surfcontrol plc annual report 2005
offices
surfcontrol inc
1900 west park drive
suite 180 westborough
massachusetts 01581 usa
tel 1 508 621 3900
fax 1 508 621 3921
email salesussurfcontrolcom
5550 scotts valley drive
scotts valley  california 95066 usa 
tel 1 831 431 1400
fax 1 831 431 1800
email infosurfcontrolcom 
surfcontrol plc
riverside mountbatten way 
congleton cheshire cw12 1dy
united kingdom
tel 44 01260 296 200
fax 44 01260 296 201
email surfinfosurfcontrolcom
surfcontrol plc – singapore
level 58 republic plaza
9 raffles place
singapore 048619
tel 65 6823 1312
fax 65 6823 1481
email supportsgsurfcontrolcom
surfcontrol plc – france
79 avenue francois arago
92017 nanterre
france
tel 33 1 46699181
fax 33 1 47859140
email infofrsurfcontrolcom
surfcontrol israel ltd – israel
c12 ramat yam street
herzeliya
israel
tel 972 9 957 9912
fax 972 9 957 9914
surfcontrol japan ltd – japan
kamiyacho mt building
14f  4320 t oranomon minatoku
tokyo 105 001
tel 81 3 5404 3818
surfcontrol gmbh 
dorotheergasse 7
a1010 vienna austria
tel 43 1 513 44 15
fax 43 1 513 44 02
email salesatsurfcontrolcom 
surfcontrol gmbh
rüsterstraße 13
d60325 frankfurt am main
germany
tel 49 69 70 79 86 0 
fax 49 69 70 79 86 20
email salesdesurfcontrolcom
surfcontrol bv
schouwburgplein 3034
3012 cl rotterdam
the netherlands 
tel 31 0 10 402 0000 
fax 31 0 10 402 0099
email salesnlsurfcontrolcom
surfcontrol pty ltd
level 1 19 havilah street
chatswood nsw 2067 
australia 
tel 61 02 9414 0000 
fax 61 02 9414 0099
email salesausurfcontrolcom
beijing surfcontrol network 
security co ltd
office t ower c2 3rd floor 
oriental plaza beijing 100 738 china
tel 86 10 8518 8860
fax 86 10 8518 0067
email infomessagesoftnet
wwwsurfcontrolcom
surfcontrol plc
annual report 2005
■ enterprise threat protection “this year has seen the attainment of a long
standing goal of becoming a circa 100m
revenue company occupying a leadership
position within our target market it is 
the culmination of years of work and an
excellent platform from which to launch
into the next stage of the company’s
development with the addition of 
pat sueltz to our management team 
we have significantly strengthened our
ability to take full advantage of the market
opportunity open to us accordingly i look
forward to the future with confidence”
steve purdham chief strategy ofﬁcer
■ the internet is critical to organisations worldwide
■ it is also their biggest security threat
■ malicious threats such as spam phishing and
spyware constantly and cumulatively assault
companies – with new threats emerging
almost daily
■ these threats impact employee productivity
drain network resources create financial losses 
and increase liability risks
surfcontrol stops these threats
surfcontrol is the world’s leading internet security company
stopping blended and malicious digital threats from
assaulting companies surfcontrol’s enterprise protection
suite™ is the only threat management system with adaptive
threat intelligence™ to continuously filter inbound and
outbound web email and imp2p traffic thus surfcontrol
customers are protected against known emerging internal
and customerspecific threats
registrars
capita registrars
the registry
34 beckenham road
beckenham
kent br3 4tu
depository for ads
bankers trust company
4 albany street
new y ork
new y ork 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 2005 highlights
01 surfcontrol plc annual report 2005 wwwsurfcontrolcom
■ group turnover increased by 12 to 978m
2004 873m 
■ ebitda increased by 6 to 167m
2004 157m
■ group invoicing increased by 2 to 1082m
2004 1066m
■ cash balances as at 30 june 2004 increased to 890m
2004 875m 
■ gross profit margin of 98
■ increased contribution of indirect channel sales
from 58 to 65 for the year
■ technology acquisitions and share repurchases funded
during the year totalling 265m
revenue by geography
 61 americas
 20 uk
 9 europe
 10 rest of world
revenue by type
18 licence
82 subscription
turnover m
05 978
04 873 3
03 732
02 542
02 03 04 05
18 corporate governance
23 directors’ remuneration report
34 independent auditors’ report to
the members of surfcontrol plc
35 group profit and loss account
35 group statement of total
recognised gains and losses
36 group balance sheet
37 company balance sheet
38 group statement of cash flows
39 reconciliation of net cash flow 
to movements in net funds
40 notes to the financial statements
63 unaudited group profit and loss account
01 highlights
02 chairman’s statement
03 chief executive’s review
04 operational review
07 financial review
12 board of directors
14 directors’ report chairman’s statement greg lock
02 surfcontrol plc annual report 2005
your company grew revenue and ebitda
and generated significant levels of cash 
flow during the year ending 30 june 2005
we have broadened our product line and
enhanced its function and effectiveness our
products have won a number of awards and
we have solidified our position as a global
leader in enterprise threat protection with all
this i am pleased but with one measure of our
performance i am not satisfied we grew our
invoicing volumes by just 2 a result which
demands improvement
your board began a thorough review of our
activities in december 2004 and concluded
that we needed to enhance the experience 
of the executive team the most significant
result of this is the appointment of 
patricia c sueltz as ceo with effect from 
1 july 2005 pat brings years of experience in
senior executive roles at ibm sun microsystems
where she led the global services business
and most recently salesforcecom where she
was president of global operations pat has
lived and worked in the uk as well as the 
usa and has begun the task of upgrading 
our capabilities and  of putting in place 
the  organisational structure systems and
processes which will allow us to realise our
growth ambitions we are delighted that an
executive of pat’s calibre and experience has
chosen to lead us at this exciting time
we have a very strong platform from which to
accelerate the growth in our market position
our balance sheet is strong we are a leader in
a large and growing market and our product
line has never been stronger in addition 
our customers partners and employees 
are valuable assets for their support i thank
them sincerely
great credit for this strength is due to the
outstanding leadership of steve purdham
whose passion insight and entrepreneurial
flair has driven our company for the last five
years steve’s efforts and achievements have
been a major factor in establishing our
leadership in unified threat management
his foresight in anticipating market needs 
and in driving our response in products and
services have been invaluable
we are determined to make the investments
in our “go to market” capabilities which will fit
us for future growth your board and the
executive team are committed to make the
changes necessary to compete vigorously
and delight our customers and partners
we shall be both relentless and rigorous in 
our execution as we strive to make your
company more valuable
greg lock
chairman of the board
5 september 2005
we are one of the world’ s leading it
security companies with revenues
of close to 100m 03 surfcontrol plc annual report 2005 wwwsurfcontrolcom
dear surfcontrol investor
you’ve read our chairman’s letter describing
surfcontrol’s fy05 results solid fundamentals
– with more focus on growth needed the
team has the technological vision for all
aspects of information security now and in
the future we’ve greeted this new year
driven by our passion for our customers and
an operational mantra of relentless execution
across the entire company strong products
customer focus relentless execution of our
current plans and a keen technological vision
for the future are the makings of a solid year
to come i’m delighted to be a part of the
surfcontrol team
pat sueltz
chief executive officer
5 september 2005
the team has the technological
vision for all aspects of information
security now and in the future
chief executive’s review patricia c sueltz
we’ve greeted this new year
driven by our passion for our
customers and an operational
mantra of relentless execution
across the entire company
wha t drives us
■ our customers we are passionate about
protecting our customers with inspired
awardwinning solutions
■ our results we are driven to deliver superior
returns for our investors now – and in the future
■ our people we strive to create a stimulating
highperforming environment in which our
employees thrive
■ our world around us we recognize our
responsibility to the world in which we operate
and act accordingly operational review steve purdham
04 surfcontrol plc annual report 2005
the company’s financial position is strong
we have no debt are profitable and strongly
cash generative and in most areas of the
business we made significant progress
however the slow down in new business 
in the americas has caused disapointingly
low billings growth
growth is the main challenge and focus 
of our attention with the convergence 
of the market towards unified threat
management our market positioning and
messaging and the strength of our award
winning technologies we firmly believe
that we have a solid foundation to attain 
and recapture growth
we are very excited to have recruited 
pat sueltz as ceo who brings a new level 
of experience and expertise to drive the
business  in a growing market where
surfcontrol enjoys a strong market position
changing threat landscape is
driving market change – and
enhances opportunity
the internet is critical to organisations
worldwide it is also their biggest security
threat organisations are assaulted daily by
an everincreasing complex host of threats
targeting their computer networks yesterday
it was porn web abuse viruses and spam
today it’s phishing and spyware tomorrow
it will be something else once spawned
these threats are cumulative and often
morph into something new
once these threats were pests or
distractions now they are
malicious hazards
with inadequate protection the success
organisation is jeopardised by significant
productivity and financial losses hijacking of 
network resources and increased legal
liability with the proliferation of wireless
technologies the boundaries of the
organisation disappear it is now easier than
ever for these malicious threats to enter an
organisation rendering traditional security
technologies ineffective
regulatory compliance and information
confidentiality are high on ceo agendas
threats from ”outbound” traffic such as sent
emails attachments and instant messaging
are as serious as traditional inbound threats
this has led to the development of a new
approach so that organisations have
maximum protection from the threats from
the minimum number of vendors this type
of approach and this market is known as
unified threat management
surfcontrol has evolved into one of the
leading internet security companies
protecting enterprises from bidirectional
threats with multiple layers of protection
we have invested in the quality effectiveness
and design of our products such that we can
deliver more layers of threat protection to our
customers these layers continuously manage
inbound outbound and internal internet
based traffic to stop known emerging and
customerspecific threats
we have signiﬁcantly invested in
increasing the quality effectiveness
and appeal of our products
80
by 2008 80 of firewall
appliances will be uniﬁed
threat management
appliances  source idc 2004 05 surfcontrol plc annual report 2005 wwwsurfcontrolcom
surfcontrol has redefined traditional filtering
to encompass the everincreasing and
cumulative impact of internet blended
threats we have merged our award winning
products into our new enterprise protection
suite™ which continuously expands an
organisation’s layers of threat protection
eliminating the need to deploy and manage
multiple products from multiple vendors
surfcontrol differs from and complements
other internet security themes by focusing on
both the content and protocols that are sent
and received over web email im and p2p
mechanisms – delivering higher quality“best of
breed” protection in these areas surfcontrol’ s
layered threat protection stops porn viruses
phishing spam spyware and company specific
threats from coming into the business it also
keeps confidential noncompliant and legal
liability items from going out of the business
another significant area of progress has been
the strengthening of our adaptive threat
intelligence service™ this is a combination
of technology people and historical
databases which constantly monitors the
internet for existing and emerging threats
this service produces daily updates to
protect our customers effectively and
efficiently and underpins our subscription
model providing for our increasing financial
forward visibility and strong cash generation
surfcontrol’s adaptive threat
intelligence service™ powers the
surfcontrol enterprise protection
suite™ to proactively identify and
stop threats as they attempt to
enter or exit an enterprise
centrally administered policies can be
defined to ensure that the right level of
protection is delivered at a company group
or individual level with relevant graphical
reporting systems to identify risk areas trends
and overall usage protection is delivered at
the perimeter network and endpoint even 
if that endpoint is a mobile pc surfcontrol
customers avoid significant business
downtime that might impact productivity
and the bottom line while also limiting their
legal liability and ensuring regulatory
compliance and confidentiality
during the year we acquired spyware
technology from apreo limited this
acquisition is part of our response to 
the changing nature of threats and has 
already enabled the launch of a major new
component enterprise threat shield which
delivers end point security protecting
companies from the impacts of spyware
games im and p2p 
business development and 
new customers
we have added over 4000 customers during
the year with more penetration into larger
enterprises than ever before
new customers include camelot royal
skandia arriva avis the british library hilton
group plc lovells roehampton university
and cable and wireless
given our subscription model each new
customer delivers longevity and future
revenue the integration of our products 
into the enterprise protection suite will 
also provide a strong platform to sell more
product and services to the installed base
partnership has been a key part of our business
development strategy today we partner with
the world’s major organisations as technology
or oem partners including bluecoat cisco
ibm juniper microsoft nokia finjan gt a
openwave and powernet

surfcontrol’ s email protection can be delivered 
as hardware
over the years organisations have had to deal with an ever increasing number of threats
surfcontrol has achieved industry recognition for its technology surfcontrol is developed for
microsoft’ s internet security
and acceleration server
surfcontrol’ s enterprise protection suite protects organisations 
from multiple threats
operational review continued
06 surfcontrol plc annual report 2005
appointment of pat sueltz as
chief executive officer
in order to capitalise on our global position 
in the internet security arena we decided
some time ago that we required a world class
executive with the relevant experience and
knowledge to drive the company forward 
to its next stage of development i was
therefore delighted that we were able to
announce the appointment of pat sueltz as
our new chief executive officer effective from
30 june 2005 she has an excellent pedigree
and i believe we are fortunate to attract
someone of this calibre to surfcontrol i look
forward to working with pat in my new role
where i can focus purely on strategy and
technological direction
outlook
this year has seen the attainment of a long
standing goal of becoming a circa 100m
revenue company occupying a leadership
position within our target market it is the
culmination of years of work and an excellent
platform from which to launch into the next
stage of the company’s development whilst
we have not delivered the levels of growth
we might have wished for this year we are
extremely well positioned to take advantage
of the opportunities in this market and
leverage our current position with the
addition of pat sueltz to our management
team we have significantly strengthened our
ability to take full advantage of the market
opportunity open to us accordingly i look
forward to the future with confidence
steve purdham
chief strategy officer
5 september 2005
surfcontrol customers avoid 
signiﬁcant business downtime
that can impact productivity
1 00m
this year has represented an
attainment of a long standing
goal of becoming a circa
100m revenue company financial review simon wilson
07 surfcontrol plc annual report 2005 wwwsurfcontrolcom
the financial results for 2005 reflect the
underlying strength of surfcontrol’s annuity
based business model the group continues
to have no debt and generates profits with
strong levels of operating and free cash flow
the deferred income position has continued
to grow and provides a high visibility of
future turnover
at the same time the growth in invoicing 
a more immediate measure of sales activity
has slowed and is currently below the industry
growth rate as a whole the low rate of growth
in invoicing has primarily arisen from a slow
down in the levels of new business growth in
the americas the strength of surfcontrol’ s
business model and hence its balance sheet
provides financial stability upon which to
rebuild our invoicing growth rates in the future
it also provides financial resources to continue
investing in new technology and capital
projects as well as returning cash to our
investors through stock purchases
during the year the group has again
strengthened its position in the enterprise
market and has steadily improved its renewal
rates with its customers it has also diversified 
its business mix both geographically outside 
of the americas and with products to
complement web filtering currently 39 of
revenue is generated outside of the americas
and the group sells a range of web email and
spyware products within its enterprise
protection suite
the challenge of rebuilding invoicing growth
rates is central to the group’s business strategy
the strength of the group’s financial position
will underpin the actions necessary to meet
that challenge
acquisitions
on 28 february 2005 the group acquired
spyware and extended threat technology
from apreo limited the technology controls
file and application distribution in order to 
secure enterprise networks from threats
arising from spyware games im p2p  music
games etc
the key terms and the accounting for the
acquisition are set out on pages 47 and 48
the operational results relating to the
acquired assets were consolidated from the
effective date of the acquisition but were not
significant to the results of the group and
have been included in continuing operations
intangible assets arising on consolidation will
be amortised over a 24 month period and this
started in the third quarter of the year under
review the purchase consideration was
settled in cash
exchange rate fluctuations
the reporting currency of the group is the
us dollar indicative of the principal trading
region and hence currency of the group
several other currencies are used for trading
areas outside of the americas the group is
therefore 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
business has significantly expanded in non
us denominated currency regions over the
period thereby increasing the potential
exposure to translation differences the
group however is not exposed to significant
realised exchange differences arising from 

an attractive business model
leading to a sound balance sheet financial review continued
08 surfcontrol plc annual report 2005
day to day transactions as its policy is to
conduct and settle the majority of trading
transactions in the relevant currency of the
geographic region
it is also the group’s policy to seek to
minimise the level of assets andor liabilities
held in currencies other than the trading
currency of the entity to which such assets
and liabilities relate in this way the group
minimises its exposure to marktomarket
adjustments at any given balance sheet date
the relative weakness of the us dollar has
had a number of translation effects on the
financial statements in 2005 none of which
have been material
turnover
group turnover increased by 12 to 978m
2004 873m 2003 732m all group
turnover arose from sales of the group’s
enterprise protection suite of products
a unified set of web email and messaging
security solutions growth rates outside the
americas remained strong as did customer
renewal rates throughout the world
however the rate of growth in group
turnover in financial year 2005 was less than
in previous years because of slower new
business growth rates in the americas
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 enterprise
sector is the key target market and customer
segment of the group and includes the
licensing of technology via software
developer kits to original equipment
manufacturers “oems” oem turnover
was 30m 2004 40m 2003 40m
oem turnover decreased by 25 as the
group was in transition from historical 
oem contracts to a combination of 
revenue share or “meet in the channel”
business relationships
the charts below show the percentage of
turnover by destination for the americas and
nonamericas geographic areas for each of
the three years under review the americas
remains the group’s largest market and
generated 598m or 61 of the overall group
turnover nonamericas however exhibited a
high annual growth rate in turnover of 27
compared to 4 for the americas this reflects
investment in sales and marketing in the
various regions around the world outside of
the americas and the decline in rates of new
business in the americas
invoicing and deferred income
the group invoiced 1082m in the year
a 2 increase on invoicing of 1066m for 
the financial year 2004 2003 921m
a proportion of the group’s invoicing is 
not immediately recognised as turnover
and is deferred over the period of the
contract to which it relates such deferred
income typically relates to threat database
subscriptions and software 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 2005 deferred income increased by
the americas remain the group’s
largest market and generated
598m or 61 of the overall 
group turnover
■ americas      ■ nonamericas
2005
61 39
66 34
71 29
2004
2003 09 surfcontrol plc annual report 2005 wwwsurfcontrolcom
13 to 849m 2004 750m 2003
543m of the carrying balance 570m
or 67 2004 490m or 65 2003
375m or 69 is due to be released to
turnover over the year to 30 june 2006
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 key
success factor in achieving scalable and
profitable growth the chart below shows
the group’s invoicing profile by channel
segment for each of financial years
under review
selling and distribution 
the group’s largest area of expenditure is
that of selling and distribution costs in this
section of the business amount to 474m
2004 440m 2003 397m the business
became more efficient in 2005 with these
costs declining to 484 of turnover 2004
504 2003 543 reflecting growth
economies of scale as well as management
of expenditure it is management’s
intention to continue to seek economies
of scale combined with more effective
management and leverage of global sales
and marketing costs through common
global messaging improved sales channel
performance and increased sales of
multiple or bundled products within the
enterprise protection suite
the main areas of increased spend compared
to prior years were salaries and benefits for
more experienced sales management
and staff recruited in the period overall
headcount was 309 at 30 june 2005
2004 309 2003 259
research and development “rd”
rd expenditure increased to 130m 2004
97m 2003 75m being 133 of turnover
2004 111 2003 103 cost efficiencies
continue to be achieved through location of
staff in lowercost employment areas within
the group relative to the us and outsourcing
of certain noncore activities enabling this
increased rd investment to be targeted 
at key growth areas such as spyware and
appliances the associated increases in salary
and benefit costs is the principal area of
increased spend compared to prior years
headcount increased by 13 to 153
employees at 30 june 2005 2004136
2003113
other administrative expenditure and
intangible asset amortisation
other administrative expenses were 190m
2004 168m 2003 146m holding steady
at 195 2004 193 2003 199 of
turnover these expenses have kept pace 
with turnover growth in order to support 
the expansion of infrastructure necessary to
support an expanded global organisation with
a growing portfolio of products headcount
increased 3 to 79 2004 77 2003 71
the acquisition of assets from both securem
inc in april 2004 and from apreo limited in
february 2005 gave rise to an amortisation
charge of 78m during the year 2004 14m
the unamortised balance of these intangible
assets as at 30 june 30 2005 was 98m
equity based compensation
equity based compensation comprises 
an employment tax provision and costs in
respect of long term incentive plan share
grants “l tips” the equity employment tax
provision relates to the potential tax liability
that may crystallise on the exercise of
outstanding options and l tip shares held 
by directors and employees at 30 june 2005
based on the then closing middle market
share price of £459 2004 £610 2003 £638
the l tip share charge of 01m 2004 nil
2003 nil has been credited to profit and
loss reserve the balance sheet employment
tax provision of 016m 2004 045m 2003
054m declined over the year reflecting 
the reduction in the company’s share price
exceptional item – onerous lease
surfcontrol inc the company’s principal
subsidiary vacated its office for alternative 

■ channel partners      ■ direct
2005
65 35
58 42
49 51
2004
2003 financial review continued
10 surfcontrol plc annual report 2005
accommodation during the year as vacant
possession was retained rent accruing over
the remaining lease term of 1648000 has
been charged to the profit and loss account
profit on sale of a business
the group sold its multiview business unit 
in february 2001 and has in prior years
received deferred payment of sale proceeds
net proceeds recognised in the profit and 
loss account were nil in 2005 2004 031m
2003 038m under the terms of the sale
agreement no further proceeds will 
be received
profit before taxation
profit before taxation declined in the financial
year 2005 to 76m 2004 144m 2003
89m this was a direct result of the increase
in intangible asset amortisation charges arising
from the securem and apreo transactions
taxation
a net tax charge of 12m was recorded for
the year 2004 29m 2003 25m and
represents an effective rate of 15 of 
pretax profits note 8 to the financial
statements on page 46 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
in accordance with tax authority
requirements around the world and 
oecd guidelines the group follows
documented armslength transfer pricing
methodologies to reflect both the domicile
of its intellectual property and the various
functions performed on behalf of other
group entities the group is currently
generating corporation tax liabilities in 
the uk australia and certain us states
this regional pattern is expected to
continue for the foreseeable future
deferred tax assets of 45m 2004 69m
2003 42m have been recognised in the
group balance sheet the reduction in the
value of deferred tax assets principally
reflects a prudent and therefore reduced
assessment of the forecast rate at which us
tax losses are expected to be utilised in the
foreseeable future this assessment reflects
the reduced level of current year invoicing 
in the us
liquidity capital resources and
treasury management
the group continues to be highly cash
generative with strong levels of both
operating and free cash flow relative to
its levels of profits net cash inflow from
operating activities before cash flows
from exceptional items was 238m 2004
324m 2003 241m net cash inflow
from returns on investments and servicing
of finance was 27m 2004 18m 2003
07m the net inflow from returns on
investments in all years came primarily 
from bank interest which amounted to
27m 2004 18m 2003 08m 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 cash
outflow from capital expenditure was
relatively stable at 22m 2004 23m 
2003 16m overall free cash flow
remained strong at 219m 2004 266m
2003 221m as set out in the table opposite
the group continues to be highly
cash generative with strong levels
of both operating and free cash flow
relative to its levels of profit 11 surfcontrol plc annual report 2005 wwwsurfcontrolcom
net cash outflow from financing was 116m
2004 inflow 29m 2003 inflow 12m
during the year the company significantly
increased its treasury share programme
spending 118m of cash in purchasing its
own shares 2004 08m 2003 nil the
board believes that purchase of own shares
is in the best interests of the company’s
shareholders and plans to continue to do
so at 30 june 2005 the group had total
cash holdings of 890m 2004 875m
2003 617m earning a current weighted
average rate of return on closing cash of
28 pa 2004 23 2004 24 net
interest receivable and similar items
primarily bank interest was 25m 2004
19m 2003 11m reflecting yield
enhancement from both rising interest 
rates in the us and improvements in
treasury management
employee sharebased incentive schemes
the potential dilution of equity from
granted options varies to the extent 
that they are inthemoney or under water
as at 30 june 2005 there were 1036840
options with an exercise price at or below
£459 which was the closing middle 
market price on that day these options
represent 33 of the issued share capital 
as at 30 june 2005 in addition there 
are a further 2108598 outstanding options
with a grant price above £459 which will 
dilute equity if the share price rises during
the year the company issued rights to
272881 shares under its long term
incentive plan
transition to international financial
reporting standards “ifrs”
listed companies in the uk are required 
to adopt ifrs for accounting periods
commencing on or after 1 january 2005 the
board considers that it will be ready to adopt
ifrs compliant accounting policies during
the financial year 2006 and be in a position 
to prepare group ifrs financial statements 
for that year the board intend to maintain 
the group’s voluntary practice of presenting 
a three year profile giving an ifrs transition
date of 1 july 2003 quarterly comparative 
restated financial statements will also be
prepared for fiscal year 2005 to maintain 
the quarterly reporting profile for investors
and analysts
as at the date of this report the expected
effects of ifrs are as set out in the group
annual report for 2004
in accordance with emerging best practice
and the recommendations from the “100
group of finance directors” a reconciliation 
of the 2004 and 2005 financial statements
from uk gaap to ifrs will be published prior
to the release of the group’s first quarter 2006
ifrs financial statements in november 2005
summary
rebuilding invoicing growth rates is central 
to the group’s business strategy these
financial statements demonstrate and explain
the strength of the group’s financial position
which has been generated by its annuity
based business model this strong financial
position will underpin the actions necessary
to achieve our goals
simon wilson
chief financial officer
5 september 2005
2005 2004 2003
m m m
net cash flow from operating activities before exceptional item 238 326 241
cash outflow from exceptional item 07 ––
returns on investments and servicing of finance 27 18 07
taxation 17 55 11
net cash outflow from capital expenditure and financial investment 22 23 16
free cash flow 219 266 221
group free cash flow board of directors
12 surfcontrol plc annual report 2005
greg lock 
nonexecutive chairman
greg lock was appointed to nonexecutive
chairman on 9 september 2003 after serving
on the board as nonexecutive 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 in addition to surfcontrol greg
serves as director of target computer group
limited chairman of nexagent limited and
director of liberata limited
pat sueltz
chief executive officer
pat sueltz joined surfcontrol in 2005 from
salesforcecom where she was president
global operations prior to this pat was
executive vice president of services and a
corporate officer of sun microsystems inc for
four years having previously held a number of
senior positions at ibm including technical
assistant to the chairman and ceo and a two
year assignment in the uk early in her career
pat has also served as a board member of
delphi and amgen both fortune 500
companies pat is based in surfcontrol’s us
headquarters in scotts valley california
steve purdham 
chief strategic officer
steve purdham cofounded 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
since mid 90s he has strategically worked
with major worldwide software organisations
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
as president and then ceo of surfcontrol
he was successful in building the operation
and driving the planning development
marketing and execution of the significant
growth of the business as cso and cto
today steve continues to drive surfcontrol’s
products forward and provides the
companys future vision
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 kpmgs us corporate
finance practice where he specialised in
advising software and it services companies
on all aspects of domestic and crossborder
top row greg lock pat sueltz steve purdham simon wilson bottom row patrick jolly george hayter rene schuster and jane tozer 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
patrick jolly 
executive vice president
corporate development
patrick jolly was appointed to the board in
july 2001 patrick is responsible for global
corporate development prior to joining
surfcontrol he was a partner specialising in
corporate finance in hammonds a uk based
international law firm where he had a
particular focus on advising technology
companies in relation to fundraisings
mergers and acquisitions
george hayter 
senior nonexecutive 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 organisations george
is currently nonexecutive chairman of
etrade financial inc a new york stock
exchange listed internet broker and bank
rene schuster
nonexecutive director
rene schuster was appointed to the board 
as nonexecutive director in november 2003
rene is currently global director of multi
national corporates within the vodafone
group previously rene was senior vice
president and general manager of hewlett
packard company where he led the
consulting and integration unit of hp
services formerly rene joined compaq in
july 2000 as the chief executive of compaq
uk and ireland the secondlargest compaq
subsidiary after north america and vice
president of compaq computer corporation
rene joined compaq from kpmg
management consulting where he served 
as chief operating officer in the europe
middle east and africa region rene serves 
as director of hudson highland group inc
jane t ozer
nonexecutive director
jane tozer was appointed to the board as
nonexecutive director in november 2003
janes current nonexecutive directorships
include retail decisions plc the pensions
service fc smaller companies investment
trust plc jp morgan fleming income 
growth plc jane is cofounder and head of
the information and tmt nonexecutives’
association itnea and is a trustee 
of the worshipful company of information
t echnologists’ charitable trust jane began
her career at ibm spending 14 years there
before moving to fi group now xansa plc as
business development manager she then
moved to softwright systems ltd where she
held the position of chief executive until 1997
– taking the company from startup through
to a successful trade sale to a nasdaq
quoted company
13 surfcontrol plc annual report 2005 wwwsurfcontrolcom the directors present their annual report for the year ended 30 june 2005
principal activities and offices
the group’s principal activity is the development and sale of internet security products that provide enterprise threat protection shielding organisations
from known and emerging internet dangers through layered threat protection
sm
the company has redefined traditional “filtering” into a unified set of web
email and messaging security solutions that continuously filter inbound and outbound internet traffic to eliminate spam spyware phishing and web and 
email abuse surfcontrol provides adaptive threat intelligence
sm
from its global threat experts
sm
to respond quickly with automatic proactive security
updates to protect customers “surfcontrol” is the group’s primary brand for its internet security products
in the third quarter of the year the group acquired enterprise spyware and extended threat technology from apreo limited for a total estimated cost 
of 70m in the fourth quarter the group successfully launched its own enterprise threat protection product incorporating this technology
the group’s principal gotomarket distribution channel is channel partnerships with resellers distributors and a range of oem partners these partners may
sell the company’s products individually or incorporated into a broader unified threat management solution the group also sells its products directly via
inside sales and via ecommerce from its website
financial results and review of developments
the results for the year are set out in the attached audited financial statements on pages 35 to 62 the directors do not recommend the payment of a
dividend and the retained profit for the year of 6445000 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 operating review statements on page 2 and pages 4 to 6 and in the financial review on pages 7 to 11
treasury share purchases
during the financial year the company acquired a total of 1089500 of its own 10p ordinary shares for treasury at an aggregate cost of 11525000 the
purchases were completed at an average price of £571 1058 per share following these purchases the company holds 1195500 shares in treasury
representing 384 of issued share capital at 30 june 2005 at this date the company has remaining authorisation up to the conclusion of the forthcoming
annual general meeting to purchase 2474174 ordinary shares the board believes that the acquisition of treasury shares is an effective use of shareholder
funds given the company’s current share price
research and development
the group’s activities in research and development are discussed in the operating review statement on pages 4 to 6 a charge of 1296m 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
3
nonexecutive group chairman and chairman of the nominations committee
george hayter
123
nonexecutive director and the senior nonexecutive director
rene schuster
123
nonexecutive director and chairman of the remuneration committee
jane e tozer mbe
123
nonexecutive director and chairman of the audit committee
steve purdham group chief executive to 30 june 2005
pat sueltz group chief executive from 30 june 2005
simon wilson group chief financial officer and company secretary 
patrick jolly president emea europe middle east asia and world wide operations outside of america 
kevin blakeman president americas operations resigned 26 october 2004
1 member of the remuneration committee
2 member of the audit committee
3 member of the nominations committee
pat sueltz was appointed to the board as group chief executive on 30 june 2005 steve purdham became chief technical officer and chief strategy officer
on the same date patrick jolly became executive vicepresident for corporate development and legal affairs on 6 july 2005
the directors retiring by rotation are greg lock george hayter and steve purdham who being eligible offer themselves for reelection in addition pat sueltz
was appointed during the financial year offers herself for reelection at the forthcoming annual general meeting
a brief description of the recent business experience of directors serving during the period is given on pages 12 to 13
directors’ report
14 surfcontrol plc annual report 2005 directors’ interests
details of directors’ interests in the ordinary share capital of the company together with their option and longterm incentive plan holdings are given in the
directors’ remuneration report on pages 23 to 33
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 5 september 2005 the company had been notified under sections 198202 companies act 1985 that the following shareholders had direct or indirect
interests of 3 or more of the current issued ordinary share capital of the company
ordinary 
shares held  of total
on date of ordinary
shareholder notification shares
1
porter orlin llc 2783420 895
tiger technology performance llc 2332239 750
fidelity international limited 2141007 688
merrill lynch and co inc 1915527 616
the goldman sachs group inc 1903973 612
wellington management company llp 1765683 567
barclays plc 1409946 453
herald investment trust plc 1094200 352
jana partners llc 1047141 337
legal and general investment management limited 957526 308
1 based on 31114572 ordinary shares in issue at 5 september 2005
employment policy and involvement
the group believes in developing and maintaining a diverse multitalented and highly motivated workforce the group is therefore committed to providing
equal employment opportunities by establishing discriminationfree 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 website the company also uses other methods of communication such as staff meetings web casts video conferencing instant messaging and
email such that the views of employees can be taken into account in making decisions that may 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 2004 28 days 2003 23 days company creditor days
were 26 days 2004 35 days 2003 28 days
political and charitable contributions
the group and company made no political contributions during the year 2004 nil 2003 nil donations to uk charities amounted to 85108 
2004 97849 2003 172249 in addition the group donated 9553 to charities outside of the uk 2004 10173 2003 4147
directors’ report
15 surfcontrol plc annual report 2005 wwwsurfcontrolcom 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 do so the
group’s website includes a section dedicated to corporate ethical employment and environmental issues
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 reappoint 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 and
 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 company and to prevent and detect fraud and other irregularities
annual general meeting
the annual general meeting will be held at riverside mountbatten way congleton cheshire cw12 1dy on 20 october 2005 at 1130am
included in the ordinary business of the meeting are resolutions 3 and 4 to reappoint greg lock and george hayter respectively as nonexecutive directors
they each have agreements without a specified fixed term which are terminable by the company or the director with three months’ notice greg lock has 
a wide experience in the technology sector having previously worked in several countries as ibm’s global general manager industrial sector george hayter
has a number of contacts in the technology sector through current and past directorships including most recently the etrade group inc which is quoted
on nasdaq neither director holds any executive position and is able to devote the time required of him as a board director greg lock is the nonexecutive
chairman of the group george hayter is the senior independent nonexecutive director
the biographical details of the directors that are submitted for reelection may be found on pages 12 to 13
as well as the ordinary business of the meeting resolutions will be proposed to renew for a further year the authority to allot unissued shares in the
company to allot shares for cash free from the preemption rights set out in the companies act 1985 and to give the company authority to make market
purchases of it shares
directors’ report
16 surfcontrol plc annual report 2005 resolution 8 will renew the directors’ authority to allot unissued 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 £1659443 being onethird of the issued ordinary share 
capital of the company at one month prior to 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 2004 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 £155572 representing 5 of the issued share capital 
at one month prior to the date of this notice 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 3111457 shares representing 10 of the issued
ordinary share capital of the company at one month prior to the date of this notice at a minimum price of 10p and a maximum price exclusive of expenses
of not more than 5 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 5 september 2005 being the last practicable date 
prior to publication of this report 3145438 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 918 of the total issued share capital of the company
inclusive of shares issued under option if the full authority to buy back shares is invoked the same options would represent 1010 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
all of the above resolutions are set out in the separate notice of annual general meeting
by order of the board
simon wilson
company secretary
5 september 2005
directors’ report
17 surfcontrol plc annual report 2005 wwwsurfcontrolcom corporate governance
introduction
the board supports the principles of the 2003 combined code on corporate governance “the combined code” as required by the listing rules of the uk
listing authority this report describes how the group has applied the principles of section 1 of the combined code
1 the board of directors
the group is controlled by a board of directors that currently comprise the four executive directors and four independent nonexecutive directors 
including the nonexecutive chairman the nonexecutive chairman is greg lock the other nonexecutive directors are george hayter rene schuster
and jane tozer
the board’s responsibilities include 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 risk tolerances and monitoring executive and management performance all
operational decisions within this business and market framework are delegated to executive management
george hayter greg lock rene schuster and jane tozer are shareholders in the company all the nonexecutive directors are considered by the board to 
be independent of the company and group as defined in section a31 of the combined code each nonexecutive director possesses considerable outside
expertise and is able to exercise detached judgement in dealing with matters before the board the senior independent director is george hayter who 
was appointed to the board as a nonexecutive director on 15 june 1998 although george hayter holds vested share options from january 2000 the board
does not consider that this affects his ability to exercise independent judgement
board meetings were held on nine 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 interalia reports covering local operating performance and activities a group operational summary management
accounts with budget variance analysis most recent forecasts and selected periodic status reports on taxation working capital management human
resources information systems internal control reviews and changes treasury and strategic matters newly introduced in april 2005 the board also receives
selected periodic indepth presentations from departmental management as to the functional operations the nonexecutive directors also meet from time
to time outside of board and committee meetings without the presence of executive directors
the board has adopted a schedule of matters reserved for its approval 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 reelection in accordance with the company’s articles of association which require no less than one third of directors 
to be eligible for reelection in each calendar year a director is also subject to reelection at the annual general meeting following their initial appointment 
to the board
professional commitments of the chairman of the board
greg lock 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 pages 12 to 13
18 surfcontrol plc annual report 2005 board committees
there are three committees of the board which are
a remuneration committee 
the remuneration committee consists of the three nonexecutive directors rene schuster chairman george hayter and jane tozer 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 directors’ remuneration report on pages 23 to 33 provides further details
of the committee’s responsibilities and work the committee meets no less than twice each year and has met four 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 wwwsurfcontrolcomcompanycorporategovernance
b audit committee
the audit committee consists of the three nonexecutive directors jane tozer chairman george hayter 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 other board directors and senior accounting managers
are 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 and maintains a regular direct dialogue with the finance director in addition the committee andor 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 five 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 size of the group the relative simplicity of the nature and type of transactions entered into by the group significant executive involvement in the 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 always encouraged open communication between staff hr senior management and executive directors in addition the audit
committee established written guidelines to encourage any employee or executive director to communicate matters of concern directly to the chairman 
or nonexecutive directors if they wish these “whistleblowing” procedures were formally adopted on 2 september 2004 and will be reviewed annually to
measure their effectiveness during the year all contacts made by employees under the policy were recorded in a register and reviewed and discussed at
board meetings appropriate follow up action was taken and recorded in the register
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 governing the
use of external auditors for nonaudit 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 nonaudit services provided by the external auditors
related to tax compliance and planning details of the nonaudit services together with their cost are set out in note 6 on page 45
the full text of the committee’s terms of reference its policy on the use of external auditors for nonaudit services and the whistleblowing policy may be
found on the company’s website at wwwsurfcontrolcomcompanyinvestorscorporategovernance
corporate governance
19 surfcontrol plc annual report 2005 wwwsurfcontrolcom c nominations committee
the nominations committee consists of the chairman and the three nonexecutive 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 of the board
during the year under review the committee recommended one executive appointment to the board patricia c sueltz as chief executive officer the
recommendation was accepted by the board in making this appointment the board utilised the services of an external search firm the prime qualities
sought for the position were integrity extensive experience in running mid to largecap organisations in the technology sector us experience and a
demonstrable track record of success
the full text of the committee’s terms of reference may be found on the company’s website at wwwsurfcontrolcomcompanyinvestorscorporategovernance
the attendance record at board and committee meetings for the directors was as follows
board audit remuneration nominations
board director held attended held attended held attended held attended
greg lock 9 9 na na na na 2 2
george hayter 99554422
rene schuster 97554321
jane tozer 99554422
pat sueltz – – na na na na na na
steve purdham 9 9 na na na na na na
patrick jolly 9 9 na na na na na na
simon wilson 9 9 na na na na na na
kevin blakeman 2 2 na na na na na na
reasons for nonattendance were vacation and other business commitments where na appears the director was not a member of the relevant board
committee
pat sueltz was appointed a director on 30 june 2005 and as a consequence did not attend any meetings in the year as a director
 kevin blakeman resigned as a director on 26 october 2004 he attended all board meetings whilst a director
annual performance evaluations
the combined code requires that the board conducts formal annual performance evaluations of the board as a whole the individual nonexecutive
directors the chairman and the board committees 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 performance input
was obtained from the auditors on the performance of the audit committee
whilst the assessment results were broadly positive select areas for improvement were identified together with specific recommended actions 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
for the year under review as in prior years the executive directors’ performance is appraised by the chairman who also obtains input from the
independent nonexecutive 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 the remuneration committee
considers these evaluations in their decisions of awards of bonuses for the year and in the setting of future compensation for the executive directors
corporate governance
20 surfcontrol plc annual report 2005 2 shareholder relations
the group keeps in contact with investors through a regular communication programme involving a variety of analyst institutional and retail shareholder
meetings recorded telephone conference calls and technology bank conference presentations on a preset schedule the group publishes unaudited
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 timesdaily telegraph subscription service the preset publication schedule together with downloadable copies of all financial results
and summaries of operating metrics is also published on the group’s website the group also publishes on the company’s website 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 listed company the company also hosts an annual analyst day where nonfinancial aspects of the group’s
operations and products are discussed the ceo and finance director are the primary points of contact for shareholder relations and the chairman and
senior independent director are available on an ongoing basis to meet with major shareholders and will promptly respond to any ad hoc requests for
meetings in addition the chairman extends an offer to meet all of the company’s top 10 major shareholders each year together with the ceo regular
feedback is given to the full board on governance strategy or any other significant issues that have been raised by institutional shareholders
save in exceptional circumstances all board directors attend the annual general meeting and shareholders are invited to ask questions concerning the
formal business or meet with the board afterwards for more general questions notice of the meeting and any related documents are sent to shareholders
at least 20 working days in advance of the meeting the level of proxy votes lodged for each resolution is announced at the meeting and a copy of the
related stock exchange announcement is available at wwwsurfcontrolcomcompanyinvestorsrns announcements
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 2005 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 its internal controls has been undertaken in the year and will be updated annually
business risks and internal controls are assessed by a number of methods including regular departmental management interviews indepth board reviews
of selected functional areas and the periodic use of external consultants to independently assess areas of potential risk
i control environment
the group’s control environment is the responsibility of the board however the implementation and day to day monitoring of internal controls is delegated
to the operational managers operational matters are communicated to the board through operating unit or global function reports at each board meeting
the effectiveness of financial internal controls is assessed annually and reported to the board by the chief financial officer any change to effectiveness of
the financial internal controls is reported 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 review or form an opinion on the financial statements
ii risk assessment
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
iii financial reporting
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 collections efficiency and leads generated by marketing any trend in the kpis away from budget is brought to the attention of the board
a comprehensive budget is produced once a year and is reviewed and approved by the board rolling quarterly operating forecasts are completed and reported 
to the board each month 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
corporate governance
21 surfcontrol plc annual report 2005 wwwsurfcontrolcom iv nonfinancial reporting
the executive directors meet twice monthly to discuss operational and strategic matters once per quarter these meetings cover strategic matters with a
timeframe extending beyond the current operating plans and budgets
senior management meet monthly via telephone or video link to review and discuss shortterm 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
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 interoperation
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 foreign exchange
4 provisions of the code
throughout the financial year ended 30 june 2005 and through to the date of approval of these financial statements the board consider that the group has
complied with section 1 of the combined code except to the extent described below
nonexecutive director’s share options
the company has in the past granted options over ordinary shares to george hayter and currently he holds 800 outstanding options at a price of £849 the
board believes that this interest in share options has not compromised his independence and george hayter has subsequently been appointed the senior
independent director
corporate governance
22 surfcontrol plc annual report 2005 23 surfcontrol plc annual report 2005 wwwsurfcontrolcom
introduction
this report sets out the remuneration policy operated by the company in respect of the executive directors together with disclosures on directors’
remuneration required by the directors’ remuneration report regulations 2002 “the regulations” the auditors are required to report on the “auditable”
part of this report and to state whether in their opinion that part of the report has been properly prepared in accordance with the companies act 1985 
as amended by the regulations the report is therefore divided into separate sections for audited and unaudited information
the board have reviewed the group’s compliance with section 1 of the 2003 combined code on corporate governance “the combined code” on
remuneration related matters and it is the opinion of the board that the group complied with all remuneration related aspects of section 1 of the combined
code during the year
unaudited information
1 remuneration committee
the remuneration committee is responsible for developing policy on remuneration for executive directors and senior management below board level 
and for determining specific remuneration packages for each of the executive directors
the remuneration committee is chaired by rene schuster and its other members are george hayter and jane tozer the remuneration committee
members have no material personal financial interest other than as shareholders in matters to be decided no potential conflicts of interests arising from
cross directorships and no daytoday involvement in running the business
during the year the committee 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 where executive directors have attended a remuneration committee
meeting there was no discussion relating to their own remuneration and benefits no executive is involved in determining his or her own remuneration
the committee receives market data on competitive levels of compensation from new bridge street consultants and radford us these firms which were
not appointed by the committee provide general remuneration information to the human resources department from time to time but are not retained to
provide any other consulting services to the committee or the group generally
the committee has taken advice from halliwell consulting during the year in respect of the design implementation and operation of the new long term
incentive plan ltip the company also took advice from halliwell consulting in respect to accounting for sharebased payments under ifrs 2
halliwell consulting was appointed by the committee in respect to work on the ltip 
2 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 website wwwsurfcontrolcomcompanycorporategoverance and are summarised below
 the scale and structure of all aspects of remuneration for the executive directors and the nonexecutive chairman
 the group’s overall policy on senior management remuneration
 the level and performance basis for share option or other sharebased awards to executive directors senior management and staff
 the maintenance of service agreements with the chairman and executive directors
the fees for nonexecutive directors are a matter reserved for a committee of the board consisting of the chairman and executive directors
3 remuneration policy overview
the remuneration committee’s overall policy aim is to provide a remuneration package which supports the achievement of the company’s three year
roadmap to success specifically this involves providing a performance based remuneration package through the operation of annual and longterm
performance plans which are focused on motivating and encouraging executive directors and other senior management to achieve the relevant group
growth and financial performance targets set out in the roadmap to success
in addition the remuneration committee is mindful of the following requirements for the company’s remuneration policy namely that the policy should
 allow the company to retain the talent needed to execute its business strategy
 enable the company to be competitive when recruiting appropriate skilled and experienced newcomers and
 align rewards with the interests of shareholders
directors’ remuneration report 24 surfcontrol plc annual report 2005
when mapping out the levels of each element of the remuneration package for executives the remuneration committee looks at other comparable
companies in the global software technology sector the following table sets out the broad policy position for each element of the company’s remuneration
package compared to these companies
base salary bonus potential share incentives pension total package
median upper quartile upper quartile lower quartile median – upper quartile
the policy is designed only to provide an upper quartile total package if bonus is earned and share incentives vest it should be noted that the real value
received by the executives under the share incentive arrangements will be dependent upon the degree to which the associated performance conditions
have been satisfied at the end of the three year performance period and the share price of the company at this time
the committee when setting remuneration for the executives also takes into account practice applicable to other employees within the group
the remuneration committee will continue to review the policy on an annual basis to ensure that it is in line with the company’s objectives and 
shareholders’ interests
throughout the year under review the committee has adopted the principle that the greater the potential award the more stretching the relevant
performance target
no specific information for pat sueltz or kevin blakeman is included in the unaudited section of this report as neither director was on the board for the full
financial year
the company encourages executive directors to take one outside appointment to broaden their experience executive directors are allowed to keep the
fees earned from these outside appointments steve purdham was paid 5575 for his nonexecutive position on the board of manchester technology fund
limited patrick jolly was paid 59470 for his nonexecutive position on the board of findel plc
4 remuneration
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 30 june 2005 consisted of a combination of cash bonuses and ltip awards the following pie charts show the elements of the total expected
remuneration package set out in the table on page 28
directors’ remuneration report
steve purdham chief executive
49 performance compensation
51 fixed compensation
patrick jolly president emea
36 performance compensation
64 fixed compensation
simon wilson chief financial officer
42 performance compensation
58 fixed compensation
key
fixed compensation is calculated as
salary
benefits
pension contribution
performance compensation is calculated as
bonus paid
intrinsic value of ltip  there were no significant changes in the structure of executive remuneration since the end of the financial year and it is the current intention of the
committee to continue the same remuneration policy during the next and subsequent financial years
steve purdham was group chief executive up to 30 june 2005 when he took up the position of chief strategy officer and chief technology officer on the
appointment of pat sueltz to the board pat sueltz received no remuneration for the financial year however the main elements of her package for the next
financial year are set out in the table below
salary bonus share incentive grant on appointment pension
450000 200000 a one off grant of 300000 share options which will up to 6 of earnings 
vest over three years in equal annual instalments this requires equal 
paid after 12 months grant is not subject to additional performance conditions executive contribution
employment with no subject to true
performance conditions an ltip award over 105272 shares subject to the normal applicable irs cap which
provisions of the rules of the ltip set out later in this report is currently 14000
will then revert to 
normal bonus arrangements the committee believes that these levels of grant and the lack 
with performance criteria of performance criteria associated with the options is appropriate 
in order to attract a high calibre chief executive who is based in
the united states where this is normal practice
basic salary
policy median
when determining the salary of the executive directors the remuneration committee takes into consideration
 levels in pay and annual increases within other comparable companies in the global software sector
 the performance of the individual executive director
 the individual executive director’s experience and responsibilities and
 pay and conditions throughout the group
the following table sets out the salary information for the executive directors in the currency of the country in which the executive resides
salary year ending salary year ending percentage rise 
name 30 june 2004 30 june 2005 2004 to 2005
steve purdham £195000 £195000 0
simon wilson 285000 308000 8
patrick jolly £200000 £208000 4
bonus
policy upper quartile
annual bonus arrangements are intended to incentivise the executive directors to achieve the group’s predetermined operational objectives for the year
under review which are stepping stones to the achievement of the three year roadmap for success
executive bonuses are based on a mix of financial objectives relating to regional or group revenue and group ebitda the minimum threshold achievement
levels are that 75 of ontarget bonuses become payable for achieving 90 of annual ebitda targets and 95 of quarterly ebitda targets the use of
ebitda as a performance measure closely aligns the executives with corporate strategy and the attainment of these targets is considered important in
attaining growth in shareholder value the remuneration committee feels strongly that at this stage of the company’s development the bonus performance
targets should also encourage growth in revenue which will enhance the value of the company in the medium to longterm and not act as a disincentive
to acquisitions which although revenue enhancing may in the shortterm have an impact on earnings per share or return on capital employed
25 surfcontrol plc annual report 2005 wwwsurfcontrolcom
directors’ remuneration report 26 surfcontrol plc annual report 2005
the following table shows the level of bonus performance achieved as a percentage of salary in respect of performance measures for the year ending 
30 june 2005
steve purdham simon wilson patrick jolly
bonus earned bonus earned bonus earned 
performance measure percentage of salary percentage of salary percentage of salary 
group or regional revenue 52 24 28
group ebitda 14 7 7
total as percentage of salary 66 31 35
bonus targets and measures are reviewed and agreed by the remuneration committee at the beginning of each financial year to ensure that they are
appropriate to the current market conditions and position of the company so that they continue to remain challenging the structure of the bonus targets
for the year ending 30 june 2006 will be similar to those operated for 2005 the maximum bonus potential for the year ending 30 june 2006 is 100 of the
relevant executive director’s salary bonuses are not pensionable
share incentives
policy upper quartile
overview
during the previous year the remuneration committee reviewed its share incentive policy and concluded that the interests of shareholders and executives
would be better aligned through awarding whole shares under an ltip which was approved by shareholders at the 2004 annual general meeting rather
than using options share options will only be granted to executive directors on recruitment although options may be granted to other senior management
this difference in policy between the executive directors and other senior management is mainly due to greater familiarity with options in the united states
although this policy will be kept under review as local practice changes over time
the company’s share incentive schemes are operated without any significant cost
shareholding requirements
in order to further align the interests of shareholders with those of the executives the remuneration committee has introduced minimum shareholding
guidelines to encourage substantial longterm share ownership by the executive directors by encouraging the executive directors to build up shareholdings
it will demonstrate their ongoing commitment to and confidence in the company the guidelines will require that over a five year period executive
directors build up and retain a holding of shares based on a percentage of salary as per the table below
position recommended shareholding requirement as 
percentage of salary built up over five years
ceo 200 
all other executive directors 100
the remuneration committee expects this requirement to be built up through the retention of some shares acquired by the executive directors under the
company’s share schemes or through individual market purchases if the executive directors do not build up such percentages the remuneration
committee may take this into account when considering the level of future incentive awards
dilution
in common with a number of companies in the technology sector the company sought an overall dilution limit greater than the standard abi limits of 10
of issued share capital for its share schemes a limit of 20 was approved by the company’s shareholders at an extraordinary general meeting on 14 july
2000 the remuneration committee recognises that practice has changed over the last three years and that this level of dilution is no longer seen as in line
with corporate governance best practice it is clearly impractical to reduce the company’s current level of dilution immediatelytherefore the company
intends to address the situation by granting fewer options over newly issued shares and using market purchased shares to satisfy awards under the ltip 
these changes coupled with historical share incentives falling out of the dilution calculation will move the company closer to the 10 limit over time
directors’ remuneration report 27 surfcontrol plc annual report 2005 wwwsurfcontrolcom
directors’ remuneration report
option scheme
the following table summarises the main terms of the option scheme
term detail term detail
participants the current executive directors participating in the ltip maximum the rules of the option scheme were approved without 
will not be granted further options options will be annual grant an annual limit however the remuneration committee 
granted to other members of senior management has determined in normal operation of the scheme that 
in addition options may still be used on recruitment the maximum annual grant to any employee during a 
financial year will be 100 of salary
performance a mix of group revenue and ebitda targets for the performance two sets of performance criteria linked to group target
condition relevant year of account these measures were used condition ebitda performance for that year and company total 
1999–2003 because the committee believed they were the most 2004 shareholder return “tsr” relative to that of the ftse
relevant measures to encourage growth at this stage techmark index over a two year period july 2003 to july
of the company’s development 2005 tsr was included by the remuneration committee 
to encourage executives to take into account the company’s
comparative returns to shareholders
status of options have either vested or lapsed status of all options which were first exercise able in july 2005
options options have lapsed
1999–2003 2004
long term incentive plan
the main terms of the ltip approved by shareholders at the annual general meeting in october 2004 are set out below which have not been varied since
the scheme was adopted the ltip will be the ongoing longterm equity arrangement for the executive directors
term detail term detail
participants currently the executive directors maximum initial awards on launch of the plan were a maximum of 200
annual grant of salary ongoing awards a maximum of 100 of salary
primary comparative tsr performance release of awards secondary the remuneration committee will ensure that the release of 
performance starting at the median 25 of awards with full release performance the award is consistent with the underlying financial 
condition at the upper quartile condition performance of the company
indicators considered will include
the remuneration committee believes that comparative  operating and free cash flow generated over the three
tsr is the most appropriate measure to align shareholders’ year period
and executives’ interests as it ensures that before being  levels of deferred revenue recognised over the three
entitled to receive any of their l tip awards the executives year period
outperform their peers over the measurement period  the value of new versus renewals billings over the
in delivering shareholder value irrespective of general three year period
market conditions
comparator alphameric plc dimension data holdings plc internet security systems inc safenet inc
group anite group plc emblaze limited marlborough stirling plc secure computing inc
autonomy corporation plc fsecure oyj northgate information sonicwall inc
solutions plc
aveva group plc gresham computing plc nsb retail systems plc watchguard technology inc
dicom group plc intec telecom systems plc royalblue group plc websense inc
 marlborough stirling plc was acquired by united utilities plc in may 2005
ltip performance will be assessed by the committee on an independent basis with the assistance of their remuneration advisers 28 surfcontrol plc annual report 2005
directors’ remuneration report
benefits
policy market practice
the company provides market practice benefits for executives of this level of seniority benefits in kind include a company car or allowance for uk based
directors access to group employee medical schemes and life assurance cover for all directors
pension
policy lower quartile
the group operates defined contribution schemes for its executive directors consistent with its policy for its employees the parent company contributes
up to 10 of basic salary into the uk based money purchase scheme in respect of patrick jolly and amounts as agreed by the committee into a separate
executive money purchase pension scheme for steve purdham
during the year surfcontrol inc provided 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 for fy06 the contribution has been increased to the lower of 6 of annual salary or 100 of personal contributions
personal contributions for all us employees are subject to a cap set annually by the irs which is currently 14000
these schemes are administered independently of the company or any group company details of contributions made by the group on behalf of directors
are given on page 31
the company does not anticipate the change in pension legislation in the uk on 6 april 2006 will affect its current pension provision the company would
not in any case provide executives with compensation for loss of tax relief on pension contributions
no director received any payment from group pension arrangements in the year
total package value
policy median to upper quartile
the company’s remuneration policy is designed so that the total package value will only be upper quartile if stretching performance is achieved and
bonuses are paid out and share incentives vest the following table shows the total package value provided to the executive directors of the company
bonus paid
during year total
ended 30 benefits pension ltip award package 
name salary june 2005 in kind contribution value value
steve purdham 362000 238000 25000 67000 195138 887138
simon wilson 308000 95000 14000 7000 139385 563385
patrick jolly 387000 137000 46000 27000 117082 714082
 the ltip award is an estimate of the potential intrinsic value of the award made in the year this cost has been spread over a threeyear vesting period in the profit and loss account as
required by uitf 17 abstract employee share schemes it should be noted that the value of ltip awards is based on the profit and loss account charge which includes an assessment of 
the likelihood of the performance conditions being satisfied the actual benefit provided by the ltip awards will only be determined three years after the date of grant and will be based on
the company’s comparative tsr performance at that point 29 surfcontrol plc annual report 2005 wwwsurfcontrolcom
5 other remuneration matters
directors’ contracts
the policy on termination is that the company does not make payments beyond its contractual obligations the only event where the company may be
liable to make a payment to any of the executive directors is on cessation of employment no payment is due on either a company takeover or liquidation
in addition executive directors will be expected to mitigate their loss further the remuneration committee ensures that there have been no unjustified
payments for failure none of the executive directors’ contracts provides for liquidated damages there are no special provisions contained in any of the
executive directors’ contracts which provide for longer periods of notice on a change of control of the company further there are no special provisions
providing for additional compensation on an executive director’s cessation of employment with the company
director date of contract contract term minimum notice period provision for compensation over notice period
pat sueltz 30 june 2005 rolling 12 months six months by the basic salary employer pension
after initial six months company in the first 12 contributions together with such 
months of employment bonuses payable pursuant to the 
or 12 months thereafter current bonus arrangements and the
and three months by cash equivalent value of all benefits 
the director in kind or allowances for the relevant 
notice period
steve purdham 1 march 1998 rolling 12 months 12 months
simon wilson 7 february 2000 rolling 12 months 12 months by the 
company or three months 
by the director
patrick jolly 28 august 2000 rolling 12 months 12 months by the 
company or six months 
by the director
kevin blakeman 17 november 2000 rolling 12 months 12 months by the
as varied 13 company or three months
december 2001 by the director
greg lock 17 october 2000 equivalent to three months fees and all nonreimbursed expenses
george hayter 15 june 1998 the minimum 
notice period
jane tozer 1 november 2003 equivalent to
rene schuster 1 november 2003 the minimum 
notice period
 resigned 26 october 2004
nonexecutive directors
the company pays the current nonexecutive directors with the exception of greg lock a fixed basic fee of £25000 47000 rene schuster and jane tozer
also receive an additional £5000 9000 per annum for their services as chairmen of the remuneration and audit committee respectively george hayter
receives an additional £5000 per annum for his position as senior independent director
during the year jane tozer received additional fees of £5000 in respect to her work on the ltip and in recognition of her additional services to the
remuneration committee rene schuster agreed to forego £5000 in fees
greg lock receives a fixed basic fee of £75000 per annum with effect from 1 january 2005 and earned fees of £67500 125000 in the financial year
nonexecutive fees are reviewed annually by a committee of the board consisting of the chairman and executive directors and are set at levels which are
considered appropriate to attract and maintain individuals with requisite experience the chairman’s fees are also reviewed annually by the remuneration
committee without reference to the chairman
directors’ remuneration report 30 surfcontrol plc annual report 2005
6 performance graph
the graph below sets out the cumulative tsr of the company and those companies comprising the ftse techmark all share index and the ftse software
 computer services index for the period of five years from july 2000 to june 2005 in the opinion of the directors these are the principal equity indices used
by the investment community as a benchmark for performance comparison with the company in addition for information the remuneration committee
has included the company’s performance against the comparator group used for the ltip 
7 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
2005 2004
steve purdham 95000 95000
pat sueltz – –
simon wilson – beneficial 2320 1330
simon wilson – non beneficial 1000 1000
patrick jolly 6989 3489
greg lock 17500 17500
george hayter 9450 9450
jane tozer 1936 –
rene schuster 10000 10000
there were no changes in directors’ interests between 30 june 2005 and the date of this report
directors’ remuneration report
–100
–80
–60
–40
–20
0
20
40
60
80
2000 2001
year
percentage
2002 2003 2004 2005
ftse software and computer services
comparator group
surfcontrol
ftse all share techmark audited information
1 details of directors’ emoluments
total salary fees cash bonus and benefits paid to the directors in the financial year were as follows
benefits
salaryfees bonus in kind total total total
2005 2005 2005 2005 2004 2003
name ’000 ’000 ’000 ’000 ’000 ’000
steve purdham 362 238 25 625 527 454
pat sueltz appointed 30 june 2005 –––– ––
simon wilson 308 95 14 417 444 469
patrick jolly 387 137 46 570 519 459
kevin blakeman resigned 26 october 2004 77 33 4 114 368 373
greg lock 125 – – 125 89 40
george hayter 56–– 56 49 40
jane tozer 65–– 65 35 –
rene schuster 47–– 47 35 –
rob barrow resigned 1 november 2003 –––– 47 158
simon acland resigned 1 november 2003 –––– 14 40
1427 503 89 2019 2127 2033
 highest paid director
included in benefits for steve purdham is 22000 for a car allowance 2004 21000 which was chargeable to uk income tax 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
2 pensions
details of pension contributions made by the group on behalf of directors are given below
2005 2004 2003
executive ’000 ’000 ’000
steve purdham 67 63 54
pat sueltz – ––
simon wilson 7 46
patrick jolly 27 17 16
kevin blakeman 1 77
102 91 83
directors’ remuneration report
31 surfcontrol plc annual report 2005 3 share options
the following table shows the movement in the number of share options held by directors during the year under review
exercise exercise 1 july granted in lapsed in exercised 30 june
name price period 2004 the year the year in the year 2005
steve purdham 331p 15700–15709 150000––– 150000
434p 301100–291109 150000––– 150000
849p 14601–13610 160000––– 160000
365p 30602–29611 150000––– 150000
421p 3703–2712 160000––– 160000
64750p 2705–1713 100000 – 100000 – –
steve purdham – non beneficial 321p 51000–41009 3000––– 3000
849p 14601–13610 3200––– 3200
pat sueltz 475p 30606–29615 – 300000 – – 300000
simon wilson 849p 21201–20210 180000––– 180000
365p 30602–29611 12500––– 12500
421p 3703–2712 50000––– 50000
64750p 2705–1713 60000 – 60000 – –
patrick jolly 849p 10901–9910 260000––– 260000
365p 30602–29611 12500––– 12500
421p 3703–2712 40000––– 40000
64750p 2705–1713 60000 – 60000 – –
kevin blakeman 321p 51000–41009 6000––– 6000
849p 9201–8210 8000––– 8000
849p 14601–13610 12000––– 12000
738p 291101–281110 85000––– 85000
365p 30602–29611 12500––– 12500
421p 3703–2712 40000––– 40000
6475p 2705–1713 60000 – 60000 – –
george hayter 849p 9201–8210 800––– 800
the closing middle market price of the company’s shares at the end of the financial year was £459 and ranged between £459 and £675 during the year
the performance conditions applying to these options are described in the share incentives section above
directors’ remuneration report
32 surfcontrol plc annual report 2005 4 l tip
the maximum number of nilcost shares that have currently been allocated to executive directors under the ltip are as follows
first vesting dates
1 july granted in released in lapsed in 30 june 21 october 30 june 
name 2004 the year the year the year 2005 2007 2008
steve purdham – 72227 – – 72227 72227 –
pat sueltz – 105727 – – 105727 – 105727
simon wilson – 51591 – – 51591 51591 –
patrick jolly – 43336 – – 43336 43336 –
ltip awards were granted to steve purdham simon wilson and patrick jolly on 21 october 2004 the closing middle market price on the day immediately
preceding the grant was £5815 ltip shares were granted to pat sueltz on 30 june 2005 the closing middle market price on the day immediately preceding
the grant was £475
the performance period is three years from the grant date in respect of all ltip allocations and the performance conditions applying to these awards are
described in the share incentives section above
rene schuster
chairman of the remuneration committee
5 september 2005
33 surfcontrol plc annual report 2005 wwwsurfcontrolcom
directors’ remuneration report 34 surfcontrol plc annual report 2005
we have audited the financial statements on pages 35 to 62 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 16 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 on pages 18 to 22 reflects the company’s compliance with the nine provisions of the 2003 frc
code specified for our review by the listing rules 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 statement and the unaudited 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 2005 and of the profit of the 
group for the year then ended
 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
st james square
manchester m2 6ds
5 september 2005
independent auditors’ report to the members of surfcontrol plc 35 surfcontrol plc annual report 2005 wwwsurfcontrolcom
2005 2004 2003
notes ’000 ’000 ’000
turnover 2 97838 87335 73232
cost of sales 1746 1393 723
gross profit 96092 85942 72509
selling and distribution 47353 44025 39740
research and development 12964 9678 7530
general and administrative 19049 16813 14580
amortisation of intangible assets and depreciation 6910 10119 3148 2779
equity based compensation 1517 181 49 487
exceptional item – onerous lease 3 1648 ––
total administrative expenses 43599 29688 25376
operating profit 5140 12229 7393
proceeds from disposal of business – 311 381
profit on ordinary activities before interest and taxation 5140 12540 7774
net interest receivable and similar items 7 2481 1859 1105
profit on ordinary activities before taxation 7621 14399 8879
tax on profit on ordinary activities 8 1176 2862 2516
profit on ordinary activities after taxation and retained profit for the period 1718 6445 11537 6363
basic earnings per ordinary share cents 4 213 373 209
diluted earnings per share cents 4 209 360 208
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 63
2005 2004 2003
notes ’000 ’000 ’000
profit for the year 6445 11537 6363
unrealised exchange difference on translation 1718 118 3355 1095
total recognised gains and losses relating to the financial year 6327 14892 7458
the notes on pages 40 to 62 form part of these financial statements
group profit and loss account
for the year ended 30 june
group statement of total recognised gains and losses
for the year ended 30 june 36 surfcontrol plc annual report 2005
2005 2004 2003
notes ’000 ’000 ’000
fixed assets
intangible assets 9 9768 12554 –
tangible assets 10 3863 4065 3268
13631 16619 3268
investments 11 31 31 29
13662 16650 3297
current assets
stocks – 69 –
debtors 12 32570 31681 24138
cash at bank and in hand 23 89044 87477 61707
121614 119227 85845
creditors amounts falling due within one year 13 74983 72226 52241
net current assets 46631 47001 33604
total assets less current liabilities 60293 63651 36901
creditors amount falling due after more than one year 14 27835 26001 16742
provisions for liabilities and charges 15 161 446 540
32297 37204 19619
capital and reserves
called up share capital 1617 5032 5027 4946
share premium account 17 3987 3803 79
capital redemption reserve 17 882 882 882
profit and loss account 17 22396 27492 13712
shareholders’ funds 18 32297 37204 19619
shareholders’ funds comprise
equity shareholders’ funds 32297 37204 19619
approved by the board of directors on 5 september 2005 and signed on its behalf by
steve purdham director simon wilson director
the notes on pages 40 to 62 form part of these financial statements
group balance sheet
as at 30 june 2005 37 surfcontrol plc annual report 2005 wwwsurfcontrolcom
2005 2004 2003
notes ’000 ’000 ’000
fixed assets
intangible assets 9 9768 11911 –
tangible assets 10 1438 1426 1308
11206 13337 1308
investments 11 178489 199754 187208
189695 213091 188516
current assets
debtors 12 8950 15993 5714
cash at bank and in hand 58358 55630 36503
67308 71623 42217
creditors amounts falling due within one year 13 42021 38462 14222
net current assets 25287 33161 27995
total assets less current liabilities 214982 246252 216511
creditors amount falling due after more than one year 14 12949 12577 3880
provisions for liabilities and charges 15 161 446 540
201872 233229 212091
capital and reserves
called up share capital 1617 5032 5027 4946
share premium account 17 3987 3803 79
merger reserve 17 130407 130407 130407
capital redemption reserve 17 882 882 882
profit and loss account 17 61564 93110 75777
shareholders’ funds 201872 233229 212091
shareholders’ funds comprise
equity shareholders’ funds 201872 233229 212091
approved by the board of directors on 5 september 2005 and signed on its behalf by
steve purdham director simon wilson director
the notes on pages 40 to 62 form part of these financial statements
company balance sheet
as at 30 june 2005 38 surfcontrol plc annual report 2005
2005 2004 2003
notes ’000 ’000 ’000
net cash inflow from operating activities 21 23120 32637 24093
returns on investments and servicing of finance 22 2627 1792 741
taxation 1679 5536 1048
capital expenditure and financial investment
purchase of tangible fixed assets 2194 2267 1633
purchase of investments – – 19
sale of tangible fixed assets – 17 28
net cash outflow from capital expenditure and financial investment 2194 2250 1624
acquisitions and disposals
business acquisitions 8725 8910 –
cash acquired with subsidiary undertaking – 120 –
proceeds from disposal of business – 311 381
net cash outflowinflow from acquisitions and disposals 8725 8479 381
net cash inflow before management of liquid resources and financing 13149 18164 22543
management of liquid resources 23 2550 7470 15620
financing
proceeds from share issue 245 3750 1271
purchase of own shares for treasury 11798 839 –
net repayment of capital element of finance leases 23 19 38 45
net cash outflowinflow from financing 11572 2873 1226
increase in cash in the period 23 4127 13567 8149
the notes on pages 40 to 62 form part of these financial statements
group statement of cash flows
for the year ended 30 june 39 surfcontrol plc annual report 2005 wwwsurfcontrolcom
2005 2004 2003
notes ’000 ’000 ’000
increase in cash in the period 4127 13567 8149
cash outflow from decrease in debt and lease financing 23 19 38 45
net transfers from liquid resources 23 2550 7470 15620
change in net funds resulting from cash flows 23 1596 21075 23814
difference on translation 23 10 4727 2477
movement in net funds in the period 1586 25802 26291
net funds at 1 july 20041 july 20031 july 2002 23 87436 61634 35343
net funds at 30 june 200530 june 200430 june 2003 23 89022 87436 61634
the notes on pages 40 to 62 form part of these financial statements
reconciliation of net cash flow to movements in net funds
for the year ended 30 june 40 surfcontrol plc annual report 2005
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 2005 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
software and appliance perpetual licence sales is recognised once the licence 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 straightline basis
softwareappliance support and maintenance threat database subscriptions cyber patrol home product subscriptions and oem contract licences 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 softwareappliance support and maintenance threat database subscriptions cyber patrol
home product subscriptions and oem contract licences deferred income is carried forward within creditors and released to turnover in the profit and loss
account in future periods on a straightline basis
research and development
all research and development expenditure is written off as incurred
technical support
all pre and postsales support expenditure is written off as incurred
taxation
the charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment 
of certain items for taxation and accounting purposes 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
equity compensation
the employment tax charge arising on the future potential exercise of inland revenue unapproved options and ltip shares is charged to the profit and 
loss account over the period from the date of grant to the date the equity based benefits unconditionally vest the charge is based upon the difference
between the grant price and the closing middle market price at the balance sheet date provision is also made for the intrinsic value of ltip shares
which is charged to the profit and loss account over the vesting period which is the same as the performance period and credited to reserves
notes to the financial statements
for the year ended 30 june 2005 41 surfcontrol plc annual report 2005 wwwsurfcontrolcom
1 accounting policies continued
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 unless impaired in which
case it is written down to its recoverable amount 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 or loss on disposal or termination is calculated after charging the unamortised amount
of any related goodwill
tangible fixed assets and depreciation
tangible fixed assets are recorded at cost 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 is 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
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
notes to the financial statements
for the year ended 30 june 2005 42 surfcontrol plc annual report 2005
1 accounting policies continued
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 straightline basis
rentals paid under operating leases are charged to the profit and loss account on a straightline basis over the lease term
provision is made for onerous leases relating to vacant properties
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 2005 2004 2003
uk sterling 179 181 165
euro 121 122 115
australian dollar 076 070 067
chinese yuan 012 012 na
japanese yen 0009 na na
israeli shekel 022 na na
profit and loss average rate of exchange us dollar to local currency 2005 2004 2003
uk sterling 186 174 158
euro 127 119 105
australian dollar 075 071 059
chinese yuan 012 012 na
japanese yen 0009 na na
israeli shekel 023 na na
notes to the financial statements
for the year ended 30 june 2005 43 surfcontrol plc annual report 2005
2 segmental analysis
analysis by geographical area
a geographical analysis of the group’s turnover profit loss before interest and tax and net assetsliabilities is as follows
2005 2004 2003
turnover by destination ’000 ’000 ’000
united kingdom 19305 15778 11792 
mainland europe 8920 7357 4493 
north america 59845 57395 52381 
rest of the world 9768 6805 4566 
97838 87335 73232 
2005 2004 2003
turnover by origin ’000 ’000 ’000
united kingdom 22895 19108 14572 
mainland europe 7229 5553 3384 
north america 59777 57216 52553 
rest of the world 7937 5458 2723 
97838 87335 73232 
2005 2004 2003
profit loss before interest and tax ’000 ’000 ’000
united kingdom 1505 5679 6111
mainland europe 814 87 28
north america 5573 9332 51
rest of the world 258 2384 1584
5140 12540 7774
2005 2004 2003
net assetsliabilities ’000 ’000 ’000
united kingdom 12952 27485 10396
mainland europe 4223 4508 2517
north america 34014 14767 27304
rest of the world 5536 3472 1798
56725 50232 42015
head office and central administration 89022 87436 61634 
32297 37204 19619 
profitloss before interest and tax and net assetsliabilities incorporate the effect of the group’s transfer pricing arrangements these adjustments primarily
consist of intragroup recharges arising from the location of intellectual property
head office and central administration net assets comprise cash balances of 89044000 and finance lease obligations of 22000 at 30 june 2005
2004 cash balances 87477000 finance lease obligations 41000 2003 cash balances 61707000 finance lease obligations 73000
notes to the financial statements
for the year ended 30 june 2005 44 surfcontrol plc annual report 2005 wwwsurfcontrolcom
2 segmental analysis continued
analysis by product group
during the current and preceding financial years the group had one product group and one class of business the development and sale of internet 
security products
analysis by continuing operations
the company acquired technology and certain assets from apreo limited on 28 february 2005 it is not possible to separately identify the post acquisition
profit before tax and interest relating to the acquired technology assets because they were immediately integrated with other like group operations
intangible asset amortisation of 1173000 has been charged to the uk segmental results shown above in respect of this acquisition
3 exceptional item – onerous lease charge
2005 2004 2003
’000 ’000 ’000
rent on vacant offices 1648 ––
during the year surfcontrol inc the company’s principal subsidiary vacated its offices for alternative accommodation in scott’s valley california vacant
possession of the premises has been retained until september 2006 or until such time as the remaining unexpired lease is assigned an amount equivalent
to the rent accruing over the remaining lease term together with related costs was written off to the profit and loss account in the year
4 earnings per share
basic and diluted earnings per ordinary share are calculated as follows
2005 2004 2003
’000 ’000 ’000
profit on ordinary activities after taxation for basic and diluted earnings per share 6445 11537 6363
basic weighted average ordinary shares in issue 30326066 30974588 30426265
dilutive effect of share options and longterm incentive share rights 448147 1036691 192885
diluted weighted average ordinary shares in issue 30774213 32011279 30619150
basic earnings per ordinary share cents 213 373 209
diluted earnings per ordinary share cents 209 360 208
own shares held by the company of 1195000 2004 106000 2003 nil have been treated as cancelled for the purpose of the earnings per share calculation
notes to the financial statements
for the year ended 30 june 2005 45 surfcontrol plc annual report 2005 wwwsurfcontrolcom
5 staff costs
2005 2004 2003
’000 ’000 ’000
wages and salaries 40579 35077 31287
social security costs 3561 3221 2964
other pension costs note 20 1055 1013 845
45195 39311 35096
staff costs include directors’ remuneration which is analysed further in the directors’ remuneration report on page 23
the average monthly number of employees during the year was
2005 2004 2003
selling and distribution 298 270 245
research and development 141 119 108
administration 79 75 75
518 464 428
6 operating profit
2005 2004 2003
’000 ’000 ’000
operating profit is arrived at after charging
depreciation
owned assets 2272 1754 1580
assets held under finance leases and hire purchase contracts 36 43 47
loss on disposal of fixed assets 23 31 109
amortisation of intangible assets 7811 1351 1152
auditors’ remuneration 324 296 284
other fees payable to the auditors and their associates
further assurance services 104 77 67
tax advisory services 383 547 419
other nonaudit services 8 29
operating lease rentals
equipment and vehicles 63 115 105
land and buildings including onerous lease charge – note 3 4441 2703 2572
other fees payable to the auditors and their associates in the year include tax advisory fees which primarily relate to tax compliance coordination and planning
further assurance services in the year mainly relate to fees for review of the group’s unaudited interim and quarterly financial statements together with
advice in respect to transition to international financial reporting standards in addition amounts paid to the auditors in connection with acquisition due
diligence that have been capitalised was 28000 2004 124000 2003 nil
auditors’ remuneration for audit services includes 111000 2004 100000 2003 93000 in respect of the parent company
notes to the financial statements
for the year ended 30 june 2005 46 surfcontrol plc annual report 2005 wwwsurfcontrolcom
7 net interest receivable and similar items
2005 2004 2003
’000 ’000 ’000
bank and bank loan interest payable 2 3 2
finance lease and hire purchase interest payable 4 8 10
other interest payable 23 9 40
29 20 52
bank interest receivable 2510 1879 1157
net interest receivable 2481 1859 1105
8 taxation on ordinary activities
2005 2004 2003
’000 ’000 ’000
us federal and state tax 509 669 1927
non us corporation tax 1047 4847 3729
adjustments in respect of previous years 432 222 136
total current tax creditcharge 970 5294 5792
deferred tax 2146 2432 3276
total tax charge 1176 2862 2516
deferred tax assets have been recognised in respect of tax losses that are more likely than not to be utilised in the foreseeable future and other timing
differences existing at the financial year end the total current tax charge in the year is lower than that implied by the standard rate of corporation tax in 
the united kingdom of 30 the differences are explained below
2005 2004 2003
reconciliation of total current tax charge ’000 ’000 ’000
profit on ordinary activities before taxation 7621 14399 8879
tax charge on profit on ordinary activities implied by the uk standard rate of 30 2286 4320 2664
factors affecting the tax charge
expenses not deductible for tax purposes on a permanent basis 135 37 778
other shortterm timing differences 3464 2332 3941
adjustment to tax charge in respect of prior years 432 222 136
deferral of tax losses arising in the year 1135 3730 90
utilisation of prior year tax losses in the year 630 165 1817
total current tax creditcharge 970 5294 5792
a reconciliation to the deferred tax assets balance carried in the group balance sheet and shown in note 12 is given below
’000
deferred tax assets at 1 july 2004 6680
deferred tax charge from above 2146
exchange differences arising in the year 6
deferred tax assets at 30 june 2005 4528 
notes to the financial statements
for the year ended 30 june 2005 47 surfcontrol plc annual report 2005 wwwsurfcontrolcom
notes to the financial statements
for the year ended 30 june 2005
9 intangible assets
intellectual
goodwill property total
group ’000 ’000 ’000
cost
at 1 july 2004 711 13194 13905
arising from current year acquisitions a 7 7000 7007
arising from prior year acquisitions b 174 1808 1982
at 30 june 2005 544 18386 18930
amortisation
at 1 july 2004 68 1283 1351
provided during the year 476 7335 7811
at 30 june 2005 544 8618 9162
net book value at 30 june 2005 – 9768 9768
net book value at 30 june 2004 643 11911 12554
net book value at 30 june 2003 –––
further details of the consideration given for acquisitions and the provisional fair value of net assets acquired is given in a and b below
the intellectual property relates to the written down value of the following acquired technologies
’000
spyware and extended threat protection technology acquired february 2005 – see a on page 48 5834
linux based appliance technology acquired april 2004 – see b on page 48 3934
9768
intellectual
property
company ’000
cost
at 1 july 2004 13194
arising from current year acquisitions a 7000
arising from prior year acquisitions b 1808
at 30 june 2005 18386
amortisation
at 1 july 2004 1283
provided during the year 7335
at 30 june 2005 8618
net book value at 30 june 2005 9768
net book value at 30 june 2004 11911
net book value at 30 june 2003 – 48 surfcontrol plc annual report 2005
notes to the financial statements
for the year ended 30 june 2005
9 intangible assets continued
a acquisition of spyware and extended threat protection technology and software engineering unit
on 28 february 2005 the group completed the purchase of spyware and extended threat protection technology from apreo ltd a company incorporated
in israel together with assets relating to a software engineering unit based in israel the aggregate consideration was 7017000 comprising 6902000
purchase consideration and acquisition costs of 115000 included in the purchase consideration is deferred consideration of 70000 in respect to a sales
related earnout that may be payable in february 2006
an analysis of the book and provisional fair value of assets and liabilities is given below
book fair value provisional
value adjustment fair values
’000 ’000 ’000
intellectual property –– 7000 
net assets of israeli based software engineering operation
fixed assets 17 7 10 
net assets 10 
total provisional fair value of net assets of israeli operation and intellectual property 7010 
acquisition cost 1 7017 
goodwill written off in the year 7 
1 acquisition cost was settled by
cash consideration including costs 6947 
deferred consideration payable in cash or treasury shares 70 
7017 
the software engineering operation in israel had no reported profit or loss in current prior periods as it formed part of apreo limited
b adjustments to the carrying value of goodwill and appliance technology
during the fourth quarter the group finalised the value of an earnout in respect to the acquisition of appliance technology acquired from securem inc 
and its china based sales and distribution operation the estimated earnout of 3123000 at 30 june 2004 was reduced by 1808000 to 1315000 as at 
30 june 2005 the amount of the earnout that remained payable was 589000 during the fourth quarter the group also made completion and hindsight
period adjustments in respect to the provisional fair value of assets and liabilities of the sales and distribution operation these adjustments amounted to 
a reduction in acquired net liabilities and of acquired goodwill of 174000 the adjustments related to payroll compensation and general accruals 49 surfcontrol plc annual report 2005 wwwsurfcontrolcom
10 tangible fixed assets
computer 
equipment construction fixtures motor 
and software in progress and fittings vehicles total
group ’000 ’000 ’000 ’000 ’000
cost
at 1 july 2004 6318 509 2675 96 9598
exchange adjustment 24 1 13 1 37
additions 1352 47 726 – 2125
acquisition of business undertaking 10––– 10
disposals 872 – 226 – 1098
reclassification 571 534 37 – –
at 30 june 2005 7355 23 3125 95 10598
depreciation
at 1 july 2004 4007 – 1441 85 5533
exchange adjustment 30 – 15 3 48
provided during the year 1688 – 607 13 2308
disposals 854 – 204 – 1058
at 30 june 2005 4811 – 1829 95 6735
net book value at 30 june 2005 2544 23 1296 – 3863
net book value at 30 june 2004 2311 509 1234 11 4065
net book value at 30 june 2003 1904 333 996 35 3268
computer 
equipment construction fixtures motor 
and software in progress and fittings vehicles total
company ’000 ’000 ’000 ’000 ’000
cost
at 1 july 2004 2400 88 1188 96 3772
exchange adjustment 57 1 26 1 83
additions 765 22 235 – 1022
reclassification 74 87 13 – –
at 30 june 2005 3182 24 1410 95 4711
depreciation
at 1 july 2004 1424 – 837 85 2346
exchange adjustment 42 – 19 3 64
provided during the year 733 – 245 13 991
reclassification 3 – 3 – –
at 30 june 2005 2112 – 1066 95 3273
net book value at 30 june 2005 1070 24 344 – 1438 
net book value at 30 june 2004 976 88 351 11 1426 
net book value at 30 june 2003 744 – 535 29 1308 
notes to the financial statements
for the year ended 30 june 2005 50 surfcontrol plc annual report 2005
10 tangible fixed assets continued
assets held under finance lease agreements included within tangible assets were as follows
motor fixtures
vehicles and fittings
group ’000 ’000
net book value at 30 june 2005 –25
net book value at 30 june 2004 11 48 
net book value at 30 june 2003 32 64 
depreciation charged on fixed assets held under finance lease arrangements was as follows motor vehicles 13000 2004 11000 2003 29000 and on
fixtures and fittings 23000 2004 22000 2003 20000
motor fixtures
vehicles and fittings
company ’000 ’000
net book value at 30 june 2005 –25
net book value at 30 june 2004 11 48
net book value at 30 june 2003 32 64
depreciation charged on fixed assets held under finance leases was as for group
11 investments
2005 2004 2003
group ’000 ’000 ’000
equity investments
at 1 july 20041 july 20031 july 2002 31 29 7
additions – –22
exchange adjustment – 2–
equity investments at 30 june 200530 june 200430 june 2003 31 31 29
notes to the financial statements
for the year ended 30 june 2005 51 surfcontrol plc annual report 2005 wwwsurfcontrolcom
notes to the financial statements
for the year ended 30 june 2005
11 investments continued
equity 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
2005 2004 2003
company ’000 ’000 ’000
investments in subsidiary undertakings
at 1 july 20041 july 20031 july 2002 59045 59045 55032
transfers 116211 – 4013
share subscriptions 326 ––
at 30 june 200530 june 200430 june 2003 175582 59045 59045
amounts owed by subsidiary undertakings
at 1 july 20041 july 20031 july 2002 140709 128163 131427
transfers 116211 3291 4013
net reductionaddition 21591 15837 749
at 30 june 200530 june 200430 june 2003 2907 140709 128163
total investments in subsidiaries 178489 199754 187208
amounts owed by subsidiary undertakings are included within investments where the subsidiary and the company have agreed that the debt will not 
be settled in the foreseeable future during the year 116211000 owed by surfcontrol inc to the company was converted into share equity and certain
longterm amounts owed by subsidiary undertakings were settled by way of assignment of other intercompany debts around the group
the subsidiary undertakings included in the group accounts at 30 june 2005 are as shown below all of these subsidiary undertakings with the exception
of beijing messagesoft technology co ltd “messagesoft” are directly and wholly owned 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 security market with the exception of surfcontrol share
scheme trustees limited which is dormant
country of
subsidiary name incorporation
surfcontrol inc united states
surfcontrol gmbh
1
austria
surfcontrol bv holland
surfcontrol pty limited australia
surfcontrol japan limited united kingdom
surfcontrol israel limited united kingdom
surfcontrol china limited united kingdom
surfcontrol share scheme trustees limited united kingdom
beijing surfcontrol network security coltd peoples’ republic of china
beijing messagesoft technology coltd peoples’ 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 security products 52 surfcontrol plc annual report 2005
12 debtors
2005 2004 2003
group ’000 ’000 ’000
trade debtors 22299 20524 17647 
other debtors 92 27 64 
taxation recoverable 2223 1475 –
deferred tax assets 4528 6680 4184 
prepayment and accrued income 3428 2975 2243 
32570 31681 24138 
deferred tax assets are analysed as follows
2005 2004 2003
’000 ’000 ’000
trading losses 3132 6212 3204 
deferred income 674 – 555 
accelerated capital allowances 353 318 289 
shortterm timing differences 369 150 136 
4528 6680 4184 
2005 2004 2003
company ’000 ’000 ’000
trade debtors 6111 4652 4201 
other debtors 3 6 14 
taxation recoverable 867 ––
deferred tax assets 722 395 425 
prepayment and accrued income 1247 1356 1074 
amounts owed by subsidiary undertakings – 9584 –
8950 15993 5714
deferred tax assets are analysed as follows
2005 2004 2003
’000 ’000 ’000
accelerated capital allowances 353 318 289 
shortterm timing differences 369 77 136 
722 395 425
notes to the financial statements
for the year ended 30 june 2005 53 surfcontrol plc annual report 2005 wwwsurfcontrolcom
notes to the financial statements
for the year ended 30 june 2005
13 creditors amounts falling due within one year
2005 2004 2003
group ’000 ’000 ’000
trade creditors 2284 2770 1966 
corporation tax 3992 5971 4709 
taxes and social security costs 2268 2004 1527 
other creditors – 308 –
accruals 8721 7995 6456 
deferred income 57040 49036 37542 
obligations under finance leases and hire purchase contracts 19 19 41
deferred consideration on acquisition of business undertakings 659 4123 –
74983 72226 52241 
2005 2004 2003
company ’000 ’000 ’000
trade creditors 852 1532 776 
corporation tax 1209 4147 1989 
taxes and social security costs 1326 1172 1069 
accruals 1967 2301 1739 
amounts owed to subsidiary undertakings 22827 14490 1162 
deferred income 13162 10678 7446 
obligations under finance leases and hire purchase contracts 19 19 41
deferred consideration on acquisition of business undertakings 659 4123 –
42021 38462 14222 
14 creditors amounts falling due after more than one year
2005 2004 2003
group ’000 ’000 ’000
deferred income
due within one to two years 20292 18399 10871 
due within two to five years 7540 7580 5777 
due after five years – – 62 
27832 25979 16710 
obligations under finance leases and hire purchase contracts
due within one to two years 3 19 18 
due within two to five years – 3 14 
3 22 32 
27835 26001 16742  54 surfcontrol plc annual report 2005
14 creditors amounts falling due after more than one year continued
2005 2004 2003
company ’000 ’000 ’000
deferred income
due within one to two years 5270 4573 2425 
due within two to five years 2113 2157 1361 
due after five years – – 62 
7383 6730 3848 
amounts owed to subsidiary undertakings
due within one to two years 4386 4660 –
due within two to five years 1177 1165 –
5563 5825 –
obligations under finance leases and hire purchase contracts
due within one to two years 3 19 18 
due within two to five years – 3 14 
3 22 32 
12949 12577 3880 
the weighted average interest rate and period to maturity on finance lease obligations was 21 and 14 months respectively there was no material
difference between the book and fair values attributable to finance leases shown in this note
15 provisions for liabilities and charges
2005
group and company ’000
as at 1 july 2004 446
credited in the year 283
paid in the year 6
exchange difference arising in the year 4
as at 30 june 2005 161
at 30 june 2004 446 
at 30 june 2003 540 
the equity based compensation provision for uk employer’s national insurance and other non uk employment taxes relates to amounts payable on the
potential profit arising from the future exercise of unapproved options and longterm incentive share rights “ltips” granted to directors and employees
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 ltips the
provision is based upon the company’s closing share price on techmark as at 30 june 2005 of £459 the above charge may vary as it is dependent upon
prevailing tax law future share price movements and the number of optionsltip shares in issue
notes to the financial statements
for the year ended 30 june 2005 55 surfcontrol plc annual report 2005 wwwsurfcontrolcom
notes to the financial statements
for the year ended 30 june 2005
16 share capital
2005 2004 2003
group and company number ’000 ’000 ’000
authorised
equity ordinary shares of £010 each 54000000 9677 9793 8806
total authorised share capital 9677 9793 8806
issued and fully paid
equity ordinary shares of £010 each 31114572 5032 5027 4946
2004 31086737 200330605856
total called up share capital 5032 5027 4946
the authorised share capital is denominated in uk sterling and consists of 54000000 10p ordinary shares with a nominal value of £5400000 fluctuations 
in the reported us dollar value wholly arise from exchange rate fluctuations
the issued ordinary share capital of the company in uk sterling at 30 june 2005 was £3111457 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
employee share schemes
the group operated two share option schemes and a longterm share incentive plan “ltip” during the financial 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
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
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 21 october 2004 the board adopted the “surfcontrol longterm incentive plan”  the ltip is administered by the remuneration committee and is not
approved for inland revenue purposes the practical operation of the ltip and company share option schemes is described in the directors’ remuneration
report on pages 23 to 33 56 surfcontrol plc annual report 2005
notes to the financial statements
for the year ended 30 june 2005
16 share capital continued
share options
as at 30 june 2005 the following options to subscribe were outstanding in respect of ordinary shares of 10p each
no of shares exercise price exercise period
5000 242p 1 june 2002 to 31 may 2009
200000 331p 15 july 2000 to 15 july 2009
49750 321p 5 october 2000 to 4 october 2009
205900 434p 30 november 2000 to 29 november 2009
147200 849p 9 february 2001 to 8 february 2010
2000 1238p 9 february 2001 to 8 february 2010
189600 849p 21 february 2001 to 20 february 2010
96400 849p 15 march 2001 to 14 march 2010
1000 1712p 22 march 2001 to 21 march 2010
5600 849p 13 april 2001 to 12 april 2010
1600 849p 17 april 2001 to 16 april 2010
402800 849p 14 june 2001 to 13 june 2010
8000 1425p 14 june 2001 to 13 june 2010
9600 849p 29 june 2001 to 28 june 2010
45203 849p 18 july 2001 to 17 july 2010
923 2025p 18 july 2001 to 17 july 2010
11816 849p 30 july 2001 to 29 july 2010
39408 849p 6 august 2001 to 5 august 2010
15571 849p 30 august 2001 to 29 august 2010
18155 849p 28 september 2001 to 27 september 2010
12266 849p 30 october 2001 to 29 october 2010
260000 849p 10 september 2001 to 9 september 2010
108386 738p 29 november 2001 to 28 november 2010
15077 875p 3 december 2001 to 2 december 2010
3446 849p 30 december 2001 to 29 december 2010
15530 849p 30 january 2002 to 29 january 2011
2307 1243p 30 january 2002 to 29 january 2011
4999 998p 27 february 2002 to 26 february 2011
3488 448p 29 march 2002 to 28 march 2011
27769 660p 29 april 2002 to 28 april 2011
4052 545p 30 may 2002 to 29 may 2011
3718 365p 29 june 2002 to 28 june 2011
187500 365p 30 june 2002 to 29 june 2011
3750 394p 15 july 2002 to 14 july 2011
2500 392p 19 august 2002 to 18 august 2011
5625 268p 23 september 2002 to 22 september 2011
5000 384p 28 october 2002 to 27 october 2011
3333 493p 1 january 2003 to 31 december 2012
83916 403p 30 june 2003 to 29 june 2012
290000 421p 3 july 2003 to 2 july 2012
10000 543p 5 july 2003 to 4 july 2012
36500 6475p 2 july 2004 to 1 july 2013
13750 7625p 29 october 2004 to 28 october 2013
5000 5525p 5 april 2005 to 4 april 2014
5000 576p 9 june 2005 to 8 june 2014
187000 620p 28 june 2005 to 27 june 2014
75000 508p 16 december 2005 to 15 december 2014
15000 645p 1 march 2006 to 28 february 2015
300000 475p 29 june 2006 to 29 june 2015
3145438 57 surfcontrol plc annual report 2005 wwwsurfcontrolcom
notes to the financial statements
for the year ended 30 june 2005
16 share capital continued
ltip shares
as at 30 june 2005 the following rights to nil cost performance based ltip shares were
number of shares vesting period
167154 21 october 2004 to 21 october 2007
105727 30 june 2005 to 30 june 2008
272881
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 £562 and the
closing middle market price on 30 june 2005 was £459 30 june 2004 £610 30 june 2003 £638
17 shareholders’ funds
capital share profit
shareredemption premium and loss
capital reserve account account total
group ’000 ’000 ’000 ’000 ’000
as at 1 july 2004 5027 882 3803 27492 37204
exercise of options in the period 5 – 184 – 189
retained profit for the period – – – 6445 6445
purchase of own shares for treasury – – – 11525 11525
equity based compensation – – – 102 102
unrealised exchange difference on translation – – – 118 118
as at 30 june 2005 5032 882 3987 22396 32297
as at 30 june 2004 5027 882 3803 27492 37204
as at 30 june 2003 4946 882 79 13712 19619
during the year the company purchased 1089500 of its own shares at a total cost of 11525000 including fees and at an average price of £571 1058
an amount of 102000 in respect of the intrinsic value of longterm incentive share rights has been charged to the profit and loss account within the
equity based compensation charge and has been credited through profit and loss reserve
capital share profit
shareredemption premium merger and loss
capital reserve account reserve account total
company ’000 ’000 ’000 ’000 ’000 ’000
as at 1 july 2004 5027 882 3803 130407 93110 233229
exercise of options in the period 5 – 184 – – 189
retained profit for the period –––– 3669 3669
purchase of own shares for treasury –––– 11525 11525
equity based compensation as noted above 102 102
unrealised exchange difference on translation –––– 23792 23792
as at 30 june 2005 5032 882 3987 130407 61564 201872
as at 30 june 2004 5027 882 3803 130407 93110 233229
as at 30 june 2003 4946 882 79 130407 75777 212091
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 3669000 relating 
to the company is dealt with in the consolidated financial statements of surfcontrol plc 2004 profit 2190000 2003 profit 4349000 the aggregate
nominal value of ordinary shares allotted in the year was 5000 2004 81000 2003 42000 58 surfcontrol plc annual report 2005
notes to the financial statements
for the year ended 30 june 2005
18 reconciliation of movement in shareholders’ funds
2005 2004 2003
group ’000 ’000 ’000
profit on ordinary activities after taxation 6445 11537 6363
new share capital subscribed 189 3805 1271
purchase of own shares for treasury 11525 1112 –
equity based compensation 102 ––
unrealised exchange difference on translation 118 3355 1095
net decreaseincrease in shareholders’ funds 4907 17585 8729
opening shareholders’ funds 37204 19619 10890
closing shareholders’ funds 32297 37204 19619
2005 2004 2003
company ’000 ’000 ’000
profit on ordinary activities after taxation 3669 2190 4349
new share capital subscribed 189 3805 1271
purchase of own shares for treasury 11525 1112 –
equity based compensation 102 ––
unrealised exchange difference on translation 23792 16255 11028
net decrease increase in shareholders’ funds 31357 21138 16648
opening shareholders’ funds 233229 212091 195443
closing shareholders’ funds 201872 233229 212091
19 other financial commitments
the group’s commitments in respect of noncancellable operating lease rentals over the next twelve months are
a lease commitments
leasehold leasehold leasehold 
property other property other property other
2005 2005 2004 2004 2003 2003
group ’000 ’000 ’000 ’000 ’000 ’000
in respect of leases expiring
within one year 462 2 361 26 101 38
in one to two years 1723 8 188 – 625 41
in two to five years 97 29 1274 39 1281 38
in more than five years 1298 – 462 – 406 –
3580 39 2285 65 2413 117 59 surfcontrol plc annual report 2005 wwwsurfcontrolcom
notes to the financial statements
for the year ended 30 june 2005
19 other financial commitments continued
the company’s commitments in respect of noncancellable operating lease rentals over the next twelve months are
leasehold leasehold leasehold 
property other property other property other
2005 2005 2004 2004 2003 2003
company ’000 ’000 ’000 ’000 ’000 ’000
in respect of leases expiring
within one year 28 – 21 – 34 –
in one to two years –– 53–––
in two to five years 97 22 –22 – 28
in more than five years 455 – 462 – 406 –
580 22 536 22 440 28
b capital commitments
the group and company had the following capital commitments authorised by directors but not provided for in the accounts
2005 2004 2003
group ’000 ’000 ’000
contracted for 74 66 275
authorised but not contracted for – –54
2005 2004 2003
company ’000 ’000 ’000
contracted for 56 3–
authorised but not contracted for – –54
20 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 1055000 
2004 1013000 2003 845000 the amount of pension cost accrued by the group was 57000 2004 23000 2003 11000
21 reconciliation of operating cash flows
2005 2004 2003
’000 ’000 ’000
operating profit 5140 12229 7393
depreciation 2308 1797 1627
amortisation of intangible assets 7811 1351 1152
loss on sale of tangible fixed assets 23 31 109
decrease in stocks 69 31 18
increase in debtors 2552 2973 5430
increase in creditors 10610 20302 18780
decreaseincrease in provisions for liabilities and charges 289 131 444
net cash inflow from operating activities 23120 32637 24093
net cash flow from operating activities before cash flows for exceptional items was 23793000 2004 32637000 2003 24093000 60 surfcontrol plc annual report 2005
notes to the financial statements
for the year ended 30 june 2005
22 returns on investments and servicing of finance
2005 2004 2003
’000 ’000 ’000
finance lease and hire purchase interest paid 4 8 10
bank interest paid 2 3 2
other interest paid 21 9 29
bank interest received 2654 1812 782
net cash inflow from returns on investment and servicing of finance 2627 1792 741
23 analysis of net funds
foreign
at 1 july exchange at 30 june at 30 june at 30 june 
2004 cash flow differences 2005 2004 2003
’000 ’000 ’000 ’000 ’000 ’000
overnight cash balances and cash in hand 50518 4127 6 54639 50518 34262
term deposits 36959 2550 4 34405 36959 27445
cash at bank and in hand 87477 1577 10 89044 87477 61707
finance leases 41 19 – 22 41 73
total 87436 1596 10 89022 87436 61634
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 currentdeposit accounts money market funds certificates of deposit and money market term
deposits liquid resources at 30 june 2005 had a weighted average period to maturity of eight weeks and earned interest at a weighted average rate of
308 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 shortterm 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 61 surfcontrol plc annual report 2005 wwwsurfcontrolcom
notes to the financial statements
for the year ended 30 june 2005
24 financial instruments
as permitted by frs 13 “derivatives and other financial instruments disclosures”  shortterm debtors and creditors have been excluded from the the
following analyses
the interest rate risk profile of financial assets and liabilities were as follows
non interest floating fixed 2005
bearing rate rate total
group 2005 ’000 ’000 ’000 ’000
financial assets
currency
us dollar 590 35683 20254 56527
uk sterling 1918 1841 23554 27313
euro 846 1810 306 2962
australian dollar – 1698 415 2113
chinese yuan 76–– 76
japanese yen 59–– 59
singapore dollar 25–– 25
3514 41032 44529 89075
non interest floating fixed 2004
bearing rate rate total
group 2004 ’000 ’000 ’000 ’000
financial assets
currency
us dollar 951 23541 20755 45247
uk sterling 1502 4401 32414 38317
euro 827 1826 304 2957
australian dollar – 139 471 610
chinese yuan 346 – 346
3626 29907 53944 87477 62 surfcontrol plc annual report 2005
notes to the financial statements
for the year ended 30 june 2005
24 financial instruments continued
non interest floating fixed 2003
bearing rate rate total
group 2003 ’000 ’000 ’000 ’000
financial assets
currency
us dollar 864 24772 – 25636
uk sterling 64 8071 27043 35178
euro 109 225 – 334
australian dollar – 154 403 557
singapore dollar –2 –2
1037 33224 27446 61707
there were no financial liabilities except for finance lease and hire purchase obligations as at 30 june 2005 2004 nil 2003 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 at 30 june 2005 
of 29836000 2004 16300000 2003 1199000 denominated in us dollars other than this and longterm 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
25 related party transactions
transactions between companies within the group are not disclosed as all such transactions are eliminated on consolidation there were no other related
party transactions for the financial periods under review 63 surfcontrol plc annual report 2005 wwwsurfcontrolcom
unaudited group profit and loss account
for the quarters ended 30 june 2005
full year
30 june 31 march 31 december 30 september 30 june 
2005 2005 2004 2004 2005
’000 ’000 ’000 ’000 ’000
turnover 26075 24637 24664 22462 97838
cost of sales 635 403 403 305 1746
gross profit 25440 24234 24261 22157 96092
selling and distribution 12751 11818 11512 11272 47353
research and development 3704 3318 3158 2784 12964
general and administrative 4783 4718 4922 4626 19049
amortisation of intangible assets and depreciation 2879 2641 2328 2271 10119
equity based compensation 330 218 11 58 181
exceptional item – onerous lease – –– 1648 1648
total administrative expenses 11036 10895 10397 11271 43599
operating profit 1653 1521 2352 386 5140
net interest receivable 718 622 582 559 2481
profit on ordinary activities before taxation 2371 2143 2934 173 7621
tax on profit on ordinary activities 381 318 451 26 1176
profit on ordinary activities after taxation 1990 1825 2483 147 6445
basic earnings per ordinary share cents 66 61 82 05 213
reconciliation of profit on ordinary activities after taxation to proforma profit after taxation
profit on ordinary activities after taxation 1990 1825 2483 147 6445
amortisation of intangible assets 2298 2037 1738 1738 7811
equity based compensation charge 330 218 11 58 181
exceptional item – onerous lease charge – –– 1648 1648
proforma profit on ordinary activities after taxation 3958 4080 4210 3475 15723 
reconciliation of proforma profit after taxation to ebitda
earnings before exceptional item net interest taxationdepreciation amortisation
of intangible assets and equity based compensation charge
proforma profit on ordinary activities after taxation 3958 4080 4210 3475 15723
tax on profit on ordinary activities 381 318 451 26 1176
depreciation 581 604 590 533 2308
net interest receivable 718 622 582 559 2481
ebitda 4202 4380 4669 3475 16726  “this year has seen the attainment of a long
standing goal of becoming a circa 100m
revenue company occupying a leadership
position within our target market it is 
the culmination of years of work and an
excellent platform from which to launch
into the next stage of the company’s
development with the addition of 
pat sueltz to our management team 
we have significantly strengthened our
ability to take full advantage of the market
opportunity open to us accordingly i look
forward to the future with confidence”
steve purdham chief strategy ofﬁcer
■ the internet is critical to organisations worldwide
■ it is also their biggest security threat
■ malicious threats such as spam phishing and
spyware constantly and cumulatively assault
companies – with new threats emerging
almost daily
■ these threats impact employee productivity
drain network resources create financial losses 
and increase liability risks
surfcontrol stops these threats
surfcontrol is the world’s leading internet security company
stopping blended and malicious digital threats from
assaulting companies surfcontrol’s enterprise protection
suite™ is the only threat management system with adaptive
threat intelligence™ to continuously filter inbound and
outbound web email and imp2p traffic thus surfcontrol
customers are protected against known emerging internal
and customerspecific threats
registrars
capita registrars
the registry
34 beckenham road
beckenham
kent br3 4tu
depository for ads
bankers trust company
4 albany street
new y ork
new y ork 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 surfcontrol plc annual report 2005
offices
surfcontrol inc
1900 west park drive
suite 180 westborough
massachusetts 01581 usa
tel 1 508 621 3900
fax 1 508 621 3921
email salesussurfcontrolcom
5550 scotts valley drive
scotts valley  california 95066 usa 
tel 1 831 431 1400
fax 1 831 431 1800
email infosurfcontrolcom 
surfcontrol plc
riverside mountbatten way 
congleton cheshire cw12 1dy
united kingdom
tel 44 01260 296 200
fax 44 01260 296 201
email surfinfosurfcontrolcom
surfcontrol plc – singapore
level 58 republic plaza
9 raffles place
singapore 048619
tel 65 6823 1312
fax 65 6823 1481
email supportsgsurfcontrolcom
surfcontrol plc – france
79 avenue francois arago
92017 nanterre
france
tel 33 1 46699181
fax 33 1 47859140
email infofrsurfcontrolcom
surfcontrol israel ltd – israel
c12 ramat yam street
herzeliya
israel
tel 972 9 957 9912
fax 972 9 957 9914
surfcontrol japan ltd – japan
kamiyacho mt building
14f  4320 t oranomon minatoku
tokyo 105 001
tel 81 3 5404 3818
surfcontrol gmbh 
dorotheergasse 7
a1010 vienna austria
tel 43 1 513 44 15
fax 43 1 513 44 02
email salesatsurfcontrolcom 
surfcontrol gmbh
rüsterstraße 13
d60325 frankfurt am main
germany
tel 49 69 70 79 86 0 
fax 49 69 70 79 86 20
email salesdesurfcontrolcom
surfcontrol bv
schouwburgplein 3034
3012 cl rotterdam
the netherlands 
tel 31 0 10 402 0000 
fax 31 0 10 402 0099
email salesnlsurfcontrolcom
surfcontrol pty ltd
level 1 19 havilah street
chatswood nsw 2067 
australia 
tel 61 02 9414 0000 
fax 61 02 9414 0099
email salesausurfcontrolcom
beijing surfcontrol network 
security co ltd
office t ower c2 3rd floor 
oriental plaza beijing 100 738 china
tel 86 10 8518 8860
fax 86 10 8518 0067
email infomessagesoftnet
wwwsurfcontrolcom
surfcontrol plc
annual report 2005
■ enterprise threat protection


Summary:
 03 surfcontrol plc annual report 2005 wwwsurfcontrolcom
dear surfcontrol investor
you’ve read our chairman’s letter describing
surfcontrol’s fy05 results solid fundamentals
– with more focus on growth needed the
team has the technological vision for all
aspects of information security now and in
the future we’ve greeted this new year
driven by our passion for our customers and
an operational mantra of relentless execution
across the entire company strong products
customer focus relentless execution of our
current plans and a keen technological vision
for the future are the makings of a solid year
to come i’m delighted to be a part of the
surfcontrol team
pat sueltz
chief executive officer
5 september 2005
the team has the technological
vision for all aspects of information
security now and in the future
chief executive’s review patricia c sueltz
we’ve greeted this new year
driven by our passion for our
customers and an operational
mantra of relentless execution
across the entire company
wha t drives us
■ our customers we are passionate about
protecting our customers with inspired
awardwinning solutions
■ our results we are driven to deliver superior
returns for our investors now – and in the future
■ our people we strive to create a stimulating
highperforming environment in which our
employees thrive
■ our world around us we recognize our
responsibility to the world in which we operate
and act accordingly