comptel

Annual Report 2012

Compte Annual Report 2012

Content

Message from the CEO ... 3
Comptel in Brief ... 5
Comptel's Strategy ... 10
Corporate Governance Statement ... 13
Board of Directors and Executive Board ... 20
Board of Directors' report ... 24
Financial Statements ... 37
Shareholder Information and Annual Summary ... 127
Comptel Offices ... 129

Comptel

Message from the CEO

In 2012 we persisted to execute our strategy. We invested in the development of our services business, launched the new Comptel Fulfillment solution and made a strategic acquisition. We also launched our new corporate identity during the first quarter.

We continued executing our strategy according to the plans in 2012. Our net sales grew faster than the market and our services sales increased significantly. The key investment areas in research and development were fulfillment and advanced analytics offering which became part of our portfolio through acquisition. We improved our profitability significantly during the second half of the year. We have set profitability increase as the most important target for 2013.

We grew faster than the market, 7.4 per cent from the previous year. We won 13 new customers in total some of which are outside our traditional domain. Share of license sales decreased, however, a strong increase in delivery projects sales accompanied by sales of new services in line with our strategy resulted in strong growth in our services business.

We secured 15 significant orders, two of which were mediation consolidation projects of multiple communications service providers in South America and West Europe. In the fourth quarter we won a major fulfillment contract in West Europe as well as the largest analytics deal in Comptel's history with Robi Axiata in Bangladesh. Furthermore, we signed a partnership agreement with broadband infrastructure supplier, Nokia Siemens Networks.

At the end of the year, we centralised sales management under one global organisation aiming at improving sales efficiency.

We invested in research and development, and acquired analytic capabilities

We continued to grow investments, especially in the Comptel Fulfillment area, and completed a strategic acquisition by acquiring a Finnish software company, Xtract, which is a global leader in supplying advanced analytics.

Comptel Annual Report 2012

Comptel

By combining Xtract's analytics capabilities and Comptel's existing software, we will create an offering which will enable service providers automate their service fulfillment and customer interaction processes. With our real-time analytics solution communications service providers will be able to fully leverage exponentially growing data to drive enhancements in customer loyalty and targeted personalised marketing.

We are aiming at a market leading position in the customer interaction automation area.

Strong growth continued in our services business

Sales from our services business increased significantly in line with our strategic targets, with a growth rate of over 45 per cent from the previous year. Our customers' demand towards service engagements remained strong. Professional services, managed services as well as business and technology consultation strengthened our position as a reliable partner for operators going through business transformation.

The efficiency of our service operations improved significantly in the second half of the year. This development gives us a solid foundation to improve our overall profitability in 2013.

Foundation for growth and profitability

We continued to execute the strategic change process in 2012. Significant investments in research and development combined with improved operations brought us positive results in net sales and order backlog but did not yet impact the profitability of the company.

We successfully implemented cost saving measures initiated during the first half of the year which impacted the operating profit during the second half of the year.

We grew faster than the market and we estimate our net sales to grow from the previous year in 2013. Increased profitability is the most important target for us in 2013.

I want to thank our shareholders for the trust they have shown towards our company during this transformation. I also warmly thank our personnel for the exemplary and strong commitment to change, by applying our company values. Finally, I wish to thank our customers and partners for the close cooperation, which I trust will be further enhanced in 2013.

Helsinki, February 2013

Juhani Hintikka
President and CEO

Comptel Annual Report 2012

Comptel

Comptel in Brief

Comptel helps Communications Service Providers (CSP) automate their customer interactions, enabling them to enhance customer loyalty, increase revenues and improve profitability. We want to become the leading supplier of automated customer interaction solutions in the telecommunications industry.

CUSTOMER MANAGEMENT, BILLING, DECISION MAKING

Turns data into intelligent decisions.

EVENT

Collects usage data from the network and turns it into charges and information.

Translates decisions into timely and relevant actions towards the network or the customer.

ACTION

TELECOMMUNICATIONS NETWORKS, SOCIAL NETWORKS

Together with our customers and partners we create and implement new solutions, which help CSPs turn fast growing network data into intelligence, automated decisions and actions. These actions can be in the form of campaigns towards the subscribers or fine tuning of the network for better quality. We make data beautiful.

Comptel Annual Report 2012

Comptel

We have delivered our software to 290 customers in 86 countries during the past 26 years.

Our customers are leading global CSPs, including América Móvil, Bharti Airtel, China Mobile, Orascom, QTel, Saudi Telecom, T-Mobile, Telefónica O2, Vodafone, NBN Co, Zain and the joint venture of NTT DOCOMO and Axiata Group, Robi Axiata in Bangladesh.

We collaborate in sales and delivery services with our partners such as IBM, Alcatel-Lucent, Nokia Siemens Networks and Cisco.

Comptel today

Comptel processes 20 per cent of global mobile data records.

We employ over 600 highly skilled experts in 22 countries
Our solutions serve over 1 billion subscribers
We have delivered around 1,400 projects
20 of world's top 30 mobile service providers use Comptel's software
We process 20 per cent of global mobile data records
Comptel has over 1,000 interfaces to various software systems and network elements

Comptel

History

Comptel Annual Report 2012

Comptel

Key events 2012

Q1

Comptel takes the next step in its strategy execution, by acquiring the Finnish software company Xtract, a leading expert in advanced analytics. The acquisition completes our vision, enabling telecom operators to react quickly to events in telecommunications networks and establish automatic measures to improve customer experience.

Comptel wins three significant contracts. One of those is South American operator, Telefónica de Argentina S.A, who replaces the existing charging systems with Comptel's convergent mediation.

Comptel's Convergent Mediation software wins the 2012 IBM Beacon Award as the best Communications Industry Solution.

Comptel appoints Ulla Koivukoski as the head of marketing and communications and a member of the Executive Board.

The Annual General Meeting approved dividend pay-out of EUR 0.03 per share for 2011.

Q2

Comptel gets seven new customers and first analytics contract with Comptel Social Links software.

Comptel wins a large EUR 5.4 million project to consolidate the mediation systems of a West-European operator and centralise the mediation system of four Central American countries of Telefónica.

Comptel and Cisco Systems Inc. settle the dispute concerning Comptel's use of a certain sub-sets of Axios software.

Comptel launches a new generation Comptel Fulfillment platform which gains wide interest within customers and industry analysts.

Comptel's Customer Engagement solutions honoured in Pipeline's 2012 Innovation Award in the "Innovations of Customer Experience Management" category.

Q3

Comptel secures three new customers.

Comptel wins two major contracts in South America. One of the contract is beyond our traditional industry, with a Brazilian utility company. The other notable contract is an extension of the Telefónica de Argentina's mediation consolidation project.

Comptel wins a Comptel Social Links software contract with a leading operator group in the Middle East.

Comptel Policy Control wins Technology Platinum Award as the best policy control product of the industry for the second consecutive year. Comptel's analytics-driven policy control was recognised for its ability to leverage analytics, its proven functionalities and ease of implementation.

Comptel Annual Report 2012

Comptel

Q4

Comptel wins three new customers.

Comptel reorganises its Sales Leadership team and Executive Board by establishing a Chief Market Operations Officer (CMO) role, appointing Mauro Carobene, the head of West European business area as CMO. Decision includes reduction of the number of Executive Board members from twelve to seven.

As of 1 November, 2012, the members of Executive Board are, Mr Juhani Hintikka (CEO), Mr. Mauro Carobene (CMO), Mr. Mikko Hytönen (CFO), Mr. Antti Koskela (CTO), Mr. Kari Onniselkä (Services), Ms. Niina Pesonen (HR) and Ms. Ulla Koivukoski (Marketing and Communications).

Comptel wins a significant Comptel Social Links contract with a joint venture of Axiata Group and NTT DOCOMO, Robi Axiata, in Bangladesh.

Comptel's existing customer buys a large upgrade of Comptel Fulfillment solution.

An analyst firm Frost & Sullivan recognises Comptel's outstanding business performance and innovation in the information and communications technology sector in Australia.

Key figures

	2008	2009	2010	2011	2012
Net sales, EUR million	84.8	74.9	77.9	76.8	82.4
Net sales, change %	3.0	-11.7	4.0	-1.5	7.4
Operating profit/loss, EUR million	11.4	1.0	9.1	11.9	-13.5
Operating profit/loss, as % of net sales	13.4	1.4	11.6	15.5	-16.4
Operating profit excluding non-recurring items, EUR million	12.5	3.5	9.1	3.1	-0.8
Return on equity, %	12.8	-4.4	10.2	16.7	-37.2
Return on investment, %	19.1	1.1	16.6	23.6	-36.3
Equity ratio, %	67.4	62.6	71.6	66.5	46.8
Research and development expenditure, EUR million	14.0	15.6	13.4	15.4	18.6
Research and development expenditure, as % of net sales	16.5	20.8	17.2	20.1	22.5
Order backlog, EUR million	38.8	37.6	34.0	47.2	48.4
Average number of employees	606	613	586	623	700

Comptel Annual Report 2012

Strategy

Comptel's Strategy

Changing business environment

The business environment of Communications Service Providers (CSPs) is in transition in terms of technology evolution and new business models.

Exponential growth of the network events and transactions challenges CSPs' capability to use their infrastructure efficiently and leverage the data for competitive advantage.
Need for investments in new technologies and enhanced capacity require constantly improved cost efficiency.
Competition gets fierce with new international service providers and market maturity. Need for partnerships, and new service and business models is growing.

Basis for the strategy

CSPs are increasingly looking for special expertise to manage their changing business environments, which are experiencing an increase in service, technology and business model complexity. The competition for customers demands the development of more innovative offerings and a focus on individual service experience, all with a drive towards cost efficiency. In order to succeed in their competitive markets, CSPs need a higher level of automation in service and individual customer experience management.

Comptel's solutions collect and process staggering amounts of data and through analytics, they turn that data into intelligent decisions, timely and relevant automated actions. Our mission is to make data beautiful by automating CSPs' customer interactions. We are aiming at the market leadership in this area.

We will continue to further develop our services business – incorporating delivery and support services, managed services and consulting related to Comptel's products. Services complement our technology offering and strengthens our position as a trusted partner in the business transformation processes of CSPs.

The importance of partnerships will continue to grow in our new sales and marketing strategy. We will grow by further developing our sales capabilities – focusing marketing investments in securing new customers, entering new markets, winning larger deals and by up-selling and cross-selling to existing customers.

Executing the strategy

In the updated strategy for 2013 – 2015, Comptel continues to focus on its unique integrated Event – Analysis – Action strategic framework, which has a growth potential within the existing customer base and opens up opportunities in new markets and customer segments. Comptel's net sales are estimated to grow from the previous year in 2013. Operating profit is estimated to increase to 5 – 10% of net sales.

Comptel Annual Report 2012

Strategy

Comptel offers one of the leading software platforms to collect and efficiently process large amount of data. Our analytics software, integrated with this platform, analyses the data and turns it into intelligence and predictions, which we can translate into decisions and automated actions towards the network or subscribers. We help both technology and business organisations build seamless processes for automated customer interactions and improved customer experience.

Comptel differentiates from the traditional network and service management providers using innovative information extraction from the exponentially growing, customer and network data. Predictive, real-time analytics software helps operators understand fast changing customer needs. Analytics can enrich the existing mediation and fulfillment systems into an integrated Event - Analysis - Action -based, automated customer interaction solution. The new brand and related marketing themes, launched in 2012, helped Comptel achieve a thought leadership position with international industry analysts.

Comptel grows by executing our strategy in analytics and delivery services, and by further development of our services business. We will enhance sales channels through collaborative sales and marketing activities with leading companies or innovative challengers, and by providing our technology for cloud service charging and customer management systems. Furthermore, we will enhance our customer base by providing selected solutions as a service (Software as a Service, SaaS) model, in addition to the traditional systems.

Comptel Annual Report 2012

Strategy

In addition to licence sales we will grow through systematic development of our services business. Operators are increasingly interested in acquiring our specialist software competences when looking for automated work processes in order to deliver seamless customer experience. Growing demand for managed services brings new growth potential for Comptel.

Comptel's way of working

Comptel's way of working is built on new company values created in 2011. The values help us build a consistent, customer focused company culture. Executing the values helps us achieve the business objectives and employee satisfaction targets.

Passion: we are proud and excited about our achievements and the benefits we bring to our customers.
United: we work as a team and support each other to reach our common goal.
Respect: we listen to our customers, keep our promises and value diversity of thinking.
Make it happen: we focus on solutions, nothing is impossible.

Comptel Annual Report 2012

Corporate governance

Corporate Governance Statement

Governing principles

Comptel Corporation complies with the Finnish Limited Liability Companies Act, other regulations concerning publicly traded companies, Comptel Corporation's Articles of Association and the rules of NASDAQ OMX Helsinki Ltd.

In addition, Comptel complies with the Finnish Corporate Governance Code issued by the Securities Market Association which entered into force on 1 October 2010. The Corporate Governance Code can be read in full at www.cgfinland.fi

Duties and responsibilities of executive bodies

The highest decision making bodies in Comptel Corporation are shareholders at the General Meeting, the Board of Directors and the President and CEO of the Group.

General Meeting

The highest decision-making power in Comptel Corporation is vested in the General Meeting. In the General Meeting shareholders decide on the adoption of the financial statements, the use of the profit shown on the balance sheet, the discharge from liability of the Board members as well as the President and CEO, the number of Board members and the remuneration paid to the Board members and auditors. The General Meeting elects the Board members and, whenever necessary, the auditor and deputy auditors or the public accounting firm. In addition, any other business mentioned in the notice of the meeting is dealt with during the General Meeting.

The General Meeting of Comptel Corporation is summoned by the company's Board of Directors. According to the company's Articles of Association, the Annual General Meeting must be held each year before the end of June, on a date set by the Board.

Comptel Corporation's Annual General Meeting for 2012 was held on 26th of March 2012. The documents concerning the Annual Meeting are available on the company's website at www.comptel.com

Board of Directors

The duties and responsibilities of the Board of Directors are primarily defined by the Finnish Limited Liability Companies Act and the Articles of Association of Comptel Corporation. The Board of Directors controls and supervises the operational management of the company. The Board of Directors is responsible for ensuring that the company's financial accounting and financial management are properly organised.

The Board of Directors has confirmed the written charter that specifies the Board's duties, business to be handled, meeting practices and the decision-making processes. According to the written charter, the Board of Directors handles and decides on all matters that are financially, commercially or fundamentally significant to the Group's operations.

Comptel Annual Report 2012

Corporate governance

The Board of Directors confirms the Group's strategy, budget, corporate structure, major corporate arrangements and investments. Furthermore, the Board of Directors approves and confirms the principles of risk management, appoints and discharges the President and CEO, and decides on the terms and conditions of employment for the President and CEO.

The Board of Directors regularly evaluates its own operations and working practices. The Board also carries out a self-assessment in relation to its operations and working practices once a year.

As specified in the Articles of Association, the General Meeting elects a minimum of three and a maximum of six Board members. The Board members are elected for one year at a time so that the term of office for all Board members ends at the close of the following year's Annual General Meeting. The Board of Directors elects a chairman and a vice chairman from among its members.

The Annual General Meeting for 2012 elected the following five Board members: Pertti Ervi (Chairman), Eriikka Söderström, Hannu Vaajoensuu (Vice Chairman), Petteri Walldén ja Antti Vasara.

As a general rule, the Board of Directors convenes once a month and additionally, whenever necessary. In 2012 the Board of Directors convened 14 times (2011: 14). The average attendance of the members was 97 per cent (95).

All members of the Board are independent of the company and the company's significant shareholders.

Board Committees

In its first meeting held on 26th of March 2012 the Board of Directors decided not to set up committees based on the following criteria: Taking into account the company's size, a clear structure and a small number of Board members, it is more effective to act without separate committees until further notice. In addition, the significantly renewed Board sees it useful to get in its entirety acquainted with the cases previously processed in the committees.

In addition, whenever needed, the Board may also set temporary working committees to prepare subjects for the Board. Working committees did not convene in 2012.

President and CEO

The President and CEO is responsible for ensuring that the company's accounting is legally arranged and that the company's financial management is reliably organised.

The President and CEO is responsible for ensuring that the objectives, strategies, future plans, outlines and goals set by the Board of Directors are implemented and achieved by the Comptel Group. The President and CEO prepares the matters to be decided by the Board of Directors and executes the decisions made.

The President and CEO is appointed by the Board of Directors. The Board of Directors decides on the terms and conditions of President and CEO's employment, including the salary, other compensations and fringe benefits that are defined in the CEO's employment contract.

Mr Juhani Hintikka was the President and CEO of Comptel Corporation in 2012.

Comptel Annual Report 2012

Corporate governance

Executive Board

The duty of the Group Executive Board is to assist the President and CEO. The Executive Board consists of the directors of the business units and the units supporting business operations.

Comptel's business management is based on the operations of business units and cost centres. Comptel Corporation's subsidiaries operate within the respective business areas. The governance of the associated company is completely independent and is governed through a board membership in the respective company. The Executive Board is responsible for integrating the activities of the Group and its parts into an operating plan associated with the annual budget to implement the Group's strategies. During the year the results of the operations in relation to the budget and operating plan are reported monthly. The causes of any deviations as well as the measures taken to correct them are properly documented.

After the organisation changes implemented in October 2012 the members of the Executive included, in addition to President and CEO, Mr Mauro Carobene (CMO), Mr Antti Koskela (CTO), Mr Kari Onniselkä (Services), Mr Mikko Hytönen (CFO), Mrs Niina Pesonen (HR) and Mrs Ulla Koivukoski (Marketing and Communications).

In 2012 the Executive Board convened 11 times (2011: 11).

Insider administration

Comptel complies with the insider guidelines of NASDAQ OMX Helsinki Ltd. In accordance with the Securities Market Act, Comptel maintains a register containing information on the so called insiders with the duty to declare, in the SIRE system of Euroclear Finland Ltd. Insiders comprise permanent insiders and project-specific insiders.

At the end of 2012, there were 18 insiders with the duty to declare (18) and 51 company-specific permanent insiders (56). The insiders with the duty to declare include the Board members, CEO, the other Executive Board members and the principal auditor.

Comptel's insiders are obliged to comply with the so called closed window rule during which time no trading with the company's share is allowed. Comptel's closed window starts seven days before each quarter. The closed window ends 24 hours after the announcement of an interim report and financial statements bulletin. Comptel does not apply any 'open window' rule.

An updated list of the insiders with the duty to declare, their connections and their holdings is available on the company's website.

Comptel Annual Report 2012

Corporate governance

Auditing

According to the Finnish Auditing Act, statutory audits comprise the auditing of the accounts, financial statements, Board's report and administration. The General Meeting must be provided with an auditor's report including an opinion on whether the financial statements give correct and sufficient information about the Group's result and financial position at the close of the financial year. The auditors report to the Board of Directors on their work and observations.

The Annual General Meeting elected Ernst & Young Oy as the auditor of Comptel. Mr Heikki Ilkka (APA) is the principal auditor. KPMG Oy Ab acted as the auditor previously.

Communications

All essential information concerning Comptel's corporate governance as well as the stock exchange and press releases are published on the company's website.

Financial Reporting Process

Objectives of internal control

Internal control comprises all processes that are designed to provide reasonable assurance regarding the achievement of the company's objectives in the following matters: the efficiency of operations, cost-effective use of resources, reliability of financial reporting and compliance with the laws and regulations as well as the internal practices.

Internal control is an essential part of Comptel's corporate governance. Comptel's Board of Directors, management and other personnel take part in internal control processes.

The objective of Comptel's internal control is to ensure that:

company's operations are efficient and profitable
financial and operational information is reliable
entire Group complies with the regulations and policies

Internal control is not a separate process, but it is integrated into the company's day-to-day operations. Internal control covers all of Comptel processes, policies and organisational structures that help to ensure that the company is achieving its objectives, that the business conduct is ethical, that the assets are managed responsibly and that financial reporting is organised properly. Internal control includes, for example, reporting, delegation of authority and information on the compliance with the policies and practices.

Comptel Annual Report 2012

Corporate governance

Control environment

The company values are the foundation of Comptel's internal control. Comptel's values are: Passion, United, Respect, Make it happen. These common values act as guiding principles of the personnel. The company has also approved the code of conduct that guides the Group's operations. The values and the code of conduct are reflected in the day-to-day operations as well as in the internal guidelines, processes and practices, thus developing the corporate culture.

Comptel's management system is based on performance management. The strategy process controls the establishment of objectives. The annual Group-level financial and other targets are translated into targets for business and other units. Target setting is an integral part of each employee's performance management in Comptel. Roles and responsibilities are given in accordance with the strategy to promote the company's objectives.

The achievement of the Group's and individual business units' annual objectives is followed up through monthly management reporting. The Executive Board regularly monitors the reliability of the company's financial reporting. Comptel's financial reporting uses comprehensive Enterprise Resource Planning system. The Group's Financial Administration monitors internal and external accounting and reconciles and investigates the possible differences between the two.

Comptel applies the International Financial Reporting Standards (IRFS). Ensuring the reliability of financial reporting requires good organisation of the financial administration and accounting systems. The financial reporting process is monitored by the Board of Directors. In connection with the statutory audit, the auditor reviews the control environment of the financial reporting as part of auditing the administration.

Risk assessment

Risk management is an integral part of Comptel's internal control. Risk management and internal control are integrated at the process level. Risk management refers to a systematic process to identify, evaluate and control risks due to external factors as well as risks arising from the Group's own activity.

Comptel's risk management system aims at minimising the detrimental impacts of risks on the Group's profit. The Board of Directors has ratified the principles of risk management defining the risk management objectives and general practices, and also the tasks and responsibilities connected with risk management.

The Chief Financial Officer is in charge of coordinating risk management within the Group. As a general rule, the business units are responsible for identification and management of any and all risks that have an impact on their operations. Risk evaluation and management is an important part of the Group's annual business planning and strategy process, budgeting, as well as the preparatory and decision-making processes connected with commercial offers, agreements and investments and other operative activities.

In addition, the risk management system is based on monthly reports that are used to track the development of the financial position, net sales, profitability, orders, deliveries, trade receivables, order backlog and order flow, which in turn enable monitoring the development of the entire Group's results. The internal reporting is carried out by business units during the meetings of the Executive Board and in the reviews of the Group's support functions.

Comptel Annual Report 2012

Corporate governance

Control activities

Comptel's internal control system includes human resources management policies, such as compensation and benefits, personnel development, recruitment and resourcing management. Individual objective and appraisal processes enable the evaluation of employees' performances on an individual level. The Human Resources function is responsible for maintaining and developing the company's HR processes.

Comptel has confirmed the corporate approval rights. The Delegation of Authority defines the situations requiring prior approval, authorisation to sign agreements, procurement rights and approval practices concerning payments. The Accounting Manual contains the charts of account and guidelines on the use of expense accounts for those approving invoices.

Comptel's Quality System defines the company's key processes and duties as well as the related roles, responsibilities, guidelines, documentation, best practice policies and quality indicators. Comptel's customer deliveries, software development and development of internal processes comply with the project management process which is described in the company's quality management system.

Revenue recognition for long-term customer projects is essential in defining Comptel's net sales and profit. The percentage of completion method and control points have been defined and approved internally. Managing, controlling and monitoring the key process of project revenue recognition is essential for the business.

Information and communication

The internal control system needs sufficient and reliable communication within the organisation. The Executive Board follows up the achievement of the company's financial and other objectives in regular meetings. The Financial Administration is responsible for preparing monthly reports and regularly updating the financial forecast. The Group uses accompany wide Enterprise Resource Planning system and a separate management reporting system.

The company's guidelines and manuals are available to all employees on the Group's intranet. The Corporate Communications is responsible for the internal communication channels and for Comptel's external communications.

Comptel Annual Report 2012

Corporate governance

Monitoring

Monitoring refers to processes that are used to assess Comptel's system of internal control and its performance. Monitoring is performed both on an ongoing basis and through separate evaluations including quality audits, internal and external audits.

The quality and process audits are carried out by the company's internal quality organisation in accordance with the annual plan.

Internal audits are conducted according to the annual plan in which the audit targets are defined. The actual audit is executed in chosen locations based on a prepared auditing plan. The audit focuses on the assessment of business operations, the implementation and realisation of financial and administrative processes in practice, and the compliance of good corporate governance. The audit also ensures the compliance of all permissions, reports and obligations.

Within Comptel Corporation, internal audits belong to the Financial Administration's responsibilities, and it is primarily carried out by the company's own personnel. Whenever necessary, external experts are used to complement the audit activities. The results of internal audits are reported to the Board of Directors.

The external auditor verifies that the company's annual accounts are correct and monitors the company's quarterly reporting. In addition, the auditors report to the Board of Directors in an ongoing manner regarding the administration and operations.

Comptel Annual Report 2012

Corporate governance

Board of Directors

Pertti Ervi

born 1957, B.Sc. (Electronics)
Chairman of the Board since 2012

Main career history

Computer 2000 AG, Co-President 1995 - 2000
Computer 2000 Finland Oy, Managing Director - 1995

Main board memberships

Chairman of the Board in Efecte Oy, Inventure Oy, Ixonos Plc and Nevtor Oy
Member of the Board in F-Secure Corporation and Teleste Corporation

Comptel shares 47,932

Hannu Vaajoensuu

born 1961, M.Sc.(Economics)
Vice Chairman of the Board since 2005

Main career history

Basware Oyj, Full-time Chairman of the Board 2005 - 2010, CEO 1999 - 2004, Partner, Executive Director 1991 - 1999

Main board memberships

Chairman of the Board in Basware Corporation, Nervogrid Oy and Dovre Group Plc
Member of the Board in Inventure Oy, Movenium Oy, Profit Software Oy, XMLdation Ltd. and the Federation of Finnish Technology Industries, Nordic Telecom Oy

Comptel shares 106,672

Eriikka Söderström

born 1968, M.Sc. (Economics)
Member of the Board since 2012

Main career history

Kone Corporation, Corporate Controller, SVP 2013 -
Vacon Plc, Chief Financial Officer 2009 - 2013
Oy Nautor Ab, Chief Financial Officer 2008
Nokia Siemens Networks, Corporate Controller 2007
Nokia Networks, various finance and control roles 1994 - 2006

Comptel shares 21,627

Comptel Annual Report 2012

Corporate governance

Antti Vasara

born 1965, D.Tech. (Technical Physics)

Main career history

Tieto Corporation, Executive Vice President, Product Engineering Services 2012 -
Nokia, Senior Vice President, Mobile Phones Product Development 2010 - 2012
Nokia, Senior Vice President, various leading positions in product programs and hardware development, corporate strategy and software sales & marketing 2003 - 2010
SmartTrust Ab, CEO 2000 - 2003
McKinsey & Company, Senior Engagement Manager 1993 - 2000

Comptel shares 17,627

Petteri Walldén

born 1948, M.Sc. (Engineering)
Member of the Board since 2009

Main career history

Alteams Oy, President and CEO 2007 - 2010
Onninen Oy, President and CEO 2001 - 2005
Ensto Oy, President and CEO 1996 - 2001
Nokia Kaapeli Oy, President and CEO 1990 - 1996
Sako Oy, President 1987 - 1990

Main board memberships

Chairman of the Board in Nokian Renkaat Plc
Vice Chairman of the Board in Tikkurila Oyj
Member of the Board in Alteams Oy, Kuusakoski Group Oy, Mesera Yhtiöt Oy, One Nordic Ab, SE Mäkinen Logistics Oy, Staffpoint Holding Oy, Teleste Corporation

Comptel shares 60,256

The holdings of board members are as per 31 December 2012. Up-to-date information on ownership is available at www.comptel.com/investors

Comptel Annual Report 2012

Corporate governance

Executive Board

Juhani Hintikka

born 1966, M.Sc. (Engineering)
President and CEO

Joined Comptel in 2011. Has previously held several general management and executive positions in research and development, operations and sales at Nokia and Nokia Siemens Networksissa since 1999, latest the global Head of Operations Support Solutions Business Line at Nokia Siemens Networks. Prior to that, worked in Konecranes Group and in Kone Group. Member of the Board of Directors of Comptel Corporation during 2007 - 2008.

Comptel shares: 358,333; share options 2012: 833,332

Mauro Carobene

born 1970, M.Sc. (Electronic Engineering)
Senior Vice President, Europe West

Joined Comptel in 2011, member of the Executive Board since 2011. Has previously held various senior solution management and sales positions in Nokia Siemens Networks and Nokia since 1998, most recently responsible for OSS consulting and systems integration business globally at NSN.

Comptel shares: 83,333; share options 2009: 100,000; share options 2012: 208,332

Mikko Hytönen

born 1977, M.Sc. (Engineering)
Chief Financial Officer

Joined Comptel in 2009, member of the Executive Board since 2011. Has previously acted as Group Controller. Prior to Comptel worked as Financial Director in Electrolux Finland, as Group Controller in SmartTrust and as Controller in Sonera.

Comptel shares: 80,000; share options 2009: 40,000; share options 2012: 200,000

Ulla Koivukoski

born 1954, B.Sc. (Physics)
Senior Vice President, Marketing and Communications

Joined Comptel in 2012, member of the Executive Board since 2012. Has previously held several sales, marketing and product development positions at Nokia and Nokia Siemens Networks. Prior to that, held marketing positions at Unisys.

Comptel shares: 60,000; share options 2012: 150,000

Comptel Annual Report 2012

Corporate governance

Antti Koskela

born 1971, M.Sc. (Engineering)
Senior Vice President, Products and Solutions

Joined Comptel in 2011, member of the Executive Board since 2011. Has previously held several management positions in Nokia Siemens Networks since 1999, latest Head of the Communication & Entertainment Solutions Business Line at. Prior to that, worked in Ericsson during 1994 - 1999.

Comptel shares: 45,800; share options 2009: 100,000; share options 2012: 114,500

Kari Onniselkä

born 1967, M.Sc. (Economics)
Senior Vice President, Global Services

Joined Comptel in 2011, member of the Executive Board since 2011. Acted earlier as Managing Director of Talent Partners since 2006. Prior to that, held several management positions at Nokia in 2000 - 2006.

Comptel shares: 40,000; share options 2012: 100,000

Niina Pesonen

born 1965, M.Sc. (Social and Behavioural)
Senior Vice President, Human Resources

Joined Comptel in 2007, member of the Executive Board since 2007. Has previously held several HR management and development positions in Nokia since 1992. Her latest positions were Business HR Director for the Delivery Operations of Nokia Networks and HR Head for North East Region in Nokia Siemens Networks.

Comptel shares: 83,333; share options 2012: 208,332

The holdings of executive board members are as per 31 December 2012. Up-to-date information on ownership is available at www.comptel.com/investors

Comptel Annual Report 2012

Board of Directors' report

Market development

Comptel operates globally in the software markets for mobile and fixed telecommunications operators.

Telecommunications operators' net sales and investments continued moderate growth of a couple of per cent as in the previous year. The global growth for both the net sales and investments was approximately four per cent. This is noteworthy since in spite of the economic outlook the growth was still higher than the overall increase in gross domestic product. Data services and the data transmitted continued to drive the development of the telecommunications sector. Mobile data was the main growth driver in the developed markets and the developing markets have also experienced a transition from subscriber growth to data services. However, there is still potential in subscriber growth since only half (48 per cent) of the global population had a mobile phone in the end of 2012.

The explosion in the usage of smart phones has driven the need to build new, fast broadband networks and improve the usability of the services in these networks as well as develop software systems supporting the new business models. This requires investments to software that enable flexible packaging of services, sales of 3rd party services and versatile pricing models. At the same time the operators need to invest in existing systems to rationalise and harmonise them to control operating expenses.

Operators' competition for customers has intensified within the traditional players and as a result of new types of service providers entering the markets. Companies like Google, Amazon, Facebook and Apple have been challenging the operators in the traditional business and particularly in the new services. The cost of customer acquisition and taking the benefit of additional sales opportunities require the operators to have better understanding of customer satisfaction and needs. This has increased software investment in systems analysing customer experience and facilitating targeted campaign management. With the help of these products the operators have better tools for customer retention and ability to push new products and services to the subscribers.

Net sales and profitability

In 2012, the net sales of Comptel Group increased by 7.4 per cent (-1.5) compared to the previous year and were EUR 82.4 million (2011: 76.8; 2010: 77.9). Net sales growth was attributable to growth in service sales.

Operating result was EUR -13.5 million (2011: 11.9; 2010: 9.1), which amounts to -16.4 per cent (15.5) of net sales. The negative operating result was mainly due to the goodwill impairment loss of EUR 10.2 million booked during the first quarter. Additionally, measures taken to improve efficiency as well as restructuring of business operations affected the operating result by some EUR 2.5 million. Full year operating result excluding these one-off items was EUR -0.8 million (2011: 3.1; 2010: 9.1), equalling to -1.0 per cent (4.0) of net sales. The operating result excluding one-off items was weakened by increased personnel expenses, costs relating to project delivery and marketing as well as low licenses sales. However, profitability improved significantly during the second half of the year as a result of the costs savings program initiated. The aim is to achieve savings of approximately EUR 10 million annually.

Comptel Annual Report 2012

Board of Directors' report

In 2012, net financial items were EUR -0.7 million (-0.8). Result before taxes was EUR -14.0 million (11.0), which corresponds to -16.9 per cent (14.3) of net sales. Net loss was EUR -12.8 million (7.6). Earnings per share for the financial year were EUR -0.12 (2011: 0.07; 2010: 0.05).

Tax expense for the financial year was EUR -1.2 million (3.4). Comptel booked a deferred tax asset of EUR 3.5 million due to the losses incurred in 2012. The tax expense included EUR 1.7 million (1.2) of withholding taxes due to double taxation. The cumulative amount of outstanding, non-credited and expensed double withholding taxes payment since 2004 is EUR 9.2 million.

Return on equity was -37.2 per cent (2011: 16.7; 2010: 10.2).

The Group's order backlog grew slightly from the previous year and was EUR 48.4 million (47.2) at the end of the financial year. Maintenance agreements represented EUR 27.2 million (24.9) and other order backlog EUR 21.2 million (22.3) of the total.

During the period under review, Comptel Corporation acquired Xtract Oy, a software company specialising in analytics, for a total consideration of EUR 3.1 million (enterprise value). By combining the leading analytics capabilities with its existing software, Comptel will create an offering which will enable operators to react quickly to events from the network and transform them automatically into relevant and timely actions that improve customer experience. Xtract Group was consolidated into Comptel Group financials as of 10 February 2012. The acquisition was financed through Comptel Corporation's liquid assets. The 20 Xtract employees working in Finland have moved to the Comptel office in Helsinki and globally as part of the Comptel organisation.

Key figures, per share data and the definition of key figures are presented in more detail in notes to the financial statements.

Comptel has restated retrospectively the cost figures for 2010 and 2011. The correction lowered the option costs EUR 0.2 million in 2010 and EUR 0.3 million in 2011. Prior period reported financials have been corrected accordingly. The changes are described in detail in note 32 to the consolidated financial statements.

Comptel Annual Report 2012

Board of Directors' report

Business areas

Business areas are defined by geography. Comptel has five business segments: Europe East, Europe West, Asia-Pacific, Middle East and Africa, and the Americas. The operating profit of the segments includes the cost of sales and customer services. Group R&D and general and administration costs are not allocated to the segments.

During the financial year, Comptel received 15 significant orders (23). Out of these 15 orders, 3 were fulfillment, 9 policy control & charge, 2 managed services and one was analytics order. As significant orders Comptel reports sold projects and licenses with a value of EUR 500,000 at the minimum.

Europe East net sales were EUR 16.3 million (12.9). Net sales increased from the previous year mainly due to the strong performance in Eurasia. The Group's operating profit from the segment was EUR 6.3 million (2.2), representing 38.6 per cent of net sales (16.9). During the financial year, Comptel won five new customers in the region out of which one was from the energy sector. Some of the most significant customers were Elisa, Telenor, TDC and operators belonging to the TeliaSonera Group.

The net sales of Europe West were EUR 21.0 million (19.1). The net sales growth was mainly driven by increased project deliveries. The Group's operating profit for the segment was EUR 9.7 million (11.4), representing 46.3 per cent of net sales (60.0). Comptel obtained one new customer in the region. Some of the most significant customers were operators belonging to the Telefónica O2, Deutsche Telekom, Vodafone, KPN and Cosmote groups. Comptel established a subsidiary in Italy during the financial year.

The net sales of Asia-Pacific were EUR 21.7 million (21.1). The Group's operating profit for the segment was EUR 9.5 million (11.9), representing 43.9 per cent of net sales (56.5). Comptel won one new customer in the region. Some of the most significant customers were Bharti, Idea, IBM and Vodafone in India, IBM, NBN Co and Vodafone Hutchison in Australia, Indosat in Indonesia, FarEastTone (FET) in Taiwan as well as operators belonging to the Telenor Group. Comptel set up a subsidiary in India.

The net sales of Middle East and Africa were EUR 14.5 million (13.7). The Group's operating profit for the segment was EUR 3.0 million (5.5), representing 20.4 per cent of net sales (39.8). Comptel won two new customers in the region similarly to the previous year. Many of the biggest operators in the Middle East are Comptel's customers, among them operators belonging to the Etisalat, Orascom, Q-Tel and Zain groups and Saudi Telecom. Comptel is in the process of setting up a branch office in Saudi Arabia.

The net sales from the Americas were EUR 8.9 million (9.9). Net sales decreased in North America. The Group's operating profit for the segment decreased to EUR 3.8 million (5.7), representing 42.3 per cent of net sales (56.9). Comptel won four new customers in the region out which one was outside Comptel's traditional domain. The most significant customers in the Americas were operators belonging to the América Móvil and Telefónica groups, Axtel and Oi.

Comptel's net sales are comprised of selling software licenses and license upgrades, and selling the services and maintenance supporting its products. License sales decreased from the previous year and were EUR 16.6 million (21.1). License sales did not meet the targets especially in the area of new products and solutions. In line with the company's strategy, services sales increased and were EUR 33.2 million (22.9). Maintenance agreements represented EUR 32.6 million (32.7) of net sales.

Comptel Annual Report 2012

Board of Directors' report

Comptel sells and delivers its products and solutions both directly through its own sales organisation and through its partners. The most significant partners are system integrators such as IBM and Tech Mahindra and network equipment vendors like Alcatel-Lucent and NSN. In addition to its global partners, Comptel cooperates with a number of local partners that are significant in their own region. Direct sales were EUR 62.1 million (57.1) and sales through partners and resellers were EUR 20.3 million (19.6). Partner sales remained at the previous year's level.

Investments

During 2012 gross investments in intangible and tangible assets amounted to EUR 4.5 million (1.0) and comprised of investments in devices, software and furnishings as well as the acquisition of Xtract corporation. Gross investments excluding Xtract acquisition were EUR 1.7 million (1.0). The investments were funded through cash flow from operations. The Xtract acquisition is described in more detail in note 3 to the consolidated financial statements.

Research and development

Comptel's direct R&D expenditures and investments were EUR 18.6 million (2011: 15.4; 2010: 13.4). This corresponds to 22.5 per cent (2011: 20.1; 2010: 17.2) of net sales.

Comptel's R&D expenditure was mainly targeted at the service fulfillment automation of telecom operators and to the management and real-time analysis of rapidly increasing data traffic. Comptel seeks global market leadership in these areas where key business challenges of operators and service providers will be solved. In addition, the company is developing an integrated software platform which will enable a cost-efficient and solution-based R&D.

In 2012, the company focused on developing its offering within the Fulfillment, Policy Control & Charging and Social Links product areas. In terms of Social Links, integrating the acquired Xtract customer analytics into the Comptel software platform is a priority. With a combined offering including real-time analytics, Comptel can help operators to improve customer loyalty as well as enable individually targeted marketing. Four major software releases were launched in these respective product areas during 2012.

Comptel extended 3 previously filed patent applications in 2012 (5). The company filed one new patent application in 2012 (0). During the year Comptel was granted 5 patents (3) related to real-time mediation of usage data and charging of subscribers in an online mediation environment, and managing data traffic in telecom network. At the end of the year, Comptel had 25 (20) granted patents and 54 (72) pending patent applications to protect its main products and solutions.

The Comptel® trademark is a registered trademark of Comptel Corporation in several countries.

Comptel Annual Report 2012

Board of Directors' report

Financial position

Statement of financial position total on 31 December 2012 was EUR 68.5 million (71.8) of which liquid assets amounted to EUR 4.8 million (9.4).

During the financial year, net operating cash flow was EUR 1.1 million (-0.0), paid dividends were EUR 3.2 million (7.2) and net investments were EUR -9.4 million (+16.9). The investments comprised mainly investments in R&D as well as the acquisition of Xtract.

The trade receivables were EUR 22.8 million (26.0) at the end of the period. The accrued income was EUR 12.6 million (10.2). The deferred income related to partial debiting was EUR 2.8 million (2.1).

Comptel entered into a new loan facility arrangement during the review period. The facility contains two parts. It includes a term-loan of EUR 7.0 million and a revolving credit facility of EUR 13.0 million. The term-loan of EUR 7.0 was withdrawn in full and EUR 1.0 million had been utilised from the revolving credit facility. The loan facilities are valid until January 2016. The equity ratio was 46.8 per cent (66.5) and the gearing ratio was 13.1 per cent (-22.3).

Company structure

At the end of 2012, Comptel Group comprised of the parent company Comptel Corporation and the wholly owned subsidiaries Comptel Communications Oy, Comptel Communications AS, Comptel Communications EOOD, Comptel Communications Sdn Bhd, Comptel Communications Brasil Ltda, Comptel Communications Inc., Comptel Ltd., Comptel Communications India Private Limited, Comptel Communications S.r.l., Xtract Oy, Xtract Corporation Limited, Comptel Passage Oy and Business Tools Oy. In addition the Group included the wholly owned subsidiary Comptel Communications Holdings and its wholly owned subsidiaries Comptel Communications Ltd and Viewgate Networks Limited. The Group also included an Irish associated company Tango Telecom Ltd. (share of ownership 20.0 per cent).

Comptel Group has registered representative and branch offices in Australia, Egypt, India, Italy, China, Russia, United Arab Emirates, The Netherlands, Sweden, Germany, Singapore and Turkey.

Personnel

At the beginning of the year Comptel had 639 employees and at the end of the year 679. The Group employed an average of 700 persons in 2012 (2011: 623; 2010: 586).

Of the Group personnel, 47.3 per cent (48.2) were located in Europe East, 10.4 per cent (11.0) in Europe West, 33.0 per cent (31.1) in the Asia-Pacific area, 7.7 per cent (6.4) in the Middle East and Africa, and 1.6 per cent (3.3) in the Americas at the end of the financial year.

Of the Group personnel, 46.8 per cent (44.8) worked in customer services, 31.7 per cent (30.7) in research, product development and product management, 13.8 per cent (15.6) in sales and marketing and 7.7 per cent (8.9) in administration and internal support services at the end of the financial year.

Comptel Annual Report 2012

Board of Directors' report

At the end of the year the Group had 657 (621) regular workers and 22 (18) non-permanent employees. Of the employees, 642 (611) were full-time and 37 (28) part-time.

Average personnel attrition in 2012 was 33.1 per cent (26.1). The average years of service was 4.5 (4.9). The average age of the employees at the end of the year was 36 years (36). At the end of the year 72 per cent (72) of the employees were men and 28 per cent (28) women.

Wages and salaries totalled EUR 37.5 million in 2012 (2011: 30.4; 2010: 29.1).

Salaries and compensations paid to the management are described in note 31 to the consolidated financial statements.

Of the personnel, 78 per cent had a university degree, 10 per cent had a polytechnic diploma, 6 per cent a vocational college diploma and 6 per cent other education.

The Group continued the Comptel University programme for personnel competence development. An average of EUR 691 per person was spent on training (1,077). The number of training days per person was 4.4 (4.6).

In the financial year, the amount of sick leave from active working hours was 1.4 per cent (1.3).

Corporate Governance

The Annual General Meeting, held on 26 March 2012, elected the following members to the Board of Directors: Mr Pertti Ervi, Mr Hannu Vaajoensuu, Mr Petteri Walldén, Mrs Eriikka Söderström and Mr Antti Vasara. In its meeting held after the AGM, the Board of Directors elected Mr Pertti Ervi as chairman and Mr Hannu Vaajoensuu as vice chairman. The Board did not set up any committees in its first meeting.

After the organisation changes implemented in October 2012 the members of the Executive Board included, in addition to President and CEO Mr Juhani Hintikka, Mr Mauro Carobene (CMO), Mr Antti Koskela (CTO), Mr Kari Onniselkä (Services), Mr Mikko Hytönen (CFO), Mrs Niina Pesonen (HR) and Mrs Ulla Koivukoski (Marketing and Communications).

In April, Comptel Corporation and Cisco Systems Inc. settled the dispute under arbitration concerning Comptel's use of a certain sub-set of Axioss software that was sold to Cisco and simultaneously licensed back to Comptel for use in the current release of Comptel Fulfillment. Cisco brought the matter to the London Court of International Arbitration in December 2011. In accordance with the settlement, the parties have agreed to withdraw all their claims against each other and the arbitration process has thereby been terminated. It has been agreed that no financial compensation will be made between the parties. Comptel will continue in the fulfillment business and will, consistent with the terms of Cisco's license back to Comptel, support its existing Axioss and Comptel Fulfillment customers.

In the end of the financial year guarantees given on behalf of the related parties amounted to EUR 70 thousand. Related party transactions are described in more detail in note 31 to the consolidated financial statements.

A separate Corporate Governance Statement has been given as a part of the annual report.

Auditors

Comptel's auditor was Ernst & Young Oy.

Comptel Annual Report 2012

Board of Directors' report

Comptel's share and shareholders' equity

Comptel has one share type. Each share constitutes one (1) vote at the Annual General Meeting. The company's capital stock on 31 December 2012 was EUR 2,141,096.20 and the total number of votes was 107,054,810.

The total exchange of Comptel's shares in 2012 was 26.7 million shares (32.8), which is 25.0 per cent (30.7) of the total number of shares. The closing price was EUR 0.40 (0.49) in 2012. Comptel's market value at the end of the year was EUR 42.8 million (52.3).

During the year, Comptel Corporation allotted 111,186 shares to the members of the Board of Directors as part of their annual compensation and 25,000 shares to the President and CEO as per the 2011 share-based incentive scheme.

Elisa Corporation notified on 17 January 2012 that its direct ownership in Comptel Corporation had increased to over the 10% threshold following the merger of Saunalahti Group Oyj into Elisa Corporation. Elisa Group's ownership remained unchanged.

Comptel's shareholders by sector and size, the largest holders and the figures on shares traded and share quotations are presented in the section Shares and shareholders in the financial statements.

The Annual General Meeting authorised the Board of Directors to decide on share issues amounting to a maximum of 21,400,000 new shares, including the shares received on basis of the special rights, can be issued. A maximum of 10,700,000 of the company's own shares held by the company can be conveyed and/or received on basis of the special rights. The authorisations are valid until 30 June 2013. However, the authorisations pertaining to the share-based incentive schemes are valid five years from the date of AGM.

Comptel has currently two option schemes.

The share subscription period of 2006 share options A expired on 30 November 2010, share options B on 30 November 2011 and share options C on 30 November 2012. During the subscription period no shares were subscribed.

The Annual General Meeting decided on 16 March 2009 to issue share options to the key personnel of the Comptel Group as a part of the incentive and commitment program.

The total number of share options issued is 4,200,000. Of the share options, 1,400,000 are marked with the symbol A, 1,400,000 are marked with the symbol B and 1,400,000 are marked with the symbol C. The share options may be exercised to subscribe to a maximum of 4,200,000 new shares in the company or existing shares held by the company. The issued share options can be exchanged for shares constituting a maximum total of 3.8 per cent of the company's shares and votes of the shares, after the potential share subscription, if new shares are issued in the share subscription.

Comptel Annual Report 2012

Board of Directors' report

The share subscription price will be based on the prevailing market price of the Comptel share on the NASDAQ OMX Helsinki Ltd in April 2009, April 2010 and April 2011. The current share subscription price for Comptel share option 2009A is EUR 0.43 per share, which corresponds to the trade volume weighted average quotation of the share on the NASDAQ OMX Helsinki during 1 April - 30 April 2009 deducted by the dividends and capital repayment paid. The current share subscription price for Comptel share option 2009B is EUR 0.70 per share, which corresponds to the trade volume weighted average quotation of the share on the NASDAQ OMX Helsinki during 1 April - 30 April 2010 deducted by the dividends and capital repayment paid. The current share subscription price for Comptel share option 2009C is EUR 0.54 per share, which corresponds to the trade volume weighted average quotation of the share on the NASDAQ OMX Helsinki during 1 April - 30 April 2011 deducted by the dividend and capital repayment paid.

The share subscription period for share options 2009A will be 1 November 2011 - 30 November 2013, for share options 2009B 1 November 2012 - 30 November 2014, and for share options 2009C 1 November 2013 - 30 November 2015.

Comptel's 2009A share options were listed on NASDAQ OMX Helsinki commencing from 1 November 2011. The trading code is CTL1VEW109 and ISIN code is FI4000031489. In 2012, a number of 38,500 options A were traded and the closing price was EUR 0.18.

Comptel's 2009B share options were listed on NASDAQ OMX Helsinki commencing from 1 November 2012. The trading code is CTL1VEW209 and ISIN code is FI4000048767. In 2012, no options were traded.

A total of 1,250,000 share options 2009A have been distributed in 2009 and a total of 1,250,000 share options 2009B have been distributed in 2010 to the key personnel of Comptel Group. During the financial year 2011, a total of 165,000 share options 2009B and 1,475,000 share options 2009C have been distributed. During the financial year 2012, a total of 100,000 share options 2009B and 100,000 share options 2009C have been distributed. During the financial year 2011, a total of number of 310,000 share options 2009A, a number of 250,000 share options 2009B and a number of 180,000 share options 2009C were returned to the company and during the financial year 2012, a total of number of 100,000 share options 2009B and a number of 150,000 share options 2009C were returned to the company. The rest of the 2009 share options have been granted to Comptel Communications Oy to be further distributed. The company holds a number of 540,000 share options 2009A, a number of 275,000 share options 2009B and a number of 155,000 share options 2009C.

The option program 2012 differs from the previous option programs introduced by Comptel. The shareholding of the recipient of the options has impact on the share options being granted. The commencement of the subscription period for the share options depends on the fact whether the commercial or financial targets of Comptel set by the Board of Directors have been achieved. The targets are net sales growth and increase in earnings per share or the market capitalisation of Comptel.

The total number of share options issued is 5,100,000. 2,550,000 of the share options are marked with the symbol A and 2,550,000 are marked with the symbol B. The share options may be exercised to subscribe to a maximum of 5,100,000 new shares in the company or existing shares held by the company. The issued share options can be exchanged for shares constituting a maximum total of 4.5 per cent of the company's shares and votes of the shares, after the potential share subscription, if new shares are issued in the share subscription.

Comptel Annual Report 2012

Board of Directors' report

The share subscription price for share options 2012A and 2012B is based on the trade volume weighted average quotation of the share on NASDAQ OMX Helsinki Ltd. during 27 February - 23 March 2012. Each year dividends and repayments of equity will be deducted from the share subscription price. The current share subscription price is EUR 0.57 per share. The share subscription period for share options 2012A will be 2 May 2015 - 30 November 2017, and for share options 2012B, 2 May 2016 - 30 November 2017.

During 2012 a total of 1,914,759 share options 2012A and 1,914,759 share options 2012B were distributed to the key personnel of Comptel Group. A number of 50,688 share options 2012A and a number of 50,688 share options 2012B were returned to the company during 2012. The rest of the 2012 share options have been granted to Comptel Communications Oy to be further distributed. The company holds a number of 685,929 share options 2012A and a number of 685,929 share options 2012B.

The President and CEO of Comptel Corporation has a share-based incentive plan. The aim of the plan is to combine the objectives of the shareholders and the CEO of Comptel Corporation in order to increase the value of the company and to commit the CEO to the company. The prerequisite for participation in the plan and receipt of reward from the performance periods is that the CEO owns company's shares or acquires them up to the number predetermined by the Board of Directors which is 230,000 shares. The ownership requirement is valid until 31 December 2015. Furthermore, the potential reward from the plan is tied to the validity of the CEO's employment contract. The maximum amount of rewards to be paid on the basis of the plan is 650,000 Comptel Corporation shares and a cash payment corresponding to the value of the shares.

The reward for 2011 was paid to the CEO in 2012 by disposing gratuitously 25,000 company shares and in cash, amounting to EUR 15,271. The potential reward from the plan for the performance period 2012-2013 will be based on the turnover growth rate and the operating profit margin of the Comptel Group.

The Board of Directors of Comptel Corporation approved in February 2012 a new share-based incentive plan for the Group key personnel.

The aim of the new plan is to combine the objectives of the shareholders and the target people in order to increase the value of the company, to commit the target people to the company, and to offer them a competitive reward plan based on long-term shareholding in the company.

The new plan includes a Matching Share Plan 2012 and Stock Options 2012, approved by the Annual General Meeting of Shareholders of the company in March 2012.

The Matching Share Plan includes two performance periods, both beginning on 2 May 2012. The performance periods will end on 2 May 2015 and on 2 May 2016. The prerequisite for participation in the plan and receipt of reward for the performance periods provides that a target person owns the company's shares or acquires them up to the number predetermined by the Board of Directors. Furthermore, the potential reward from the plan is tied to the validity of the target person's employment or service or contractual relation. No reward will generally be paid if a target person's employment or service ends before the reward payment.

Rewards from the Plan will be paid partly in the company's shares and partly in cash in 2015 and in 2016. The cash proportion is intended to cover taxes and tax-related costs arising from the reward to a target person. The total amount of rewards to be paid on the basis of the Plan is an approximate maximum of 1,050,000 Comptel Corporation shares and a cash payment corresponding to the value of the shares, multiplied by 1.5, in the maximum.

Comptel Annual Report 2012

Board of Directors' report

There were 35 persons in the plan at the end of 2012.

Members of the Board of Directors and the CEO held at 31 December 2012 a total of 1.634 per cent of the company's outstanding shares and share options, 0.998 per cent of the votes and share capital and the share options can provide them with 0.716 per cent of the votes and share capital.

The company held 161,219 of its own shares at the end of the financial year, which is 0.15 per cent of the total number of its shares. The total counter-book value of the shares held by the company was EUR 3,224.

The Annual General Meeting (AGM), held on 26 March 2012, approved the proposal of Board of Directors that a dividend of EUR 0.03 per share be paid for 2011.

Business risks

Comptel's business risks are regularly estimated as part of the annual operative planning and strategy process, of the process of preparing and deciding on commercial offers and agreements and investments and other resource allocations, and of other operative actions. Strategic risks are considered the most significant. Strategic risks are further divided into market risks and risks related to Comptel's business strategy.

Below is a description of the most important factors outside the Group or generated by its operation, which may be of significance to Comptel's business, operating result and share price in the future.

The demand in the operations support system markets may vary significantly by region.

Comptel develops dynamic end-to-end solutions for leading operators globally in the telecom field. This requires Comptel to understand correctly the trends taking place in its business environment and the needs of its customers and resellers by each region. Failure to identify market conditions, address customers' needs and develop its products in a timely way may significantly undermine the growth of Comptel's business and its profitability.

Characteristics for Comptel's field of industry are significant quarterly variations of net sales and profit, which are related to customers' purchasing behaviour and the timing of major single deals.

The OSS market is highly competitive. The sector is undergoing consolidation between the market players, which is reflected in the duration and pricing of agreements. If Comptel does not manage to adapt its operations and address the changes taking place in its competition environment, the market development may greatly impair the company's business and operating result.

Comptel has initiated the execution of customer and partner intimate business model which requires getting competent resources closer to key customers and partners in certain growth markets.

The Middle East, Africa and Asia are increasingly important market areas for Comptel. The company is operating in several countries where the political and social situation is unstable. Deterioration of the situation in these areas may hinder Comptel's business and undermine its profitability.

Comptel Annual Report 2012

Board of Directors' report

Comptel's business consists of deliveries of large productised IT system and the value of a single project may be several million euros. Therefore, the risk or credit risk associated with a single project or an individual customer may be significant. Furthermore, some of Comptel's customers operate in countries that are or have been war zone which in part may increase credit risk.

Comptel operates globally so it is exposed to risks arising from different currency positions. Exchange rate changes between the Euro, which is the company's reporting currency, and the US Dollar, UK Pound Sterling and Malaysian Ringgit affect the company's net sales, expenses and net profit.

The application process to prevent Comptel's double taxation is still pending with the Ministry of Finance in Finland. However, the process between the states is very slow and the timing of a change is hard to forecast. The interpretation of tax treaties may result in different views between the countries in questions. This could mean that the double taxation will prevail.

The financial risks of Comptel are described more in detail in note 27 to the consolidated financial statements.

Events after the reporting period

There were no significant events after the reporting period.

Outlook

Comptel's net sales are estimated to grow from the previous year in 2013. Operating profit is estimated to increase to 5 - 10 per cent of net sales.

Characteristically a significant part of Comptel's operating profit and net sales is generated in the second half of the year.

Board of Directors' Proposal for the Disposal of Profits

The Group parent company's distributable equity on 31 December 2012 was EUR 1,840,001.68 (15,026,574.95).

The Board of Directors proposes to the Annual General Meeting that no dividend payment will be made for 2012.

Helsinki, 12 February 2013

Comptel Corporation
Board of Directors

Comptel Annual Report 2012

Board of Directors' report

Comptel Annual Report 2012

Board of Directors' report

Comptel Annual Report 2012

Financial statements

Consolidated Statement of Comprehensive Income

EUR 1,000	Notes	1 Jan – 31 Dec 2012	1 Jan – 31 Dec 2011(*)
Net sales	2	82,428	76,751
Other operating income	5	9	19,802
Materials and services	6	-5,477	-5,285
Employee benefits	7	-44,108	-36,454
Depreciation, amortisation and impairment charges	8	-14,619	-13,635
Other operating expenses	9	-31,749	-29,277
		-95,954	-84,651
Operating profit/loss		-13,517	11,902
Financial income	12	1,042	536
Financial expenses	12	-1,739	-1,289
Share of result of associated companies		259	-187
Profit/loss before income taxes		-13,955	10,963
Income taxes	13	1,152	-3,373
Profit/loss for the period		-12,804	7,590
Other comprehensive income
Cash flow hedges		781	-727
Translation differences		46	175
Income tax relating to components of other comprehensive income	13	-191	177
Total comprehensive income for the period		-12,168	7,216
Profit/loss attributable to:
Equity holders of the parent company		-12,804	7,590
Non-controlling interest		-	-
Total comprehensive income attributable to:
Equity holders of the parent company		-12,168	7,216
Non-controlling interest		-	-
Shareholders of the parent company	14
Earnings per share, EUR		-0.12	0.07
Earnings per share, diluted, EUR		-0.12	0.07

*) Year 2011 error has been corrected.

Comptel Annual Report 2012

Financial statements

Consolidated Statement of Financial Position

EUR 1,000	Notes	31 Dec.2012	31 Dec.2011
ASSETS
Non-current assets
Goodwill	16	2,646	10,832
Other intangible assets	16	13,350	9,255
Tangible assets	15	1,518	1,381
Investments in associates	17	1,076	817
Available-for-sale financial assets		87	87
Deferred tax assets	18	3,804	636
Other non-current receivables		493	409
		22,974	23,418
Current assets
Trade and other receivables	19	40,617	38,919
Current tax assets		43	22
Cash and cash equivalents	20	4,817	9,401
		45,476	48,343
TOTAL ASSETS		68,451	71,761
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent company
Share capital	21	2,141	2,141
Fund of invested non-restricted equity	21	243	178
Translation difference	21	-636	-682
Retained earnings		25,208	40,169
		26,956	41,805
Total equity		26,956	41,805
Non-current liabilities
Deferred tax liabilities	18	3,302	4,798
Provisions	24	787	1,529
Non-current financial liabilities	25	5,275	29
		9,364	6,355
Current liabilities
Provisions	24	1,511	1,221
Current financial liabilities	25	3,082	38
Trade and other current liabilities	26	27,230	21,615
Current tax liabilities		307	726
		32,130	23,600
Total liabilities		41,494	29,956
TOTAL EQUITY AND LIABILITIES		68,451	71,761

Comptel Annual Report 2012

Financial statements

Consolidated Statement of Cash Flows

EUR 1,000	Notes	1 Jan -31 Dec 2012	1 Jan -31 Dec 2011*)
Cash flows from operating activities
Profit/loss for the period		-12,804	7,590
Adjustments:
Non-cash transactions or items that are not part of cash flows from operating activities	28	15,815	-4,756
Interest and other financial expenses		228	63
Interest income		-412	-56
Income taxes		-1,152	3,373
Change in working capital:
Change in trade and other receivables		-592	-4,903
Change in trade and other current liabilities		4,307	1,211
Change in provisions		-452	796
Interest paid		-312	-63
Interest received		17	48
Income taxes paid and tax returns received		-3,551	-3,350
Net cash from operating activities		1,092	-47
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired		-1,812	-
Investments in tangible assets		-1,044	-434
Investments in intangible assets		-417	-558
Investments in development projects		-6,101	-3,965
Proceeds from sale of tangible and intangible assets		-	21,903
Change in other non-current receivables		-32	-58
Net cash used in investing activities		-9,406	16,888
Cash flows from financing activities
Dividends paid		-3,207	-7,242
Capital repayment		-	-7,473
Proceeds from borrowings		29,000	-
Repayment of borrowings		-22,020	-
Lease payments		-38	-38
Net cash used in financing activities		3,735	-14,753
Net change in cash and cash equivalents		-4,579	2,088
Cash and cash equivalents at the beginning of the period	20	9,401	7,028
Cash and cash equivalents at the end of the period	20	4,817	9,401
Change		-4,585	2,373
Effects of changes in foreign exchange rates		-5	286

*) Year 2011 error has been corrected.

Comptel Annual Report 2012

Financial statements

Consolidated Statement of Changes in Equity

| Equity attributable to equity holders of the parent company
EUR 1000 | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | Share capital | Other reserves | Translation differences | Fair value reserve | Treasury shares | Retained earnings | Total |
| Equity at 31 Dec 2010 | 2,141 | 7,575 | -858 | -40 | -600 | 40,927 | 49,146 |
| Dividends | | | | | | -7,473 | -7,473 |
| Capital repayment | | -7,473 | | | | | -7,473 |
| Transfer of treasury shares | | 76 | | | 225 | -225 | 76 |
| Share-based compensation) | | | | | | 314 | 314 |
| Total comprehensive income for the period) | | | 175 | -550 | | 7,590 | 7,216 |
| Equity at 31 Dec 2011 | 2,141 | 178 | -682 | -589 | -375 | 41,133 | 41,805 |
| Dividends | | | | | | -3,207 | -3,207 |
| Transfer of treasury shares | | 66 | | | 14 | -14 | 66 |
| Share-based compensation | | | | | | 460 | 460 |
| Total comprehensive income for the period | | | 46 | 590 | | -12,804 | -12,168 |
| Equity at 31 Dec 2012 | 2,141 | 243 | -636 | 0 | -361 | 25,568 | 26,956 |

*) Year 2011 error has been corrected.

Comptel Annual Report 2012

Financial statements

Notes to the Consolidated Financial Statements

1. Accounting principles for the consolidated financial statements

Company profile

Comptel Corporation is a Finnish public limited liability company organised under the laws of Finland. Founded in 1986, Comptel Corporation is one of the leading providers of telecom software and services in convergent mediation and charging, predictive analytics and service fulfillment. Comptel Corporation is listed on NASDAQ OMX Helsinki (CTLIV). The parent company of the Comptel Group, Comptel Corporation, is domiciled in Helsinki and its registered address is Salmisaarenaukio 1, 00180 Helsinki.

A copy of the consolidated financial statements can be obtained either from Comptel's website (www.comptel.com) or from the parent company's head office, the address of which is mentioned above.

On 12 February 2013 the Board of Directors of Comptel Corporation has authorised the publication of the consolidated financial statements of Comptel Corporation for the year 2012. According to the Finnish Companies Act, the Annual General Meeting can confirm or reject the consolidated financial statements after the publication. The Annual General Meeting may decide to change the financial statements.

Comptel Annual Report 2012

Financial statements

Basis of preparation

Comptel's consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) in force as at 31 December 2012 including the IAS and IFRS standards as well as the SIC and IFRIC interpretations. IFRSs referred to in the Finnish Accounting Act and in ordinances issued based on the provisions of this Act, refer to the standards and their interpretations adopted in accordance with the procedure laid down in regulation (EC) No 1606/2002 of the EU. The notes to the consolidated financial statements also conform to the Finnish accounting and company legislation.

The consolidated financial statements are prepared under the historical cost convention except for available-for-sale assets, derivative financial instruments and hedged items under fair value hedging. Share-based payments are recognised at fair value at the grant date.

All financial information presented in euros has been rounded to the nearest thousand and consequently the sum of the individual figures can deviate from the sum figure.

Comptel first adopted the IFRS in 2005 and applied IFRS 1 First-time adoption of IFRS in the transition. The transition date was 1 January 2004.

On 1 January 2012 the Group adopted the following new and amended standards and interpretations endorsed by the EU and that are applicable to Comptel:

Amendments to IFRS 7 Financial Instruments: Disclosures (effective for financial years beginning on or after 1 July 2011). The amendments will promote transparency in reporting and improving users' understanding of the risk exposure relating to transfers of financial instruments. The aim of the amendments is to analyse the effect of these risks on an entity's financial position, particularly those involving securitisation of financial assets. The changes did not have any impact on Comptel's consolidated financial statements.

The preparation of financial statements in conformity with IFRS requires management to make estimates as well as use judgement when applying accounting principles. Actual results may differ from these estimates. The chapter "Accounting policies requiring management's judgement and key sources of estimation uncertainty" discusses judgements made by management when applying the accounting principles adopted by the Group and those financial statement items on which judgements have the most significant effect.

Comptel Annual Report 2012

Financial statements

Principles of consolidation

The consolidated financial statements incorporate the financial statements of the parent company Comptel Corporation and all those subsidiaries in which it has, directly or indirectly, control (together referred to as "Group" or "Comptel"). Associates included in the consolidated financial statements are those entities in which the parent company Comptel Corporation has, directly or indirectly, significant influence, but not control, over the financial and operating policies.

Subsidiaries

Subsidiaries are entities controlled by Comptel. Control means that the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Control exists, among other, when the voting rights attached to the shares owned by Comptel amount to 50 per cent or more of the total voting rights. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account.

Acquisitions of subsidiaries are accounted for using the purchase method of accounting. The consideration transferred and the identifiable assets acquired and the liabilities assumed have been recognised at fair value at the acquisition date. The acquisition costs, excluding the costs to issue debt or equity securities, have been recognised as a cost. The consideration transferred exclude business operations treated separately from the acquisition. The impact is recognised in profit or loss when the acquisition takes place. Possible contingent consideration has been recognised at fair value at the acquisition date and has been classified as liability or equity. Contingent consideration classified as liability is recognised at fair value at the end of each reporting period and the resulting gain or loss is recognised in profit or loss or other comprehensive income. Contingent consideration classified as equity shall not be remeasured.

The subsidiaries acquired have been consolidated from the date of acquisition, when control commenced. The subsidiaries disposed of are included in the consolidated financial statements until the control ceases. All inter-company income and expenses, receivables, liabilities and unrealised profits arising from inter-company transactions, as well as distribution of profits within the Group are eliminated as part of the consolidation process. Unrealised losses are eliminated only to the extent that there is no evidence of impairment.

The allocation of the profit or loss and the distribution of the comprehensive income for the period attributable to equity holders of the parent company and non-controlling interest are presented in connection with the consolidated statement of comprehensive income. Possible non-controlling interest is recognised at fair value or amount corresponding to its proportional share of the net identifiable assets acquired and liabilities assumed. Valuation method is defined separately for each acquisition. Comprehensive income is attributed to equity holders of the parent company and non-controlling interest even if share of non-controlling interest was negative. The share of equity attributable to non-controlling interest is presented separately as part of equity in the statement of financial position. If parent company ownership change in a subsidiary and does not result in loss of controlling interest it is recognised in equity.

If a business combination is achieved in stages the previously held equity interest is recognised at fair value and the resulting gain or loss is reflected in profit or loss. If the Group no longer has a controlling stake in a subsidiary, the remaining asset is recognised at fair value at such date when the transaction takes place and the resulting gain or loss is recognised in profit or loss.

Accounting treatment for acquisitions prior to 1 January 2010 has followed the prevailing standards at the end of the reporting period.

Comptel Annual Report 2012

Financial statements

Associates

Associates are those entities in which Comptel has significant influence. Significant influence generally arises when Comptel holds voting rights less than 50 per cent but over 20 per cent or when the Group otherwise has significant influence over the financial and operating policies, but not control. Holdings in associates are incorporated in these financial statements using the equity method from the date that significant influence commences until the date that significant influence ceases. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. When Comptel's share in an associate's losses exceeds its interest in the associate, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate or made payments on behalf of the associate. The Group's proportionate share of associates' profit for the period is presented as a separate line item in the consolidated statement of comprehensive income.

Foreign currency transactions

The result and financial position of a Group entity are measured using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in euros, which is the functional and presentation currency of the parent company.

Transactions in foreign currencies are translated at the exchange rates prevailing on the dates of the transactions. Foreign currency monetary balances are translated at the exchange rate at the end of reporting period. Non-monetary items measured at fair value in a foreign currency are translated at the exchange rate at the end of reporting period. Gains and losses resulting from transactions in foreign currencies and translation of monetary items are recognised in profit or loss.

Financial statements of foreign subsidiaries

Statements of comprehensive income and cash flows of foreign subsidiaries are translated into euros at the average exchange rate during the financial period. Their statements of financial position are translated using the exchange rate at the end of reporting period. The translation differences arising from the translation of the profit for the period by using the average and closing rates are recognised in other comprehensive income and presented as a separate item in equity. The translation differences arising from the use of the purchase method and after the date of acquisition as well as the result of the hedge of a net investment in a foreign operation are recognised in other comprehensive income and presented within equity. If a subsidiary is disposed of, related cumulative translation differences deferred in equity are recognised in profit or loss as part of the gain or loss on sale. From the transition date onwards translation differences arising on the consolidation are presented as a separate component of equity.

Goodwill and fair value adjustments to assets and liabilities that arose on an acquisition of a foreign entity occurred prior to 1 January 2004 are translated into euros using the rate that prevailed on the date of the acquisition. Goodwill and fair value adjustments arisen on an acquisition after 1 January 2004 are treated as part of the assets and liabilities of the acquired entity and are translated at the closing rate.

Comptel Annual Report 2012

Financial statements

Tangible assets

Tangible assets are measured at historical cost less cumulative depreciation and any impairment losses. Where parts of an item of tangible assets have different economic useful lives, they are accounted for as separate items of tangible assets. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of tangible assets. The depreciation period for machinery and equipment is four years.

Maintenance, repairs and renewals are generally expensed during the period in which they are incurred except for substantial renovation expenditure relating to leased premises that are capitalised under tangible assets. Such costs are depreciated over the shorter of five years and the lease term.

Residual values of tangible assets and expected useful lives are reassessed at each reporting date and where necessary are adjusted to reflect the changes in the expected future economic benefits.

Tangible assets classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are not depreciated after the classification as held for sale.

Gains and losses on sales and disposals of tangible assets are included in operating income and in operating expenses, respectively.

According to IAS 23 borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are to be capitalised.

Intangible assets

Goodwill

Goodwill resulting from business combinations subsequent to 1 January 2010 is recognised at the value at which the consideration transferred the amount of non-controlling interest and previously held assets together exceed the Group's share of the amount of the net of the acquisition-date fair values of the identifiable assets acquired and liabilities assumed.

Acquisitions that have taken place between 1 January 2004 and 31 December 2009 have been recognised based on the previous IFRS standards. Goodwill arisen from the business combinations occurred prior to the IFRS transition date has been accounted for in accordance with FAS and has been taken as a deemed cost.

In accordance with IAS 36 Impairment of Assets goodwill is not amortised but tested for impairment annually. Goodwill is stated at cost less any cumulative impairment losses.

Research and development costs

In accordance with IAS 38 Intangible Assets expenditure on research activities is recognised as an expense in the period in which it is incurred. Development costs that arise from design of new or improved products are capitalised as intangible assets in the statement of financial position when the product is technically and commercially feasible and it will generate future economic benefits. Amortisation of such an asset is commenced when it is available for use.

Comptel Annual Report 2012

Financial statements

Unfinished assets are tested annually for impairment.

Comptel capitalises development costs and costs related to internal system projects meeting the requirements under IAS 38. Capitalised development costs are amortised on a straight-line basis over three years and the costs related to internal system projects over four years.

Government grants that compensate the Group for the development costs are either deducted from the carrying amount of the asset or from the related expenses in profit or loss.

Other intangible assets

Patents and licenses acquired as well as costs incurred from patent applications with a finite useful life are capitalised and amortised on a straight-line basis over their useful lives. Amortisation is calculated based on the original cost and allocated over the useful life.

The capitalised patent costs are generally amortised over ten years and licenses over four years.

The expected amortisation periods are reviewed at each reporting date and if they differ from previous estimates, the amortisation period is changed accordingly.

Identifiable intangible assets acquired on a business combination are measured at fair value. Such intangible assets relate for example to client relationships and technologies received in an asset acquisition and they are amortised over three to five years.

Leases

Comptel as lessee

IAS 17 Leases divides leases into finance and operating leases. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the typical risks and rewards of ownership to the lessee.

At the commencement of the lease term an asset acquired under a finance lease is recognised in the statement of financial position at an amount equal to the lower of its fair value and the present value of the minimum lease payments. An asset acquired under a finance lease is depreciated over the shorter of the lease term and its useful life. Lease payments are apportioned between the finance charge and the reduction of the outstanding lease liability so as to achieve a constant periodic rate of interest on the liability balance outstanding. Lease liabilities are included in financial liabilities.

If the lease does not meet the requirements of a finance lease, it is always classified as an operating lease. In such a case the lessee has the right to use the asset for a limited time and the risks and rewards incidental to ownership are not transferred to the lessee.

The leases of Comptel are mainly treated as operating leases. Payments made thereunder are recognised in profit or loss as rental expenses on a straight-line basis over the lease term.

Comptel Annual Report 2012

Financial statements

Impairment

Tangible and intangible assets

Comptel assesses at each reporting date whether there is any indication of impairment of assets. If there are such indications, the asset's recoverable amount is estimated. In addition, the recoverable amount is estimated annually for the following assets regardless of there being any indications of impairment: goodwill and unfinished intangible assets. The need for impairment is reviewed at the level of cash-generating units which is the lowest level for which there are separately identifiable, mainly independent cash flows.

The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. The value in use represents the discounted future net cash flows expected to be derived from an asset or a cash-generating unit. The discount rate used is the pre-tax rate that reflects the market's view on the time value of money and the specific risks related to the asset.

An impairment loss is recognised if the carrying amount of an asset or a cash-generating unit is higher than the recoverable amount. Impairment losses are recognised in profit or loss. If an impairment loss is allocated to a cash-generating unit, it is first allocated to decrease the goodwill allocated to this cash-generating unit and subsequently to decrease pro-rata other assets of the cash-generating unit. An impairment loss is reversed if there are any indications that the conditions and the recoverable amount have changed since the impairment loss was recognised. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised. An impairment loss recognised for goodwill is never reversed.

Pension obligations

Under IAS 19 Employee Benefits pension plans are classified as either defined contribution plans or defined benefit plans based on the company's obligations. In a defined contribution plan the company pays fixed contributions to a separate entity and has no further obligations. The pension plans of Comptel are arranged in accordance with the local legislation. Contributions of the defined contribution plans based on the regularly reviewed actuarial calculations prepared by the local pension insurance companies are recognised as an expense in profit or loss in the year to which they relate. Other plans are classified as defined benefit plans.

In a defined benefit plan the liability to be recognised in the statement of financial position is the net amount of the net present value of the pension obligation and the plan assets measured at fair value at the year-end, adjusted with both unrecognised actuarial gains and losses as well as with unrecognised past service cost. The calculation for pension obligations is carried out by qualified actuaries. The amount of the obligation is based on the projected unit credit method. Pension expenses are recognised in profit or loss over the expected working lives of the employees participating in the plan.

Comptel Annual Report 2012

Financial statements

Share-based payments

Comptel has several option schemes and they are paid out as equity instruments. Equity-settled share-based schemes are measured at fair value at the grant date and expensed in profit or loss on a straight-line basis over the vesting period. The expense determined at the grant date is based on the Group's estimate on the number of those options that eventually vest at the end of the vesting period. The fair value is determined using the Black-Scholes option pricing model.

Comptel has also share-based incentive programs. The share-based incentive programs provide the key personnel of the Comptel Group with a possibility to receive shares of the company as compensation. The compensation paid based on the share-based incentive programs is paid as a combination of company shares and cash after the vesting period has expired. Costs incurred from the share-based incentive programs are recognised as employee benefit expenses over the commitment period.

Provisions

IAS 37 Provisions, Contingent Liabilities and Contingent Assets prescribes the recognition criteria for a provision. A provision is based on an existing obligation and it is recognised in the statement of financial position when an entity has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The amounts recognised as provisions shall be the best estimate at the end of the reporting period and if the best estimates change the provisions are adjusted. Changes in the provision are recognised similarly in profit or loss as the original provision.

A warranty provision is recognised when a product that embodies a warranty is sold or delivered. The amount of the warranty provision is based on experience-based information about the materialisation of warranty costs.

A restructuring provision is recognised when Comptel has prepared a detailed plan for restructuring, commenced the implementation of the plan and announced about the plan. A restructuring plan includes at least the following information: the business concerned, the principal locations affected, the location, function and approximate number of employees who will be compensated for terminating their services, the expenditures that will be undertaken and when the plan will be implemented. No provision is recognised for the expenditure arising from the Group's continuing operations.

A provision is recognised when the expected economic benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract.

Comptel Annual Report 2012

Financial statements

Income taxes

The income taxes in the consolidated statement of comprehensive income consist of current tax and the change in the deferred tax assets and liabilities. Current tax is calculated on the taxable profit for the period determined in accordance with local tax rules and is adjusted with the tax for previous years. The deferred tax amount attributable to other comprehensive income or equity is reflected in other comprehensive income or equity, accordingly.

Deferred tax assets and liabilities are provided using the statement of financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The enacted or substantially enacted tax rate at the reporting date is used as the tax rate. In Comptel the main temporary differences arise from the depreciation of tangible assets not deducted in taxation, the fair value measurement of derivatives, capitalisation of development costs and the reversal of goodwill amortisation on Group level.

Deferred tax liabilities are recognised at their full amounts in the statement of financial position, and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised.

Revenue recognition and net sales

Revenue from the sale of goods is recognised when significant risks and rewards of ownership have been transferred to the buyer. Revenue from services is recognised when the service has been performed. License revenue that includes no work performance is recognised when the license is delivered. The number of subscribers at a client is reviewed continuously. If their number exceeds the number agreed on in the terms of the license, the client can be charged for the increased number of subscribers. This license upgrade revenue is recognised upon invoicing. Maintenance revenue is recognised as income on a straight-line basis over the maintenance term.

Long-term projects

Revenue and expenses from long-term projects are recognised using the percentage-of-completion method, when the outcome of a long-term project can be estimated reliably. The revenue from a long-term project comprises license income and work. The outcome of a long-term project can be estimated reliably when the revenue and expenses expected as well as the progress made towards completing a particular project can be measured reliably and when it is probable that the economic benefits associated with the project will flow to the Group. In Comptel the degree of completion of a long-term project is determined by the relation of accrued work hours to estimated overall work hours. If it is probable that total project costs will exceed total project revenue, the expected loss is recognised as an expense immediately.

Net sales is adjusted for discounts granted, sales-related indirect taxes and effects of the translation differences arisen on the translation of the trade receivables denominated in foreign currencies.

A separate warranty provision is recognised to cover costs under warranty periods following the completion of the projects. The total estimated margin of onerous projects is recognised as an expense and a provision.

Comptel Annual Report 2012

Financial statements

Earnings per share

The calculation of earnings per share is based on the profit attributable to ordinary shareholders that is divided by the weighted average number of ordinary shares outstanding during the year. Treasury shares owned by the Group are excluded when calculating the weighted average number of ordinary shares. For the purpose of calculating diluted earnings per share using the treasury stock method, the Group assumes the following: the exercise of dilutive warrants and options occurred at the beginning of the financial period, the exercise of dilutive warrants and options granted during the period followed at their grant date and the proceeds from their exercise was spent by acquiring treasury shares at the average market price during the period. The denominator includes the weighted average number of ordinary shares and the shares to be issued following the exercise of warrants and options.

The assumptions of the exercise of options is excluded when calculating diluted earnings per share if the exercise price of the warrants and options exceeds the average share market price during the period. The options and warrants have a dilutive effect only if the average share market price during the period is higher than the subscription price of an option and a warrant.

Financial assets and liabilities

Financial assets

In accordance with IAS 39 Financial Instruments: Recognition and Measurement the financial assets of the Group are classified to following groups: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. Classification is based on the nature of the item and it is made at initial recognition.

An item is classified as financial asset at fair value through profit or loss when it is held for trading or classified at initial recognition as financial asset at fair value through profit or loss. The latter group comprises such investments that are managed based on their fair value or an investment which contains one or more embedded derivative which changes the cash flows of the contract significantly in which case the entire compound instrument is measured at fair value. Financial assets held for trading have been mainly acquired to generate profits from short-term changes in market prices. Derivative instruments which do not meet the criteria for hedge accounting defined in IAS 39 have been classified as held for trading. Derivatives held for trading as well as financial assets maturing within 12 months are included in current assets. These assets have been measured at fair value. Unrealised and realised gains and losses arisen from fair value measurement are recognised in profit or loss in the period in which they occur.

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity. Held-to-maturity investments are measured at amortised cost and they are included in non-current assets. Comptel had no such financial assets during the financial year ended 31 December 2009.

Comptel Annual Report 2012

Financial statements

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group does not hold them for trading purposes either. They are included in current assets, except for maturities greater than 12 months after the reporting date. Trade receivables are recognised based on the original amount charged from a client less any impairment losses.

Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date, in which case they are classified as current. Available-for-sale financial assets may include shares (equity securities) and interest-bearing investments. They are measured at fair value, or when the fair value can not be reliably determined, at cost.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term, highly liquid investments with original maturities of three months or less. Any bank overdrafts are included within current liabilities.

Financial liabilities

Financial liabilities are initially recognised at fair value, net of transaction costs. Subsequently financial liabilities are measured at amortised cost using the effective interest rate method. Financial liabilities are both non-current and current. A financial liability is classified as current when the Group does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Borrowing costs are recognised in profit or loss as incurred. Fees paid on the establishment of loan facilities are recorded as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. When the draw-down occurs, the fees paid on the establishment of loan facilities are recognised as part of transaction costs. To the extent it is probable that some or all of the facility will not be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

Comptel Annual Report 2012

Financial statements

Derivative financial instruments and hedge accounting

Derivatives are initially recognised in the statement of financial position at cost, equivalent to their fair value and are subsequently measured to fair value.

As of 1 October 2012, Comptel did not apply hedge accounting in accordance with IAS 39. The changes in the fair values of the derivatives hedging trade receivables are booked against sales revenues. The changes in the fair values of derivatives hedging expected sales and loans are booked in financial income and expenses.

Previously, gains and losses arising from the fair value measurement were accounted for in accordance with the purpose of the derivative in the financial statements. Those derivatives that were used for hedging purposes and were effective hedges were presented consistently with the hedged item in profit or loss. When Comptel entered into a derivative contract, it was accounted for either as a fair value hedge of assets, liabilities or a firm commitment or, in respect of currency risk as a cash flow hedge, a hedge of a highly probable forecast transaction or as a derivative that does not meet the conditions of hedge accounting under IAS 39.

At the inception of a hedge relationship, Comptel formally designated and documented the hedge relationship as well as the Group's risk management objective and strategy for undertaking the hedge. Comptel documented and assessed, at the inception of a hedge relationship and at least at each reporting date, the hedging instrument's effectiveness in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged risk. The changes in the fair values of those derivatives meeting the criteria of a fair value hedge were recognised in profit or loss together with the fair value changes of the hedged asset or liability attributable to the hedged risk.

If a derivative met the conditions of a cash flow hedge, the change in the fair value of the effective portion of the hedging instrument was recognised in other comprehensive income and presented in equity in the hedging reserve. The accumulated gains or losses in equity were reclassified into profit or loss in the same period during which the hedged item affected profit or loss. Those gains and losses resulting from the instruments hedging the expected sales denominated in foreign currency were adjusted against sales revenues. If the hedged forecast transaction subsequently resulted in the recognition of a non-financial asset, the associated gains and losses were removed from equity and were included in the cost of the asset. When a hedging instrument designated as a cash flow hedge expired or was sold or the hedge no longer met the criteria for hedge accounting, the cumulative gain or loss on the hedging instrument remained in equity until the forecast transaction occurred. However, if the forecast transaction was no longer expected to occur, any related cumulative gain or loss in equity was recognised immediately in profit or loss.

Dividends

The dividend proposed by the board of directors is not recognised until approved by a general meeting of shareholders.

Comptel Annual Report 2012

Financial statements

Accounting policies requiring management's judgment and key sources of estimation uncertainty

The preparation of financial statements calls for the management to make future-related estimates and assumptions which may differ from the actual results. In addition, judgment is required when applying accounting principles. The estimates are based on management's best view at the reporting date. Possible changes in estimates and assumptions are recognised in that period when an assumption or estimate is corrected as well as in all subsequent periods.

In Comptel those key assumptions concerning the future and those key sources of estimation uncertainty at reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are the following:

Impairment testing

Goodwill, patenting costs and development costs capitalised under unfinished intangible assets are tested annually for impairment. Assets are reviewed for impairment in accordance with the principles set out above. Estimates are required in preparing these calculations.

Additional information about the sensitivity of the recoverable amount to changes in the assumptions used is presented in note 16. Intangible assets.

Revenue recognition

As described above under the heading Revenue recognition principles revenue and expenses from long-term projects are recognised using the percentage of completion method when the outcome of a long-term project can be estimated reliably. The percentage of completion method is based on estimates of total expected project revenue and costs, as well as on reliable measurement of the progress made towards completing a particular project. The recognition of project revenue and project costs in profit or loss is changed if the estimate of the outcome of a project deviates from the plan, in the period in which the change is identified for the first time and it can be estimated reliably. An expected loss on a long-term project is recognised in profit or loss immediately when it is identified and can be estimated reliably.

Additional information about the long-term contracts is presented in note 4. Revenue recognition using percentage of completion method.

Taxes

Management needs to assess the treatment of withholding taxes as well as the possibility to utilise deferred tax assets. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised.

Comptel Annual Report 2012

Financial statements

Application of new or amended standards and interpretations

The below described standards, interpretations or their amendments have been published but are not yet effective and Comptel has not adopted them prior to the mandatory application date. Comptel will adopt the following amended or new standards and interpretations issued by the IASB as soon as they are effective if the effective dated is the same as the beginning of the financial year, or if the effective date is different, they will be adopted as from the beginning of the following financial year:

Amendments to IAS 1 Presentation of Financial Statements (effective for financial years beginning on or after 1 July 2012): The major change is the requirement to group items of other comprehensive income as to whether or not they will be reclassified subsequently to profit or loss when specific conditions are met. The amendments only have an impact on the presentation of Comptel's consolidated financial statements.

Amendment to IAS 19 Employee Benefits (effective for financial years beginning on or after 1 January 2013): In future all actuarial gains and losses are immediately recognised in other comprehensive income, i.e. the corridor approach is eliminated, and finance costs are calculated on a net funding basis. Currently Comptel does not have defined benefit plans, so the amendment will not have an impact on the consolidated financial statements.

IFRS 9 Financial Instruments and subsequent amendments (effective for financial years beginning on or after 1 January 2015): IFRS 9 is the first step of the IASB's three-phase project to replace the current IAS 39 Financial Instruments: Recognition and Measurement. The amendments resulting from the first phase address the classification, measurement and recognition of financial assets and financial liabilities. Different ways of measurement for financial assets have been retained, but simplified. Based on measurement, financial assets are classified into two main groups: financial assets at amortised cost and financial assets at fair value. Classification depends on a company's business model and the characteristics of contractual cash flows. For financial liabilities, the standard retains most of the IAS 39 requirements. Comptel Group is yet to assess the full impact of the amendments. The standard has not been endorsed for use in the EU yet.

IFRS 10 Consolidated Financial Statements* (effective for financial years beginning on or after 1 January 2013): IFRS 10 builds on existing principles by identifying the concept of control as the determining factor when deciding whether an entity should be incorporated within the consolidated financial statements. The standard also provides additional guidance to assist in the determination of control where this is difficult to assess. The new standard is not expected to have an impact on Comptel's consolidated financial statements.

IFRS 11 Joint Arrangements* (effective for financial years beginning on or after 1 January 2013): In the accounting of joint arrangements IFRS 11 focuses on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. In future jointly controlled entities are to be accounted for using only one method, equity method, and the other alternative, proportional consolidation is no longer allowed. Comptel does not have joint arrangements as defined in the standard. Thus, the standard will not have an impact on Comptel's consolidated financial statements.

IFRS 12 Disclosures of Interests in Other Entities* (effective for financial years beginning on or after 1 January 2013): IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including associates, joint arrangements, structured entities and other off-balance sheet vehicles. The information disclosed on these entities will be extended by the standard.

IFRS 13 Fair Value Measurement (effective for financial years beginning on or after 1 January 2013): IFRS 13 establishes a

Comptel Annual Report 2012
54

Financial statements

single source for all fair value measurements and disclosure requirements for use across IFRSs. The new standard also provides a precise definition of fair value. IFRS 13 does not extend the use of fair value accounting, but it provides guidance on how to measure fair value under IFRSs when fair value is required or permitted. The new standard is not expected to have a material impact on Comptel's consolidated financial statements.

IAS 27 (revised 2011) Separate Financial Statements* (effective for financial years beginning on or after 1 January 2013): The revised standard includes the provisions on separate financial statements that are left after the control provisions have been included in the new IFRS 10. The revised standard will not have an impact on Comptel's consolidated financial statements.

IAS 28 (revised 2011) Investments in Associates and Joint Ventures* (effective for financial years beginning on or after 1 January 2013): Following the issue of IFRS 11 the revised IAS 28 includes the requirements for joint ventures, as well as associates, to be equity accounted. The revised standard is not expected to have an impact on Comptel's consolidated financial statements.

Amendment to IAS 32 Offsetting Financial Assets and Financial Liabilities (effective for financial years beginning on or after 1 January 2014). The amendment further defines the rules pertaining to the presentation of net financial assets and liabilities and sets forth additional guidelines relating to the topic. The amendment will not have an impact on the consolidated financial statements.

Amendment to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities (effective for financial years beginning on or after 1 January 2013). The amendment specifies requirements to the notes to the financial statements impacting presentation of net financial instruments and general netting arrangements or alike. The amendment will not have an impact on the consolidated financial statements.

Annual Improvements to IFRSs 2009-2011, May 2012, (effective for financial years beginning on or after 1 January 2014). Under this procedure minor and not urgent amendments are grouped together and carried out through a single document annually. The related amendments deal with 5 standards. The impact of the amendments differs, but will not have a significant impact on the consolidated financial statements. The amendments have not been endorsed by the EU yet.

*) The EU has endorsed the standard in December 2012. The companies shall apply the standard, at the latest, for financial years beginning on or after 1 January 2014.

Comptel Annual Report 2012

Financial statements

2. Segment reporting

Comptel Group has five reportable segments which are based on geographical areas. In the beginning of July 2011 Comptel divided its European business into two areas: Europe East and Europe West. Comptel operates globally in all geographical market areas. Market areas differ from each other in terms of price level, competitive position and Comptel's own resource allocation. The segment division is based on the geographical location of customers. Geographical segments are Europe East, Europe West, Asia-Pacific, Middle East and Africa and Americas. All segments generate revenue from sales of software licenses, services and support and maintenance associated with the software licenses.

Comptel Group's operating segment reporting is conforming to IFRS standards.

The assessment of the operating results and resource allocation is based on the operating result of the segment in Comptel Group. The President and CEO of Comptel Group is ultimately responsible for these decisions.

Total net sales from the operating segments consolidate to Group external net sales. Segment expenses include sales and customer service expenses. Unallocated expenses relate to product management, research and development as well as administration units. Segment assets include trade receivables.

2012 EUR 1,000	Europe East	Europe West	Asia-Pacific	Middle East and Africa	Americas	Segments total
Net sales	16,312	20,975	21,665	14,541	8,934	82,428
Segment share of operating result	6,304	9,712	9,504	2,967	3,782	32,269
Depreciation and amortisation	0	11	230	1	12	254
Trade receivables	2,915	5,035	4,783	5,269	4,822	22,825
2011 EUR 1,000	Europe East	Europe West	Asia-Pacific	Middle East and Africa	Americas	Segments total
---	---	---	---	---	---	---
Net sales	12,910	19,074	21,109	13,716	9,942	76,751
Segment share of operating result	2,180	11,442	11,919	5,458	5,657	36,655
Depreciation and amortisation	27	0	90	12	10	140
Trade receivables	2,273	6,562	3,264	6,292	7,625	26,016

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Financial statements

Reconciliations

| Result
EUR 1,000 | 2012 | 2011*) |
| --- | --- | --- |
| Segment share of operating result | 32,269 | 36,655 |
| Unallocated expenses | -45,786 | -24,753 |
| Financial income and expenses | -697 | -753 |
| Share of result of associated companies | 259 | -187 |
| Group profit/loss before income taxes | -13,955 | 10,963 |

*) Year 2011 error has been corrected.

| Depreciation, amortisation and impairment charges
EUR 1,000 | 2012 | 2011 |
| --- | --- | --- |
| Segment depreciation and amortisation | 254 | 140 |
| Unallocated depreciation, amortisation and impairment charges | 14,365 | 13,495 |
| Total depreciation, amortisation and impairment charges | 14,619 | 13,635 |
| Assets
EUR 1,000 | 2012 | 2011 |
| --- | --- | --- |
| Segment assets | 22,825 | 26,016 |
| Unallocated assets | 45,626 | 45,745 |
| Total assets | 68,451 | 71,761 |

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Financial statements

Information about products and services

| Revenues from external customers
EUR 1.000 | 2012 | 2011 |
| --- | --- | --- |
| Licenses | 16,614 | 21,144 |
| Services | 33,229 | 22,900 |
| Maintenance agreements | 32,585 | 32,707 |
| Total | 82,428 | 76,751 |

Geographical information

The geographical split of net sales is based on the customer domicile.

| Revenues from external customers
EUR 1.000 | 2012 | 2011 |
| --- | --- | --- |
| India | 7,549 | 5,782 |
| Finland | 6,192 | 6,441 |
| Germany | 5,626 | 2,211 |
| Saudi Arabia | 4,320 | 5,236 |
| Australia | 4,167 | 7,076 |
| Other countries | 54,573 | 50,004 |
| Total | 82,428 | 76,751 |

The geographical split of non-current assets is based on the location of such assets. Non-current assets are presented without deferred tax assets and post-employment benefit assets.

| Non-current assets
EUR 1.000 | 2012 | 2011 |
| --- | --- | --- |
| Finland | 13,629 | 9,774 |
| Other countries | 1,643 | 1,359 |
| Investments in associates | 1,076 | 817 |
| Unallocated assets | 2,821 | 10,832 |
| Total | 19,170 | 22,782 |

Information about major customers

In 2012 and 2011 revenues from a single customer did not exceed 10% of the total Comptel group net sales.

Comptel Annual Report 2012

Financial statements

3. Business combinations

On 9 February 2012, Comptel Corporation acquired all shares of Xtract Oy, a Finnish software company specialising in analytics.

By acquiring Xtract the company creates a unique offering by combining world class analytics capabilities with its existing assets. This offering enables operators to react quickly to events from the network and transform them automatically into relevant and timely actions that improve the customer experience.

The total consideration (enterprise value) was EUR 3,100 thousand. The actual purchase price EUR 2,075 thousand was paid in cash.

The goodwill according to IFRS 3 is EUR 1,993 thousand after the fair value allocations reflected in net assets. EUR 215 thousand was recognised in intangible assets which are amortised over five years.

The goodwill is attributable to the skilled workforce of Xtract and the utilisation potential of Comptel's existing sales channel to promote Xtract products.

The values of the assets and liabilities arising from the acquisition were as follows:

EUR 1,000	Recognised fair values on acquisition
Technology (incl. in other intangible assets)	840
Other intangible assets	1
Machinery and equipment	6
Trade receivables and other receivables	842
Cash and cash equivalents	263
Total assets	1,952
Deferred tax liabilities	53
Other non-interest bearing liabilities	597
Interest bearing liabilities	1,220
Total liabilities	1,870
Net assets	82
Acquisition cost	2,075
Goodwill	1,993
Purchase price paid in cash	2,075
Cash and cash equivalents in acquired subsidiary	-263
Total net cash outflow on the acquisition	1,812

Comptel has expensed acquisition-related consultation fees of EUR 145 thousand. The fees are included in other operating expenses.

Comptel Annual Report 2012

Financial statements

Xtract's net sales EUR 1,145 thousand and loss EUR 1,523 thousand for the period 10 February to 31 December 2012 are included in the comprehensive statement of income. Comptel Group net sales for 1 January - 31 December 2012 would have been EUR 82,793 thousand and loss EUR 13,457 thousand if Xtract had been consolidated from the beginning of the year 2012.

4. Other operating income

EUR 1,000	2012	2011
Net sales recognised as revenue according to percentage of completion	17,864	18,676
Amount recognised as revenue during the financial year and previous years for long-term projects in progress	27,814	22,949
Total costs of incomplete long-term projects	14,246	10,072
Backlog of orders of long-term projects according to percentage of completion	13,229	13,232
Prepayments and accrued income recognised on the basis of percentage of completion	9,339	8,222
Deferred income and accruals recognised on the basis of percentage of completion	2,826	2,070

5. Other operating income

EUR 1,000	2012	2011
Gains on disposal of tangible assets	6	3
Net gain from sale of Axios software	-	19,705
Other income items	2	95
Total	9	19,802

A more detailed breakdown of the gain from the sale of the Axios software can be found in note 10. The impact of the Axios software sale on the operating result in 2011.

6. Materials and services

EUR 1,000	2012	2011
Purchases	325	615
External services	5,152	4,670
Total	5,477	5,285

Comptel Annual Report 2012

Financial statements

7. Employee benefits

EUR 1,000	2012	2011*)
Wages and salaries	36,903	30,076
Pension expenses - defined contribution plans	3,736	3,418
Pension expenses - defined benefit plans	-	99
Share options granted	339	188
Expenses related to share-based incentive program	224	143
Other social security costs	2,907	2,529
Total	44,108	36,454

*) Year 2011 error has been corrected.

The average number of employees in the Group during the financial year

	2012	2011
Europe East	344	307
Europe West	76	69
Asia-Pacific	214	195
Middle East and Africa	49	34
Americas	17	18
Total	700	623

Information on the remuneration of the Group management is presented in note 31. Related party transactions.

Information on the options granted and on the management's share in the share-based incentive plan is presented in note 22. Share-based payments.

Comptel Annual Report 2012

Financial statements

Depreciation, amortisation and impairment charges

EUR 1,000	2012	2011
Depreciation and amortisation by asset type
Intangible assets
Patents and trademarks	76	78
Capitalised development costs	2,766	3,143
Other intangible assets	674	575
Total	3,515	3,796
Tangible assets
Machinery and equipment	767	937
Total	767	937
Impairment charges by asset type
Goodwill	10,179	8,742
Capitalised development costs	-	161
Other intangible assets	1	-
Machinery and equipment	157	-
Total	10,337	8,903
Total depreciation, amortisation and impairment charges	14,619	13,635

Other operating expenses

EUR 1,000	2012	2011
Lease payments	4,870	5,830
Travel expenses	6,315	6,211
Marketing expenses	1,769	1,292
Other operating expenses	18,796	15,944
Total	31,749	29,277

Comptel Annual Report 2012

Financial statements

The auditors' fees

EUR 1,000	2012	2011
Ernst & Young
Audit	99	-
Tax consultation	6	-
Other services	66	-
Total	171	-
KPMG
Audit	8	104
Tax consultation	21	54
Other services	39	28
Total	68	186
Pricewaterhouse Coopers
Audit	6	-
Total	6	-
Total auditors' fees	245	186

Audit fees include the fees of the statutory auditors of each Group company.

10. The impact of the Axios software sale on the operating result in 2011

During the financial period 2011 Comptel sold the Axios software to Cisco.

The impact on the net operating result in 2011 is as follows:

EUR 1,000	2011
Sales price	22,122
Impairment of intangible assets related to the operations sold	-2,198
Expenses related to the asset sale	-219
Other operating income, net	19,705
Goodwill impairment	-8,742
Impact on operating result	10,963

The asset sale resulted in one-off expenses of EUR 2,165 thousand which impacted the operating result.

Comptel Annual Report 2012

Financial statements

11. Research and development costs

The research and development costs recognised as expenses in the statement of comprehensive income amounted to EUR 12,411 thousand in 2012 (EUR 11,454 thousand in 2011).

The capitalised development expenditure totalled EUR 6,170 thousand (EUR 3,965 thousand in 2011). The amortisation of the capitalised development costs amounted to EUR 2,841 thousand (EUR 3,220 thousand in 2011). A write-down of EUR 161 thousand was made on the capitalised development costs in 2011. An impairment loss of EUR 1,273 thousand was booked on capitalised development costs related to the operations sold in 2011. The impairment loss was booked in other operating income.

12. Financial income and expenses

EUR 1,000	2012	2011
Interest income from cash and cash equivalents	17	48
Interest income from other receivables	7	8
Financial assets/liabilities measured at fair value through profit or loss:
Forward exchange contracts not in hedge accounting	388	-
Foreign exchange gains from other receivables and other liabilities	630	481
Interest expenses from financial liabilities measured at amortised cost	-66	0
Interest expenses from other liabilities	-15	-14
Foreign exchange losses from other receivables and other liabilities	-1,511	-1,226
Other financial expenses	-147	-49
Total	-697	-753

Comptel Annual Report 2012

Financial statements

Statement of comprehensive income items include foreign exchange differences as follows:

EUR 1,000	2012	2011
Net sales
Change in fair value of forward exchange contracts	-665	422
Foreign exchange differences, net	-36	-163
Materials and services
Foreign exchange differences, net	-143	-85
Financial income
Change in fair value of forward exchange contracts	388	-
Foreign exchange profits	630	481
Financial expenses
Change in fair value of forward exchange contracts	-16	-147
Foreign exchange losses	-1,495	-1,079
Total	-1,337	-571

Comptel discontinued applying hedge accounting in accordance with IAS 39 and all changes in fair values have been recognised through profit or loss.

Comptel Annual Report 2012

Financial statements

13. Income taxes

EUR 1,000	2012	2011
Current tax expense	678	1,955
Adjustments for previous years' taxes	-15	-12
Deferred taxes	-4,906	-619
Withholding taxes	3,024	1,942
Other direct taxes	67	106
Total	-1,152	3,373

In November 2006 Comptel Corporation received a refusal from the Board of Adjustment of the Tax Office for Major Corporations concerning the crediting of taxes withheld at source in taxation of 2004. The claim for adjustment concerns the crediting of taxes withheld at source the company has paid in 2004 to avoid double taxation.

Comptel Corporation recognised and paid these taxes withheld at source for 2004 in 2005. According to the Board of Adjustment's decision currently in force, Comptel Corporation has expensed taxes withheld at source amounting to EUR 1,680 thousand in 2012. The total withholding taxes expensed between 2004 and 2012 amount to EUR 9,244 thousand.

Comptel Corporation has received license revenue from the countries with which Finland has a tax treaty. The purpose of the tax treaties is to avoid double taxation. Taxes have been withheld from the payments made to Comptel Corporation, in accordance with the royalty article of the related tax treaty, in the source country of the revenue. If the taxes withheld at source paid by Comptel Corporation will not be credited in Finland, the revenue from the customers located in the tax treaty countries will be subject to double taxation.

Comptel Annual Report 2012

Financial statements

At the end of year 2010 Comptel had a tax receivable of EUR 595 thousand from Greece and Romania. The Ministry of Finance had earlier announced that it had reached an agreement with these two countries. However, during the refund process factors indicating that Greece will not adhere to the agreement have come up. Comptel wrote off the tax receivables during 2011.

Income tax recognised in other comprehensive income

EUR 1,000	2012			2011
	Before tax	Tax expense (-) / benefit (+)	Net of tax	Before tax	Tax expense (-) / benefit (+)	Net of tax
Cash flow hedges	781	-191	590	-727	177	-550
Translation differences	46		46	175		175
Total	827	-191	636	-552	177	-374

Comptel Annual Report 2012

Financial statements

Reconciliation between the income tax expense recognised in the statement of comprehensive income and the taxes calculated using the Group's domestic corporate tax rate 24.5% (26% in 2011):

EUR 1,000	2012	2011*)
Profit before taxes	-13,955	10,376
Income tax calculated using the domestic corporation tax rate	-3,419	2,698
Effect of tax rates in foreign jurisdictions	-18	78
Non-deductible expenses	272	128
Non-deductible depreciations, amortisations and impairment charges	30	2,273
Withholding taxes, net	1,680	1,942
Current year losses for which no deferred tax assets was recognised	373	-3,660
Taxes for previous years	-15	-26
Other items	-54	-60
Income taxes in the consolidated statement of comprehensive income	-1,152	3,373

*) Year 2011 has been corrected.

14. Earnings per share

The basic earnings per share is calculated by dividing the profit/loss for the year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the financial year.

	2012	2011*)
Profit/loss for the year attributable to equity holders of the parent (EUR 1,000)	-12,804	7,590
Number of outstanding shares during the financial period, weighted average	106,863,518	106,775,223
Basic earnings per share (euro)	-0.12	0.07

In calculating the diluted earnings per share, the weighted average number of shares is adjusted by the effect of the conversion into shares of all dilutive potential ordinary shares. Comptel has share options, which have a diluting effect, when the exercise price of the share options is lower than the fair value of the share. The fair value of the share is based on the average price of the shares during the financial period. In 2012 and 2011, the options did not have a material dilutive effect on earnings per share.

Comptel Annual Report 2012

Financial statements

	2012	2011(*)
Profit/loss for the year attributable to equity holders of the parent (EUR 1,000)	-12,804	7,590
Weighted average number of shares for calculation of diluted earnings per share	107,650,327	106,775,223
Diluted earnings per share (euro)	-0.12	0.07

*) Year 2011 error has been corrected.

15. Tangible assets

EUR 1,000	Machinery and equipment
Cost at 1 Jan 2012	6,467
Additions	1,044
Business combinations	6
Disposals	-821
Exchange difference	-4
Cost at 31 Dec 2012	6,692
Accumulated depreciation at 1 Jan 2012	-5,086
Depreciation	-767
Impairment loss	-157
Disposals	820
Exchange difference	15
Accumulated depreciation at 31 Dec 2012	-5,174
Book value at 1 Jan 2012	1,381
Book value at 31 Dec 2012	1,518

Comptel Annual Report 2012

Financial statements

EUR 1,000	Machinery and equipment
Cost at 1 Jan 2011	6,142
Additions	479
Disposals	-131
Exchange difference	-24
Cost at 31 Dec 2011	6,467
Accumulated depreciation at 1 Jan 2011	-4,300
Depreciation	-937
Disposals	129
Exchange difference	23
Accumulated depreciation at 31 Dec 2011	-5,086
Book value at 1 Jan 2011	1,842
Book value at 31 Dec 2011	1,381

Comptel Annual Report 2012

Financial statements

Intangible assets

EUR 1,000	Goodwill	Patents and trademarks	Development costs	Other intangible assets	Total
Cost at 1 Jan 2012	19,566	1,179	27,126	12,211	60,083
Additions	1,993	44	6,126	634	8,797
Business combinations				807	807
Disposals				-35	-35
Exchange difference				128	128
Cost at 31 Dec 2012	21,559	1,223	33,252	13,745	69,778
Accumulated amortisation at 1 Jan 2012	-8,734	-420	-19,228	-11,615	-39,995
Amortisation		-76	-2,766	-674	-3,515
Impairment loss	-10,179			-1	-10,180
Disposals				35	35
Exchange difference				-128	-128
Accumulated amortisation at 31 Dec 2012	-18,913	-495	-21,993	-12,382	-53,783
Book value at 1 Jan 2012	10,832	759	7,899	597	20,087
Book value at 31 Dec 2012	2,646	728	11,259	1,363	15,995
EUR 1,000	Goodwill	Patents and trademarks	Development costs	Other intangible assets	Total
---	---	---	---	---	---
Cost at 1 Jan 2011	19,626	1,081	23,259	11,670	55,636
Additions		98	3,867	558	4,523
Exchange difference	-60			-17	-77
Cost at 31 Dec 2011	19,566	1,179	27,126	12,211	60,083
Accumulated amortisation at 1 Jan 2011	-	-342	-14,651	-10,070	-25,063
Amortisation		-78	-3,143		-3,220
Impairment loss	-8,742		-161	-575	-9,478
Impairment loss booked in other operating income			-1,273	-925	-2,198
Exchange difference	8			-44	-36
Accumulated amortisation at 31 Dec 2011	-8,734	-420	-19,228	-11,615	-39,995
Book value at 1 Jan 2011	19,626	739	8,608	1,600	30,573
Book value at 31 Dec 2011	10,832	759	7,899	597	20,087

Comptel Annual Report 2012

Financial statements

Allocation of goodwill

Goodwill amounted to EUR 2,646 thousand on 31 December 2012. Comptel changed the allocation principles of goodwill during the first quarter of 2012. In conjunction with the change, goodwill impairment was performed at the new cash generating unit level which was lower level compared to the one used during financial year 2011. As a result of the goodwill impairment test Comptel booked an impairment loss of EUR 10,179 thousand during the first quarter of the year.

Goodwill has been allocated to two different product business units which form separate cash generating units. These product business units do not relate directly to geographic segments reported by Comptel. Future cash flows can be generated from all geographical market areas. Consequently, goodwill cannot be allocated to a specific geographical segment. Goodwill has been allocated to two cash generating units which are Inventory unit and Intelligent Customer Interaction unit. The latter was formed as a result of the Xtract acquisition in 2012. EUR 653 thousand (no allocated goodwill in 2011) of goodwill has been allocated to Inventory unit and EUR 1,993 thousand (no allocated goodwill in 2011) to Intelligent Customer Interaction unit. Total goodwill amounted to EUR 10,832 thousand in the end of 2011.

Impairment testing

The recoverable amount of goodwill is determined based on value in use calculations. The value in use is computed based on discounted forecast cash flows. The cash flow forecasts rely on the plans approved by the Board of Directors and management concerning in particular profitability and the growth rate of net sales. The plans cover a five-year period taking into account the recent development of the business. The used pre-tax rate discount rate is 17.9% (16.4% in 2011).

The cash flows after the five-year period for the Inventory unit have been forecasted by estimating the future growth rate of net sales to be 0%. Net sales is mainly generated from existing support and maintenance contracts as well as change requests to the existing systems. Based on these facts, management view is that there is a reasonable justification to use lower growth projection than the long-term economic growth estimate. Another key factor impacting the cash flows is operating expenses. Based on the impairment tests there is no need to recognise an impairment loss.

The cash flows after the five-year period for the Intelligent Customer Interaction unit have been forecasted by estimating the future growth rate of net sales to be 3%. The global growth of communications services providers' net sales and investments was approximately 4% in 2012. In spite of somewhat weak economic outlook the growth rate was higher than the GDP growth in general. Consequently, using a 3% growth rate is justified. Analytics software is one of the fastest growing sectors in the telecommunications software space. Net sales growth is the key factor impacting the valuation of the unit due to the significant growth expectation set for the unit. Based on the impairment tests there is no need to recognise an impairment loss.

The use of the testing model requires making estimates and assumptions concerning investments, market growth and general interest rate level.

Sensitivity analysis of impairment testing

The realisation of an impairment loss in the Inventory unit would require the long-term EBITDA level to be more than 20% lower than the management's estimate at the end of reporting period or that the discount rate was over 28%.

The realisation of an impairment loss in the Intelligent Customer Interaction unit would require the long-term EBITDA level to be more than 33% lower than the management's estimate at the end of reporting period or that the discount rate was over 63%.

Comptel Annual Report 2012

Financial statements

17. Investments in associates

EUR 1,000	2012	2011
Carrying amount at 1 Jan	817	1,003
Share of results	259	-187
Carrying amount at 31 Dec	1,076	817

The carrying amount of goodwill included in the carrying amount of the investment in the associate amounted to EUR 400 thousand at 31 December 2012 (31 December 2011: EUR 400 thousand).

Summary financial information for the Group's investments in the associate – assets, liabilities, net sales and profit / loss:

EUR 1,000	Assets	Liabilities	Net sales	Profit / loss	Ownership %
2012
Tango Telecom Ltd.	6,606	1,743	7,959	1,298	20
2011
Tango Telecom Ltd.	4,706	1,139	5,025	-933	20

18. Deferred tax assets and liabilities

Changes in deferred tax assets and liabilities during 2012:

EUR 1,000	31 Dec 2011	Recognised in profit or loss	Recognised in other comprehensive income	Exchange differences	31 Dec 2012
Deferred tax assets
Provisions	49	66			116
Reversal of depreciation and amortisation in taxation	328	-59		1	270
Impairment loss on trade receivables	160	-160			0
Loss for the period	-	3,487			3,487
Forward contracts hedging backlog of orders	191		-191		0
Other tax deductible temporary differences	-92	23		0	-69
Total	636	3,358	-191	1	3,804

Comptel Annual Report 2012

Financial statements

EUR 1,000	31 Dec 2011	Recognised in profit or loss	Business combinations	Exchange differences	31 Dec 2012
Deferred tax liabilities
Capitalisation of intangible assets	2,123	815			2,938
Capitalisation of and amortisation on technology in acquired business operations	-	-10	53		43
Impact of goodwill amortisation in taxation	2,654	-2,494			160
Cumulative depreciation difference	8	36		0	45
Forward contracts hedging backlog of orders	-	95			95
Other taxable temporary differences	14	8			22
Total	4,798	-1,549	53	0	3,302

Changes in deferred tax assets and liabilities during 2011:

EUR 1,000	31 Dec 2010	Recognised in profit or loss	Recognised in other comprehensive income	Exchange differences	31 Dec 2011
Deferred tax assets
Provisions	91	-41			49
Reversal of depreciation and amortisation in taxation	390	-63		0	328
Impairment loss on trade receivables	188	-29			160
Forward contracts hedging backlog of orders	14		177		191
Other tax deductible temporary differences	99	-193		1	-92
Total	783	-326	177	2	636

Comptel Annual Report 2012

Financial statements

EUR 1,000	31 Dec 2010	Recognised in profit or loss	Exchange differences	31 Dec 2011
Deferred tax liabilities
Capitalisation of intangible assets	2,432	-309		2,123
Capitalisation of and amortisation on technology in acquired business operations	407	-407		-
Impact of goodwill amortisation in taxation	2,817	-163		2,654
Cumulative depreciation difference	107	-98	0	8
Other taxable temporary differences	-	14		14
Total	5,762	-964	0	4,798

19. Trade receivables and other current receivables

EUR 1,000	2012	2011
Trade receivables	22,825	26,016
Prepayments	67	86
Accruals from long-term projects	9,339	8,222
Other prepayments and accrued income	3,188	1,732
Other receivables	5,198	2,861
Total	40,617	38,919

Comptel has recognised credit losses on trade receivables totalling EUR 15 thousand in 2012 (2011: EUR 598 thousand). The carrying amounts of the trade receivables and other receivables equal the related maximum exposure to credit risk. Other prepayments and accrued income mainly consist of accruals related to software service and user charges and rent accruals.

Comptel Annual Report 2012

Financial statements

Ageing analysis of trade receivables

EUR 1,000	Gross 2012	Impaired	Net 2012
Not past due	14,710		14,710
1-30 days past due	3,409		3,409
31-90 days past due	2,831		2,831
91-180 days past due	856	-99	757
181-360 days past due	1,088	-33	1,055
Over 360 days past due	1,212	-1,149	63
Total	24,106	-1,281	22,825
EUR 1,000	Gross 2011	Impaired	Net 2011
---	---	---	---
Not past due	17,290		17,290
1-30 days past due	2,337		2,337
31-90 days past due	2,586		2,586
91-180 days past due	1,853		1,853
181-360 days past due	1,040		1,040
Over 360 days past due	1,606	-695	911
Total	26,711	-695	26,016

20. Cash and cash equivalents

EUR 1,000	2012	2011
Cash at bank and in hand	4,817	9,401
Total	4,817	9,401

Comptel Annual Report 2012

Financial statements

21. Capital and reserves

The impacts of movement in the number of shares are as follows:

EUR 1,000	Number of shares	Share capital	Fund of invested non-restricted equity	Treasury shares	Total
At 1 Jan 2011	106,454,905	2,141	7,575	-600	9,116
Transfer of treasury shares	423,068		76	225	301
Return of treasury shares	-115,848				-
Capital repayment	-		-7,473		-7,473
At 31 Dec 2011	106,762,125	2,141	178	-375	1,944
Transfer of treasury shares	136,186		66	14	80
Return of treasury shares	-4,720				-
At 31 Dec 2012	106,893,591	2,141	243	-361	2,023

The maximum number of Comptel Corporation shares is 500 million at 31 December 2012 (31 December 2011: 500 million). The counter-book value of a share is EUR 0.02 per share and the maximum share capital amounts to EUR 8,400,000.00 (31 December 2011: EUR 8,400,000.00). All shares issued have been fully paid.

The descriptions of the reserves under equity are as follows:

Fund of invested non-restricted equity

The fund of invested non-restricted equity includes other investments of equity nature and subscription prices of shares to the extent that it is specifically not to be credited to share capital. During the financial year 2011 Comptel paid its shareholders EUR 7,473 thousand capital repayment.

Translation reserve

The translation reserve comprises the translation differences arising from the translation of the financial statements of the foreign subsidiaries.

Fair value reserve

The fair value reserve comprises the hedging reserve including the effective portion of the cumulative net change in the fair value of cash flow hedging instruments. Comptel discontinued applying hedge accounting in accordance with IAS 39 during 2012.

Comptel Annual Report 2012

Financial statements

Treasury shares

Treasury shares reserve includes the acquisition cost of treasury shares held by the Group. During the financial year 2011 the company allotted 312,920 shares as part of share-based incentive plan to persons involved in the program and 110,148 shares to members of the Board of Directors as part of their annual compensation. During the financial year 2011, 115,848 shares were returned to Comptel Corporation based on the terms and conditions of the 2009 and 2010 share-based incentive plans. During the financial year 2012 the company allotted 25,000 shares to the President and CEO based on the terms of the share-based incentive plan 2011 and 111,186 shares to members of the Board of Directors as part of their annual compensation. During the financial year, 4,720 shares have been returned to Comptel Corporation based on the terms and conditions of the 2010 share-based incentive plan. At the end of the financial year the company had 161,219 treasury shares (292,685 treasury shares at 31 Dec 2011).

Dividends

The Board of Directors proposes to the Annual General Meeting that no dividend payment will be made for 2012.

22. Share-based payments

Share options

The Group has had three share option schemes during the financial year. The options in question have been granted to the key personnel as well as to a subsidiary fully owned by Comptel Corporation.

For the option scheme approved in 2006, the total number of share options issued was 4,200,000. The subscription period of the 2006C option expired on 30 November 2012. During the subscription period no shares were subscribed.

For the option scheme approved in 2009, the total number of share options issued is 4,200,000. The share options may be exercised to subscribe a maximum of 4,200,000 Comptel Corporation shares in total. The share subscription period is for option 2009A, 1 November 2011-30 November 2013, for option 2009B, 1 November 2012-30 November 2014 and for option 2009C, 1 November 2013-30 November 2015. The members of the Executive Board were not included in 2009 option program.

The Annual General Meeting of Shareholders has on 26 March 2012 decided on the issue of share options to the Comptel Group key personnel as a part of the incentive and commitment program. The share Option Plan 2012 differs from the company's previous share option plans in such a way that the shareholding of a share option recipient affects the number of share options be offered, and that the beginning of the share subscription period with the share options requires attainment of certain operational and financial targets determined by the Board of Directors. The targets are the growth of Group net sales and the growth of earnings per share or the growth of company's market capitalisation.

The share subscription period for share options 2012A will be 2 May 2015 - 30 November 2017, and for share options 2012B, 2 May 2016 - 30 November 2017.

Comptel Annual Report 2012

Financial statements

Changes in the number of the outstanding share options and weighted average exercise prices during the period were as follows:

2012	2006C	2009A	2009B	2009C	2012A	2012B
Outstanding at the beginning of the year	1,068,000	860,000	1,125,000	1,295,000
Granted during the year			100,000	100,000	1,914,759	1,914,759
Forfeited during the year			100,000	150,000	50,688	50,688
Expired during the year	1,068,000
Outstanding at the end of the year	0	860,000	1,125,000	1,245,000	1,864,071	1,864,071
Exercisable at the end of the year		860,000	1,125,000
Weighted average exercise price (euro)		0.43	0.70	0.54	0.57	0.57
2011	2006B	2006C	2009A	2009B	2009C
---	---	---	---	---	---
Outstanding at the beginning of the year	1,114,000	1,068,000	1,170,000	1,210,000	0
Granted during the year				165,000	1,475,000
Forfeited during the year			310,000	250,000	180,000
Expired during the year	1,114,000
Outstanding at the end of the year	0	1,068,000	860,000	1,125,000	1,295,000
Exercisable at the end of the year		1,068,000	860,000
Weighted average exercise price (euro)		1.34	0.46	0.73	0.57

The number and average exercise prices of the share options outstanding at the end of the period:

	2012		2011
Year of expiration	Average exercise price, EUR/share	Number of options	Average exercise price, EUR/share	Number of options
2012	-	-	1.34	1,068,000
2013	0.43	860,000	0.46	860,000
2014	0.70	1,125,000	0.73	1,125,000
2015	0.54	1,245,000	0.57	1,295,000
2017	0.57	3,728,142	-	-

Comptel Annual Report 2012

Financial statements

The inputs used in the Black-Scholes formula were as follows:

2012	2012A	2012B	2009B	2009C
Weighted average share price (euro)	0.56	0.56	0.42	0.42
Exercise price EUR/share	0.57	0.57	0.70	0.54
Expected volatility	39%	39%	37%	33%
Expected option life (years)	5.6	5.6	2.1	3.1
Risk-free interest rate	1.43%	1.43%	0.09%	0.24%
Fair value at grant date (euro)	0.21	0.21	0.02	0.06
2011	2009C, 1st grant	2009C, 2nd grant	2009B
---	---	---	---
Weighted average share price (euro)	0.70	0.48	0.48
Exercise price EUR/share	0.67	0.57	0.73
Expected volatility	40%	41%	40%
Expected option life (years)	4.5	4.0	3.0
Risk-free interest rate	2.64%	1.53%	1.37%
Fair value at grant date (euro)*	0.27	0.13	0.07

*) Year 2011 error has been corrected.

The expected volatility has been determined based on the historical volatility for a period equalling to the option vesting period.

In 2012 the expense recognised in respect of the option schemes amounted to EUR 339 thousand (2011: EUR 188 thousand).

Share-based incentive plan

The key personnel of the Group had a share-based incentive plan which included three vesting periods, calendar years 2009, 2010 and 2011. The cost of the program is recognised under employee benefit expenses over the commitment period. The earnings criteria set for the financial year 2011 were not met, and no reward was paid for the vesting period. In 2012, EUR 59 thousand was expensed (2011: EUR 143 thousand), of which EUR 28 thousand is the proportion to be paid in cash (2011: EUR 42 thousand).

In 2012, EUR 46 thousand was expensed for the share based incentive plan of the President and CEO and EUR 22 thousand is the portion to be paid in cash.

The Board of Directors of Comptel Corporation approved a new share-based incentive plan for the Group key personnel in February 2012.

Comptel Annual Report 2012

Financial statements

The aim of the new plan is to combine the objectives of the shareholders and the target group of employees in order to increase the value of the company, commit the target group to the company and to offer them a competitive reward plan based on long-term shareholding in the company.

The Matching Share Plan includes two performance periods, both beginning on 2 May 2012. The performance periods will end on 2 May 2015 and on 2 May 2016. The pre-requisite for participation to the plan and the receipt of reward from the performance periods requires that a target person owns the company's shares or acquires them up to a number predetermined by the Board of Directors. Furthermore, the potential reward from the plan is tied to the validity of the target person's employment or service or contractual relation.

Rewards from the Plan will be paid partly in the form of company's shares and partly in cash in 2015 and 2016.

The cost of the program is recognised under employee benefit expenses over the vesting period. In 2012, EUR 119 thousand was expensed of which EUR 52 thousand is the portion to be paid in cash.

The outstanding option schemes and share-based incentive programs are described in more detail in Section Shares and shareholders.

23. Pension obligations

Comptel has pension plans in various countries that are based on the local legislation and well-established practices. In Finland the pension arrangement is mainly managed through the Finnish Statutory Employment Pension Scheme (TyEL) which is a defined contribution plan.

The Group does not have any defined benefit plans in force. The voluntary additional pension plan to certain employees in Finland was brought to an end during the financial year 2011. The impact on the result was EUR 99 thousand in 2011.

Comptel Annual Report 2012

Financial statements

24. Provisions

Movements in provisions during 2012:

EUR 1,000	Provision for warranty	Lease provision	Other provisions	Total
Balance at 1 Jan 2012	241	2,509	-	2,750
Provisions made during the year	261		300	561
Provisions used during the year	-241	-826		-1,067
Exchange difference		54		54
Balance at 31 Dec 2012	261	1,737	300	2,298
EUR 1,000	2012	2011
---	---	---
Non-current provisions	787	1,529
Current provisions	1,511	1,221
Total	2,298	2,750

In previous years, all provisions have been presented as non-current provisions. As of 2012, the provisions are divided to non-current and current provisions.

Provision for warranty

A provision for warranties is recognised when the underlying product including a warranty is sold. The provision is based on management estimates on warranty costs which will materialise.

Lease provision

This item includes the provisions made for unoccupied leased facilities.

Other provisions

Other provisions contain a cost reserve for fulfilling obligations pertaining to customer projects. The obligations are estimated to be fulfilled during the first half of 2013.

Comptel Annual Report 2012

Financial statements

25. Financial liabilities

EUR 1,000	2012	2011
Non-current financial liabilities measured at amortised cost
Loans	5,138	-
Finance lease liabilities	-	29
Other interest-bearing liabilities	137	-
Total	5,275	29
Current financial liabilities measured at amortised cost
Loans	2,973	-
Finance lease liabilities	29	38
Other interest-bearing liabilities	80	-
Total	3,082	38

The fair values of liabilities are presented in note 27. Financial risk management.

Comptel had loans amounting to EUR 8,000 thousand at 31 December 2012 (no loans at 31 December 2011). Comptel has a loan facility ("Facility") which consists of a EUR 7 million term loan and EUR 13 million Revolving Credit Facility. The ending date for the facility is 31 January 2016. At 31 December 2012 the amount available under the Revolving Credit Facility was EUR 12 million. Comptel's subsidiary has a loan in the amount of EUR 200 thousand from Finnvera with fixed amortisation schedule. The last instalment will be paid on 15 August 2017.

The interest rate of the Facility is floating and determined based on prevailing IBOR. The weighted average interest rate is 1.7%. The interest of the loan from Finnvera is determined based on 6 months euribor. At 31 December 2012 the interest rate was 4.1%.

Maturity analysis of finance lease liabilities

EUR 1,000	2012	2011
Finance lease liabilities - minimum lease payments
Less than one year	29	38
Between one and five years	-	29
Total	29	67
Finance lease liabilities - present value of minimum lease payments
Less than one year	29	38
Between one and five years	-	29
Total	29	67
Future financial charges	0	0

Comptel Annual Report 2012

Financial statements

26. Trade and other current liabilities

EUR 1,000	2012	2011
Trade payables	2,843	1,260
Advances received from long-term contracts	2,826	2,070
Accrued expenses and deferred income	15,469	13,559
Other liabilities	6,091	4,726
Total	27,230	21,615

The accrued expenses and deferred income mainly comprise of accruals related to deferred revenue, accrued employee benefits and accrued operating expenses.

27. Financial risk management

Comptel is exposed to financial risks in its ordinary business operations. The objective of Comptel's risk management is to minimise the adverse effects arising from fluctuations of financial markets on the Group's cash flows, result and equity. Comptel's general risk management principles are approved by the Board of Directors and their implementation is the responsibility of the Chief Financial Officer (CFO) together with the business units. Comptel's financial policy is risk-adverse. The main financial risks for the Group are currency risk and credit risk. Financial management identifies and assesses risks and acquires the instruments needed to hedge against risks together with operating units. Hedging transactions are carried out in accordance with the written risk management principles approved by the Board of Directors. Comptel uses foreign currency forwards in its currency risk management. Other currency instruments may be used based on a resolution of the Board of Directors.

Currency risk

Comptel operates globally and is therefore exposed to currency risks arising from various currency positions. In Comptel's business operations the major currencies are Euro and US Dollar (USD). An other significant currency is UK Pound Sterling (GBP).

Comptel hedges open foreign currency positions. The currency position is monitored on a 12-month rolling period twice a month. Comptel discontinued applying hedge accounting in accordance with IAS 39 during the fourth quarter of 2012. All changes in fair value of forward contracts are recognised through profit or loss.

The hedging instruments are forward contracts entered into with banks. The hedging forward contract is denominated in the same currency as the underlying item resulting the value of the hedging instrument to change in the opposite way compared to the underlying item.

The invoicing of sales orders follows the progress of projects, which causes timely uncertainty. Moreover, the realised turnover of trade receivables exceeds the terms in the client agreements. The hedging of the future cash flows is timed taking these facts into account.

Comptel Annual Report 2012

Financial statements

Interest rate risk

Interest rate risk is the risk that cash flows or the result will fluctuate because of changes in market interest rates. Comptel's interest-bearing liabilities at 31 December 2012 totalled EUR 8,357 thousand (in 2011; EUR 67 thousand). Comptel had bank loans amounting to EUR 8,000 thousand at 31 December 2012 (no bank loans at 31 December 2011). Comptel has a loan facility, which consists of a EUR 7 million term loan and EUR 13 million Revolving Credit Facility. The ending date for the facility is 31 January 2016. At 31 December 2012 the amount available under the Revolving Credit Facility was EUR 12 million. Comptel's subsidiary has a loan in the amount of EUR 200 thousand from Finnvera with fixed amortisation schedule. The last instalment will be paid on 15 August 2017.

The interest rate of the loan facility is floating and determined based on prevailing IBOR. The weighted average interest rate is 1.7%. The interest of the loan from Finnvera is determined based on 6 months euribor. At 31 December 2012 the interest rate was 4.1.

Possible short-term investments in financial securities give rise to interest rate risk but the impact of such risk is not significant. Comptel's revenues and operating cash flows are mainly independent of the fluctuations of market rates.

Credit risk

Credit risk is the risk that one party will cause a financial loss for the Group by failing to discharge an obligation. In Comptel credit risk mainly arises from trade receivables related to customers, derivatives and cash and cash equivalents.

Credit risk management principles are defined in Comptel's documented procedures (Risk Management Principles, Currency hedging in Comptel Corporation and General principles of liquidity management). Credit risk management in respect of derivatives and investments is centralised to the Group accounting department, in respect of clients and credit control to the business area organisation.

Comptel's customers are mainly mid-size or large teleoperators. The Group's clientele is large and geographically widely dispersed, which decreases the customer risk of the Group.

Comptel's business consists of deliveries of large productised IT system and the value of a single project may be several million euro. Therefore the risk associated with a single project or an individual client may be significant. Furthermore some of Comptel's clients operate in countries that are or have been war zone areas, which in part increases credit risk.

Comptel has no significant credit risk concentrations, since no individual customer or customer group represents a material risk. In delivery projects partial advance invoicing is generally used. Furthermore credit risk is reduced by progress payments invoiced based on percentage of completion. In some countries letter of credits are used.

Comptel has a policy for writing off trade receivables. According to the policy a bad debt provision of 50% of the total value is generally booked if the receivable is overdue more than 360 days and a provision of 100% is impacted when the receivable is overdue more than 540 days. The amount of credit losses recognised in the statement of comprehensive income in the financial year 2012 was EUR 15 thousand (EUR 598 thousand in 2011). The ageing analysis of trade receivables is presented in note 19. Trade receivables and other current receivables.

Comptel Annual Report 2012

Financial statements

Liquidity risk

Liquidity risk means insufficient financing or higher than normal financing expenses when business environment deteriorates and financing is needed. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that financing of business operations is available when needed quickly enough. Part of the Group's liquid funds are invested in mutual funds based on the principles approved by the Board of Directors. Comptel's main source of financing has been the operating cash flow. Cash levels are monitored on a daily basis.

At 31 December 2012 the Group's cash and cash equivalents totalled EUR 4,817 thousand (EUR 9,401 thousand at 31 December 2011). At 31 December 2012 Comptel's interest-bearing liabilities totalled EUR 8,357 thousand (EUR 67 thousand in 2011). Under the Revolving Credit Facility in place until 2016 there is still EUR 12 million available for drawdown. The Facility contains a covenant whereby Group equity ratio must be at least 35%. At 31 December 2012 Comptel's equity ratio was 46.8% (2011: 66.5%). In addition, the arrangement contains a covenant, which is tied to the Group's EBITDA. The covenants are reported every three months. Furthermore, Comptel has an option for TyEL (earnings-related pension) premium loan amounting to EUR 11.5 million.

The following table sets forth maturity analysis based on contractual cash flows. Cash flow includes both loan repayments and interest payments.

2012 EUR 1,000	Carrying amount	Contractual cash flow	1-6 months	7-12 months	1-2 years	3-5 years
Non-derivative financial liabilities
Loans	8,111	8,449	2,062	1,079	4,222	1,085
Hire purchase liabilities	217	237	44	44	150
Finance lease liabilities	29	29	19	10
Trade payables	2,843	2,843	2,843
Derivative financial liabilities
Forward exchange contracts not under hedge accounting
Inflow	-611	-611	-439	-172
Outflow	23	23	23
2011 EUR 1,000	Carrying amount	Contractual cash flow	1-6 months	7-12 months	1-2 years
---	---	---	---	---	---
Non-derivative financial liabilities
Finance lease liabilities	67	67	19	19	29
Trade payables	1,260	1,260	1,260
Derivative financial liabilities
Forward exchange contracts under hedge accounting
Outflow	1,222	1,222	829	393

Comptel Annual Report 2012

Financial statements

Capital structure management

The purpose of Comptel capital structure management is to support the business operations by securing normal operational demands and grow shareholder value in the long-term. Comptel aims at continuing profitable business by investing in R&D and enhancing its presence on the global market place. Comptel's profit distribution is typically 30 to 60 per cent of the net income for the previous financial year. The amount of dividends paid may vary according to the near-term economic outlook as well as Comptel's financial position.

Gearing in 2012 and 2011 was as follows:

EUR 1,000	2012	2011
Interest-bearing liabilities	8,357	67
Cash and cash equivalents	-4,817	-9,401
Interest-bearing net liabilities	3,541	-9,334
Total equity	26,956	41,805
Gearing	13.1%	-22.3%

Exposure to currency risk

EUR 1,000	2012		2011
	USD	GBP	USD	GBP
Loan receivables	87	234
Trade receivables	9,734	419	13,849	789
Cash and cash equivalents	79	40	158	667
Trade payables	-386	-7,243	-458	-677
Loans				-6,603
Net statement of financial position exposure	9,515	-6,550	13,549	-5,823
Order backlog (12 months)	18,967	1,453	23,548	923
Hedging
Forward contracts (12 months)	-15,916	6,739	-22,026	6,578
Total net exposure	12,565	1,642	15,070	1,678

Comptel Annual Report 2012

Financial statements

Sensitivity to foreign exchange rates

A 10% weakening/strengthening of the euro against the currencies below at 31 December would have affected equity and result after taxes as follows:

EUR 1,000
2012	Equity	Result
USD	-445/445	-483/483
GBP	-3,900/3,900	14/-14
2011	Equity	Result
USD	-595/595	316/-316
GBP	-3,845/3,845	61/-61

In calculating the sensitivity related to exchange rate changes the following assumptions were used:

a +/- 10% exchange rate change
the position comprises foreign currency financial assets and financial liabilities, i.e. loans, trade receivables, cash and cash equivalents, trade payables and derivative instruments. This applies to companies operating in currency which is different from the currency subject to the sensitivity analysis.
the position excludes future foreign currency cash flows

Fair values of financial assets and liabilities

The carrying amount of the loans is EUR 8,111 thousand and the fair value is EUR 8,200 thousand. For other financial assets and liabilities their carrying amounts equal their fair values as the discounting has no material effect considering the short maturity of these items.

Derivative instruments measured at fair value:

| 2012
EUR 1,000 | Positive fair value
(carrying amount) | Negative fair value
(carrying amount) | Nominal value of
underlying
instrument |
| --- | --- | --- | --- |
| Forward contracts - not under hedge accounting | 611 | 23 | 22,656 |

Comptel discontinued applying hedge accounting in accordance with IAS 39 during 2012. The changes in the fair value are recognised in profit or loss.

Comptel Annual Report 2012

Financial statements

2011 EUR 1,000	Negative fair value (carrying amount)	Nominal value of underlying instrument
Forward contracts – under hedge accounting
Cash flow hedges
Recognised in other comprehensive income	781	12,752
Fair value hedges
Recognised in profit or loss	441	15,859

Fair value hierarchy for financial instruments measured at fair value

EUR 1,000	31 Dec 2012	Level 2	31 Dec 2011	Level 2
Assets measured at fair value
Financial assets measured at fair value through profit or loss
Forward contracts – not under hedge accounting	611	611
Total	611	611
Liabilities measured at fair value
Financial liabilities measured at fair value through profit or loss
Forward contracts – not under hedge accounting	-23	-23
Forward contracts – under hedge accounting			-1,222	-1,222
of which cash flow hedges			-781	-781
Total	-23	-23	-1,222	-1,222

According to IFRS 7 financial instruments carried at fair value must be classified according to a three level hierarchy.

Level 1: fair values are based on quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: fair values are based on inputs other than quoted prices included within level 1. However, the fair values are based on information that is observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: fair values are based on significantly different information than the input data and is not based on observable market data (unobservable inputs). The fair values are based on management estimates and application of those in generally accepted valuation models.

Comptel Annual Report 2012

Financial statements

28. Adjustments to cash flows from operating activities

Non-cash transactions or items that are not part of cash flows from operating activities:

EUR 1,000	2012	2011*)
Other operating income	-	-19,705
Depreciation, amortisation and impairment charges	14,619	13,635
Exchange differences	881	745
Share of result of associates	-259	187
Share-based payments	523	211
Other adjustments	52	171
Total	15,815	-4,756

*) Year 2011 error has been corrected.

29. Operating leases

Minimum lease payments on non-cancellable office facilities leases and other operating leases are payable as follows:

EUR 1,000	2012	2011
Less than one year	2,934	3,377
Between one and five years	6,087	7,909
Total	9,021	11,286

Comptel has leased the office premises it uses. These leases typically run for a period from one to ten years, and normally with an option to renew the lease after that date. The index, renewal and other terms of the agreements are diverse.

The statement of comprehensive income for the year 2012 includes lease expenses for the office premises amounting to EUR 4,235 thousand (2011: EUR 5,359 thousand).

Comptel Annual Report 2012

Financial statements

30. Commitments and contingencies

EUR LOCO	2012	2011
Bank guarantees	2,969	1,847
Corporate mortgages	200	-
Collaterals given on behalf of others
Guarantees	123	-

Litigations

In December 2011, Cisco Systems Inc. filed a request for arbitration against Comptel Corporation and its wholly-owned subsidiary Comptel Communications Ltd in the London Court of International Arbitration concerning Comptel's use of a certain sub-set of Axios software that was sold to Cisco and simultaneously licensed back to Comptel for use in the current release of Comptel Fulfillment. The parties settled the dispute in April 2012 and it was agreed that no financial compensation will be paid between the parties.

Comptel Annual Report 2012

Financial statements

31. Related party transactions

The Comptel Group companies are as follows:

		2012		2011
Company	Domicile	Group holding (%)	Group voting (%)	Group holding (%)	Group voting (%)
Comptel Corporation	Finland
Comptel Communications Holdings Ltd.	UK	100.00	100.00	100.00	100.00
Comptel Communications Ltd.	UK	100.00	100.00	100.00	100.00
Business Tools Oy	Finland	100.00	100.00	100.00	100.00
Comptel Communications AS	Norway	100.00	100.00	100.00	100.00
Comptel Communications Brasil Ltda	Brazil	100.00	100.00	100.00	100.00
Comptel Communications EOOD	Bulgaria	100.00	100.00	100.00	100.00
Comptel Communications Inc.	USA	100.00	100.00	100.00	100.00
Comptel Communications Oy	Finland	100.00	100.00	100.00	100.00
Comptel Communications Sdn Bhd	Malaysia	100.00	100.00	100.00	100.00
Comptel Passage Oy	Finland	100.00	100.00	100.00	100.00
Comptel Ltd	UK	100.00	100.00	100.00	100.00
Viewgate Networks Ltd.	UK	100.00	100.00	100.00	100.00
Xtract Oy	Finland	100.00	100.00	-	-
Xtract Corporation Ltd.	UK	100.00	100.00	-	-
Comptel Communications India Private Ltd.	India	100.00	100.00	-	-
Comptel Communications S.r.l.	Italy	100.00	100.00	-	-

Comptel Annual Report 2012

Financial statements

The Comptel Group has a related party relationship with its associates, the Board of Directors, President and CEO, the Executive Board and also with people and companies under Comptel management's influence.

Transactions, which have been entered into with related parties, are as follows:

EUR 1,000	2012	2011
Other operating income
Associates	2	-
Purchases of goods and services
Associates	-	156
Interest revenue
Associates	8	8
Non-current receivables
Associates	98	91
Trade receivables
Associates	1	-

Contingent liabilities assumed on behalf of Group companies

In 2008 Comptel Corporation gave a performance guarantee, still in force, on behalf of its subsidiary. The total value of this agreement is USD 4 million. Comptel gave a guarantee of GBP 700 thousand for its subsidiary in 2009.

Key management compensation

The key management personnel compensation includes the employee benefits of the President and CEO, the members of the Board of Directors and the members of the Executive Board.

EUR 1,000	2012	2011
Salaries and other short-term employee benefits	2,033	2,942
Share-based payments	233	207
Total	2,267	3,148

Comptel Annual Report 2012

Financial statements

The employee benefits of the President and CEO and the members of the Board of Directors of the parent company:

EUR 1,000	2012	2011
President and CEO	456	361
Board of Directors at 31 Dec 2012
Ervi Pertti	45	-
Söderström Eriikka	25	-
Vaajoensuu Hannu	40	44
Vasara Antti	24	-
Walldén Petteri	32	34
Former Board members
Kotilainen Timo	9	37
Lassila Juhani	9	36
Riikkala Olli	15	64
Österlund Henri	9	36
Total	206	250

An additional defined contribution pension plan has been agreed on for the President and CEO of the parent company. The retirement age is based on the Finnish Statutory Employment Pension Scheme (TyEL).

In 2012, former members of the Executive Board were granted 639,164 share options and current members of the Executive Board were granted 981,164 share options (no share options granted in 2011). The President and CEO was granted 833,332 share options in 2012 (no share options in 2011). At 31 December 2012 the management had 2,054,496 share options, of which 140,000 were exercisable (2011: 70,000 share options, of which 30,000 were exercisable). The compensation to the members of the Board of Directors has been paid by giving shares in Comptel Corporation with 40% of the annual gross compensation.

The management of the Group had no loans referred to in the Companies Act, chapter 8, article 6.

Guarantees and other contingent liabilities

EUR 1,000	2012	2011
Guarantees	70	-

32. Corrections to figures reported in 2010 and 2011

An error was discovered in the line item Employee benefits for the periods 2010 and 2011. The errors have been corrected retrospectively according to IAS 8. The errors were related to the calculation of option costs. The correction of the error in 2010 did not have an impact on the amount of equity and no restated opening balances are presented.

Comptel Annual Report 2012

Financial statements

The key figures for the financial year 2010 will be restated and presented in the financial statements for 2012.

The statement of comprehensive income for 2011 was changed as follows:

	Reported	Corrected
Consolidated Statement of Comprehensive Income	1 Jan – 31 Dec 2011	1 Jan – 31 Dec 2011
Net sales	76,751	76,751
Other operating income	19,802	19,802
Materials and services	-5,285	-5,285
Employee benefits	-36,747	-36,454
Depreciation, amortisation and impairment charges	-13,635	-13,635
Other operating expenses	-29,277	-29,277
	-84,944	-84,651
Operating profit/loss	11,609	11,902
Financial income	536	536
Financial expenses	-1,289	-1,289
Share of result of associated companies	-187	-187
Profit/loss before income taxes	10,669	10,963
Income taxes	-3,373	-3,373
Profit/loss for the period	7,297	7,590
Other comprehensive income
Cash flow hedges	-727	-727
Translation differences	175	175
Income tax relating to components of other comprehensive income	177	177
Total comprehensive income for the period	6,922	7,216
Profit/loss attributable to:
Equity holders of the parent company	7,297	7,590
Total comprehensive income attributable to:
Equity holders of the parent company	6,922	7,216
Shareholders of the parent company:
Earnings per share, EUR	0.07	0.07
Earnings per share, diluted, EUR	0.07	0.07

The earnings per share figure has also been restated. Due to the rounding it did not have impact on the key figure. The correction did not impact the amount of equity.

Comptel Annual Report 2012

Financial statements

Key Figures

Financial summary	2008	2009	2010*)	2011*)	2012
Net sales, EUR 1,000	84,849	74,896	77,888	76,751	82,428
Net sales, change %	3.0	-11.7	4.0	-1.5	7.4
Operating profit/loss, EUR 1,000	11,383	1,018	9,066	11,902	-13,517
Operating profit/loss, change %	-31.1	-91.1	790.8	31.3	-213.6
Operating profit/loss, as % of net sales	13.4	1.4	11.6	15.5	-16.4
Profit/loss before taxes, EUR 1,000	10,597	388	8,671	10,963	-13,955
Profit/loss before taxes, as % of net sales	12.5	0.5	11.1	14.3	-16.9
Return on equity, %	12.8	-4.4	10.2	16.7	-37.2
Return on investment, %	19.1	1.1	16.6	23.6	-36.3
Equity ratio, %	67.4	62.6	71.6	66.5	46.8
Gross investments in tangible and intangible assets, EUR 1,000 **	10,919	686	1,124	1,037	4,484
Gross investments in tangible and intangible assets, as % of net sales **	12.9	0.9	1.4	1.4	5.4
Research and development expenditure, EUR 1,000	14,007	15,582	13,414	15,419	18,581
Research and development expenditure, as % of net sales	16.5	20.8	17.2	20.1	22.5
Order backlog, EUR 1,000	38,846	37,554	34,049	47,217	48,368
Average number of employees during the financial period	606	613	586	623	700
Interest-bearing net liabilities, EUR 1,000	-1,083	1,282	-6,923	-9,334	3,541
Gearing ratio, %	-2.1	2.8	-14.1	-22.3	13.1

**) The figure does not include investments in development projects. Includes the acquisition of Axiom Systems in 2008. The aggregate gross capital expenditure excluding this acquisition amounted to 1,461 thousand euro, which was 1.7% of the net sales. Includes the acquisition of Xtract in 2012. The gross capital investments excluding the acquisition amounted EUR 1,678 thousand, which is 2.0% of net sales.

Comptel Annual Report 2012

Financial statements

Per share data	2008	2009	2010*)	2011*)	2012
EPS, EUR	0.06	-0.02	0.05	0.07	-0.12
Diluted EPS, EUR	0.06	-0.02	0.05	0.07	-0.12
Equity per share, EUR	0.48	0.43	0.46	0.39	0.25
Dividend per share, EUR ***	0.04	0.03	0.04	0.03	0.00
Dividend per earnings, % ***	64.6	-150.1	87.6	42.2	-
Effective dividend yield, % ***	5.8	3.8	5.8	6.1	-
P/E ratio	11.1	-39.0	15.1	6.9	-3.3
Highest share price			0.95	0.79	0.63
Lowest share price			0.68	0.42	0.37
Market value at year-end, million EUR			73.5	52.3	42.8
Adjusted number of shares at the end of period	107,054,810	107,054,810	107,054,810	107,054,810	107,054,810
of which the number of treasury shares	92,654	304,004	599,905	292,685	161,219
Outstanding shares at the end of period	106,962,156	106,750,806	106,454,905	106,762,125	106,893,591
Adjusted average number of shares during the period	106,938,539	106,953,918	106,477,113	106,775,223	106,863,518
Average number of shares, dilution included	106,938,539	107,078,252	107,398,488	106,775,223	107,650,327

**) The Board's proposal
) Year 2010 and 2011 error has been corrected.

Comptel Annual Report 2012

Financial statements

Definitions of Key Figures

Operating margin %	=	Operating profit/loss	x 100
		Net sales
Profit margin (before income taxes) %	=	Profit/loss before taxes	x 100
		Net sales
Return on equity % (ROE)	=	Profit/loss	x 100
		Total equity (average during year)
Return on investment % (ROI)	=	Profit/loss before taxes + financial expenses	x 100
		Total equity + interest bearing liabilities (average during year)
Equity ratio %	=	Total equity	x 100
		Statement of financial position total - advances received
Gross investments in tangible and intangible assets, as % of net sales	=	Gross investments in tangible and intangible assets	x 100
		Net sales
Reasearch and development expenditure, as % of net sales	=	Research and development expenditure	x 100
		Net sales
Gearing ratio %	=	Interest-bearing liabilities - cash and cash equivalents	x 100
		Total equity
Earnings per share (EPS)	=	Profit/loss for the financial year attributable to equity shareholders
		Average number of outstanding shares for the financial year
Equity per share	=	Equity attributable to the equity holders of the parent company
		Adjusted number of shares at end of period
Dividend per share	=	Dividend
		Adjusted number of shares at end of period
Dividend per earnings %	=	Dividend per share	x 100
		Earnings per share (EPS)
Effective dividend yield %	=	Dividend per share	x 100
		Share closing price at end of period
P/E-ratio	=	Share closing price at end of period
		Earnings per share (EPS)

Comptel Annual Report 2012

Financial statements

Parent Company, Income Statement, FAS

EUR 1,000	Notes	1 Jan - 31 Dec 2012	1 Jan - 31 Dec 2011
Net sales	2	78,254	74,157
Other operating income	3	3	11
Materials and services	4	-5,295	-4,150
Personnel expenses	5	-16,791	-15,835
Depreciation and amortisation	6	-516	-540
Other operating expenses	7	-63,454	-47,482
		-86,056	-68,006
Operating profit/loss		-7,800	6,161
Financial income	8	1,971	3,122
Financial expenses	9	-1,249	-1,149
Profit/loss before appropriations and income taxes		-7,078	8,134
Profit/loss before income taxes		-7,078	8,134
Income taxes	10	-2,968	-3,217
Profit/loss for the period		-10,045	4,917

Comptel Annual Report 2012

Financial statements

Parent Company, Balance Sheet, FAS

EUR 1,000	Notes	31 Dec 2012	31 Dec 2011
ASSETS
Non-current assets	11
Other intangible assets		930	637
Tangible assets		107	211
Investments		3,279	1,016
		4,316	1,864
Current assets
Non-current receivables	12	3,330	1,591
Current receivables	13	39,637	38,530
Cash and cash equivalents		2,352	6,178
		41,989	44,707
TOTAL ASSETS		49,635	48,162
EQUITY AND LIABILITIES
Capital and reserves	14
Share capital		2,141	2,141
Fund of invested non-restricted equity		243	178
Retained earnings		11,642	9,932
Profit/loss for the period		-10,045	4,917
		3,981	17,168
Provisions	15	734	443
Liabilities
Non-current liabilities	16	5,409	272
Current liabilities	17	39,511	30,280
TOTAL EQUITY AND LIABILITIES		49,635	48,162

Comptel Annual Report 2012

Financial statements

Parent Company, Statement of Cash Flows, FAS

EUR 1,000	1 Jan – 31 Dec 2012	1 Jan – 31 Dec 2011
Cash flows from operating activities
Profit/loss before appropriations and income taxes	-7,078	8,134
Adjustments:
Depreciation, amortisation and impairment charges	516	540
Financial income and expenses	-1,223	-2,712
Other adjustments	66	76
Change in working capital:
Change in trade and other current receivables	228	-6,663
Change in trade and other current liabilities	12,683	1,228
Change in provisions	291	-153
Interest paid	-225	-26
Interest received	6	36
Taxes paid and tax returns received	-2,816	-2,461
Net cash from operating activities	2,448	-2,001
Cash flows from investing activities
Acquisition of subsidiaries	-2,263	-
Investments in tangible and intangible assets	-488	-519
Proceeds from repayments of loans	-	9,994
Loans granted	-1,732	-
Dividends received from investments	-	2,554
Net cash used in investing activities	-4,483	12,029
Cash flows from financing activities
Dividends paid	-3,207	-7,242
Capital repayment	-	-7,473
Proceeds from borrowings	29,000	6,584
Repayment of borrowings	-21,000	-
Repayment of other long-term borrowings	-6,584	-
Net cash used in financing activities	-1,791	-8,131
Change in cash and cash equivalents	-3,826	1,897
Cash and cash equivalents at the beginning of period	6,178	4,281
Cash and cash equivalents at the end of period	2,352	6,178
Change	-3,826	1,897

Comptel Annual Report 2012

Financial statements

Notes to the Financial Statements of the Parent Company, FAS

1. Accounting principles for the financial statements

Company profile

Comptel Corporation is a Finnish public limited liability company organised under the laws of Finland. Founded in 1986, Comptel Corporation is one of the leading providers of telecom software and services in convergent mediation and charging, predictive analytics and service fulfillment. Comptel Corporation is listed on NASDAQ OMX Helsinki (CTL1V). The parent company of the Comptel Group, Comptel Corporation, is domiciled in Helsinki and its registered address is Salmisaarenaukio 1, 00180 Helsinki.

Comptel Corporation's separate financial statements are prepared in accordance with Finnish Accounting Standards (FAS).

Presentation of financial information

All financial information presented in euro has been rounded to the nearest thousand and consequently the sum of the individual figures can deviate from the total figure.

Foreign currency transactions

Transactions denominated in foreign currencies are translated at the exchange rates prevailing on the dates of the transactions. Foreign currency monetary balances are translated at the closing rate at the balance sheet date. Non-monetary items measured at fair value in a foreign currency are translated at the closing rate at the balance sheet date. Gains and losses resulting from transactions in foreign currencies and translation of monetary items are recognised on the income statement.

Tangible assets, intangible assets and other long-term expenditure

Tangible assets, intangible assets and other long-term expenditure are stated at historical cost less cumulative depreciation and amortisation and any impairment losses. Where parts of an item of tangible assets, an intangible asset or parts of other long-term expenditure have different useful lives, they are accounted for as separate items of tangible assets, intangible assets or other long-term expenditure. Maintenance, repairs and renewals are generally expensed during the financial period in which they are incurred except for large renovation expenditure relating to leased premises that are capitalised under other long-term expenditure.

Depreciation and amortisation is charged to the income statement on a straight-line basis over the estimated useful life of an asset. The depreciation/amortisation period for all assets is four years, with the exception of the basic refurbishment of leased premises, which are amortised over the shorter of the period of five years and the lease term. The amortisation period for goodwill is five years. Gains and losses on sales and disposals of the abovementioned assets are included in operating income and in operating expenses, respectively.

The difference between the annual depreciation according to plan and the depreciation made in taxation is shown as a

Comptel Annual Report 2012

Financial statements

separate item under appropriations in the income statement. The accumulated depreciation difference is shown under appropriations between the shareholders' equity and liabilities in the balance sheet.

Research and development costs

Research and development costs are expensed during the period in which they occur. Government grants that compensate the company for the development costs are deducted from the related expenses in the income statement.

Leases

Lease payments are expensed during the financial period in which they occur.

Pension obligations

The pension plans of the parent company are arranged in accordance with the Finnish legislation. Contributions based on the regularly reviewed actuarial calculations prepared by the pension insurance company are recognised as an expense in the income statement in the year to which they relate.

Provisions

A provision is based on an existing obligation and it is recognised on the balance sheet when an entity has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

A provision for onerous contracts is recognised when the expected benefits to be derived by the company from a contract are lower than the unavoidable cost of meeting its obligations under the contract.

Income taxes

The income taxes in the income statement consist of income tax based on taxable profit for the financial period, adjustments to prior year taxes and withholding taxes treated as non-deductible.

Revenue recognition and net sales

Revenue from the sale of goods is recognised when significant risks and rewards of ownership have been transferred to the buyer. Revenue from services is recognised when the service has been performed. License revenue that includes no work performance is recognised when the licence is delivered. The number of subscribers at a client is reviewed continuously. If their number exceeds the number agreed on in the terms of the licence, the client is charged for the increased number of subscribers. This licence upgrade revenue is recognised upon invoicing. Maintenance revenue is recognised on a straight-line basis over the maintenance term.

Long-term projects

Revenue and expenses from a long-term project are recognised using the percentage of completion method, when the outcome of a long-term project can be estimated reliably. The revenue from a long-term project comprises licence income and work. The outcome of a long-term project can be estimated reliably when the revenue and expenses expected as well as the progress made towards completing a particular project can be measured reliably and when it is probable that the economic benefits associated with the project will flow to the company. In Comptel the percentage of

Comptel Annual Report 2012

Financial statements

completion of a long-term project is determined by the relation of accrued work hours to estimated overall work hours. When it is probable that total project costs will exceed total project revenue, the expected loss is recognised as an expense immediately.

Net sales are adjusted for sales-related indirect taxes and other adjusting items.

Trade receivables

Trade receivables are recognised at the original invoice amount to customers and stated at their cost less impairment losses.

Cash and cash equivalents

Cash and cash equivalents comprise cash, bank balances and other short-term highly liquid investments with original maturities of three months or less from the date of acquisition. Bank overdrafts, if any, are included within current liabilities.

Derivative financial instruments

Principles

Receivables, debt and cash flow in foreign currencies can be hedged. Cash flows are hedged against currency fluctuations in respect of those projects for which revenue is recognised based on the percentage of completion method and invoices issued in a currency other than euro.

Recognition and measurement

The company uses currency forward contracts. The changes in the values of the currency forward contracts entered into to hedge currency risks are recognised so that the interest rate difference, if material, is allocated over the term of the contract and the accrued portion is recognised in interest income or expenses. Exchange rate gains and losses are recognised as adjustments to sales or in exchange rate gains and losses under financial items, depending on the nature of the underlying item.

Any open currency forward contracts are measured at the average exchange rate at the balance sheet date and the resulting changes in value are recognised in the income statement. The exception applies to currency forward contracts relating to the company's cash flow from sales, as their changes in value are recognised in the income statement as the cash flow is realized. The nominal values and market values (closing cost) of all unexpired currency forward contracts are presented in the notes to the financial statements under the heading Collaterals, commitments and other contingent liabilities, irrespective of whether their changes in value have been recognised in the income statement.

Comptel Annual Report 2012

Financial statements

2. Net sales

EUR 1,000	2012	2011
By geographical area
Europe	35,279	30,698
Asia-Pacific	20,674	20,371
Middle East and Africa	14,528	13,716
Americas	7,772	9,372
Total	78,254	74,157

Net sales figures have been calculated based on the area, where the work was delivered to.

Revenue recognition using percentage of completion method

EUR 1,000	2012	2011
Net sales recognised as revenue according to percentage of completion	17,239	17,888
Amount recognised as revenue during the financial year and previous years for long-term projects in progress	27,283	22,206
Total costs of incomplete long-term projects	14,146	9,935
Backlog of orders of long-term projects according to percentage of completion	12,939	12,914
Prepayments and accrued income recognised on the basis of percentage of completion	9,339	7,873
Deferred income and accruals recognised on the basis of percentage of completion	2,541	1,475

3. Other operating income

EUR 1,000	2012	2011
Gains on disposal of tangible and intangible assets	1	3
Other	2	8
Total	3	11

Comptel Annual Report 2012

Financial statements

4. Materials and services

EUR 1,000	2012	2011
Purchases	325	615
External services	4,969	3,534
Total	5,295	4,150

5. Personnel expenses

EUR 1,000	2012	2011
Wages and salaries	13,767	12,891
Pension expenses	2,405	2,480
Other social security costs	618	464
Total	16,791	15,835

Management salaries and other compensation

EUR 1,000	2012	2011
Members of the Board of Directors	206	250

Information on the remuneration of the Group management is presented in more detail in note 31. Related party transactions to the consolidated financial statements.

	2012	2011
Average number of personnel	210	216

Pension commitments in respect of members of the Board of Directors and the President and CEO

An additional defined contribution pension plan has been agreed on for the President and CEO. The retirement age is based on the Finnish Statutory Employment Pension Scheme (TyEL).

Comptel Annual Report 2012

Financial statements

6. Depreciation, amortisation and impairment charges

EUR 1,000	2012	2011
Depreciation and amortisation
Intangible rights	317	161
Other long-term expenditure	25	42
Machinery and equipment	174	337
Total	516	540

7. Other operating expenses

EUR 1,000	2012	2011
Lease payments	2,170	2,280
Travel expenses	1,324	1,741
Marketing expenses	1,630	1,229
Software expenses	3,814	2,909
Consulting expenses	2,698	1,725
Group charges	46,743	31,393
Other operating expenses	5,074	6,205
Total	63,454	47,482

Auditor's fees

EUR 1,000	2012	2011
KPMG
Audit	-	38
Tax consultation	17	22
Other services	39	28
Total	56	88
Ernst & Young
Audit	41	-
Tax consultation	1	-
Other services	66	-
Total	109	-
Total auditor’s fees	165	88

Comptel Annual Report 2012

Financial statements

8. Financial income

EUR 1,000	2012	2011
Interest income
From Group companies	0	159
From others	13	43
Income from dividends
From Group companies	1,487	2,554
Exchange gains
From others	471	365
Total	1,971	3,122

9. Financial expenses

EUR 1,000	2012	2011
Interest expenses
To Group companies	48	18
To others	56	2
Other financial expenses
To others	174	43
Exchange losses
To others	972	1,086
Total	1,249	1,149

10. Income taxes

EUR 1,000	2012	2011
Current tax expense	-	1,379
Withholding taxes	3,024	1,879
Taxes from previous years	-57	-41
Total	2,968	3,217

Comptel Annual Report 2012

Financial statements

11. Non-current assets

Intangible assets

EUR 1,000
	Intangible rights	Other long-term expenditure	Total
Cost at 1 Jan 2012	8,621	417	9,039
Additions	634		634
Cost at 31 Dec 2012	9,255	417	9,673
Accumulated amortisation at 1 Jan 2012	8,008	393	8,401
Amortisation	317	25	342
Accumulated amortisation at 31 Dec 2012	8,326	417	8,743
Book value at 31 Dec 2012	930	-	930
EUR 1,000
---	---	---	---
	Intangible rights	Other long-term expenditure	Total
Cost at 1 Jan 2011	8,064	417	8,481
Additions	558		558
Cost at 31 Dec 2011	8,621	417	9,039
Accumulated amortisation at 1 Jan 2011	7,847	351	8,198
Amortisation	161	42	203
Accumulated amortisation at 31 Dec 2011	8,008	393	8,401
Book value at 31 Dec 2011	613	25	637

Comptel Annual Report 2012

Financial statements

Tangible assets

EUR 1,000	Machinery and equipment
Cost at 1 Jan 2012	1,434
Additions	71
Cost at 31 Dec 2011	1,505
Accumulated depreciation at 1 Jan 2012	1,223
Depreciation	174
Accumulated depreciation at 31 Dec 2012	1,397
Book value at 31 Dec 2012	107
EUR 1,000	Machinery and equipment
---	---
Cost at 1 Jan 2011	1,428
Additions	6
Cost at 31 Dec 2011	1,434
Accumulated depreciation at 1 Jan 2011	887
Depreciation	337
Accumulated depreciation at 31 Dec 2011	1,223
Book value at 31 Dec 2011	211

Comptel Annual Report 2012

Financial statements

Investments

EUR 1,000	Shares	Shares	Shares	Total
	In Group companies	In Associated companies	In Other investments
Cost at 1 Jan 2012	528	400	87	1,016
Additions	2,263	-		2,263
Cost at 31 Dec 2012	2,792	400	87	3,279
Book value at 31 Dec 2012	2,792	400	87	3,279
EUR 1,000	Shares	Shares	Shares	Total
---	---	---	---	---
	In Group companies	In Associated companies	In Other investments
Cost at 1 Jan 2011	528	400	87	1,016
Cost at 31 Dec 2011	528	400	87	1,016
Book value at 31 Dec 2011	528	400	87	1,016

Additions in Group companies in 2012: Xtract Oy EUR 2,253 thousand (ownership 100%), Comptel Communications S.r.l. EUR 10 thousand (ownership 100%), Comptel Communications India Private Ltd EUR 0 thousand (ownership 1%), total EUR 2,263 thousand.

Comptel Annual Report 2012

Financial statements

12. Non-current receivables

EUR 1,000	2012	2011
Receivables from Group companies
Loan receivables	3,232	1,500
Total	3,232	1,500
Receivables from associated companies
Loan receivables	75	75
Prepayments and accrued income	23	16
Total	98	91
Non-current receivables total	3,330	1,591

Capital loans of EUR 3,232 thousand have been granted to the subsidiaries Comptel Communications Oy and Xtract Oy in accordance with the Companies Act chapter 12, constituting a non-current loan receivable. The loan granted to Comptel Communications Oy amounts to EUR 1,500 thousand and is interest-free. The loan granted to Xtract Oy amounts to EUR 1,732 thousand and the interest of the loan is the base rate set by the Ministry of Finance +1.55%.

13. Current receivables

EUR 1,000	2012	2011
Receivables from Group companies
Trade receivables	1,253	1,412
Loan receivables	87	-
Other receivables	1,488	58
Prepayments and accrued income	48	153
Total	2,876	1,623
Receivables from others
Prepayments	3	15
Trade receivables	20,804	25,406
Other receivables	4,908	2,784
Prepayments and accrued income	11,045	8,701
Total	36,761	36,906
Current receivables total	39,637	38,530
Specification of prepayments and accrued income
Accrued income capitalised according to degree of completion	9,339	7,873
Other prepayments	1,707	828
Total	11,045	8,701

Comptel Annual Report 2012

Financial statements

14. Equity

EUR 1,000	2012	2011
Restricted equity
Share capital at 1 Jan	2,141	2,141
Share capital at 31 Dec	2,141	2,141
Non-restricted equity
Fund of invested non-restricted equity at 1 Jan	178	7,575
Treasury shares given to the members of the Board of Directors	66	76
Capital repayment	-	-7,473
Fund of invested non-restricted equity at 31 Dec	243	178
Retained earnings at 1 Jan	14,849	17,405
Dividends paid	-3,207	-7,473
Retained earnings at 31 Dec	11,642	9,932
Profit/loss for the financial year	-10,045	4,917
Equity, total	3,981	17,168

Breakdown of distributable funds

EUR 1,000	2012	2011
Fund of invested non-restricted equity	243	178
Retained earnings	11,642	9,932
Profit/loss for the financial year	-10,045	4,917
Total	1,840	15,027

15. Provisions

EUR 1,000	2012	2011
Provisions at 1 Jan	443	596
Provisions made during the financial year	320	-
Provisions used during the financial year	-29	-153
Provisions at 31 Dec	734	443

The provisions include a provision recognised for unoccupied leased office facilities, a warranty provision and a cost reserve for fullfilling obligations pertaining to customer projects. The obligations pertaining to customer projects are estimated to be fulfilled during the first half of 2013.

Comptel Annual Report 2012

Financial statements

16. Non-current liabilities

EUR 1,000	2012	2011
Liabilities to Group companies
Other liabilities	272	272
Liabilities to others
Loans	5,000	-
Other liabilities	137	-
Total	5,137	-
Total non-current liabilities	5,409	272

17. Current liabilities

EUR 1,000	2012	2011
Liabilities to Group companies
Loans	168	6,584
Trade payables	20,079	10,085
Other liabilities	73	73
Accruals and deferred income	66	18
Total	20,386	16,760
Liabilities to others
Trade payables	2,079	871
Loans	3,000	-
Other liabilities	433	323
Accrued expenses and deferred income	13,613	12,326
Total	19,125	13,520
Current liabilities total	39,511	30,280
Specification of accrued expenses and deferred income
Personnel expenses	2,637	2,015
Items recognised on the basis of percentage of completion method	2,541	1,475
Other accrued expenses and deferred income items related to revenue recognition	7,089	6,838
Other accrued expenses and deferred income items	1,346	1,997
Total	13,613	12,326

Comptel Annual Report 2012

Financial statements

18. Deferred tax assets

Deferred tax assets, which have not been booked in the balance sheet:

EUR 1,000	2012	2011
Provisions	116	49
Reversal of depreciation and amortisation in taxation	235	286
Loss for the period	3,487	-
Impairment loss on trade receivables	-	160
Total	3,837	495

19. Collaterals, commitments and other contingent liabilities

Lease commitments

EUR 1,000	2012	2011
Amounts payable during the next financial year	186	204
Amounts payable later	100	156
Total	286	360

The leases the company has entered into generally run for a period of three years and contain no redemption commitments.

Rental commitments

EUR 1,000	2012	2011
Amounts payable during the next financial year	1,662	1,883
Amounts payable later	4,877	7,170
Total	6,539	9,054

Guarantees

EUR 1,000	2012	2011
Bank guarantees due within one year	2,376	1,168
Bank guarantees due later	5	191
Total	2,382	1,358

Comptel Annual Report 2012

Financial statements

Collaterals given on behalf of others

EUR 1,000	2012	2011
Guarantees	123	-

Contingent liabilities assumed on behalf of Group companies

In 2008 Comptel Corporation has given a performance guarantee on behalf of its subsidiary, still valid on 31.12.2012. The total value of this agreement is USD 4 million. Comptel gave a guarantee of GBP 700 thousand for its subsidiary in 2009.

Derivative instruments

EUR 1,000	2012	2011
Forward exchange contracts
Market value	588	-1,222
Value of underlying instrument	22,656	28,611

Forward exchange contracts are used for hedging purposes.

Litigations

In December 2011, Cisco Systems Inc. filed a request for arbitration against Comptel Corporation and its wholly owned subsidiary Comptel Communications Ltd in the London Court of International Arbitration concerning Comptel's use of a certain sub-set of Axios software that was sold to Cisco and simultaneously licensed back to Comptel for use in the current release of Comptel Fulfillment. The parties settled the dispute in April 2012, and it was agreed that no financial compensation will be paid between the parties.

Comptel Annual Report 2012

Financial statements

Shares and Shareholders

The share of Comptel Corporation is listed in the NASDAQ OMX Helsinki under the code CTL1V.

Comptel has one series of shares. Each share equals to one (1) vote at the Shareholders' General Meeting.

The share capital of the company has not changed during the financial year ended. The company's share capital on 31 December 2012 amounted to 2,141,096.20 euros, and the total number of shares was 107,054,810.

Authorisations to the Board of Directors

Authorisation to decide on share issues

The annual General meeting on 26 March 2012 granted to the Board of Directors an authorisation to decide on share issues and granting special rights entitling to shares. A maximum of 21,400,000 shares can be issued. A maximum of 10,700,000 of the company's treasury shares held by the company can be conveyed and/or received on basis on the special rights.

The new shares can be issued and the company's own shares held by the company conveyed to the company's shareholders in proportion to their present holding or by means of a directed issue, waiving the pre-emptive rights of the shareholders, if there is a weighty financial reason for the company to do so, such as using the shares to strengthen or develop the company's capital structure, as financing or in implementing acquisitions or other arrangements or in implementing the company's share-based incentive programs. The authorisation will also entitle to decide on a free share issue to the company itself.

The Board of Directors was authorised to grant option rights and other special rights referred to in Chapter 10, Section 1 of the Companies Act, which carry the right to receive, against payment, new shares of the company or the company's own shares held by the company in such a manner that the subscription price of the shares is paid in cash or by using the subscriber's receivable to set off the subscription price.

The subscription price of the new shares and the consideration paid for the company's own shares shall be recorded in the invested non-restricted equity fund.

The authorisations are valid until 30 June 2013. However, the authorisation to implement the company's share-based incentive programs is valid until five years from the AGM resolution.

Authorisation to repurchase company's own shares

The AGM authorised the Board of Directors to decide on repurchase of the company's own shares up to a maximum number of 10,700,000 of the company's own shares for developing the company's capital structure, to be used in financing or implementing acquisitions or other arrangements, for implementing the company's share-based incentive programs or to be conveyed by other means or to be cancelled.

The authorisation to repurchase the own shares is valid until 30 June 2013.

Comptel Annual Report 2012

Financial statements

Share option schemes

Comptel has currently two share option schemes.

SHARE OPTION SCHEME 2006

The Annual General Meeting decided on 13 March 2006 to issue share options to the key personnel of Comptel Group, as well as to a wholly owned subsidiary of Comptel Corporation. It was decided to disapply the pre-emptive rights of existing shareholders, since the share options are intended as part of an incentive and commitment program for the key personnel.

SHARE OPTION SCHEME 2009

The Annual General Meeting decided on 16 March 2009 to issue share options to the key personnel of the Comptel Group as a part of the incentive and commitment program.

The share subscription period for stock options 2009A is 1 November 2011 - 30 November 2013, for stock options 2009B 1 November 2012 - 30 November 2014, and for stock options 2009C it will be 1 November 2013 - 30 November 2015.

Comptel's 2009A share options were listed on NASDAQ OMX Helsinki commencing from 1 November 2011. The trading code is CTL1VEW109 and ISIN code is FI4000031489. In 2012, a number of 38.500 options A were traded and the closing price was EUR 0.18.

Comptel's 2009B share options were listed on NASDAQ OMX Helsinki commencing from 1 November 2012. The trading code is CTL1VEW209 and ISIN code is FI4000048767. In 2012, no options were traded.

Comptel Annual Report 2012
118

Financial statements

100,000 share options 2009B and 100,000 share options 2009C have been distributed. During the financial year 2011, a total of number of 310,000 share options 2009A, a number of 250,000 share options 2009B and a number of 180,000 share options 2009C were returned to the company and during the financial year 2012, a total of number of 100,000 share options 2009B and a number of 150,000 share options 2009C were returned to the company. The rest of the 2009 share options have been granted to Comptel Communications Oy to be further distributed.

The company holds a number of 540,000 share options 2009A, a number of 275,000 share options 2009B and a number of 155,000 share options 2009C.

SHARE OPTION SCHEME 2012

The Share Option Plan 2012 differs from the company's previous share option plans in such a way that the shareholding of a share option recipient affects the number of share options to be offered, and that the beginning of the share subscription period with the share options requires attainment of certain operational and financial targets determined by the Board of Directors. The targets are the growth of Group net sales and the growth of earnings per share or the growth of company's market capitalisation.

The total number of share options issued is 5,100,000. Of the share options, 2,550,000 are marked with the symbol A and 2,550,000 are marked with the symbol B. The share options may be exercised to subscribe to a maximum of 5,100,000 new shares in the company or existing shares held by the company. The issued share options can be exchanged for shares constituting a maximum total of 4.5 per cent of the company's shares and votes of the shares, after the potential share subscription, if new shares are issued in the share subscription.

The share subscription period for share options 2012A will be 2 May 2015 - 30 November 2017, and for share options 2012B, 2 May 2016 - 30 November 2017.

Comptel Annual Report 2012

Financial statements

Share-based incentive plans

CEO PERFORMANCE SHARE PLAN 2011-2013

The CEO has a share-based incentive plan. The aim of the plan is to combine the objectives of the shareholders and the CEO of Comptel Corporation in order to increase the value of the company and to commit the CEO to the company. The prerequisite for participation in the plan and receipt of reward from the performance periods is that the CEO owns company's shares or acquires them up to the number predetermined by the Board of Directors which is 230,000 shares. The ownership requirement is valid until 31 December 2015. Furthermore, the potential reward from the plan is tied to the validity of the CEO's service contract.

The plan includes two performance periods, the calendar year 2011 and calendar years 2012-2013, during which the CEO may earn rewards based on the achievement of the determined performance criteria (Performance Shares) and validity of the service contract (Restricted Stock). The Board will determine the performance criteria in the beginning of the relevant performance period. A two-year restriction period will follow each performance period's reward payment, during which shares cannot be transferred. Should the CEO's service contract end during the restriction period, he must gratuitously return the shares paid as reward to the company.

The rewards will be paid in 2012 and 2014 as a combination of shares and cash. For the Performance Share component the cash reward corresponds to the value of the transferred shares and it is intended to cover taxes and tax-related costs arising from the reward payment. For the Restricted Stock component the cash rewards correspond to the value of taxes and tax-related costs. The total amount of rewards to be paid on the basis of the plan is 650,000 Comptel Corporation shares and a cash payment corresponding to the value of the shares.

The reward from the performance period 2011 was based on the turnover growth rate and the operating profit margin of the Comptel Group. The criteria were not achieved and thus no Performance Share reward was paid. The Restricted Stock reward for 2011 was paid to the CEO in 2012 by disposing gratuitously 25,000 company shares and in cash, amounting to EUR 15,271. The potential reward from the plan for the performance period 2012 - 2013 will be based on the turnover growth rate and the operating profit margin of the Comptel Group.

MATCHING SHARE PLAN 2012

The Board of Directors of Comptel Corporation approved in February 2012 a new share-based incentive plan for the Group key personnel.

The new plan includes a Matching Share Plan 2012 and Stock Options 2012, approved by the Annual General Meeting of Shareholders of the company in March 2012. The description of the Stock Options 2012 can be found in the section "Share option schemes" of the annual report.

The Matching Share Plan includes two performance periods, both beginning on 2 May 2012. The performance periods will end on 2 May 2015 and on 2 May 2016. The prerequisite for participation in the plan and receipt of reward from the performance periods provides that a target person owns the company's shares or acquires them up to the number predetermined by the Board of Directors. Furthermore, the potential reward from the plan is tied to the validity of the

Comptel Annual Report 2012

Financial statements

target person's employment or service or contractual relation. No reward will generally be paid if a target person's employment or service ends before the reward payment.

There were 35 persons in the plan at the end of 2012.

Shareholding of the Board and CEO

Members of the Board of Directors and the CEO held at 31 December 2012:

A total of 1.634 per cent of the company's outstanding shares and share options
0.998 per cent of the votes and share capital
The share options can provide them with 0.716 per cent of the votes and share capital

Graphs and tables

Comptel Annual Report 2012

Financial statements

Share trading data

	2010	2011	2012
Closing price, EUR	0.69	0.49	0.40
Highest price, EUR	0.95	0.79	0.63
Lowest price, EUR	0.68	0.42	0.37
Weighted average trading price, EUR	0.80	0.64	0.49
Shares traded, 1,000 shares	38,301	32,837	26,734
Shares traded, EUR million	29.0	21.0	13.4
Market capitalisation at the year end, EUR million	73.5	52.3	42.8

Comptel Annual Report 2012

Financial statements

Shareholding by owner group on 31 Dec 2012

	Shares	% of total shares
Companies	21,646,435	20.2
Financial and insurance companies	31,551,169	29.5
Public sector	11,033,504	10.3
Non-profit making entities	767,892	0.7
Private households	35,232,414	32.9
Foreign holding	366,415	0.4
Nominee registered	6,456,981	6.0
Total number of shares	107,054,810	100.0

Shareholding by number of shares on 31 Dec 2012

Number of shares	Number of shareholders	% of shareholders	Number of shares	% of total shares
1 - 100	1,989	10.9	123,912	0.1
101 - 500	10,369	57.0	1,905,405	1.8
501 - 1 000	1,700	9.3	1,427,076	1.3
1 001 - 5 000	2,853	15.7	7,160,837	6.7
5 001 - 10 000	615	3.4	4,700,209	4.4
10 001 - 50 000	557	3.1	11,770,757	11.0
50 001 - 100 000	55	0.3	4,088,121	3.8
100 001 - 500 000	42	0.2	9,173,002	8.6
500 001 -	17	0.1	66,705,491	62.3
Total	18,197	100.0	107,054,810	100.0

Comptel Annual Report 2012

Financial statements

Largest shareholders on 31 Dec 2012

	Shares	% of shares and votes
1. Mandatum Life Insurance Company Limited	20,532,625	19.18
2. Elisa Oyj	14,304,000	13.36
3. Kaleva Mutual Insurance Company	8,724,980	8.15
4. Varma Mutual Pension Insurance Company	5,144,825	4.81
5. Ilmarinen Mutual Pension Insurance Company	2,736,368	2.56
6. The State Pension Fund	2,600,000	2.43
7. Mutual Fund Evli Finnish Equity	1,679,564	1.57
8. Rakshit Tommi	1,025,000	0.96
9. Perisalo Asko	933,648	0.87
10. Fourton Fokus Fund Finland	900,000	0.84
11. Tugent Oy	579,000	0.54
12. SSP yhtiöt Oy	571,669	0.53
13. Mandatum Life	559,000	0.52
14. Kesko Pension Fund	500,000	0.47
15. FIM	500,000	0.47
FIM Fenno Fund	500,000	0.47

The Board of Directors' proposal for the disposal of parent company profits

According to the parent company balance sheet at 31 December 2012 the parent company's distributable funds were EUR 1,840,001.68.

The Board of Directors proposes to the Annual General Meeting that no dividend payment will be made for 2012.

Helsinki, 12 February 2013

Pertti Ervi

Hannu Vaajoensuu
Eriikka Söderström

Antti Vasara
Petteri Walldén

Juhani Hintikka
President and CEO

Comptel Annual Report 2012

Financial statements

Auditor's Report

To the Annual General Meeting of Comptel Corporation

We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of Comptel Corporation for the financial period 1.1.-31.12.2012. The financial statements comprise the consolidated statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows, and notes to the consolidated financial statements, as well as the parent company's balance sheet, income statement, cash flow statement and notes to the financial statements.

Responsibility of the Board of Directors and the Managing Director

The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of financial statements and the report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company's accounts and finances, and the Managing Director shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner.

Auditor's Responsibility

Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the report of the Board of Directors are free from material misstatement, and whether the members of the Board of Directors of the parent company or the Managing Director are guilty of an act or negligence which may result in liability in damages towards the company or have violated the Limited Liability Companies Act or the articles of association of the company.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of financial statements and report of the Board of Directors that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the report of the Board of Directors.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Comptel Annual Report 2012

Financial statements

Opinion on the consolidated financial statements

In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

Opinion on the company's financial statements and the report of the Board of Directors

In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements.

Helsinki, February 12, 2013

Ernst & Young Oy
Authorized Public Accountant Firm

Heikki Ilkka
Authorized Public Accountant

Comptel Annual Report 2012

Shareholder information

Annual General Meeting

The Annual General Meeting of Comptel shareholders will be held at the Marina Congress Center, Fennia I hall, Katajanokanlaituri 6, 00160 Helsinki starting at 3 pm on Wednesday, 20 March 2013.

A shareholder, who wants to participate in the General Meeting, shall register for the meeting no later than 10 am on 15 March 2013 by giving a prior notice of participation. Such notice can be given:

a) by notice at Company's website: www.comptel.com
b) by telephone at +358 20 770 6877, from 9 am to 4 pm Monday to Friday
c) by telefax at +358 9 700 11224
d) by regular mail to Comptel Corporation, P.O. Box 1000, FI-00181 Helsinki, Finland (envelopes should be marked "Annual General Meeting")

Shareholders registered on 8 March 2013 in the Company's Shareholder Register maintained by Euroclear Finland Ltd shall have the right to attend the Annual General Meeting. Possible proxies shall be delivered to the above address before the last date for registration.

Dividend and financial statements

The Board of Directors has decided to propose to the Annual General Meeting that no dividend be paid for the financial year 2012.

The proposals of the Board of Directors are available on Comptel Corporation's website at www.comptel.com. The annual report is available on the above-mentioned website no later than 27 February 2013. The Proposal of the Board of Directors and the annual accounts documents are also available at the meeting.

Changes of name and address

Shareholders should notify the book-entry securities register where their book-entries are registered of any changes in name and/or address.

Publication of interim reports 2013

January - March, Wednesday 17 April
January - June, Tuesday 16 July
January - September, Wednesday 16 October

Comptel publishes its interim reports, financial statements bulletins and annual reports in English and Finnish. The financial reports are available on Comptel's website at www.comptel.com under Investors. They may also be ordered by email ([email protected]) or by phone (+358 9 700 11793).

Comptel Annual Report 2012

Shareholder information

Investor contacts

Ms Ulla Koivukoski, SVP, Marketing and Communication
Tel. +358 400 481870, +358 9 700 1131, fax (09) 700 11375
Email: [email protected]

Annual summary

Stock Exchange Releases of Comptel Corporation in 2012

17 Jan Notice of Ownership Pursuant to Chapter 2 Section 10 of the Securities Markets Act
26 Jan Comptel announces preliminary information on its financial statements for 2011
26 Jan Comptel takes next steps in executing its strategy by acquiring leading analytics company Xtract
27 Jan Comptel Appoints Marketing and Communications Head in the Executive Board
9 Feb Xtract transaction has been closed
10 Feb Comptel Corporation's Financial Statements Bulleting for 2011
27 Feb Notice of Annual General Meeting
27 Feb The Board of Directors of Comptel Corporation Resolved Conditionally on Key Personnel Incentive Plan
2 Mar Comptel Annual Report 2011 Published
26 Mar Resolutions of Comptel Annual General Meeting
26 Mar Share Subscription Price and Market Value of Comptel Corporation Stock Options 2012A and 2012B
29 Mar Changes in Comptel's Holding of Own Shares
19 Apr Comptel and Cisco have settled their dispute under arbitration
20 Apr Interim Report of Comptel Corporation 1 January - 31 March 2012
15 Jun Comptel reduces its guidance for 2012
19 Jun Comptel streamlines R&D in line with its product strategy
18 Jul Interim Report of Comptel Corporation 1 January - 30 June 2012
7 Aug Comptel continues earlier announced cost savings activities and starts statutory cooperation negotiations in Finland and United Kingdom
23 Aug Change in Comptel's Holding of Own Shares
4 Sept Comptel Concludes Statutory Co-operation Negotiations
26 Sep Comptel's Annual General Meeting and Financial Reports in 2013
8 Oct Comptel Applies for Listing of Stock Options 2009B on Nasdaq OMX Helsinki
17 Oct Comptel Renews its Executive Board
18 Oct Interim Report Of Comptel Corporation 1 January - 30 September 2012
3 Dec Expiry of Comptel Corporation's 2006C share options
14 Dec Comptel agrees on EUR 20 million loan facility
31 Dec Robi Axiata Selects Comptel Social Links to Automate Customer Engagement and Optimise Business Performance

Comptel Corporation's stock exchange releases are available on Comptel's web site at www.comptel.com

Comptel Annual Report 2012

Comptel Offices

Europe East and Europe West

Helsinki, Finland
Düsseldorf, Germany
The Hague, Netherlands
Istanbul, Turkey
Milan, Italy
Moscow, Russia
Oslo, Norway
Reading, UK
Sofia, Bulgaria
Stockholm, Sweden

Email: [email protected]

Asia Pacific

Kuala Lumpur, Malaysia
Hong Kong, China
New Delhi, India
Beijing, China
Singapore, Singapore
Sydney, Australia

Email: [email protected]

Middle East and Africa

Dubai, United Arab Emirates
Cairo, Egypt
Cape Town, South Africa

Email: [email protected]

Americas

São Paulo, Brazil
Buenos Aires, Argentina
Mexico DF, Mexico

Email: [email protected]

Comptel Annual Report 2012

calmisaarenaukio 1
P.O. Box 1000, FI-00181 Helsinki
Tel. +358 9 700 1131
Fax. +358 9 700 11375
www.comptel.com

AI assistant

ComTel SpA — Annual Report 2012

9984_rns_2013-02-27_0443e241-0ae8-4f69-8292-311438ee60c7.pdf

Annual Report 2012

Content

Message from the CEO

We invested in research and development, and acquired analytic capabilities

Strong growth continued in our services business

Foundation for growth and profitability

Comptel in Brief

CUSTOMER MANAGEMENT, BILLING, DECISION MAKING

TELECOMMUNICATIONS NETWORKS, SOCIAL NETWORKS

Comptel

Comptel today

History

Key events 2012

Q1

Q2

Q3

Q4

Key figures

Comptel's Strategy

Changing business environment

Basis for the strategy

Executing the strategy

Comptel's way of working

Corporate Governance Statement

Governing principles

Duties and responsibilities of executive bodies

General Meeting

Board of Directors

Board Committees

President and CEO

Executive Board

Insider administration

Auditing

Communications

Financial Reporting Process

Objectives of internal control

Control environment

Risk assessment

Control activities

Information and communication

Monitoring

Board of Directors

Pertti Ervi

Main career history

Main board memberships

Hannu Vaajoensuu

Main career history

Main board memberships

Eriikka Söderström

Main career history

Antti Vasara

Main career history

Petteri Walldén

Main career history

Main board memberships

Executive Board

Mauro Carobene

Mikko Hytönen

Ulla Koivukoski

Antti Koskela

Kari Onniselkä

Niina Pesonen

Board of Directors' report

Market development

Net sales and profitability

Business areas

Investments

Research and development

Financial position

Company structure

Personnel

Corporate Governance

Auditors

Comptel's share and shareholders' equity

Business risks

Events after the reporting period

Outlook

ComTel SpA Annual Report 2012