Net Insight Delivers the Worlds Most Efficient and Scalable Optical

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Net Insight delivers the worlds most efficient and scalable 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 30 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 2008 Net Insight in brief. Net Insight’s products enable transport of voice and data services in customer networks without loss of quality. Optimal use of network capacity allows new revenue-generating video services such as HDTV, digital TV, and video-on-demand, all of the highest quality, to be launched and delivered simultaneously with telephony and data traffic. As a rule Net Insight’s products offer customers lower capital expenditures, shorter payback periods, and lower operating costs than rival products. Net Insight’s sales mainly take place in Europe, Middle East, Asia, and North America. Its customers are TV networks, broadcast and media companies, IPTV and cable TV providers, network owners, and telecom operators.

Contents

3 Highlights of the year revenue and GROSS MARGIN

4 Statement from the CEO % MSEK 6 Vision, business concept, 300 80 objectives and strategies 250 8 Market and trends 60 11 Market areas 200

14 Nimbra at the customer 150 40

16 Partners 100 17 Technical platform 20 50 20 Employees

0 0 22 The Net Insight share 04 05 06 07 08 24 Five year summary

25 Administration report NET INCOME

30 The Group MSEK 32 The Parent Company 80 35 Accounting principles and 60 notes 40 20 46 Auditors’ report 04 05 06 0 47 Board of Directors 07 08 -20 48 The Board’s Corporate -40 Governance Report -60 50 Management -80 51 Glossary and financial -100 reporting 2009

total CASH FLOW Annual General Meeting MSEK 60 The annual general meeting will be held at 10:00 a.m. on 50 Tuesday April 28, 2009 at Net Insight’s premises in Västberga. 40 Shareholders who wish to attend and vote at the Annual 30 General Meeting must be entered in the share register kept by 20 the Euroclear Sweden AB (formerly VPC AB) on April 22, 2009 10 04 05 06 and register with the Company no later than 4:00 p.m. on April 0 07 08 22, 2009. Attendance at the meeting can be registered through -10 mail to Net Insight, Box 42093, 126 14 Stockholm, by phone -20 +46 (0)8 – 685 04 00, by fax +46 (0)8 – 685 04 20 or through -30 e-mail to [email protected] -40 -50 In order to be entitled to attend, owners of shares registered -60 with nominees must temporarily re-register the shares in their -70 own name with Euroclear Sweden AB. A request for such -80 registration must be made to the administrator of the shares in sufficient time prior toA pril 22, 2009.

2Dividend Net Insight annual report 2008 The Board proposes that the AGM resolve that no dividend be paid for the 2008 fiscal year. NET INSIGHT SHARE PRICE – OMX MID CAP % 50

40 2006–2008 30

10 2008 0

-10

-20

-30 n Net Insight Class B share -40 n OMX Mid Cap Stockholm_Pl -50

HIGHLIGHTS OF THE YEAR

Demand for greater capacity and new communication network services led to repeat orders from our exisiting customers, this together with several new customer gains in all our major segments resulted in a record year in terms of sales, profitability and a positive cash flow.

l Sales increased by 20 percent to SEK 274.3 million (228.8). l Net income was significantly improved at SEK 67.9 million (34.0). l Positive cash flow of SEK 23.5 million (50.6). l Gross margin remained strong and stable at 72.4 percent (70.8). l The successful delivery and installation of equipment for the Beijing Olympics gave the Company a world-class reference case for HTDV contribution media networks. l Multiple orders for digital terrestrial TV networks open up new important markets including China. The Time Transfer feature is a unique differentiator. l Further strengthened market position in the US, where MediaXstream selected Net Insight for a large multiservice media transport network.

KEY FIGURES 2008 2007 2006 Net sales MSEK 274.3 228.8 134.8 Operating earnings MSEK 37.9 32.6 – 11.4 Net income MSEK 67.9 34.0 – 10.2 Earnings per share SEK 0.18 0.09 – 0.03 Gross margin % 72.4 70.8 70.5 Equity/assets ratio % 77 69 70 Shareholders’ equity per share SEK 0.72 0.49 0.37 Average number of employees 101 93 80

Net Insight annual report 2008 3 CEO Statement

One year ago, I ended my statement by indicating that Net the world around us. During 2008, we also reached a healthy Insight’s position was encouraging. In 2008, we have deliv- balance of revenues between our three main regions, Europe 51 ered significant operational and financial improvements in all percent, 29 percent in the US and 20 percent in Asia. respects. While having to systematically evaluate the current It is interesting to note that our largest revenues last year came world economic challenges, we still see opportunities for con- from three new customers namely Korea Telecom, the newly tinued growth over the next 12–24 months. We are a strong formed and fast growing US company MediaXstream and (the company and there will be fluctuations in terms of revenue leasing revenue) from our contract with Beijing Olympic Broad- growth and financial performance but the business opportu- casting for the Beijing Olympics. Interestingly, these customers nities for Net Insight, in our core segments, are increasing represent three different areas of our core business focus, namely across the world. the very large and increasingly “media centric” telecom opera- 2008 is a year during which we were successful in further tors, the specialised Quality of Service (QoS) video and data penetrating our strong base of satisfied customers in over 30 service providers as well as the major events business. The fact countries and we added about 10 important new customers that we can effectively serve a variety of industries and industry in six countries. participants is a tribute to the versatility, scalability, cost as well The strong base of globally recognised and satisfied custom- as energy efficiency of our Nimbra platform. As an example the ers represents a very good platform for future business and of- network sold to Korea Telecom via our partner Sanam, is a true fers invaluable references when bidding for new business with multi service platform over which many forms of video, data new customers. and voice services are carried. I refrain from marketing state- For 2008, we show our strongest financial result so far. We ments relating to the Beijing Olympics but want to state that increased revenues by 20 percent to 274.3 MSEK while also in- I am extremely proud of how the Nimbra platform as well as creasing the gross margin to 72.4 percent. EBITDA was 80.7 our people performed their tasks during the Beijing Olympic MSEK and the net income increased by 20 percent reaching Games. Multi service i.e. the ability to handle different types of 40.9 MSEK (excluding a deferred tax asset recognition of 27 traffic over one and the same platform with the highest QoS in MSEK). Adjusted for one time other operating revenues the the industry constitutes a very valuable unique selling point. increase in net income was actually 68 percent. The cash flow During 2008, we also delivered our new Time Transfer func- remained strong and produced a net cash position of 151.7 tionality to the Norwegian DTT network operated by Telenor/ MSEK with zero debt. We now post a fundamentally strong Norkring, which has received an award as the most efficient TV balance sheet, which is an advantageous position to have, given distribution network in Europe. Distribution of Digital Terres-

4 ceo statement trial TV (DTT) and Mobile TV often require a Single Frequency ing 18 months and when you read this, we will have intro- Network (SFN). In a SFN significant operational efficiencies are duced our new IP transport capability between Nimbra nodes. achieved through more efficient utilisation of the radio spectrum We were already carrying video IP and Ethernet signals more allowing a higher number of TV and radio programs, improved effectively than dedicated IP networks but as from now we are coverage area and network stability. SFN networks are today syn- also able to operate over pure IP networks between Nimbra chronized using the more costly GPS system with GPS receiv- nodes. This will give our customers unique flexibility in being ers at all transmitter sites. The satellite based GPS system is very able to operate over higher quality optical networks as well as, vulnerable to various types of disturbance and interference. We sometimes more cost efficient, IP/Ethernet lines. are told that Net Insight’s Time Transfer solution is the most ef- Our three core segments DTT and Mobile TV networks, fective and probably the only GPS independent synchronization Broadcast and Media Networks and IPTV/CATV networks resolution for SFN networks. Clearly, this is yet another unique main unchanged. During 2008, and based on our success in selling point for our Nimbra platform going forward. numerous TV distribution networks in many countries, we Our business model is based on a combination of direct and saw new business in the Mobile TV space as well as the IPTV/ indirect sales through partners. Sales through partners in 2008 CATV area where revenues so far have been modest. amounted to approximately 27 percent and we have a clear In summary, I feel that we have a very strong offering at strategy to grow indirect sales for increased momentum and the growing sweet spot of the communications industry. The accelerated core market penetration. More and more partners Nimbra platform is also a strong compliment to the project are trained, have own sales and demonstration capabilities and portfolios of other small and large companies enabling effective they do an impressive job for us on the front line in both exist- business partnerships for future growth. We also enjoy a great ing and new markets. level of energy and support from our customers, partners, own- Reaching new markets and new customers requires a clear ers and our board members. Yet again, the employees of Net focus, project selection and an efficient sales process. During Insight have produced another record year and we are all eager 2009 we will also increase our resources and invest more in to do our very best to continue on that path. marketing. While keeping our organic cost growth under control (+11 Thank you, percent on a comparable basis), we continue to invest heavily in developing new functionalities and products. There will be new exciting and value-adding product releases over the com- Fredrik Trägårdh, Chief Executive Officer

Net Insight annual report 2008 5 Net Insight’s strategic objective is to acquire a major share of the media-rich carriage market by providing transport network products that facilitate the production, distribution and delivery of media- rich content. In order to achieve its objective, Net ”Insight applies detailed strategies for distribution, marketing, products, development and organization.”

VISION, BUSINESS CONCEPT, OBJECTIVES AND STRATEGIES

Net Insight was founded in 1997 on the vision that network traffic will increasingly be domi- nated by video applications such as TV, pay-per-view, video-on-demand, video conferences and music videos. These services demand substantially increased network capacity and 100 percent quality of service, which is what Net Insight’s products enable. The ongoing worldwide transition from analog to digital TV distribution and the rise in high-definition HD( ) programming are also important market drivers.

BUSINESS CONCEPT interest-bearing liabilities, which is a strong position in view Net Insight’s business concept is to develop, market and of the lingering credit crunch. sell products to public and private optical fiber networks The majority of sales, 73 percent, derive from the profes- that transport high-quality, media-rich traffic. Net Insight’s sional media industry (Networks for Broadcast & Media), products offer customers the opportunity to introduce new which is still the largest market segment. Net sales of services revenue-generating services, while at the same time cutting such as training, maintenance and support surged 56 percent, capital expenditures and operating costs. Nimbra offers a scal- significantly exceeding internal targets. Indirect sales repre- able platform that is capable of handling existing and added sented 27 percent during the year, which was in line with services with a minimum of manual control and a guaranteed both the target and the partner strategy. 100 percent Quality of Service (QoS). Improved results and profit margins are due to factors such Depending on the specific needs of the individual cus- as increased sales of services, stronger position in negotiations tomer, Net Insight offers either a comprehensive or a focused and more cost-efficient production due to increasing econo- selection of products and services. Revenues are generated mies of scale. through the sale of products and licenses, support and maintenance agreements, installation services and training. Strategy Net Insight’s strategic objective is to acquire a major share TARGET FULFILLMENT of the media-rich carriage market, focusing on providing While Net Insight did not provide any detailed earnings or transport network products that facilitate the production, sales forecast for 2008, the year represents an all-time high in distribution and delivery of media-rich content. Net Insight terms of revenues, profit and liquidity. Compared to last year, will focus sales, marketing and product excellence activities total sales increased 20 percent to SEK 274 million, while net in three segments: Broadcast and Media Networks (BMN), income rose to SEK 68 million and the cash flow situation Digital Terrestrial TV (DTT) and Mobile TV, and Cable TV remained positive. The final quarter was the second best ever and IPTV (CATV/IPTV) services. The main focus will lie on for the Company, despite the generally severe downturn in the first two segments, whileCATV /IPTV will be pursued on the global economy. a case-by-case basis. Net Insight closed the year with a record-strong balance In order to achieve its objectives Net Insight will apply sheet, with liquid funds of SEK 152 million and and an eq- the following strategies for distribution, marketing, products, uity/asset ratio of almost 77 percent. The Company holds no development and organization during the coming year:

6 vision, business concept, objectives and strategies OVERARCHING OBJECTIVES

Generate return on equity and earnings per share to make the company an attractive investment

Leading global Grow faster than supplier of net- the market, with work products for good profitability media-rich traffic

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. DISTRIBUTION AND MARKETING l Networks for digital terrestrial TV and mobile TV – – Continue to expand geographically in the prioritized seg- broadcasters and operators that build new distribution networks in the transition from analog to digital terrestrial ments BMN and DTT/ Mobile TV into new markets in television. This segment also includes the rapidly growing Europe, Asia, Eastern Europe, the Middle East, Africa and market for mobile TV. South America. l Networks for cable TV and IPTV distribution – Telecom – Increase revenues from major existing accounts and imple- and cable TV operators that want to be able to offer households and businesses telephony, data and video services ment a channel strategy for telecom operators that resell in a bundled solution. CPE equipment to end customers. – Explore opportunities to capitalize on the new and unique Time Transfer function. – Strengthen the position and expand from the media production and contribution (BMN) segment into the neighboring Content Delivery Networks (CDN) segment. sales by region – Focused market activities towards all ongoing projects in Digital Terrestrial TV (DTT) around the world. EMEA, 50 % – Expand the company’s sales force for direct sales and marketing initiatives aimed at selected customer segments. – Establish additional partnerships with suppliers in distribution and systems integration for local support in geographi- APAC, 21 % North America, 29 % cally remote markets.

PRODUCTS AND DEVELOPMENT geografisk fördelning – Further develop existing solutions and products in close REVENUE by SEGMENT collaboration with the market. Examples of new products and applications in the pipeline include IP trunk and DTT & Mobile TV, 25 % JPEG2000 compression. IPTV/CATV, 2 % ORGANIZATION Broadcast & Media, 73 % – Strive to achieve a decentralized organization in which employees have insight into and are able to influence the Company’s objectives and performance. – Continue to develop employee skills and expertise. – Build long-term commitment among the employees through competitive reimbursement systems and stock option programs.

Net Insight annual report 2008 7 Industry borders become blurred as telecom operators are forced to introduce new services in order to retain customers and stave off players from the cable TV sector, who introduce triple- ”play services (telephony, Internet and TV).”

MARKET AND TRENDS

The continued convergence of the telecom, media and entertainment industries raises new requirements for an upgraded network infrastructure. New business models require multi- service networks that utilize scarce bandwidth efficiently, yet are able to guarantee Quality of Service (QoS). Net Insight’s Nimbra meets these demands.

Several market trends point towards an increasing demand Media and telecom hold up in for Net Insight’s network solutions. Industry borders become worsening economic climate blurred as telecom operators are forced to introduce new ser- The global economic decline that begun in the final tertiary vice in order to retain customers and stave off competitors of 2008 has, relatively speaking, affected the telecom and en- from the cable TV sector, who introduce triple-play services tertainment industries less than many other sectors. Some (telephony, Internet and TV). In addition, entertainment and broadcasters have witnessed a decline in advertising revenue, media consumption increasingly takes place via broadband but entertainment at large doesn’t suffer from weakening networks, with the explosive growth in video and stream- demand in tougher times. The traditional telecom industry, ing traffic resulting from popular sites and communities like covering equipment vendors as well as operators, has also MySpace, FaceBook and YouTube, a site which is believed to held up fairly well amidst the severe downturn faced by many generate 10 percent of all network video traffic. These trends other industries. combine to require substantial investments in network up- On the contrary, the ongoing worldwide switch from ana- grades. log to digital TV distribution, the increased use of HDTV, In order to handle the growing amount of traffic that is coupled with the digitalization of broadcast and media are based on different media types with vastly differing require- major drivers capable of boosting demand for Net Insight’s ments – from streaming video and real-time file transfers to products. audio data and VoIP – network operators also crave a cost-effective and easily managed multiservice platform. The Nim- Analog TV switch-off pushed bra platform offers true convergence of different traffic that by governments enables IP data and media services to be offered according to Regulators worldwide are pushing for an analog television premium and pay-per-use business models. distribution switch-off in order to free up frequencies that

8 market and trends Net Insight supports convergence Broadband TV, downloads from sites like Quality requirements and Net Insight value new services drives demand proposition YouTube, webcast radio and music, gaming, VPN services and IP telephony combine to Improved Improved picture quality bandwith through HDTV utilization fill the networks to capacity. YouTube alone 10 More channels Increases requirements 100 % is believed to generate some percent of through on bandwith and quality quality digitalization of service ”all network video traffic. In such an en-

Mobile TV Broad know vironment, network upgrading becomes on laptop and how in network cellphones and media crucial to network operators.”

Video and TV is estimated to make up 90 % of all broadband traffic

may be auctioned off and used for other applications. Some 150 countries around the globe are set to implement Digital Terrestrial TV (DTT) distribution and Net Insight is actively pursuing this market either directly or through its strong network of partners. Sixteen national and regional networks had 07 08 09 already implemented Net Insight’s solution by year’s end. Analysts at ABI Research estimate that the addressable n Video n market for Net Insight’s type of DTT solution to equal about Data/ Voice USD 100 million in 2009 on a global basis.

Switch to HD quintuples HDTV requires multiple bandwidth requirements more network capacity Within broadcast and media, High-Definition (HD) is increasingly becoming the preferred format, for capturing as 10 well as production and sharing. Uncompressed HD files, however, requires at least five times as much network capacity than Standard-Definition (SD) TV. Screen Digest estimated in September 2008 the total equipment market size for broadcast and media technology industry to be USD 16.1 billion, of which 9 percent – or USD 1.42 billion – accrues to Net 5 Insight’s potential target market of content and communication infrastructure. Another important driver stems from the increased pressure on public networks. The world’s total Internet traffic jumped 63 percent in 2008, while the number of broadband subscrib- 0 ers in the OECD countries increased 14 percent from June 2007 to June 2008. This growth increased broadband penetra- n Standard DefinitionT V (SD-SDI) tion rates to 21.3 subscriptions per 100 inhabitants. Broad- n High DefinitionT V (HD-SDI) n Full High DefinitionT V (3G-SDI) band TV, downloads from sites like YouTube, webcast radio and music, gaming, VPN services and IP telephony combine to fill the networks to capacity. In such an environment, network upgrading becomes crucial to network operators.

Net Insight annual report 2008 9 Telepresence – next-generation videoconferencing – demands higher quality standard and network capacity which presents an exciting opportunity for Net Insight to widen its target market substantially.

The number of IPTV users is estimated to exceed 80 million by 2012

milj 100 100 Digitization of media content offers 80 new business models Digitization of media content also offers new players (such as 60 media companies) the opportunity to distribute media ser- vices50 to end users directly over public networks. And the end 40 users possess a growing number of platforms that are able to receive digitized media content, from computers and televi- 20 sions to mobile phones and game consoles. Different platforms have different bandwidth requirements, but they all require0 excellent transmission quality. If the quality cannot 2008 2009 2010 2011 2012 be guaranteed, end users will not be willing to pay for the n Asia services. n Europe n North America Mobile TV and telepresence – new business n Rest of world opportunities The consumption of TV is moving to new channels, away from the traditional TV receiver and onto the Web and mobile phones. ABI Research estimates that there will be 500 million mobile TV users worldwide in 2013, while Frost & Sullivan expects the total market for services over DVB-H (Digital Video Broadcast – Handheld) to be worth over USD 2 billion in 2012. In order to cost-effectively roll out mobile TV and reach the market faster, mobile operators often collaborate with national terrestrial TV operators. Given 63 % its solid market penetration within DTT networks over 63 % recent years, Net Insight is well positioned for the network Global internet traffic increased by 63 % during 2008. expansion required by the arrival of mobile TV. Net Insight’s position as a leading vendor for multi-service transport equipment of video and media-centric services opens up new business opportunities. For example, within the business-to-business market, telepresence – next-generation videoconferencing – presents an exciting opportunity for Net Insight to widen its target market substantially.

10 market and trends Broadcast and media companies worldwide rely on Nimbra-based networks for production and editing in real-time. The result is higher video quality, a more efficient use of studio resources and reduced production time.

BROADCAST AND MEDIA NETWORKS

Target customers within the Broadcast and Media Networks compression HD signals, producers and broadcasters can de- (BMN) segment include broadcasters, telecom operators liver higher quality programs more economically. The Nim- and satellite companies, which either own or lease terrestrial bra platform provides a perfect fit as it is optimized to handle infrastructure for the transportation of media for (mainly) both video production and distribution. production and contribution purposes. Traditionally, much In addition to superior transmission quality, a major advan- of the traffic has taken place via satellite, which is relatively tage of Net Insight’s solution is the ability to offer all services expensive and compromises quality since video traffic must for video, data and telephony in a single product. In the past first be compressed. With a fiber-based terrestrial solution, it was not possible to simultaneously transport a mix of 1.5 broadcasting and production companies are able to exchange Gbps HDTV streams with 270 Mbps SDTV in uncompressed high-quality, uncompressed material in real time, regardless format, MPEG (ASI or IP), audio (AES/EBU or E1) and IP/ of geographic distance and at a lower cost. Ethernet traffic. With Nimbra, studio equipment and servers are directly linked to standard connections in the platform. HDTV requires five times more network capacity Olympic showcase The BMN segment is currently one of Net Insight’s two pri- A prime showcase for Net Insight’s capabilities in 2008 was ority segments and its share of the Company’s total business offered by the Beijing Olympics, the largest and most mis- rose to 73 percent in 2008. The explosive growth of video sion-critical TV event of the year, with over 1,000 cameras traffic in the networks and the shift towards high-definition at different Olympic venues and a transport platform that (HD) programming are two significant drivers that served to handled an unprecedented volume of HDTV contribution boost demand for Net Insight’s products and solutions. to the International Broadcasting Center, ultimately reach- Throughout the broadcast and media industry, HD pro- ing TV audiences around the world. Net Insight delivered duction is rapidly gaining momentum as a result of the in- and installed Nimbra equipment under the contract with the dustry shift from analog TV to digital TV and the implemen- host broadcaster, Beijing Olympic Broadcasting (BOB), in a tation of new digital production technologies. The transition very important project, the successful completion of which from standard-definition TV (SDTV) to HDTV requires ap- generated strong market interest and secured new business proximately five times more capacity in the communication for the Company. infrastructure and ten times as much for Full HDTV services (1080p/50). Net Insight offers interfaces and solutions for Telepresence widens market both HDTV and SDTV in the same platform, which enables Another new application for Net Insight’s products, which simple migration. holds the potential of widening the customer base to the New display technologies and changing consumer prefer- entire enterprise sector, is telepresence – or next-generation ences also constitute important drivers, as households switch video conferencing. High-end, real-time collaborative video to HD-enabled flat-screen TV sets and PCs are becoming requires significantly more packets and bandwidth than tra- an additional viewing option for TV content, especially for ditional videoconferencing of the past. Delay wreaks havoc the young generation. In order for television viewers to fully on this type of video distribution, disrupting the goal of total experience the HD picture the material must be delivered immersion in telepresence, which makes Nimbra the ideal through the entire chain without any loss of quality. solution, thanks to its low latency. In all, the trends of ever-increasing amounts of HD video Optimized for both production and distribution traffic in the networks, coupled with the growth in real- Since Net Insight provides network equipment that enables time file exchanges, point towards a bright future for Net a more cost-effective handling of uncompressed or lossless Insight’s Nimbra platform.

Net Insight annual report 2008 11 The worldwide transition from analog to digital TV distribution is the biggest technology shift in TV history and Net Insight is right at the heart of it. Pushed by regulatory requirements and strong business incentives, the digitization of terrestrial TV networks offers operators that implement the Nimbra-based platform a wide array of new and profitable business opportunities.

NETWORKS FOR DTT AND MOBILE TV

The Digital Terrestrial TV (DTT) and mobile TV segment tive share of the Company’s total business fell to 25 percent represents the transport infrastructure used by TV broadcast- in 2008. The reasons were mainly the exceptionally strong ers and telecom operators for mass-market media distribu- growth of the Broadcast and Media Networks (BMN) seg- tion. The ongoing migration from analog to digital distribu- ment and the fact that some initial DTT contracts have been tion across the globe in combination with the digitalization somewhat smaller than previously anticipated. and transition to High-Definition HD ( ) programming, are The fundamental drivers behind the DTT market are, how- important market drivers for Net Insight. According to IMS ever, firmly in place. Regulators across the world are pushing Research, the DTT market is expanding rapidly, with an an- for a transition from analog to digital TV distribution. One of nual growth rate of more than 43 percent and the number the reasons is the powerful economic incentive based on the of households with digital terrestrial TV is expected to triple fact that frequency spectrum is a scarce resource and analog over the next five years. transmissions require four to five times more spectrum than The mobile TV sub-segment includes customers that de- digital transmissions. Spectrum that is freed up by the ana- liver TV over a terrestrial distribution infrastructure in parallel log switch-off may be auctioned off to market players such as with a GSM or 3G mobile network. The transition to DTT mobile operators. networks frees up frequencies that may be used for mobile ap- The European Union has set a timetable by which mem- plications such as broadband (WiFi/WIMAX) and mobile TV ber states must complete the analog switch-off by 2012. In transmitted over the same infrastructure as digital TV signals. China, the world’s largest TV market, the government is pursuing an equally ambitious plan. Mobile TV is also taking Multi-service network offers new business off and there are plans to rollout mobile TV services across opportunities China by the end of 2009. This creates new opportunities for For TV audiences, DTT offers improved image and audio Net Insight, which during the third quarter of 2008 received quality and more variety and choice. For the operator, the a first order for a TV distribution network in the People’s technology offers lower operational costs and better utiliza- Republic, rapidly followed by two more orders. Net Insight’s tion of the frequency spectrum with the possibility to offer strong performance during the Beijing Olympics has cer- more TV channels, increased interactivity and new data ser- tainly presented an important curtain raiser paving the way vices to subscribers. for these deals. With Nimbra, operators not only get a DTT network but a multi-service transport infrastructure that allows them to Unique selling points win new customers become true media multi-service operators. Media produc- To national regulators as well as individual TV operators, tion services, IPTV backhaul distribution, mobile TV, digital Net Insights’ new Time Transfer function offers a unique radio and wireless broadband access are just a few means to selling point, since it eliminates the need for costly and boost revenues. potentially vulnerable GPS synchronization receivers in the network. This new functionality rendered Net In- Governments push for analog switch-off sight’s already competitive offering even more unique and Consequently, the DTT and mobile TV segment remains one played an integral part in several DTT contract wins over of Net Insight’s two priority segments, even though its rela- the year.

12 market areas The amount of TV and video over broadband is soaring thanks to the popularity of Web TV and video content available on Web sites like YouTube, coupled with increased bandwidth and consumer- friendly price wars between telecom operators and cable TV companies. Only one outcome is certain – networks need to be upgraded and transport made even more cost effective. The answer – for telecom and cable TV operators alike – is spelled Nimbra.

CABLE TV AND IPTV

Transport networks for cable TV (CATV) and IPTV services smallest segment, the Company secured several important are (mainly) used for the delivery of TV and video via broad- deals in 2008, such as a major US telecom operator and Ca- band to households. Within this segment, Net Insight focuses blenet, a telecommunications provider in Cyprus that offers on telecom operators and their backhaul carriage of video to triple-play services across the island. Cablenet decided to up- and from households, as well implementation of “one-hop” grade their national core network with the Nimbra platform networks within the metro/aggregation networks. CATV op- and its network now carries high-speed data and telephony erators are, however, a large potential target group. traffic between the main point-of-presences in four cities. Telecom operators around the world are subject to fierce Telecom operators aren’t the only ones facing challenges and steadily growing competition from a host of industries, in this market. Cable TV operators must constantly upgrade from CATV companies to mobile phone operators and me- their networks in order to offer telephony and increased dia companies. The fixed-to-mobile substitution has put call broadband capacity in addition to their television offering. rates for fixed telephony under pressure. To compensate for But it is primarily the transition to HDTV and the potential shrinking revenues, a growing number of operators are now of new interactive services like video-on-demand (VOD) and beginning to review their service offering to complement network based Personal Video Recorder services (PVR) that it with premium TV and video services that subscribers are are driving this trend. PVR services entail video streams trans- willing to pay for. This strategy is intended to increase rev- mitted to individual subscribers in the unicast mode, rather enues and customer loyalty, capture new subscribers with a than a common stream transmitted to all subscribers, which more attractive selection of services, and reduce the risk of is multicast. losing existing customers. High quality from start to end Cable companies go digital and offer triple-play Centralization of media content is another important trend Competition for broadband subscribers is driving business in that places new demands on the infrastructure. A consistently the IPTV and CATV network markets. Many CATV opera- high quality must be guaranteed all the way from the media tors have already made the transition to digital TV and are provider to the end user at home. Transport of video traffic now offering high-speed Internet services and telephony via must also be extremely efficient to use bandwidth optimally IP (VoIP) in direct competition with the established telecom and the network must be scalable. operators, who are thus subject to competition within their The Nimbra platform is built to handle these demands, “home territory” of telephony. providing a cost-effective solution to handle the growing video traffic in public networks. Net Insight’s solution is located IPTV reduces distribution costs in the transport network and comprises the link between the Based on a standardized protocol, IPTV reduces distribu- content providers, distribution networks and the access net- tion costs to the operator and enables distribution of narrow works to which households connect. Net Insight’s solution is niche programming that adds diversity to the offering and also independent of the access solution used for the last leg makes it financially viable. out to the end customer, whether it is the phone company’s With the introduction of television and video to today’s traditional copper lines, the CATV network, or an entirely broadband networks, particularly with the transition to fiber-based infrastructure since most of the interfacing to all HDTV, this traffic will quickly become dominant. of these equipments is Ethernet-based. The Nimbra platform With a growing number of major telecom operators already can also be used to digitize existing CATV networks at the on its list of customers, Net Insight is well positioned to take same time that the operator can introduce new interactive advantage of the new strategy and ambitious expansion plans services on an existing solution and consolidate all services in among operators. While CATV/IPTV is still Net Insight’s a single network.

Net Insight annual report 2008 13 KPN Broadcast Services The Nimbra platform met all our requirements in terms of capacity expansion and MediaXstream guaranteed premium-service quality”

”With Net Insight, we can deliver a leading, Chongqing Broadcasting Group Station all-digital network that exceeds the grow- ”ing needs and demands of our customers”

NImbra at the customer

From Asia to Europe and North America, broadcasters and network operators across the globe utilize the multiservice transport capabilities of the Nimbra platform to reach market leader- ship and to introduce new and revenue-boosting services.

China goes digital Nimbra’s high bandwidth capacity utilization, which lets the Chongqing Broadcasting Group Station (CQBS) – a local broadcaster add more TV channels to each microwave link. television broadcaster based in Chongqing, south-central TV operators deploying DTT based on the Nimbra platform China – has selected the Nimbra media transport platform to not only get a DTT network but a multi-service transport deploy a new TV distribution network. infrastructure that opens up for new business opportunities. The contract is strategically important in view of the CQTV’s solution includes a combination of Net Insight’s pending upgrade of TV networks throughout the People’s Nimbra 360 and Nimbra One switches, Nimbra Vision Net- Republic. work Management system and a powerful multicast engine Most Chinese provinces still broadcast analog television for efficientTV distribution, which will be carried over STM- but as possession of set-top boxes becomes more widely 1 microwave links. spread, a large-scale transition to digital television broadcast- Chongqing, or Chungking in English, is the largest city ing is expected within the next two to three years. of the Szechwan province and the leading industrial center In addition to television, CQBS will use the new network in south-central China with a population over 5 million, and for internal data services and the contribution of audio servic- more than 20 million in the greater metropolitan area. es between local studios and the central production facility. Net Insight’s Chinese partner New Digital Technologies “Nimbra met all our requirements” (NDT) Group, a renowned distributor and system solutions Leading Dutch operator KPN has built what is probably the provider in the broadcast and telecommunication industries, world’s most efficient multi-service media network based on was instrumental in securing the deal, having worked nearly Net Insight’s Nimbra platform. Initially, Nimbra was selected two years on this client. for the construction of a nationwide Digital Terrestrial Tele- “We have been actively promoting the Net Insight solu- vision (DTT) network and a contribution network aimed at tion to CQTV for some time. The customer found that Net broadcasters and production companies. Insight’s Nimbra platform is the most efficient solution for Positive experiences from running these two networks led a DTT distribution and contribution network that is scal- to KPN Broadcast Services decision to use Nimbra technol- able and future proof,” says Wang Tong, Vice President of ogy as the heart of its media broadcast expansion, accord- NDT. “With Net Insight’s state-of-the-art technology and ing to Jesse Robbers, Market Manager TV & Media at KPN great support combined with NDT’s commitment, we have Broadcast Services: been successful in deploying an advanced transport solution “The Nimbra platform met all our requirements in terms in China.” of capacity expansion and guaranteed premium-service qual- Another reason why CQTV opted for Nimbra was that it ity needed to meet the extreme requirements of real-time TV features integrated media interfaces, whereas competing so- transmissions in combination with file transfer and data traf- lutions require several separate converters. Another factor is fic – all at the lowest possible operational cost.”

14 nimbra at the customer The Nimbra 600 series platform became the ideal solution of content distribution transport paths such as for multicast for KPN Broadcast Services expansion. The Nimbra 680 had video traffic. Selecting the Nimbra platform met these goals the required redundancy of power supplies, node controllers and enabled the company to roll out its new network in re- and switch matrixes and could easily support the capacity of cord time and become operational in over 17 markets in less dual 10 Gbps links in the backbone network. Nimbra 680 than 90 days. handles all long-distance traffic from access and aggregation MediaXstream rapidly gained sufficient market coverage networks based on Nimbra One and Nimbra 300-series ac- to immediately address broadcast commitments to rights cess units. holders of Major League Baseball for the 2008 season. Other The high-capacity core network was up and running at applications include news and entertainment, as well as file the end of 2007 and KPN Broadcast Services was ready for transfers for the motion picture industry. Previously, movie business expansion into areas like mobile TV, digital radio studios often relied on shipping VCR cassettes with digital and sports content in the form of uncompressed contribution content between production facilities and locations. The new feeds from 38 football stadiums covering the top two leagues MediaXstream network, however, permits file transfer at high in the Netherlands. speed with retained quality. By 2008, the network supports an array of applications, in- “With Net Insight, we can deliver a leading, all-digital net- cluding multicast distribution of multiplexed channels from work that exceeds the growing needs and demands of our head-end to transmitter sites all over the Netherlands for the customers,” says Wayne Price, CTO of MediaXstream. Dutch digital terrestrial TV service (DVB-T/Digitenne). In The new network ensures top-flight content quality for addition, the network handles multicast distribution of DVB- business-critical video content, such as live feeds from major H signals for a mobile TV application, and is one of the first league basketball, baseball and NHL hockey events. Nimbra commercial mobile TV services in Europe with nationwide also delivers superior bandwidth capacity utilization at a low- coverage. er cost than competing solutions. KPN Broadcast Services has evolved into one of Net Insight’s “The Net Insight switches are much less expensive than most important customers. The operator now utilizes most of Cisco routers and utilize bandwidth better,” says Del Bothof, the multiservice transport capabilities of the Nimbra platform, MediaXstream’s CEO. for a variety of applications, using different business models End customers are able to manage network provisioning and in different broadcast markets (Europe and Global). and file transfers at their own premises with the help of dedicated software connected to the operations center at MediaX- Real-time HD across America stream. To the end users, the Nimbra-based network offers Founded in 2008, media service provider MediaXstream of- the flexibility of only paying for the bandwidth required on fers high capacity transmission of uncompressed and com- each occasion. pressed HD or SD video, data and voice services to profes- MediaXstream’s position at the center of America’s broad- sional media companies across North America. Its solutions cast, media and entertainment market and its optimized net- are designed for producers, broadcasters and content dis- work presents Net Insight with a very strong reference case in tributors who create, manage and distribute original media, North America. especially HD media. “As the provider of local and long haul transmission ser- In optimizing its network, MediaXstream was looking for vices for the biggest names in the media business, MediaX- a platform with the flexibility to support an array of video stream is extremely selective in what technology we use in our input types and the ability to map them to different types network,” Price points out.

Net Insight annual report 2008 15 Controlware We are proud to promote Nimbra for many reasons, one of them being that it offers an ideal migration platform between broadcast media Digital Video enterprises ”and an IP environment” Without the capability that Net Insight integrates into our solution, holographic-appearing telep- Century Sage Scientific System ”resence would not be easily achieved”

Expanding market reach through value GEOATLASÆ WORLD VECTOR - GRAPHI-OGREÆ - France - 1997 adding business partners Net Insight collaborate with partners that possess excellent knowledge of the local market and add considerable value to the customer offering. This global network of business partners is highly efficient in expanding market reach towards new customers and countries.

Covering the world’s biggest market and ARD, the joint organization of Germany’s regional pub- Renowned Chinese systems integrator CSS (Century Sage Sci- lic-service broadcasters. entific Systems) has been a partner of Net Insight since its estab- Vendor-independent Controlware has tried and tested oth- lishment in 2007. Delivering high competence in systems inte- er platforms besides Nimbra and enjoys arguing the unique gration, CSS possesses the know-how and experience required benefits of Nimbra to network operators and end users. to develop complete network solutions for its customers. “We are proud to promote Nimbra for many reasons, one To Net Insight, CSS contributes solid market knowledge of them being that it offers an ideal migration platform be- about China. As a partner that enjoys close contacts with the tween broadcast media and an IP environment,” says Bernd largest network operators and broadcasters, CSS actively pro- Schwefing,COO at Controlware. motes Net Insight’s portfolio across China. The cooperation has already been instrumental in securing Holographic videoconferencing several important contract wins for Net Insight in the country. The new partnership with US video conferencing supplier A major Chinese broadcaster has chosen Nimbra as platform DVE (Digital Video Enterprises) offers Net Insight an op- for an international media network, while a regional television portunity to tap into the vast enterprise market. DVE caters company selected Nimbra for its contribution network. Another to the high end of the teleconferencing market in offering provincial customer placed an order to deploy a DMB-T (Digi- telepresence, where participation takes on a new dimension tal Multimedia Broadcast Terrestrial) distribution network. with the help of HD-quality holographic images. With a head office in Beijing and branch offices in Shang- Traditional teleconferencing never really hit it off big time, hai, Guangzhou and Hong Kong, the company is one of Net despite its obvious benefits from reduced traveling and zero Insight’s most important partners in the People’s Republic – environmental impact, partly because jittery sessions with the world’s largest television market. post-it size video screens weren’t seen as an alternative to face- to-face meetings. “Nimbra is an ideal platform for migration As telepresence applications require an underlying real- between broadcast and IP” time architecture, Nimbra-based networks are ideal, since low German systems integrator and distributor Controlware con- latency is crucial to performance. In fact, few other network tributes to high customer satisfaction in the large and impor- solutions are capable of simultaneously delivering two-way tant German market by bringing excellent skills on the Nimbra HD video traffic with100 percent QoS. platform and by offering strong and dedicated local support “Without the capability that Net Insight integrates into our as well as 24/7 service on Net Insight’s products. Controlware solution, holographic-appearing telepresence would not be easi- employs over 580 people across the world and enjoys excellent ly achieved,” says Steve McNelley, co-founder and CEO of DVE. contacts among telecom operators and media companies. “Video quality has come a long way. With video streamed to A partner of Net Insight’s since 2003, Controlware received our podiums without jitter, latency or delay, we have exceeded Net Insight’s Special Award in 2007. The company has been expectations of telepresence opportunities and applications.” instrumental in securing several important contracts with Applications like telepresence potentially broaden the mar- customers such as WDR (Westdeutscher Rundfunk), HR ket for Net Insight’s equipment far beyond the broadcast and (Hessischer Rundfunk), ZDF (Zweites Deutsches Fernsehen) media segments, to the enterprise market at large.

16 Partners Live Events Content Studio Providers Production

NETWORK

IPTV/CAT V

Satelite Up-link Digital Video Broadcast N Digital Video Broadcast Live Events E = Nimbra 340/360 = Nimbra 680 = Nimbra 1 For production and For transport Satelite upplink T distribution W O Studio Production R Satelite Up-link K

Content IPTV/CATV Providers

= Nimbra 340/360 = Nimbra 680 = Nimbra 1 For production and For transport Satelite upplink distribution

NIMBRA CHANNELS FIBER CAPACITY, CREATING A VIRTUAL NETWORK INSIDE THE NETWORK IP is a universal interface to rapidly deploy TV new services and cost-effective transport, TRANSMISSION- LINKS but – let’s face it – IP was not designed to carry VIDEO Digital Video Live Events video. Nimbra is – and it offers full IP interop- Broadcast TV N 34 Mb Studio E DATA 45 Mb erability with theVIDEO improved quality of transT - NIMBRA FIBER NW Production IP Satelite Up-link 155 Mb W Classes of port required DAforTA media services. O 622 Mb R VOICE service VOICE K ETH IPTV/CAT V 1 Gb Content 2,5 Gb Providers 10 Gb AUDIO

= == TV

NET INSIGHT’S PRODUCT PORTFOLIO N VIDEO E Next-generation IP media Net Insight’s product portfolio comprises a complete T series of multiservice switches for broadcast and media NIMBRA FIBER NW W networks, consisting of several network switches and transport solution access units. The Nimbra platform handles a broad span O of applications for production, contribution and distribu- DATA R The growing amount of high-quality video and other capacity- tion in backbone and metro networks. The many different K ETH demanding traffic in public networks poses a significant challenge access and transport modules in the Nimbra products allow them to be tailored to the needs and wishes of the VOICE to network operators on their migration towards an all-IP environ- individual customer. ment. When 90 percent of the total traffic in a given network is made up of video, the risk of endless buffering and ensuing packet loss may grow beyond what is acceptable to end users. The al- = ternative to the network operator is costly overprovisioning and nimbra 600 series The Nimbra 600 series consists of the resource-demanding traffic planning, which inherently is a non- Nimbra 680 and 688 switches which scalable solution. combine high capacity, the lowest = cost per bit transport and guaranteed Under these conditions, Net Insight’s Nimbra platform is the 100 percent QoS. Nimbra 688 is the DTT perfect link, offering network operators lower costs, simpler han- Studio Post mostProduction powerful switchDVB-T offering / ATSC / Mobile-TV twice Production production company DMB-T / ISDB-T DVB-H / MediaFLO = Q S the access and trunk port count of dling and guaranteed o . Nimbra is simply the next-generation Nimbra 680. solution for transport of IP video and media services.

Nimbra 340 Nimbra 680 Migration towards an IP centric environment is poised to con- Nimbra Vision Network tinue and Nimbra is the ideal migration platform in broadcast IP Live Events Operationsnimb Centre ra 300 series

Nimbra 340 Nimbra 680 The Nimbra 340 and 340- media environments. HD HD are primarily access IP is a universal interface to rapidly deploy new services and Nimbra 340 units Nforimbra 360 the professionalNimbra 360 IP Nimbra 680 CORE Nimbmediara 680 industryMETRO as well as cost-effective transport, but – let’s face it – was not designed to = Nimbra 340 = Nimbra 360 = Nimbra 340 HD = Nimbra 680 = Nimbra 1 Nimbra 340 for the digital TV and mobile TV markets N.imb Thera 360 NimbraNimbra 360 340-HD For production and For transport Nimbra 680 For production and Satelite upplink carry video. Nimbra is – and it offers full IP interoperability with also has a built-in interface for transport of high-resolution distribution distribution the improved quality of transport required for media services. video/HDTV. The NimbraNimbra 340 Nimb ra360 1 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 feature and is particularly suited Innovation behind key benefits Content Enterprice Satelite Enterprice IPTV/CATV Provider/to the new digitalvideo terrestrialUp-lin andk mobilevideo television networks Nimbra offers the industry’s lowest cost-per-bit switching, un- play-outunder constructionconference around the world.conference matched bandwidth utilization and guaranteed QoS. What’s the se- cret? A combined transport and switching technology that, in simple terms, is based on channelization of the capacity of the fiber. nimbra ONE Nimbra automatically channels fiber capacity down to a granu- A modular high capacity switch with space larity of 512 kbps inside the network, in effect creating a “virtual for an array of different access and trunk interfaces. Nimbra One’s efficient resource network” inside the network. The channeling, or dynamic dedica- management of bandwidth ensures maxi- tion, corresponds to customer preferences and the demands of the mum quality of service, which meets the high demands of broadcasting and media particular file type. Once the capacity is dedicated and the content companies, distributors of terrestrial digital is switched, delivery with 100 percent QoS is guaranteed. This dy- TV and cable TV operators. namic channeling enables a multiple streams with different requirements to be sent simultaneously, in both directions and without any risk of packet loss, at a total network utilization rate of close to 100 NIMBRA VISION percent. Nimbra Vision is a complete tool for the operation and maintenance of a Operating a Nimbra-based network is so easy that complete new- Nimbra network, providing the op- comers need only a few of training days to master it. After that, erator with a complete overview and control of network activities. highly automatic network management, Nimbra Vision, and the control system built in to the products requires a small staff operating the network even providing very advanced network services.

Net Insight annual report 2008 17 The Nimbra platform combines optical network transport technology with carrier-class Ether- net, multiservice functionality and an automated control layer. The result is a solid platform for enhanced service offerings at lower capital and operational expenditures, since operators and users may converge everything from media services to Ethernet services onto a single platform.

TECHNICAL PLATFORM, PRODUCTS PATENTS PROTECT INNOVATIONS A high content of innovation has brought Net Insight’s products and solutions to the AND DEVELOPMENT leading edge of technology. This technological advantage is secured by a number of patents to prevent technology plagiarism and to protect knowledge and know-how. So far, a total of 28 families of patents have Nimbra is equally well suited for high-end video production been filed in one or more countries. During and event networks requiring 100 percent quality assurance 2008 one new patent application was filed and one of the applications were registered for transporting uncompressed video and HDTV streams, as as patent, bringing the total number of well as for distributing hundreds of ASI or IP MPEG streams patents registered to 26. for IPTV, CATV, Digital Terrestrial or mobile TV networks. The products feature true media-centric multi-service capabilities with built-in data, telephony and video interfaces, such as Gigabit Ethernet, 10/100 Ethernet, E1/T1, E3/DS3, STM-N/OC-N, DVB-ASI, SD-SDI, HD-SDI, 3G-SDI, AES/ UNIQUE TIME TRANSFER FUNCTION EBU. All services can be multicast for efficient distribution Most DTT and Mobile TV networks are over any network topology. Single Frequency Networks (SFN) where the Net Insight offers a powerful solution for operators and transmitter stations must be synchronized to send their signals at exactly the same service providers that want to implement multiservice net- time to avoid interference from nearby works, while cutting operating costs and creating new busi- antennas. The Nimbra platform offers the unique “Time Transfer” function, which ness opportunities. Some of the key characteristics that make allows highly accurate distribution of real Nimbra unique are: time over the existing network and thus eliminates the need to add costly and potentially vulnerable GPS receivers to the SUPERIOR QUALITY OF SERVICE network. The Nimbra platform offers dynamic resource allocation by separating different types of traffic into secure and logical channels, creating a “virtual and dynamic network” inside a given network. As a result, real-time critical services like HD video and audio are transported without any packet loss or distor- NIMBRA AND ETHERNET/IP/MPLS tion, ensuring 100 percent QoS for all kinds of services. The Nimbra platform’s unique proper- ties and extensive Ethernet functionality MAXIMUM CAPACITY UTILIZATION provide excellent QoS for transport of IP traffic. Net Insight will continue to focus The encapsulation – or channelling – of traffic in Nimbra on developing IP/Ethernet functionality enables maximum resource utilization by the reservation which enables customers to gain unique advantages, allowing them to use both of channel bandwidth with minimum overhead. This is an optical transport networks and IP/MPLS optimum resource allocation that guarantees QoS even at a networks for efficient video and media network load of 95 percent or more. Each channel may be transport. set up and configured with sub Mbps granularity and may be either symmetrical or asymmetrical depending on the need. All Nimbra switches from the smallest access elements to the highest capacity core nodes support full connectivity, maximum granularity, and any combination of unicast and multicast connections.

18 technical platform, products and development PRODUCTION & CONTRIBUTION DISTRIBUTION Distribution DTT Studio Post Production DVB-T / ATSC / Mobile-TV production production company DMB-T / ISDB-T DVB-H / MediaFLO

340 680 Nimbra Vision Network Live events Operations Centre

340 HD 680

340 360 360

680 CORE 688 METRO

340 360 360 680

340 One

Content Enterprise Satellite Enterprise IPTV/CATV provider/ video up-link video play-out conference conference Nimbra

DYNAMIC PROVISIONING OF SERVICES market segments. Recently introduced products and func- With the help of a signaling protocol, channels automatically tionalities have served to strengthen the competitiveness of find their way through the network. When the network is Nimbra. extended, new nodes are automatically identified and the dy- One example is the unique Time Transfer function, which namic routing protocol considers new pathways through the provides GPS-free time synchronization in Nimbra-based network. This enables services to be provisioned in a simple networks and was fully commercialized during 2008. Time one-step process and automatically rerouted in case of net- Transfer offers a Unique Selling Point (USP) to network op- work failures erators, while bringing Net Insight’s competence beyond core network functionality and towards the overall security aspect MULTICAST FOR MORE EFFICIENT DISTRIBUTION of a network. With support for the multicasting of all kinds of services, the As the migration towards all-IP continues, Net Insight is Nimbra platform efficiently distributes TV, radio and video consistently developing the capability of Nimbra to handle simultaneously over a network. Multicasting of Ethernet traf- IP traffic in a seamless fashion on a converged platform. One fic means that hundreds of IPTV channels may be broadcast example, is our IP trunking solution without disrupting other traffic on the same link. This year, the Nimbra product portfolio was expanded with additional access and transport functionality. In the sec- FLEXIBLE TOPOLOGY OVER OPTIONAL TRANSMISSION ond quarter, Net Insight introduced two new access modules LINKS for its Nimbra 600 series, expanding interface support to in- The Nimbra network can be configured as ring, star, point- clude asynchronous serial interface (ASI) and Gigabit Ether- to-point or mesh structure as desired, thereby simplifying net transport. The introduction extends Nimbra 680 versa- network planning and allowing a build-as-you-grow strategy. tility beyond its inherent backbone switching capabilities to include high-capacity video and data aggregation. NIMBRA OPTIMIZES UTILIZATION OF THE CLIENTS’ NET- In June, Net Insight launched a new eight-port 3 Gbps WORKS Video Access Module for the Nimbra 600 series multi-service Net Insight’s customers include the most demanding players switches, enabling transport of uncompressed 1080p HD in the media market, with extremely high requirements for video in studio and contribution networks with 100 percent transport of high-quality video material. Net Insight’s Nim- quality of service (QoS) guaranteed. The new module is also bra platform provides clients with one of the most future- capable of delivering a mixture of 1080p, 1080i, 720p and oriented and cost-effective network solutions available today, SD signals from a single Nimbra switch, which enhances allowing higher revenues and lower costs – higher revenues customer service flexibility. Unlike other solutions offering because new services can be launched in the same network only point-to-point 1080p distribution, the new Video Ac- that is already used for voice and data communications, and cess Module enables routing and multicasting of 3Gbps SDI lower costs for operation and maintenance when a single services in any network topology. platform handles all services. During the third quarter, Net Insight announced general High bandwidth utilization means cost-effective operation availability of the Nimbra 688 multi-service switch. Based on and superior quality of service means reliable revenues for the the Nimbra 600 series, the Nimbra 688 is aimed at fulfilling customer, without requiring unnecessary excess capacity. the highest demands in terms of capacity and availability of the professional media industry, telecom operators and CATV / DEVELOPMENT IPTV networks. Offering twice the access and trunk port count Research and development focuses on developing interna- of Net Insight’s Nimbra 680, Nimbra 688 doubles traffic capa- tionally competitive and market-leading products for defined bilities for compressed and uncompressed live HD video.

Net Insight annual report 2008 19 Employee numbers 2008 2007 2006 Average number 101 93 80 of employees Number of women, % 11 12 12 Staff turnover, % 6.6 7.57 11 Sickness absence 1.9 3.0 2.7 (See also Note 7), % Cost/employee for skills 3,427 1,281 4,656 development, SEK Value added/employee:* 2,600 1,540 993 SEK thousands

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

kvinnor/män område

Employees

Net Insight is a highly technology-driven company, offering unique network solutions based on years of research and development. The success of the AVERAGE LENGTHanst tid OF EMPLOYMENT ålder Companyutbildning relies on the expertise, creativity and com- l >5 years, 46 % l 3-4 years, 18 % mitment of its employees. l < 2 years, 36 %

By year’s end, Net Insight had 108 employees, including 6 in the US subsidiary Net Insight Inc., 4 at the Singapore sales office, 1 in Russia and 1 in the UK.

Expertise An innovation-based, high-tech company like Net Insight is characterized by a high level of education among the employees. Over employees per area kvinnor/män område 80 percent of the staff have a university degree. Since Net Insight’s l Research and development, 46% unique solutions challenge many established industry concepts, the l Business development and sales, 39 % kvinnor/mänl Administration and logistics, 15 % område Company needs people with leading-edge skills who are able to come up with solutions that add value to the customers.

Commitment and recognition Almost half the work force has been with Net Insight more than five years and among them, a large number has been with the Company since it was founded in 1997. This is a high figure in the fast-moving technology sector and gives Net Insight an important continuity. The anst tid ålder utbildning sense of loyalty with the Company is generally very high. Employee surveys show that an important reason behind the gener- AGE DISTRIBUTION anst tid ålder utbildning ally high job satisfaction is the opportunity for personal and profes- l 24–35 years, 18 % sional development that comes from working for a technology-driven kvinnor/män l 36–45 years,område 55 % company with a unique, high-quality offering. Objectives and strate- l >45 years, 27 % gies are broken down at the individual level in order to become clear and measurable. To reward personal efforts and initiatives, Net Insight operates a system in which employees receive cash bonuses related to corporate goals in terms of growth and profitability.

Health and job satisfaction Employee health and job satisfaction are top priorities. Net Insight will offer an attractive workplace where employees perceive their jobs as rewarding and challenging. The firm promotes wellness programs LEVEL OF EDUCATION and employees are provided with an annual subsidy to be used for ex- anst tid ålder utbildning l Upper secondary education, 18 % ercise and fitness activities. Sickness absence is a low 1.9 percent (3.0). l University education, 82 % No work-related incidents were reported during the year.

20 employees Göran Rangne is part of the team that created Net Insight’s new and unique Time Transfer function. He says he enjoys working with research and development in an industry where the speed of technological development is extremely high.

Craving creative challenges

Like many of his colleagues, Göran Rangne at the Systems taneously in order to avoid interference. The maximum al- Development department has been with Net Insight for a lowed deviation is 1.5 millionth of a second after ten hops. long time – ten years in Göran’s case. Apart from nice col- Göran tries in simple terms to explain how Time Transfer leagues and decent coffee, he suggests plenty of opportunity works: for professional and personal development as an important “The first node in the network receives UTC time. This reason why he has never contemplated leaving. time signal is then transferred through the network on a “I enjoy being constantly faced with new challenges and node-by-node basis, with each node updating the accurate to come up with solutions as fast as possible. My department time based on the received time and how long it took for the contributes to making our products better all the time and signal to arrive from the preceding node in the network. The my job never gets dull.” technical principle is that you measure the time it takes for a Like many of his colleagues, Göran holds a Master of Sci- roundtrip signal to travel between the nodes and divide it by ence degree. He has recently been active in developing Net two. This is followed by calculations at each end to consider Insight’s new Time Transfer function, which is now inte- the actual distance between the two nodes. If necessary, cor- grated into all aspects of the Nimbra platform; hardware, rections are made for asymmetric links.” software and firmware. Research and development is highly The usefulness of accurate timing stretches far beyond dig- customer driven at Net Insight and the challenge behind this ital TV networks, however, as the rapid growth in live media project was to come up with a solution that would free cus- exchange has boosted demand for time synchronization in tomers from being dependent on GPS timing. If successful, general, Göran points out. this would reduce dependencies as well as costs to network “Real-time video traffic between broadcasters and produc- operators. tion companies, for example, requires time synchronization “Today’s society is becoming increasingly dependent on between different studios and locations. In that case – and GPS timing for many critical everyday services, such as digi- whenever there is a need to synchronize time between two or tal TV and radio distribution systems and mobile networks,” more locations – Time Transfer is very useful as it eliminates Göran explains. the need to buy separate GPS equipment.” During several years of hard work, Göran and his team suc- Göran has already encountered many positive reactions cessfully developed Time Transfer, which automatically pro- among Net Insight’s customers. vides UTC time synchronization at all nodes in the network. “I know it has added a dimension to our talks with cus- Göran recalls that the opportunity to gather real-life ex- tomers and that Net Insight is moving beyond core network periences of the new solution was very important and that functionality towards the overall security aspects of a com- Norkring was very helpful in this respect. munication network.” “Large-scale networks in a real environment offer condi- To conclude, Göran enjoys being part of a fast-moving in- tions that aren’t easily simulated at the drawing board or in a dustry where the speed of technical development is extremely lab environment.” high, and he is convinced the future belongs to Net Insight. “Today’s consumers capture HD video and stills, which 1.5 millionth of a second they share online with each other and via sites like YouTube Accurate timing is crucial to single-frequency (SFN) digital and communities such as FaceBook. This paves the way for a TV and mobile telephony networks. When all transmitters huge traffic increase and consequently a growing demand for use the same frequency, transmissions must take place simul- Net Insight’s products.”

Net Insight annual report 2008 21 Net Insight Share price movements Class B shares OMX Mid Cap Stockholm_Pl (2004–2008)B−Aktien Omsattantalaktier 1000−tal OMXMidCap Stockholm_PI Share turnover in thousands 9 8 7

3 200 000

150 000 2 100 000

50 000

1 2004 2005 2006 2007 2008 © NASDAQOMX

THE NET INSIGHT SHARE AND SHAREHOLDERS

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

OWNERSHIP The company had 13,725 shareholders on December 31, from the previous year. In 2007 533 million shares were sold 2008, compared with 13,708 the previous year. Net In- for a total value of SEK 3,210 million, with an average volume sight’s three founders remain as shareholders with 1.85 per- of 2.1 million shares per day. cent (2.1) of capital and 6.8 percent (6.4) of the votes. As of December 31, 2008, the 20 largest shareholders account for WARRANTS 52.1 percent of capital and 53.0 percent of votes. The ma- In connection with Constellation Ventures (Bear Stearns jor shareholders primarily consist of strong institutions and Asset Management Fund) going in as the largest shareholder funds. Foreign ownership made up 22.7 percent of capital, of Net Insight AB in April 2004, 9,790,000 warrants (War- compared with 25.3 percent the previous year. rants 7b) were issued with a private placement. Under the terms, Constellation Ventures can redeem the warrants at PRICE MOVEMENTS SEK 2.28 per share and thereby obtain 1.06 shares per war- The share price declined by 23 percent during the year. The rant until April 1, 2009. There were 9,474,000 warrants out- highest price during the fiscal year, SEK 6.55, was quoted standing as of December 31, 2008. on May 27, 2008, and the lowest, SEK 2.70, on October 27, 2008. During the year the share price outperformed the EMPLOYEE STOCK OPTIONS OMX index, as well as outperforming companies in the The company has one outstanding employee stock option technology sector to some extent. Net Insight’s total market program, which was implemented in 2007. During 2008 the capitalization was about SEK 1,255 million as of December stock option programs from 2003 and 2004 expired, which 31, 2008, a decrease compared with the previous year when generated 9,287,749 new shares. The maximum dilution ef- it was SEK 1,600 million. fect of outstanding employee stock options is about 2.1 percent of the number of shares in the Company. TRADING VOLUME In all about 267 million shares were sold at a total value of al- SHARE CAPITAL most SEK 1,232 million, corresponding to a 70 percent turn- Share capital was SEK 15,196,000 as of December 31, 2008. over rate for 2008. On average 1.1 million shares were traded There were 1,900,000 Class A shares, and 377,990,569 Class per day during the fiscal year, which is a 48 percent decline B shares, for a total of 379,890,569 shares.

22 the net Insight share and shareholders 20 largest owners as of dec 31, 2008 Class A Class B Holdings Votes Market value, Name shares shares (%) (%) SEK 000s

1 Constellation Ventures 0 38,090,051 10.0 9.6 127,983 2 Swedbank Robur fonder 0 37,494,003 9.9 9.4 125,980 3 AMF Pension fonder 0 22,443,000 5.9 5.7 75,408 4 Lannebo fonder 0 18,499,107 4.9 4.7 62,157 5 Dexia 0 12,146,667 3.2 3.1 40,813

Ownership structure, capital % 6 Alecta Pensionsförsäkring 0 10,925,732 2.9 2.8 36,710 l Swedish banks and institutions, 7 Handelsbanken fonder incl XACT 0 8,954,124 2.4 2.3 30,086 33.6 % 8 JP Morgan Bank 0 8,337,823 2.2 2.1 28,015 l Other Swedish legal entities, 8.2 % 9 Försäkringsaktiebolaget, l Swedish natural persons, 35.5 % Avanza Pension 0 6,978,251 1.8 1.8 23,447 l Foreign investors, 22.7 % 10 Nordnet Pensionsförsäkring AB 0 6,671,016 1.8 1.7 22,415 11 Banco fonder 0 4,820,000 1.3 1.2 16,195 12 Lars Gauffin 600,000 3,124,636 1.0 2.3 10,499 13 Karl Otto Wikander and companies 0 3,322,915 0.9 0.8 11,165 14 Länsförsäkringar Skåne 0 3,000,000 0.8 0.8 10,080 15 Per Lindgren 800,000 1,951,790 0.7 2.5 6,558 16 Fjärde AP-Fonden 0 2,433,800 0.6 0.6 8,178 17 AB, V.S.A.T. 0 2,180,000 0.6 0.6 7,325 18 Davegårdh & Kjäll Sverige 0 1,896,000 0.5 0.5 6,371 19 SEB Private Bank S.A. 0 1,682,174 0.4 0.4 5,652 20 Nordea Life & Pension SA 0 1,558,000 0.4 0.4 5,235 Total of the largest owners – in terms of holdings 1,400,000 196,509,089 52.1 53.0 660,270 Total other owners 500,000 181,481,480 47.9 47.0 609,778

number of owners Total 1,900,000 377,990,569 100 100 1,270,048 (concentration, %) l Sweden, 97.0 % Total number of shares 379,890,569 l USA, 0.2 % Total number of votes 396,990,569 l Other, 2.8 % OWNERSHIP STRUCTURE - Class of shares CLASS B SHARES As of Dec. 31, 2008 Class Number of Number of Equity, Votes, Shareholding, Percentage of Percentage of shares voting rights % % Number of shareholders of share stock shares capital A 1,900,000 19,000,000 0.5 4.8 1–1,000 41.1 0.7 1,001–10,000 40.6 6.4 B 377,990,569 377,990,569 99.5 95.2 10,001– 15,000 13.1 11.4 Total 379,890,569 396,990,569 100 100 15,001–20,000 2.6 7.1 20,001+ 2.6 74.4 Total 100 100 number of owners (capital, %) l Sweden, 74.7 % l USA, 10.6 % l Other, 14.7% distribution of share capital

Class A Class B Number of Par value Share capital Year Transaction shares shares shares (SEK) (SEK) 2002 New share issue 3,600,000 65,155,020 68,755,020 0.04 2,750,201 2002 New share issue 3,600,000 133,910,040 137,510,040 0.04 5,500,402 2003 New share issue 3,600,000 179,746,720 183,346,720 0.04 7,333,869 2003 New share issue 3,600,000 225,583,400 229,183,400 0.04 9,167,336 2003 New share issue 3,600,000 253,083,400 256,683,400 0.04 10,267,336 2004 New share issue 3,600,000 284,083,400 287,683,400 0.04 11,507,336 2004 New share issue 3,600,000 286,583,400 290,183,400 0.04 11,607,336 2004 Options redeemed 3,600,000 287,405,345 291,005,345 0.04 11,640,214 2005 New share issue 3,600,000 360,332,660 363,932,660 0.04 14,557,306 2005 Options redeemed 3,600,000 364,157,010 367,757,010 0.04 14,710,280 number of owners (Votes, %) 2007 Options redeemed 3,600,000 367,002,820 370,602,820 0.04 14,824,113 l Sweden, 75.8 % Conversion of Class A l USA, 10.1 % 2007 shares to Class B shares 1,900,000 368,702,820 370,602,820 0.04 14,824,113 l Other, 14.1 % 2008 Options redeemed 1,900,000 377,990,569 379,890,569 0.04 15,195,623

Net Insight annual report 2008 23 five year summary

Income statement, SEK m 2008 2007 2006 2005 20041) Net sales 274.3 228.8 134.8 90.9 40.5 Operating earnings 37.9 32.6 –11.4 – 60.8 – 84.2 Profit/loss after financial items 40.9 34.0 –10.2 – 59.6 – 82.4 Net income 67.9 34.0 –10.2 – 59.6 – 82.4 Balance sheet, SEK m Fixed assets 103.5 82.1 65.3 49.0 27.8 Current assets 254.3 178.9 128.9 141.6 116.2 Total assets 357.8 261.0 194.2 190.6 144.0 Shareholders’ equity 274.5 181.2 136.8 147.7 114.7 Liabilities 83.3 79.8 57.4 42.9 29.3 Total equity and liabilities 357.8 261.0 194.2 190.6 144.0 Key ratios Gross margin, (%) 72 71 71 63 60 Capital expenditure, SEK m 45.7 49.0 44.7 39.5 17.3 Return on capital employed (%) 19 21 Neg. Neg. Neg. Return on equity (%) 30 21 Neg. Neg. Neg. Operating margin,(%) 14 14 Neg. Neg. Neg. Earnings per share – basic, SEK 0.18 0.09 – 0.03 – 0.17 – 0.29 – diluted, SEK 0.18 0.09 – 0.03 – 0.17 – 0.29 Dividend per share 0 0 E/t E/t E/t Cash flow per share, SEK 0.26 0.23 0.05 – 0.10 – 0.24 Equity / assets ratio (%) 77 69 70 77 80 Net asset value per share, SEK, – before dilution, SEK 0.72 0.49 0.37 0.40 0.39 – after dilution, SEK 0.71 0.49 0.37 0.40 0.39 Number of employees as of December 31 108 98 82 77 69 Added value per employee, SEK 000s 2,600 1,540 993 194 Neg Share price as of December 31, SEK 000s 3.36 4.34 8.00 2.53 1.86 Number of shares as of December 31 379,890,569 370,602,820 367,757,010 291,005,345 256,683,400

n/a = not applicable. 1) Includes re-classifications made in connection with translation to IFRS.

Definitions

Return on equity Earnings per share, basic Net profit as a percentage of average shareholders’ equity. Profit/loss for the year divided by the average number of shares during Return on capital employed the year. Operating earnings after financial items plus financial expenses in Operating margin relation to average capital employed. Capital employed is the balance Calculated on profit before net financial items and before taxes. sheet total less non-interest bearing liabilities including deferred tax Equity/assets ratio liabilities. Shareholders’ equity divided by the balance sheet total. Gross margin Net asset value per share, basic Gross profit as a percentage of net sales. Shareholders’ equity plus undisclosed reserves in assets with an Added value per employee objective market value less deferred tax divided by number of shares Operating earnings plus salaries and fringe benefits relative to the during the year. average number of employees. Net asset value per share, diluted Cash flow per share Shareholders’ equity plus undisclosed reserves in assets with an Cash flow from operating activities before changes in operating capital objective market value less deferred tax divided by number of shares divided by average number of shares issued. during the year (for more information please see accounting principles). Earnings per share, diluted Profit for the year divided by average number of shares issued during the year (for more information please see under accounting principles).

24 FIVE YEAR SUMMARY ADMINISTRATION REPORT Net Insight AB (publ) Corp. ID No. 556533-4397

Events during the year and further boost the reliability of its satellites, while Broad- Net Insight develops, markets and sells network equipment cast Service Danmark (BSD) expanded its DTT network in for efficient and scalable optical transport of voice, data and Denmark. video. With 100% Quality of Service and optimum network Dutch operator KPN proceeded to expand its Nimbra- utilization, the Nimbra platform offers the customers lower based multimedia service network with an upgrade to allow capital and ope¬rating expenditures. The majority of Net In- digital radio distribution and a new solution for HD live cov- sight’s sales are made in Europe, North America and Asia, to erage of 18 football stadiums. customers such as broadcast and media companies, cable TV GlobeCast France placed an expansion order for its media providers, network owners and telecom operators. Founded transport network and Net Insight also received an expansion in 1997, Net Insight has 108 employees in Stockholm, Singa- order from another large European media operator’s trans- pore and the US and is listed on the Mid Cap (NETI B) list port network, used to network multiple satellite uplink sta- for Swedish shares on the Stockholm Stock Exchange. tions and carry IP, telephony and broadcast quality video. In Asia, Net Insight strengthened its position significantly SALES during the year. Market penetration increased with the ar- In terms of sales, profit and cash flow, 2008 marks Net rival of several new customers and the successful delivery and Insight’s best year ever. Revenues increased by 20% compared installation of equipment for broadcasts from the Beijing to 2007, while the gross profit margin rose to 72% from 69% Olympics proved a valuable reference case, particularly in last year. China, where Net Insight received its first orders for DTT During the year, Net Insight won new customers in priori- distribution networks, from Chongqing Television (CQTV) tized markets segments in Europe, North America and Asia, and another provincial broadcaster. while the current customer base continued to generate a sub- Net Insight entered other new Asian markets like Thai- stantial volume of expansion orders. Reasons for the growth land – where national telecommunications provider TOT in business include the rapidly growing share of video traffic deployed a Nimbra-based multiservice network – and Ja- in the networks and the ongoing migration towards HD con- pan, where a communications company selected Nimbra to tent. Regulators in Asia and the EU are pushing for a rapid provide services for video contribution and distribution to rollout of Digital Terrestrial Television (DTT) networks, various operators from terrestrial broadcasters to CATV. In which also benefits Net Insight’s offering. another Asian country, Net Insight was selected by the lead- In Europe, Net Insight broke into several new markets, in- ing broadcaster and satellite operator to supply a Digital Ter- cluding Ireland, where RTÉ NL selected the Nimbra platform restrial TV and Mobile TV network (DVB-T/H). for its national Digital Terrestrial TV distribution network, Existing Asian customers placed extension orders, like ST whereas Cablenet of Cyprus ordered an upgrade of its national Teleport of Singapore, which expanded and upgraded its core network transporting triple play services across the island. Nimbra-based pan-pacific video contribution network con- In Sweden, Net Insight received its first order from Teracom, necting Singapore, Hong Kong, and the US. for delivery of Nimbra equipment to a media contribution Across the Atlantic, Net Insight won new important cus- network to interconnect its media contribution networks. tomers in the US, including MediaXstream, which launched In the Middle East, Net Insight secured a first contract win its new Nimbra-based network to carry real-time traffic for for a TV distribution and media network, while a country in professional media companies. MediaXstream’s network was Eastern Europe selected Nimbra for a new nationwide DTT expanded throughout the year to cover new sites across North network. America. The existing European customer base continued to place A large North American telecom operator deployed a mul- extension and upgrade orders to their Nimbra networks. tiservice media network based on the Nimbra platform, to Swiss public broadcaster SRG built a media contribution net- carry real-time traffic between sites in the US and Europe work for the European Football Championship, while EBU for a large global media group. Existing US customers, such (European Broadcasting Union) expanded the Eurovision as HTN and a large sports broadcaster, continued to expand Nimbra network for the TV feeds from the Olympic Games their Nimbra networks. in Beijing. In the US, Net Insight received an order for an IPTV vir- In Norway, Telenor Satellite Broadcasting upgraded its ter- tual head-end distribution network. The Nimbra platform restrial multiservice media network with the high-capacity has several unique features for virtual head-end solutions, in- Nimbra 680 switch at a number of sites, to extend capacity cluding redundant head-end protection switching.

Net Insight annual report 2008 25 Worldwide, a global news agency network operator select- media network from Stockholm to Amsterdam. These dem- ed Net Insight to supply a video contribution network. This onstrations generated extensive trade press coverage of how new customer delivers news content to broadcasters around the Nimbra platform enables highly advanced video applica- the world and employs the Nimbra platform to carry video, tions. voice and data from key sites of its global network. RESEARCH AND DEVELOPMENT PARTNERSHIPS Research and development focuses on developing interna- Net Insight continued to enlarge its global network of part- tionally competitive and market-leading products for defined ners, which support sales growth and provide local support to market segments. Recently introduced products and func- customers. In addition, local representatives are instrumental tionalities have served to strengthen the Company’s overall in identifying business opportunities and to expand market competitiveness. reach towards new customers and countries. One example is the unique Time Transfer function, which In 2008, Net Insight signed up 5 new partners in Asia, Eu- provides GPS-free time synchronization in Nimbra-based rope and the Middle East. By the end of the year, Net Insight networks and was fully commercialized during 2008. Time had 29 business partners and indirect sales represented 27% Transfer offers a Unique Selling Point (USP) and has proven a of total sales. true differentiator in customer talks, while also bringing Net Insight’s perceived competence beyond core network func- MARKETING ACTIVITIES tionality towards overall security aspects. During the year, Net Insight was present at a number of trade In addition, the Nimbra product portfolio was expanded shows and exhibitions across four continents. In February, with additional access and transport functionality. In the sec- Net Insight participated in the SMPT-VSF Joint Conference ond quarter, Net Insight introduced two new access mod- in Houston, Texas and demonstrated the Nimbra platform ules for its Nimbra 600 series, expanding interface support for applications in DTT networks at the DVB World seminar to include asynchronous serial interface (ASI) and Gigabit in Budapest. Ethernet transport. The introduction extends Nimbra 680 In Dubai, Net Insight’s partner Alphatron exhibited versatility beyond its inherent backbone switching capabili- Nimbra at the CABSAT show while Net Insight presented ties to include high-capacity video and data aggregation. its study “Synchronization of Digital Terrestrial and Mobile In June, Net Insight launched a new eight-port 3 Gbps TV Distribution Networks” at the conference session. At the Video Access Module for the Nimbra 600 series multi-service NAB Show2008 (National Association of Broadcasters) in switches, enabling transport of uncompressed 1080p HD Las Vegas, Net Insight showcased all Nimbra products and video in studio and contribution networks with 100 percent presented the paper “Leveling the Triple Play: Consolidating quality of service (QoS) guaranteed. The new module is also IPTV Costs Through Virtual Headends”. capable of delivering a mixture of 1080p, 1080i, 720p and The Nimbra product range was also displayed at Com- SD signals from a single Nimbra switch, which enhances cus- municAsia2008 in Singapore, where Net Insight presented tomer service flexibility. the paper “GPS-free synchronization of Digital Terrestrial During the third quarter, Net Insight announced the gen- TV and Mobile TV distribution networks”. In Australia, Net eral availability of the Nimbra 688 multi-service switch. Based Insight’s local partner Techtel exhibited Nimbra equipment on the Nimbra 600 series, the Nimbra 688 is aimed at fulfill- at the ABE (Australian Broadcasting Exhibition) in Sydney, ing the highest demands in terms of capacity and availability while Net Insight made a presentation about Media Net- of the professional media industry, telco and CATV / IPTV working at the conference session. networks. Offering twice the access and trunk port count of Net Insight’s Korean partner SanAm participated at the Net Insight’s Nimbra 680, Nimbra 688 doubles traffic capa- KOBA 2008 (Korea Broadcast) exhibition, presenting the bilities for compressed and uncompressed live HD video. Nimbra product portfolio. In neighboring China, the Chi- Based on market-leading products and technology, the nese partner NDT represented Net Insight at the trade show Company has built a strong customer base in over 30 coun- Shanghai TV Festival. tries across the globe, providing excellent reference cases. At IBC2008 in Amsterdam, Net Insight demonstrated the full Nimbra range and presented holographic-appearing tele- PATENTS conferencing in cooperation with US partner DVE and Telia A high content of innovation has brought Net Insight’s prod- Sonera International Carrier. Using Nimbra switches, Telia ucts and solutions to the leading edge of technology. Using Sonera transported the data stream over its switched Europe- patents to prevent technology plagiarism, protect knowledge an media network from Stockholm to the IBC show floor in and know-how is consequently crucial if the Company is to Amsterdam. The effect simulated reality by permitting video retain its technological advantage. So far, a total of 28 families images of conference participants to appear in 3D. of patents have been filed in one or more countries. During In cooperation with Telia Sonera, Panasonic and DVE, Net 2008 1 new patent application was filed and one of the appli- Insight also delivered a first-of-its-kind demonstration, where cations were registered as patent, bringing the total number uncompressed 1080p50 video was streamed over a switched of patents registered to 26.

26 Net Insight annual report 2008 IT opinion that the Company has adequate insurance coverage Net Insight’s IT environment consists mainly of PC-based regarding product liability and the direct risk is consequently systems using different operating systems, such as Windows considered as limited. and Linux, with a network environment based on switched Since Net Insight recurrently seeks to protect its company 1 Gbps and 100 Mbps Ethernet. Internet connections are name, brands and trademarks, the Company is well prepared protected by a firewall and VPN over the Internet is used to for any infringement litigation, both through insurance cov- enable remote access when needed. New investments cover erage and with the help of thorough experience internally in mainly the expansion of network capacity, increased com- the corporate legal department and externally with the Com- puter capacity, replacement of old equipment and upgrades pany’s legal consultants. Neither Net Insight nor its subsid- for certain existing computers and software. Total IT invest- iaries are currently involved in any litigation process, legal ments during the year amounted to SEK 0.5 million (1.5). procedure or arbitration. The Board is not aware of any other The new ERP system, which was implemented in the fourth circumstances that could lead to a dispute capable of damag- quarter of 2007 and successfully commissioned in January ing Net Insight’s financial position to any significant degree. 2008, has significantly improved business control and contributed to faster operational processes. Customer dependency and contract risks Should one of Net Insight’s larger customers become insol- Risk and sensitivity analysis vent or switch to a different supplier, it would have a manage- Since Net Insight’s operations and result are influenced by a able impact on Net Insight’s earnings. The growing number number of external and internal factors, the Company relies of large customers and the relatively high cost to customers of on a continuous process of identifying existing risks and as- changing suppliers, significantly limit this risk. sessing how each risk should be managed. The risks to which The risk of a major customer becoming insolvent is also the company is exposed include customer dependence, tech- limited, as Net Insights customers in general are very well es- nology development and financial risks (predominately cur- tablished media and telecom operators in the private and the rency exposure). Financial risks are described under Account- public sectors. To further limit customer risks, Net Insight ing Principles and the notes. continuously strives to exceed customer expectations with regards to the technological performance and quality of the MARKET-RELATED RISKS Company’s products, as well as the level of customer service. Competition and technology development Dependence on individual customers is decreasing as the cus- Operating in a dynamic industry that is characterized by rap- tomer base of well-established operators grows. id technological development, Net Insight needs to remain at the cutting edge of development in order to provide the most SUMMARIZED RISK ASSESSMENT attractive and competitive offering to the customers. If Net The following table provides an attempt to assess the likeli- Insight should fail to keep up with the pace of technological hood of Net Insight being affected by the various operational development or make incorrect technological investments, risks described in this section and the impact of these risks. this would put pressure on revenues. The assessment does not claim to be exhaustive, but is in- The board and management of Net Insight assess the risk tended to serve as an illustration. that an unexpected forward leap in technology would ren- der the Company’s products out of date or obsolete as low. Risks to Net Insight The risk of making erroneous technological investments is Risk Probability Impact also considered low. The skills and competence of the development staff in combination with comprehensive market Product fault leading to analysis, close competitor tracking and intimate cooperation product liability Low Low with large customers contribute to keeping Net Insight well Intellectual property dispute Low Low informed and up to date on relevant trends in technology Major customer becomes insolvent Low Medium and markets. Major customer leaves Net Insight for competitor Medium Medium Political risks Most of Net Insight’s customers are located in the Nordic Net Insight’s technology becomes countries, Europe, the United States, and Asia. The countries outdated Low High in which Net Insight currently does business are not seen as Net Insight makes incorrect presenting any significant political risks. technology investment Low High

RISKS RELATED TO THE OPERATION Product liability, intellectual property rights and litigation While potential defects in Net Insight’s products could lead to claims for compensation and damages, the Board is of the

Net Insight annual report 2008 27 Corporate social responsibility and sustain- guidelines where special cause exists therefore in an individ- able development ual case. Net Insight’s paramount goal is to be a leading global supplier If ownership conditions change in such a manner so that there of efficient and scalable optical transport solutions for media, will be a new majority owner of the Company, the CEO shall IP and broadcast networks. Net Insight’s code of conduct for be entitled to a period of notice of six months and severance responsible business means handling environmental, ethical pay equivalent to 18 months’ salary. This severance pay shall and social aspects in a manner that enables the creation of su- be diminished by any other income that the CEO obtains perior value for its customers, owners, and society as a whole. from other employment during the period of notice. The executive management team coordinates Net Insight’s If ownership conditions change so that there will be a new strategic efforts in CSR and sets policies and directives for majority owner of the Company, the EVP of the Company environmental, social, ethic and economic governance. shall be entitled to a period of notice of six months and a sev- The manufacturing of Net Insight’s products is outsourced erance pay equivalent to three months’ salary. The severance to external business partners, mainly in Sweden, and has little pay shall be diminished by any other income that the EVP environmental impact on the Company’s own activities. Net obtains from other employment during the period of notice. Insight has a quality management policy that includes environmental aspects and requires that the outsourced manu- Sales and earnings facturing complies with laws and regulations. The environ- Net sales for the twelve months period increased by 20 % to mental impact from the use Net Insight’s products is mainly SEK 274.3 million (228.8). Positive exchange rate effects of related to the energy they consume while in operation, as SEK 7.9 million impacted net sales. Net sales grew by 16 % well as material handling and recycling. These aspects are adjusted for exchange rate effects. Support and service rev- duly considered during in-house product development, and enue grew by 56 %. The sharp increase in other revenue is the products support RoHS-5 as well as meeting the WEEE mainly related to equipment leased out to Beijing Olympic requirements. Broadcasting for the Olympic games. Hardware revenue ac- Net Insight’s products support and have a positive impact counted for 65 % (77) of total revenue whereas support & on the development of telecommunication across the world, service revenue accounted for 13 % (10) and software license since they enable network operators and media companies to revenue 10 % (12). Other revenue including leasing account- reduce their operating costs. ed for 12 % (1). Net Insight considers it an important success factor to take The EMEA region accounted for SEK 139.4 million (175.2) social responsibility. All our relations and activities should be of total sales. The temporary decrease is mainly related to the in accordance with national and local rules as well as industry completion of the main project with Norkring in 2007. The codes. All contacts with customers, authorities, business part- North America and the APAC regions both accounted for ners and employees should be characterized by professional- a strong growth for the twelve months period, which more ism, respect and good ethics. Through this conduct we lay than offset the lower volumes in the EMEA region. North the foundation for long-term confidence. America sales increased to SEK 78.7 million (41.0) and APAC Operating in a global market requires Net Insight’s em- sales increased to SEK 56.2 million (5.2). The Broadcast & ployees to have an open attitude toward other cultures and Media Networks segment represented approx. 73 % (61) of different ways of doing business. Net Insight works actively total sales, Digital Terrestrial TV & Mobile-TV Networks to be an attractive employer for all people regardless of ethnic 25 % and IPTV/CATV 2 %. background, nationality, age, religion or gender. Gross margin continued to be strong and stable at 72.4 % Sustainable development is also about offering a work en- (70.8 %). Effective from January 1, 2008, accounting of cost vironment characterized by high physical as well as psycho- of sold services (support, services and training expenses) was social standards. At Net Insight, everyone works towards the reclassified from operating expenses to direct costs of goods same goal and share the same vision. sold. The impact on gross margin is 2.1 %. Despite the con- The Company encourages creativity and listens carefully tinued sales growth, gross margin has remained at a high and to its employees, in order to keep ahead of its competitors. stable level; this is mainly attributed to the strong customer Employee surveys are carried out regularly and serve as the offering, cost-efficient products and increased revenue from basis for continuous improvements of the Company’s busi- software licenses and support and services. ness. Operating expenses for the twelve months period amounted to SEK 164.5 million (141.2), an increase by 17 %. The Guidelines for remuneration for senior reclassification of support, services and training expenses has executives affected operating expenses by SEK 5.8 million. Operating ex- The most recently adopted guidelines for remuneration for penses before depreciation and capitalization of development senior executives are described in Note 7. At the 2009 An- expenditures increased by 11 %, which was in line with the nual General Meeting, there will be a proposal to extend the Company’s growth plan for 2008. Resources have been added current guidelines until the time of the next Annual Gen- to sales, professional services and development. Compared to eral Meeting. The Board of Directors may deviate from the previous year the average number of employees has increased

28 Net Insight annual report 2008 from 93 to 101. Capitalization of development expenditures Outlook totaled SEK 44.5 million (49.0). Depreciation of capitalized The Board is pleased with the progress in 2008 and remains development expenditures totaled SEK 45.8 million (39.2). confident that the positive development will continue, with Other operating revenue of SEK 3.8 million (11.9) consists quarterly fluctuations. of premiums for exercising of options under the employee option programs. Dividend Operating earnings for the twelve months period amount- The board proposes that the AGM resolve that no dividend is ed to SEK 37.9 million (32.6). Last year’s operating earnings paid for the financial year 2008. was impacted by the acquisition of a Swedish partnership, which brought in a profit of SEK 9.8 million. The financial Proposed distribution of earnings net amounted to SEK 3.0 million (1.3). Net income amount- The following funds are at the disposal of the parent com- ed to SEK 67.9 million (34.0), which corresponds to a net pany profit margin of 24.8 % (14.8). Premium reserve SEK 28,800,978 CASH FLOW AND FINANCIAL POSITION Retained earnings SEK 41,145,558 At the end of the year, liquid funds totaled SEK 151.7 million (128.2). This year’s cash flow from ongoing operations Profit for the year SEK 61,415,126 amounted to SEK 51.5 million (98.3) whereas total cash flow Total SEK 131,361,662 amounted to SEK 23.5 million (50.6). Working capital totaled The board of directors proposes that funds be disposed of as SEK 177.7 million (109.6). Ongoing investments in intangi- follows: ble assets have affected cash flow in the amount of SEK -44.5 million (-49.0). Ongoing investments in tangible assets have To be brought forward 131,361,662 SEK. affected cash flow in the amount of SEK 3.7 million (-9.0). Shareholders’ equity totaled SEK 274.5 million (181.2) With regard to the result and position of the group and par- resulting in an equity/assets ratio of 76.7 % (69.4 %). On the ent company in general, please refer to the following balance balance sheet date, Net Insight had unutilized credit and fac- sheets, income statements and cash flow statements, with ac- toring facilities of SEK 75 million. companying notes.

INVESTMENTS Board’s assurance Investments in tangible assets during the twelve months pe- The board and CEO confirms that the group’s accounts have riod amounted to SEK 1.2 million (2.6). Depreciation of been prepared in accordance with IFRS and that they give a tangible assets for the twelve months period amounted to true and fair view of the group’s financial position and perfor- SEK 8.2 million (2.0). Capitalized development expendi- mance. The Administration Report covering the parent and tures for the twelve months period, reported as intangible as- the group gives a true and fair view of their activities, finan- sets, amounted to SEK 44.5 million (49.0). Depreciation of cial position and performance, as well as, discussing material capitalized development expenditures was SEK 45.8 million risks and exposed areas at the parent company and companies (39.2). At the end of the period, net book value of capitalized within the group. development expenditures amounted to SEK 67.9 million (69.2).

EMPLOYEES At the end of the period Net Insight had 108 (98) employees. The parent company Net Insight AB had 102 (91) employees, of which four employees are based in Singapore. The US subsidiary Net Insight Inc. had 6 (7) employees.

PARENT The parent company’s net turnover was SEK 307.7 million (269.7). Net income amounted to SEK 61.4 million (32.3). Liquid funds amounted to SEK 149.9 million (127.0).

Significant events after the period In January, HTN continued the expansion of its US network with Net Insight’s Nimbra platform to support new customers.

Net Insight annual report 2008 29 GROUP

CONSOLIDATED INCOME STATEMENT

Amounts in SEK 000 NOTE 2008 2007 Net sales 5, 33 274,305 228,764 Cost of goods sold 9 – 75,691 – 66,788 Gross earnings 198,614 161,976 Marketing expenses 7, 10, 11 – 66,689 – 64,917 Administration expenses 7, 9, 10, 11, 12 – 26,341 – 22,946 Development expenses 7, 8, 9, 10, 11 – 71,517 – 53,370 Other operating income 13 3,822 11,898 Operating earnings 6 37,889 32,641 Result from financial investments Financial income 14 6,216 2,796 Financial expenses 15 – 3,243 – 1,478 Result from financial investments 2,973 1,318 Net income before tax 40,862 33,959 Tax 31, 34 27,078 0 Net income 67,940 33,959 Earnings per share 16 0.18 0.09 Earnings per share after dilution 16 0.18 0.09 The result in its entirety is attributable to the Parent Company.

CONSOLIDATED BALANCE SHEET

Amounts in SEK 000 NOTE Dec 31, 2008 Dec 31, 2007 ASSETS Intangible fixed assets Capitalized expenditures for development 17 67,864 69,194 Goodwill 17 4,354 4,354 Tangible fixed assets Equipment 18 3,830 3,465 Equipment for leasing 18 0 4,864 Financial fixed assets Deferred tax claims 27,078 0 Deposits paid, long-term 19 359 187 Total fixed assets 103,485 82,064 Current assets Inventories 21 30,136 20,511 Accounts receivable 22 62,608 20,010 Other receivables 22 5,186 4,924 Prepaid expenses and accrued income 22 4,634 5,223 Cash and cash equivalents 23 151,744 128,233 Total current assets 254,308 178,901 Total assets 357,793 260,965

LIABILITIES AND SHAREHOLDERS’ EQUITY Shareholders’ equity Equity attributable to the Parent Share capital 24 15,196 14,828 Other contributed capital 1,176,497 1,153,294 Translation differences – 730 – 2,478 Accumulated deficit – 916,489 – 984,429 Total shareholders’ equity 274,474 181,215 Long-term liabilities Long-term liabilities 1,551 2,188 Other provisions 25 5,168 8,287 Total long-term liabilities 6,718 10,475 Current liabilities Other provisions 25 9,243 7,608 Accounts payable 26,411 16,255 Other liabilities 26 3,504 7,259 Accrued expenses prepaid income 27 37,443 38,153 Total current liabilities 76,601 69,275 Total liabilities and shareholders’ equity 357,793 260,965

30 Net Insight annual report 2008 CONSOLIDATED CASH FLOW STATEMENT

Amounts in SEK 000 NOTE 2008 2007 Operating activities Earnings before tax 40,862 33,959 Depreciation 9 54,036 41,380 Other items not affecting liquidity 28 1,150 10,521 Cash flow from operating activities before changes in working capital 96,048 85,861

Changes in working capital Increase (–)/Decrease (+) in inventories – 9,625 364 Increase (–)/Decrease (+) in receivables – 42,271 220 Increase(+)/Decrease (–) in current liabilities 7,326 11,834 Cash flow from operating activities 51,478 98,279

INVESTING ACTIVITIES Acquisitions of intangible fixed assets 17 – 44,469 – 49,020 Acquisitions of tangible fixed assets 18 – 3,731 – 9,025 Increase(+)/Decrease (–) in current liabilities – 172 – 116 Increase(+)/Decrease (–) in long-term receivables – 637 2,188 Cash flow from investing activities – 49,009 – 55,973

FINANCING ACTIVITIES Option programs/New share issue 21,042 8,245 Cash flow from financing activities 21,042 8,245

Increase/Decrease in liquid funds 29, 30 23,511 50,551 Liquid funds, opening balance 29, 30 128,233 77,682 Liquid funds, closing balance 151,744 128,233

CHANGES IN GROUP SHAREHOLDERS’ EQUITY

Other Total contributed Accumulated shareholders’ Amounts in SEK 000 Share capital capital Reserves deficit equity January 1, 2007 14,710 1,142,247 – 1,773 – 1,018,388 136,796 Translation 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 revenues/expenses -for the year 0 0 – 705 33,959 33,254 Unregistered share capital 4 256 0 0 260 New share issue – exercise of options 114 7,871 0 0 7,985 Personnel option program: Value of employees’ services 0 2,920 0 0 2,920 December 31, 2007 14,828 1,153,294 – 2,478 – 984,429 181,215

January 1, 2008 14,828 1,153,294 – 2,478 – 984,429 181,215 Translation difference for the period 1,748 1,748 Total transactions reported directly in shareholders’ equity 1,748 1 748 Net earnings 67,940 67,940 Total revenues/expenses -for the year 1,748 67,940 69,688 Unregistered share capital New share issue – exercise 368 20,674 21,042 of options Personnel option program: Value of employees’ services 2,529 2,529 December 31, 2008 15,196 1,176,497 – 730 – 916,489 274,474

Net Insight annual report 2008 31 PARENT COMPANY

INCOME STATEMENT

Amounts in SEK 000 NOTE 2008 2007 Net sales 5, 33 307,712 269,730 Cost of goods sold 9 – 99,544 – 111,242 Gross earnings 208,167 158,488 Marketing expenses 7, 10, 11 – 67,135 – 62,768 Administration expenses 7, 9, 10, 11, 12 – 27,431 – 30,013 Development expenses 7, 8, 9, 10, 11 – 72,659 – 45,872 Other operating income 13 0 9,806 Operating earnings 6 40,943 29,641 Result from financial investments Impairment loss in subsidiaries 20 0 – 170 Share in profits from partnership 20 – 9,551 1,603 Financial income 14 6,189 2,734 Financial expenses 15 – 3,243 – 1,475 Total result from financial investments – 6,605 2,692 Net income before tax 34,337 32,333 Tax 31, 34 27,078 0 Net income 61,415 32,333

32 Net Insight annual report 2008 BALANCE SHEET

Amounts in SEK 000 NOTE Dec 31, 2008 Dec 31, 2007 ASSETS Intangible fixed assets Capitalized expenditures for development 17 67,864 69,194 Tangible fixed assets Equipment 18 3,830 3,465 Equipment for leasing 18 0 4,864 Financial fixed assets Shares in Group companies 20 18,398 3,387 Deferred tax claims 27,078 0 Deposits paid, long-term 19 359 187 Total fixed assets 117,529 81,097 Current assets Inventories Products in progress 21 900 3,400 Finished goods 21 29,236 17,111 Receivables Accounts receivable 22 62,608 20,010 Current receivables 22 5,072 2,636 Prepaid expenses and accrued income 22 4,634 5,223 Receivable other Group companies 0 4,272 Cash and bank balances Cash and cash equivalents 23 149,880 126,982 Total current assets 252,331 179,634 Total assets 369,859 260,731 LIABILITIES AND SHAREHOLDERS’ EQUITY Shareholders’ equity Restricted equity Share capital 24 15,196 14,824 Unregistered share capital 0 4 Legal reserve 119,089 116,558 Non-restricted equity/Accumulated deficit Share premium reserve 28,801 8,127 Retained earnings 41,145 2,092 Net income 61,415 32,333 Total shareholders’ equity 265,646 173,939 Provisions Other provisions 25 5,168 15,894 Total provisions 5,168 15,894 Long-term liabilities Long-term liabilities 1,551 2,188 Total long-term liabilities 1,551 2,188 Current liabilities Other provisions 9,243 0 Accounts payable 26,411 16,255 Payables to Group companies 22,513 9,043 Other liabilities 26 3,504 7,259 Accrued expenses and prepaid income 27 35,824 36,153 Total current liabilities 97,495 68,710 Total liabilities and shareholders’ equity 369,859 260,731

Pledged assets 29 189 355 Contingent liabilities none none

Net Insight annual report 2008 33 CONSOLIDATED CASH FLOW STATEMENT

Amounts in SEK 000 NOTE 2008 2007 Operating activities Net income before tax 34,337 32,333 Depreciation 9 54,036 38,495 Other items not affecting liquidity 28 10,611 11,864 Cash flow from operating activities before changes in working capital 98,984 82,692

Changes in working capital Increase (–)/Decrease (+) in inventories – 9,625 364 Increase (–) /Decrease (+) in current receivables – 40,188 – 1,793 Increase (+)/Decrease (–) in current liabilities – 391 13,831 Cash flow from operating activities 48,780 95,094

INVESTING ACTIVITIES Acquisitions of intangible fixed assets 17 – 44,476 – 49,020 Acquisitions of tangible fixed assets 18 – 3,731 – 9,025 Net investment in subsidiaries 3,073 Increase (–)/Decrease (+) in long-term receivables – 172 – 116 Increase(+)/Decrease (–) in long-term liabilities – 637 2,188 Cash flow from investing activities – 49,016 – 55,088

FINANCING ACTIVITIES Option programs/New share issue 21,042 8,245 Group contribution received 2,092 0 Cash flow from financing activities 23,134 8,245

Increase/Decrease in liquid funds 29, 30 22,898 50,439 Liquid funds, opening balance 29, 30 126,982 76,543 Liquid funds, closing balance 149,880 126,982

CHANGES IN PARENT COMPANY SHAREHOLDERS’ EQUITY Amounts in SEK 000 Share pre- Retained Total sharehold- Share capital Legal reserve Net income mium reserve earnings ers’ equity January 1, 2007 14,710 121,739 0 0 –8,102 128,347 Transfer of net income 0 –8,102 0 0 8,102 0 Unregistered share capital 4 0 256 0 0 260 New share issue – exercise of 114 0 7,871 0 0 7,986 options Group contribution 0 0 0 2,092 0 2,092 Personnel option program: Value of employees’ services 0 2,920 0 0 0 2,920 Net income 0 0 0 0 32,333 32,333 December 31, 2007 14,828 116,558 8,127 2,092 32,333 173,939

January 1, 2008 14,828 116,558 8,127 2,092 32,333 173,939 Transfer of net income 32,333 –32,333 0 Unregistered share capital New share issue – exercise of 368 20,674 21,042 options Group contribution 6,722 6,722 Personnel option program: Value of employees’ services 2,529 2,529 Net income 61,415 61,415 December 31, 2008 15,196 119,087 28,801 41,147 61,415 265,646

34 Net Insight annual report 2008 as of the date of acquisition regardless of the extent of a potential minority interest. The surplus made up of the difference between the purchase Notes 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 Note 1 General information of the acquired subsidiary’s net assets, the difference is reported directly in the income statement. Net 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 2.3 SEGMENT REPORTING A business segment is a group of assets and operations that provide prod- of service at the same time that the network’s capacity is fully utilized, ucts or services exposed to risks and opportunities that differ from what which leads to major savings in both operational and capital expenditures applies to other business segments. Geographic areas provide products for the customers. The Company sells in primarily North America, Europe or services in an economic environment exposed to risks and opportuni- and Asia to television broadcasters, production companies, cable TV and ties that differ from what applies to other economic environments. The telecommunication operators. Net Insight was founded in 1997 and has Company’s sales pertain to one product segment, within which differ- 108 employees in Sweden, the US and Singapore. Net Insight was listed ent solutions have been created depending on the customer’s specific on the Stockholm Stock Exchange in 1999 and has been listed on the requirements and desires. The Company’s sales are also reported divided OMX Nordic Mid Cap SEK index since July 1, 2007. 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 Note 2 Summary of important accounting principles Company has a primary and a secondary segment. The most important accounting principles applied in the preparation of the 2.4 TRANSLATION OF FOREIGN CURRENCIES consolidated accounts are indicated below. These principles have been A. Functional currency and reporting currency applied consistently for all years represented, unless otherwise stated. Items included in the financial statements for the different units in the Group are valued in the currency used in the economic environment in 2.1 BASIS FOR THE REPORT’S PREPARATION which the respective companies are primarily active (functional currency). The consolidated accounts were prepared in accordance with the Annual In the consolidated accounts as well as the Parent Company’s financial Accounts Act, International Financial Reporting Standards (IFRS) and in- statements Swedish kronor (SEK) are used, which is the Parent Com- terpretational statements from the International Financial Reporting Inter- pany’s functional currency. pretations Committee (IFRIC), which have been adopted by the European B. Transactions and balance sheet items Commission. Furthermore, the Swedish Financial Accounting Standards Foreign currency transactions are translated to the functional currency at Council’s recommendation RR 1.1 Supplemental accounting regulations the exchange rates applicable on the transaction date. Exchange gains for groups was applied. and losses arising upon payment of such transactions and in translation of The Parent Company’s annual report was prepared in accordance with monetary assets and liabilities in foreign currencies at the exchange rate RR 2.1 and the Annual Accounts Act. The most important accounting prin- on the reporting date are reported in the income statement. ciples applied in the preparation of the consolidated accounts are indi- C. Group companies cated below. These principles have been applied consistently for all years The financial position and performance of the foreign subsidiary, which represented, unless otherwise stated. has a different functional currency than the reporting currency, are trans- New IFRS directives and interpretations, which have been published, lated to the Group’s reporting currency as per the following: but have not yet entered into effect, and which Net Insight does not yet assets and liabilities for the balance sheet are translated at the reporting apply, are listed below. Other amendments and new pronouncements are date rate income and expenses are translated at the average exchange not considered to be relevant to the Group. rate, and all exchange rate differences that arise are reported as a sepa- • IFRS 8 Operating segments rate part of equity. 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 2.5. TANGIBLE ASSETS COST of the company’s business into different segments. Under the standard, The Company’s tangible fixed assets are carried at purchase the Company shall use the structure of internal reporting as a starting cost with deductions for depreciation. Included in the purchase point and determine reportable segments according to this structure. The cost are expenses that can be directly attributed to the acquisi- Company’s preliminary assessment is that another three segments will tion of the asset. The straight-line depreciation method is applied be presented in the 2009 annual report. for all types of assets over their estimated useful lives, as follows: • IAS 1 (Amendment) Presentation of financial statements* –Equipment 3–5 years. The amendment of this standard enters into effect on January 1, 2009. The changes mainly involve the presentation and titles of the financial 2.6. INTANGIBLE ASSET COSTS statements. The future presentation of financial statements for theG roup A. Costs that are directly linked with the development of products are rec- will therefore be affected by implementation of this standard. ognized as intangible assets in the following cases: the Company intends *This standard/ interpretation has not been adopted by the EU at this to complete the product; there are probable economic benefits relating to time. 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 2.2 CONSOLIDATED ACCOUNTS be measured reliably. Costs include the costs for employees that arise Subsidiaries through development of the products and a reasonable proportion of in- Subsidiaries are all of the companies (including companies for special direct costs. Other development expenditures are reported as costs as purposes) where the Group is entitled to govern financial and operational they arise. Development expenditures that have previously been reported strategies in a manner usually pursuant to shareholdings amounting to as a cost are not reported as an asset in an ensuing period. Development more than half of the voting rights. The occurrence and effect of potential expenses with a limited useful life that have been capitalized are depreci- voting rights that are currently possible to utilize or convert are observed ated straight-line from the time that the commercial production of the in the assessment of whether the Group exercises control over another product is initiated. Depreciation is done during the expected useful life. company. The following depreciation periods are applied up through December 31, A subsidiary is to be included in the consolidated accounts as of the 2008: Capitalized expenditures for development 3 years. date that control is transferred to the Group. A subsidiary is excluded A reassessment concerning the expected useful life has resulted in from the consolidated accounts as of the date that control ceases. The the extension of the depreciation period for capitalized expenditures to 5 purchase method is used to report the Group’s acquisition of subsidiaries. years, effective January 1, 2009. The purchase cost of an acquisition comprises the fair value of assets When an indication exists that an asset has decreased in value, an as- provided as payment, issued equity instruments and liabilities arising or sessment of the asset’s carrying amount is performed. When an asset’s assumed as of the date of transfer, plus costs directly attributable to the carrying amount exceeds its estimated recoverable amount, the asset is acquisition. Identifiable acquired assets and assumed liabilities and con- immediately impaired to its recoverable amount. tingent liabilities in a corporate acquisition are initially valued at fair value

Net Insight annual report 2008 35 (Note 2, cont’d) 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 B. Goodwill consists of the amount by which the purchase cost exceeds Company, this transaction cost is reported in the income statement.n. 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 2.14 EMPLOYEE COMPENSATION subsidiaries is included in intangible assets and has an indefinite useful A. Bonuses life. Goodwill is tested at least annually to identify potential impairment The Company reports a liability and an expense for bonuses based on goal requirements and is reported at purchase cost less accumulated impair- fulfillment with regard to achieved sales, the earnings trend and achieved ment losses. Gains or losses upon disposal of a unit include residual car- market objectives. rying amount of the goodwill pertaining to the disposed unit. B. Pension commitments No straight-line depreciation of goodwill is performed in the Group. All The Company only has defined contribution pension plans and these are intangible fixed assets will be tested by the book value being compared expensed as needed. with the recoverable amount every year or when indications of impairment requirements exist, as per IAS 36 - Impairment of assets. They are C. Share related benefits tested by comparing the book value with the recoverable amount. The Group has a share-related compensation plan where payment is made with shares. Fair value of the service that entitles employees to 2.7 IMPAIRMENT allocation of options is expensed. The total amount to be expensed dur- Non-financial assets that have an indefinite useful life are not depreci- ing the vesting period is based on the fair value of the allocated options, ated, but rather reviewed annually regarding potential impairment require- excluding potential impact from non-market related terms for vesting (e.g. ments. Assets that are subject to depreciation are reviewed for impair- profitability and objectives for sales increases). Non-market related terms ment whenever events or changes in circumstances indicate that the for vesting are observed in the assumption about how many options are carrying amount may not be recoverable. expected to be redeemable. Every reporting date, the Company revises Impairment is applied in the amount by which the asset’s carrying its assessments of how many shares are expected to be redeemable. amount exceeds its recoverable amount. The recoverable amount is the The revision’s potential impact on the original assessments is reported higher of an asset’s fair value less costs to sell and value in use. in the income statement divided over the rest of the vesting period and For the purposes of assessing impairment, assets are grouped at the corresponding adjustments are made in equity. lowest levels for which there are separately identifiable cash flows (cash- generating units). D. Compensation upon termination Net Insight constitutes a cash-generating division. Compensation upon termination is paid when an employee’s employment is terminated prior to the time for normal retirement or when an employee 2.8 FINANCIAL INSTRUMENTS voluntarily resigns from employment in exchange for such compensation. Financial instruments reported on the assets side of the balance sheet The Group reports severance pay when it is demonstrably obliged either include cash and cash equivalents, financial receivables, accounts receiv- to terminate employees according to a formal detailed plan without pos- able, accounts payable and deposits paid. The Group classifies its finan- sibility of revocation, or to provide compensation upon termination as a cial instruments in two categories: loan receivables and accounts receiv- result of an offer having been made to encourage voluntary resignation able, and financial liabilities as described in 2.10 and 2.11 respectively. from employment. 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 2.15 PROVISIONS financial asset is removed from the balance sheet when the rights in the Provisions are made when a legal or informal obligation arises. The Com- agreement are realized, lapse or the company loses control of them. A pany makes provisions for guarantee costs that will probably arise as well financial liability is derecognized from the balance sheet when the obliga- as for the management’s variable incentive program. The product war- tions in the contract are fulfilled or discharged in some other way.The ranty provision is based on historical outcome and is placed in relation carrying value less any impairment provision on accounts receivable and to the Company’s sales. If there are several similar commitments, the accounts payable are assumed to approximate their fair values due to the probability is assessed that an outflow of resources will be required upon short-term nature of accounts receivable and accounts payable. settlement for this entire group of commitments. A provision is reported, although the probability of an outflow is low. 2.9 INVENTORIES Inventory is reported at the lowest of the purchase cost and the net sell- 2.16 REVENUE RECOGNITION ing price. The purchase cost is determined by using the first-in, first-out Revenues include the fair value of goods and services sold excluding method (FIFO). The net selling price is the estimated selling price in the value added tax and discounts and, in the Group, after elimination of intra- operating activities less applicable variable selling expenses. Group sales. Revenues are recognized as per the following: 2.10 ACCOUNTS RECEIVABLE A. Sales of goods Accounts receivable are reported initially at fair value and subsequently Revenues mainly comprise hardware sales. The revenues pertain entirely less any provisions for bad debts. A provision for accounts receivable bad to the Parent Company and are reported upon delivery when the risk and debts is applied when there is objective proof and other indications that ownership rights also transfer to the buyer. In those cases where the sale the Group will not be able to obtain all amounts due under the receiv- involves installation or integration as well as a final authorization from the ables’ original terms. The size of the provision is the difference between customer, revenues are recognized upon acceptance of delivery. Expect- the asset’s carrying amount and the estimated fair value. The reserved ed outstanding revenues are also taken into consideration and reserves amount is recognized in the income statement under the item marketing are set aside for estimated outstanding expenses. expenses. The Company has an agreement relating to loans on accounts receiv- B. Revenue from licenses, support and services able. The ownership right to the accounts receivable remains with the Revenue comprises licenses, support and services Support agreements Company as well as the risk of potential losses on accounts receivable. are recognized as revenue on a straight-line basis over the term of the contract. 2.11 ACCOUNTS PAYABLE Accounts payable are initially recognized at fair value and thereafter at 2.17 leasing amortized cost. A 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 2.12 LIQUID ASSETS during the lease term (after deductions for potential incentives from the Liquid assets include cash, bank balances and other investments with lessor) are expensed in the income statement straight-line over the lease maturity dates of less than three months. term. When assets are leased out under operating leases, the asset is rec- 2.13 SHARE CAPITAL ognized in the balance sheet in the relevant asset class. Lease income is Ordinary shares are classified as equity. Transaction costs that can be recognized on a straight-line basis over the term of the lease.

36 Net Insight annual report 2008 All leasing agreements, whether financial or operating leases, are rec- 3.4 INTEREST RISK ognized as operating leases in the Parent Company. Interest risk is the risk that the value of a financial instrument varies due to changes in market rates. Net Insight’s interest risk is low because the need 2.18 CASH FLOW STATEMENT for external financing has been limited. In those cases Net Insight utilized The cash flow statement is prepared according to the indirect method. its invoice credit facility during the year, the interest rate was variable. The The reported cash flow only includes transactions involving deposits or Company’s advance on receivables was not used on the balance sheet date payments. Cash and bank balances are classified as liquid assets as are in 2007 or 2008. Cash and cash equivalents are usually invested with a fixed short-term financial investments, which are only exposed to an insignifi- interest period of two weeks up to three months. cant risk of value fluctuations and: • are traded on the open market for known amounts or 3.5 CREDIT RISK • have a remaining duration of less than one month from when they are Credit risk means that a party in a transaction with a financial instrument purchased. cannot fulfill its commitment. Net Insight did not have any credit losses in 2007 or 2008. The Company’s customers are large, well-established com- 2.19 GROUP CONTRIBUTIONS AND SHAREHOLDER CON- panies with strong payment capacity, distributed over several geographic TRIBUTIONS markets. There is no significant concentration of credit risks either geo- The Company recognizes shareholder contributions as an increase in graphically or to a particular customer segment. In order to limit the risks the value of shares and participations. Shares and participations are then of potential credit losses, the Company’s credit policy includes guidelines tested for impairment. Group contributions are recognized based on and regulations for the credit rating of new customers, terms of payment economic substance; in other words, directly against profit/loss brought and procedures and processes for handling unpaid claims. 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 Note 4 Significant estimates and judg- equivalent to a shareholders’ contribution is reported, taking into account ments for accounting purposes the current tax effect, according to the principle for shareholder contribu- Estimates and judgments are evaluated on an ongoing basis, based on his- tions above. toric experience and other factors, including expectations of future events that are considered reasonable under the prevailing circumstances. Note 3 Financial risks The Group makes estimates and assumptions about the future. The Net Insight is exposed to different financial risks of which the currency estimates for accounting purposes that result from these will, in terms risk is clearly dominant. The Board assesses that Net Insight is primarily of definition, seldom correspond to the actual outcome. The estimates exposed to the following financial risks: and assumptions that entail a significant risk of material adjustments in carrying amounts for assets and liabilities during the next fiscal year are 3.1 CURRENCY RISK discussed below. The risk that the value of a financial instrument varies due to changes in exchange rates. Net Insight has a strong international character with A. Assessment of impairment requirements for goodwill most of its sales in EUR and USD. Components are mainly purchased in The Group assesses if any impairment requirements exist for goodwill on Swedish kronor (SEK) but are linked to USD through currency clauses that an annual basis, in accordance with the accounting principle described in are regularly adjusted on delivery. Currency risks are managed according clause 2.7. The recoverable amount for the Company’s cash-generating to the fiscal policy established by the Board. The risk of exchange rate unit was established by calculating the value in use. For these calcula- fluctuation is also managed by the Company, which regularly adjusts and tions, certain estimates must be performed (Note 17). 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. B. Assessment of impairment requirements for capitalized develop- Hedges of existing receivables and liabilities in foreign currencies as well ment expenses as hedging of net assets in foreign subsidiaries are assessed case by Expenses arising in development projects are reported as intangible fixed case, but no hedging was done in 2006 or 2007. assets when it is probable that the project will be successful in terms of If the Swedish krona (SEK) had strengthened/weakened by 5 percent its commercial and technical potential and when the expenses can be against the EUR, all other variables remaining constant, this year’s rev- measured reliably. At each reporting occasion, the Company assesses enues as of December 31, 2008, would have been SEK 8.0 million lower/ if any impairment requirements exist within capitalized development ex- higher. Profits are more sensitive to exchange rate fluctuations between penses. This means that a complete review of these expenses is per- SEK and EUR during 2008 than in 2007 due to the increase in revenues formed with regard to economic life and the products’ profitability. The in EUR. products’ lifetime varies and is generally between five to eight years. A If the Swedish krona (SEK) had strengthened/weakened by 10 percent depreciation rate of three years concerning capitalized development ex- against the USD, all other variables remaining constant, this year’s rev- penses has been applied through December 31, 2008. enues as of December 31, 2008 would have been SEK 11.0 million lower/ A reassessment concerning the expected useful life has resulted in higher. Profits are more sensitive to exchange rate fluctuations between the extension of the depreciation period for capitalized expenditures to 5 SEK and USD during 2008 than in 2007 due to the increase in revenues years, effective January 1, 2009. in USD. C. Deferred tax Deferred tax claims pertaining to loss carry-forwards are recognized to 3.2 LIQUIDITY RISK the extent that it is probable that future taxable profit will be available Liquidity risk means that financing cannot be obtained at all, or only at against which the unused tax losses can be utilized. In Q4 Net Insight sharply increased costs. Net Insight makes it a policy to only invest liq- began capitalizing SEK 27.1 million in deferred tax claims, corresponding uid assets in banks or bank-related institutions. The instruments in which to tax loss deductions of SEK 103 million. The capitalization is based on liquid assets are invested shall be fully liquid so that a risk does not arise the previous year’s earnings along with an expected positive long-term in time or value if they are not pure cash deposits. All reported accounts earnings trend. payable are due within one year and show the undiscounted amount.

3.3 CAPITAL RISK Note 5 Net sales and segment information The Group’s objectives with respect to capital structure are to secure the The Group’s sales pertain to one product segment, within which different so- Group’s ability to continue operations, so that it can continue to generate lutions are created depending on the customer’s specific requirements and returns for shareholders and benefit for other stakeholders and to main- desires. Orders, inventories and invoiced sales have taken place exclusively tain an optimal capital structure to keep capital down. In order to maintain from Sweden. The distribution of sales across different markets, which do or adjust the capital structure, the Group can change the dividend it pays not yet meet the requirements to be reported as different segments, is in- shareholders, repay capital to shareholders, issue new shares, or sell as- dicated below. This assessment is based on the fact that the Company has sets to reduce liabilities. The Group’s target is for its equity ratio to be at absolutely no investments in other markets. The assets of the American sub- least 65 percent. sidiary consist solely of liquid assets amounting to SEK 1,698 thousand.

Net Insight annual report 2008 37 (Note 5, cont’d) Number of directors and senior executives Of Of The Group sells to four primary geographic areas, which are guided December which December which by a global perspective. All invoicing is done from the Parent Company, Group (incl subsidiary) 31, 2008 men 31, 2007 men where all revenues are reported. The following indicates the distribution Board members 8 88% 9 90% of net sales across geographic markets: Chief Executive Officer and other senior executives 5 100% 5 100% Parent Company Group 2008 2007 Board members 6 83% 6 83% Sweden 3,316 10,291 Chief Executive Officer and other Europe (excluding Sweden) 136,118 164,926 senior executives 5 100% 5 100% North America 78,662 41,005 Asia 56,209 12,542 REMUNERATION AND OTHER BENEFITS Total 274,305 228,764 2008 Board of Directors Group 2008 2007 Parent Company 2008 2007 SEK 000 Directors’ fees Fee Fee Sweden 36,723 51,257 Lars Berg (Chairman) 350 300 Europe (excluding Sweden) 136,118 164,926 Ragnar Bäck 150 125 North America 78,662 41,005 Gunilla Fransson 150 0 Asia 56,209 12,542 Clifford H. Friedman 150 125 Total 307,712 269,730 Marco Limena 0 125 Bernt Magnusson 150 125 Internal invoicing for services received in the form of further development Birgitta Stymme Göransson 0 125 of products and for administrative services to the subsidiary by the Par- Arne Wessberg 150 0 ent Company has taken place since 2004. The subsidiary invoices the Total 1,100 925 Parent Company monthly for a license fee for the use of the intellectual property rights. The amounts refer to fees for the Parent Company as approved at the 2008 shareholders’ meeting. During the year, invoices to the subsidiary amounted to SEK 33,407 thousand (40,966). This invoicing pertains to further development of prod- 2003 Distributed among the CEO, VP, other senior executives and ucts licensed to the Parent Company and administrative costs incurred by other employees. (Compensation paid excluding pension costs and Net Insight AB on the partnership’s behalf. share-related compensation in accordance with IFRS 2)

Internal transactions 2008 2007 Vari- Share- able based Other Sales to NIIP HB 33,407 40,966 remu- Other Pen- remu- remu- Purchases from NIIP HB 23,853 44,454 Fixed nera- ben- sion nera- nera- SEK 000 salary tion efits costs tion tion Total Fredrik Trägårdh (CEO) 1,750 875 0 647 2,785 0 6,057 Note 6 Exchange rate differences Anders Persson (VP) 1,500 532 0 388 1,336 0 3,756 The operating profit/loss for 2007 includes exchange rate differences re- Other senior garding operating receivables and operating liabilities. For 2008 exchange executives (3) 2,652 920 0 664 821 0 5,057 rate losses and gains from operations are recognized in net revenues as Other employees 52,862 7,905 470 8,878 6,186 0 76,301 well as in the financial income and expenses item. Total 58,764 10,232 470 10,577 11,128 0 91,171

Approved variable compensation for 2008, which will be paid out in 2009, Group Parent Company is the following: SEK 3,500 thousand for the CEO, SEK 1,265 thousand 2008 2007 2008 2007 for the VP, and SEK 748 thousand for other senior executives. Variable Exchange rate gains 15,255 8,290 15,255 8,290 compensation for 2007 is included in compensation paid in 2008. The Exchange rate losses 7,354 – 6,506 7,354 – 6,506 CEO and VP’s salaries are fixed from 2006 through 2011.A s of December Net exchange rate differences 7,901 1,784 7,901 1,784 31, 2008, SEK 5,726 thousand has been reserved for the long-term variable compensation program for the CEO and VP. A proposal to extend Hedge accounting is not applied, but rather the total effect of rate fluctua- the program will be submitted to the annual shareholders’ meeting on tions have been reported directly in the income statement. April 28, 2009.

2007 Distributed among the CEO, VP, other senior executives and Note 7 Personnel other employees. (Compensation paid excluding pension costs and Average number of employees, salaries and wages, other benefits and share-related compensation in accordance with IFRS 2) social security contributions. Vari- Share- able based Other Average number of employees of which men % remu- Other Pen- remu- remu- Sweden 95 (85) 87 (88) Fixed nera- ben- sion nera- nera- SEK 000 salary tion efits costs tion tion. Total USA 6 (8) 84 (88) Fredrik Trägårdh (CEO) 1,750 718 0 642 1,439 0 4,549 At year-end, the number of employees was 102 (91) in the Parent Com- Anders Persson (VP) 1,500 447 0 383 751 0 3,081 pany and 6 (7) in the subsidiary. Absence due to sick leave amounted Other senior 3,779 423 116 646 502 428 5,893 to 1.9 percent (3.0) of the total ordinary working hours in the company. executives (3) Of the absence due to sick leave in the Company, 1.0 percent (2.0) was Other employees 47,590 7,750 704 7,970 1,750 608 66,371 made up of coherent absence covering more than 60 days, i.e. sick leave Total 54,619 9,338 819 9,641 4,442 1,036 79,894 absence excluding long-term absence amounted to 0.9 percent (1.0). Other benefits refer to health insurance. Women’s absence amounted to 1.2 percent (2.1) of total working hours Other remuneration includes severance pay. in the Company. In the age group 30–49, sick leave was 1.0 percent (1.5) of the Group’s total ordinary working hours, while in the age group 50–65, sick leave was 5.2 (1.5) percent. The other age groups include fewer than 10 people, which is why they are not reported separately.

38 Net Insight annual report 2008 PARENT COMPANY sponsibility and authority of the senior executive. Variable remuneration is 2003 Distributed among the CEO, VP, other senior executives and generally based on a combination of revenues, performance and activity other employees. (Compensation paid excluding pension costs and objectives. For the CEO, the annual variable remuneration has a ceiling of share-related compensation in accordance with IFRS 2) 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 measurable financial targets. For the CEO and the Vice President, the contractual Vari- Share- base salary is fixed in 2009, 2010 and 2011.H alf of the variable remunera- able based Other tion that falls due from 2009, 2010 and 2011 is locked in and will be paid remu- Other Pen- remu- remu- in April 2012, with a multiplier on the accumulated, locked-in amount. The Fixed nera- ben- sion nera- nera- SEK 000 salary tion efits costs tion tion Total multiplier is calculated on the increase of the Company’s market capital- Fredrik Trägårdh (CEO) 1,750 875 0 647 2,785 0 6,057 ization. It is paid if the average market capitalization corresponds with a Anders Persson (VP) 1,500 532 0 388 1,336 0 3,756 minimum share price of SEK 5 and a maximum of SEK 12.50 during a Other senior execu- six-month period from October 2011 through March 2012. Any outcome 2,652 920 0 664 821 0 5,057 tives (3) from the employee stock option program in 2007 and 2009 is deducted Other employees 47,765 5,482 0 8,878 6,186 0 68,311 from the resulting amount. For other senior executives, the variable remuneration has a ceiling of Total 53,667 7,809 0 10,577 11,128 0 83,181 10–40 percent of the base salary. Almost all employees have some form 2007 Distributed among the CEO, VP, other senior executives and of variable remuneration and all employees participate in the employee other employees. (Compensation paid excluding pension costs and stock option program. share-related compensation in accordance with IFRS 2) A provision is made as with other variable remuneration including social security contributions.

Vari- Share- able based Other Pension commitments remu- Other Pen- remu- remu- The Company’s pension commitments towards the CEO amount to 35 Fixed nera- ben- sion nera- nera- percent of the annual salary excluding bonuses. For other senior execu- SEK 000 salary tion efits costs tion. tion. Total tives pension commitments amount to between 20 and 35 percent of the Fredrik Trägårdh (CEO) 1,750 718 0 642 1 439 0 4,549 annual salary. All pension plans are defined contribution plans.T he pen- Anders Persson (VP) 1,500 447 0 383 751 0 3,081 sion age for the CEO and other senior executives is 65 years. Other senior execu- 2,443 423 0 646 493 0 4,005 tives (3) Severance pay Other employees 41,103 5,980 0 7,970 1,644 482 57,178 A mutual period of notice of six months applies between the Company Total 46,796 7,568 0 9,641 4,327 482 68,813 and the CEO. Upon termination on the part of the Company, severance pay of 18 months’ salary is received with no obligation to work from the 2008 end of the term of notice. Any salary or other remuneration that the CEO Oth- receives in a new position or in a company that the CEO runs during the Vari- er able Share- re- eighteen months following the period of notice shall be deducted from remu- Other based mu- the severance pay. The contract between the Company and the other Fixed nera- ben- Pension remunera- Social management employees is subject to three to six months’ notice by ei- SEK 000 salary tion efits costs neration tion costs Total ther party. Sweden 53,667 7,809 0 10,576 11,128 0 26,343 109,649 The Board reserves the right to depart from the proposed guidelines USA 5,097 2,423 470 0 0 0 485 8,475 in particular cases. 2007 Financial instruments Vari- Other On December 31, 2008 The CEO had 750,000 employee stock options, able Share- re- remu- Other based mu- the Vice President had 650,000 employee stock options and the other Fixed nera- ben- Pension remunera- Social senior executives had 1,100,000 employee stock options. SEK 000 salary tion efits costs neration tion costs Total Sweden 46,796 7,568 0 9,641 4,327 482 21,507 90,320 Holdings (number) As of Dec. 31, 2003 of senior executives USA 7,822 1,770 819 0 114 555 701 11,781 Employee Employee Employee Other benefits refer to health insurance. stock op- stock op- stock op- Other remuneration includes severance pay. tions 2003 tions 2004 tions 2007 CEO Proposed guidelines for remuneration and other employment terms BB 700,000 900,000 750,000 for senior executives Change for the year – 700,000 – 900,000 0 For 2008 the senior executives’ terms and remuneration as well as gener- EB 0 0 750,000 al remuneration principles do not deviate from what was approved at the value 1,192,500 2008 shareholders’ meeting. No remuneration from the current approved VP long-term remuneration program for the CEO and VP was vested during BB 150,000 600,000 650,000 2008. For 2009 the Board proposes that the shareholders’ meeting move Change for the year – 150,000 – 600,000 0 to approve its proposed guidelines for determining remuneration and oth- EB 0 0 650,000 er terms of employment for senior executives as follows. The proposal is Value 1,033,500 for an extension of the long-term remuneration program. The proposed Other senior executives guidelines do not contain any material changes compared with the guidelines that were approved at the 2008 Annual Shareholders’ Meeting. BB 8,000 950,000 1,100,000 Change for the year – 8,000 – 950,000 0 Senior executives’ terms and remuneration as well as general remu- EB 0 0 1,100,000 neration principles Value 1,749,000 The Company applies market-based salaries and benefits based on fixed and variable elements, which are reviewed by an external salary consul- tant. Remuneration to the CEO and other senior executives consists of a base salary, variable remuneration, personnel options and a pension. Senior executives refers to the five persons who together with the CEO and Vice President constitute the executive management. The breakdown between basic salary and variable remuneration is in proportion to the re-

Net Insight annual report 2008 39 (Note 7, cont’d) Social security contributions The wholly owned subsidiary Net Insight Consulting AB holds 2,000,000 Value refers to the estimated market value at the grant date of the Stock warrants which may be used to avoid any potential impact on cash flow Option Plan in 2007. The market value has been calculated using the from social security contributions that may arise due to the employee stock Black & Scholes valuation model. Based on an analysis of the historical option program. In the event of full utilization of all outstanding subscription volatility for the Company’s share price the expected volatility is assessed options issued in conjunction with the personnel option program, dilution to be 40 percent (2007). However, those disposition restrictions that ap- is calculated to be approximately 2.1 percent of the total number of shares ply to personnel options have a value reducing effect, which has been and approximately 2.0 percent of the total number of votes in the Com- calculated based on anticipated personnel turnover and the probability of pany. Dilution effects have been calculated by dividing the total number of redemption of the instruments before the expiration of the duration. The shares/votes provided by the subscription options by the total number of value reducing effect has been assessed at 40 percent compared with the shares/votes after the subscription options were utilized for the subscription estimated value of the personnel option in accordance with the Black & of shares. In regard to the above, the completion of the personnel option Scholes valuation model. Possible future dividends have not been taken program is not expected to result in any future cash flow impact to the into consideration. The value per employee stock option as of the grant Company. date has been calculated to be SEK 1.59 (2007).

Preparatory and decision-making process Note 8 Development expenses Benefits paid to the EO C for the 2008 fiscal year were approved by the Development expenses are constituted primarily of product development, Board. Benefits to other senior executives were approved by theR emunera- the purchase of components, patent applications, licenses, salary costs tion Committee after consultation with the CEO. for personnel and other costs related to development work.

Related party transactions Related party transactions have only been carried out with subsidiaries Note 9 Depreciation of tangible and intan- during 2008, as specified in note 5. gible fixed assets Personnel option programs Group Dec 31, 2008 Dec 31, 2007 The Annual Shareholders’ Meeting resolved on employee stock option pro- Capitalized expenditures for grams during 2003, 2004 and 2007. The 2003 and 2004 programs were development work 45,806 39,206 exercised in April and November of 2008, respectively. The 2007 Annual Equipment for leasing 7,373 1,560 Shareholders’ Meeting resolved to issue employee stock options that allow Equipment 857 614 all employees in the Group to acquire Class B shares with the grant date Total 54,036 41,380 of May 25, 2007. For outstanding personnel options, the following terms apply: One third of them can be utilized per year during the first three years. Parent Company Dec 31, 2008 Dec 31, 2007 Exercise of the 2007 program is also linked to the fulfillment of operational Capitalized expenditures for objectives predetermined by the Board of Directors at certain points in time. development work 45,806 36,474 Upon termination of employment, personnel options normally expire in as Equipment for leasing 7,373 1,560 far as they can no longer be utilized. Personnel options that can be utilized Equipment 857 461 normally expire three months after termination of employment. Person- Total 54,036 38,495 nel options are allocated without fee and may not be transferred. Term, redemption price and number of allocated and outstanding options are illus- trated below. The personnel option program is intended to be an incentive Note 10 Operating leases for employees in the Group, thereby contributing to the Group’s continued The nominal value of future leasing fees (including rent for premises), re- development. garding non-terminable leases are distributed as per the following:

Status of operational goals, 2007 option program Group Parent Company The 2007 option program included three operational goals linked with the 2009 6,791 6,791 development and launch of new products, as well as new functionality in 2010 5,587 5,587 the Nimbra 600 series: 2011 5,049 5,049 • A Gigabit Ethernet card for the Nimbra 680 ready to ship to customers 2012 5,034 5,034 by Q4, 2007. • A Nimbra 688 chassis and 80 Gb/s switch ready to ship to customers 2013 5,034 5,034 by February 15, 2008. Total 27,495 27,495 • Full SDI functionality in the Nimbra 680 platform ready to ship to cus- Leasing costs for the year totaled SEK 5,461 (5,313) thousand for both the tomers by Q4 2007. Parent Company and the Group. No single contract has a term of 3 years All three goals were met on time. We can note that products that de- or more except for the lease for the Company’s premises, which was pended on the stated goals were key components of the Nimbra system renewed in 2008 and has a duration of 60 months. that was used during the Beijing Olympics.

Personnel option program 2007 Maturity date April 15, 2011 2008 2007 As of January 1 6,285,000 0 Allocated 250,000 6,285,000 Forfeited – 210,000 0 Utilized 0 0 Expired 0 0 As of December 31 6,325,000 6,285,000 Possible to utilize 0 0 Total number of options 9,900,000 9,900,000 Redemption price 7.10 7.10 Number of shares per option 1.00 1.00

During 2008 8,762,027 personnel options were exercized at a weighted average share price, at the exercize date, of SEK 4.64.

40 Net Insight annual report 2008 Note 11 Costs divided by type value that this subscription payment corresponds with, which means that the dilution effect in this context amounts to 5,174,137 shares. Group Parent Company 2008 2007 2008 2007 2008 2007 Goods for resale: Profit for the year attributable to Cost of goods sold: 75,691 65,228 99,544 65,228 Parent Company shareholders 67,940 TSEK 33,959 TSEK Cost type: Average number of shares after full Salary and salary related dilution 379,480,711 381,471,875 costs 115,731 107,469 109,975 95,347 Earnings per share after dilution 0.18 0.09 Sales and marketing costs 5,256 3,191 16,592 3,068 Travel expenses and related costs 8,528 7,846 6,518 5,316 Note 17 Intangible fixed assets and good- Office expense 8,909 8,402 8,303 7,796 Other administrative will expenses 2,781 4,934 2,635 4,659 Capitalized expenditures for development External services 6,994 4,111 6,854 3,716 Development expenses, Group Parent Company gross 14,161 14,447 14,161 14,447 Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 Capitalization – 44,476 – 49,020 – 44,476 – 49,020 Accumulated pur- Depreciation/disposal 46,663 41,380 46,663 38,495 chase costs at begin- Other costs 0 33 0 0 ning of the year 167,946 118,926 133,400 84,380 Total costs 240,238 208,021 266,769 189,052 New purchases 44,476 49,020 44,476 49,020 Disposal 0 0 0 0 Total 212,422 167,946 177,876 133,400 Note 12 Fees and remunerations Accumulated amor- The Group and the Parent Company have paid Öhrlings Pricewater- tization according to houseCoopers AB remuneration of SEK 231,000 (203,000) for audit ser- plan at beginning of vices and SEK 169,000 (422,000) for other assignments. the year – 98,752 – 59,546 – 64,206 – 27,731 Depreciation for the Note 13 Other operating income year – 45,806 – 39,206 – 45,806 – 36,475 In December 2007 the Company acquired 100 percent of the shares in a Disposal 0 0 0 0 partnership. No corresponding transactions took place in 2008. Total – 144,558 – 98,752 – 110,012 – 64,206 Residual value according to plan at year-end 67,864 69,194 67,864 69,194 Note 14 Financial income Group Parent Company All depreciation pertaining to intangible fixed assets, both in the Parent 2008 2007 2008 2007 Company and the Group, are included in development expenses. Interest income 4,980 2,796 4,954 2,734 Exchange rate differences Group on current receivables Goodwill Dec 31, 2008 Dec 31, 2007 and investments 1,235 0 1,235 0 Accumulated purchase costs at beginning of Total 6,215 2,796 6,189 2,734 the year 4,354 4,354 Residual value according to plan at year-end 4,354 4,354 The exchange rate difference for current receivables and investments in 2007 is reported in the operating profit/loss. Assessment of impairment requirements for goodwill and capitalized assets. The acquisition of the Q2 Lab Group in March 2004 resulted in goodwill of SEK 4,354 thousand. The Group has only one cash-generating unit (CGU) within which Note 15 Financial expenses goodwill is reported. The recoverable amount for the Group’s CGU is Group Parent Company established based on calculations of value in use. These calculations are 2008 2007 2008 2007 based on estimated future cash flow based on financial forecasts ap- Interest expenses – 20 – 43 – 20 – 40 proved by the management and that cover a five-year period. Cash flow beyond the five-year period is extrapolated with the help of an assessed Cost of credit facilities – 1,574 – 1,435 – 1,574 – 1,435 growth rate. The growth rate does not exceed the long-term growth Exchange rate differences – 1,649 0 – 1,649 0 rate for the telecommunications market in which the CGU in question is Total – 3,243 – 1,478 – 3,243 – 1,475 active. Management has established the budgeted gross margin based on earlier results and its expectations for market development. The average Note 16 Earnings per share annual growth rate is estimated at about 13% over a 10-year period, and Earnings per share have been calculated by dividing profit for the year 5% thereafter. The Weighted Average Cost of Capital (WACC) which has been used is 11% percent after tax. It reflects the specific risks that with the weighted number of registered shares. apply for the segment in which the company has operations. A change 2008 2007 in WACC of 3 percentage points does not give rise to any impairment Profit for the year attributable to requirements. A change in estimated EBITDA by 2 percentage points Parent Company shareholders 67,940 TSEK 33,959 TSEK will not bring about any impairment requirements. A change in estimated Average number of shares 374,306,574 369,363,339 gross margins by 3 percentage points does not give rise to any impair- Earnings per share before dilution 0.18 0.09 ment requirements. Based on the above, no impairment of assets has been deemed neces- In the calculation of diluted earnings per share, the registered number sary. 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 was SEK 4.69 for 2008. A dilutive effect arises if the present value of the warrants is less than the fair value of the share. ProgramT07B has a redemption price that is less than this value and therefore gives 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

Net Insight annual report 2008 41 Note 18 Tangible fixed assets Note 21 Inventories Group Parent Company Group Parent Company Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 Accumulated pur- Products in progress 900 3 400 900 3 400 chase costs at begin- Finished goods 29 236 17 111 29 236 17 111 ning of the year 15,449 6,424 14,867 5,842 Total inventory 30 136 20 511 30 136 20 511 New purchases 12,663 9,025 12,663 9,025 Reclassifications – 17,865 0 – 17,865 0 The expenditure for inventories expensed is included in the item cost of Total 10,247 15,449 9,665 14,867 goods sold and amounts to SEK 57,149 thousand (67,088). Inventories of a value of SEK 50,334 thousand (31,581) have been impaired to an Accumulated amorti- assessed net selling price of SEK 30,136 thousand (20,511). Impairment zation according to loss of inventories for the year amount to SEK 10,189 thousand (6,760) plan at beginning of and is recorded in cost of goods sold. the year – 7,120 – 4,927 – 6,538 – 4,518 Depreciation for the year – 8,229 – 2,091 – 8,229 – 2,020 Disposal 0 – 102 0 0 Note 22 Accounts receivable and other Reclassifications 8,932 0 8,932 0 receivables Total – 6,417 – 7,120 – 5,835 – 6,538 Group Parent Company Residual value ac- Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 cording to plan at Accounts receivable 62,835 20,010 62,608 20,010 year-end 3,830 8,329 3,830 8,329 Provision for depre- Depreciation/amorti- ciation of receivables – 228 0 0 0 zation included in Ksv – 7,372 – 1,560 – 7,372 – 1,560 Accounts receivable - Depreciation included trade, net 62,608 20,010 62,608 20,010 in development Current receivables 5,186 4,924 5,072 2,636 expenses – 561 – 584 – 561 – 431 Prepaid expenses Depreciation included and accrued income 4,634 5,223 4,634 5,223 in administrative Carrying amount of expenses – 296 – 30 – 296 – 30 accounts receivable Total – 8,229 – 2,174 – 8,229 – 2,020 and other receivables 72,428 30,157 72,314 27,869

The Group has not reported any losses on accounts receivable during Note 19 Deposits paid 2008 and therefore there is no need for impairment. Below is an aging The amount pertains to deposits in connection with the establishment of analysis of accounts receivable due and related reserves. a new sales office in Singapore. Invoices due (SEK 000) 2008 2007 Less than 3 months 21,693 8,201 Note 20 Shares in Group companies 3–6 months 204 0 Total 21,897 8,201

Propor- Propor- Number Share- Change in provision for bad debts 2008 2007 tion of tion of of Book holders’ Parent Company equity % votes % shares Value equity As of January 1 0 – 960 Net Insight Inc. Provision for bad debts – 228 960 Domicile: Delaware USA 100 100 1,000 2,777 7,131 As of December 31 – 228 0 Net Insight Consulting AB The Group’s accounts receivable and other Corp.ID.no.: receivables in carrying amount by currency 2008 2007 556583-7365 SEK 29,994 10,036 Domicile: Stockholm, USD 18,834 7,803 Sweden 100 100 5,000 500 493 EUR 23,600 12,318 Q2 Labs AB Total 72,428 30,157 Corp.ID.no.: 556640- 8570 The above amounts have been translated to SEK at the closing day rate. Domicile: Stockholm The Company has an agreement relating to loans on accounts receivable. Sweden 100 100 142,864 15,021 147 The loan amount is 80 percent up to a maximum of EUR 5,370,569. At Ten Tech AB year-end, no loans had been taken out on accounts receivable. Corp.ID.no.: 556669-4559 Current receivables contain the following major items: Domicile: Stockholm Group Parent Company Sweden 100 100 1,000 100 91 Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 VAT claims 4,633 3,966 4,604 1,825 Purchase costs Dec 31, 2008 Dec 31, 2007 Salary taxes 0 24 0 24 Accumulated purchase costs at beginning of Other 553 934 468 787 the year 3,387 5,022 Total 5,186 4,924 5,072 2,636 Purchase cost – partnership 398,114 Repayment of original investment – 398,114 in partnership Impairment loss of shares in Q2 Labs – 170 Shareholder contributions 170 Liquidation Boliten HB – 48 Withdrawals/Contributions – 3,190 Share in profits 1,603 Q2 Labs’ purchase of shares 11 Shareholder contributions to NIIP HB before transfer to Q2 Labs 15,000 Total shares in Group companies 18,398 3,387

42 Net Insight annual report 2008 Accrued income and prepaid expenses include the following large items: As of January 1 2008 Group Parent Company Recognized in the Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 income statement 4,032 3,575 4,032 4,255 15,894 Rent for the first – additional provisions 1,136 4,075 1,136 0 6,347 quarter of 2009 – reversed unused (2008) 1,382 1,141 1,382 1,141 amount 0 – 3,575 0 – 4,255 – 7,830 Prepaid license-/ As of December 31, 2008 5,168 4,075 5,168 0 14,411 service fees 477 537 477 537 Prepaid insurance Current Long-term costs 1,572 1,176 1,572 1,176 provisions provisions Prepaid exhibition Product Product Variable expenses 406 343 406 343 warranty Other warranty incen- Accrued interest 98 123 98 123 Parent Company provi- provi- provi- tive Other items 699 1,903 699 1,903 As of January 1, 2007 sions sions sions program Total Total 4,634 5,223 4,634 5,223 Recognized in the income statement 6,465 1,000 0 0 7,465 – additional provisions 0 2,575 4,032 4,255 10,862 Note 23 Liquid assets – reversed unused Group Parent Company amount – 2,433 0 0 0 2,433 Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 As of December 31, 2007 4,032 3,575 4,032 4,255 15,894 Cash and bank balances 51,744 30,233 49,880 28,982 As of January 1, 2008 Investments 100,000 98,000 100,000 98,000 Recognized in the income statement 4,032 3,575 4,032 4,255 15,894 Total cash equivalents 151,744 128,233 149,880 126,982 – additional provisions 1,136 4,075 1,136 0 6,347 of which in blocked – reversed unused account 189 355 189 355 amount 0 – 3,575 0 – 4,255 – 7,830 As of December 31, 2008 5,168 4,075 5,168 0 14,411 The average interest rate on investments during the year was 4.42 percent (3.32). Product 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 Note 24 Share capital probable future remuneration; for more information please see note 7. The share capital, SEK 15,196 thousand, is distributed over 379,890,569 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 Note 26 Other liabilities to one (1) vote. The distribution of the different classes of shares is as Other liabilities include the following items: follows: Group Parent Company Number of Number of Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 shares shares Options Options Prepaid extended Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 warranty, current part 701 0 701 0 Unrestricted Special salary taxes 202 0 202 0 A-shares 1,900,000 1,900,000 Tax at source 2,594 2,072 2,594 2,072 Unrestricted Other current B-shares 377,990,569 368,702,820 liabilities 7 5,187 7 5,187 Warrants 2003 / 2008 0 2,558,415 Total current liabilities 3,504 7,259 3,504 7,259 Warrants 7B 9,474,000 9,474,000 Warrants Note 27 Accrued expenses 2004 / 2008 0 7,667,000 Accrued expenses contains the following major items: Warrants 2007/2011 9,900,000 9,900,000 Group Parent Company Total 379,890,569 370,602,820 19,374,000 29,599,415 Dec 31, 2008 Dec 31, 2007 Dec 31, 2008 Dec 31, 2007 The terms for Subscription options 7B are as follows: Each warrant en- Vacation pay liability 4,826 4,097 4,384 3,787 titles the holder to 1.06 shares at the subscription price of SEK 2.28. The Social security contributions 8,301 2,607 8,301 2,607 maturity date is April 1, 2009. For terms regarding other option programs, Accrued see Note 7. remuneration 18,179 8,386 17,250 7,470 Accrued consulting fees 157 85 157 85 Note 25 Other provisions Prepaid revenue from customer 0 12,126 0 12,126 Current Long-term Other items 5,980 10,852 5,732 10,077 provisions provisions Total 37,443 38,153 35,824 36,153 Product Product Variable warranty Other warranty incen- Group provi- provi- provi- tive As of January 1 2007 sions sions sions program Total Note 28 Items not affecting liquidity Recognized in the Group Parent Company income statement 6,465 1,000 0 0 7,465 2008 2007 2008 2007 – additional provisions 0 2,575 4,032 4,255 10,862 Translation differences 1,649 – 705 1,649 0 – reversed unused Profit/loss in partnership 0 0 9,551 – 1,603 amount – 2,433 0 0 0 – 2,433 Provisions – 3,119 8,287 – 3,119 8,287 As of December 31, 2007 4,032 3,575 4,032 4,255 15,894 Group contribution 0 0 0 2 260 Adjustments for personnel options 2,530 2,920 2,530 2,920 Other items 90 19 0 0 Total 1,150 10,521 10,611 11,864

Net Insight annual report 2008 43 Note 29 Pledged assets Note 33 Operating leases The amount pertains to blocked bank balances of SEK 189 thousand Operating leases in which a group company is lessor. (355). Future minimum lease fees that refer to non cancellable operating leases are as follows: Note 30 Cash flow statement Liquid assets at the beginning of the year and at the end of the year are 2008 2007 related to bank balances and petty cash for both years. Of total liquid assets in the Group in 2008, SEK 1,698 thousand (1,075) pertain to liquid Within 1 year 0 3,731 assets in the subsidiary Net Insight Inc. Between 1–5 years 0 0 More than 5 years 0 0 Total 0 3,731 Note 31 Tax deficit Group Parent Company Note 34 Deferred tax claims 2008 2007 2008 2007 Difference between Group Parent Company reported tax expense and Deferred tax claims Dec 31, Dec 31, Dec 31, Dec 31, tax expense based on on tax deficits 2008 2007 2008 2007 applicable tax rate Opening balance 0 0 0 0 Reported result before tax 40,862 33,959 34,337 32,333 Recognized in the Tax according to current income statement 27,078 0 27,078 0 tax rate – 11,338 – 9,500 – 9,614 – 9,053 Closing balance 27,078 0 27,078 0 Tax effect from non-deduct- Deferred tax claims pertaining to loss carry-forwards are recognized to ible expenses – 1,267 – 114,203 – 1,108 – 114,113 the extent that it is probable that future taxable profit will be available Text effect from non-taxable against which the unused tax losses can be utilized. In Q4 Net Insight revenue 1,878 0 0 0 began capitalizing SEK 27,078 thousand in deferred tax claims, corre- Tax effect of group contribu- sponding to tax loss deductions of SEK 102,958 million. The capitalization 0 0 0 – 586 tion is based on the previous year’s earnings along with an expected Reversal of previous years’ positive long-term earnings trend. In addition there are loss carry-for- non-deductible costs 110,052 173,895 110,052 173,895 wards amounting to SEK 980,206 thousand that have not been valued as Non-reported effect of loss deferred tax claims. Net Insight AB holds the loss carry-forwards, which carry-forwards – 72,247 – 50,192 – 72,251 – 50,142 are thus Swedish loss carry-forwards of unlimited duration. Tax on profit/loss for the year as per the income statement 27,078 0 27,078 0 Note 35 Significant events after the

Deductible differences for period which deferred tax claims are • In January HTN continued to expand its network in the US, using Net not reported Insight’s Nimbra platform to support new customers. Loss carry-forward 980,206 639,154 979,231 638,461 • A major media network operator in Europe will construct a new con- Total 980,206 639,154 979,231 638,461 tribution media network based on Net Insight’s Nimbra platform. The network is intended to broadcast video from several sports arenas in a Deductible differences for European country. which deferred tax liability is not recognized Temporary differences pertaining to Share of Boliten HB 0 0 0 0 Share of Doliten HB 0 0 0 398,114 Total 0 0 0 398,114

Note 32 Acquisition of subsidiary

2008 2007 Acquired Acquired Fair book Fair book value value value value Purchase price – cash payment 398,395 – fair value of issued shares Total purchase price 398,395 Fair value of acquired net assets 408,201 Deficit/surplus value* – 9,806 Cash and cash equivalents 408,201 408,201 Acquired net assets 408,201 408,201 Purchase price, cash paid – 398,395 0 Liquid assets in acquired subsidiaries 408,201 0 Effect on the Group’s liquid assets from the year’s acquisitions 9,806 0

*Reported as other operating income.

There were no acquisitions in 2008.

44 Net Insight annual report 2008 The income statement and balance sheet will be submitted to the Annual General meeting on April 28 for adoption.

Stockholm, February 19, 2009

Lars Berg Clifford H Friedman Chairman

Ragnar Bäck Bernt Magnusson

Gunilla Fransson Arne Wessberg

Fredrik Trägårdh Chief Executive Officer

Our auditor’s report was submitted on February 27, 2009.

Sten Håkansson Authorized Public Accountant

Net Insight annual report 2008 45 AUDITORS’ REPORT

To the Annual Shareholders’ Meeting of Net Insight AB (publ) Corp. ID No. 556533-4397

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 2008. The Company’s annual accounts are included in the printed version of this document on pages 25–45. The Board of Directors and the CEO 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 IFRS international financial reporting standards 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 annual 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 judgments 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 significant 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 CEO. We also examined whether any Board member or the CEO 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 have been prepared in accordance with the Annual Accounts Act and thereby give a true and fair view of the company’s financial position and results of operations in accordance with generally accepted auditing standards in Sweden. The consolidated accounts have been prepared in accordance with IFRS international financial reporting standards 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 Shareholders’ Meeting that the income statements and balance sheets of the Parent Company and the Group be adopted, that the profit of the Parent Com- pany 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 liability for the fiscal year.

Stockholm, February 27, 2009 Öhrlings PricewaterhouseCoopers AB

Sten Håkansson Authorized Public Accountant

46 Net Insight annual report 2008 BOARD OF DIRECTORS

Lars Berg Ragnar Bäck Gunilla Fransson Chairman of the Board Board member Board member Born in 1947. Bachelor of Business Born in 1944 and has a degree in MS Born in 1960. Has a PhD in Nuclear Science. Administration. Chairman of the Board Engineering from the Royal Institute of Board Member since 2008. Gunilla Fransson since 2001 and a board member since Technology in Stockholm. Board member is the Managing Director of Saab Security. 2000. Main assignment: European Venture since 2006. Bäck has previously worked at Gunilla has over 20 years of experience from Partner, Constellation Growth Capital, New Ericsson where he held several executive the telecommunications industry. She has held various leading positions within the York. Other significant Board assignments. positions such as CEO in Italy and in the Chairman of the Board of Eniro, Viamare and Ericsson Group where she most recently Netherlands, Executive Manager for the was product and development manager Dahlia Televisión. Board member of Ratos and Asian/Pacific region in Hong Kong, and at Ericsson Enterprise between 2005 and KPN/OnePhone. Previous positions include Executive Manager for Western Europe in 2008. Previous positions at Ericsson include Member of Mannesmann’s executive board London. Bäck is a Board member of Todos, VP Mobile Internet Solutions, VP Strategic with responsibility for the Telecom Division, Unfors, Nordia Innovation and NGB (Next Business Development at Core Unit Service President and CEO of Telia, and various exec- Generation Broadcasting). Layer and VP Product Development Unit utive positions within the Ericsson Group. Mobile Internet Applications. Shareholdings in Net Insight: 20,000 Shareholdings in Net Insight: 1,008,332 series- Shareholdings in Net Insight: 0 shares. series-B shares. Present at board meetings 2008: 4/5 B shares. Present at board meetings 2008: 5/5 Present at board meetings 2008: 5/5

Clifford H Friedman Bernt Magnusson Arne Wessberg Board member Board member Board member Born in 1959. Bachelor of Science in Born in 1941. Master of Arts (Politics). Born in 1943. Studies in Economics at Electrical Engineering, Master of Science Board member since 1997. Chairman of Tammerfors University. Board Member since in Electro Physics and Masters of Business the Board of Kwintet AB; member of the 2008. Arne Wessberg is President of Prix Administration in Finance and Investments. Boards of Volvo Car Corp., Fareoffice AB, Europa and the President of IIC (International Board member since 2004. Clifford H. Höganäs AB, Pharmadule AB, Coor Service Institute of Communications) and Chairman Friedman is Managing Director for Highbridge Management AB and Nordia Innovation AB. of the Board of DigiTVPlus Oy. He has a long- Previous positions include Chairman of the Principle Strategies and Constellation Growth standing and solid experience from the media Boards of Swedish Match, Nobel Industrier and communications industry. Between Capital. He has over 25 years of experience in AB, Assi Domän AB and Skandia AB, CEO 2000 and 2006, he was President of the EBU finance and venture capital and the technology Nordstjernan AB and NCC AB. (European Broadcasting Union) and during and media industries. Clifford is a Board more than ten years Arne Wessberg was member of Vivid Logic, TVONE, AirPlusTV AB, Shareholdings in Net Insight: Bernt Director General of YLE (the Finnish broad- MediaXstream, Widevine Technologies. Magnusson and wife, 1,232,947 series-B casting company) in which he also started shares. his career within the broadcasting industry in Present at board meetings 2008: 5/5 Shareholdings in Net Insight: 0 shares. the beginning of the 1970’s. Between 1999 Present at board meetings 2008: 5/5 and 2003, Arne Wessberg was Chairman of the Board of Digita Oy and also served on the Board of Directors of the Nokia Corporation during five years until 2006.

Shareholdings in Net Insight: 0 shares. Present at board meetings 2008: 3/5

Net Insight annual report 2008 47 THE BOARD’S CORPORATE GOVERNANCE REPORT Net Insight AB (publ) is a public stock company domiciled in Board duties. The Nomination Committee is also responsible for Stockholm. Net Insight’s stock is listed on the Nasdaq OMX Nor- submitting proposals for the election of the auditor and auditors’ dic Exchange Midcap Stockholm. The basis for governance of fees. The members of the Nomination Committee should be ap- the Company and Group includes the Articles of Association, the pointed, or the method for appointing the members should be Swedish Companies Act and the regulations of the Stockholm decided, at the Annual Meeting. In accordance with the decision Stock Exchange, including the Swedish Code of Corporate Gov- of the Annual Meeting, Net Insight’s Nomination Committee ernance as of July 1, 2008. consists of the Chairman of the Board of Net Insight AB and the company’s four largest shareholders as of September 30 each Introduction year, who are then each entitled to appoint a representative to be Net Insight follows the Swedish Code of Corporate Gover- a member of the Nomination Committee. The composition of nance, deviating from the code in two respects: the Nomination Committee was published on October 22, 2008. Rule Deviation Explanation Net Insight’s nomination committee for the 2009 Annual Share- 2.4 The Nomination Committee in- The Chairman of the Board is holders’ Meeting has the following composition: Cliff Friedman cludes more than one (two) Board represented on the Nomination Members, and both of them Committee due to his experi- (Constellation Growth Capital), Åsa Nisell (Swedbank Robur are dependent in relation to the ence and many years with the largest shareholder. The Chairman Company; moreover he serves funds), Ramsay Brufer (Alecta), Christer Bohm (representing the of the Nomination Committee is as the Chairman of the Nomina- three founders), and Lars Berg (Chairman of the Board of Net In- Chairman of the Board as well. tion Committee for the same reasons. The fact that the prin- sight AB and European Venture Partner of Constellation Growth cipal owner is a member of the Nomination Committee as well Capital). The Nomination Committee elected Lars Berg as its as the Board of Directors is an chairman. The Nomination Committee has held two meetings expression of active ownership. in preparation for the 2009 annual shareholders’ meeting. Net Insight deviates from the Swedish Code of Corporate Articles of Association Governance concerning the composition of the Nomination The Articles of Association describe the business of the Company, Committee, in that the Chairman of the Board is also the Chair- its share capital, number and types of shares, and allocation of votes, man of the Nomination Committee, and the two Board mem- as well as the number of Directors and auditor, notices of, and mat- bers who are also members of the Nomination Committee are ters to be dealt with at, the Annual Shareholders’ Meeting, as well dependent on the Company’s largest shareholder. as the requirement that this meeting be held in Stockholm. During the period between Annual Shareholders’ Meetings, the Board of Directors Board of Directors of Net Insight AB (publ) is the highest deci- The Board administers the Company’s affairs in the interests of sion-making body of the Company. The duties of the Board are the Company and all of its shareholders. The size and composi- regulated in the Companies Act and the Articles of Association. tion of the Board guarantees its ability to administer the Compa- The current Articles of Association were adopted at the Annu- ny’s affairs effectively and with integrity. The Board’s tasks include al Shareholders’ Meeting held on April 26, 2007. The Articles of establishing business goals and strategy, deciding on acquisitions Association are available in their entirety at www.netinsight.net. and sales, appointing, evaluating and deciding the compensation of the CEO, ensuring that there are effective systems to monitor Annual Shareholders’ Meeting and control the Company’s business, ensuring that the necessary The Annual Shareholders’ Meeting of Net Insight AB (publ) ethical guidelines for the Company’s conduct are established, and was held on April 10, 2008. The Company’s Nomination Com- evaluating the Board’s work. The Board’s work plan is established mittee is responsible for proposing a Chairman for the Annual annually at the Statutory Board Meeting or when it is necessary. Shareholders’ Meeting. Lars Berg was elected the Chairman of In addition to the assignments mentioned above, the work plan the meeting. stipulates items including Board meeting procedures, instructions for the Company’s CEO, decision-making procedures within the The Annual Shareholders’ Meeting made the following decisions: Company, allocation of work, and the provision of information • Adoption of income statement and balance sheet for the Par- between the Company and the Board. ent Company and the consolidated income statement and The Board monitors the CEO’s performance of his duties, in- balance sheet for the Group. cluding implementation of the Board’s decisions and guidelines, • Lars Berg, Clifford H. Friedman, Bernt Magnusson and and evaluates his efforts annually. The Board held five meetings Ragnar Bäck were re-elected and Gunilla Fransson and Arne during the year, not counting three per capsulam meetings. At Wessberg were newly elected to the Board. Lars Berg was elect- these meetings the Board considered standing agenda items for ed Chairman of the Board. each Board meeting such as the state of the business, year-end and • Adoption of the compensation principles and other terms of interim reports, budgets, etc.. In addition overarching issues such employment for the leading executives, as proposed by the as the prevailing economic situation, long-term strategies, busi- Board. ness plans and partners were considered. At the Statutory Board The complete minutes of the Annual Shareholders’ Meeting, as Meeting, the Board considered and adopted the work plan for well as the underlying documentation, is available at www.netin- the Board and instructions for the CEO. Fees to the Board totaled sight.net/corporate_governance.asp MSEK 1.1, SEK 350,000 of which was paid to the Chairman of the Board, and SEK 150,000 each to the other Board members. Nomination Committee The Nomination Committee is responsible for submitting nomi- Independence of the Board nations for the Chairman and other members of the Board, as The Board occupies an independent position vis-à-vis the well as fees and other compensation to each member for their Company since all its members are also independent in rela-

48 Net Insight annual report 2008 tion to the Company. Four of the Board’s members are in- BOARD’S REPORT ON INTERNAL CONTROLS REGARDING dependent of the company’s principal owners. None of Net FINANCIAL REPORTING Insight’s Board members work for the company in an op- Net Insight’s objective is to fulfill the requirements for ongoing erative capacity. Clifford H. Friedman, who represents the risk management and internal controls which are incumbent largest owner Constellation Growth Capital, is also member upon the Company because it follows the Swedish Code of Cor- of the board and chairman of Media Xstream, one of Net porate Governance. For Net Insight, internal controls of finan- Insight’s largest customers. Constellation Growth Capital is cial reporting are an integral part of corporate governance. These also a major owner of MediaXstream. controls contain processes and methods to safeguard the Group’s See page 47 for information about the Board members and assets and accuracy in financial reporting, in order to thereby pro- the CEO. tect the owners’ investment in the Company. The Board supervises the quality of financial reporting in sev- Remuneration Committee eral ways. The Board establishes a work plan every year, which The Board’s overall responsibility cannot be delegated, but it has regulates the work of the Chairman of the Board and the CEO instituted a remuneration committee charged with preparing among other things. According to his instructions, the CEO is questions concerning salaries, compensation and other terms of responsible for reviewing and ensuring the quality of all financial employment for the CEO and other members of the manage- reporting, as well as ensuring that the Board otherwise receives ment team, as well as compensation programs of a broader na- the reports it needs to be able to continually assess the Group’s ture, such as option programs, for final decision by the Board The financial position. The CEO’s instructions stipulate the issues committee reports to the Board on a continuous basis. where the CEO may exercise his authority to act on behalf of The remuneration committee consists of Chairman of the the Company after receiving authorization or approval from the Board Lars Berg and Board member Bernt Magnusson. During Board. Net Insight has performed a risk analysis of its financial the year the committee held three meetings at which minutes reporting and initiated a review and verification of existing gover- were kept, discussing the following matters: the CEO’s variable nance and internal controls, in order to provide the Board with a compensation for 2007 to be decided by the Board; a decision on basis for establishing the level of internal governance and controls. variable compensation for 2007 for the rest of the management The internal reporting and control system builds upon annual team; the CEO’s business goals for 2008; and the salary structure financial planning, monthly reports and daily monitoring of key for the rest of the management team. business ratios. The Group’s finance department inspects and monitors report- Audit Process and Auditors ing, as well as compliance with internal and external regulations. The Board of Directors of Net Insight has chosen not to have Risks concerning financial reporting that have been identified are a separate Audit Committee; instead, the Board in its entirety managed through the Company’s control activities. For example, handles audit issues. The Board has chosen this approach since it the IT-based system has automated controls that manage access is suitable as long as the company has a relatively uncomplicated rights and signatory authority, as well as manual controls such as business and audit structure. In consultation with the company’s duality, in both current and closing entries of transactions. The auditors, the Board has also proactively discussed new recom- business-specific controls are complemented by detailed finan- mendations in the field of accounting that may affect future com- cial analyses of company results and follow-up checks against pany accounting and reporting. Once a year, the auditors report the budget and forecasts, which provides an overall confirmation personally to the Board of Directors about their audit reviews and of the quality of reporting. Because the Board does not have an their assessment of internal controls. In addition to the normal audit committee, the Board instead ensures that financial report- auditing functions, Öhrlings PricewaterhouseCoopers also pro- ing maintains a high standard of quality. The Board monitors vides Net Insight with general advice in the areas of accounting and evaluates quality assurance through quarterly reports on the and taxes. The legally-mandated term of auditors is four years. Company’s business and earnings trends, and by considering the The Company’s auditor, Öhrlings PricewaterhouseCoopers AB, Group’s financial situation at every regular Board meeting. was re-elected at the 2007 Annual Shareholders’ Meeting for a Every year the Board evaluates whether there is a need to es- term lasting until the 2011 annual meeting. Sten Håkansson was tablish a special internal review office (internal audit). The Board appointed the new auditor in charge. See Note 12. determined that there was no need for this in 2008. In their rea- Once a year, when the books are closed, the Group’s auditors soning, the Board noted that internal controls were principally report their observations from their audit to the entire Board. The performed through: Board also meets with the auditors at least once a year – without • the central finance department and the management team being present – in order to stay informed • supervisory controls by management. on the direction and scope of the audit, as well as to discuss the Due to these factors and the size and limited complexity of the coordination of the external audit and internal controls, and the Company, it is the Board’s view that for the present having an auditors’ views of risks to the Company. additional office cannot be justified financially. Attendance by each Board member is presented below.

2008 Attendance Presence at Name Board meetings Remuneration Committee Lars Berg 5/5 2/2 Bernt Magnusson 5/5 2/2 Clifford H. Friedman 5/5* Ragnar Bäck 5/5 Gunilla Fransson 4/5** Arne Wessberg 3/5** * Participated in two out of five meetings by telephone ** Elected at Annual Shareholders’ Meeting on April 10, 2008 Net Insight annual report 2008 49 executive management

Fredrik Trägårdh Anders Persson Lars Kevsjö Chief Executive Officer Vice President and Director of Chief Financial Officer Product Development Born: 1956. Born: 1958 Master of Business Administration. Master of Business Administration. Born: 1957. Employed since June 2006. Lars Kevsjö Employed since 2002, then as the CFO. Master of Science in Engineering. have more than 20 years of experience Took office as CEO in February 2006. Employed since 2000. Anders Persson from management positions in finance and Fredrik Trägårdh previously worked at has many years of experience with the economics, mainly in the IT and telecom German DaimlerChrysler Rail Systems as Ericsson Group, where his latest position industry. Lars was previously the CFO of senior vice President and Director of Group was General Manager for Network Design Bewator Group. Prior to that he was CFO Finance. Fredrik has extensive international and Performance Improvement. In addi- of Cygate and has previously been active at experience and has previously held mana- tion, Anders has held a number of other Telia and Pripps. gement positions within ABB Financial leading management positions at Ericsson. Services. Shareholdings in Net Insight: Shareholdings in Net Insight: 0 Class B shares Shareholdings in Net Insight: Mr and Mrs Anders Persson 300 000 employee stock options 343 332 Class B shares 220 000 Class B shares 750 000 employee stock options 650 000 employee stock options

Per Lindgren Thomas Wahlund Director of Business Development Support manager

Born: 1967 Born: 1969 PhD. Master of Science in Engineering. Employed since 1997. Per Lindgren has a Thomas started at Net Insight in 1997 and Ph.D. in telecommunications and has pre- since 1999 he has been responsible for viously served as an Assistant Professor building up the Operations organization, at KTH (Royal Institute of Technology, including responsibility for sales support, Stockholm), where he worked with opti- customer support, services and training. cal networks, EU projects related to new He holds an MSc degree from the Royal broadband services, etc. Institute of Technology, Stockholm and has extensive industry experience in Shareholdings in Net Insight: network planning. 800 000 Class A shares 1 951 790 Class B shares 600 000 employee stock options Shareholdings in Net Insight: 46 582 Class B shares 200 000 employee stock options

50 Net Insight annual report 2008 GLOSSARY

ACCESS NETWORK IP SDI The part of the public network closest to end-users. (Internet Protocol) Protocol used for data transmission (Serial Digital Interface). Consists of copper lines in the telephone network and over the Internet. All Internet traffic is transmitted in IP A physical standard for professional, uncompressed 270 coaxial cable for cable TV. Fiber and wireless solutions packets. Mbps video. Is used in the media industry to connect are also increasingly being used. sound and image equipment in production areas. IPTV ASI Television that is broadcast over IP (broadband). METRO AREA NETWORK (Asynchronous serial Interface). A standardized physical A high-capacity network that links together an urban or interface for compressed video. Used within the media LAN regional area. Often referred to as a Metropolitan Are- industry to transport content between geographically (Local Area Network). Smaller local networks for data aNetwork, MAN. remote production units and in cable TV networks. communication within a department, building or block. BACKBONE NETWORK ATM MPLS High-capacity network linking together geographically (Asynchronous transfer Mode). Packet-switched tech- (Multi Protocol Label Switching). Minutes for efficient remote areas or a number of smaller networks within an nology for data traffic. management of connections over a package-switched area. Also known as a transport network or backbone. network. BANDWIDTH STUDIO QUALITY Measure of how much information can be sent over a MULTICAST The quality obtained if studio production equipment is line. Measured in bits per second, bps. Transmits the same message to a large number of connected together locally. Can be achieved with a low recipients without needing to be addressed to every or constant delay over a network with an extremely BROADBAND NETWORK single individual (unicast) or sent to all possible recipi- high QoS. Network with extremely high capacity, at least 2 Mbps ents (broadcast). to each end-user. TELEPRESENCE Next Generation SDH/SONET Next generation videoconferencing solution. BROADCAST SDH/SONET enhanced with functions based on GFP, Transmission from a single sender to all possible recipi- LCAS and VCAT (see elsewhere in the glossary for TOPOLOGY ents in a network. explanation). In networks, the topology describes how the nodes are linked together, for example, in a ring or star where CONTENT NGN all nodes are switched directly to a central node, or a Content that is distributed in the network. Next Generation Networks or Next Generation Network. mesh, an irregular structure with multiple switches General concept for the development of networks and/ between many nodes. CONTRIBUTION or a standardization framework to enable new services Communication for production and processing of mate- and integrate fixed and mobile services over common TRIPLE PLAY rial before it is transmitted to the end-user. infrastructure in future networks. A technology used for the transport of TV/video, data and telephony via a single network. CORE NODE Larger transport networks between cities and backbone A unit that is connected to a network, either as a send- Uplink stations networks. er/receiver, or to connect together different networks. Where the content in a fiber optic network or other terrestrial-based network contacts a satellite network. DTT PAY-PER-VIEW For example, when programming companies broadcast (Digital Terrestrial Television). Name for digital terrestrial Pay only for what you watch. Unlike video-on-demand, their content for distribution. TV to ordinary TV receivers equipped with ”set-top the programs or films must be viewed at set times. boxes”. Also called DVB-T. VCAT POST PRODUCTION (Virtual Concatenation) Facility to combine different DVB Post production of e.g. TV programs or films. non-contiguous data containers (SDH/SONET contain- (Digital Video Broadcast) Standard for transmission of ers). digital video over various kinds of media. PROTOCOL An agreed set of rules as to how different network VIDEO-ON-DEMAND DVB-H equipment should communicate with each other. Enables digital delivery of films over a broadband (Digital Video Broadcast – Handheld). A standard for network. The ”video store” on the network means digital terrestrial TV to mobile receivers, such as a cell PVR that there is always a copy available even of the most phone or other mobile unit with a screen. (Personal Video Recorder). Network-based video popular movie that can be ordered at any time. recorder. DVB-T VPN (Digital Video Broadcast – Terrestrial). Name of the stan- QoS (Virtual Private Network) Technology for setting up a dard for digital terrestrial TV to ordinary TV receivers (Quality of Service). Name for the quality of service secure private network within the public network by equipped with ”set-top boxes”. Also called DTT. (that can be provided by a network). Video and speech using Internet infrastructure. require a higher QoS. QoS is achieved in a network ETHERNET either by separating traffic so that interference cannot SWITCH The most common technology for communication in lo- occur or by prioritization where the highest priority is Used to direct information between different network cal area networks, LAN. Transmission speeds of 10/100 sent first. Video and voice require higher QoS. links and users. Mbps, 1 Gbps and 10 Gbps. REAL-TIME GIGABIT ETHERNET Immediate transmission of material without delay. Financial information 2009 Development of the Ethernet primarily used in large LAN Annual General Meeting: April 28 and backbone networks. Can handle transmission speeds Router Interim Report January–March: May 13 of up to 1,000 Mbps. A unit to guide and forward data packets, for example, in the Internet. Interim Report January–June: August 28 GRANULARITY Interim Report January–September: October 22 Resolution. Routing Net Insight’s financial information is available in Guiding and forwarding data packets through a com- both Swedish and English. The reports are most HD puter network. conveniently available on the Net Insight web (High Definition). High resolution. site www.netinsight.net. Reports can also be SDH/SONET ordered by e-mail: [email protected], or by HDTV Circuit-switched technology for communication in opti- (High Definition TV). High resolution TV. cal backbone networks. SDH is the European standard telephone +46 (0)8 – 685 04 00. and Sonet is the American standard. INTEROPERABILITY Two devices operating together.

Net Insight annual report 2008 51 P roduction: Net Insight in cooperation with P ublicera Information A B, www.publicera.se P hoto: Mike P owell/ G etty Images, Walter Bibikow/G etty Images, S teven P uetzer/ G etty Images, Image S ource/ J ohnér Bildbyrå, Most P hotos, E rik S vensson, Malcolm H anes, P rinter: A lfa P rint A B

Net Insight AB Head office in Stockholm Company registered in Sweden Box 420 93 SE-126 14 Stockholm, Sweden Telephone: +46 8 – 685 04 00, Fax: + 46 8 – 685 04 20 [email protected] www.netinsight.net