1 n 01 - net insight · & media networks (bmn) 61 percent, dtt & mobile tv net-works 38...

Net Insight delivers the worlds most efficient and scaleable optical transport

solution for media networks, digital terrestrial TV, mobile TV networks and

IPTV/cable TV networks. Net Insight products truly deliver 100 percent Quality

of Service with three times improvement in utilization of bandwidth for a

converged transport infrastructure. Net Insight’s NimbraTM Platform is the

industry solution for video, voice and data, reducing operational costs by 50

percent and enhancing competitiveness in delivery of existing and new revenue-

generating TV and video services. Our customers provide public media services

over Net Insight products to more than 100 million people in more than 25

countries. Net Insight delivers the worlds most efficient and scaleable optical

transport solution for media networks, digital terrestrial TV, mobile TV networks

and IPTV/cable TV networks. Net Insight products truly deliver 100 percent

Quality of Service with three times improvement in utilization of bandwidth for

a converged transport infrastructure. Annual Report 2007

2 Net INsIght aNNual report 2007

1997–2007: Net Insight 10 years in brief

Net Insight Information/Annual General Meeting

Annual General Meetingthe annual general meeting will be held at 10:00 a.m. on thursday april 10, 2008 at Net Insight’s premises in Västberga. shareholders who wish to attend and vote at the annual general Meeting must be entered in the share register kept by the securities register Center (VpC aB) on april 4, 2008 and register with the Company no later than 4:00 p.m. on april 4, 2008 by one of the following methods: telephone +46 (0)8 – 685 04 00 Fax +46 (0)8 – 685 04 20e-mail [email protected] Net Insight, Box 42093, 126 14 StockholmIn order to be entitled to attend, owners of shares registered with nominees must temporarily re-register the shares in their own name. a request for such registration must be made to the administrator of the shares in sufficient time prior to april 4, 2008.

Dividendthe Board proposes that the agM resolve that no dividend be paid for the 2007 fiscal year.

Financial information 2008annual general Meeting: April 10Interim report January–March: May 9Interim report January–June: August 28Interim report January–september: October 23Net Insight’s financial information is available in both swedish and english. the reports are most conveniently available on the Net Insight web site www.netinsight.net. reports can also be ordered by e-mail: [email protected], or by telephone +46 (0)8 – 685 04 00.

Net Insight in brief.NetInsight’sproductsenabletrans-portofvideo-richservicesincustomernetworkswithoutlossofquality.Optimaluseofnetworkcapacityallowsnewrevenue-generatingvideoservicessuchasHDTV,digitalTV,andvideo-on-demand,allofthehighestquality,tobelaunchedanddeliveredsimultaneouslywithordinarytelephonyanddatatraffic.AsaruleNetInsight’sproductsoffercustomerslowercapitalexpenditu-res,shorterpaybackperiods,andloweroperatingcoststhanri-valproducts.NetInsight’ssalesmainlytakeplaceinEurope,Asia,andNorthAmerica.ItscustomersareTVnetworks,broadcastandmediacompanies,cableTVproviders,networkowners,andtelecomoperators.

Contents

3 Highlights of the year

4 Statement from the CEO

6 Vision, business concept, objectives

and strategies

8 Market and trends

12 Nimbra at the customer

14 Market areas

17 Partners

18 Technical platform

20 Employees

22 The Net Insight share

24 Five year summary

25 Administration report

30 The Group

32 The Parent Company

34 Accounting principles and notes

43 Auditors’ report

44 Board of Directors

45 Corporate governance

and board activities

46 Management

47 Glossary

Net INsIght aNNual report 2007 3

1997–2007: Net Insight 10 years in brief

HIGHLIGHTSOFTHEYEAR

2007 in brief

l sales rose 70 percent to seK 228.8 million (134.8).l Net income improved significantly to seK 34.0 million (–10.2).l positive cash flow of seK 50.6 million (–15.2). l gross margin of 70.8 percent (70.5). l selected to supply to Korea telecom’s national network for multimedia services.l selected to supply to media networks in the united states, including htN’s network

for tV broadcasts from sports venues.

l shipments commenced during the year under the contract with Beijing olympic Broadcasting (BoB).

l Continued deliveries to Norkring and the Norwegian digital terrestrial tV network, as well as upgrades of core networks to the high-capacity Nimbra 680 switch for KpN in the Netherlands and BsD in Denmark.

Strong market demand for more capacity and higher quality in communication networks around the world continued to spur business with increasing sales, improved financial performance and a continued strong gross margin.

key figures 2007 2006 2005

Net sales MseK 228.8 134.8 90.9 operating earnings MseK 32.6 – 11.4 – 60.8Net income for the year MseK 34.0 – 10.2 – 59.6earnings per share seK 0.09 – 0.03 – 0.17gross margin % 70.8 70.5 62.9equity/assets ratio, % 69 70 77shareholders’ equity per share seK 0.49 0.37 0.40average number of employees 93 80 70

1997startup of Net Insight; key individuals recruited to com-mercialize DtM technology.

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4 stateMeNt FroM the Ceo

STATEmENTFROmTHECEO

Net Insight experienced its strongest year to date in 2007. We reached our goals and demonstrated our international competi-tiveness. We increased sales by 70 percent and maintained a high gross margin of 70.8 percent. Our full-year results show a profit for the first time and we won deals with several new customers in new countries during the year. In 2007 we had done business in 21 countries and revenues were up in all major markets in the US, Europe and Asia. We also signed our first contract on the African continent. At the same time our established customer base has genera-ted a substantial volume of follow-up business; all of our cur-rent customers bought equipment for network expansion during 2007. Repeat sales to existing customers now constitute a more stable basis for future business. Deliveries to Norkring continued during the year and the first phase of the Norwegian DTT network opened in Septem-ber. Deliveries also commenced during the year under the cont-ract with Beijing Olympic Broadcasting (BOB) for the contribu-tion network connecting arenas during the summer Olympics in Beijing.

SHARP INCREASE IN VIDEO TRAFFIC The market developed extremely positively and in exactly the right direction for Net Insight. The single strongest driver in the communications industry is the huge surge in video traffic. At Net Insight we expected this trend and have therefore focused on and invested in it for several years. Network owners and ope-rators all over the world are mustering their strength in prepa-ration for what could be a ”video explosion,” at the same time as new business models and supplier constellations are forming – all with the purpose of maximizing opportunities for new and growing business in video and real-time critical services.

TRANSPORT OF HIGH-QUALITY VIDEOOur real strength is our ability to deliver video transport solu-tions of the highest quality to broadcast and media companies, telecom companies, distributors of digital terrestrial TV, and mobile TV operators. Net Insight’s Nimbra platform is easy to install, extremely cost-effective and it is scaleable, while at the same time guaranteing 100 percent quality of service. Our custo-mers have confirmed the unique advantages of our products: highest bandwidth utilization, unsurpassed multicasting, as well as its integrated voice, data and video interfaces. All of this in one box, for an extremely strong offering chosen by more and more customers to ensure the growth and success of their busi-ness operations.

IMPROVED CUSTOMER OFFERINGIn 2007 we launched a new, powerful technology that we call Time Transfer. This function, which is available with the Nim-bra 360 and 680 series, offers a brand new method of GPS-in-dependent synchronization for communication networks. Net-works around the world are currently synchronized with atomic clocks and the time is distributed through the GPS system. The television and telecommunications infrastructure is vital in all countries and many are now searching for reliable, cost-effective alternatives to GPS. Time Transfer and its functional advantages contribute substantially to our customer offering and our custo-mers have expressed considerable interest. We now know that we offer an extremely competitive product platform and that we are in the ”right market with the right product at the right time”.

CONTINUED GROWTH IN ALL MARKETSRevenues by market segment in 2007 were as follows: Broadcast & Media Networks (BMN) 61 percent, DTT & Mobile TV Net-works 38 percent and IPTV/CATV 1 percent. The geographic

1998Net Insight is selected as ”one of the top 25 hot startups of 1998” and wins its first customer, Vasa läns telephone.


distribution of revenues shows a surge in North America, which accounts for 18 percent, extremely strong growth in Europe, which accounts for 77 percent and an encouraging first year in Asia, which accounts for five percent and also delivered several important new business transactions. Today we can count many telecom operators as customers. Our next step will be to take our platform to the large-scale IPTV/ CATV investments that will be carried out in many countries. Digital terrestrial TV networks are being installed all over the world, both regionally and nationally. Many countries have yet to take this step, representing tremendous business potential for Net Insight. In 2007 we delivered equipment to this type of net-work in 11 countries and our successful DTT projects are indeed encouraging.

GROWING BUSINESS THROUGH EFFECTIVE PARTNERSHIP Our growth strategy involves a focus on indirect sales by wor-king closely with 26 carefully selected business partners. Our first fiscal year in Asia represents a successful example of how rapid market penetration can be achieved through effective partner-ship. Obviously Net Insight always supports its partners during business negotiations and procurement phases. In 2007 we saw several good examples of truly partner driven business generation. Net Insight’s products complement and strengthen our partners’ own offerings and services – strengthening competitiveness in the process, which in turn provides increased revenues for both Net Insight and our partners. It is my firm conviction, and we see clear signs supporting this belief, that Net Insight’s products beneficially complement offerings from other suppliers and partners. This relationship bo-des well for effective partnerships in a market characterized by a growing number of customers who choose end-to-end solutions with associated services.

FINANCIAL STRENGTH Our favorable financial performance in 2007 with a positive cash flow of SEK 51 million, net income of SEK 34 million and cash and cash equivalents at year end of SEK 128 million create the platform for our organic growth. We allocate our resources according to a carefully formulated plan with an emphasis on sales and operations, business development and the continued development of the Nimbra platform. Net Insight’s dedicated employees worked extremely hard in 2007 and collaboration with the board of directors and share-holders was very productive. I would like to take the opportu-nity at this time to thank everyone involved. We now have a platform that is on the cutting edge and our most recently launched products and functions have sold very well in 2007. We offer a complete multiservice platform for voice, data and video on which network owners can build and run competitive business models. In 2007 we have taken a significant step in the right direc-tion in all regards and it is at the same time with great satisfac-tion that we at Net Insight enjoy highly positive feedback from our existing customers. All in all, this situation is very encoura-ging for the future.

1999Net Insight is listed on the stockholm stock exchange. Nimbra one is selec-ted as one of the ”50 hot products of 1999”.

Fredrik TrägårdhPresident and Chief Executive Officer.

6 VIsIoN, BusINess CoNCept, oBJeCtIVes aND strategIes

Since its inception in 1997 Net Insight’s efforts have been based on the vision that tomorrow’s network traffic will be dominated by various video applications such as TV, pay-per-view, video-on-demand, video conferences and music videos. These services, which demand considerably increased network capacity with 100 percent quality of service, are the driving force behind many of the net-work rollouts that have been initiated or will be initiated in the coming years.

NET INSIGHT ADDrESSES THrEE MAIN MArkETS THAT DEMAND

HIGH quAlITy FrOM THEIr MEDIA TrAFFIC:

l Networks for Broadcast and Media – Television and media companies that send large amounts of video traffic within and between different production units for studio editing, as well as network operators and satellite companies that build network solutions for this growing segment.

l Networks for digital terrestrial TV and mobile TV – broadcasters and opera-tors that build new distribution networks in the transition from analog to digital terrestrial television. This segment also includes the rapidly growing market for mobile TV.

l Networks for cable TV and iPTV distribution – Telecom and cable TV opera-tors that want to be able to offer households and businesses telephony, data and video services in a bundled solution.

BUSINESS CONCEPTNet Insight’s business concept is to develop, market and sell pro-ducts to public and private networks to transport high-quality and media-rich traffic. Net Insight’s products offer customers the opportunity to produce new revenue-generating services, while lowering capital expenditures and operating costs when the same platform can handle all services. Net Insight offers either a comprehensive or a focused selection of products and services, depending on the needs of the individual customer. Net Insight generates revenues through the sale of products and li-censes. In addition to direct sale revenues, current revenues are generated through support and maintenance agreements with customers. Revenues are also generated through the sale of in-stallation services and training.

TARGET FULFILLMENTNet Insight did not provide any detailed earnings or sales fore-cast for 2007; it indicated only the expectation of a substantial increase in sales. With sales of SEK 229 million, equivalent to an increase of 70 percent, net income of SEK 34 million and a positive cash flow, 2007 was a strong year. As expected, the ma-jority of sales derive from the professional media industry (net-works for Broadcast & Media), which at 61 percent is still the largest market segment. Net sales of software and services such as courses, service and support surged 96 percent, significantly exceeding internal targets. Indirect sales increased by 40 percent during the year, which was in line with both the target and the partner strategy.

VISION,BUSINESSCONCEPT,OBJECTIVESANDSTRATEGIES.

2000twintin-circuit launched. Break- through order from media industry and metro network installations.

geografisk fördelning

sALes By regiON

asia, 6 %

North america, 18 %

europe, 76 %


COMMUNICATED OBJECTIVES FOR FISCAL YEAR 2008The Board of Directors is satisfied with the company’s perfor-mance in 2007 and is confident that the positive developments will continue in 2008.

strategiesIn order to achieve its objectives Net Insight will apply the following strategies for distribution, marketing, products, deve-lopment and organization during the coming year:

DISTRUBUTION AND MARKETING

– Continue to geographically expand in the prioritized segments Broadcast Media Networks and DTT into new markets in Europe, Asia, Eastern Europe and the Middle East.

– Strengthen the company’s position in professional media and broadcasting by expanding into adjacent segments for distri-bution of video and media to companies and private individu-als through marketing initiatives focused on new and existing customers with the support of the new Nimbra 300 and Nim-bra 600 product lines.

– Expand the company’s sales force for direct sales and marketing initiatives aimed at selected customer segments.– Establish additional partnerships with suppliers in distribu-

tion and system integration for local support in geographically remote markets.– Increase sales through commercialization of the new unique Timer Transfer function.

PRODUCTS AND DEVELOPMENT – Further develop existing solutions and products in close col-

laboration with the market.

ORGANIZATION– Strive to achieve a decentralized organization in which the em-

ployees have great insight into and influence on the company’s objectives and performance.

– Continue to develop employee skills and expertise.– Build long-term commitment among the company’s employ-

ees through competitive reimbursement systems and stock option programs.

OVErArCHING OBJECTIVES

l Net insight’s objective is to become a leading global supplier of network products for media-rich traffic.

l Net insight will grow faster than the market average, with good profit-ability.

l Net insight will generate return on equity and earnings per share to make the company an attractive investment for current and future share-holders.

2001order from the Dutch network operator KpN. the new Nimbra 210, Nimbra 290 and Nimbra 291 switches are launched.

8 MarKet aND treNDs

mARKETANDTRENDS

The media and telecom markets are converging, resulting in major changes in infrastructure and business models. At the same time, the proportion of video and media services is rising sharply, in both public and private networks, placing great demands on increased bandwidth and 100 percent quality of service.

NEW VIDEO AND MEDIA SERVICES INCREASE THE NEED FOR BANDWIDTHToday’s telecom operators face strong competition with lower margins in both telephony and broadband services. In order to increase revenues and – even more importantly – reduce the number of customers who switch to competitors (”churn”), telecom operators are introducing new TV and video services offered in attractive packages bundled with the other services. These new services change the requirements for broadband networks. At the same time the number of broadband users continues to rise; this increase was 24 percent in the OECD countries between June 2006 and June 2007. Add to this scenario the new popular time-critical broadband services such as YouTube, radio and music services, IP telephony and the entire gaming industry. Clearly far more network capacity is needed, while the demands for 100 percent quality of service are essential for delivering these services with an acceptable quality, something today’s internet is unable to achieve. These developments create excellent opportunities for Net Insight which, with its world-leading technology for network solutions, has extensive experience and understan-ding of the customer demands for cost-effective media and video transport solutions. Meeting the surging demands for bandwidth and quality requires major invest-ments in networks. According to ABI Research (January 2007), cable TV alone will require investments of about USD 80 billion in network expansion over the next six years. Thanks to its effective utilization of bandwidth with retained quality, Net Insight’s media transport solution can significantly reduce investment costs to handle these future network requirements. Net Insight has an extremely strong solution for digital terrestrial TV. Analysts at ABI Research estimate that the addressable market for Net Insight’s type of products is about USD 100 million in 2008 on a global basis. With Net Insight’s strong technical platform and the reference customers acquired over the past 24 months, there is great potential to increase market share in this segment.

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= Nimbra 340For production and distribution

= Nimbra 680For transport

= Nimbra 1Satelite upplink

ETH

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Digital VideoBroadcastLive Events

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= Nimbra 340/360For production and distribution



Digital VideoBroadcast

Live Events

StudioProduction

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Live Events

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Satelite Up-link

IPTV/CATV

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= Nimbra 340 HD

NIMBRA

TRANSMISSIONS-LÄNKAR

34 Mb45 Mb

155 Mb622 Mb

1 Gb2,5 Gb10 Gb

DATA

VIDEO

TV

VOICE

AUDIO

IPClasses of

service

Mobile-TVDVB-H / MediaFLO

Nimbra VisionNetwork

Operations CentreLive Events

StudioProduction

ContentProvider/play-out

Satelite Up-link

IPTV/CATV

Postproduction

Productioncompany

DTTDVB-T / ATSC / DMB-T / ISDB-T

Enterprice video

conference

Nimbra 680 Nimbra 680

Nimbra 680

Nimbra 680

Nimbra 680Nimbra 340

Nimbra 340 Nimbra 1


Nimbra 340 HD

Enterprice video

conference

Nimbra 360

METROCORE


Nimbra 340

Improved bandwith utilization

100 % quality of service

Broad know how in network

and media

HDTV

Improved picture quality through HDTV

More channels through digitalization

Mobile TV on laptop and cellphones

PRODUKTION & KONTRIBUTION DISTRIBUTION

Increases requirements on bandwith and quality

Net Insight supports convergence

Picture quality and mobility Net Insight valuedrives demand proposition

TVpå Laptop

Ökar NV-utnyttjande

100 % QOS

Brett kunnande

Digitalisering

HDTV

Ökar kraven på nätverketsbandbredd & kvalitet

Net Insight möjliggör konvergering

Bildkvalitet och mobilitet Net Insight erbjuder

Driver efterfrågan

n Videon Data/ Voice


2002alphatron becomes new partner. Net Insight gains a foothold in a new segment – triple play. New products and multicast support are introduced.

Consumption of video and other media services is undergoing explosive growth and placing new demands on networks.This trend opens opportunities for Net insight, both in its core segments, as well as with the strengthened product portfolio to expand into new adjacent segments for video transport and media distribution.

10 MarKet aND treNDs

TV IN THE CELL PHONE MOVES FROM PILOT TO COMMERCIAL ROLLOUTTV can now be broadcast to cell phones, and already, early 2007, 70 pilot projects were running and several commercial roll-outs had started. ABI Research estimates that in 2012 there will be 462 million mobile TV users. Frost & Sullivan’s report ”DVB-H Technology – Market and Potential Analysis” expects the total market for services over DVB-H to be worth over USD 2 billion in 2010, declaring this to be one of the strongest growth segments. About ten standards for mobile TV broadcasts are being tested around the world, the largest of which are DVB-H, MediaFLO, ISDB-T and DMB. Net Insight’s equipment works re-gardless of the standard chosen. In order to cost-effectively roll out mobile TV and reach the market faster, mobile ope-rators often collaborate with the national operators for terrestrial TV. With its successes in the market for digital terrestrial TV networks in recent years, Net Insight is well-positioned for the network expansion of mobile TV. Mobile TV requires exact time synchronization by transmitter stations, which usually rely on GPS receivers. Net Insight’s unique Time Transfer function allows GPS-independent synchronization, which reduces costs and vulne-rability. The mobile TV segment will undergo strong growth over the next few years, opening a new market window for Net Insight with great potential.

DIGITIZATION AND HDTV REQUIRE MAJOR INFRASTRUCTURE INVESTMENTSThe United States, Western Europe and parts of Asia have already switched their media production to digital format and now face major investments to upgrade their infrastruc-ture for HDTV, which generally requires about five times more capacity than standard TV (SDTV). HDTV along with increasing percentage of on-demand services also drives the expan-sion of broadband and TV distribution networks. Improved compression standards, such as MPEG 4, now commercially available, only partially helps stem this need for expansion. Nevertheless, the total net increase of video traffic is considerable and will continue to climb sharply, giving Net Insight a stronger position in these types of solutions. Digitization also involves opportunities to distribute media services more easily over public data and telecom networks, which opens up competition with respect to offering TV and media services to end customers. In addition, more and more platforms can receive me-dia content: computers, televisions, cell phones or game consoles. Different platforms have different bandwidth requirements, but they all require excellent transmission quality. If the quality cannot be guaranteed, users will not be willing to pay for the services.

VIDEO SERVICESNet Insight has a unique combination of expertise in optical networks, the media and the broadcast industries. The convergence now taking place in these markets creates many new business opportunities. According to IABM, the total equipment market for the media in-dustry is eleven billion USD, about 7 percent of which is for communications equipment in production. The total equipment market for optical networks is about six billion USD (Gartner 2006). Net Insight focuses on three main segments: the professional broadcast and media market, distribution networks for digital terrestrial networks (DTT) and mobile TV, as well as transport network solutions for IPTV and CATV. Large growth opportunities can also be found in adjacent segments such as networks for camera surveillance, telemedicine, video conferences (telepresence) and distance learning.

2003New important customer references when eBu and WDr build media networks with Nimbra. triple play installation with Nimbra in alaska. Institutional ownership strengthens the company.

NuMBer Of iPTV users

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The united states, Western europe and parts of Asia have already switched their media production to digital format and now face major investments to up-grade their infrastructure for High Definition TV (HDTV), which generally requi-res about five times more capacity than standard definition TV (sDTV).

12 NIMBra at the CustoMer

NImBRAATTHECUSTOmER

HTN Net Insight scores a touchdown with HTN and brings HD sports into american homes.

The deal with leading sports distribution network HTN signifi-cantly raises Net Insight’s visibility within the US media industry and secures Nimbra as the solution of choice for high-quality, high-definition live broadcasting. To say that Americans enjoy sports is an understatement – they love them and events like the annual Super Bowl game typically attract a bigger television audience than any other televised event throughout the year. Baseball, basketball, ice hockey and football equal big business in the US and therefore comprise a large and profitable chunk of the broadcasting and media industries. The demand for live event broadcasting is surging and with HD screens rapidly becoming common features in American ho-mes, the demand for HD sports programming is soaring. Bet-ween 30 and 40 percent of all professional sports events are now being broadcast in HD and this share is growing fast. HTN Communications and its predecessors, which have serviced the sports broadcast and cable marketplace with trans-mission facilities and services since 1956, is deploying a network to transport sports programming using Net Insight’s Nimbra platform. The network will significantly increase bandwidth and the service offering, including multiple HDTV and SDTV video channels from the venues.

Korea telecom, KTNationwide multiservice network in Korea.

KT is South Korea’s leading communications service provider and has been the nation’s frontrunner in the development of the communications business since its privatization in 1982. Drawing on cutting-edge technology, KT has played a key role in turning South Korea into an IT and electronics giant on the world stage. To further extend its technological position, KT recently de-ployed a multiservice media network based on over 100 Nimbra switches from Net Insight. The combined distribution and con-tribution media network will initially be used by KT client Seoul Broadcasting System (SBS) to distribute media content between its Seoul headquarters and nine local TV stations across the coun-try. The traffic comprises uncompressed High Definition TV (HDTV) and Standard Definition TV (SDTV) for DTT, com-pressed video for mobile TV distribution, FM radio channels, digital audio services and various types of data traffic. Compared with competing solutions, the Nimbra platform offers better bandwidth utilization, which allows broadcasters to distribute more digital television channels and, consequently, boost revenues from being able to offer a broader supply of hig-her-quality content. As consumer demand for HDTV increases, transport solutions that can optimally use bandwidth become a crucial success factor. Jeoung Ha-Myung, head of support at KT, explains why the company chose Net Insight’s Nimbra-platform.”We take great pride in being the world’s leading broadband operator. We take even greater pride in combining our industry-leading know-how with partners and operators around the globe to create networks that push technology and solutions to even higher levels. Net In-sight fits well in this context.” The order was received in cooperation with Net Insight’s partner Sanam Technology and systems integrator Yukyung. Be-fore choosing Nimbra, KT evaluated various solutions and tested Nimbra’s performance. KT chose the Nimbra platform because of its multiservice capabilities, scaleability, low latency and its compatibility with a large number of different media content standards. KT will make the most of the multiservice transport capability of the Nimbra platform by combining HD-SDI, SDI, ASI, AES/EBU, IP/Ethernet, and E1 services over 2.5 Gbps high-capacity transport links. The Nimbra platform also offers one plus one redundancy with automatic switching and rerouting in case of shutdown. The Nimbra Vision management system makes it easy to manage and monitor the network.

2004t-systems chooses Net Insights Nimbra-plattform for digital terrestrial tV and the swedish space agency orders equipment for distribution of IptV channels. Constellation ventures buys a large equity stake in Net Insight and Nimbra 340 is introduced.

The media and communications industries are undergoing constant change. Markets grow and evolve, new technological solutions provide new prospects and at the same time the competition intensifies. We are therefore extremely proud when our customers say that Net Insight is the best in its class!

”Broadcast clients have shown a trem-

endous desire to take advantage of the

reliability and quality benefits of a

Nimbra network.”


Since HTN’s fiber optic network carries a high percentage of all US professional sports broadcasts — including over a thousand major league baseball, basketball and ice hockey events annually — the Nimbra solution, and the advantages of using DTM tech-nology for high-quality media transport, will be powerfully posi-tioned at the heart of America’s broadcasting industry. The deal effectively carries the Net Insight brand across the professional sports venues in the US and among important execu-tive decision-makers. The message is that Nimbra enables broad-casters to run audio, video, file transfers, VoIP and communica-tions over a single network. Through the launch of the new network, HTN can demon-strate the benefits of using Net Insight’s technology for high-qua-lity media distribution. ”Broadcast clients have shown a tremendous desire to take advantage of the reliability and quality benefits of a Nimbra net-work,” says Joseph Cohen, Chairman and CEO of HTN Com-munications. ”HTN’s new networks will expand upon the exis-ting selection of services while vastly improving the current fiber optic transport network. We look forward to continuing our tra-dition of providing broadcasters with reliable live broadcasts in the evolving world of HD television.” Nimbra’s multiservice capabilities and ability to handle dyna-mic, simultaneous transfer of different media types are particular-ly well suited to broadcasting sports events, as they commonly involve not just live video and audio but a sizeable load of data as well. After each game, a huge amount of data transfer of statistics covering shots on goal and other details is being transferred. In addition, Nimbra opens up for conducting duplex servi-ces, enabling simultaneous sending and receiving from the venue, which lets the producer assemble footage from various sources.

NorkringNorway goes digital with NimbraNorkring is Norway’s largest broadcasting distributor, delivering infrastructure and network services to large broadcasters. Owned by Telenor, Norkring is a very demanding customer that strives to operate the best contribution and distribution network for di-gital terrestrial TV and radio broadcast with maximum network utilization and flexibility. As Norway prepared to start national digital broadcasting a few years ago, Norkring began to evaluate various digital terrestrial television (DTT) platforms. To further strengthen its leading po-sition, Norkring chose to build the new DTT infrastructure based on Net Insight’s Nimbra platform and in 2006 signed a frame agreement for delivery of over 600 nodes. The demanding topography of the mountainous and sparsely populated country poses a challenge to network planning and con-struction. Since radio links are used in many areas, cost-efficiency and quality of service are important factors in choosing network equipment. Net Insight developed the Nimbra 360 multiservice ac-cess/edge switch, in effect a tailor-made solution for the DTT mar-ket and the first solution that integrates transport of DTT and Digi-tal Audio Broadcast (DAB) services with the unique Time Transfer

”We have found Net insight to be very

customer-oriented and ’best in class’ in terms

of project management, delivery precision

and knowledge.”

Frank aarhus, Norkring

function. The Time Transfer function enables transfer of highly ac-curate timing information, eliminating the need for GPS receivers.

NEW BUSINESS OPPORTUNITIESNimbra 360 is a flexible and cost-effective transport solution for advanced multimedia services. The Nimbra platform offers high capacity backbone and plug-in modules for IP video and data, which alongside uncompressed video and audio services turns the network into a very powerful media contribution platform. The multi-service transport capabilities are very attractive to Norkring’s various customer segments – the national television networks NRK, TV Norge, the local TV stations and NTV – which enhance their competitiveness in delivering existing and new media services. To broadcast companies, this means in-creased opportunities to offer subscribers and viewers additional channels at a lower cost. Another reason why Norkring selected the Nimbra platform is that it offers the highest possible quality of service (QoS) and level of network utilization at a lower cost than any other trans-port network solution for broadcast and media networks.

”NET INSIGHT BEST IN CLASS”Throughout the sales process and truly massive equipment rollout and installation phase, Norkring has been very satisfied with Net Insight’s expertise and professional project management.”We have found Net Insight to be very customer-oriented and ’best in class’ in terms of project management, delivery precision and knowledge,” says Frank Aarhus, Manager Transmission Net-work Department at Norkring. ”They have an ability and flexibi-lity to match our tough rollout schedule and we enjoy a uniquely good client/supplier relationship.”

14 MarKet areas

NImBRAFORFASTERANDLESSEXPENSIVEmEDIAPRODUCTIONNetworks for broadcast and media. The transition to digital production and distribution of video has created new business opportunities for broadcasters and media operators. New optical transport networks also make it possible to optimize production and distribution of video. But large files and streaming HDTV place new demands for capacity and quality on these networks.

A COST-EFFECTIVE COMPLEMENT TO SATELLITESThe professional media industry places extremely high demands on quality. It must be possible to transport TV and video material with the highest quality between different production units for remote editing. Traditionally much of the traffic goes via satel-lite, which is both more expensive and compromises quality, since video traffic must first be compressed. With a fiber-based solution, broadcasting and production companies can now exchange high-quality, uncompressed mate-rial in real-time, regardless of geographic distance and at a signi-ficantly lower cost. Traditional network solutions for media com-panies are often based on point-to-point solutions, which offer poor scaleability with respect to number of services and users. Net Insight’s solution creates a completely new way to build a media network, similar to a Media Internet. By being connected to the network you can reach any other point with the highest standards of quality and security.

DIGITIZATION AND HDTV REQUIRE MAJOR INFRASTRUCTURE INVESTMENTS Most media companies have already switched their production to digital format and now face major investments to upgrade their infrastructure for HDTV, which generally requires about five ti-mes more capacity than standard TV (SDTV). Broadcasters and media companies plan to invest more than USD 2 billion in the transition to HDTV. Net Insight offers interfaces and solutions for both HDTV and SDTV in the same platform, enabling simp-le migration for customers. HDTV also drives capacity growth in broadband networks and TV distribution networks, which has meant that suppliers and operators in this segment have recogni-zed the substantial cost and quality benefits of Net Insight’s trans-port solution. Sports broadcasts in HDTV are a strong driving force behind the development, highlighting even the underlying

challenges of transporting real-time critical HD-quality video. In order for television viewers to fully experience the HD picture the material must be delivered through the entire chain without any loss of quality. Net Insight’s Nimbra platform provides a perfect fit – optimized to cost-effectively handle both video production and distribution.

ONE NETWORK FOR ALL SERVICESIn addition to superior transmission quality, one of the major ad-vantages of Net Insight’s transport solution is the ability to offer all services for video, data and telephony in a single product. In the past it was not possible to simultaneously transport a mix of 1.5 Gbps HDTV streams with 270 Mbps uncompressed SDTV, MPEG (ASI or IP), audio (AES-EBU or E1) and IP/Ethernet traf-fic. Studio equipment and servers are directly linked to standard connections in the platform, eliminating the need for expensive converters. Today broadcast and media companies worldwide use Nimbra-based networks for production and editing in real-time from central production centers, enabling broadcasters to achieve higher video quality, while using studio resources more efficiently and reducing production time. The Nimbra platform also makes it possible to quickly and easily set up temporary transport connections when necessary - an important characteristic for TV and media companies when re-porting breaking news or sports events, providing them with great opportunities to quickly adapt their offering for their customers. With efficient capacity utilization and superior quality of service, Nimbra is also an excellent solution for new professi-onal applications such as digital cinema or high-quality video conferences (telepresence). Net Insight’s Nimbra platform has also been chosen for many major sports events to transport top-quality television and video material from the arena to the studio for editing.

During the year Net Insight strengthened its posi-tion in the Broadcast & Media segment when a few more of the industry’s most distinguished broad-cast and media companies chose Nimbra for their media networks. In the united States HTN deployed a Nimbra-based network for TV broadcasts from sports venues and korea Telecom deployed a mul-tiservice network linking ten cities in South korea. Deliveries also commenced under the contract with Beijing Olympic Broadcasting (BOB) for the contribution network connecting arenas during the summer Olympics in Beijing.

DTT and mobile TV

Cable TV and IPTV

Broadcast and Media


DIGITALTVTAKESOVERNetworks for digital terrestrial TV and mobile TV. The transition to digital terrestrial TV is now un-derway. Over the next three years about fifty countries will carry out the largest technology shift in television history.

MORE ROOM IN ETHER FOR MORE CHANNELS AND NEW SERVICESCompetition for TV customers is intensifying and offering more services has become the primary means of competition to win and retain new customers. Digitization of the terrestrial network is a natural step for using capacity more effectively and creating room for many more channels, with improved audio and image quality, interactivity and new data services. The expansion of the digital terrestrial networks is currently underway around the world and most countries will completely replace their analog infrastructure over the next ten years. Ho-wever, the major push will take place over the next two to three years, when at least half of the new networks will be deployed. The digital terrestrial TV market is rapidly expanding, with an annual growth rate of more than 43 percent according to IMS Research. The total market potential for Net Insight’s products in 2008 in these segments is estimated at about USD 100 million according to ABI Research and the number of households with digital terrestrial TV is expected to triple over the next five years to about 131 million. The market for mobile TV is also rapidly expanding.

MOBILE TV - A LARGE GROWTH SEGMENTWith the transition to digital terrestrial networks more frequencies are freed up in the ether that can be used for mobile applications such as broadband (WiFi/Wimax) and mobile TV, which can be transmitted over the same infrastructure as digital TV signals. The possibility of providing digital services such as TV, radio and data directly to cell phones or other mobile units opens new oppor-tunities to television and cell phone operators to broaden their service offering, with increased revenues as a result. ABI Research predicts that there will be about 462 million mobile TV users over the digital TV network in 2012.

COMPLETE SOLUTION CUTS COSTSCompetition for TV customers becomes even more intense when TV services are also provided via satellite, cable TV and broad-band. In order for the expansion of national digital terrestrial TV networks to be profitable, the total cost for networks must be mi-nimized. Net Insight’s Nimbra platform is a flexible and cost-effective solution with several unique features for terrestrial digital TV and mobile TV that also makes it possible to offer other services over the same platform. Network operators who are deploying DTT networks with the Nimbra platform get both a digital TV net-work and a new infrastructure for delivery of new services that create new business opportunities. Integrating all necessary functionality into one unit eliminates the need for extra equipment in the network and when multi-ple services can use a common infrastructure the total cost of the network decreases. The Nimbra platform also maximizes network utilization and creates room for up to 20 percent more TV chan-nels, which further lowers operating costs and generates new reve-nue opportunities for the operator.

GPS-INDEPENDENT FOR NATIONAL SECURITYContemporary society has become increasingly dependent on the GPS system for many critical services such as distribution of TV broadcasts. The problem is that GPS reception can be disrupted, which would knock out communications. TV screens would go black. A GPS-independent system has therefore become a key fac-tor when choosing new solutions for terrestrial digital TV and mobile TV. During the year Net Insight introduced the unique Time Transfer function for time synchronization without GPS re-ceivers, making it possible to further reduce investment costs, but even more importantly, to improve security for the new national terrestrial networks.

2005Nimbra 680 lanseras och adresserar större marknader och Net Insight erhåller större beställningar från Danmark, tyskland och Norge.

During the year, the first phase of the large digital TV network in Norway went into opera-tion, deployment of new networks in europe and Asia began, as did the rollout of the first mobile TV networks. Net insight is strongly positioned to continue to provide the most efficient and flexible transport solutions for the digital terrestrial networks now being deployed for TV and mobile TV.

DTT and mobile TV

Cable TV and IPTV

Broadcast och Media

16 MarKet areas

Networks for cable TV and IPTV. New services such as broadband TV and video services such as YouTube increase traffic on the broadband network. At the same time the introduction of IPTV and other commercial premium services increases demand, occupying more room in the network and reducing the quality of other services. Operators facing this major challenge must now upgrade their networks.

The telephony market is engaged in fierce competition. One ope-rator after the other lower their call rates and offer advantageous prices on broadband while at the same time overall traffic con-tinues to grow. To compensate for shrinking revenues, growing numbers of operators are now beginning to review their service offering to complement it with more advanced TV and video ser-vices for which users are much more willing to pay. With this strategy they intend to increase revenues and customer loyalty, capture new subscribers with a more attractive selection of servi-ces, and reduce the risk of losing existing customers.

SKYROCKETING VIDEO TRAFFIC IN BROADBAND NETWORKThe advance of IPTV has thus far been limited, largely because the transmission speed offered is too low. As bandwidth to house-holds increases, the selection of broadband TV programming is also increasing. Based on a standardized protocol, IPTV reduces distribution costs to the operator at the same time that distribu-ting narrow niche programs to provide true diversity in the of-fering becomes financially viable. With the introduction of television and video to today’s broadband networks, particularly with the transition to HDTV, this traffic will quickly become dominant. According to the ”IPTV Bandwidth Study” from Bell Labs Research (2006), television and video are expected to account for 90 percent of the broadband traffic in 2009. This will set entirely new demands on how the broadband networks and the access points to the local broadband networks are built. Cable TV operators are also facing major upgrades of their networks. To hold their own in the competition they must be able to offer telephony and increased broadband capacity in addition to their television offering. But it is primarily the transition to

HDTV and the potential of new interactive services like video-on-demand (VOD) and personal video recorder services (PVR) that are driving this trend. The latter services mean that a video stream must be transmitted to each end customer (unicast), rather than a common stream transmitted to all subscribers (multicast).

NET INSIGHT GUARANTEES EFFICIENT TRANSPORTCentralization of media content is another important trend that places new demands on infrastructure. Above all, it must be pos-sible to guarantee consistent high quality all the way from the media provider to the end user at home. Transport of video traffic must also be extremely efficient to use bandwidth optimally and the network must be scaleable. The Nimbra platform is built to handle just these demands, providing a cost-effective solution to handle the growing video traffic in public networks. Net Insight’s solution is located in the transport network and comprises the link between the content providers, distribution networks and the access networks to which households connect. Net Insight’s solution is also independent of the access solution used for the last leg out to the end customer, whether it is the phone company’s traditional copper lines, the cable TV network, or an entirely fiber-based infrastructure. The Nimbra platform can also be used to digitize existing cable TV networks at the same time that the operator can introduce new interactive services on an existing solution and consolidate all services in a single network.

PROMISING MARKET POTENTIALThe market for providing new television and video services to companies and households over broadband or upgrading cable TV networks indicates strong growth in the coming years. Re-search analyst firm IDC expects sales for equipment for this type of networks of about SEK 16 billion in 2009.

NEWSERVICESANDmOREUSERSFILLTHENETWORKS

2006Net Insight launches Nimbra 360 and wins major contracts for terrestrial digital tV network in Nor-way as well as several other Dtt deals. selected as video transmission equipment supplier for the 2008 olympics in Beijing.

DTT and mobile TV

Cable TV and IPTV

Broadcast och Media

in the last two years the market has begun to gain momentum, but end customers have remained hesitant about these new services, so the majority of traffic is still comprised of telephony and data. Once video traffic does gain momentum, the need for network upgrades will be accelerated, creat-ing major market potential for Net insight. With the powerful new Nimbra 680 platform, business opportunities in the segment will increase consi-derably in 2008.


PARTNERSPROVIDECUSTOmERSWITHCONSIDERABLEADDEDVALUE

SanamIn South Korea, Net Insight enjoys a highly rewarding partnership with Sanam Technology, a leading supplier of broadcasting sys-tems as well as electronic and medical components. Sanam mar-kets Net Insight’s products in South Korea to broadcast stations, CATV stations, production houses and telecom operators. Sanam is particularly strong in Broadcast & Media and its customers in-clude most major broadcasters. With an efficient organization that includes highly skilled, professional tech personnel, Sanam can dedicate its efforts to promoting Net Insight’s products in industry media and at trade shows and other important venues. As a direct result of one and a half years of committed promo-tion and sales efforts, Sanam helped Net Insight secure a highly prestigious contract with KT (Korea Telecom), covering a multi-service media network based on over 100 Nimbra switches. The combined distribution and contribution media network will be used by KT client Seoul Broadcasting System (SBS) for exchang-ing media content between its Seoul headquarters and nine local broadcasters across the country. In promoting Net Insight’s solution, Sanam visited every single SBS broadcaster to present the advantages of a Nimbra-based network. Together with KT’s systems integrator YukYung, Sanam also conducted tough benchmark tests at KT’s facilities.

AlphatronAlphatron Broadcast Electronics in the Netherlands is one of Net Insight’s most valuable and oldest partners and resellers in the Benelux countries. With its extensive experience of network solutions from Net Insight and studio systems for broadcasters, Alphatron achieved the highest sales volume of all of our partners, in 2007. Alphatron, which has a customer base that includes major telecom operators and production companies in the entertain-ment industry and the advertising world, was instrumental in se-curing one of Net Insight’s largest and most prestigious contracts with KPN Broadcast Services, the largest telecom operator in the Netherlands. By offering a local presence, the partnership with Alphatron effectively accelerated the process of establishing a relationship between Net Insight and KPN. The KPN deal includes a national network for DVB-T and DVB-H. The same network is also used for multiple applications, which makes it a true multiservice network.

GeartechSince 2004 Net Insight enjoys a highly successful cooperation with Geartech, a Canadian distributor of broadcast and telecom equipment that offers an excellent example of a value-added resel-ler (VAR) whose competence is able to add significant value to Net Insight’s customer offering. Geartech commands a level of technical expertise that enables them to fully comprehend and communicate the unique advan-tages of the Nimbra platform to telecom and broadcast custo-mers. Partnering with Net Insight enables Geartech to offer its customers a unique solution unavailable anywhere else in the local market. The IT industry contains many resellers that stock and sell a multitude of technical components and equipment, but offer little or no insight into the business advantages of the various applications. In contrast, Geartech focuses on a limited line of technologies and solutions, which leaves more resources to de-monstrate how Nimbra users gain a competitive edge by reducing operating costs and increasing efficiency. Unlike most resellers, Geartech also operates its own video production company, which provides hands-on knowledge of the flow of actual production and gives the staff an opportunity to test Nimbra components in a live environment.

Net Insight’s strategy to collaborate with local partners all over the world has been extremely successful. Our partners’ customer relationships as well as their knowledge of local and national radio, TV and telecom industries have benefitted Net Insight’s expansion into new markets. Net Insight chooses its partner with great care. Obviously they must possess technical knowledge and have a good reputation in their markets, but the key factors when choosing partners are that they must be able to provide the customer with considerable added value and possess excellent knowledge of the local market.

AlphatronAlphatron Broad-cast electronics is a Dutch company that delivers net-work solutions and studio systems to the broad-casting industry.

Sanamsanam technology in south korea is a leading supplier of broadcasting systems, as well as electronic and medical compo-nents.

Geartechgeartech is a Canadian distri-butor of broad-casting and telecommunica-tion equipment.

18 teChNICal platForM, proDuCts aND DeVelopMeNt

TECHNICALPLATFORm,PRODUCTSANDDEVELOPmENTToday computer network traffic around the world is expanding with the growing use of various television and video services. This trend is exactly in line with the vision that laid the foundation for developing the Nimbra platform and which strengthens Net Insight’s current position in the market.

The Nimbra platform consists of network switches designed specifically to transport video together with voice and data. The products are optimized for efficient video transfer with the hig-hest possible quality of service. The Nimbra platform is a versatile transport solution and has several unique characteristics for DTT and mobile TV. In addition it is a flexible and cost-effective solu-tion for advanced multimedia services in media networks and for distribution in IPTV/cable TV networks. With integrated video and audio interfaces such as ASI, SDI, HD-SDI and AES/EBU and strong support for IP/Ethernet and SDH/Sonet, Net Insight offers a powerful solution for operators and service providers that want to take the step to multiservice networks, while cutting operating costs substantially and creating new business opportunities. Some of the key characteristics that make the platform unique are:

y SUPERIOR QUALITY OF SERVICE The Nimbra platform uses dynamic resource allocation where all traffic goes over separate channels, which means that real-time critical services like video and audio arrive without packet loss and distortion, ensuring the highest quality of service (100 % QoS) for all kinds of services sent over the network.

y MAXIMUM CAPACITY UTILIZATION Resource allocation guarantees quality of service even at a net-work load of 95 percent or more. The channels can be set up and configured with high granularity and can be symmetrical or asymmetrical according to need.

y DYNAMIC PROVISIONING OF SERVICESWith the help of a signaling protocol, the channels can auto-matically find their way through the network. As the network is extended, new nodes are automatically found and the dynamic

PrODuCTS BASED ON STrONG PATENTS

The Nimbra platform has an advanced and future-oriented technology con-tent. Net insight works actively with patents to maintain its technological advantage and prevent technological plagiarism. The patents cover 27 patent families and also offer opportunities for future revenues through technology licensing to partners.

uNIquE TIME TrANSFEr FuNCTION The Nimbra platform offers the unique “Time Transfer” function, which makes it possible to distribute precise time synchronization in the same network that transports the video signals, eliminating the need for expensive and potentially vulner-able gPs receivers in the network.

NIMBrA AND ETHErNET/IP/MPlS

The Nimbra platform’s unique properties and extensive ethernet functionality provide excellent quality of service for transport of iP traffic. Net insight will continue to focus on developing iP/ethernet functional-ity which enables customers to gain unique advantages, allowing them to use both optical transport networks and iP/MPLs networks for efficient video and media transport.

routing protocol automatically considers new pathways through the network, which makes it much easier to hook up new custo-mers and services.

y MULTICAST FOR MORE EFFICIENT DISTRIBUTION With support for the multicasting of all kinds of services, the Nimbra platform can efficiently distribute TV, radio and video over the networks. Multicasting of Ethernet traffic means that hundreds of IPTV channels can be broadcast without disrupting other traffic on the same link.

y FLEXIBLE TOPOLOGY OVER OPTIONAL TRANSMISSION LINKS The Nimbra network can be configured to build ring, star, point-to-point or mesh structures as desired, thereby simplifying net-work planning and allowing a build-as-you-grow strategy.

Transmission over separated channels ensures 100% quality of service and maximizes use of bandwith.




ETH

NETWORK

NIMBRA FIBER NW

DATA

VOICE

TV

VIDEO

=

=

=

ETH

NETWORK

NIMBRA FIBER NW

DATA

VOICE

TV

VIDEO

= = =

Digital VideoBroadcastLive Events

StudioProduction

ContentProviders

Satelite Up-link

IPTV/CATV





Live Events

StudioProduction

ContentProviders

Satelite Up-link

IPTV/CATV

NETWORK





Live Events

StudioProduction

ContentProviders

Satelite Up-link

IPTV/CATV

NETWORK


= Nimbra 340 HD

NIMBRA

TRANSMISSION-LINKS

34 Mb45 Mb

155 Mb622 Mb

1 Gb2,5 Gb10 Gb

DATA

VIDEO

TV

VOICE

AUDIO

IPClasses of

service



Operations CentreLive Events

StudioProduction

ContentProvider/play-out

Satelite Up-link

IPTV/CATV

Postproduction

Productioncompany


Enterprice video

conference


Nimbra 680

Nimbra 680


Nimbra 340 Nimbra 1


Nimbra 340 HD

Enterprice video

conference

Nimbra 360

METROCORE


Nimbra 340


NIMBRA OPTIMIZES UTILIZATION OF THE CLIENTS’ NETWORKS

NET INSIGHT’S PrODuCT POrTFOlIONet insight’s product portfolio comprises a complete series of multiservice switches for broadcast and media networks, consisting of several network switches and access units. The Nimbra platform handles a broad span of applications for production, contribution and distribution in backbone and metro networks. The many different access and transport modules in the Nimbra products allow them to be tailored to the needs and wishes of the individual customer.

NIMBrA ONEA modular high capacity switch with space for an array of different access and trunk interfaces. Nimbra One’s efficient resource management of bandwidth ensures maximum quality of service, which meets the high demands of broadcasting and media compa-nies, distributors of terrestrial digital TV and cable TV operators.

NIMBrA 680A high capacity switch that often serves as the core of a typical Nimbra network. The Nimbra 680 was developed to meet the stringent demands for superior quality of service and accessibility placed on full-scale multiservice networks; it also supports Time Transfer.

NIMBrA 300 seriesThe Nimbra 340 and 340-HD are primarily access units for the professional media industry as well as for the digital TV and mobile TV markets . The Nimbra 340-HD also has a built-in interface for transport of high-resolution video/HDTV. The Nimbra 360 is a network switch with the same characteristics as the Nimbra 340, but with an additional four built-in sONeT/sDH ports. This switch is equipped with the new Time Transfer module and is particularly suited to the new digital terrestrial and mobile television networks under construction around the world. NIMBrA VISIONNimbra Vision is a complete tool for the operation and maintenance of a Nimbra network, providing the operator with a complete overview and control of network activities.

Production & contribution Distribution

Net Insight’s customers include the most demanding players in the media market, with extremely high requirements for transport of their high-quality video material. Net Insight’s Nimbra plat-form provides clients with one of the most future-oriented and cost effective network solutions available today, allowing higher revenues and lower costs – higher revenues because new servi-ces can be launched in the same network that is already used for voice and data communications, and lower costs for operation and maintenance when a single platform handles all services. High bandwidth utilization means cost-effective operation and superior quality of service means reliable revenues for the customer, with-out requiring excess capacity.

DEVELOPMENTSDuring the year the product portfolio was extended with functio-nality to further expand the access and switching capacity of the products. The Nimbra 360 was formally launched into the market and the new 8-port access module HD/SD SDI was introduced to transport uncompressed SDTV and HDTV signals. A doubled switching capacity was introduced in the high capacity Nimbra 680 switch and in Switzerland the 8*AES/EBU-module was com-missioned in a nationwide audio network. The Time Transfer function has now been introduced and installed in a major DTT network. During 2008 the products will be supplemented with additional access and transport functionality as well as switching capacity with the introduction of the Nimbra 688, new access modules and expanded Ethernet/IP functionality.



Operations CentreLive events

Studioproduction

Contentprovider/play-out

Satellite up-link

IPTV/CATV

Postproduction

Productioncompany


Enterprise video

conference


Nimbra 680

Nimbra 680


Nimbra 340 Nimbra 1


Nimbra 340 HD

Enterprise video

conference

Nimbra 360

METROCORE


Nimbra 340

PRODUKTION & KONTRIBUTION DISTRIBUTION

20 eMployees

EmPLOYEES

Net Insight is a high-tech company based on years of intensive research. Our employees, with their expertise and commitment, are crucial to our success. One of Net Insight’s most important tasks is to be an attractive employer, ensuring that our employees are satisfied, enthusiastic and have growth opportunities.

Net Insight currently has 98 employees, including 7 who are active in the US subsidiary Net Insight Inc. Many of the employees have been with Net Insight since its inception in 1997. During the past year the company has strengthened the sales and operations departments to meet growing demand. In February 2007 the company opened a sales office in Singapore to cultivate the rapidly growing markets in Asia, Australia and New Zealand. The office cur-rently has three employees.

EXPERTISEThe level of education in Net Insight is generally high, and approximately 80 percent of the employees have a university background where most are engineering graduates. Skills development is one of the pillars of the company’s operations. The need for specialist know-ledge is great and to ensure that expertise is always maintained at the right level, Net Insight works with individual competence profiles. These profiles are linked to the position and used during employee performance appraisals between manager and employee, as well as during recruitment of new employees. Training and personal development takes place in part th-rough various work projects, and in part through internal and external courses.

PARTICIPATION AND COMMITMENTThe company is active in an industry undergoing strong growth and competition for the most talented employees is intense. Being an attractive employer is a critical success factor. We believe that all employees should feel their work is meaningful and has a direct impact on the company’s success. Overarching corporate objectives and strategies are broken down at the individual level in order to become clear and measurable. Salaries are individually adjusted with a system of rewards based on efforts and results at both the corporate and individual levels. Through Net Insight’s personnel option program the employees are of-fered partial ownership and the opportunity to share in the company’s success. Because the options presume that employment continues, both commitment and loyalty to the company is stimulated.

HEALTH AND JOB SATISFACTIONEmployee health and job satisfaction are top priorities for Net Insight. We will offer an attractive workplace where employees perceive their jobs as rewarding and challenging. The firm promotes wellness programs and employees are provided with an annual subsidy to be used for exercise and fitness activities. Net Insight also works with various health-related educational activities involving diet and exercise. Sickness absence is a low 3.0 percent (2.7). No work-related incidents were reported during the year.

AVerAge LeNgTH Of eMPLOyMeNT

l >5 years, 46%

l 1–2 years, 40 %

l 3–4 years, 14 %

eMPLOyees Per AreA

l research and development, 53%

l Business development and sales, 31%

l administration and logistics, 16%

Age DisTriBuTiON

l 24–35 years, 18 %

l 36–45 years, 47 %

l >45 years, 35 %

LeVeL Of eDuCATiON

l upper secondary education, 22 %

l university education, 78 %

ålderanst tid utbildning

områdekvinnor/män


områdekvinnor/män


områdekvinnor/män


områdekvinnor/män

Employee numbers 2007 2006 2005

average number of employees 93 80 71

Number of women, % 12 12 14

staff turnover, % 7,57 11 8sickness absence (see also Note 7), % 3,0 2,7 2,9

Cost/employee for skills development, seK 1 281 4 656 3 177

Value added/employee:*seK thousands 1 540 993 194

*Definition: operating profit/loss plus salaries and fringe benefits in relation to the average number of employees.


Asia and the Pacific Rim area is without a doubt currently the most dynamic region in the world financially. With a new office in Singapore, Net Insight and Director of Operations David McKaige are at the center of the action.

”Asia continues to be a driving force in the world’s growth, and the regions telecom operators, broadcasters, and service providers are expanding fast,” says David McKaige at Net Insight in Singa-pore. David joined the company as a consultant in 2006 and was tasked with helping to establish an Asia-Pacific presence. Today, he is director of operations for Asia-Pacific, which involves supporting the sales team and working with customers and channel partners in both pre- and post-sale technical support and training. ”The opening of the Net Insight office in Singapore was an important step as it put the company closer to our partners and customers. We’ve been working hard on building brand awareness in the region, but helping us out is the fact that our existing custo-mer base in Europe and North America reads like a ’who’s who’ when it comes to broadcast services. Importantly, the video con-tent that moves on networks built with Net Insight’s equipment is also very impressive and speaks volumes about the product’s reliability,” says David.

LOVES THE ”LIGHT-BULB MOMENTS”A big part of the job is listening to customer needs and helping them to design a solution that fits their needs both today and in the future, according to David, who had no hesitations about joining Net Insight: ”I’ve been in the broadcast industry and in the region for over 20 years, first in production and later in engineering and engine-ering management. Prior to joining Net Insight, I was designing networks using their equipment for several clients and became completely enamored with the product. The Nimbra platform

employee interview: withDAVID MCkAIGE, singapore. David works in operations and has long-term experience of the professional media industry and works with technical sales support and network design. The operations department works the closest to the customers and constitutes the link between Net insight’s customers, sales personnel and technicians.

TARGETINGSUCCESS

2007Net Insight opens sales office in singapore and lands several deals in asia, including major contracts in Korea. Wins additional important customers in Broadcast & Media, including a media network for tV broadcasts from sports venues in the us. launches time transfer function.

really is THE best-of-breed solution in its space.” That Nimbra is a superior choice is constantly borne out in contacts with customers, says David: ”An interesting part of the design process when working with customers are those ’light bulb moments’ when they realize how much more they can be doing with our equipment on their networks.” Given the tremendous growth in the Asian markets, David says it is an exciting time to be at Net Insight in Singapore. ”The Nimbra platform is a proven and mature product that is simply the best solution available for real-time video transport over SDH or optical networks.”

SIGNED IMPORTANT CONTRACTSAlong with Kenth Andersson, Director of Sales APAC, David and the rest of the team at the Singapore office have enjoyed a phenomenally successful year in 2007. Important contracts were signed with prestigious customers like KT (Korea Telecom) and ST Teleport, new partners were added, a lot of business opportu-nities were identified and many customer contacts were initiated to create an excellent foundation for new business in 2008. David explains why having strategic partnerships is a cor-nerstone in Net Insight’s strategy: ”Asia is a very large and diverse region, which would pose a challenge if we were trying to do everything ourselves. Working through experienced channel partners in each specific geographic market has proved an essential strategy for us in 2007, and will remain so moving forward.” Looking ahead, 2008 should be even more exciting, as Net Insight has been selected as supplier of equipment for the video and media network for the 2008 Beijing Olympics. ”An important part of our work in the first half of 2008 will be gearing up for the Beijing games. We have a significant amount of hardware up there already, and new inquiries are coming in weekly. Working with our partners in China and directly with some key customers, we’ll be providing on-site support for the build out and during the event itself.”

22 the Net INsIght share aND shareholDers

OWNERSHIP STRUCTURE, CAPITAL %Countries %swedish banks and institutions 27.6other swedish legal entities 7.0swedish natural persons 40.0Foreign investors 25.3

NuMBer Of OWNers (CONCeNTrATiON, %)

l sweden, 97.0 %

l usa, 0.2 %

l other, 2.8 %

NuMBer Of OWNers (CAPiTAL, %)

l sweden, 74.7 %

l usa, 10.6 %

l other, 14.7 %

NuMBer Of OWNer (VOTes, %)

l sweden, 75.8 %

l usa, 10.1 %

l other, 14.1 %

OwnershipThe company had 13,708 shareholders on December 31, 2007, compared with 13,897 the previous year. Net Insight’s three founders remain as shareholders with 2.1 percent of capital and 6.4 percent of the votes. As of December 31, 2007, the 20 largest shareholders account for 49.0 percent of capital and 50.0 percent of votes. The major shareholders increasingly consist of strong institutions and funds. Foreign ownership comprised 25.3 percent of capi-tal, compared with 26.5 percent the previous year.

Price movementsDuring the year the share price fell 38 percent. The highest price during the fiscal year, SEK 8.4, was quoted on January 9, 2007, and the lowest, SEK 3.9, on August 17, 2007. Price movements during the year fell short of the OMX index, though it outperformed companies in the technology sector to some extent (see diagram on page 23). Net Insight’s total market capitalization was about SEK 1,600 million on December 31, 2007, a decrease compared with the previous year, when it was SEK 2,900 million.

Trade volumeIn all about 533 million shares were sold at a total of value of almost SEK 3,210 million, corresponding with a turnover rate of 151 percent for 2007. On average 2.1 million shares were sold per trading day under the fiscal year. In 2006 612 million shares were sold for a total value of SEK 2,224 million and an average of 2.4 million shares were traded per day.

WarrantsIn connection with Constellation Ventures (Bear Stearns Asset Management Fund) going in as the largest shareholder of Net Insight AB in April 2004, 9,790,000 warrants (warrants 7b) were issued with a private placement. Under the terms, Constellation Ventures can re-deem the warrant sat SEK 2.3 per share and thereby obtain 1.1 shares/warrant until April 1, 2009.

Employee stock optionsThe company has three outstanding employee stock option programs that were implemen-ted in 2003, 2004 and 2007. The maximum dilution effect is about 5.5 percent of the number of shares in the company.

Share capitalShare capital amounts to SEK 14,828,000 as of December 31, 2007. The number of Class A shares amounts to 1,900,000 and the number of Class B shares to 368,702,820, for a total of 370,602,820 shares.

Dividend policyWhere appropriate the Board will make proposals regarding dividends, upon which the AGM will decide.

THENETINSIGHTSHAREANDSHAREHOLDERSNet Insight was first listed in 1999 and has been listed on the OMX Nordic Mid Cap SEK index (NETIB) since July 1, 2007.

CLASS OF SHARESClass of stock

Number of shares

Number of voting

rights

Equity, %

Votes, %

A 1,900,000 19,000,000 0.5 4.9

B 368,702,820 368,702,820 99.5 95.1

Total 370,602,820 387,702,820 100 100

20 LARGEST OWNERS AS OF DEC. 31, 2007

Name Class A shares

Class B shares

Holdings %

Votes %Market

value, SEk 000s

1 Constellation Ventures (Bear stearns asset Management Fund) 0 38,090,051 10.3 9.8 165,311

2 swedbank robur Fonder 0 36,836,620 9.9 9.5 159,8713 aMF pension fonder 0 22,243,000 6.0 5.7 96,5354 Dexia 0 13,181,638 3.6 3.4 57,2085 alecta pensionsförsäkring 0 10,611,732 2.9 2.7 46,0556 Jp Morgan Bank 0 8,892,657 2.4 2.3 38,5947 lannebo fonder 0 6,205,000 1.7 1.6 26,930

8 Nordnet pensionsförsäkring aB 0 6,168,077 1.7 1.6 26,769

9 Försäkringsaktiebolagrt, avanza pension 0 5,302,940 1.4 1.4 23,015

10 Karl otto Wikander m bolag 0 3,947,915 1.1 1.0 17,13411 lars gauffin 600,000 3,124,636 1.0 2.4 13,56112 Fjärde ap-fonden 0 3,627,800 1.0 0.9 15,74513 Mattias Westman 0 3,402,859 0.9 0.9 14,76814 eFg private Bank s.a., W8IMy 0 3,319,290 0.9 0.9 14,40615 Banco fonder 0 3,260,000 0.9 0.8 14,14816 per lindgren 800,000 2,351,790 0.9 2.7 10,20717 länsförsäkringar skåne 0 3,000,000 0.8 0.8 13,02018 seB 0 2,499,090 0.7 0.6 10,84619 Norrhem aB 0 2,180,000 0.6 0.6 9,46120 guy Wilson livs aktiebolag 0 1,795,000 0.5 0.5 7,790

Total of the 20 largest owners)– in terms of holdings 1,400,000 180,040,095 49.0 50.1 781,374

total other owners 500,000 188,662,725 51.0 50.0 818,796

Total 1,900,000 368,702,820 100.0 100.0 1,600,170

Total number of shares 370,602,820

Total number of votes 387,702,820

year Transaction Class A shares

Class B shares

Number of shares

Par value (SEk)

Share capital (SEk)

2002 New share issue 3,600,000 65,155,020 68,755,020 0.04 2,750,2012002 New share issue 3,600,000 133,910,040 137,510,040 0.04 5,500,4022003 New share issue 3,600,000 179,746,720 183,346,720 0.04 7,333,8692003 New share issue 3,600,000 225,583,400 229,183,400 0.04 9,167,3362003 New share issue 3,600,000 253,083,400 256,683,400 0.04 10,267,3362004 New share issue 3,600,000 284,083,400 287,683,400 0.04 11,507,3362004 New share issue 3,600,000 286,583,400 290,183,400 0.04 11,607,3362004 options redeemed 3,600,000 287,405,345 291,005,345 0.04 11,640,2142005 New share issue 3,600,000 360,332,660 363,932,660 0.04 14,557,3062005 options redeemed 3,600,000 364,157,010 367,757,010 0.04 14,710,2802007 options redeemed 3,600,000 367,002,820 370,602,820 0.04 14,824,1132007 Conversion of Class 1,900,000 368,702,820 370,602,820 0.04 14,824,113

a shares to Class Bshares

DISTRIBUTION OF SHARE CAPITAL

SHARE PRICE MOVEMENTS (2003–2007)Class B shares

B-aktien

oMX stockholm_pI

sX452010

2002 2003 2004 2005 20060,5

1

2

3

4

5

678

B-aktien

OMX Stockholm_PI

SX452010

(C) FINDATA

Shareholding, Number of shares

Percentage of shareholders

Percentage of share capital,

1–1,000 41.1 0.7

1,001–10,000 40.6 6.4

10,001– 50,000 13.1 11.4

50,001–100,000 2.6 7.1

100,001+ 2.6 74.4

Total 100 100

OWNERSHIP STRUCTURE - CLASS B SHARES as of Dec. 31, 2007


(C) FINData

87654

3

2

1

2003 2004 2005 2006 2007

Income statement, SEk m 2007 2006 2005 20041) 20032)

Net sales 228.8 134.8 90.9 40.5 34.6

operating earnings 32.6 –11.4 – 60.8 – 84.2 – 81.3

profit/loss after financial items 34.0 –10.2 – 59.6 – 82.4 – 80.4

Net income 34.0 –10.2 – 59.6 – 82.4 – 80.4

Balance sheet, SEk m

Fixed assets 82.1 65.3 49.0 27.8 16.0

Current assets 178.9 128.9 141.6 116.2 133.1

Total assets 261.0 194.2 190.6 144.0 149.1

shareholders' equity 181.2 136.8 147.7 114.7 126.7

liabilities 79.8 57.4 42.9 29.3 22.4

Total equity and liabilities 261.0 194.2 190.6 144.0 149.1

key ratios

gross margin, (%) 71 71 63 60 56

Capital expenditure, seK m 49.0 44.7 39.5 17.3 9.8

return on capital employed (%) 21 Neg. Neg. Neg. Neg.

return on equity (%) 21 Neg. Neg. Neg. Neg.

operating margin,(%) 14 Neg. Neg. Neg. Neg.

earnings per share

– basic, seK 0.09 – 0.03 – 0.17 – 0.29 – 0.49

– diluted, seK 0.09 – 0.03 – 0.17 – 0.29 – 0.49

Dividend per share 0 e/t e/t e/t e/t

Cash flow per share, seK 0.23 0.05 – 0.10 – 0.24 – 0.31

equity / assets ratio (%) 69 70 77 80 85

Net asset value per share, seK,

– before dilution, seK 0.49 0.37 0.40 0.39 0.49

– after dilution, seK 0.49 0.37 0.40 0.39 0.49

Number of employees as of December 31 98 82 77 69 61

added value per employee, seK 000s 1,540 993 194 Neg Neg

share price as of December 31, seK 000s 4.34 8.00 2.53 1.86 1.55

Number of shares as of December 31 370,602,820 367,757,010 291,005,345 256,683,400 137,510,040

FIVEYEARSUmmARY

return on equityNet profit as a percentage of average shareholders’ equity.

return on capital employedoperating earnings after financial items plus financial expenses in relation to average capital employed. Capital employed is the balance sheet total less non-interest bearing liabilities including deferred tax liabilities.

Gross margingross profit as a percentage of net sales.

Added value per employeeoperating earnings plus salaries and fringe benefits relative to the average number of employees.

Cash flow per shareCash flow from operating activities before changes in operating capital divided by average number of shares issued.

Earnings per share, dilutedprofit for the year divided by average number of shares issued during the year (for more information please see under accounting principles).

Earnings per share, basicprofit/loss for the year divided by the average number of shares during the year.

Operating marginCalculated on profit before net financial items and before taxes.

Equity/assets ratioshareholders’ equity divided by the balance sheet total.

Net asset value per share, basicshareholders’ equity plus undisclosed reserves in assets with an objective market value less deferred tax divided by number of shares during the year.

Net asset value per share, dilutedshareholders’ equity plus undisclosed reserves in assets with an objective market value less deferred tax divided by number of shares during the year (for more information please see accounting principles).

n/a = not applicable.1) Includes re-classifications made in connection with translation to IFrs. 2) Not restated under IFrs.

24 FIVe year suMMary

Definitions


ADmINISTRATIONREPORTNet insight AB (publ) Corp. iD No. 556533-4397

Events during the yearNet Insight develops, markets and sells network equipment for efficient and scaleable optical transport of voice, data and video. With 100% Quality of Service and optimal network utilization, the Nimbra platform offers the customers lower capital and ope-rating expenditures. The majority of Net Insight’s sales are made in Europe, North America and Asia. Net Insight’s customers are broadcast and media companies, cable TV providers, network owners and telecom operators. Net Insight was founded in 1997, has 98 employees in Stockholm and the USA and is listed on the Mid Cap (NETI B) list for Swedish shares on the Stockholm Stock Exchange.

SALESIn 2007, Net Insight achieved a breakthrough by showing an ope-rating profit and a positive cash flow for the entire year for the first time. A strong customer offering based on the new Nimbra 300 and 600 series of products, combined with market growth, has been a strong factor contributing to this positive development. The market for video transport solutions has accelerated during the year apace with the rapid growth in video traffic on com-munication networks, and the development of digital TV and HDTV. The use of video in fiber based media networks, HDTV, and the increase in real-time critical media content are driving the demand for more capacity and higher quality in the networks. Networks for Digital Terrestrial Television (DTT) are being rolled out globally, creating new opportunities for mobile TV. Network operators are reviewing their infrastructure, and building more efficient networks to meet customer demand, which is driven by new media services. These changes in the market fit Net Insight’s offering very well. During the year, existing customers continued to upgrade and expand their Nimbra networks and these customers repre-sented the majority of total revenue. During this period of rapid growth, Net Insight strengthened and improved its position as a leading supplier of transport solutions for video-intensive traffic. The Company’s global presence has been strengthened through the opening of a new sales office in Singapore, new partners in Asia, additional resources and new partners in Russia and Eastern Europe and a first partner in the Middle East. In Europe, the strong growth continued, with revenues increasing 60% compa-red with the previous year. The Norwegian DTT project was suc-cessfully opened in September and a very large part of the original contract has now been successfully delivered and installed. On the North American market there was also growth, with a 69% increase in revenues. The business activity in Asia and the Pacific region increased substantially during the year, with an order from Korea Telecom being one of the largest and most important deals. In December 2006, the Host Broadcaster of the 29th Olympiad in Beijing 2008, Beijing Olympic Broadcasting, selected Net In-sight and its Nimbra platform for the contribution network bet-ween all the Olympic Venues located in Beijing and the Interna-

tional Broadcasting Centre (IBC), also in Beijing. During 2007, shipments commenced under this contract.

PARTNERSHIPS The growing network of partners is becoming a highly efficient way to expand revenues and market reach towards new customers and countries. During the year, six new partners in Asia, Eastern Europe, and the Middle East, have been signed up. At the end of the year, Net Insight had 26 local partners, with total indirect sales increasing by 40% during the year.

MARKETING ACTIVITIESDuring the year, Net Insight was active at a number of trade shows in Europe, the United States and Asia. In the United States, Net Insight participated in the NAB2007 (National Association of Broadcasters) held in Las Ve-gas showcasing all Nimbra products, as well as introducing a new access-module. At the seminar Telecom@NAB2007 the Compa-ny gave a presentation, “Solving the QoS Bottleneck in Video and Triple Play Networks”. Net Insight also participated in Telco TV, held in Atlanta, at IPTV2007 in San Jose and at ON*Vector2007 in San Diego, as well as at several industry seminars. The entire Nimbra product portfolio was demonstrated at Europe’s largest media/broadcast trade fair, IBC2007 (Interna-tional Broadcasting Convention) in Amsterdam. In cooperation with TeliaSonera International Carrier and Astrodesign, Net In-sight performed the world’s first demonstration of uncompres-sed ultra HD (4K) video, which was broadcast through a public multi-service-network. This resulted in Net Insight winning the prize, ”Best of IBC2007” from TVB Europe. At the IBC Confe-rence, “Wired & Wireless Technologies,” Net Insight presented the unique Time Transfer function for GPS-independent synch-ronization in DDT and mobile TV networks. Net Insight also participated in the DVB World seminar in Dublin, where it fo-cused on demonstrating Nimbra 360 for applications in DTT networks. In Asia, Net Insight was represented at CommunicAsia, Asia’s largest media and TV trade show. In addition, the Asian partners presented Net Insight’s products at several trade shows, including the Shanghai TV Festival, IMMC in Tokyo, the KOBA Show in Seoul, SMPTE (Society of Motion Picture and Televi-sion Engineers) in Sydney and BIRTV (Beijing International Ra-dio, TV & Film) in Beijing. RESEARCH AND DEVELOPMENT Research and development focuses on developing internatio-nally competitive and market-leading products for the defined market segments. New products have been introduced and were well received during the year. This has further strengthened the company’s overall competitiveness. Net Insight’s Nimbra product portfolio offers a complete range of powerful multi-service swit-ches for access, edge and transport.

26 aDMINIstratIoN report

The Nimbra 680 and Nimbra 360 were introduced in the second half of 2006, and the introduction has been very successful and clearly demonstrates the vitality of our product development. The Nimbra 680 and the Nimbra 360 represented 59% (22%) of re-venues during 2007. The Nimbra 680 is a high-capacity switch, while the Nimbra 360 is a flexible access product and cost-effective solution for delivering advanced multimedia services in Broadcast and Media networks. This product also includes unique functions that make it ideally suited for Digital Terrestrial Television (DTT) and Mobile TV applications. Deliveries of the new 8-port AES/EBU access module started in the spring. This module is used for transferring digital audio and provides an excellent complement to the product portfolio’s other media and data oriented products. During the summer, the first deliveries were made of a com-pact access module for HD/SD. This new Nimbra module is being developed for the Nimbra 600 series, and has eight ports, which provides the required flexibility when supporting uncom-pressed HD content in media and TV-networks. The first deployment of the Time Transfer feature has been completed. This unique feature enables GPS-independent time synchronization in single frequency networks such as networks for DTT and Mobile TV. Based on these market-leading products and technology, the Company has built a strong customer base providing excellent reference cases.

PATENTSNet Insight’s products and solutions are at the leading edge of technology and have a highly innovative content. Net Insight the-refore considers it important to use patents to prevent technology plagiarism, protect its knowledge and know-how, and retain its technological lead. A total of 27 families of patents have been filed in one or more countries. During 2007, 5 of these patents were registered and there are now 25 patents registered in one or more countries.

ITNet Insight’s IT environment mainly consists of PC-based sys-tems using several different operating systems, such as Windows and UNIX (mainly Linux). The Company’s network environment consists of switched Ethernet (1 Gbs and 100 Mbs). Its Internet connection is protected by a firewall. VPN over the Internet is used when needed to enable remote access. In September, a decisi-on was made to invest in a new business system, better adapted to the business of the Company, and to increase the quality of finan-cial and operational management. The system was commissioned in January 2008. Other investments involve mainly expanding network capacity, increasing computer capacity, replacement of old computer equipment and upgrades for certain existing com-puters. Total IT investments during the year amounted to SEK 1.5 million (0.6).

Risk and sensitivity analysisNet Insight’s operation and result are impacted by a number of external and internal factors. A continuous process identifies all

existing risks and assesses how each risk should be managed. The risks to which the company is exposed include customer depen-dence, technology development and financial risks (predomina-tely currency exposure). Financial risks are described under Ac-counting Principles and the notes.

MARKET-RELATED RISKSCompetition and technology developmentNet Insight operates in a dynamic industry that is characterized by rapid technological development. It is therefore important that Net Insight be at the cutting edge of development to ensure that the company can provide the most attractive and competitive of-fering to the customers. Risks in this aspect are that Net Insight may not keep up with the pace of technological development, thus causing the Company’s income to decline markedly, and that Net Insight, in its efforts to be a leader, may make incorrect tech-nological investments. The board and management of Net Insight assess the risk that a leap forward in technology would make the company’s products out of date, as low. The risk for making incor-rect technological investments is also considered low. The compe-tence of the development staff, comprehensive market analysis, close competitor tracking and close cooperation with large custo-mers, contribute to keeping Net Insight well informed and up to date about technology and market trends.

Political risksMost of Net Insight’s customers are located in the Nordic countri-es, Europe, the United States, and Asia. The countries in which Net Insight currently does business are not deemed to present any significant political risks.

RISKS RELATED TO THE OPERATIONProduct liability, intellectual property rights and litigationPotential defects that may occur in Net Insight’s products could lead to claims for compensation and damages. However, the opi-nion of the Board is that Net Insight has adequate insurance co-verage regarding product liability and, hence, the direct risk is considered a limited one. Net Insight regularly seeks to protect its company name, brands and trademarks and is well prepared for infringement litigation both through insurance and through experience from its long-standing relationship with its own legal department and the Company’s legal consultants. Net Insight or its subsidiaries are not currently involved in any litigation, legal procedure or arbitra-tion. Neither is the Board aware of other circumstances that could lead to a dispute and that could damage Net Insight’s financial position to any significant degree.

Customer dependency and contract risksIf one of Net Insight’s larger customers becomes insolvent or chooses a different supplier, this will have a manageable impact on Net Insight’s earnings. This risk is significantly limited by a growing number of large customers and the relatively high cost to customers of changing suppliers. The risk that a major customer would become insolvent is limited since Net Insights customers in general are very well established media and telecom operators,


both in the private and public sectors. To further limit the risks, Net Insight continuously strives to exceed customer expectations regarding its products’ technological performance and quality as well as the level of customer service. Dependence on indivi-dual customers is also decreasing as the customer base of well- established operators grows.

SUMMARIZED RISK ASSESSMENT In the following table, an attempt has been made to assess the likelihood of Net Insight being affected by the main operational risks described in this section and the impact of these risks. The assessment does not claim to be exhaustive, but is intended to serve as an illustration of the assessment.

Corporate social responsibility and sustainable developmentNet Insight’s overarching goal is to be a leading global supplier of network products for video-intensive traffic. Responsible busi-ness means handling environmental, ethical and social aspects in a manner that makes it possible for the Company to create value for its customers, owners, and society as a whole. The executive ma-nagement team coordinates Net Insight’s strategic work with CSR and set policies and directives for environmental, social, ethic and economic governance. All manufacturing of Net Insight’s products is carried out by outside business partners, and has little environmental impact on the Company’s own activities. Net Insight has a quality manage-ment policy that includes environmental aspects, and requires that all manufacturing comply with laws and regulations. Net Insight imposes environmental requirements on its suppliers, and moni-tors compliance. The suppliers are mainly based in Sweden, and the environmental impact originates primarily from the products use of energy while in operation, as well as material handling and recycling. These aspects are considered during product develop-ment, and the products support RoHS-5 as well as meeting the WEEE requirements. Net Insight’s products support and have a positive impact on the development of telecommunication across the world. The Company’s products enable customers to reduce their operating costs, and create value in their respective local markets, and in society as a whole. At Net Insight, everyone works toward the same goals and vision. Net Insight is a young and adaptable organization, where we work close together in teams and on projects in an atmosphere of openness. We encourage creativity, listen carefully and respect the market, our customers and our employees in order to main-

tain our head start compared to our competitors. We operate in a global market where our employees need to have an open attitude toward other cultures and various ways of doing business. The Company’s ethical guidelines are the basis of our employees’ busi-ness relations to our surroundings. An annual employee survey is conducted, and serves as a basis for continuous improvement of the Company’s business.

Guidelines for remuneration for senior executivesThe most recently adopted guidelines for remuneration for senior executives are described in Note 7. At the 2008 Annual General Meeting, there will be a proposal to extend the current guidelines until the time of the next Annual General Meeting. The Board of Directors may deviate from the guidelines from case to case where special cause exists. If ownership conditions change in such a manner so that there will be a new majority owner of the Company, the CEO shall be entitled to a notice period of six months and severance pay equivalent to 18 months’ salary. This severance pay shall be diminished by any other income that the CEO obtains from oth-er employment during the notice period. If ownership conditions change so that there will be a new majority owner of the Company, the EVP of the Company shall be entitled to a notice period of six months and a severance pay equivalent to three months’ salary. The severance pay shall be di-minished by any other income that the EVP obtains from other employment during the notice period.

Sales and earnings Net Insight’s revenues during the year amounted to SEK 228.8 million (134.8), an increase of 70% compared with 2006. Hard-ware sales totaled SEK 178.9 million (109.1), an increase of 64%. Revenue for software, support and services totaled SEK 49.9 million (25.7), an increase of 94% compared with the previous year. By region, sales in Europe were SEK 175.2 million (109.2), North America, SEK 41.0 million (24.3) and APAC, SEK 12.6 million (1.3). By business segments, BMN (Broadcast & Media Networks) accounted for SEK 61%, DTT (Digital Terrestrial TV) and mobile TV for 38%, and IPTV/CATV for 1%. Gross margin totaled 70.8 % (70.5). Despite the strong growth in sales, gross margin has remained at a very high level, this is mainly due to the strong customer offering represented by the new cost-efficient products in the Nimbra 300 and 600 series and higher revenues from software, support and services. The total operating costs for the year amounted to SEK 141.2 million (119.9), an increase of 18%. This increase is re-lated to greater resources devoted to marketing and sales to meet increased demand for the Company’s products, as well as more resources for product development. Adjusted for depreciation and capitalization of development costs, the increase of operating expenses amounted to approximately 9%. Depreciation of capi-talized development costs totaled SEK 39.2 million (26.1). Provi-sions for costs relating to the option programs and the long-term variable compensation totaled SEK 5.2 million. The IFRS 2 cost of the new option program 2007/2011 totaled SEK 2.9 million.

Risks to Net InsightRisk Probability Impact

Product fault leading to product liability Low Low Intellectual property dispute Low Low Major customer becomes insolvent Low MediumMajor customer leaves Net Insight for competitor Medium MediumNet Insight’s technology becomes outdated Low HighNet Insight makes incorrect technology investment Low High

28 aDMINIstratIoN report

Insight and the network will carry real-time traffic for professional media companies across 17 of North America’s largest cities. Net Insight received a second order from HTN Communica-tions to expand its Nimbra-based transport network for enhanced sports programming across U.S. major league sport venues.

OutlookThe board is pleased with the progress in 2007 and is confident that the possitive development will continue in 2008.

DividendThe Board will propose a dividend when appropriate about which the annual general Meeting will make a decision. The board pro-poses that the AGM resolve that no dividend is paid for the finan-cial year 2007.

Proposed distribution of earnings

The following funds are at the disposal of the Parent Company

Premium reserve SEK 8,126,537Group contribution SEK 2,092,231Profit for the year SEK 32,333,573 Total: SEK 42,552,341

The Board of Directors proposes that funds be disposed of as follows: To be brought forward 42,552,341 SEK. With regard to the result and position of the Group and Pa-rent Company in general, please refer to the following balance sheets, income statements and cash flow statements, with ac-companying notes.

BOARDS’ ASSURANCEThe board and CEO confirms that the groups accounts have been prepared in accordance with IFRS and that they give a true and fair view of the groups financial position and performance. The Administration Report covering the parent and group gives a true and fair view of their activities, financial position and per-formance, as well as discussing material risks and exposed areas at the parent and companies within the group.

Operating earnings amounted to SEK 32.6 million (-11.4). Ad-justed for the other operating revenue of SEK 11.9 million, of which SEK 9.8 million derives from the acquisition of a Swedish partnership, operating earnings amounted to SEK 20.7 million (-24.9). The improvement of operating profit can be primarily ex-plained by higher revenue, continuing strong gross margin, more cost effective products and increased productivity. Net financial items amounted to SEK 1.3 million (1.2). Net income amounted to SEK 34.0 million (-10.2).

CASH FLOW AND FINANCIAL POSITIONAt the end of the year, liquid funds totaled SEK 128.2 million (77.7). This year’s cash flow totaled SEK 50.6 million (–15.2). Cash flow from ongoing operations totaled SEK 95.4 million (30.5). Working capital totaled SEK 109.6 million (71.5). Ongo-ing investments in capitalized development costs have affected cash flow in the amount of SEK – 49.0 million (– 44.7). Ongoing investments in fixed assets have affected cash flow in the amount of SEK – 9.0 million (– 0.9). Equity capital totaled SEK 181.2 million (136.8), resulting in an equity/asset ratio of 69% (70%). On the balance sheet date, Net Insight had unutilized credit and factoring facilities of SEK 75 million.

INVESTMENTSIn 2007 the Company acquired shares in a partnership, and the-reby obtained SEK 9.8 million in net cash. The acquisition entai-led other operating revenue of SEK 9.8 million in the group. See Note 13 and 32 for further details. Investments in tangible fixed assets during the period amounted to SEK 2.6 million (0.9). Capitalized development costs, which have been reported as intangible fixed assets, amoun-ted to SEK 49.0 million (44.7). At the end of the year, intangible fixed assets (net value after depreciation) amounted to SEK 69.2 million (59.4).

EMPLOYEESAt the end of year, the Group had 98 (82) employees. The Parent, Net Insight AB, had 91 (75) employees, two of whom are statio-ned in Singapore. The American subsidiary, Net Insight Inc, had 7 (7) employees.

PARENTThe Parent company’s net turnover was SEK 269.7 million (166.1). Net income totaled SEK 32.2 million (-8.1). Liquid funds totaled SEK 127.0 million (76.5).

Significant events after the periodIn the beginning of the year, the company was selected to supply Nimbra equipment for a national Digital Terrestrial TV and Mo-bile TV network (DVB-T/H) to the leading broadcaster and sa-tellite operator in an Asian country. Switzerland’s public broadcaster SRG, selected Net Insight’s Nimbra platform for a media contribution network spanning four Swiss sites during the European Football Championship 2008. Net Insight received an order from a new North American video transport service provider. This is a new customer to Net


The income statement and balance sheet will be submitted to the Annual General Meeting on April 10 for adoption.

Stockholm February 21, 2008.

Lars Berg Bernt Magnusson Chairman

Ragnar Bäck Clifford H Friedman

Birgitta Stymne Göransson Marco Limena

Fredrik Trägårdh Chief Executive Officer

Our auditor’s report was submitted on February 28, 2007.

Sten Håkansson Authorized Public Accountant

30

GROUPCONSOlIDATED INCOME STATEMENTAmounts in SEk 000 NOTE 2007 2006

Net sales 5, 33 228,764 134,783Cost of goods sold 9 – 66,788 – 39,808Gross earnings 161,976 94,975

Marketing expenses 7, 10, 11 – 64,917 – 52,241administration expenses 7, 9, 10, 11, 12 – 22,946 –18,960Development expenses 7, 8, 9, 10, 11 – 53,370 – 48,680other operating income 13 11,898 13,497Operating earnings 6 32,641 –11,409

result from financial investmentsFinancial income 14 2,796 1,426Financial expenses 15 – 1,478 –185result from financial investments 1,318 1,241

Net income before tax 33,959 –10,168tax 31 0 0Net income 33,959 –10,168

Earnings per share 16 0.09 – 0.03Earnings per share after dilution 16 0.09 – 0.03

the result in its entirety is attributable to the parent Company.

CONSOLIDATED BALANCE SHEETAmounts in SEk 000 NOTE 31 dec 2007 31 dec 2006

ASSETSIntangible fixed assetsCapitalized expenditures for development 17 69,194 59,380goodwill 17 4,354 4,354Tangible fixed assetsequipment 18 3,465 1,497equipment for leasing 18 4,864 0Financial fixed assetsDeposits paid, long-term 19 187 71Total fixed assets 82,064 65,302

Current assetsInventories 21 20,511 20,875accounts receivable 22 20,010 20,848other receivables 22 4,924 6,221prepaid expenses and accrued income 22 5,223 3,308Cash and cash equivalents 23 128,233 77,682Total current assets 178,901 128,934Total assets 260,965 194,237

lIABIlITIES AND SHArEHOlDErS’ EquITyShareholders’ equityEquity attributable to the parent share capital 24 14,828 14,710other contributed capital 1,153,294 1,142,247translation differences – 2,478 –1,773accumulated deficit – 984,429 –1,018,388Total shareholders’ equity 181,215 136,796

long-term liabilitieslong-term liabilities 2,188 0other provisions 25 8,287 0Total long-term liabilities 10,475 0

Current liabilitiesother provisions 25 7,608 7,465accounts payable 16,255 25,265other liabilities 26 7,259 1,971accrued expenses and prepaid income 27 38,153 22,740Total liabilities 69,275 57,441Total liabilities and shareholders’ equity 260,965 194,237


CONSOlIDATED CASH FlOW STATEMENTAmounts in SEk 000 NOTE 2007 2006

Operating activitiesearnings before tax 33,959 –10,168Depreciation 9 41,380 27,854other items not affecting liquidity 28 10,521 1,034Cash flow from operating activities before changes in working capital 85,861 18,720

CHANGES IN WOrkING CAPITAlIncrease (–)/Decrease (+) in inventories 364 –7,014Increase (–)/Decrease (+) in receivables 220 4,451Increase (+)/Decrease (–) in current liabilities 11,834 14,310Cash flow from operating activities 98,279 30,467

INVESTING ACTIVITIESacquisitions of intangible fixed assets 17 – 49,020 – 44,688acquisitions of tangible fixed assets 18 – 9,025 – 945Increase (–)/Decrease (+) in long-term receivables – 116 – 71Increase (+)/Decrease (–) in long-term liabilities 2,188 0Cash flow from investing activities – 55,973 – 45,704

FINANCING ACTIVITIES 32option programs/New share issue 8,245 0Cash flow from financing activities 8,245 0

Increase/Decrease in liquid funds 29, 30 50,551 –15,237liquid funds, opening balance 29, 30 77,682 92,919liquid funds, closing balance 128,233 77,682

CHANGES IN GrOuP SHArEHOlDErS’ EquITy

Amounts in SEk 000 Share capitalOther contribu-

ted capital reservesAccumulated

deficitTotal sharehol-

ders’ equity

January 1, 2006 14,710 1,141,839 – 634 – 1,008,221 147,694translation difference for the period 0 0 – 1,139 0 – 1,139

total transactions reported directly in shareholders’ equity 0 0 – 1,139 0 – 1,139

Net earnings 0 0 0 – 10,167 –10,167

total revenue/expenses for the year 0 0 – 1,139 – 10,167 – 11,306

personnel option program:Value of employees’ services 0 408 0 0 408December 31, 2006 14,710 1,142,247 –1,773 – 1,018,388 136,796

January 1, 2007 14,710 1,142,247 –1,773 – 1,018,388 136,796translation difference for the period 0 0 –705 0 –705

total transactions reported directly in shareholders’ equity 0 0 –705 0 –705

Net earnings 0 0 0 33,959 33,959

total revenue/expenses for the year 0 0 –705 33,959 33,254

Non-registered share capital 4 256 0 0 260New shares issued - personnel option program

114 7,871 0 0 7,985

personnel option program:Value of employees’ services 0 2,920 0 0 2,920December 31, 2007 14,828 1,153,294 – 2,478 – 984,429 181,215

32

PARENTCOmPANYINCOME STATEMENTAmounts in SEk 000 NOTE 2007 2006

Net sales 5, 33 269,730 166,050Cost of goods sold 9 – 111,242 –72,891Gross earnings 158,488 93,159

Marketing expenses 7, 10, 11 – 62,768 – 51,757administration expenses 7, 9, 10, 11, 12 – 30,013 – 25,573Development expenses 7, 8, 9, 10, 11 – 45,872 – 38,354other operating income 13 9,806 13,497Operating earnings 6 29,641 – 9,028

result from financial investmentsImpairment loss in subsidiaries 20 – 170 0share in profits from partnership 20 1,603 –194Financial income 14 2,734 1,305Financial expenses 15 – 1,475 –185Total result from financial investments 2,692 926

Net income before tax 32,333 – 8,102tax 31 0 0Net income 32,333 – 8,102

BAlANCE SHEETAmounts in SEk 000 NOTE 31 dec 2007 31 dec 2006

ASSETSINTANGIBlE FIxED ASSETSCapitalized expenditures for development 17 69,194 56,649Tangible fixed assetsequipment 18 3,465 1,325equipment for leasing 18 4,864 0Financial fixed assetsshares in group companies 20 3,387 5,022Deposits paid, long-term 19 187 71Total fixed assets 81,097 63,067

Current assetsInventoryproducts in progress 21 3,400 0Finished goods 21 17,111 20,875receivablesaccounts receivable 22 20,010 20,848other receivables 22 2,636 6,217prepaid expenses and accrued income 22 5,223 3,283receivable other group companies 4,272 0Cash and bank balances 23 126,982 76,543Total current assets 179,634 127,766Total assets 260,731 190,833

lIABIlITIES AND SHArEHOlDErS’ EquITyShareholders’ equityrestricted equityshare capital 24 14,824 14,710Non-registered share capital 4 0legal reserve 116,558 121,739Non-restricted equity/Accumulated deficit share premium reserve 8,127 0retained earnings 2,092 0Net income 32,333 – 8,102Total shareholders’ equity 173,939 128,347

Provisionsother provisions 25 15,894 7,465Total provisions 15,894 7,465

long-term liabilitieslong-term liabilities 2,188 0Total long-term liabilities 2,188 0Current liabilitiesaccounts payable 16,255 25,265payables to group companies 9,043 6,062other short-term liabilities 26 7,259 1,681accrued expenses and prepaid income 27 36,153 22,013Total short-term liabilities 68,710 55,021Total liabilities and shareholders equity 260,731 190,833

Pledged assets 29 355 1,316Contingent liabilities none none


CONSOlIDATED CASH FlOW STATEMENT

Amounts in SEk 000 NOTE 2007 2006

Operating activitiesNet income before tax 32,333 – 8,102Depreciation 9 38,495 21,987other items not affecting liquidity 28 11,864 1,295Cash flow from operating activities before changes in Working capital 82,692 15,180

Changes in working capitalIncrease (–)/Decrease (+) in inventories 364 –7,014Increase (–)/Decrease (+) in receivables – 1,793 4,351Increase (+)/Decrease (–) in current liabilities 13,831 15,638Cash flow from operating activities 95,094 28,155

Investing activitiesacquisitions of intangible fixed assets 17 – 49,020 – 44,688acquisitions of tangible fixed assets 19 – 9,025 – 945Net investment in subsidiaries 3,073 2,198Increase (-)/Decrease (+) in long-term receivables – 116 –71Increase (+)/Decrease (–) in long-term liabilities 2,188 0Cash flow from investing activities – 55,088 – 43,506

Financing activitiesoption programs/New share issue 8,245 0Cash flow from financing activities 8,245 0

Increase/Decrease in liquid funds 29,30 50,439 – 15,351liquid funds, opening balance 29,30 76,543 91,894liquid funds, closing balance 126,982 76,543

CHANGES IN PArENT COMPANy SHArEHOlDErS EquITy

Amounts in SEk 000 Share capital legal reserve Share pre-

mium reserveretained earnings Net income

Total sharehol-ders’ equity

January 1, 2006 14,710 189,867 0 0 – 68,536 136,041Net profit/loss 0 – 68,536 0 0 68,536 0personnel option program:Value of employees’ services 0 408 0 0 0 408Net income 0 0 0 0 – 8,102 – 8,102December 31, 2006 14,710 121,739 0 0 – 8,102 128,347

January 1, 2007 14,710 121,739 0 0 – 8,102 128,347Net profit/loss 0 – 8,102 0 0 8,102 0Non-registered share capital 4 0 256 0 0 260New shares issued - personnel option program 114 0 7,871 0 0 7,986

group contribution 0 0 0 2,092 0 2,092personnel option program:Value of employees’ services 0 2,920 0 0 0 2,920Net income 0 0 0 0 32,333 32,333December 31, 2007 14,828 116,558 8,127 2,092 32,333 173,939

34

Note 1 general informationNet Insight develops and sells network equipment for fiber optic networks for the transmission of voice, data and video. With the Nimbra product family, traffic in the network can be transmitted with 100 percent quality of service at the same time that the network’s capacity is fully utilized, which leads to major savings in both operational and capital expenditures for the customers. the Company primarily sells in North america, europe and asia to television broadcasters, production companies, cable-tV and telecommu-nication operators. Net Insight was founded in 1997 and has 98 employees in sweden and the us. Net Insight was listed on the stockholm stock ex-change in 1999 and has been listed on the oMX Nordic Mid Cap seK index since July 1, 2007.

Note 2 summary of important accounting principlesthe most important accounting principles applied in the preparation of the consolidated accounts are indicated below. these principles have been app-lied consistently for all years represented, unless otherwise stated.

2.1 BASIS FOr THE rEPOrT’S PrEPArATIONthe consolidated accounts were prepared in accordance with the annual accounts act, International Financial reporting standards (IFrs) and inter-pretational statements from the International Financial reporting Inter-pretations Committee (IFrIC), which have been adopted by the european Commission. Furthermore, the swedish Financial accounting standards Council’s recommendation rr 30 supplemental accounting regulations for groups was applied.

the parent Company’s annual report was prepared in accordance with rr 32.06 and the annual accounts act. the most important accounting prin-ciples applied in the preparation of the consolidated accounts are indicated below. these principles have been applied consistently for all years repre-sented, unless otherwise stated. New IFrs directives and interpretations, which have been published, but have not yet entered into effect, and which Net Insight does not yet apply, are listed below.• IFRS 8 Operating segments this standard enters into effect on January 1, 2009 and applies to fiscal years that start as of this date. the standard concerns the division of the Company’s business into different segments. under the standard, the Company shall use the structure of internal reporting as a starting point and determine reportable segments according to this structure. the Company’s preliminary assessment is that another three segments will be presented in the 2009 annual report.• IAS 1 (Amendment) Presentation of financial statements* the amendment of this standard enters into effect on January 1, 2009. the changes mainly involve the presentation and titles of the financial state-ments. the future presentation of financial statements for the group will therefore be affected by implementation of this standard. *this standard/ interpretation has not been adopted by the eu at this time.

2.2 CONSOlIDATED ACCOuNTSSubsidiariessubsidiaries are all of the companies (including companies for special purposes) where the group is entitled to govern financial and operational strategies in a manner usually pursuant to shareholdings amounting to more than half of the voting rights. the occurrence and effect of potential voting rights that are currently possible to utilize or convert are observed in the as-sessment of whether the group exercises control over another company.

a subsidiary is to be included in the consolidated accounts as of the date that control is transferred to the group. a subsidiary is excluded from the consolidated accounts as of the date that control ceases. the purchase met-hod is used to report the group’s acquisition of subsidiaries. the purchase cost of an acquisition is comprised of the fair value of assets provided as payment, issued equity instruments and liabilities arising or assumed as of the date of transfer, plus costs directly attributable to the acquisition. Identifiable acquired assets and assumed liabilities and contingent liabilities in a corporate acquisition are initially valued at fair value as of the date of ac-quisition regardless of the extent of a potential minority interest. the surplus comprised of the difference between the purchase cost and the fair value of the group’s share of identifiable acquired net assets is reported as goodwill. If the purchase cost is less than the fair value of the acquired subsidiary’s net assets, the difference is reported directly in the income statement.

2.3 SEGMENT rEPOrTINGa business segment is a group of assets and operations that provide pro-ducts or services exposed to risks and opportunities that differ from what

applies to other business segments. geographic areas provide products or services in an economic environment exposed to risks and opportunities that differ from what applies to other economic environments. the Company’s sales pertain to one product segment, within which different solutions have been created depending on the customer’s specific requirements and desires. the Company’s sales are also reported divided into different markets, which do not yet meet the requirements to be reported as different segments. this assessment is based on the Company having absolutely no investments in other markets. In other words, the Company has a primary and a secondary segment.

2.4 TrANSlATION OF FOrEIGN CurrENCIESA. functional currency and reporting currencyItems included in the financial statements for the different units in the group are valued in the currency used in the economic environment in which the respective companies are primarily active (functional currency). In the consolidated accounts as well as the parent Company’s financial statements swedish kronor (seK) are used, which is the parent Company’s functional currency.

B. Transactions and balance sheet itemsForeign currency transactions are translated to the functional currency at the exchange rates applicable on the transaction date. exchange gains and losses arising upon payment of such transactions and in translation of mo-netary assets and liabilities in foreign currencies at the exchange rate on the reporting date are reported in the income statement.

C. group companiesthe financial position and performance of the foreign subsidiary, which has a different functional currency than the reporting currency, are translated to the group’s reporting currency as per the following:i) assets and liabilities for the balance sheet are translated at the reporting date rateii) income and expenses are translated at the average exchange rate, andiii) all exchange rate differences that arise are reported as a separate part of equity.

2.5 TANGIBlE ASSETS COSTthe Company’s tangible fixed assets are carried at purchase cost with deductions for depreciation. Included in the purchase cost are expenses that can be directly attributed to the acquisition of the asset. the straight-line depreciation method is applied for all types of assets over their estimated useful lives, as follows: –equipment 3–5 years.

2.6 INTANGIBlE ASSET COSTSa. Costs that are directly linked with the development of products are recognized as intangible assets in the following cases: the Company intends to complete the product; there are probable economic benefits relating to its commercial opportunities, and it is possible in terms of technology and resources to complete the product so that it can be sold and its costs can be measured reliably. Costs include the costs for employees that arise through development of the products and a reasonable proportion of indirect costs. other development expenditures are reported as costs as they arise. Deve-lopment expenditures that have previously been reported as a cost are not reported as an asset in an ensuing period. Development expenditures with a limited useful life that have been capitalized are depreciated straight-line from the time that the commercial production of the product is initiated. De-preciation is done during the expected useful life. the following depreciation periods are applied: –Capitalized expenditures for development 3 years.When an indication exists that an asset has decreased in value, an as-sessment of the asset’s carrying amount is done. When an asset’s carrying amount exceeds its estimated recoverable amount, the asset is immediately impaired to its recoverable amount.

B. goodwill comprises the amount with which the purchase cost exceeds the fair value of the group’s share of the acquired subsidiary’s identifiable net assets at the time of acquisition. goodwill on acquisitions of subsidiaries is included in intangible assets and has an indefinite useful life. goodwill is tested at least annually to identify potential impairment requirements and is reported at purchase cost less accumulated impairment losses. gains or los-ses upon disposal of a unit include residual carrying amount of the goodwill pertaining to the disposed unit.

goodwill is not depreciated on a straight-line basis in the group. all intangible fixed assets will be tested by compared the carrying amount with the recoverable amount every year or when indications of impairment requirements exist, as per Ias 36 – Impairment of assets.

Notes


2.7 IMPAIrMENTassets that have an indefinite useful life are not depreciated, but rather reviewed annually regarding potential impairment requirements. assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Impairment is applied in the amount with which the asset’s carrying amount exceeds its recoverable amount. the recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Net Insight comprises a cash-generating division.

2.8 FINANCIAl INSTruMENTSFinancial instruments reported on the assets side of the balance sheet include cash and cash equivalents, financial receivables, accounts receiva-ble, accounts payable and deposits paid. the group classifies its financial instruments in two categories: loan receivables and accounts receivable, and financial liabilities as described in 2.10 and 2.11 respectively. a financial asset or financial liability is carried in the balance sheet when the Company becomes a party to the instrument’s contractual terms. a financial asset is removed from the balance sheet when the rights in the agreement are realized, lapse or the Company loses control of them. a financial liability is derecognized from the balance sheet when the obligations in the contract are fulfilled or discharged in some other way. the carrying value less any impairment provision on accounts receivable and accounts payable are assumed to approximate their fair values due to the short-term nature of accounts receivable and accounts payable.

2.9 INVENTOrIESthe inventory is reported at the lowest of the purchase cost and the net selling price. the purchase cost is determined with the use of the first-in, first-out method (FIFo). the net selling price is the estimated selling price in the operating activities less applicable variable selling expenses.

2.10 ACCOuNTS rECEIVABlEaccounts receivable are reported initially at fair value and subsequently less any provisions for bad debts. a provision for accounts receivable bad debts is applied when there is objective proof and other indications that the group will not be able to obtain all amounts due under the receivables’ original terms. the size of the provision comprises the difference between the asset’s carrying amount and the estimated fair value. the reserved amount is recognized in the income statement under the item marketing expenses.

the Company has an agreement relating to loans on accounts receivable. the ownership right to the accounts receivable remains with the Company as well as the risk of potential losses on accounts receivable.

2.11 ACCOuNTS PAyABlEaccounts payable are initially recognized at fair value and thereafter at amortized cost.

2.12 lIquID ASSETSliquid assets include cash, bank balances and other investments with matu-rity dates of less than three months.

2.13 SHArE CAPITAlordinary shares are classified as equity. transaction costs that can be directly attributed to the issue of new shares or options are reported in the group’s equity as a deduction from the issue funds. In the parent Company, this transaction cost is reported in the income statement.

2.14 EMPlOyEE COMPENSATIONA. Bonusesthe Company reports a liability and an expense for bonuses based on goal fulfillment with regard to achieved sales, earnings trend and achieved market objectives.

B. Pension commitmentsthe Company only has defined contribution pension plans and these are expensed as needed.

C. share related benefits the group has a share-related compensation plan where payment is made with shares. Fair value of the service that entitles employees to allocation of options is expensed. the total amount to be expensed during the vesting period is based on the fair value of the allocated options, excluding potential impact from non-market related terms for vesting (e.g. profitability and objec-tives for sales increases). Non-market related terms for vesting are observed

in the assumption about how many options are expected to be redeemable. every reporting date, the Company revises its assessments of how many shares are expected to be redeemable. the revision’s potential impact on the original assessments is reported in the income statement divided over the rest of the vesting period and corresponding adjustments are made in equity.

D. Compensation upon terminationCompensation upon termination is paid when an employee’s employment is terminated prior to the time for normal retirement or when an employee voluntarily resigns from employment in exchange for such compensation. the group reports severance pay when it is demonstrably obliged either to terminate employees according to a formal detailed plan without possibility of revocation, or to provide compensation upon termination as a result of an offer having been made to encourage voluntary resignation from employ-ment.

2.15 PrOVISIONSprovisions are made when a legal or informal obligation arises. the Company makes provisions for guarantee costs that will probably arise as well as for the management’s variable incentive program. the product warranty provision is based on historical outcome and is placed in relation to the Company’s sales. If there are several similar commitments, the probability is assessed that an outflow of resources will be required upon settlement for this entire group of commitments. a provision is reported, although the probability of an outflow is low.

2.16 rEVENuE rECOGNITIONrevenues include the fair value of goods and services sold excluding value added tax and discounts and, in the group, after elimination of intra-group sales. revenues are recognized as per the following:

A. sales of goodsrevenues mainly comprise hardware sales. the revenues pertain entirely to the parent Company and are reported upon delivery when the risk and ownership rights also transfer to the buyer. In those cases when the sale involves installation or integration as well as a final authorization from the customer, revenues are recognized upon acceptance of delivery. expected outstanding revenues are also taken into consideration and provisions are made for estimated outstanding expenses.

B. revenue from licenses, support and servicesrevenue comprises licenses, support and services. support agreements are recognized as revenue on a straight-line basis over the term of the contract.

2.17 lEASINGa lease, where a significant part of the risks and benefits of ownership is kept by the lessor, is classified as an operating lease. payments made during the lease term (after deductions for potential incentives from the lessor) are expensed in the income statement straight-line over the lease term.

When assets are leased out under operating leases, the asset is recog-nized in the balance sheet in the relevant asset class. lease income is recog-nized on a straight-line basis over the term of the lease.

all leasing agreements, whether financial or operating leases, are recog-nized as operating leases in the parent Company.

2.18 CASH FlOW STATEMENTthe cash flow statement is prepared according to the indirect method. the reported cash flow only includes transactions involving deposits or payments. Cash and bank balances are classified as liquid assets as are short-term financial investments, which are only exposed to an insignificant risk of value fluctuations and:•are traded on the open market for known amounts or•have a remaining duration of less than one month from when they are purchased.

2.19 GrOuP CONTrIBuTIONS AND SHArEHOlDEr CONTrIBuTIONSthe Company recognizes shareholder contributions as an increase in the value of shares and participations. shares and participations are then tested for impairment. group contributions are recognized based on economic substance; in other words, directly against profit/loss brought forward after deduction for the current tax effect. group contributions received that are equivalent to dividends are recognized as dividends from group companies in the income statement. a group contribution that is equivalent to a share-holders’ contribution is reported, taking into account the current tax effect, according to the principle for shareholder contributions above.

36

Note 3 financial risks

Net Insight is exposed to different financial risks of which the currency risk is clearly dominant. the Board assesses that Net Insight is primarily exposed to the following financial risks:

3.1 CurrENCy rISkCurrency risk refers to the risk that the value of a financial instrument varies due to exchange rate fluctuations. Net Insight has a strong international character with most of its sales in eur and usD. Components are mainly purchased in swedish kronor (seK) but are linked to usD through currency clauses that are regularly adjusted on delivery. Currency risks are managed according to the fiscal policy established by the Board. the risk of exchange rate fluctuation is also managed by the Company, which regularly adapts and evaluates the price lists. Net Insight does not normally have a policy of hedging future cash flows, but the Board may decide to make exceptions. hedges of existing receivables and liabilities in foreign currencies as well as hedging of net assets in foreign subsidiaries are assessed case by case, but no hedging was done in 2006 or 2007.

If the swedish kronor (seK) had strengthened/weakened by 5 percent against the eur, all other variables remaining constant, this year’s revenues as of December 31, 2007, would have been seK 9.0 million higher/lower. profits are more sensitive to exchange rate fluctuations between seK and eur during 2007 than in 2006 due to the increase in revenues in eur.

If the swedish kronor (seK) had strengthened/weakened by 10 percent against the usD, all other variables remaining constant, this year’s revenues as of December 31, 2007, would have been seK 5.5 million higher/lower. profits are more sensitive to exchange rate fluctuations between seK and usD during 2007 than in 2006 due to the increase in revenues in usD.

3.2 lIquIDITy rISkliquidity risk means that financing cannot be obtained at all, or only at shar-ply increased costs. Net Insight makes it a policy to only invest liquid assets in banks or bank-related institutions. the instruments in which liquid assets are invested shall be fully liquid so that a risk does not arise in time or value if they are not pure cash deposits. all reported accounts payable are due within one year and show the undiscounted amount.

3.3 CAPITAl rISkthe group’s objectives with respect to capital structure are to secure the group’s ability to continue operations, so that it can continue to generate returns for shareholders and benefit for other stakeholders and to maintain an optimal capital structure to keep capital down. to maintain or adjust the capital structure, the group can change the dividend it pays shareholders, repay capital to shareholders, issue new shares, or sell assets to reduce liabilities. the group’s target is for its equity ratio to be at least 65 percent.

3.4 INTErEST rISkInterest risk is the risk that the value of a financial instrument varies due to market rate fluctuations. Net Insight’s interest risk is low because the need for external financing has been limited. In those cases Net Insight utilized its invoice credit facility during the year, the interest rate was variable. the Company’s advance on receivables was not used on the balance sheet date in 2006 or 2007. Cash and cash equivalents are usually invested with a fixed interest period of two weeks up to three months.

3.5 CrEDIT rISkCredit risk means that a party in a transaction with a financial instrument can-not fulfill its commitment. In 2006 or 2007, Net Insight did not have any cre-dit losses. the Company’s customers are large, well-established companies with strong payment capacity and spread over several geographic markets. No significant concentration of credit risks, geographically or to a certain customer segment, exists. In order to limit the risks of potential credit losses, the Company’s credit policy includes guidelines and regulations for the credit rating of new customers, terms of payment and procedures and processes for handling unpaid claims.

Note 4 significant estimates and judgements for accounting purposes

estimates and judgments are evaluated on an ongoing basis, based on historic experience and other factors, including expectations of future events that are considered reasonable under the prevailing circumstances. the group makes estimates and assumptions about the future. the estimates for accounting purposes that result from these will, in terms of definition,

seldom correspond to the actual outcome. the estimates and assumptions that entail a significant risk of material adjustments in carrying amounts for assets and liabilities during the next fiscal year are discussed below.

A. Assessment of impairment requirements for goodwill annually, the group assesses if any impairment requirements exist for good-will, in accordance with the accounting principle described in clause 2.7. the recoverable amount for the Company’s cash-generating unit was established by calculating the value in use. For these calculations, certain estimates must be done (Note 17).

B. Assessment of impairment requirements for capitalized development expenses. expenses arising in development projects are reported as intangible fixed assets when it is probable that the project will be successful in terms of its commercial and technical potential and when the expenses can be measured reliably. at each reporting occasion, the Company assesses if any impairment requirements exist within capitalized development expenses. this means that a complete review of these expenses is done with regard to economic life and the products’ profitability. the products’ life varies and is generally between five to eight years. the depreciation rate concerning capitalized development expenses is three years. Because of the short depreciation period there has been no need for impairment to date.

C. Deferred taxDeferred tax claims pertaining to loss carry-forwards have not yet been recorded. Deferred tax assets are recognized when it is probable that future taxable profit will be available against which the unused tax losses can be utilized. Deferred tax claims pertaining to temporary differences that are as-signed to investments in the subsidiaries are not reported in Net Insight aB’s consolidated accounts since the parent Company can control when the entry for temporary differences will be reversed and it is not deemed likely that a reversal will occur within the foreseeable future.

Note 5 Net sales and segment information

the group’s sales pertain to one product segment, within which different solutions are created depending on the customer’s specific requirements and desires. orders, inventories and invoiced sales have taken place exclu-sively from sweden. the distribution of sales across different markets, which do not yet meet the requirements to be reported as different seg-ments, is indicated below. this assessment is based on the fact that the Company has absolutely no investments in other markets. the assets of the american subsidiary consist solely of liquid assets amounting to seK 1,075 thousand.

the group sells to four primary geographic areas, which are guided by a global perspective. all invoicing is done from the parent Company, where all revenues are reported. the following indicates the distribution of net sales across geographic markets:

Group 2007 2006sweden 10,291 4,628europe (excluding sweden) 164,926 104,576North america 41,005 23,903asia 12,542 1,676Total 228,764 134,783

Parent Company 2007 2006sweden 51,257 35,896europe (excluding sweden) 164,926 104,576North america 41,005 23,903asia 12,542 1,675Total 269,730 166,050

Internal invoicing for services received in the form of further development of products and for administrative services to the subsidiary by the parent Company has taken place since 2004. the subsidiary invoices the parent Company monthly for a license fee for the use of the intellectual property rights.

During the year, invoices to the subsidiary amounted to seK 40,966 thou-sand (31,267). this invoicing pertains to further development of products licensed to the parent Company and administrative costs incurred by Net Insight aB on the partnership’s behalf.

Internal transactions 2007 2006

sales to NIIp hB 40,966 31,267purchases from NIIp hB 44,454 33,083


Note 6 exchange rate differences

exchange rate differences regarding operating receivables and operating liabilities are included in operating profit/loss as per the following:

Group Parent Company2007 2006 2007 2006

exchange rate gains 8,290 8,308 8,290 8,308exchange rate losses – 6,506 – 8,141 – 6,506 – 8,141Net exchange rate differences 1,784 167 1,784 167

hedge accounting is not applied, but rather the total effect of rate fluctua-tions have been reported directly in the income statement under the type of cost of other costs.

Note 7 Personnel

average number of employees, salaries and wages, other benefits and social security contributions.

Average number of emplyees of which men %

sweden 85 (73) 88 (90)usa 8 (7) 88 (100)

at year-end, the number of employees was 91 (75) in the parent Company and 7 (7) in the subsidiary. absence due to sick leave amounted to 3.0 percent (2.7) of the total ordi-nary working hours in the Company. of the absence due to sick leave in the Company, 2.0 percent (1.5) comprised coherent absence covering more than 60 days, i.e. sick leave absence excluding long-term absence amounted to 1.0 percent (1.2). Women’s absence amounted to 2.1 percent (1.8) of total working hours in the Company. In the age group 30-49, sick leave is 1.5 percent (1.3) of the group’s total ordinary working hours. In the age group 50– 65 years the sickness absence rate is 1.5 percent. the other age groups comprise less than 10 people, which is why they are not reported separately.

Number of directors and senior executives

Group (incl subsidiary) 2007-12-31Of which

men

2006-12-31Of which

men

Board members 9 90 % 10 80 %Chief executive officer and other senior executives 5 100 % 5 100 %Parent Company

Board members 6 83 % 6 83 %Chief executive officer and other senior executives 5 100 % 4 100 %

reMuNerATiON AND OTHer BeNefiTs

2007 Board of Directors

GrOuP 2007 2007 2006 2006

SEk 000 Directors’ fees Fee Other remu-neration Fee Other remu-

neration

lars Berg (chairman) 300 0 300 0ragnar Bäck 125 0 125 0Clifford h. Friedman 125 0 125 0Marco limena 125 0 125 116Bernt Magnusson 125 0 125 0Birgitta stymme göransson 125 0 125 0Total 925 0 925 116other remuneration refers to consultant fees. the amounts refer to both parent and subsidiary.

2007 Distributed among the CEO, VP, other senior executives and other employees

SEk 000Fixed salary

Variable remu-

ne-ration

Other bene-

fits

Pen-sion costs

Share-based

remune-ration

Other remu-nera-tion Total

Fredrik trägårdh (Ceo) 1,750 1,788 0 642 369 0 4,549anders persson (Vp) 1,500 898 0 383 300 0 3,081other senior executives (3) 3,779 423 116 646 502 428 5,893

other employees 47,590 7,750 704 7,970 1,750 608 66,371Total 54,618 10,859 819 9,641 2,921 1,036 79,893

2006 Distributed among the CEO, VP, other senior executives and other employees.

SEk 000Fixed salary

Variable remune-

ration

Other bene-

fits

Pen-sion

costs

Share-based

remune-ration


Fredrik trägårdh (Ceo) 1,523 493 0 686 78 0 2,779tomas Duffy (f.d.VD) 167 0 0 140 0 0 307anders persson (Vp) 1,313 328 0 331 41 0 2,013other senior executives (3) 3,300 963 113 425 63 0 4,864

other employees 44,117 7,376 728 7,364 226 0 59,811Total 50,419 9,160 840 8,946 408 0 69,773

other benefits refer to health insurance.other remuneration includes severance pay.

PArENT COMPANy


SEk 000Fixed salary

Variable remu-

ne-ration

Other bene-

fits

Pen-sion costs

Share-based

remune-ration


Fredrik trägårdh (Ceo) 1,750 1,788 0 642 369 0 4,549anders persson (Vp) 1,500 898 0 383 300 0 3,081other senior executi-ves (2) 2,443 423 0 646 493 0 4,005other employees 41,103 5,980 0 7,970 1,644 482 57,178Total 46,796 9,089 0 9,641 2,806 482 68,813


SEk 000Fixed salary

Variable remune-

ration

Other bene-

fits

Pen-sion costs

Share-based

remune-ration


Fredrik trägårdh (Ceo) 1,523 493 0 686 78 0 2,779tomas Duffy (former Ceo) 167 0 0 140 0 0 307anders persson (Vp) 1,313 328 0 331 41 0 2,013

other senior executives (4) 1,760 963 0 425 48 0 3,196

other employees 37,997 6,744 0 7,364 213 0 52,318Total 42,759 8,528 0 8,946 380 0 60,613

2007

SEk 000

Fixed salary

Variable remune-

ration

Other bene-

fitsPension

costs

Share-based remunera-

tion

Other remune-

ration

social costs Total

sweden 46,796 9,089 0 9,641 2,806 482 21,507 90,320usa 7,822 1,770 819 0 114 555 701 11,781

2006

SEk 000

Fixed salary

Variable remune-

ration

Other bene-

fitsPension

costs

Share-based remunera-

tion

Other remune-

ration

social costs Total

sweden 42,759 8,528 0 8,946 380 0 17,521 78,134usa 7,660 632 840 0 28 0 565 9,725

other benefits refer to health insurance.other remuneration includes seve-rance pay.

senior executives’ terms and remuneration as well as general remuneration principles.the Company applies market-based salaries and benefits based on fixed and variable elements, which are reviewed by an external salary consultant. remuneration to the Ceo and other senior executives is comprised of a base salary, variable remuneration, personnel options and a pension.

senior executives refers to the three persons who together with the Ceo and Vice president constitute the executive management, all of whom are men. the breakdown between basic salary and variable remuneration is in proportion to the responsibility and authority of the senior executive. Variable remuneration is generally based on a combination of revenues, performance and activity objectives. For the Ceo, the annual variable remuneration has a ceiling of 100 percent, and for the Vice president, the ceiling is 60 percent of the base salary. of the variable remuneration, 70 percent is based on measu-rable financial targets. For the Ceo and the Vice president, the contractual base salary is fixed 2006, 2007 and 2008. half of the variable remuneration that falls due from 2006, 2007 and 2008 is locked in and will be paid in april 2009, with a multiplier on the accumulated, locked-in amount. the multiplier is calculated on the increase of the Company’s market capitalization from the

38

time that the Ceo and Vice president took over their positions, compared with the average market capitalization during the 6 month period from octo-ber 1, 2008 to March 31, 2009.

Variable remuneration is paid if the market capitalization as described above corresponds with a minimum share price of seK 5 and a maximum of seK 12.50. For other senior executives, the variable remuneration has a ceiling of 30 percent of the base salary. a provision is made as with other variable remuneration including social security contributions. almost all employees have some form of variable remuneration and all employees participate in the personnel option program.

Pension commitmentsthe Company’s pension commitments towards the Ceo amount to 35 percent of the annual salary excluding bonuses. For other senior executives pension commitments amount to 20 to 35 percent of the annual salary. all pension plans are defined contribution plans. the pension age for the Ceo and other senior executives is 65 years.

severance paya mutual period of notice of six months applies between the Company and the Ceo. upon termination on the part of the Company, severance pay of eighteen months’ salary is received with no obligation to work from the end of the term of notice. any salary or other remuneration that the Ceo recei-ves in a new position or in a company that the Ceo runs during the eighteen months following the period of notice shall be deducted from the severance pay. the contract between the Company and the other management em-ployees is subject to three to six months’ notice by either party.

financial instrumentson December 31, 2007 the Ceo had 2,350,000 personnel options, the Vice president had 1,400,000 personnel options and the other senior executives had 2,058,000 personnel options.

Senior executives holdings (number) as of Dec. 31, 2007Personnel

options 2002Personnel

options 2003 Personnel

options 2004Personnel

options 2007

CEOBB 150,000 700,000 900,000 0 Change for the year – 150,000 0 0 750,000 eB 0 700,000 900,000 750,000 value 135,000 1,192,500VPBB 250,000 250,000 600,000 0 Change for the year – 250,000 – 100,000 0 650,000 eB 0 150,000 600,000 650,000 value 90,000 1,033,500Other senior executivesBB 50,000 130,000 1,350,000 0 Change for the year – 50,000 – 122,000 – 400,000 1,100,000 eB 0 8,000 950,000 1,100,000value 1,425,00 1,749,000

Value refers to the estimated market value at the grant date of the stock option plan 2007 and 2004. the market value has been calculated using the Black & scholes valuation model. Based on an analysis of the historical volatility for the Company’s share price the expected volatility is assessed to be 40 percent (2007) and 35 percent (2004). however, those disposition res-trictions that apply to personnel options have a value reducing effect, which has been calculated based on anticipated personnel turnover and the proba-bility of redemption of the instruments before the expiration of the duration. the value reducing effect has been assessed at 40 percent compared with the estimated value of the personnel option in accordance with the Black & scholes valuation model. possible future dividends have not been taken into consideration. the value per employee stock option as of the grant date has been calculated to be seK 1.59 (2007) and seK 0.15 (2004).

Preparatory and decision-making processBenefits paid to the Ceo for the 2007 fiscal year were approved by the Board. Benefits to other senior executives were approved by the remunera-tion Committee after consultation with the Ceo.

related party transactionsrelated party transactions have only been carried out with subsidiaries during 2007, as specified in note 5.

Personnel option programsthe annual general Meeting resolved to approve personnel option programs during 2003, 2004 and 2007. the 2007 annual general Meeting resolved to issue personnel options that provide all employees in the group to acquire Class B shares with the grant date of May 25, 2007. For outstanding personnel options, the following terms apply: one third of them can be exercised per year during the first three years. exercise of the 2007 program is also associated with fulfillment of preset operational objectives at certain points in time by the Board of Directors. upon termination of employment, unexercisable personnel options normally expire. personnel options that can be exercised normally expire three months after termination of employment. personnel options are allocated without fee and may not be transferred. term, redemption price and number of allocated and outstanding options are illustrated below. the personnel option program is intended to be an in-centive for employees in the group and, therefore, contribute to the groups continued development.

Stock Option Plan 2003. Maturity date April 15, 2008

2007 2006

as of January 1 1,827,500 2,337,500allocated 0 450,000Forfeited – 55,000 – 960,000utilized – 493,000 0expired 0 0as of December 31 1,279,500 1,827,500possible to utilize 1,279,500 1,370,625total number of options 3,875,500 3,875 500redemption price 2.84 seK 2.84 seKoriginal redemption price 3.00 seK 3.00 seKNumber of shares per option 1.06 1.06

Stock Option Plan 2004. Maturity date Nov. 28, 2008. 2007 2006

as of January 1 5,865,000 6,080,000allocated 0 740,000Forfeited – 103,000 – 955,000utilized – 10,32,000 0expired 0 0as of December 31 4,730,000 5,865,500possible to utilize 4,730,000 3,929,550total number of options 8,900,000 8,900,000redemption price 2.69 seK 2.69 seKoriginal redemption price 2.84 seK 2.84 seKNumber of shares per option 1.06 1.06

Stock Option Plan 2007. Maturity date April 15, 2011.

2007

as of January 1 0allocated 6,285,000Forfeited 0utilized 0expired 0as of December 31 6,285,000possible to utilize 0total number of options 9,900,000redemption price 7.10original redemption price 7.10Number of shares per option 1.00

Because of rights issues carried out since 2002 the number of shares that an option entitles the holder to acquire and the redemption price have been adjusted for the 2003 and 2004 programs. In 2007, 2,302,500 personnel options were exercised at a weighted average share price as at the exercise date of seK 6.11. redemption usually takes place once a month.

social security contributionsprovisions for social security contributions have been made and are based on the personnel options’ fair value on the reporting date. provisions were calculated with consideration given to anticipated personnel turnover and an estimate was made in regard to the likelihood of redemption. the estimated cost was distributed over the options’ remaining duration.

the wholly owned subsidiary Net Insight Consulting aB holds 6,616,000 warrants which may be used to avoid any potential impact on cash flow from social security contributions that may arise due to the employee stock option program. In the event of full utilization of all outstanding subscription options issued in conjunction with the personnel option program, dilution is calculated to be approximately 6.0 percent of the total number of shares and approximately 5.5 percent of the total number of votes in the Company. Dilution effects have been calculated wherein the total number of shares/votes granted by the subscription options was divided by the total number of shares/votes after the subscription options were utilized for the subscription of shares. In regard to the above, the completion of the personnel option program is not expected to result in any future cash flow impact to the Company.

Note 8 Development expenses

Development expenses are constituted primarily of product development, the purchase of components, patent applications, licenses, salary costs for personnel and other costs related to development work.

Note 9 Depreciation of tangible and intangible fixed assets

Group 2007-12-31 2006-12-31

Capitalized expenditures fordevelopment work 39,206 27,453equipment for hiring 1,560 0equipment 614 401Total 41,380 27,854

Parent Company

Capitalized expenditures fordevelopment work 36,474 21,733equipment for hiring 1,560 0equipment 461 254Total 38,495 21,987

Note 10 Operating leases

the nominal value of future leasing fees (including rent for premises), regar-ding non-terminable leases are distributed as per the following:

Group Parent Company

2008 5,457 5,4572009 90 90Total 5,547 5,547

leasing costs for the year totaled seK 5,313 thousand for both the parent Company and the group. No single contract has a term of 3 years or more. the lease for the Company’s premises expires during 2008.

Note 11 Costs divided by typeGroup Parent Company

2007 2006 2007 2006

Goods for resale:Cost of goods sold: 65,228 39,808 65,228 39,808Operating expenses:salaries and salary related costs 107,469 96,348 95,347 86,277sales and marketing costs 5,273 5,179 4,755 4,955travel expenses and related costs 7,846 6,874 5,316 5,524

office expense 8,402 6,860 7,796 6,359

other administration expenses 6,898 1,384 6,623 1,298Development expenses, gross 14,512 18,980 14,512 18,940Capitalization – 49,020 – 44 688 – 49 020 – 44,688Depreciation/disposal 41,380 27 854 38 495 21,727other costs 33 1,190 0 1,396Total costs 208,021 159,689 189,052 141,596

Note 12 fees and remunerations

the group and the parent Company have paid Öhrlings pricewaterhous-eCoopers aB remuneration of seK 203,000 (277,000) for audit services and seK 169,000 (91,000) for other assignments.

Note 13 Other operating income

In December 2007 the Company acquired 100 percent of the shares in a partnership. the effect of the transaction on earnings is seK 9.8 million, which is reported as other operating income and seK 9.8 million in provided cash equivalents. In December 2006 the Company acquired 100 percent of the shares in a partnership. the effect of the transaction on earnings was seK 13.5 million, which is reported as other operating income and seK 13.5 million in provided cash equivalents.

Note 14 financial incomeGroup Parent Company

2007 2006 2007 2006

Interest income 2,796 1,426 2,734 1,305

Note 15 financial expensesGroup Parent Company

2007 2006 2007 2006

Interest expenses – 43 –150 – 40 –150Cost of credit facilities – 1,435 – 35 – 1,435 – 35Total – 1,478 – 185 –1,475 – 185

Note 16 earnings per share

earnings per share have been calculated by dividing profit for the year with the weighted number of registered shares.

2007 2006

profit for the year attributable to parent Company shareholders

33,959 tseK –10,168 tseK

average number of shares 369,363,339 367,757,010

earnings per share, basic 0.09 – 0.03

In the calculation of diluted earnings per share, the registered number of shares is adjusted for the warrants that could have been converted. the fair value has been calculated as the average value of the price during the accounting period and for 2007 was seK 5.76. a dilutive effect arises if the present value of the warrants is less than the fair value of the share. program to 7B, personnel option program 2003 and personnel option program 2004 have redemption prices that are less than this value and therefore give rise to dilution. the dilution effect has been calculated as the difference between the number of shares to which the holder of a warrant is entitled to subscribe and the number of shares measured at fair value that this subscription pay-ment corresponds with, which means that the dilution effect in this context amounts to 12,108,53 shares.

2007 2006

profit for the year attributable to parent Company shareholders

33,959 tseK –10,168 tseK

average number of shares after full dilution

381,471,875 369,549,333

earnings per share after dilution 0.09 – 0.03


40

Note 17 intangible fixed assets and goodwillCapitalized expenditures for development.

Group Parent Company2007-12-31 2006-12-31 2007-12-31 2006-12-31

accumulated purchase costs at beginning of the year 118,926 77,052 84,380 42,506New purchases 49,020 44,688 49,020 44,688Disposal 0 – 2,814 0 – 2,814Total 167,946 118,926 133,400 84,380

accumulated amortization according to plan at begin-ning of the year – 59,546 – 33,407 – 27,731 – 7,312

Depreciation for the year – 39,206 – 27,453 – 36,475 – 21,733Disposal 0 1,314 0 1,314

Total – 98,752 – 59,546 – 64,206 – 27,731residual value according to plan at year-end 69,194 59,380 69,194 56,649

all depreciation pertaining to intangible fixed assets, both in the parent Company and the group are included in development expenses.

goodwill Group2007-12-31 2006-12-31

accumulated purchase costs at beginning of the year 4,354 4,354

residual value according to plan at year-end 4,354 4,354

assessment of impairment requirements for goodwill and capitalized assets. the acquisition of the Q2 labs group in March 2004 resulted in goodwill of seK 4,354 thousand.

the group has only one cash generating unit (Cgu) within which goodwill is reported. the recoverable amount for the group’s Cgu is established based on calculations of value in use. these calculations are based on estimated future cash flow based on financial forecasts approved by the ma-nagement and that cover a five-year period. Cash flow beyond the five-year period is extrapolated with the help of an assessed growth rate. the growth rate does not exceed the long-term growth rate for the telecommunications market in which the Cgu in question is active.

Management has established the budgeted gross margin based on earlier results and its expectations for market development. the weighted average growth rate used is in accordance with the forecasts found in industry reports. the growth rate is calculated to be 21 percent over a 9-year period and the-reafter 7 percent. the Weighted average Cost of Capital (WaCC), which has been used, and totals 12.8 percent, is given before tax and reflects the speci-fic risks that apply for the segment in which the Company has operations. a change in WaCC of 3 percentage points does not give rise to any impairment requirements. a change in estimated eBItDa by 2 percentage points will not bring about any impairment requirements. a change in estimated gross margins by 5 percentage points does not give rise to any impairment require-ments.

Based on the above, no impairment of assets has been deemed necessary.

Note 18 Tangible fixed assets


accumulated purchase costs at beginning of the year 6,424 5,479 5,842 4,897New purchases 9,025 945 9,025 945Total 15,449 6,424 14,867 5,842

accumulated amortization according to plan at begin-ning of the year – 4,927 – 4,526 – 4,518 – 4,264Depreciation for the year – 2,091 – 401 – 2,020 – 254Disposal –102 0 0 0Total – 7,120 – 4,927 – 6,538 – 4,518residual value according to plan at year-end 8,329 1,497 8,329 1,324

Depreciation/amortization included in Cogs – 1,560 0 – 1,560 0Depreciation included in development expenses – 584 – 356 – 431 – 209Depreciation included in administrative expenses – 30 – 45 – 30 – 45Total – 2,174 – 401 – 2,020 – 254

New purchases include seK 6,424,000 for equipment for leasing.

Note 19 Deposits paid

the amount pertains to deposits in connection with the establishment of a new sales office in singapore.

Note 20 shares in group companies

Propor-tion of

equity %

Propor-tion of

votes %

Num-ber of shares

Carrying amount

Share-holders’ equity

Net Insight Inc.Domicile: Delaware, usa 100 100 1,000 2,777 5,570

Net Insight Consulting aBCorp .ID. no: 556583-7365Domicile: stockholm, sweden 100 100 5,000 500 493

Q2 labs aB Corp .ID. no.: 556583-7365Domicile: stockholm,sweden 89 89 143 0 147

Net Insight Intellectual property hB Corp.ID.no.: 969685-6344 99,99 99,99 10,000 10 10

ten tech aBCorp. ID. no.: 556669-4559Domicile: stockholm,sweden 100 100 1,000 100 87

Doliten hB 100 100 100 0 0 Corp. ID. no.: 969731- 4590

Purchase costs 2007-12-31 2006-12-31

accumulated purchase costs at beginning of the year 5,022 7,414

purchase cost - partnership 398,114 621,052repayment of original investment in partnership – 398,114 – 621,052

Impairment loss of shares in Q2 labs – 170 0

shareholder contributions 170 0

liquidation Boliten hB – 48 0

Withdrawals/Contributions – 3,190 – 2,198

share in profits 1,603 – 194

Total shares in Group companies 3,387 5,022


Note 21 inventoriesGroup Parent Company

2007-12-31 2006-12-31 2007-12-31 2006-12-31

products in progress 3,400 0 3,400 0

Inventory 17,111 20,875 17,111 20,875

Total inventory 20,511 20,875 20,511 20,875

the expenditure for inventories expensed is included in the item cost of goods sold and amounts to seK 67,088 thousand (39,808). Inventories of a value of seK 31,581 thousand have been impaired to an assessed net selling price of seK 20,511 thousand. Impairment loss of inventories for the year amount to seK 6,760 thousand (5,216) and is recorded in cost of goods sold.

Note 22 Accounts receivable and other receivables


accounts receivable 20,010 21,808 20,010 21,808provision for depreciation of receivables 0 – 960 0 – 960accounts receivable – trade, net 20,010 20,848 20,010 20,848

other receivables 4,924 6,221 2,636 6,217prepaid expenses and accrued income 5,223 3,308 5,223 3,283Carrying amount of ac-counts receivable and other receivables 30,157 30,377 27,869 30,348

the group has not reported any losses on accounts receivable during 2007 and therefore there is no need for impairment. Below is an aging analysis of accounts receivable due and related reserves.

Invoices overdue (SEk 000) 2007 2006

less than 3 months 8,201 9,895

3-6 months 0 0

Total 8,201 9,895

Change in provision for bad debts 2007 2006

as of January 1 –960 – 1,053

provision for bad debts 960 93

As of December 31 0 – 960

The Group’s accounts receivable and other receivables in carrying amount by currency 2007 2006

seK 10,036 8,603

usD 7,803 3,658

eur 12,318 18,116

Total 30,157 30,377

the above amounts have been translated to seK at the closing day rate. the Company has an agreement relating to loans on accounts receivable. the loan amount is 80 percent up to a maximum of seK 45 million. at year-end, no loans had been taken out on accounts receivable.

Current receivables contain the following major items:


2007-12-31 2006-12-31 2007-12-31 2006-12-31

Vat claims 3,966 3,243 1,825 3,243salary taxes 24 193 24 193

other 934 2,785 787 2,781

Total 4,924 6,221 2,636 6,217

accrued income and prepaid expenses include the following large items:


2007-12-31 2006-12-31 2007-12-31 2006-12-31

rent for the first quarter 2008 (2007) 1,141 1,116 1,141 1,116prepaid license-/service fees 537 117 537 117

prepaid insurance costs 1,176 852 1,176 852prepaid exhibition ex-penses 343 96 343 96accrued interest 123 20 123 20other items 1,903 1,107 1,903 1,082Total 5,223 3,308 5,223 3,283

Note 23 Liquid assets

Group Group Parent Company

Parent Company

2007-12-31 2006-12-31 2007-12-31 2006-12-31

Cash and bank balances 30,233 25,682 28,982 24,543

Investments 98,000 52,000 98,000 52,000

total cash equivalents 128,233 77,682 126,982 76,543

of which in blocked account 355 1,316 355 1,316

the interest rate on investments amounted to 3.32 percent (2.87).

Note 24 share capital

the share capital, seK 14,828 thousand, is distributed over 370,602,820 shares, with a nominal value of 0.04 per share. one a-series share entitles the holder to ten (10) votes and one B-series share entitles the holder to one (1) vote. the distribution of the different classes of shares is as follows:

Number of shares

Number of shares Options Options

2007-12-31 2006-12-31 2007-12-31 2006-12-31

unrestricted a-shares 1,900,000 3,600,000

unrestricted B-shares 368,702,820 364,157,010personnel stock options 2002 / 2007 0 3,025,500personnel stock options 2003 / 2008 2,558,415 3,875,500personnel stock options 7B 9,474,000 9,790,000personnel stock options 2004 / 2008 7,667,000 8,900,000personnel stock options 2007/2011 9,900,000 0Total 370,602,820 367,757,010 29,599,415 25,591,000

the terms for subscription options 7B are as follows: each warrant entitles the holder to 1.06 shares at the subscription price of seK 2.28. the maturity date is april 1, 2009. For terms regarding other option programs, see Note 7.

Note 25 Other provisions

Group Current provisions long-term provisions

As of January 1 2006

Product warranty

provisionsOther

provision

Product warranty

provisions

Variable incentive program Total

recognized in the income statement 5,200 2,000 2,000 0 9,200

– additional provisions1,265 0 0 0 1,265

– reversed unused amount 0 – 1,000 – 2,000 0 – 3,000As of December 31, 2006 6,465 1,000 0 0 7,465

As of January 1, 2007

recognized in the income statement 6,465 1,000 0 0 7,465

– additional provisions0 2,575 4,032 4,255 10,862

– reversed unused amount – 2,433 0 0 0 –2,433As of December 31, 2007 4,032 3,575 4,032 4,255 15,894

42

Parent Company Current provisions long-term provi-sions

As of January 1, 2006

Product warranty

provisionsOther

provision

Product warranty

provisions

Variable incentive program Total

recognized in the income statement 5,200 2,000 2,000 0 9,200

– additional provisions1,265 0 0 0 1,265

– reversed unused amount 0 – 1,000 – 2,000 0 – 3,000As of December 31, 2006 6,465 1,000 0 0 7,465

As of January 1, 2007recognized in the income statement 6,465 1,000 0 0 7,465

– additional provisions0 2,575 4,032 4,255 10,862

– reversed unused amount – 2,433 0 0 0 –2,433As of December 31, 2007 4,032 3,575 4,032 4,255 15,894product warranty provisions have been made to cover possible anticipated expenses that may arise due to business transactions that are carried out. provisions for the variable incentive program have been made to cover pro-bable future remuneration; for more information please see note 7.

Note 26 Other liabilitiesaccrued expenses include the following major items:


2007-12-31 2006-12-31 2007-12-31 2006-12-31

tax at source 2,072 1,608 2,072 1,608

other current liabilities 5,187 364 5,187 73

Total current liabilities 7,259 1,972 7,259 1,681

Note 27 Accrued expensesaccrued expenses include the following major items:


2007-12-31 2006-12-31 2007-12-31 2006-12-31

Vacation pay liability 4,097 4,001 3,787 3,870

social security contri-butions 2,607 1,620 2,607 1,620

accrued bonuses 8,386 10,043 7,470 9,659accrued consulting fees 85 149 85 149

prepaid revenue from customer 12,126 0 12,126 0

other items 10,852 6,927 10,077 6,715

Total 38,153 22,740 36,153 22,013

Note 28 items not affecting liquidity

Group Parent Company 2007 2006 2007 2006

translation differences – 705 –1,139 0 0

exchange gain/loss 0 0 0 –1,072

profit/loss in partnership 0 0 –1,603 194

other provisions 8,287 265 8,287 265

Disposal of intangible assets 102 2,814 0 2 814

Depreciation disposals – 83 –1,314 0 –1314

group contributions 0 0 2,260 0

adjustments for personnel options 2,920 408 2,920 408

Total 10,521 1,034 11,864 1,295

Note 29 Pledged assetsthe amount pertains to blocked bank balances of seK 355 thousand (1,314).

Note 30 Cash flow statement liquid assets at the beginning of the year and at the end of the year are related to bank balances and petty cash for both years. of total liquid as-sets in the group in 2007, seK 1,075 thousand (930) pertain to liquid assets in the subsidiary Net Insight Inc.

Note 31 Tax deficit

Group Parent Company2007 2006 2007 2006

Difference between reported tax expense and tax expense based on applicable tax rate

reported result before tax 33,959 –10,168 32,333 – 8,102tax according to current tax rate – 9,500 3,238 – 9,053 2,269tax effect from non-deductible expenses – 114,203 –174,963 –114,113 –174,027tax effect of group contribution 0 0 – 586 0

reversal of previous years’ non-deductible costs 173,895 0 173,895 0

Non-reported effect of loss carry-forwards – 50,192 171,725 – 50,142 171,759Tax on profit/loss for the year as per the income statement 0 0 0 0Deductible differences for which deferred tax claims are not reportedloss carry-forward 639,154 460,193 638,461 459,382Total 639,154 460,193 638,461 459,382Deductible differences for which deferred tax liability is not recognizedtemporary differences pertaining to share of Boliten hB 0 0 0 621,052 share of Doliten hB 0 0 398,114Total 0 0 398,114 621,052

the liquidation of Doliten hB, after the end of the fiscal year, has meant that the tax deficit has increased by seK 398 million to seK 1,037 million.

Note 32 Acquisition of subsidiaryon December 19, 2007, the Company acquired 100 percent of shares in Doliten, a partnership. the transactions involving this company are also de-scribed in the administration report. on December 22, 2006, the Company acquired 100 percent of shares in Boliten. No business was conducted in these companies during the year. Information about acquired net assets and goodwill is presented below.

2007 2006

Fair value

Acquired carrying amount

Fair value

Acquired carrying amount

purchase price- cash payment 398,395 622,498

- fair value of issued shares

total purchase price 398,395 622,498

Fair value of acquired net assets 408,201 635,995Deficit/surplus value* – 9,806 –13,497

the assets and liabilities included in the acquisition are as follows:Cash and cash equivalents 408,201 408,201 635,995 635,995acquired net assets 408,201 408,201 635,995 635,995

purchase price, cash paid – 398,395 0 – 622,498 0liquid assets in acquired sub-sidiaries 408,201 0 635,995 0

effect on the group’s liquid as-sets from the year’s acquisitions 9,806 0 13,497 0

*reported as other operating income.

Doliten started operations on November 28, 2007 and the effect on opera-ting profit would have been the same if the acquisition had occurred then. the acquisition of Boliten would not have had any material effect on opera-ting profit if the acquisition had occurred on January 1, 2006.

Note 33 Operating leasesoperating leases in which a group company is lessor. Future minimum lease fees that refer to non cancellable operating leases are as follows:

2007 2006

Within 1 year 3,731 0Between 1-5 years 0 0More than 5 years 0 0Total 3,731 0


AUDITORS’REPORT

To the Annual general Meeting of shareholders in Net insight AB (publ) Corp. iD. no. 5565334397

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the Chief Executive Officer of Net Insight AB (publ) for the year 2007. The Company’s annual accounts are included in the printed version of this document on pages 25–42. The Board of Directors and the President are responsible for these accounts and the administration of the company as well as the application of the Annual Ac-counts Act when preparing the annual accounts, and for the application of international financial reporting standards IFRSs as adopted by the EU and the application of the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to make a statement on the an-nual accounts, the consolidated accounts and the company’s administration based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable, but not abso-lute, assurance that the annual and consolidated accounts are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts It also includes an assessment of the accounting policies used and of their application by the Board of Directors and the President, and of the significant estimates and judgements made by the directors in the preparation of the annual accounts and consolidated accounts as well as an evaluation of the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined signifi-cant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any Board member or the President. We also examined whether any Board member or the President has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinions as set out below. The annual accounts and the consolidated accounts have been prepared in accordance with the Annual Accounts Act and thereby give a true and fair view of the company’s and the group’s financial position and results of operations in accordance with generally accepted auditing stan-dards in Sweden. The consolidated accounts have been prepared in accordance with international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fair view of the Group’s financial position and results of operations. The administration report is consistent with the other parts of the annual accounts and the consolidated accounts.

We recommend to the Annual General Meeting of shareholders that the income statements and balance sheets of the Parent Company and the Group be adopted, that the loss of the Parent Company be dealt with in accordance with the proposal in the Administration Report and that the members of the Board of Directors and the Chief Executive Officer be discharged from liabi-lity for the fiscal year.

Stockholm, February 28, 2008Öhrlings PricewaterhouseCoopers AB

Sten Håkansson Authorized Public Accountant

44

rAGNAr BäCkBoard memberBorn: 1944. Master of science in engineering. Board member since 2006. ragnar Bäck has extensive experience from ericsson where he held executive positions such as Ceo in Italy and the Netherlands and executive Manager for the asia region in hong Kong and for Western europe in london. Board member of todos, unfors and Nordia Innovation.

Shareholdings in Net Insight: 20,000 Class B shares.Attendance at board meetings in 2007: 11/11

ClIFFOrD H FrIEDMANBoard memberBorn: 1959. Bachelor of science in electrical engineering. Master of science in electrophysics and Master of Business administration in Finance and Investments. Board member since 2004. Clifford h. Friedman is senior Managing Director of Bear stearns Constellation Ventures and has more than 25 years of experience in the finance, venture capital, technology and media industries. Board member of Vivid logix, tVoNe, origin Digital, airplus tV aB, Fathom online, Verance and Widevine technologies.

Shareholdings in Net Insight: 0 shares.Attendance at board meetings in 2007: 11/11

BErNT MAGNuSSONBoard member

Born: 1941. Master of arts (politics). Board member since 1997. Chairman of the board of Kwintet aB, board member of Volvo Car Corp., Fareoffice aB, höganäs aB, pharmadule aB, Coor service Management aB and Nordia Innovation aB. previous assignments include chairman of the board of swedish Match, Nobel Industries aB, assi Domain aB and skandia aB, Ceo of Nordstjernan aB and NCC aB.

Shareholdings in Net Insight: Bernt Magnusson and wife, 1,232,947 Class B shares.Attendance at board meetings in 2007: 11/11

BIrGITTA STyMME GörANSSONBoard member

Born: 1957. M.sc. engineering and MBa from harvard Business school. Board member since 2004. Ceo of semantix aB. previous assignments include Vp for telefos and various management positions in swedish media and retail trade. Birgitta stymne göransson is chairman of the board of Kontakt east holdings aB, board member of elekta aB, orkla as, arcus as and lernia aB.

Shareholdings in Net Insight: 85,000 Class B shares.Attendance at board meetings in 2006: 9/11

lArS BErGChairmanBorn: 1947. Master of Business administration. Chairman of the Board since 2001 and a board member since 2000. primary assignments: european Venture partner, Constellation ventures, New york. Chairman of the board of eniro, Viamare and Dahlia televisión. Board member of ratos. previous assignments include member of Mannesmann’s manage-ment with responsibility for telecom Division, president and Ceo of telia, and various management positions at ericsson.

Shareholdings in Net Insight: 1,008,332 Class B shares.Attendance at board meetings in 2007: 11/11

MArCO lIMENABoard member

Born: 1965. Master of electrical engineering and system Dynamics. Board member since 2006. president and Ceo sylantro systems Corporation. previously Vice president of hewlett-packard’s solution organization for the Network and service provider business.

Shareholdings in Net Insight: 0 shares. Attendance at board meetings in 2007: 11/11

BOARDOFDIRECTORS


ARTICLES OF ASSOCIATIONThe Articles of Association describe the business of the Company, its sha-re capital, number and types of shares, and allocation of votes, as well as the number of Directors and auditors, notices of, and matters to be dealt with at, the Annual General Meeting, as well as the requirement that this meeting be held in Stockholm. During the period between Annual General Meetings, the Board of Directors of Net Insight AB (publ) is the highest decision-making body of the Company. The duties of the Board are regulated in the Companies Act and the Articles of Association. The current Articles of Association were adopted at the Annual Ge-neral Meeting held on April 26, 2007. The Articles of Association are available in their entirety at www.netinsight.net. ANNUAL GENERAL MEETINGThe Annual General Meeting of Net Insight AB (publ), held on April 26, 2007, made the following decisions:– Adoption of income statement and balance sheet for the parent com-pany and the consolidated income statement and balance sheet for the group. – The Board shall consist of six directors without deputies, and Lars Berg, Clifford H. Friedman, Birgitta Stymne Göransson and Bernt Magnusson, Ragnar Bäck and Marco Limena were re-elected for a term until the next Annual General Meeting. – Öhrlings PricewaterhouseCoopers AB was selected as the Company’s auditor, and the fee will be as on current account.– Amendment of the Articles of Association to enable Series A shares to be changed into Series B shares at the request of the owner of the shares.– Adoption of the compensation principles and other terms of employ-ment for the leading executives, as proposed by the Board.– Approval of the Board’s proposed new employee stock option program. The complete minutes of the Annual General Meeting, as well as the underlying documentation, is available at www.netinsight.net.

BOARD ACTIVITIESThe Board is responsible for organizing and administering the Company’s affairs. The work of the Board is regulated by an annually adopted work plan. This work plan stipulates, among other things, instructions for the Company’s CEO, decision-making procedures within the Company, Board meeting procedures, assignment of tasks, and the provision of infor-mation between the Company and the Board. The Board’s main tasks in-volve deciding on strategic issues, taking responsibility for the Company’s capital structure and supply of capital, ensuring that the Company has an appropriate executive management and deciding on other matters of major significance. The Board should monitor the CEO’s performance of his duties, including implementation of the Board’s decisions and guideli-nes, and should evaluate his efforts continuously. In 2007 the Board held eleven meetings at which minutes was kept. At these meetings, the Board considered permanent items on the agenda for each Board meeting such as the state of the business, budgets, and year-end and interim reports. In addition, overarching issues, such as long-term strategies, business plans and partners were considered. At the Statutory Board Meeting, the Board considered and adopted the work plan for the Board, and the instructions for the CEO. Fees to the Board totaled SEK 925,000, SEK 300,000 of which was paid to the Chairman of the Board, and SEK 125,000 each to the other Board members.

REMUNERATION COMMITTEEThe company’s Remuneration committee is appointed by the Board and consists of the Chairman of the Board, Lars Berg, and Board member,

Bernt Magnusson. The committee prepares the CEO’s benefits for further decision by the Board. The committee also decides on compensation for the management team (i.e. those reporting to the CEO). In addition, the committee considers compensation programs of a broader nature, such as option programs, for decision by the Board. During the year the commit-tee held two meetings at which minutes were kept, discussing the follo-wing matters: the new personnel option program decided at the 2007 An-nual Shareholders’ Meeting, bonus outcome for the CEO, the long-term incentive program for management, and the targets for 2007.

AUDIT PROCESS AND AUDITORSThe Board of Directors of Net Insight has chosen not to have a separate Audit Committee; instead, the Board in its entirety handles audit issues. The Board has chosen this approach since it is suitable as long as the company has a relatively uncomplicated business and audit structure. In consultation with the company’s auditors, the Board has also proactively discussed new recommendations in the field of accounting that may af-fect future company accounting and reporting. Once a year, the auditors report personally to the Board of Directors about their audit reviews and their assessment of internal controls. By statute, the period of appoint-ment of auditors is four years. In addition to the normal auditing func-tions, Öhrlings PrivewaterhouseCoopers also provides Net Insight with general advice in the areas of accounting and taxes. The legally mandated term of auditors is four years. The Company’s auditor, Öhrlings Price-waterhouseCoopers AB, was re-appointed at the 2007 Annual General Meeting. Sten Håkansson was appointed the new auditor in charge.

NOMINATION COMMITTEENet Insight’s Nomination Committee consists of the Chairman of the Board of Net Insight AB and the company’s four largest shareholders as of September 30 each year. The composition of the Nomination Committee will be published not later than six months prior to the next Annual Ge-neral Meeting. The Nomination Committee is responsible for preparing and submitting proposals in advance of a forthcoming Annual General Meeting with regard to the number of Board members, the fees for the Board of Directors, the composition of the Board, the Chairman of the Board, Chairman of the Annual General Meeting and, as applicable elec-tion of auditors and auditors’ fees. Net Insight’s nomination committee for the 2008 Annual General Meeting has the following composition: Cliff Friedman (Constellation Ventures), Ramsay Brufer (Alecta), Åsa Ni-sell (Swedbank Robur), Christer Bohm, representing the three founders, and Lars Berg (Chairman of the Board of Net Insight AB). The Nomina-tion Committee elected Lars Berg as its chairman. In preparation for the 2008 annual shareholders’ meeting, the Nomination Committee has held two meetings in 2007, and two meetings in 2008.

INDEPENDENCE OF THE BOARDThe Board occupies an independent position vis-à-vis the Company since all its members are also independent in relation to the Company. Besides this, four of the members are independent of the company’s principal owners. None of Net Insight’s Board members work for the company in an operative capacity.

SWEDISH CODE OF CORPORATE GOVERNANCEAs of July 1, 2008, all companies listed on the OMX Nordic Exchange in Stockholm and NGM Equity shall apply a revised code of corporate governance. Until now, Net Insight has applied the relevant parts of the code, and is monitoring the development of this code, as well as changes that will be introduced during the first half of 2008.

CORPORATEGOVERNANCEANDBOARDACTIVITIES

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EXECUTIVEmANAGEmENT

ANDErS PErSSONVice president and Director of product Development

Born: 1957. Master of science in engineering. employed since 2000. anders persson has many years of experience with the ericsson group, where his latest position was general Manager for Network Design and performance Improvement. In addi-tion, anders has held a number of other leading management positions at ericsson.

Shareholdings in Net Insight: 150,000 Class B shares1,400,000 employee stock options

lArS kEVSJöChief Financial officer

Born: 1958 Master of Business administration. employed since June 2006. lars Kevsjö have more than 20 years of experience from management positions in finance and economics, mainly in the It and telecom industry. lars was previously the CFo of Bewator group. prior to that he was CFo of Cygate and has previously been active at telia and pripps.

Shareholdings in Net Insight: 0 Class B shares600,000 employee stock options.

THOMAS WAHluNDsupport manager

Born: 1969Master of science in engineering.thomas started at Net Insight in 1997 and since 1999 he has been responsible for building up the operations organization, including responsibility for sales support, customer support, services and training. he holds an Msc degree from the royal Institute of technology, stockholm and has extensive industry experience in network planning.

Shareholdings in Net Insight:46,102 Class B shares258,000 employee stock options

FrEDrIk TräGårDHChief executive officer

Born: 1956. Master of Business administration. employed since 2002, then as the CFo. took office as Ceo in February 2006. Fredrik trägårdh previously worked at german DaimlerChrysler rail systems as senior vice president and Director of group Finance. Fredrik has extensive international experience and has previously held mana-gement positions within aBB Financial services.

Shareholdings in Net Insight: 343,332 Class B shares2,350,000 employee stock options

PEr lINDGrENDirector of Business Development

Born: 1967phD. employed since 1997. per lindgren has a ph.D. in telecommunications and has pre-viously served as an assistant professor at Kth (royal Institute of technology, stockholm), where he worked with opti-cal networks, eu projects related to new broadband services, etc.

Shareholdings in Net Insight: 800,000 Class a shares2,351,490 Class B shares1,000,000 employee stock options


ACCESS NETWOrkthe part of the public network closest to end-users. Consists of copper lines in the telephone network and coaxial cable for cable tV. Fiber and wireless solutions are also increasingly being used.

ASI (asynchronous serial Interface). a standardized physical interface for compressed video. used within the media industry to transport content between geographically remote production units and in cable tV networks.

ATM (asynchronous transfer Mode). packet-switched tech-nology for data traffic.

BANDWIDTHMeasure of how much information can be sent over a line. Measured in bits per second, bps.

BrOADBAND NETWOrkNetwork with extremely high capacity, at least 2 Mbps to each end-user.

BrOADCASTtransmission from a single sender to all possible reci-pients in a network.

CONTENTContent that is distributed in the network.

CONTrIBuTIONCommunication for production and processing of mate-rial before it is transmitted to the end-user.

COrElarger transport networks between cities and backbone networks.

DTT (Digital terrestrial television). Name for digital terrestrial tV to ordinary tV receivers equipped with ”set-top boxes”. also called DVB-t.

DVB(Digital Video Broadcast) standard for transmission of digital video over various kinds of media.

DVB-H (Digital Video Broadcast – handheld). a standard for digital terrestrial tV to mobile receivers, such as a cell phone or other mobile unit with a screen.

DVB-T (Digital Video Broadcast – terrestrial). Name of the stan-dard for digital terrestrial tV to ordinary tV receivers equipped with ”set-top boxes”. also called Dtt.

ETHErNETthe most common technology for communication in lo-cal area networks, laN. transmission speeds of 10/100 Mbps, 1 gbps and 10 gbps.

GIGABIT ETHErNETDevelopment of the ethernet primarily used in large laN and backbone networks. Can handle transmission speeds of up to 1,000 Mbps.

GrANulArITyresolution.

HD (high Definition). high resolution.

HDTV (high Definition tV). high resolution tV.

INTErOPErABIlITytwo devices operating together.

IP (Internet protocol) protocol used for data transmission over the Internet. all Internet traffic is transmitted in Ip packets.

IPTVtelevision that is broadcast over Ip (broadband).

lAN (local area Network). smaller local networks for data communication within a department, building or block.

MPlS (Multi protocol label switching). Minutes for efficient management of connections over a package-switched network.

MulTICASTtransmits the same message to a large number of reci-pients without needing to be addressed to every single individual (unicast) or sent to all possible recipients (broadcast).

NExT GENErATION SDH/SONETsDh/soNet enhanced with functions based on gFp, lCas and VCat (see elsewhere in the glossary for explanation).

NGNNext generation Networks or Next generation Network. general concept for the development of networks and/or a standardization framework to enable new services and integrate fixed and mobile services over common infrastructure in future networks.

NODEa unit that is connected to a network, either as a sen-der/receiver, or to connect together different networks.

PAy-PEr-VIEWpay only for what you watch. unlike video-on-demand, the programs or films must be viewed at set times.

POST PrODuCTIONpost production of e.g. tV programs or films.

PrOTOCOlan agreed set of rules as to how different network equipment should communicate with each other.

PVr (personal Video recorder). Network-based video recorder.

qoS (Quality of service). Name for the quality of service (that can be provided by a network). Video and speech require a higher Qos. Qos is achieved in a network either by separating traffic so that interference cannot occur or by prioritization where the highest priority is sent first. Video and voice require higher Qos.

rEAl-TIMEImmediate transmission of material without delay.

rOuTEr a unit to guide and forward data packets, for example, in the Internet.

rOuTING guiding and forwarding data packets through a compu-ter network.

SDH/SONETCircuit-switched technology for communication in opti-cal backbone networks. sDh is the european standard and sonet is the american standard.

SDI (serial Digital Interface).a physical standard for professional, uncompressed 270 Mbps video. Is used in the media industry to connect sound and image equipment in production areas.

METrO ArEA NETWOrka high-capacity network that links together an urban or regional area. often referred to as a Metropolitan areaNetwork, MaN.

BACkBONE NETWOrkhigh-capacity network linking together geographically remote areas or a number of smaller networks within an area. also known as a transport network or backbone.

STuDIO quAlITythe quality obtained if studio production equipment is connected together locally. Can be achieved with a low or constant delay over a network with an extremely high Qos.

TOPOlOGyIn networks, the topology describes how the nodes are linked together, for example, in a ring or star where all nodes are switched directly to a central node, or a mesh, an irregular structure with multiple switches between many nodes.

TrIPlE PlAya technology used for the transport of tV/video, data and telephony via a single network.

uPlINk STATIONS Where the content in a fiber optic network or other terrestrial-based network contacts a satellite network. For example, when programming companies broadcast their content for distribution.

VCAT (Virtual Concatenation) Facility to combine different non-contiguous data containers (sDh/soNet contai-ners).

VIDEO-ON-DEMANDenables digital delivery of films over a broadband network. the ”video store” on the network means that there is always a copy available even of the most popular movie that can be ordered at any time.

VPN (Virtual private Network) technology for setting up a secure private network within the public network by using Internet infrastructure.

SWITCHused to direct information between different network links and users.

GLOSSARY

Net Insight ABhead office in stockholmCompany registered in swedenBox 420 93se-126 14 stockholm, swedentelephone: +46(0)8 – 685 04 00, Fax: +46(0)8 – 685 04 [email protected]

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