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ANNUALREPORT2007AboutF-SecureCorporation3CEO'sletter20074BoardofDirectors'Report20076FinancialInformation10F-SecureConsolidatedIncomestatement11Balancesheet12Cashflowstatement13Statementofchangesinshareholders'equity14Notestothefinancialstatements14F-SecureCorporationIncomestatement32Balancesheet32Cashflowstatement33Notestothefinancialstatements33Auditors'report42CorporateGovernance43BoardofDirectors45ExecutiveTeam46Contactinformation47Index0100200300400500600AdministrationResearchandDevelopmentSalesandMarketing2007200620052004200302,0004,0006,0008,00010,00012,000ISPRevenues2001–2007Q4/07Q3/07Q2/07Q1/07Q4/06Q3/06Q2/06Q1/06Q4/05Q3/05Q2/05Q1/05Q4/04Q3/04Q2/04Q1/04Q4/03Q3/03Q2/03Q1/03Q4/02Q3/02Q2/02Q1/02Q4/01Q3/01Q2/01Q1/010204060801001200102030405060RevenuesOperatingProfit20072006200520042003051015202530OperatingProfitRevenuesQ4Q3Q2Q1AboutF-SecureCorporationF-SecureCorporationprotectsconsumersandbusinessesagainstcomputervirusesandotherthreatsfromtheInternetandmobilenetworks.
Wewanttobethemostreliableproviderofsecurityservicesinthemarket.
Onewaytodemonstratethisisthespeedofourresponse.
F-Secure'saward-winningsolutionsareavailableasaservicesubscriptionthroughmorethan160Internetserviceprovidersandmobileoperatorpartnersaroundtheworld,makingF-Securethegloballeaderinthismarket.
Thesolutionsarealsoavailableaslicensedproductsthroughthousandsofresellersglobally.
F-Secureaspirestobethemostreliablesecurityprovider,helpingmakecomputerandsmartphoneusers'networkedlivessafeandeasy.
Thisissubstantiatedbythecompany'sindependentlyprovenabilitytorespondfastertonewthreatsthanitsmaincompetitors.
Foundedin1988andheadquarteredinFinland,F-SecurehasbeenlistedontheOMXNordicExchangeHelsinkisince1999.
Thecompanyhasconsistentlybeenoneofthefastestgrowingpubliclylistedcompaniesintheindustry.
Thelatestnewsonreal-timevirusthreatscenariosisavailableattheF-SecureDataSecurityLabweblogathttp://www.
f-secure.
com/weblog/.
RevenuesandOperatingProfit2007(m)RevenuesandOperatingProfit2003-2007(m)ISPRevenues(k)Personnel2003-2007DearF-Securecustomers,shareholders,partnersandemployees,IwouldliketoexpressmysincerethanksfortheexcitingyearwiththeF-Securecommunityallaroundtheworld!
WhatusedtobeInformationTechnologyisincreasinglybecomingInteractionTechnology,andthusourmodernlivesareincreasinglyconnected.
Weareconnectedtootherpeoplearoundtheplanet,weareconnectedtovariousservices,andweconnectthroughmanydifferenttypesofdigitaldevices.
LifehasbecomeConnected.
During2007approximately166millionmorepeopleworldwidejoinedthe1.
1billionofusalreadyenjoyingtheopportunitiesofConnectedLifeontheInternet.
AndwhatisveryencouragingforF-SecureistheincreasingamountofthesenewInternetcitizensthatprotecttheirexperiencebyusingSecurityasaServicefromtheF-Securepartnercommunity!
AstheroleofInformationandCommunicationTechnology(ICT)continuestobecomemorecentralinlifeandbusiness,theimportanceofourworkasthesecurityexpertsandasatrustedpartnerforServiceProvidersgloballywillcontinuetoincrease.
ThisalsoimpliesanincreasingsocialresponsibilityofenablingsafeandeasyInternetexperiences,andforsafeguardingcontinuityintermsofserviceaccessandconnectedness.
ItisaninspiringroleforF-SecureFellowstobeservingon-lineInternetusersgloballyasweenablemillionsofcustomerstoexperiencetheInternetinatrustedmanner.
AsConnectedLifebecomesarealityformorepeople(someestimatethat5billionpeoplewillbeconnectedby2015,primarilythroughsmartphones!
)wecanalsoforeseethatthecombinationofinformationtechnology,valueaddedservices,andInternetsecurityservicescontinuetoofferexcitingserviceopportunitiesforourpartnersandourselves.
Thisopportunitytojointlyinnovatenewservicesandtohaveanincreasinglyrelevantroleinservingsocietystronglymotivatesustostrivefornewheightsasaworkplaceandasacompany.
On-linewellbeingspursgrowthofon-lineservicesAsourlivesbecomeconnectedthroughICTtheprotectionofourdigitaldevicesandthequalityoftheserviceexperiencebecomeaspectsofourwellbeing.
Thisiswhatwecallon-linewellbeing,anditistheapproachthatF-Securehasadoptedforplanningitsfuture.
Increasingthelevelofon-linewellbeingforInternetuserswillbeaneffectivewaytoencouragehigheradoptionratesfornewvalueaddedservices.
Availabilityofon-lineservicesisnothingnewtotheglobalInternetcommunity.
Whatischangingistheinnovationofnewtailoredservicesforspecificcustomersegments.
WiththenaturalevolutionofInternetrelatedservices,theindustryisrecognizingthattherequirementsforagreaton-lineexperiencedifferbetweenuniquecustomersegments.
Bynature,astheInternetoffersanexpandedsetofopportunities,wewillseeaclearsegmentationofneedsbetweentechnicallyadvancedusersononehand,andontheotherhandthebulkofInternetuserswhereeaseofuseandsupportisvaluedthemost.
CEO'sletter2007Aclearerfocusonuniquecustomersegmentbasedneedsalsosupportstheobjectiveofmassadoptionofnewtechnologiesandservices.
Initiallyweexperienceanarrowmarketpenetrationofnewtechnologieswhilethemassmarketwaitsforthe"hasslefree"experienceandtheavailabilityofmorepersonalizedservices.
ThisisthestagewearecurrentlyatwithintheInternetrelatedservicesindustry.
AntivirusandInternetsecurityproductswereinitiallydeployedbythetechnicallyadvancedusers,whilethenon-technicalusersmayhavehadaproductontheirPCswhichthesecurityupdateswere30daysold–andthusofferingnorealprotection.
TodaythemostpopularwayofstayingprotectedistosubscribetoasecurityservicefromtheInternetServiceProvider,whoalreadyhastheinterestandtoolstosupporttheircustomersinachievingon-linewellbeing.
Inthefuturewecanexpecttoseeanexpandedsetofservicestoaugmentthetotaluserexperience,thusenablingpeopletodomorewiththeirConnectedLives.
Asinnovationmakesnewservicesavailable,andasnewtypesofdigitaldevicesproliferate,therewillbeanaturaldemandforservicesthatenableatrustedandeasyexperience.
ThisistheareawhereyouwillseeF-Securecontinuetoplayanactiveroleasweinnovatenewtools,technologiesandrelatedserviceswithourServiceProviderpartners,withoneultimategoalinmind–agreatcustomerexperiencefortheglobalon-linecommunity.
ToachievewellbeinginourConnectedLiveswewillhaveacontinuingneedforuptodateprotectionagainstthelatestInternetthreats–whetherweaccessitthroughfixedormobilenetworks.
Internetthreats:astormbeneaththecalmsurfaceThemotivationforInternetcriminalitytodayismoney,notpublicity.
Theseillegalactivitiesusetechniquesliketrojansandbotsoftwaretodistributespamandphishingattacks,butarequitesuccessfulinstayinginvisibletotheinfectedusers.
Theinvisibilityoftheattackshasmadethetopicrelativelyuninterestingforthemedia,andconsequentlythepublicperceptionisthatthemalwarefrontisfairlyquiettoday.
Thisisfarfromthetruth.
During2007alonetheamountofmalwaredoubledandreachedthelevelofhalfamillionattheendoftheyear.
Thisillustrateshowthecriminalshavebeenabletorampuptheirinnovativecapacity,andhaveproducedasmuchmalwareinoneyearaswasproducedovertheprevious20yearsintotal.
Onewidelyvisibleattackduring2007wasthe"StormWorm"—Stormbeingtheumbrellanameforacollectionofbackdoortrojansande-mailworms.
Theyusedsensationalizedversionsofrealnewsheadlinesasatemplate,andthisprovedtobeaverycleverbitofsocialengineering.
StorminitiallypenetratedmillionsofPCsaroundtheworld,accumulatingmassivecomputerpowerandgainingsignificantmediaattention.
FromatechnicalperspectivethisattackisanotherexampleoftheinnovationcapabilitiesofInternetcriminals.
Itwasthefirsttotallydistributedbotnetwithnocentralizedcontrolpoints,makingitverydifficulttotakedown.
Thisbotnetalsohadthecapabilitytoactivelydefenditselfagainstvirusresearchersthroughlaunchingadistributeddenialofserviceattackagainstinvestigators'computers.
Thethreatlevelformobilephonesremainedlowduring2007.
Onenewphenomenonwastheincreasingavailabilityofspyingsoftware.
Whilethedesign,salesandpurchaseofsuchsoftwareisquitelegalperse,itisverydifficulttofindanylegaluseofsuchsoftware.
Thetypicalusesoftheseproductsincludethesurveillanceofindividuals'spouseswithfeatureslikeremotelisteningofthephoneandremotedownloadingofmessagesandcontactlists.
Movingforward,newSecurityasaServicerelatedinnovationsandtechnologiescontinuetobehighontheagendaforsecuritycompanies.
ThisistheonlywaytoprotectInternetusersfromthedangersoftheon-lineworld.
Servingcustomersgloballywith166ServiceProviderPartnersThethreatscenarioisbecomingmorecomplexandconsequentlyitisgettingharderforbothconsumersandsmallormediumsizedbusinessestomaintainthenecessaryexpertiseandupdatedtechnologythataneffectiveprotectionlevelrequires.
AgoodwaytoaddressthisproblemistoacquiresecurityasaservicefromaServiceProvider.
Duringthepastyearwehavebeenfortunatetoexpandto166ServiceProvider(SP)partnerships,withatotalpotentialofmorethan50millionbroadbandcustomerstoserve.
Withsuchalargeaddressablemarketwecanalsoseeastrongdemandfornewservicesandthusgreatopportunitiestoinnovatesuchservices,creatingnewandinterestingbusinessopportunitiesforourcombinedecosystem.
Withthenewaccessmethods(e.
g.
Wi-Fi)andaconstantlyincreasingmultitudeofdigitaldevicesthesimplicityoftheuserexperienceandthereliabilityofsupportwillbecomeevermoreimportant.
WeshareacommoninterestwithourSPpartnersforserviceinnovation,revenueincrease,andchurnreduction,andovertimewewillseeanunparalleledportfolioofservicesofferedtosimplifytheInternetexperienceforbothconsumersandbusinesscustomers.
ThisistheworldwhereF-Secureisatitsbest.
WehavebeenthepioneerinSecurityasaService–beingoneoftheveryfirstcompaniestoprovethebusinesslogicofdeliveringhighqualityandscalablesoftwareservicesovertheInternet.
TheSecurityasaServiceconceptwilllikelyexpandtoothersoftwareandserviceareasinthefuture.
Thebeststartingpointforexpansionistoutilizethesignificantexperienceandknowledgewealreadyhave,listentoourcustomersandpartners–andbeveryopenforfutureinnovation.
F-Securecelebratesits20thAnniversaryin2008!
Ourcompanywasfoundedin1988andwewillcelebrateour20yearanniversaryinMaythisyear.
Duringthese20yearswehavegrownfromacompanyservicingx86PCstotheapproximately100mcompanywearetoday,withglobalpresenceandauniquerecognizedcompetencyprofile.
Weseeourfuturebusinesslandscapeasmoredynamicthanever.
Withthis20yearhistoryweareproudtocontinueourpassionatepursuitofcustomersatisfactionandbusinessexpansion.
FortheF-SecureFellows,wecontinuetofosterourcorevalueofRELIABILITYatthecenterofourvalueset.
Withthisvaluecommitment,andencouragedbyourachievementssofar,wealsoexpecttofurthersetthestandardsforhighquality,reliablesoftwareservicesandanunparalleledfocusoncustomersatisfaction.
On-linewellbeingwithpassionWeallcananticipaterapidinnovationintheglobalmarket–anditisalsouptoustotakeadvantageoftheseopportunities.
Today,ourglobalreachisgreaterthanever,sowehaveenteredtheyear2008withhealthyandhighambitionstobeattheforefrontofnewserviceinnovation.
Withourpassionforinnovationandgrowthweareexpectingaveryinspiringandexcitingfuture!
Sincerely,KimmoAlkioBoardofDirectors'Report2007BusinessattheGroupLevelForthefullyear2007totalrevenueswere96.
8m(80.
7m),representing20%growth.
EBITwas19.
5m(8.
9mincludingthe4.
8mwrite-offoftheNetworkControlproduct)and20%ofrevenues,representing120%growth.
Cashflowwas17.
6mpositive(5.
4mpositive).
Deferredrevenueswere31.
9mattheendoftheyear(27.
6mattheendof2006).
TheAnnualrevenueswereinlinewiththegivenguidanceatthebeginningof2007(guidance95m±10%).
Theprofitabilitywasbetterthanguidedatthebeginningof2007(guidance14-18%ofrevenues).
TheTotalcostswere70.
6m(65.
2mincludingthe4.
8mwrite-offofNetworkControlproduct),representing8%growth.
TheGroupcapitalizessomeofitsdevelopmentexpensesaccordingtotheaccountingrules.
Thishadnomaterialimpactonthecostlevel.
Thegeographicalbreakdownofthebusinesswasasfollows:NordicCountries39%(37%),RestofEurope43%(44%),NorthAmerica9%(10%)andRestoftheWorld9%(9%).
Anti-virusandintrusionpreventionrepresented99%ofthetotalrevenues.
BusinessinISPSegmentStrongdevelopmentintheGroup'skeystrategicsegment,theServiceProviderbusiness,continued.
TheAnnualrevenuesthroughtheInternetServiceProvider(ISP)partnerswere35.
9m(26.
0m),representing37%ofthetotalrevenues(32%)andagrowthof38%fromthepreviousyear.
Atotalof30newISPpartnershipsweresignedduringtheyear.
ThetotalnumberofISPpartnerswas166,operatingin36countriesattheendof2007.
ThetotalnumberoftheGroup'sISPpartnersissignificantlylargerthanthoseofanyothersecurityservicevendor.
Attheendof2007theGroup'sISPpartnersheldapproximately37%(34%)marketshareoftotalhigh-speedconsumerconnectionsinEurope,approximately10%(10%)inNorthAmericaandapproximately9%(n/a%)inAPAC(Source:DataxisandF-Secure).
BusinessthroughOtherChannelsTheRevenuesthroughtraditionalsaleschannels,includingValueAddedResellers,ITServiceProviders,ManagedSecurityServiceProviders,e-StoreandRetailchannelswere60.
8m(54.
7m)representing63%oftotalrevenues(68%)andagrowthof11%fromthepreviousyear.
MobileSecurityMobilesecurityrevenueswereatthelevelofapproximately2%oftheGroup'stotalannualrevenues.
Mobilerevenuesareincludedintheabove-mentionedchannelrevenuesandthepercentagefigureisshownasanindicatoronly.
F-Securestartedalong-termco-operationwithSonyEricssonattheendoftheyear.
Theco-operationisseenasanimportantelementinenablingfuturemobilerevenuestreams.
Closeco-operationwithNokiaandSonyEricssontogetherwiththecurrentoperatorpartnerships,suchasOrangeUK,OrangeSwitzerland,T-MobileGermany,T-MobileUK,Swisscom,TeliaSoneraandElisa,istheprimevehicletomakemobilesecurityapplicationsavailabletoalargenumberofendusers.
Co-operationinitiativeswithothermajormobileoperatorsarealsoprogressingwell.
F-Secure'sco-operationwithNokiacontinuedstrong.
F-SecureMobileAnti-ViruscontinuestobeavailableforthemajorityofthecurrentlyshippingorupcomingNokiaS603rdeditiondevices,Nseries&Eseries.
Products&Services,ResearchandDevelopmentDuringtheyearF-Securecontinuedtointroducenewsolutionsandversionstobothbusinessandconsumercustomersegments.
Keyannouncementswerethesecurityasaserviceconcepttobusinesscustomers(ProtectionServiceforBusinesses3.
0/3.
1),anditscounterparttoconsumers(F-SecureProtectionServiceforConsumers).
F-SecureHealthChecktoServiceProviderswaspre-releasedattheendoftheyearandthepubliclaunchtookplaceinJanuary2008.
F-SecureClientSecurity(forbusinesses)andF-SecureInternetSecurity2008(forconsumers)werekeylaunchestobesoldthroughtraditionalchannels.
F-Securecontinueditssolidco-operationwithMicrosoft.
TheGroupwasannouncedasthefirstsecuritypartnerforMicrosoft'sWindowsHomeServerplatform.
EarlierintheyearF-SecureInternetSecurity20072ndEditionaddedsupportfortheMicrosoftVistaoperatingsystemforconsumercustomers.
AnotherimportantannouncementwasF-SecureMobileAnti-Virus4.
0forWindowsMobile.
CompetitiveSituationTherewerenosignificantchangesinthecompetitivelandscapeduringtheyear.
Pricinglevelshaveremainedrelativelystable.
However,therehavebeenoccasionalsignsofincreasingpricecompetitioninsomecountries.
Microsoft'sentryintothecontentsecuritymarketdidnotrepresentanymajorcompetitivepressuresduringtheyear.
CustomerSatisfactionF-Securereneweditsannualcustomersatisfactionsurveyattheendoftheyear.
Thesurveywasupdatedtocovercustomerandproductsatisfactioninmoredetailandwasextendedtonewareassuchasuserexperience.
ThenewsurveyandmethodologyprovideF-Securewithmoreaccurateanddetailedinformationinthefollowingareas:customerdemography,overallsatisfaction,purchasingexperience,supportservices,F-Secureweb,detailedproductsatisfaction,anduserexperience.
Theoverallsatisfactionreachedacommendable4.
1onascalefrom1to5.
FinancingTheGroup'sfinancialpositionremainedstrong.
TheGroup'sequityratioonDecember31,2007,was82%(80%).
Financialincomefor2007was1.
9m(1.
5m).
During2007cashflowwas17.
6mpositiveafterpaiddividendof3.
1m(5.
4mpositiveafterpaiddividendof10.
8m).
ThemarketvalueoftheliquidassetsoftheGrouponDecember31,2007was84.
1m(66.
7m).
ThechangeintheUSD-EURexchangeratehashadaslightlynegativeeffectonrevenuesandresults.
CapitalExpendituresTheGroup'scapitalexpendituresduring2007were2.
2m(3.
7m).
TheseconsistedmainlyofIThardware,softwareandcapitalizationofdevelopmentexpenses.
Shares,Shareholders'Equity,andOptionProgramsF-Securehasoneclassofshares,eachshareentitledtoonevote.
TheCompanydoesnotownanyofitsownshares.
Duringtheyear,atotalof74,620F-SecuresharesweresubscribedforwiththeA1/A2warrantsandatotalof44,200F-SecuresharesweresubscribedforwiththeB1/B2/B3warrants,andatotalof1,050F-SecuresharesweresubscribedforwiththeC1/C2/C3warrantsattachedtotheF-Secure2002WarrantPlan.
Inaggregatethenumberofshareswasincreasedby119,870becauseoftheabove-mentionedsubscriptions.
Thecorrespondingincreaseinthesharecapital,intotalEUR1198.
70,hasbeenregisteredintheFinnishTradeRegister.
F-Securereceivedasadditionalshareholders'equityatotalofEUR86,197.
00.
OnOctober31,the2002C3-warrantsofF-SecureCorporationwereconsolidatedinto2002C1/C2-warrants.
FollowingthatthenameofthewarrantsisF-SecureCorporation2002C1/C2/C3warrantsandtheirISIN-codeisF10009610190.
F-SecureCorporation'ssharepremiumwasdecreasedduringthethirdquarterinaccordancewiththeAnnualGeneralMeeting'sdecisionandtheamount(FAS36,000,000;IFRS33,582,113)wastransferredtothecompany'sdistributableequity.
Afterthereportingperiodatotalof68,880F-SecuresharesweresubscribedforwiththeA1/A2warrantsandatotalof5,900F-SecuresharesweresubscribedforwiththeB1/B2/B3warrantsattachedtotheF-Secure2002WarrantPlan.
Inaggregatethenumberofshareswasincreasedby74,780.
Thecorrespondingincreaseinthesharecapital,intotalEUR747.
80wasregisteredintheFinnishTradeRegisteronJanuary7,2008.
F-Securereceivedasadditionalshareholders'equityatotalofEUR46,638.
00.
ThesharecapitalofF-SecurecurrentlyisEUR1,551,311.
18andthetotalnumberofsharesis155,131,118.
Thecorrespondingnumberofsharesfullydilutedwouldbe161,464,443includingallstockoptionprograms.
CapitalManagementTheobjectiveoftheGroup'scapitalmanagementistoaimatanefficientcapitalstructurethatensuresthefunctioningofbusinessoperationsandpromotestheincreaseofshareholdervalue.
TheGrouphasagoaltoimproveitscurrentcapitalstructure.
ThereviewoftheGroup'scapitalstructurebelongstothestandardfollow-upindicatorsoftheGroup'sfinancialperformance.
ThedecisionoftheAnnualGeneralMeetingonMarch20,2007,todecreasethesharepremiumandtransferthedecreasedamounttodistributableequityenablesvariousactionstobetakentoboosttheefficiencyoftheequityand/ortoreturntheequitytoshareholders.
ThedividendpolicyofF-SecureCorporationistopayapproximatelyhalfofitsannualprofitasdividend.
Subjecttocircumstances,thecompanymaydeviatefromthispolicy.
PersonnelandManagementTheGroup'spersonnelnumbered566attheendoftheyear,average528(479attheendof2006,average439).
TheGroup'sExecutiveTeamconsistedofthefollowingpersons:Mr.
AriAlakiuttu(VicePresident,ProductsandServices),Mr.
KimmoAlkio(PresidentandCEO),Ms.
EilaMustala(VicePresident,HumanResources),Mr.
TrondNeergaard(VicePresident,Marketing),Mr.
PirkkaPalomki(SeniorVicePresident,ResearchandDevelopment),Mr.
AnttiReijonen,(VicePresident,Strategy),Mr.
TaneliVirtanen(ChiefFinancialOfficer)andMr.
TravisWitteveen(SeniorVicePresident,SalesandGeographyOperations).
TheGrouphasre-organizeditsoperationsatthebeginningoftheyear2008andadjustedtheline-upofitsExecutiveTeamaccordingly.
ThecurrentExecutiveTeamconsistsofthefollowingpersons:Mr.
AriAlakiuttu(VicePresident,HumanResources),Mr.
KimmoAlkio(PresidentandCEO),Mr.
TrondNeergaard(VicePresident,ISPBusiness),Mr.
PirkkaPalomki,(ChiefTechnologyOfficer),Mr.
AnttiReijonen,(VicePresident,Strategy),Mr.
TaneliVirtanen(ChiefFinancialOfficer)andMr.
TravisWitteveen(SeniorVicePresident,SalesandGeographyOperations).
CorporateGovernanceF-SecurecomplieswiththeCorporateGovernancerecommendationsforpubliclistedcompaniespublishedinDecember2003byOMXNordicExchangeHelsinki,theCentralChamberofCommerceofFinlandandtheConfederationofFinnishIndustryandEmployersasdescribedontheGroup'swebpages.
TheAnnualGeneralMeeting(AGM)ofF-SecureCorporationwasheldonMarch20,2007.
TheMeetingconfirmedthefinancialstatementsforthefiscalyear2006.
ThemembersandthedeputymemberoftheBoardofDirectorsandthemanagingdirectorweregrantedadischargefromliability.
OtherAGMdecisionswereasfollows:ItwasdecidedtodistributeadividendofEUR0.
02pershare.
ThedividendwaspaidonMarch30,2007.
ItwasdecidedthatannualcompensationforthememberisEUR20,000and10,000stockoptions(2005C-series),forthevicechairmanEUR30,000and15,000(2005C-series)shareoptionsandforthechairmanEUR40,000and20,000(2005C-series)shareoptions.
MembersoftheboardthatareemployedbytheGroup,willnotbecompensated.
Inaddition,itwasdecidedthatannualcompensationforvicechairmanshareoptionsfor2006isEUR30,000and15,000(2005B-series).
ItwasdecidedthatthenumberofBoardmemberswouldbesix.
Thefollowingmemberswereelected:Mr.
MarkoAhtisaari,Mrs.
SariBaldauf,Mr.
PerttiErvi,Mr.
AriHyppnen,Mr.
RistoSiilasmaa,andMr.
AlexisSozonoff.
TheBoardelectedinthefirstmeetingMr.
RistoSiilasmaaasChairmanoftheBoardandMr.
PerttiErviasViceChairman.
Itwasdecidedtopayauditor'sfeesagainstapprovedinvoices.
Ernst&YoungOywaselectedtheGroup'sauditors.
APA,Mr.
ErkkaTalvinkoisactingasresponsiblepartner.
TheBoardwasauthorizedtodecideondirectedshareissuesandtheirterms.
Theauthorizationisvalidfortheperiodofoneyear.
Themaximumcumulativenumberofissuednewsharesis40,000,000.
Theauthorizationhasremainedunused.
TheBoard'sproposaltodecreasethecompanysharepremiumbyEUR36millionbytransferringthedecreasedamounttothecompany'sdistributableequitywasapproved.
AGMapprovedtheamendmentoftheArticlesofAssociationasproposedbytheBoard.
Afterthereportingperiod,inearly2008,theBoarddecidedtoestablishanAuditCommitteeandanExecutiveCommittee(nominationandremunerationtopics).
IthasnominatedMr.
PerttiErvitochairtheAuditCommitteeandMs.
SariBaldauftochairtheExecutiveCommittee.
RisksandUncertaintiesintheNearFutureTheGrouphasnotseenanymaterialchangestotherisksanduncertaintiesduringtheyear,anditdoesnotforeseeanysuchchangesinthenearfuture.
ThemostimportantstrategicrisksanduncertaintiesoftheGrouparerelatedto,amongotherthings,thecompetitivenessoftheGroup'sproductportfolio,competitivedynamicsinthecontentsecurityindustry,theimpactofchangesintechnology,andtheoveralldevelopmentofvalueaddedsecuritysolutionsintheServiceProviderandmobileoperatormarket.
Inaddition,theGroupfacesmanyoperationalrisksanduncertaintiesrelatedto,amongotherthings,theabilitytorecruitandretainkeyindividualswiththerightskillsettoguaranteethetimelyandsuccessfulcommercializationofcomplextechnologiesasnewproductsandsolutions,thesustainabilityofpartnerrelationships,theabilitytofollowupwiththeservicequalitylevelrequirements,theabilitytoprotectintellectualproperty(IPR)intheGroup'ssolutions,theuseofthirdpartytechnologiesonreasonablecommercialterms,andthesustainabilityofsubcontractingrelationships.
DisputesInDecember2006,DiagnosticsSystemsCorporationfiledapatentinfringementlawsuitagainstF-Secure,Inc.
andsixotherco-defendantsintheStateofCalifornia.
Atrialhasbeenre-scheduledforMarch2009.
TheGroupbelievesthattheseclaimshavenomeritanddoesnotexpectanymaterialimpactonitsfinancials.
ThedisputeprocesswithSRVViitosetOyremainsopen.
F-SecurehasappealedtochangetheverdictsentencedbytheHelsinkiDistrictCourtinSeptember2005.
F-Secureisaccruingthecostsofapossiblenegativeoutcomeovertheperiodoftheleasecontract.
EventsaftertheReportingPeriodTherewerenosignificantbusinessrelatedeventsafterthereportingperiod.
StrategyOutlineandFutureOutlookTheGroup'sfirstpriorityistodrivestronggrowth.
ThecoregrowthelementcontinuestobetheISPchannel.
TheGroupcontinuestoinvestinnewsalesandmarketingactivitiestobuildscalabilityforfuturegrowthespeciallyforserviceprovidersandinthemobilesegment.
TheGroupcontinuestopursueinnovationsinsecurity-relatedtechnologies,aswellasinnewservicesrelatedtotheonlinewellbeingofInternetusers.
Managementexpectsfullyear2008revenuestobebetween110and120millionandfullyearEBITbetween19and23%ofrevenues.
Inthe2-4-yearhorizontheGroupaimstocontinuetoexceedtheaveragemarketgrowthratesinrevenuesandseeksanEBITlevelaround25%.
TheQuarter-over-quartergrowthrateintheISPbusinessisexpectedtoremainstrong,around10%asaquarterlyaveragein2008.
However,inthefirstquarterof2008thegrowthrateisexpectedtobebelowtheplannedquarterlyaverageoftheyear.
Inthemobilesecuritybusinessrevenuesareexpectedtogrowsteadily.
However,itisexpectedtoremainasmallpartoftheGroup'srevenuesduring2008.
TheFirstquarter2008revenuesareestimatedtobebetween26mand28m.
Fixedcostsareestimatednottoexceed20minQ1.
Therevenueestimatesarebasedonthesalespipelineatthetimeofpublishing,existingsubscriptionsandsupportcontractsandaEUR/USDexchangerateof1.
45.
DividendProposalThedistributableshareholder'sequityofF-SecureCorporationistotally64m.
TheBoardproposestotheAnnualGeneralMeetingthatadividendofEUR0.
07persharetobepaid,approximately10.
9moverthetotalnumberofshares.
TherehavebeennomaterialchangesinthefinancialsituationofF-SecureCorporationaftertheclosingof2007.
TheCompany'ssolvencyisgoodandtheproposeddividendwillnotjeopardiseit.
February13,2008F-SecureCorporationBoardofDirectorsRistoSiilasmaaPerttiErviMarkoAhtisaariSariBaldaufAriHyppnenAlexisSozonoffINDEXF-SecureConsolidatedIncomestatement11Balancesheet12Cashflowstatement13Statementofchangesinshareholders'equity14Notestothefinancialstatements14F-SecureCorporationIncomestatement32Balancesheet32Cashflowstatement33Notestothefinancialstatements33Auditors'report42CalculationofkeyratiosEquityratio,%Shareholders'equity+minorityinterestBalancetotal-receivedadvancepaymentsROI,%Resultbeforetaxes+financialexpensesBalancetotal-non-interestbearingliabilities(average)ROE,%Resultbeforetaxes-taxesShareholders'equity+minorityitems(average)Gearing,%Interestbearingliabilities-cashandbankaccounts,liquidfinancialassetsShareholders'equity+minorityitemsEarningspershare,euroResultbeforetaxes-taxes+/-minorityinterestAdjustednumberofshares(average)Shareholders'equitypershare,euroShareholders'equityAdjustednumberofshares,Dec31P/EratioSharepriceclosing,Dec31EarningspershareDividendperearnings,%DividendpershareEarningspershareEffectivedividends,%DividendpershareSharepriceclosing,Dec31FinancialInformation11F-SecureConsolidatedINCOMESTATEMENT(EUR1000)INCOMESTATEMENTJan1-Dec31,2007ConsolidatedConsolidatedIFRSIFRS20072006Netsales(1)9676180695Materialandservice-7547-7274Grossmargin8921473421Otheroperatingincome(2)808622Salesandmarketing(3,4)-43168-38648Researchanddevelopment(3,4)-21213-22477Administration(3,4)-6169-4056Operatingresult194738862Financialincomeandexpenses(5)18861486Shareofprofitofassociate(9)2021Profitbeforetaxes2137910369Incometaxes(6)-5934-3051RESULTFORTHEFINANCIALYEAR154457318Earningspershare-basic(7)0,100,05-diluted0,100,0512F-SecureConsolidatedBALANCESHEET(EUR1000)BALANCESHEETDecember31,2007AssetsConsolidatedConsolidatedIFRSIFRS20072006Non-currentassetsTangibleassets(8)37693227Intangibleassets(8)33024499Investmentsinassociatedcompanies(9)4221Deferredtaxassets(11)779796Otherfinancialassets(13)148141Totalnon-currentassets80408684CurrentassetsInventories(12)277181Tradeandotherreceivables(13)2203819371Incometaxreceivables(13)5520Available-for-salefinancialassets(14)7156954663Cashandbankaccounts(15)1270012211Totalcurrentassets10663986446TOTALASSETS11467995130Shareholders'equityandliabilitiesShareholders'equity(16)Sharecapital15511549Unregisteredshareissues4769Sharepremium12333619Fairvaluereserve40-51Translationdifferences-332Reserveforinvestedunrestrictedequity33582Retainedearnings3219818953Totalshareholders'equity6753854171Non-currentliabilitiesDeferredtaxliabilities(11)96109Provisions(18)12861187Othernon-currentliabilities(19)48474419Totalnon-currentliabilities62295716Currentliabilities(19)Tradeandotherpayables1243211783Incometaxliabilities1406306Othercurrentliabilities2707523155Totalcurrentliabilities4091235243TOTALSHAREHOLDERS'11467995130EQUITYANDLIABILITIES13(EUR1000)CASHFLOWSTATEMENTDecember31,2007ConsolidatedConsolidatedIFRSIFRS20072006CashflowfromoperationsResultforthefinancialyear154457318Adjustments1211814082Cashflowfromoperationsbeforechangeinworkingcapital2756321399ChangeinnetworkingcapitalCurrentreceivables,increase(-),decrease(+)-2572-3677Inventories,increase(-),decrease(+)-100-106Non-interestbearingdebt,increase(+),decrease(-)769648Provisions,increase(+),decrease(-)9874Cashflowfromoperationsbeforefinancialitemsandtaxes2575818338Interestexpensespaid-3-6Interestincomereceived772624Otherfinancialincomeandexpenses10301010Incometaxespaid-4890-468Cashflowfromoperations2266719498CashflowfrominvestmentsInvestmentsinintangibleandtangibleassets-2078-3454Cashflowfrominvestments-2078-3454CashflowfromfinancingactivitiesIncreaseinsharecapital64188Dividendspaid-3101-10834Cashflowfromfinancingactivities-3036-10646Changeincash175535397Translationdifference-282-137Cashandbankatthebeginningoftheperiod6673061844Cashandbankatperiodend8400167104Changeinnetfairvalueofcurrentavailable-for-saleassets123-375Cashandbankatperiodend8412466730F-SecureConsolidatedCASHFLOWSTATEMENT14F-SecureConsolidatedSTATEMENTOFCHANGESINSHAREHOLDERS'EQUITY(EUR1000)STATEMENTOFCHANGESINSHAREHOLDERS'EQUITYDecember31,2007ConsolidatedShareShareShareFairTransl.
UnrestrictedRetainedTotalcapitalissuepremiumvaluediff.
equityearningsequityIFRSfundreservereserveEquityDec31,200515473833459227352182757132Available-for-salefinancialassets,net-277-277Translationdifference-4-4Totalincomeandexpensefortheyearrecogniseddirectlyinequity-277-4-281Resultofthefinancialyear73187318Totalincomeandexpensefortheyear-277-473187037Dividends10834-10834Registrationofshareissue1-3838Exerciseofoptions269121191Costofsharebasedpayments630630Otherchanges1141523115910191-9998EquityDec31,200615496933619-51311895554171Available-for-salefinancialassets,net9191Translationdifference-34-34Totalincomeandexpensefortheyearrecogniseddirectlyinequity91-3457Resultofthefinancialyear1544515445Totalincomeandexpensefortheyear91-341544515502Dividends3101-3101Registrationofshareissue1-6968Exerciseofoptions0471764Costofsharebasedpayments902902Otherchanges-3358133582-11-22-3349633582-2199-2134EquityDec31,200715504712340-3335823220067539F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTSCorporateinformationF-SecureproducesservicesandsoftwareprotectionforindividualsandbusinessesagainstcomputervirusesandotherthreatscomingthroughtheInternetormobilenetworks.
TheparentcompanyoftheGroupisF-SecureCorporationincorporatedinFinlandanddomiciledinHelsinki.
Company'sregistrantaddressisTammasaarenkatu7,00180Helsinki.
AcopyofconsolidatedfinancialstatementcanbereceivedfromInternetaddresswww.
f-secure.
comorparentcompany'sregistrantaddress.
Intheirmeetingon13February2008,theBoardofDirectorsofF-SecureCorporationhaveagreedtopermitthepublicationoftheconsolidatedfinancialstatementsofF-SecureCorporationfortheyear2007.
AccordingtotheFinnishCompaniesAct,theAnnualGeneralMeetingcanconfirmorrejecttheconsolidatedfinancialstatementafterpublication.
TheGeneralAnnualMeetingcanalsodecidetochangethefinancialstatement.
ACCOUNTINGPRINCIPLESBasisforpresentationTheconsolidatedfinancialstatementsofF-SecureCorporationhavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)asadoptedbytheEU.
ThedisclosuresalsoconformtoFinnishAccountinglegislation.
TheGrouphasadoptedthefollowingneworamendedStandardsandInterpretationsduringtheyear.
IFRS7FinancialInstruments:Disclosures.
Thenewdisclosuresareincludedthroughoutthefinancialstatements.
IAS1Amendment:CapitalDisclosures.
Thenewdisclosureisincludedthefinancialstatements.
IFRIC8:ScopeofIFRS2.
AstheGrouphadnosucharrangementmentionedintheinterpretationduringthisperiod15ForeigncurrencytranslationThepresentationcurrencyofF-SecureGroupistheeuro,whichisthemeasurementcurrencyoftheparent.
Forpurposesofinclusionintheconsolidatedfinancialstatements,thebalancesheetofeachforeignentityistranslatedintoeurosattheexchangeratesprevailingatthebalancesheetdate.
Theincomestatementofeachforeignentityistranslatedattheaverageexchangeratesforthefinancialyear.
Theresultingnettranslationdifferenceisrecordedintheshareholders'equity.
TheConsolidatedCashFlowStatementhasbeenpreparedbytranslatingeachsubsidiary'sindividualcashflowstatementsattheaverageexchangeratesforthefinancialyear.
Foreigncurrenciesaretranslatedintothelocalcurrencyusingfixedmonthlyexchangerates.
Atthebalancesheetdate,assetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedattheratesofexchangeprevailingatthatdate.
Exchangerategainsandlossesoffinancialtransactionsarerecognizedintheincomestatementunderfinancialitems.
TangibleandintangibleassetsOthertangibleassetsincluderenovationcostsofrentedofficespace.
Intangibleassetsincludesoftwarelicenses.
Intangibleassetsrecognizedseparatelyfromgoodwillinacquisitionsconsistoftechnology-basedintangibleassets.
Tangibleandintangibleassetsarerecordedathistoricalcostlessaccumulateddepreciation.
Depreciationisrecordedonastraight-linebasisovertheestimatedusefullifeofanasset.
Theestimatedusefullivesoftangibleandintangibleassetsareasfollows:Machineryandequipment3–8yearsOthertangibleassets5–10yearsCapitalizeddevelopmentcosts3yearsIntangibleassets5–10yearsOrdinaryrepairsandmaintenancecostsarechargedtotheincomestatementduringthefinancialperiodinwhichtheyareincurred.
Thecostofmajorrenovationsisincludedintheassets'carryingamountwhenitisprobablethattheGroupwillderivefutureeconomicbenefitsinexcessoftheoriginallyassessedstandardorperformanceoftheexistingasset.
Anygainorlossarisingonderecognitionoftheasset(calculatedasthedifferencebetweenthenetdisposalproceedsandthecarryingamountoftheasset)isincludedintheincomestatementintheyeartheassetisderecognized.
GovernmentgrantsGovernmentgrantsarerecognizedattheirfairvaluewherethereisreasonableassurancethatthegrantwillbereceivedandallattachingconditionswillbecompliedwith.
Whenthegrantrelatestoanexpenseitem,itisrecognizedasincomeovertheperiodnecessarytomatchthegrantonasystematicbasistothecoststhatitisintendedtocompensate.
Thesegrantsarerecognizedasotheroperatingincomeintheincomestatement.
Governmentgrantsrelatedtoanassetaredeductedfromtheacquisitioncostoftheassetandrecognizedasincomebyreducingthedepreciationchargeoftheassettheyrelateto.
orpreviousperiods,theinterpretationhadnoimpactonthefinancialstatement.
IFRIC9:ReassessmentofEmbeddedDerivates.
AstheGrouphadnosucharrangementmentionedintheinterpretationduringthisperiodorpreviousperiods,theinterpretationhadnoimpactonthefinancialstatement.
UseofestimatesThepreparationoffinancialstatementsinaccordancewithIFRSrequirestheuseofestimatesandassumptionsthataffectthereportedamountofassetsandliabilities,thedisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatements,andthereportedamountsofrevenuesandexpensesduringreportingperiods.
Althoughtheseestimatesarebasedonmanagement'sbestknowledgeofcurrenteventsandactions,actualresultsmayultimatelydifferfromthoseestimates.
Thekeyassumptionsconcerningthefutureandotherkeysourcesofestimation,thathaveasignificantriskofcausinganadjustmenttothecarryingamountsofassetsandliabilities,areimpairmentofassetsanddevelopmentexpenditurescarriedforward.
Moredetailsaregivenindisclosure10.
Impairmenttestingofgoodwill.
PrinciplesofconsolidationSubsidiariesinwhichF-SecureCorporation'sholdingexceeds50percentareconsolidatedinthefinancialstatements.
SubsidiariesareconsolidatedfromthedateonwhichcontrolistransferredtotheGroupandceasetobeconsolidatedfromthedateonwhichcontrolistransferredoutoftheGroup.
TheCompany'sholdingintheassociatedcompaniesisalsoconsolidated.
TheGroup'sinvestmentinitsassociateisaccountedforundertheequitymethodofaccounting.
Theincomestatementreflectstheshareoftheresultsofoperationsoftheassociate.
Equityaccountingisdiscontinuedwhenthecarryingamountoftheinvestmentinanassociatedcompanyreacheszero,unlesstheGrouphasincurredorguaranteedobligationsinrespectoftheassociatedcompany.
Allintra-grouptransactionsandbalances,includingunrealizedprofitsarisingfromintra-grouptransactions,havebeeneliminatedonconsolidation.
Wherenecessary,theaccountingpoliciesofsubsidiarieshavebeenadjustedtoensureconsistencywiththepoliciesadoptedbytheGroup.
GoodwillMutualownershipofshareshasbeeneliminatedusingthepurchasemethodofaccounting.
Thecostofanacquisitionismeasuredatthefairvalueoftheassetsgivenup,sharesissuedorliabilitiesundertakenatthedateofacquisitionpluscostsdirectlyattributabletotheacquisition.
Theexcesscostofacquisitionoverthefairvalueofthenetassetsofthesubsidiaryacquiredisrecordedasgoodwill.
Goodwillrepresentstheexcessofpurchasecostoverthefairvalueofassetslessliabilitiesofacquiredcompanies.
Followinginitialrecognition,goodwillismeasuredatcostlessanyaccumulatedimpairmentlosses.
Goodwillisreviewedforimpairment,annuallyormorefrequentlyifeventsorchangesincircumstancesindicatethatthecarryingvaluemaybeimpaired.
16ResearchanddevelopmentcostsResearchcostsareexpensedasincurred.
Developmentexpendituresincurredonindividualprojectsoftotallynewproductsorproductversionswithsignificantnewfeaturesarecarriedforwardwhentheyaretechnicallyfeasibleandtheirfuturerecoverabilitycanreasonablyberegardedasassured.
InventoriesInventoriesarevaluedatthelowerofcostandnetrealizablevaluewithcostbeingdeterminedbyfirst-infirst-outmethod.
Netrealizablevalueistheestimatedsellingpriceintheordinarycourseofbusiness,lessestimatedcostsofcompletionandtheestimatedcostsnecessarytomakethesale.
LeasesLeaseswherethelessorretainssubstantiallyalltherisksandbenefitsofownershipoftheassetareclassifiedasoperatingleases.
TheGrouphasonlyoperatingleases.
Operatingleasepaymentsarerecognizedasanexpenseintheincomestatementonastraight-linebasisovertheleaseterm.
Leasesofunusedofficespacearerecognizedasotheroperatingincomeintheincomestatementonstraight-linebasisovertheleaseterm.
ImpairmentofassetsAteachreportingdate,theGroupassesseswhetherthereisanyindicationthatanassetmaybeimpaired.
Whereanindicatorofimpairmentexists,theGroupmakesaformalestimateofrecoverableamount.
Wherethecarryingamountofanassetexceedsitsrecoverableamounttheassetisconsideredimpairedandwrittendowntoitsrecoverableamount.
Recoverableamountisthehigherofanasset'sorcash-generatingunit'sfairvaluelesscoststosellanditsvalueinuseandisdeterminedforanindividualasset,unlesstheassetdoesnotgeneratecashinflowsthatarelargelyindependentofthosefromotherassetsorgroupsofassets.
Apreviouslyrecognizedimpairmentlossisreversedonlyiftherehasbeenachangeintheestimatesusedtodeterminetheasset'srecoverableamountsincethelastimpairmentlosswasrecognized.
Theincreasedamountcannotexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciation,hadnoimpairmentlossbeenrecognizedfortheassetinprioryears.
ImpairmentlossesrelatingtoGoodwillcannotbereversedinfutureperiods.
PensionsAllofF-SecureGroup'spensionarrangementsareinaccordancewithlocalstatutoryarrangementsanddefinedcontributionplans.
Contributionstodefinedcontributionplansarerecognizedintheincomestatementintheperiodtowhichthecontributionsrelate.
TheGrouprecognizesdisabilitycommitmentofFinnishTYELpensionplanwhendisabilityappears.
Share-basedpaymenttransactionsIntheCompany'sindustryitiscommonpracticeinternationallythatincentivesareprovidedtoemployeesintheformofequity-settledshare-basedinstruments,warrants.
TheCompany'swarrantprogramscoverkeypersonnel.
Thecostofequity-settledtransactionswithemployeesismeasuredbyreferencetothefairvalueatthedateatwhichtheyaregranted.
ThefairvalueisdeterminedbyusingtheBinomialmodel.
Thecostofequity-settledtransactionsisrecognized,togetherwithacorrespondingentryinequity,overtheperiodinwhichtheperformanceconditionsarefulfilled,endingonthedateonwhichtherelevantemployeesbecomefullyentitledtotheaward(vestingdate).
Iftheholderofthewarrantleavescompanybeforevestingthewarrantisforfeited.
Thecumulativeexpenserecognizedforequity-settledtransactionsateachreportingdateuntilthevestingdatereflectstheextenttowhichthevestingperiodhasexpiredandthenumberofawardsthat,intheopinionofthedirectorsoftheGroupatthatdate,basedonthebestavailableestimateofthenumberofequityinstrumentsthat,willultimatelyvest.
TheGrouphastwowarrantprogramsinforce,whichwereissuedbeforethenewCompanyActSeptember1,2006.
Proceedsfromexercisedwarrantsconcerningtheseprogramsarerecognizedinshareholders'equityundersharecapitalandsharepremiumfund.
ProvisionsProvisionsarerecognizedwhentheGrouphasapresentobligation(legalorconstructive)asaresultofapastevent,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimatecanbemadeoftheamountoftheobligation.
AsthemarketpriceoftheCompany'ssharerises,thevalueofthewarrantprogramrisesaccordingly.
Thiswillgeneratetaxableincometothepersonnelwhenthewarrantsarerealized.
Incertaincountriestheemployermustpaysocialchargesbasedonthetaxableincometriggeredbytherealizationofthewarrants.
Theprovisionhasbeenmatchedagainsttherealizedsocialcosts.
Theprovisionismeasuredbasedonthefairvalueoftheoptions,andtheamountofprovisionisadjustedtoreflectthechangeintheshareprice.
ThemarketpriceoftheCompany'sshareasofDecember31,2007was2.
45euro.
InSeptember2005,bythedecisionofHelsinkiDistrictCourt,F-SecurewassentencedtopayadditionalconstructionandrefurbishmentworkdoneattheGroup'sheadquarterpremisesandlitigationcostsplusinteresttoSRVViitosetOy.
F-Secureconsidersthattheworkwasalreadycoveredbytheoriginalrentalagreementandhasappealedtochangetheverdict.
EventhoughthecaseisstillopenF-Securedecidedtorecognizetheobligation.
Constructioncostsareallocatedovertherentalperioduntiltheyear2010startingSeptember2005.
IncometaxesDirectcurrenttaxesarecalculatedontheresultsofallGroupcompaniesinaccordancewiththelocaltaxandaccountingrulesineachcountry.
Deferredtaxes,resultingfromtemporarydifferencesbetweenthefinancialstatementandtheincometaxbasisofassetsandliabilities,usetheenactedtaxratesineffectintheyearsinwhichthedifferencesareexpectedtoreverse.
Deferredtaxassetsarerecognizedtotheextentthatitisprobablethatfuturetaxableprofitwillbeavailable.
RevenuerecognitionRevenueisprimarilyderivedfromsoftwarelicenseagreementsalesandmonthlycontentsecurityservicesales.
Licenseagreementsconsistofinitiallicenseagreementsandperiodicmaintenanceagreementscoveringproductupdatesandcustomersupport.
TherevenuerecognitionpolicyofF-Secure17Grouprecognizesthelicensefeerevenuesastheproductisdelivered,andthemaintenancerevenuesarerecognizedratablyovertheperiodcoveredbythemaintenancecontract,andtheservicerevenueisrecognizedatthetimeofdelivery.
Indirecttaxes,discountsgrantedandexchangeratedifferencesareexcludedfromnetsales.
OtheroperatingincomeOtheroperatingincomeincludesprofitsfromthesalesoffixedassets,rentalrevenue,andgovernmentgrantsreceivedforresearchanddevelopmentprojects.
PresentationofexpensesClassificationofthefunctionallypresentedexpenseshasbeenmadeasfollows:varioustypesofexpensesindifferentgeographicallocationshavebeenallocatedtothevariousfunctionsbyallocatingtodirectlyallocableexpensestotherespectivefunction,andotheroperatingexpenseshavebeenallocatedtofunctionsonthebasisofaverageheadcountineachlocation.
FinancialassetsAccordingtoIAS39standard,financialassetshavebeenclassifiedintofinancialassetsatfairvaluethroughprofitorloss,held-to-maturity,loansandreceivablesoriginatedbytheenterpriseandavailable-for-salefinancialassets.
Theclassificationisdependentonthepurposeforwhichtheassetswereacquired.
Purchasesandsalesoffinancialassetsarerecognizedonthetradedatei.
e.
thedatethattheGroupcommitstopurchasetheasset.
Thecostofpurchaseincludestransactioncosts.
Financialassetsarecurrentlyclassifiedasloansandreceivablesandavailable-for-salefinancialasset.
Loansandreceivablesoriginatedbytheenterprisearemeasuredatamortizedcost.
Tradereceivablesarecarriedattheoriginalinvoiceamounttocustomerslessanestimatemadefordoubtfulreceivables.
Outstandingreceivablesarereviewedperiodicallyandbaddebtsarewrittenoffwhenidentified.
Available-for-salefinancialassetsconsistofinterest-bearingdebtsecuritiesandsharesinmutualfundsinvestedinsimilarinstruments.
Forassetsthatareactivelytradedinorganizedfinancialmarkets,fairvalueisdeterminedbyreferencetoStockExchangequotedmarketbidpricesatthecloseofbusinessonthebalancesheetdate.
Assets,thefairvalueofwhichcannotbemeasuredreliably,arerecognizedatcostlessimpairment.
Thefairvaluechangesofavailable-for-salefinancialassetsarerecognizedinshareholders'equityunderfairvaluereserve.
Whenfinancialassetsrecognizedasavailable-for-salearesold,theaccumulatedfairvaluechangesarereleasedfromequityandrecognizedintheincomestatement.
Cashandcashequivalentsinthebalancesheetcomprisecashatbankandinhandandotherhighlyliquidshort-terminvestments.
Forthepurposeoftheconsolidatedcashflowstatement,cashandcashequivalentsconsistofcashandcashequivalentsasdefinedabove.
DerivativefinancialinstrumentsandhedgingTheGroupusesderivativefinancialinstrumentssuchasforwardcurrencycontractstohedgeitsrisksassociatedwithforeigncurrencyfluctuations.
Suchderivativefinancialinstrumentsareinitiallyrecognizedatfairvalueonthedateonwhichaderivativecontractisenteredintoandaresubsequentlyremeasuredatfairvalue.
Anygainsandlossesarisingfromchangesinfairvalueonderivativesthatdonotqualifyforhedgeaccountingaretakendirectlytonetprofitorlossfortheyear.
Thefairvalueofforwardcurrencycontractsiscalculatedbyreferencetocurrentforwardexchangeratesforcontractswithsimilarmaturityprofiles.
AdoptionofnewandrevisedstandardsTheGrouphasnotappliedthefollowingneworrevisedStandardsandInterpretationsthathavebeenissued,butarenotyeteffective.
IFRIC11:IFRS2-GroupandTreasuryShareTransactions.
TheGroupexpectsthatadoptionoftheInterpretationwillhavenoimpactontheGroup'sfinancialstatementsintheperiodofinitialapplication.
Interpretationbecomeseffectiveforfinancialyearsbeginningonorafter1March2007andisadoptedbytheEU.
IFRIC12:ServiceConcessionArrangements.
TheGroupexpectsthatadoptionoftheInterpretationwillhavenoimpactontheGroup'sfinancialstatementsintheperiodofinitialapplication.
Interpretationbecomeseffectiveforfinancialyearsbeginningonorafter1January2008andisnotadoptedbytheEU.
IFRIC13:CustomerLoyaltyProgrammes.
TheGroupexpectsthatadoptionoftheInterpretationwillhavenoimpactontheGroup'sfinancialstatementsintheperiodofinitialapplication.
Interpretationbecomeseffectiveforfinancialyearsbeginningonorafter1July2008andisnotadoptedbytheEU.
IFRIC14:IAS19-TheLimitonaDefinedBenefitAsset,MinimumFundingRequirementsandtheInteraction.
TheGroupexpectsthatadoptionoftheInterpretationwillhavenoimpactontheGroup'sfinancialstatementsintheperiodofinitialapplication.
Interpretationbecomeseffectiveforfinancialyearsbeginningonorafter1January2008andisnotadoptedbytheEU.
IFRS8OperatingSegments.
TheGroupexpectsthatadoptionofthenewStandardwillhaveimpactonthedisclosuresofGroup'sfinancialstatementsintheperiodofinitialapplication.
Standardbecomeseffectiveforfinancialyearsbeginningonorafter1January2009andisadoptedbytheEU.
IAS23Amendment:Borrowingcosts.
TheGroupexpectsthatadoptionoftherevisedStandardwillhavenoimpactonthedisclosuresofGroup'sfinancialstatementsintheperiodofinitialapplication.
Amendedstandardbecomeseffectiveforfinancialyearsbeginningonorafter1January2009andisnotadoptedbytheEU.
IAS1Amendment:PresentationofFinancialStatements.
TheGroupexpectsthatadoptionoftherevisedStandardwillhaveimpactonGroup'sfinancialstatementsintheperiodofinitialapplication.
Amendedstandardbecomeseffectiveforfinancialyearsbeginningonorafter1January2009andisnotadoptedbytheEU.
18(EUR1000)2.
OtheroperatingincomeConsolidatedConsolidated20072006Rentalrevenue417445Govermentgrants328127Other6450Total8086223.
DepreciationandreductioninvalueDepreciationsfromnon-currentassetsOthercap.
expenditure-714-958Capitalizeddevelopment-540-405Intangibleassets-1255-1363Machinery&equipment-1247-1036Othertangibleassets-257-212Tangibleassets-1504-1248Totaldepreciation-2759-2611Reductioninvaluefromnon-currentassetsGoodwill-1185Othercap.
expenditure-3645Capitalizeddevelopment-149Totalreductioninvalue-4979Totaldepreciationandreductioninvalue-2759-7590DepreciationsbyfunctionSalesandmarketing-1272-956Researchanddevelopment-1368-1576Administration-119-79TotalDepreciation-2759-26111.
SegmentinformationTheGroup'sprimaryreportingformatisbusinesssegmentanditssecondaryformatisgeographicalsegment.
TheGrouphasonebusinesssegment;datasecurity.
TheGroup'sgeographicalsegmentsaredeterminedbythelocationoftheGroup'sassetsandoperations.
GeographicalsegmentsConsolidatedFinlandandRestofNorthRestofDec31,2007ScandinaviaEuropeAmericatheworldGroupSalestoexternalcustomers38078418168946792196761Segmentassets108978104720462608114679Capitalexpenditures12901331735652161ConsolidatedFinlandandRestofNorthRestofDec31,2006ScandinaviaEuropeAmericatheworldGroupSalestoexternalcustomers30219351868081720980695Segmentassets902463672967155095130Capitalexpenditures316776734493765F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS19(EUR1000)4.
PersonnelexpensesConsolidatedConsolidatedPersonnelexpenses20072006Wagesandsalaries-29857-25598Pensionexpenses-definedcontributionplan-3954-3638Share-basedpayments-902-630Othersocialexpenses-2554-2152Total-37267-32018EmployeebenefitsofManagementarestatedindisclosure25.
RelatedpartytransactionsShare-basedpaymentsarestatedindisclosure17.
Share-basedpaymenttransactionsAveragenumberofpersonnel528439PersonnelbyfunctionDec31Salesandmarketing264228Researchanddevelopment261221Administration4130Total5664795.
FinancialincomeandexpensesInterestincome818483Interestexpense-99-85Otherfinancialincome10871068Exchangegainsandlosses15831Otherfinancialexpenses-78-12Totalfinancialincomeandexpenses18861485FinancialincomeandexpensesfromloansandreceivablesInterestincome299168Interestexpense-30Exchangegainsandlosses-113-95Total18373FinancialincomeandexpensesfromAvailable-for-salefinancialassetsInterestincome519315Otherfinancialincome10841037Total16031352F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS20(EUR1000)6.
IncometaxesConsolidatedConsolidated20072006Incometaxesofthebusinessactivity-6008-809Incometaxesfrompreviousyears47182Deferredtax27-2424Total-5934-3051AreconciliationofincometaxexpenseapplicabletoaccountingprofitbeforeincometaxatthestatutoryincometaxratetoincometaxexpenseattheGroups'effectiveincometaxratefortheyearsended31December2007and2006isasfollows:Resultbeforetaxes2137910369Incometaxesatstatutoryrateof26%-5559-2696Taxesonforeignsubsidiaries'netincomeinexcessofincometaxesatstatutoryrates-33-69Non-deductibleexpenses-389-626Unrecognisedtaxlosses-53Incometaxesfrompreviousyears47182Other4154Totaltaxes-5934-30517.
EarningspershareBasicearningspershareamountsarecalculatedbydividingnetprofitfortheyearattributableonordinaryequityholdersoftheparentbytheweightedaveragenumberofordinarysharesoutstandingduringtheyear.
Dilutedearningspershareamountsarecalculatedbydividingthenetprofitattributabletoordinaryshareholdersbytheweightedaveragenumberofordinarysharesoutstandingduringtheyearadjustedfortheeffectsofdilutiveoptions.
Netprofitattributabletoequityholdersfrom154457318continuingoperationsWeightedaveragenumberofordinaryshares(1000)155041154860Effectofdilution:shareoptions64246605Adjustedweightedaveragenumberofordinaryshares161464161464fordilutedearningpershareBasicearningspershare(EUR/share)0.
100.
05Dilutedearningspershare(EUR/share)0.
100.
05F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS21(EUR1000)8.
Non-currentassetsConsolidatedOthercap.
CapitalizedGoodwillTotalMachineryOtherTotalexpendituredevelopment&equip.
TangibleAcquisitioncostJan1,2006925511311185115718298172510023Translationdifference-39-39-124-37-161Additions1019902192112692721541Disposals-131-131AcquisitioncostDec31,20061023520331185134539312196011272Translationdifference-10-10-147-51-198Additions39212551713802631643Disposals-8-42-50AcquisitioncostDec31,200710617215911851396010537213012668Acc.
depreciationsJan1,2006-2490-146-2636-6358-709-7067Translationdifference212111027137Depreciationofthefinancialyear-955-405-1360-1017-226-1243Depreciationofdecreases128128Reductioninvalue-3645-149-1185-4979Acc.
depreciationsDec31,2006-7069-700-1185-8954-7137-908-8045Translationdifference131312522147Depreciationofthefinancialyear-714-540-1254-1237-254-1491Depreciationofdecreases32124Acc.
depreciationsDec31,2007-7770-1240-1185-10195-8246-1119-9365BookvalueasatDec31,2006316613334499217510523227BookvalueasatDec31,200728479193766229110113302IntangibleassetsTangibleassets9.
InvestmentinassociateConsolidatedConsolidated20072006BookvalueasatJan1210Shareofassociatedcompanies'results2021BookvalueasatDec314121Associate'sbalancesheet,revenueandprofitAssets810860Liablities683794Revenue16021722Profit6267AssociatedcompaniesGroup(%)VineyardInternationalLtd,HelsinkiFinland32.
910.
ImpairmenttestingofgoodwillInthepreviousperiodimpairmentlossof4.
8millioneurowasrecognized,fromwhich1.
2millioneurowasallocatedtogood-willand3.
6millioneurotoothercapitalizedexpenditures.
F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS22(EUR1000)11.
DeferredtaxConsolidatedConsolidatedDeferredtaxassets20072006Othertemporarydifferences566495Fromprovisions213151Lossescarriedforward132Taxchargedtoshareholders'equity-Changeinfairvalue,available-for-sale18779796DeferredtaxliabilityFairvalueadjustmentsonacquisition82109Taxchargedtoshareholders'equity-Changeinfairvalue,available-for-sale14Total96109AtDecember31,2007theGrouphadnolosscarriedforward(EUR0.
5millionin2006).
12.
InventoriesOtherinventories277181Noimpairmentwasrecognizedfrominventoriesinyears2007and2006.
13.
ReceivablesNon-currentLoanreceivables148141Total148141CurrentreceivablesTradereceivables1795815139Loanreceivables512Otherreceivables656488Prepaidexpensesandaccruedincome34203733Accruedincometax5520Total2209419391TradereceivablesAsat31December2007,tradereceivablesatnominalvalueof458thousandeuro(2006:377thousandeur)werecollectivelyimpairedandfullyprovidedfor.
BookvalueasatJan1377304chargefortheyear354231Utilised-273-158BookvalueasatDec31458377Ageinganalysisoftradereceivablestotalnotduepastdue90daysAsat31Dec,20071795813268465040Asat31Dec,200615139114383552149MaterialitemsincludedinprepaidexpensesandaccruedincomeUninvoicedsales278Prepaidexpenses1263863Prepaidexpenses,royalty19412422Accruedinterest216170Total34193733F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS23(EUR1000)14.
Available-for-salefinancialassetsAvailable-for-salefinancialassetsconsistofinterest-bearingdebtsecuritiesandsharesinfundsinvestedinsimilarinstruments.
Forassetsthatareactivelytradedinorganizedfinancialmarkets,fairvalueisdeterminedbyreferencetoStockExchangequotedmarketbidpricesatthecloseofbusinessonthebalancesheetdate.
Assets,whichfairvaluecannotbemeasuredreliably,arerecognizedatcostlessimpairment.
Thefairvaluechangesofavailable-for-salefinancialassetsarerecognizedinshareholders'equityunderfairvaluereserve.
ConsolidatedConsolidated20072006FairvalueasatJan15466253452Additions/deductions,net167841585Changeinfairvalue123-375FairvalueasatDec317156954662Shares-unlisted144144Maturitydatemorethan3months57025926Maturitydatelessthan3months6572348592FairvalueasatDec317156954662AcquisitionvalueasatDec31715145473115.
Cashandshort-termdepositsCashatbankandinhand1270012211Available-for-salefinancialassetsarerecognizedasliquidshort-terminvestmentsandareheldaspartoftheGroup'songoingcashmanagementactivities.
Seenote21.
FinancialriskmanagementobjectivesandpoliciesForthepurposesoftheconsolidatedcashflowstatement,cashandcashequivalentscomprisethefollowingatDecember31:Cashatbankandinhand1270012211Available-for-sale7142554519Total8412466730F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS2416.
Shareholders'EquityDuringtheyear,ordinarysharesof0.
01euroeachweresubscibedwithwarrantsattachedtoF-SecureoptionprogramsandconvertedasfollowsNumberofShareShareUnrestrictedIssuedandfullypaidsharescapitalpremiumfundequityreserveTotal31.
12.
200515471181815473345935006Registrationofshareissue6040013838Exerciseofoptions164250212112231.
12.
200615493646815493361735166Registrationofshareissue9360016869Exerciseofoptions2627001718Premiumfundtransfertounrestrictedequity-335823358231.
12.
200715505633815501203358235253Thesharecapitalamountedto1,550,563euroandthenumberofshareswas155,056,338attheendoftheyear2007.
SharepremiumfundProceedsfromexercisedwarrantsarerecognizedunderthesharecapitalandsharepremiumfund.
UnrestrictedequityreserveOnMarch20,2007,theshareholders'meetingdecidedtodecreasethesharepremiumfund.
Thedecreasedamountof33,582thousandeurowastransferredtounrestrictedequityreserve.
TranslationdifferencesThetranslationdifferenceisusedtorecordexchangedifferencearisingfromthetranslationofthefinancialstatementsofforeignsubsidiaries.
FairvaluereserveThereserveisusedtorecordincrementsanddecrementsinthefairvalueofavailable-for-salefinancialassets.
DividendsproposedandpaidProposedforapprovalatAGMforyear20070.
07europershare.
Finaldividendforyear20060.
02europershare,paidduringtheyear2007:3,101,601euroFinaldividendforyear20050.
07europershare,paidduringtheyear2006:10,834,055eurobeforetaxtaxaftertaxEquityDec31,2005306-80226226Available-for-sale,net-21055-156-156Fairvaluegains/lossestoPL-16443-122-122EquityDec31,2006-6918-51-51Available-for-sale,net88-236565Fairvaluegains/lossestoPL35-92626EquityDec31,200754-154040Fairvalue,available-for-saleTotal(EUR1000)F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS2517.
Share-basedpaymenttransactionsTheCompanyhashadwarrantprogramssinceApril1998.
DuringtheperiodtheGrouphadtwowarrantprograms.
TheCompany'swarrantprogramscoverthekeypersonnel.
Warrantsentitletheholdertosubscribeforcompanyshareswithsubscriptionpriceandtimedefinedoneachwarrantprogram.
Iftheholderofthewarrantleavesthecompanybeforevesting,thewarrantisforfeited.
TheGrouphasappliedIFRS2toequity-settledawardsgrantedafterNovember7,2002thathadnotvestedonorbeforeJanuary1,2005.
OnMarch27,2002,theshareholders'meetingdecidedtoissueatotalof5,500,000warrants.
Eachwarrantentitlestheholdertosubscribeforoneshare.
OnMarch23,2005,theshareholders'meetingdecidedtocancelatotalof3,089,275unallocatedwarrants.
Thesubscriptioninfullwouldincreasethecapitalstockby24,107euro,whichrepresents1.
6percentoftheCompany'ssharecapitalandvotingpoweronDecember31,2007.
ThesubscriptionpriceofashareineachseriesistheweightedaveragepriceoftheCompany'ssharesquotedontheHelsinkiExchangesduringthefollowingperiods:2002A-series:July1,2002–September30,2002;2002B-series:July1,2003-September302003;2002C-series:July1,2004–September30,2004.
Duringthefinancialperiod,atotalof119,870sharesweresubscribedwiththewarrantsattachedtothiswarrantprogramandconsequentlysharecapitalwasraisedby1,199euro.
PlanIssuedCategoryStartEndExerciseprice2002A1.
11.
200331.
12.
20080.
602002B1.
11.
200431.
12.
20080.
902002C1.
11.
200531.
12.
20081.
6020022410725OnMarch23,2005,theshareholders'meetingdecidedtoissueatotalof4,500,000warrants.
Eachwarrantentitlestheholdertosubscribeforoneshare.
Thesubscriptioninfullwouldincreasethecapitalstockby45,000euro,whichrepresents2.
9percentoftheCompany'ssharecapitalandvotingpoweronDecember31,2007.
ThesubscriptionpriceofashareineachseriesshallbethetradevolumeweightedaveragepriceoftheCompany'ssharequotedontheOMXTheNordicExchange,Helsinkiasfollows:2005AonMarch2005;2005BonMarch2006;2005ConMarch2007and2005DonMarch2008,roundedofftothenearestcent.
Thesubscriptionpriceofthestockoptionsshall,asperthedividendrecordeddate,bereducedbytheamountofdividendpershare.
However,onlysuchdividendswhosedistributionhasbeenagreeduponafteroftheperiodfordeterminationofthesharesubscriptionpriceandwhichhavebeendistributedpriortothesharesubscriptionaredeductedfromthesubscriptionprice.
PursuanttotheCompaniesAct,thesharesubscriptionpriceshall,nevertheless,alwaysbeatleasttheaccountingequivalentvaluepershare.
PlanIssuedCategoryStartEndExerciseprice2005A1.
3.
200830.
11.
20091.
732005B1.
3.
200930.
11.
20103.
152005C1.
3.
201030.
11.
20111.
972005D1.
3.
201130.
11.
2012-20054500000Thesharessubscribedforonthebasisofthewarrantsshallentitletheholdertodividendforthefinancialperiodinwhichthesubscriptiontakesplace.
OthershareholderrightsshallcommenceupontheentryintotheTradeRegisterofincreaseofthesharecapital.
Themaximumdilutioneffectoftheissuanceofthewarrantsis6,408,105sharesonaggregateor4.
0percentoftheCompany'ssharecapitalafterdilution.
5.
4millionwarrantshavebeenissuedfromcurrentwarrantprograms(22.
2milliontotally)asofDecember31,2007.
4.
7millionwarrantsareheldbythesubsidiarycompanyDF-DataOy.
OptionsoutstandingandweightedaverageexercisepriceOutstandingJan0146191721.
8527169061.
34Granted5850001.
9722808002.
39Forfeited1784902.
331538842.
25Exercised1198700.
722246500.
72OutstandingDec3149058121.
8346191721.
85ExercisableDec3118012421.
3015795051.
18(EUR1000)Jan01-Dec31,2007Jan01-Dec31,2006NumberofoptionsWeightedaverageexercisepriceNumberofoptionsWeightedaverageexercisepriceF-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS26Foroptionsexercisedduringtheperiodtheweightedaveragesharepricewas2.
41euro(2.
65euroinyear2006).
Optionswereexecisedonaregularbasisthroughouttheperiod.
TheGroupreceived64thousandeuroforexercisedoption,fromwhich1thousandeurowasrecordedtosharecapitalandtheresttosharepremiumaccount(2thousandeurotosharecapitaland121thousandeurotosharepremiuminyear2006).
Theoptionsoutstandingbyrangeofexerciseprices0.
60-1.
006034301.
000.
747222502.
000.
741.
10-3.
1743023822.
861.
9838969223.
662.
0649058124619172Expensearisingfromshare-basedpaymenttransactionsduringtheperiodwas902thousandeuro(630thousandeuroinyear2006).
Theweightedfairvalueofoptionsgrantedatthedateofgrantdatewas0.
72euro(0.
93euroinyear2006).
ThefairvalueofoptionsgrantedduringtheperiodwasdeterminedatthedateofgrantbyusingtheBinomialmodel.
Usedarguments:20072006Weightedaverageshareprice2.
092.
51Weightedaverageexerciseprice2.
412.
65Expectedvolatility25.
59%32.
19%Optionlifeinyears4.
84.
8Risk-freeinterestrate4.
08%3.
90%Expecteddividends--Expectedvolatilityreflectstheassumptionthatthehistoricalvolatilityisindicativeoffuturetrends,whichmayalsonotnecessarilybetheactualoutcome.
Basedonpreviousyears,thecompanyhasestimatedthat2–3%ofgrantedoptionswillbeforfeited.
Whenthesubscriptionpricehasnotyetbeendefined,closingsharepriceasof31December2007hasbeenused.
18.
ProvisionsAprovisionisrecognizedfortheemployer'sliabilityforsocialsecuritycontributionsonshareoptiongains,whichwillariseonexerciseoftherelevantshareoptions,byemployees.
TheprovisioniscalculatedbasedonthenumberofoptionsoutstandingatthebalancesheetdateoutsideFinlandthatareexpectedtobeexercised,andusingthemarketpriceoftheshareatthebalancesheetdateasthebestestimateofmarketpriceatthedateofexercise.
Itisexpectedthatthecostswillbeincurredduringtheexerciseperiodof1January2008to30November2012.
BydecisionofHelsinkiDistrictCourtonSeptember2005aprovisionisrecognizedfortheGroup'sliabilityforpaymentofadditionalconstructionworkdonebySRVforheadquarterpremises.
ConsolidatedConsolidated20072006BookvalueasatJan111871113Arisingduringtheyear9879Utilised-5BookvalueasatDec3112861187Socialcosts64SRV1279118319.
LiabilitiesNon-currentliabilitiesDeferredrevenues48474419Totalnon-currentliabilities48474419CurrentliabilitiesDeferredrevenues2707523155Tradepayables22862423Otherliabilities16871265Accruedexpenses84598094Incometaxliabilities1406306Totalcurrentliabilities4091235243MaterialamountsshownunderaccrualsanddeferredincomeAccruedpersonnelexpenses54145525Deferredroyalty11801211Accruedexpenses18661358Total84608094December31,2007December31,2006ExercisepriceWeightedaverageremainingcontractuallifeinyearsNumberofoptionsWeightedaverageexercisepriceNumberofoptionsWeightedaverageremainingcontractuallifeinyearsWeightedaverageexerciseprice(EUR1000)F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS2720.
FinancialassetsandliabilitiesConsolidatedConsolidated20072006Loansandotherreceivables154153Tradereceivables1795815139Available-for-salefinancialassets7156954662Cashandbankaccounts1270012211Tradepayables-2286-2423Total10009479742ThecarryingamountsoftheGroup'sfinancialinstrumentsareequivalenttofairvalues.
21.
FinancialriskmanagementobjectivesandpoliciesGeneralThegoalofriskmanagementistoidentifyrisksthatmayhinderthegroupfromachievingitsbusinessobjectives.
Theresponsibilityforthecompany'sriskmanagementlieswithCEO,themanagementandfinallywiththeBoardofDirectors.
TherisksrelatedtotheGroup'sfinancialinstrumentsaremainlyrelatedtocreditrisksandforeigncurrencyfluctuations.
TheGroup'savailable-for-saleassetsarealsoexposedtointerestratefluctuations.
CreditriskTheGrouptradesonlywithrecognized,creditworthythirdparties.
ReceivablebalancesaremonitoredandcollectedonanongoingbasiswiththeresultthattheGroup'sexposuretobaddebtsisnotsignificant.
TherearenosignificantconcentrationsofcreditriskwithintheGroup.
Seenote13.
ReceivablesForeigncurrencyriskTheGroupinvoicesmainlyinEuros.
However,therearesometransactionalcurrencyexposuresthatarisefromsalesorpurchasinginothercurrencies.
TheothermainmeasurementcurrenciesareUSD,JPY,SEKandGBP.
Inordertominimizetheimpactofthefluctuationoftheexchangerates,thegoalistouseforwardcurrencycontractstoeliminatethecurrencyexposureoftheestimatedcashflowofthesecurrenciesforaperiodofsixmonths.
DerivativesCurrencyinstruments–CurrencyforwardcontractNominalvalue48463808Fairvalue10534F-SecureCorporationhashedgedreceivablesdenominatedinUSD,JPY,SEKandGBPwithaforwardratecontract.
TheforwardratecontractexpiresonJanuary15andApril17,2008.
Thecompanydoesnothaveotherderivatives.
F-SecureCorporationdoesnothedgeinvestementsmadeinitssubsidiariesbecausetheimpactofchangesofexchangerateswouldnotberelevantintheGroup'sbalancesheet.
Salesindifferentcurrencies%%EUR7271SEK,GBP1212USD,JPY1314Othercurrencies33100100Theriskinvolvedinthesalesinforeigncurrencyisnotabalydiminishedbytheoperationalexpensesinsubsidiariesthatusethesamecurrency.
Financialassetsandliablilitiesindifferentcurrencies%%EUR8788SEK,GBP66USD,JPY76100100F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS(EUR1000)28ThetablebelowdemonstrateshowsensitivetheGroup'sprofitbeforetaxesistoreasonablypossiblechangesintheUSD,JPY,SEKandGBPexchangerate,assumingthatallothervariablesareheldconstant.
Theanalysisisbasedontradereceivablesandincludesforwardcurrencycontracts.
ConsolidatedConsolidated20072006USD,GBP+10%-20+5%-76JPY,SEK+5%22+5%20InterestrateriskTheGroupdoesnothaveanyinterestbearingliabilities.
BasedontheGroup'sconservativeinvestmentpolicy,itinvestsitscashmainlyinshorttermandlowriskfunds.
Investmentsaremadeincreditworthyfunds.
Theseavailable-for-saleinvestmentsareexposedtomarketriskforchangesininterestrisks.
TheGroup'sobjectiveistomaintainabalancebetweencontinuityoffundingandflexibilitythroughtheuseofcashandavailable-for-salefinancialassets.
Seenote14.
Available-for-salefinancialassetsCapitalmanagementTheobjectiveoftheGroup'scapitalmanagementistomaintainanefficientcapitalstructurethatensuresthefunctioningofbusinessoperationsandpromotestheincreaseofshareholdervalue.
ReviewingthecapitalstructureoftheGroupisapartoftheprocessformonitoringfinancialperformance.
TheobjectiveoftheGroupistoimproveitscurrentcapitalstructure.
AGM2007madeadecisiontodecreasethesharepremiumtodistributableequity.
ThisenablestheGrouptoemployvariousactionstoboosttheefficiencyoftheequity;and/ortoreturntheequitytoshareholders.
AccordingtothedividendpolicyofF-SecureCorporation,approximatelyhalfofitsannualprofitispaidasdividend.
Thecompanymaydeviatefromthispolicysubjecttocircumstances.
22.
NotestocashflowstatementAdjustmentsDeferredincome44624320Depreciationandamortization27592612Profit/lossonsaleoffixedassets273Otheradjustments8225581Financialincomeandexpenses-1886-1485Incometaxes59343051Total121181408223.
OperatingleasecommitmentsTheGrouphasenteredintocommercialleasesonofficespaceandonmotorvechicles.
Motorvechicleleaseshaveanaveragelifeofthreeyearsandofficespacebetweentwoandfiveyearswithrenewaltermsincludedinthecontracts.
Futureminimumrentalspayableundernon-cancellableoperatingleasesasat31DecemberareasfollowsAslesseeWithinoneyear34253155Afteroneyearbutnotmorethanfiveyears55007753Total892510908TheGrouphasenteredintocommercialleasesonunusedofficespace.
Leaseshaveanaveragelifebetweenoneandthreeyearswithrenewaltermsincludedinthecontracts.
Futureminimumrentalreceivablesundernon-cancellableoperatingleasesat31DecemberareasfollowsAslessorWithinoneyear162256Afteroneyearbutnotmorethanfiveyears23Total162279F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS(EUR1000)2924.
ContingentliabilitiesConsolidatedConsolidated20072006OtherliabilitiesOthers238246LegalclaimsBydecisionofHelsinkiDistrictCourtonSeptember2005aguaranteewasprovidedtoSRVViitosetOyforGroup'sliabilityforpaymentofadditionalconstructionworkdonebySRVforheadquarterpremises.
Seedisclosure18.
ProvisionsDiagnosticsSystemsCorporationhasfiledapatentinfringementlawsuitagainstoneofF-Securesubsidiariesandsixotherco-defendantsintheStateofCalifornia.
TheGroupbelievesthatthisclaimhasnomeritanddoesn'texpectanymaterialimpactonitsfinancials.
Accordinglynoprovisionforanyliabilityhasbeenmadeinthesefinancialstatements.
25.
RelatedpartydisclosuresCompensationofkeymanagementpersonneloftheGroupWagesandothershort-termemployeebenefits-2140-1526Share-basedpayments-474-311Total-2614-1837Wagesandothershort-termemployeebenefitsManagingdirectors-832-718Membersoftheboardsofdirectors-209-171Boardofdirectors2007andmanagingdirectorWagesFeesGrantedwarrantsKimmoAlkio,managingdirector427--RistoSiilasmaa,chairmanoftheboard-3513AriHyppnen90--MarkoAhtisaari-156SariBaldauf-206PerttiErvi-309AlexisSozonoff-206Total51712041Warrantsgrantedtoboardmembersasanannualremunerationaremeasuredtothefairvalueatthedateatwhichtheyweregranted.
Warrantscanbeexercisedfrom1March2010until30November2011.
TheCEO'sretirementageandthedeterminationofhispensionconformtothestandardrulesspecifiedbyFinland'sEmployeePensionAct(TYEL).
TheperiodofnoticefortheCEOistwelve(12)monthsbothwaysandtherearenoseparatecompensationsfordismissal.
Theconsolidatedfinancialstatementsincludethefinancialstatementsofcorporationslistedinthefollowingtable.
NameCountryofincorporationGroup(%)ParentF-SecureCorporation,HelsinkiFinlandDF-DataOy,HelsinkiFinland100F-SecureInc.
,SanJoseUnitedStates100F-SecureLtd,LondonGreatBritain100NihonF-SecureCorp.
,YokohamaJapan100F-SecureGmbH,MünchenGermany100DF-MobileGmbH,MünchenGermany100F-SecureSARL,PoissyFrance100F-SecureAB,StockholmSweden100F-SecureSrl,MilanoItaly100F-SecureSPz.
o.
o.
,WarsawPoland100F-SecureCorporation(M)SdnBhd,KualaLumpurMalaysia100F-Secure(M)SdnBhd,KualaLumpurMalaysia100F-SecurePvtLtd,MumbaiIndia100F-SecurePteLtd,SingaporeSingapore100F-SecureB.
V.
,UtrechtTheNetherlands100F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS(EUR1000)3026.
SharesandshareholdersSharesandshareownershipdistribution,December31,2007SharesNumberofPercentageofTotalsharesPercentageshareholdersshareholdersofshares1-100290613.
24%1904250.
12%101-10001463866.
69%50578613.
26%1001-10000403018.
36%118596187.
65%10001-500003021.
38%60397843.
90%50001-100000250.
11%18167221.
17%100001-480.
22%13009192883.
90%Total21949100.
00%155056338100.
00%PercentageShareholdercategory,December31,2007TotalsharesofsharesCorporations52212313.
37%Financialandinsuranceinstitutions4259682827.
47%Generalgoverment84047395.
42%Non-profitorganizations20763211.
34%Households9607252561.
96%Othercountriesandinternationalorganizations6846940.
44%Total155056338100.
00%LargestshareholdersandadministrativeregisterPercentageOwnerSharesofsharesRistoSiilasmaa6259977540.
37%KeskininenhenkivakuutusyhtiSuomi77000004.
97%AriHyppnen70794604.
57%BergrothIsmo45027522.
90%KeskininenhenkivakuutusyhtiIlmarinen31771502.
05%Valtionelkerahasto30000001.
93%OP-Suomipienyhtit27441571.
77%OP-Delta-sijoitusrahasto14725230.
95%OP-Focus-erikoissijoitusrahasto12444240.
80%SijoiturahastoNordeaNordicsmallcap11479370.
74%AdministrativeregisterSkandinaviskaEnskildaBanken1629324010.
51%NordeaPankkiSuomiOyj45589672.
94%OKOPankkiOyj14850760.
96%Otherregisters10625750.
69%Othershareholders3698830223.
85%Total155056338100.
00%OwnershipofmanagementBoardofDirectorsShares%sharesWarrants%sharesRistoSiilasmaa6259977540.
37%4312250.
28%MarkoAhtisaariSariBaldauf540000.
03%PerttiErvi50000.
00%250000.
02%AriHyppnen70794604.
57%1200000.
08%AlexisSozonoff100000.
01%Total6973823544.
98%5862250.
38%ExecutiveteamShares%sharesWarrants%sharesKimmoAlkio140510.
01%AriAlakiuttu110500.
01%EilaMustalaTrondNeergard140000.
01%PirkkaPalomki900000.
06%AnttiReijonenTaneliVirtanen30000.
00%950000.
06%TravisWitteveen400000.
03%Total170510.
01%2500500.
16%F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS31051015202530354000.
511.
522.
53Turnover(EUR1000000)12/0711/0710/0709/0708/0707/0706/0705/0704/0703/0702/0701/07Averageprice(EUR)F-SecureConsolidatedNOTESTOTHEFINANCIALSTATEMENTS27.
KeyratiosIFRSIFRSIFRSIFRSFASFASEconomicindicators200720062005200420042003Netsales(MEUR)96.
880.
761.
847.
347.
339.
0Netsalesgrowth%20%31%31%21%21%1%Operatingresult(MEUR)19.
58.
97.
46.
56.
81.
5%ofnetsales20.
1%11.
0%11.
9%13.
8%14.
4%3.
8%Resultbeforetaxes21.
410.
49.
37.
77.
44.
3%ofnetsales22.
1%12.
8%15.
0%16.
3%15.
7%11.
0%ROE(%)25.
4%13.
1%12.
9%35.
9%36.
7%7.
0%ROI(%)36.
3%19.
3%19.
0%21.
3%22.
1%11.
5%Equityratio(%)81.
6%80.
2%80.
6%84.
2%84.
4%78.
1%Investments(MEUR)2.
23.
78.
32.
92.
90.
6%ofnetsales2.
3%4.
6%13.
4%6.
1%6.
1%1.
5%R&Dcosts(MEUR)*)21.
217.
714.
710.
710.
79.
0%ofnetsales21.
9%21.
9%23.
8%22.
6%22.
5%23.
0%Capitalizeddevelopment(MEUR)0.
10.
90.
80.
3Gearing%-124.
6%-123.
2%-108.
2%-110.
7%-110.
3%-130.
7%Personnelonaverage528439354291291295PersonnelonDec31566479390306306283*)excludingimpairmentlossof4,8MEURinyear2006KeyratiosEarnings/share(EUR)0.
100.
050.
040.
090.
090.
01Earnings/sharediluted0.
100.
050.
040.
090.
090.
01Shareholders'equitypershare0.
440.
350.
370.
300.
300.
21Dividendpershare**)0.
070.
020.
07Dividendperearnings(%)70.
0%40.
0%175.
0Effectivedividends(%)2.
9%0.
9%3.
4P/Eratio24.
647.
646.
919.
819.
597.
1Shareprice,lowest(EUR)1.
832.
051.
551.
221.
220.
65Shareprice,highest(EUR)2.
793.
482.
141.
981.
981.
50Meanshareprice(EUR)2.
322.
541.
821.
671.
671.
06SharepriceDec312.
452.
252.
041.
811.
811.
33Marketcapitalization(MEUR)379.
9348.
6317.
2270.
6270.
6194.
9Tradingvolume(millions)80.
393.
869.
360.
160.
144.
5Tradingvolume(%)51.
8%60.
6%45.
7%40.
6%40.
6%30.
6%AdjustednumberofsharesAverageduringtheperiod155040771154859859151759785147973590147973590145246290Averageduringtheperiod,diluted161464443161464443162394953163197747163197747163237460Dec31155056338154936468154711818149509650149509650146533104Dec31,diluted161464443161464443161464443163185050163185050163230484**)BoardproposalTurnoverandaveragepricepermonthOwnershipofmanagementTheBoardofDirectorsandCEOownedatotalof69,752,286sharesonDecember31,2007.
Thisrepresents45.
0percentoftheCompany'ssharesandvotes.
Inaddition,thewarrantsofthemanagementaccountedfor0.
54percentofthetotalamountofF-Secureshares.
Withthesestockoptions836,275newsharescanbeissued.
32F-SecureCorporationINCOMESTATEMENT(EUR1000)INCOMESTATEMENTJan1-Dec31,2007FASFAS20072006Netsales(1)8548371048Materialandservice-7215-6969Grossmargin7826864078Otheroperatingincome(2)18061232Salesandmarketing(3,4)-35264-29485Researchanddevelopment(3,4)-19930-21877Administration(3,4)-5293-4009Operatingresult195889939Financialincomeandexpenses(5)17281473Profitbeforetaxes2131611412Incometaxes(6)-5636-4005Resultforthefinancialyear156807407F-SecureCorporationBALANCESHEETBALANCESHEETDecember31,2007AssetsFASFAS20072006Non-currentassetsTangibleassets(7)15661722Intangibleassets(7)42545162Investmentsinassociatedcompanies(8)4141Investmentsingroupcompanies(8)241223Totalnon-currentassets61027147CurrentassetsInventories(10)230148Long-termreceivables(11)679930Short-termreceivables(11)2326420072Deferredtaxassets(9)18Short-terminvestments(12)7156854662Cashandbankaccounts72207888Totalcurrentassets10296183717Totalassets10906390864Shareholders'equityandliabilitiesShareholders'equity(14,15)Sharecapital15511549Unregisteredshareissues4769Sharepremium11936034Fairvaluereserve40-51Reserveforinvestedunrestrictedequity360000Retainedearnings122837977Profitforthefinancialyear156807407Totalshareholders'equity6572052985Mandatoryprovisions(17)12791183LiabilitiesDeferredtaxliabilities(9)14Long-termliabilities(18)39073290Short-termliabilities(18)3814333405Totalliabilities4206336695Totalshareholders'10906390864equityandliabilities33F-SecureCorporationCASHFLOWSTATEMENTCASHFLOWSTATEMENTDecember31,2007FASFAS20072006CashflowfromoperationsResultforthefinancialyear156807407Adjustments1023911553Cashflowfromoperationsbeforechangeinworkingcapital2592018960ChangeinnetworkingcapitalCurrentreceivables,increase(-),decrease(+)-2905-4709Inventories,increase(-),decrease(+)-82-71Non-interestbearingdebt,increase(+),decrease(-)1101663Provisions,increase(+),decrease(-)9670Cashflowfromoperationsbeforefinancialitemsandtaxes2313915914Interestexpensespaid-20Interestincomereceived696598Otherfinancialincomeandexpenses10591013Incometaxespaid-4527-217Cashflowfromoperations2036517307CashflowfrominvestmentsInvestmentsinintangibleandtangibleassets-1195-2833Investmentsinsubsidiaryshares-18-39Otherinvestments00Cashflowfrominvestments-1213-2873CashflowfromfinancingactivitiesIncreaseinsharecapital64191Dividendspaid-3101-10834Cashflowfromfinancingactivities-3036-10643Otheradjustments*)226Changeincash161164018Cashandbankatthebeginningoftheperiod6240658763Cashandbankatperiodend7852262781Changeinnetfairvalueofcurrentavailable-for-saleassets123-375Cashandbankatperiodend7864562406*)RommonOymerger(EUR1000)F-SecureCorporationNOTESTOTHEFINANCIALSTATEMENTSCorporateinformationF-SecureproducesservicesandsoftwareprotectiontoindividualsandbusinessesagainstcomputervirusesandotherthreatscomingthroughtheInternetormobilenetworks.
TheParentcompanyoftheGroupisF-SecureCorporationincorporatedinFinlandanddomiciledinHelsinki.
Company'sregistrantaddressisTammasaarenkatu7,00180Helsinki.
CopyofconsolidatedfinancialstatementcanbereceivedfromInternetaddresswww.
f-secure.
comortheparentcompany'sregistrantaddress.
ACCOUNTINGPRINCIPLESThefinancialstatementofF-SecureCorporationhasbeenpreparedinaccordancewithFinnishAccountingStandards(FAS).
ForeigncurrencytranslationForeigncurrenciesaretranslatedintothelocalcurrencyusingfixedmonthlyexchangerates.
Atthebalancesheetdate,assetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedattheratesofexchangeprevailingatthatdate.
Exchangerategainsandlossesoffinancialtransactionsarerecognizedintheincomestatementunderfinancialitems.
Forwardratecontractsforhedgingpurposesarerecordedusingtheexchangerateprevailingatthebalancesheetdate.
TangibleandintangibleassetsIntangibleassetsincludesoftwarelicenses.
Intangibleassetsrecognizedonmergerconsistoftechnology-basedintangibleassets.
Tangibleandintangibleassetsarerecordedathistoricalcostlessaccumulateddepreciation.
Depreciationisrecorded34onastraight-linebasisovertheestimatedusefullifeofanasset.
Theestimatedusefullivesoftangibleandintangibleassetsareasfollows:Machineryandequipment3–8yearsCapitalizeddevelopmentcosts3yearsIntangibleassets5–10yearsOrdinaryrepairsandmaintenancecostsarechargedtotheincomestatementduringthefinancialperiodinwhichtheyareincurred.
Thecostofmajorrenovationsisincludedintheassets'carryingamountwhenitisprobablethattheCompanywillderivefutureeconomicbenefitsinexcessoftheoriginallyassessedstandardorperformanceoftheexistingasset.
Anygainorlossarisingonderecognitionoftheasset(calculatedasthedifferencebetweenthenetdisposalproceedsandthecarryingamountoftheasset)isincludedintheincomestatementintheyeartheassetisderecognized.
ResearchanddevelopmentcostsResearchcostsareexpensedasincurred.
Developmentexpendituresincurredonindividualprojectsoftotallynewproductsorproductversionswithsignificantnewfeaturesarecarriedforwardwhentheyaretechnicallyfeasibleandtheirfuturerecoverabilitycanreasonablyberegardedasassured.
InventoriesInventoriesarevaluedatthelowerofcostandnetrealizablevaluewithcostbeingdeterminedbymethodfirst-infirst-outmethod.
Netrealizablevalueistheestimatedsellingpriceintheordinarycourseofbusiness,lessestimatedcostsofcompletionandtheestimatedcostsnecessarytomakethesale.
LeasesLeaseswherethelessorretainssubstantiallyalltherisksandbenefitsofownershipoftheassetareclassifiedasoperatingleases.
TheCompanyhasonlyoperatingleases.
Operatingleasepaymentsarerecognizedasanexpenseintheincomestatementonastraight-linebasisovertheleaseterm.
Leasesofunusedofficespacearerecognizedasotheroperatingincomeintheincomestatementonastraight-linebasisovertheleaseterm.
PensionsPensionarrangementisoflocalstatutoryarrangementanddefinedcontributionplans.
Contributionstodefinedcontributionplansarerecognizedinincomestatementintheperiodtowhichthecontributionsrelate.
TheCompanyrecognizesthedisabilitycommitmentofTYELpensionplanwhendisabilityappears.
ProvisionsProvisionsarerecognizedwhentheCompanyhasapresentobligation(legalorconstructive)asaresultofapastevent,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimatecanbemadeoftheamountoftheobligation.
InSeptember2005,bythedecisionofHelsinkiDistrictCourt,F-SecurewassentencedtopayadditionalconstructionandrefurbishmentworkdoneattheGroup'sheadquarterpremisesandlitigationcostsplusinteresttoSRVViitosetOy.
F-Secureconsidersthattheworkwasalreadycoveredbytheoriginalrentalagreementandhasappealedtochangetheverdict.
EventhoughthecaseisstillopenF-Securedecidedtorecognizetheobligation.
Constructioncostsareallocatedovertherentalperioduntiltheyear2010startingSeptember2005.
IncometaxesDirectcurrenttaxesarecalculatedinaccordancewiththelocaltaxandaccountingrules.
Deferredtaxes,resultingfromtemporarydifferencesbetweenthefinancialstatementandtheincometaxbasisofassetsandliabilities,usetheenactedtaxratesineffectintheyearsinwhichthedifferencesareexpectedtoreverse.
Deferredtaxassetsarerecognizedtotheextentthatitisprobablethatfuturetaxableprofitwillbeavailable.
RevenuerecognitionRevenueisprimarilyderivedfromsoftwarelicenseagreementsalesandmonthlycontentsecurityservicesales.
Licenseagreementsconsistofinitiallicenseagreementsandperiodicmaintenanceagreementscoveringproductupdatesandcustomersupport.
TherevenuerecognitionpolicyofF-Securerecognizesthelicensefeerevenuesastheproductisdelivered,andthemaintenancerevenuesarerecognizedratablyovertheperiodcoveredbythemaintenancecontract,andtheservicerevenueisrecognizedatthetimeofdelivery.
Indirecttaxes,discountsgrantedandexchangeratedifferencesareexcludedfromnetsales.
OtheroperatingincomeOtheroperatingincomeincludesprofitsfromthesalesoffixedassets,rentalrevenue,andgovernmentgrantsreceivedforresearchanddevelopmentprojects.
PresentationofexpensesClassificationofthefunctionallypresentedexpenseshasbeenmadeasfollows:varioustypesofexpensesindifferentgeographicallocationshavebeenallocatedtothevariousfunctionsbyallocatingtodirectlyallocableexpensestotherespectivefunction,andotheroperatingexpenseshavebeenallocatedtofunctionsonthebasisofaverageheadcountineachlocation.
FinancialassetsShort-terminvestmentsaremeasuredatfairvalue.
Short-terminvestmentsconsistofinterest-bearingdebtsecuritiesandsharesinmutualfundsinvestedinsimilarinstruments.
Forassetsthatareactivelytradedinorganizedfinancialmarkets,fairvalueisdeterminedbyreferencetoStockExchangequotedmarketbidpricesatthecloseofbusinessonthebalancesheetdate.
Assets,thefairvalueofwhichcannotbemeasuredreliably,arerecognizedatcostlessimpairment.
Thefairvaluechangesofshort-terminvestmentsarerecognizedinshareholders'equityunderfairvaluereserve.
Whenfinancialassetsrecognizedasavailable-for-salearesold,theaccumulatedfairvaluechangesarereleasedfromequityandrecognizedintheincomestatement.
Cashandcashequivalentsinthebalancesheetcomprisecashatbankandinhandandotherhighlyliquidshort-terminvestments.
F-SecureCorporationNOTESTOTHEFINANCIALSTATEMENTS35F-SecureCorporationNOTESTOTHEFINANCIALSTATEMENTS1.
NetSalesFASFASGeographicalsegments20072006FinlandandScandinavia3453127617RestofEurope4179435174NorthAmerica41633792Restoftheworld49954465Total85483710482.
OtheroperatingincomeRentalrevenue417445Govermentgrants49127Other1340661Total180612323.
DepreciationandreductioninvalueDepreciationsfromnon-currentassetsOthercap.
expenditure-840-802Capitalizeddevelopment-540-405Intangibleassets-1380-1208Machinery&equipment-953-827Tangibleassets-953-827Totaldepreciation-2333-2035Reductioninvaluefromnon-currentassetsOthercap.
expenditure-3874Capitalizeddevelopment-149Totalreductioninvalue-4023Totaldepreciationandreductioninvalue-2333-6058DepreciationsbyfunctionSalesandmarketing-1023-717Researchanddevelopment-1191-1239Administration-119-79TotalDepreciation-2333-20354.
PersonnelexpensesPersonnelexpensesWagesandsalaries-19729-17591Pensionexpenses-3257-3035Othersocialexpenses-1269-1083Total-24255-21709CompensationofkeymanagementpersonnelWagesandothershort-termemployeebenefits-1370-1147Wagesandothershort-termemployeebenefitsManagingdirectors-427-339Membersoftheboardsofdirectors-209-171Wagesandothershort-termemployeebenefitsoftheboardofdirectorsandmanagingdirectorseegroupdisclosure25.
Relatedpartydisclosure(EUR1000)36F-SecureCorporationNOTESTOTHEFINANCIALSTATEMENTSIntangibleassetsTangibleassetsTheCEO'sretirementageandthedeterminationofhispensionconformtothestandardrulesspecifiedbyFinland'sEmployeePensionAct(TYEL).
TheperiodofnoticefortheCEOistwelve(12)monthsbothwaysandtherearenoseparatecompensationsfordismissal.
FASFAS20072006Averagenumberofpersonnel355331PersonnelbyfunctionDec31Salesandmarketing118107Researchanddevelopment207202Administration3526Total3603355.
FinancialincomeandexpensesInterestincome742457Interestexpense-98-80Otherfinancialincome10851039Exchangegainsandlosses4854Otherfinancialexpenses-482Total172814736.
IncometaxesIncometaxesofthebusinessactivity-5695-465Incometaxesfrompreviousyears59182Deferredtax-3723Total-5636-4005AreconciliationofincometaxexpenseapplicabletoaccountingprofitbeforeincometaxatthestatutoryincometaxratetoincometaxexpenseattheGroups'effectiveincometaxratefortheyearsended31December2006and2005isasfollows:Resultbeforetaxes2131611412Incometaxesatstatutoryrateof26%-5542-2967Non-deductibleexpenses-147-1182Incometaxesfrompreviousyears59182Other-6-38Totaltaxes-5636-40057.
Non-currentassetsOthercap.
CapitalizedTotalMachineryOtherTotalexpendituredevelopment&equip.
TangibleAcquisitioncostJan1,200657951131692664906490Additions102890219309385943Additions/merger44524452AcquisitioncostDec31,200611275203313308742857433Additions347125473797797AcquisitioncostDec31,200711622215913781822558230Acc.
depreciationsJan1,2006-2771-146-2917-4884-4884Depreciationofthefinancialyear-803-405-1208-827-827Reductioninvalue-3874-149-4023Acc.
depreciationsDec31,2006-7448-700-8148-5711-5711Depreciationofthefinancialyear-839-540-1380-953-953Acc.
depreciationsDec31,2007-8288-1240-9528-6665-6665BookvalueasatDec31,2006382713335160171651721BookvalueasatDec31,200733359184253156151565(EUR1000)37F-SecureCorporationNOTESTOTHEFINANCIALSTATEMENTS8.
InvestmentsGroupcomp.
AssociatedTotalsharescomp.
sharesBookvalueasatJan122341264Additions1818BookvalueasatDec3124141282NameCountryofincorporationShareofownership(%)ParentF-SecureCorporation,HelsinkiFinlandDF-DataOy,HelsinkiFinland100F-SecureInc.
,SanJoseUnitedStates100F-SecureLtd,LondonGreatBritain100NihonF-SecureCorp.
,YokohamaJapan100F-SecureGmbH,MünchenGermany100DF-MobileGmbH,MünchenGermany100F-SecureSARL,PoissyFrance98F-SecureAB,StockholmSweden100F-SecureSrl,MilanoItaly100F-SecureSPz.
o.
o.
,WarsawPoland100F-SecureCorporation(M)SdnBhd,KualaLumpurMalaysia100F-Secure(M)SdnBhd,KualaLumpurMalaysia100F-SecurePvtLtd,MumbaiIndia100F-SecurePteLtd,SingaporeSingapore100F-SecureB.
V.
,UtrechtTheNetherlands100AssociatedcompaniesShareofownership(%)VineyardInternationalLtd,HelsinkiFinland32.
99.
DeferredtaxFASFAS20072006DeferredtaxassetsTaxchargedtoshareholders'equity-Changeinfairvalue,available-for-sale18Total18DeferredtaxliabilityTaxchargedtoshareholders'equityOthertemporarydifferences-Changeinfairvalue,available-for-sale14Total1410.
InventoriesOtherinventories230148(EUR1000)38F-SecureCorporationNOTESTOTHEFINANCIALSTATEMENTS(EUR1000)11.
ReceivablesFASFAS20072006Non-currentReceivablesfromgroupcompaniesOtherreceivables679930Total679930CurrentreceivablesTradereceivables1443411557Loanreceivables512Otherreceivables4141Prepaidexpensesandaccruedincome28333465Total1731315075ReceivablesfromgroupcompaniesTradereceivables51834595Otherreceivables768402Total59514997Totalcurrentreceivables2326420072MaterialitemsincludedinprepaidexpensesandaccruedincomeUninvoicedsales278Prepaidexpenses677595Prepaidexpenses,royalty19412422Accruedinterest216170Total2833346512.
Short-terminvestmentsShort-terminvestmentsconsistofinterest-bearingdebtsecuritiesandsharesinfundsinvestedinsimilarinstruments.
Forassetsthatareactivelytradedinorganizedfinancialmarkets,fairvalueisdeterminedbyreferencetoStockExchangequotedmarketbidpricesatthecloseofbusinessonthebalancesheetdate.
Assets,whichfairvaluecannotbemeasuredreliably,arerecognizedatcostlessimpairment.
Thefairvaluechangesofshort-terminvestmentsarerecognizedinshareholders'equityunderfairvaluereserve.
FairvalueasatJan15466253451Additions/deductions,net167831586Changeinfairvalue123-375FairvalueasatDec317156854662Shares-unlisted143143Maturitydatemorethan3months57025926Maturitydatelessthan3months6572348592FairvalueasatDec317156854661AcquisitionvalueasatDec31715135473013.
Cashandshort-termdepositsForthepurposesofthecashflowstatement,cashandcashequivalentscomprisethefollowingatDecember31:Cashatbankandinhand72207888Available-for-sale7142554519Total786456240739F-SecureCorporationNOTESTOTHEFINANCIALSTATEMENTS(EUR1000)14.
Statementofchangesinshareholders'equityParentCompanyShareShareShareFairUnrestrictedRetainedTotalcapitalissuepremiumvalueequityearningsequityFASfundreservereserveEquityDec31,2005154738358752271881256498Available-for-salefinancialassets,net-277-277Resultofthefinancialyear74077407Dividend-10834-10834Registrationofshareissue1-3838Exerciseofoptions269121191EquityDec31,200615496836034-511538552985Available-for-salefinancialassets,net9191Resultofthefinancialyear1568015680Dividend-3101-3101Registrationofshareissue1-6968Exerciseofoptions0471764Otherchange-3600036000EquityDec31,20071550461194136000279656572015.
Shareholders'EquityOnDecember31,2006,theCompanyhad154,936,468sharesissuedandoutstanding.
Theregistrationprocessof93,600sharesconvertedthroughtheuseofwarrantswaspendingasofDecember31,2006.
Duringtheyear,119,870ordinarysharesof0.
01euroeachweresubscibedwithwarrantsattachedtoF-Secureoptionprograms.
TheCompany'ssharecapitalamountedto1,550,563euroandthenumberofshareswas155,056,338attheendoftheyear2007.
Theregistrationprocessof74,780sharesconvertedthroughtheuseofwarrantswaspendingasofDecember31,2007.
TheregistrationwillincreasetheCompany'ssharecapitalby748euroandtherestwillbebookedintothesharecapitalpremiumaccount.
Seegroupdisclosure16.
Shareholders'EquityDistributableshareholders'equityonDecember31,2007Unrestrictedequityreserve36000Retainedearnings12284Resultofthefinancialyear15680Distributableshareholders'equityonDecember31,20076396516.
Share-basedpaymenttransactionsSeegroupdisclosure17.
Share-basedpaymenttransactions40(EUR1000)17.
ProvisionsBydecisionofHelsinkiDistrictCourtonSeptember2005aprovisionisrecognizedforGroup'sliabilityforpaymentofadditionalconstructionworkdonebySRVforheadquarterpremises.
FASFAS20072006BookvalueasatJan111831113Arisingduringtheyear9679Utilised-9BookvalueasatDec3112791183SRV1279118318.
LiabilitiesNon-currentliabilitiesDeferredrevenues39073290Total39073290CurrentliabilitiesDeferredrevenues2157818008Tradepayables17551892Otherliabilities1162799Accruedexpenses80786955Total3257327655LiabilitiestothegroupcompaniesAdvancepayments32193138Tradepayables4Otherliabilities23482613Total55705750Totalcurrentliabilities3814333405MaterialamountsshownunderaccrualsanddeferredincomeAccruedpersonnelexpenses44074778Deferredroyalty11801211Accruedexpenses1316900Accruedtax117566Total8078695519.
FinancialriskmanagementobjectivesandpoliciesSeeGroupdisclosure21.
FinancialriskmanagementobjectivesandpoliciesF-SecureCorporationNOTESTOTHEFINANCIALSTATEMENTS41F-SecureCorporationNOTESTOTHEFINANCIALSTATEMENTS(EUR1000)20.
NotestocashflowstatementFASFASAdjustments20072006Deferredincome39772920Depreciationandamortization23332035Otheradjustments214065Financialincomeandexpenses-1728-1473Incometaxes56364005Total102391155321.
OperatingleasecommitmentsTheGrouphasenteredintocommercialleasesonofficespaceandonmotorvehicles.
Motorvehicleleaseshaveanaveragelifeofthreeyearsandofficespacebetweentwoandfiveyearswithrenewaltermsincludedinthecontracts.
Futureminimumrentalspayableundernon-cancellableoperatingleasesasat31DecemberareasfollowsAslesseeWithinoneyear25422468Afteroneyearbutnotmorethanfiveyears49937204Total75359672TheGrouphasenteredintocommercialleasesonunusedofficespace.
Leaseshaveanaveragelifebetweenoneandthreeyearswithrenewaltermsincludedinthecontracts.
Futureminimumrentalreceivablesundernon-cancellableoperatingleasesat31DecemberareasfollowsAslessorWithinoneyear162256Afteroneyearbutnotmorethanfiveyears23Total16227922.
ContingentliabilitiesGuaranteesforothergroupcompanies1415OtherliabilitiesOthers238246DerivativesseeGroupdisclosure21.
Financialriskmanagementobjectivesandpolicies23.
SharesandshareholdersSeeGroupdisclosure26.
Sharesandshareholders24.
KeyratioSeeGroupdisclosure27.
Keyratios42TotheshareholdersofF-SecureCorporationWehaveauditedtheaccountingrecords,thereportoftheBoardofDirectors,thefinancialstatementsandtheadministrationofF-SecureCorporationforthefinancialyear2007.
TheBoardofDirectorsandtheManagingDirectorhavepreparedtheconsolidatedfinancialstatements,preparedinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEU,aswellasthereportoftheBoardofDirectorsandtheparentcompany'sfinancialstatements,preparedinaccordancewithprevailingregulationsinFinland,containingtheparentcompany'sbalancesheet,incomestatement,cashflowstatementandnotestothefinancialstatements.
Basedonouraudit,weexpressanopinionontheconsolidatedfinancialstatements,aswellasonthereportoftheBoardofDirectors,theparentcompany'sfinancialstatementsandtheadministration.
WeconductedourauditinaccordancewithFinnishStandardsonAuditing.
ThosestandardsrequirethatweperformtheaudittoobtainreasonableassuranceaboutwhetherthereportoftheBoardofDirectorsandthefinancialstatementsarefreeofmaterialmisstatement.
Anauditincludesexaminingonatestbasisevidencesupportingtheamountsanddisclosuresinthereportandinthefinancialstatements,assessingtheaccountingprinciplesusedandsignificantestimatesmadebythemanagement,aswellasevaluatingtheoverallfinancialstatementpresentation.
ThepurposeofourauditoftheadministrationistoexaminewhetherthemembersoftheBoardofDirectorsandtheManagingDirectoroftheparentcompanyhavecompliedwiththerulesoftheCompaniesAct.
ConsolidatedfinancialstatementsInouropiniontheconsolidatedfinancialstatements,preparedinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEU,giveatrueandfairview,asdefinedinthosestandardsandintheFinnishAccountingAct,oftheconsolidatedresultsofoperationsaswellasofthefinancialposition.
Theconsolidatedfinancialstatementscanbeadopted.
Parentcompany'sfinancialstatements,reportoftheBoardofDirectorsandadministrationInouropiniontheparentcompany'sfinancialstatementsandthereportoftheBoardofDirectorshavebeenpreparedinaccordancewiththeFinnishAccountingActandotherapplicableFinnishrulesandregulations.
Theparentcompany'sfinancialstatementsandthereportoftheBoardofDirectorsgiveatrueandfairviewoftheparentcompany'sresultofoperationsandofthefinancialposition.
ThereportoftheBoardofDirectorsisconsistentwiththeconsolidatedfinancialstatements.
Theparentcompany'sfinancialstatementscanbeadoptedandthemembersoftheBoardofDirectorsandtheManagingDirectorsoftheparentcompanycanbedischargedfromliabilityfortheperiodauditedbyus.
TheproposalbytheBoardofDirectorsregardingthedisposalofdistributablefundsisincompliancewiththeCompaniesAct.
Helsinki,February13,2008ERNST&YOUNGOYAuthorizedPublicAccountantFirmErkkaTalvinkoAuditorsreport43CorporateGovernanceGeneralF-SecureCorporation(theCompany)appliesprinciplesofsoundcorporategovernanceandhighethicalstandards,complyingwiththeFinnishCompaniesAct,SecuritiesMarketActandotherregulationsontheadministrationofpubliccompaniesissuedbytheauthorities.
TheCompanycomplieswith,asexplainedbelow,theCorporateGovernancerecommendationsforpubliclistedcompaniespublishedinDecember2003byOMXNordicExchangeHelsinki,theCentralChamberofCommerceofFinlandandtheConfederationofFinnishIndustryandEmployers.
ThekeyelementsoftheCompany'sCorporateGovernancesystemarebrieflydescribedbelow.
AmoredetaileddescriptionisavailableontheCompany'swebsite,aswellasdetaileddescriptionsoftheArticlesofAssociation,thedecisionsofthelatestAnnualGeneralMeeting,thecompositionoftheBoardofDirectors,therulesofprocedureoftheBoardofDirectors,thecharterofthecommitteesoftheBoardofDirectors,thecompositionoftheExecutiveTeamandthelistofpermanentinsiders.
AnnualGeneralMeetingofShareholdersTheCompany'shighestgoverningbodyistheAnnualGeneralMeetingofShareholders.
TheAnnualGeneralMeeting(AGM)shallbeheldwithinaperiodfromtheendofthefinancialyearasproposedbytheBoardofDirectorsandasdefinedbythelaw.
TheAGMshallconfirmremunerationstotheBoardmembersandauditors,decidethenumberofmembersontheBoardofDirectors,appointBoardmembers,approvethefinancialstatement,determinetheamountofdividendsandselecttheauditorsandotherissuesasdescribedinArticleofAssociationsoftheCompanyandinFinnishCompaniesAct.
ThedecisionsofAGM2007arepresentedintheBoardofDirectors'reportonpage6.
BoardofDirectorsTheoperationoftheBoardofDirectorsisgovernedbytheFinnishCompaniesAct,theArticlesofAssociationoftheCompany,decisionsoftheGeneralMeetingsofshareholders,legislationonaccountingandthesecuritiesmarket,andtherulesoftheOMXNordicExchangeHelsinki.
TheBoardrepresentsallshareholders.
TheBoardshallalwaysworktothebestadvantageoftheCompanyandallofitsshareholders.
TheBoardshallmanagethebusinessoftheCompanywiththeaimofachievingthebestpossiblereturnoninvestedcapitalforshareholdersinthelongterm.
ThedutiesandresponsibilitiesoftheBoardaredefinedaccordingtotheArticlesofAssociationoftheCompany,theFinnishCompaniesActandotherapplicablelawsandregulations.
TheBoardisauthorizedtodealwithanymatters,whichthelawortheArticlesofAssociationdonotstipulatetobedecidedorperformedbyotherorgans.
TheBoardisresponsibleformakingsurethatsupervisionoftheCompany'saccountingandfinancialmanagementisdulyorganized.
ThemeetingsoftheBoardshallregularlydiscussreportspresentedbytheCEOoftheCompanyonthefinancialstatusandoperationsoftheCompany.
Furthermore,itisthedutyoftheBoardtopreparematterstobehandledbytheshareholders'meeting,todecideontheconveningoftheshareholders'meetingandtomakesurethatthedecisionsmadeattheshareholders'meetingareputintoeffect.
Anymattersthataresignificantorfar-reachingfromtheCompany'spointofviewshallbedealtwithbytheBoard.
Theseincludestrategicoutlines,approvalofbudgetsandoperatingplansandsupervisionofhowtheseareputintoeffect,acquisitionsandcorporatestructure,anymajorinvestmentsinregardwiththeCompany'soperation,organizationofthesupervisionofaccountingandfinancialmanagement,internalmonitoringsystemsandriskmanagementaswellaspersonnelpoliciesandrewardsystems.
AccordingtotheArticlesofAssociation,theBoardshallcontainaminimumofthreeandamaximumofsevenpermanentmembers.
Theannualshareholders'meetingshalldecideonthenumberofBoardmembersinaccordancewiththeArticlesofAssociationandelecttheBoardmembers.
TheBoardmembersshallelectaChairmanfortheBoardfromamongitsmembers.
TheBoardmembersshallalsoelectasecretary,whomaybeanon-memberoftheBoard.
ThetermoftheBoardmembersisoneyear.
ThetermendsattheendofthenextAnnualGeneralMeetingofShareholdersthatfollowstheelectionoftheBoardmembers.
ThenumberoftermsoftheBoardmembersisnotlimited.
ThedistributionoftasksorareasofresponsibilityoftheBoardmembersisnotspecified,exceptfortheCommitteessetbytheBoardasdescribedbelow.
TheBoardofDirectorsshallconveneupontherequestoftheChairmanatleastfivetimesduringitsterm.
Theaimistohavemeetingsatregularintervalsaswellaswhendeemednecessary.
IfatleasttwoBoardmembersrequestthattheBoardconvenes,theBoardshallmeetinnolessthanfourweeksfromthesaidrequest.
TheBoardoftheCompanyhassetuptwoCommitteestoassisttheBoardinitsduties:theAuditCommitteeandtheExecutiveCommittee(NominationandCompensation).
TheAuditCommitteeprepares,instructsandevaluatesriskmanagement,internalsupervisionsystems,financialreportingandauditingofaccounts,andinternalauditing.
TheExecutiveCommittee(NominationandCompensation)preparesmaterialandinstructswithissuesrelatedtothecompositionandcompensationoftheBoardofDirectorsandremunerationofothermembersoftopmanagement.
TheCommitteesareneitherdecision-makingnorexecutivebodies.
TheAnnualGeneralMeetingdecidesontheremunerationtobepaidtothemembersoftheBoard.
ThedecisionsoftheAGMonMarch20,2007relatedtoBoardcompositionandremunerationaredescribedintheBoardofDirector'sreportonpage6,alongsidewiththeBoard'sdecisionsontheelectionofChairman,ViceChairmanandCommitteeChairmen.
44ThemajorityofBoardmembersshallbeindependentfromtheCompanyandfromitsmajorshareholders.
BoardmembersshallbefullyqualifiedforthetaskandabletodevoteasufficientamountoftimeforBoardwork.
CurrentlyfourBoardmembersoutofsixhavenodependenceontheCompany.
Mr.
RistoSiilasmaaactedastheCEOoftheCompanybeforeassumingtheresponsibilitiesofthechairmanoftheBoard.
Mr.
RistoSiilasmaaisthebiggestshareholderoftheCompany.
Mr.
AriHyppnenhasactedasCTOoftheCompanyandisamajorshareholderoftheCompany.
TheBoardconsidersthatgrantedoptionsarenotsignificantenoughtoendangertheindependenceoftheBoard.
During2007theBoardhad14meetingsandtheattendanceratewascloseto100%.
TheBoardshallconductanannualself-assessmentofitsoperations.
ThepurposeofthisassessmentistoexaminehowtheworkoftheBoardhasbeencarriedoutduringtheyear.
Theassessmentwillalsobeusedasthebasisforanyfurtherevaluationandimprovementoftheworkingmethods,practicesandcompositionoftheBoard.
CEOTheBoardshallappointtheCEOanddecideuponhis/herremunerationandotherbenefits.
TheCEO'sdutiesincludemanagingthebusinessaccordingtotheinstructionsissuedbytheBoard,presentingthematterstobedealtwithintheBoard'meeting,implementingthemattersresolvedbytheBoard,andotherissuesdeterminedintheCompaniesAct.
TheBoardconfirmsthesalaryandotherbenefitsoftheCEO.
TheCEO'sretirementageandthedeterminationofhis/herpensionconformtothestandardrulesspecifiedbyFinland'sEmployeePensionAct.
TheperiodofnoticefortheCEOistwelve(12)monthsbothwaysandtherearenoseparatecompensationsfordismissal.
During2007,theCEO,Mr.
KimmoAlkio,waspaidatotalamountofEUR426,750includingallbonuses.
ExecutiveTeamTheCompany'sExecutiveTeamassiststheCEOinthemanagementanddevelopmentoftheCompany.
TheCEOappointstheexecutiveteammembersanddecidesuponthetermsandconditionsoftheiremployment.
TheBoardofDirectorsapprovescompensationfortheexecutiveteams.
Bonusesandgrantofstockoptionsarebasedonperformanceofthegroupandtheindividual.
TheExcecutiveTeamassemblesregularlyonceamonthandseparatelyasneeded.
AuditorsandInternalControlsTheCompany'sauditorisErnst&YoungOy,afirmofAuthorizedPublicAccountants.
Theauditor'stermofserviceisoneyear.
APAErkkaTalvinkoisactingasresponsiblepartnerandisresponsibleforthedirectionandcoordinationoftheauditwork.
TheauditorwillreporttotheBoardatleastonceayear.
During2007,theGrouppaidatotalofEUR108,360forauditingactivitiesandEUR71,610forotherservices.
TheExecutiveTeam,FinancialManagementandSecurityTeamareresponsiblefortheinternalcontrolandinstructionsintheCompany.
Regularauditswillbeperformedinthedifferentbusinessunitsaswellasinthesubsidiaries.
Thepurposeistoensurecompliancetotheconsistentadministration,accountingpracticesandinformationsecurityoftheF-SecureGroup.
RiskManagementThegoalofriskmanagementistoidentifyrisksthatmayhindertheCompanytoachieveitsbusinessobjectives.
TheresponsibilityfortheCompany'sriskmanagementlieswiththeCEOandtheExecutiveTeam.
TheBoardofDirectorsandthecommitteesapproveandfollowupthereportingprocedures,andmonitortheadequacy,appropriatenessandeffectivenessoftheCompany'sbusinessandadministrativeprocesses.
WeeklyandmonthlyfinancialreportingthatcoverstheentireGroupisusedtomonitorhowwellfinancialtargetsarebeingmet.
Thereportsincludeactualfigures,plansandup-to-dateforecasts.
TheCompanyhassoughttomanagetherisksrelatingtoitsbusinessoperationsbydevelopingitsoperatingprocessesandcontrolsystems.
TheCompany'sriskmanagementteamregularlymonitorsandcoordinatesactivitiestomitigatethethreats.
TheCompanydoesnotprovidefinancingoutsideindustrystandardpaymentterms.
InvoicingismainlydoneinEuros.
Thereisexchangerateriskwithsomecurrencies.
Inordertominimizetheimpactoffluctuationinexchangeratesthegoalistohedgetheestimatedcashflowofthesecurrencies.
TheinvestmentpolicyoftheCompanyforcashreservesisconservative.
Cashismainlyinvestedinshort-termfundsandotherlowriskinvestments.
TheCompany'scriticalITsystemsarereviewedexternallytoensuretheirsecurity.
TheCompanymonitorssystemsinternallyaswell.
InsiderRegulationsandSilentPeriodTheCompanyfollowstheinsiderregulationsoftheHelsinkiStockExchange.
Insidersaredividedintothreecategories:(1)permanentinsidersincludingthemembersoftheBoard,theauditors,andtheExecutiveTeam,(2)permanentcompany-specificnon-publicinsidersincludingpersonswhobyvirtueoftheirpositionortaskslearninsideinformationonaregularbasis,and(3)projectbasedinsiders.
Permanentpublicinsidersandpermanentcompany-specificinsidersarenotentitledtotradeshares,optionsorothersecurities21dayspriortopublicationofinterimfinancialstatementsorcompanyaccounts.
TheCompanyhasaSilentPeriodof21daysbeforeeachquarterlyfinancialreportannouncement.
DuringtheSilentPeriodtheCompanywillnotarrangemeetingsorconferencecallswiththeinvestorcommunity.
45BoardofDirectorsRistoSiilasmaaRistoSiilasmaaisthefounderofF-SecureandservedasthePresidentandCEOofthecompanyuntilNovember5,2006.
SincethenhehasheldthepositionofChairmanoftheBoardofDirectors.
HeisalsoaChairmanoftheBoardsofEkahauInc.
,EfecteCorporationandFruugoInc.
HeisamemberoftheBoardofDirectorsofBlykLtd.
,andmemberoftheBoardoftheFederationofFinnishTechnologyIndustriesandamemberoftheBoardofElisaCorporation.
Mr.
SiilasmaaservesalsoontheCommunicationsAdministrationadvisoryboardoftheMinistryofTransportandCommunications,Finland.
RistoSiilasmaaisamemberoftheadvisoryboardsoftheHelsinkiUniversityofTechnologyandHelsinkiUniversityofEconomics.
SariBaldaufSariBaldaufhasbeenamemberoftheBoardofF-Securesince2005andchairsitsExecutiveCommittee.
SheservesalsoontheBoardofDirectorsofCapManPlc,HewlettPackardCompany,SanomaCorporation,andSupervisoryBoardofDaimlerAG.
PreviouslysheworkedformorethantwentyyearswithNokiaCorporation;asamemberoftheGroupExecutiveBoard,1994-2005andExecutiveVicePresidentandGeneralManagerofNetworks,1998-2005.
Inadditiontobusiness,Sari'sinterestincludeworkforthebenefitofchildren&youthaswellasculture.
SheservesontheBoardofInternationalYouthFoundation,FoundationforEconomicEducationandEVA(ElinkeinoelmnValtuuskunta).
SheisamemberoftheBoardofTrusteesofFinnishCulturalFoundation,GlobalAdvisoryBoardofIEBusinessSchool(Madrid)andAdvisoryBoardofHelsinkiSchoolofEconomics.
SheisChairmanoftheBoardofSavonlinnaOperaFestival.
SariearnedaB.
Sc.
degreein1977andMasterofScience(BusinessAdministration)in1979fromtheHelsinkiSchoolofEconomicsandBusinessAdministration,FinlandandsheholdshonorarydoctoratedegreefromtheHelsinkiUniversityofTechnologyandtheTurkuSchoolofEconomicsandBusinessAdministration.
PerttiErviPerttiErviisanindependentconsultantandinvestor.
HehasservedontheBoardsince2003.
Mr.
ErviisalsoChairmanoftheBoardsofMentoriumVentureConnectionOy,InventureOy,ForteNetservicesOy,TrackwayOyandStonesoftCorporation.
Heco-foundedComputer2000FinlandOyandservedasaMDforthecompanyuntil1995.
AfterthatheworkedasCo-PresidentforComputer2000AGinternationalheadquartersinMunich,Germany.
Mr.
ErvihasworkedcloselyatinternationalmanagementlevelwithmajorITVendorslikeCisco,IBM,Intel,HPandMicrosoft.
Mr.
ErviholdsaB.
Sc/ElectronicsdegreefromTekniskaLroverket(SwedishInstituteofTechnology)inHelsinki.
Hehasalsocompletedseveralfinancialandmanagementstudies.
AlexisSozonoffAlexSozonoffhasservedasamemberoftheBoardofF-Securesince2005.
Mr.
SozonoffhasbeenworkingforHewlett-PackardCompanysince1967.
In1981heworkedforHarrisInformationSystemsasVicePresidentofInternationalOperations.
HelaterrejoinedHPandhasbeenworkinginseveralpositions,asHP'sEuropeanGeneralManageroftheComputerProductsSalesandDistributionOrganization,VicePresidentandGeneralManagerofHP'sWorldwideChannelBusinessandasGeneralManagerofComputerMarketingandOperations,developingthee-WorldVisionforHP,whicheventuallybecameHP'se-servicesstrategy.
In1997,hewasnamedExecutiveoftheYearbytheNorthAmericanNationalAccountManagementAssociation(NAMA).
Mr.
SozonoffwasVicePresidentofCustomerAdvocacyforHewlett-Packarduntilhisretirementin2002andservedassenioradvisortotheCEOofHP.
InadditiontoactingasChairmanofGlobalBeach,aprivatelyheldinteractivemarketingorganizationbasedinLondon,Mr.
SozonoffservesasChairmanofEuropeanWholesaleGroup(EWG),Switzerland.
InadditionheisChairmanoftheBoardofHewlett-PackardFinlandandBalticsheisalsoontheHewlett-PackardRussiaAdvisoryBoard.
HehasbeenaMemberoftheBoardofthesecondlargestRussianmobileoperatorVimpelComuntilJune2005.
HeisalsoViceChairmanoftheGeneva-basedSirPeterUstinovCharityFoundation.
Mr.
SozonoffholdsaBachelor'sdegreeineconomicsfromtheUniversityofTennesseeinKnoxvilleandadegreefromtheNijenrodeUniversityinBreukelen,Netherlands.
HealsograduatedfromtheWhartonAdvancedManagementProgramin1995.
MarkoAhtisaariMarkoAhtisaariisHeadofBrand&DesignatBlyk,theEuropeanfreemobileoperatorforyoungpeople,fundedbyadvertising.
Blykhasbeenindevelopmentsince2006andisbackedbySofinnovaPartners.
FromJanuary2005toSeptember2006Mr.
AhtisaariworkedasDirectorofDesignStrategyatNokia.
HejoinedNokiain2002andheldmanagementpositionsincorporatestrategyandventuring,alwayswithafocusoncreatingnewgrowththroughbetteruserexperience.
From1999to2001Mr.
AhtisaaribuiltandledthemobilepracticeatdigitalservicescompanySatamaInteractive.
From1994to1997hewasalecturerandFellowoftheFacultyofPhilosophyatColumbiaUniversityintheCityofNewYork.
Mr.
AhtisaariservesontheboardofdirectorsofArtekoyabandisanadvisortoFON,thelargestWiFicommunityintheworld.
In2006heservedonthejuryoftheinternationalPrixArsElectronica.
Mr.
Ahtisaariisco-founderoftheAulanetworkthatorganizeseventsinFinlandwiththeworld'sleadingexpertsonInternetservicebusinessanddesign.
MarkoAhtisaariholdsaBAdegreesummacumlaudeinEconomicsandPhilosophyandaMAdegreeinPhilosophyfromColumbiaUniversityintheCityofNewYork.
AriHyppnenAriHyppnenisChiefTechnologyOfficeratF-Secure.
HehasservedontheBoardsince1999.
Priortojoiningthecompanyin1989,Mr.
HyppnenworkedforStateComputingFacility,NixuLtd.
,theDipoliInstituteandWiseManLtd.
HehasservedintheStateofFinland'sAdvisoryCommitteeforInformation46SecurityandparticipatedinthedevelopmentoftheNationalInformationSecurityStrategy.
HeholdsaCISSP(CertifiedInformationSystemsSecurityProfessional)certificationgrantedbytheInternationalInformationSystemsSecurityCertificationConsortium.
Hyppnenstudiedcomputerscience,internationalmarketingandoccupationalpsychologyatHelsinkiUniversityofTechnology,andgraduatedwithaM.
Sc.
degreeattheCentreofSupercomputingandAstrophysicsatSwinburneUniversityofTechnology,Melbourne.
KimmoAlkioKimmoAlkiostartedasthePresidentandCEOofF-SecureCorporationonNovember6,2006.
Mr.
AlkiojoinedF-SecurefromNokiawherehewastheVicePresidentfortheConsulting&Integrationbusiness(April2005-Oct2006)andservedasamemberoftheGlobalServicesBusinessUnitmanagementteamwithinNetworks.
PriortoNokiaMr.
AlkiowaswithF-SecureastheChiefOperatingOfficer(2001-2005).
Intheearlierstagesofhiscareer,MrAlkiospent14yearswithDigitalEquipmentCorporationandCompaqComputerinnumerousmanagementpositionswithbothEuropeanandglobalresponsibilitiesoutoftheheadquarteroperationsinSwitzerland,GermanyandtheUnitedStates.
Duringhis20yearsworkingintheIT,softwareandtelecommunicationsindustries,hehasheldseniormanagementpositionsforproductandservicebusinessesforOperator,EnterpriseandDistribution-basedcustomersegments.
MrAlkioholdsaBBAdegreefromTexasA&MUniversityandExecutiveMBAdegreefromHelsinkiUniversityofTechnology.
AnttiReijonenAnttiReijonenisVicePresidentofStrategyofF-SecureCorporation.
BeforejoiningF-SecureheworkedatNokiaNetworksServicesasDirectorofStrategyandPortfolioinConsulting&IntegrationservicebusinessandpriortothatheservedasEngagementManagerwithMcKinsey&Company.
Mr.
ReijonenholdsaMasterofSciencedegreefromHelsinkiUniversityofTechnologyandanMBAfromINSEAD.
TaneliVirtanenTaneliVirtanenistheChiefFinancialOfficerofF-Secure.
PriortojoiningFSecurein1999,Mr.
VirtanenworkedforSantasalo-JOTGroupasGroupController.
HeholdsaMasterofSciencedegreeinEconomicandBusinessAdministrationfromtheHelsinkiSchoolofEconomics.
EilaMustalaEilaMustalaisVicePresident,HumanResourcesofF-SecureCorporation.
ShehaspreviouslyservedasSeniorVicePresidentofHumanResourcesatPerlosandpriortothatVicePresident,HR,Strategy,RenewalandOperationalExcellenceatNokiaCorporation.
BeforethatsheworkedinseveralothermanagerialpositionsatNokiaCorporation,NokiaNetworksandNokiaMobilePhones.
IntheearlierstagesofhercareershehasworkedasHRManageratMcDonaldsOy,DirectorofHumanResourcesatDigitalEquipmentCorporation,recruitmentandtrainingmanageratOyPhilipsAbandasconsultantatMPS-FinlandOy.
Ms.
MustalaholdsaBachelorofSciencedegreefromHelsinkiUniversity.
PirkkaPalomkiPirkkaPalomkiisExecutiveVicePresident,Research&DevelopmentofF-SecureCorporation.
HejoinedF-Securein1997andhaspreviouslyheldpositionsinproductmanagementandmarketing.
PriortojoiningF-Secure,Mr.
PalomkihasworkedatTelecomFinland(currentlyTeliaSonera)inthefieldofmarketing,businessdevelopmentanddevelopmentmanagementfordatacommunicationservices.
HeholdsaMasterofSciencedegreeinInternationalMarketingandBusinessStrategyfromHelsinkiUniversityofTechnology.
TrondNeergaardTrondNeergaardisVicePresidentofMarketingofF-SecureCorporation.
BeforejoiningF-SecureheworkedatSuuntoOyasHeadofGlobalSales.
PriortothatheservedasVicePresident,HeadofglobalconsumerbusinessunitatF-Secure.
Intheearlierstagesofhiscareer,Mr.
NeergaardworkedforseveralcompaniessuchasThalese-SecurityandforXeroxEuropeLtd.
(UK)inseveralmarketingandsalespositionsinthefieldofglobalsaleschannelandbusinessdevelopment.
TrondNeergaardholdsanengineeringdegreeinMachineConstructionandMaintenanceaswellinSafetyTechnologyofEngineering,fromHortenSchoolofEngineering,Norway.
TravisWitteveenTravisWitteveenisSeniorVicePresidentofSalesandGeographyOperationsofF-SecureCorporation.
PreviouslytheVicePresidentatF-SecureNorthAmerica,TravisiscreditedwithturningtheNorthAmericanoperationfromadirectsalesforcefocusedonencryptionproductstoaContentSecurityoperationsellingviaserviceprovidersandpartners.
BeforetheNorthAmericanposition,hewastheGeneralManagerofF-SecureGmbHinMunich,Germany,alsoresponsibleforoperationsinAustriaandSwitzerland.
PriortojoiningF-Securein1999,Mr.
WitteveenworkedasaCountryManagerforAxentTechnologies,RaptorSystemsInc,andFTPSoftware.
HeholdsBachelorofArtsandBachelorofSciencedegreesinFinanceandBusinessAdministrationfromNortheasternUniversityinBoston,Massachusetts.
AriAlakiuttuAriAlakiuttuisVicePresident,Products&ServicesatF-SecureCorporation.
HejoinedF-Securein2000andhaspreviouslyheldpositionsinproductmanagement,productmarketingandchanneldevelopment.
PriortojoiningF-Secure,Mr.
AlakiuttuworkedatTellabsandatNokiainthefieldofproductmanagementandproductdevelopmentfortelecommunicationsnetworkmanagement.
HeholdsaMasterofSciencedegreeinEngineeringfromtheUniversityofOulu.
ExecutiveTeam47CorporateHeadquartersF-SecureCorporationPL24,Tammasaarenkatu700181HelsinkiFinlandTel.
+358925200700Fax+358925205001helsinki@f-secure.
comBelgiumF-SecureCorporationc/oJoVanWinckelInterleuvenlaan62,Zone2,Bus563001Heverlee-LeuvenBelgiumTel:+3216394735Fax:+3216394737DenmarkF-SecureCorporationInternationalHouseCenterBoulevard5DK-2300KbenhavnSTel:+4532473347Mobile:+4526298847Finland:OuluF-SecureCorporationElektroniikkatie390570OuluFinlandTel.
+358925200700Fax+35885513701FranceF-SecureSARL38/44rueJeanMermoz78600MaisonsLaffitteFranceTel.
+33(0)820025508Fax:+33(0)139223002france@f-secure.
comGermanyF-SecureGmbHGanghoferstrae29a80339MünchenGermanyTel.
+498978746700Fax+498978746799Generalgermany@f-secure.
comHongKongF-SecureLtdCambridgeHouse,Level8TaikooPlace,979King'sRoadQuarryBayHongKongTel.
+85222932647Fax.
+85222932622hongkong@f-secure.
comIndiaF-SecurePvtLtd410,FourthFloor,PeninsulaPlaza,VeeraIndustrialEstateOffLinkRoad,Andheri(West)Mumbai400053IndiaTel:+912226744137Tel:+912226744147Fax:+912226744347India@f-secure.
comItalyF-SecureSrlViaGiorgioStephenson,43/A20157MilanoItalyTel.
+39(0)238093590Fax+39(0)238093591italy@f-secure.
comJapanNihonF-SecureCorporationSkyBldg.
23F,2-19-12Takashima,Nishi-ku,Yokohama220-0011JapanTel.
+81454406610Fax+81454406616japan@f-secure.
comMalaysiaF-SecureCorporation(M)SdnBhdSuite2A-5-2,Level5,Block2APlazaSentralJalanStesenSentral550470KualaLumpurMalaysiaTel.
+60322640200Fax+60322640299malaysia@f-secure.
comTheNetherlandsF-SecureB.
V.
Newtonlaan1153584BHUtrechtTheNetherlandsTel+31(0)302106243Fax+31(0)302106244USAF-SecureInc.
100CenturyCenterCourt,Suite700SanJose,CA95112,USATel:(888)4328233Fax:(408)3502339sanjose@f-secure.
comNorwayF-SecureCorporationNydalsveien330484OsloNorwayTel:+4721520062Fax:+4721520010PolandF-SecureSp.
z.
o.
o.
ul.
Hrubieszowska6a00-209WarszawaPolandTel:+48224318221Fax:+48224318220SingaporeF-SecurePteLtdNo.
9JurongTownHallRoad02-06TheiHubSingapore609431Tel.
+6562553720Fax+6562555846singapore@f-secure.
comSwedenF-SecureABBox717(postaladdress)16927SOLNA,SwedenGrdsvgen18(visitingaddress)16970SOLNASwedenTel.
+46850744000Fax+46850744001sweden@f-secure.
comUnitedKingdomF-SecureUKLimitedMercuryParkWycombeLaneWooburnGreenHighWycombeBuckinghamshireHP100HHUnitedKingdomTel:+44(0)8458903300Fax:+44(0)8458903301uk@f-secure.
comMoreinformation:www.
f-secure.
comhttp://support.
f-secure.
cominfo@f-secure.
comContactinformationwww.
f-secure.
com