2009, respectively.
No prepayments or loans to members of the Management Board, the Supervisory Board or the Advisory
Board were granted in fiscal years 2010 and 2009.

Transactions with MC Holding GmbH & Co. KG

As of December 31, 2010, Giesecke & Devrient has recorded a liability to the shareholder MC Holding
GmbH & Co. KG amounting to EUR 1.0 million (see Note 10).

The average number of full-time equivalent employees (excluding trainees, employees on maternity
leave and employees doing national service) was:

Transactions between the affiliated companies and associated companies/joint ventures

and other related parties
Production

Transactions were carried out between the affiliated companies and associated companies/joint ventures and
other related parties. The following summary presents these transactions from the viewpoint of the affiliated
company:
Services rendered

Sales

2010

2009

7,297

7,078

925

916

Research and development

1,003

998

Administration

1,081

1,063

10,306

10,055

2010

2009

455,887

421,265

Social security contributions

72,064

64,238

Other personnel expenses

27,114

24,703

555,065

510,206

(25)
Number of
Employees

Services received

2010

2009

2010

2009

24,563

24,488

672

665

1,112

1,481

25,675

25,969

680

665

Associated companies/joint ventures

Goods and services
Financial transactions

Undertakings in which G&D has a participating interest

Goods and services

5,204

8,080

30

30,879

34,079

680

673

Wages and salaries

(26)
Personnel
Expenses

Other related parties

Goods and services

in thousands of EUR

Giesecke & Devrient leases office and manufacturing facilities from the related party MC Vermgensverwaltung GmbH & Co. KG. The resulting total annual lease payment amounted to EUR 15.3 million
in 2010 and 2009.

in thousands of EUR

The consolidated financial statements include the results of secunet AG, a publicly traded company. In
accordance with 161 AktG (German Stock Corporation Act), the management of secunet AG has
filed the required declaration and has made it permanently available to the shareholders on their
website (http://www.secunet.com).

(27)
Disclosure in
Accordance with
161 AktG

122 |

123

Notes

(28)
Commitments
and Contingent
Liabilities

Legal proceedings/contingent liabilities

Giesecke & Devrient is defendant in various lawsuits that allege infringement of patents. The plaintiffs
are seeking damages based on the revenues resulting from the use of these patents. Management of
G&D is of the opinion that the accrued amounts cover the risk from these lawsuits.
Giesecke & Devrient is involved in other pending claims and legal proceedings arising in the ordinary
course of business. Provisions have been made for the estimated liabilities for certain items. It is the
opinion of management that the resolution of all such matters will not have a material impact on G&Ds
net assets, results of operations and financial position.

The aggregate amount of required payments for commitments as of December 31, 2010 is as follows:
2011

199,830

2012

15,660

2013

5,943

2014

2,110

2015

190

thereafter

171
223,904
in thousands of EUR

Guarantees

Giesecke & Devrient does not maintain substantial amounts of financial assets which serve as collateral
for liabilities or contingent liabilities. Moreover, G&D does not hold collateral, which it would be
permitted to sell or re-pledge in the absence of default by the owner of the collateral.
G&D has issued guarantees for deposits received in the amount of EUR 29.0 million as of December 31,
2010 and EUR 19.0 million as of December 31, 2009.
Guarantees for third-party liabilities exist representing guarantees of indebtedness of a joint venture
concerning contractual performance by this company. These arrangements cover credit lines of the joint
venture in the amount of up to EUR 2.9 million in 2010 and 2009, respectively. Amounts relating to interest
charges are also guaranteed. In the event of default of the joint venture, G&D is required to repay the
borrowings covered by these guarantees. The maximum exposure relating to these guarantees amounted
to EUR 2.9 million as of December 31, 2010 and December 31, 2009, respectively.
In fiscal 2006, Giesecke & Devrient granted Giesecke & Devrient Holding GmbH an absolute guarantee
in the amount of EUR 100.0 million for a loan obligation. The amount of the loan obligation amounted
to EUR 57.1 million as of December 31, 2010 and EUR 71.4 million as of December 31, 2009.
Commitments

As of December 31, 2010, Giesecke & Devrient has material purchase commitments which consist mainly of short-term agreements for the purchase of raw materials, supplies, property, plant and equipment,
and services that were entered into during the 2010 fiscal year.

Grants from fiscal authorities and from the Schsische Aufbaubank are primarily received for non-current
assets. The grants are given under the condition that G&D maintains the non-current assets for at least
five years. In fiscal 2010 and 2009, Giesecke & Devrient recorded grants in the amount of EUR 6.5 million
and EUR 8.0 million which were offset against the acquisition and manufacturing costs.

(29)
Grants

Furthermore, in fiscal 2010 and 2009 G&D received other miscellaneous grants for operational investments in the amount of EUR 1.0 million and EUR 0.7 million which were recognized in other operating
income. At present, there is reasonable assurance that the attached conditions will be fulfilled.

Refer to section 8. of the Group management report, Risks, Opportunities, and Forecast, for the related
disclosures.

(30)
Risks

The audit fees for KPMG Europe LLP for the financial year ended 2010 amounted to EUR 2.1 million.
The break down into categories is as follows: a) fees for audit services EUR 0.9 million, b) fees for auditrelated services EUR 0.1 million, c) fees for tax-related services EUR 0.7 million, and d) fees for all
other services EUR 0.4 million.

(31)

Giesecke & Devrient Holding GmbH is the parent company of the Giesecke & Devrient Group (see
Note 24). As of December 31, 2010, consolidated financial statements and a Group management report
will be prepared in accordance with International Financial Reporting Standards (IFRS). The consolidated financial statements of Giesecke & Devrient Holding GmbH will be published electronically in
the German Federal Gazette.

(32)

Refer to section 4. of the Group management report, Subsequent Events, for the related disclosures.

(33)

Audit Fees

Group to which the

Company Belongs

Events after the

Balance Sheet Date

124 |

125

Notes

(34)
Shareholdings

Direct and indirect investments held by Giesecke & Devrient in affiliated companies

Shareholding in %

Direct and indirect investments held by Giesecke & Devrient in affiliated companies

Shareholding in %

Papierfabrik Louisenthal GmbH, Gmund am Tegernsee

100.00

Venyon Inc., Irving

100.00

Giesecke & Devrient Cash Management Services GmbH, Munich

100.00

PT Giesecke & Devrient Indonesia, Jakarta

100.00

Giesecke & Devrient International Finance S.A., Luxembourg

100.00

Giesecke & Devrient Egypt Services LLC, Cairo

99.00

GyD Ibrica S.A., Barcelona

100.00

GD Burti Sociedade Anonima, So Paulo

95.00

Giesecke & Devrient GB Ltd., Wembley/Middlesex

100.00

secunet Security Networks AG, Essen

79.43

Giesecke & Devrient S.A., Zaventem

100.00

secunet SwissIT AG, Solothurn

79.43

Giesecke & Devrient Istanbul Ticaret ve Servis Ltd. Sirketi, Istanbul

100.00

SECUNET s.r.o., Prague

Giesecke & Devrient Technologia, OOO, Moscow

100.00

secunet Inc., Austin (shell company)

79.43

Giesecke & Devrient FZE, Dubai

100.00

G&D LOMO, ZAO, St. Petersburg

70.81

Giesecke & Devrient Egypt Ltd., Cairo

100.00

Giesecke & Devrient Malaysia SDN BHD, Kuala Lumpur

70.00

Giesecke & Devrient Holding FZE, Dubai

100.00

Giesecke & Devrient Secure Flash Solutions GmbH, Munich

70.00

Giesecke & Devrient (Southern Africa) (Pty.) Ltd., Johannesburg

100.00

Huangshi Wanda Security Card Co. Ltd., Huangshi/Hubei Province

60.00

Giesecke & Devrient Africa Ltd., Lagos

100.00

Giesecke & Devrient Matsoukis, Security Printing, S.A., Athens

60.00

Giesecke & Devrient Bahrain S.P.C., Muharraq Town

100.00

Giesecke & Devrient Kabushiki Kaisha, Tokyo

51.00

Giesecke & Devrient America, Inc., Dulles/Virginia

100.00

BA International, Inc., Ottawa/Ontario

100.00

Giesecke & Devrient Systems Canada, Inc., Toronto/Ontario

100.00

Giesecke y Devrient de Mxico S.A. de C.V., Mexico City

100.00

Servicios Giesecke y Devrient de Mxico S.A. de C.V., Mexico City

100.00

Giesecke & Devrient Brasil Ltda., So Paulo

100.00

GyD Latinoamericana S.A., Buenos Aires

100.00

Giesecke & Devrient Australasia Pty. Ltd., Knoxfield/Victoria

100.00

Giesecke & Devrient Asia Pte. Ltd., Singapore

100.00

Giesecke & Devrient (China) Information Technologies Co. Ltd., Nanchang/Jiangxi

100.00

Giesecke & Devrient India Private Limited, New Delhi

100.00

Giesecke & Devrient Slovakia, s.r.o., Nitra

100.00

Giesecke & Devrient Italia, S.R.L., Milan

100.00

Giesecke & Devrient France S.A.S., Paris

100.00

SmartTrust AB, Stockholm

100.00

SmartTrust Systems Oy, Helsinki

100.00

SmartTrust GmbH, Dsseldorf

100.00

SmartTrust Ltd., London

100.00

iD2 Technologies AB, Stockholm

100.00

SmartTrust Pte., Singapore

100.00

SmartTrust Ltd., Hong Kong

100.00

SmartTrust Infosolutions Pvt. Ltd., Noida

100.00

SmartTrust U.S. Inc., Delaware

100.00

SmartTrust Ltda., So Paulo

100.00

Giesecke & Devrient Asia Pacific Ltd., Hong Kong

100.00

Giesecke & Devrient Asia Pacific Banking Systems (Shanghai) Co. Ltd., Shanghai

100.00

Giesecke & Devrient Asia Pacific (Korea), Seoul

100.00

Venyon GmbH, Munich

100.00

Venyon Oy, Helsinki

100.00

79.43
1

Not consolidated due to immateriality

Investments held by Giesecke & Devrient in associated companies

and joint ventures as well as undertakings in which G&D has a participating interest

Shareholding in %

E-Kart Elektronik Kart Sistemleri Sanayi ve Ticaret Anonim Sirketi, Gebze

50.00

Shenzhen G&D Currency Automation Systems Co. Ltd., Shenzhen

50.00

EPC Electronic Payment Cards, Gesellschaft fr Kartenmanagement mbH, Gmund am Tegernsee

49.00

Investments held by Giesecke & Devrient in non-consolidated companies

Shareholding in %

Original1 GmbH, Frankfurt am Main

20.00

Dr. K. Ottenberg

M. Kuemmerle

H. W. Kunz

Giesecke & Devrient GmbH

The Management Board
Munich, Germany
March 28, 2011

Dr. W. Schlebusch

Dr. P. Zattler

126

127

Corporate
Bodies

Supervisory Board

Dr. Peter-Alexander Wacker

Prof. Dr.-Ing. Gunther Reinhart

Dr. Peter-Alexander Wacker

Prof. Dr.-Ing. Gunther Reinhart

(Chairman)
Munich

Hebertshausen

(Chairman)
Munich

Hebertshausen

Walter Bogner*
(Deputy Chairman)
Dachau

Ralf Gerlach*
Gilching

Dr. Dietrich Hoppenstedt

Burgwedel

Jens Mller*
Gerichshain

Michael Reinhard*

Claudia Scheck*
Knigsmoos

Dr. Dietrich Hoppenstedt

Peter-Johann Stark*

(Deputy Chairman)
Burgwedel

Fischbachau

Johannes Ignatius van der Velde

Franz Markus Haniel

Munich

Advisory Board

Johannes Ignatius van der Velde

London

Verena von Mitschke-Collande

Tutzing

Dr. Susanne Weiss

Munich

London

Verena von Mitschke-Collande

Tutzing

Dr. Susanne Weiss

Munich

Kirchseeon

Dr. Karsten Ottenberg

Michael Kuemmerle

Chairman and CEO

Hans Wolfgang Kunz

Dr. Walter Schlebusch
Dr. Peter Zattler

* Employee representatives

Management Board

128

Glossary

129

Application ___ An application or app is a piece

of software that performs specific functions.

Carbon footprint ___ The total greenhouse gas

emissions caused by a person, organization, or
product.

Contactless ___ In a contactless smartcard, the chip

Debit card ___ Bank card used to make cashless

payments or withdraw money from ATMs.

Card token ___ New type of USB token that

communicates with the card reader using RFIDbased induction technology. These cards merely
require close proximity to an antenna to perform
transactions.

combines the benefits of smartcards (security

and personalization) with the convenience of
a USB token in a single solution.

Convego ___ Brand name for G&D product

Authentication ___ Determining that objects,

documents, or data have not been modified;

validating ones own identity.

Compliance ___ Conduct whereby a company

and its employees meet legal requirements, re
gulations, standards, and social conventions.

Authenticity ___ Validity in the sense of being

lines in the field of electronic payment.

unmodified or genuine.
Cash center ___ A location that handles cash-
related logistical processes.

Clean note policy ___ Policy adopted by central

banks to maintain the high quality and cleanliness

of circulating banknotes.

Corporate governance ___ Encompasses the

principles of responsible management, covering
all organizational structures and specific aspects
of management and monitoring within companies.
Designed to provide an appropriate and legally
compliant framework for corporate management
and decision-making.

Digital signature ___ A cryptographic method

consisting of a public, non-secret key and a private,
secret key.

Display card ___ Smartcard with an integrated

flexible display for showing card balances, onetime passwords (OTP), public transport infor
mation, etc.

Dual-interface card ___ Smartcard with a chip

featuring both contact-based and contactless in

terfaces for data transmission to and from the card.

Banknote processing system (BPS) ___ Range of

solutions for counting, inspecting, and sorting bank

notes. Depending on the configuration, the bank
notes can also be banded and then bundled and
destroyed online if necessary. G&Ds BPSM7
system is the technology leader in banknote
processing.

Company ID card ___ Multifunctional smartcard

with wide-ranging applications such as physical

access control, time recording, secure e-mail com
munications, and payment functions for company
canteens or vending machines.

Compass VMS ___ State-of-the-art software apBiometrics ___ Method of recognition used to
identify individuals by means of unique characteristics, such as facial features, fingerprints,
irises, or veins.

plication that offers a variety of flexible functions,

including accepting, processing, storing, and
returning to circulation banknotes and other
articles of monetary value. High transparency
with regard to inventories and processes means
CompassVMS can significantly reduce the risk
associated with cash management.

Corporate social responsibility (CSR) ___ Incorporates both legal requirements and additional, voluntary activities through which companies fulfill
their responsibilities to society. The objective is to
promote sustainable development in an economic,
environmental, and social context. CSR shapes a
companys activities throughout the entire value
chain.

Cryptography ___ The science of encrypting in-

formation.

E
E-banking ___ Paperless bank transactions performed electronically.

E-business ___ One of the most important applications of digital information and communication
technologies, encompassing all types of business
process that are handled electronically.

eCall ___ An in-vehicle system initiated by the

European Union to automatically alert the emergency services in the event of an accident.

130

Glossary

131

E-government ___ Processing national adminis-

tration activities and delivering services via the

Internet, e-mail, and other digital communication
technologies.

E-health ___ The use of modern information and

communication technologies in the healthcare
sector.

E-ID dokument ___ Electronic ID documents such

as passports, ID cards, drivers licenses, visas, etc.

F
Flash memory ___ Non-volatile storage used in
memory chip cards that can take the place of
hard disks.

FEEL (Fast Energy Effective Link) ___ Interactive

security feature from G&D that incorporates a
temperature cascade. The color change or appear
ance of information takes place in stages as the
temperature rises or falls.

E-passport ___ In an e-passport, biometric data

a digital photograph of the holder and two fingerprints is stored on a chip. This enables verification that the person presenting the document is
indeed its authorized holder.

complies with the EMV standard.

Green SIM card ___ SIM cards with reduced form

factors to avoid wasting materials. Also refers to

the use of alternative card body materials with less
impact on the environment than plastic.

chip-based credit and debit cards. The specification is issued by EMVCo, whose current members are MasterCard, VISA, and JCB (Japan
Credit Bureau).

responds to heat by changing color or revealing

hidden information.

graving method developed by G&D to produce

intaglio printing plates.

G
GalaxSIM ___ SIM card product line from G&D

Environment, Health and Safety (EHS) ___

ICAO standard ___ The International Civil Aviation

Organization is a United Nations organization that
defines standards for travel documents.

ID card ___ Highly secure means of personal

identification.
GSM/EDGE ___ The Global System for Mobile

Communications is a standard for fully digital cell

phone networks. EDGE (Enhanced Data Rates
for GSM Evolution) is a technology that improves
data transmission speeds for this service.

H
HIGHSEC eERP (European Residence Permit) ___

EMV standard ___ Global industry standard for

Intaglio ___ A gravure printing method used for

banknotes and postage stamps, etc.

FEEL-ID ___ Security feature for ID cards that

FIT (Fine Intaglio Technology) ___ Digital enEMV chip card ___ Chip-based payment card that

GPRS ___ General packet radio service is a

packet-oriented mobile data service for GSM
and UMTS networks.

with flash memory capacities of up to 1 GB.

Residence permits are normally essential when

living abroad for an extended period. To simplify
the process of identification and administration,
European governments are introducing standard
ized residence permits for third-country nationals.
These contain biometric data and meet the standards of the International Civil Aviation Organization (ICAO). HIGHSEC is G&Ds brand for
this purpose.

ISO 14001 ___ International standard for environmental management systems, focusing on a
process of continuous improvement.

L
LOOK (Laser Originated Optical Key) ___

A banknote printing method from G&D that

uses ultramodern laser technology to individually
adapt established security features on banknotes
and thereby create new ones.

A program covering all standards in these areas.

LTE/4G ___ Long Term Evolution is a next-generaGerman electronic healthcare card ___ Chip card
featuring a microprocessor that is set to replace
existing health insurance cards in Germany. As
well as personal details, the card will include a
photograph and emergency data. Additional
applications, such as documenting medication,
are also possible.

Human feature ___ A feature on a banknote, for

example, that people can verify without using

technical equipment.

HybridTM ___ New G&D banknote substrate com

bining the benefits of two different materials:
cotton paper and polymer.

tion cell phone standard that improves on UMTS

and significantly increases bandwidth. Also known
as 4G.

132

Glossary

133

Machine to machine (M2M) ___ The automated

NFC technologie ___ Near Field Communication

PDA (Personal Digital Assistant) ___ Handheld,

SCWS ___ Smartcard web server among other

exchange of data between devices via a central

control point.

is a short-range connectivity technology that allows contactless data transfer across distances of
just a few centimeters. Possible NFC applications
include sharing data between two NFC-enabled
cell phones simply by holding the phones next to
each other.

compact computer.

things, this enables mobile network operators to

tailor the look of SIM-based services, for example by implementing a graphical user interface.

MAGIC-ID ___ Optically variable 3D effect based

on microlens technology.

PECSEC ___ Material developed by G&D for

passports and ID cards.

SIM card ___ Subscriber identity module a chip
POS ___ Point of sale may refer to a place of

microSDTM card ___ Highly compact flash memory

Numeron ___ Compact banknote processing sys-

card, scarcely bigger than a human fingernail.

tem from G&D, designed to process between

50,000 and 100,000 banknotes per day. This system
is not only suitable for central banks but can also
be deployed by commercial banks, cash centers,
security transport companies, and casinos.

MobiCore ___ Platform developed by G&D that

enables high-performance, security-critical applications to be run using standard interfaces on a

mobile device.

Mobile device management (MDM) ___ Methods

of managing and distributing applications, data,

and configuration settings to mobile devices such
as cell phones, PDAs, notebooks, etc., usually via
centralized solutions.

SINA ___ Secure Inter-Network Architecture

ProxSIM ___ G&D SIM card for NFC systems.

This is used to store and execute secure, contactless applications, such as mobile payment.

manufacturer.

RFID (Radio Frequency Identification) ___ A tech-

SkySIM ___ G&Ds JavaTM-based SIM card

platform.

OHSAS 18001 ___ Occupational Health and Safety

nology for automatic, contactless identification

and object localization, as well as automated data
capture and storage.

MultiCodeTM ___ Magnetic feature for security

threads in banknotes.

enable communication between a SIM card and

NFC chip (e.g. in a cell phone).

OEM ___ Abbreviation for original equipment

Assessment Series; the most widely known and

important standard for occupational health and
safety management systems. The primary objectives are to reduce the number of accidents and
improve health in the workplace.

SkySIM CX ___ To optimize customer benefits,

Roaming ___ The ability of a cell phone subscrib-

OTA SIM management ___ Secure administration

RollingStar ___ New G&D security feature em-

and updating of all relevant SIM data over the air.

bedded into banknote paper. A security thread

around four millimeters wide creates the impression of a flowing wave when the banknote is tilted.

er to use networks other than their own to make

and receive calls, send and receive data, etc.

Mobile security card ___ A microSDTM card fea-

turing an integrated chip that gives a cell phone

all the functionality of a standard smartcard
(with no need for an additional reader).

developed by the German Federal Office for

Information Security (BSI) to process information in need of high protection in non-secure
networks.

Single Wire Protocoll (SWP) ___ Specification to

Mobile money ___ Refers to the idea of using a

cell phone or smartphone to make payments or

transfers. Frequently used to pay for digital items,
such as music downloads, but now also replacing
bank accounts in countries without a nationwide
banking infrastructure.

purchase or, in more specific terms, a cash register

or checkout.

card that can be inserted into a cell phone. Its

functions include identifying the cell phone user
to the mobile network.

G&D has developed a new operating system

based on JavaTM. Building on SkySIM,
SkySIM CX adds new technologies such as NFC,
LTE, and SCWS to the product portfolio, enabling
integration of the latest and even future solutions.
SkySIM CX can combine Near Field Communication, a contactless data transmission standard,
with SWP, SCWS, and USB high-speed interfaces.

134

Glossary

135

Smartcard ___ Also known as chip cards or integrated circuit cards (ICC), smartcards are special
plastic cards with an integrated chip containing
hardware logic, memory, or a microprocessor.

SmartInsightTM ___ Delivers information to mobile

network operators about the devices used on their

networks, including regular trend analysis of device
models, their capabilities, and usage patterns.

Telematics ___ The integrated use of telecommu-

UMTS ___ The Universal Mobile Telecommunica-

nications and information technology in Internet

applications and telephone and cell phone networks, for example. The most familiar application
area is vehicle telematics.

tions System is a third-generation (3G) cell phone

standard.

USB ___ Universal serial bus a system for connecting a computer to external devices.
Token ___ Device for user authentication that

SmartRoam ___ This service ensures that roaming subscribers are continuously attached to the
preferred available network and access technology, with the widest possible network coverage at the destination and without outages in
the roaming service.
TM

SmartTrust DPTM ___ Over-the-air (OTA) platform

can take the form of a USB token or smartcard,

for example.

USB token ___ Device for user authentication

containing a chip with smartcard functionality.
Optionally available with additional memory.

Touch&Travel ___ E-ticketing system initiated by

Vodafone and German railroad operator Deutsche

Bahn. This is based on NFC technology, with the
cell phone (and SIM card) acting as a ticket. G&D
provides SIM cards for this project.

from G&D for mobile device and SIM management, as well as value-added mobile services.

Trusted Service Management (TSM) ___ OTA

StarSign ___ G&D product line for secure, reli-

able e-identities and transactions with smartcards

and/or token forms. StarSign solutions enable
secure user authentication on IT networks and
the Internet.

provision of secure services, for instance for

payment or public transit, on an NFC-enabled
cell phone.

varifeye C2 ___ Optically variable security fea-

ture for human authentication of banknotes.

varifeye Magic ___ Window security element in

banknotes with micro-optical structures.

StarSign mobility token ___ Mobile, highly secure

authentication and storage medium for data and

applications.

STARSIM ___ G&D product line for GSM

networks.

STARSIM Atlas ___ Telecommunications card in

G&Ds STARSIM product line.

Some information in this glossary may stem from common Internet sources
such as Wikipedia.
This list is not intended to be exhaustive. A more comprehensive glossary
is available at www.gi-de.com.

136

G&D AROUND
THE WORLD

Legal Notice

Europe
_ Belgium
_ Czech Republic
_ Finland
_ France
_ Germany
_ Greece
_ Italy
_ Luxembourg
_ Russia
_ Slovakia
_ Spain
_ Sweden
_ Switzerland
_ Turkey
_ United Kingdom

Americas
_ Argentina
_ Brazil
_ Canada
_ Mexico
_ USA

Africa
_ Egypt
_ Nigeria
_ South Africa

Asia

Australia

_ China
_ India
_ Indonesia
_ Japan
_ Malaysia
_ Singapore
_ South Korea
_ UAE

Published by:
Giesecke & Devrient GmbH
Prinzregentenstrasse 159
P.O. Box 80 07 29
81607 Munich
Germany
Phone +49 (0) 89 41 19-0
Fax
+49 (0) 89 41 19-15 35
www.gi-de.com
Project management:
Corporate Communications
Phone +49 (0) 89 41 19-13 82
Fax
+49 (0) 89 41 19-12 08
Concept, editorial, design:
Cortent Kommunikation AG, Frankfurt/Main
thema communications ag, Frankfurt/Main
Photography:
Michael Dannenmann, Dsseldorf
Hubertus Hamm, Munich
Production:
Volkhardt Caruna Medien, Amorbach

By using PEFC-certified wood, we are supporting

better management of the worlds forests.

This annual report is also available in German.

Both versions can be found on the website: www.gi-de.com.
Giesecke & Devrient GmbH, 2011
Printed in Germany. All rights reserved.
No reproduction in any form without permission.

Headquartered in Munich, Giesecke & Devrient has over 60 subsidiaries, joint ventures,
and associated companies on every continent of the world.

VCM 05/11/E2.500 Art. Nr. 288 8056

ANNUAL REPORT 2010

Giesecke & Devrient GmbH

Prinzregentenstrasse 159
P.O. Box 80 07 29
81607 Munich
Germany
Phone +49 (0) 89 41 19-0
Fax +49 (0) 89 41 19-15 35
www.gi-de.com