Report of the Non-executive Board members

Board meetings and activities during 2009

Meetings

The Board held nine meetings: five in person and four by conference call. Each of the Board members attended the majority of the meetings.

The Board addressed in different meetings the following main subjects:

The CEO was not present and did not take part in the discussion or decision-making by the Board at the part of meetings in which his remuneration and performance was discussed. The Board members met regularly in the absence of the CEO and of the senior management.

Performance evaluation

The Board evaluated the performance of the Board, of the committees and of its individual members, including the CEO. The Board followed-up on the 2008 evaluation and noted the implementation of several suggestions, including the CEO participating in the board of a major international technology company. Other items discussed included the composition and competencies of the Board, the setup and content of meetings and meeting materials. Also the relationship with the senior management was discussed. Suggestions for improvement either have been fully implemented, or will be implemented as it becomes feasible to do so.

Training

The Board made a visit to one of its factories for training on Gemalto’s products and held meetings with managers to further familiarize themselves with the business and the senior management team.

Board composition

For information on the composition of the Board, please refer to ‘Composition of the Board’. For information on the individual Board members, please refer to ‘The Board and the management’.

Independence

The Board currently consists of ten Board members: nine Non-executive Board members and one Executive Board member, the CEO. The Board considers that, as of May 20, 2009 (with the appointment of Mr. B. Alexander) five Non-executive Board members are independent, and as of May 28, 2009, seven Non-executive Board members are independent, within the meaning of best practice provision III.2.2; thus the Company complies with best practice provision III.8.4.
As of May 28, 2009, the following Non-executive Board members are considered non-independent:

Until May 28, 2009, Mr. D. Bonderman, Founding Partner of Texas Pacific Group (TPG), and Mr. G. Fink, a principal of TPG, were considered non-independent, as TPG owned more than 10% of Gemalto’s share capital. On May 28, 2009, TPG´s shareholding decreased from 12.24% to 6.53%, as a consequence of which, as of that date, Mr. D. Bonderman and Mr. G. Fink are considered independent.

Report of the Audit committee

The committee consists of four Non-executive Board members, listed in ‘The Board and the management’. During 2009, the committee held eight meetings. The CEO, CFO, Chief Accounting Officer, the Internal Audit Director and the external auditors were invited to attend the committee meetings. The committee also met on at least one occasion privately with the CFO, the Internal Audit Director, the external auditors and the General Counsel (without other members of management being present).

During 2009, the committee reviewed the 2008 annual financial statements and the related audit report from the external auditors. The committee also reviewed the condensed interim financial statements as of June 30, 2009 and the related report by the external auditors, as well as the announcements of the 2009 quarterly revenue figures. In connection with these reviews, the committee reviewed the Company’s accounting policies and compliance with accounting standards.

During the year, the committee received and considered reports on the Company’s risk management system and key internal financial control policies and procedures.

With regard to the internal audit, the committee reviewed the revised internal audit charter, the internal audit plan for 2010 and its coverage in relation to the scope of external audit. It also reviewed the effectiveness and independence of the internal audit process. The committee received reports on the work of the internal audit department and considered their significant findings and recommendations.

With regard to the external audit, the committee reviewed the independent auditor’s audit plan for the financial year ended December 31, 2009. The committee assessed the performance and independence of the auditors and considered steps taken to ensure their independence, including reviewing the fees paid for non-audit services. For an overview of the aggregate fees billed by the external auditors for professional services rendered for the fiscal year 2009, please refer to note 11 of the company financial statements.

The committee carried out the review and assessment of the effectiveness of internal controls. This included a review of the tax and treasury risks, and the information and communication technology risks. The committee reviewed the Company’s insurance coverage program. The committee reviewed the code of ethics and the anti-fraud policy. The committee also reviewed the effectiveness of the whistle-blowing arrangements, received reports on whistle-blowing, significant claims and disputes, including those resulting in litigation, and related party transactions.

Report of the Compensation committee

The committee consists of three Non-executive Board members, listed in ‘The Board and the management’. During 2009, the committee held six meetings. In these meetings, the committee reviewed the 2008 achievements and associated bonus payments for the CEO and senior management, as well as the 2009 salary increases, objectives and bonus levels. The remuneration for the CEO was determined within the limits of the Remuneration Policy for the CEO. The committee prepared the 2009 Remuneration Report, which report can be found in ‘2009 Remuneration report of the Board’.

The committee made recommendations to the Board on the grant of restricted share units to eligible employees, as well as on the performance conditions relating to such share incentive. Details of the grant of restricted share units to the CEO are disclosed in ‘Compensation of the CEO for the financial year 2009’.

The committee also recommended to the Board that eligible employees be offered the opportunity to purchase shares in the Company at a discount of 15% to the prevailing market price within the GESPP, as described in more detail in ‘Global Employee Share Purchase Plan’. As part of their duties, the committee requested external advice from Mercer, an independent internationally recognized firm of compensation specialists, which firm does not provide advice to the CEO on senior management compensation.

Report of the Nomination and Governance committee

The committee consists of three Non-executive Board members, listed in ‘The Board and the management’. During 2009, the committee held five meetings. The committee advised the Board in 2009 on the appointment and reappointment of the following Non-executive Board members: Messrs. B. Alexander, K. Atkinson, D. Bonderman, J. Fritz and J. Ormerod, and reviewed potential candidates to fill future vacancies on the Board, including the proposal to apppoint Mr. Ph. Alfroid as Non-executive Board member. The committee advised the Board on a new reappointment schedule following the (re-)appointment of Board members. The committee monitored the development of senior management and reviewed the succession plan process for the CEO and the senior management.

The committee considered the amendments to the Dutch corporate governance code applicable as of January 1, 2009, coordinated the results of the review performed by each committee and discussed further steps that the Company could take to improve its corporate governance. The committee reviewed the Annual Report, including a chapter on sustainability, and considered the agenda for the 2009 AGM. The committee reviewed the code of ethics. The committee prepared and coordinated with the Chairman of the Board the annual self-assessment of the Board and of the committees, which took place in the second half year of 2009.

As of May 28, 2009, the Company complies with the recommendation of best practice provision III.5.1, as two of the three members of the committee are considered independent within the meaning of best practice provision III.2.2. Prior to this date, only one member of the committee was considered independent. The Company considers that this deviation was justified by the specific circumstances created by the sudden demise of Mr. J. de Wit on May 28, 2008.

Report of the Strategy and M&A committee

The committee consists of five Non-executive Board members, listed in ‘The Board and the management’. During 2009, the committee held six meetings.

The committee advised and submitted recommendations to the Board on the Board’s responsibilities in overseeing and reviewing Gemalto’s M&A and divestiture activities, and Gemalto’s strategic plans and their implementation. The committee reviewed certain investment and divestiture proposals, including the acquisitions of O3SiS, NamITech South Africa and Trusted Logic, Xiring and a majority equity investment into Serverside.

Financial statements 2009

The financial statements of the Company for 2009, as presented by the Board, have been audited by PricewaterhouseCoopers Accountants N.V., the Company’s external auditors. Please refer to the ‘Auditor’s report’, for PricewaterhouseCoopers’ report. All individual Board members have signed the financial statements. The Board proposes that the financial statements for the year 2009 be adopted by the AGM of May 19, 2010 and that the other resolutions proposed to the shareholders be approved.

Finally, we would like to express our thanks to the CEO, the senior management and all employees of the Group for their continued dedication and contribution during the past twelve months, making 2009 a successful year for Gemalto.

The Non-executive Board members

Amsterdam, March 2, 2010