SurfControl plc Annual report + accounts 2004
Principal Offices
SurfControl Inc.
United States – Massachusetts
1900 West Park Drive, Suite 180, 
Westborough, MA 01581 USA
Tel: +1 (508) 621 3900
Fax: +1 (508) 621 3921
E-mail: sales.us@surfcontrol.com
United States – California
5550 Scotts Valley Drive,
Scotts Valley CA, 95066 USA 
Tel: +1 (831) 431 1400
Fax: +1 (831) 431 1800
E-mail: info@surfcontrol.com 
SurfControl plc
United Kingdom – Congleton
Riverside, Mountbatten Way, Congleton,
Cheshire CW12 1DY United Kingdom
Tel: +44 (0)1260 296 200
Fax: +44 (0)1260 296 201
E-mail: surfinfo@surfcontrol.com
SurfControl plc – Singapore
Level 58 Republic Plaza,
9 Raffles Place, Singapore 048619
Tel: +65 6823 1312
Fax: +65 6823 1481
E-mail: support.sg@surfcontrol.com
SurfControl plc – France
Le Challenge 92, 124 bd François Arago
Nanterre, France
SurfControl GmbH 
Austria 
Dorotheergasse 7, A-1010 Vienna, Austria
Tel: +43 1 513 44 15
Fax: +43 1 513 44 02
E-mail: sales.at@surfcontrol.com 
SurfControl GmbH 
Germany
Rüsterstraße 13,
D-60325 Frankfurt am Main, Germany
Tel: +49 69 70 79 86 0 
Fax: +49 69 70 79 86 20
E-mail: sales.de@surfcontrol.com
SurfControl BV
Netherlands
Schouwburgplein 30-34, 3012 CL Rotterdam, 
The Netherlands 
Tel: +31 (0) 10 402 0000 
Fax: +31 (0) 10 402 0099
E-mail: sales.nl@surfcontrol.com
SurfControl Pty Ltd
Australia
Level 1, 19 Havilah Street, Chatswood,
NSW 2067 Australia 
Tel: +61 (0)2 9414 0000 
Fax: +61 (0)2 9414 0099
E-mail: sales.au@surfcontrol.com
Beijing Messagesoft Technology Co., Ltd.,
Office Tower C2, 3rd Floor,
Oriental Place, Beijing, 100 738, China
Tel: +86 10 8518 8860
Fax: +86 10 8518 0067
E-mail: info@messagesoft.net
www.surfcontrol.com
The World’s #1 Web and E-mail Filtering Company
Annual report + accounts 2004
Contents
01 Chairman’s statement
02 Chief Executive’s strategic review
12 SurfControl at a glance
14 Finance Director’s review
20 Board of Directors
22 Advisers
23 Directors’ report
27 Corporate governance report
33 Directors’ remuneration report
40 Independent auditors’ report
41 Group profit and loss account
41 Group statement of total recognised
gains and losses
42 Group balance sheet
43 Company balance sheet
44 Group statement of cash flow
45 Reconciliation of net cash flow to
movement in net funds
46 Notes to the financial statements
68 Unaudited Group profit and loss account [ BACK COVER ] [ FRONT COVER ] [ FLAP OUTER ]
SurfControl plc Annual report + accounts 2004
Principal Offices
SurfControl Inc.
United States – Massachusetts
1900 West Park Drive, Suite 180, 
Westborough, MA 01581 USA
Tel: +1 (508) 621 3900
Fax: +1 (508) 621 3921
E-mail: sales.us@surfcontrol.com
United States – California
5550 Scotts Valley Drive,
Scotts Valley CA, 95066 USA 
Tel: +1 (831) 431 1400
Fax: +1 (831) 431 1800
E-mail: info@surfcontrol.com 
SurfControl plc
United Kingdom – Congleton
Riverside, Mountbatten Way, Congleton,
Cheshire CW12 1DY United Kingdom
Tel: +44 (0)1260 296 200
Fax: +44 (0)1260 296 201
E-mail: surfinfo@surfcontrol.com
SurfControl plc – Singapore
Level 58 Republic Plaza,
9 Raffles Place, Singapore 048619
Tel: +65 6823 1312
Fax: +65 6823 1481
E-mail: support.sg@surfcontrol.com
SurfControl plc – France
Le Challenge 92, 124 bd François Arago
Nanterre, France
SurfControl GmbH 
Austria 
Dorotheergasse 7, A-1010 Vienna, Austria
Tel: +43 1 513 44 15
Fax: +43 1 513 44 02
E-mail: sales.at@surfcontrol.com 
SurfControl GmbH 
Germany
Rüsterstraße 13,
D-60325 Frankfurt am Main, Germany
Tel: +49 69 70 79 86 0 
Fax: +49 69 70 79 86 20
E-mail: sales.de@surfcontrol.com
SurfControl BV
Netherlands
Schouwburgplein 30-34, 3012 CL Rotterdam, 
The Netherlands 
Tel: +31 (0) 10 402 0000 
Fax: +31 (0) 10 402 0099
E-mail: sales.nl@surfcontrol.com
SurfControl Pty Ltd
Australia
Level 1, 19 Havilah Street, Chatswood,
NSW 2067 Australia 
Tel: +61 (0)2 9414 0000 
Fax: +61 (0)2 9414 0099
E-mail: sales.au@surfcontrol.com
Beijing Messagesoft Technology Co., Ltd.,
Office Tower C2, 3rd Floor,
Oriental Place, Beijing, 100 738, China
Tel: +86 10 8518 8860
Fax: +86 10 8518 0067
E-mail: info@messagesoft.net
www.surfcontrol.com
The World’s #1 Web and E-mail Filtering Company
Annual report + accounts 2004
Contents
01 Chairman’s statement
02 Chief Executive’s strategic review
12 SurfControl at a glance
14 Finance Director’s review
20 Board of Directors
22 Advisers
23 Directors’ report
27 Corporate governance report
33 Directors’ remuneration report
40 Independent auditors’ report
41 Group profit and loss account
41 Group statement of total recognised
gains and losses
42 Group balance sheet
43 Company balance sheet
44 Group statement of cash flow
45 Reconciliation of net cash flow to
movement in net funds
46 Notes to the financial statements
68 Unaudited Group profit and loss account
4569 SurfControl COVER  9/23/04  1:03 PM  Page 1 [ INSIDE FRONT COVER ] [ INSIDE BACK COVER ] [ FLAP INNER ]
Highlights
■ Pre-tax profit increased by 62% to $14.4m
(2003: $8.9m) 
■ Group turnover increased by 19% to $87.3m
(2003: $73.2m) 
■ Group invoicing increased by 16% to $106.6m
(2003: $92.1m)
■ Cash balances as at 30 June 2004 increased 
to $87.5m (2003: $61.7m) 
■ Gross profit margin of 98%
■ Increased contribution of indirect channel
sales from 49% to 58% for the year
42.2
01 02 03
(Year)
04
54.2
73.2
87.3
Turnover $m
$87 .3m
Turnover up 19% from
$73.2m in 2003
$87 .5m
Cash balance $61.7m in 2003
SurfControl the world leader in
enterprise Web and e-mail filtering.
SurfControl plc, the world leader in
enterprise Web and e-mail filtering,
delivers on its promise to help companies
‘Stop Unwanted Content’ in the workplace
by continuous innovation, invention and
expansion of its filtering products to
address new content risks as they emerge. 
SurfControl is the industry’s only
complete solution to managing Internet
risk. SurfControl technology protects all
points of entry, and every way employees
use the Internet for business – Instant
Messaging, Web, e-mail and peer-to-peer.
It also works on every platform they work
on – Blue Coat, Cisco, Check Point,
Microsoft Exchange and ISA 2004,
and many more. 
The company’s products and technology
are used by more than 20,000 customers
worldwide, including many of the world’s
largest corporations. SurfControl employs
more than 500 people in offices across
the United States, Europe and Asia/Pacific.
For further information and news
on SurfControl, please visit
http://www.surfcontrol.com/
> vision
> leadership
> innovation
> evolution
4569 SurfControl COVER  9/23/04  1:03 PM  Page 2 [ INSIDE FRONT COVER ] [ INSIDE BACK COVER ] [ FLAP INNER ]
Highlights
■ Pre-tax profit increased by 62% to $14.4m
(2003: $8.9m) 
■ Group turnover increased by 19% to $87.3m
(2003: $73.2m) 
■ Group invoicing increased by 16% to $106.6m
(2003: $92.1m)
■ Cash balances as at 30 June 2004 increased 
to $87.5m (2003: $61.7m) 
■ Gross profit margin of 98%
■ Increased contribution of indirect channel
sales from 49% to 58% for the year
42.2
01 02 03
(Year)
04
54.2
73.2
87.3
Turnover $m
$87 .3m
Turnover up 19% from
$73.2m in 2003
$87 .5m
Cash balance $61.7m in 2003
SurfControl the world leader in
enterprise Web and e-mail filtering.
SurfControl plc, the world leader in
enterprise Web and e-mail filtering,
delivers on its promise to help companies
‘Stop Unwanted Content’ in the workplace
by continuous innovation, invention and
expansion of its filtering products to
address new content risks as they emerge. 
SurfControl is the industry’s only
complete solution to managing Internet
risk. SurfControl technology protects all
points of entry, and every way employees
use the Internet for business – Instant
Messaging, Web, e-mail and peer-to-peer.
It also works on every platform they work
on – Blue Coat, Cisco, Check Point,
Microsoft Exchange and ISA 2004,
and many more. 
The company’s products and technology
are used by more than 20,000 customers
worldwide, including many of the world’s
largest corporations. SurfControl employs
more than 500 people in offices across
the United States, Europe and Asia/Pacific.
For further information and news
on SurfControl, please visit
http://www.surfcontrol.com/
> vision
> leadership
> innovation
> evolution
4569 SurfControl COVER  9/23/04  1:03 PM  Page 2 SurfControl plc Chairman’s statement 01.
Invoicing for the year reached $106.6m,
turnover grew 19% to $87.3m, this
resulted in pre-tax profit of $14.4m 
and at the year end a cash balance of
$87.5m. The last five years have seen a
tremendous level of commitment and
drive from all our employees led in an
exemplary fashion by the executive
management. At the end of this fiscal
year the Group had 522 employees,
and I take this opportunity to thank
every one of them for all that they have
achieved for SurfControl. During my first
year as your Chairman I have had the
chance to meet our teams in the UK,
USA, Europe and in Australia, and I 
have found them facing the future with
confidence and determination. Our
results also reflect the strong and loyal
support of our business partners, and
I thank them for it. Most of all I thank
our customers for choosing our web,
e-mail and instant messaging products
and services.
The vision set out by Rob Barrow and
Steve Purdham some six years ago has
borne great fruit and today we can fairly
claim to be a world class software
company. The Group’s success has
been built upon the enthusiasm and
dedication shown by all the people at
SurfControl. It is their skill and expertise
which has allowed us to compete on
the world stage.
Any more than a few moments spent
on self congratulation would be foolish,
the world is not static – and in a
growing market such as ours the
competition only ever gets stronger.
During this past year we have put in
place a future strategy based on our
core capabilities and upon a thorough
analysis of our chosen markets and our
competition. We have created a platform
for future growth. You will see details of
our future roadmap in Steve’s Chief
Executive Strategic Review but already
we have made significant moves in
technology, geography and markets
with the acquisition of a Linux-based
filtering appliance and the establishment
of a sales and distribution operation in
the People’s Republic of China.
Your Board has changed in composition
to reflect our size and ambition. Rob
Barrow decided a year ago that the
time was right for him to step down as
Chairman. We thank and applaud Rob
for his tremendous contribution to our
company over many years. Two new
Non-Executive Directors have joined 
us: Jane Tozer and Rene Schuster,
strengthening our corporate governance
expertise and adding further breadth to
our international software and services
industry knowledge. We are now a
significant company and your Board
has also spent considerable time and
effort on ensuring we have appropriate
governance procedures in place.
Throughout this report you will see
examples of where we added new
and enhanced information about the
Group’s corporate governance position
and the requirements of the Revised
Combined Code.
I thank you, our shareholders, for your
confidence in our future and I hope
you find this report informative and
encouraging. I look forward to the
opportunity of personally meeting
with you, our shareholders, in the
coming year.
Greg Lock
Chairman of the Board
6 September 2004
In this, my first report to shareholders as the Chairman
of SurfControl, it gives me pleasure to report on a year
of strong results and continued growth.
Today we can fairly claim to be a
world class software company 
FACT: 30-40% OF INTERNET USE
IN THE WORKPLACE IS NOT
RELATED TO BUSINESS
(SOURCE: IDC, AUGUST 2004)
Greg Lock, Chairman SurfControl plc Chief Executive’s strategic review 02.
This, together with the desire to
produce the best technology available
on the market at that time, gave us the
ability to capture mindshare and market
share, to become leaders in our field
and create a growing, cash generative,
profitable business
By 2000, the adoption of the Internet as
the main business communication tool
highlighted that the need to ‘Stop
Unwanted Content’ was about to go
beyond the boundaries of Web Filtering.
This gained further momentum as the
issues of content became universal
across Internet delivery mechanisms
such as E-mail and then Instant
messaging. Furthermore, the content
challenges subtly widened to include
pornography, sport, entertainment,
gambling and eventually the scourge
of SPAM. This led to the evolution and
strengthening of our software family to
include the SurfControl e-mail filter in
2001 followed closely by our Instant
Message Filter.
But it wasn’t just technology that was
driving change; increased use of 
the Internet beyond the US was also 
a key point of flux, and accordingly 
we expanded our reach into other
geographical regions giving us the
global presence that we have today.
Since conception we have experienced
a full range of emotions: excitement,
frustration, fear, and pride as we have
achieved all the objectives that we set
ourselves. At the beginning many long
term goals were ‘set in stone’ to drive
our vision and actions. The most
important ones were building a
business which had sustainable
growth, was both profitable and cash
generative, and in particular generated
$100m of annual sales. 
With our increasing geographical
reach and continued technological
advancement to further increase
revenues, cash generation and profits,
it is with great pride that we can
announce that we have achieved all of
our original goals, mostly ahead of the
original plan produced back in 1997/8.
With invoicing for the year ending
30 June 2004 reaching over $106m,
turnover of $87.3m, cash of $87.5m
and pre-tax profits of $14.4m, over
520 people and 13 offices around
the world together with ‘best of breed’
products, our 2003/4 year has been
another record year.
Building on
our success.
In 1998, when we launched our first web filtering
software we recognised that the market was due to
change from ‘protecting children from Pornography’ 
into ‘Protecting businesses from Unwanted Content’ 
that would affect Productivity, Resources, Legal Liability
and Security. This ‘change’ in mindset from Porn
Blockers to Rich Content Web Filters was the driving
force in our adoption by corporations across the globe.
> vision
> leadership
> innovation
> evolution
Steve Purdham, Chief Executive
Stop Unwanted Content
PRODUCTIVITY
SECURITY
LEGAL LIABILITY
NETWORK RESOURCES
INTERNET
CONTENT
RISKS
04 05
20 Billion E-mails (non-spam) 2007
07 06
E-mail Boxes
(Business)
699m
754m
806m
648m
(Source: IDC AntiSpam Survey 2004) Annual report + accounts 2004 03. SurfControl plc Chief Executive’s strategic review continued 04.
So after taking a few moments to reflect
and enjoy SurfControl’s significant
achievements we must now focus all
our attention on the future.
We have succeeded. We aim to
continue: winning tomorrow and
beyond is the focus.
In the last 12 months SurfControl has
looked further into the future and defined
the direction, objectives and technology
that we need to evolve. This work
culminated in the announcement in May
2004 of our T echnology Roadmap.
Our future continues with an aggressive
focus on our core strength of Content
Filtering. However the dynamics of our
market are changing at an accelerated
pace, presenting both a significantly
bigger opportunity and increased
challenges.
Our Roadmap has three key components
– technology, geography and market.
To fully appreciate our direction we
need to examine the dynamics of
change in our market.
Winning tomorrow and
beyond is the focus.
> vision
> leadership
> innovation
> evolution
98 99 00 01 02 03 04 05 06 07
Maintaining Momentum
1998-2007 & beyond
Revenues
$87.3m $87.3m
$14.4m $14.4m
Net Profit before taxation
Integrated Technology Roadmap
Service INTERNET Appliance Software
Global
Threats
INBOUND
Perimeter
Threats
INBOUND /
OUTBOUND
Departmental
Control
INBOUND /
OUTBOUND
At SurfControl we are developing technologies that will enable us to offer a completely integrated
content filtering solution. Annual report + accounts 2004 05.
Charles Darwin stated that “It’s not the strongest of
the species that survives, nor the most intelligent.
It is the one that is the most adaptable to CHANGE. ”,
and SurfControl’s ability to adapt to change during
its early growth is one of the keys to its success.
This ability to adapt to change is also one of the key
strengths as we move towards our next exciting
level of growth and expansion.
we project. we deliver. SurfControl plc Chief Executive’s strategic review continued 06.
The use of e-mail and the web at work
has been the most important business
development in recent times. It has
brought with it fundamental risks and
challenges to the business community
such as legal liability, risks to productivity,
network capacity pressures, and
increased security threats. There was an
opportunity, the market demanded a
solution and we provided it. We provided
software that gave our customers the
power to choose the type of content
they received and the type of content
they sent. We provided it on a multitude
of platforms to fit within differing
technological environments. We enabled
companies to stop unwanted content. 
This market, which also includes anti-
virus solutions, has become known as
the Secure Content Market. In 2003,
it generated combined sales of $3.2
billion. In 2008, it is predicted to
generate $7 .2 billion (IDC) growing at a
Compound Annual Growth Rate (CAGR)
of 17%. The Secure Content Market
contains three major segments: web
filtering, message security and anti-virus.
It has driven our success to date and
the opportunity is continuing to expand.
However, within this expansion in 
opportunity and market size the
challenges and competition are also
expanding. In particular they are
evolving in terms of technology 
delivery and geography.
At a technology level our focus to date
has been on high quality software
delivery, but as the market has evolved
so have the ways in which filtering is
delivered. Filtering software is run on a
company’s server within the corporate
network. However, in recent times we
have seen an emerging market trend
towards putting in place two other
filtering solutions, firstly, a hardware
solution with the installation of a task
specific filtering appliance, and secondly
a managed service solution, with
content filtering being provided as 
a service by a third party.
The Market Dynamics
– a great opportunity.
In 1996, when the decision was taken to target this
market, it hardly existed – but we knew then it would
be big. Eight years on, the true implications of internet
access in the work place are only just being realised.
> vision
> leadership
> innovation
> evolution
Lyndon B Johnson stated ‘Tomorrow is ours to win or lose’ .
We succeeded by never resting on our laurels. We have
succeeded by doing things better tomorrow that we did
well today. We have succeeded by both driving and
reacting to a dynamic and evolving market. We have
succeeded because every step we have taken has put us
in a position to take the next steps.
3.2
03 04 05
($Bn)
(Year)
06 08 07
3.9
4.7
5.4
6.3
7.2
Secure Content Market
2003-2008
($Bn)
The Secure Content Market is set to show
consistent growth for years to come 
(Source: IDC, 2004) Annual report + accounts 2004 07.
The market opportunity for the Secure
Content Appliance is expected to exhibit
70% CAGR between now and 2007
and will be worth $1.6bn.
Beyond Appliances there is also the
emerging opportunity from Managed
Services which is set to show significant
growth in the future.
we listen. we respond.
This is particularly the case with regard
to the control of e-mail. Today, software
remains the most favoured e-mail
filtering tool accounting for 44% of
the market. However the appliance
approach now represents 28% as
does the managed service solution. 
The following factors have encouraged the
growth of demand for the security appliance:
> Reduced complexity. The all-in-one
approach simplifies product selection,
product integration and ongoing support.
> An alternative to software installation
with incremental servers. Customers or,
more often, value-added resellers (VARs),
value-added dealers (VADs), or managed
service providers (MSPs) can easily install
and maintain the products. Increasingly,
this process is handled remotely.
> Install and forget. The appliances are
generally “plug and play,” with very little
installation required. 
> Synergy with high-end software
solutions. Appliances are used in remote
sites at which an enterprise does not have
security professionals on the ground. A
plug-and-play appliance can be installed
and then managed remotely. This
management is synergistic with large,
centralized, software-based firewalls and
content security solutions. 
> Less end user interaction. The black box
approach limits the “damage” users can
do. This reduces support calls and
improves security
> Troubleshooting ease. When a box fails, it
is easier to swap it out than to troubleshoot.
The process gets the node back online more
quickly, and it can be done by a non-
technical person. This feature is especially
important for remote offices without
dedicated technical staff on site. 
Delivery Segmentation
■ Software Ferris AntiSpam
■ Appliance Report 2004
■ Service
44%
28%
28%
SCM Appliance Market
(Prime function is content filtering)
02 03 04
(Year)
CAGR 70%
05 07 06
$205m
$390m
$630m
$1bn
$1.6bn
$109m
Today, content filtering is based on three
delivery mechanisms (Source: Ferris 2004)
Of the three content filtering delivery
mechanisms, the appliance market is 
set to grow at the fastest rate 
(Source: IDC, 2003) SurfControl plc Chief Executive’s strategic review continued 08.
Software
Currently we provide web and e-mail
software and we will continue to offer
this solution to new customers and our
global customer base alike. During the
year, we announced several upgrades
and enhancements to our software
solution, and added functionality and
performance. These included the launch
of SurfControl Web filter for Cisco CE
and Blue Coat platforms and upgrades
to our Web Filtering software for
Microsoft Windows, Proxy server and
ISA server, Check Point Firewall 1, Linux
and Nokia IPSO offerings. For many
organisations, software remains the
solution of choice and our software is
consistently viewed by the market as
being the best of breed in its class.
Appliance
This year will mark the launch of the
SurfControl filtering appliance and is
the result of a year of planning and
assessment of the market. SurfControl
examined several ways in which to
address the market and concluded that
the acquisition of an existing appliance
vendor would be the best way forward.
Accordingly, on 19 April 2004, we
announced the acquisition of the
principle assets of SecureM, a provider
of e-mail appliance technology. By
combining our core filtering expertise
with SecureM’s specific Linux based
appliance technology we will launch an
e-mail filtering appliance in the second
half of calendar year 2004 that is
superior to existing competitive offerings. 
This is a major new advance in the
development of SurfControl. But of
course, this is just the beginning and
as part of our technology roadmap
we will build our web filtering into
new generations of SurfControl
fully integrated appliances, offering
both web and e-mail filtering.
Managed Services
In conjunction with the development
of our appliance offering, we are
designing a managed service offering
enabling the remote filtering of e-mail
and web content. This is a natural step
for SurfControl. In fact, we have already
built up a working knowledge of this
area with the provision of our Content
Portal Authority solution for OEMs. This
technology enables ISPs to provide a
centrally managed content filtering
service based on our own core
technology. The managed services
approach completely removes the
delivery of content filtering from within
the corporate network and is becoming
increasingly popular. By providing a
managed service, we will provide
customers with a third option for
content filtering.
Technology – our
three year roadmap 
to success.
Going forward we are going to build upon our software
heritage and our core focus of Rich Content Filtering
and extend our offerings into Appliances and Managed
Services to provide customers with the ability to manage
content using one or a combination of methods that
best suit their needs.
> vision
> leadership
> innovation
> evolution
Technology Roadmap
S/W
APPLIANCE
Functionality
Enterprise
Scalability
Performance
Compliance
Confidentiality
Others...
Web
E-mail
Web App. INTEGRATED
APPLIANCE
E-mail App.
Anti-Virus
SERVICE Extended Service
AV AS PORN CPA
INTEGRATED
Base Service Annual report + accounts 2004 09.
Integrated Offering
Having developed the various delivery
mechanisms for enabling organisations
to filter content, we will be positioned to
offer a complete integrated offering. No
matter which mechanism our customer
wishes to employ we will provide them
with the solution based on our trusted
core filtering technology.
“SurfControl has always focused on providing its
customers with the “total filtering solution. ” As we
embark on our next stage of development, we
will provide the market with the ultimate choice
– multiple delivery on multiple platforms
according to the customer’s needs. ”
we understand. we go beyond. SurfControl plc Chief Executive’s strategic review continued 10.
This means that, in order to access
the larger market opportunity and to
provide a balanced risk for future
growth, it is important to invest in global
infrastructure and expansion. With that
in mind we will be increasingly investing
in further geographical regions, and in
particular mainland Europe and China.
The world is changing, our market is
changing and we are changing to meet
the challenge and the opportunity. 
Our current success, together with
the investment in technological and
geographical expansion, will continue
to drive our long-term growth and
profitability.
Steve Purdham
Chief Executive
6 September 2004
Geography –
beyond the USA.
Historically, the USA has been the single dominant
market for Filtering, however the importance of
the rest of the world is starting to emerge with the
market opportunity being as much as 57% outside
the US by 2008. 
> vision
> leadership
> innovation
> evolution
522 People, 13 Offices, Worldwide Annual report + accounts 2004 11.
we perform. we are the difference.
SCM Software Market
$72 billion (2008)
■ USA 43%
■ Europe 36%
■ Asia 17%
■ Rest of World 4%
03 04 05
Global Content Security Market:
2003-2007 = 31.4% CAGR
07 06
Global Content Security 
Market Forecast 2003-2007
$1.97bn
$1.61bn
$1.30bn
$1.08bn
$728m
(Source: IDC, 2003)
(Source: IDC, 2003) SurfControl plc SurfControl at a glance 12.
SurfControl at a Glance The Market Facts & Figures
FACT: THE AMOUNT OF SPAM
MESSAGES BEING SENT ON
AN AVERAGE DAY WORLDWIDE
WILL REACH 17BN IN 2004
(SOURCE: IDC, AUGUST 2004)
FACT: SPAM REPRESENTS
60-80% OF TODAYS EMAIL
(SOURCE: GARTNER, 2004)
“Some form of IM is now used in 85 percent of enterprises,
according to SurfControl’s research, yet the IT staff are
only managing the IM systems being used about ten
percent of the time. ”
3.2
03 04 05
($Bn)
(Year)
06 08 07
3.9
4.7
5.4
6.3
7.2
Secure Content Market
2003-2008
($Bn)
03 04 05
Global Content Security Market:
2003-2007 = 31.4% CAGR
07 06
Global Content Security 
Market Forecast 2003-2007
$1.97bn
$1.61bn
$1.30bn
$1.08bn
$728m
Delivery
Market
(Source: Ferris 2004) (Source: IDC, 2003)
(Source: IDC, 2004) (Source: IDC, 2003)
(Source: IDC, 2003)
(Source: IDC AntiSpam Survey 2004)
Delivery Segmentation
■ Software Ferris AntiSpam
■ Appliance Report 2004
■ Service
44%
28%
28%
SCM Appliance Market
(Prime function is content filtering)
02 03 04
(Year)
CAGR 70%
05 07 06
$205m
$390m
$630m
$1bn
$1.6bn
$109m
04 05
20 Billion E-mails (non-spam) 2007
07 06
E-mail Boxes
(Business)
699m
754m
806m
648m
The Market Explosion
Worldwide - 2007
AV
$4.4
Billion
Web &
E-mail
$1.9
Billion
■ AntiVirus 15% CAGR
■ Web Filtering 27% CAGR
■ E-mail Filtering 36% CAGR Annual report + accounts 2004 13.
FACT: 39% OF WORKERS HAVE
RECEIVED CONFIDENTIAL
INFORMATION VIA E-MAIL THAT
WAS NOT INTENDED FOR THEM
(SOURCE: SURFCONTROL, SEPTEMBER 2004)
FACT: 30-40% OF INTERNET USE
IN THE WORKPLACE IS NOT
RELATED TO BUSINESS
(SOURCE: IDC, AUGUST 2004)
522 People, 13 Offices, Worldwide
Beijing
Chertsey
Congleton
Frankfurt
Milan
Paris
Rotterdam
Scotts Valley
Shanghai
Singapore
Sydney
Vienna
Westborough
Geography
Technology Roadmap
The Next 3 Years
■ Enhance Core
 Competency of Filtering
■ Enhance Software
 Functionality
  ■ Increased exploitation
   of MS Platforms
  ■ Linux
■ Appliance Delivery
■ Managed Service
Integrated Technology Roadmap
Service INTERNET Appliance Software
Global
Threats
INBOUND
Perimeter
Threats
INBOUND /
OUTBOUND
Departmental
Control
INBOUND /
OUTBOUND
Technology SurfControl plc Financial Director’s review 14.
General
The financial results for 2004 reflect
success at every level for the Group. Sales,
profits, and cash flow all exhibited strong
growth. As a direct consequence, the
Group’s balance sheet has benefited 
from higher cash balances and higher
levels of deferred income, in turn providing
a stronger platform for future investment
and growth.
The Group has strengthened its position
in the Enterprise market, and continued 
to achieve high rates of growth in its
business outside of the Americas – both
key success factors in securing future
increases in market share in the Secure
Content Market. 87% of the Group’s
business in 2004 was generated from
Corporate customers and 35% from
customers outside of the Americas.
This growth has allowed the Group to
make investments for the future. In 2004
the Group laid the foundation for the
launch of both appliance and managed
service versions of our filtering solutions 
all under the single global brand of
SurfControl. At the same time, the Group
has established offices in The People’s
Republic of China and in Paris, expanding
its presence in the non-Americas regions
to better serve the high market growth rates
in demand for Secure Content solutions. 
Acquisitions
In April 2004, the Group acquired Linux-
based e-mail filtering appliance technology
from SecureM, together with their China-
based sales and marketing operations.
The key terms and the accounting for the
acquisition are set out in note 9 on pages
54 and 55. The operational results relating
to the acquired assets were consolidated
from the effective date of the acquisition
but were not significant to the turnover,
costs, or net assets of the Group. Intangible
assets arising on consolidation will be
amortized over a 24 month period, starting
in the fourth quarter of the year under
review. The purchase consideration was
cash, and the impact on the Group’s
liquidity position is set the Group cash
flow statement on page 44.
Exchange rate fluctuations
The reporting currency of the Group is the
US dollar, reflecting the principal trading 
currency of the Group. In addition, Sterling,
the Euro, and the Australian dollar are also
trading currencies for the majority of the
trading areas outside of the Americas. It is
the Group’s policy to conduct and settle
the majority of trading transactions in the
relevant currency of the geographic region,
and therefore the Group’s profit and loss
account is not exposed to significant
realised exchange gains of losses arising
from day to day transactions. The Group is
however exposed to exchange differences
arising from the translation of the
underlying regional financial statements to
the Group’s reporting currency of the US
dollar. The Group’s sales and operations
over the last three years have expanded
significantly in non-US denominated
currency regions, and at the same time the
US dollar has experienced an increased
level of volatility against other major trading
currencies. The combination of these two
factors has increased the Group’s exposure
to such translation differences. The recent
weakness in the US dollar, through
translation differences, has had a number
of impacts on our financial statements in
2004. In the profit and loss statement,
both the Group’s non-US dollar
denominated revenues and costs have
increased, resulting in an immaterial net
effect on reported profitability. In the
balance sheet, all non-US dollar
denominated asset and liability balances
have increased. The principal accounts
affected in 2004 were the Group’s 
cash holdings and deferred income. 
Finance Director’s
review
The financial results for 2004 reflect success 
at every level for the Group. 
In 2004 the Group laid the
foundation for the launch of
both appliance and managed
service versions of our filtering
solutions all under the single
global brand of SurfControl. Turnover
Group turnover increased by 19% to
$87.34m (2003: $73.23m) (2002:
$54.17m). All turnover in the financial
year was organic other than a minor
contribution in the fourth quarter of the
fiscal year from the China operations
acquired from SecureM. Details of trading
from the acquisition are provided in Note 3
on page 50. All Group turnover arose
from sales of the Group’s Internet filtering
product set: being Web filtering, e-mail
filtering, and instant messaging filtering.
The rate of growth in Group turnover in
2004 was less than in previous years
primarily because of the slower new
business growth rates in the Americas, and
challenging market conditions in the US
Education market. Growth rates across all
areas of our business outside the Americas
have been very strong in 2004.
Invoicing, and to a lesser degree turnover,
continued to exhibit patterns of seasonality
within the year, with Q2 and Q4 typically
producing stronger sequential rates of
growth than Q1 and Q3. The Corporate
market is the key target market of the
Group and its turnover grew by 23% 
to $75.59 (2003: $61.66m) (2002:
$44.18m). This market includes the
licensing of technology via software
developer kits (“SDKs”) to Original
Equipment Manufacturers (“OEMs”). OEM
turnover was $4.04m (2003: $4.01m)
(2002: $3.19m). OEM turnover growth
has slowed in 2004 as the Group has
moved from an annual fee in advance 
to a royalty arrangement.
The Education market exhibits its own
seasonality due to the timing of the school
year. Compared to the prior year, Education
market turnover fell slightly to $10.58m
(2003: $10.83m) (2002: $9.06m) due 
to the difficult budgetary environment
experienced by the majority of US state
schools over the last two years.
Home turnover comprises sales of the
CyberPatrol Web filter product into the
home market. Compared to the prior 
year, Home market turnover has
increased 57%, to $1.17m (2003:
$0.74m) (2002: $0.93m) reversing 
the prior year decline of 20%.
The chart below shows the Group’s
turnover profile by customer segment 
for the last three years.
The chart below shows the percentage of
turnover by destination for the Americas
and Non-Americas geographic areas for
the last three years. The Americas remains
the Group’s principal market and generated
$57.40m or 66% of the overall Group
turnover of $87.34m. However, the
market outside of the Americas exhibited
a higher annual growth rate of 44%,
compared to 10% for the Americas. This
reflects both our investment in sales and
marketing in the various regions around
the world, as well as the emerging and
rapid rate of adoption by corporations of
content filtering in these regions. 
Invoicing and deferred income
The Group invoiced $106.63m in the
year, a 16% increase on invoicing of
$92.10m for the financial year 2003
(2002: $65.19m).
Annual report + accounts 2004 15.
Group turnover profile %
02 03 04
0
20
40
60
80
100
Home     Education     Corporate
Regional split – Americas  
& outside Americas %
02 03
Outside Americas
Americas
04
0
20
40
60
80
100
FACT: 39% OF WORKERS HAVE
RECEIVED CONFIDENTIAL
INFORMATION VIA E-MAIL THAT
WAS NOT INTENDED FOR THEM
(SOURCE: SURFCONTROL, SEPTEMBER 2004) SurfControl plc Financial Director’s review continued 16.
A proportion of the Group’s invoicing is not
immediately recognised as turnover, and
is instead deferred over the period of the
contract to which it relates. Such deferred
income typically relates to content list
subscriptions and maintenance contracts.
Full details of the Group’s accounting
policies, including those relating to turnover
and deferred income, are given in Note 1
to the financial statements. As at 30 June
2004, deferred income increased by 38%
to $75.02m (2003: $54.25m) (2002:
$33.9m). Of the carrying balance
$49.04m, or 65%, (2003: $37.54, or
69%) (2002: $26.85m, or 79%) is due
to be released to turnover over the year 
to 30 June 2005. 
The volume and proportion of the Group’s
business generated via its indirect channel
partners continued to increase in the year.
The Company views this progress as a 
key success factor in achieving scaleable
and profitable growth. The chart below
shows the Group’s invoicing profile by
channel segment for each of the financial
years under review.
Selling and distribution costs
The Group’s main area of expenditure is
that of selling and distribution. Costs in
this section of the business amounted 
to $44.03m (2003: $39.74m) (2002:
$32.85m). As a percentage of turnover,
these costs declined to 50.4% (2003:
54.3%) (2002: 60.7%). The relative cost
decline is a result of improving economies
of scale, as well as effective management
of expenditure. Examples of the economies
of scale include utilisation of common
global marketing messages for all of the
Group’s products, the use of existing 
sales skills and sales channels to sell
incremental products, and increasing
market recognition of the SurfControl
brand. It is management’s intention to
continue to seek economies of scale
combined with effective management of
expenditure in the selling and distribution
cost category. The main areas of increased
spend compared to prior years have 
been sales commissions (reflecting the 
16% increase in invoicing), marketing
communication activities, and salary and
benefit related costs associated with an
expanded workforce. Headcount has
increased by 19% to 309 at 30 June
2004 (2003: 259) (2002: 231).
Research and development
Research and development expenditure
was $9.68m (2003: $7.53m) (2002:
$6.36m). As a percentage of turnover
these costs increased to 11.1% (2003:
10.3%) (2002: 11.7%). While cost
efficiencies continue to be achieved
through location of staff in lower-cost
employment areas within the Group, and
outsourcing of certain non-core activities,
R&D investment has been increased and
targeted at key growth areas such as
appliances, Linux, and next generation
products. Headcount increased by 20%
to 136 employees at 30 June 2004
(2003:113) (2002:101). The associated
increases in salary and benefit costs is
the principal area of increased spend
compared to prior years.
Other administrative expenditure 
and amortisation of intangible assets
Other administrative expenses were
$16.81m (2003: $14.58m) (2002:
$12.87m). As a percentage of turnover
these costs declined to 19.3% (2003:
19.9%) (2002: 23.8%). The Group
continues to concentrate on effective
cost management and the attainment of
economies of scale from this function, 
in order to offset the necessary increases
in infrastructure to support a global
organisation with a growing portfolio of
products. Headcount increased 8% to 77
(2003: 71) (2002: 73). The main areas
of increased spend compared to prior
years have been outside services including
IT services, legal, tax and other professional
advice, together with office related costs,
and increased salary and benefits
associated with the increased headcount.
The acquisition of  the e-mail filtering
appliance technology from SecureM 
together with their Chinese based
subsidiary in April 2004 gave rise to an
amortization charge of $1.35m in the
fourth quarter of the year. The unamortized
balance of these intangible assets as at
June 30, 2004 was $12.55m. The
historical acquisitions completed prior to
2004 gave rise to a goodwill amortisation
charge in 2003 of $1.15m (2002:
$70.3m). All such goodwill has now 
been fully amortised.
Indirect channel &  
Direct channel split %
02 03
Direct sales
Channel Partner sales
04
0
20
40
60
80
100
FACT: THE AMOUNT OF SPAM
MESSAGES BEING SENT ON
AN AVERAGE DAY WORLDWIDE
WILL REACH 17BN IN 2004
(SOURCE: IDC, AUGUST 2004) Share option tax provision
The share option tax provision relates to
the potential employer tax liability that
may crystallise on the exercise of all
outstanding options held by Directors and
employees at 30 June 2004, based on
the then closing middle market share
price of £6.10 (2003: £6.375) (2002:
£3.975). The balance sheet provision 
of $0.45m (2003: $0.54m) (2002:
$0.07m) declined slightly over the year, 
in line with the slight reduction in the
Company’s share price. 
Proceeds from disposal of business
The Group sold its MultiView business
unit in February 2001 and has received
deferred payment of sale proceeds on 
a retrospective quarterly basis since that
date. Net proceeds recognised in the
profit and loss account were $0.31m in
2004 (2003: $0.38m) (2002: $0.25m).
In line with the terms of the transaction,
no further sale proceeds will be received
after the 2003/4 financial year.
Profit before taxation
The achievement of a profit before taxation
for the first time in 2003 was an important
milestone for the Group. In 2004 this
position was consolidated, and pre-tax
profit increased by 62% to $14.40m
(2003: $8.88m) (2002: loss of $69.39m). 
Taxation
A net tax charge of $2.86m was recorded
for the year (2002: $2.52m) (2002:
credit of $0.98m), and represents an
effective rate of 20% of pre-tax profits.
Note 8 to the financial statements on
page 53 gives details of matters affecting
the current tax charge, and how it
reconciles to the charge predicted by
applying the UK standard corporation tax
rate to the Group profit on ordinary
activities before taxation.
A deferred tax asset of $6.68m (2003:
$4.18m) (2002: $0.81m) has been
recognised in the Group balance sheet.
The increase in the value of the deferred
tax asset in 2004 primarily reflects the
extent of US tax losses which are expected
to be utilised in the next 18 months.
In accordance with the tax authority
requirements around the world and OECD
guidelines, the Group implements arm’s-
length transfer pricing methodologies
to reflect the domicile of its intellectual
property and the various functions
performed within the Group. The Group
expects to pay corporation tax in the UK
and Australia, and certain US state taxes,
in 2005.
Liquidity, capital resources and
treasury management
The Group has been cash positive at the
operational level throughout the year
under review. This has been achieved by 
a combination of rises in invoicing and
pre-tax profitability, combined with steady
working capital management. The move
to becoming self-financing during 2002
has been strongly maintained with net
cash inflow from operating activities at
$32.64m (2003: $24.09m) (2002:
$11.69m). Net cash inflow from returns
on investments and servicing of finance
was $1.79m (2003: $0.74m) (2002:
$0.63m). The net inflow from returns on
investments in all years came primarily
from bank interest amounting to $1.81m
(2003: $0.78m) (2002: $0.66m). The
Group funded the purchase of all tangible
fixed assets in the year from its own cash
resources, and as in previous years has
minimal finance lease commitments. 
The scale of cash outflow from capital
expenditure is increasing in line with the
size of the Group and was $2.27m
(2003: $1.63m) (2002: $1.06m). 
Net cash inflow from financing was $2.87m
(2003: $1.23m) (2002: $0.38m)
principally in relation to $3.75m of proceeds
from exercise of share options (2003:
$1.27m) (2002: $0.52m). This was
partially offset by a cash outlay of $0.84m
(2003 and 2002: $nil) for the purchase of
own shares. Further such cash outlays of
$0.27m occurred after the year end in July
2004, due to settlement timing differences
on share purchases in June 2004.
At 30 June 2004 the Group had total
cash holdings of $87.48m (2003:
$61.71m) (2002: $35.45m) earning a
current weighted average rate of return on
closing cash of 2.25% p.a (2003: 2.35%)
(2002: 2.71%). Net interest receivable
and similar items, primarily bank interest,
was $1.86m (2003: $1.11m) (2002:
$0.65m). The increase in net interest
receivable directly reflects the Group’s
growing cash balances driven by strong
operational cash flow. 
Annual report + accounts 2004 17.
The move to becoming self-
financing during 2002 has been
strongly maintained with net
cash inflow from operating
activities at $32.64m SurfControl plc Financial Director’s review continued 18.
The Group will continue to apply its
cash resource to fund its working capital
requirement, capital expenditure, tax
obligations, corporate investment
acquisition opportunities, and purchases
of own shares. 
Employee share option schemes
Full details of the Group’s employee share
option schemes can be found on pages
61 to 63. The potential employer tax
liability that may crystallise on the future
exercise of options is estimated and
charged to the profit and loss account
over the vesting period of the option grant. 
The potential dilution of equity from granted
options varies to the extent that they are
“in-the-money” or “underwater”. As at
June 30 2004, there were 1,090,815
options with an exercise price below
£6.10, which was the closing middle
market price on that day. These options
represented 3.5% of the issued share
capital as at June 30, 2004. In addition
there are a further 2,390,679 outstanding
options with a grant price above £6.10
which will further dilute equity if the 
share price rises.
In addition to share options, employees
participated in a variety of incentive
compensation schemes in the year, the
total value of which is disclosed in note 5
on page 51.
Transition to International 
Accounting Standards
The Group is preparing to fully adopt
International Accounting Standards (“IAS”)
which have an effective date for accounting
periods beginning on or after January 1,
2005. The first annual IAS financial
statements for the Group will be prepared
for the year ending June 30, 2006, with
comparatives for fiscal years 2004 and
2005 thereby maintaining the Group’s
current voluntary practice of providing a
three year financial profile. Quarterly
comparative re-stated financial statements
will also be prepared for fiscal year 2005
to maintain our current quarterly reporting
profile for investors and analysts. The
Board considers that it is on schedule 
to adopt IAS in the prescribed time.
Having reviewed all relevant accounting
standards, the potential areas of impact
arising from IAS on the Group’s financial
statements will be accounting for Share-
Based Compensation (IFRS 2), Business
combinations and Goodwill (IFRS 3) and
Intangible Assets (IAS 38). IFRS 2 applies
to share-based payments including
options granted on or after 7th November
2002 which have not fully vested on
January 1, 2005. Since November 2002
the Group has issued 726,000 options,
and therefore the majority of total options
which have been granted by the Company
pre-date 7th November 2002 and will not
contribute to the charge to the profit and
loss account. The resultant charge to the
Group profit and loss account for the fair
value of options when IAS is adopted is
not expected to be significant.
IFRS 3 applies to all combinations arising
on or after March 2004 and therefore the
Group’s recent acquisition of assets from
SecureM will fall under the new standard.
The restatement of the accounting for this
acquisition is not expected to be
significant when IAS is adopted. 
The third area of potential impact is
accounting for research and development
expenditure under IAS 38. Like the
majority of software companies in the UK
and US, the Group currently expenses all
such costs as they are incurred as the
Board believes that it would not be a
prudent accounting policy to capitalise
such costs, given the short life and volatile
market conditions surrounding software
products. Under IAS, the Group may be
required to capitalise a portion of its
current development expenditure.
The presentation, terminology, and the
nature and extent of disclosure of the
Group’s financial statements will also
change under IAS.
This assessment is based upon the
Group’s current range of trading activities
and current publications from the
International Accounting Standards Board,
and therefore the actual impact of IAS on
the Group’s results may differ from that
outlined above. In anticipation of the
adoption of IAS in 2006, the Group will
include estimates of the financial impact
in its 2005 Annual Report.
The Board considers that it is 
on schedule to adopt IAS in 
the prescribed time.
FACT: SPAM REPRESENTS
60-80% OF TODAYS EMAIL
(SOURCE: GARTNER, 2004) Summary
The financial results for 2004 reflect
success at every level for the Group. Solid
turnover growth of 19%, leveraged cost
efficiencies resulting in 65% growth in
operating profit, and a 81% increase in
net profit after taxation (79% increase in
basic earnings per share). Operating cash
flow grew 36% and represented 2.7
times operating profit. The Group balance
sheet gained further strength with no
debt, over $87m of cash, and over $75m
of deferred income giving the Group high
levels of turnover visibility into 2005 and
beyond. This was a record year by many
measures, but the Group must always
look beyond – to new opportunity, to
challenge, and to change.
The Group’s three year product roadmap
published in May 2004 and presents
further opportunities in the areas of
appliance and managed service-based
deliveries of our content filtering solutions. 
This will also present new financial and
working capital challenges for the Group,
for example in managing hardware related
logistics with third party vendors and
providing ‘software as a service’. As the
global market for content filtering continues
to grow and evolve, so will our customer
base grow in different regions around the
world. As we enter fiscal 2005, the Group
is also making final preparation for the
change from UK GAAP to International
Accounting Standards for financial year
2006 and comparative periods. Clearly
2005 will be filled with new opportunity,
challenge, and change.
Simon Wilson
Chief Financial Officer
6 September, 2004
Annual report + accounts 2004 19.
Cleary 2005 will be filled with
new opportunity, challenge,
and change SurfControl plc Board of Directors 20.
1. Greg Lock 
Non-Executive Chairman
Greg Lock was appointed to Non-Executive
Chairman on 9 September 2003 after
serving on the Board as Non-Executive
Director since 17 October 2000. Until
April 2000, Greg lived and worked in the
United States, France, Germany and the
United Kingdom as IBM’s Global General
Manager, Industrial Sector. In this position,
he had worldwide responsibility for IBM’s
business with companies in the
Automotive, Aerospace, Electronics,
Chemical, Petroleum and other
Manufacturing Industries representing
approximately 15% of the company’s
revenues. He served as a member of the
IBM Worldwide Management Council 
and as a Governor of the IBM Academy 
of Technology. In addition to SurfControl,
Greg serves as Director of Target
Computer Group Ltd, Chairman of
Nexagent Ltd and Director of Liberata Ltd.
He holds an MA in Natural Sciences from
Churchill College Cambridge and is a
Fellow of the Royal Society of Arts,
Manufacturers and Commerce. 
2. Stephen Purdham 
Chief Executive Officer
Steve Purdham co-founded the vision,
architecture and development of
SurfControl in 1996. It was this vision 
and opportunity that enabled the
Company to enter the public arena in
1998 and experience rapid growth. 
His early experience was as a technical
strategist for a major European computer
OEM, with specific focus on the financial
sector. During the early 80’s, he was
intimately involved with the emergence 
of the Open Systems market.
Since mid 90’s he has strategically 
worked with major worldwide software
organizations to understand, analyse and
define the exploding Internet marketplace.
He has been a frequent conference speaker
on the subject of the Internet and has
contributed to several books and papers
on the subject. 
3 2 1
6 5 4
8 7
Board of Directors As President and then CEO of SurfControl
he has been specifically responsible for
building the operation, driving the
planning, development, marketing and
execution of the significant growth of the
business from its first appearance on the
LSE AIM market, then EASDAQ to its
current TechMARK status.
SurfControl has rapidly grown to a leading
global operation with over 520 people in
fifteen separate locations across the United
States, Europe and Asia/Pacific. The
company delivers on its promise to help
‘Stop Unwanted Content’ in the enterprise
and has established itself as the world’s
number one Web and e-mail filtering
company in the Content Security Market. 
3. Simon Wilson
Chief Financial Officer 
Simon Wilson joined SurfControl in 2000
and was appointed as Chief Financial
Officer in September 2001. He has served
on the Board of SurfControl since July 2001. 
Simon joined SurfControl from KPMG’s
US Corporate Finance Practice, where he
specialised in advising software and IT
services companies on all aspects of
domestic and cross-border acquisitions,
sales, divestitures and financings. From
1989 to 1994, Simon held a variety of
Finance Director roles at subsidiaries 
of Misys plc after having spent five years
with Ernst & Young.
Simon is a member of the Institute of
Chartered Accountants in England & Wales,
a member of the Chartered Institute of
Marketing, and holds a Bcomm (Honours)
from Birmingham University, England. 
4. Patrick Jolly 
President, Europe, Middle East, 
Asia and worldwide operations 
outside America
Patrick Jolly was appointed to the Board 
in July 2001. Patrick is responsible for
overall operations in UK, EMEA and rest 
of the world outside America, and is also
responsible for Corporate Finance and 
UK legal matters including the structuring
and implementation of transactions. 
Prior to joining SurfControl, he was a
partner specialising in Corporate Finance
in Hammond Suddards Edge, a leading
UK-based law firm, where he had a
particular focus on advising technology
companies in relation to fundraisings,
and mergers and acquisitions. 
5. George Hayter 
Senior Non-Executive Director
George Hayter was previously Managing
Director of the Trading Markets Division of
the London Stock Exchange where he was
earlier responsible for the information and
trading systems including implementation
of TOPIC, SEAQ and SEAQ International.
Since 1990 he has acted as an
independent consultant to a number of
overseas stock exchanges and other UK
and overseas organizations.
George was Non-Executive Deputy
Chairman of Unipalm Group plc from
1993 until its acquisition by UUNET
Technologies Inc in 1995. George is
currently a Non-Executive Chairman of
E*Trade Group Inc (a NASDAQ quoted
Internet stockbroker) and of several
other private and public companies.
Having been Non-Executive Chairman,
George stood down from this position
due to other commitments to take a
senior Non-Executive Director position
on the Board in June 2000. 
6. Kevin Blakeman
President, the Americas
Kevin Blakeman was appointed to the
Board in July 2001. Kevin is responsible
for overall US operations. Kevin joined the
Company in 1993 as a Product Manager
in the UK office. He moved to the US in
1995, taking on the role of Marketing
Director. In August 1998, he was named
VP of Strategic Partners for the SurfControl
division, where he was responsible for
working with key partners such as
Microsoft, IBM, HP, and Tivoli. He was
named President of SurfControl USA in
August 2000. 
7. Rene Schuster
Non-Executive Director
Rene Schuster was appointed to the Board
as Non-Executive Director in November
2003. Rene is currently Global Marketing
Director for the Vodafone Group. 
Previously Rene was Senior Vice President
of Hewlett-Packard Company and provided
services for IT technologies, including
mission-critical infrastructure, application
services, and extended enterprise services. 
Formerly, Rene joined Compaq in July
2000 as the Chief Executive of Compaq
UK and Ireland (the second-largest
Compaq subsidiary after North America)
and Vice President of Compaq Computer
Corporation. Rene joined Compaq from
KPMG Management Consulting, where 
he served as Senior Partner/Chief
Operating Officer in the Europe, Middle
East and Africa region. 
8. Jane Tozer
Non-Executive Director
Jane Tozer was appointed to the Board 
as Non-Executive Director in November
2003. Jane’s current appointments
include Directorships of Retail Decisions
plc; 3i European Technology Trust plc; and
JP Morgan Fleming Income & Growth Unit
Trust plc. Jane has a number of other
appointments including a Non-Executive
position at The Pensions Service, and she
is a founder on the Information and TMT
Non Executive’s Association (ITNEA). 
Jane began her career at IBM, spending
13 years there before moving to FI Group
(now Xansa plc) as Business Development
Manager. She then moved to Softwright
Ltd., where she held the position of Chief
Executive until 1997 – taking the company
from start-up through to a successful trade
sale to a NASDAQ quoted company. 
Annual report + accounts 2004 21. SurfControl plc 22.
Registrars
Capita IRG plc
Bourne House
34 Beckenham Road
Beckenham
Kent BR3 4TU
Depository for ADS
Bankers Trust Company
4 Albany Street
New York
New York 10006
United States
Registered Office
Riverside
Mountbatten Way
Congleton
Cheshire CW12 1DY
Bankers
Royal Bank of Scotland plc
2 St Philip’s Place
Birmingham B3 2RB
Solicitors
Hammonds Solicitors
Trinity Court
16 John Dalton Street
Manchester M60 8HS 
Brokers
UBS Limited
1 Finsbury Avenue
London EC2M 2PP
Advisers Directors’ report
Annual report + accounts 2004 23.
The Directors present their Annual Report for the year ended 30 June 2004.
Principal activities and offices
The Group’s principal activity is the development and sale of Internet Web and E-mail Filtering solutions. The Group’s products enable customers to
manage unwanted Internet content that enters and leaves the business so as to significantly reduce the risks to productivity, network resources, legal
liability and security. During the financial year the Group had two product brands, “SurfControl” and “Cyber Patrol”. “SurfControl” is the Group’s brand 
for server based web, e-mail, instant messaging and bundled filtering products and is sold into the corporate and education sectors. “Cyber Patrol” is
designed for client-based products sold into the home market. Software development kits are also incorporated into product offerings provided by
original equipment manufacturer (“OEM”) partners.
In the fourth quarter of the year the Group acquired Linux based e-mail filter appliance technology from SecureM, Inc, together with its Chinese based
distributor at an estimated cost of $13,194,000 in cash (including earn-out based consideration of $3,123,000 at 30 June 2004). This acquisition will
strengthen the Group’s filtering product portfolio and global distribution network. The Group has also announced its intention to offer filtering as a
managed service in the future.
The Group’s products are currently sold in four different ways:
(1) By direct sales after a potential customer downloads a trial copy from the Company’s web site (www.surfcontrol.com);
(2) Indirectly through a reseller or partner who may incorporate the products into a broader secure content management solution;
(3) Indirectly through strategic alliances and OEM partners; and 
(4) Direct e-commerce sales, without interaction of sales personnel.
Financial results and review of developments
The results for the year are set out in the attached audited financial statements on pages 41to 67. The Directors do not recommend the payment of
a dividend and the retained profit for the year of $11.54m is transferred to reserves.
A full review of the operations of the Group during the year, together with an indication of current and future developments can be found in the
Chairman’s and Chief Executive’s Statements on pages1 to10 and the Finance Director’s Review on pages14 to19. 
Share purchases
During the final quarter of the financial year the Company acquired a total of 106,000 of its own 10p ordinary shares for treasury at an aggregate cost
of $1,112,000. The purchases were completed at an average price of £5.83 ($10.41) per share and represented 0.34% of issued share capital at
30 June 2004. At this date the Company has remaining authorisation up to the conclusion of the forthcoming Annual General Meeting to purchase
2,984,000 ordinary shares. The shares were repurchased as the Board believes that it is a good use of shareholder funds given the share price and
the Group’s future market opportunities. 
Research and Development
The Group’s activities in research and development are discussed in the Chairman and Chief Executive’s Review on pages1 to10. A charge of $9.68m
has been recorded in the Group profit and loss account during the period for research and development. Board structure
The Directors who have held office during the year and their positions on the Board are as follows:
Greg Lock
(2)(3)
(age 56) Group Chairman and Chairman of the Nominations Committee. 
George Hayter
(1)(2)(3)
(age 65) Non-Executive Director and Senior Non-Executive Director
Rene Schuster
(1)(2)(3)
(age 42) Non-Executive Director and Chairman of the Remuneration Committee 
(appointed 1 November 2003)
Jane E Tozer MBE
(1)(2)(3)
(age 56) Non-Executive Director and Chairman of the Audit Committee 
(appointed 1 November 2003)
Simon Acland (age 46) Non-Executive Director (resigned 1 November 2003)
Rob Barrow (age 54) Non-Executive Director (resigned 1 November 2003) 
Steve Purdham (age 47) Group Chief Executive.
Simon Wilson (age 42) Group Chief Financial Officer and Company Secretary 
Patrick Jolly (age 38) President EMEA (Europe Middle East Asia) and World Wide Operations outside of America 
Kevin Blakeman (age 49) President Americas Operations.
(1)
Member of the Remuneration Committee.
(2)
Member of the Audit Committee.
(3)
Member of the Nominations Committee
The Directors retiring by rotation are Simon Wilson and Patrick Jolly who, being eligible, offer themselves for re-election. In addition Jane Tozer and
Rene Schuster who were appointed in the year offer themselves for re-election at the forthcoming Annual General Meeting.
A brief description of the recent business experience of Directors serving during the period is given on page 20.
Directors’ interests
Details of Directors’ interests in the ordinary share capital of the Company and details of their option holdings is given in the Remuneration Committee
report on page 33 to 39.
None of the Directors had a material financial interest in any contract of significance, other than a service contract, with the Company or any of its direct
and indirect subsidiaries at any time during the financial year.
Substantial shareholders
As at 6 September 2004 the Company had been notified under sections 198-202 Companies Act 1985 that the following shareholders had notifiable
interests in the current issued ordinary share capital of the Company. 
Ordinary
shares held % of total
on date of ordinary
Shareholder notification shares 
Fidelity International Limited (including interests of Fidelity Management Research Corporation) 4,261,608 13.71
Deutsche Bank AG 3,110,534 10.01
Tiger Technology Performance, LLC 2,021,108 6.50
Herald Investment Trust plc 1,094,200 3.52
Wellington Management Company, LLP 1,034,522 3.33
Legal and General Investment Management Limited 957,526 3.08
Goldman Sachs Group, Inc 951,541 3.06
(1)
Based on 31,086,737 ordinary shares in issue at 6 September 2004.
Directors’ report
SurfControl plc 24. Directors’ report
Annual report + accounts 2004 25.
Employment policy and involvement
The Group believes in developing and maintaining a diverse, multi-talented and highly motivated workforce. The Group is therefore committed to
providing equal employment opportunities by establishing discrimination-free recruitment and employment practices, and maintaining an environment
that is free from any form of discrimination. The Group companies give full consideration to all employment applications from disabled persons.
Disabled employees, and employees who may become disabled during the course of their employment with the Company or Group, are eligible to
participate in all appropriate training and career development generally available to staff.
The Directors acknowledge their responsibilities to consult staff and communicate relevant information to them. All employees have access to the
internal corporate web site. The Company also uses other methods of communication such as staff meetings, web casts, video conferencing, instant
messaging, and e-mail, such that the views of employees can be taken into account in making decisions which are likely to affect their interests.
Creditor payment policy
It is Group policy to pay suppliers in accordance with agreed terms and conditions of purchase, provided that the supplier complies with all relevant
terms and conditions. The policy developed is specific to the Group’s businesses and, consequently, adoption of an external code of payment to
suppliers is considered unnecessary. The average time taken to pay purchase invoices by the Group is 28 days (Company: 35 days).
Political and charitable contributions
The Group made no political contributions during the year. Donations to UK charities amounted to $97,879 (2003: $172,249) (2002: $10,239).
In addition to these charitable donations, the Group donated $10,173 to charities outside of the UK (2003:$4,147) (2002:$127,800).
Corporate responsibility
The Group conducts its business having regard to its various stakeholders and the wider community. The Directors are committed to a management
culture that promotes the health, safety, and general welfare of employees. As mentioned above full and timely communication is maintained with
employees. The Group aims to foster fair and transparent relations with all its customers, whilst maintaining a clear commercial basis to its business
transactions. The Group ensures payment is made promptly to suppliers, irrespective of their size, unless there are sound business reasons to withhold
payment. Group companies support their communities with involvement in local initiatives, and through charitable contributions. The Board recognises
its responsibility to consider social and environmental issues as these arise and to ensure compliance with relevant local statutory regulations. The
Board believes it has adequate information systems in place to assess any environmental and social concerns that may arise from time to time. These
matters will, where relevant, form part of the Group’s risk management strategy although as a software developer the Group has no manufacturing
facilities that pose environmental issues. Waste products are recycled in all offices and management aim to ensure responsible use of energy as far as
it is economic and practical to so.
The Group’s website includes a section dedicated to corporate, ethical, employment and environmental issues. (www.surfcontrol.com/company/csr)
Going Concern 
The Directors have reviewed budgets and have a reasonable expectation that the Group has adequate resources to continue as an operational
business for the foreseeable future. The financial statements have therefore been prepared on a going concern basis.
Auditors
An ordinary resolution to re-appoint KPMG Audit Plc as auditors of the Company is to be submitted to the forthcoming Annual General Meeting.
Statement of Directors’ responsibilities
Company law requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the
Company and of the Group and of the profit or loss for that period. In preparing those financial statements, the Directors are required to:
> Select suitable accounting policies and then apply them consistently;
> Make judgements and estimates that are reasonable and prudent;
> State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the 
financial statements;
> Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group 
will continue in business.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They have general responsibility for taking
such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Directors’ report
SurfControl plc 26.
Annual General Meeting
At the Annual General Meeting of the Company, in addition to the ordinary business of the Meeting, resolutions will be proposed to renew for 
a further year the authority to allot un-issued shares in the Company, to allot shares for cash free from the pre-emption rights set out in the
Companies Act 1985, to give the Company authority to make market purchases of it shares, and to put into place a long-term incentive
programme for Executive Directors.
Resolution 8 will renew the Directors’ authority to allot un-issued shares in the Company in accordance with section 80 of the Companies Act 1985.
The resolution authorises the Directors to allot shares up to an aggregate nominal amount of £1,657,959 (being one-third of the issued ordinary share
capital of the Company at the date of this notice plus the maximum current options). The authority will expire at the conclusion of the next Annual
General Meeting of the Company or on the day 15 months from the date of the passing of this resolution (whichever is the earlier). The Directors
have no immediate intention to exercise this authority other than in connection with the group’s employee share schemes.
Under Section 89 of the Companies Act 1985, equity securities in the Company may not be allotted for cash (otherwise than in respect of an
employee share scheme) without first being offered pro rata to existing shareholders, unless the prior approval of the shareholders is given in a general
meeting. The Directors consider that it is in the best interests of the Company to renew the relevant authority given at the annual general meeting in
2003. Accordingly, a Special Resolution to this effect is proposed as Resolution 9 in the notice of the Annual General Meeting. The proposed authority
will expire at the conclusion of the next Annual General Meeting of the Company or on the day 15 months from the date of the passing of this
resolution (whichever is the earlier) and permits the Directors during this period to issue up to an aggregate nominal amount of £155,434
(representing 5% of the issued share capital at 30th June 2004) without first offering them to existing shareholders.
Under the terms of the Companies Act 1985 and its Articles of Association, the Company has power to purchase its own shares provided that this
power has first been sanctioned by shareholders. Resolution 10 authorises the Company to make purchases of up to 3,108,674 shares (representing
10% of the issued ordinary share capital of the Company as at the date of this notice) at a minimum price of 10p and a maximum price (exclusive of
expenses) of not more than 5 per cent above the average of the middle market quotations for the ordinary shares of the Company as derived from
the London Stock Exchange Daily Official List for the 5 business days prior to the purchase. The authority will expire at the conclusion of the next
Annual General Meeting of the Company or on the day 15 months from the date of the passing of this resolution (whichever is the earlier). As at 
September 2004 (being the last practicable date prior to publication of this Report) 3,481,494 options to subscribe for ordinary shares in the
Company, pursuant to the SurfControl Executive Share Option Schemes were outstanding. If exercised as at the date of this document, those options
would represent 10.07% of the total issued share capital of the Company inclusive of shares issued under option. If the full authority to buy back
shares being sought is used, the same options would represent 11.07% of the total issued share capital of the Company inclusive of shares issued
under option. The fact that the Directors are seeking this authority should not be taken as an indication that the Company will purchase its own shares
at any particular price or indeed at all and the Directors would only consider making purchases if they believed that such purchases would be in the
best interests of shareholders generally, having regard to the effect on earnings per share.
Full details of the resolution in respect to a proposed long-term incentive programme for Executive Directors will be given in the notice of Annual
General Meeting
By order of the Board
Simon Wilson
Company Secretary
6 September 2004 Corporate governance report
Annual report + accounts 2004 27.
Introduction
The Board supports the principles of the June 1998 Combined Code on Corporate Governance (“the Combined Code”) and has broadly complied
with it throughout the year. 
Reports by Sir Derek Higgs and Sir Robert Smith have prompted recent changes to the Combined Code. The Revised Code applies to reporting periods
commencing on or after 1 November 2003 and therefore the Company has no obligation to report on “the Revised Code” this year. However, the Board
takes the matter of corporate governance very seriously, and so this report also sets out the Group’s compliance in relation to the Revised Code, and our
plans to develop our corporate governance practices and procedures in the future. As a result, new or expanded areas addressed in this year’s report
include Board performance evaluation, details of the operation of Board committees, Non-Executive Directors’ Board attendance records, whistle-blowing
procedures, and shareholder communications.
Details of non compliance with the Combined Code and the Revised Code are given on page 32.
1. The Board of Directors
The Group is controlled by a Board of Directors that currently comprise four Executive and four Non-Executive Directors. The Non-Executive Directors
are George Hayter, Greg Lock, Rene Schuster, and Jane Tozer. 
The Board has adopted a Schedule of Matters reserved for its approval. The Board’s responsibilities extend to setting overall business and market
strategy for the Group as a whole. This involves approving significant strategic decisions such as acquisitions, product and market diversification, and
capital structure. It also involves approving annual operating budgets and monitoring performance against budget, establishing a risk framework and
setting tolerances for a risk profile, and monitoring executive and management performance. All operational decisions within this business and market
framework are delegated to executive management. 
George Hayter, Greg Lock and Rene Schuster are shareholders in the Company. All the Non-Executive Directors are considered by the Board to be
independent of the Company and Group, as defined in section A3.1 of the Combined Code, as each Non-Executive Director possesses considerable
outside expertise, and is able to exercise detached judgement in dealing with matters before the Board. The senior independent Non-Executive Director
is George Hayter, who was appointed to the Board on 15 June 1998. Although the senior Non-Executive Director holds stock options in the Company
which were granted in 2001, subject to performance criteria, the Board does not consider that this affects his ability to exercise independent judgement.
Board meetings were held on eight separate occasions during the year. In advance of each meeting, the Board is furnished with timely information
to enable it to discharge its duties, including inter-alia reports covering local operating performance and activities, a Group operational summary,
management accounts with budget variance analysis, most recent forecasts, and status reports on taxation, working capital management, human
resources, information systems, internal control reviews and changes, treasury and strategic matters. The Non-Executive Directors also meet from
time to time, outside of Board and committee meetings, without the presence of Executive Directors.
Directors have access to the advice of the Company Secretary at all times, and may seek independent professional and legal advice. Although there is
no formal training programme, training is provided to Directors on induction and from time to time on request.
All Board Directors are subject to re-election in accordance with the Company’s Articles of Association, which require up to one third of Directors to be
eligible for re-election in each calendar year. A Director is also subject to re-election at the Annual General Meeting following their initial appointment to
the Board.
Professional commitments of the Chairman of the Board
The Chairman of the Board is Greg Lock, who is also chairman of Nexagent Limited and held Directorships in Target Group Limited and Liberata
Limited throughout the year.
The biographies of all of the Board’s Directors, and their continuing outside Directorships if any, are set out on page 20 of this annual report. Corporate governance report
SurfControl plc 28.
Board Committees
There are three Committees of the Board, which are:
(a) Remuneration Committee 
The Remuneration Committee consists of three Non-Executive Directors: Rene Schuster (Chairman), George Hayter, and Jane Tozer. Simon Acland
was Chairman of the Committee prior to Rene Schuster’s appointment on 1 November 2003. In accordance with the recommendations of the Higgs
Report, Greg Lock resigned from his position on the Committee on 29 January 2004. Other Board Directors and senior Human Resource managers
are from time to time invited to attend Remuneration Committee meetings at the request of the Chairman. The Committee’s responsibilities are to set
the remuneration for the Executive Directors, and to set the remuneration policy for the Group so as to enable the recruitment and retention of high
calibre executives and senior management. The Board’s Remuneration Report on pages 33 to 39 provides further details of the Committee’s
responsibilities and work. The Committee meets no less than twice each year, and it has met five times in the year under review. The full text of the
Committee’s terms of reference may be found on the Company’s website at www.surfcontrol.com/company/cg.
(b) Audit Committee
The Audit Committee consists of four Non-Executive Directors: Jane Tozer (Chairman), George Hayter, Greg Lock, and Rene Schuster. In the Board’s
opinion, Jane Tozer has relevant up to date financial experience and is suitably qualified to chair this committee. Greg Lock acted as Chairman prior to
Jane Tozer’s appointment on 1 November 2003. Other Board Directors and senior accounting managers are from time to time invited to attend Audit
Committee meetings at the request of the Chairman.
The Committee is responsible for monitoring all accounting, reporting, control and financial aspects of the executive management’s activities, and for
ensuring that an appropriate risk management framework is in place for the Group. It is also responsible for ensuring that the financial performance of
the Company and Group is properly reported with regard to compliance with UK Company law, accounting standards and best practice requirements
of the Combined Code.
The Committee meets no less than four times a year, and meets with the external auditors each quarter to review their reports in relation to the
Group’s accounts and internal controls. The Committee also reviews significant areas of business and financial risk, and assumptions or judgements
made by management in assessing these risks. In addition the Committee and/or the Chairman meet periodically with the external auditors without
the presence of the Finance Director or other Executive Directors. In the year under review, the Committee met four times.
The Board reviews the need for an internal audit function annually. At present an internal audit function is not considered necessary for a number 
of reasons: the small size of the Group, the relative simplicity of the nature and type of transactions entered into by the Group, significant executive
involvement in the Group’s day to day business, the ongoing improvement of internal controls and the operation of key financial controls via peer
review. As the Group increases in size, global reach, and complexity of business mix, the possible need for an internal audit function will continue 
to be reviewed at least annually.
The Company has not historically adopted a formal ‘whistle-blowing’ procedure, although it has always encouraged open communication between staff,
HR, senior management and Executive Directors. The Audit Committee is working to include the formality of written guidelines and to encourage any
employee or Executive Director to communicate matters of concern directly to the Non-Executive Directors if they wish. The written guidelines will upon
completion be published on the Company’s website. These reporting procedures will be reviewed annually to measure their effectiveness and details
will be disclosed in the 2005 Annual Report.
The Committee is responsible for making recommendations to the Board on the appointment, reappointment and removal of the external auditors.
The Committee keeps under review the cost effectiveness, independence and objectivity of the external auditors, as well as maintaining a policy on the use
of external auditors for non-audit services. The policy’s objective is to avoid potential conflicts of interest or circumstances where the external auditor’s
judgement or independence may be compromised, and only to retain the external auditors where their knowledge and expertise provides service over
and above other professional service providers of similar standing. In the year under review, the majority of non-audit services provided by the external
auditors related to tax compliance and planning. Details of the non-audit services, together with their cost, are set out in Note 6 on page 52.
The full text of the Committee’s terms of reference, and its policy on the use of external auditors for non-audit services, may be found on the
Company’s website at www.surfcontrol.com/company/cg.
(c) Nominations Committee
The Nominations Committee consists of four Non-Executive Directors: Greg Lock (Chairman), George Hayter, Rene Schuster, and Jane Tozer. The
Committee’s responsibilities are to identify, evaluate and select candidates for Board positions, and to review annually the composition and size of 
the Board. It makes recommendations on appointments and changes to the composition to the Board. During the year under review the Committee (at the time consisting of Greg Lock (Chairman), George Hayter, Simon Acland and Rob Barrow),
recommended two Non-Executive appointments to the Board: the Chairman of the Audit Committee and the Chairman of the Remuneration
Committee. These recommendations were accepted. In making these appointments the Board considered, but did not utilise, the services of an
external search firm. Instead, a list of twenty qualified candidates was drawn up from a variety of sources. Ten of these were interviewed and
considered for the positions. The prime qualities sought for the Chairman of the Audit Committee were recent and relevant financial experience, 
and a passionate commitment to the principles of strong corporate governance. For the Chairman of the Remuneration Committee, the qualities 
were high levels of knowledge, experience and understanding of a global software and services business at a senior level.
The full text of the Committee’s terms of reference may be found on the Company’s website at www.surfcontrol.com/company/cg.
The attendance record at Board and committee meetings for Non-Executive Directors was as follows:
Board Audit Remuneration Nominations 
Board Director Held Attended Held Attended Held Attended Held Attended
Greg Lock
(1)
87441111
George Hayter 86435411
Rene Schuster
(2)
652244 n/a n/a
Jane Tozer
(2)
662244 n/a n/a
Simon Acland
(3)
22221111
Rob Barrow
(3)
21211111
(1)
Greg Lock resigned from the Remuneration Committee 29, January 2004.
(2)
Rene Schuster and Jane Tozer were appointed to the Board 1, November 2003 
(3)
Simon Acland and Rob Barrow resigned from the Board 1, November, 2003
Reasons for non-attendance were telephone system failure at a remote location, illness, and unavoidable travel delays.
The attendance record at Board meetings for the Executive Directors was 100% for each individual.
Annual performance evaluations
Previously the Board has not conducted formal annual performance evaluations of the Board as a whole, the individual Non-Executive Directors, the
Chairman, or the Board Committees. Such evaluation to date has been informal and ad hoc. In response to the recommendations of the Revised
Combined Code, the Board conducted an evaluation of its effectiveness in a separate meeting with all members present. Attendance at Board and
Committee meetings was reviewed and each Board member provided his or her assessment of the Board’s collective performance. The review
considered committee terms of reference and the timeliness and efficacy of each committee’s performance and output. Input was obtained from 
the auditors on the performance of the audit committee. 
Whilst the assessment results were very encouraging there were nevertheless clear areas for improvement, and an agenda for implementation has
been put in place. The Group is committed to continuous improvement in its business operations, and this same ethos applies to the Board.
Separately the Senior Independent Director conducted an assessment of the performance of the Chairman with input from each member of the
Board. The Chairman was absent from the discussions. This assessment was shared with the Chairman and suggestions made for improvement were
accepted by him.
The processes and improvement agenda described above will form an integral part of the Board’s work and the formal assessment of performance 
will be conducted annually
For the year under review, as in prior years, the Executive Directors’ performance is appraised by the Chairman (who also obtains feedback from the
Non-Executive Directors) in conjunction with the Chief Executive. This follows the Chief Executive’s own evaluation of their performance and
contribution to the Company. The Chairman also evaluates the performance against objectives of the Chief Executive having obtained input from the
Non Executive Directors. The Remuneration Committee considers these evaluations in their decisions on bonus awards for the year, and in the setting
of future compensation for the Executive Directors.
Corporate governance report
Annual report + accounts 2004 29. Corporate governance report
SurfControl plc 30.
2. Shareholder Relations
The Group keeps in contact with investors through a regular communication programme involving a variety of analyst and institutional meetings,
recorded telephone conference calls, and technology bank conference presentations. On a pre-set schedule, the Group publishes un-audited results
each quarter via Reuters News Service. The Group’s annual and interim reports are circulated to shareholders, all known interested parties, and through
the Financial Times/Daily Telegraph subscription service. The pre-set publication schedule, together with downloadable copies of all financial results, is
also published on the Group’s web site. The Group also publishes on the Company’s web site downloadable copies of all presentations made to
investors or analysts. These activities are an integral part of the Company’s policy of maintaining a high level of transparency with investors and
complying with its obligations as a fully listed company. The Company also hosts an annual Analyst Day where non-financial aspects of the Group’s
operations and products are discussed. The CEO and Finance Director are the primary points of contact for shareholder relations. The Chairman of the
Board is available on an ongoing basis to meet with major shareholders, and promptly responds to any ad hoc requests for meetings. In addition, the
Chairman extends an offer to meet with all of the Company’s top 10 major shareholders each year, together with the CEO.
3. Internal control
The Directors acknowledge their responsibility for the Group’s system of internal control. Internal control systems are designed to meet the particular
needs of the Group and the risks to which it is exposed, and by their nature can provide only reasonable and not absolute assurance against material
misstatement of financial information or safeguarding of assets.
Guidance for Directors, “Internal Control: Guidance for Directors on the Combined Code” was published in September 1999. The Group considers that
it complied with this guidance for the year ending 30 June 2004, and through to the date of the approval of the financial statements.
A review of the business risks faced by the Group and the effectiveness of existing internal controls takes place at least annually. Discussed below are
the four major business risks currently faced by the Group, together with the systems and initiatives in place to address these risks.
(a) Quality assured product development
Bringing products to market that meet and anticipate customer demand is critical in the software industry, as life cycles are short and competition is
fierce. If not successful, new business growth will slow and customer retention will suffer. 
To address the risks associated with product development, the Group operates a formal product development life cycle process, and the functions of
Product Management and Engineering are separately managed and staffed. This ensures that product development is ‘market-led’ rather than
‘engineering-pushed’. Close relationships are maintained with our resellers, the major security platform and Secure Content Management vendors, and
of course our customers, in order to ensure timely market feedback within the overall development process. Quality Assurance (QA) extends beyond
assuring feature-rich products and upgrades, to ease of installation, inter-operability with all the popular operating and network environments, and
scalability. For example, the Group recently announced key inter-operability relationships for its Web filtering solution with Cisco and BlueCoat – two
leading vendors of Content Caching Engines. To complement the formal QA process, the QA and Technical Support teams have a formalised escalation
process that explicitly evaluates the potential risk to the wider customer base represented by each reported problem or bug. A global QA database
tracks and evaluates problems captured by the Support teams, and weekly ‘bug’ meetings are held to ensure that problem resolution is timely. The
Group’s global resources support efficient QA and product development by having highly skilled teams in cost-effective regions of the world, such as
China, Australia, and the UK.
To complement in-house development, and to reduce time to market, the Group outsources certain non-core projects. The Group also evaluates
partnering, investment, and acquisition opportunities as a means to cost-effectively reduce time to market. For example, in the year under review the
Group outsourced a number of product translation projects, and acquired the intellectual property of an e-mail filtering appliance.
(b) Acquisitions and new business areas
Historically and in the year under review the Company has acquired businesses and technology to accelerate time to market in executing its strategic
plans with respect to technology, markets, and geographic reach. Acquisitions present a high risk/high reward profile to any company, and this is
particularly true in the field of software and technology, due to the highly competitive nature of the market and rapidly changing market conditions.
Risks arise in three broad categories: Candidate selection, valuation, and integration. The Group seeks to manage these risks in relation to the potential
rewards of accelerated time to market for high quality and competitive product offerings, and the acquisition of teams and channels to deliver such
products. If the rewards outweigh the costs and managed risks, a positive return to investors can be achieved. If the costs and risks outweigh the
rewards, the Group’s financial position could be harmed. The Group seeks to manage these risks by using multi-disciplinary teams to evaluate a wide
range of acquisition candidates before completing any acquisition. Disciplines within the teams include product management, engineering, finance, and
legal. Each team is led by two Executive Directors, being the Finance Director and the President of the region in which the candidate is located. Outside
advisors are used where appropriate to assist in due diligence. The CEO has oversight of the due diligence, and the Board reviews due diligence Corporate governance report
Annual report + accounts 2004 31.
findings, approving valuation and the actual decision to acquire a company or technology. Integration risk is managed by involving Company
management from HR, IS, and other support functions in the latter stages of due diligence to develop a detailed integration plan. Integration
commences immediately upon completion of an acquisition and involves the same multi-disciplinary team that conducted the due diligence, in
conjunction with the acquired entity’s management.
In May 2004, the Company announced a three year product and technology roadmap, which included delivering its filtering solutions via appliance 
and managed service platforms, in addition to the current server software basis of delivery. The acquisition of Linux based e-mail filtering appliance
technology in April 2004 has accelerated the Group’s ability to execute against this product roadmap. Appliances and managed services represent new
business areas of opportunity for the Group, in which the Group has little prior experience, and therefore present new areas of risk. The Group will seek
to manage these new risks by outsourcing non-core activities, such as manufacturing, logistics, and hosting. Additional skills will be hired into the Group
as appropriate.
In April 2004 as a result of the acquisition of the principal assets of SecureM, Inc., the Group acquired sales offices in China; for the first time directly
penetrating this large and culturally different marketplace. New markets afford new opportunities for the Group. Lack of experience in new markets and
cultures also present new areas of risk. The Group will seek to manage these new risks by retaining and hiring locally experienced employees and
managers, utilising external expert advice with regard to local trading and regulatory conditions, and applying additional internal control procedures.
Examples of internal controls include more senior levels of expenditure authorization, increased oversight by Group management, and more frequent
and detailed financial controls relative to the size of the local operation.
(c) Intellectual property
The Group’s intellectual property rights are valuable, and any inability to protect them could reduce the value of the Group’s products, services and
brand. Effective intellectual property protection may not be available in every country in which the Group’s products and services are distributed.
Unauthorized use of the Group’s intellectual property, or third party intellectual property claims, with or without merit, could be expensive to litigate or
settle and could divert management resources and attention. The Group relies on a combination of patent, trademark, copyright and trade secret laws,
as well as confidentiality procedures and contractual provisions to protect the Group’s proprietary technology and intellectual property. The Group also
controls access to proprietary technology, and enters into confidentiality and invention assignment agreements with the Group’s employees and
consultants, as well as other third parties.
(d) Internal communication and management information systems
The Group operates out of thirteen offices in eight countries, and has grown both organically and by acquisition. Rapid growth on a global basis
presents risks associated with communication, while the use of various local information systems (which are often legacy applications from past
acquisitions) may have a detrimental impact on the production of accurate, timely and relevant management information.
To address the risks associated with communication and management information flows, the Information Systems (IS) team operates as a global
function to create and implement common systems that produce consistent data in standard reporting formats. IS has a formal Management
Information Systems (MIS) development plan covering a rolling two year period. In addition, challenges associated with communication across the
organisation are met through use of tools such as video, telephone, instant messaging and email. Management and executive meetings are also
frequently held, examples of which are given in the Non-Financial Reporting paragraph below.
In addition to the four major business risks discussed above, there are a number of monitoring, reporting, and control risks which are common to
many companies, irrespective of market sector, size, or rate of growth. The principal current control procedures operated by the Group to address
such risks include: 
i) Control environment
The Group’s control environment is the responsibility of the Board, however senior management work hard to improve the level of risk awareness
throughout the Group. Operational managers are delegated with the implementation and day to day monitoring of internal controls. Operational
matters are communicated to the Board through operating unit or global function reports at each Board meeting, held eight times per year. The
effectiveness of financial internal controls is reported to the Board by the Chief Financial Officer at each Board meeting. The Board also receives a
quarterly review from the external auditors, in addition to the year end review, covering the scope of controls that they have sought to rely on in order
to form an opinion on the financial statements.
ii) Risk assessment
As noted above the Board has established a formal procedure to monitor the risk environment and reviews how controls are developed and adapted
to minimise the Group’s exposure. Corporate governance report
SurfControl plc 32.
iiI) Financial reporting
A comprehensive budget is produced once a year and is reviewed and approved by the Board. Rolling quarterly operating forecasts are completed
monthly, and are reported to the Board monthly. Budgets are devolved to local and regional operational management who are responsible for
managing their operating units within budgetary constraints. Individual department managers are aware of and accountable for their authorisation 
limits with regard to expenditure and staff recruitment.
The monthly results of the operating units are reported monthly to the Board and compared to the current budget. In addition, key performance
indicators (“KPIs”) relevant to the Group are monitored more frequently; on a daily and weekly basis by senior management, for example invoicing
levels and sales mix, cash flows, and leads generated by marketing. Any trend in the KPIs away from budget is brought to the attention of the Board. 
iv) Non-financial reporting
Management in sales, marketing, product management, engineering, technical support, human resources and legal meet at least monthly as teams to
monitor and assess progress against current operating plans, as well as opportunities to improve inter-operation. These meetings occur separately in
each major office within the Group. 
Senior management meets monthly via telephone or video link to review and discuss short term tactical and operational matters. These meetings are
global in nature and bring all disciplines together at each meeting. Issues that affect multiple departments, and communication are explicitly targeted as
important agenda items.
The Executive Directors meet twice monthly to discuss operational and strategic matters. Once per quarter these meetings cover strategic matters with
a time-frame extending beyond the current operating plans and budgets.
v) Treasury policy
The Board has a formal policy governing its treasury function, which is reviewed annually by the Board. The policy’s objective is to produce a
competitive yield on Group funds without exposing the Group to a significant level of risk, such that sufficient cash is preserved for working capital 
and investment needs. The following risks are explicitly addressed: liquidity, counterparty, product, interest, and exchange. 
4. Provisions of the Code
Throughout the financial year ended 30 June 2004, and through to the date of approval of the financial statements, the Board consider that the Group
has complied with Section 1 of the 1998 Combined Code except to the extent described below:
Non-Executive Directors’ Service Contracts and Share Options
In accordance with the terms of their original appointments, Non-Executives currently serve under service contracts without a specified fixed term, but
with notice periods of three months. 
The Company has in the past granted options over ordinary shares to the senior Non-Executive Director. These grants occurred several years ago when
the Company was a much smaller business than it is today, reflecting the very significant growth in the business over a short period of time. The senior
Non-Executive Director is considered by the Board to be independent.
In addition, throughout the financial year ended 30 June 2004, and through to the date of approval of the financial statements, the Board considered
that the Group has complied with Section1 of the Revised Combined Code except to the extent described below:
(a) Audit and Remuneration Committee Membership
The Audit and Remuneration Committees did not wholly comprise independent Non-Executive Directors throughout the financial year as required by
provisions B.2.1 and C.3.1 of the Revised Combined Code. Following Greg Lock’s appointment as Group Chairman he resigned from his position on
the Remuneration Committee in Janurary 2004. Greg Lock remains a member of the Audit Committee because the Board believe him to be
independent and highly value his input to the Committee’s work.
(b) Board Performance Evaluations
The Company recently adopted a formal process for evaluating the performance of the Board as a whole, its committees, the individual Non-Executive
Directors, and the Chairman as required by provision A.6 of the Revised Combined Code. As such this process has not been in place for the whole of
the year under review.
(c) “Whistle-blowing” Procedures
The Company’s current informal and unwritten procedures for reporting matters of employee concern have always encouraged open communications
with all levels of staff including Executive Directors, but have not historically included encouraging employees or Executive Directors to communicate
matters of concern to the Non-Executive Directors. These reporting procedures will be formalised and amended to encourage communication with any
and all Board members, from the second quarter of fiscal year 2005. Directors’ remuneration report
Annual report + accounts 2004 33.
Introduction
The purpose of this report is to inform shareholders of the Group’s policy on Directors’ remuneration as recommended by the Remuneration Committee
and adopted by the full Board. The report details how the Board has complied with the Directors’ Remuneration Report Regulations 2002 from the
Department of Trade and Industry, and section B of the Combined Code. 
Members of the Remuneration Committee and advisers
The Committee comprised of the following Non-Executive Directors during the year:
Rene Schuster (Chairman appointed 1 November 2003)
George Hayter
Jane Tozer
Simon Acland (Chairman resigned 1 November 2003)
Greg Lock (resigned 29 January 2004) 
Simon Acland resigned from both the Committee and the Board. Greg Lock resigned from the Committee to comply with the revisions to the
Combined Code, which state that the Chairman of the Board should not sit on the Remuneration Committee.
The Committee has received market data on competitive levels of compensation in the UK and US from New Bridge Street Consultants and Radford
US during the year. The consulting firms provide information to the Human Resources department from time to time but are not retained to provide
any specific consulting services for the Committee or the Group generally.
During the year the Committee has also consulted Steve Purdham and Greg Lock about its proposals relating to the remuneration of other Executive
Directors. The Committee also consults with other senior members of staff on an occasional basis.
Terms of reference
The Committee works within detailed terms of reference, which are set by the Board. Copies of the Committee’s terms of reference are available from
the Group’s web site, www.surfcontrol.com/company/cg and are summarised below:
> The scale and structure of all aspects of remuneration for the Executive Directors and the Non-Executive Chairman; 
> The Group’s overall policy on executive and senior management remuneration;
> The level and performance basis for share option or other share-based awards to Executive Directors, senior management and staff; and 
> The maintenance of service agreements with the Chairman and Executive Directors.
The fees for Non-Executive Directors are a matter reserved for a Committee of the Board which does not include any Non-Executive Directors.
Remuneration policy
The Committee believes remuneration levels should be competitive, and based on individual contribution. The aim of its policy is to provide 
incentive structures which support the achievement of the Group’s growth and financial performance goals. The current policy is to determine
executive and senior management remuneration by reference to comparisons in the global software technology sector, whilst having regard to the
relative performance and growth prospects for the Group, and the current and expected future performance of the individuals concerned. The
Committee, when setting remuneration for the executives and senior management also takes into account practice applicable to other employees
within the Group.
The Committee is of the view that a significant proportion of executive remuneration should be linked to corporate performance so that the interests 
of the executives are aligned as far as possible with those of shareholders. Performance related payments for the Executive Directors for the financial
year ended June 2004 consisted of a combination of cash bonuses and share options.
There were no significant changes in the structure of executive cash-based remuneration since the end of the financial year, although the Committee is
currently in the process of reviewing long-term incentive arrangements for the Executive Directors. There were no LTIP’s in operation during the year
under review. It is intended that neither Executive nor Non-Executive Directors will receive share options for the foreseeable future, but that Executive
Directors will participate in a new long-term incentive scheme paying due regard to corporate governance best practice. Details of the proposed
scheme will be presented to shareholders for approval as part of the notice of the 2004 Annual General Meeting. Other than the introduction of the
new LTIP, the current intention of the Committee is to continue the same remuneration policy during the next and subsequent financial years. Directors’ remuneration report
SurfControl plc 34.
Basic salary and benefits in kind
Basic salaries are subject to annual review and are fully pensionable. Salaries are designed to be competitive in order to recruit and retain 
excellent people.
Benefits in kind include a Company car (or allowance where appropriate) for UK based Directors, and access to Group employee medical schemes
and life assurance cover for all Directors. These benefits are not pensionable.
Annual and monthly cash bonus scheme
Annual bonus arrangements are intended to provide incentives to the Executive Directors to achieve the Group’s pre-determined operational objectives
for the year under review. Executive bonuses are based on a mix of financial objectives relating to regional or Group revenue and Group EBITDA with
minimum and threshold achievement levels. 75% of such bonus is payable if the Group attained 95% or more of the target EBITDA. 
Cash bonus payments represented 48% of executive basic pay in the current year (2003: 53%) (2002: 40%). 70% of Executive Directors’ cash
bonus is uncapped. Bonuses are not pensionable.
Share options
The Remuneration Committee regards share options as an important component of total remuneration but intends to make only limited allocation 
of options in the future, for the benefit of senior management rather than Executive Directors as detailed above. The grant of options to senior
management are subject to operational and individual targets, and are set in consultation with the CEO and the Executive team.
Up to now Executive Directors’ entitlement to options under the Group scheme have been subject to the achievement of the following 
performance conditions: 
For financial years 1999-2003 options were granted to executives based on a mix of Group revenue and EBITDA targets for the relevant year of
account. Outstanding options arising from this period have been fully tested as to performance criteria and are eligible to vest in accordance with the
terms of the original grant, or have otherwise lapsed.
For financial year 2004, 280,000 options were granted to the Executive Directors on 3 July 2003 at a price of £6.475, which was the closing middle
market price on that day. Steve Purdham received 100,000 options and the other Executive Directors received 60,000 options each. The options were
subject to the following performance and vesting conditions:
> 80% of options vest on 2 July 2004, subject to achievement of Group target EBITDA for the year ended 30 June 2004, with 75% of such options
vesting if the Group attained 95% or more of target EBITDA;
> 10% of options vest on 2 July 2005, provided that the Company’s total shareholder return (TSR) exceeds the median achieved by techMARK listed
companies over the period July 2003-July 2005;
> 10% of options vest on 2 July 2005, provided that the Company’s TSR is in the upper quartile achieved by techMARK listed companies over the
period July 2003-July 2005.
Additionally, in the event that the Group EBITDA for the year ended 30 June 2004 performance condition is not achieved, or only partially achieved,
the unvested options become eligible to vest on 2 July 2005 on the same TSR basis described in the paragraphs above. Fifty percent of the unvested
options would then vest on the achievement of the median TSR and fifty percent on achieving a TSR in the upper quartile, but thereafter no further
retesting of performance is permitted and the options lapse.
None of the above performance conditions have been varied during the financial year. Group EBITDA is assessed by reference to the published
audited annual accounts of the Company. Following a review of the Group’s full year 2004 management accounts, the Committee concluded that the
Group EBITDA targets had not been achieved in all respects, and that accordingly all the relevant options would be re-tested under the above TSR
criteria in July 2005.
Throughout the year under review the Committee has adopted the principle that the greater the potential award of options to participants, the more
stretching shall be the relevant performance target. The Committee has not formally valued share options that it has approved. 
There is no limit set on the number of options held by any individual participants in the Company’s share option schemes, including Directors, as the
allocation of options is wholly at the discretion of the Committee. The Group’s current share option scheme is operated without significant external
management cost. Service Contracts
The Company has service agreements with its Directors. It is the Remuneration Committee’s policy that such agreements should contain notice periods
of not more than 12 months, and that provision for compensation for loss of office is limited in scope to the termination provisions as set in each
Executive Director’s contract. Details of agreements in place for the current Directors is as follows:
Director Date of contract Term Notice period Provision for compensation
Greg Lock 17 October 2000 Equivalent to Not less than 3 3 months’ salary and all non-reimbursed
the minimum months by either expenses after deduction of relevant
notice period party. tax and national insurance.
Steve Purdham 1 March 1998 Equivalent to Not less than 12 months’ basic salary, employer
the minimum 12 months by pension contributions, together with such
notice period. either party. bonuses (payable pursuant to the current 
bonus arrangements), and the cash 
equivalent value of all benefits in kind or 
allowances. Compensation payments shall 
be made after deduction of relevant 
employee tax and national insurance.
Simon Wilson 7 February 2000 Equivalent to 12 months by 12 months’ basic salary, employer 
the minimum the Company or pension contributions, together with such
notice period. 3 months by the bonuses (payable pursuant to the 
Director. current bonus arrangements), and the cash 
equivalent value of all benefits in kind or 
allowances. Compensation payments shall 
be made after deduction of relevant 
employee social security taxes.
Patrick Jolly 28 August 2000 Equivalent to Not less than 12 months’ basic salary, employer
the notice period 12 months by the pension contributions, together with such
given by the Company or 6 bonuses (payable pursuant to the 
relevant party. months by the current bonus arrangements), and
Director. the cash equivalent value of all benefits in
kind or allowances. Compensation payments 
shall be made after deduction of relevant
employee tax and national insurance.
Kevin Blakeman 17 November 2000 Equivalent to 12 months by 12 months’ basic salary, employer
(as varied 13 the minimum the Company or pension contributions, together with such
December 2001) notice period. not less than bonuses (payable pursuant to the
3 months by the current bonus arrangements), and he cash 
Director. tequivalent value of all benefits in kind or 
allowances. Compensation payments shall 
be made after deduction of relevant 
employee social security taxes.
Directors’ remuneration report
Annual report + accounts 2004 35. Directors’ remuneration report
SurfControl plc 36.
Director Date of contract Term Notice period Provision for compensation
George Hayter 15 June 1998 Equivalent to Not less than  3 months’ salary and all non-reimbursed
the minimum 3 months by  expenses after deduction of relevant notice 
period either party. tax and national insurance.
Jane Tozer 1 November 2003 Equivalent to Not less than  Fees for 3 months and all non-reimbursed
the minimum 3 months by  expenses
notice period with either party.
an initial term of
three years.
Rene Schuster 1 November 2003 Equivalent to Not less than  3 months’ salary and all non-reimbursed 
the minimum 3 months by  expenses after deduction of relevant 
notice period with either party. tax and national insurance.
an initial term of
three years.
Details of the service agreements in respect to the other Directors who have served during the year are as follows: 
Rob Barrow 1 March 1998  Equivalent to Not less than  3 months’ salary and all non-reimbursed
(as varied on the minimum 3 months by expenses after deduction of relevant 
11 June 2001) notice period either party. tax and national insurance 
(1) Quester Services Limited* 15 June 1998 Equivalent to Not less than Fees for 3 months and all non-reimbursed 
(2) Simon Acland the minimum 3 months by expenses.
notice period either party.
*Quester Services Limited employed Simon Acland as a director.
Each agreement also contains post termination restrictive covenants, which place limitations on solicitation of customers or employees, and acting in
competition with the business of the Group.
Performance graph
The graph below sets out the cumulative TSR of the Company and those companies comprising the FTSE techMARK All Share Index for the period of 
5 years from July 1999 to June 2004. In the opinion of the Directors this is the principal index used by the investment community as a benchmark for
performance comparison with the Company
Earnings from other Directorships held
Steve Purdham earned and retained fees of $3,479 from his Non-Executive position on the Board of the Manchester Technology Fund Limited. 
Patrick Jolly earned and retained fees of $52,185 from his Non-Executive position on the Board of Findel plc.
2,500
2,000
1,500
1,000
500
0
1999 2000
Year
Percentage (%)
2001 2002 2003 2004
SurfControl
FTSE techMARK All Share Audited Information
Share options
The following table shows the movement in interests in share option held by Directors during the year under review.
Exercise Exercise 1 July Granted in Lapsed in Exercised in 30 June 
price period 2003 the year* the year* the year* 2004
Steve Purdham 331p 15/7/00–15/7/09 150,000 – – – 150,000
434p 30/11/00–29/11/09 150,000 – – – 150,000
849p 14/6/01–13/6/10 160,000 – – – 160,000
365p 30/6/02– 29/6/11 150,000 – – – 150,000
421p 3/7/03–2/7/12 160,000 – – – 160,000
647.50p 2/7/05–1/7/13 – 100,000 – – 100,000
Steve Purdham – non beneficial 321p 5/10/00–4/10/09 3,000 – – – 3,000
849p 14/6/01–13/6/10 3,200 – – – 3,200
Simon Wilson 849p 21/2/01–20/2/10 180,000 – – – 180,000
365p 30/6/02–29/6/11 37,500 – – (25,000) 12,500
421p 3/7/03–2/7/12 50,000 – – – 50,000
647.50p 2/7/05–1/7/13 – 60,000 – – 60,000
Patrick Jolly 849p 10/9/01–9/9/10 260,000 – – – 260,000
365p 30/6/02–29/6/11 37,500 – – (25,000) 12,500
421p 3/7/03–2/7/12 40,000 – – – 40,000
647.50p 2/7/05–1/7/13 – 60,000 – – 60,000
Kevin Blakeman 321p 5/10/00–4/10/09 6,000 – – – 6,000
849p 9/2/01–8/2/10 8,000 – – – 8,000
849p 14/6/01–13/6/10 12,000 – – – 12,000
738p 29/11/01–28/11/10 85,000 – – – 85,000
365p 30/6/02–29/6/11 37,500 – – (25,000) 12,500
421p 3/7/03–2/7/12 40,000 – – – 40,000
647.5p 2/7/05–1/7/13 – 60,000 – – 60,000
George Hayter 186p 11/9/99–7/10/08 5,200 – – (5,200) –
849p 9/2/01–8/2/10 800 – – – 800
Rob Barrow 434p 30/11/00–29/11/09 150,000 – – (150,000) –
849p 14/6/01–13/6/10 80,000 – (80,000) – –
Patrick Jolly and George Hayter exercised 25,000 and 5,200 options on 9 September 2003 at a market price of £8.75. They made gains of £125,700
and £35,828 respectively. Simon Wilson and Kevin Blakeman exercised 25,000 options each on the same date at a market price of £8.40, and made
gains of £118,750 each. Following his retirement as a Director, Rob Barrow was eligible, under the terms of his severance agreement, to exercise
outstanding options by 30 June 2004. He exercised 75,000 options with a grant price of £4.34 on 9 March 2004 at a market price of £5.75, and
made a gain of £105,750. A further 75,000 options with a grant price of £4.34 were exercised on 28 April 2004 at a market price of £6.16, giving a
gain of £136,500. Rob Barrow’s remaining options lapsed on 30 June 2004, following his retirement from the Board. 
The market price of the Company’s shares at the end of the financial year was £6.10 and ranged between £5.10 and £10.675 during the year.
Directors’ remuneration report
Annual report + accounts 2004 37. Details of Directors’ emoluments
Benefits
Salary/fees Bonus in kind Total Total Total
2004 2004 2004 2004 2003 2002
$’000 $’000 $’000 $’000 $’000 $’000
Steve Purdham
*
339 165 23527 454 365
Simon Wilson 285 145 14 444 469 336
Patrick Jolly 348 128 43 519 459 352
Kevin Blakeman 223 136 9 368 373 370 
Greg Lock 89 – – 89 40 36
George Hayter 49 – – 49 40 36
Jane Tozer (appointed 1 November 2003) 35–– 35 ––
Rene Schuster (appointed 1 November 2003) 35–– 35 ––
Rob Barrow (resigned 1 November 2003) 47–– 47 158 144
Simon Acland (resigned 1 November 2003) 14–– 14 40 36
Shelagh Rogan (resigned 11 September 2001) –––– –342
1,464 574 89 2,127 2,033 2,017
* Highest paid Director
Included in benefits for Steve Purdham is $21,000 for a car expense allowance (2003:$19,000) (2002:$3,000). No other Director received an
expense allowance in the year.
The amounts shown in the above table of Directors’ emoluments for Simon Acland represent payments to Quester Services Limited who employed
him as a Director. The Company pays the current Non-Executive Directors a fixed basic fee of £25,000 ($43,000) per annum. Rene Schuster and 
Jane Tozer also receive an additional £5,000 ($9,000) per annum for their services as Chairmen of the Remuneration and Audit Committees. George
Hayter also receives an additional £5,000 ($9,000) per annum for his position as senior independent Non-Executive Director. Non-Executive fees are
reviewed annually by the Chairman and Executive Board and are set at levels which are considered appropriate to attract and maintain individuals 
with requisite experience. 
Retirement benefits
The Group operates defined contribution schemes for its Executive Directors, consistent with its policy for its employees. The Parent company
contributes 5% of basic salary into the Company’s UK based pension scheme and such further amounts as may be agreed by the Committee into an
executive money purchase pension scheme for Steve Purdham. SurfControl Inc. provides 401k employer contributions for US based executives at the
lower of 3% of annual salary or 50% of the personal contributions paid by the executive.
Directors’ remuneration report
SurfControl plc 38. These schemes are administered independently of the Company. Details of contributions made by the Group on behalf of Directors are given below:
2004 2003 2002
$’000 $’000 $’000
Steve Purdham 63 54 47
Simon Wilson 4 67
Patrick Jolly 17 16 16
Kevin Blakeman 7 75
Greg Lock – ––
George Hayter – ––
Jane Tozer – ––
Rene Schuster – ––
Rob Barrow – ––
Simon Acland – ––
Shelagh Rogan – –34
91 83 109
Interest in shares
The Directors who held office at the end of the financial year, and their immediate families, had the following interests in the shares of the Company:
Ordinary Ordinary
10p shares 10p shares
30 June 30 June 
2004 2003
Steve Purdham 95,000 120,000
Simon Wilson – beneficial 1,330 430
Simon Wilson – non beneficial 1,000 –
Patrick Jolly 3,489 –
Kevin Blakeman 8,500 8,500
Greg Lock 17 ,500 19,500
George Hayter 9,450 9,450
Jane Tozer – –
Rene Schuster 10,000 –
There were no changes in Directors’ interests between 30 June 2004 and the date of this report.
By order of the board
Rene Schuster
Chairman of the Remuneration Committee
6 September 2004
Directors’ remuneration report
Annual report + accounts 2004 39. We have audited the financial statements on pages 41 to 67. We have also audited the information in the Directors’ remuneration report that is
described as having been audited.
This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has
been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
The Directors are responsible for preparing the Annual Report and the Directors’ remuneration report. As described on page 25, this includes
responsibility for preparing the financial statements in accordance with applicable United Kingdom law and accounting standards. Our responsibilities,
as independent auditors, are established in the United Kingdom by statute, the Auditing Practices Board, the Listing Rules of the Financial Services
Authority, and by our profession’s ethical guidance.
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the
Directors’ remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our
opinion, the Directors’ report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not
received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and
transactions with the Group is not disclosed.
We review whether the Corporate Governance Statement reflects the company’s compliance with the seven provisions of the Combined Code issued
in June 1998 specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to
consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s
corporate governance procedures or its risk and control procedures.
We read the other information contained in the Annual Report, including the Corporate governance report and the un-audited part of the Directors’
remuneration report, and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies with the financial statements.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors’ remuneration report to be audited. 
It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and
of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors’ remuneration report to be audited are free
from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of
the presentation of information in the financial statements and the part of the Directors’ remuneration report to be audited.
Opinion
In our opinion:
> the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 30 June 2004 and of the profit of the
Group for the year then ended; and
> the financial statements and the part of the Directors’ remuneration report to be audited have been properly prepared in accordance with the
Companies Act 1985.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
Manchester, England
6 September 2004
Independent auditors’ report 
to the members of SurfControl plc
SurfControl plc 40. 2004 2003 2002
Notes $’000 $’000 $’000
Turnover
Continuing operations 3 86,859 73,232 54,167
Acquisitions 3 476 ––
2 87,335 73,232 54,167
Cost of sales (1,393) (723) (643)
Gross profit 85,942 72,509 53,524
Selling and distribution costs 3 (44,025) (39,740) (32,854)
Research and development 3 (9,678) (7,530) (6,358)
General and administrative costs 3 (16,813) (14,580) (12,872)
Amortisation of intangible assets and depreciation 3,6 (3,148) (2,779) (71,709)
Movement in share option provision 3,16 (49) (487) (20)
Total administrative expenses (29,688) (25,376) (90,959)
Operating profit/(loss)
Continuing operations 3 13,648 7,393 (70,289)
Acquisitions 3 (1,419) ––
6 12,229 7,393 (70,289)
Proceeds from disposal of business 311 381 253
Profit/(loss) on ordinary activities before interest and taxation 2 12,540 7,774 (70,036)
Net interest receivable and similar items 7 1,859 1,105 651
Profit/(loss) on ordinary activities before taxation 14,399 8,879 (69,385)
Tax on profit/loss on ordinary activities 8 (2,862) (2,516) 980
Profit/(loss) on ordinary activities after taxation and retained profit/(loss) for the period 18,19 11,537 6,363 (68,405)
Basic earnings/(loss) per ordinary share (cents) 4 37.3 20.9 (225.9)
Diluted earnings/(loss) per share (cents) 4 36.0 20.8 (225.9)
There is no material difference between the reported results and the results calculated on an historical cost basis.
All results are from continuing activities except for proceeds from disposal of business.
An unaudited reconciliation between the Group profit on ordinary activities after taxation and EBITDA is shown on page 68.
Group statement of total recognised gains & losses
for the years ended 30 June
2004 2003 2002
Notes $’000 $’000 $’000
Profit/(loss) for the year 11,537 6,363 (68,405)
Unrealised exchange difference on translation 18,19 3,355 1,095 (105)
Total recognised gains and losses relating to the financial year 14,892 7,458 (68,510)
The notes on pages 46 to 67 form part of these financial statements.
Group profit & loss account
for the years ended 30 June
Annual report + accounts 2004 41. 2004 2003 2002
Notes $’000 $’000 $’000
Fixed assets
Intangible assets 9 12,554 –1,152
Tangible assets 10 4,065 3,268 2,950
16,619 3,268 4,102
Investments 11 31 29 7
16,650 3,297 4,109
Current assets
Stocks 12 69 –18
Debtors 13 31,681 24,138 14,149
Cash at bank and in hand 24,26 87,477 61,707 35,454
119,227 85,845 49,621
Creditors: amounts falling due within one year 14 (72,226) (52,241) (35,642)
Net current assets 47,001 33,604 13,979
Total assets less current liabilities 63,651 36,901 18,088
Creditors: amount falling due after more than one year 15 (26,001) (16,742) (7,126)
Provisions for liabilities and charges 16 (446) (540) (72)
37,204 19,619 10,890
Capital and reserves
Called up share capital 17,18 5,027 4,946 4,904
Share premium account 18 3,803 79 63,724
Merger reserve 18 – –130,407
Capital redemption reserve 18 882 882 882
Profit and loss account 18 27,492 13,712 (189,027)
Shareholders’ funds 37,204 19,619 10,890
Shareholders’ funds comprise:
Equity shareholders’ funds 19 37,204 19,619 10,890
Approved by the Board of Directors on 6 September 2004 and signed on its behalf by;
Steve Purdham, Director Simon Wilson, Director
The notes on pages 46 to 67 form part of these financial statements.
Group balance sheet
as at 30 June 2004
SurfControl plc 42. 2004 2003 2002
Notes $’000 $’000 $’000
Fixed assets
Intangible assets 9 11,911 ––
Tangible assets 10 1,426 1,308 1,395
13,337 1,308 1,395
Investments 11 199,754 187,208 186,459
213,091 188,516 187,854
Current assets
Stocks 12 – –18
Debtors 13 15,993 5,714 3,700
Cash at bank and in hand 55,630 36,503 13,664
71,623 42,217 17,382
Creditors: amounts falling due within one year 14 (38,462) (14,222) (7,799)
Net current assets 33,161 27,995 9,583
Total assets less current liabilities 246,252 216,511 197,437
Creditors: amount falling due after more than one year 15 (12,577) (3,880) (1,922)
Provisions for liabilities and charges 16 (446) (540) (72)
233,229 212,091 195,443
Capital and reserves
Called up share capital 17,18 5,027 4,946 4,904
Share premium account 18 3,803 79 63,724
Merger reserve 18 130,407 130,407 130,407
Capital redemption reserve 18 882 882 882
Profit and loss account 18 93,110 75,777 (4,474)
Shareholders’ funds 233,229 212,091 195,443
Shareholders’ funds comprise:
Equity shareholders’ funds 19 233,229 212,091 195,443
Approved by the Board of Directors on 6 September 2004 and signed on its behalf by;
Steve Purdham, Director Simon Wilson, Director
The notes on pages 46 to 67 form part of these financial statements.
Company balance sheet
as at 30 June 2004
Annual report + accounts 2004 43. 2004 2003 2002
Notes $’000 $’000 $’000
Net cash inflow from operating activities 22 32,637 24,093 11,686
Returns on investments and servicing of finance 23 1,792 741 630
Taxation (5,536) (1,048) 150
Capital expenditure and financial investment
Purchase of tangible fixed assets (2,267) (1,633) (1,061)
Purchase of investments – (19) (4)
Sale of tangible fixed assets 17 28 64
Net cash outflow from capital expenditure and financial investment (2,250) (1,624) (1,001) 
Acquisitions and disposals
Purchase of subsidiary undertaking (8,910) ––
Cash acquired with subsidiary undertaking 120 ––
Proceeds from disposal of business 311 381 253
Net cash inflow from acquisitions and disposals (8,479) 381 253
Net cash inflow before management of liquid resources and financing 18,164 22,543 11,718
Management of liquid resources 24 (7,470) (15,620) 4,075
Financing
Proceeds from share issue 3,750 1,271 523
Purchase of own shares for treasury (839) ––
Issue costs – –50
Repayment of amounts borrowed – –(32)
Net repayment of capital element of finance 24 (38) (45) (160)
Net cash inflow from financing 2,873 1,226 381
Increase in cash in the period 24 13,567 8,149 16,174
The notes on pages 46 to 67 form part of these financial statements.
Group statement of cash flow
for the years ended 30 June
SurfControl plc 44. 2004 2003 2002
Notes $’000 $’000 $’000
Increase in cash in the period 13,567 8,149 16,174
Cash outflow from decrease in debt and lease financing 24 38 45 192
Net transfers from liquid resources 24 7,470 15,620 (4,075)
Change in net funds resulting from cash flows 24 21,075 23,814 12,291
New finance leases 24 – – (64)
Difference on translation 24 4,727 2,477 591
Movement in net funds in the period 25,802 26,291 12,818
Net funds at 1 July 2003/1 July 2002/1 July 2001 24 61,634 35,343 22,525
Net funds at 30 June 2004/30 June 2003/30 June 2002 24 87,436 61,634 35,343
The notes on pages 46 to 67 form part of these financial statements.
Reconciliation of net cash flow to 
movement in net funds
for the years ended 30 June
Annual report + accounts 2004 45. Notes to the financial statements
for the years ended 30 June
SurfControl plc 46.
1. Accounting policies
The following principal accounting policies have been applied consistently in dealing with items considered material in relation to the Group’s 
financial statements.
Accounting convention
The financial statements are prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. 
The functional currency of the Group is US dollars as the majority of the Group’s business is conducted in the United States and accordingly amounts
in the financial statements are denominated in that currency.
Basis of Consolidation
The Group financial statements consolidate the financial statements of SurfControl plc and its subsidiary undertakings made up to 30 June 2004.
Unless otherwise stated, the acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired
in the year are included in the consolidated profit and loss account from the date of acquisition.
Under section 230 (4) of the Companies Act 1985 the Company is exempt from the requirements to present its own profit and loss account. 
Turnover and deferred income
Turnover represents the value of goods and services (net of VAT and other regional sales tax) delivered in the normal course of business. Turnover
from perpetual software and appliance license sales is recognised once the license is delivered, all significant obligations in relation to the sale have
been fulfilled, and where the sales price is fixed and determinable. Sales made via channel partners are neither invoiced, nor recognised as turnover,
until the product or service is delivered to the end customer. Turnover from the following items are recognised over the relevant period of the contract
on a straight-line basis: software/appliance support and maintenance, content list subscriptions, Cyber Patrol home product subscriptions, and OEM
contract licenses. Turnover from services is recognised upon completion. Where the proportion of the total sale price attributable to different elements
of the sale is not specifically identified, an estimate is made based upon the published list prices for each of the individual elements.
Deferred income represents the value of goods and services (net of VAT and other regional sales tax) that has been invoiced but not considered
delivered or completed, plus the unrecognised portion of turnover from software/appliance support and maintenance, content list subscriptions, Cyber
Patrol home product subscriptions, and OEM contract licenses. Deferred income is carried forward within creditors, and released to turnover in the
profit and loss account in future periods.
Research and development
All research and development expenditure is written off as incurred.
Technical support
All pre-and post sales support expenditure is written off as incurred.
Deferred taxation
Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting
purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19.
Pensions
The Group operates a number of defined contribution pension schemes, the assets of which are held separately from those of the Group in
independently administered funds. Contributions are charged to the profit and loss account as incurred.
Share options
The tax charge arising on the future potential exercise of Inland Revenue unapproved options is charged to the profit and loss account over the period
from the date of grant to the date options unconditionally vest with the employee. The charge is based upon the difference between the option
exercise price and the closing market price at the balance sheet date. Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 47.
1. Accounting policies cont.
Intangible assets and goodwill
Intangible assets include the fair value of acquired intellectual property and goodwill. Acquired goodwill (representing the excess of the fair value of the
consideration and associated costs over the fair value of the separable net assets acquired) arising on consolidation is capitalised. Acquired intellectual
property is also capitalised, where in the opinion of the Directors it satisfies the recognition criteria given in FRS 10, Goodwill and Intangible Assets.
Acquired intellectual property and positive goodwill is amortised to nil by equal annual instalments over its estimated useful economic life. For
acquisitions to date, the estimated useful economic life of these assets has been two years.
On the subsequent disposal or termination of the business, the profit and loss on disposal or termination is calculated after charging the un-amortised
amount of any related goodwill.
Tangible fixed assets and depreciation
Tangible fixed assets fixed are recorded at cost as and when they are delivered and available for use. The carrying value of such assets is written down
by the amount of any impairment, and the loss is recognised in the profit and loss account in the period in which this occurs.
Included within tangible fixed assets are the project costs associated with the construction of various software and hardware systems for use within the
Group’s internal systems. Cost includes basic salary, related employer tax costs, and travel expenses for computer engineers, for the duration of the
development stage of the application. Also included in the asset cost are any related external consultancy or engineering fees. All costs relating to initial
planning or aborted projects are written off to profit and loss account as incurred.
Assets in the course of construction are not depreciated until they are completed, at which time the final asset cost is transferred to Computer
equipment and software or Fixtures and fittings.
Depreciation is provided at rates calculated to write off the cost less the estimated residual value of tangible fixed assets over their estimated useful
economic lives as follows:
Computer equipment and software – over 3 years
Motor vehicles – over 4 years
Fixtures and fittings – over 5 years
Investments
Fixed asset investments, which principally relate to the Company’s investment in subsidiary undertakings, are stated at cost less any provisions for
impairment in value.
Stocks
Stocks are valued at the lower of cost and net realisable value. Cost is determined on a “first in, first out” basis. Net realisable value is determined on
the basis of expected selling price less any further anticipated costs that may be incurred prior to completion or disposal.
Cash and liquid resources
Cash, for the purpose of the cash flow statement, comprises cash in hand, deposits repayable on demand and investments in instant access money
market managed funds. Liquid resources are current asset investments which are disposable without curtailing or disrupting the business and are either
readily convertible into known amounts of cash at or close to their carrying values or traded in an active market. Liquid resources comprise term
deposits of one year or less and certificates of deposit.
Leasing and hire purchase commitments
Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and are depreciated over their useful lives. The
corresponding liability for the capital element is recorded as borrowings, and the interest element of the rental obligations is charged to the profit and
loss account over the period of the lease on a straight-line basis. Rentals paid under operating leases are charged to income on a straight-line basis
over the lease term. 1. Accounting policies cont.
Foreign currencies
Monetary assets and liabilities of each entity denominated in currencies other than the functional currency of the Group are translated at the rates of
exchange ruling at the balance sheet date. Transactions in such currencies are recorded at the average rate ruling during the period of the transaction. 
Exchange differences arising from the translation of the opening net assets of entities which principally operate in currencies other than US dollars to
the exchange rate ruling at the balance sheet date, and the difference between the profit and loss accounts of such entities translated at an average
rate and at the closing rate, are recorded as movements on reserves. All other differences are taken to the profit and loss account.
Relevant rates of exchange were:
Balance sheet rate of exchange (US Dollar to local currency) 2004 2003 2002
UK Sterling 1.81 1.65 1.53
Euro 1.22 1.15 0.99
Australian Dollar 0.70 0.67 0.56
Chinese Yuan 0.12 n/a n/a
Profit and loss account average rate of exchange (US Dollar to local currency). 2004 2003 2002
UK Sterling 1.74 1.58 1.44
Euro 1.19 1.05 0.90
Australian Dollar 0.71 0.59 0.53
Chinese Yuan 0.12 n/a n/a
2. Segmental analysis
Analysis by geographical area
A geographical analysis of the Group’s turnover, profit/(loss) before interest and tax, and net assets/(liabilities) is as follows:
2004 2003 2002
Turnover by destination $’000 $’000 $’000
United Kingdom 15,778 11,792 7,865
Mainland Europe 7,357 4,493 3,282
North America 57,395 52,381 40,696
Rest of the world 6,805 4,566 2,324
87,335 73,232 54,167
2004 2003 2002
Turnover by origin $’000 $’000 $’000
United Kingdom 19,108 14,572 9,635
Mainland Europe 5,553 3,384 2,352
North America 57,216 52,553 40,856
Rest of the world 5,458 2,723 1,324
87,335 73,232 54,167
Notes to the financial statements
for the years ended 30 June
SurfControl plc 48. 2. Segmental analysis cont.
2004 2003 2002
Profit /(loss) before interest and tax $’000 $’000 $’000
United Kingdom 5,679 6,111 (11,981)
Mainland Europe (87) 28 (2,955)
North America 9,332 51 (55,155)
Rest of the world (2,384) 1,584 55
12,540 7,774 (70,036)
2004 2003 2002
Net assets / (liabilities) $’000 $’000 $’000
United Kingdom (27,485) (10,396) (3,418)
Mainland Europe (4,508) (2,517) (1,869)
North America (14,767) (27,304) (18,609)
Rest of the world (3,472) (1,798) (557)
(50,232) (42,015) (24,453)
Head office and central administration 87,436 61,634 35,343
37,204 19,619 10,890
Profit/(loss) before interest and tax and net assets/(liabilities) incorporate the effect of the Group’s transfer pricing arrangements. These adjustments
primarily consist of intra-group recharges arising from the location of intellectual property.
Head office and central administration net assets comprise cash balances of $87,477,000 and finance lease obligations of $41,000 at 30 June 2004. 
(2003: Cash balances: $61,707,000, Finance lease obligations: $73,000) (2002: Cash balances: $35,454,000,Finance lease obligations: $111,000).
Analysis by product group
During the current and preceding financial years the Group had one product group and one class of business, development and sale of software.
Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 49. 3. Analysis of operations
Continuing Acquisitions Total
operations
$’000 $’000 $’000
2004 2004 2004
Turnover 86,859 476 87,335
Cost of sales (1,280) (113) (1,393)
Gross profit 85,579 363 85,942
Selling and distribution costs (43,812) (213) (44,025)
Research and development (9,622) (56) (9,678)
General and administrative costs (16,660) (153) (16,813)
Amortisation of intangible assets – (1,351) (1,351)
Depreciation (1,788) (9) (1,797)
Movement in share option provision (49) – (49)
Operating profit 13,648 (1,419) 12,229
4. Earnings/(Loss) per share
Basic and diluted earnings/(loss) per ordinary share are calculated as follows:
2004 2003 2002
$’000 $’000 $’000
Profit/(loss) on ordinary activities after taxation (for basic and diluted earnings per share) 11,537 6,363 (68,405)
Basic weighted average ordinary shares in issue 30,974,588 30,426,265 30,275,479
Dilutive effect of share options 1,036,691 192,885 –
Diluted weighted average ordinary shares in issue 32,011,279 30,619,150 30,275,479
Basic earnings/(loss) per ordinary share (cents) 37.25 20.91 (225.90)
Diluted earnings/(loss) per ordinary share (cents) 36.04 20.78 (225.90)
Share options in issue and outstanding at 30 June 2002 had no dilutive effect as the Group made a loss on ordinary activities after taxation during that
financial year.
Own shares held by the Company of 106,000 (2003: nil) (2002: nil) have been treated as cancelled for the purpose of the earnings per 
share calculation.
Notes to the financial statements
for the years ended 30 June
SurfControl plc 50. 5. Staff costs
2004 2003 2002
$’000 $’000 $’000
Wages and salaries 35,077 31,287 24,439
Social security costs 3,221 2,964 2,162
Other pension costs (note 21) 1,013 845 567
39,311 35,096 27,168
Staff costs include Directors’ remuneration which is analysed further in the Directors’ Remuneration report on pages 33 to 39.
Included in Wages and salaries was $977,000 (2003: $1,320,000) (2001: $1,020,000) arising from performance related bonuses earned during 
the year. These bonuses (which exclude Directors’ bonuses and commission paid to sales staff) relate to the achievement of predetermined individual,
regional, or global corporate targets.
The average monthly number of employees during the year was:
2004 2003 2002
Selling and distribution 270 245 227
Research and development 119 108 97
Administration 75 75 69
464 428 393
Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 51. 6. Operating profit/(loss)
2004 2003 2002
$’000 $’000 $’000
Operating profit/(loss) is arrived at after charging:
Depreciation:
Owned assets 1,754 1,580 1,324
Assets held under finance leases and hire purchase contracts 43 47 85
Loss on disposal of fixed assets 31 109 28
Amortisation of intangible assets 1,351 1,152 70,300
Auditors’ remuneration 296 284 147
Other fees payable to the auditors and their associates:
Further assurance services 77 67 83
Tax advisory services 547 419 297
Other non-audit services 2 927
Operating lease rentals:
Equipment and vehicles 115 105 152
Land and buildings 2,703 2,572 2,323
Other fees payable to the auditors and their associates in the year include tax advisory fees which primarily relate to tax compliance, co-ordination and
planning. Further assurance services in the year mainly relate to fees for review of the Group’s un-audited interim and quarterly financial statements,
together with advice in respect of the transition to International Accounting Standards. In addition, amounts paid to the auditors in connection with
acquisition due diligence that have been capitalised were $124,000 (2003: $nil) (2002: $nil).
Auditors’ remuneration for audit services includes $100,000 (2003: $93,000) (2002: $70,000) in respect of the parent company.
7. Net interest receivable and similar items
2004 2003 2002
$’000 $’000 $’000
Bank and bank loan interest payable (3) (2) (4)
Finance lease and hire purchase interest payable (8) (10) (18)
Other interest payable (9) (40) (14)
(20) (52) (36)
Bank interest receivable 1,879 1,157687
Net interest receivable 1,859 1,105 651
Notes to the financial statements
for the years ended 30 June
SurfControl plc 52. 8. Taxation on ordinary activities
2004 2003 2002
$’000 $’000 $’000
US Federal and state tax (669) (1,927) 239
Non US Corporation tax (4,847) (3,729) (24)
Adjustments in respect of previous years 222 (136) –
Total current tax (charge)/credit (5,294) (5,792) 215
Deferred tax 2,432 3,276 765
Total tax (charge)/credit (2,862) (2,516) 980
Deferred tax assets have been recognised in respect of tax losses that are more likely than not to be utilised in the near future and other timing 
differences existing at the financial year end.
The total current tax charge in the year is greater than that implied by the standard rate of corporation tax in the United Kingdom of 30%. 
The differences are explained below:
2004 2003 2002
Reconciliation of total current tax charge /(credit) $’000 $’000 $’000
Profit/(loss) on ordinary activities before taxation 14,399 8,879 (69,385)
Tax charge/(credit) on profit/loss on ordinary activities implied by the UK standard rate of 30% 4,320 2,664 (20,816)
Factors affecting the tax charge/credit:
Expenses not deductible for tax purposes on a permanent basis (37) 778 6,732
Goodwill amortisation charged in the year, and deductible for tax purposes in future years – –13,163
Other short term timing differences (2,332) 3,941 742
Adjustment to tax charge/credit in respect of prior years (222) 136 239
Deferral of tax losses arising in the year 3,730 90 932
Utilisation of prior year tax losses in the year (165) (1,817) (1,207)
Total current tax charge/(credit) 5,294 5,792 (215)
A reconciliation to the deferred tax assets balance carried in the Group balance sheet and shown in note 13, is given below:
$’000
Deferred tax assets at 1 July 2003 4,184
Deferred tax asset from above 2,432
Exchange differences arising in the year 64
Deferred tax assets at 30 June 2004 6,680
Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 53. 9. Intangible assets
Goodwill Intellectual Total
Property
Group $’000 $’000 $’000
Cost:
At 1 July 2003 –––
Arising from acquisitions 711 13,194 13,905
At 30 June 2004 711 13,194 13905
Amortisation:
At 1 July 2003 –––
Provided during the year (68) (1,283) (1,351)
At 30 June 2004 (68) (1,283) (1,351)
Net book value at 30 June 2004 643 11,911 12,554
Net book value at 30 June 2003 –––
Net book value at 30 June 2002 1,152 – 1152
Further details of the consideration given for these acquisitions and the provisional fair value of net assets acquired is given below.
In the Company the acquisition has been dealt with as follows:
Intellectual
Property
Company $’000
Cost:
At 1 July 2003 –
Arising from acquisitions 13,194
At 30 June 2004 13,194
Amortisation:
At 1 July 2003 –
Provided during the year (1,283)
At 30 June 2004 (1,283)
Net book value at 30 June 2004 11,911
Net book value at 30 June 2003 –
Net book value at 30 June 2002 –
Acquisition of appliance technology and Chinese based sales distributor
On 19 April 2004 the Group completed the purchase of Linux based appliance technology from SecureM, Inc, together with operational control of its
China based sales and distribution operation, Beijing Messagesoft Technology Co., Ltd., (“Messagesoft”) a company incorporated in the People’s
Republic of China.
The aggregate consideration was $13,194,000 comprising purchase consideration of $12,808,000 and acquisition costs of $386,000.
Included in the purchase price is deferred consideration consisting of a retention provision of $1,000,000 payable in April 2005, and an estimated
earnout of $3,123,000, payable over the period July 2004-January 2005 (see note 14).
Notes to the financial statements
for the years ended 30 June
SurfControl plc 54. 9. Intangible assets cont.
An analysis of the book and provisional fair value of assets and liabilities acquired is given below:
Book value Fair value Provisional
adjustments
(1)
fair values
$’000 $’000 $’000
Intellectual property ––13,194
Net liabilities of Messagesoft structured as follows:
Fixed assets 38 (26) 12
Stock 132 (32) 100
Debtors 64 – 64
Cash at bank and in hand 120 – 120
Creditors due within one year (347) (660) (1,007)
Net liabilities of Messagesoft 7(718) (711)
Goodwill 711
Total cost was settled by:
Cash consideration including costs 9,071
Deferred consideration 4,123
13,194
(1)
Fair value adjustments relate to depreciation of fixed assets, expensing of unidentified stock and incorporation of accruals for unrecorded payroll compensation and Chinese taxes.
Messagesoft recorded a loss on ordinary activities after taxation, under its accounting policies, of $28,000 for the period 1 January 2004 to the date 
of acquisition and a loss on ordinary activities after taxation of $20,000 in its preceding financial year ended 31 December 2003.
Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 55. 10. Tangible fixed assets
Computer Construction Fixtures Motor Total
equipment and software in progress andfittings vehicles
Group $’000 $’000 $’000 $’000 $’000
Cost:
At 1 July 2003 4,592 333 1,947 87 6,959
Exchange adjustment 218 4 126 9 357
Additions 1,533 758 190 – 2,481
Acquisition of subsidiary undertaking 12––– 12
Disposals (137) – (74) – (211)
Reclassification 100 (586) 486 – –
At 30 June 2004 6,318 509 2,675 96 9,598
Depreciation:
At 1 July 2003 2,688 – 951 52 3,691
Exchange adjustment 127 – 69 12 208
Provided during the year 1,297 – 479 21 1,797
Disposals (105) – (58) – (163)
At 30 June 2004 4,007 – 1,441 85 5,533
Net book value at 30 June 2004 2,311 509 1,234 11 4,065
Net book value at 30 June 2003 1,904 333 996 35 3,268
Net book value at 30 June 2002 1,892 – 997 61 2,950
Computer Construction Fixtures Motor Total
equipment and software in progress and fittings vehicles
Company $’000 $’000 $’000 $’000 $’000
Cost:
At 1 July 2003 1,616 – 1,122 87 2,825
Exchange adjustment 183 4 109 9 305
Additions 703 84 31 – 818
Disposals (102) – (74) – (176)
At 30 June 2004 2,400 88 1,188 96 3,772
Depreciation:
At 1 July 2003 872 – 587 58 1,517
Exchange adjustment 105 – 66 6 177
Provided during the year 542 – 242 21 805
Disposals (95) – (58) – (153)
At 30 June 2004 1424 – 837 85 2,346
Net book value at 30 June 2004 976 88 351 11 1,426
Net book value at 30 June 2003 744 – 535 29 1,308
Net book value at 30 June 2002 725 – 615 55 1,395
Notes to the financial statements
for the years ended 30 June
SurfControl plc 56. 10. Tangible fixed assets cont.
Assets held under hire purchase agreements included within tangible assets were as follows:
Motor Fixtures
vehicles and fittings
Group $’000 $’000
Net book value at 30 June 2004 21 48
Net book value at 30 June 2003 32 64
Net book value at 30 June 2002 56 78
Depreciation charged on fixed assets held under finance lease arrangements was: motor vehicles $21,000 (2003: $27,000) (2002: $69,000) and on
fixtures and fittings $22,000 (2003: $20,000) (2002: $16,000).
Motor Fixtures
vehicles and fittings
Company $’000 $’000
Net book value at 30 June 2004 11 48
Net book value at 30 June 2003 32 64
Net book value at 30 June 2002 56 78
Depreciation charged on fixed assets held under finance leases was as for Group.
11. Investments
2004 2003 2002
Group $’000 $’000 $’000
Fixed asset investments:
At 1 July 2003/1 July 2002/1 July 2001 29 73
Additions – 22 4
Exchange adjustment 2 ––
Fixed asset investments at 30 June 2004/30 June 2003/30 June 2002 31 29 7
Fixed asset investments, which are stated at cost, wholly relate to bond holdings required by Austrian law to cover severance obligations towards
employees based in that country, payable in the event of a compulsory winding up of SurfControl GmbH.
2004 2003 2002
Company $’000 $’000 $’000
Investments in subsidiary undertakings:
At 1 July 2003/1 July 2002/1 July 2001 59,045 55,032 55,016
Transfers – 4,013 –
Share subscriptions – –16
At 30 June 2004/30 June 2003/30 June 2002 59,045 59,045 55,032
Amounts owed by subsidiary undertakings:
At 1 July 2003/1 July 2002/1 July 2001 128,163 131,427 112,176
Transfers (3,291) (4,013) –
Net additions 15,837 749 19,251
At 30 June 2004/30 June 2003/30 June 2002 140,709 128,163 131,427
Total unquoted investments 199,754 187,208 186,459
Amounts owed by subsidiary undertakings are included within investments where the the subsidiary and the Company have agreed that the debt will
not be settled in the foreseeable future.
Principal trading subsidary undertakings, included in the Group accounts at 30 June 2004, are as shown below. All of these subsidiary undertakings
with the exception of Beijing Messagesoft Technology Co., Ltd., (“Messagesoft”) are directly and wholly owned.
Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 57. 11. Investments cont.
The Company, under the terms of its sale and purchase agreement with SecureM, Inc. has control over the operational and financial policies 
of Messagesoft, and accordingly Messagesoft has been accounted for as a subsidiary of the Group. All companies, including Messagesoft are engaged
in the internet filtering and secure content management market. A full list of companies will be included in the Company’s next annual return.
Country of
Subsidiary name incorporation
SurfControl Inc United States
SurfControl GmbH
(1)
Austria
SurfControl BV Holland
SurfControl Pty Limited Australia
Beijing Messagesoft Technology Co., Ltd., People’s Republic of China
(1)
The results of SurfControl GmbH, a company incorporated in Austria, include those of its wholly owned subsidiary SurfControl GmbH, a company incorporated in Germany, engaged
in the business of internet filtering and secure management software.
12. Stocks
2004 2003 2002
Group $’000 $’000 $’000
Goods for resale 69 –18
2004 2003 2002
Company $’000 $’000 $’000
Goods for resale – –18
13. Debtors
2004 2003 2002
Group $’000 $’000 $’000
Trade debtors 20,524 17,647 12,077
Other debtors 27 64 49
Taxation recoverable 1,475 ––
Deferred tax assets 6,680 4,184 812
Prepayment and accrued income 2,975 2,243 1,211
31,681 24,138 14,149
Deferred tax assets are analysed as follows:
2004 2003 2002
$’000 $’000 $’000
Unutilised trading losses 6,212 3,204 429 
Deferred income – 555 272 
Accelerated capital allowances 318 289 92 
Short term timing differences 150 136 19 
6,680 4,184 812 
Notes to the financial statements
for the years ended 30 June
SurfControl plc 58. 13. Debtors cont.
2004 2003 2002
Company $’000 $’000 $’000
Trade debtors 4,652 4,201 2,698
Other debtors 6 14 8
Deferred tax assets 395 425 540
Prepayment and accrued income 1,356 1,074 454
Amounts owed to subsidiary undertakings 9,584 ––
15,993 5,714 3,700
Deferred tax assets are analysed as follows:
2004 2003 2002
$’000 $’000 $’000
Unutilised trading losses – –429 
Accelerated capital allowances 318 289 92 
Short term timing differences 77 136 19 
395 425 540 
There were no debtors due after more than one year in all periods at Group or in the Company.
14. Creditors: amounts falling due within one year:
2004 2003 2002
Group $’000 $’000 $’000
Trade creditors 2,770 1,966 1,775
Corporation tax 5,971 4,709 11
Taxes & social security costs 2,004 1,527 1,000
Other creditors 308 ––
Accruals 7,995 6,456 5,967
Deferred income 49,036 37,542 26,848
Obligations under finance leases and hire purchase contracts 19 41 41
Deferred consideration on acquisition of subsidiary undertaking 4,123 ––
72,226 52,241 35,642
2004 2003 2002
Company $’000 $’000 $’000
Trade creditors 1,532 776 1,160
Corporation tax 4,147 1,989 –
Taxes & social security costs 1,172 1,069 681
Accruals 2,301 1,739 1,285
Amounts owed to subsidiary undertakings 14,490 1,162 –
Deferred income 10,678 7,446 4,632
Obligations under finance leases and hire purchase contracts 19 41 41
Deferred consideration on acquisition of subsidiary undertaking 4,123 ––
38,462 14,222 7,799
Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 59. 15. Creditors: amounts falling due after more than one year:
2004 2003 2002
Group $’000 $’000 $’000
Deferred income:
Due within one to two years 18,399 10,871 5,734
Due within two to five years 7,580 5,777 1,322
Due after five years – 62 –
25,979 16,710 7,056
Obligations under finance leases and hire purchase contracts:
Due within one to two years 19 18 70
Due within two to five years 3 14 –
22 32 70
26,001 16,742 7,126
2004 2003 2002
Company $’000 $’000 $’000
Deferred income:
Due within one to two years 4,573 2,425 1,348
Due within two to five years 2,157 1,361 504
Due after five years – 62 –
6,730 3,848 1,852
Amounts owed to subsidiary undertakings:
Due within one to two years 4,660 ––
Due within two to five years 1,165 ––
5,825 ––
Obligations under finance leases and hire purchase contracts:
Due within one to two years 19 18 70
Due within two to five years 3 14 –
22 32 70
12,577 3,880 1,922
The weighted average interest rate and period to maturity on finance lease obligations was 21% and 26 months respectively. There was no material
difference between the book and fair values attributable to finance leases shown in this note.
16. Provisions for liabilities and charges
2004
Group and Company $’000
Provision for option charges as at 1 July 2003 540
Charged in the year 49
Paid in the year (179)
Exchange difference arising in the year 36
Provision for option charges at 30 June 2004 446
Provision for option charges at 30 June 2003 540
Provision for option charges at 30 June 2002 72
The tax option charge for UK Employer’s National Insurance and Non UK Employment tax relates to amounts payable on the potential profit arising
from the future exercise of unapproved options granted to Directors and employees (for UK personnel on options granted after 6 April 1999). The
provision is charged to the profit and loss account on a straight line basis over the relevant vesting period of the outstanding options, and is based
upon the Company’s closing share price on techMARK as at 30 June 2004 of £6.10.
The above charge may vary as it is dependent upon prevailing tax law, future share price movements and the number of options in issue.
Notes to the financial statements
for the years ended 30 June 2004, 30 June 2003 and 30 June 2002
SurfControl plc 60. 17. Share Capital
2004 2003 2002
Group and Company Number $’000 $’000 $’000
Authorised
Equity ordinary shares of £0.10 each 54,000,000 9,793 8,806 7,749
Non-equity deferred Shares of £0.50 each 1,001,991 – – 882
Total authorised share capital 9,793 8,806 8,631
Issued and fully paid
Equity ordinary shares of £0.10 each 31,086,737 5,027 4,946 4,904
(2003: 30,605,856
2002: 30,343,825)
Total called up share capital 5,027 4,946 4,904
The authorised share capital is denominated in UK£ and consists of 54,000,000 10p ordinary shares with a nominal value of £5,400,000.
Fluctuations in US$ value arise on exchange translation. 
The issued ordinary share capital of the Company in UK £ at 30 June 2004 was £3,109,000. The Company’s share capital has been translated into
US dollars on a cumulative basis, at exchange rates prevailing as and when capital flows occurred. Movements in issued share capital over the period
wholly arose from the exercise of Company share options.
The Ordinary Shares of 10p each carry one vote and have no fixed rights to dividends. They are entitled to participate equally in the assets of the
Company on a winding up.
Share Options
As at 30 June 2004, the following options to subscribe were outstanding in respect of Ordinary Shares of 10p each.
No of Shares Exercise Price Exercise Period
1,020 29.4p 15 June 1998 to 29 January 2005
5,000 242p 1 June 2002 to 31 May 2009
200,000 331p 15 July 2000 to 15 July 2009
58,500 321p 5 October 2000 to 4 October 2009
209,900 434p 30 November 2000 to 29 November 2009
174,400 849p 9 February 2001 to 8 February 2010
2,000 1238p 9 February 2001 to 8 February 2010
189,600 849p 21 February 2001 to 20 February 2010
96,400 849p 15 March 2001 to 14 March 2010
45,600 849p 22 March 2001 to 21 March 2010
1,000 1712p 22 March 2001 to 21 March 2010
6,400 849p 13 April 2001 to 12 April 2010
1,600 849p 17 April 2001 to 16 April 2010
2,400 849p 15 May 2001 to 14 May 2010
Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 61. Notes to the financial statements
for the years ended 30 June
SurfControl plc 62.
17. Share Capital cont.
Share Options cont.
No of Shares Exercise Price Exercise Period
3,200 849p 30 May 2001 to 29 May 2010
463,600 849p 14 June 2001 to 13 June 2010
8,000 1425p 14 June 2001 to 13 June 2010
9,600 849p 29 June 2001 to 28 June 2010
67,830 849p 18 July 2001 to 17 July 2010
923 2025p 18 July 2001 to 17 July 2010
11,816 849p 30 July 2001 to 29 July 2010
64,456 849p 6 August 2001 to 5 August 2010
18,279 849p 30 August 2001 to 29 August 2010
18,155 849p 28 September 2001 to 27 September 2010
14,481 849p 30 October 2001 to 29 October 2010
260,000 849p 10 September 2001 to 9 September 2010
109,386 738p 29 November 2001 to 28 November 2010
15,077 875p 3 December 2001 to 2 December 2010
3,876 849p 30 December 2001 to 29 December 2010
22,607 849p 30 January 2002 to 29 January 2011
2,307 1243p 30 January 2002 to 29 January 2011
2,584 849p 27 February 2002 to 26 February 2011
8,075 998p 27 February 2002 to 26 February 2011
5,950 448p 29 March 2002 to 28 March 2011
33,769 660p 29 April 2002 to 28 April 2011
4,052 545p 30 May 2002 to 29 May 2011
4,026 365p 29 June 2002 to 28 June 2011
187,500 365p 30 June 2002 to 29 June 2011
3,750 394p 15 July 2002 to 14 July 2011
2,500 392p 19 August 2002 to 18 August 2011
5,625 268p 23 September 2002 to 22 September 2011
2,250 313p 27 September 2002 to 26 September 2011
5,000 384p 28 October 2002 to 27 October 2011
4,333 493p 1 January 2003 to 31 December 2012
98,667 403p 30 June 2003 to 29 June 2012
290,000 421p 3 July 2003 to 2 July 2012
10,000 543p 5 July 2003 to 4 July 2012
184,000 647.5p 2 July 2004 to 1 July 2013
30,000 762.5p 29 October 2004 to 28 October 2013
10,000 552.5p 5 April 2005 to 4 April 2014
5,000 576p 9 June 2005 to 8 June 2014
217,000 620p 28 June 2005 to 27 June 2014
280,000 647.5p 2 July 2005 to 1 July 2013
3,481,494
The average share price (based on the Company’s share price as shown in the Official List of the London Stock Exchange) during the year was
£7.05 and at 30 June 2003 was £6.10 (30 June 2003: £6.375) (30 June 2002: £3.975).
Employee share option schemes
The Group operated two share option schemes for the benefit of Group employees and Directors during the year.
On 2 April 1992 the “JSB Computer Systems Executive Share Option Scheme” was adopted by the Board of Directors. The scheme has not been
approved by the Inland Revenue. No options were granted during the financial year and there is no intention to grant further options under this scheme. 17. Share Capital cont.
On 11 September 1998 the Board adopted the “JSB Software Technologies 1998 Executive Share Option Scheme” (“the 1998 scheme”). The
scheme is approved by the Inland Revenue although a schedule is incorporated into the rules allowing the grant of unapproved options. The scheme is
administered by the Remuneration Committee. Options may be granted at any time the committee considers appropriate, subject to compliance with
the Model Code on Directors’ dealings. Options may be granted subject to such performance targets as the committee in its discretion may decide and
with approval of the Inland Revenue where appropriate. 
On 14 July 2000 in an Extraordinary General Meeting of the Company shareholders approved minor amendments to the 1998 scheme including
revision to the maximum limit on the number of shares for which options may be granted from 15% to 20% of the issued ordinary share capital.
On 31 October 2002 in Annual General Meeting, shareholders approved the adoption of a second schedule to the Scheme to facilitate the granting of
options from November 1 2002 to Californian residents staff in a manner consistent with Section 25102(o) of the Californian Corporations Code.
18. Reserves
Share Capital Share Merger Profit Total
capital redemption premium reserve and loss
reserve account account
Group $’000 $’000 $’000 $’000 $’000 $’000
As at 1 July 2003 4,946 882 79 – 13,712 19,619
Exercise of options in the period 81 – 3,724 – – 3,805
Retained profit for the period ––––11,53711,537
Purchase of own shares for treasury –––– (1,112) (1,112)
Unrealised exchange difference on translation –––– 3,355 3,355
As at 30 June 2004 5,027 882 3,803 – 27,492 37,204
As at 30 June 2003 4,946 882 79 – 13,712 19,619
As at 30 June 2002 4,904 882 63,724 130,407 (189,027) 10,890
During the year the Company purchased 106,000 of its own shares at a cost of $1,112,000 and at an average price of £5.83 ($10.41). 
Share Capital Share Merger Profit Total
capital redemption premium reserve and loss
reserve account account
Company $’000 $’000 $’000 $’000 $’000 $’000
As at 1 July 2003 4,946 882 79 130,407 75,777 212,091
Exercise of options in the period 81 – 3,724 – – 3,805
Retained profit for the period –––– 2,190 2,190
Purchase of own shares for treasury –––– (1,112) (1,112)
Unrealised exchange difference on translation ––––16,25516,255
As at 30 June 2004 5,027 882 3,803 130,407 93,110 233,229
As at 30 June 2003 4,946 882 79 130,407 75,777 212,091
As at 30 June 2002 4,904 882 63,724 130,407 (4,474) 195,443
The purchase of own shares was as for Group.
SurfControl plc has not presented its own profit and loss account as permitted by Section 230 of the Companies Act 1985. A profit of $2,190,000
relating to the Company is dealt with in the consolidated financial statements of SurfControl plc (2003: profit $4,349,000) (2002: profit $1,731,000).
The aggregate nominal value of ordinary shares allotted in the year was $81,000 (2003:$42,000) (2002:$19,000).
Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 63. 19. Reconciliations of movement in shareholders’ funds
2004 2003 2002
Group $’000 $’000 $’000
Profit/(loss) on ordinary activities after taxation 11,537 6,363 (68,405)
New share capital subscribed 3,805 1,271 536
Purchase of own shares for treasury (1,112) ––
Unrealised exchange difference on translation 3,355 1,095 (105)
Net increase/ (decrease) in shareholders’ funds 17 ,585 8,729 (67,974)
Opening shareholders’ funds 19,619 10,890 78,864
Closing shareholders’ funds 37,204 19,619 10,890
2004 2003 2002
Company $’000 $’000 $’000
Profit on ordinary activities after taxation 2,190 4,349 1,731
New share capital subscribed 3,805 1,271 536
Purchase of own shares for treasury (1,112) ––
Unrealised exchange difference on translation 16,255 11,028 9,922
Net increase in shareholders’ funds 21,138 16,648 12,189
Opening shareholders’ funds 212,091 195,443 183,254
Closing shareholders’ funds 233,229 212,091 195,443
20. Other financial commitments
(a) Lease commitments
The Group’s commitments in respect of non-cancellable operating lease rentals over the next twelve months are:
Leasehold OtherLeasehold OtherLeasehold Other
property property property
2004 2004 2003 2003 2002 2002
Group $’000 $’000 $’000 $’000 $’000 $’000
In respect of leases expiring:
Within one year 361 26 101 38 6 107
In one to two years 188 – 625 41 183 51
In two to five years 1,274 39 1,281 38 1,859 7
In more than five years 462 – 406 – 429 –
2,285 65 2,413 117 2,477 165
The Company’s commitments in respect of non-cancellable operating lease rentals over the next twelve months are:
Leasehold OtherLeasehold OtherLeasehold Other
property property property
2004 2004 2003 2003 2002 2002
Company $’000 $’000 $’000 $’000 $’000 $’000
In respect of leases expiring:
Within one year 21 – 34––4
In one to two years 53 – ––––
In two to five years –22 –28 – 20
In more than five years 462 – 406 – 429 –
536 22 440 28 429 24
Notes to the financial statements
for the years ended 30 June
SurfControl plc 64. 20. Other financial commitments cont.
(b) Capital commitments
The Group and Company had the following capital commitments authorised by Directors but not provided for in the accounts:
2004 2003 2002
Group $’000 $’000 $’000
Contracted for 66 275 –
Authorised but not contracted for – 54 –
2004 2003 2002
Company $’000 $’000 $’000
Contracted for 3 ––
Authorised but not contracted for – 54 –
21. Pension Costs
The Group operates defined contribution schemes. The assets of the schemes are held separately from those in the Group in independently
administered funds. The pension charge included in staff costs in note 5, represents contributions payable by the Group to the funds and 
amounted to $1,013,000 (2003: $845,000) (2002: $567,000). 
The amount of pension cost accrued by the Group was $23,000 (2003: $11,000) (2002: $122,000).
22. Reconciliation of operating cash flows
2004 2003 2002
$’000 $’000 $’000
Operating profit/(loss) 12,229 7,393 (70,289)
Depreciation 1,797 1,627 1,409
Amortisation of intangible assets 1,351 1,152 70,300
Loss on sale of tangible fixed assets 31 109 28
Decrease in stocks 31 18 84
Increase in debtors (2,973) (5,430) (763)
Increase in creditors 20,302 18,780 10,932
(Decrease)/increase in provisions for liabilities and charges (131) 444 (15)
Net cash inflow from operating activities 32,637 24,093 11,686
23. Returns on investments and servicing of finance
2004 2003 2002
$’000 $’000 $’000
Finance lease and hire purchase interest paid (8) (10) (17)
Bank interest paid (3) (2) (4)
Other interest paid (9) (29) (6)
Bank interest received 1,812 782 657
Net cash inflow from returns on investment and servicing of finance 1,792 741 630
Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 65. 24. Analysis of net funds
At Cash Foreign At At At
1 July flow exchange 30 June 30 June 30 June
2003 differences 2004 2003 2002
$’000 $’000 $’000 $’000 $’000 $’000
Overnight cash balances and cash in hand 34,262 13,567 2,689 50,518 34,262 24,608
Term deposits 27,445 7,470 2,044 36,959 27,445 10,846
Cash at bank and in hand 61,707 21,037 4,733 87,477 61,707 35,454
Finance leases (73) 38 (6) (41) (73) (111)
Total 61,634 21,075 4,727 87,436 61,634 35,343
The principal financial risks faced by the Group are counterparty, exchange rate, interest rate and liquidity risks. Counterparty risk is managed by placing
cash deposits with banks principally in the UK and US, which have satisfactory credit ratings. To balance interest rate and liquidity risk the Group places
its cash balances in excess of immediate requirements on deposit with the intention of maximising income whilst ensuring funds are available to meet
the Group’s expenditure requirements. Exchange rate risk is managed by minimising balances in currencies other than those of local operations. The
Group’s policy is not to enter into forward exchange contracts
Cash and other liquid resources consist of cash held in current/deposit accounts, money market funds, certificates of deposit, and money market term
deposits. Liquid resources at 30 June 2004 had a weighted average period to maturity of 12 weeks and earned interest at a weighted average rate 
of 2.25% per annum.
There was no significant differences between book value and fair value (determined by discounting future cash flows at current interest rates) for these
funds. No details regarding financial exposure of the short term debtors and creditors have been included. The Group does not engage in any hedging
in respect of interest rate risks.
There are no material committed undrawn facilities at year end. 
25. Analysis of net cash inflow in respect of acquisitions
A summary of the net cash outflow in respect of Beijing Messagesoft Technology Co., Ltd., is given below:
2004
$’000
Cash outflow from operating activities (146)
Contribution to operating activities by Parent 500
Capital expenditure and financial investment (128)
Increase in cash in the period 226
26. Financial instruments
As permitted by FRS 13 “Derivatives and other financial instruments: Disclosures”, short term debtors and creditors have been excluded from the
following analyses.
The interest rate risk profile of financial assets and liabilities were as follows:
2004
Non interest Floating Fixed Total
bearing rate rate
Group 2004 $’000 $’000 $’000 $’000
Financial assets:
Currency
US dollar 951 23,541 20,755 45,247
UK sterling 1,502 4,401 32,414 38,317
Euro 827 1,826 304 2,957
Australian dollar –139 471 610
Chinese Yuan 346 – – 346
3,626 29,907 53,944 87,477
Notes to the financial statements
for the years ended 30 June
SurfControl plc 66. 26. Financial instruments cont.
2003
Non interest Floating Fixed Total
bearing rate rate
Group 2003 $’000 $’000 $’000 $’000
Financial assets:
Currency
US dollar 864 24,772 – 25,636
UK sterling 64 8,071 27,043 35,178
Euro 109 225 – 334
Australian dollar –154 403 557
Singapore dollar –2–2
1,037 33,224 27,446 61,707
2002
Non interest Floating Fixed Total
bearing rate rate
Group 2002 $’000 $’000 $’000 $’000
Financial assets:
Currency
US dollar (46) 22,381 4,987 27,322
UK sterling 214 948 5,859 7,021
Euro 294 525 – 819
Australian dollar –93 199 292
462 23,947 11,045 35,454
There were no financial liabilities except for finance lease and hire purchase obligations as at 30 June 2004. (2003: $nil) (2002: $nil). Floating and
fixed rate financial assets comprise cash at bank and in hand and bear interest at prevailing market rates.
The UK operations held cash balances of $16,300,000 (2003: $1,199,000) (2002: $13,664,000). Denominated in US dollars. Other than this and 
long term intercompany loans, the operations within the Group had no significant monetary assets or liabilities denominated in currencies other than
their own.
There are no material unrecognised gains or losses at the beginning or end of the year as the Group did not trade in financial instruments.
27. Related party transactions
Transactions within companies within the Group are not disclosed as all such transactions are eliminated on consolidation. Payments were also made
to Quester Services Limited for the services of Simon Acland as a Non-Executive Director for the period to October 2003, which are referred to in the
Directors’ Remuneration Report on page 38. There were no other related party transactions for the financial periods under review.
Notes to the financial statements
for the years ended 30 June
Annual report + accounts 2004 67. 30 30 Full year
30 June 31 March December September 30 June
2004 2004 2003 2003 2004
$’000 $’000 $’000 $’000 $’000
Turnover 24,490 22,027 21,154 19,664 87,335
Cost of sales (461) (318) (320) (294) (1,393)
Gross profit 24,029 21,709 20,834 19,370 85,942
Selling and distribution costs (12,377) (11,298) (10,636) (9,714) (44,025)
Research and development (2,788) (2,499) (2,242) (2,149) (9,678)
General and administrative costs (4,804) (4,185) (3,993) (3,831) (16,813)
Amortisation of intangible assets and depreciation (1,827) (472) (438) (411) (3,148)
Movement in share option provision (162) 433 (6) (314) (49)
Total administrative expenses (9,581) (6,723) (6,679) (6,705) (29,688)
Operating profit 2,071 3,688 3,519 2,951 12,229
Proceeds from disposal of business (2) 130 117 66 311
Net interest receivable 498 566 441 354 1,859
Profit on ordinary activities before taxation 2,567 4,384 4,077 3,371 14,399
Tax on profit on ordinary activities 114 (1,108) (1,031) (837) (2,862)
Profit on ordinary activities after taxation 2,681 3,276 3,046 2,534 11,537
Basic earnings per ordinary share (cents) 8.5 10.6 9.98.3 37.3
Reconciliation of Profit on ordinary activities after taxation 
to Pro-forma Profit after taxation:
Profit on ordinary activities after taxation 2,681 3,276 3,046 2,534 11,537
Movement in share option provision 162 (433) 6 314 49
Amortisation of intangible assets 1,351 ––– 1,351
Pro–forma Profit on ordinary activities after taxation 4,194 2,843 3,052 2,848 12,937
Reconciliation of Pro–forma Profit after taxation to EBITDA
(Earnings before net interest, taxation,depreciation, amortisation of goodwill, 
share option provision and after proceeds from disposal of business):
Pro–forma profit on ordinary activities after taxation 4,194 2,843 3,052 2,848 12,937
Tax on profit on ordinary activities (114) 1,108 1,031 837 2,862
Depreciation 476 472 438 411 1,797
Net interest receivable (498) (566) (441) (354) (1,859)
EBITDA 4,058 3,857 4,080 3,742 15,737
Un-audited Group profit & loss accounts
for the quarters ended 30 June 2004
SurfControl plc 68. SurfControl plc Annual report + accounts 2004
Principal Offices
SurfControl Inc.
United States – Massachusetts
1900 West Park Drive, Suite 180, 
Westborough, MA 01581 USA
Tel: +1 (508) 621 3900
Fax: +1 (508) 621 3921
E-mail: sales.us@surfcontrol.com
United States – California
5550 Scotts Valley Drive,
Scotts Valley CA, 95066 USA 
Tel: +1 (831) 431 1400
Fax: +1 (831) 431 1800
E-mail: info@surfcontrol.com 
SurfControl plc
United Kingdom – Congleton
Riverside, Mountbatten Way, Congleton,
Cheshire CW12 1DY United Kingdom
Tel: +44 (0)1260 296 200
Fax: +44 (0)1260 296 201
E-mail: surfinfo@surfcontrol.com
SurfControl plc – Singapore
Level 58 Republic Plaza,
9 Raffles Place, Singapore 048619
Tel: +65 6823 1312
Fax: +65 6823 1481
E-mail: support.sg@surfcontrol.com
SurfControl plc – France
Le Challenge 92, 124 bd François Arago
Nanterre, France
SurfControl GmbH 
Austria 
Dorotheergasse 7, A-1010 Vienna, Austria
Tel: +43 1 513 44 15
Fax: +43 1 513 44 02
E-mail: sales.at@surfcontrol.com 
SurfControl GmbH 
Germany
Rüsterstraße 13,
D-60325 Frankfurt am Main, Germany
Tel: +49 69 70 79 86 0 
Fax: +49 69 70 79 86 20
E-mail: sales.de@surfcontrol.com
SurfControl BV
Netherlands
Schouwburgplein 30-34, 3012 CL Rotterdam, 
The Netherlands 
Tel: +31 (0) 10 402 0000 
Fax: +31 (0) 10 402 0099
E-mail: sales.nl@surfcontrol.com
SurfControl Pty Ltd
Australia
Level 1, 19 Havilah Street, Chatswood,
NSW 2067 Australia 
Tel: +61 (0)2 9414 0000 
Fax: +61 (0)2 9414 0099
E-mail: sales.au@surfcontrol.com
Beijing Messagesoft Technology Co., Ltd.,
Office Tower C2, 3rd Floor,
Oriental Place, Beijing, 100 738, China
Tel: +86 10 8518 8860
Fax: +86 10 8518 0067
E-mail: info@messagesoft.net
www.surfcontrol.com
The World’s #1 Web and E-mail Filtering Company
Annual report + accounts 2004
Contents
01 Chairman’s statement
02 Chief Executive’s strategic review
12 SurfControl at a glance
14 Finance Director’s review
20 Board of Directors
22 Advisers
23 Directors’ report
27 Corporate governance report
33 Directors’ remuneration report
40 Independent auditors’ report
41 Group profit and loss account
41 Group statement of total recognised
gains and losses
42 Group balance sheet
43 Company balance sheet
44 Group statement of cash flow
45 Reconciliation of net cash flow to
movement in net funds
46 Notes to the financial statements
68 Unaudited Group profit and loss account [ INSIDE FRONT COVER ] [ INSIDE BACK COVER ] [ FLAP INNER ]
Highlights
■ Pre-tax profit increased by 62% to $14.4m
(2003: $8.9m) 
■ Group turnover increased by 19% to $87.3m
(2003: $73.2m) 
■ Group invoicing increased by 16% to $106.6m
(2003: $92.1m)
■ Cash balances as at 30 June 2004 increased 
to $87.5m (2003: $61.7m) 
■ Gross profit margin of 98%
■ Increased contribution of indirect channel
sales from 49% to 58% for the year
42.2
01 02 03
(Year)
04
54.2
73.2
87.3
Turnover $m
$87 .3m
Turnover up 19% from
$73.2m in 2003
$87 .5m
Cash balance $61.7m in 2003
SurfControl the world leader in
enterprise Web and e-mail filtering.
SurfControl plc, the world leader in
enterprise Web and e-mail filtering,
delivers on its promise to help companies
‘Stop Unwanted Content’ in the workplace
by continuous innovation, invention and
expansion of its filtering products to
address new content risks as they emerge. 
SurfControl is the industry’s only
complete solution to managing Internet
risk. SurfControl technology protects all
points of entry, and every way employees
use the Internet for business – Instant
Messaging, Web, e-mail and peer-to-peer.
It also works on every platform they work
on – Blue Coat, Cisco, Check Point,
Microsoft Exchange and ISA 2004,
and many more. 
The company’s products and technology
are used by more than 20,000 customers
worldwide, including many of the world’s
largest corporations. SurfControl employs
more than 500 people in offices across
the United States, Europe and Asia/Pacific.
For further information and news
on SurfControl, please visit
http://www.surfcontrol.com/
> vision
> leadership
> innovation
> evolution
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