KUDELSKI GROUP Annual Report 2010 Key Figures

KUDELSKI GROUP Annual report 2010 Key figures

Solid 2010 resultS

Group total revenues and other operating income rose by 7.6% at constant currencies, driven by strong organic growth in the Digital TV division, posting a sales growth of 6.8% at constant currencies, and by a one-off positive contribution from government grants. These effects contrast with weaker growth rates in the Middleware and Advertising and Public Access segments, posting constant currency growth of 0.5% and 2.1% respectively.

In a challenging environment characterized by plummeting exchange rates against the CHF, with the EUR average rate down 8.6% and year-end rate down 15.8%, the USD average rate down 4.2% and the year-end rate down 9.2%, Kudelski managed to deliver a robust operating result, with an operating income before depreciation and amortization of CHF 173.0 million, representing a best ever mark for the Group, a CHF 110.0 million operating income for the full year, compared to CHF 73.3 million in 2009, an increase of 50%.

Key figures 2010

In million CHF 2010 2009 Variation %

Total Revenues & OOI 1 069.3 1 060.8 0.8% OIBDA 1) 173.0 137.8 25.5% Operating income 110.0 73.3 50.0% Net Income / (loss) 66.7 51.1 30.5%

1) OIBDA : operating income before interest, taxes, depreciation and amortization

Revenue breakdown by sector 1000 800 In CHF ’000 2010 600 Digital TV 684 477 400 Middleware & Advertising 126 071 Public Access 224 624 200 Total 1 035 172 0

Employee breakdown By activity by region 100 80 60 Digital TV * 58% Europe 70% 40 Middleware & Advertising 20% Americas 16% Public Access 22% Asia & Oceania 14% 20 Total 100% Total 100% 0 * Includes Nagra Audio employees (23) Total employees at 31.12.2010 : 3068 Highlights

Solid performance of the Group Increase of 50% of operating in a difficult environment income over previous year

Development strategy focusing Profitability improvement on emerging markets program launched including cost reduction initiatives for all sectors

Renovation of the Middleware & Success in Over-The-Top and Cable Advertising activity US sectors

Kudelski technologies serving more than 120 major operators worldwide and securing content delivered to more than 144 million active smart cards/devices Group profile

Digital television Public access audio

Digital television is the Kudelski Group’s Public access designs both hardware- Audio is the founding activity of the Ku- core business. The company is a world and software-based solutions to globally delski Group, which, 60 years ago, gave leader in this sector, with security and manage access of people and vehicles to birth to the Nagra Brand, legendary for its access control solutions providing an sites and installations such as car parks, professional recording equipment. This optimal level of protection throughout the ski lifts, stadiums, arenas and amuse- sector now also includes a range of high- content distribution chain, from creation ment parks. The division also provides end Hi-Fi devices designed for music to consumption. The Group’s innova- a multifunction solution designed for lovers in search of perfection. tions are continuously contributing to the university campuses, business premises evolution of the digital television ecosys- and hospitals. tem, enabling operators to extend their multimedia offering.

DIGITAL TELEVISION

Public Access Audio TABLE OF CONTENTS

01 Chairman's letter P. 02

02 Financial review P. 04

03 Strategic review P. 08

04 Digital Television P. 14

05 Public Access P. 24

06 Nagra Audio p. 28

07 Corporate Governance p. 32

08 Appendices P. 54

DIGITAL TV public AccEsS Nagra Audio 01 Chairman's letter

The Kudelski Group experienced a IT over the last decade. The awards we cally designed for these markets so as mixed year in 2010. Despite sovereign have won for our innovations testify to to maximize medium- and long-term debt crises in several eurozone coun- our strength in this new, interconnected growth. This unit has been up and run- tries and a spectacular rise in the Swiss environment. To cite only two examples, ning since late 2010. franc, which contributed to a particularly the Kudelski Group won awards at IBC unstable operating environment, we 2010 and TV Innovation for our Persistent – The geographical footprint of our delivered strong financial results. Rights Management and Next User Expe- teams has been adjusted, with the rience extended security solutions. creation of a new R&D unit in India, as Total revenues and other operating well as growth in our China- and India- income for the reporting period stood Keeping pace with the new “super based teams. This will lower unit costs, at CHF 1.069 billion, with operating digital ecosystem” that convergence has allowing us to be more competitive in income at CHF 110 million and net produced will require intense R&D efforts emerging markets. income at CHF 66.7 million. going forward –and these are efforts we intend to make. – We have rolled out a series of cost- The changeover to the service-based cutting measures designed to both business model implemented over the However, convergence is not the only compensate for unfavorable currency previous two years paid off, strengthen- potential revenue driver for the Group in movements and bring our cost struc- ing our overall position. Our installed the years ahead. Other opportunities are tures into line with revenue streams. 2 based of service-mode cards and out there, for example the accelerating Concretely, our more expensive modules grew by 15% in 2010 to a total growth trend in emerging markets, even service providers are being systemati- of 69.4 million units, ensuring a strong, as developed economies are showing cally replaced by our India- and China- stable and recurring revenue base for weak growth. based teams. the Group going forward. We have been active internationally for – We are undertaking a comprehensive The 2010 reporting period also saw the decades. Historically, our main revenue review of our activities. In line with full integration of OpenTV within the streams have come from developed the Group’s medium- and long-term Group, as well as the strengthening of countries, but this situation is now funda- strategy, some current areas of opera- our middleware and user interface R&D mentally changing. Emerging markets are tion could be merged, sold, or dropped, teams. As expected, the development playing an increasingly important role in while other areas will be strengthened efforts currently underway to bring the the global economy, as is illustrated by the and new areas developed. The Group next generations of interactive solutions fact that China has become the world’s will increasingly resort to strategic to market are proving to be substantial. second-largest economy. partnerships in order to round out its However, this area should return to prof- offering in areas that are non-core but itability in 2012. Brazil is another example of this paradigm nonetheless complementary to our shift toward emerging markets. We grew businesses. With regard to our overall strategy, we our revenues in Brazil by 100% in 2010, experienced the first concrete examples and that country is now one of our top In addition, we will take a more tar- of the anticipated convergence between seven markets. geted approach to innovation. Here, digital TV, telecoms and IT in 2010. the idea will be to sharpen the focus on Convergence is often seen as a risk for The trend observed during the second half the Group’s medium- and long-term established operators, but it also repre- of 2010 has continued into 2011, and this potential, with an eye to keeping R&D sents an extraordinary opportunity to de- has led Management to adopt a series cost growth below top-line growth over velop new generations of solutions and of initiatives designed to boost revenues the medium term. This will result in a open up new horizons for consumers. and enhance profitability. The following structural improvement in our profitability In a convergence-driven environment, measures have already been initiated: and enhance our competitive position in quality and simplicity count. Here, we feel emerging markets. we are in a strong position, thanks to the – A dedicated emerging-markets team experience accumulated by our various has been created in order to leverage There will be many challenges in 2011. teams working in digital TV, telecoms and the growth potential of these regions. We will have to gain pace in emerging We intend to offer solutions specifi- markets and counter the impact of the André Kudelski Kudelski Group CHAIRMAN AND CHIEF EXECUTIVE OFFICER annuAl REport 2010 OF THE KUDELSKI GROUP

rise in the Swiss franc. We are positioning the last few decades: the Kudelski Group shareholders at our upcoming annual ourselves to meet these challenges by has proved strong and durable through general meeting. growing revenues while reducing costs. changing environments, yet flexible enough to meet new challenges suc- On behalf of the Board, I would like to Finally, 2011 has a certain symbolic val- cessfully. thank our clients, our teams, and you, our ue at Kudelski Group, since the company shareholders, for your continuing trust. It was founded 60 years ago this year. For Based on our 2010 financials and our is this trust that is our strongest source of six decades, innovation has been at the medium-term outlook, the Board of motivation. heart of our corporate culture. It is this Directors will propose a dividend of CHF very innovation that has allowed us to 0.30 per bearer share and CHF 0.03 reinvent the company several times over per registered share for approval by the André Kudelski 02 FINANCIAL REVIEW

In a difficult environment charac- Group total revenues and other ope- Other operating expenses rose by CHF terized by plummeting exchange rating income rose by 7.6% in local 6.3 million from 2009, representing a rates against the CHF, with the currency, driven by strong organic 2.8% increase. Incremental costs were EUR average rate down 8.6% and growth in the Digital TV division, posting generated in the first half, when other year-end rate down 15.8%, the a sales growth of 6.8% in local currency, operating expenses rose by CHF 6.6 USD average rate down 4.2% and and by a one-off positive contribution million. The main driver of this increase the year-end rate down 9.2%, from government grants. These effects relates to legal and consultancy costs in- Kudelski managed to deliver a contrast with weaker growth rates in the creased by 5.7 million compared to 2009 robust operating result, with an Middleware and Advertising and Public including a new CHF 7.5 million litigation operating income before depre- Access segments, posting constant provision for legal fees and litigations ciation and amortization of CHF currency growth of 0.5% and 2.1% related to a suit filed by Echostaret al 173.0 million, representing a respectively. (including Nagrastar) against NDS. best ever mark for the Group and a strong operating cash flow at Solid 2010 group profitability The Group operating income before CHF 149.1 million. Reported total revenues and other ope- depreciation and amortization amounts rating income for the year rose by CHF to CHF 173.0 million, representing a 8.5 million to reach CHF 1 069.3 million. CHF 35.2 million improvement from the The “Margin after cost of material” (a pro- previous year. Depreciation, amortiza- 4 forma non-IFRS item) rose by CHF 69.9 tion and impairments were at CHF 63.0 million to CHF 809.1 million. Relative to million. This resulted in a CHF 110.0 total revenues, this translates to a 6% in- million operating income for the full year, crease to 75.7%, reflecting a second half compared to CHF 73.3 million in 2009, margin materially higher than in previous an increase of 50%. years. The Group’s ability to defend prices in a difficult environment and the benefi- At constant currencies, operating cial impact of supply chain improvements margins for 2010 were CHF 22 million were instrumental in allowing the Group higher at CHF 132 million. Adjusted to expand its gross margin in spite of the operating income, net of the aforemen- challenging macroeconomic environ- tioned one-off other operating income ment. Further, 2010 margins benefit from and litigation provision amounts to CHF 29.8 million of R&D government CHF 116 million, representing a 58.3% grants including a one-off entitlement increase from 2009. accrued from work performed in previous years and fulfilling Group revenue reco- Interest expenses of CHF 16.7 million gnition criteria in 2010. include, in addition to the charges related to the outstanding convertible bond, the Personnel expenses rose by CHF 28.4 interest charges for the loans - now fully million from 2009, representing a 7.6% refunded - aimed at financing the full growth. This increase took place mainly acquisition of OpenTV. The CHF 16.7 in the first half, when personnel expenses million net finance expenses are mainly rose by CHF 20.5 million. Following the driven by a CHF 17.5 million net foreign full acquisition of OpenTV, the Group has exchange transaction loss, while the significantly strengthened its middleware share of results of associates includes a operations through new hires and CHF 3.1 million gain related to the sale transfers from the DigitalTV segment of our 28% stake in Ticketcorner. Overall, resulting in an increase of close to 150 the Group generated CHF 66.7 million Full Time Equivalents of the Middleware net income for the full year, an impro- and Advertising headcount. In 2010, total vement of CHF 15.6 million from the Group headcount expanded by 3.9% to previous year. 3’068 employees. financiAL REVIEW Kudelski Group annuAl REport 2010

Digital TV business driven by strong Group’s Brazilian revenues more than first half doubled to reach CHF 72.7 million, with A very strong first half with a constant close to 90% of these sales generated in currency growth of over 20% drove Di- Digital TV. gital TV full year results. For the full year, reported revenues were substantially Finally, Asian Digital TV sales were subs- stable, translating to a 6.8% revenue lift tantially stable year-on-year as well as in in constant currency. both half-years, with the core conditional access business posting solid growth Following the sustained double digit rates and Abilis’ CMOS RF Modulators growth of the last reporting periods, product line with a shrinking second half European Digital TV sales in constant top line, following a strong first half. currency experienced a slow down with a 6.4% rise for the full year. First half repor- Digital TV operating income for the year ted growth was at 20.8% while second climbed from CHF 67.5 million to CHF half sales were lower than in the first 129.5 million, representing a 91.8% half year. The steep decline of the Euro increase and an operating margin of in the second half significantly affected 18.9%. reported sales. Moreover, seasonality 5 patterns reversed compared to previous Overall, Digital TV profitability was ahead years, as several customers delivered an of target, as the core conditional access exceptionally strong first half. continued to deliver a strong performance and segment results benefitted In the first half, the Group posted from the improved profitability of new material revenues from the swap out of business areas. In particular, year-on- the Virgin Media installed base of smart year profitability of SmarDTV’s Common cards. The Group Italian business deli- Interface business developed favorably. vered a particularly strong performance Other operating income materially contri- in the first half, benefitting from the buted to segment profitability. Finally, continued growth of Mediaset Premium Quative’s mission was recast to extend cards as well as sustained sales of the existing Service Delivery Platform SmarDTV Common Interface modules. business into the middleware space: In the second half, these sales materially hence, Quative results are now included slowed down compared to the first half. in the Middleware and Advertising The Spanish digital terrestrial business, segment. a material contributor to 2009 sales as retail distribution channels were filled On the other hand, the aforementio- to support the launch of the new digital ned European slowdown resulted in a terrestrial operations, generated mate- shrinking volume of cards delivered in rially lower volumes in 2010. Finally, a the second half as compared to the first mixed picture characterized the Eastern half. The contraction of the Italian and European landscape, with some opera- Spanish terrestrial markets affected tors suffering from a tougher economic second-half profits from the Group’s environment in the second half, resulting digital terrestrial operations and from the in a slower subscriber acquisition. Common Interface business. Further, the Group’s semiconductor business was Digital TV revenue in the Americas rose down from the first to the second half 12.1% in local currencies, with the Bra- and mobile TV equally consolidated its zilian market representing the strongest top line contribution following a success- growth driver. At a consolidated level, the ful first half. financiAL REVIEW Kudelski Group annuAl REport 2010

Subdued Public Access growth particularly well driven, in particular, by and profitability the strong performance of Brazilian In a difficult environment, Public Access operators. delivered a 2.1% revenue growth in constant currency. European revenues Balance sheet and cash flow declined by 0.8% in constant currency, Total non-current assets decreased by with Italy and Germany as the main CHF 36.4 million to CHF 506.8 million. underperforming markets. Public Access, The item mainly driving such decrease on the other hand, continued to extend was Financial assets and other non- its extra-European business, in particular current assets declining from CHF 97.0 with a 37.9% constant currency growth million to CHF 72.5 million, as the Group in the Americas. Following a strong sold most marketable securities and 2009, driven in particular by the access continued to amortize deferred contract business from the World Cup in South costs for assets provided to Digital TV Africa, Asia Pacific and Africa consolida- customers in a service model. ted 2010 sales decreased by 9.2%. Total current assets decreased by CHF A lower gross margin and a continued 116.4 million to CHF 598.6 million. 6 growth of the operating cost base resul- Inventories were substantially stable, ted in a Public Access Operating Income posting a CHF 3.4 million increase to decline of CHF 8.0 million to CHF 8.8 CHF 85.7 million, mainly due the seg- million. mentation of customized chip platforms for conditional access customers. Trade Middleware & Advertising turnaround accounts receivable continued to im- With the full acquisition of OpenTV prove, with a reduction of CHF 46.6 mil- completed at the beginning of 2010, the lion to CHF 245.5 million. Past due Trade Group launched a turnaround plan, with accounts receivable improved by CHF a reconfiguration of the product road- 31.1 million to reach CHF 82.2 million. map representing the key milestone of the program. This program resulted in a Other current assets declined by CHF ramp-up of R&D investments aimed at 26.6 million, with the reduction driven, accelerating the deployment of the next among other factors, by the repayment generation Group middleware solution. of an outstanding loan to the former With a material headcount increase, this associate Ticketcorner early in the year. ramp-up mainly took place in the first The sale of Ticketcorner and the loan half year, resulting in an operating loss of repayment resulted in a total cash-in of CHF 6.0 million for the first half. Further, over CHF 30 million. The sale of most the recognition of one-off government outstanding marketable securities grants supported segment profitability. reduced Short-term financial assets by In the second half of 2010, the operating CHF 35.6 million to CHF 2.1 million. loss was reduced to CHF 0.4 million, Cash and cash equivalents at the end of while the development of the next gene- 2010 were at CHF 199.0 million. ration solutions continued to progress as planned. Total equity decreased by CHF 5.0 million, reflecting, among others, the effect Against this backdrop, the substantial top of the squeeze out of OpenTV minority line stability, with a 0.5% year-on-year interests booked against equity. Total growth in constant currency represented liabilities decreased by CHF 147.8 million a satisfactory result. Similarly to Digi- as the Group paid back most of the loans tal TV, American revenues developed taken up for the acquisition of OpenTV. In 2010, the Group generated a strong This unit will serve both the Digital TV cash flow from operating activities of and the Middleware and Advertising CHF 149.1 million, representing an in- segments. The Group expects to start crease of CHF 13.9 million compared to reaping economic benefits from these 2009. The Group used CHF 41.0 million initiatives in 2012. Headcount in India of cash for investing activities, consisting will be expected to grow significantly as of a net CHF 62.8 million inflow from the transfers of external resources will be divestment of financial assets, including effected. the repayment of the aforementioned Ticketcorner loan, a CHF 32.0 million net In Middleware and Advertising, the outflow for acquisitions (mainly related Group started restructuring its roadmap to the squeeze out of OpenTV minority as it acquired full control of OpenTV in interests) and net capital expenditures of early 2010. As originally planned, the CHF 71.8 million. Finally, a CHF 108.7 initial outcome of this effort is expec- million cash flow was used for financing ted in 2012. Furthermore, the Group activities, mainly consisting of the reim- announced that it will organize its bursement of bank loans and of a CHF advertising operations in a joint entity 16.0 million dividend payment. with Korean satellite operator SkyLife. This entity will develop a groundbreaking 7 Outlook advanced advertising platform and Currency headwind is likely to continue initially deploy this solution in the Korean affecting Group total revenues and ope- market. rating income. Average USD and EUR exchange rates in for the first 7 weeks of Finally, the Group launched a targeted 2011 lost a further 7% to 9% compared cost reduction program in the Public to average 2010 rates. Access segment. This program is aimed at reducing operating expenses effective If the current exchange rate environment this year. persists for the remainder of the year, the Group would report declining total revenues in 2011. Operating profits would also be further affected by a two-digit million amount as compared to 2010.

To contain the negative macroeconomic developments, the Group has launched a set of profitability improvement initiatives in each segment.

In the Digital TV segment, the Group is strengthening its focus on emerging markets. To this end, it set up a sales unit specifically targeting these markets with customized offers. Further, the Group is systematically replacing external development and engineering resources in high cost locations with its own resources in lower cost locations. To this end, it set up a new engineering unit in India, already staffed with 35 employees. 03 STRATEGIC OVERVIEW

In hardly more than ten years, Digital television Kudelski Group's product development the Kudelski Group has under- strategy. For several years now, we have gone fundamental change, with Across the ecosystem proactively sought to develop cost-ef- revenues rising by a factor of The Kudelski Group operates in the fective solutions, designing our product ten to reach more than one bil- digital television sector, a market that is and service offerings in line with market lion Swiss francs in 2010. While constantly evolving and in which frontiers requirements and operators needs. initially, the Group's Television are being pushed back. Players from One example is the way we have deve- business consisted essentially of many different sectors are now involved loped differentiated solutions for mature designing content security and in Digital TV. They include TV opera- and emerging markets. This illustrates encryption systems for pay-TV tors as well as telecoms and Internet our commitment to tailoring our solutions operators, the Group has become Service Providers, to name just a few. to context, and more fundamentally, to a truly global player today as Increasingly, these market participants ensuring that each of our client opera- digital convergence becomes a are combining their network and service tors receives the best possible solution reality across all sectors. offerings in order to provide end-users for their particular environment and with an extended digital experience. requirements, both in terms of technical The aim is to provide a digital ecosystem performance and return on investment. in which users, no matter where they are and what they are doing, can move Infrastructures have become more 8 seamlessly between various devices – complex with the development of from TV to PC to game console to mobile multimedia, multi-content and multi-plat- phone to tablet – with access to content form services. To keep in step, we have in an intuitive way. developed a range of extremely flexible system architectures that can be easily This trend toward multi-screen conver- integrated with existing configurations. gence is a technological challenge on Our solutions can be quickly implemen- several levels. Operators need to be able ted and are simple to manage, while to protect the content assets that drive enabling operators to offer services their revenues. In addition, platforms based on various business models – a combining different types of networks key decision-driver when choosing new (satellite, terrestrial, cable, telecom, and equipment. broadband internet) must be integrated. Finally, providing a consistent and user- Leverage strong growth in emerging friendly user interface is crucial to enable markets consumers to access content easily The Kudelski Group already enjoys as they navigate today’s increasingly strong presence in the mature markets of content-rich digital landscape. Europe and North America. Here, many opportunities still await, driven by digital The Kudelski Group provides innovative convergence, technological advances and responses to these technological chal- changing lifestyles. One such opportunity lenges by delivering solutions, technolo- is the shift from analog to digital television gies and federated services that address and from standard to high definition televi- market needs across the entire digital sion. These transitions have the potential ecosystem. to drive strong organic growth for the Group as digital enables pay-TV services Focusing on operators and markets to reach new mass markets and generate Of course, technological advances and high-volume business. The advent of innovative breakthroughs are of little digital is also leading to the mass deve- use unless they actually help operators lopment of certain markets that were not be more competitive and grow their initially considered as pay-TV target mar- revenues. This has been driving the kets, such as digital terrestrial television. STRATEGIC OVERVIEW Kudelski Group annuAl REport 2010

Additionally, emerging markets, parti- This approach has proven relevant, par- cularly in Asia and Latin America, are a ticularly in the context of today's funda- potential growth driver for the Group. mental market changes, and has enabled We have been building our presence in us to consolidate our role as market those regions for years, and now have a driver and shaper in a highly competitive network of subsidiaries and a constantly industry. growing sales force. In 2009 we opened an R&D center in Beijing (China). The Helping TV operators meet the broadband center’s 300 employees focus on tailo- challenge ring our solution offering to the specific The digital TV market has recently expe- requirements of Asian markets, bringing rienced profound structural change, and out solutions and services that are more this has revolutionized the way in which closely attuned to local needs, both digital content and services are provi- technologically and economically. This ded. The transformation of the digital TV approach is paying off, as shown by our ecosystem has been driven by several recent contract wins with Asian ope- factors: rators and our overall success in these markets. − hybrid broadband-broadcast networks are a fact and OTT (Over-The-Top) is 9 Keeping the focus on innovation coming of age along with it; Innovation has been at the heart of − multi-screen digital media services the Kudelski Group’s success for 60 are required to respond to consumers' years. We make a major commitment to emerging digital lifestyle; research and development every year, − the user experience defines or even with almost one quarter of our revenues becomes the service and gradually earmarked for R&D. In absolute terms, transforms the business model alto- we have invested over one billion Swiss gether. francs in R&D over the last five years.

Kudelski's solutions allow access to content on various screens STRATEGIC OVERVIEW Kudelski Group annuAl REport 2010

These changes have significant implica- Offering a unified and consistent tions. Hybrid network have for example user experience made possible so-called OTT transmis- In a market where networks and de- sions. OTT is a widely adopted term used vices interconnect and where content by the digital industry to characterize is consumed over various screens, it is video services that make use of the particularly important for users to move open internet to transport content to end across devices totally seamlessly. users. It refers to the fact that the service provider is using a transport network that In view of this requirement, The Kudelski they do not own, hence the name "Over- Group has placed a special focus on de- The-Top". The availability of broadband veloping a new generation user interface and the advances in internet delivery through its affiliate OpenTV, specialized technology have gradually transformed a in middleware solutions. OpenTV has phenomenon that was initially limited to launched a user interface based on an the PC world into a new reality. Today, the innovative design and navigation philo- OTT content delivery is feasible on the sophy that can be used as is or reskinned widest spectrum of devices. Connected in line with an operator's brand identity. TVs, game consoles, tablets, and mobile 10 phones are all new platforms that can Advanced advertising solutions be used by consumers to access video Middleware is becoming an increasingly content. important component of the digital TV ecosystem. Within the operating system, Advanced advertising offers a myriad of OTT falls logically into the Kudelski the middleware powers the creation and new possibilities Group's product strategy based on its the management of innovative interac- Federated Services Architecture. We tive features that take the television are ideally positioned as the partner of experience far beyond simply watching choice for our customers to lead in this programs. These features include for new playground. We are able to provide example video on demand, access to them with the tools to respond to the internet content, program recommenda- new trends and to consumers' needs for tions via social networks, etc. Middleware finding any type of content from a one- also enables the rollout of advanced stop shop, seamlessly, and regardless of advertising solutions which contribute to the device types and the conduits being the user experience. used. In order to gain additional expertise in the field of middleware and advanced advertising and to have a better control of the development of this strategic element of the digital TV value chain, the Kudelski Group finalized the acquisition of OpenTV in March 2010, following the acquisition of a majority stake in this company in 2007. While interactivity allows new forms of The Kudelski Group’s philosophy when advertising to emerge, it also enables it comes to digital content protection is consumers to control their viewing expe- based on the principle that each context rience including, for example, skipping requires a specific security solution. The over content – in particular with DVR Kudelski Group offers three families of time-shifting capabilities and VOD. This security solutions which enable opera- means that advertising has to be relevant tors to adopt the security strategy that is and interesting for consumers, otherwise ideally suited to their particular needs: it will simply get skipped. The Kudelski Group offers advanced solutions for the − smartcard-based security for broad- delivery and management of addres- cast networks; sable, targeted and interactive adver- − embedded security solutions for tising, which is destined to become a always-on networks; major revenue stream for operators. − software security for open devices, sometimes with the use of a remo- Differentiated security solutions vable dongle. As user interfaces move toward an increasingly unified user experience, The Kudelski Group offers the broadest security solutions are heading in the security solution in the industry. 11 opposite direction, toward diversity, with technologies that take into account the special security requirements of each particular device and network type.

EMBEDDED SECURITY OPEN DEVICES

SMART CARD BROADCAST Conditional access USB + NAGRA Media (CAS ELK) with smartcard PLAYER INTERMITTENT RETURN PATH Embedded NAGRA Media ALWAYS-ON CAS (ELK) PLAYER STRATEGIC OVERVIEW Kudelski Group annuAl REport 2010

mers find our access solutions simple to Public Access use despite the complex state-of-the-art technology inside. Endless possibilities for users Public Access – the Kudelski Group's These solutions can be tailored to a given second activity sector – focuses on desi- marketing strategy. Our objective is to gning systems that control the access of provide operators with powerful mana- people and vehicles to facilities and sites. gement tools that allow them to launch These activities account for 22% of the the most attractive combination of ser- Group’s revenues. vices, increase the number of consumers using those services and win the loyalty Public Access markets both hardware- of their customers. and software-based solutions to manage access to car parks, ski lifts, stadiums Our solutions also allows operators to and amusement parks. It also offers mul- centrally manage multi-site systems tifunction access management solutions from a secure network hub. Global ac- designed for schools, business premises cess management solutions, combining and hospitals. the system platform with management 12 services, have become one of the core As in the Digital TV sector, digital tech- offerings of Nagra Public Access. This nologies have opened up a large array of division also offers hosting and main- new possibilities enlarging the range of tenance services enabling operators to features available to users. securely host their platform and data as well as to perform maintenance and For example, it is now possible for consu- upgrades on their system remotely. This mers to buy ski passes and book parking solution keeps costs down, providing spots straight from their smartphone, smaller operators with the opportunity to using a dedicated application. People implement access solutions that might with electric cars can now use a mobile- prove difficult to finance otherwise. phone application to access battery charging stations with their parking Consulting and service activities are also ticket. Integrated parking access mana- a key component of our Public Access gement systems can also automatically offering. This has taken on an even grea- load the vehicle’s license-plate number. ter value recently, given the high level of expertise required in an increasingly Powerful tools for operators complex technological environment. Public Access designs solutions that are in step with today’s digital lifestyle. Continuing with international expansion They are ideally suited to a world in which While Public Access continues to grow technologies work interdependently in its traditional markets, it is pursuing to bring more freedom and mobility to a very active strategy of international consumers in the course of their daily expansion. Business trends in 2010 lives. confirmed the success of this strategy with contract wins on five continents, in- Here, our highly intuitive product designs cluding two major new deals in emerging play a crucial role in ensuring that consu- markets. Six stadiums in South Africa were equipped with Nagra Public Access solutions for the World Cup, and six cric- ket stadiums in India were fitted out with them to become part of the IP-based access systems. multimedia production process.

Geographical diversification contributes The devices range in size from compact to a better balance of revenue streams, to hand-held and, like previous Nagra reduces the potential impact of market- products over the years, are considered specific risk and alleviates foreign ex- market leaders in terms of sound quality change rate volatility. and durability. The recorder product line also includes devices dedicated to security applications. A micro-recorder small Nagra Audio enough to fit within a case the size of a credit card was launched in 2010 and Audio excellence met with immediate success. The Kudelski Group has been active in the audio segment since 1951: 2011 The new Nagra SD handheld recorder will mark the 60th anniversary of the is currently in production and is slated invention of the portable, self-contained for launch in 2011. This device replaces Nagra recorder that revolutionized the the bestselling Nagra ARES-M. Its even sound engineering industry. more attractive pricing should pave the 13 way for success. With the strong growth of the Group’s other business activities, Audio revenues The Hi-Fi sector is focusing on progres- now represent a relatively small propor- sively rounding out its product offering tion of overall Group sales. But Nagra with all the components needed for a Audio’s impact on the Nagra brand trans- 100% Nagra sound system. The target cends mere numbers. This legendary demographic is demanding audiophiles line of products is the Group's historical who are looking for the ultimate in per- business line and represents the founda- formance and prefer a timeless – rather tion of Nagra's brand identity. than a trend-based – approach to Hi-Fi product design. Two product lines The Nagra Audio division has two main From a business perspective, the addi- product lines: professional recorders tion of the Hi-Fi range has proven to be and the more recent (1995) Hi-Fi range an effective revenue-stream diversifier: dedicated to high-end equipment. Both it now accounts for almost half of the ranges are designed by the same pro- division’s sales. duct development teams, with distinctive sales and marketing channels.

Nagra’s recorders have been digital for the last twenty years and feature the most advanced technology enabling 04 DIGITAL TELEVISION

2010 was a good year for our Strengthening our market presence in Israel subscribe to HOT's multimedia Digital Television Division services. despite a difficult economic In 2010, Nagra, the Digital TV division environment. We secured of the Kudelski Group, continued to Numericable, France's leading cable new contracts and strengthe- strengthen its international footprint in operator serving more than 3 million ned our presence in markets mature as well as in emerging markets, subscribers, will integrate the latest throughout the world – par- through new partnerships or extensions release of OpenTV's middleware onto ticularly in emerging mar- of existing contracts. its platform. Numericable already uses kets. Operators adopted and a comprehensive Nagra end-to-end launched our new solutions Europe solution and has now selected Nagra to and we received awards for The Group signed an agreement with roll-out widget applications. Further, both our innovations. These achie- ONO, Spain's leading cable operator, to parties have agreed to partner on a joint vements confirm the growing secure the first hybrid broadband/broad- 3DTV project. momentum of our Digital cast content delivery platform in Spain. Television Division as well as This agreement further extends the Americas to the drive of our teams, par- relationship between ONO and Nagra In North America, the Group signed a tners and clients. to include conditional access. The new strategic contract with Cable One, Inc., platform will combine traditional pay TV one of the top cable service providers in 14 services with the power of the Internet the United States, to support the roll out and will be delivered over ONO's exclu- of the operator's new digital television sive fiber-optic network. Nagra's latest service. This agreement marks the entry conditional access solution will secure into the US cable market of a Nagra ONO's next generation services which end-to-end solution. Cable One serves will feature video on demand and pay- approximately 720 000 customers in 10 per-view as well as new and advanced states with cable television, telephone PVR features. This agreement further and high-speed Internet services. consolidates Nagra as the leading conditional access supplier in Spain, securing In South America, Kudelski has esta- the most important satellite, cable and blished a strong presence in the last few terrestrial pay TV operators. years. The most recent contracts include DISH Mexico and Hi-tv in Mexico, Oi In Poland, we extended our long-term Brazil and Embratel in Brazil, American agreement with Cyfrowy Polsat, Poland's Movil in Panama, Clara Puerto Rico DTH leading DTH platform. The ten-year in Puerto Rico and Cable Magico Perù in extension relates to the operator's Peru. conditional access system. With this new agreement, Nagra reinforces its long- Nagra's South American presence was term commitment to Cyfrowy Polsat and further strengthened in 2010 with a new demonstrates the confidence we have in contract signed with CTBC, a Brazilian the on-going growth of digital pay TV in telecom company. CTBC selected Na- Poland. gra's latest conditional access solution to secure its new satellite service begin- In Israel, Nagra extended its partnership ning in June 2010. This service is part with triple-play operator HOT to include of CTBC's triple-play offering for its 1.4 an advanced cross-platform solution million subscribers. designed to provide a compelling user experience powered by OpenTV mid- The Kudelski Group developed and dleware and offering advanced security deployed the industry's first geo-control capabilities through NAGRA Media technology for the Brazilian operator PRM. A total of 1.3 million households Globo in 2010. This technology allows DIGITAL TELEVISION Kudelski Group annuAl REport 2010

selected transmission depending on the geographical location of the consumer, while blocking reception of the signal outside a pre-defined area. The solution enables Globo to broadcast to non-urban areas in Brazil. It includes a conditional access system as well as geographical localizer chips.

Asia/Pacific Nagra's booth at the International Broadcasting Convention (IBC) 2010 in Amsterdam, The Kudelski Group performed well in The Netherlands the Asia/Pacific region in 2010, especially in Korea, Taiwan and China which Korea Digital Satellite Broadcasting are amongst the area's most promising Co. Ltd., more universally recognized markets. under its "SkyLife" brand, is the only satellite broadcasting operator (DTH In Korea, Nagra and DTH operator platform) in Korea, providing more than SkyLife started a multi-fold coopera- 220 channels, 72 of which are HD tion in 2010. SkyLife chose to work channels, the most in Korea. SkyLife 15 with Nagra to complete the fast-paced commenced its commercial service in migration of its services from standard March 2002 and had 2.8 million subs- to high definition television. SkyLife cribers at the end of 2010. selected the NAGRA Media ACCESS conditional access solution to secure its Nagra is also well established in Taiwan, new services in replacement of its legacy a market with strong potential in the system. The operator plans to introduce a Asia/Pacific region. In 2010, Nagra hybrid satellite/IPTV offer as well as 3D further strengthened its leadership with programming supported by Kudelski's the signature of new contracts. technology. Nagra now secures one of the largest and most advanced satellite HYA (Hsin Yeong An Cable TV), Taiwan's platforms in Asia. largest independent cable television operator, will digitize its network and roll- Cooperation between the Group and out advanced digital services secured this major operator was further extended by Nagra's next generation conditional in January 2011 with the creation of a access solution. Kudelski will act as lead joint-venture company to develop world integrator of the platform. This agree- leading advanced advertising solutions ment confirms Nagra's leading position enabling operators to offer and monetize as DTV and CAS system integrator in addressable and interactive advertising. Taiwan, where four major cable operators use its technology. Kudelski and SkyLife also joined forces to create a state-of-the-art 3D expe- A partnership was also formed between rience for home viewers. The operator is Nagra and DishHD for the delivery of using high-end 3D production systems a conditional access system to secure which enable it to launch a variety of DishHD's new satellite TV service, which 3D content, focusing on live sporting was launched in July 2010. The service events and concerts. Nagra developed a offers the widest variety of high definition comprehensive 3D content sourcing and video channels in Taiwan and delivers distribution operation and will license more than 30 HD channels from Asia original 3D content to SkyLife. and around the world. DIGITAL TELEVISION Kudelski Group annuAl REport 2010

Taiwan Broadband Communications (TBC), one of the leading multi-system cable operators in Taiwan with more than 750 000 subscribers and a Nagra customer since 2008, signed a new contract for the launch of its turnkey Push VOD project. Nagra is the system integrator and will deploy NAGRA Media PRM, content management and video server solutions within the operator's systems.

These new contracts follow the agreement signed by Nagra in 2009 with China Network Systems Co., Ltd (CNS), one of the leading triple play operators in Taiwan. The agreement provides for the delivery of a last-generation NAGRA Media ACCESS system to secure the 16 operator's new premium and high definition services.

In China, Beijing Gehua CATV Network Co. Ltd (BGCTV), the sole cable operator in Beijing and surrounding area with more than 3.5 million subscribers, signed a new agreement extending a long- standing relation to introduce Nagra's latest generation conditional access technology, NAGRA Media PRM content protection and a new Push VOD on-demand solution.

The Kudelski Group has been present in China since 1999. Our solutions are currently being used by some of China's leading digital television operators including Beijing Gehua Cable TV Network (BGCTV), Chinese Suzhou Digital Television Company, OCN (Oriental Cable Network) and CBC, Nagra OpenTV nX: a user interface with advanced functionalities the mobile operator of CMMB. AdDressing new market trends Nagra OpenTV nX won the TV innova- ad about a product and obtain a free tion Award for Advanced User Interface product sample. Nagra's multichannel and multi-screen during the TV 3.0 – Innovations in TV solutions enable operators to broadcast and Content Delivery conference in Advanced advertising can also include content and provide a consistent user Los Angeles in December 2010. This voting and polling, dedicated advertiser experience on television, PC and mobile award honors groundbreaking com- links, video on demand and electronic phone. This is made possible thanks to panies that are shaping the future of program guide advertising. The possibili- a federated head-end and a complete television. ties are endless. suite of applications which ensure an intuitive, seamless HD user experience Advanced advertising: endless possibi- Applications: for a personalized TV on various consumer devices. lities experience OpenTV also offers a wide range of ad- Today, with the surge of connected TV, An innovative user interface vanced advertising services. Advanced certain web applications have been One of the key elements of the user advertising comprises everything – adapted for television and can enhance experience is the interface. OpenTV, a largely enabled by digital TV – that goes the television viewing experience. These Kudelski Group entity specialized in Mid- beyond the simple TV commercial, inclu- applications come from the Internet and dleware and Advertising solutions, offers ding on demand, interactive, addressable are the first step in the convergence the OpenTV nX application – an innova- and cross-platform advertising. With of the broadcast (TV) and broadband tive interface which enables consumers the concept of "TV everywhere", people (web) worlds into a seamless multimedia 17 to enjoy a unified experience across all want to control what they watch. The experience. content (live, on-demand, music, photos, possibility to target broadcasting opens etc.) and across all devices. up huge opportunities to personalize the Nagra has developed a dedicated TV environment. solution for rolling out these applications. With the extraordinary diversity of con- It comprises both the technological plat- tent delivered to consumers today, rang- Addressable advertising allows diffe- form and a library of applications. ing from linear to on-demand television, rent households to receive advertising video on demand and internet-based messages specific to the geographic, content, this advanced interface simpli- demographic or psychographic profile of End-to-end conditional access fies the content discovery process by that household even though they may be solutions offering smooth and intuitive navigation. watching the same program. It also includes recommendation and Today, the Kudelski Group's offering search features over social networks, Interactive advertising is another form of covers the entire digital television enabling consumers to access particu- advanced advertising. Viewers can ob- ecosystem including conditional access, larly interesting and meaningful content. tain further information about products, middleware, content management and order them and take part in games. For protection, interactivity, user interfaces example, they can press a button on and security modules. We offer com- their remote control to view a long-form prehensive and scalable solutions that address all types of networks and meet their needs in terms of security, content management and functionality.

Web-based applications for enhanced user experience DIGITAL TELEVISION Kudelski Group annuAl REport 2010

NAGRA Media ACCESS ELK-CAS: security tional access and the NAGRA Media for IP and hybrid networks Guide. It enables operators to offer subs- Nagra's next generation conditional ac- criptions to live TV, pay-per-view, video cess solution, NAGRA Media ACCESS on demand and PVR applications. ELK-CAS (Embedded Link CAS) is specifically designed to protect live video Security for VOD and PVR applications: content over "always-on" IP managed NAGRA Media PRM networks. This state-of-the-art security NAGRA Media PRM (Persistent Rights system leverages an innovative combi- Management) is a security solution nation of software and hardware root for VOD and PVR based on Nagra On of trust using Nagra On Chip Security Chip Security (NOCS) technology. It is (NOCS). This technology has been certi- independent of the conditional access Awards received by Kudelski's selutions fied on most chipset models manufactu- system and deployed as a standalone red by the major chipset suppliers. component. This makes for the short time-to-market, regardless of whether Nagra set up a partnership program cal- it is deployed on new or existing set- led Nagra On-Chip Security (NOCS) top boxes. NAGRA Media PRM gives which establishes standards for the operators gateway control over content 18 integration of security within chipsets. consumption and delivery. In 2010, this So far, more than 80 million NOCS- security solution was integrated in the compliant chipsets have been certified NAGRA Media PLAYER platform to ad- and embedded in set-top boxes to dress the specific needs of open devices serve more than 120 pay-TV operators such as personal computers, tablets and worldwide. mobile phones.

Solutions for IPTV networks NAGRA Media ACCESS ELK-CAS is also the security component of Nagra's global IPTV solution.

Nagra's integrated, end-to-end solution is designed for telecom and cable operators who want to rapidly launch IPTV services. It comprises a state-of- the-art Service Delivery Platform (SDP) combined with a comprehensive Content Management System (CMS), NAGRA Media ACCESS ELK-CAS for condi- 19

Television everywhere thanks to the mobile phone DIGITAL TELEVISION Kudelski Group annuAl REport 2010

NAGRA Media PRM addresses both Solution for mobile networks: hardware security enabled devices NAGRA Media MOBILE (set-top box, iDTV) and open devices. The NAGRA Media MOBILE solution Its robustness rules are certified by the has made Nagra the undisputed global Nagra Advanced Security Certification leader in the mobile TV market. This solu- (NACS) program. tion protects services that are broadcast over mobile networks using the major NAGRA Media PRM won the CSI mobile broadcast technologies. Award in the "Best Content Protection" category during the IBC 2010 trade- Nagra is continually developing inno- show in Amsterdam. vative solutions designed to boost the mass adoption of mobile TV throughout Solution for OTT networks: the world. In 2010, NAGRA Media NAGRA Media PLAYER MOBILE brought to market a number NAGRA Media PLAYER is an extension of innovative Mobile TV solutions: these to the Nagra hybrid solution offering. It include proof of concept solutions dedi- allows premium content to securely flow cated to secured streaming Mobile TV to open devices such as personal com- on smart phones and interactive tablets, 20 puters, mobile phones, tablets and game catch-up TV and VOD markets over consoles, over multiple networks. 3G/4G and WiFi networks.

Open devices do not have a smart 3D TV card slot or a secure embedded root of After HDTV, the next logical step in the trust. This is why Nagra introduced the evolution of digital television is three- NAGRA Media PLAYER solution. It is a dimensional television. Nagra deve- software application to secure content loped a new version of its user interface based on the NAGRA Media PRM so- NAGRA Media GUIDE that offers a 3D lution. Its unified multi-screen interface experience for viewers. NAGRA Media delivers a consistent media experience, GUIDE enables users to navigate the whatever the device users choose to electronic program guide in order to view view the content on. and purchase 3D video content. It is designed for operators who want to expand their subscriber service offering and capitalize on the rapidly growing market for 3D content.

Conditional Access Modules (CAMs): increasing success throughout the world Conditional access modules: growing Abilis – Innovative DTT tuner success worldwide In 2010 Abilis introduced an innovative Conditional access modules (CAMs) DTT tuner designed to address the enable consumers to access services needs of the worldwide digital terrestrial that use different conditional access sys- TV market. The AT810 tuner is integra- tems through one single device, such as a ted in consumer devices such as set-top set-top box or an integrated digital televi- boxes, PCTVs, portable TVs, DVD players sion set. A leader in this sector, SmarDTV and automotive media appliances. It pro- continued its sustained growth in 2010, vides enhanced user experience thanks following major deployments completed to features such as picture-in-picture, on DTT networks in Europe in 2009. multichannel visual programming guides and PVR applications. The performance Digital display cards developed and produced by In 2010, Swedish operator Com Hem and cost effectiveness of this silicon NagraID Security selected SmarDTV's CI Plus modules for tuner are helping to accelerate the adop- its conditional access system. Com Hem tion of the multiple receiver functionality is one of the leading distributors of TV, by the DTT mass market. payment due dates and more, precisely broadband and telephony in Sweden and when they need it, anywhere, anytime has more than 40% of Swedish house- using their trusted and familiar payment holds (representing 1.76 million house- NagraID – a revolution in Display card. The card allows for PIN activation 21 holds) connected to its cable network. Cards thanks to the embedded keypad and the Com Hem aims to roll out high definition secure chip. services to integrated digital televisions The Kudelski Group offers state-of- using the CI Plus specification. the-art smartcard expertise through our The new Information Display Card affiliates NagraID and NagraID Security. enables unprecedented levels of interac- In Italy, SmarDTV launched a new These companies produce multi-com- tivity between issuers and cardholders. Conditional Access Module especially ponent and other complex cards for the One of the major advantages of this designed for high definition services, security and identification industries. Na- technology is that it is very easy to deploy SmarCAM-3 Italia. This module offers TV graID provides advanced design, deve- and leverages the standard EMV in- viewers who have subscribed to services lopment and industrialization capabilities vestment by using the existing payment such as Mediaset Premium and Dahlia for innovative authentication solutions. It infrastructure and equipment. TV access to their high definition pro- holds international patents for a non-vio- grams directly on their HD digital-ready lent lamination process used for embed- TV sets without the use of an external ding sensitive, electronic components set-top box. into card and other form-factors.

Recognizing the enormous poten- At the Cartes 2010 trade show in Paris, tial of Latin America, and in particular NagraID Security demonstrated its 5th Brazil which will host the World Cup in generation Display Card, the NagraID 2014 and the Olympic Games in 2016, Security MasterCard® Information Dis- SmarDTV set up an office in North Ame- play Card. This is the first smartcard that rica as a regional base to be closer to its connects the EMV (EuroCard/Master- customers in the Americas. Card/Visa) payment contact chip to an embedded LCD display that enables in- Reinforcing CI Plus capability formation stored on the card to be uploa- With CI Plus gaining traction across Eu- ded every time the card goes online. With rope, the Kudelski Group entered into an this new revolutionary payment card, for agreement in 2010 to purchase assets the first time cardholders can access from technology company Iwedia in order up-to-date, vital account and payment- to strengthen our R&D capability in this related information such as account ba- area. lance, transaction history, reward points, DIGITAL MEDIA ECOSYSTEM KUDELSKI END-TO-END SOLUTIONS

1. CONTEntS

MANAGE THE MULTITUDE OF CONTENTS AND OFFER GREATER CHOICES TO CONSUMERS

The multitude of contents offered to consumers is ope- ning up new opportunities for operators. The Kudelski Group’s solutions enable them to protect their content, expand their services and offer additional value-added applications.

22 TV PROGRAMS TV

TV MOVIES BROADCAST: SET-TOP BOX TERRESTRIAL, SATELLITE AT HOME MUSIC HOME SERVER APPLICATIONS

GAMES BROADCAST: PC CABLE APPS WEB HYBRID: PROTECTION OF ACCESS TO COMBINED MOBILE CONTENT AND SERVICES NETWORKS PHONE INTERNET IP CONTENT

BROADBAND: MULTIMEDIA CABLE, PLAYER TIME-SHIFTING TELCOS, OTT ON THE MOVE CONTENT LAPTOP ON VIDEO ON MANAGEMENT DEMAND DEMAND

INTERACTIVE MOBILE : 3G, ADVERTISING DVB-H, DVB-SH, TABLET MEDIAFLO, STIMI 2. DISTRIBUTION 3. CONSUMPTION

MAXIMIZE OPPORTUNITIES ON OFFER A SEAMLESS VEWING EXPERIENCE ALL TYPES OF NETWORKS

One of the key issues for operators is to be able to inte- The Groups’ solutions provide optimal comfort and ease grate new platforms and technologies in order to extend of use. They are designed to offer subscribers a seamless their services to other types of consumers. Thanks to their and consistent TV experience across all devices. open architecture and their modular design, Kudelski’s solutions enable them to achieve this in a rapid and cost-effective manner.

23 TV PROGRAMS TV

TV MOVIES BROADCAST: SET-TOP BOX TERRESTRIAL, SATELLITE AT HOME MUSIC HOME SERVER APPLICATIONS

GAMES BROADCAST: PC CABLE APPS WEB HYBRID: PROTECTION OF ACCESS TO COMBINED MOBILE CONTENT AND SERVICES NETWORKS PHONE INTERNET IP CONTENT

BROADBAND: MULTIMEDIA CABLE, PLAYER TIME-SHIFTING TELCOS, OTT ON THE MOVE CONTENT LAPTOP ON VIDEO ON MANAGEMENT DEMAND DEMAND

INTERACTIVE MOBILE : 3G, ADVERTISING DVB-H, DVB-SH, TABLET MEDIAFLO, STIMI 05 PUBLIC ACCESS

Despite a difficult environment, Strengthening expertise In May 2010, SKIDATA announced the SKIDATA's new service-oriented SKIDATA entered partnership with acquisition of c-oncept software GmbH, product strategy continued to Signal Telecom/Parktime, one of the an innovative provider of online solutions be popular with operators work- leading parking management opera- and services. Thanks to this acquisition, ing across transversal market tors in Russia. This partnership allows SKIDATA's customers will benefit from segments and over multiple SKIDATA to further extend its market an enhanced web-enabled, feature-rich platforms. Geographically, the presence and enter the parking segment platform allowing them to launch new company succeeded in extend- in Russia. Signal Telecom/Parktime is services such as pay-per-use purchases. ing its foothold in certain key a market leader with more than 500 markets including Australia and parking facility installations in Russia. South America. This partnership enables SKIDATA Car Access clients to access a network of specialists throughout Russia. In parallel to the new partnerships concluded in this sector, SKIDATA imple- SKIDATA has already established a mented several new projects in various strong presence in the ski sector in Rus- parts of the world including Europe, the sia. Its access solutions currently equip a United States and New Zealand. The dozen ski resorts in the country. largest deployment was made at Dallas/ 24 Forth Worth airport in the United States. In the parking segment, SKIDATA also entered into strategic partnership Airport segment with PARKEON, the on-street parking Dallas/Forth international airport, one systems specialist. This partnership of the world's ten largest airports, dovetails nicely with SKIDATA's off- selected a SKIDATA turnkey solution street systems. By uniting forces, the for parking access management at the two companies provide parking facility airport. This comprehensive solution, operators with concrete solutions for based on the Hosted Business Services improving operational efficiency and en- concept, provides hardware, software hancing services offered to end users on and administration. Intelligent software the move. This partnership is in line with solutions support airport management the trend towards increased interaction with functional planning options, thereby between private and public transporta- improving their efficiency. The system tion, a dynamic in which parking plays a self-monitors, which frees employees Making your life easier: parking payment key role. from routine tasks and enables air system using the mobile phone travelers and airport staff to benefit The alliance between PARKEON and from advanced technology. An Automa- SKIDATA will generate innovative inte- tic Vehicle Identification (AVI) system grated solutions to car park operators, enables regular customers to access and enabling them to combine data from exit parking areas smoothly and rapidly. both areas of the parking business (on- street and off-street) using a single par- A leader in airport parking solutions, king back-office. Operators will thus be SKIDATA equips major airports in the able to better manage their operations world including those serving Munich, and ensure consistency across all car London, Zurich, Amsterdam, Montreal, parks within a given area. The platform Abu Dhabi and Hong Kong, to name will also enable them to optimize vehicle but a few. flows into a city and control access to certain areas. PUBLIC ACCESS Kudelski Group annuAl REport 2010

The new Prime Tower in Zurich (Switzerland) equipped with a SKIDATA parking system PUBLIC ACCESS Kudelski Group annuAl REport 2010

People Access Easy.Gate is a compact scanner based on the RFID (Radio-Frequency IDenti- Hosted Business Services fication) technology. It is ideally suited The centralized services of the Hosted for small- and medium-sized resorts or Business Services platform range from to expand an existing system. It pro- marketing to management and mainte- vides fast and easy access to the skiing nance. This solution is designed for ope- area, while requiring little infrastructure rators who wish to benefit from a simple and maintenance. global solution to help them manage customer relationships, obtain statistical The Ski segment also showed strong network analysis, host data securely, momentum in terms of geographical ex- monitor and maintain their installations pansion. There were new contract wins and perform marketing activities. in several key markets outside Europe where SKIDATA had not been present Hosted Business Services can be used before. As an example, the Australian for many types of application including mountains welcomed SKIDATA for the stadium access, fairs and exhibitions, first time. A ski access solution will equip and ski resorts. In 2010, this platform Perisher Resort, the country's largest 26 was rolled out successfully across the ski destination, as well as the Thredbo company's various activity sectors. resort. Both ski areas are located in the Snowy Mountains. Ski segment This very dynamic segment continues In Argentina, SKIDATA will also deploy to offer some of the most innovative its ski access solutions in Las Leñas, one solutions on the market. In 2010, SKI- of the country's largest Andean ski re- SKIDATA access systems used in a variety DATA launched the iSkiPass application sorts, and in Tierra del Fuego. SKIDATA of situations allowing users to quickly and securely already equips the large Cerra Catedral buy a ski pass from their iPhone. This resort in this market. solution is the first ski pass reservation application for iPhones. It will be de- Stadiums and Arenas ployed in the 2010/2011 season in SKIDATA signed an agreement with several European countries. ENJOY Montpellier in France which will result in the installation of people access Other technological innovations were solutions in several cultural and sports launched in 2010 including the Easy. venues in the city, including a concert Gate unit. The Sölden ski resort in hall, congress and exhibition centers, etc. Austria selected this equipment as a This is the first project in the Stadiums complement to their existing SKIDATA and Arenas segment based on the Hos- Freemotion system. ted Business Services platform: systems are centrally managed and hosted on SKIDATA's secure servers. The operator can access data and reports online at may be booked online via a "one-stop anytime, globally or site by site. The Hos- shopping" set-up. Residents also benefit ted Business Services platform enables from pay-per-use arrangements. This is a customers to deploy state-of-the-art typical Destination Management project access management solutions without a integrating a whole array of services on a Parking access: Dallas/Fort Worth costly investment in IT infrastructure. unified SKIDATA platform. International airport

The North Sea islands of Juist and Nor- derney, as well as the seven connecting ferries, were equipped with an access and online ticketing solution. All services that are part of the global offering

Main projects in 2010 Stadium access: Moses Mabhida stadium in Car Access Durban, South Africa 27 Airports USA Installations for Dallas/Fort Worth international airport

Other segments France Q-Park: Network of 9 parking sites in the city of Valence New Zealand Parking lot of the Sky City resort in Auckland Switzerland Parking lot of Switzerland's tallest commercial building, the Prime Tower in Zurich

People Access Ski access: Las Leñas ski resort, Argentina Stadiums & Arenas France Access for various cultural and commercial venues in the City of Montpellier Germany Ticketing and access solution for German islands of the North Sea

Ski Argentina Installations in the Las Leñas and Tierra del Fuego ski resorts Australia Installations in the Perisher and Thredbo ski resorts Canada Installations in the Massif of Charlevoix 06 Nagra audio

Nagra Audio’s two sectors, Professional Recorders as a six-track recorder. Two new tracks professional recorders and Hi-Fi, were added in 2010, further enhancing have broadened their product Digital technology and advanced en- the device's versatility. The Nagra VI’s range with new devices that gineering have made it easier to build comprehensive range of features, such define the state-of-the-art in their recorders to high specifications. Today’s as time code and metadata, are a perfect respective fields. These products devices, contrary to those made in the illustration of how digital technology has stand out for their exceptional analog era, do not contain any mecha- improved what the latest generation technical characteristics. They nical components requiring precision of recorders has to offer in terms of deliver pure audio transparency engineering techniques to build. Even functions and ease of use. It is operated and rigorously faithful sound and the hard drives on which recording data via a series of straightforward menus on music reproductions. is saved are no longer motor-driven: they a large LCD color screen.. The excep- now use solid state disk (SSD) techno- tional quality of its microphone inputs logy in a 100% electronic environment. – a Nagra specialty – ensures sound recordings of the highest caliber. This However, the digital revolution does not makes the Nagra VI a popular choice mean that designing a state-of-the-art for high-precision audio mastering work recorder is now an easy accomplish- as well as many other areas of sound ment. Today, performance specifications recording. 28 are not the only characteristics driving the high end of the recorder market: The Nagra VI received the Technical customers also scrutinize recorders’ Excellence and Creativity (TEC) Award software, range of functions, ergonomics at the Audio Engineering Society (AES) and ability to integrate into a variety of show in New York. different multimedia ecosystems. This is especially true among professionals. Nagra LB The Nagra LB is a compact two-track re- It is precisely in these areas that Nagra corder designed primarily for radio jour- Nagra VI 8-channel digital recorder Audio is innovating. Nagra’s devices are nalists. Since its launch in 2009 it has constantly pushing back the limits on experienced great success not just in its recording techniques, delivering sound main target market, however, but also captures of the highest quality in all among musicians, sound engineers and environments (on-set filming, extreme other individuals looking for a versatile, outdoor conditions and studio recording), portable device. The LB has dual color no matter how demanding they may be. screens and its top panel is equipped with a full on-board audio editing and Like Nagra’s previous models, the communication platform. Sound can be current generation of recorders is captured, edited and sent straight from built to last, featuring the same robust the field ready for use in the studio. construction that has helped make the Nagra LB 2-track digital recorder Nagra brand a legend. Many Nagra Nagra SD recorders purchased decades ago This new high performance hand-held are still in use – and are still delivering recorder is now ready for the market and pitch-perfect sound captures. In addition, will be officially launched in 2011. The it has become even easier to maintain SD was designed to replace the peren- Nagra devices today, as updates can be nial bestseller Ares-ML, which has sold accessed directly online from more units than any other recorder over www.nagraaudio.com. the last twenty years.

The Nagra VI now offers eight tracks The Nagra SD takes its name from the The Nagra VI was launched in 2008 Secure Digital memory card technology NAGRA AUDIO Kudelski Group annual Report 2010

Nagra SD handheld stereo digital recorder NAGRA AUDIO Kudelski Group annual Report 2010

aboard. It offers a wide range of functions The MSA comes in a compact case for a handheld at an attractive price, and designed to be compatible with Nagra’s Nagra CDP CD player is built to the usual high Nagra standard. preamplifiers and CD players. It features innovative transistor technology that delivers 60 watts per channel and performs Hi-Fi range with perfect precision. It is comfortable even when paired with speakers consi- Nagra’s Hi-Fi range was launched in dered difficult to drive. 1995 and quickly established its position at the top of the industry. These devices Two new amplifiers based on the legen- have won the most prestigious prizes dary 300B tube awarded by trade magazines throughout At the 2010 CES (Consumer Electronics the world, and their reputation for Show) in Las Vegas, Nagra presented Nagra PL-L tube line preamplifier excellence now rivals that of Nagra’s a prototype version of an amplifier built professional recorders. This success has around the legendary 300B tube. The been driven by the devices’ exceptionally prototype generated considerable pure sound, although the units are also buzz, both among trade journalists and stand-outs for their precise and exacting other CES visitors. Product testing and 30 designs and their robust, high-quality development were completed later in construction. 2010, and the new device was officially launched at the 2011 CES. It is available Nagra Audio’s suite of Hi-Fi products in two versions: the 300i integrated has grown to include the following stereo amplifier and the 300p power devices: amplifier. Nagra PL-P tube line/phono preamplifier – Nagra CDC, CDT and CDP compact This launch coincided with the 60th disc players anniversary of Nagra’s founding, which – Nagra PL-L and PL-P tube preampli is particularly appropriate in light of the fiers historical resonance of the 300B tube. – Nagra VPS (tube) and BPS (transis That legendary tube symbolizes the las- tor) phono preamplifiers ting importance of certain key inventions – Nagra VPA monoblock tube amplifiers in audio technology, such as the first – Nagra PMA (mono) and PSA (stereo) self-contained audio recorder, created by transistor amplifiers Nagra in 1951. – Nagra MSA compact stereo transistor Nagra VPS tube phono preamplifier power amplifiers The basic idea behind the 300i and – Nagra 300i integrated tube amplifiers 300p amps was to surround the 300B and 300p power tube amplifiers tubes with the latest state-of-the-art technology in order to maximize the Nagra Hi-Fi is present in the principal acknowledged sound quality of the markets of Europe, North America and triode tubes. The amps deliver 20 watts Asia. per channel and can thus be used to drive the many medium-to high-output Nagra MSA amplifier speakers on the market today. The Nagra MSA stereo amplifier has been commercially available since early Nagra BPS transistor phono preamplifier 2010. It got off to a strong start thanks to its range of features, which attracted immediate attention amongst sound industry professionals. 31

Nagra 300p (power) and 300i (integrated) triode tube amplifiers

Nagra MSA MOSFET stereo power amplifier Nagra PMA (mono) and PSA (stereo) transistor amplifiers

Nagra VPA monoblock tube amplifiers 07 CORPORATE GOVERNANCE This report was prepared in compliance with the directive on information relating to corporate governance issued by the SIX Swiss Exchange. Unless otherwise mentioned, the information provided in this report reflects the situation as of 31D ecember 2010.

32 CORPORATE GOVERNANCE Kudelski Group annual Report 2010

1. Group structure and shareholding divisions: Digital Television, Middleware & The Public Access division is divided into Advertising and Public Access, which de- three segments: 1.1. Group structure velop their solutions with the assistance of departments dedicated to Marketing, − Car Access Kudelski SA has its registered offices in Research and Development, Sales and − People Access (ski) Cheseaux-sur-Lausanne. The company Management of Intellectual Property. − People Access (events) has been structured as a holding company since 1999 and its shares have been The Digital Television division is com- The company’s Audio activities are conso- listed on the SIX Swiss Exchange since 2 posed of four departments: lidated in the accounts of Nagravision SA August 1999. − Sales and Operations and are under the operational direction of − Products and Solutions Charles Egli. The structure of the Kudelski Group is − Conditional Access shown below − sections 1.1.1 - 1.1.3. − Corporate Development Results by sector are presented on pages 22 and 23 of the Kudelski Group’s 2010 1.1.1. Operational structure of the Group The Middleware & Advertising division is financial statements. From an operational point of view, the composed of the two segments referred Group’s activities are divided into three to in its name.

33 Main operating companies held directly or indirectly by Kudelski SA

Digital Television 0 % 50 % 100 % Middleware/ 0 % 50 % 100 % Advertising

Nagravision SA (Switzerland) OpenTV (U.S.A.)* Nagra France SAS (France) Nagra USA, Inc. (U.S.A.) Nagravision Asia Pte Ltd (Singapore) Nagravision Shanghai Technology (China) Public Access 0 % 50 % 100 % Nagra Media India Pvt. Ltd. (India) Nagra Media Korea LLC (South Korea) 100% SkiData AG (Austria) NagraID SA (Switzerland) polyright SA SmarDTV SA (Switzerland) (Switzerland) Abilis Systems Sàrl (Switzerland) EDSI SAS (France) TESC Test Solution (Germany) Embedics LLC (U.S.A.) Quative Ltd (United Kingdom) NagraStar LLC (U.S.A.) Nagra plus SA (Switzerland) Nagra Thomson Licensing SA. (France) NagraID Security SA (Switzerland)

* Since 26 March 2010, OpenTV is fully owned by the Kudelski Group

On June 4th 2010, effective 1st January 2010, Nagra Public Access AG was absorbed by Kudelski SA CORPORATE GOVERNANCE Kudelski Group annual Report 2010

Head offices Subsidiaries / companies with specific purpose Offices

International presence

Digital TV Middleware/ Public Access Nagra Audio Advertising Europe Switzerland France Austria Germany Belgium Spain Italy Netherlands Sweden United Kingdom, Ireland Portugal

34 Americas USA Brazil Chili

Middle East United Arab Emirates

Asia / Pacific Singapore China Hong Kong Japan Taiwan South Korea Australia India

1.1.2. Listed companies included in the Corp, headquartered in San Francisco 1.2. Significant shareholders scope of consolidation (United States), has not been listed on The principal shareholders of Kudelski Kudelski SA is a Swiss holding com- the NASDAQ since 26 March 2010. SA are the Kudelski family pool including pany listed on the SIX Swiss Exchange Mr André Kudelski and Mr Stefan Ku- (Ticker: KUD; Sec. No 001226836/ 1.1.3. Unlisted companies included in the delski and, outside the Kudelski family ISIN: CH0012268360) with a market scope of consolidation pool, Mrs Irène Kudelski Mauroux and Mr capitalization at 31 December 2010 Information concerning the company Henri Kudelski (and their respective des- of CHF 971 459 540. Only the bearer name, registered office, share capital and cendants), and Mrs Marguerite Kudelski shares of Kudelski SA are listed on the holdings owned by unlisted Group compa- and Mrs Isabelle Kudelski Haldy (and SIX Swiss Exchange. Following the ten- nies included in the scope of consolidation their respective descendants) through der offer made by the Kudelski Group at is shown on pages 62 and 68 of the Ku- two investment structures of which the end of 2009, the company OpenTV delski Group’s 2010 financial statements. they are the beneficiaries. Furthermore, Mrs Marguerite Kudelski holds 5112 Kudelski Financial Services SCA has on the company website at: www.nagra. bearer shares in her own name. To the issued a convertible bond (ISIN: CH com/investors-doc.html. Group’s knowledge, no other sharehol- 0022692609) for an amount of CHF der holds more than 3% of the voting 350 million, representing 5 225 440 They are also available on the SIX Swiss rights and there are no shareholder bearer shares (5.51% of voting rights). Exchange website under the following agreements between the family pool and See section 2.7 for details. link: other shareholders. http://www.six-exchange. As part of the Group’s share purchase com/shares/security_info_ The shareholding structure, under which plan (which is described in section fr.html?id=CH0012268360CHF4. the Kudelski family pool has control over 2.7 below and in pages 49-50 of the Click on the link regarding management the company, guarantees the Group’s financial report) Kudelski SA has issued transactions. long term stability. This stability is essen- a certain number of stock options for tial to ensure long-term continuity and Group employees. independence, which are key elements 1.3 Cross-holdings for the Group’s main customers. Announcements made by Kudelski SA to The Group has no knowledge of the SIX Swiss Exchange concerning disclo- existence of any cross-holdings. sure of shareholdings may be consulted

At 31 December 2010 Registered Bearer Share capital Voting rights shares shares held

Kudelski family pool 46 300 000 8 034 311 23.73% 57.17% Mrs I. Kudelski Mauroux and Mr H. Kudelski (and their respective descendants) 3 000 000 5.62% 3.16%

Mrs M. Kudelski* and Mrs I. Kudelski Haldy (and their respective descendants) 3 000 000 5.62% 3.16%

* Mrs Marguerite Kudelski holds in addition 5 112 bearer shares in her own name

2. Capital STRUCTURE Authorized capital The preferential subscription rights The Board of Directors is authorized to of shareholders may be excluded and 2.1. Amount of ordinary, authorized and increase the share capital in one or more allotted to third parties by the Board conditional capital at 31.12.2010 and stages until 4 May 2012 by a maximum of Directors with a view to acquiring 2.2. Specific information concerning amount of CHF 40 881 640 through the companies or parts of companies or in authorized and conditional capital issue of 3 768 164 bearer shares with order to finance whole or partial acqui- a nominal value of CHF 10 per share sition of other companies in Switzerland Ordinary capital and 3 200 000 registered shares with a or elsewhere. All statutory restrictions to The share capital amounts to CHF nominal value of CHF 1 per share to be the transfer of shares are applicable to 533 683 120. It is divided into fully paid up. new registered shares. 48 738 312 bearer shares with a nominal value of CHF 10 per share and The issue price, the nature of contribu- 46 300 000 registered shares with a tions, the date from which new shares nominal value of CHF 1 per share. Each shall give entitlement to dividends and share confers the right to one vote. All other modalities of the share issue shall shares are fully paid up. be determined by the Board of Directors. CORPORATE GOVERNANCE Kudelski Group annual Report 2010

Conditional capital (c) the conversion price must be at least the Swiss Code of Obligations, i.e. if ad- The conditional capital amounts to CHF the equivalent of market conditions at the mission of the acquirer of the stocks into 107 754 440 and is structured as follows: time of the issue of the bond. the shareholder’s group is incompatible

- a maximum amount of CHF 7 754 440 2.3. Changes in capital through the issue of a maximum of 775 444 bearer shares with a nominal CHF ’000 31.12.10 31.12.09 31.12.08 value of CHF 10 per share, to be fully paid up, as and when the option rights Registered share capital 46 300 46 300 46 300 or share subscription rights which Bearer share capital 487 383 485 635 477 660 will be granted to employees of the Legal reserve 84 611 81 887 79 028 company and of affiliated companies Net profit 90 615 42 834 48 321 are exercised. There are no preferential Total available earnings 394 900 322 532 290 079 subscription rights for shareholders. Total shareholders’ equity 1 013 194 936 354 893 067 Share option or subscription condi- For information relating to changes in the capital which have taken place in 2010, 2009, 2008, please tions are determined by the Board of refer to the Group’s corresponding financial statements Directors. Issue at a price below market conditions is authorized; 2.4. Shares and participation certificates with the object of the company or may 36 The capital of Kudelski SA at 31 Decem- jeopardize the economic independence - a maximum amount of CHF 100 000 000 ber 2010 was made up of 46 300 000 of the company. This would in particular through the issue of a maximum of registered shares with a nominal value of be the case if the acquirer could prejudice 10 000 000 bearer shares with a no- CHF 1 per share, and 48 738 312 bearer the company directly or indirectly, or if minal value of CHF 10 per share, to be shares with a nominal value of CHF 10 transfer of the stock could jeopardize the fully paid up, as and when the conver- per share. Each share confers the right to existing majorities. sion rights related to the convertible one vote at the General Meeting and to a bonds of the company or its subsidia- dividend proportional to the nominal value b) If the company offers the seller of the ries are exercised. of the relevant type of share. Kudelski SA shares to acquire the shares for its own does not have participation certificates. account, for the account of other sha- There are no preferential subscription reholders or of third parties at their real rights for shareholders. The preferential 2.5. Profit sharing certificates value at the time of the request. subscription right of shareholders to Kudelski SA does not have profit sharing the issuance of a convertible bond may certificates. c) If the acquirer does not expressly be limited or eliminated by decision of declare that he has acquired the shares in the Board of Directors on valid grounds, 2.6. Restrictions on transferability and his own name and for his own account. If namely (a) if the convertible bonds are nominee registration the shares are acquired by inheritance, di- placed primarily on markets outside Swit- As per the Articles of Incorporation of vision of an estate, marital property rights zerland, or if the issue proceeds contribute Kudelski SA, registered shares may be or by debt enforcement, the company (b) to the financing or refinancing of transferred upon delivery of the endorsed may only refuse its consent if it makes acquisitions of companies or firms or (c) to share certificate, subject to the approval an offer to the acquirer to take over the the financing of other strategic invest- of the Board of Directors and registra- shares at their real value. ments of the Group, or (d) to financing tion in the share register; also subject to the redemption of all or part of convertible the Swiss Federal Act on Intermediated In the event of a dispute, the real value loans previously issued by the company or Securities. referred to in this section will be deter- its subsidiaries. If the convertible bond is mined by the court having jurisdiction not offered preferentially to shareholders, The Board of Directors may refuse to in the place where the company has its (a) the convertible bonds must be sold to approve the transfer of registered shares registered office. The company will bear the public under market conditions, (b) in one or more of the following cases: the costs of such valuation. If the acquirer conversion rights must be exercised wi- does not reject the purchase offer within thin a period of seven years from the day a) If there exists valid reason within the one month of becoming aware of the real of issuance of the respective bond, and meaning of article 685 b paragraph 2 of value, the offer will be deemed accepted. Kudelski SA has no regulations concer- an extraordinary gross dividend of CHF Share purchase plan ning the registration of nominees. 0.30 per bearer share with a nominal In 2004, the Kudelski Group introduced a value of CHF 10. In accordance with share purchase plan for the employees of Limitations on the transferability of regis- section D.1.2 (1) (c) of the bond condi- certain Group companies, enabling those tered shares, authorized or conditional tions, the methods of conversion were employees to buy Kudelski SA bearer increases in share capital and limitations adjusted as follows, with effect from 30 shares on favorable terms. Each partici- on or eliminations of preferential subs- May 2007: bonds, with a nominal value of pant can subscribe annually to this plan cription rights are decided upon at the CHF 5000 each, may be converted at no up to a maximum amount of 7.7% of his/ General Meeting if approved by share- cost until 21 September 2012 (subject to her gross annual salary. holders holding at least two thirds of the early repayment), into 74.6491 (instead shares represented at the Meeting and of 73.7898) bearer shares of Kudelski The share purchase price is the closing an absolute majority of the nominal share S.A. with a nominal value of CHF 10 per price of the Kudelski SA share listed capital represented. share. The conversion price of bearer on the SIX Swiss Exchange on the day shares now amounts to CHF 66.98 of subscription with a discount of up to The General Meeting is validly constitu- (instead of CHF 67.76). A conditional 42%. However, the shares are subject ted regardless of the number of share- capital of 5 225 440 Kudelski SA shares to a three year blocking period from the holders present and/or the number of has been constituted for this purpose, as date of purchase. shares represented. mentioned in section 1.2 above. A chart showing employee participation 37 2.7. Convertible bonds and options The repayment price of the bonds is at in this plan for the year 2010 can be par on 5 October 2012. Early repayment found on pages 49-50 of the Kudelski Convertible bond can take place from 5 October 2010. Group financial statements. On 5 October 2005, Kudelski Financial Kudelski SA unconditionally and irrevo- Services Holding S.C.A., a wholly owned cably guarantees this issue. The conver- subsidiary of Kudelski SA, issued a non- tible bond is quoted on the SIX Swiss subordinated convertible bond of CHF Exchange, under security number ISIN 350 million in order to pursue the aim of CH0022692609. the Kudelski Group to actively manage its assets, in particular by optimizing its The offering circular for the convertible financial costs and by improving the dura- bond is available on request from the tion of its financial debt instruments. The Group’s head office or by e-mail to issue proceeds were used mainly for the [email protected]. More information about redemption of the previous convertible the convertible bond can be found in the bond issued at the end of January 2002, financial reports, note 28 of the consoli- and the remainder is used for potential dated financial statements. acquisitions or other purposes corresponding to the general interest of the Options Group outside Switzerland. In 2003, the Kudelski Group implemented a stock option plan for certain The annual coupon amounts to 1.625% employees. At 31 December 2010, there calculated with reference to the nomi- were no longer any options in issue. nal amount of the bond payable on 5 October each year from 5 October 2006. Number Vesting Expiration Ratio Exercise The conversion price was initially set at of options price CHF 67.76 per ordinary bearer share of Kudelski SA. At the Ordinary General 125 000 01.04.2006 01.04.2007 1 –for – 1 CHF 20 Meeting of shareholders of Kudelski S.A., 126 000 01.04.2007 01.04.2008 1 –for – 1 CHF 20 held on 24 May 2007, it was decided in 126 000 01.04.2008 01.04.2009 1 –for – 1 CHF 20 particular to pay, on 30 May 2007, an For more information on the stock option plan, please refer to the financial reports of the Kudelski ordinary gross dividend of CHF 0.30 and Group, pages 49-50 CORPORATE GOVERNANCE Kudelski Group annual Report 2010

3.Board of Directors Three Committees, an Audit Committee, Mr Stefan Kudelski has been the Hono- a Strategy Committee and a Remune- rary Chairman of the Board of Directors The Board of Directors is the highest ration and Nomination Committee, are since 2 May 2006. executive body of the company. It has formed within the Board of Directors and the non-transferable and inalienable res- are responsible for specific tasks (see Mr Nicolas Gœtschmann, who is not a ponsibilities set forth by the law and the sections 3.4.1 - 3.5.) Board member, was appointed as Corpo- Articles of Incorporation. The Board cur- rate Secretary by the Board. rently consists of eight members elected by the General Meeting of Shareholders.

3.1. Members of the Board of Directors

Year of Nationality Education First End of term Birth Election of office

38 André Kudelski* 1960 Swiss Degree in Physical Engineering 1987 05.04.2011 Chairman of the Board Ecole Polytechnique Fédérale de Lausanne and Chief Executive Officer (EPFL) Claude Smadja 1945 Swiss Degree in Political Science 1999 05.04.2011 Deputy Chairman of the Board University of Lausanne and Lead Director Norbert Bucher 1931 Swiss Doctorate in Engineering 1992 05.04.2011 Ecole Polytechnique Fédérale de Lausanne Various postgraduate studies at the University of New York, Harvard Business School and IMD Lausanne Patrick Fœtisch 1933 Swiss Doctorate in Law 1992 05.04.2011 University of Lausanne Bar Exam Laurent Dassault 1953 French Degree in Corporate Law 1995 05.04.2011 Degree from ESLSCA Ecole Supérieure Libre des Sciences Commerciales Appliquées, Paris Pierre Lescure 1945 French Degree in Literature and 2004 05.04.2011 Journalism Centre de formation des journalistes, Paris Marguerite Kudelski 1965 Swiss Engineering degree 2006 05.04.2011 in Microtechnology Doctorate in Microtechnology, Ecole Polytechnique Fédérale de Lausanne (EPFL) Executive MBA IMD Lausanne Alexandre Zeller 1961 Swiss Degree in Economics 2007 05.04.2011 University of Lausanne

*André Kudelski is the only member to combine his Board duties with an executive function within the Group (Chief Executive Officer). André Kudelski Claude Smadja

NOrbert Bucher Patrick Fœtisch Laurent Dassault

Pierre Lescure Marguerite Kudelski Alexandre Zeller CORPORATE GOVERNANCE Kudelski Group annual Report 2010

CURRENT MANDATES KUDELSKI GROUP OTHER

André Kudelski

André Kudelski began his career in 1984 as a − Nagravision SA, Chief Executive Officer − Dassault Systèmes SA (France), Board mem- Research & Development engineer with Kudelski − Nagra plus SA, Chairman and Chief Executive ber, member of the Audit Committee and of the SA. In 1986, after working for several months with Officer Remuneration and Nomination Committee a firm in Silicon Valley, he returned to work in the − SkiData AG, Member of the Supervisory Board − Edipresse SA (Switzerland), Board member, family business firstly as Pay TV Product Manager − Open TV Corp., Executive Chairman until Chairman of the Audit Committee then as Director of Nagravision SA, a company 31.12.2010 − HSBC Private Banking Holdings (Suisse) SA in charge of the Pay TV sector. Mr Kudelski then − NagraStar LLC., Co-Chairman (Switzerland), Board member took over from his father Stefan Kudelski and from − Nestlé SA (Switzerland), Board member, 1991 became Chairman and Chief Executive Of- member of the Audit Committee ficer of the parent company Kudelski SA. − Comité d'economiesuisse (Switzerland), member − Swiss-American Chamber of Commerce (Switzerland), Vice-Chairman

Claude Smadja

After 15 years with Télévision Suisse Romande − OpenTV Corp., Board member until − Edipresse SA (Switzerland), Board member, (TSR) as Deputy Editor of the Information Depart- 31.12.2010 Chairman of the Remuneration Committee ment, Claude Smadja joined the management of − Infosys Technologies Ltd. (United States), Inde- 40 the World Economic Forum in 1987, a position that pendent Director, Chairman of the Nomination he held until 1992. He then returned to TSR as Committee Director of Information until 1996, in which year − International Board of Overseers of the Illinois he was appointed Managing Director of the World Institute of Technology (United States), Economic Forum. In June 2001, Claude Smadja member. set up his own strategy consultancy Smadja & As- sociates, Strategic Advisory, which collaborates on strategic problems with multinationals and government bodies and organizes international events.

Norbert Bucher

Norbert Bucher began his professional career − Nagra plus SA, Board member as an engineer with Sulzer, in Winterthur and in New York, then moved to Syska & Hennessy Inc, Consulting Engineers in New York. He then joined Philip Morris Europe SA as Deputy Managing Director. After eleven years as Deputy Managing Director at Interfood SA in Lausanne, he occupied the position of Senior Vice President with Jacobs Suchard in Zurich for seven years.

Patrick Fœtisch

Patrick Fœtisch is an independent lawyer special- − Nagravision SA, (Switzerland) Chairman − Renault Finance SA (Switzerland), Board izing in contracts and finance at an international − Nagra France SAS, (France) Chairman member level. He acts as legal counsel to Group companies − NagraID SA, (Switzerland) Chairman as and when required, bringing to bear his in-depth − Nagra plus SA, (Switzerland) Board member knowledge of their activities to provide assistance − SkiData AG, (Austria) Member of the Supervi- and legal advice. sory Board OTHER

Laurent Dassault

After a career spanning thirteen years in the bank- − 21 Centrale Partners SA (France), member of − Immobilière Dassault SA (France) (since ing sector, in 1992 Laurent Dassault joined the the Supervisory Board 2003), Chairman of the Supervisory Board Dassault Group, in whose subsidiaries he holds − Amis du FRAC (Fond Régional d'Art Contem- − Laurent Dassault Rond Point (LDRP) SCI important positions. Today he assumes around porain en Aquitaine) (France), President (France), Associé Gérant thirty mandates, including those of the Dassault − Arqana SAS (France), advisory to the Directoire − Lepercq, de Neuflize & Co. Inc. (United States), Group, mainly in the financial, industrial and wine- − Artcurial Développement Sàrl (France), Co- Board member producing sectors. gérant − Organisation pour la Prévention de la Cécité − Artcurial Holding SA (France), Chairman of the (OPC) (France), Board member Development Committee − ONE DROP France (association), President − Association des Amis du Musée d’Art Moderne − PECHEL INDUSTRIES SAS (France), mem- (France), Board member bre du comité de suivi − Banque Privée Edmond de Rothschild Europe − Power Corporation du Canada (company SA (Luxembourg), Board member incorporated under Canadian law on joint stock − Catalyst Investments II L.P. (Israel), Chairman companies) (Canada), Board member of the Advisory Board − SAGARD PRIVATE EQUITY PARTNERS SAS − Château Dassault SAS (France) (since 1994), (France), membre du comité consultatif Chairman − SGAM ALTERNATIVE INVESTMENTS SA − Dassault Systèmes SA (France) (since 1992), (France), prestataire Board member − Sita SA (Switzerland), Board member − SOGITEC Industries SA (France), Board − Financière Louis Potel & Chabot SAS (France), 41 Board member member − GENERALI France SA (France), Board member and member of the Accounting Committee − Groupe Industriel Marcel Dassault SAS (France), Vice-Chairman (since 1992)

Pierre Lescure

Save for a two year period (1972-1974) as a televi- − Lagardère SCA (France), member of the sion news presenter for Antenne 2, Pierre Lescure Supervisory Board spent the first fifteen years of his professional − Havas SA (France), Board member career with the RTL, RMC and Europe1 radio sta- − PrisaTV S.A.U. (Spain), member of the Supervi- tions where he successively occupied a variety of sory Board positions, in particular Deputy Editor and Director − DTS Distribuidora de Televisión Digital, S.A. of Programs. In 1981 he returned to television ( Digital+) (Spain), member of the Supervisory as Editor in Chief of Antenne 2. From 1984, he Board (since 20.01.2011) worked with André Rousselet on the launch project for the pay TV channel CANAL+ where he was appointed Director and then Chief Executive Officer. From 1993 to 2002, he was Chairman and Chief Executive Officer of the CANAL+ Group. From 2000 to 2002 Pierre Lescure was also co-Chief Executive Officer of Vivendi-Universal. Since 2002, he has been Chairman and Chief Executive Officer of Anna Rose Production SAS, a company active in audiovisual and cinematographic production as well as in communication consultancy services. Lastly, since July 2008 he has directed the Théâtre Marigny in Paris. CORPORATE GOVERNANCE Kudelski Group annual Report 2010

CURRENT MANDATES KUDELSKI GROUP

Marguerite Kudelski 3.4.1. Distribution of tasks within the Board of Directors Marguerite Kudelski’s professional career began − polyright SA, Board member The Board of Directors constitutes itself at the EPFL’s Laboratory of Electromechanics and by appointing from within its ranks the Electrical Machines, where she worked from 1991 to 1999. During this period she also worked as a Chairman and the Deputy Chairman. The development engineer within the Nagra Audio divi- functions of Chief Executive Officer and sion of the Kudelski Group. In 1999, she became Lead Director are allocated if the Board the Head of R&D with Précel SA in Neuchâtel decides to elect a Chief Executive Officer. (then a Kudelski Group company) before being Otherwise management of the company appointed as CEO and Board member of the same company in 2000, positions that she occupied is delegated in full to the Executive Board. until the end of 2002. After completing a number A Corporate Secretary may be appointed of marketing and financial analysis projects for and chosen from outside the Board of NagraID in 2003, she took responsibility for certain Directors. He or she is not a member of key projects for the Group within the Finance De- the Board of Directors. partment from 2004 to 2006. Since March 2007, Marguerite Kudelski has worked as a consultant, offering services such as business development The Chairman of the Board leads the and management consulting. discussions at the General Meeting, ensures that the minutes are taken, is in 42 Alexandre Zeller charge of protocol and directs meetings of the Board, informs Board members of Alexandre Zeller began his professional career in the development of business and the half- 1984 with Nestlé as a Management Auditor. Three years later he joined Credit Suisse, where he car- yearly accounts, represents the company ried out various duties in the field of loans and asset in dealings with administrative and/or management at a Swiss and international level, judicial authorities subject to mandates while at the same time managing various branches. entrusted by the Board of Directors to In 1999 he was appointed to the Executive Board a third party, to a Director or to one of its of Credit Suisse Private Banking. In November 2002, Alexandre Zeller joined the Banque Canto- members. nale Vaudoise. Since July 2008, he has been CEO of HSBC Private Bank (Switzerland). The Deputy Chairman may convene a meeting of the Board of Directors. He chairs the General Meeting in the ab- sence of the Chairman.

Management of the company may be 3.2.Other activities and vested interests 3.4. Internal organization delegated to the Chief Executive Officer, Please refer to the individual profiles of The Board of Directors performs inalie- unless otherwise stipulated by law. In his Board members under 3.1 above. nable and non-transferable duties pres- management activities, the Chief Execu- cribed by the law (art. 716 of the Swiss tive Officer acts in accordance with direc- 3.3. Election and term of office Code of Obligations) with the support of tives issued by the Board of Directors and The Board of Directors comprises its three Committees: Audit, Strategy, and safeguards the interests of the company. between one and ten members. Board Remuneration and Nomination. He also makes a report at each meeting members are appointed by the General of the Board of Directors covering the Meeting for a period of one year. The The internal organization of the Board of essential aspects of the current business term of office ends on the day of the Directors is defined in the Articles of Incor- situation. Ordinary General Meeting. They may be poration and the Board Regulations. The re-elected. The year of the first election regulations are available on request to the In the Group's current structure, the as well as the end of term of office for General Secretariat of the Kudelski Group functions of Chairman of the Board of each member are mentioned under by calling +41 21 732 01 27 or by post Directors and Chief Executive Officer are section 3.1. at the following address: 22-24 route de exercised by one person. This situation Genève, 1033 Cheseaux-sur-Lausanne. guarantees a rapid and fluid information and decision-making process, enabling of the Group's various sectors of activity and oversees the Group's development the company to respond operationally as well as relating to specific fields of its by means of investments, disinvestments and strategically at the pace required by choice. The Committee calls on experts and reorganization. developments in the sectors of activity outside the Board of Directors where this pursued by the Group. There are mecha- is deemed necessary for the successful To define strategic choices, the Stra- nisms to counterbalance a potential risk completion of its tasks. tegy Committee relies upon information resulting from the combination of these supplied by management, the members functions through the institution of the The Audit Committee supervises the of the Board of Directors and, if deemed Lead Director. company's internal financial reporting necessary, by external counsel. process and ensures its integrity, transpa- The Lead Director ensures the indepen- rency and quality. It ensures that accoun- The Strategy Committee periodically dence of the Board of Directors vis-à-vis ting methods comply with applicable reviews the balance between the Group's the Chairman and Chief Executive Officer regulations and constantly updates and objectives, its structure and the organiza- and also the management of the compa- provides financial information to the tion in place to achieve strategic objec- ny; he also chairs the Board of Directors in company. tives. The Strategy Committee makes cases of conflict of interest involving the proposals to the Board of Directors, which Chairman and Chief Executive Officer. It assesses the quality of work of external has ultimate decision-making power on Thus the Lead Director may autono- auditors and provides appropriate recom- strategy. mously convene and direct a meeting of mendations to the Board of Directors 43 the independent members of the Board of concerning renewal of the term of office Remuneration and Nomination Directors if the interests of the company of external auditors or, where neces- Committee require independent deliberation. He sary, their replacement. The Committee This Committee is composed of three ensures a performance appraisal process ensures that the recommendations of non-executive members of the Board of for the Chairman of the Board of Directors external auditors are followed up and Directors. It meets at least twice a year. and the Chief Executive Officer. safeguards their independence. The Committee supervises the remune- 3.4.2. Composition, attributions and The Committee provides regular reports ration policy put in place by the company delimitation of competencies of Board presenting its recommendations to the (confer section 5: Remuneration, share- Committees Board of Directors concerning the ade- holdings and loans). Committees are constituted by the Board quacy, efficiency and veracity of accoun- of Directors which appoints their mem- ting processes. The Committee presents proposals to bers and chairpersons. The Board Com- the Board of Directors concerning the mittees meet as often as is necessary. Strategy Committee appointment of Board members to be They have a consultative and preparatory Until 30 June 2010, the Strategy Com- submitted to the General Meeting. At the role vis-à-vis the Board of Directors, to mittee was composed of three members request of the Chief Executive Officer, it which they report on a regular basis. Com- of the Board of Directors, including the examines applications for management mittee reports serve as the basis for deci- Chairman and Deputy Chairman. Since positions and may if it wishes meet with sion making by the Board of Directors. 1 July 2011, the Committee has been candidates. composed of four members. It meets at Audit committee least twice a year. 3.4.3. Working methods of the Board of The Committee consists of at least three Directors and its Committees non-executive members of the Board The purpose of the Strategy Committee The cooperation and allocation of compe- of Directors. At least one Committee is to review and define Group strategy. It tencies between the Board of Directors member has proven experience in the drafts strategic development options with and its Committees are described in field of accounting. All members may a view to ensuring the long-term enhan- chapter 3.4.2. have knowledge or practical experience cement of the Group's competitive posi- in the field of financial management. The tion and its shareholder value. To this end, The Board of Directors meets at least four Audit Committee meets in principle three the Strategy Committee monitors market times a year, but as often as is required for times a year. The Audit Committee may trends and the Group's competitive po- the proper conduct of business. at any time request detailed risk analyses sition, drafts future development models CORPORATE GOVERNANCE Kudelski Group annual Report 2010

Chairman Member

Audit Strategy Remuneration information and control instruments at Committee Committee and Nomination different levels, which it improves on a Committee continuous basis. These instruments André Kudelski concern strategy, operations, finance, law, human resources and information Claude Smadja management. Norbert Bucher Laurent Dassault Supervision Patrick Fœtisch − The Chief Executive Officer submits Marguerite Kudelski a report to the Board members prior Pierre Lescure to each meeting outlining key aspects Alexandre Zeller of the current business situation (key contracts, sales trends, market trends, In 2010, the Board of Directors and its to ensure in particular compliance human capital) for each Group entity Committees met as follows: with the law, the Articles of Incorpo- and activity. ration, regulations and instructions − Board members receive weekly or Board of Directors 7 times given; quarterly press digests concerning Strategy Committee 2 times − writes the annual report, calls the the Group, depending on the amount 44 Audit Committee 3 times General Meeting and implements its of relevant newsflow; they may also Remuneration and decisions; receive other informative documents Nomination Committee 2 times − takes decisions on capital calls with concerning the Group and its entities, respect to shares that are not fully as well as a message from the Chief Average attendance at Board meetings paid up (article 634a of the Code of Executive Officer whenever the CEO exceeded 90%. Meetings of the Board Obligations); deems this is necessary. of Directors lasted on average five − takes decisions regarding the − At least twice a year, members of hours. Most Committee meetings lasted assessment of an increase in capital management are invited to present between two and three hours. and relevant changes to the Articles their activities to members of the of Incorporation (articles 651 para. Board of Directors. Members of the 3.5. Competencies 4, 651a, 652a, 652g, 652h, 653g, Board may also ask questions directly Please see also section 3.4.1 for details 653h of the Code of Obligations); to company executives as and when of the internal organization of the Board − informs the judge in the event they see fit. of Directors and the position of Chief of over-indebtedness. − At each Board meeting, if justified by Executive Officer. the business situation and depending Group management on the agenda, members of mana- The Board of Directors The Board of Directors has delegated gement, Group executives or outside The Board of Directors: full management of the company to the experts are invited to present specific − has the ultimate management of the Chief Executive Officer, subject to legal subjects to members of the Board of company and issues all necessary imperatives and contrary provisions in Directors. instructions; the Articles of Incorporation. The Chief − determines the organization; Executive Officer therefore coordinates Operations and strategy − determines the principles of the ac- the day-to-day operations of the Group − In the Group's key sectors, ad hoc counting system and of the financial companies. committees comprising a cross-disci- controls and also of financial planning plinary panel of internal experts eva- insofar as this is necessary for the 3.6. Information and control instruments luate market, strategic, operational, management of the company; with respect to Group management legal and financial risks. These ad hoc − appoints and dismisses persons Because of the nature of the industry, committees analyze risks, manage entrusted with management and mechanisms for controlling Group processes relating to the evaluation representation; management and information feedback of such risks, propose measures and − exercises ultimate supervision over systems are very important. The Ku- monitor their implementation. There persons entrusted with management delski Group has therefore put in place is a committee for each segment, as well as a security committee and forecast by entity, as well as their at least twice a year an innovation committee. Informa- operational indicators; a sales report tion and comments arising from including region, client and sales Human Resources these committees are conveyed to type-specific analysis as well as their − The HR Department uses a per- the Group management during the respective margins; a report on the formance development tool (“Per- Executive Board Meetings, which operational cost trend broken down formance Development System” take place at least once a month. The by cost center and a report on the – PDS) designed to align the teams' Digital TV Executive Board Meetings, financial development of key projects. management programs with the which take place at least once a needs of the company. PDS features month and last on average four hours, − In addition, the Group has an internal performance- and skills-evaluation also use the information provided by control system based on the COSO functions and establishes a career the ad hoc committees and review (Committee Of Sponsoring Organi- development baseline for employees in particular two specifically chosen zations of the Treadway Commission) in line with the company’s needs. and relevant topics for the Digital TV reference system. This system aims segment. at providing “reasonable assurance” Information management as regards the performance and − The Corporate IT department has de- Finance efficiency of operations, the reliability veloped and implemented a series of − The Controlling entity conducts regu- of financial information and reporting, policies and procedures concerning lar financial and operational analyses and compliance with laws and regu- IT security (for the use of computer 45 intended to identify operational and lations in force. A team is in charge systems, data protection and back- financial risks throughout the value of internal controls. The various up, etc.). chain of the various activities of processes are periodically reviewed Group companies and proposes and and analyzed by the external auditors coordinates necessary improvements (PriceWater-houseCoopers). and corrective actions. This entity also makes available a platform of analy- Legal tical services to Group management − Close involvement of the Legal De- and operational departments. partment in decision making contri- − Each year the Group improves the butes to improving legal risk manage- level of detail and efficiency of its ment. information management system, − Contract management and electronic in particular by combining financial archiving tools have been introduced information and quantitative infor- enabling more efficient tracking of mation while taking into account the contracts and confidentiality agree- different stages in the sales process. ments. This provides an increasingly ac- − Under the responsibility of the Legal curate and global view of the activity. Department, management implemen- Every month, the Controlling entity ted an "IP Board" including experts prepares a number of reports which from the Legal Department and from are made available to management. the Corporate Development Depart- Those reports are then adapted ment. This Board is responsible for and sent to each regional head and providing management with propo- account manager with the correspon- sals regarding operational and stra- ding analytical metrics. The reports tegic issues in the field of intellectual include: a report providing an over- property. The Board is also in charge view of the Group's profit and loss of the implementation and of the fol- broken down by activity an showing low-up of management decisions. It profit trends and budget overruns/ meets at least once a month, submits shortfalls, with adaptations based proposals and reports on its activity on quarterly revisions of the annual during the Executive Board Meetings CORPORATE GOVERNANCE Kudelski Group annual Report 2010

4. Group management

4.1. Group executive management members

Date of birth Nationality Position Education

André Kudelski 1960 Swiss Chairman and Chief Executive Engineer-physicist Officer CEO( ) of the Group Ecole Polytechnique Fédérale de Lausanne (EPFL)

Pierre Roy 1952 Swiss Director of Operations (COO), Degree in Business Executive Vice President of Digital TV Management the Group Hautes Etudes Commerciales (HEC) de l’Université de Lausanne Charles Egli 1948 Swiss Director ETS Engineer in Electronics Executive Vice President of Chief Executive Officer Ecole Supérieure Technique (or today the Group of Nagra Public Access AG HES (Hautes Hautes Etudes Spéciali- sées Lausanne) 46 Mauro Saladini 1966 Swiss Chief Financial Officer ETHZ Electrical Engineer Executive Vice President of (CFO) Ecole polytechnique fédérale de Zurich the Group MBA INSEAD (France) Lucien Gani* 1948 Swiss Director of Group Legal Affairs Doctorate in Law General Counsel HEC Degree University of Lausanne Bar Exam John Burke 1953 Irish Director of Group Human Degree in Economics Senior Vice President Resources MBA (Hons) Trinity College (Dublin) Nicolas Gœtschmann 1960 Swiss Director of Group Administration Degree in Economics Corporate Secretary University of Fribourg Alex Osadzinski** 1958 British/ Director Product Degree equivalent to a Executive Vice President of American USA BSc in Computer the Group Science / Management Information Systems and Marketing* Yves Pitton 1968 Swiss Director Corporate Degree in Physical Engineering Senior Vice President Development University of Lausanne Doctorate in Materials Science Ecole Polytechnique Fédérale de Lausanne (EPFL) MBA SDA Bocconi (Italy)

*Lucien Gani, General Counsel of the Kudelski Group, has decided to retire from the function of General Counsel as from 31 March 2011. He will continue to respond to occasional requests from the Group. Mark Beariault (born in 1971, American National, Doctor in Law (Juris Doctor) from the University of Geor- getown and admitted to the California and New York bars) will succeed Lucien Gani as Group General Counsel and member of the Executive Board as from 1 April 2011. **Alex Osadzinski obtained various scientific diplomas in the United Kingdom in return for which the company International Education Evaluations Inc. in 1991 issued an equivalence to an American Bachelor’s degree in Computer Science/Management Information Systems and Marketing. André Kudelski Pierre Roy Charles Egli

Mauro Saladini Lucien Gani John Burke

Nicolas Gœtschmann Alex Osadzinski Yves Pitton CORPORATE GOVERNANCE Kudelski Group annual Report 2010

Mandates with main operational companies held by KUDELSKI sa

André Kudelski

Please see article 3.1 of this section.

Pierre Roy

Pierre Roy began his professional career with Procter & Gamble as a Financial Analyst in 1975. Following − OpenTV Corp., Board member until this early experience, he joined IBM in 1977 as a Sales Engineer. In 1979, he began his international ca- 31.12.2010 reer with Digital Equipment Corporation, where he fulfilled various management positions at the European − Nagravision SA, Board member, Director headquarters in Geneva and also abroad, in the Finance and Administration, Marketing and Business − SmarDTV SA, Board member Management departments. He joined Kudelski SA in 1992 as Managing Director of Nagra Audio, Busi- − Nagra USA, Inc., Board member ness Development Director of Nagravision and Managing Director of Précel (at the time a Kudelski Group − Quative Ltd., Board member company). In 1999 he started his own corporate consultancy firm working in the telecommunications sec- − Nagravision Asia Pte Ltd., Board member tor while continuing to collaborate on strategic projects for Nagravision. In 2003, he was appointed Chief − Nagra Media Korea LLC, Board member Operating Officer for the Digital Television sector of the Kudelski Group and Executive Vice President. − Nagra Media Pvt Ltd., India, Board member − Nagra Thomson Licensing SA, Chairman

48 Charles Egli

Charles Egli worked at Studer Revox in Zurich as a Development Engineer then as Project Manager until − SkiData AG, CEO Vorstandsvorsitzender 1989, when he joined Nagravision as Project Manager. In 1992, he was appointed as Chief Operating Of- − Nagra Public Access AG, Chief Executive Of- ficer of Kudelski SA and then, in January 2003, Chief Executive Officer of Nagra Public Access AG (until ficer (until 4 June 2010) 4 June 2010) and Executive Vice President of the Kudelski Group. He has also occupied the post of Chief − Nagravision SA, Board member Executive Officer of SkiData AG since September 2004. − polyright SA, Board member, Vice President − Nagra plus SA, Director

Mauro Saladini

After five years as a financial services consultant with Accenture, Mauro Saladini joined Thema Consulting, − Nagravision SA, Director where he set up the Zurich subsidiary and took responsibility for cash flow and risk management activities. − OpenTV Corp., Board member In 1997, he joined McKinsey & Co, where he became a partner in 2001. He worked in particular on corpo- (until 31 December 2010) rate finance and strategy projects relating to various industries, mainly media and telecommunications. − SkiData AG, Chairman of the Board In addition, Mauro Saladini was in charge of the Swiss Media Practice and joint-head of the European Me- of Directors dia Practice. He has been the Chief Financial Officer and Executive Vice President of the Kudelski Group − NagraID Security SA, Board member since 1 February 2003. − Quative Ltd, Board member Other: − Newave Energy Holding SA (Switzerland), Board member

Lucien Gani

Lucien Gani began his professional career in 1972 as a lawyer with the Federal Tax Administration, and then − OpenTV Corp., Board member occupied the post of Deputy Director with the Compagnie Vaudoise d'Electricité in Lausanne, where he (until 31 December 2010) remained from 1974 until 1976. Between 1977 and 1983, he was a trader with the company La Commer- − SmarDTV SA, Chairman ciale SA in Lausanne. From 1984, he wrote his doctoral thesis in law and undertook a law internship in 1987. − NagraID SA, Board member Since 1990, he has worked as an independent lawyer with a law firm in Lausanne. He joined the Kudelski − Nagravision SA, Board member Group in January 2006 as Director of Legal Affairs. Previously, he acted as counsel for several years as an − EDSI SAS (France), Chairman independent lawyer in the drafting and negotiation of strategic contracts for the Kudelski Group. − EmbedICs LLC, Director − Nagra Media Pvt, Ltd., India, Board member Mandates with main operational companies held by KUDELSKI sa

John Burke

John Burke began his professional career in marketing with Procter & Gamble International in Geneva in − Nagravision SA, Director 1977. From 1982, he was appointed Group Marketing Manager with various Group subsidiaries, including Geneva, Athens, Cincinnati and Madrid. In 1986, he joined RotoVision SA as Sales Director. He then joined the IUCN (World Conservation Union) in 1991 as Director of Communications and Public Relations. In 1996, he joined Novartis Consumer Health, initially as Head of Human Resources and Communication. He was then appointed Head of the Medical Nutrition division and a member of the Executive Commit- tee, before being promoted to worldwide Head of the Nutrition division. In 2001, John Burke joined the Geneva-based International Federation of Red Cross and Red Crescent Societies as Director of Support Services and in 2004 was appointed Chief Administrative Officer of the Global Fund to Fight Aids, TB and Malaria, where he remained until he joined the Kudelski Group on 1 June 2006.

Nicolas Gœtschmann

From 1986 to 1989, Nicolas Gœtschmann was a Private Client Executive with Credit Suisse in Geneva − Nagravision SA, Director before becoming a Fund Manager with Kestrel SA in Neuchâtel. In 1990, he joined the Kudelski Group as − Nagra ID SA, Board member Director of Finance and Administration. Since 2004, he has been the Corporate Secretary of the Kudelski − Nagra Public Access AG, Director Group as well as Director of Group Administration. (until 4 June 2010) − Nagra USA Inc., Board member − Nagra France Holding SAS (France), Chairman 49

Alex Osadzinski

Alex Osadzinski began his professional career in the United Kingdom in 1978, at two successful start-up − Nagravision SA, Director companies which were subsequently sold. In 1984, he joined AT&T as European Sales Manager. From − OpenTV Corp., Board member 1986 to 1994 he worked for Sun Microsystems, where he became Vice President for Markets and Product − Quative Ltd., Board member Strategy. After two years with Grass Valley Group (Tektronix) as Vice President for Marketing and Interna- tional Sales, President of Grass Valley Japan and General Manager, Mr Osadzinski returned to the world of start-ups with the companies BE from 1996 to 1998 and Vitria Technology from 1998 to 2000. Both these companies were subsequently listed on the stock exchange. He then became CEO of the start-up Katmango. From 2001 to 2008 he was involved in start-ups as a “Venture Partner” through the company Trinity Ventures, one of the main venture capital companies in Silicon Valley and active in software and digital media. In December 2008 Mr Osadzinski joined the Kudelski Group as Executive Vice President Product in the Digital Television division.

Yves Pitton

Mr Pitton worked on several projects at the Ecole Polytechnique Fédérale de Lausanne (EPFL) and for − Nagravision SA, Director various international companies during the three years of his PhD thesis. After obtaining his PhD in Mate- − Abilis Systems Sàrl, gérant rial Sciences & Engineering, he joined Alusuisse (now called Alcan Aluminium Valais SA) as Project and Other : Product Manager, with responsibilities for product development, marketing and business development. He − Ligaris SA (Switzerland), Board member left Alusuisse to study for an MBA, which he obtained after one year's study in 2001. From August 2001, Mr Pitton worked as a consultant and then Engagement Manager for McKinsey & Co in Europe and the United States, where he led strategic projects for international companies operating in various business sectors, including finance, TV & new media, high-tech, technology and industrial businesses, both in Eu- rope and in the US. He joined the Kudelski Group in October 2006 and was put in charge of strategic projects. In September 2008, he took responsibility for Business Development, and on 15 December he was appointed to the Group Executive Board as Senior Vice President in charge of Corporate Development. CORPORATE GOVERNANCE Kudelski Group annual Report 2010

BOARD OF DIRECTOrs

P. Roy M. Saladini Executive VP Executive VP Director of Operations DTV (CFO) André Kudelski Chairman and Chief Executive Officer (CEO) A. Osadzinski L. Gani Executive VP General Counsel Director of Product DTV Director of Group Legal

Y. Pitton N. Gœtschmann J. Burke Senior VP Corporate Secretary Senior VP Director Corporate Development Director of Group Administration Director of Group RH

C. Egli Executive VP CEO of NPA AG

50 4.2. Other activities and vested interests The Committee seeks to ensure that glo- Nomination Committee considers that Please refer to the individual profiles of bal remuneration offers a salary level that there are no companies that can be members of the Group management is comparable with that of an executive compared to the Group, outside the under 4.1 above. manager with similar competencies and above-mentioned general elements. This responsibilities, also taking into account is in particular due to the diversification 4.3. Management contracts national and international practices in of the Group's activities and the rapid There were no management contracts the digital television and Internet activity evolution of the markets in which the in place at Kudelski SA on 31 December sectors. The Committee also takes into Group operates on the one hand, and the 2010. account the Group's desire not to dilute influence of the players in these markets the capital of the company excessively. on the other hand.

5. Remuneration, shareholdings and Fixed remuneration is not considered The purpose of the variable component loans individually as a comparison factor for of remuneration is to align the interests the Committee, which favors an overall of the members of Group Management 5.1. Principles of remuneration assessment of remuneration in the long- with those of the company by having The objective of the remuneration policy of term interest of the company and of its members contribute to value creation or the Remuneration and Nomination Com- shareholders. The Remuneration and be penalized in the opposite situation. mittee is to align the interests of the mana- Nomination Committee's assessment The variable component of remuneration gement bodies as closely as possible with of the terms of remuneration was based depends on the Group's results (both those of the company over the medium on its own opinion and on the terms ap- economic and strategic), the employee's and long term. In particular, the variable plied in the market by other companies level of responsibility, and the achieve- component of remuneration can change of similar size (in terms of complexity, ment of individual objectives. Variable depending on the evolution of business, revenues and number of employees and remuneration is not expressed as a the level of responsibility assumed by listed on Nasdaq or on Swiss Perfor- percent of fixed remuneration. executive members and their performance, mance Index – SPI – sectors Techno- which can have a positive or negative effect logy) and with which it competes in hiring There is currently no provision setting on the remuneration of each member of board members and upper managers, forth a particular allowance or benefit management. The method for determining without being implicitly in the same acti- – including with regard to share vesting the remuneration of each executive mem- vity sector, without referring to particular periods - in the event of termination of ber is optimized in such a way as to avoid benchmarks or engaging the services the employment contract of a member favoring short-term results. of consultants. The Remuneration and of Group Management, early departure of a member of the Board of Directors or of a member of Group Management sation is thus maximized by reaching, change in control of the company. who does not reside in Switzerland and or even surpassing, several individual whose variable remuneration is paid enti- objectives. However, failing to reach a 5.2. Components of remuneration rely in cash. These shares are blocked for single important objective has a non- Note 44 to the financial statements a period of 1, 3 or 7 years in accordance linear effect that can impact variable shows the breakdown of payments to with the employee's wishes, but at least salary significantly. members of the Board of Directors and half of these shares must be blocked for Group Management, pursuant to Article at least three years. Members of Group Special information regarding 2010 663bis of the Swiss Code of Obligations. Management may also take part in the The remuneration of each member of The principles governing the determi- share purchase plan introduced in 2004, management is fixed globally and the nation of components of remuneration in accordance with the terms of said plan variable remuneration of management are different for non-executive members (refer to section 2.7). members is not determined according of the Board of Directors and for Group to the fixed component of remuneration Management Variable remuneration as specified in section 5.1. above. As The amount of the variable component an indication, the variable component 5.2.1 Members of the Board of Directors depends on the individual performance of the remuneration of members of Overall remuneration of non-executive of the member of management and the management in 2010 represented members of the Board of Directors is strategic, economic and operational per- between 30% and 65% of the global composed of fixed annual fees and an formance of the Group. The key factors remuneration, except for the remunera- 51 allowance for costs and other expenses determining variable remuneration levels tion of the Chief Executive officer (see incurred while performing their duties. are the performance of the Group and its note 44 of the Financial Statements). This remuneration is paid in cash. divisions, the budget, the strategic initia- This ratio is not fixed and can therefore tives, the achievement of objectives and change every year. The differences in If specific tasks or services not within the the quality of management delivered by the ratio between fixed and variable usual scope of activities are assigned to the member of management concerned. remuneration between the management Board members, the services rendered members is based on the practices used are remunerated on the basis of fees The objectives are set by the Board of Di- in the market at the time of the person's that correspond to market rates for the rectors and reflect the Group's strategy; nomination, the function and the status same type of services. they also represent part of the objectives within the company as mentioned under of the Chief Executive Officer (CEO). section 5.1. above. 5.2.2 Members of Group Management The CEO sets the individual objectives Instruments of remuneration of each member of Group Management The variable component of the remune- The total annual remuneration of mem- with the Remuneration Committee. ration of members of management was bers of Group Management includes a lower than in 2009, mainly because of salary and a variable component . The Remuneration and Nomination the Group's results which were nega- Committee has discretionary authority to tively impacted by a certain number of Remuneration is paid in cash, shares and determine how the components of indi- external factors related to the effects payment in kind, including for example vidual performance and those relating to of foreign exchange rates and slower payment of all or part of the health the Group are to be weighted, in order to growth in some regions, among other insurance premium and the provision set the remuneration of each member of causes. of a company car. The fixed component Group Management. is in principle paid in cash. The Remu- 5.3 Competency and procedure for deter- neration and Nomination Committee The global results of the assessment of mining remuneration levels has discretionary authority to determine each individual objective are calculated The Remuneration and Nomination how the variable part is paid, taking into according to a weighted geometric Committee is responsible for setting the account such criteria as the share price average. The result of the mathematical remuneration policy as well as the remu- and the dilution effect. A maximum of formula promotes excellence at all levels neration of each member of the Board of 50% of the variable part of remuneration and encourages members of manage- Directors and Group Management. As an is in principle paid in the form of Kudelski ment to work on their weakest points. exception to this principle, the remune- SA bearer shares, with the exception The variable component of compen- ration of members of the Remuneration CORPORATE GOVERNANCE Kudelski Group annual Report 2010

and Nomination Committee is set by 6.1. Voting rights and representation 7. Changes of control and defense the Board of Directors (refer to section restrictions measures 3.4.2, Remuneration and Nomination In accordance with the Articles of Committee). The Chairman of the Board Incorporation of Kudelski SA, there are 7.1. Duty to make an offer is invited to take part in setting the no restrictions on voting rights and no Kudelski SA has no provision on opting- remuneration of members of the Board statutory Group clauses and rules on out or opting-up in its Articles of Incorpo- and key managers in the company, with granting exceptions. ration. This means that if a shareholder the exception of the Chairman's own reaches the limit laid down by the law on remuneration. 6.2. Statutory quorums stock markets (art. 32 LBVM: 33 1/3% The Kudelski SA Articles of Incorpo- of the voting rights), he must by virtue of Each year, the Remuneration and Nomi- ration do not provide for any statutory this law submit a takeover bid. nation Committee examines the remune- quorums. ration policy and sets the remuneration of 7.2. Clauses on changes of control each member of the Board of Directors 6.3. Convening of the General Meeting of No such clauses exist. and Group Management, in principle Shareholders during the first quarter; during the same The rules in the Articles of Incorpora- period, the Chief Executive Officer sets tion on calling the General Meeting of 8. Auditors the performance objectives of the mem- Shareholders are in accordance with 52 bers of Group Management. He presents applicable legal provisions. The General 8.1. Duration of the mandate and term of the decisions to the Board of Directors in Meeting of Shareholders must be called office of the lead auditor a meeting that is generally held during the at least 20 days before the date of the The auditors of Kudelski SA are Pricewa- first quarter as well. The remuneration of meeting. The notice of the General terhouseCoopers SA (Lausanne). Some non-executive members of the Board of Meeting is published in the Swiss Official companies affiliated to the Group are Directors and of the Remuneration and Gazette of Commerce. audited by other auditors. The audi- Nomination Committee is set by the entire tors were reappointed by the General Board of Directors in a meeting that is also 6.4. Agenda Meeting of Shareholders of Kudelski SA generally held during the first quarter. The Items on the agenda are mentioned in of 4 May 2010 for a statutory period of individuals whose remuneration is being the notice regarding rules for adding one year. The PricewaterhouseCoopers discussed do not attend the relevant mee- items to the agenda, the Articles of SA mandate began in 1985. It has been tings of the Remuneration and Nomination Incorporation of Kudelski SA do not under the responsibility of Ms Corinne Committee and of the Board of Directors contain provisions that differ from the Pointet Chambettaz since 1 January Swiss Code of Obligations, namely Art. 2010. The auditor in charge is replaced 5.4 Changes to the remuneration policy 699 CO, “Shareholders who represent at the latest seven years after the year in during the year under review shares totaling a nominal value of CHF which he first occupied this position, as No major change was made to Kudelski 1 million (*) may request that an item be specified in article 730a paragraph 2 of Group's remuneration policy relative to included in the agenda. The calling and the Swiss Code of Obligations. the 2010 financial year. the inclusion of an item on the agenda must be requested in writing listing the 8.2. Auditing fees items and motions”. The Kudelski Group paid Pricewaterhou- 6. Shareholder participation (*) This represents 0.2% of the capital of Kudelski SA. seCoopers for auditing services for the year 2010 the sum of CHF 1 104 590. The provisions of the Articles of Incorpo- 6.5. Registration in the share register ration governing the participation rights Kudelski SA shares that can be traded Auditing services are understood to of shareholders are in compliance with on the Swiss Exchange are bearer mean the work required each year to the law as set out in the Swiss Code of shares; consequently there is no register examine the consolidated accounts of Obligations. The Articles of Incorporation of shareholders for this category of the Group and its subsidiaries and to pre- of Kudelski SA may be consulted on the shares. pare the reports required under the laws Kudelski Group website via the following of each country, performed by Pricewa- link: www.nagra.com/ar/statuts_Kudelski. terhouseCoopers. pdf. 8.3. Additional fees please refer to points 3.4.2 and 3.4.3 of INTERNET LINKS The Kudelski Group paid Pricewate- this report. rhouseCoopers for additional services Group web site for the year 2010 the sum of CHF 391 www.nagra.com 240, representing CHF 297 400 for tax 9. Information policy Investor relations section advisory services and CHF 63 840 for www.nagra.com/investors.html other additional services. Additional ser- The Kudelski Group keeps investors Important dates vices mean in particular services such as regularly informed of the following deve- www.nagra.com/investors-calendar.html the auditing of occasional transactions, lopments: Financial documentation advice for the implementation of a cash − progress of business, major new www.nagra.com/investors-doc.html flow management and personnel profit- contracts; Press releases sharing plan and other services such as − changes occurring in the manage- www.nagra.com/media-pr.html new or modified accounting methods. ment of the Group; − acquisitions or sales of companies; 8.4. Monitoring and control instruments − half-yearly and annual financial E-MAIL ADDRESSES pertaining to the audit results. The aim of the Audit Committee of the General information Board of Directors is to provide effective Press releases are issued in compliance [email protected] and regular supervision of the company's with the rules in force on the Swiss Investor relations 53 financial reporting processes in order to Exchange concerning factual publicity [email protected] ensure their integrity, transparency and and are available on the Group's website Media relations quality. To this end and under its terms of simultaneously with their publication. A [email protected] reference, it is responsible for monitoring link on the home page of the Group's the work of the external auditors. web site allows direct access to press PricewaterhouseCoopers provides the releases. The Group communicates as Audit Committee with a detailed report often as necessary in this manner. Press before each Committee meeting regar- releases are generally published in ding the execution and results of its work French and in English. In certain specific within the Kudelski Group, proposals to cases a German version is also provided. correct or improve identified problems They are available in these languages on and the implementation status of deci- the website. Persons wishing to receive sions made by the Audit Committee. Kudelski Group press releases may subscribe to a mailing list using a form The auditor's representatives, including available on the Kudelski Group website. the auditor in charge of the Group's Financial results are presented to inves- audit, are regularly invited to take part in tors and financial analysts during a press meetings of the Audit Committee as ex- conference held twice a year. Persons ternal participants. Representatives from invited can also follow the conference by PricewaterhouseCoopers were invited to phone. The Group's website is a perma- all three meetings of the Audit Com- nently updated source of information. mittee with the exception of discussions The Investor Relations section contains a and decisions of the Audit Committee list of the principal dates of the corporate regarding the auditors. The auditor in calendar (publication of results, General charge of the internal audit attended the Meeting and presence at major trade parts of these three meetings that were shows) as well as the Group's main relevant for him. publications (annual report and half-year report). For more information on the Audit Com- mittee, and particularly on the selection, evaluation and independence criteria, 08 APENDICES GROUP PROFILE

DIGITAL TELEVISION

Nagra Integrated software security solutions for digital television operators and content providers. Middleware solutions enabling advanced digital television services including interactive television as well as interactive and addressable advertising. Multi-screen user interfaces. Last generation turnkey IPTV platform including content protection, management and distribution.

SmarDTV Removable Conditional Access Modules (CAM) for digital TV access on digital devices.

Abilis Systems Integrated circuits for digital television and wireless communications.

NagraID Development and production of modules and smart cards for contact and contactless 54 identification systems.

Nagra+ Security systems for analog pay television. Innovative concepts developed in cooperation with Canal+ in the digital TV area. Joint-venture with Canal+ (F).

PUBLIC ACCESS

SkiData Integrated access and management solutions for car parks, ski lifts as well as sports, culture, entertainment and exhibition facilities.

polyright Open-ended rights and service management solutions for hospitals, universities and corporations. Joint-venture with the Securitas group.

AUDIO

Nagra Audio Portable digital recorders for professionals; products in the high-end Hi-Fi sector Historical overview Kudelski Group annual Report 2010

1951 1996 Creation of the company by Stefan Full conversion of the convertible bond Kudelski and launch of the first portable (1986-1996) as part of a PEO. recorder, the Nagra I.

1997 1958 Digital television becomes the compa- Release of the Nagra III, the legendary ny's core business. cinema recorder. Nagra Audio launches a range of high- end Hi-Fi products 1986 The company is listed on the stock market. 1998 Creation of NagraStar, a joint-venture with EchoStar, and of NagraCard. 1989 Canal+ adopts Kudelski's access control Capital increase and first indirect split of system for pay television. the Kudelski share (5+1). 55

1991 1999 André Kudelski succeeds Stefan Ku- The company becomes a holding com- delski as Chairman and Chief Executive pany. Officer of the Kudelski Group. Kudelski stock is listed on the principal First million analog decoders sold. market of SIX Swiss Exchange. Conditional access television systems become Kudelski's core business. 2000 Investment in SportAccess (today poly- 1992 right). Creation of Nagra+, joint-venture with Canal+. Capital increase and second indirect split (10+2). Launch of the Nagra D, the first portable- professional 4-track digital recorder. 2001 The Group makes several acquisitions in 1995 the public access sector (SkiData, Tic- First order (from EchoStar) for a Nagra- ketcorner) and in digital television (Lysis, vision digital system, marking the arrival Livewire). of Nagravision in the North American market. The Kudelski share is split by 10.

Launch of a convertible bond of USD 325 million. The operation is heavily over-subscribed. Historical overview Kudelski Group annual Report 2010

2002 2006 2009 After a ten-year period of uninterrupted growth, the Kudelski Group suffers from Strategic investments for the develop- Migration to service mode completed, the impact of the crisis in the television ment of the digital TV ecosystem. ensuring a more stable revenue base for market, particularly in Europe, and of un- the Group. favourable developments in the foreign Acquisition of the digital TV activity of exchange markets. The company carries SCM Microsystems resulting in the crea- Massive deployments on digital terres- out an in-depth review of its structures. tion of SmarDTV. trial television markets.

Creation of the holding company Nagra Intensified Research & Development Full OpenTV acquisition. Public Access (including SkiData, Tic- effort with a focus on content protection, ketcorner and polyright). IPTV and mobile TV. Market expansion and long term contract with DISH network (USA).

2003 2007 Creation of an R&D center in China. Recovery of the digital television market. The group becomes a leader in middleware and interactivity for digital televi- Acquisition of the MediaGuard product sion with the acquisition of a controlling 2010 56 line from Canal+ Technologies and crea- interest in OpenTV. Expansion strategy focusing on emer- tion of Nagra France. ging markets. Launch of new IPTV and mobile TV solutions. Renovation of the Middleware & Adverti- 2004 sing activity. Launch of new families of security The Group publishes record results, solutions. Success in Over-The-Top and US cable tripling its digital TV revenues in Europe markets. and almost doubling them in America. Excellent results for Nagra Public Ac- cess.

2005 Success of the Nagra CD player. Early redemption of the USD 325 million convertible bond and issuance of a new convertible bond of CHF 350 million. 2008 Revenues pass the billion Swiss francs Creation of Quative (IPTV sector). milestone for the first time thanks to a 20.4% Group revenue growth in New Nagra Public Access structure; the constant currency. entity is profitable again. Over 101 million digital TV active smart Sale of the majority stake of Ticketcor- cards & devices worldwide. ner. 25 million smart cards successfully Success of the new Nagra PMA pyrami- migrated to service mode. dal amplifier. Increasing footprint in Asia including for new solutions. adDresses

Kudelski Group headquarters NAGRA PLUS Nagra Audio 22-24, route de Genève KUDELSKI SA P. O. Box 134 NAGRA AUDIO 22-24, route de Genève 1033 Cheseaux Nagravision SA – Kudelski Group P. O. Box 134 Switzerland 22-24, Route de Genève 1033 Cheseaux Tel. +41 21 732 0311 P. O. Box 134 Switzerland Fax +41 21 732 0300 1033 Cheseaux Tel. +41 21 732 0101 [email protected] Switzerland Fax +41 21 732 0100 www.nagraplus.com Tel. +41 21 732 0101 [email protected] Fax. +41 21 732 0100 www.nagra.com NAGRA ID SA [email protected] Le Crêt-du-Locle 10 www.nagraaudio.com P. O. Box 1161 Digital TV 2301 La Chaux-de-Fonds Switzerland NAGRAVISION SA Tel. +41 32 924 0404 22-24, route de Genève Fax +41 32 924 0400 P. O. Box 134 [email protected] 1033 Cheseaux www.nagraID.com 57 Switzerland Tel. +41 21 732 0311 Fax +41 21 732 0300 Public Access [email protected] www.nagravision.com SKIDATA AG Untersbergstrasse 40 SMARDTV SA 5083 Grödig/Salzburg 22-24, route de Genève Austria P. O. Box 134 Tel. +43 6246 888 -0 1033 Cheseaux Fax +43 6246 888-7 Switzerland [email protected] Tel. +41 21 732 04 04 www.skidata.com Fax. +41 21 732 04 15 [email protected] POLYRIGHT SA www.smardtv.com 10, rue de l'Industrie P. O. Box 1261 ABILIS SYSTEMS SA 1951 Sion 18, Chemin des Aulx Switzerland 1228 Plan-Les-Ouates/Genève Tél. +41 27 323 0910 Switzerland Fax +41 27 323 0911 Tel. +41 22 706 19 30 [email protected] Fax +41 22 706 19 49 www.polyright.com [email protected] www.abilis.com impressum Kudelski Group annual Report 2010

Project management Design

Corporate Communications, essencedesign Kudelski Group

Support, coordination Printing

Desrochers Communication Swissprinters, Renens, Switzerland

PhotolithographY

atelierZed

Disclaimer

This report contains forward-looking statements, including, but not limited to, statements that are predications of or indicate future events, trends, plans or objectives. These statements are subject to known and unknown risks and uncertainties and could be affected by other factors that could cause actual results, plans and objectives to differ materially from those expressed or implied in the forward- looking statements. Potential risks and uncertainties include such factors as general economic conditions, performance of financial market, competitive factors and changes in laws and regulations.

In case of inconsistency between the French and the English versions of the 2010 Annual Report, the French version prevails. KUDELSKI SA 22-24, Route de Genève T + 41 21 732 01 01 Case postale 134 F + 41 21 732 01 00 1033 Cheseaux [email protected] Suisse www.nagra.com